Greece crisis: Is there an exit?

[Infinite Chaos]

The impact of Greece's financial woes is being felt ever more keenly in European financial markets as fears grow that some kind of debt default may be inevitable.

BBC News - Greece crisis: Is there an exit?

As of today / last night it appears a deal has been done for 120Billion Euros over three years.

Greece said it had agreed a deal with the European Union and IMF to rescue the nation's embattled economy.
Prime Minister George Papandreou said that avoiding bankruptcy was the country's priority but that Greece would have to make "great sacrifices".
Details of the rescue deal and the austerity cuts agreed to in return for the loans will be announced later.
Remainder of story: BBC

Interesting view below given that apparently Germany and France hold the largest amount of Greek debt -

Argentina is one of the precedents for what is happening in Greece today, it might be worth paying attention to the views of former Argentine economy minister Domingo Cavallo.
He argues that Greece could cut its high labour costs and balance its books by a programme of tax reform.
Payroll taxes, where collected, add hugely to the cost of creating jobs, but they are widely evaded, he points out.
As a result, he suggests, raising the VAT rate to 25% across the board, instead of the current differential rates that vary from 4.5% to 19%, would allow the government to scrap payroll taxes entirely and collect more revenue.
Mr Cavallo also asserts, in a paper co-written with consultant Joaquin Cottani, that it was the IMF that triggered Argentina's crisis in 2001 by not disbursing promised funds.
"We hope that Germany, France, and the other Eurozone countries will not make the same mistake with Greece that the IMF made with Argentina," they write.

Somehow, the French and German govts have to prevent any default situation but on the other side, countries like Argentina and Russia both defaulted on debts in the last 15 years and have rebuilt and recovered.

This is not the end of the Euro - much as I don't want it for the UK.

 

[Lord Tammerlain]

I dont see why so many dislike the Euro

Having a currency that the government can not debase for political reasons is a good thing not a bad thing. Time and time again when a government has the ability to debase the currency to enact short term economic needs rather then make the harder structural reforms that are needed, politicians always go for the debasement (excepting German politico's)

Secondly, for countries that have a high level of its debt in foreign denominated currencies like Greece would (small countries to not tend to get to issue debt in their own currencies except to its own citizens) currency debasement makes it harder to pay back debt.

Lastly being in the Euro zone provided Greece with a great opportunity only to waste it. It was and is not the Euro's fault for the Greek crisis, but it is the Greeks fault

 

[Infinite Chaos]

I dont see why so many dislike the Euro

This wasn't a thread about why the UK should or shouldn't be part of the Euro but I have no problems with the existence of the Euro. Just not for the UK.

Time and time again when a government has the ability to debase the currency to enact short term economic needs rather then make the harder structural reforms that are needed, politicians always go for the debasement --

Devaluation is not always the only tool a govt uses in economic policy. Anyhow, back on topic -

Eurozone approves massive Greece bail-out
Eurozone members and the IMF have agreed a 110bn-euro (£95bn; $146.2bn) three-year bail-out package to rescue Greece's embattled economy.
In return for the loans, Greece will make major austerity cuts which Prime Minister George Papandreou said involved "great sacrifices".
The EU will provide 80bn euros in funding and the rest will come from the International Monetary Fund (IMF).
The deal is designed to prevent Greece from defaulting on its massive debt.
However, it must first be approved by some parliaments in the 15 other eurozone countries.

--snip--

The austerity plan aims to achieve fresh budget cuts of 30bn euros over three years - with the goal of cutting Greece's public deficit to less than 3% of GDP by 2014. It currently stands at 13.6%.
Measures include:

• Scrapping bonus payments for public sector workers
• Capping annual holiday bonuses and axing them for higher earners
• Banning increases in public sector salaries and pensions for at least three years
• Increasing VAT from 21% to 23%
• Raising taxes on fuel, alcohol and tobacco taxes by 10%
• Taxing illegal construction

BBC Story

Hopefully this will stabilise the situation in Greece; it will certainly push the other PIGS countries not to be in the same situation. Watched a BBC broadcast earlier from one of the many housing estates in Ireland that are about to be bulldozed for lack of buyers.

