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Europe's Haves & Have-Nots: Greek Bulls "Throw In The Towel... They've Gone Plain Nuts"

Things are not going well for the Greeks. Bond yields are at post-default highs, implicitly shutting them out of the capital markets; stocks are cratering; and deposit outflows continue as the cash crunch looms. Even ex-Goldman silver-lining-finder Erik Nielsen stated this weekend that he is "throwing in the towel," on Greece, adding, as Bloomberg reports, that things have gone "plain nuts" in Athens. However, things are going great for the Germans - borrowing costs have never been lower, and the stock market is at record-er highs every day, as Draghi's money-printing fiasco has succeeded in one thing (and one thing only) dividing an already fragile 'union' into ever-greater 'haves' and ever-lesser 'have-nots'.

 

Until Sunday, Erik Nielsen (who previously worked at the International Monetary Fund and Goldman Sachs Group Inc.) had sounded more confident that Greece would remain in the 19-nation currency bloc. Just last month, he said the government had surrendered to “reality” in agreeing to concessions keep the bailout on track. In January, he said fumbled negotiations and the loss of outside support was “no more than a tail-end risk.” As Bloomberg reports, in January, he said fumbled negotiations and the loss of outside support was “no more than a tail-end risk.” But no more...

“I am throwing in the towel,” Nielsen wrote in his “Sunday Wrap” report. “If they don’t want to play by the rules (and the past weeks give me little hope,) they should get ready to leave!”

 

“And please appreciate what a difficult conclusion that is to draw for a deeply committed European like myself,” said Nielsen.

 

The reason? Greek Prime Minister Alexis Tsipras’s call last week that Germany pay World War II reparations shows things have gone “plain nuts” in Athens. That, combined with what he called “blatant hypocrisy” and ignorance of the constraints facing the European Central Bank, shows all the parties need to brace for Greece’s exit from the euro.

 

Tsipras is facing the choice of either signing up to economic policies demanded in return for aid or accepting life outside the euro area and “virtually certain collapse” of the economy, according to Nielsen.

 

“If the Greek government does not want the first option, it should prepare for the second option so that the exit becomes as orderly as possible,” he said, proposing the choice of reform or rupture be put to the electorate.

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And it appears that the rest of the market feels that way too..

Bond yields surging and curve inverting...

Stocks plunging...

Bank bonds getting crushed... (as prices collapse into the 60s)

And what has Draghi's insanity achieved...

Growing the divide...

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We leave it to Mr. Nielsen to conclude...

“I still hold hope that sanity returns to Greek politics,” said Nielsen.

 

“But if not, the rest of Europe needs to draw a line in the sand, and the Greek government should draw the conclusion, ask the people, and make the necessary preparations.”

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