What's going on in Greece?

rick_chasey

Gazzaputt wrote:

Bloody hell booked to go the Crete in September with Thomas Cook. Double whammy?

I would like to how the tourist islands are fairing with all this.

Not well I'd suspect....

If all people see on the news is "GREECE ON FIRE" then people are unlikely to go there on holiday.

I know a family who own a house there, and they were saying how for years and years they tried to pay tax on it, and they found it so difficult that they gave up. They sent a letter to the tax man saying "we tried, we failed, please come and collect it" and they never have!

Stevo_666

Rick Chasey wrote:

Stevo 666 wrote:

TheStone wrote:

But what are the options for Greece? I can only see 3:

1) Accept the handout and the terms that come with it (some austerity)

2) Full default (enforced austerity much deeper than 1)

3) Full default and leave the Euro. Print loads of money to avoid austerity. Major breakdown in 12-18 months.

Is option 2 a feasible option? The assumption was (as I understood it) was that a full default would lead to Greece's exit from the Euro.

S'how I see it too, it's stick with the EU and bite the bullet, or exit and hope the firewalls stop a Lehman mark 2 - now it's serious. I think with an exit, the question is how much will the financial system collapse in Greece? FT seems to think it will be pretty total.

Politically, the question is whether the Greeks continue to operate as a democracy. It may well be that for #1 to happen the EU will usurp the gov't and install technocrats ala Italy.

As an aside, was on a trading floor yesterday, and I noticed the guys already had the Drachma all ready set up in anticipation. Was a little odd.

Not sure how easy it would be for the EU do do an Italy and install 'their man' given how heated the Greek political situation is?

I have a feeling that they are going to default as despite the majority of Greeks wanting to stay in the Euro, they want to do it on their terms and that isn't acceptable to EU/Germany. Given that Greece is pretty much bankrupt without EU support then I reckon the Greek financial system system will collapse. Then there's the danger of 'contagion' and the knock on effect if the bad debts in greece cause a domino effect on countries and banks elsewhere. Worrying stuff...

Cressers

Is the rest of europe ready to cope with a tide of starving, destitute Greeks?

No doubt the EU will try to put together an emergency aid package, but the real problem for them is despite the political backing, despite the immense loans, the inevitable happened. The ripples from that loss of EU credibilty will wash around the world...

Frank the tank

Cressers wrote:

Is the rest of europe ready to cope with a tide of starving, destitute Greeks?

No doubt the EU will try to put together an emergency aid package, but the real problem for them is despite the political backing, despite the immense loans, the inevitable happened. The ripples from that loss of EU credibilty will wash around the world...

Partly the point I've been making, whatever the nuts and bolts and any proposed political solution fact is, a lot of people will be pushed to the brink and beyond by their personal situation. Where/what will that lead to?

TheStone

Frank the tank wrote:

Partly the point I've been making, whatever the nuts and bolts and any proposed political solution fact is, a lot of people will be pushed to the brink and beyond by their personal situation. Where/what will that lead to?

So they either accept some austerity now (which came with further bailouts and a writing down of huge chunks of debt), or they refuse, continue the nonsense that's being going on for the last decade+ and eventually all starve.

The choice is completely theirs.

Frank the tank

TheStone wrote:

Frank the tank wrote:

Partly the point I've been making, whatever the nuts and bolts and any proposed political solution fact is, a lot of people will be pushed to the brink and beyond by their personal situation. Where/what will that lead to?

So they either accept some austerity now (which came with further bailouts and a writing down of huge chunks of debt), or they refuse, continue the nonsense that's being going on for the last decade+ and eventually all starve.

The choice is completely theirs.

Thing is, people have been accepting "some austerity" as you so glibbly put it, for a few years now, seeing incomes falling or disappearing altogether, taxes going up ever higher unemployment. Yes dead easy for me to sit here from afar and say more austerity for the Greeks it's the best way forward from a selection of bad choices.

I've said I don't know the answer but one outcome will be 10s of thousands with no future at all. People in work have seen their income fall, taxes increase and they're being told you've got to have more of the same. At what point does that group of people chuck the towel in

MaxwellBygraves

As capitalism does not seem to be delivering for the people of Greece, I would not blame them if they wanted to think about an alternative.

TheStone

Frank the tank wrote:

Thing is, people have been accepting "some austerity" as you so glibbly put it, for a few years now, seeing incomes falling or disappearing altogether, taxes going up ever higher unemployment. Yes dead easy for me to sit here from afar and say more austerity for the Greeks it's the best way forward from a selection of bad choices.

I've said I don't know the answer but one outcome will be 10s of thousands with no future at all. People in work have seen their income fall, taxes increase and they're being told you've got to have more of the same. At what point does that group of people chuck the towel in

I can't see an easy answer.
One generation has stolen from all the others.

