Greece & the €uro Crisis.

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Grumpy David
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PostGreece & the €uro Crisis.
by Grumpy David » Wed Jun 17, 2015 9:53 pm

A topic which could have been started several years ago and if it had been, I would have predicted Greece would have defaulted and as a result, have been forced to leave the €uro and return to the Drachma.

It seems like the default may be in the next few weeks. We can only hope the Drachma returns early enough for Brits to book cheap last minute Summer holidays.

Greeks admit they will default at the end of the month as central bank turns on government

http://www.telegraph.co.uk/finance/economics/11682277/Greeks-admit-they-will-default-at-the-end-of-the-month-as-central-bank-turns-on-government.html

Prime minister Alexis Tsipras says he is ready to assume responsibility for his government’s negotiating stance as “uncontrollable crisis” beckons

The Telegraph wrote:The Greek government has admitted it will become the first developed country in history to default on the International Monetary Fund (IMF) if its creditor powers fail to strike a deal with the Leftist government over its eurozone future in the coming days.

With just 13 days before the country’s bail-out programme officially expires, finance ministers will gather in Luxembourg on Thursday to discuss whether to finally give assent to release bail-out cash and stave off an unprecedented default.

Before the 11th hour attempt to secure a deal, Athens’ chief negotiator said his government had run out of cash to make a €1.6bn payment to the IMF, also on June 30.

"At the moment we haven’t got the money," said Oxford-educated minister Euclid Tsakalotos.

Greece has been without any aid from its creditors since August 2014.

The Syriza government has been locked in five month stalemate over the release of a remaining €7.2bn owed to the country under its current programme. Athens only avoided falling into arrears with the IMF earlier this month by taking recourse in an obscure “bundling” method which delayed debt payment until the end of June.

Mr Tsakalotos, who was drafted in by the Greek prime minister to head up negotiations, said the country had been “squeezing every last bit of drop of liquidity” to service its international obligations.

“There is no financing, we haven’t got access to the markets, we haven’t got money that hasn’t been paid since the summer of 2014 so obviously we won’t be able to have the money to pay that [the €1.6bn to the IMF],” he said.

Relations between the Leftist Syriza government and its paymasters has reached breaking point in recent days. Alexis Tsipras, the prime minister, has accused the IMF of bearing “criminal responsibility” for his country’s plight, while previous Greek ally Jean-Claude Juncker has declared he has lost faith in the Greek government.

Mr Tsipras seemed to brace himself from the fall-out of his government’s negotiating stance, saying he was ready to "assume the responsibility to say ‘the big no’ to a continuation of the catastrophic policies for Greece".

Hopes of a settlement at a meeting of eurozone finance chiefs has rapidly faded. Greek finance minister Yanis Varoufakis has said he will not present any new proposals to his colleagues, at what has been seen as a last-ditch attempt to rescue the country from the fate of a euro exit.

Thousands of anti-austerity protesters took to the streets of central Athens on Wednesday, in the first major demonstration against Greece's creditors since the government took office.

Panagiota Bleta, a 40-year old Athenian demonstrator said she supported a euro exit if it ended the country's "humiliation".

"It's time to create a Europe of equals," she said. "Greece is part of a third-speed Europe."

In more evidence that Syriza has run out of friends, the Bank of Greece, also turned on the government in a startling intervention which warned Greece was on the way to becoming “a poor country in the European South”.

A report from the Bank of Greece said a missed payment would trigger a "credit event" which would inexorably lead to an ejection from the euro, and ultimately the European Union.

This would result in a “deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area membership,” said the report.

"From its position as a core member of Europe, Greece would see itself relegated to the rank of a poor country in the European South."

Syriza hit back at the apocalyptic prediction, accusing the Bank of breaching its constitutional role and attempting “to contribute to the creation of an asphyxiating framework in the moves and negotiating abilities of the Greek government.”

In its latest weekly decision on Greek bank funding, the European Central Bank decided to increase its drip feed of emergency cash on Wednesday. The ECB raised the ceiling on its liquidity assistance by €1.1bn, taking the total level of aid to €84.1bn.

President Mario Draghi said earlier this week there was no fixed ceiling on the amount of liquidity available to Greece. But the ECB will soon be forced to take a judgement on the country’s stalled negotiation as the June 30 deadline approaches.

The solvency of the banking system has come under pressure as most ordinary Greeks have pulled their deposits out of the banks. Figures from the Bank of Greece showed more than €30bn has left the financial system from October to April.


Every time Greece has popped back into the news over the years I've thought "The EU won't 'rescue' Greece this time, they'll give up and Greece will default" and every time I've been disappointed.

Default in 2015? We can only hope.

If GRcade were to take the bet, would they bet on default or some classic EU botch job which saves the €uro but kills the patient?

