AUDIO: The Enronisation of Europe

Nick Beecroft, senior markets consultant at Saxo Bank, looks at the broader implications of Greece's plans for a referendum on the EU bailout package revealed at the end of October.

In this freeaudiocast, Beecroft highlights weaknesses in the bailout package, whereby EU leaders agreed Greece's public debt should be reduced to 120% of GDP by 2020, with a 50% haircut on Greek debt already sold. As part of the package, Eurozone member states were to contribute up to €30 billion to the private sector involvement package, and a new bailout fund for Greece of up to €100 billion would be put in place by the EU and the International Monetary Fund before year-end.

"There is no new money of any nature or size, and it is based on financial wizardry," says Beecroft. "You can call it the ‘Enronisation' of Europe, with special-purpose vehicles, collateralised debt obligations and guarantees but very little hard cash. The key question is, how much can societies take? I'm sure it was political pressure that led prime minister George Papandreou to move towards a referendum, that the Greek population was at the end of its tether and wouldn't necessarily take it."

He says the shock announcement of a referendum was indication that the college of eurozone members was beginning to fall apart. "The will to keep this thing together is starting to fall apart, so we're very much in a 2008 state of affairs."

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