Time to burn Greece?

Damian_ir

Today

https://www.youtube.com/watch?v=3xkgxBaJvKw

https://www.youtube.com/watch?v=wY0tIBKnbYA

Damian_ir

Damian_ir wrote: »

Today

https://www.youtube.com/watch?v=3xkgxBaJvKw

https://www.youtube.com/watch?v=wY0tIBKnbYA

There'll be some craic in Greece alright when the people get what they want and they're working the whole day to afford a loaf of bread.

Voltex

Greece will be the "Weimar Syndrome" of European history!
Buy the papers...your grandkids will need them for their history projects!!

Damian_ir

THURSDAY - Second day of the General Strike and Protests

https://www.youtube.com/watch?v=_poA0RDF6jE

BANZAI_RUNNER

Is it just me or is Greece fast becoming to the ' Anglo Irish Bank' of the EU , they are giving them more and more money but the end result will be the same ...default/ no recovery of the debt , or if they do manage to recover any of the debt , it will be subject to a severe haircut, perhaps its time to cut them loose

Sand

It seems the gameplan since 2008 is to pour billions and billions into black holes and *then* default...

It'll be another textbook example why its best to risk defaulting too early than default too late. The agonised extend and pretend nonsense has completely poisoned the European project with bitching and sniping between the various Eurozone members. If nothing else, it has been underlined that Germans will never see fiscal transfers to Greece and the periphery in the same light as they see transfers within Germany itself and the Greeks will never see fiscal discipline imposed by European agencies in the same light as whatever fiscal discipline exists in Greece. That is the requirement for a common currency, and it was the expectation that by introducing the Euro, European electorates would be forced to enter into a fiscal and thus political as the only rational option to the weakness in the Euro's design.

Up until now, electorates across Europe are digging their heels in and refusing to follow the script.

Voltex

I believe there is a report in the FT that says sources close to the Troika have a report on Greece that will show the economy has taken a turn for the worse (how it could possibly get any worse baffles me) and that it will be at least 10 years before they could think of going back to the markets.

I think that a big bazooka write down on Greek debt needs to happen in tandem with a planned re-capitalisation to the exposed banks and then banks with exposure to Greek debt CDS's, because this will be a "credit event"

I also feel that if something concrete doesnt come out before sunday night we will see a huge sell off on Sunday night in Asia.

liammur

Voltex wrote: »

I believe there is a report in the FT that says sources close to the Troika have a report on Greece that will show the economy has taken a turn for the worse (how it could possibly get any worse baffles me) and that it will be at least 10 years before they could think of going back to the markets.

I think that a big bazooka write down on Greek debt needs to happen in tandem with a planned re-capitalisation to the exposed banks and then banks with exposure to Greek debt CDS's, because this will be a "credit event"

I also feel that if something concrete doesnt come out before sunday night we will see a huge sell off on Sunday night in Asia.

Strikes certainly aren't helping the economy, the tourism sector must be in bits over there.
I think the main news as far as the markets are concerned is on wednesday, but it will be a volatile week ahead.

Voltex

liammur wrote: »

Strikes certainly aren't helping the economy, the tourism sector must be in bits over there.
I think the main news as far as the markets are concerned is on wednesday, but it will be a volatile week ahead.

Its going to be intresting ( from a historical perspective) how the EU manage a delinquent Greece within the Euro zone. I think the next couple of months will be defining for the Euro as a community project...so im keeping the papers, as Im sure all our kids will be studying these events in years to come!!

ragg

The news from Greece is confusing me at the minute. They get to "BURN THE BONDHOLDERS" (read in a joan Burton voice) which is fair. However, they are going to be condemed for generations to be the closest thing to "third world" that europe will see.

French banks are going to get hammered, but they will just buffer with money from europe as a whole (Which is fair considering how much they contribute).

What im finding hard is that Ireland needed both of these solutions at one point, but they were rebuffed.
It just like we're too small/ not desperate enough to get a fair deal, but part of me thinks this all for the best.

Unprecedented times.

Scofflaw

ragg wrote: »

The news from Greece is confusing me at the minute. They get to "BURN THE BONDHOLDERS" (read in a joan Burton voice) which is fair. However, they are going to be condemed for generations to be the closest thing to "third world" that europe will see.

French banks are going to get hammered, but they will just buffer with money from europe as a whole (Which is fair considering how much they contribute).

What im finding hard is that Ireland needed both of these solutions at one point, but they were rebuffed.
It just like we're too small/ not desperate enough to get a fair deal, but part of me thinks this all for the best.

Unprecedented times.

