Greek Financial Crisis Thread

[Phoaenice]

A default is missing your bill. Greece missed a payment hence defaulted.

Bankruptcy is a process of handling a debt by an outside party (the Court).

Any guess on what happens now?

I think personally, in both cases of result, Greece won t leave.
In the scenario of stamping national bills, so an other currency, I don t find as obvious this to be decleared. A sort of double currencies.
The distance wouldn t be formal, in my opinon, substantial instead, since the private savings would be at secure untill development; Central Bank keeping its already taken obligation with fair interest (and guarantee); and Country knowning possibility of fresh investments (and Greeks itslelf fled away to came back after time, in little steps).
Referendum over Memorandum has value, still it doesn t implies a "spike" choice all-or-nothing leaving/gaining euro area.
I live in Itlay, we and most my compatriots know we haven t solved debt crisis, wich could take off in unprecised circumnstances, again (if Greece leaves, in some years some of us attend the worst).

[Arkolon]

I've just started packing for my holiday in Greece this August. Tell me, how many wheelbarrows should I bring to hold my drachmas?

[Risottia]

Exactly, how having to pay tarifs on their exports towards the biggest market in the area is going to help the Greek economy?

But what is Greece exporting? In your previous posts you explained ship manufacturing is not the best export materials.

The most of its industrial exports is refined petroleum and food.
While it's not a massive export, and largely dependent on imports of raw materials (especially crude petroleum), punishing it further would only make things worse for Greece.

Also, even the most greatest fans of EU integration can see the euro was a bad idea from begin.

Actually no. The bad idea was allowing some governments to fudge their accounts so they could join; and even worse was not having (before or at the same time) a complete integration of the political level of the EZ economies, that is, common tax policies, common debt policies, common treasury, and everything in the hands of the Commission instead of having various countries squabbling along.

[Risottia]

Austerity as an economic policy for everyday is doomed to fail, yea. Austerity as a temporary means to the end of cutting down the deficit has worked in other countries (Spain, Italy to name two), which leads me to think that in Greece it has been implemented poorly.
Also, defaulting isn't the best of option, because, the world being what it is, in the future Greece will need more loans to kickstart its economy again, and defaulting isn't going to give better loan conditions in the next future.

WTF

Reading problems? The deficit/GDP in Spain and Italy is going back at bearable levels. That's why the rates on the Spanish and Italian bonds have been going down in the last 4 years.

[Kelinfort]

I've just started packing for my holiday in Greece this August. Tell me, how many wheelbarrows should I bring to hold my drachmas?

I don't think they'll see hyperinflation. Very inflation is likely if they switch, but I don't think we'll see 5000% inflation rates.

[Pollona]

Strange definition of worked... Also, the ECB bought up plenty of Spanish and Italian bonds, something which helped stabilise those economies but they didn't do it for Greece. Also I don't understand how Greek austerity has been poorly implemented seeing as how Greece has cut 26% off its government spending compared to Italy's 2%.

The ECB had far more leeway with Spain and Italy than they did with Greece, particularly because the original bond buying program was not around for the first Greek rescue package. However, the crises in Spain and Italy was more easily solved. Both had structurally weak banks that simply could not be rescued by the government (due to their high levels of debt). That in turn shook confidence in their sovereign bonds as well. Italy to my knowledge avoided a full "bailout" like Spain had to go through, and rather they just had the ECB buy up bonds like candy. Both still had to make not-insignificant cuts to their government spending (~7% and ~4% respectively). As of right now both countries are not under any EU bailout program, Spain exited theirs in January.

The problem with Greece is that the crisis is a fundamentally different animal than other Eurozone countries. Greece's has a massive sovereign debt problem that necessitated getting it's fiscal house in order. It's set to finally achieve a surplus, but after a ~23-24% cut in government spending I'm sure many people in Greece are not feeling too pleased by that.

This is just my opinion, but the issue should have been solved back in the first bailout plan. Perhaps in a two phase proposal, one for immediate austerity, and one for long term pro-market reforms. None of this constant austerity->bailout->austerity cycle. It's difficult to see if the country can take much more of it.

Austerity as an economic policy for everyday is doomed to fail, yea. Austerity as a temporary means to the end of cutting down the deficit has worked in other countries (Spain, Italy to name two), which leads me to think that in Greece it has been implemented poorly.

