What Matters In The Financial World Today (11/5/2011)

The Greek democracy is over 3,000 years old, and it may take another 3,000 for the nation to sort out its national debt problems. Prime Minister George Papandreou was able to withstand a vote of confidence in the parliament. He must now try to put together a coalition government to carry forward Greece’s austerity plans–the key to a bailout by its neighbors. The amount of that aid is $180 billion and assumes the Greek debt to GDP ratio will be down to 120% by 2020. No rational economist believes that. The sum that Greece will need over the next three years is closer to $300 billion. That is based on a proof that the southern European country can pull itself  out of a recession which currently shrinks GDP at a rate of 5% per annum.

Close by in Italy, prime minister Silvio Berlusconi has refused IMF aid although his country is swamped under $2.5 billion in sovereign debt. The Italian government has “invited” the IMF to keep careful track of the local economy–a decision forced on it by Germany and France. International capital markets investors believe that if Greece falters Italy will be the next major economy of the euro zone to stumble. And, that is likely. No amount of austerity and almost no amount of aid can save Italy from a recession which it may already be in and unemployment which has stayed stubbornly above 13. And, many economists believe it is austerity that will eventually crippled Italy’s economy for another several years.

Saab may finally have run out its nine lives. The car maker has passed through four hands since GM (NYSE: GM) cut it loose nearly a decade ago. Swedish Automobile, which owns Saab, has not been able to raise the money to keep the cars in production. Zhejiang Youngman Lotus Automobile and Pang Da Automobile Trade want to pay $140 million to buy the manufacturers assets. GM still holds a contract right to veto any sale, and say it may exercise it. Why it would want to block the sale of such a tiny firm and drive it into bankruptcy has no logical explanation.

Web 2.0 game company Zynga would like to follow Groupon into the IPO market. Groupon’s public offering performed much better than expected. It raised $700 million, and shares surged 40% as shares became available for public trade. Zynga may be even more successful. It is profitable a revision to its S-1 shows. Zenga’s net income was $13 million for the third quarter of 2011. That figure was down 43%, but Zynga was able to show it had used its revenue growth to make reasonable investments. Total sales for the period were up 80% to $304 million. Unlike Groupon, Zynga has shown it does not have to spend hundreds or millions of dollars to sustain it.

Douglas A. McIntyre