What Happens if Greece Defaults?

[Obsidian 10]

Many people think that Greece will default this year. Do you think the same?

If yes, what will be the consequences? Will it lead to a stronger euro? or will it lead to collapse of the eurozone?

[khamore1 10]

Greece was admitted to EU by fraud, their departure will not cause any long term

 

damage , on the contrary it will strengthen them

[Obsidian 10]

Would Greece want to leave?

If they leave or get kicked, how would that affect other countries fighting with the same problems?

How about the countries, banks, investors that lent tons of money to Greece?

Will that start a big chain reaction or will hopes keep the united europe dream alive?

[MightyMouse 12]

Would Greece want to leave?

If they leave or get kicked, how would that affect other countries fighting with the same problems?

How about the countries, banks, investors that lent tons of money to Greece?

Will that start a big chain reaction or will hopes keep the united europe dream alive?

 

Don't despair. A Greek default is already priced into the picture. The banks are determining the haircut they are going to have to take.

 

All this fun will lead to more government in Europe and abroad. More govt means more taxes.

 

Times will certainly get better and then they will taper off again. When they do taper off the added tax burden will make this recession look and feel easier. So enjoy yourself while you can because these will be the best hard times we will have for a long time.

[Obsidian 10]

I agree that a Greek default is already priced in...I just feel the reasons for the union are political, rather than economical...I can't imagine a fiscal union...The countries involved in the euro are far too different to be under the same monetary policy...For example it makes sense to combine the Netherlands and Germany...But Germany and Greece/Spain/Portugal are completely different worlds...

[Tams 20]

the Germans will pay for it one way or another:

 

1. continue to have cheap vacation, (ie bail them out)

 

2. pay for more expensive vacation. (ie let them default)

[Obsidian 10]

I am happy that I am not a German

French elections will be in this year and German elections in 2013. How will they affect the policy?

I would like to hear thoughts of the people living in the eurozone.

 

Here in Thailand I meet European people who come here to work and most of them say Europe is a mess...

[daVinciLite 10]

The Euro was never workable in the first place. It came form the minds of elitist who know nothing of the real world. As long as the leaders in Europe can keep hope alive, the market place will keep hope for the future of the euro – it’s just too painful to face the truth. But sooner than later the Euro as we know it will come to an end. At a minimum the PIGS will be thrown out. Then we can go along our merry way once the world takes its medicine.

 

This audio link should help you understand the situation:

 

Cowen on the European Crisis | EconTalk | Library of Economics and Liberty

 

dVL

[Obsidian 10]

Seems like Merkel is finally realizing that Germany can't save the euro...She was complaining about placing too many financial burdens on Germany...politicians:crap:

[RealDemo 10]

I would like to hear thoughts of the people living in the eurozone.

 

Here in Thailand I meet European people who come here to work and most of them say Europe is a mess...

 

Europe is a very big place and not all of us are eating mud, well not yet anyway

 

One of the major effects of all this debt is the kind of unemployment figures you find in countries like Spain with 23%, it's a real cancer in their society and the trend is up.

 

If Greece defaults I believe the greatest pain will be felt by the Greeks themselves.

[Landser 10]

I think that the default in Greece is just the matter of time and this event is already priced in (to some extent).

 

After this event EU leaders will try to impose stricter fiscal rules but this approach will be born dead because of the local politicians (such as Athenians) that won't approve new rules may be just in order to demonstrate their independency.

 

And I don't think that any EU country will leave the union (at least for the next 12 months) since there're now any mechanisms for that.

[Obsidian 10]

Eurozone debt web: Who owes what to whom?

BBC News - Eurozone debt web: Who owes what to whom?

[Obsidian 10]

Still no news about the PSI deal?

[Obsidian 10]

Bavarian Finance Minister: Greece Won't Be Able To Avert Default

 

As Greece continues its battle to get a second bailout package, the finance minister of the German state of Bavaria in a radio interview Monday says Greece isn't capable of carrying out necessary reforms and won't be able to avoid a default.

