1.
“Every tru
Greece is
arguably
Social un
Euro. In
Greece h
In the lon
list of re
Regardle
this pred
debtor (G
From the
Greece h
indisputa
according
debt resc
Looking
100%, w
averaged
maintain
uth has two s
s in a precar
unsustainab
nrest is on t
the short ter
has accepted
ng term, how
eforms inten
ess of what u
dicament and
Greece); the
e creditors’
has become t
able fact tha
g to the Ban
cheduling for
at more rece
while at the s
d above 7%.
ed an averag
Greec
sides; it is as
rious positio
ble. Unempl
he rise, and
rm, much of
the terms of
wever, Greec
nded to clea
ultimately ha
d how it is p
implications
perspective
the irrespons
at Greece h
nk of Americ
r close to a q
ent history, G
same time th
To put thing
ge debt-to-G
ce: Two
well to look a
on. Currently
loyment is a
d they are fo
f Europe’s an
f a third bail
ce’s problem
an up their b
appens, it is
perceived by
s of which sp
(EU, IMF
sible benefic
as a long a
ca Merrill Ly
quarter of the
Greece’s ave
heir budget
gs into persp
GDP ratio of r
o for t
at both, befor
y, its debt to
a staggering
orced again t
nxiety about
lout from th
ms are far fro
balance she
important t
both the cre
peak to the s
ECB and d
ciary of mem
and mired h
ynch, Greec
e past two ce
erage debt-to
deficit (the
pective, over
roughly 61%
the Mo
re we commit
o GDP ratio
g 25.6% and
to consider
t a Grexit is
e European
om over as th
et, fight fra
to understand
editor (EU,
sustainability
de facto lea
mbership in
history of m
ce has been i
enturies.
o-GDP ratio
difference b
r that same p
% and a budg
oney
t ourselves to
is closing in
d is far wors
the possibili
behind them
Stability Me
hey must stil
aud and bols
d how Gree
ECB & IMF
y of the Euro
ader of the E
the Europea
mismanaging
in default or
from 1993 h
between spen
period, the U
get deficit on
either.” -Aes
n on 180% a
se for the yo
ity of exitin
m as, in princ
echanism (E
ll deal with a
ster product
ce found its
F), as well a
ozone as a w
EU – Germ
an Union. It
money. In
r some mann
has been nor
nding & inc
United State
n average of
sop
and is
oung.
ng the
ciple,
ESM).
a new
tivity.
elf in
as the
whole.
many),
is an
fact,
ner of
rth of
come)
es has
f .5%.
2.
With suc
and adop
such that
budget d
Sachs he
such, Gr
accompa
its privile
from an
advantag
growth a
sector. A
good cre
rapid pac
and conti
This fina
revised t
massive
soaring y
and by A
partners.
Greece w
deal with
bailouts w
intended
has been
From the
predicam
benefitte
ways by
instance,
have rem
less comp
As menti
credit. A
the onset
any other
was new
became r
ch a clearly t
pt the commo
t any countr
deficit of no
elped Greece
reece was a
any members
eges.” First
instant we
ges of free tr
at rates faster
Another bene
dit risk. As
ce. With this
inued to hide
ally came to
the country’
loss in mar
yields. Overn
April of 201
At this poin
was afforded
h its private
were extend
to get its ec
little progre
e debtor’s (G
ment is due
d from inclu
admitting p
Germany: i
mained dispr
petitive in E
ioned previo
As such, Germ
t of the crisi
r country wi
w incentive f
relatively ch
troubled past
on currency?
ry seeking m
more than 3
e mask the t
admitted int
ship. To quo
and foremos
alth effect
rade and elim
r than that in
efit of memb
such, Greec
s easy money
e their actua
o a head in
s public de
rket confide
night, their €
0 Greece wa
nt Greece wa
d a second b
e lenders tha
ded to Greec
conomy bac
ess reforming
Greece) pers
primarily to
usion in the
oorer countr
if it had not
roportionatel
Europe, as we
ously, Greec
many was no
is), German
ith the excep
for the Gree
eap, and now
t, how is it th
? Back in 20
membership
3% of GDP.
true extent o
to the EU a
ote the old A
st, they conv
which initia
mination of c
n the EU; dri
bership is th
ce had new a
y, Greece co
al deficit figu
2009, after
ficit figures
ence that re
€300 billion
as forced to
as afforded
ailout totalin
at allowed G
ce with cave
ck on track.
g its econom
pective, and
o what amou
EU, wealthi
ries like Spa
adopted the
ly stronger
ell as the glo
ce’s member
ow willing t
banks had
ption of Fran
eks to buy G
w the Greeks
hat Greece m
001, the rule
p in the EU
In an effor
of its deficit
and initially
American E
verted from
ally boosted
currency con
iven primari
hat member
access to ea
ontinued to s
ures from the
the newly
s from 6% o
esulted in cr
n debt burden
ask for hel
its first bailo
ng €130 bill
Greece to cu
eats, meanin
To the grea
my. For the c
d one that is
unts to pred
ier countries
ain, Italy, Po
Euro, their
and would h
obal markets
rship in the
to buy their
purchased m
nce. And to
German prod
s had both th
managed to g
es set forth b
and adopt
rt to legally
t with the he
y began to
Express adve
the Drachm
d consumpti
nversion cos
ily by shippi
r countries (
sy credit an
spend reckle
e EU.