In a sense, you've answered your own question there - Greece will get to burn the bondholders, but will still be mired in debt that it can't pay, and that nobody is 100% willing to pay on its behalf. And the fact that that will be the case even after burning the bondholders is the reason burning the bondholders has to happen. It's a case of "can't pay, won't pay".

Ireland's case is different - we can just about afford to pay. Sure, we think of ourselves as poverty-stricken, and the debt as an impossible burden, but that's largely just a historical hangover of beal bocht - in fact, we're a small, wealthy, relatively well-run and productive nation. So until such a time as there's minimal risk of contagion, nobody is going to let us off our debts. Those who believe we have a clear case that we can't possibly sustain the debts are optimists, whereas in Greece's case they're just realists.

cordially,
Scofflaw

ragg

Totally agree with all you said, but in the interest of fairness we have anglo debt of 1 billion quid that is sue for payment anyday, that should be let slide. Of course it won't be, but we should be get the option to refuse to pay for an institution that doesn't exist anymore

Good loser

ragg wrote: »

Totally agree with all you said, but in the interest of fairness we have anglo debt of 1 billion quid that is sue for payment anyday, that should be let slide. Of course it won't be, but we should be get the option to refuse to pay for an institution that doesn't exist anymore

That payment has absolutely nothing to do with Greece. Like saying he stole €1000 why can't I?

Can't you see that the whole Euro zone is at breaking point?

Greece having faltered is all the more reasom why we should not.

jc84

Everything that can be done to help Greece should be done, but I think that the eu needs to arrange for Greece to exit the euro currency, Greece is in the **** right now and shouldn't be allowed to bring the other euros one countries with it

liammur

The Greek situation looks worse than most thought, apart from the German finance minister. They need to be cut loose at this stage as they could use up the entire funds available. How they ever got into the € is anyone's guess.

AlekSmart

liammur wrote: »

The Greek situation looks worse than most thought, apart from the German finance minister. They need to be cut loose at this stage as they could use up the entire funds available. How they ever got into the € is anyone's guess.

Hmmmm..watching Joanna Lumley visiting a Greek Military outpost the other night set me thinking........What would the Ottomans have done...?

Perhaps Johnny Turk might take a look over his neighbours four green fields.....?

professore

Scofflaw wrote: »

If one believes that the EU is some kind of immense bureaucracy with extraordinary fiat powers over the helpless member states and a lot of time on its hands to poke and pry where it's not wanted, that explanation would make sense. However, the EU is in fact a very small bureaucracy (smaller than the HSE, for example) with very limited powers, and whose officials pretty much have their hands full just carrying out the duties they've been tasked with. As such, it doesn't have any way of "independently verifying" the books of a member state - it has to act on the basis that the data it's given are not fraudulent.

Finding out whether a national government is cooking the books is really beyond the powers of anybody bar that national government - if the government wants to hide the fact, it can and will do so. So, in the case of Greece, it was only when a new and reforming government was elected to office that the fraud committed by the previous governments came out - and I suspect that had the fraud been sustainable the current Greek government might also have decided just to keep quiet about it.

It was up to the member states at the time of the creation of the euro to decide whether they would give the EU the legal power and the necessary resources to independently verify whether the member states were being honest about the convergence criteria, presumably through some kind of hostile audit procedure. Opposition from a single member state would have been sufficient to put an end to any such plan, although there's no particular sign that the member states did anything bar say "well, we're all grown-up First World countries, right? I'm sure we're all telling the truth..." rather than go down the road of putting themselves in a position where they too would be audited.

This seems to be a regular theme, by the way - the EU has fantastical powers attributed to it by people, and then has negligence attributed to it because it doesn't use the imaginary powers it doesn't have. The EU isn't Europe's federal government - it's a relatively small bureaucracy with rather strictly circumscribed powers at the service of a framework for joint European action by the member states.

cordially,
Scofflaw

At the time before Greece's accession to the EU it was widely reported in the international press that they were cooking th books to get in. Surely this merited further investigation? Turkey, a country with far better economic credentials has been repeatedly shot down for accession talks for purely political reasons.

professore

On the original topic, I think "Burning Greece" might backfire big time - with the realisation that actually they are better off back with the Drachma.

Remember the "we are not Iceland" refrain here? You don't hear that anymore - since after a harsh but short readjustment period Iceland are immesurably better off now than we are: http://www.economist.com/node/17732935

liammur

What it's like in Greece:

An English teacher in Athens wrote to the Guardian describing her day-to-day life (via Yves Smith):
The Australian embassy is flooded with Greeks applying to emigrate to Australia because the unemployment rate here is well over 25%. My father emigrated to Canada in 1952, when Greece had been completely devastated following World War Two and a civil war. There was no work, there was great poverty so workers emigrated to the US, Canada and Australia in droves.

