Greece Debt Crisis - Après Oxi

QuinDixie · 06-07-2015 02:35PM

road_high wrote: »

Give it a few days...once the ECB pulls backing for the Greek banks the above will be an avalanche. Food/medicine already running low in many parts according to news reports.

The Greeks will revert to a new currency if they have to.
Greece showed yesterday they are made of stern stuff and if they are booted out they will survive.

where Greece and Ireland differ is that many people in ireland had much to lose if we had pulled a Greece.
I am talking the wealthy minority, all civil servants, all social welfare recipients.
Sure they have taken hits, but nothing serious.

The fact is the vast majority of Greeks have little to lose, so they voted NO.

Grandpa Hassan · 06-07-2015 02:35PM

Inquitus wrote: »

The worst option is Grexit, they will be immeasurably worse off if that happens, far more so than if they took the current deal on the table. They don't have an economy suited to a return to the Drachma nor do they have anywhere near the required amount of Foreign currency reserves to successfully launch the New Drachma.

If Greece Exits the euro the Austerity, and GDP reduction they have seen to date will look like boomtimes in comparison to the adjustment Syriza will immediately be required to make in order to balance revenues with expenditure.

My point is that absent a debt writedown or a freezing of repayments for a considerable period this is inevitable. So just get on with it and make a decision one way or the other. Greece will default at some stage if the staus quo continues.

Inquitus · 06-07-2015 02:39PM

Grandpa Hassan wrote: »

My point is that absent a debt writedown or a freezing of repayments for a considerable period this is inevitable. So just get on with it and make a decision one way or the other. Greece will default at some stage if the staus quo continues.

Yes but a debt writedown, down the line, in 5-10 years with a much more robust global and EU economy after Greece has successfully implemented large scale taxation reform is not unlikely.

A Greek Writedown right now is simply not possible in the context of the wider 18 state Eurozone political climate. Kicking the can down the road a bit is the best solution all round.

Drexel · 06-07-2015 02:40PM

Grandpa Hassan wrote: »

My point is that absent a debt writedown or a freezing of repayments for a considerable period this is inevitable. So just get on with it and make a decision one way or the other. Greece will default at some stage if the staus quo continues.

After all thats happened, I think Greece would get their debt writedowns if they signed up to a bailout plan with no write downs and show over the course of 6 months / 1 year they were implementing what they needed to

Inquitus · 06-07-2015 02:41PM

QuinDixie wrote: »

The fact is the vast majority of Greeks have little to lose, so they voted NO.

Only 60% of 65% of Greeks vote no, that's only approx 40% of the population.......

Quin_Dub · 06-07-2015 02:41PM

Grandpa Hassan wrote: »

I get it. More of the same treatment by the Troika is absolutely not an option. The Greek aconomy is too far gone to generate anything on the revenue side. And cuts cannot make up the slack. Cuts to the extent required will lead to the economy going further down the plughole as it continues to contracts and revenues decline. No other country has got to this point of a downward spiral (how they got there is old news, and not relevant other its impact on individual emotions and a pointy finger blame game which is not productive). The Troika's models just cannot be applied at this stage....something that the IMF has recognised through their statements last week.

So it comes down to the agreement of a package of debt forgivness plus extension plus repayment breaks (linked to future performance targets). Or else Grexit. Through this referendum the government has made sure that it has a mandate to walk away from the status quo if necessary. A status quo which is unteneble in the long run and would just result in a Greece exit or a debt writedown a couple of years down the line. And instead it now has a mandate to leave only the options of debt write off or Grexit on the table. So I get why they went through with it.

The choice between those two things in the long run is surely inevitable. So why not just go through the negotiations and make the decision now, one way or the other, and get it over with.

Of the 3 options.....debt writedown package, Grexit and continuation of current bailouts, the 3rd is the worst for Greece IMO, and it is right to reject it.

But they are coming back with a variation of the existing (now expired) deal??

