On the sovereign debt woes of Greece...

Looking at the deteriorating sovereign debt situation in Europe, in particular, Greece, is like watching a train wreck in slo-mo.

I've always wondered how Euro could have worked, with countries having a garden variety of economies and state of affairs coming together to join in hip by only their currency (thereby fiscal policy), and nothing much else. Back in late 1990s when one of my projects in a big bank was to convert all transactions and contracts from various European currencies into euros, I've always wondered to myself how this could have worked. I have my doubts because I don't see how it could work. Then again, I'm not economics type. I thought the economists and all the talking heads knew better (or knew something that I didn't), since everyone was so gungho and excited about this whole euro thing. I let that idea/doubt go. My project went through with flying colors, and that's what happened to me then. I still miss some of the currencies (like DEM, FRF, and more). At least GBP is still around, so I'm good.

And then, the worldwide economic recessions that started in US in 2008 - the Great Recession, as some call it - put everything under harsher spotlight, in particular, the PIIGS economies, Greece being one of them.

The first bailout of Greece came in 2010, now they're talking about the second bailout. It's such a big white elephant in the room. Everyone knows it's going to fail. Everyone knows Greece won't make it. But no one wants to admit it. No one wants to call the default, a default, which is what Greece is. The idea of "buying Greece some time" to sort things out, to clean up the house, whatever the actions might require, is so weak. Don't get me wrong, I would not want to see a whole country fail, thereby pushing the Greek livelihood over the edge of the cliff. The fact that big brothers, like Germany and France, who want to keep Greece in the fold of euro, yet are reluctant to embrace full rescue, both fiscally and monetarily, are simply self-defeating.

But we all know, Greece is like another Lehman (that collapsed in 2008), except that, unlike Lehman, Greece is another "too big to fail" basket case. No one wants to see a repeat of Lehman - just ask Hank Paulson - particularly given that Greece is considered the birthplace of western philosophy and democracy, and its failure would have not only financial, but symbolic, significance.

So, what do we do?

The US is too busy trying to rescue itself. Europeans are in the I-don't-want-to-help-but-maybe-I-need-to-do-something mode. Everyone knows that ECB and other European countries will step in, one way or another. However much the haircut the bondholders are going to take, they're going to come out whole, one way or another. So, emerging big brothers like China are going to step in the void and scoop up whatever resources and assets and bonds that Europeans and PIIGS are selling. In a decade or two, everyone will be working for the Chinese to pay off their debts; so, everyone is looking up to the new master (China) now already. Learning mandarin is only the first step.

Surprisingly (or not), the credit agencies, who were accused to have been sleeping on their watch during the subprime meltdown in US, are the watchdogs that everyone is looking up to again, without any meaningful reforms whatsoever on how to avoid their conflicts of interests they committed during the subprime mess. Some things in life never change. Sad...

Nothing of these is news to anyone anyways. Ireland will tough it out. The Irish people have the kind of fortitude and resolve to tough it out, but the Greeks don't. The celtic tiger is going to come out from this mess roaring again, but the continental peers like Greece and Portugal and Spain are going to continue dragging their feet.

I would be very interested to see what's going to happen to the small eastern European cohorts who newly join euro.

Then again, as I said, I'm not an economics type. I hope I'm wrong (I really do), but I have this nagging feelings that something seriously wrong is in this whole picture. Everyone wants to see the rosy colors, but no one wants to consider the worst-case scenarios. The future generations around the world are going to be paying for the sins and mistakes that this generation commits. Very sad...