Seems like the markets will shrug it off as they’ve just been delaying the inevitable. A Greek exit is probably better for the EU in terms of having to not continuously lend Greece money that will never be paid back. Greece can devalue their own currency and try to export their way to growth (one of many simple solutions). What I don’t think the EU is ready for is a mass exodus of young, frustrated, and unemployed Greeks. Employment in Europe is not getting better, and this situation will certainly not help.
why can’t Greece just get kicked out already. then when their currency collapses into nothing, I can go vacation there for dirt cheap. finally get to see that Parthenon
Well, because if Greek get “kicked out”, they will default on 300 billion euros of debt. Germany and friends want to eventually get paid back… and that’s why they are trying so hard to “help” Greece repair its finances. Germany also does not want a roadmap for countries to leave the EZ. The weaker states help keep the currency devalued and keeps us buying BMWs. The EU decisions are not driven by ideology. There is PnL at stake.
Arguably, its better for Greece than for the rest of the EZ if they were to leave. At least this would enable them to devalue their currency and boost their real economy. However, the downside will be huge capital flight, crazy inflation, and probably most importantly, loss of access to the “free money” borrowing from the EU. The Greeks can accept a lower standard of living through austerity, or through inflation. An exit would be a net loss for Greece.
So essentially, it’s in everyone’s interests for Greece not to leave. However, someone will have to pay something, so they are bluffing each other. Greece will eventually accept some concessions. Tsipiras is a professional bullshitter. He will talk shit, but is not about to throw his country and career into the toilet. Once there is some progress, EU will pay them a bit more.
partial debt forgiveness is the only option that results in Greece staying in the EU for good. if the EU/IMF/ECB fails to accept that, this will end with Greece leaving, eventually, even if they extend the bailout again this month. but yes, partial debt forgiveness means others will look for the same treatment, but that would be a good thing wrt to the longevity of the union.
Germany should just shut up and take the Greek default. Austerity is a violation of Greece’s sovereignty. Don’t lend money to people who can’t pay you back.
Germany is basically paying Greece to introduce austerity measures. Greece is free to walk away (well, I guess it is not legal in the EU, but that does not matter if they are quitting the EU). However, Greece also does not want to walk away from the money…
The reality is that the money lend to Greece is already lost for German and European taxpayers. One of the major reasons Germany does not want to have a haircut on the debt is that this would put into manifest that in contrast to what Germans were promised by Merkel the taxpayers will realize severe losses on the debt. Kind of equivalent to the disposition effect in behavioral finance…if the loss is not realized it’s not a loss….
All the rescue packages in the past where basically programs to bail-out and shield the European banks and insurance companies against the Greek risk by shifting the debt to the (German) tax payers either directly or through the EU. The irony is that from the entire rescue packages no one cent ended up in Greece. It was just a circular flow from the taxpayers to Greece and from there directly to the banks and insurance companies.
It must have been clear for everyone with two brain cells that the austerity and reform measures (which undoubtedly are necessary) could not have worked out without being accompanied by major investment programs (kind of a European Marshall plan).
What bothers me most is that the EU is not handling the whole situation from a political/global situation, like the geopolitical consequences a Grexit might have for Europe (e.g. Putin would be very delighted).
^ Nice. Well to be fair they do have some stuff to offer besides olives and armpit hair. They just don’t seem to be a very coordinated/planned village. It’s been embarrassing watching this “plan” of theirs, that dipshit Yanis and his “game theory” or whatever. Jeez, just put on a suit, some deodorant, go talk to the bankers, work out a grown up deal, then go back home and fix your problems so you don’t have to do this again. My European IB buddy says we should buy the dip, that Greece is family and Europe will save them from themselves. I just find it hard to put my cash behind these numb nuts.
Tourism - once visitors realize their money goes further in Greece, they will spend more while on vacation. Greece also has some pharmaceuticals, manufacturing, agriculture, and miscellaneous stuff that are export oriented. Presumably, if Greece had lower wages, other economic activity would become viable as well.
I actually do own GREK ETF, but I bought it during the first Greek crisis. It did well for a while, but I did not sell it to avoid capital gains tax. Now the cycle has repeated…
Some forgiveness of Greek debt might be part of the final solution. However, they might just find a creative way of kicking the can indefinitely. France, Italy, or the U.S. for that matter, will never pay back their national debt.
The biggest problem with Grexit I see is the intransparence of the ECBs Target2 system. Hans Werner Sinn, one of Germany’s leading economists, has for years been advertising the idea that the Target2 system might have some inconvenient circumstances in case of a Grexit. His main point is that it is wrong to assume the currency union is a currency union (really!). He argues that national banks still have authority over printing money and are responsibility for balancing out transnational cash flows within the union. Since the ECB extended massive ELAs to the Greek national bank, the national banks of target countries of the Greek capital flight are forced “to print” Euros in return for promises on repayment from the Greek national bank. Under normal circumstances that would be irrelevant, since Target2 money is only paper money, but in case of a Greek default both national banks and the ECB would miss out on both Target2 credits and ELA liabilities.
Overall, I wonder how long central banks can play this game of buying up all the available soverign debt in the world to depress interest rates. Everything works until it doesn’t. So far it looks like Greece has successfully blackmailed its creditors because they are more afraid of a bond market panic than they are of throwing good money after the bad. Why not, it’s not their money after all. Like Oprah they are just shouting “you get a loan, and you get a loan, and you get a loan!”
Indeed, my hatred for paying taxes has stood in the way of risk management. Still, I don’t regret holding this, given that the risk/reward was affected by the tax hurdle.