So you agree that austerity is positive? As for Greece, it failed not because it was implemented poorly, hell it was(and remains) the most harsh austerity programme of all the countries mentioned, with tremendous humanitarian effects on our society, but most importantly(at least for you); it caused the majority of Greek and Greek-based companies who based their profits in internal consumption to go bankrupt/leave, or in the best case lose tremendous amounts of capital, this, along with the impoverishment and unemployment of large parts of the Greek people meant less taxes for the government.
It failed because that's what austerity is designed for; to bring societies to their knees, so that a free market capitalist system can exist completely unrestricted without laws, or anyone voicing an opinion.

There's no need to be conspiratorial here. This is not some sneaky backdoor plan to implement a more market oriented economy. Austerity is not an economic program. Austerity is, first and foremost, designed so countries can repay their debts. That's why you see crazy proposals like massive cuts in government spending and calls for further tax hikes. In a normal world doing so in a recession is ludicrous. But this is no normal scenario. Again, it's a program designed to get a country's fiscal house in order. Greece obviously could not pay back it's debts like any other reasonable nation, and is now paying the price in economic misery. It lived far beyond its means. Only long term pro market reforms can really turn the economy around at this stage; the sooner Greece acknowledges failures in state owned businesses and inefficiencies in certain industries, the better.

I won't address the discredited Keynesian strategy, but I will say that it would have made Greek austerity far worse. Creditors would have loved to massacre Greece on the bond/equities market for that. When you are that far down in debt hole, the first and most rational thing to do is to stop digging.

[Pollona]

I've just started packing for my holiday in Greece this August. Tell me, how many wheelbarrows should I bring to hold my drachmas?

I don't think they'll see hyperinflation. Very inflation is likely if they switch, but I don't think we'll see 5000% inflation rates.

They might see very brief months of hyperinflation, particularly right after the switch to the Drachma. What depositors do afterwards will likely spell the fate of Greek banks.

Best case scenario might be annual inflation rates of 50%. Anything lower than that is certainly far more optimistic.

[New Werpland]

I've just started packing for my holiday in Greece this August. Tell me, how many wheelbarrows should I bring to hold my drachmas?

Be careful, I know someone who got conned on their trip to Greece.

[Arkolon]

Took me a while: all the way from page 26.

I'm not saying that there isn't anything about clamping down on corruption and tax evasion, but I'm sure there would be very few governments who would be opposed to such measures. Syriza would be unlikely to walk out of negotiations over such demands.

Syriza walked out of the negotiations because any demands would require change. For Syriza, an avowedly anti-Brussels sort of party, the last thing they would want to do is capitulate to the European bureaucrats and enforce austerity on the people. And, to be honest, reading the proposals offered they aren't half bad, and for austerity they're quite lenient (nevertheless still austerity measures). The Greek government walked out of the negotiations out of pure, reckless ideology and a false, unneeded sense of honour that has put them where they are today. That is why Tsipras proposed a referendum at all: he knew the proposals given by the EU were pretty much final, and accepting them would have meant Syriza had finally caved in to the demands of the "troika". Syriza didn't walk out of the negotiations over any particular demand, no, Syriza walked out of the negotiations because there were final demands at all.

And my point about the IMF is that they messed up big time. If they had gotten their calculations correct then it is likely that they wouldn't have suggested such extreme austerity measures. Main point: the creditors, including the IMF, did not fully realise how much damage austerity could cause.

That is a possibility. The IMF messed up its calculations and may have proposed less damaging austerity measures had they not messed up, but I wouldn't take it for granted. I still think the IMF would have went along with the same, identical measures to press on the Greek economy because, as I have said before, in this crisis the IMF isn't trying to look for economic growth and economic development. It's looking to repay debts. The fact that the IMF published calculations at all was to ease tensions that, hey, austerity might not be so bad-- where they were wrong. From where I stand, I see the published calculations as there for political reasons, not economic reasons. They were there so that IMF intervention would be seen as helpful and temporary, where, again, they were wrong. I still don't see the fact that they messed up on their guesswork as relevant in terms of policy today.

But unless it is intended for Greece to pay off its entire debt in one period then GDP falling or rising will have an impact on whether or not Greece does in fact pay off its debts. If Greek GDP rises significantly (hypothetically, obviously) then they wouldn't need to cut as much. Looking at the opposite, if GDP falls massively then, theoretically more cuts in spending are needed to meet targets. But that second point is something I would argue can't happen due to the vicious cycle nature of austerity ( you cut causing GDP to fall and then need more cuts next year to be able to repay the debt). But I'm rambling a little, my point is GDP is very important when it comes to repaying debt. That is why the debt-to-GDP ratio is generally used when determining the effectiveness of a reform program. Greece's deteriorating debt-to-GDP ratio is making it less likely that creditors will get any money back.

