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Grexit - will it happen or not?

Markus S

41 - 29
Make your predictions here.

My personal view - I still don't think it will happen, but I'm not as sure as I was until the middle of last week.
 
Syriza are in a very difficult place, if they go long with EU demands they will lose popular support and for that reason I think Greece will exit. In other words political survival for the government will overide the long range well being of the country. Grexit on the way.
 
Could leaving the Euro be a good move? GDP would go down, but reduced salaries and prices in Euros would boost the tourism. Greece is never going to be an industrial power
 
If you look at per capita GDP figures, Greece is today no poorer than Portogal and richer than a number of developed European countries in eastern Europe, the Balkans and the Baltic. So really no reason that they should not accept a lower standard of living, lower wages and prices, and so an increase in tourism and in whatever exports there may be, and so a gradual increase in wealth.

As to what "Grexit" would produce, or how it would actually happen, bankruptcy and back to the Drachma? Or bankruptcy and keep the Euro? I haven't the slightest idea. It is all uncharted territory. Do you suddenly freeze Greek banks while Euros are converted into Drachmas? And what about Greek-owned Euro accounts in other countries?
 
Well it's looking increasingly likely that it will happen.

A hardening in public positions of people/institutions seems to point to this being the-end-of-the-line, unless the greek government completely capitulate, which also looks unlikely.

I think Greece have painted themselves into the corner this time.

The question is, what is best for Greece ? Their own bonds are now rated as junk iirc, so do they really have anything more to lose, in terms of raising loans if they default now ?

Longterm, it could benefit Greece to have a weak Drachma in terms of exports/tourism, but short term it's got to be state-of-emergency time.

It's difficult to have a great deal of sympathy due to the way Greece has run its own financial affairs. They seem to have brought it on themselves.
 
And let's not forget that Greece already defaulted a couple of years ago. The EU-cum-Athens called it a "haircut," but in practice they welched on about 75% of the value of state bonds.
 
Monday's (todays) outflow of capital = 400m Euros!

Ouch...this can not continue.

Something will/must happen this week.

If you're holidaying in Greece, take cash :)
 
The situation is more than a bit mental as the maths are pretty clear. In order to gain access to the agreed financing, Greece is being asked, after eye watering amouts of sacrifice, to run a massive surplus. This is essentially impossible and benefits nobody.

Equally impossible, since nobody is lending them any more money, if for the Greeks to run a deficit.

The obvious course of action then is for the Greeks to run a small surplus which is what the Greeks are offering, but this is unacceptable because morality.

Meanwhile the IMF jumps up and down and goes on about "structural reforms" because that's all they ever do in these situations. Which is odd because their own economists will tell you that what they are asking will reduce Greece's ability to run a surplus and meet their obligations.

I predict some fudge will be made as the EU always seems to find some way to patch it up. If the Greeks do leave then:

-- It will be awful in Greece for a couple of years.
-- There will be some kind of crisis in financial markets (either minor or Tsunami depending on how much you believe it's priced in and how confident you are in stress tests on German and French banks).
-- It will be squeaky bum time at the next Italian and Spanish bond auctions.

Assuming we somehow survive this the interesting part is what happens in 3 years time when Greece is booming, Europe is still stuck in Austerity driven secular stagnation and the Troika tell the Spanish to have more unemployment and misery for their own good.
 
EU officials and German politicians have vented their frustration at Greece, with time running out for reaching a debt deal.

One diplomat described as amateurish Greece's attempts to unlock bailout funds from the EU and IMF.

Greek Prime Minister Alexis Tsipras said it was up to international creditors to "turn to realism".

But Germany's European Commissioner said if talks failed Greece would come under a state of emergency. BBC news

Coming out of the EU would be catatrophic for the Greek people as their whole financial system would crash. Ukippers and Tory sympathisers should take note.
 
Is anyone proposing Greece will come out of the EU? The Euro is a different matter.

Everyone know Greece has debts they can't repay, so a writing off of debt, or a payment default, seem the only obvious answers.
 