The key problem is the desire for Debt forgiveness before reform.

They are not paying anything against the loans they are looking to have written off, nor are the costing them any money as interest and payments are on hold until 2023.

So , they want us (and yes , it is US , all of us) to write off debts that they are not currently paying without making any reforms to their political and economic structures which everyone , Syriza included acknowledge are a shambles??

How would writing off those debts help them today, this week, next week???

Agree to reforms NOW not in 2yrs , 5yrs or whatever - NOW , then we can talk about further debt write-downs , further debt restructuring , further repayment deferrals.

Because they've already had ALL of those things , but without reform it's utterly meaningless.

06-07-2015 02:41PM

Quin_Dub wrote: »

Devalution kills them , It doesn't make them more competitive as it might do in other countries as they do not make/sell their own stuff - They buy in Crude oil , refine it and then sell it on..

Wait a minute, isn't this what anti-Greek-austerity/ pro-Syriza users are supposed to be saying, and not the pro-Greek-austerity/ anti-Syriza crowd?

First principles: A devaluation is a devaluation, it can be internal or external. You must consider that an internal devaluation has been the fundamental demand of the bailout programme, and has begun to yield results in improved productivity and competitiveness.

Any devaluation (either: internal (austerity), or external (drachma)) decreases real incomes and it increases the costs of imports to households.

The previous experience of internal devaluation in Greece is that devaluation benefits tourism significantly, and increases exports slightly.

It strikes me that one cannot logically advocate an internal devaluation (austerity) in Greece, and simultaneously claim to have any evidence that an external devaluation (drachma) would "kill them".

Unless you accept that internal devaluation "kills them", and that Syriza is right about that, do you?

Quin_Dub · 06-07-2015 02:48PM

A Tyrant Named Miltiades! wrote: »

Wait a minute, isn't this what anti-Greek-austerity/ pro-Syriza users are supposed to be saying, and not the pro-Greek-austerity/ anti-Syriza crowd?

First principles: A devaluation is a devaluation, it can be internal or external. You must consider that an internal devaluation has been the fundamental demand of the bailout programme, and has begun to yield results in improved productivity and competitiveness.

Any devaluation (either: internal (austerity), or external (drachma)) decreases real incomes and it increases the costs of imports to households.

The previous experience of internal devaluation in Greece is that devaluation benefits tourism significantly, and increases exports slightly.

It strikes me that one cannot logically advocate an internal devaluation (austerity) in Greece, and simultaneously claim to have any evidence that an external devaluation (drachma) would "kill them".

Unless you accept that internal devaluation "kills them", and that Syriza is right about that, do you?

Given the dynamics of the Greek economy I see it this way

Internal devaluation is a recoverable wound but only if accompanied by the much needed reforms - Which is has not been thus far. So what should have been a wound they could recover from has gone septic and is at risk of killing them because they chose to simply sit back and watch it bleed.

External devaluation is an almost instant kill-shot - No chance of recovery, no way to avoid the bullet.

QuinDixie · 06-07-2015 02:48PM

jonny666 wrote: »

Can you elaborate on this a small bit?

Keep in mind reuters are reporting the banks (surprise, surprise) wont be opening tomorrow and not for a couple of days.

The EURO was a dreadful decision by all involved. The sooner we are out the better. What we are living through at the moment is pure denial by everyone involved.
All EURO countries, politicians and citizens, refuse to admit the obvious truth, the EURO is finished.
Greece should be made leave for their own good, as I believe it will not be long before France and Italy will Ask to leave.
the debt is unsustainable and growth is not there, 8 years of bad decisions by the troika and nations prove Its just a matter of time.

Thomas_. · 06-07-2015 02:52PM

Jelle1880 wrote: »

But... Democracy won I read on here.

I'm also interested in the talks with Putin, I wonder what those might be about.

The people had their say and voted accordingly as they saw fit. Now, if talks with the EU/IMF failes, Putin might be ready to buy Greece for a cheap price.