I don't expect Greece to pay off all of its debt, just to make it smaller in real terms (and not necessarily in proportional terms). This is also one of the reasons why I see some kind of (conditional!) write-off as absolutely necessary as well: there is no way Greece can manage the debt it has today just through the repayment schedule the IMF is pushing onto it. The fact that I don't expect Greece to pay off all of its debt is important in your point: when the debt is repaid, even if it represents an even higher proportion of GDP, there is still less debt, and investors have been repaid. Sure, then you have the problem where no one will want to lend to Greece for a while because of its high apparent debt burden when compared to GDP, but at least the debt crisis would have been resolved: at this point, normal economic rules apply and Greece begins anew investment programmes, infrastructure programmes, education programmes, etc, wages pick up and the ratio shrinks. At that point, obviously all hypothetically and only in theory, all problems would have been resolved and everything will be peachy, as the IMF debt has been repaid.

And I do see what you mean, that its not important the ratio provided the debt goes down, but it hasn't really even done that. Debt has fallen in only a very small way, which is no surprise seeing as Greece is not able to lend from international markets. On top of that inflation has been incredibly low, in some cases even being deflation, meaning that the real value of the debt would rise even if the nominal remained stagnant. I remember vaguely you mentioned that the dollar level of Greek debt had fallen, but that would happen anyway because the ECB has been consistently devaluing the euro in the last few months. Had GDP not fallen at such a significant level that it had then we would not be in the situation we are now as it would be easier to repay the debt. In short, a bad debt to GDP ratio means that a country can't pay back it's debts and will be unable to make necessary future payments, having a real and substantial effect on whether or not Greece will actually pay back it's debts.

Since the 2012 restructuring, Greece has one creditor to repay to: the IMF. The EU has a stake in Greek debt, but for political reasons it's a lot easier for Europe to be more lenient on that (and maybe write it off) than the IMF. We've got to remember that when we're talking about "investors" here, we're really talking about the IMF and their repayment schedule (actually the ECB and its repayment schedule is also very important here). With austerity, these investors are being repaid, and that is the purpose of austerity. As these investors are being repaid, austerity is technically working since austerity is fulfilling its very purpose. I mean, how could austerity not work; what better way is there to immediately repay investors than by cutting spending, raising revenues, and paying them back? Yeah, it's shit for every Greek person out there, and it's pretty terrible for social justice, but this is a very serious economic crisis, and I'm afraid to say that austerity is the only way out of it. Once Greece has fulfilled its repayment schedule to the IMF and to the ECB (hopefully, and probably, with some well-deserved write-offs along the way) as well as implementing the reforms, Greece will be in normal economic conditions once again. And that is what we're striving for here.

[Benian Republic]

How does Greece fund their army?

[Atlanticatia]

I've just started packing for my holiday in Greece this August. Tell me, how many wheelbarrows should I bring to hold my drachmas?

Why are you packing a month or more in advance?

[Arkolon]

I've just started packing for my holiday in Greece this August. Tell me, how many wheelbarrows should I bring to hold my drachmas?

Why are you packing a month or more in advance?

I think ahead.

[Atlanticatia]

Why are you packing a month or more in advance?

I think ahead.

See, I have to pack for five months worth of stuff, and I'm leaving in 3 days. Haven't started packing.

[Atlanticatia]

Anyone have thoughts on this? http://www.theguardian.com/business/201 ... ill-needed

[Liberty and Linguistics]

Tho Troika has repeatedly threatened kicking Greece out of the Euro if they vote no.

And, as polls reveal that Greeks wish to vote no, this could be interesting. I don't wish to say anything along the lines of "bad", since I'm rooting for a Grexit.

[Arkolon]

Anyone have thoughts on this? http://www.theguardian.com/business/201 ... ill-needed

Well, duh, to be honest. Doesn't really come as a surprise.

[Arkolon]

Tho Troika has repeatedly threatened kicking Greece out of the Euro if they vote no.

And, as polls reveal that Greeks wish to vote no, this could be interesting. I don't wish to say anything along the lines of "bad", since I'm rooting for a Grexit.

Rooting for the lower living standards for all Greeks, the mass exodus of educated Greeks looking for work, the collapse of the Greek banking system, the greater burden of more expensive Greek imports, a worldwide stock market free-fall, and the political fragmentation of the Eurozone?

[Novus America]

Tho Troika has repeatedly threatened kicking Greece out of the Euro if they vote no.

