Greeks having a referendum on bailout

ei.sdraob · 01-11-2011 01:50PM

A bit of historical perspective is missing here

Greece has defaulted many times in past and the world did not end, Greece has also relatively recently emerged from military rule and is still heavily militarized

The choice for the Greeks is

a) Yes, endure 10+ (!!!) years of more austerity (real austerity that is none of that Crooked park austerity) as an EU vassal, with a possibility of the country reverting to military dictatorship in order to prevent civil war and unrest

b) No, go Icelandic with a sharp shock for a month and then be out the doldrums in few years, be ejected from euro (somehow! maybe be pegged initially) and go back to drachma, then promptly devalue

They are in a deep hole thanks to their politicians and incompetent EUro politicians, option a) could go very very wrong with the country reverting to its old self, that is a much scarier option than going thru' what Iceland did.

Scofflaw · 01-11-2011 01:58PM

ei.sdraob wrote: »

A bit of historical perspective is missing here

Greece has defaulted many times in past and the world did not end, Greece has also relatively recently emerged from military rule and is still heavily militarized

The choice for the Greeks is

a) Yes, endure 10+ (!!!) years of more austerity (real austerity that is none of that Crooked park austerity) as an EU vassal, with a possibility of the country reverting to military dictatorship in order to prevent civil war and unrest

b) No, go Icelandic with a sharp shock for a month and then be out the doldrums in few years, be ejected from euro (somehow! maybe be pegged initially) and go back to drachma, then promptly devalue

They are in a deep hole thanks to their politicians and incompetent EUro politicians, option a) could go very very wrong with the country reverting to its old self, that is a much scarier option than going thru' what Iceland did.

I find it kind of hilariously sad that you think that these are mutually exclusive options.

sadly amused,
Scofflaw

Mr_Maestro · 01-11-2011 02:02PM

Anyone just get the feeling that any sort of economic bailout is just delaying the inevitable. The ECB and other affiliated parties are trying to plug to many holes. Only a matter of time until the dam bursts IMO

ei.sdraob · 01-11-2011 02:06PM

Scofflaw wrote: »

I find it kind of hilariously sad that you think that these are mutually exclusive options.

sadly amused,
Scofflaw

Of course there could be a bit of each that happens, they are stuck between under a rock and a hard place

I would choose the hard place option (going Icelandic) and be over and done with (and actually start solving the issues involved one way or another) than being under EU rock for a decade or more and risk the whole country imploding

Anyways this could very well be a bluff, to focus the minds of certain euro politicians who continue to drag their feet and despite various proclamations of "victory over the markets" have only so far managed to come up with something that resembles a giant multi trillion ponzy derivatives scheme

Permabear · 01-11-2011 02:11PM

This post has been deleted.

ei.sdraob · 01-11-2011 02:18PM

How does one state go about getting kicked out of the eurozone or EU for that matter

Its a serious question, what can the ECB do (if anything) and other EU+eurozone members do, there is no "ejection" mechanism

Go to war to get their money back? well that wont go down well

There already countries using euro and are not eurozone members, its impossible to stop other people/countries using a currency if there is demand for it so the country could very well endup dual currency (drachmas for public servants) euro for everyone else

ixtlan · 01-11-2011 02:25PM

ei.sdraob wrote: »

b) No, go Icelandic with a sharp shock for a month and then be out the doldrums in few years, be ejected from euro (somehow! maybe be pegged initially) and go back to drachma, then promptly devalue

Is Iceland really a valid comparison? As far as I can see they never defaulted on their sovereign debt, and in fact have been able to recently issue new bonds. Also they are actually in an IMF program right now, which allowed them to stabilise their economy.

If Greece rejects this deal, nobody is going to loan them anything for years. They will have an immediate shock, and I would be doubtful that that would last just a month. I suspect that we would see charities in the EU raising money for the destitute in Greece, and food trucks being sent in. Unfortunately, if a Greece
rejection precipitates an even worse Euro crisis it may be difficult to raise such charitable money. The EU may not have it to spare.

ix.

ixtlan · 01-11-2011 02:31PM

Permabear wrote: »

This post had been deleted.

