What follows here is a synopsis of an email sent out by Graham Summers, Chief Market Strategist at Phoenix Capital Research.
Summers and other analysts say the coming collapse has been delayed by heavy intervention from the European Central Bank. European leaders have been quite aggressive in their efforts to hold things together -- the preservation of the euro depends on it, and many economic & commercial benefits accrue from that for most of the countries in Europe.
However, by the end of last year, Greece had already received bailouts in excess of 150% of its GDP -- yet still posted a GDP loss of 6.8%! So it was hard to believe that the Greeks would accept yet more austerity measures and more debt. But they did.
Political tensions between Greece and Germany had reached the point that Greeks were openly comparing German Chancellor Angela Merkel and Finance Minister Wolfgang Schauble to Nazis while the Germans referred to Greece as a "bottomless hole" into which their money was being tossed.
The obvious reality was that Germany wanted to force Greece out of the EU, but didn't want to do that explicitly or directly. So instead they acted indirectly, offering Greece the worst deal imaginable that could still be portrayed as an offer to help: The German aid package stipulated that Greece would have to accept levels of austerity measures so onerous that there was no chance the Greek people would ever tolerate it. Or so the Germans thought. But Greece surprised them and accepted it. And so it is that the EU experiment continues to exist today. But it hangs by a thread and will not last much longer. The reasons are as follows.
For starters, unemployment in Greece as a whole is now over 20%. For Greek youth (aged 15-24) unemployment if over 50%! The country is in nothing short of a Depression. So let's not fool ourselves with pretensions to the contrary.
Instead understand that Greece has by now experienced five straight years of economic contraction, resulting in a 17% contraction of its GDP. To view this in perspective, understand that when Argentina collapsed in 2001 its total GDP loss was 20%, and this was accompanied by full-scale defaults as well as systemic collapse and open riots.
So, with freshly installed austerity measures now in place in Greece, there is little doubt that this country too will soon see a GDP contraction of 20%, if not more. Therefore this will almost certainly lead to an Argentina-style default in this country as well.
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