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PostRe: Greece & the €uro Crisis.
by Fatal Exception » Wed Jun 17, 2015 10:13 pm

Greece needs to just default from the Wonga-esque debt plan the EU forced the previous government into. They'll be better off controlling their own finances.

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PostRe: Greece & the €uro Crisis.
by That » Wed Jun 17, 2015 10:15 pm

My understanding is that the crisis in Greece would have been over already if they could have just printed their own money, which makes it a real shame that this has been dragged on so long. :(

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PostRe: Greece & the €uro Crisis.
by Grumpy David » Wed Jun 17, 2015 10:22 pm

Iceland defaulted and devalued years ago and are doing far better now.

It's a shame Greece didn't copy them. They're not an economy like Ireland which can take the EU "help" and recover in spite of it, it's far less attractive for foreign investment. Lower prices are massively useful for a tourist economy like Greece.

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PostRe: Greece & the €uro Crisis.
by Meep » Wed Jun 17, 2015 10:30 pm

If they follow the offer being given to them it will take the better part of a century to work things out. On the other hand, if they drop the Euro now and start printing Drachma to wipe out their debt they could be out of it in twenty years maybe. The troika seem to be hoping Greece won't have the sense to go for short term pain and will sell the future of a couple of generations to avoid it, which is completely irrational. Either vastly improve the offer to Greece or admit you cannot make a better one and let them leave the EZ.

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PostRe: Greece & the €uro Crisis.
by bigcheez2k3 » Wed Jun 17, 2015 10:37 pm

I'm going to Greece in August. If they were to default, what would that mean for me?

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Grumpy David
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PostRe: Greece & the €uro Crisis.
by Grumpy David » Wed Jun 17, 2015 10:44 pm

bigcheez2k3 wrote:I'm going to Greece in August. If they were to default, what would that mean for me?


Assuming Drachma had returned by then...cheaper everything.

Assuming default takes place whilst you're there and/or transition to Drachma is taking place...possibly cash machines not working and currency controls in place. Perhaps extended bank holidays.

I would take a Halifax Clarity credit card with me and have cash in my wallet.

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PostRe: Greece & the €uro Crisis.
by bigcheez2k3 » Wed Jun 17, 2015 11:32 pm

Grumpy David wrote:
bigcheez2k3 wrote:I'm going to Greece in August. If they were to default, what would that mean for me?


Assuming Drachma had returned by then...cheaper everything.

Assuming default takes place whilst you're there and/or transition to Drachma is taking place...possibly cash machines not working and currency controls in place. Perhaps extended bank holidays.

I would take a Halifax Clarity credit card with me and have cash in my wallet.


Thanks.

Why a Halifax credit card? I usually just use cash when on holiday with a credit card for emergencies.

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PostRe: Greece & the €uro Crisis.
by bear » Thu Jun 18, 2015 1:02 am

Meep wrote:If they follow the offer being given to them it will take the better part of a century to work things out. On the other hand, if they drop the Euro now and start printing Drachma to wipe out their debt they could be out of it in twenty years maybe. The troika seem to be hoping Greece won't have the sense to go for short term pain and will sell the future of a couple of generations to avoid it, which is completely irrational. Either vastly improve the offer to Greece or admit you cannot make a better one and let them leave the EZ.



What sort of "short term" pain can the people take? The country is already on its knees. I'm assuming short term pain would include some jump in the unemployment rate but its already around 26%, youth unemployment north of 50%. Can an economy function with unemployment that high, what if this short term pain pushes it past 30%? That unemployment rate is also what renders the Iceland comparison worthless in my eyes. At the height of the Icelandic crisis unemployment was 9.2%.


I'm guessing there will be some sort of deal done but it will achieve bugger all. It'll be another 1-2 year bodge when it needs to be a ten year plan to try and kill off any uncertainty. The last six months have shown how dangerous uncertainty can be.

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PostRe: Greece & the €uro Crisis.
by Fatal Exception » Thu Jun 18, 2015 8:34 am

My money is on Spain ditching the euro next. They'll be watching Greece very closely. If Spain goes, Italy might follow.

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PostRe: Greece & the €uro Crisis.
by Return_of_the_STAR » Thu Jun 18, 2015 9:29 am

bear wrote:
Meep wrote:If they follow the offer being given to them it will take the better part of a century to work things out. On the other hand, if they drop the Euro now and start printing Drachma to wipe out their debt they could be out of it in twenty years maybe. The troika seem to be hoping Greece won't have the sense to go for short term pain and will sell the future of a couple of generations to avoid it, which is completely irrational. Either vastly improve the offer to Greece or admit you cannot make a better one and let them leave the EZ.



What sort of "short term" pain can the people take? The country is already on its knees. I'm assuming short term pain would include some jump in the unemployment rate but its already around 26%, youth unemployment north of 50%. Can an economy function with unemployment that high, what if this short term pain pushes it past 30%? That unemployment rate is also what renders the Iceland comparison worthless in my eyes. At the height of the Icelandic crisis unemployment was 9.2%.


