America's Road to Fame

Chapter 285 The European Debt Crisis
During this period of time, the attention of the media, apart from William Chen and Ivanta's approaching wedding date, is also focused on Greece's sovereign debt crisis.

On June 6, after Greece once again asked the EU for help due to its sovereign debt crisis, there are four options before the EU.

The first option is for countries in the euro zone or even the entire EU to work with the International Monetary Fund (IMF) to help Greece out of the crisis.

If this option works, it is the easiest and least harmful method.

The necessity to do this is:

If Greece is not rescued, once the Greek sovereign debt crisis expands, it will endanger its own economic security, and even lead to the disintegration of the euro zone, which will be extremely unfavorable to most euro zone countries.

And in the case of hedge funds aggressively shorting the euro and European stock markets, the slower the rescue action, the more serious the crisis will be. At present, in addition to Greece, the economies of other weaker euro zone countries have also experienced instability due to short-selling behavior. sign.

Then even if a crisis breaks out in only a few countries, a "butterfly effect" will be formed, causing major shocks in the global financial market and even the real economy.

But making this choice also comes with difficulties.

Taking Greece as an example, no one, including the Greek government, can say for sure how big the real losses involved in this crisis are.EU countries can no longer really trust the figures they disclose.

Moreover, this kind of rescue behavior will be opposed by the people of the donor country and the recipient country at the same time.

Yes, you read that right. It is normal for the people of the rescue country to object. After all, no country is willing to use the wealth accumulated by its people’s hard work to aid those lazy and uncreative countries at a very low rate of return.

But the Greek people also strongly opposed the EU rescue operation...

On Monday, June 6th, a large-scale strike movement took place across the country to protest against the rescue action for the country that the government and the EU are negotiating!
The reason is that as a condition for aid, the EU requires the Greek government to make a commitment to effectively reduce the fiscal deficit, including cutting spending, reducing the salaries of civil servants, freezing welfare measures including social security, and requiring them to use most of their state-owned assets as collateral in exchange for aid funds until they are fully returned.

Uh, in fact, these contents have been reported on Friday night, but the "lovely" Greek people, even if they are on strike, have to wait until Monday working day to start...

Facing the domestic public opposition, Greece's finance minister immediately issued a strong speech, claiming that Greece would never accept such "humiliating" aid from the EU, which would be a loss of sovereignty.

The general meaning is that although our people are lazy, we have dignity. If you don’t give me money for nothing, I will never accept it!

Faced with such a poor Greece, the European Union is also helpless.

So besides bailing out Greece, is there any other option?Of course there are.

The second option is to drive Greece out of the euro area or wait for Greece to withdraw from the euro area voluntarily.

After the outbreak of the Greek sovereign debt crisis, German Chancellor Angela Merkel immediately put forward the idea of ​​expelling Greece from the euro area, but this idea was opposed by the head of the Bundesbank and did not receive any response from other countries in the euro area.

Because, in the design plan and institutional arrangements of the Eurozone, there are no regulations and mechanisms for expelling a sovereign country from the Eurozone!
As for Greece taking the initiative to withdraw from the euro area?That is simply impossible.

The Greek government is not really stupid, or it is not so stupid yet - exiting the euro zone will face the penalty of high interest rates, and will bear huge euro debts, and the national currency will also face the risk of large-scale devaluation, large-scale Unemployment and recession will follow, with even more catastrophic consequences for the economic outlook.

More importantly, according to the EU constitution, exiting the euro area means exiting the EU at the same time, which will undoubtedly make the countries that exit the euro area face a catastrophe.Therefore, although this option cannot be said to be impossible, it will be difficult to implement.

The third option is to implement large-scale international rescue, or to increase the share of IMF funds held by major countries, and then the IMF will expand the scale of rescue.

The biggest flaw of this approach is that there is no legal and effective security guarantee for the rescue funds, and it does not comply with the corresponding regulations of the IMF.Unless it is a last resort, the possibility of implementing a large-scale global rescue will not be too high.

The fourth option is the collapse of the euro and the disintegration of the euro zone.