Nowadays intellectuals and professionals are the ones who are emigrating. My children are at university. My son is studying engineering at the Athens Technical University. The president of the university informed the students that the university may close down in January due to a lack of funds. Why are we destroying our children's hopes and dreams?

Now my children may have to emigrate to Canada just as their grandfather did 50 years ago. Why should a young person feel that he must leave his homeland in order to have a decent future?

I can't get to work easily most days because public transport is usually on strike three days every week. The streets are piled high with rubbish.
It gets even worse, as she talks about pharmacies running out of anti-depressants to sell, and heart diseases surging also due to lack of medicine.
A recent Credit Suisse report on the risks facing Europe suggested that at some point Greece would simply reaching its breaking point, and refuse to comply with any international demands or austerity schemes. Now granted, this is just one account of life in Greece these days, but reading it, it's hard to imagine the country going that much further.

Sand

Theres an immense gap in Greece between what people expect from their government - spending - and what their government is actually capable of delivering - revenue.

Spending >>>>> Revenue.

The Greeks have two options:

Austerity

Leave the Euro, print drachmas as vast as they can until they need wheelbarrows to carry their lunch money in.

Austerity is tough. Running the printing presses is also tough - look at Weimar Germany. Theres no magical no pain escape hatch for the Greeks. They can riot, or not riot. Makes no difference because Spending >>>>> Revenue and they need to fix that relationship.

Greece seems like a broken country - everyone seems to be clear on what theyre entitled to and not much else.

The idea of "burning the greeks" was always a ludicrous projection however. The ECB and the core states, particularly France, are terrified of "burning Greece". Greece may default, but the country, the nation, the state will live on in some shape or form. French banks, the ECB, the Euro...they may not have such a long life.

Sand

Its become apparent that its not all happy families in the EU summits these days...

According to insiders, Wolfgang Schaeuble, Germany's finance minister, could not resist taking an "I told you so" approach - he had been, after all, the first to call for an "orderly" default for Greece 18 months ago, at a time when the cost of such a move was less than one third of the price today.

"Schaeuble is a man who does not mince his words, whose reputation for harshness and arrogance is well earned. He was, frankly, unbearable," said one diplomat.

Time being money, it appears playing for time and can kicking has a cost all of its own. Playing for time on Greece so banks could build up their balance sheets doesnt seem to have accomplished anything other than building up the cost of the inevitable default.

bryaner

Sand wrote: »

Its become apparent that its not all happy families in the EU summits these days...



Time being money, it appears playing for time and can kicking has a cost all of its own. Playing for time on Greece so banks could build up their balance sheets doesnt seem to have accomplished anything other than building up the cost of the inevitable default.

And thats a wrap..

beeftotheheels

ragg wrote: »

The news from Greece is confusing me at the minute. They get to "BURN THE BONDHOLDERS" (read in a joan Burton voice) which is fair. However, they are going to be condemed for generations to be the closest thing to "third world" that europe will see.

French banks are going to get hammered, but they will just buffer with money from europe as a whole (Which is fair considering how much they contribute).

What im finding hard is that Ireland needed both of these solutions at one point, but they were rebuffed.
It just like we're too small/ not desperate enough to get a fair deal, but part of me thinks this all for the best.

Unprecedented times.

Nope, and this is the kicker and why "burning the bondholders" doesn't always auger well.

Papademos said....

At the moment 30% of Greek debt is held by Greek investors (banks, insurers, pension funds).

30% is held by official creditors (ECB, IMF etc) so

40% is held by foreign private investors.

In so far as you burn the Greek investors Greece will have to make them whole again to protect the Greek population.

The official investors will not tolerate being burnt.

Meaning any agreed discount is worth 40% of its face value. Write off 60% of Greek debt (as the Germans seem to want) and chances are that you only reduce Greek debt by (60% of 40%=)24% which does not render Greece solvent.

http://www.ft.com/intl/cms/s/0/88e54436-fd91-11e0-b6d9-00144feabdc0.html#axzz1ayishOJq

Lets not get too wedded to the idea of "burning the bondholders", it comes with a lot of pain and if (and official creditors are a bigger proportion of the total for us given our low national debt to begin with) it doesn't actually gain you much (absent being prepared to step outside the EU as I suspect Greece must do in the coming months) if you're a small, open economy who might just be able to get through this without p!$$ing everyone off.

If the world economy contracts we may have no other options, but while we do, lets just keep collecting our gold stars.

maninasia

if you're a small, open economy who might just be able to get through this without p!$$ing everyone off.

This line illustrates well why Ireland always continues to take the 'safest' route, meaning the longest route to the cliff-face. All routes lead to the cliff-face, some are simply faster or lower down on the cliff-face.