I'm guessing there will be some sort of deal done but it will achieve bugger all. It'll be another 1-2 year bodge when it needs to be a ten year plan to try and kill off any uncertainty. The last six months have shown how dangerous uncertainty can be.


It doesn't render the comparison pointless. Greeces unemployment rates are only so high because when they accepted the EU bail out they had to make massive cuts as part of the agreement prior to accepting this their rate was between 9 and 10% also depending on the source.

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PostRe: Greece & the €uro Crisis.
by bear » Thu Jun 18, 2015 9:54 am

Return_of_the_STAR wrote:
bear wrote:
Meep wrote:If they follow the offer being given to them it will take the better part of a century to work things out. On the other hand, if they drop the Euro now and start printing Drachma to wipe out their debt they could be out of it in twenty years maybe. The troika seem to be hoping Greece won't have the sense to go for short term pain and will sell the future of a couple of generations to avoid it, which is completely irrational. Either vastly improve the offer to Greece or admit you cannot make a better one and let them leave the EZ.



What sort of "short term" pain can the people take? The country is already on its knees. I'm assuming short term pain would include some jump in the unemployment rate but its already around 26%, youth unemployment north of 50%. Can an economy function with unemployment that high, what if this short term pain pushes it past 30%? That unemployment rate is also what renders the Iceland comparison worthless in my eyes. At the height of the Icelandic crisis unemployment was 9.2%.


I'm guessing there will be some sort of deal done but it will achieve bugger all. It'll be another 1-2 year bodge when it needs to be a ten year plan to try and kill off any uncertainty. The last six months have shown how dangerous uncertainty can be.


It doesn't render the comparison pointless. Greeces unemployment rates are only so high because when they accepted the EU bail out they had to make massive cuts as part of the agreement prior to accepting this their rate was between 9 and 10% also depending on the source.


The comparison had some sort of merit 5 years ago but it doesn't now. The greek economy of 2015 is so much weaker than the Icelandic economy when its crisis kicked in that there isn't much of value that can be applied to the Greek situation.

And while the bailout hasn't helped things, it Is worth pointing out that the unemployment was already rising sharply at the time of the first bailout. A lot of those cuts were made because successive pre-crisis Greek governments had done such a poor job of managing the economy.

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PostRe: Greece & the €uro Crisis.
by Rhubarb » Thu Jun 18, 2015 11:38 am

From a purely selfish point of view I hope they sort out some sort of deal to avoid a default. I work remotely for a Dutch company and the euro taking a pummelling would result in a rather unpleasant pay cut for me - it's already been a grim enough cut over the last year or so as it is.

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PostRe: Greece & the €uro Crisis.
by Lagamorph » Thu Jun 18, 2015 11:58 am

Greece should never have joined the Euro in the first place. Tax evasion has always been a huge part of the Greek way of doing things (keeping houses as building sites to avoid tax etc) so their economy was never going to be able to handle something like the Euro in the long term.

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PostRe: Greece & the €uro Crisis.
by Return_of_the_STAR » Thu Jun 18, 2015 4:22 pm

Lagamorph wrote:Greece should never have joined the Euro in the first place. Tax evasion has always been a huge part of the Greek way of doing things (keeping houses as building sites to avoid tax etc) so their economy was never going to be able to handle something like the Euro in the long term.


Agreed. It should never have been allowed. The only people who thought it was a good idea at the time were the people in power. Any article I read at the time said it was a bad idea.

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PostRe: Greece & the €uro Crisis.
by massimo » Fri Jun 19, 2015 5:56 pm

Not 100% relevant, but thought it might be of interest. The Olympic site 10 years later.
http://www.news.com.au/sport/more-sport ... 7024073167

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PostRe: Greece & the €uro Crisis.
by Fatal Exception » Fri Jun 19, 2015 7:27 pm

The Greeks are making good points on the news. This is about democracy, the Greek government are trying to act out their democratically elected mandate and Europe / the IMF are trying to circumvent that for their own benefit.

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PostRe: Greece & the €uro Crisis.
by VeryNiceGuy » Fri Jun 19, 2015 7:28 pm

That's what the IMF do. And so much more.

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PostRe: Greece & the €uro Crisis.
by Errkal » Fri Jun 19, 2015 7:31 pm

massimo wrote:Not 100% relevant, but thought it might be of interest. The Olympic site 10 years later.
http://www.news.com.au/sport/more-sport ... 7024073167


Mental that they couldn't have done anything else with it and have let it rot.

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PostRe: Greece & the €uro Crisis.
by Grumpy David » Fri Jun 19, 2015 11:19 pm

Yanis Varoufakis, the Greek Finance Minister (former Steam/Sir Gaben employee) is meant to be on Question Time next week.

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