If you look at per capita GDP figures, Greece is today no poorer than Portogal and richer than a number of developed European countries in eastern Europe, the Balkans and the Baltic. So really no reason that they should not accept a lower standard of living, lower wages and prices, and so an increase in tourism and in whatever exports there may be, and so a gradual increase in wealth.

As to what "Grexit" would produce, or how it would actually happen, bankruptcy and back to the Drachma? Or bankruptcy and keep the Euro? I haven't the slightest idea. It is all uncharted territory. Do you suddenly freeze Greek banks while Euros are converted into Drachmas? And what about Greek-owned Euro accounts in other countries?

Paul, does your eagerness to make Greece suffer have anything to do with your questionable investment decision some time back?
 
I think the possibility that Greece may leave monetary union and the EU highlights a massive issue that requires immediate legislation to correct. Namely the abbreviation through concatenated portmanteau replacing the simple addition of -gate to describe extreme situations, crises or scandals.

As execrable as the knee jerk "-gate"-ing was, the extension of the portmanteau technique from tabloid labels for real and imagined seleb couples to international incidents is clearly worse.

I really don't care if the world economy is dragged into another crash or not - just please ban the use of the term Grexit.
 
Coming out of the EU would be catatrophic for the Greek people as their whole financial system would crash. Ukippers and Tory sympathisers should take note.

Sorry, but, nonsense!

Greece and the UK are in no way comparable. The UK is the 5th richest economy in the world.
 
Ah, you remember! Well, to answer your question, yes and no. I do not think what I am saying has anything to do with that. As I said, there are many other countries that are worse off than the Greeks, nobody starves, they simply have a lower standard of living than in France, or Italy or Germany. Why should the Greeks have a divine right to a high standard of living? The Portuguese, as poor or poorer than the Greeks, have so far honoured their debts.

I don't think you are being fair in referring to my "questionable investment decision." Greece, like all nations, needed money, so they floated bonds. I happened to buy some of these, which at the time had 5% interest rate. by doing so, I agreed to lend Greece some money in exchange for 5% interest. This constituted a contract, which included Greece reimbursing of the sum at the expiry date. They failed to do so, and replaced their bonds with about 24 different bonds worth 25% of what I lent them.
So they broke a contract. Legally and morally. What did I do that was "questionable"?
 
I'm not saying they are comparable, but just to mention that there could be a number of unintended consequences which might not be very nice in a financial sense.

I'm sure these ultra smart UKIP people don't need me to tell them that and they have probably got it all sussed out as we speak :D
 
To suggest that Greece could be booming 3 years after exiting the Euro is not shared by everyone and seems highly optimistic to me.

On 29 May 2012 the National Bank of Greece (not to be confused with the central bank, the Bank of Greece) warned that "[a]n exit from the euro would lead to a significant decline in the living standards of Greek citizens."

According to the announcement, per capita income would fall by 55%, the new national currency would depreciate by 65% vis-à-vis the euro, and the recession which Greece has been in for five years would deepen to 22%.

Furthermore, unemployment would rise from its current 22% to 34% of the work force, and the inflation, which is currently at 2% would soar to 30%.
According to the Greek think-tank Foundation for Economic and Industrial Research (IOBE), a new drachma would lose half or more of its value relative to the euro. This would drive up inflation, and reduce the purchasing power of the average Greek.

At the same time, the country's economic output would drop, putting more people out of work where one in five is already unemployed. The prices of imported goods would skyrocket, putting them out of reach for many.

Analyst Vangelis Agapitos has estimated that inflation under the new drachma would quickly reach 40 to 50 per cent to catch up with the fall in the new currency's value. To stop the falling value of the drachma, interest rates would have to be increased to as high as 30 to 40 per cent, according to Agapitos. People would then be unable to pay off their loans and mortgages and the country's banks would have to be nationalised to stop them from going under, he predicted.
 
Given the amount the economy has already contracted and the amount of contraction predicted in your anonymous three year old quote and the almost universal way that economies go after massive recession and currency devaluation, then it would seem highly unlikely that Greece would be anything but booming 3 years after an exit.
 


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