Boy, a trillion dollars doesn’t stretch like it used to.
On Thursday, Deutsche Bank’s CEO, Josef Ackermann, said publicly what nobody in Europe wants to hear, that Greece — even after its bailout — may not be able to pay off its debts. A second German banker, Ulrich Kater, chief economist of Germany’s Dekabank, has now seconded Ackermann’s fears. It’s one thing when Cassandras and contrarians say the things nobody wants to hear. But when the adults in the room start saying these things, that’s a bad sign.
Ackermann caught some grief for his candor. Germany’s economic minister, Rainer Bruederle, called the comments “strange, surprising and annoying.” But what’s so strange about them? The ECB’s chief economist, Juergen Stark, said all the $1 trillion bailout bought is time. And Jean-Claude Trichet himself said Europe’s economy is at its worst point since World War II, if not World War I.
Nobody’s going out on much of a limb here, by the way. Greece is past the point of no return. They can’t grow their way out of their debts, they can’t debase their currency, and in order to get public spending under control, they’re going to put in such draconian cuts and taxes that it’s going to send the country into a multi-year tailspin that can only be properly described as a depression (little “d,” the old fashioned kind that used to crop up regularly until the word became fraught with such terror nobody wanted to use it anymore.)
No, Greece is going to go through all that, Europe (and the U.S. for that matter, don’t forget that,) is going to go through the expense, the great expense, of a bailout, and Greece isn’t going to be able to pay off its debt anyhow. They’ll call it something diplomatic, a restructuring or something, but bluntly it’s a default. Which isn’t the worst thing in the world. Greece has been around in one form or another for 3,500 years, probably more, there are cultures there that predate history. They were around yesterday, and they’ll be around tomorrow. But it’s going to a long, slow, painful rehabilitation.