I’m a buyer if GREK gets crushed Monday, can we get it under $9 please?
So, Varoufakis quit…
“Soon after the announcement of the referendum results, I was made aware of a certain preference by some European participants, and assorted ‘partners’ for my ‘absence’ from its meetings: an idea that the prime minister judged to be potentially helpful to him in reaching an agreement,” he wrote on his personal blog.
I feel like many of us (including myself) have kind of lost sight of the big picture.
Greece borrowed money that it is not able to pay back --> don’t really need to extend on that
Greece borrowed money that it is not willing to pay back --> they elected a radical-left party with a clear mandate to tell europe and the IMF to go fuck themselves with austerity and just voted a clear “no” on the referendum
Ok, great, just let them default. Countries have defaulted, happened throughout history.
The European Stability Fund, the ECB and the IMF will take the bulk of the losses ; I am pretty sure that the private sector holders of greek bonds are entities that can stomach these losses, like distressed funds for example. My feeling is that the Eurozone will hardly feel these 300 B€ lost of taxpayers’ money.
So, that leaves us with the question of WTF will happen to Greece. They have a great merchant fleet but they pay no taxes. They have tourism. But that’s it. Do they even export anything ? Can they produce anything with value-added ?
This mean poverty and chaos for Greece, since they won’t get any financing after their default.
So I guess that it leaves them with the only option of selling their soul to Moscow and China.
Please if anyone has an answer, please tell me how Greece can escape spiraling into third-world poverty and chaos.
By no means am I going to say that Greece has done everything right but this time, I do believe that it was about time someone called Germany’s bluff and put an end to this “take some money now and we’ll talk again if you get into trouble”.
It cannot be disputed that Greece’s finances are in mess and their politicians are to blame for the state it’s country is in now but saying that Greece should start repaying it’s debt like the Brits did abt a 100yrs ago is mad - we paid 3-4% of annual GDP for quite a few decades whereas Germany reduced it’s debt from 200% of GDP to c.30% after WW II in a single decade. Ironically Germany is asking Greece to do what Brits did, when Greeks simply want to repeat the German strategy. Obviously you cannot compare German and Greek economies but I’m just commenting on the big picture.
The answer lies in debt restructuring for the entire EU (not just Greece but other heavily indebted economies too), debt forgiveness (like Germans did in London Agreement) and focus on expansion and not austerity, which is going to push Greece further into recession.
Again, by no means am I saying that Greeks did everything right but I’m tired of hearing people talk them down because believe it or not, UK, Germany and many such developed, prosperous nations have been down the same route before.
Greece might be a small nation but allowing Greece to be kicked out of Europe is going to inevitably cause a breakup of the entire union. Markets will turn to the next weak member state, after the Greek drama is over. Europe must do all it can to avoid a Grexit.
Sorry, I just don’t see it. If anything, it will remind borderline euro states that this is the ultimate painful (and shameful) route for being a failed economy. Also, Eurozone citizens are mostly convinced europeans and PIGS (without the G) economies are recovering and the Eurozone is much more solid now than it was 5 years ago. Greece is pretty unique in Europe.
But who knows, maybe Varoufakis will become a left radical international icon, travel to Spain to help Podemos out…Maybe this is the start of a phenomenom, who knows.
The tricky part for me to answer is whether Greece remains in the Eurozone after defaulting.
Obviously Greece’s exports would benefit from a cheap-ass Drachma or whatever but there are many advantages in remaining in the zone.
Just forgot to mention : Greece actually would need to be kicked out and left on its own.
Then you don’t have the moral hazard of other countries/radical-left political parties who think that they can just default or renegociate their debt (à la Podemos in Spain) because they know that there are harsh consequences.
Everyone needs to know that defaulting is possible, but won’t be tolerated. It’s a choice.
You’re right - it’s very tricky to answer whether it will stay in the Eurozone or not - I think it would, but that’s just a guess.
If I haven’t mixed up the timelines then I think 20th July is the next crucial date - which is when Greece is due to pay back ECB on a floating rate note. Failure to pay IMF’s loan wasn’t technically a default, but if Greece doesn’t pay ECB then it certainly would be. And I’m failing to see how things can work out in the absence of a debt forgiveness and restructuring
PS: I’m so very very tired of talking about Greece. I can only imagine how pissed off FMs must be right now
Because the politicians are afraid that this would then be an example to follow by the other countries in deep problems like Spain, Portugal, Italy and so on. I am quite sure that such a situation would boost the left wing parties in these countries. (Recall that there will be elections in Spain in December).
