Greece Is The Next Lehman Brothers
As the Greek debt crisis intensified, many analysts fear that Greece could become a second Lehman Brothers, and ultimately drag the debt crisis of Europe into a new round of financial turmoil sweeping the globe.
From the summer of 2007 so far, the current international financial crisis has continued for more than two years. So far, the crisis experienced roughly two stages. First, from the summer of 2007 to September 15, 2008 Lehman Brothers filed for bankruptcy protection. This stage, the U.S. housing market bubble burst, triggering the so-called “sub-prime crisis.”
The Lehman Brothers filed for bankruptcy symbolized the crisis entering the second phase. As the fourth-largest U.S. investment bank Lehman Brothers filed for bankruptcy protection, the collapse of the global investor confidence resulted, culminating in the U.S. subprime mortgage crisis sweeping the world evolved into an international financial and economic crisis.
In the second half of last year, the so-called European “PIIGS” the five countries (Spain, Italy, Ireland, Portugal and Greece) of sovereign debt crises gradually surfaced. The five state-owned one thing in common: the governments lack fiscal discipline. In the financial crisis, the five countries on the one hand need the government to stimulate economic growth and further intensive expenditure. On the other because of the economic downturn and the sharp declines in tax revenue, they are deep in the fiscal deficit. In the beginning of the year 2010, the European debt crisis had become worse, triggering the world’s major financial markets volatility. As the European favorite currency, the euro has also been hit hard against the dollar sharply.
As the entire global financial system is concerned, Greece and Lehman Brothers have a great deal similarity. First of all, both in the financial crisis has been hit hard, and then face enormous pressure to pay; Secondly, the two gradually lost the confidence of investors, financing costs continue to soar, even in the face was eventually shut out the danger of the bond market; lastly, it is difficult for both to coordinate relief operations to deal with the crisis are the loss of critical time.
Greece is currently facing the situation that Lehman Brothers have all faced at that time. Lehman Brothers neither raise enough money, nor has successfully sold himself to others and, ultimately, the U.S. government for anxiety of creating what is called a huge “moral hazard” and refused to rescue the region, the century-old came crashing down.
Now, Greece is facing a similar position. The Greek Government undertakes to select a series of cuts in spending measures to gradually cleave the size of budget deficit to gather the confidence of investors. But the indicate situation, fiscal discipline has always been a loose Greek government will be difficult to complete self-help. Moreover, the Greek government’s measures to cut expenses for each one will affect the welfare of tens of thousands of Greek people, they face social resistance will be unprecedented.
In the self-help when faced with many obstacles, to rely on external aid has become the only scheme out. For Lehman Brothers, the U.S. government does not want to be adventurous speculator of last resort, hoping to Lehman Brothers bankruptcy, other financial institutions to stimulate self-help, and avoid the huge lead the American public grievances. But the result is that the parties anticipated. Lehman Brothers bankruptcy, the U.S. financial system at the brink of collapse. Do not want to effect Lehman Brothers, the U.S. government had to employ more taxpayer funds for save more financial institutions.
At present, the EU, especially in the euro zone’s largest economy, Germany, are unwilling to put Greece. Reason with the United States Government is not willing to save Lehman Brothers, similar reluctance to create “moral hazard”, but also willing to assume the public condemnation.
However, the rapid development of the Greek debt crisis may be beyond the EU’s expectations. At present, the serious investors do not trust Greece, Greece and the Greek government bonds yield bonds, “credit default swaps” (i.e., the Greek government bonds used to hedge the risk of default insurance costs) are increased significantly. In the case of high financing costs, the Greek pressure is growing.
Even more serious is that investors not only to look at the empty Greece, but also the entire Euro bearish. At present, a large number of euro financial markets, investors hold short positions. In this case, the euro area lagged behind economic integration and political integration will be fully exposed the weakness of the euro zone economies, the country is difficult to transcend sovereignty interests in the face of crisis can not be effectively coordinated and timely response to the shortcomings will be fully exposed.
If we say that this round of financial crisis has a third stage, it will most likely be a debt crisis in Europe, precipitated by the world’s sovereign credit crisis; and Greece, perhaps will be the Lehman Brothers 2nd.
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Filed under Stock Bankruptcy by on Mar 11th, 2011. 
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