I wonder whether the Greeks might be better off in the influence sphere of Putin and being dependent on his Money, or within the EU. I doubt that the Greeks can keep the Euro, not after that vote.

06-07-2015 02:56PM

Quin_Dub wrote: »

Given the dynamics of the Greek economy I see it this way

Internal devaluation is a recoverable wound but only if accompanied by the much needed reforms - Which is has not been thus far. So what should have been a wound they could recover from has gone septic and is at risk of killing them because they chose to simply sit back and watch it bleed.

External devaluation is an almost instant kill-shot - No chance of recovery, no way to avoid the bullet.

No, this isn't logical. You're trying to distinguish between external devaluation and internal devaluation by stapling internal devaluation onto the coat-tails of "reforms", and conflating external devaluation with no structural reform.

So leaving aside policy reforms as a separate topic, why, or with what evidence, do you claim that external devaluation "kills" the Greek economy?

Quin_Dub wrote: »

They are not paying anything against the loans they are looking to have written off, nor are the costing them any money as interest and payments are on hold until 2023.

I believe the date is 2020, and as for interest rates, Greece is paying interest on its debt to the EU at 3-month Euribor+50bp, which has a NPV of 6 billion euro, or about 3.5% of GDP.

In fact, it is the NPV that is crucial to debt sustainability metrics employed by financial intermediaries, and the profile of the maturities is obviously very relevant to that. The fact that it isn't immediately payable is not as relevant as you appear to think.

Quin_Dub · 06-07-2015 03:10PM

A Tyrant Named Miltiades! wrote: »

No, this isn't logical. You're trying to distinguish between external devaluation and internal devaluation by stapling internal devaluation onto the coat-tails of "reforms", and conflating external devaluation with no structural reform.

So leaving aside policy reforms as a separate topic, why, or with what evidence, do you claim that external devaluation "kills" the Greek economy?

With Internal devaluation €1 is still €1 so if they reduce costs and drive reforms they become more efficient and the economy benefits. The Greek devaluation was heavily focussed on blanket cuts and contained little in the way of reform on the income side so they drove their economy even further south. Had they driven through the reforms they'd have needed less reductions on the spend side, helping still further.

The Greek Export economy is heavily (almost totally) dependent on imports so in the event of Grexit, they need huge amount of foreign currency to keep it going. Having defaulted, their ability to keep these import cost under control is negligible so all the internal cost reductions in the world wont help them to remain competitive. In a post Grexit world €1 is no longer €1 for Greece - it's much much more as the Drachma devalues.. Hence , Grexit kills their export economy..

The only hope is that Tourism increases massively plugging the gap , but that's a big hope...

A Tyrant Named Miltiades! wrote: »

I believe the date is 2020, and as for interest rates, Greece is paying interest on its debt to the EU at 3-month Euribor+50bp, which has a NPV of 6 billion euro, or about 3.5% of GDP.

In fact, it is the NPV that is crucial to debt sustainability metrics employed by financial intermediaries, and the profile of the maturities is obviously very relevant to that. The fact that it isn't immediately payable is not as relevant as you appear to think.

The Debt interest that it being paid is for a smaller % of the overall debts - The write-offs that they are looking for cover the larger sum which is the one that is currently deferred..

Point still remains - The size of the overall debt burden is not Greeces problem today , the problem is the lack of reform and the complete lack of political will to tackle it (and all the Greek politicians are accountable there , Syriza have simply continued the same approach as the previous governments in that regard.

Crosswind · 06-07-2015 03:14PM

Quin_Dub wrote: »

The Greek Banks haven'y opened either....Nor will they.

So? What do you think this means for the majority of the Greek people?

FreudianSlippers · 06-07-2015 03:14PM

Quin_Dub wrote: »

The Greek Banks haven'y opened either....Nor will they.

