Greece Vs EU

[Stanley Road]

How will blink first?

Reckless Spending Vs Reckless Lending

I'm not sure the negotiations with the lenders will end in agreement and if Greece stands by its word and does not want to accept another loan, then surely the Euro project will fall apart.

I don't understand the mentality of the lenders at all, they will never get all of their money back even if Greece stick to the plan and they will unlikely get any of it back if Greece defaults.

Interesting times

 

[peterstorey]

I think the troika won't make concessions and the Greeks will leave the euro. It won't cause major disruption as it would have a couple of years back with other PIGS jumping ship and I think it's largely written into global market prices too. The Greeks can then go about reflating their economy.

 

[Red_toad]

I think the troika won't make concessions and the Greeks will leave the euro.

I wonder what effects that will have on the Greeks long term? The country lives beyond its means & who is going to bankroll their standard of living?

 

[peterstorey]

Greece is a perfectly viable economic entity. Straight off the bat revaluing the currency will kickstart exports and tourism.

 

[MikeUpNorth]

I think the troika won't make concessions and the Greeks will leave the euro. It won't cause major disruption as it would have a couple of years back with other PIGS jumping ship and I think it's largely written into global market prices too. The Greeks can then go about reflating their economy.

If/when the news leaks that they're leaving the Euro, will we not see the bank run to end all bank runs in Greece?

 

[peterstorey]

If/when the news leaks that they're leaving the Euro, will we not see the bank run to end all bank runs in Greece?

They'll have to limit withdrawals to living expenses until the conversion to new drachma (see Argentina's devaluations). A lot of rich people have already taken their funds out, I could see Syriza making them repatriate those funds to be drachma'ed.

 

[Jippy]

They'll have to limit withdrawals to living expenses until the conversion to new drachma (see Argentina's devaluations). A lot of rich people have already taken their funds out, I could see Syriza making them repatriate those funds to be drachma'ed.

You know that moving to the drachma will devalue every Greek person's life savings by 50% or more in all probability. Moving all of the mortgages and loans to drachmas will decimate the Greek banks too. I know you want them to throw of the yoke of Troika, but it will be carnage.

 

[MikeUpNorth]

You know that moving to the drachma will devalue every Greek person's life savings by 50% or more in all probability. Moving all of the mortgages and loans to drachmas will decimate the Greek banks too. I know you want them to throw of the yoke of Troika, but it will be carnage.

I don't think anyone doubts it would be chaos for at least a couple of years. The debate is whether it would be better for Greece's long term fortunes to throw off the debt and retake control of its monetary policy.

 

[peterstorey]

You know that moving to the drachma will devalue every Greek person's life savings by 50% or more in all probability. Moving all of the mortgages and loans to drachmas will decimate the Greek banks too. I know you want them to throw of the yoke of Troika, but it will be carnage.

I doubt it would be 50% more like 25%. It means that you still buy the same amount of bread and pay the same amount of rent but that BMW doesn't get bought. Greek banks would return to taking deposits, lending money etc ie what banks should be about, not tangoing with Goldman Sachs in the global finance casino.

 

[Jippy]

I don't think anyone doubts it would be chaos for at least a couple of years. The debate is whether it would be better for Greece's long term fortunes to throw off the debt and retake control of its monetary policy.

In many ways, being in control of its own monetary policy will be a positive but it will have so little money, the central bank will have few tools at its disposal. The loss of access to global capital markets will be massive- Argentina is not an economic model anyone would want to follow.

I doubt it would be 50% more like 25%. It means that you still buy the same amount of bread and pay the same amount of rent but that BMW doesn't get bought. Greek banks would return to taking deposits, lending money etc ie what banks should be about, not tangoing with Goldman Sachs in the global finance casino.

If the Swiss franc can move 18% in a single day, I bet you the drachma would move far more. I doubt prices would move down in tandem with the currency's fall. Any imports would be ridiculously expensive. The problem of converting euro liabilities, ie mortgages, pensions, corporate debt etc...into drachma will be crippling and bankrupt loads of banks and companies.

 

[Stanley Road]

If/when the news leaks that they're leaving the Euro, will we not see the bank run to end all bank runs in Greece?