Possibly. I'm sure some of the no side will phrase the debate in these terms.The problem is that it may not work. One report said the vote could be early next year, which is plenty of time for panic to spread. Since the EU cannot start considering an improved deal until after a "no" and since any improved deal might be rejected also, it would seem that rationally the EU would need to consider preparing to remove Greece from the Euro... or collapsing the Euro itself...

Very scary times indeed.

Ix

seamus · 01-11-2011 02:34PM

Scofflaw wrote: »

I couldn't agree less - I think the proposal (likely to be derailed/defeated, sadly) is an excellent idea. It forces everyone to put up or shut up. If the Greeks vote No, then they wouldn't have stuck to the plan anyway. If they vote Yes, then they've agreed as a people to stick to the plan.

I agree actually, I thought of that after I'd posted. It's win-win for the Government because either way whatever happens is on the peoples' heads. There would be no need for rioting or protesting or whatever since the consequences are entirely down to the people's choice.

In the medium-term it might actually improve market stability.

Tazz T · 01-11-2011 02:39PM

Duke Leonal Felmet wrote: »

Do you think the next most important day will be when PS workers go to their ATM and find nothing there? I'd imagine you will hear a lot of Ochis, that day.

Yeah, sure, but they're in this problem because of the bloated and ridiculous PS system they can't afford. They can't seem to sack anyone, so the only thing left is not pay them. There is no other way. A huge majority of them have businesses and other jobs anyway.

Greece will be back in business before you know it. A devalued drachma means tourism and exports will take off again. Greece has been defaulting since independence. Will be no more difficult than trying to pay back the bailout (which they can't) and they get to keep their economic sovereignty.

Permabear · 01-11-2011 02:45PM

This post has been deleted.

Tazz T · 01-11-2011 02:46PM

ixtlan wrote: »

Is Iceland really a valid comparison? As far as I can see they never defaulted on their sovereign debt, and in fact have been able to recently issue new bonds. Also they are actually in an IMF program right now, which allowed them to stabilise their economy.

If Greece rejects this deal, nobody is going to loan them anything for years. They will have an immediate shock, and I would be doubtful that that would last just a month. I suspect that we would see charities in the EU raising money for the destitute in Greece, and food trucks being sent in. Unfortunately, if a Greece
rejection precipitates an even worse Euro crisis it may be difficult to raise such charitable money. The EU may not have it to spare.

ix.

You don't know the Greeks. Thousands, especially on the islands are self-sufficient, living off the land and the sea. People will still eat. PS people will lose their jobs, that's all that'll happen. People will move from Athens back to their family homes. There'll be emigration like here. The Greeks will take this in their stride. Many will see it as an opportunity.

carveone · 01-11-2011 02:55PM

Permabear wrote: »

This post had been deleted.

The news came out at 2pm yesterday (US time), 2 hours before market close. Noone seemed to worry until the pundits realised they could put this down as a new crisis and chase people out of positions (it's all a big game really). Banking stocks are starting to shrug it off now. It's a $60tn world economy, I really don't think whether Greece gets the $11bn for its next part of the bailout really matters. It's all perception...

The upside to chaos is that there are always plenty of money-making opportunities.

If you don't lose your mind first. Look at the graphs of the DAX and the DOW. It's a rollercoaster...

Scofflaw · 01-11-2011 02:57PM

ei.sdraob wrote: »

Of course there could be a bit of each that happens, they are stuck between under a rock and a hard place

I would choose the hard place option (going Icelandic) and be over and done with (and actually start solving the issues involved one way or another) than being under EU rock for a decade or more and risk the whole country imploding

First, the idea that Iceland is in some kind of happy place is still wrong - and second, doing what worked in a small, homogeneous society like Iceland might turn out not to be such a great idea for a much larger and deeply divided society like Greece.

ei.sdraob wrote: »

Anyways this could very well be a bluff, to focus the minds of certain euro politicians who continue to drag their feet and despite various proclamations of "victory over the markets" have only so far managed to come up with something that resembles a giant multi trillion ponzy derivatives scheme

True - which would still make it a great move!

cordially,
Scofflaw

Scofflaw · 01-11-2011 02:59PM

Tazz T wrote: »

You don't know the Greeks. Thousands, especially on the islands are self-sufficient, living off the land and the sea. People will still eat. PS people will lose their jobs, that's all that'll happen. People will move from Athens back to their family homes. There'll be emigration like here. The Greeks will take this in their stride. Many will see it as an opportunity.