MaxwellBygraves

Greece to hold fresh elections: http://www.bbc.co.uk/news/world-europe-18076757

ddraver

I don't think the Greeks should default and leave the Euro, but I think they will, mostly because the both the Greek People x (well actually they want everything to just go back to how it was before, but that's not an option) and the People of Northern Europe (and hence their desperate for power leaders) want that.

The trouble is that I don't think people really know what a terrible disaster for the Greek people that would be...

beverick

MaxwellBygraves wrote:

Getting interesting - Merkel suffers election drubbing: http://www.independent.co.uk/news/world ... 43508.html

The electorate giving the government a bloody nose at local elections.

It'd never happen in this country.....

Bob

beverick

Bobbinogs wrote:

I went to Greece for my family hols last year and was left feeling very deflated......quote]

In tune with the Greek economy then:

beverick

ddraver wrote:

I don't think the Greeks should default and leave the Euro, but I think they will, mostly because the both the Greek People x (well actually they want everything to just go back to how it was before, but that's not an option) and the People of Northern Europe (and hence their desperate for power leaders) want that.

The trouble is that I don't think people really know what a terrible disaster for the Greek people that would be...

I can't see how they can default AND leave the Euro. It's one or the other.

Bob

rick_chasey

Seems the press is reporting that people who should know (i.e. with significant money at stake - investors) reckon Greece leaving the Euro is a now a 'credible option'. Given what I saw yesterday, most places have already got to that point a while ago.

The $1m question is... is the rest of Europe and the global economy well enough protected to the inevitable financial fallout after a Greek exit?

Seems no-one knows.

rick_chasey

beverick wrote:

ddraver wrote:

I can't see how they can default AND leave the Euro. It's one or the other.

Bob

Certainly can AFAIK.

In theory Greece goes bankrupt next month. In which case they'' have to default. They may decide to exit the Euro then anyway.

TheStone

It will be default and leaving the euro. No point otherwise.

I don't think it'll be a major for the finance world as people think. Most of the european banks have already written down most of the debt with just a small P&L adjustment.

The ECB (Germany), will lose a fair bit, but then they possibly gained the most in the first place.

The real losers, however this pans out, will be the Greeks. The wages and pensions and services will fall much further.

rdt

Rick Chasey wrote:

The $1m question is... is the rest of Europe and the global economy well enough protected to the inevitable financial fallout after a Greek exit?

Seems no-one knows.

Neither Greece nor the rest of the Euro Zone are yet ready for an unplanned Greek EZ exit - at present, such an exit will be disastrous for Greece, very grim for the EZ, and pretty grim for the rest of us.

An unplanned Greek exit would likely be caused by a rapid acceleration of the drip-drip bank run they've been experiencing for several years. So far, it's predominantly been the wealthiest people who've withdrawn their money from the Greek banking system, and it's been a surprise that more ordinary folks haven't followed suit.

This might well change in the coming days or weeks, if folks begin to grasp that the notion of retaining EZ membership while walking away from their prior agreements is not a serious proposition.

If a bank run develops then EZ exit could be precipitated within days; simultaneously, the Government will run out of money to pay public servant wages and pensions, the banking system will collapse, people will likely take to the streets and rioting commence, and it'd be no surprise to see the army step in to contain order.

Hopefully, none of this will happen, but this outcome is now a very real possibility, as there is a complete leadership and political vacuum in Greece, and an electorate with one foot in la-la land.

If the situation deteriorates within the coming days and weeks, making this scenario appear likely, expect to see some sort of pre-emptive policy response (printing presses at the ready) from our "revered" central bankers, to act as sand bags before the flood waters hit.

TheStone wrote:

The real losers, however this pans out, will be the Greeks. The wages and pensions and services will fall much further.

I agree. The template for this is Argentina, but without Greece having the great advantage that Argentine had in terms of its Agriculture able to benefit from a secular bull market (Chinese demand growth). Despite this advantage, Argentina is still a basket case, and economic pariah.. Greeks better get ready to see their savings destroyed by devaluation and then hyper inflation, and then endure the joys of living in a collapsed economy with little in the way of exports ruled over by shambolic populist governments intent on lining their own pockets and/or military control. Nice.

nathancom

TheStone wrote:

It will be default and leaving the euro. No point otherwise.

I don't think it'll be a major for the finance world as people think. Most of the european banks have already written down most of the debt with just a small P&L adjustment.

The ECB (Germany), will lose a fair bit, but then they possibly gained the most in the first place.

The real losers, however this pans out, will be the Greeks. The wages and pensions and services will fall much further.

The problem lies in the implications for Spain as it becomes the next in the firing line. Capital flight from PIIGS countries will intensify if/when Greece withdraws putting significant strain on already ailing banks in those countries.

