Greek Fire, Part 31

The legendary, unquenchable Greek Fire continues to burn in Athens as tens of thousands of protesters surrounded the parliament building there in opposition to the latest round of austerity cuts.

Riot police and barricades blocked approaches to parliament as 20,000 people gathered in the capital, summoned by a popular protest group that has occupied central Syntagma Square for weeks after a similar mobilisation in Spain.

Lawmakers inside the building are debating a new austerity package worth over 28 billion euros ($40 billion), a condition demanded by Greece's creditors in return for a badly-needed new aid bailout.

Prime Minister George Papandreou began an emergency meeting with the Greek head of state, President Carolos Papoulias, after a government deputy defected on Tuesday, reducing the government's majority to five seats.

Another party member also recently indicated that he would vote against the government's plan, raising the likelihood the reforms may be rejected.

Greek citizens know they are the ones who are going to be paying and paying and paying for the bailout of the government, and they aren't happy one bit.  This is the third general strike this year for Greece and once again it has paralyzed the country.

A Greek default and collapse of the euro is no longer unthinkable.  As a result, the Greek government has all but collapsed:

After violent protests against austerity measures Wednesday, Greek Prime Minister George Papandreou announced a government reshuffle in a bid to solve his nation's debt woes.


Papandreou said in a brief televised statement that he will seek a vote of confidence in the new government Thursday. He did not offer any details of the extent of the government reorganization.

The Greek parliament has opened debate on the austerity measures, seen as essential to Greece's meeting the terms of its international creditors.

Papandreou said the formation of a unity government requires agreement from all opposition parties on the cuts and privatizations agreed to in an international bailout Greece undertook just over a year ago.

This will solve precisely nothing.  If the Greek government falls, no, when the Greek government falls, the euro and eurozone are next.  A number of truly awful financial scenarios branch out from a Greek collapse and default, and all of them end up causing severe damage to the already weakened US economy.

Our inability to deal with the Too Big To Fail regime has now come full circle.  It's no longer banks that are insolvent, but entire countries like Greece.  And should the Greek Fire spread like I think it will, the second half of 2011 is going to make 2008 look like a picnic.

Batten down the hatches, folks.  It just got real.