The banks aren't closed, it's just an "extended bank holiday"!

daheff · 06-07-2015 03:15PM

gandalf wrote: »

We have the backdrop of a Spanish election later on this year. If the Greeks get too good a deal then you will have the Spanish left parties quite rightly campaigning exactly the same way that Syriza did in Greece. For this reason alone I do not see the Greeks getting any major debt write-downs. Couple that with the fact Enda will rock up and start whinging for a better deal for Ireland as well along with the Portuguese and the Italians.

If the Greeks get a deal, Enda will be out on his ass. The political heat will be unbearable. Enda then going to EU for a deal will be laughed out of it. He'll be a dead duck Taoiseach and the EU will know that and ignore him. Merkel will probably pat him on the head.

gandalf wrote: »

So what happens next. TBH that's up to Merkel and the Germans. Again I do not see any easy way out for the Greeks and I have a feeling that if the EU feel the currency can take it they may wave bye bye to Athens from the Euro.

EU/ECB can posture all they want about how the EURO can handle a country exiting. the only true way to know is to do it and see how the market takes it. I dont think theres too many of them that would be privately confident of there being no major issues if a member country left the EURO.

CatInABox wrote: »

The ECB have already said that any debt restructuring would be against their rules, so they aren't going to allow it.

The IMF has also said that they're not willing to accept any write downs as well.

Essentially, the IMF and the ECB have passed the buck to the EU, with the partner nations footing the bill for any write down. It's a disaster all round really, there's no way that 18 governments will agree to any write down before the next deadline.

Merkel wont allow it. Her 15 years as Chancellor will be deemed a failure if she lets Greece leave the EURO or the EU. But she wont be allowed to accept a write down.

I dont know why the ECB dont just print a couple of hundred billion Eur and turn up in the dead of night and deposit it in the bank account of the Greek Govt??/ Ok...well I do...inflation ,morale hazard,some laws..etc....but it'd be an easier way out for everybody.

Bob24 · 06-07-2015 03:18PM

Crosswind wrote: »

So? What do you think this means for the majority of the Greek people?

No access to their own money. Which is a very big deal.

Crosswind · 06-07-2015 03:21PM

Bob24 wrote: »

No access to their own money. Which is a very big deal.

1) What money?
2) Where do you get your info from? You can buy anything you want via credit/debit cards within Greece. You just can't withdraw cash.

06-07-2015 03:22PM

Quin_Dub wrote: »

With Internal devaluation €1 is still €1 so if they reduce costs and drive reforms they become more efficient and the economy benefits. The Greek devaluation was heavily focussed on blanket cuts and contained little in the way of reform on the income side so they drove their economy even further south. Had they driven through the reforms they'd have needed less reductions on the spend side, helping still further.

No, you're making the same mistake again.

You're conflating internal devaluation with structural reform. This is an error. Neither internal nor external devaluations are synonymous with such reforms; after all, Greece has already undergone significant internal devaluation without having effected adequate structural reforms.

In fact, some of the reforms demanded by the European 'partners' (such as increasing corporate income tax, and increasing employers' social security contributions) actually undermine the internal devaluation that has been achieved.

On the other hand, following a Grexit and an external devaluation, the inability to borrow, and the need to maintain a primary surplus, would leave the Greeks with no options but to take a more business-friendly series of reform. Otherwise, they wouldn't be able to retain a primary surplus.

There is no sense in your attempt to distinguish between internal and external devaluations by claiming that the latter kills Greece. Maybe it's time to abandon your shovel and think of a better criticism.

Quin_Dub · 06-07-2015 03:24PM

Crosswind wrote: »

So? What do you think this means for the majority of the Greek people?

It means it's pretty awful to be Greek right now - No question...

The situation is Greece has been terrible for quite some time so the Greeks voted for Syriza in an attempt to do something different..Fair enough...

Syriza though , have lied and obfuscated their way though the last 5/6 months and continue to do so today...