I think most of the 'Mafia' money already resides in other banks, possibly German and Swiss ones. Which begs the question, will any of these countries freeze these accounts? Probably loads of unpaid tax money is sitting around Europe's banks

 

[Pogue Mahone]

I doubt it would be 50% more like 25%. It means that you still buy the same amount of bread and pay the same amount of rent but that BMW doesn't get bought. Greek banks would return to taking deposits, lending money etc ie what banks should be about, not tangoing with Goldman Sachs in the global finance casino.

I suspect the Greek people are currently relying on imports much more mundane than BMWs to maintain a reasonable quality of life.

 

[Nick 0208 Ldn]

In many ways, being in control of its own monetary policy will be a positive but it will have so little money, the central bank will have few tools at its disposal. The loss of access to global capital markets will be massive- Argentina is not an economic model anyone would want to follow.

The new government ha strong ties with Moscow i believe, and as such is courting Russia for investment.

 

[Pogue Mahone]

What could possibly go wrong with getting into bed with a stand up guy like Putin?!

 

[MikeUpNorth]

In many ways, being in control of its own monetary policy will be a positive but it will have so little money, the central bank will have few tools at its disposal. The loss of access to global capital markets will be massive- Argentina is not an economic model anyone would want to follow.

I'm guessing Greece would look to Russia/ China for investment.

 

[MikeUpNorth]

What could possibly go wrong with getting into bed with a stand up guy like Putin?!

The temptation of the 'radical left' to seek closer ties with Russia due to sentimental reasons is something that always worries me.

 

[peterstorey]

I suspect the Greek people are currently relying on imports much more mundane than BMWs to maintain a reasonable quality of life.

They import a lot of fuel, chemicals and machinery (all of which Russia could supply incidentally)but also a lot of consumer goods, the overall position would be more than compensated by exports/tourism uplift.

 

[Jippy]

They import a lot of fuel, chemicals and machinery (all of which Russia could supply incidentally)but also a lot of consumer goods, the overall position would be more than compensated by exports/tourism uplift.

It's already got a hell of a trade gap.

Exports:
$30.39 billion (2013 est.)
Imports:
$50.58 billion (2013 est.)

https://www.cia.gov/library/publications/the-world-factbook/geos/gr.html

Bizarrely for a country that is renowned for tax avoidance, Greece as a country has the 23rd highest proportion of GDP derived from its tax take.

23 Greece
43.7%
2013 est.
https://www.cia.gov/library/publica...eece&countrycode=gr&regionCode=eur&rank=23#gr

 

[peterstorey]

It's already got a hell of a trade gap.

Exports:
$30.39 billion (2013 est.)
Imports:
$50.58 billion (2013 est.)

Their import bill has already fallen by 33% since 2009 and would fall further, exports are depressed by being overvalued.

 

[JustAFan]

Unrest/social issues/problems caused by Greece leaving the EU could also have a large negative impact on tourism for some years, could it not? Depends of course on the extent and how far into the future you assume the benefits from increased tourism to kick in, I guess. Though if it is cheap enough and has enough things tourists want to see, I guess they might ignore some other concerns.

 

[peterstorey]

Unrest/social issues/problems caused by Greece leaving the EU could also have a large negative impact on tourism for some years, could it not? Depends of course on the extent and how far into the future you assume the benefits from increased tourism to kick in, I guess. Though if it is cheap enough and has enough things tourists want to see, I guess they might ignore some other concerns.

I wouldn't think twice about going to Athens, considerably warmer, safer, more interesting and prettier than Detroit.

 

[Stanley Road]

I just dont believe coming to an arrangement on debt is worse than a default. That must be the only consideration.

 

[peterstorey]

I just dont believe coming to an arrangement on debt is worse than a default. That must be the only consideration.

There is no arrangement forthcoming from Merkel and co, it's either continue to screw your people into the ground or do one. The Greeks said we've had enough, the Spanish and Portuguese (see Arruda's post) may not be far behind.

 

[Stanley Road]

Yes but.....

you dont get all your money back if they stay in

you dont get all your money back if they leave

 

[peterstorey]

I think the troika position is that they're not getting much anyway, they'll hold out for at least that. If they agree to further reductions then SPII will want some of that.

 

[JustAFan]

I wouldn't think twice about going to Athens, considerably warmer, safer, more interesting and prettier than Detroit.

