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Thread: Greek Default: What It Would Mean

  1. #11
    Senior Member Patrioten's Avatar
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    Interesting read:
    http://finance.fortune.cnn.com/2012/...ing/?hpt=hp_t3

    Greece's future

    So now what of Greece? The country was forced to make draconian cuts in government spending to secure the 130 billion euros, which should plunge the country further into an economic depression. Greek GDP fell 7% in 2011 and is in total free fall. General unemployment just hit 21% and youth unemployment just hit 51%. Both are expected to rise as the nation is forced to fire thousands of government workers to pay off its debts. Greece is now using nearly all of the cash it takes in from taxes to service its debt. If the country continues in this current state with no outside economic stimulus, it should burn through that 130 billion euros in no time. A third bailout seems inevitable.

    But there are some things Greece can do to raise some more revenue. For starters, it can finally get serious about selling off state assets. From excess land to utilities, the Greek government has a large portfolio of assets that can be liquidated. That money can be used to create job training programs or could be used as grants for small businesses. This will help grow the economy, which should bring in more revenue to help the country service its debts.


    In addition to selling assets, the Greeks should be seeking more grants from the EU and its neighbors and forgoing any new debt. This past weekend, Greek officials said that they would be seeking 1 billion euros in financing from the European Investment Bank. But more debt seems like a mistake. After all, while the restructuring did chop 100 billion euros off the nation's debt load, it also added 130 billion euros of fresh debt. In effect, the debt swap simply shifted Greek debt out of private hands and into public hands. The net effect on the Greek economy is basically the same, in fact, it's worse, as it adds another 30 billion euros to the pile. Greece needs growth, not more debt.
    The eurozone members can either watch Greece limp along and come begging for another bailout in a year or so, or they can do something to stabilize the situation. For example, Greece is entitled to 20 billion euros in EU structural fund grants from 2007 to 2013, of which they have used just 8 billion euros. The EU should release the remaining 12 billion euros to Greece immediately to help the country invest in some job-stimulating ventures. While 12 billion euros will barely move the needle in some economies, it could make a mark in Greece.

    But eventually Greece will need more grants to help stimulate its economy. That means that its northern eurozone neighbors will need to open their wallets and actually give instead of lend money to Greece. While that may be politically unpopular, especially in the Netherlands where talk of leaving the euro has been growing, it may be the best hope to keep the eurozone together and finally put an end to this seemingly never-ending crisis.
    How is job training supposed to get people back to work in a country that is shedding jobs? Is there a sector of the economy that is hiring like never before? If job training would spawn tons of jobs out of thin air then western Europe wouldn't have a problem with unemployment today, every government out there spends billions on job training without it leading to lower unemployment. Job training might work to some degree in a booming economy that requires skilled labor of a particular kind that is in short supply, but in an economic melt down where even the public sector, the only sector which tends to be recession-proof, is being cut, how is it going to help?

    The key here might lie in the shift away from private to public holders of Greek debt. If the author is correct in her description of the deal, where debt has been concentrated over to sovereign states, then such a swap could facilitate Greece leaving the Euro and or collapse economically, without there being massive reprecussions to the financial system. The sovereign debt holders would then have to brace themselves, cut their losses and move on. Maybe that's the plan?

  2. #12
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    There are parliamentary elections in Greece on the 6th of May, and so far things are looking very Weimary.

    The establishment parties will win, but the voters seem to be leaving them for new parties and 'extreme' parties on both sides. Probably the most interesting situation is the rise of the Golden Dawn (Chrysi Avgi) party which has gone from absolute irrelevance in the last election (about 0.2%) to looking to achieving anywhere from 5-10% of the vote in the upcoming election, and certainly achieving significant parliamentary representation. That doesn't sound like much, but given the splitting of the vote among so many different parties in Greece, it should give them a fair bit of power. The interesting thing about the Golden Dawn is that it is not just nationalist, but national socialist to the extent that they sell books by Hitler. I've been following their progress keenly, because its fairly unprecendented in recent times.

