The Greek tragedy just gets worse and it doesn't look like Greece will get out of this mess easily.
First, we have ratings agency Moody's warning that that Greece could see its long-term credit ratings cut by two notches. This follows a similar statement from Standard & Poor's. This is dangerous territory now: if Greece's credit rating is cut, it would increase the country's borrowing costs which would make it even more difficult for the government to cut its budget deficit. Furthermore, it would cripple Greek banks which use all those Greek bonds to get money out of the European Central Bank. A lower rating could mean that the ECB will no longer accept those bonds.
In other words, Greece is struggle to extricate itself and get working again.
What makes it even worse is Greek Deputy Prime Minister Theodoros Pangalos accusing Germany of failing to compensate Greece for Nazi occupation during World War II in an interview with the BBC. "They [the Nazis] took away the Greek gold that was in the Bank of Greece, they took away the Greek money and they never gave it back," he said.
How dumb is that? The Greeks are hoping the Germans will give them some cash to get out of this mess. Not smart at all. The Nazi reference will go down like a brick parachute in Berlin.
Greece is now headed for junk status as European Union inspectors don't expect it to meet its deficit reduction targets. The situation is made even worse with The Wall Street Journal reporting that wealthy Greeks are pulling their money out of Greek banks and sending it abroad. Greeks with money don't expect the local economy will save them. One private banker has told the WSJ he estimates that €8 billion has moved out of Greece to accounts abroad since December. That represents a substantial chunk of the €30 billion under management in Greek's private banks and it's not a good sign for the future.
Meanwhile, Federal Reserve chairman Ben Bernanke says Goldman Sachs and other investment banks would be investigated for their role in the crisis when they bet Greece would default on its debt.
Still, you'd have to say that Goldman Sachs will come out of this better than Greece. Or for that matter, the global economy.
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