Greece Votes Communist

[Staggerwing]

And the answer is Spain and Italy thinking: 'We don't want to end up too deep in the crapper to pull ourselves out, like those Greeks...'

[Boggit]

The problem for ordinary Greeks is that they are already suffering hugely under austerity measures already. The Greek government have as much chance of paying off their debts as a snowball in hell, so in many ways it is far better to write off the debt on the understanding that Greece will exit the Eurozone and readopt the drachma, Maintaining this debt farce is delusional. It'll never get paid and will cripple any chance of Greece ever picking itself off the floor. Far better for the ECB to cut its losses now than persist in a charade that will just hamper the Greek economy, as well as damage the rest of Europe by continuing to pay out further loans that will never be paid back. If anything financial support for Greece leaving the euro is a very good thing as a transition measure, on the proviso that it is actually used to restart the Greek economy (like a Marshall plan lite) as opposed to the government spending any cash for restructuring on pet projects, their own bank accounts etc...

[Staggerwing]

as opposed to the government spending any cash for restructuring on pet projects, their own bank accounts etc...

Another snowball in hell.

[airboy]

The problem for ordinary Greeks is that they are already suffering hugely under austerity measures already. The Greek government have as much chance of paying off their debts as a snowball in hell, so in many ways it is far better to write off the debt on the understanding that Greece will exit the Eurozone and readopt the drachma, Maintaining this debt farce is delusional. It'll never get paid and will cripple any chance of Greece ever picking itself off the floor. Far better for the ECB to cut its losses now than persist in a charade that will just hamper the Greek economy, as well as damage the rest of Europe by continuing to pay out further loans that will never be paid back. If anything financial support for Greece leaving the euro is a very good thing as a transition measure, on the proviso that it is actually used to restart the Greek economy (like a Marshall plan lite) as opposed to the government spending any cash for restructuring on pet projects, their own bank accounts etc...

I agree that Greece will never pay this debt off in Euros.  The negotiation is about Greece getting some amount of new funding for additional belt tightening and following the current loan agreement.  Either Greece will agree to the terms, the Europeans will cave, or the Greek banking system fails.  The financial press reports huge withdrawals of cash from Greek bank accounts.

[Boggit]

as opposed to the government spending any cash for restructuring on pet projects, their own bank accounts etc...

Another snowball in hell.

As you recognise, this is a BIG what if, and past performance as an indicator is NOT good.

[Boggit]

The problem for ordinary Greeks is that they are already suffering hugely under austerity measures already. The Greek government have as much chance of paying off their debts as a snowball in hell, so in many ways it is far better to write off the debt on the understanding that Greece will exit the Eurozone and readopt the drachma, Maintaining this debt farce is delusional. It'll never get paid and will cripple any chance of Greece ever picking itself off the floor. Far better for the ECB to cut its losses now than persist in a charade that will just hamper the Greek economy, as well as damage the rest of Europe by continuing to pay out further loans that will never be paid back. If anything financial support for Greece leaving the euro is a very good thing as a transition measure, on the proviso that it is actually used to restart the Greek economy (like a Marshall plan lite) as opposed to the government spending any cash for restructuring on pet projects, their own bank accounts etc...

I agree that Greece will never pay this debt off in Euros.  The negotiation is about Greece getting some amount of new funding for additional belt tightening and following the current loan agreement.  Either Greece will agree to the terms, the Europeans will cave, or the Greek banking system fails.  The financial press reports huge withdrawals of cash from Greek bank accounts.

The problem is that the whole thing is a circular issue, and something HAS to be done to break the debt cycle or it will just continue to be a regular expense to the ECB/IMF with absolutely no hope of being resolved. If anything, the debt will just get bigger with swathes of Greeks migrating elsewhere into the EU as they'll have no future at home. By doing something along the lines of what I suggested in my previous post there is a possible solution to a situation that for all practical purposes is beyond repair. By amortising the debt, and allocating funds to rebuild the shattered Greek economy (Over the last year GDP fell by 25% according to the BBC) they have a chance to rebuild their country to stand on its own feet. I'd add that Staggerwing's 'snowball in hell' comment is sufficient justification to ensure that any funds for rebuilding are strictly monitored and controlled both by the lending institutions and by the EU Council of Ministers (although my faith in the absence of corruption in EU institutions is hardly what you'd call confident...  :(  )

[airboy]

The Greek banking system may fall in the next 7 days.  Yesterday 1 billion Euros in cash were withdrawn.  Odds are pretty high that there will be a big bank run next week where depositors want their money in cash - and the Greek banking system cannot survive that.  Talks between the EU & Greece broke down in acrimony last night. 

