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I have said it before and say it again, only losers dawdle.

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[B][I]I have said it before and I say it again and, amazingly, my screams at you are supported by Matthew Lynn, a leading Chief Economist: well bugger me, I thought the whole clan were just lying bullshi**ers, well one Sparrow............[/I][/B]
[B][I]
We have no reason to be proud, the longer you wait the more you lose, as the Dictatorship, take your money to give to the rich. I also said this before, it will all go pear shaped and, there is never a good time but, why should you give all you have to the Rich, before it does go. And go it will...........[/I][/B]

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That revolt is going to grow and grow as 2012 progresses. Political leaders are going to fight back against the austerity the financial markets demand.
In Greece, it is hard to imagine that permanent 1930s-recession will be acceptable forever, even if the European Union does put technocrats in charge of the country. The same is true of Spain and Italy. Spain will be back into recession this year: The government now expects that GDP will contract by 0.2% this quarter and by 0.3% in the next. Italy looks just as bad. The economy contracted by 0.2% in the latest quarter, according to government figures, and with deep cuts looming in public spending, and little sign of structural reform, the downturn may well be a deep one as 2012 unfolds.
Everyone knows the reason. The confidence of the bond markets has to be restored. The debtors have to be paid in full. The banks canít be allowed to go bust, otherwise the entire economy will collapse.
In fact, it isnít really true. Iceland went bust, and seems to be growing again now ó indeed, it is doing better than many of the countries that are still struggling to pay back every cent they owe. Eventually new leaders are going to emerge who demand that some of the debts get written off. Europe will be the epicenter of that. But it wonít be restricted to Europe alone. The U.S. has massive, and quite possibly unaffordable debts. So does Japan. So do many other countries.

In reality, sorting out of the debt bubble is going to take a long time and is going to involve a lot of pain for everyone. The view of the markets is that it is always ordinary people who should take the punishment ó and never the banks or bondholders who should suffer any losses.
But Hungary shows that isnít always going to be possible.
Prime Minister Orban has realized that bankruptcy isnít such a bad option. It simply means the investors suffer some losses.

He is unlikely to be the last leader to reach that conclusion and that means there is a lot of pain ahead for the financial markets. Much of the debt that was built up in the last decade is, in reality, never going to be re-paid. The investors will have to take some losses, and the economy will have to suffer some austerity. A one-sided deal is not, in the medium term, going to be acceptable.
Hungary may be the first country to make that point, but it certainly wonít be the last.


Matthew Lynn is chief executive of Strategy Economics, a London-based consultancy.
[URL="http://www.marketwatch.com/story/hungary-wont-be-last-to-make-bondholders-pay-2012-01-11?link=MW_story_popular"]Hungary won[/URL][/QUOTE]
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