Greece should never have been admitted. Everybody knew it. Why were they admitted? Because it was good for Germany and france.
Greece should never have been admitted. Everybody knew it. Why were they admitted? Because it was good for Germany and france.And then what happens next? Spain, Ireland, Italy demands the same treatment and the Euro becomes an undisciplined fiat money currency, crashing in value. Instead of doing something that would destroy the credibility of the Euro as a currency, why not boot out Greece from the Eurozone? The Euro is not only a right for the countries adopting it, it is also a duty, Greece failing to carry on its duties should entail consequences, however bad they are.
Greece imports are about 45 billion euros per year, of which more than a third of that is oil and its sub-products, so I don't think Europe is going to miss Greek imports at all, especially if the EU can get rid of the annual Greek bailout bill. Commerce would be the last reason to keep Greece on the EU.
And then what happens next? Spain, Ireland, Italy demands the same treatment and the Euro becomes an undisciplined fiat money currency, crashing in value. Instead of doing something that would destroy the credibility of the Euro as a currency, why not boot out Greece from the Eurozone? The Euro is not only a right for the countries adopting it, it is also a duty, Greece failing to carry on its duties should entail consequences, however bad they are.
I believe you are correct except that some of this money is IMF money, so the USA will also be making up part of the write-off. Perhaps a lot of the write-off, since the ECB & the EZ have no mechanisms for a nation defaulting. To the extent (if any) the IMF bails them out, the USA is on the hook for that, and if memory serves we pay about 20% of the IMF funding. Expect Uncle Sam to be singing another sad song for Uncle Mao since, like Greece, we too live above our means and must borrow to meet our obligations.The way I understand it, about 2/3 are owned by the central banks of individual countries. In that case, they had to pay actual euros for the Greek bonds that they bought. Only the ECB can create new money, not individual central banks. You can think of it as the difference between the various Federal Reserve regional banks and the FOMC. Only the fed through the FOMC can print money, no individual bank can.
So if those banks lose money, it has to come out of someone's pocket. That's going to be the taxpayers of each country - or so I assume. I don't think there's any mechanism for the ECB to reimburse losses.
The only way that could happen would be for the ECB to buy the bad bonds from the individual state banks. But I don't think the ECB is as independent as our federal reserve. So public opinion, especially from Germany and France, is going to matter.
From their standpoint there are two likely paths. First, Greece stays in the euro. In that case Greece will require another hundred billion or so before either everyone stops pretending this money will ever be paid back. The other option is the Grexit. Greece will still be a charity case, but perhaps less of one as the crashing drachma cheapens and thus encourages domestic production. Also, chances are very good that the IMF and/or USA pick up more of the additional lending. The creditors will also send a strong signal to the other PIGS nations that one cannot default and still enjoy the benefits of the EuroZone and the euro.There's something I don't understand here. Some of the biggest creditors like Germany seem to be actively rooting for Greece to leave. Surely they understand that means that no one, themselves included, are going to be paid back. So at this point, does anyone really believe that they give a rat's butt about the amount they have already sunk into Greece. If they do care, they have a strange way of showing it.
Your point is well taken. Problem is while everyone concerned wants Greece to recover for political reasons, the economics prohibit that. Assuming Greece manages to produce an honest surplus - not something it has managed to date - it's economy is simply far too small to pay even the interest. Even assuming that surplus were allowed to be plowed back into the Greek economy, AND that Greece would do so honestly rather than simply plowing it right into public sector pensions and wages, Greece's population is too small to ever grow big enough to pay off the principle. Meanwhile most European leaders face constituents dead set against another bailout. Even the first two bailouts may end up rewriting European political landscape as taxpayers eat the first two bailouts.@werepossum: If what I've read is correct, the Greece's economy is about the size of Miami's. And the nation's total population is a little bit larger than 11 millions. This issue is about politics as much as, if not more than, economics.
Below is the chart from 2012. I assume the current position of Greece is a lot worse.
full article at linkThe deal -- if ratified -- should prevent a chaotic Greek exit from the euro, an unprecedented event that would have shaken Europe to its core.
"EuroSummit has unanimously reached agreement," tweeted Donald Tusk, president of the European Council and summit chairman.
Leaders of the 19 nations that use the euro hammered out the agreement at a marathon overnight meeting in Brussels, after weeks of frantic diplomacy sparked by Greece walking away from a previous bailout program.
That decision left it without the cash to make a payment to the International Monetary Fund, triggered the closure of its banks, and sent Greek economy into free fall.
Fast running out of money, Greece faced an awful choice: Accept the conditions demanded by the only people willing to lend it money, or crash out of the euro.
Speculation about the currency should now fade, but it's not clear how soon the money the country desperately needs will flow, and when its banks will reopen.
The agreement means the Greek government must go way beyond a reform proposal it submitted last week, by making much more profound changes to pensions, energy, labor and product markets, and by scaling up a program of privatization. It also has to overhaul its public administration and justice system.
They got what they asked about reforms, which frankly we would had to make them after all.
We got what we were asking all along, that we also need to grow the economy after all those years taking only austerity measures.
Im more interesting now to see how the World stock exchanges will react now that there is no Grexit in the vocabulary.
The Euro, like the dollar, is already fiat currency. Did the dollar crash in value when the FRB bought up a mountain of shitty mortgage bonds, restored liquidity to the banking system?
And if Greeks are guilty, are not the creators of Greek debt equally as guilty, perhaps more so?
How far can we depersonalize this in order to put the welfare of a few thousand bankers ahead of the welfare of millions of Greeks & others in similar straits?