[Boggit]

The Greek banking system may fall in the next 7 days.  Yesterday 1 billion Euros in cash were withdrawn.  Odds are pretty high that there will be a big bank run next week where depositors want their money in cash - and the Greek banking system cannot survive that.  Talks between the EU & Greece broke down in acrimony last night.

Unfortunately the EU has its head in the sand still coming out with the same old wishful thinking rhetoric, and the Greek government continue playing games in the belief that the EU will just go along with things. Both sides need to seriously sit down and address the issue with a sensible plan that can actually work if the EU doesn't want to be permanently burdened with Greek debt, and the Greek government doesn't want to see its economy implode with all the social and political catastrophe that will come with it.

[Staggerwing]

I'm thinking that one of the problems is that the Greeks at the helm of Greece's gov't don't keep their money in Greek banks.

[LongBlade]

I'm thinking that one of the problems is that the Greeks at the helm of Greece's gov't don't keep their money in Greek banks.

I'm thinking that the Greeks at the helm of their govt don't have any money to put in banks.

[Boggit]

I'm thinking that one of the problems is that the Greeks at the helm of Greece's gov't don't keep their money in Greek banks.

I'm thinking that the Greeks at the helm of their govt don't have any money to put in banks.

Lol! That is funny. Sadly the reality isn't for your average Greek. :(

[jejo68]

The Greek banking system may fall in the next 7 days.  Yesterday 1 billion Euros in cash were withdrawn.  Odds are pretty high that there will be a big bank run next week where depositors want their money in cash - and the Greek banking system cannot survive that.  Talks between the EU & Greece broke down in acrimony last night.

Unfortunately the EU has its head in the sand still coming out with the same old wishful thinking rhetoric, and the Greek government continue playing games in the belief that the EU will just go along with things. Both sides need to seriously sit down and address the issue with a sensible plan that can actually work if the EU doesn't want to be permanently burdened with Greek debt, and the Greek government doesn't want to see its economy implode with all the social and political catastrophe that will come with it.

Yeah kick greece the hell out of the EURO. Russia has said they are willing to borrow greece some Money, let them have all the trouble from now on.

[airboy]

The Greek banking system may fall in the next 7 days.  Yesterday 1 billion Euros in cash were withdrawn.  Odds are pretty high that there will be a big bank run next week where depositors want their money in cash - and the Greek banking system cannot survive that.  Talks between the EU & Greece broke down in acrimony last night.

Unfortunately the EU has its head in the sand still coming out with the same old wishful thinking rhetoric, and the Greek government continue playing games in the belief that the EU will just go along with things. Both sides need to seriously sit down and address the issue with a sensible plan that can actually work if the EU doesn't want to be permanently burdened with Greek debt, and the Greek government doesn't want to see its economy implode with all the social and political catastrophe that will come with it.

I do not think there is a reasonable conclusion other than default by Greece.  The EU does not want to throw even more money at Greece.  The Greek government was elected on a promise to a] keep the EU & the Euro; b] Greek debts are forgiven; c] Greece gets to spend tons of other people's money on pensions & government workers.  The rest of the EU knows that if they give Greece even more money to blow that they will get tossed out by their voters.

I don't give the Greek banking system 14 more days before either a default or currency controls.  Greece is already in default on their payments with a bunch more due on June 30.  Greece does not have the money, can't print more Euros, and their cash on hand is rapidly going into mattresses.  This is a pretty classic banking collapse situation.

[Staggerwing]

Airboy,
If the Greek banking system does go critical and melts down through whatever containment infrastructure was supposed to keep it intact what will the immediate Euro fallout be? What about the rest of the world economy? Would it be just a blip on the dosimeter or something more insidious in the longterm?

[airboy]

Airboy,
If the Greek banking system does go critical and melts down through whatever containment infrastructure was supposed to keep it intact what will the immediate Euro fallout be? What about the rest of the world economy? Would it be just a blip on the dosimeter or something more insidious in the longterm?

Greece has already defaulted on government bond holdings to private investors in previous restructurings.  Loans to Greek banks by the private sector are also relatively minimal ($13 billion).  The Greek paper is mostly being held by the EU Central Bank or by other individual EU countries central banks.

Greek stock market is down 50% in the last several months.

Until something happens, you never know what the actual impact will be.  But most of the private money left Greek bonds (or was defaulted already) a long time ago.  No country has left the Euro yet - so the impact of that is unknown.

The aggregate markets have been relatively quiet in the last 3 weeks (Portugal, Spain, German Bonds) etc.... except of course for Greece itself.  The Euro is up in June against the dollar.

If I could predict the future, I would be really wealthy.  But this is what has happened in the recent past.