Banks will reopen , Deposits are safe , Deal imminent etc.

All now shown to be lies or at the very least delusional.

There is no easy path of Greece, No matter what , it's going to hurt and it's going to hurt for quite a while, but the approach taken by Syriza is going to make it hurt more and for longer then it needs to.

All so Syriza can stay true to their ideals??

Having said that , the turn-out for the referendum yesterday was the lowest turn-out in Greece in decades....For the single most important vote taken by any country anywhere for a very very long time?

That I don't understand...

Quin_Dub · 06-07-2015 03:26PM

Crosswind wrote: »

1) What money?
2) Where do you get your info from? You can buy anything you want via credit/debit cards within Greece. You just can't withdraw cash.

Except you can't - Most retailers have stopped accepting them as they can't get the money on the back-end...Everybody wants cash in hand..

There are no "official" limits on card transactions but the reality is quite different...

Bob24 · 06-07-2015 03:27PM

Crosswind wrote: »

1) What money?
2) Where do you get your info from? You can buy anything you want via credit/debit cards within Greece.

1) Salaries and pensions for a starter. And of course the billions of euros savings people have in the banks.
2) You said it, by credit card only (while stocks last for imported goods, as retailers can't pay suppliers abroad) and within Greece ... meaning for example that a Greek account holder can't travel to another country if they don't have loads of cash under their mattress.

Thomas_. · 06-07-2015 03:35PM

Crosswind wrote: »

1) What money?
2) Where do you get your info from? You can buy anything you want via credit/debit cards within Greece. You just can't withdraw cash.

That´s just too bad for those pensioners who have no such cards. But it´s often been said that it´s them who will have to pay for the bailout, one way or another.

I expect things getting more worse there and we haven´t seen the end of it yet.

Quin_Dub · 06-07-2015 03:35PM

A Tyrant Named Miltiades! wrote: »

No, you're making the same mistake again.

You're conflating internal devaluation with structural reform. This is an error. Neither internal nor external devaluations are synonymous with such reforms; after all, Greece has already undergone significant internal devaluation without having effected adequate structural reforms.

In fact, some of the reforms demanded by the European 'partners' (such as increasing corporate income tax, and increasing employers' social security contributions) actually undermine the internal devaluation that has been achieved.

On the other hand, following a Grexit and an external devaluation, the inability to borrow, and the need to maintain a primary surplus, would leave the Greeks with no options but to take a more business-friendly series of reform. Otherwise, they wouldn't be able to retain a primary surplus.

There is no sense in your attempt to distinguish between internal and external devaluations by claiming that the latter kills Greece. Maybe it's time to abandon your shovel and think of a better criticism.

Think we're at cross-purposes here - It seems we both agree that without reform Greece is screwed either way..

Yes , they had internal devaluation , undermined by the lack of reform leading them to their current position..

You say

On the other hand, following a Grexit and an external devaluation, the inability to borrow, and the need to maintain a primary surplus, would leave the Greeks with no options but to take a more business-friendly series of reform. Otherwise, they wouldn't be able to retain a primary surplus.

Which again says - Without reform they are screwed..

My belief is that External devaluation would hurt much more and that it would happen far quicker than the case with the internal devaluation..

With reform , both Kill Greece , one just kills it a lot quicker in my view...

Crosswind · 06-07-2015 03:37PM

Quin_Dub wrote: »

It means it's pretty awful to be Greek right now - No question...

The situation is Greece has been terrible for quite some time so the Greeks voted for Syriza in an attempt to do something different..Fair enough...

Syriza though , have lied and obfuscated their way though the last 5/6 months and continue to do so today...

Banks will reopen , Deposits are safe , Deal imminent etc.

All now shown to be lies or at the very least delusional.

There is no easy path of Greece, No matter what , it's going to hurt and it's going to hurt for quite a while, but the approach taken by Syriza is going to make it hurt more and for longer then it needs to.