elected Gre
of GDP to
redit rating
n became ex
lp from the
out to the tu
lion along w
ut half of its
ng Greece ha
at frustration
reditors, Gre
rarely given
datory lendin
s like Germa
ortugal and i
local curren
have made
s inclusive of
EU afforded
debt, and a
more debt fr
what end? B
ducts. Put an
he means an
gain membe
by the Maastr
the Euro h
circumvent
elp of a der
enjoy all o
ertisement, “
ma to the Eu
ion. They a
sts, which h
ing, tourism
(by default)
d began to b
essly, inflate
eek governm
12.7%. Wh
downgrade
xponentially
IMF as wel
une of €145
with a genero
s debt load.
ad agreed to
n of Greece’
eece has bec
n much atten
ng. While G
any benefitte
in this case
ncy (the Deu
products lik
f the U.S. an
d them chea
lot of it. In
rom Greece
By capitalizi
nother way,
d incentive t
rship into th
richt Treaty
ad to maint
policy, Gold
rivatives dea
of the perks
“Membership
uro and bene
also enjoyed
elped to gen
and the fina
are conside
borrow at a
the public s
ment dramati
hat ensued w
es and ultim
more expen
l as its Euro
billion. By 2
ous one-off
Of course,
o a set of ref
s creditors,
come a cance
ntion, the cu
Greece origi
ed in a numb
Greece. Tak
utschmark) w
ke the VW m
nd Asia.
ap and acces
fact, by 201
than banks
ing Greece,
German ex
to buy them.
he EU
were
tain a
dman
al. As
s that
p has
efitted
d the
nerate
ancial
ered a
more
sector
ically
was a
mately
nsive,
ozone
2012,
swap
both
forms
there
er.
urrent
inally
ber of
ke for
would
much
ssible
10 (at
from
there
xports
.
3.
This fram
engine hu
40% of G
50% of t
in worldw
within E
wonder f
their mea
consider
The first
considere
extended
taking on
While th
solvent, i
has disco
independ
contracti
through
forgivene
To bring
in princip
again wi
largely af
other han
resolved.
mework has
umming alo
Germany’s
heir exports
wide sales f
urope. Clear
for how long
ans can acce
Greece’s or
t option (an
ed reforms.
d maturities.
n additional d
he bailout fun
implementat
overedand
dent moneta
on. In short,
reduced rev
ess.
this full cir
ple agreed to
th a long lis
ffected by w
nd, the futur
.
“Unless b
functioned
ong and their
GDP comes
never leave
for the first
rly this has
g? One must
ept the fact th
riginal option
nd a sensibl
This would
Instead, Gr
debt in the f
nds have aff
tion of the r
Germany is
ary policy o
what’s gain
venue. So a
rcle, despite
o the terms o
st of reform
whether or no
e of the EU
oth sides wi
exceptional
r trade surpl
s from expo
e Europe. Th
half of 2015
been a succ
t also questio
hat they are
ns for contin
e one) was
have allow
reece was fo
form of bailo
fforded Gree
reforms has h
reluctant to
or ability to
ned in the for
austerity in
an overwhe
of a third ba
ms. Greece’s
ot they inten
arguably ha
in, no agreem
lly well for
lus growing
orts. What is
his fact was
5. The irony
cessful busin
on how a co
perpetuating
nued membe
to restructu
wed for partia
orced to take
outs coupled
ce temporar
had a crippl
admitis th
o devalue a
rm of saving
this situatio
elming “no”
ilout. This ti
future in th
d to meaning
angs in the b
ment can be
the German
exponential
s more inter
driven home
y here is tha
ness model f
ountry so ins
g indebtedne
ership in the
ure Greece’
al haircuts (
e the second
d with austeri
ry liquidity a
ling effect o
hat spending
a currency
gs on the fro
on will not
vote in a re
ime the pack
he EU hang
gfully coope
balance as to
e permanent
ns and has
lly. Presentl
resting is th
e after VW s
at the major
for Germany
sistent on oth
ess. This is a
EU at the o
’s debt alon
(debt forgive
d option, wh
ity measures
and the illus
on its econom
g cuts in an e
leads direc
nt end is los
be success
ecent referen
kage is wort
s in the bal
erate moving
o how this cr
t.” - Jimmy
kept their e
ly, approxim
hat approxim
surpassed To
rity of sales
y, but one h
hers living w
a factor when
onset of the c
ng with care
eness) as we
hich consist
s.
sion that the
my. What G
economy wi
ctly to econ
st on the back
ful without
ndum; Greec
th €86 billion
ance and w
g forward. O
risis is ultim
Carter
export
mately
mately
oyota
were
has to
within
n you
crisis.
efully
ell as
ted of
ey are
Greece
ith no
nomic
k end
debt
ce has
n and
ill be
On the
mately
4.
Washingto
do not gua
business or
on Trust Bank b
arantee its accu
r a recommend
believes that th
uracy. Neither
dation of the pu
he information
the information
urchase or sale
Matthew C
Client Port
mclarke@
Matthew i
Wealth M
primarily i
used in this ar
n nor any opin
e of securities o
Clarke
tfolio Manager
watrust.com
s a Client Port
Management &
in Eastern Was
rticle was obtai
nion expressed
or commoditie
r
tfolio Manager
& Advisory Se
shington.
ined from relia
constitutes a s
es.
r for Washing
ervices, worki
able sources, bu
solicitation for
ton Trust Bank
ing with clien
ut we
k's
nts
