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Peter Zeihan, VP of analysis at Stratfor, breaks down the latest from Greece and offers his thoughts on a potential European "contagion" eff...
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-- -- year joining me now -- -- -- hand vice president of analysis for Stratford and Peter.
Talk to me about sort of the precedent that is Greece and mean it seems to be in this extended triage period -- everyone talks about at least certainly last year.
The contagion -- fact that it's gonna be after Greece is gonna be Portugal Spain Italy the list goes on -- on and on.
We haven't even been able to get to that to the domino effect because we're still dealing with Greece here.
What does this signal for us about the situation there -- -- what Khamese extrapolate about contagion to -- neighboring regions.
The -- -- the concern was very real if you look back to the beginning of the bailout period -- -- but two years behind us now.
-- -- anywhere between a half billion euros at -- or half a trillion Euro and a full trillion Euro exposure base and how you do the math.
The fear was that if the Greek government defaults on the sovereign bond portion of that at least with catastrophic banking failure threaten Greece.
Which then it carries over to the rest of the European Union at large.
That would have happened that would have brought down the Euro and the Europe and the European Union and perhaps even the global economy.
But that was over two years ago.
The Europeans have now had two years to sequester Greece and put in a box and most of the bailout programs have been designed.
To pull a lot of this debt off the market and put -- in the hands of a few governmental institutions.
And so the IMF hold some.
The ECB holds quite a bit and these various members own governments hold a bunch.
But if you look at that -- -- Greek exposure to the rest of Europe it's now.
Or only about a quarter of a trillion bureau probably closer to 200 billion Euro.
We're getting into the realm that the eurozone can survive a Greek default we're not quite there yet and -- -- why the talks today are kind of -- but we're not that far off either.
Now it's interesting because yes there was a dire situation that it felt like any news that coming out of Europe in about any countries -- was Greece Italy Spain.
It felt like we could be on the brink of another sort of Lehman like and that that seems to be off of the table but again.
Even bringing Greece in -- into the EU was very very controversial now restarted -- why it was so controversial because if it has a whole host of problems it's quite small in comparison to act.
Neighboring regions why -- it big -- take out yet really get kicked out this year.
It's not so much that'll get kicked out will probably happen is the Germans and the other northern Europeans will decide that we're not gonna pay for this country any more increases only been able to participate in the European system.
And I don't just mean the EU Europe going back into the eighteen hundreds.
What it's been subsidized by some sort of regional player better reason to keep -- independent so the brits helped the Greeks get their independence to use them in wars against the ornaments.
The Americans then took over subsidizing Athens in order to use them as a foil against the Soviets keep the Soviets bottled up in the Black -- For the first ten years of the Euro -- the eurozone kinda played that same role providing them with credibility otherwise couldn't.
Qualify for but we're now -- an error when nobody has -- a fight with the Turks no one really wants a fight with the Russians the Americans have checked out to the Islamic world.
And Greece is just there are left holding this debt that normally would hand over to its sponsor it's simply isn't sustainable.
And so these -- bailouts we've seen one every two years for 150 to 200 billion Euro.
They're going to need that every two years for ever.
In order to keep their system solvent.
And sooner or later the northern Europeans are gonna choose not to -- that because they're gonna realize.
That the countries become so isolated economically that it's actually cheaper to just let it go.
At a session a critical point they're making Peter is that this company has no economic growth prospects I can support the level of debt that it still is currently written up wit.
Which basically means because it's gonna be coming back to the table with its hands hoping year after year after year.
Let me ask you -- very quickly -- before we have to let you go wobble in Europe look like in five years from now.
Well even if.
Greece is -- to the curb.
That still doesn't solve the Euro zone problems as well Greece is certainly the most damaged not too far behind it is Italy and you can't just excise Italy Italy's got -- two trillion Euro in debt to multi trillion -- banking economy.
Doesn't give you matter future given 51020 years that can't isolate it -- from the system like they have Greece.
And so all getting rid of Greece does is buy them time.
But -- gonna go down sooner or later probably within five.
But will -- what will so are you saying are you making a call that both Greece and Italy will be out and the years.
Well Greece will be out of the Euro zone because of the rest of the Europeans no longer maintain -- rate of the -- though no choice but to leave.
Italy would Italy cracks there won't be -- eurozone left the day after.
It is so that basically will be will be the breaking point for this year -- eurozone -- resigning and then Stratford thanks for.
In -- us it's a very complicated issue and we appreciate your thoughts on the on the topic.