The disintegration of the euro area may have two ways: one is that the crisis continues to erupt on a large scale and has reached the point of no return, and finally the disintegration of the euro area and the disappearance of the euro have to be announced; It may even reach a level of 1:1 or even lower. In this case, countries such as Germany and France will suffer huge economic losses, and Germany may take the lead in announcing its withdrawal from the euro zone.

Since Germany is the largest economy in Europe and the euro zone, if Germany withdraws from the euro zone, it will deal a fatal blow to the euro, and the euro mechanism will be difficult to maintain, and finally it has to announce its disintegration.

Therefore, among these four choices, the best choice is the first one, and the worst choice is the fourth one.The EU has no choice but to pinch its nose and continue to put pressure on the Greek government to rescue Greece.

And Greece itself is not having a good time, but because of the demonstrations of the people, the Minister of Finance issued a strong speech to the EU, which immediately put them on top.

William Chen is also happy to see this, because not only did he use his offshore account to short the euro, Tianshu Fund also used the remaining 50 billion US dollars to short the European stock market together with Wall Street capital.

Especially Greece, which is deeply in the sovereign debt crisis, together with other relatively weak euro zone members, are the main targets of their shorting.It's just that this time, for the sake of safety, he didn't use too much leverage, and he didn't have too much profit expectation. Anyway, he took a bite by the way, and these funds are idle.

After the outbreak of the economic crisis caused by the subprime mortgage crisis, Huaguo has taken the lead in getting out of the trough through four trillion yuan of incentives, forming a V-shaped reversal.Under the stimulus of the Fed's quantitative easing policy, the American economy is also slowly improving. Only the European Union's economy suffered another blow due to the sudden outbreak of the sovereign debt crisis in Greece.

However, for Wall Street capital, this is a good opportunity to suck blood from Europe and restore blood to itself, so naturally it will not miss it.

At the same time, taking advantage of this opportunity, Caitlin Fund purchased 3.5% of Hermes Group shares with a total investment of 3 million U.S. dollars, which allowed William Chen to control 51% of Hermes Group shares, thus firmly securing the The luxury company is in the palm of its hand.

……

Faced with more and more short-selling funds, the European Union knows that it cannot continue to hesitate, and Greece is even more unbearable, because it has become the main target of capital short-selling, and their economy has been hit harder. Therefore, the Greek government announced that the Minister of Finance resigned , quickly took office as a new finance minister, and reopened negotiations with the European Union on bailing out the Greek economy.

This is something that can’t be helped. The previous minister’s tough statement has already been released. If the government wants to turn around, it can only abandon it.

This time the Greek government is aware of the danger, and the EU has also relaxed the bailout conditions. Now Greece is not required to mortgage their state-owned assets to receive assistance, but only requires the right to sell state-owned assets to be mortgaged, that is to say, their State-owned assets are still in the hands of the state, but the right to sell them is locked and cannot be sold.

The step that the European Union gave to Greece was finally accepted by Greece.

On July 7, the chairman of the Eurogroup and Luxembourg Prime Minister Juncker announced that the member states of the euro area agreed to provide Greece with a three-year rescue loan of 5 billion euros, of which 1100 billion euros came from the member states of the euro area and the remaining 800 billion euros. billion euros from the International Monetary Fund (IMF).

The bailout is by far the largest bailout for a single country.

But first of all, in order to obtain this rescue from the EU, Greece must meet the prerequisites for providing rescue loans to Greece proposed by the EU and the IMF.

At the same time, the Greek government announced an unprecedentedly severe fiscal austerity plan to save 300 billion euros within three years, and promised to reduce the proportion of the fiscal deficit to the gross domestic product from 2014% last year to the level stipulated by the European Union before 13.6. within 3%.

To this end, the Greek government will take a variety of specific measures to increase income and reduce expenditure, including freezing public sector expenditure for three years, further reducing civil servant benefits, increasing value-added tax from 3% to 21%, increasing fuel tax, increasing the actual retirement age, and reducing retirement age. Kim et al.

These measures will inevitably cause the current Greek government to be criticized by the people, but by this time, they can no longer take care of them, because even if they do not do this, I am afraid that Greece will not have so much money to provide welfare that can satisfy the people.

(End of this chapter)