And, as polls reveal that Greeks wish to vote no, this could be interesting. I don't wish to say anything along the lines of "bad", since I'm rooting for a Grexit.

A Grexit would actually be good for the EU in that Greece is more trouble than it is worth financially. Although in the highly unlikely scenario that Greece actually does well after the Grexit the EU would collapse. Britain and many other countries deeply dislike the EU but only stay in because they are afraid leaving would crash the economy. If Greece did leave and succeed the one thing (fear of the unknown) holding the EU together would be gone. Conversely if Greece leave as and fails miserably the EU will be stronger as the fear will be stronger.

[Atlanticatia]

Tho Troika has repeatedly threatened kicking Greece out of the Euro if they vote no.

And, as polls reveal that Greeks wish to vote no, this could be interesting. I don't wish to say anything along the lines of "bad", since I'm rooting for a Grexit.

Rooting for the lower living standards for all Greeks, the mass exodus of educated Greeks looking for work, the collapse of the Greek banking system, the greater burden of more expensive Greek imports, a worldwide stock market free-fall, and the political fragmentation of the Eurozone?

If all of that is going to happen, it seems the Greeks would have a bit more bargaining power, to possibly get a haircut on debt.

[Arkolon]

Rooting for the lower living standards for all Greeks, the mass exodus of educated Greeks looking for work, the collapse of the Greek banking system, the greater burden of more expensive Greek imports, a worldwide stock market free-fall, and the political fragmentation of the Eurozone?

If all of that is going to happen, it seems the Greeks would have a bit more bargaining power, to possibly get a haircut on debt.

The Greek government knows they have a lot of bargaining power for these reasons-- why else would the crisis have been going on for this long? If getting rid of them had no strings attached, they'd have been kicked out ages ago. But even then, it seems as if Grexit would be far worse for Greeks themselves than it would be for the Eurozone.

[Novus America]

Tho Troika has repeatedly threatened kicking Greece out of the Euro if they vote no.

And, as polls reveal that Greeks wish to vote no, this could be interesting. I don't wish to say anything along the lines of "bad", since I'm rooting for a Grexit.

Rooting for the lower living standards for all Greeks, the mass exodus of educated Greeks looking for work, the collapse of the Greek banking system, the greater burden of more expensive Greek imports, a worldwide stock market free-fall, and the political fragmentation of the Eurozone?

I agree Greece will be screwed. But I think the worldwide and even EU impact will be limited. The EU did create quarantine measures after the 2012 crisis. And non Greek banks are not at risk. Plus if Greece implodes it makes the EU stronger as fewer would risk leaving for fear of the same fate.

[Camelza]

Rooting for the lower living standards for all Greeks, the mass exodus of educated Greeks looking for work, the collapse of the Greek banking system, the greater burden of more expensive Greek imports, a worldwide stock market free-fall, and the political fragmentation of the Eurozone?

I agree Greece will be screwed. But I think the worldwide and even EU impact will be limited. The EU did create quarantine measures after the 2012 crisis. And non Greek banks are not at risk. Plus if Greece implodes it makes the EU stronger as fewer would risk leaving for fear of the same fate.

This notion seems more possible, the whole EU economy can't be that fragile.

[Arkolon]

Rooting for the lower living standards for all Greeks, the mass exodus of educated Greeks looking for work, the collapse of the Greek banking system, the greater burden of more expensive Greek imports, a worldwide stock market free-fall, and the political fragmentation of the Eurozone?

I agree Greece will be screwed. But I think the worldwide and even EU impact will be limited. The EU did create quarantine measures after the 2012 crisis. And non Greek banks are not at risk. Plus if Greece implodes it makes the EU stronger as fewer would risk leaving for fear of the same fate.

This crisis is highly publicised: you'd be surprised how easily investors freak out. For example, shares fell 4% when the end was looking nigh for Greece a few days ago. This crisis definitely has a worldwide impact, as it determines the political fate of the Eurozone which reverberates on the worldwide economy. Greek banks are indeed at risk, what with major capital flight in the event of a Grexit, which also explains the political fragmentation of the Eurozone: investors fret easily, and Italians, Spaniards, the Portuguese, etc, may also begin mass capital exoduses to the safer North. Grexit poses a very real risk of political and economic contagion across the whole Southern bend of the European Union.

[Phoaenice]

"Grexit" would disintegrate Europe in some years, after reducing Greek' s relative poors to hungry. Would be fine and nice to have a poll.
Options for: Greece ousided from euro; default into euro; Memorandum (without IMF defalut) ect.
if someone more used to this forum wants to do it.

[Votumnia]

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