Greeks protesting at another critical moment for Europe
Jeremy Hobson: Now let’s get to Greece. A day after the government submitted a budget cutting plan that’s needed in order for Greece to get more bailout money. There are huge strikes over the cuts going on in Athens today. Oh, and by the way, the European finance ministers say they’re not yet convinced that the Greeks are ready to get their budget under control.
Marketplace’s Stephen Beard is in Athens and he joins us now. Good morning, Stephen.
Stephen Beard: Hello Jeremy.
Hobson: So bring us up to date, it seems like things are developing very quickly in Greece right now.
Beard: Yes, I mean there is some political turmoil and disarray here — nothing unusual in that in Greece these days — but it does appear to be getting worse. The leader of one of the three parties in the coalition government says he will not support the bailout package when it comes before parliament on Sunday. Now does that mean the coalition is falling apart and the measure won’t pass? No, we can’t say that. But it might be close — it could be a knife edge vote.
Hobson: And Stephen, there are protests going on today, you’ve been out in the streets. What’s happening there in Athens?
Beard: Well yes, there has been a violent protest outside the parliament about a mile away from where I am now; two protesters have been injured. There is a growing anger here that may well spill over into more troubles, a sign of how desperate some people in this society have become.
Hobson: Stephen, does it look like all the stars are going to align and everything will get pass and get accepted and we’ll move forward without the messy default in Greece?
Beard: It’s almost impossible to say, Jeremy. I mean, it does really hinge on this vote on Sunday; it could really go either way. We’ll talk again on Monday morning.
Hobson: We certainly will. Marketplace’s Stephen Beard in Athens, Greece. Stephen, thanks.
Beard: OK, Jeremy.
Hobson: So how is this playing on Wall Street? Well, let’s bring on our regular Friday guest, Chris Low. He is chief economist with FTN financial and he is with us live as he is always, from New York. Good morning, Chris.
Chris Low: Good morning.
Hobson: What do you make of what Stephen was saying and what’s going on in Greece?
Low: Not surprisingly, the markets are closely focused on this for two reasons. One, we actually haven’t had much economic data this week so we’re sort of looking for a story to follow. But two, this Greek thing has dominated trading for the better part of two years. It used to be every month or so we had to worry about it, not it seems like it’s every day or two — and equities are now sharp this morning.
Hobson: Chris, what do you make of it as an economist, looking at it from sort of a macro view?
Low: Well, look, as a U.S. economist, we have to look at Greece and how it might affect the United States. And to echo something Stephen said, it’s almost impossible to say. And again, that’s why the market reacts the way it does. Euphoria, when it looks like a deal will be done. Despair, when it looks like a deal won’t be done. I don’t think this will have either way — even if they cannot work things out — I don’t think it will have a huge impact on the U.S. economy. But what we don’t know is sort of the black box financial market effects that might come through.
Hobson: What do you mean by that?
Low: What I mean by that — we know the banks are relatively well-shielded. The Federal Reserve has reassured us; Ben Bernanke has reassured us and believe it or not, the Fed now has employees sitting on the trading floors at the big U.S. banks, monitoring positions, meeting with risk managers and so on. If he says they’re OK, they’re OK. The problem is this huge unregulated universe of hedge funds. We don’t know if they’re exposed and MF Global is a reminder — a timely reminder — of what can happen.
Hobson: Chris Low, chief economist with FTN Financial. Thanks so much, Chris.
Low: You’re welcome.
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