It was a long holiday weekend in the United States, but across the Atlantic, Euro-bureaucrats and -bankers were at work trying to keep Greece from defaulting on its debts and thus doing some kind of unpredictable harm to the euro. The leaderless but still active IMF touched off this latest sovereign debt kerfuffle last week when it said that it would withdraw its next round of aid to Greece, due for payment in late June, unless the EU guarantees Greek finances for the rest of the year.
Last year, the EU bailed out Greece to the tune of 110 billion euros ($158 billion), with the understanding that austerity measures, the kind that spark riots, would reduce Greek government debt, which has been running roughly 150 percent of gross domestic product of that country. Among developed economies, only Japan has larger sovereign debt in GDP terms, at about 225 percent, but Japan has the advantage of its own currency and a large trade surplus.
By all accounts, some of the more solvent nations of the euro zone–the likes of Germany, Norway and Finland–will have to deal with strong public sentiment against bailing out the Greeks again, especially on the heels of a similar cash infusion to Portugal earlier in May. There might also be a few politicos in the wealthier countries looking to make hay from anti-bailout or anti-EU feelings. Meanwhile, Greeks have been withdrawing cash from banks in larger amounts by the day: 1.5 billion euros during the last two days of last week alone, compared with 2 billion euros during all of April.
Pending U.S. Home Sales Droop in April
Pending U.S. home sales took a beating in April, according to the National Association of Realtors. The organization’s Pending Home Sales Index, which is based on deals inked but not yet closed, dropped to 81.9 in April, from a downwardly revised 92.6 in March.
The index is now well below its most recent (and clearly artificial) peak of 111.5 in April 2010, when buyers were angling to beat the deadline for the homebuyer tax credit. Every part of the United States saw a drop in April in pending home sales except the Northeast, which eked out a 1.7 percent gain, though the April 2011 index for that part of the country is 33.4 percent lower than a year ago.
Sounding something like a populist running for office, NAR chief economist Lawrence Yun laid the blame for low home sales at the door of timid banks. “We simply have to get back to sound, common-sense lending standards to provide mortgages to creditworthy borrowers who are buying homes well within their means,” he said in a statement. “Bank balance sheets show rising cash reserves and declining loan balances–it’s time to loosen the purse strings.”
Roubini Predicts “Correction” for Stock Markets
Dr. Doom–the would-be economist Nouriel Roubini, famed for pointing out back during the misty pre-recession days that the real estate bubble was about to blow a hole in the larger economy–said on Friday that stock markets are at a “tipping point.” Roubini, co-founder and chairman of Roubini Global Economics, spoke of a “correction” at a conference in Budapest late last week.
How come? The recovery, worldwide, isn’t what it could be, especially in the wake of the natural disaster in Japan and the ongoing debt problems for the weaker links in the EU’s chain.
The markets shrugged off any such Cassandra-like warnings on Friday, with the Dow Jones Industrial Average up 8.82 points, or 0.31 percent. The S&P 500 gained 0.41 percent and the Nasdaq was up 0.5 percent. The markets were closed on Monday for the Memorial Day holiday.