So, not only are they going to hold a referendum about this debt thing, but they’re going to wait for over a month? Why is this country still in the Eurozone?
I think there are a few factors at play here. The referendum is about: - legitmacy for the decisions Papandreou has made thus far, and - ending the demonstrations, riots and protests (no public support if they back the referendum) The referendum will probably be structured in such a way that it asks Greeks if they want to stay in the EU and eurozone, or not. My bet is they will vote in favour of the status quo, which gives the Greek government the legitimacy it needs. Whether or not it’s in Greece’s best interests is another question. Greece needs a currency worth probably a quarter of what the euro is now, but it ain’t going to get it unless it bails.
Getting out of the Euro is similar to getting off the gold standard during the Great Depression. The first ones to do it were better off than those that waited. Greece needs to devalue its currency. It will get a head start by getting out now before the rest of the Euro fails. Germany also greatly benefited from the Eurozone by devaluing its currency while revaluing all others relatively. Let’s see how well german exports will do in this globalized world when its currency will be worth 3 times more than its ex-Eurozone neighbors.
Its such a crazy move for Greece by its PM, when your country is in deep trouble, the world is trying to help, you tell us you need to decide if the help is needed or not. I totally agree with the European leaders to freeze the bailout money to Greece for the moment.
Well, if you are a country that can’t pay its bills with massive debt coming due and huge salary cuts coming. You can screw all the debtholders and don’t pay them a dime and totally default. Of course, no one would want to lend you money anymore… so you better have your plan straight before you go this route
You know, the rest of the Euro countries would have you think the bailout packages to Greece are some sort of benevolent selfless move. But the truth is, the only reason they’re doing this is to postpone a Greek default long enough to shore up their own financial institutions and sovereign deficits in an effort to contain any systemic contagion. Of course if Greece suffers a disorderly default and it does drag down other peripheral countries such as Portugal and causes a severe recession in core nations through capital erosion and higher interest rates within the financial system of the core nations, that would truly put Greece under severe hardship. At that point, they would also be unlikely to receive much aid from other European countries. Additionally, down the road, in 10 years or 15 when this is all past history, Greece could continue to suffer through reduced trading via it’s lack of inclusion in the Euro nations. So, there are motives for each party to continue to follow this cycle of bailout packages and austerity measures, but there are costs as well born by each party that must be taken into account. Greece is just finally starting to ask itself if two to three years of suffering through austerity before an inevitable default that will finally begin the recovery process is really the best course for them, or if all this suffering beneath heavy austerity prior to a default is only benefiting their neighbors. In my mind, they should have had an open political discourse on the true pros and cons long ago rather than just agreeing to everything in sight.
Good insight mate. That was an interesting take on the current situation.
If Greece leaves, they’re also screwed. How are they going to raise money? They can’t. So they will print it. Greece is screwed either way. I just wish they kicked these guys out earlier and just guaranteed or haircut the existing debt. This Blacksheep needs to go.
Well, of course the other countries are doing this for ultimately self-serving reasons. However, it still remains that Greece is benefiting the most from this arrangement. For instance, lets say I lose all my life savings at Vegas and the casino goons are coming after me. Then, I hold a gun to your head and demand that you pay the debts for me. Sure, paying me would be in your best interests, since you would not get shot. However, how am I not the bad guy in this scenario? Greece is in its current state due to misgovernment and rampant corruption. They need to accept austerity as the cost of fixing their fiscal condition. I understand the argument of the referendum giving “legitimacy” to Papendreo’s government. But from the perspective of someone outside Greece, he has put the stability of his own government ahead of the stability of the Eurozone. So, other heads of state - Merkel, Sarkozy and company, who have defaced their public images in their own countries to support the bailout - are understandably angry. I would be angry if I was in their situation.
Keep this quote handy. Pretty soon you’ll be able to interchange Greece with Italy, Ireland, Portugal, Spain, and, yes, the United States.
Not so sure about the US. They’re a productive nation with warfare power. The other PIIG countries are struggling no doubt, but they’re making an effort. The problems these countries face are more political than anything. Somebody needs to get wacked. The world is going to be tough, but hot classy babes are still going to wear pumps.
I actually like Greece’s decision. This is what all troubled countries in the Euro zone should do. Exit and devalue. In the long run it is the least expensive route. You default, devalue and start with a clean slate. Problem with Greece isn’t that they are having trouble paying their debt NOW, its a problem of having trouble paying their debt EVER as long as they stay in the EU. They are insolvent not illiquid. No matter what happens, they wont be able to pay. They just don’t have the assets or economic output
Greece can pay their debts if they’re serious about reform. The ppl don’t want to take the pain. If they cut the wages of gov’t workers by 50% they can do it. Problem is they’re in a deflationary state but they do not want to deflate. this is a classic problem that countries pegged to a currency will have when they’re losing productivity. Thsi is a lesson to those who feel currencies should be tied to bullion. When economies deflate, wages rarely.
A potential pitfall to a 50% wage cut for a significant portion of the population would be the potential for increased defaults and ultimately increased recession. This in turn further hurts tax revenues and as Ireland has found out, deficits can widen in the face of aggressive austerity measures if tax receipts fall of disproportionately.
I have to agree there. wage cuts will cause a recession and make things worst. its not a viable or good option. ok, so they can’t cut, can’t pay their debts. so I think that leaves basically one option, leave the euro and start their own currency which will be worth nothing while interest rates sky rocket. looks like they’re in for economic death. the young in greece should problably move.
Like I said Default and let the markets do their job. You’d be surprised how quickly the international community tends to forget these things. Case in point: every South American, Eastern European and Asia economy over the past 50 years
I’d go with Hemlock. It worked for Socrates.
Yeah but under the current set of circumstances Greece can’t simply default. If it defaults it needs to leave the euro as well, which is a far more complicated event than simply calling up your creditors and telling them to shove it up their jumper. If Greece defaults without devaluing its currency its economy will never recover (at least in the next 20 years).
Why can’t they default and stay in the euro? Sure they’ll be saddled by high borrowing costs, but the ECB can also buy their bonds.