Ian Mathias

“There are times in a nation’s history that define it for decades, for generations to come. This is such a time.”

That’s true for most countries in the world right now, but likely more for Greece than anyone else. The quote above comes from Prime Minster Papandreou, who made an emergency speech last night. Just as Rob Parenteau forecast yesterday, the focus of the world has turned to the Greeks.

Pinned under a 12.7% budget deficit-to-GDP ratio, at monetary odds with other EU nations and recently targets of sovereign credit downgrades, Papandreou and his people are scrambling. Last night, he promised to reduce that same ratio to 3% (the limit under EU laws) by 2013. The plan: Cut spending where convenient and soak the hell out of the rich. Greece will soon have higher taxes, probably across the board, but most notable will be a 90% tax on bonuses in the financial industry and the introduction of a capital gains tax. Ironically, in the same breath, he promised to fight corruption and tax evasion, both crimes that will likely rise in the wake of more government confiscation.

Will it work? The market says no. The difference in yield between Greek and German bonds was 229 basis points before Papandreou spoke. Soon after, it was 252 bps.

“Some professional investors are already attracted to this widening spread in Greek and German bonds,” Rob Parenteau adds, “and they are finding encouragement from the restrictive policy measures announced in the past week or so. But it strikes us as too early to wade into the fray. We would not go so far as to predict Greece will default, nor would we go so far as to suggest the euro is about to come undone, but we do believe the pressures and the pushback that are going to be brought to bear on a number of European nations will put a serious question in the minds of investors who may have convinced themselves in recent months that the euro was a contender for snatching the reserve currency status of the U.S. dollar.”

Greece’s total debt to GDP ratio is currently over 112%.

Ian Mathias

Ian Mathias is the managing editor of Agora Financial's Income Franchise, where he writes and researches about retirement, dividend and fixed income investing. Much of his work is featured in The Daily Reckoning and Lifetime Income Report, Agora Financial's flagship income investing advisory.  

Previously, Ian managed The 5 Min. Forecast, a fun, fast-paced daily look into the future of global markets and macroeconomics. He's also worked in public relations, where media outlets like Forbes, AP, Yahoo! and MSN Money have syndicated his writing. If he's not at work, you'll probably find Ian on a bicycle, racing up and down the "mountains" of Baltimore County. Ian has a BA from Loyola University in Maryland. 

Recent Articles

The Awful Way Social Security Might Be “Saved”

Dave Gonigam

The US Social Security program is complete mess. The funds needed to pay these benefits are quickly drying up, and agreeable solutions are in short supply. But all is not lost... There actually IS a viable way to "save" Social Security. But as Dave Gonigam explains, you're probably not going to like it. Read on...


Important Facts You Need to Know the Ebola Outbreak

Stephen Petranek

This summer, the worst Ebola outbreak ever recorded hit sub-Saharan Africa. But the greatest danger, as Stephen Petranek explains, is that the virus will have a chance to mutate into a form that spreads more easily. And if that happens, there will be far reaching consequences - from both a health and an investment side. Read on...


Laissez Faire
A Free Way to Turn Your Unique Skill Into Real Money

Chris Campbell

Everyone in the world has a unique talent or skill that someone else might find useful. Whether it's editing video, speaking Spanish or even eating paper, chances are there is someone out there willing to pay for what you have to offer. Today, Chris Campbell shows you one way to find those consumers and how to make your skill work for you...


The End of the “Gun Control” Bull Market

Greg Guenthner

For the last few years, gun enthusiasts have been concerned that the Feds would find a way to block their access to firearms. Now those fears appear to be subsiding... and so do gun sales. Greg Guenthner explains how to navigate this market in the coming months and years. Read on...


The Most Important Trait of Any Successful Resource Investor

Henry Bonner

The gold mining sector is one of the most difficult areas of the market to navigate successfully. But there is money to be made here. Henry Bonner sits down with one of the giants of this industry and picks his brain about how to find winners in this market and the four things every great investment has in common. Read on...