This is also the reason why Greece was unsuccessful in getting support from southern governemnts. Their nightmare is a succesfull haircut combined with less austerity.
Greece doesn’t want out though, in their own words it would be catastrophic. Creditors want their money of course, and less money is better than no money. So both want a deal. And in the end they are family and stuck with each other anyhow, if they are not family it brings into question the entire union.
Thus a deal likely happens. But both have an interest in holding out till the last possible moment; a deal without restructuring is pointless for Greece, but creditors obviously don’t want to do that unless they have no other option.
Seems like a 10% probability type of event, not 90%. Unless someone becomes emotional (stupid), I don’t see how that would happen. People in these positions don’t tend to make emotional decisions. Germans in particular; make the wrong financial decision in favor of emotion?
I assume that you are answering the question “why can’t they default and stay in the Eurozone” and I agree.
At this point, fuck Greece ; they have clearly signalised which path they wish (I respect this decision, but there is a price to pay for that).
At the risk of sounding racist (which I am not, Greek culture and Greece are totally awesome), I really feel like Greek people live in some sort of parallel world where they mix their antique glory with contemporary realities. Like deep down inside they feel like they are walking to the Thermopyles to sacrify themselves in a heroic act against barbarians or whatever.
But I digress. IMO Greece is a sunk cost at this point; they are to be let go of, precisely to give no hopes of a pan-mediteranean marxist revolution to the unwashed in Spain.
Maybe of course this whole thing was a mascarade and Tsipras intends to sign after getting a couple of benign concessions. I don’t exclude this possibility (remember that a week ago, Tsipras did mention his willingness to sign given a couple of adjustements) ; I think the Greeks feel like they just caught everyone by surprise à la Salamine battle against Persia and feel very smart about it. Maybe they are so galvanised that they won’t even realise when Tsipras complies to the Europeans. That would be hillarious ; Tsipras actually trolling his own people.
Tsipras could actually turn out to be a very astute politician.
Greece lied their way into the EURO, allowed massive cheating on taxes, paid out nice pensions and benefits all paid for through debt money from other EU countries, elected a socialist government, and are now saying “SCREW YOU” I’m not paying you back unless you agree to MY terms and you have to haircut my down 30% so I don’t have to pay that portfion back. WTF.
Why would any country ever trust Greece ever again? I wouldn’t
“Why would any country ever trust Greece ever again?”. It’s not a yes/no thing - it’s a spectrum (like being gay/not gay). Some creditors will still lend money to Greece, but at a very high interest rate, unlike the low/zero rates that Greece currently enjoys from the IMF or EU stability mechanisms.
At this point, yes, I am approaching the opinion that the EU should offer Greece terms that are consistent to those that have been given to Portugal, Ireland, or other European countries who have needed bailouts. If Greece does not accept these terms, they should be allowed to default.
A default of Greece’s debt, as others mentioned, would not necessarily lead to the country leaving the European Union or even the Euro Zone. In fact, even if Greece were to start to print their own currency, they would most likely continue to use the Euro as a parallel currency for many years.
Well, not seeing the price I want on GREK this morning. Perhaps tomorrow we get some real carnage with the banks opening? Are they opening the stock market tomorrow also?
Why would it be a bad example for the PIIGS countries? Greece can just default, bond holders can suck it up and deal with it, and things will go on, albeit with really high borrowing costs for Greece…? I guess the last part is the real problem?
EDITING ; this thread is going so fast that using ^^^^ lands 5 posts below. This is a reply to Ohai.
Agreed about the subjectivity of the trust issue after default.
If you borrow money, the entity lending it to you is doing so based on trust and the assumption that you will honour your debt. That is true for your cousin lending you a thousand bucks, the same way that it is true for a tradable debt security that ends up in vulture funds.
From a moral standpoint, mom and pops have lost money lending to Greece, not directly but through pension funds and insurance companies that purchased greek bonds.
This is why when I hear from lefties (and Europe is full of them) that Greeks shouldn’t have to pay back wall-street capitalist vultures, I sometimes doubt that they even have the slightest grasp of what is going on.
Now, from a pragmatic point of view, Russia defaulted in '98 and financial markets seemed to give zero fuck 10 years later.
Argentina did the same in 2001 (?), and they have been excluded from financial markets ever since.
As with anything complex, we are dealing with a bunch of grey areas, here.