Greece given three years to control themselves, markets not convinced

We predicted this would happen.

First, the market rocked the financial institutions, so private investors came in.  Then, the market made fools out of the new investors, so governments bailed them out.  Then, the market takes out the governments so the IMF and Europe join in.  What happens next?

First, the IMF and Europe have agreed to the larges bailout ever, via Next:
The unprecedented $160 billion bailout of a member of the 16-nation euro zone is the culmination of months of often fraught negotiations. The crisis has tested the credibility of the single currency and created some of the deepest fissures in the European project since its inception, more than half a century ago.

Finance Minister George Papaconstantinou set out some of the details of the austerity measures that are required for the bailout package, which were expected to be disclosed in Brussels later.

He said that Greece would make budget cuts of €30 billion, or $40 billion, to reduce the budget deficit to less than 3 percent by 2014.

He said the funding from the rescue plan would cover a large part of Greek borrowing needs for the next three years. The country faced a "choice between collapse and salvation," he said.
Markets have a way of making the wise look foolish.  My bet is on Monday the bloodbath continues but this time with Spain and Portugal as it is quite clear that if they are giving 150 Euro for Greece, what would a country the size of Italy require given that it is 10 times the GDP of Greece.  Via Straights Times:
The single European currency bought US$1.3224 at 0200 GMT (10am Singapore time), down from US$1.3294 late in New York Friday, paring back early gains that saw it climb as high as US$1.3332.

'We still need the German parliament to approve (the bailout) and the other issue is the German election,' Philip Wee, a senior currency economist with DBS Group Research in Singapore, told AFP.

The European Union bailout must now pass rapidly through parliaments of euro zone nations including Germany, where public resistance to the bailout runs deep and where a major state election is due on Saturday.

The euro had rallied last week in anticipation of the bailout, but it is 'still too early' to tell if the EU's commitment to rescue Greece will shore up the currency, Wee said. 
Color me skeptical.  Starting Monday, look for more pain in Spain and Portugal.  Wouldn't be surprised to see investors in Japanese markets to look for safety.


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