It is depressing how poorly the political class in the Eurozone have acted (our politicians have been no better though). National self interest has trumped economic cooperation at every point which has just led to a beggar-thy-neighbour situation, especially where Germany is concerned. They benefited greatly from the Euro, exacerbating the lack of competitiveness of Southern European economies, but have been very unwilling to dig into their pockets to salvage the Eurozone. I think Merkel will be viewed very poorly by history.

What next? It could be really bad - extremist governments (Spain and Greece are at risk in particular), permanent drops in economic output across Southern Europe which will have a direct effect on our own economy. Unfortunately we have decided to sit this out across the channel so have had little input in trying to rescue a situation we cannot avoid.

MrT

I think the saddest thing, and what must hack your average Greek off, is the report in the papers at the weekend that the big wig London estate agents have seen a huge growth in interest for London properties over 1.5 mill from Greeks, Spaniards and Portugese. In real terms ain't going to do much for our economy.....the lack of confidence in their own economies says it all!
Beware the contagion.

ddraver

beverick wrote:

ddraver wrote:

I don't think the Greeks should default and leave the Euro, but I think they will, mostly because the both the Greek People x (well actually they want everything to just go back to how it was before, but that's not an option) and the People of Northern Europe (and hence their desperate for power leaders) want that.

The trouble is that I don't think people really know what a terrible disaster for the Greek people that would be...

I can't see how they can default AND leave the Euro. It's one or the other.

Bob

I think one will follow the other tbh - If they default, they ll be kicked out...

@nathon - the most frustrating thing about "contagion" is that if they did nt "all turn their attention" to Spain and Portugal, they would most probably be fine. Both States are making, and are able to make, workable changes to their economies if things stay roughly where they are now. If however, suddenly all eyes are on them and unrealistic demands put on them then they will suffer. Fat Cats in Banks will make a profit, but because they won't make "more" profit, they ll cause havoc...

Unfortunately the Greek economy was so much more screwed, even before it joined the Euro.

Mad Roadie

just wondering if the timing is right to buy a house in Greece, the prices must be going through the floor, and value for money must be going skywards. but then if the leave the Euro, the floor they are currently falling through will go completely and they will be falling through the basement I expect - time to wait?


was looking at a cliff house and pool that is now offered at 70% of its February price, and that was already a distressed sale. how much lower will it go? I suppose the danger is you buy a house and then the government slam you with some horrendous residents tax, when an influx of foriegn money could be exactly what Greece needs to stem the freefall?

TheStone

nathancom wrote:

National self interest has trumped economic cooperation at every point which has just led to a beggar-thy-neighbour situation, especially where Germany is concerned. They benefited greatly from the Euro, exacerbating the lack of competitiveness of Southern European economies, but have been very unwilling to dig into their pockets to salvage the Eurozone. I think Merkel will be viewed very poorly by history.

I agree that Germany benefited the most (in fact the only country that has benefited), but they are now paying a heavy price with debt write downs and further bailouts. I don't think it's unreasonable for them to insist Greece live within their means, or at least to the same standards as Germany.

Gazzaputt

I would guess that the Greek islands have their own mini economies based on the tourist trade would I be right in this assumption? If so do they give a damn? I recall talking to the owner of the apartments in Crete we stayed in a few years back and he said there was a large underground economy in Crete. A lot of cash payments made for services and goods. They seemed to have a dislike and distrust of the countries government and believed that money made in Crete stays in Crete and shouldn't go to supporting the mainland.

If so is it only the mainland and major cities really affected by this where a larger proportion of the population are employed by the state?

Listening to Simon Calder yesterday on BBC Radio2 he said the best thing you can do is holiday there to help them.

I'm looking forward still to my 2 weeks in Crete later in the year.

rick_chasey

rdt wrote:

Neither Greece nor the rest of the Euro Zone are yet ready for an unplanned Greek EZ exit - at present, such an exit will be disastrous for Greece, very grim for the EZ, and pretty grim for the rest of us.

An unplanned Greek exit would likely be caused by a rapid acceleration of the drip-drip bank run they've been experiencing for several years. So far, it's predominantly been the wealthiest people who've withdrawn their money from the Greek banking system, and it's been a surprise that more ordinary folks haven't followed suit.

AFAIK they've been planning for this for a good 18months and have taken an exit seriously for the past 12-6 months.

Like I said, the guys I talk to on the fixed income at the banks side are prepared enough that they have a grexit already modelled across all their front office offerings, ready to go.

For sure, the firewalls laid down by the ECB more of a grey area, but there's not much more they can do.

Like I said, it's will they hold?

rdt

Rick Chasey wrote:

rdt wrote:

Neither Greece nor the rest of the Euro Zone are yet ready for an unplanned Greek EZ exit - at present, such an exit will be disastrous for Greece, very grim for the EZ, and pretty grim for the rest of us.

