EU central bankers ponder Greece euro exit

[T_i_B]

Source: BBC

Europe central bankers have been openly expressing views on the possibility of Greece leaving the eurozone as its leaders struggle to form a government.

Germany's top banker said it was up to the Greeks to decide, but if they did not keep to their bailout commitments, they would receive no new aid.

His counterpart in the Irish Republic said a Greek exit would be damaging but not necessarily fatal to the euro.

Greece is to make a final attempt at forming a government on Sunday.


Read more: http://www.bbc.co.uk/news/world-europe-18046280

[Vincardog]

1. If the Greeks leave the financial parasites will just move on to the next victim to be looted.

[Kelvin Mace]

2. The Irish, Spanish, Italians, Dutch and Portuguese

should threaten to join Greece unless the austerity program is repealed.

Germany's greed and fear of inflation is blinding them to the speeding train heading toward them.

[EFerrari]

12. Last week on the same day Merkel was threatening Greece

I read a story that the Deutsche Bank has to pay a 202 millions dollars fine for mortgage fraud, which makes me wonder how many millions they should be paying.

[hack89]

22. Why is Germany being greedy?

They reduced Greek debt by 75%. Why should German taxpayers fund future loans to Greece?

[Kelvin Mace]

28. They were greedy

because they lent money in the first place hoping to make money off Greece, a country they had NO business loaning money to in the first place. Greece should never have been let into the EU, and had obviously cooked the books to get meet the the financial requirements.

Germany walked into this with their eyes wide open.

Read "Boomerang" by Michael Lewis for the reason I have no sympathy for Germany.

Oh, and by the way, when I say Germany in the above context, I am talking about German banks. You are certainly correct that the taxpayer should NOT be stuck with the bill, just the same as we should NOT have been stuck with the bill for the bank bailout.

I apologize for not making that clear.

If anyone can figure out how to stop banks from privatizing profit while socializing losses, I hope they will share the insight.

[cstanleytech]

3. The Greeks arent exactly innocent victims or

atleast their government wasnt.
Mind you I am not saying the bankers are virgins either, they are more at fault than anyone for the mess the worlds in atm but its completely delusional imo to lay all the blame on the bankers only.
Anyway if Greece pulls out of the euro I wish them luck but either way its going to take them years to recover imo.

[coalition_unwilling]

13. Whatever happened to the notion that 'lenders lend at their own risk'? That

little nostrum, under which I was raised, seems to have gone by the wayside if the lenders are big banks.

A Greek exit from the Euro would mean that bond-holders take a haircut (and to a lesser extent, stock-holders in financial institutions that hold Greek Euro-denominated debt). But a Greek economy tied to a New Drachma could easily fix Greece's fiscal problems in very short order, not years.

[rayofreason]

15. I agree - "Caveat Emptor" and no bailouts...

...but the flip side is that the Greeks should not complain when no one wants to lend to them in the future except at crippling rates so that the lender can consider the risk worthwhile.

I suspect that when (not if) the Greeks exit the Euro and denominate all their notes as Drachmas that will rapidly devalue (a de facto default) a number of pension funds around the world will take a hit. It will be ugly for all involved, but I cannot see any other way out for the Greeks. In the short run they will be hammered far beyond what any austerity budget would do. But it the long run they will have regained their financial independence and perhaps the seeds of a cultural shift that will produce better government and fiscal stewardship in Greece.

[coalition_unwilling]

16. Any hedge or pension fund that has not already hedged its

risk in Greek Euro-denominated bonds by now can only be called either willfully incompetent or purely speculative. If the former, no investor exercising due diligence should remain and, if the latter, then caveat emptor indeed. (One of the legitimate uses of credit default swaps is to hedge against the risk of a debtor defaulting.)

I use Argentina as the closest historical analogue to what faces Greece. The Henny-Penny sky is falling crowd were running around madly back then also when Argentina defaulted on its debt. And now 20 years later, Argentina's economy is brimming with vitality and creditors are lined up waiting to lend it money.

[dmallind]

19. Creditors are lined up??

Every peso of Argentine sovereign debt in the last decade has come from intergovernmental borrowin. They have not even TRIED international credit.

[coalition_unwilling]

21. Hmm, that runs counter to what I have read and my general sense of

the Argentinian macro economy.

However, I am ill equipped to go tracking down sources for my vague post above.

Have I missed something here or perhaps I was thinking of international creditors being eager to lend money to Argentine businesses? Somehow I think I've missed a crucial piece of the puzzle here but am not sure exactly what that piece is.

[rayofreason]

25. I was in Argentina in the fall....

...and I noticed that things had become significantly more expensive from the year before - even though I was getting more pesos for my dollars.

I went to grocery stores, priced stuff in pesos, and yes, there has been a lot of inflation in one year. This was confirmed by cab drivers I spoke with (always a good source of info). They uniformly told me that the economy was getting worse and that prices were rising. Crime was going up as well.

All is not well in Argentina.

[hack89]

26. The fundamental difference between Greece and Argentina

is that Argentina's fiscal crisis came during a period of very high global demand for their agriculture products (soy in particular). They were bringing in export revenue at a record rate so they had the cash to cushion the crash. Greece does not have that luxury - they have a poorly performing economy fully integrated into a sick European economy.

[cstanleytech]

17. That doesnt give someone who owes a debt carte blanche though in paying

atleast some of it off if they can, of course I wouldnt shed a tear if that happened to the banks mind you but still the point is the ones who made the promises to the banks should be held responsible to.
As for them pulling out of the euro sure it might fix some of their problems but it might make it very difficult for them to afford to import things that they themselves cannot produce or grow like for example medications and they can also pretty much kiss off most banks and or governments loaning them money for years if not decades.