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    The election results so far are as follows:

    Code:
    Party                         Seats Percentage Vote
    New Democracy	        113*	20,65 %
    SYRIZA	                47	15,51 %
    PASOK                   44	14,29 %
    INDEPENDENT GREEKS	32	10,30 %
    KKE                 	25	8,26 %
    GOLDEN DAWN             21	6,84 %
    DEMOCRATIC LEFT	        18	5,95 %
    http://www.ekloges.ypes.gr/v2012a/pu...x.html?lang=en

    *The winner of the most seats in Greece gets a 50 seat bonus

    It's a pretty clear rejection of the establishment parties (in the last election the highest vote for a 3rd party was 7.5%). Unless the economy miraculously improves, I doubt the new government will last long. New Democracy is pro-bailout, so I doubt their policies will do anything to help the Greek economy.

    Greece will certainly be an interesting place to watch!

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    Thought I would go through wikipedia and paste the ideology info part of the pages if this is all Greek to you.

    New Democracy
    Liberal conservatism
    Conservatism
    Christian democracy

    SYRIZA
    Democratic socialism
    Eco-socialism
    Anti-capitalism
    Alter-globalization

    PASOK
    Social democracy
    Social liberalism

    INDEPENDENT GREEKS
    Conservatism
    Nationalism
    Populism

    KKE
    Communism
    Marxism–Leninism
    Anti-imperialism

    GOLDEN DAWN
    Greek nationalism
    Neo-Nazism
    Fascism

    DEMOCRATIC LEFT
    Democratic socialism
    Social democracy
    Pro-Europeanism

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    A narrow majority for pro-bailout parties in the Greek election saw European markets rally on the open today but that soon fizzled out as traders focussed on the job still to be done in Greece to form a stable government.

    Moreover, investors were reminded of the eurozone's fragility as Spanish 10-year bond yields this morning surged again to a sky-high 7.13 per cent.

    Although the worst-case scenario of Greece rejecting the European Union's bailout conditions has not materialised, markets are set for days and weeks of uncertainty and volatility after Greek elections produced only a narrow parliamentary majority for parties that have pledged to stick to austerity measures.

    ----------------------------

    Read more: http://www.thisismoney.co.uk/money/n...#ixzz1y96SyNcd

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    Golden Dawn pretty much retained its share in the vote.

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    By electing a pro-bailout party they may have staved off default at a tremendous human cost, but it can only by temporary, because the fundamentals are rotten. After that comes Italy and Spain and then its Great Depression II (at least!).

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    By electing a pro-bailout party they may have staved off default at a tremendous human cost, but it can only by temporary, because the fundamentals are rotten. After that comes Italy and Spain and then its Great Depression II (at least!).
    Speaking of which, this evening's breaking news is "Spain and Italy to be bailed out in £600bn deal"


    ... and it looks like Germany will be footing the bill again

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    Senior Member Neophyte's Avatar
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    If you read the tea-leafs in the press it's beginning the become pretty obvious that the Greeks themselves will be bailed out now; e.g. our minister of finance here in Sweden, though we are not members of the EMU, has publicly said that the Greek debt must be renegotiated. They all understand that continued austerity for Greece will, sooner or later, bring about some seriously unwanted consequences, at least for them.

    The reason that they have waited till now to say this is that it is only now that a) the problems are becoming acute and b) that a sufficiently large portion of the Greek debt now has been transferred from the banks onto the North European, predominately German, tax-payers. The Greek debt itself is now in the hands of the German tax-payers, so no Jewish money will be hurt by a debt write-off.

  10. #20
    Senior Member Patrioten's Avatar
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    Quote Originally Posted by Neophyte View Post
    If you read the tea-leafs in the press it's beginning the become pretty obvious that the Greeks themselves will be bailed out now; e.g. our minister of finance here in Sweden, though we are not members of the EMU, has publicly said that the Greek debt must be renegotiated. They all understand that continued austerity for Greece will, sooner or later, bring about some seriously unwanted consequences, at least for them.

    The reason that they have waited till now to say this is that it is only now that a) the problems are becoming acute and b) that a sufficiently large portion of the Greek debt now has been transferred from the banks onto the North European, predominately German, tax-payers. The Greek debt itself is now in the hands of the German tax-payers, so no Jewish money will be hurt by a debt write-off.
    I assume that Germany has to borrow money to fund the bailouts for Greece and to buy up private debt, which means that the writing down of Greek debt will see billions of Euro essentially go up in smoke, whilst Germany is stuck with their own loans that have to be paid back (noone is going to bailout Germany after all). So the income stream from Greece dries up but the loan at the other end remains the same. This effectively means that Germany will have a budget post on the expense side for paying back a debt that no longer exists for a long time to come.

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