 

"Personally, I don't believe anymore that an agreement is possible," Bavarian Finance Minister Markus Soeder tells Deutschlandfunk radio. "Everyone is trying, but it can't be that Germany and Europe permanently pay and pay, and ultimately the Greeks, above all the Greek government, don't change."

 

Soeder belongs to the Christian Social Union, the sister party of Angela Merkel's Christian Democratic Union, and one of the pillars of the Chancellor's government in Berlin.

 

A Greek insolvency could also be a chance for a new beginning for the Hellenic country, Soeder says, but added that it needs to be assured that a Greek default isn't a default of Europe.

 

"Greece is an absolute exception," Soeder says, adding that Italy is a rich country capable to solve its own problems.

 

Greece's political party leaders will resume talks Monday after major differences on draconian reforms as part of an international aid package remained unresolved following a marathon meeting Sunday.

 

German Chancellor Angela Merkel at a meeting later Monday with French President Nicolas Sarkozy in Paris likely will discuss the Greek impasse. Euro-zone finance ministers may hold a meeting later this week in Brussels about Greece's debt restructuring and the second bailout program.

 

Source: Deutschlandfunk Radio

[khamore1 10]

Many people think that Greece will default this year. Do you think the same?

If yes, what will be the consequences? Will it lead to a stronger euro? or will it lead to collapse of the eurozone?

 

In my opinion if they don’t come up with a solution BEFORE the closing bell on Friday

(2-10-2012) they will go bankrupt on the weekend. They intend to trap the market in the current position

Edited February 9, 2012 by khamore1

[Obsidian 10]

They were "too close" to come up with a solution 2 weeks ago :rofl:

[mohsinqureshii 10]

Greece will never default. The Euro Zone will be handling the same way as they are handling greece and other countries now a days. Using delaying tactics is their policy and if Greece will get default there are lot other countries which will be defaulting soon.

 

Not only in other European countries but also in Asian countries , the discussion will be started to get default as many countries are shy to say something like that. If there will be one default the world will be going for a swear Financial Crises more then 2007-08.

[Obsidian 10]

*Greek political leaders have clinched a deal on austerity measures needed to secure a bailout to keep the country afloat, two government sources said on Thursday...

 

*Mario Draghi says: “A few minutes ago I got a call from the prime minister of Greece saying that an agreement has been reached and has been endorsed by the major parties.” Eurozone finance ministers will discuss the deal and next steps at their meeting this evening, he adds.

 

Source: FT

[Obsidian 10]

Banks Come First in a Greek Rescue Plan

 

It now appears that Europe is prepared to pay what it needs to pay to save its banks. But not to rescue Greece.

 

Once again, there is optimism that a new round of European talks are going to result in an announcement of a Greek bailout. On Thursday, the Greek political parties caved in and agreed to a new austerity package that will satisfy the latest European demands. When other loose ends are tied up, it appears the Greeks will have given up their principal bargaining chip — the threat that if they are allowed to collapse, they will take the European financial system with them.

 

If that happens, then at some point down the road, when it turns out that Greece has again fallen short of its deficit reduction targets, Germany will again demand more sacrifices. If the Greeks refuse, then the rest of Europe could be in a position to let Greece go. It might or might not stay in the euro zone, but a bankrupt Greece would be left to fend for itself, with much of the rest of Europe saying — just as it did two years ago, when Greece’s distress was just becoming clear — that it is a small country of little importance to the rest of Europe.

 

Perhaps Europe, in its stumbling and sometimes disorganized fashion, will have accomplished a large part of what it set out to do. It will have put a fence around the Greek tragedy and preserved — most of, if not all — the euro zone. As for rescuing Greece, well, you can’t win them all. The current European attitude was best captured by a document that was circulated as part of the now-abandoned German proposal to force Greece to accept a “budget commissar” to supervise its spending.

 

“Greece has to legally commit itself to giving absolute priority to future debt service,” said the document, said to have been circulated by German officials. “State revenues are to be used first and foremost for debt service.” Whatever money was left over could be used for other purposes, such as paying police salaries or purchasing hospital supplies. That was shot down because it sounded so undemocratic and authoritarian, said Whitney Debevoise, a partner in Arnold & Porter with long experience in international bond negotiations. “Plan B is the escrow.”