Subsistence agriculture, emigration, and cheap tourism is an opportunity?

absolutely dazzled,
Scofflaw

Sierra Oscar · 01-11-2011 03:04PM

Its looking likely that the Greek government will have collapsed by the days end. Serious political instability which has already caused markets across the world to nose dive today. Difficult to see all of this not ending in a disorderly default by Greece.

irishh_bob · 01-11-2011 03:29PM

Permabear wrote: »

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and wont us irish feel like royal chumps for having taking such a beating ( allegedly for our own good ) like obedient children yet despite this the wide boys in greece keep getting a pass :mad:

irishh_bob · 01-11-2011 03:31PM

Permabear wrote: »

This post had been deleted.

yeah , pity some people wont share the lotto numbers though

Scofflaw · 01-11-2011 03:41PM

irishh_bob wrote: »

and wont us irish feel like royal chumps for having taking such a beating ( allegedly for our own good ) like obedient children yet despite this the wide boys in greece keep getting a pass :mad:

Given the idea is that the Greeks may be in the hands of the troika until 2027, you'll have plenty of time to find out, I guess. Unless of course they avail of the fabulous opportunities in the subsistence agriculture sector, of course.

cordially,
Scofflaw

edanto · 01-11-2011 03:41PM

Permabear wrote: »

This post had been deleted.

I'm by no means an expert on the subject, but I'm fairly certain that the leading socialist types said little or nothing to support bailing out bust banks with public money.

We are pretty far from Socialism now and fairly squarely in crony capitalism. Privatising public assets (at rock bottom contemporary prices) and making private debt public. Not Socialist. Rinse and repeat until it sinks in.

Scofflaw · 01-11-2011 03:46PM

edanto wrote: »

I'm by no means an expert on the subject, but I'm fairly certain that the leading socialist types said little or nothing to support bailing out bust banks with public money.

We are pretty far from Socialism now and fairly squarely in crony capitalism. Privatising public assets and making private debt public. Not Socialist. Rinse and repeat until it sinks in.

You'll be asking him to accept it's not Keynesianism next!

amused,
Scofflaw

djpbarry · 01-11-2011 04:00PM

Tazz T wrote: »

Greece will be back in business before you know it. A devalued drachma means tourism and exports will take off again.

All they need now is something to export.

Duke Leonal Felmet · 01-11-2011 04:11PM

djpbarry wrote: »

Tazz T wrote: »

Greece will be back in business before you know it. A devalued drachma means tourism and exports will take off again.

All they need now is something to export.

And to find a way of dealing with the civil unrest once PS wages are no longer being paid. Look at them now, ffs...

bauderline · 01-11-2011 04:21PM

Light fuse and retire to a safe distance

beeftotheheels · 01-11-2011 04:21PM

ei.sdraob wrote: »

How does one state go about getting kicked out of the eurozone or EU for that matter

Its a serious question, what can the ECB do (if anything) and other EU+eurozone members do, there is no "ejection" mechanism

I have given this a lot of thought and I think that the ECB would privately inform them of the intention to pull the ELA but giving them a couple of weeks notice. This information, once public, would cause a run on Greek banks. The only alternative for them then is to get out the printing press to be ready for the recap when the funding is pulled.

In order to leave the Euro they would probably also leave the EU (not least because their actions on leaving the Euro would leave them being sued right left and center so leaving the EU removes one further foreign court to hear appeals).

Leaving the EU is easy, do whatever domestic law requires and then write to the rest and say adios!

