Greece defaults on its debts

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So the IMF has agreed that Greece probably needs more money, to the tune of 50 billion euros over three years, and that the EU may need to write off some of its Greek debt.

I'm curious as to whether Syriza will change tack on the referendum now that they've gotten more rope.
 
vitriol said:
Is the euro a functional institution if it prevents some of the economies that use it from competing?
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No, and TBH I don't believe that it ever was. The European economic zone should have just remained a trade coalition - this CWC-esque q-assed approach to developing a federal government benefits no-one in its current form: either step up and take the reins properly or back off and remain a trade coalition with some mutually agreed ground rules.
 
DawnMachine said:
So the IMF has agreed that Greece probably needs more money, to the tune of 50 billion euros over three years, and that the EU may need to write off some of its Greek debt.
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Yeah that's worth mentioning here. There's been considerable speculation around why that report came out now. Apparently the E.U side of the troika tried to suppress the report because it gives Syriza cheap ammunition.

A leaked cable about Angela Merkel also dropped this week. She never thought Greece's debt was sustainable.

Quote-
"Merkel's fear was that Athens would be unable to overcome its problems even with an additional haircut, since it would not be able to handle the remaining debt. Furthermore, she doubted that sending financial experts to Greece would be of much help in bringing the financial system there under control."
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Personally, I'm pretty confident a yes vote will happen this Sunday regardless.
 
DawnMachine said:
Greece has already agreed to review its public corruption (something I think Syriza was planning on doing anyway) and they're in talks to privatize some utilities and the country's biggest port.
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The thing about corruption is that it's extremely sticky. Saying "we will address" corruption is basically meaningless, not least since it's what every Greek government since the year dot has done. I am sure Syriza sincerely intends to address corruption, not least because the people who benefit from it are outside Syriza's support base. But at the same time, corruption is usually woven throughout the economy, so addressing it tends to lead to economic disruption, often among those who are already vulnerable (since any sensible corrupt official will make sure to spread a bit of the largesse downward). So even with the best will in the world, Syriza's promise to tackle corruption has to be treated as a 'wait-and-see' concession.

Having said that, it's worth noting that since it became independent in the early 19th century, Greek has spent nearly half of its existence in some form of default on its debt. Expecting any government to permanently change that seems quite optimistic.
 
Problems with going back to drachma:

- All the debt is in Euro, so they would have to default on all of it, instead of a part of it, meaning impossibility to borrow money for decades instead of years

- The cost of living would increase dramaticaly from the devaluation, + the central bank would have to monetize every deficit because of point 1.

And for what ? To boost export of olive oil.
Is there something I am missing or that road to economic recovery seems like suicide ?
 
GWash said:
Problems with going back to drachma:

- All the debt is in Euro, so they would have to default on all of it, instead of a part of it
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Not necessarily. Presumably the new Drachma would be convertible to Euro, and for that matter, just because the Euro is no longer Greece's official currency, that won't prevent them from acquiring or retaining existing Euro stocks. Russia has been doing this for ages (with USD too).
 
AnOminous said:
Well, my gripe is that they elected a bunch of what are basically Communists.

It isn't about the plebiscite, which was basically rigged. The vote was basically "do you want austerity measures." Nobody is going to vote for that.
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We are getting close. What party would you have voted for? As a reminder there was commies, neo-nazis, or the usual agree to any term party.
 
Now who in his right mind would trade sound Euro for a new currency waiting to be devalued ?
No they won't be convertible at an official rate, if it happens. Btw Greece do not have Euro stocks left. That's actually the problem.

What could happen is the government forcing conversion of currently frozen bank accounts and paying salaries and pensions in this new currency. Any Euro it would need to pay it's debt would have to be bought since it's tax revenues will also be in the new currency, with the existing Euros being hoarded by the population. The price of Euros will raise with the devaluation, hence the debt will become even more unsusbtainable.


Well I wrote that and realise you misunderstood me. I know Greece can buy Euro, in theory. What I mean is Greece will not have to money to buy Euro, and, as time passes and the currency is further devalued, Euro will cost more and more, leaving complete default as the only solution.
 
vitriol said:
Disclaimer i know nothing about national fianances.

I deal quite often with private individuals who are in serious debt though.

I don't understand why greece doesn't default and revert to the drachma- yes the d would tank but that would make greek exports cheaper and make it cheaper than spain or italy to visit- they coukd undercut their eu competitors in fish exports etc and their med competitors in tourism.

Yes in the short term bankruptcy is painful but in the longterm they probably stand to gain.

But i realise countries and private individuals are quite different so im probably wrong!
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Yes their exports would be cheaper but they are mostly a services economy. So yes as you note there would be benefits to a dramatically reduced currency but they would be a silver lining on a very dark cloud because Greek equity would plunge in value. If you add that on top of the austerity they've been dealing with the past few years, they would become a third-world country overnight.
 
GWash said:
Now who in his right mind would trade sound Euro for a new currency waiting to be devalued ?
No they won't be convertible at an official rate, if it happens. Btw Greece do not have Euro stocks left. That's actually the problem
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Right now they don't, but the theory is that devaluation would allow them to reach a point where the currency is actually appropriately valued for the way their economy is right now (as opposed to valued for the average Eurozone economy, which is much less debt-leveraged) and put them at a point where they could acquire Euros or whatever. It's obviously a long term plan, but it could happen.

WARNING POWER LEVEL SHOWING: I work for a Europe-based financial services business, and we are already laying in plans to start trading in Drachmas if they're introduced. The currency won't somehow be radioactive, no matter how devalued it is.
 
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Ass Manager 3000 said:
Personally, I'm pretty confident a yes vote will happen this Sunday regardless.
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AnOminous said:
Appears that it's getting closer to a yes as the date approaches. It's still the height of irresponsibility for a government to say basically, lol, whatever, you decide when faced with the very kind of choice which is why you have a government in the first place.
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looks like we could both be wrong.

Several exit and opinion polls say that 'No' may have won by a few points
 
Holdek said:
Yes their exports would be cheaper but they are mostly a services economy. So yes as you note there would be benefits to a dramatically reduced currency but they would be a silver lining on a very dark cloud because Greek equity would plunge in value. If you add that on top of the austerity they've been dealing with the past few years, they would become a third-world country overnight.
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greece is not a service economy though: their main industries are exporting olives, cotton, figs,rice and nuts. Its other large sectors are beer, cigarettes, cement, pharmaceuticals and tourism.

the service section of their economy is maritime rather than finance based and is more dependant on their geographic location and port facilities than anything else.

GWash said:
- All the debt is in Euro, so they would have to default on all of it, instead of a part of it, meaning impossibility to borrow money for decades instead of years

- The cost of living would increase dramaticaly from the devaluation, + the central bank would have to monetize every deficit because of point 1.

And for what ? To boost export of olive oil.
Is there something I am missing or that road to economic recovery seems like suicide ?
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with the current levels of debt austerity will likely last decades anyway, the practical result of having to pay large debts and not being lent money is the same- cuts to public spending or rises in taxes. the difference being that with default and drachma Greece's exports economy might get an edge over its competitors.

the biggest danger would be that default would destroy the internal banking system but even then that could be rebuilt- Argentina managed it, greece is far from the first country to default.

what bankers look for is stability a wipe of greek debts following default might lead to that. Currently no one is lending in greece anyway.

either way the short term will be painful.
 
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