 

Escrow does sound like something neutral. But it apparently means the same thing. European aid to Greece would go into an escrow account, to be released as Europe saw fit and withheld if Greece again failed to live up to its promises to cut its budget deficit. But of course the money would be released for debt payments on the restructured bonds. For at least a few years, banks and others that own the new Greek bonds would be assured of collecting their interest payments.

 

“The euro area will be able to call the bluff of the Greek government,” said Jacob Kirkegaard, an economist at the Peterson Institute for International Economics. “Greece says, ‘If we default, all hell breaks loose,’ ” he said. “The reality is that the threat from Greek contagion becomes a lot less credible.”

 

The escrow system may also persuade more bondholders to go along with the “voluntary” restructuring. Anyone who did not, hoping that the handful of unexchanged bonds would be paid since the cost would not be that great, would run the risk that Europe would release funds to pay debt service on the new bonds, but not on unexchanged old ones. There have been Greek rescue packages before, followed by new crises. But this could be different.

 

By the time it becomes clear that Greece cannot meet its new promises, the recapitalization of major European banks may be completed, and in any case they will have no immediate worry of a Greek default. The European Stability Mechanism, the new European bailout fund, will be in place, and perhaps the International Monetary Fund will have raised more capital. The much-talked-about “firewall” could be a reality, preventing contagion.

 

There are a lot of ifs in all that, and reasons for caution. Any capital infusion by the International Monetary Fund presumably would have to proceed without the participation of the United States; Congress has yet to sign on to the last capital increase. And European attempts to build that firewall have in the past included more rhetoric than hard cash. But the essential part would be done. The Greek threat would be contained.

 

An optimist might think that would make it more likely the Greeks would really try to comply this time, and that the threat of a European cutoff would spur reform. Even if that were to happen, however, it is hard to see Greece’s economy improving much, and no particular reason to think the new budget targets will prove to be more realistic than their predecessors.

 

Already some in Europe seem to be looking ahead to the prospect of Greece’s abandoning the euro. “There is absolutely no ‘man overboard’ if we miss someone from the euro zone,” Neelie Kroes, a member of the European Commission, told a Dutch newspaper this week, adding that the claim that the “whole edifice” would collapse if one country left the euro zone “is simply not true.”

 

There is, of course, no legal way for Greece, or any other country, to leave the zone, and it is hard to see how a departure could avoid being very messy. But nothing that has been done so far provides any reason to hope that Greece will be able to revive its economy without an exit and a substantial devaluation of the new Greek currency. And without an economy that offers growth and hope, Greek tax revenue will continue to be disappointing.

 

The troika negotiating with the Greeks — the International Monetary Fund, the European Central Bank and the European Commission — sought some of the advantages a devaluation would offer by demanding a reduction in the Greek minimum wage. It appears to have gotten that, and the expectation is that other private sector wages will be reduced as well. That idea sounds horrifying to Greeks, who assume their personal obligations, for food and clothes and housing costs, will not also be cut.

 

There is nothing new in leading European states’ insisting that debts owed to their banks and citizens by sovereign states must take precedence over any other call on a debtor nation’s resources. It is not, however, a particularly noble tradition.

 

In 1902, Venezuela seemed to be unwilling to discuss settling international debts incurred during a series of civil wars. Germany, Italy and Britain responded by sending in gunboats. German ships bombarded a Venezuelan fort — the Germans said the Venezuelans fired first — and some civilians were killed. In the end, Venezuela agreed that 30 percent of its revenue from tariffs on imports would be diverted to debt service. Some of the debts — which included reimbursing the European powers for the costs of sending the warships — were reduced.

 

In those days, international arbitration was available at The Hague under elaborate rules, and the case wound up in arbitration. Not, however, on the issue of whether it was proper to send in warships. Instead the issue was whether the countries that did send in the ships should have priority in collecting the debt payments over citizens from other countries, like the United States, that had not resorted to military force.