The major banks in the EU won't fare nearly as well hence the entire reason for the bailouts. You honestly don't think they are just trying to be nice do you?
Anyone with money in a Greek bank will now take the opportunity to move it to another eu country.
Greece will be back. Like Arnold Schwarzenegger.
Congrats. I don't know about long term, but short term this averts disaster.They got what they asked about reforms, which frankly we would had to make them after all.
We got what we were asking all along, that we also need to grow the economy after all those years taking only austerity measures.
Im more interesting now to see how the World stock exchanges will react now that there is no Grexit in the vocabulary.
All current currencies are fiat currencies, but one thing is to have the Fed or the ECB taking care of it, another thing is the Venezuelan central bank doing it. Allowing all the Europeans countries to write down debt via fiat money would destroy the currency and the bonds credibility.
That ship has sailed, as the banks were already bailed out and nobody with a bit of sanity on his head has exposure to Greece. Even commercial companies are cutting exposure to Greece.
I think the main objective today is how to not make Greece an economic wasteland, worse than it already is. And unless it reforms, it won't be able to get out of this hole.
Let's see how things fare from here. The deal that passed was so draconian and stringent that either things move forward and Greece starts to behave like a normal country or they will balk and will try a different path, akin to countries like Argentina or Venezuela.
Mere repetition of a point already countered. If TARP didn't destroy the dollar then why would bailing out Euro banks destroy the Euro?
Well, somebody is exposed, given that German bankers are still trying to force payment.
The main objective of the Troika is *obviously* to make Greece an economic wasteland & keep it that way for many years to come. In that, they've controlled the message extremely well, creating a conventional wisdom that you accept & isn't wise at all.
Nobody gives a fuck about making Greece an economic wasteland. It's 11 million people for fuck's sake - that's less than the population of Paris alone. What they care about is making Greece self-sustaining, so that they can get at least some of their money back rather than accepting that Greece will be eternally on the dole. Greece as an economic wasteland would be a continual drain on Europe's resources; Greece as a self-sustaining, economically healthy democracy strengthens Europe and therefore Western civilization.Mere repetition of a point already countered. If TARP didn't destroy the dollar then why would bailing out Euro banks destroy the Euro?
Well, somebody is exposed, given that German bankers are still trying to force payment.
The main objective of the Troika is *obviously* to make Greece an economic wasteland & keep it that way for many years to come. In that, they've controlled the message extremely well, creating a conventional wisdom that you accept & isn't wise at all.
Congrats. I don't know about long term, but short term this averts disaster.
People in Greece will not see any good coming from those measures in the short term, those measures will take the economy in to a growth trajectory but it will take a few years to feel the change.
The main thing changed that will have an immediately affect is the end of a Grexit threat that had a tremendous negative effect in the economy. Now that the markets (esoteric and foreign) dont get bombarded with a Grexit threat and the field is stable to do business again, the economy will start to move.
The biggest problem so far was the uncertainty, once that is eliminated we can start to build once again. But, lets hope those measures will not only have an austerity effect the next two-three years and that growth measures will have a real affect in the economy, otherwise we will be in the same situation as before.
Agreed. It's going to be a balancing act, no doubt - convincing the Greeks that the pain is short term and worth it, convincing the rest of Europe's leaders that Greece is making the changes necessary, convincing the rest of Europe's people that they are better off allowing Greece to heal than to insist on interest-only payments on the agreed-upon schedules. But I'm optimistic that it can work. This deal (from what I've read anyway, which is limited) seems to be the best obtainable for everyone.People in Greece will not see any good coming from those measures in the short term, those measures will take the economy in to a growth trajectory but it will take a few years to feel the change.
The main thing changed that will have an immediately affect is the end of a Grexit threat that had a tremendous negative effect in the economy. Now that the markets (esoteric and foreign) dont get bombarded with a Grexit threat and the field is stable to do business again, the economy will start to move.
The biggest problem so far was the uncertainty, once that is eliminated we can start to build once again. But, lets hope those measures will not only have an austerity effect the next two-three years and that growth measures will have a real affect in the economy, otherwise we will be in the same situation as before.
The money is tightly controlled by the EU and is contingent on Greece fixing its structural problems on schedule. I believe his point was that assuming these structural problems are fixed, it still does little good (for Greece) if the spending saved is immediately sucked out of the Greek economy into interest-only payments, because that leaves no wealth to grow the economy and dooms Greece to making interest-only payments forever, until they revolt. If instead that extra wealth is allowed to stay in the Greek economy for a few years AND if the Greek government can resist seizing it and plowing it right back into the public sector, then Greece's private sector will be generating more wealth, making them able to pay back more and convincing the Greeks that the pain of living within their means is worth it.Maybe you should use this as an opportunity to fix the numerous structural problems with your economy before dreaming of a couple years ahead to your next blowout spending orgy that puts you right back into the situation you find yourself in today.
The money is tightly controlled by the EU and is contingent on Greece fixing its structural problems on schedule. I believe his point was that assuming these structural problems are fixed, it still does little good (for Greece) if the spending saved is immediately sucked out of the Greek economy into interest-only payments, because that leaves no wealth to grow the economy and dooms Greece to making interest-only payments forever, until they revolt. If instead that extra wealth is allowed to stay in the Greek economy for a few years AND if the Greek government can resist seizing it and plowing it right back into the public sector, then Greece's private sector will be generating more wealth, making them able to pay back more and convincing the Greeks that the pain of living within their means is worth it.