All so Syriza can stay true to their ideals??

Having said that , the turn-out for the referendum yesterday was the lowest turn-out in Greece in decades....For the single most important vote taken by any country anywhere for a very very long time?

That I don't understand...

I am Greek, so i have an idea if it's awful or not

The way i see it, is that Syriza actually exposed everyone for what they truly are for the past 6 months. Right now, everyone in Krugman's caliber support Greece, so economically they must be doing something right.

Re the turnout, if you consider the tens of thousands that left the country the past years and couldn't afford/didn't want to go back and vote + plus the dead i find it to be quite high.

Now, regarding the lies. The banks would be open if it wasn't for all this FUD the past few weeks. I understand the need for Merkel, Schoible, Rahoy, Enda and the likes to protect their little club, but the only thing they achieved was to intimidate people in withdrawing their money.

As for the media, i have my two personal favorites: An image from South Africa in 2012 showing a granny protecting another granny in an ATM and one from the earthquake in Turkey with an old man holding bread crying, both presented as happening right now in Greece.

Crosswind · 06-07-2015 03:38PM

Quin_Dub wrote: »

Except you can't - Most retailers have stopped accepting them as they can't get the money on the back-end...Everybody wants cash in hand..

There are no "official" limits on card transactions but the reality is quite different...

Nope, this is just another example of FUD.

06-07-2015 03:44PM

Very interesting development with Tsipras now receiving the backing of New Democracy, To Potami and Pasok.

We're not far from a unanimous Government front on this issue now.

Could this be the beginning of actually entertaining reforms that desperately need doing?

If all parties are signed up to an agreement, then none can use it as political ballast to attempt to unseat each other on the back of it.

Perhaps a willingness to entertain politically unpalatable measures finally?
(Tax clampdowns etc)

Jonblack · 06-07-2015 03:46PM

Imf should write of their share of loan as they screwed up. Greece gets debt relief, Europe gets repaid. Rest of pigs told no debt relief as your bailouts are o.k

Patser · 06-07-2015 03:46PM

Crosswind wrote: »

So? What do you think this means for the majority of the Greek people?

That the businesses that employ them cannot access foreign markets for supplies, or even pay/collect debts domestically - which is forcing many to lay off staff, increasing their financial problems and generating even more dissatisfaction.

You know, jobs.

Quin_Dub · 06-07-2015 03:48PM

Crosswind wrote: »

I am Greek, so i have an idea if it's awful or not
The way i see it, is that Syriza actually exposed everyone for what they truly are for the past 6 months. Right now, everyone in Krugman's caliber support Greece, so economically they must be doing something right.

Krugman , Stiglitz and indeed Yanis himself are theorists - Who've never had to actually try to implement any of their theories...

Their support in the real-world isn't really a measure of "right" to be honest..

Crosswind wrote: »

Re the turnout, if you consider the tens of thousands that left the country the past years and couldn't afford/didn't want to go back and vote + plus the dead i find it to be quite high.

Possibly a factor , but unless they've all left or died since Syriza got elected 6 months ago I can't see how it the main factor given that the General election turn-out was substantially higher.

Crosswind wrote: »

Now, regarding the lies. The banks would be open if it wasn't for all this FUD the past few weeks. I understand the need for Merkel, Schoible, Rahoy, Enda and the likes to protect their little club, but the only thing they achieved was to intimidate people in withdrawing their money.

As for the media, i have my two personal favorites: An image from South Africa in 2012 showing a granny protecting another granny in an ATM and one from the earthquake in Turkey with an old man holding bread crying, both presented as happening right now in Greece.

Crosswind wrote: »

Nope, this is just another example of FUD.

I'm not following - I've no doubt that there is hyperbole on both sides, but are you saying that everything is actually fine in Greece , everybody is able to buy what they need and go about their daily business??

Permabear · 06-07-2015 03:49PM

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Greece Debt Crisis - Après Oxi

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