 

[cpwill]

Greece erupts as men from IMF prepare to wield axe

MAY DAY protests in Greece turned violent yesterday as youths in gas masks and hoods set fire to vehicles, smashed shop fronts and threw molotov cocktails and rocks at police in an explosion of fury over austerity measures they claim will hurt only the poor....

“No to the IMF’s junta,” they chanted as a youth in a black hood produced a hammer to try to smash windows of the luxury Grande Bretagne hotel...

Anger has grown against the EU for insisting on tough austerity measures in return for a bailout worth an estimated €45 billion (£39 billion) this year alone, and up to €120 billion (£104 billion) over three years.

Some young Greeks prefer to blame their elders for the mountain of debt that has resulted in Greece, like a wayward child, being placed under the tutelage of the men from the IMF.

“I cannot help but blame my parents a little for what’s happened,” said Achilles Zacharoulis, a 36-year-old cardiologist. “They were here all that time,” he added, referring to the past three decades of mismanagement and fiscal insanity. “But what did they do to stop it?”

Vaggelis Gettos, 24, is just as alarmed at the burden being heaped on the young by austerity measures expected to be announced today, and has pledged to resist them in more protests this week against what he sees as a plot to impoverish Greece.

“We will live much worse than our parents,” he said. “Why should we be made to pay for their mistakes?” ...




political incentives for Greece are now to find a way to default; and the only way to stop them from doing it is going to be to turn them into a permanent welfare recipient from the rest of the EU. Well done.

 

[UtahBill]

Greece erupts as men from IMF prepare to wield axe


Some young Greeks prefer to blame their elders for the mountain of debt that has resulted in Greece, like a wayward child, being placed under the tutelage of the men from the IMF.

“I cannot help but blame my parents a little for what’s happened,” said Achilles Zacharoulis, a 36-year-old cardiologist. “They were here all that time,” he added, referring to the past three decades of mismanagement and fiscal insanity. “But what did they do to stop it?”

Vaggelis Gettos, 24, is just as alarmed at the burden being heaped on the young by austerity measures expected to be announced today, and has pledged to resist them in more protests this week against what he sees as a plot to impoverish Greece.

“We will live much worse than our parents,” he said. “Why should we be made to pay for their mistakes?” ...

.

Why indeed? I wonder how long before our offspring here in the USA ask the same question?

 

[Infinite Chaos]

-- political incentives for Greece are now to find a way to default; and the only way to stop them from doing it is going to be to turn them into a permanent welfare recipient from the rest of the EU. Well done.

The rest of the Eurozone just isn't going to let Greece default. The other Eurozone countries would (IMO) rather see Greece leave the Euro than be a permanent wounded economy draining funds from coffers across Europe.

 

[whoknows]

Look, look, Russians are discussing who is guilty and what to do with Greeks!
As always.

 

[UtahBill]

The majority of Greek citizens are tax cheats, according to what I read online news the other day. They used satellite imagery to count pools and found out that only a small percentage of them were owned up to...

People there are living lavish lifestyles but declaring an income that is less than their utility bills....

So they had their own way of cutting taxes.
See where it ends?:2razz:

 

[cpwill]

The rest of the Eurozone just isn't going to let Greece default. The other Eurozone countries would (IMO) rather see Greece leave the Euro than be a permanent wounded economy draining funds from coffers across Europe.

Greece get kicked out? all the PIGGS to follow?

 

[Wiseone]

The Greek people need to get their act together and realize there is no solution to their problem other than the EU and IMF bailout. Many are protesting that all the benefits they've enjoyed in the past will be taken away, I hope they realize that is out of the hands of anyone in their government. Greece has literally run out of money, it was about to default on half of its bonds this year as they matured. Don't these people realize there is no money, they can protest all they want for gold to fall from the sky but its just not going to happen. Greece can't print money and the rest of world isn't going to just hand money over for nothing so Greeks dont have to "suffer."