[hack89]

24. So now the EU understands the risk of lending to Greece

do you blame them for being reluctant to lend?

The banks have already taken a 75% haircut.

An economy based on a New Drachma is a fantasy.

[4th law of robotics]

23. Good luck with that argument

some people here just won't listen to it.

Apparently The Banks forced the poor greeks to spend beyond their means for decades against their will. They wanted to pay their taxes and have a reasonable budget and cut down on corruption but The Banks stopped them.

[tralala]

10. If the Greeks leave it will cause a break in the chain of payments

between the other Eurozone countries

[freshwest]

4. Dumb questions: Can't Greece make it on their own? Why do they need this kind of aid?

Can't they support themselves from their own industries? Who really owns the resources of Greece, or are they without enough to take care of their own people? Are we talking people who can't live without borrowed money?

Why is it said that this is their fault? Are we talking about the government or the people themselves doing something to bring this about? Are the tales from Italy and Greece that hedge fund people were robbing them untrue?

I'm not sure how we're still tottering along after TARP 1 & 2, if Greece can't do something like what we did. I feel sorry for the people of those countries and what they're going through.

[PoliticAverse]

5. The short answer is the Greeks lack the political will to pay for their level of public spending

with commensurate taxes. As a result they are #2 on the list of highest debt to GDP ratio ( see: http://en.wikipedia.org/wiki/List_of_countries_by_public_debt ).

A prime difference between the US and Greece is that the US has its own currency while the Greeks joined the Euro currency. The US was able to finance the
bailouts by 'printing the money' (the Federal Reserve purchased the majority of US government debt issues last year for example).

Greece will likely have to leave the Euro and get their own currency back.

[freshwest]

7. Thanks, that makes sense. What will come of this 'debt' they appear to owe the EU?

Will this really disrupt other countries or will they just drop investing or doing business with them?

Perhaps the Greeks can reorganize their government to take care of themselves without dependence on the Euro. This could be a good thing for them. It doesn't look like what they're doing is working for them. It seems like any country could make their own currency to take care of their internal affairs.

That was news to me, about them not paying taxes enough. I hope we aren't on the same road with the 'don't tax me' players here.

I appreciate your making the gap for me.

EDIT:

What would happen within Greece during a currency change? Such as government operations, perfoming transactions between individuals and businesses, exporting or importing goods for sale or consumption with other countries?

Wow, this is way past my speed.

[PoliticAverse]

9. What will happen to their debt is an excellent question...

Greece and its creditors are currently playing a high-stakes game of chicken.

There's an old joke that goes something like: If you owe a bank $1,000 and can't pay you have a problem. If you owe a bank
$1,000,000 and can't pay the bank has a problem.

Under the bailout plan that was agreed to earlier this year Greece got to have their debt reduced if they agreed to cut their budget
deficit. This is the 'imposed austerity' people talk about.

The US has been doing a similar thing to Greece. We just borrowed money to pay for the Iraq and Afghanistan wars for example.
Continually spending more than you take in and borrowing to make up the difference ultimately isn't sustainable, the only real
question is when will people stop lending you money to do it.

The Greeks either have to get serious about collecting enough taxes to pay for their expenditures or they have to leave the
Euro get their own currency back and finance their expenditures through the inflation-tax. Leaving the Euro will likely be a very
bumpy road. Here's an article posted today which discusses the issue:
http://www.guardian.co.uk/business/2012/may/13/greece-leave-eurozone-five-difficult-steps
and one from a few days ago: http://www.bbc.co.uk/news/business-15575751 .

[fasttense]

11. This is just so ridiculous. As if this game of sovereign debt were real

All Greece has to do is declare the debt accrued and orchestrated by Goldman Sachs and other banksters as illegal. Then arrest the banksters and politicians who designed and implemented the book keeping con. Yes the EU will scream. Then Germany will have to go back to starting wars in order to pillage and plunder other countries.

Of course these excessively wealthy people who don't pay their taxes have the power and they want to pretend that the book keeping con is real so they can cash out.

This is just all fake money going around and around from bankster to bankster.

The whole system has to be reworked because the current system is infected with parasites.

[hack89]

27. The EU and large foreign banks have written off 75% of that Greek debt

as part of the bail out. The present issue is that they want the EU to lend them enough money to fund government operations for 2 years. The EU is insisting on austerity measures before they lend Greece a penny more.

[dmallind]

20. No

Greek government spending is 40% of GDP and far far in excess of tax revenues. Without spending much less or borrowing much more they cannot function alone.

[AdHocSolver]

6. I suggest to the Greeks that they not submit to extortion. nt

[unkachuck]

8. c'mon Greece....

....leave the eurozone, go back to printing Drachmas and get yourself free! Pay those wall-street jackals off with good wholesome Greek paper.

"...if they did not keep to their bailout commitments, they would receive no new aid."

....so Greece, like what advantage is there in being a member of the eurozone?

[muriel_volestrangler]

14. It keeps their imports cheaper than they'd be under an independent currency

and imports are about $65 billion - 21% of the $310 bn or so GDP (compared to US imports which are 15% of GDP).

All the parties from Syriza to New Democracy favour, in public at least, remaining in the eurozone. That may apply to the Independent Greeks too, I'm not sure. Maybe it's short-sighted, but that is at least their negotiating position, and what the majority of voters want - to remain in the eurozone, but not to have the heavy austerity measures.

[panzerfaust]

18. Penultimate problem was letting culturally non-European

countries into the Eurozone.



The ultimate problem is the greed and corruption of the financial system.