You're right that there is no provision to make them leave, but the ECB can make it too expensive for them to stay.

Manach · 01-11-2011 04:45PM

Offhand, withdrawing from the EU takes about two years to follow through on the various obligiations in the relevant treaties.

beeftotheheels · 01-11-2011 04:53PM

It doesn't necessarily take 2 years, can be immediate if you read Article 50 below.

Article 50

1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be
negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it. A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.

5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.

ei.sdraob · 01-11-2011 05:03PM

Why would the Greeks choose to voluntarily withdraw from the EU altogether, beside that probably requiring another referendum.

Hell even Iceland despite having the likes of UK use antiterrorism legislation on them is still an EFTA member

beeftotheheels · 01-11-2011 05:15PM

ei.sdraob wrote: »

Why would the Greeks choose to voluntarily withdraw from the EU altogether, beside that probably requiring another referendum.

Hell even Iceland despite having the likes of UK use antiterrorism legislation on them is still an EFTA member

Because in order to leave the euro you'd need to bring in rules breaching all the fundamental freedoms and you'd need to give State Aids to your banks to recap them. If this was all illegal under EU law (as it is) then the litigation would negate all the benefits e.g. you give your banks €30bn but it is a State Aid then they cannot take it as they would have to repay it (with interest). If Greek default and exit puts e.g. France in play then it is not clear that the Commission could bless such an aid as they have done with aids intended to stop the crisis, this would be an aid necessitated by Greece's actions.

It is a bit like arguing for an Irish default at a time we can (just about) afford to pay our debts. We'd get sued in England and would simply have converted €1bn of sovereign bond into €1bn of a judgement debt so it wouldn't reduce our debt burden at all. Well it would, a little, as not every bondholder will sue if they have other options, a Greek exit leaves no other options so a hell of a lot would have a motivation to sue.

Cleaner answer is to leave the EU, possibly stay in EFTA, and look at rejoining the EU in a decade when you've got your house in order.

Oh, and Iceland is EEA like Norway & Lichtenstein, only Switzerland is EFTA alone (think of them as three circles within circles with the EU being the inner circle, EEA being the second circle which includes the EU circle and three other countries, and EFTA is the outside circle). EEA has more of the rights and obligations of EU membership than pure EFTA membership does hence Iceland can be sued for not interposing a directive properly. Greece could not, I don't think, remain EEA, they'd have to go to the outside circle of EFTA alone.

Scofflaw · 01-11-2011 05:42PM

beeftotheheels wrote: »

Because in order to leave the euro you'd need to bring in rules breaching all the fundamental freedoms and you'd need to give State Aids to your banks to recap them. If this was all illegal under EU law (as it is) then the litigation would negate all the benefits e.g. you give your banks €30bn but it is a State Aid then they cannot take it as they would have to repay it (with interest). If Greek default and exit puts e.g. France in play then it is not clear that the Commission could bless such an aid as they have done with aids intended to stop the crisis, this would be an aid necessitated by Greece's actions.

It is a bit like arguing for an Irish default at a time we can (just about) afford to pay our debts. We'd get sued in England and would simply have converted €1bn of sovereign bond into €1bn of a judgement debt so it wouldn't reduce our debt burden at all. Well it would, a little, as not every bondholder will sue if they have other options, a Greek exit leaves no other options so a hell of a lot would have a motivation to sue.

Cleaner answer is to leave the EU, possibly stay in EFTA, and look at rejoining the EU in a decade when you've got your house in order.

Oh, and Iceland is EEA like Norway & Lichtenstein, only Switzerland is EFTA alone (think of them as three circles within circles with the EU being the inner circle, EEA being the second circle which includes the EU circle and three other countries, and EFTA is the outside circle). EEA has more of the rights and obligations of EU membership than pure EFTA membership does hence Iceland can be sued for not interposing a directive properly. Greece could not, I don't think, remain EEA, they'd have to go to the outside circle of EFTA alone.

And they probably wouldn't even have a working fax machine...

cordially,
Scofflaw

Greeks having a referendum on bailout

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