 

The Russian czar was chosen to appoint a panel to consider the case, and chose two Russians and one Austrian. The panel ruled that it made perfect sense for those that manned the warships to be paid first. The “neutral powers,” as the noncombatants were called, would otherwise get equal benefit from a war they did not pay for. There was more than a little international revulsion to that whole affair, and in 1907 the Hague conventions were modified to outlaw the use of military force to settle debts.

 

There is no military force here, of course. But it appears the result may be about the same. Greece is being allowed to reduce what it owes, but the European powers of this era will make sure that the remaining debts have “absolute priority” over any other obligations.

 

Source: NYT

[Obsidian 10]

Greece's cabinet has unanimously approved the painful reform measures the country must take to secure a new EUR130 billion bailout from its international creditors, a senior government official said Friday. "We've approved it," the official said after a four-hour meeting of the cabinet.

 

The approval comes just hours after the caretaker government of Prime Minister Lucas Papademos lost the support of a junior partner in the coalition government and amid growing opposition to the new measures from other lawmakers and unions. Greece's parliament must now also approve the package of measures before the country's European partners and the International Monetary Fund will unlock the new aid program, which also calls for a massive EUR100 billion debt write-down.

 

That vote has been set for Sunday. Earlier Friday, the small, nationalist Laos party--which along with the Socialist party and the conservative New Democracy party make up the coalition--effectively withdrew from the government with four party officials resigning from the cabinet. The Laos party controls just 16 seats in Greece's 300-member parliament. Even without its support, the two main coalition partners have a combined 236 seat majority. According to a second government official, Papademos will announce a cabinet reshuffle Sunday to replace the departing officials.

 

In October last year, Greece's European partners and the International Monetary Fund promised a fresh bailout to the country to cover its financing needs through 2015. They have also demanded, as a precondition for that loan, that Greece's private-sector creditors write down EUR100 billion of the country's debt. According to one cabinet official leaving the meeting, the European Central Bank, which holds tens of billions of euros of Greek debt, will also indirectly participate in the debt-swap plan.

 

Source: Dow Jones

[SunTrader 10]

the Germans will pay for it one way or another:

 

1. continue to have cheap vacation, (ie bail them out)

 

2. pay for more expensive vacation. (ie let them default)

As they should.

 

Although Greece got low interest rates which fueled job growth especially in the public sector, the Germans got the real benefits of job growth in the export driven private sector.

 

I think Greece will technically default, which it already has actually, but stay in the Euro-denominated community. "Merkozy", the bankers and lawyers will figure it all out as if nothing happened until..........

[Obsidian 10]

What is German's benefit? Obviously, they are not paying Greece because they love Greek people.

2 things come to my mind...

-As a result of crisis, man power moves to better countries, So Germany can get the qualified labor force easily.

-During privatization process, Greeks will be selling their properties (to the biggest German and French companies) cheap as hell. These can be very profitable in the long run.

[Christian359 10]

The main problem of Greece and other countries in Eurozone like Greece - Italy, Portugal and Ireland - is that the public debt exceeds the GDP. But it is not from an year or two. If you have a look to charts of Central government debts of these countries you will find that Greece's debts are 120% and above of GDP still 2000. Italy's debt is between 100 and 120% in the same period. So the problem is not new. The problem is that they have to cut a lot of social expenditures, real jobs in government and public sector. Even they have to shorten assets.

[SunTrader 10]

.......... you will find that Greece's debts are 120% and above of GDP still 2000. Italy's debt is between 100 and 120% in the same period. So the problem is not new....

True but what did Germany and France say years ago? Come on in .....to the Euro.

 

And now they are surprised. Not!!

[zdo 20]

 

“It’s not here… it’s over there”

..or is it?

 

Greece, on the street, …

This Is What An Economic Depression Looks Like In The 21st Century - BlackListedNews.com

 

not mentioned therein (not really mentioned anywhere much these days) but… the banksters' dreaded ‘deflation’ can only be postponed for but so long…

 

Barack Obama: Let’s Steal 150 Million Dollars An Hour From Our Children

 

:haha: Maybe we should consider making some real history and elect an old wise american indian chief as president instead of a white guy (disguised in black skin) ... I know, fat chance...