Last Updated: 17 May 2021
I imagine the number of people who recognize the name Karolos Papoulias has risen by a factor of 50 over the last month.
There are a lot of things that amaze me about this crisis.
For starters, it’s amazing that a country the size of Greece can hold the global economy in its thrall. Greece accounts for 3% of the GDP of the European Union and less than 1% of world GDP. And yet, all markets right now hang on Greek’s ability to roll its debt forward in March. It’s amazing.
Another thing that amazes me is the way the Greek crisis has sparked incendiary commentary from market analysts who are usually somewhat staid, rational and conservative. The Dennis Gartman interview on IndexUniverse.eu and IndexUniverse.com is a case in point. Here is an extraordinarily smart market analyst who thinks the euro is “doomed.” That’s a big word.
On the flip side, we have an interview posting on IndexUniverse.com later on today from Cumberland Advisors’ David Kotok, who says that the euro will emerge from this crisis stronger than ever. He’s eagerly awaiting the moment of maximum Greek pain, seeing it as a massive buying opportunity.
It’s not often that David and Dennis disagree, and to see them on such opposite poles—the euro is either doomed or about to boom—is really something.
Of all the articles I’ve read about the Greek crisis recently, the one that stuck with me most was from the FT’s John Authers. In it, he notes that Moody’s is threatening to join S&P and others in downgrading Greece’s debt if the country is unable to stick to its austerity plan.
That’s bad news, because if Moody’s does so, Greece will lose its ability to swap its debt for collateral at the European Central Bank. And that would be a disaster. As Authers writes, “Downgrades, once they occurred, became self-fulfilling prophecies of doom, as they automatically cut off sources of funding.”
In other words, the Greek situation could easily spiral into a true crisis.
Authers’ point is that the fate of Greece, the euro and to some extent global markets, currently rests on the whims of a single credit analyst at Moody’s. That’s quite a weight. I wonder how he’s sleeping these days.