But the choice isn't just between Athens and Detroit is it? Not even sure how Detroit plays into this? I'll just put that comment down to more of your inane trolling. Of course if there is a lot of unrest in Greece because of this, then it might not be as safe as it is now or might not appear as safe to potential tourists. Purely speculative of course.

 

[Globule]

At this point, with the EU and Merkel in particular being so vocal in their opposition to a renegotiation, and Tspiras being elected on his promise of a renegotiation, I'm fully expecting a compromise, but one that looks like both sides won.

The EU can live without Greece, but the idea of Greece forging closer links to Russia is probably a bigger factor than the threat it will have on the single currency. Greece can live without the EU, but they're going to struggle immensely and Syriza's anti-austerity mandate will have to be compromised.

They'll come to an agreement, but first they'll make threats so it looks like the other has bowed to their terms.

 

[Snowjoe]

I wouldn't think twice about going to Athens, considerably warmer, safer, more interesting and prettier than Detroit.

I'd rather set up a deckchair by the River Somme in 1916 than go to Detroit.

 

[Pogue Mahone]

I wouldn't think twice about going to Athens, considerably warmer, safer, more interesting and prettier than Detroit.

Athens is a shit-hole. Definitely one of Europe's least desirable cities to visit or live in. Some nice suburbs though, along the coast.

 

[Jippy]

Their import bill has already fallen by 33% since 2009 and would fall further, exports are depressed by being overvalued.

I would say it is the other way round. The euro has fallen against most major currency over the last couple of years making imports more expensive but its exports more competitive.

 

[Pogue Mahone]

I would say it is the other way round. The euro has fallen against most major currency over the last couple of years making imports more expensive but its exports more competitive.

Not to mention the fact that exports within Europe have been facilitated by the EU Trade Policy.

 

[peterstorey]

Wut. You effectively devalue the currency by 25% and you make exports much more attractive to buyers. Or is there something I'm missing here?

 

[Jippy]

Wut. You effectively devalue the currency by 25% and you make exports much more attractive to buyers. Or is there something I'm missing here?

I think we've got crossed wires here. We're talking about the euro's slump- the drachma moves, assuming it happens, would obviously change things considerably.

 

[JakeC]

The temptation of the 'radical left' to seek closer ties with Russia due to sentimental reasons is something that always worries me.

Syriza wouldn't have much sentimentality for the Soviet Union.

 

[peterstorey]

I think we've got crossed wires here. We're talking about the euro's slump- the drachma moves, assuming it happens, would obviously change things considerably.

We're talking Grexit aren't we?

 

[Jippy]

We're talking Grexit aren't we?

Yep, but the Greeks, like all eurozone members, have been dealing with the classic combo of increased export costs cos of euro weakness and the degree to which this is offset by export strength. If Greece leaves the single currency then yeah, this will be magnified. From what market commentators are saying today, Syriza is really softening its stance btw and pushing more for a longer timeframe to pay down its debt. They don't seem keen on outright default by all accounts, but the big EU summit is on Thursday, so I guess more will emerge then.

 

[Stanley Road]

They've never been in favour of a default and the softened stance is only to buy more time to implement the hard stance

so I believe

 

[PedroMendez]

Its really a tricky situation. There is no middle ground so a substantial compromise isnt possible. Usually that results in postponing the issue, but even this is difficult, because Greece needs money. Sure, they get another €60bn in emergency loans from the ECB and if the European+Greece politicians try really hard they might "continue" for another few month/years, but in the end one side has to give in. Both ways will have severe consequences for Europe and the Euro.

 

[JakeC]

They've never been in favour of a default and the softened stance is only to buy more time to implement the hard stance

so I believe

I don't think so. I don't think they're as much of a threat to the establishment as people believe. The KKE refused to go into Government with them because of the rightward shift of some of their economic policies.

Whether or not you would have any sympathy for the KKE at all or not, this interview makes some interesting reading.

http://inter.kke.gr/en/articles/SYRIZA-the-new-pole-of-social-democracy-in-Greece/

 

[PedroMendez]

Giorgos Stathakis, their minister of ecconomic affairs, tourism and naval stuff is certainly acting in the interest of the common people......oh never mind....he is already protecting the money of oligarchs and shipowners