Apart from that, pissing people off is no reason not to do something.

RichardAnd

liammur wrote: »

What it's like in Greece:

An English teacher in Athens wrote to the Guardian describing her day-to-day life (via Yves Smith):
The Australian embassy is flooded with Greeks applying to emigrate to Australia because the unemployment rate here is well over 25%. My father emigrated to Canada in 1952, when Greece had been completely devastated following World War Two and a civil war. There was no work, there was great poverty so workers emigrated to the US, Canada and Australia in droves.

Nowadays intellectuals and professionals are the ones who are emigrating. My children are at university. My son is studying engineering at the Athens Technical University. The president of the university informed the students that the university may close down in January due to a lack of funds. Why are we destroying our children's hopes and dreams?

Now my children may have to emigrate to Canada just as their grandfather did 50 years ago. Why should a young person feel that he must leave his homeland in order to have a decent future?

I can't get to work easily most days because public transport is usually on strike three days every week. The streets are piled high with rubbish.
It gets even worse, as she talks about pharmacies running out of anti-depressants to sell, and heart diseases surging also due to lack of medicine.
A recent Credit Suisse report on the risks facing Europe suggested that at some point Greece would simply reaching its breaking point, and refuse to comply with any international demands or austerity schemes. Now granted, this is just one account of life in Greece these days, but reading it, it's hard to imagine the country going that much further.

To be fair, it's hard to know how much of that is true. I'm sure we all recall that letter some weeks back where in, an impoverished father claimed his daughter was eating cardboard? Who's to say that this letter is not of a similar origin?

Scofflaw

maninasia wrote: »

This line illustrates well why Ireland always continues to take the 'safest' route, meaning the longest route to the cliff-face. All routes lead to the cliff-face, some are simply faster or lower down on the cliff-face.

Apart from that, pissing people off is no reason not to do something.

That depends on whether you're going to be reliant on those people after doing so.

cordially,
Scofflaw

maninasia

As the old adage goes 'to make an omellete you've got crack some eggs'. You can't NOT piss people off when you are in debt like the Greeks.

As for reliance, even if you piss some people off others will still lend to you as long as they think that you can pay them back and they can make a nice profit. Default and bring back their own currency, there doesn't seem to be a way around that. Even in the current plan there is talk of a 60% haircut, there are going to be MANY pissed off lenders. So what, it's inevitable.

Maura74

The Greeks know that they are holding the grenade and if the other EU countries do not give them more money to let them have jobs for life as well as early retirements and paying little or no tax then they will pull the pin.:(

Scofflaw

Maura74 wrote: »

The Greeks know that they are holding the grenade and if the other EU countries do not give them more money to let them have jobs for life as well as early retirements and paying little or no tax then they will pull the pin.:(

Er, no. The Greeks got away with that because they were able to borrow from the market cheaply using, in effect, Germany as their guarantor.

With a default on privately owned debt, the Greeks will not be able to repeat that trick. Instead, they're putting themselves in a position where the only people who will lend to them will be the troika, and the troika will insist on the kind of conditions they're insisting on here. They can't at this stage push the Greeks too hard, but they'll have plenty of time, because the Greeks will probably be in the hands of the troika for the next decade at least. It's perfectly possible to get blood out of a stone - you just need to squeeze gently and firmly for a long time.

We may look with envy at the Greek conditions of receivership compared to ours, but we'll be out of receivership many years before them. Their only way out of it is to collapse out of the EU and out of democratic Europe and go back to being really poor - and on the roadmap before that is probably a civil war and military intervention by the EU and NATO.

We're highly unlikely to follow the same route - and even if we did, it would be extremely unlikely to involve a civil war - but it would involve going back to being a poor British satellite. I don't think any government we might elect will voluntarily go down that path, so while we might look for politely termed debt reductions, we don't need to do what the Greeks are doing, and we won't if we can possibly help it. And yes, that will involve further paying off of Anglo bondholders and the like.

cordially,
Scofflaw

halkar

Time to sing


At first we took the aid
We were petrified
Kept thinking we could only live
with Germans by our side
But then we spent so many nights
Thinking how you did us wrong
And we grew strong
And learned to string you all along

and so we're back
Just watch this space
What are the yields doing
what's that sad look on your face
We should have made people pay taxes
And begun austerity
But were busy on the beach
And you bail us out for free!

Go on now go walk out the door
Things turned around now
And the markets are on the floor
Merkel the one who tried to hurt me with goodbye
Watch the markets tumble and the single currency die.

Oh no, not I
I will survive
Oh as long as Trichet buys our bonds I know I'll stay alive
We have our cushy lives to live
And in return nothing to give
And I'll survive I will survive (hey hey)