Greece: Between a Rock and Hard Place

European economists are issuing dire warnings of what will transpire should Greece exit the Euro.

Commerzbank AG (CBK) Chief Economist Joerg Kraemer said it would be “economic suicide” for Greece to return to the drachma, which would prompt a run on local banks to withdraw euros, Welt reported, citing an interview.

Thomas Mayer, chief economist at Deutsche Bank AG, said a Greek exit from the euro region would lead to a crisis in Europe’s political and currency union and could cause a bank run in some EU countries, the newspaper said.

Thomas Straubhaar, head of the Hamburg-based HWWI economic institute, told the newspaper a euro exit could force Greece into bankruptcy and cause a “domino effect” like the collapse of Lehman Brothers Holdings Inc.

So why is Greece threatening to leave the Euro? Because it took a $157 billion bailout loan last year from the European Union and the IMF. And the payments to the troubled Mediterranean country are contingent upon successfully passing a series of audits.

Greece heads for another audit of its battered finances this week after European officials closed ranks to quash fears of an inglorious Greek exit from the euro cited in a German online report.

A high-level team of experts from the EU, the IMF and the European Central Bank will pore over plans by the Greek government to economise some 26 billion euros over three years to help bring down the country's enormous debt.

..The delivery of a 12-billion-euro instalment from that loan hinges on the audit but Greece so far has struggled to meet its deficit-reduction targets because of a deeper-than-expected recession at home.

Problem is, the market thinks that the Grecian-formula bailout has little likelihood of ever being paid off.

The cost of insuring Greek sovereign debt for five years using derivatives rose 5.6% Friday from the previous close, reaching 1,370 basis points [Ed: 13.7%] on unconfirmed reports that Greece is considering exiting the euro currency, according to data provider Markit.

...Now quoted at 1,370 basis points, the cost is equivalent to $1.37 million a year to cover the same amount of sovereign debt for five years. This is not yet an official closing price, but if it were it would be a record high, Casey said.

Prices on the five-year protection now imply a 70% chance of default, up from 66% in mid April, according to Markit.

Greece will never be able to pay off its massive deficits. It just hasn't admitted it yet.

Yet, here in the U.S., the Democrat-Media complex continually lobbies for more deficit spending and more insane redistribution schemes, which can't work and -- in fact -- have never worked throughout human history.

Which is all the proof you need that liberalism is, as Ann Coulter once said, a mental disorder.