Brave Souls !

Despite teetering on the very edge of the abyss it seems that Europe and the Greeks have stepped back and  kicked the can further down the road - and a new $53 billion in bailout funds will be added to Greece's debt.   The details have not been released but it seems that Alexis Tsipras has ignored the overwhelming rejection of further austerity measures delivered in the referendum of just a few days earlier and agreed to the demands made by Angela Merkel of Germany, Francois Hollande of France and Donald Tusk, president of the EU council to lower pensions and implement even tighter austerity measures on the Greek economy.

There will be obvious short term gains.  Emergency funds will  see the banks reopen and some sort of pension payments will recommence, but apart from that - nothing has changed.  Greece is still stuck with a vastly over valued Euro that is crippling it's economy and it will continue to have a huge number of people unemployed.   Younger - smarter - educated Greeks will leave the country in droves and those remaining will stagger under the yoke of what is clearly an unpayable debt.

It can only be concluded that this new bailout is an arrangement between " brave souls ".   The Greeks are stuck with a prime minister who has done precisely what he was elected not to do, and the leaders of the EU have doled out more loan money to a country that has not met it's previous reform commitments in exchange for past bailouts.

It would indeed be an optimist who thinks that the Greek saga is over.   We seem to be midway through the stage version of a "Greek Tragedy "  and the audience is waiting for the story to reach it's inevitable ending !

Greece has hogged the headlines for months and yet a similar debt problem is playing out on the other side of the world.  Puerto Rico is a strange little country that America took under it's wing when as a result of the Spanish/American war of 1898 the United Status took "protectorate status " over Cuba, the Philippines and Puerto Rico.

This Caribbean island has long wanted to become an American state and it enjoys special status as a Commonwealth, with a social safety net paid for by US taxpayers.  It has been in deep recession for a decade and it's governor Alejandro Garcia Padilla has stated that it's national debt of $ 72 billion is virtually  " unpayable ".

There is a ghostly parallel here to the situation in Greece.  The currency of Puerto Rico is the US dollar and it's spiking value is undermining Puerto Rican exports and making the tourist trade uncompetitive.  Recession has seen five percent of it's citizens migrate abroad - mainly to the US - to seek better job opportunities and only forty percent of it's citizens work in the regular work force.  It is a country of small enterprise, often conducted from home.

Fortunately, almost the entire Puerto Rican debt is owed to America and it is anticipated that eventually the island will follow the course of Hawaii  and achieve statehood.   It will then be little different to the other US states in holding debt owed to Uncle Sam that is continually rolled over from year to year.

The big danger when paying debt becomes a problem - is precedent.   Debtor nations are watching closely and a few years ago Africa was deemed encumbered with unpayable debt and much of this was " forgiven ".   Argentina, a regular debt defaulter has been forced into a further default when a court found in favour of "Vulture " funds which had snapped up it's unpaid debt for mere pennies and insisted it be included in a scheduled part payment.

Russia used trumped up charges and dodgy accounting to dismember a major oil company and disperse it's assets to the state.   It's original shareholders won a damages case and Russia is using state sovereignty and refusing to pay up and it seems likely that it's foreign holdings may be seized.
In many other cases international debt has been subjected to arbitration, resulting in the debt being settled in  what has been called a " haircut " with the debt holders being forced to settle for less.

Fear of where the final outcome may lead seems to influence decision makers.   In the vast majority of cases finality is deferred - until another day !