When I read some of the reports on their protesters or visit their websites, ie blogs, and read their complaints its comes across to me like a bunch of children whining and crying their bottle got taken away.

 

[cpwill]

yeah. i cringe when i look at them and realize that's our future; that's what 1/3 to 1/2 of this country wants us to become.

 

[bub]

As of today / last night it appears a deal has been done for 120Billion Euros over three years.



Interesting view below given that apparently Germany and France hold the largest amount of Greek debt -

Somehow, the French and German govts have to prevent any default situation but on the other side, countries like Argentina and Russia both defaulted on debts in the last 15 years and have rebuilt and recovered.

This is not the end of the Euro - much as I don't want it for the UK.

They should stop spending 5 or 6% of their GNP into their army. They've got very modern and expensive material, that's a shame for a country that is going bankrupt!

 

[Ahlevah]

They should stop spending 5 or 6% of their GNP into their army. They've got very modern and expensive material, that's a shame for a country that is going bankrupt!

Greece has a army?

 

[mikhail]

I dont see why so many dislike the Euro

Having a currency that the government can not debase for political reasons is a good thing not a bad thing. Time and time again when a government has the ability to debase the currency to enact short term economic needs rather then make the harder structural reforms that are needed, politicians always go for the debasement (excepting German politico's)

Secondly, for countries that have a high level of its debt in foreign denominated currencies like Greece would (small countries to not tend to get to issue debt in their own currencies except to its own citizens) currency debasement makes it harder to pay back debt.

Lastly being in the Euro zone provided Greece with a great opportunity only to waste it. It was and is not the Euro's fault for the Greek crisis, but it is the Greeks fault

maybe but they also cant have a currency that is devalued therefor they cant reap the benefits of increased exports.

 

[Lord Tammerlain]

Greece has a army?

For the size of the country a rather large one. Due in part to competition with Turkey.

 

[Lord Tammerlain]

maybe but they also cant have a currency that is devalued therefor they cant reap the benefits of increased exports.

That is a short term fix with all sort of other negative issues.

Greece can accomplish the same thing without devalueing the currency, lower wages and benifits for one will accomplish the same thing. It would take longer to accomplish though. Secondly given the high level of foreign debt that Greece had, devalueing the currency would increase the debt owed as the currency went down in value.

Overall the Greeks are going to see a drastic reduction in thei standard of living. If they default, they will not be able to borrow much money at all, and the government would have to make cut backs, if they dont default and pay back the debts, they will have large interest payments to make for years to come, leading to a lower standard of living. The greeks screwed themselves, and now it is the present and future generations of greeks that have to pay for the wastefull ways of their parents

 

[Ahlevah]

For the size of the country a rather large one. Due in part to competition with Turkey.

Must be, because they sure aren't spending anything on their force in Afghanistan. Seventy guys shouldn't be much of a strain on a budget.

 

[Lord Tammerlain]

Must be, because they sure aren't spending anything on their force in Afghanistan. Seventy guys shouldn't be much of a strain on a budget.

As % of GDP Greek military spending is probably one of the largest in Europe if not the largest. At over 3% they are/were spending 3 times as much as Canada does at 1.2%

I believe they are generally far better equiped then Canada


Of course this is all going to go by the wayside as Greek military spending will be taking a big hit in the future

 

[Infinite Chaos]

Greece get kicked out? all the PIGGS to follow?

Greece won't be kicked out if they follow the guidelines and conditions of the loan set out by the other Eurozone members.

As for the other PIGS countries - fear of what happens to Greece in the next few years may stop them following suit.

 

[Ahlevah]

As % of GDP Greek military spending is probably one of the largest in Europe if not the largest. At over 3% they are/were spending 3 times as much as Canada does at 1.2%

And as a member of NATO in this so-called Force Action Against Radical Terrorists (FAART) it ain't doing us a ****s worth of good. All the Greeks want to do is pick a fight with another "ally" of ours. Canada's pretty much worthless, too, unless we need some BC weed or curling supplies.

 

[mikeey]

We the uk can ajust the intrest rates,where as the EURO CAN NOT

THAT IS THE PROBLEM.

mikeey