Argh... Mean:

PS - I am far from being a fan of the EU, but that does not stop me noting that this really seems an attack at it via proxy of its weak links.

Pero la estupidez de los mercados lleva a que solo miren el pasivo y no el activo. Cuando analizan las empresas miran el patrimonio neto, no solo las deudas. En el fondo es un planteamiento ideológico tendente a reducir el peso del Estado.

The stupidity of markets leads them to only look at liabilities and not assets. When they analyse firms they look at the net equity, not just the debts. At the bottom it's an ideological approach tending to reduce the weight of the State

My math for Greece is not adding up.

They have 440k bureaucrats averaging under 20k in euros annually. Gov't budget is 40 billion. GDP is 250 billion. Debt is 300 billion.

When you add things up, it's very hard to blame the debt on the bloated bureaucracy, and also to imagine that you can cut into that debt by restraining the bureaucracy.

I'm sure pensions/social security will also figure in greatly, but here we are talking about a small nation. It's recent scandals have been about big bribes paid by corporations and private developers to politicians who approved projects that had perhaps little value when it comes to increasing economic activity.

$15 billion on the Olympics.
$15 billion a year in military hardware
$3 billion on a bridge to nowhere.

Those are just three projects, but when we're talking an annual budget of 40 billion, you begin to sense that something is really wrong.

Just this week a 2 year note auction with a base line of 300 million € harnessed demand for more than 2 000 million €, the Treasury opting to cut at 1.715%, selling 800 million €. This obviously made a lot of people upset.

Vencit omnia veritas.

I was skeptical, but looks like you're right:

Don't throw bricks...European debt levels compared | Worldmapping beyond mere description - 2010.3.24

The following map compares the total debt of the EU-27 countries and the debt's share of the GDP - revealing some interesting views: In sheer numbers, the PIGS are not alone (Greece, in fact, almost not counting). Eventually, we're all in the same boat in the sea of gloom (click map for larger view)...

["Country sizes proportional to each country's total debt"]

What's more,

Global recovery? The real dimension of external debt | Worldmapping beyond mere description - 2010.4.6

... it is not only the Eurozone, but most Western countries in a deep crisis - global inequalities the other way around this time - this is a topic that will be with us for months (and years) to come and still a long way to go on the road to recovery. So, keep this picture in mind:

["Country sizes proportional to each country's total external* debt"]

And:

Gaian Economics: Lies, Damned Lies, and Economic Statistics - 2010.4.1

... The graph illustrates how The Economist sees the situation (it illustrates the ratio of debt to GDP for a number of countries). These data were derived from World Bank sources. They seem to bear little resemblance to what the UK is reporting to the EU and offer no justification for the singling out of Greece for a particular beating by the foreign exchange markets. Given that these figures do not include either our private debts or our off-balance-sheet debts, it is a miracle that the pound is still trading at all

I'm not clear about the significance of the word "external" in the phrase "external debt" for the second graphic.

The point is not to be right, but to get to right.

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UK

Economics Essays: Why Current Accound Deficit Persists - Economics Help - 2009.12.17

Source: ONS retrieved Dec 14th 2009

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More detail on Portugal:

Portugal Sustains: Roots of the Problem | Seeking Alpha - 2009.1.12

... Of course another of the problems Portugal will have in 2009 is that of financing and reducing its current account deficit, which is estimated by the IMF to have hit 12% of GDP in 2008. In particualr I would draw attention to the structural damage to the income account (see chart below) which has been caused by the external financing required by so many years of running such large deficits. Thus as we get into 2010/11 the risk of a serious financing problem on the back of a pair of "twin deficits" which simply get worse and worse is hardly to be taken lightly.

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More detail on Spain:

Spain's Current Account Deficit Folds In On Itself | Spain Economy Watch - 2009.10.2

The net debt chart illustrates quite clearly why the ability to issue debt denominated in your own currency is one of the most treasured possesions of any sovereign state. Basically Spain's debt is in euros, and since the Spanish treasury and central bank have no capacity to create euros, or to devalue the currency, the only way to correct Spain's distortions is via and long slow and hard process of ideflation (also known by the more politically correct title of internal devaluation, which doesn't make it any easier or less painful as we can see now in Latvia).

My bold.

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More detail on Greece:

Greece Needs to Implement a Significant Internal Devaluation | Seeking Alpha - 2009.12.16

Greece needs to implement a significant internal devaluation, as without this, correcting the fiscal deficit will only involve playing around with the tip of the iceberg, and default in the longer term will become inevitable.

PIIGS - Wikipedia, the free encyclopedia

A great deal of the recent turmoil on Greek bond markets appears to be the result of selective reporting and speculative financial market activity. Given the very large external funding requirements of all the Anglo-Saxon countries the recent crisis also appears to be an attempt to draw international capital away from the Euro Area in order that countries, such as the U.K. and the U.S. can continue to fund their large and growing external deficits which are matched by large and growing Government deficits. Anglo-Saxon countries do not have large domestic savings pools to draw on and therefore are completely dependant on external savings. This is not the case in the Euro Area which is completely self funding.

Some economic commentators have used the sell off on the Greek government bond market as a justification for imposing 'austerity' policies on Greece in exchange for access to European funds, funds which would help to marginally lower borrowing costs. It is not at all clear that it is in Greece's economic interests to impose fiscal austerity on an economy already in recession in exchange for the dubious benefit of obtaining lower domestic interest rates. Tighter fiscal policy would merely offset the positive impact of lower borrowing costs and, in addition, social disruption would likely have a significantly negative impact on investment and growth.

In essence, in exchange for cheaper funding from the EU Greece and other countries would, in addition to losing control over monetary policy and foreign exchange policy, also lose control over domestic fiscal policy. EU economic domination would therefore be complete.

Although I also wonder if government borrowing inherently needs to be from hyenas in the first place - why do our fiat money systems magically require private debt issuance at point X instead of point Y?

Either way, it's not something that can be changed overnight... the question of the moment is will the round of speculators keep going after countries on the edge of the Euro? And will that finally force one of them to leave?

We can't forget, too, that CDS's are under the table private deals, and that we have no idea what it out there, so the banks will quote the index and say, See, there's not that much in CDS's out there, but then when there's talk of the market becoming more transparent so that everyone can see what is going on, then suddenly there's outrage, which for me implies the market is bigger than we know. And that makes sense. Investors probably don't want people to know how much they personally are exposed on any given investment.

Also, we can't forget that the investment banks are the ones who originate the CDS contracts, at a low price. Then there's a momentum play, the contracts get driven up, the investors panic, start buying up CDS at a premium, and the originators are laughing all the way to the bank. Some of them even end up buying short-term bonds whose yields have been driven up in the panic.

This is a momentum play, a kind of reverse pump-and-dump, and it relies on the skittish psychology of investors.

According to the IMF, the total amount of foreign claims, in this case focusing on Southern Europe countries, better known as PIIGS, on European international banks is $1.54 trillion. And while many have claimed that Germany would stand to lose the most from an implosion in the European periphery, that is in fact not true true: with $781 billion, France has much more at stake than Germany, whose banks have "just" $522 billion in "Southern European" claims. And while the IMF cut German GDP forecasts in large part due to the country's exposure to Southern Europe, it appears that France is next on the chopping block.

The source of the above data is IMF report titled: "Germany: 2010 Article IV Consultation--Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Germany" in