By Philippe Herlin – Researcher in finance Contributor to With the upcoming German elections, the problems in the Eurozone have been left aside. Angela Merkel doesn’t want to lose some voters by talking about it. Her finance minister slipped, during the campaign, saying that Greece will have to be helped again but, not to worry, with only 10 billion euros.

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But on Sunday, this comedy will end. Greece will not need only 10 billion euros, it will need much more. The country is getting deeper in crisis; it will not be able to reimburse its debt, and a new restructuration plan will have to be put in place. And it will be even more complicated than the last time because the major part of that debt is held by the European central bank (ECB), which will have to be refunded to avoid being depleted of its own funds. The rest is held by some relief funds guaranteed by the European countries (FESF, MES), and they, too, will have to put some money back in those structures.

Also, there is Portugal having trouble meeting its obligations, and it won’t be able to reimburse the 78 billion of aid brought by the European Union and the IMF in May 2011. The ten-year rate is over 7%, the situation is untenable. Again, there will have to be some kind of restructuration, and some of this debt will have to be erased. The European relief funds will, after Greece, be downgraded, and the countries guaranteeing them will have to inject more funds into them… Municipal elections are coming September 29, and after that, these things will have to be taken care of.

And let’s not forget these two small countries, Cyprus and Slovenia. Cyprus is going deep into recession; an 8% drop in GDP, at least, is predicted in 2013! There is no way this country will reimburse the 10 billion euros of its bailout plan! And Slovenia is suffering with its banking system, with toxic debt amounting to 20% of its GDP… quick, a bailout plan!

Next? Spain and Italy will make news as well. The spanish banking sector is still very sick; all the losses associated with the real estate bubble haven’t been taken into account, far from it. Italy’s chaotic political situation makes for an uncertain future. And those two countries aren’t back on the road to growth, while their public debt keeps growing. Italy has just experienced its eighth consecutive quarter of recession!

And next? Well, in France, up to now, everything is okay, the rates aren’t too worrisome for now. But when the markets realise that the budget deficit of this year will be way off the mark, the financial climate may change. We shall see what happens when the markets understand that there is no serious structural reform being implemented…

The parenthesis is being closed and certain issues will now have to be dealt with openly. The relative calm we’ve witnessed these last few months in the Eurozone had nothing to do with any improvement in the economic fundamentals… it had to do with Germany’s wish to keep quiet about it, and since they’re the ones paying the bill… We shall see what Monday brings.


Philippe Herlin


Philippe Herlin – Researcher in finance and junior lecturer at the Conservatoire National des Arts et Métiers in Paris / Contributor on / @Philippeherlin / Facebook

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