An unplanned Greek exit would likely be caused by a rapid acceleration of the drip-drip bank run they've been experiencing for several years. So far, it's predominantly been the wealthiest people who've withdrawn their money from the Greek banking system, and it's been a surprise that more ordinary folks haven't followed suit.

AFAIK they've been planning for this for a good 18months and have taken an exit seriously for the past 12-6 months.

Like I said, the guys I talk to on the fixed income at the banks side are prepared enough that they have a grexit already modelled across all their front office offerings, ready to go.

For sure, the firewalls laid down by the ECB more of a grey area, but there's not much more they can do.

Like I said, it's will they hold?

The EZ are much more prepared than they were 1 or 2 years ago, but they aren't "ready". A couple more years and they probably would be.

Your fixed income guys may well be ready to trade the resulting "environment", but that's very different to that environment itself being a robust, prepared and coherent one!

Specifically, the main missing piece currently is some sort of fiscal transfer mechanism (red/blue bonds) in place that would be a credible firebreak for contagion to other peripherals; without that it's all down to whatever further tactical (interim) responses Draghi can come up with to contain the situation as best he can while the EZ jokers shirk any heavy lifting themselves.

rick_chasey

rdt wrote:

Rick Chasey wrote:

rdt wrote:

Neither Greece nor the rest of the Euro Zone are yet ready for an unplanned Greek EZ exit - at present, such an exit will be disastrous for Greece, very grim for the EZ, and pretty grim for the rest of us.

An unplanned Greek exit would likely be caused by a rapid acceleration of the drip-drip bank run they've been experiencing for several years. So far, it's predominantly been the wealthiest people who've withdrawn their money from the Greek banking system, and it's been a surprise that more ordinary folks haven't followed suit.

AFAIK they've been planning for this for a good 18months and have taken an exit seriously for the past 12-6 months.

Like I said, the guys I talk to on the fixed income at the banks side are prepared enough that they have a grexit already modelled across all their front office offerings, ready to go.

For sure, the firewalls laid down by the ECB more of a grey area, but there's not much more they can do.

Like I said, it's will they hold?

The EZ are much more prepared than they were 1 or 2 years ago, but they aren't "ready". A couple more years and they probably would be.

Your fixed income guys may well be ready to trade the resulting "environment", but that's very different to that environment itself being a robust, prepared and coherent one!

Specifically, the main missing piece currently is some sort of fiscal transfer mechanism (red/blue bonds) in place that would be a credible firebreak for contagion to other peripherals; without that it's all down to whatever further tactical (interim) responses Draghi can come up with to contain the situation as best he can while the EZ jokers shirk any heavy lifting themselves.

For sure, but these guys aren't stupid right? If they've modelled the trading side, presumably they've modelled the financing side behind it and everything else. The financial institutions know they're exposed, and I'm sure they are as prepared as they can be. Ultimately no-one knows quite what will happen.

OffTheBackAdam

What are the odds on a military coup?
Something the Greeks are good at.
Since they can't form a civilian government, I wouldn't rule it out.
The Eurochickens are really coming home to roost here.

beverick

Rick Chasey wrote:

beverick wrote:

ddraver wrote:

I can't see how they can default AND leave the Euro. It's one or the other.

Bob

Certainly can AFAIK.

In theory Greece goes bankrupt next month. In which case they'' have to default. They may decide to exit the Euro then anyway.

If Greece remains in the Euro, the other members are bound by various European treaties (including last years accord scuppered by Cameron) to bail them out. (nb, DC's veto is looking smarter all the time!)
Effectively, if Greece remain in the Euro, the other European member states are bound to refinance them - they hace little choice. Greece continues to pay some interest (probably from monies given to them from other Eurozone countries) whilst the capital amount continues to run uncontrolled until such a time as some kind of economic growth returns to their (ha!) and the other European enonomies. The main 'pain' will be bourne by France and Germany, further and continual refinancing is virtually certain and we'll all get hit by the mud as the banks catch cold. However, the main risk remains within Europe and the Eurozone in particular.

If Greece leaves the Euro, they, Germany and France are effectively saying "won't pay, can't pay" to both capital debt and refinancing/underwriting deals. Greece defaults on both the loans and the interest payments, and are effectively put into administration. Greece's new currency would be valued at such a level as to return a small percentage of the debt to their creditors (the IMF, ECB and the underwriting banks and governments). Several world banks go bust (including Barclays and HSBC perhaps) money stops flowing out of ATMs in our country and we all have to scratch around to find a few £trillion under our collective mattresses.

The effect is that Greece's economy remains depressed but 'liquid' - ie they have their own cash within their own economy (and the Greek economy would survive but whether they would still be able to trade (and indeed compete) with other countries is doubtful - but that's no different to the Greece of old.

Basically, unless I've missed something obvious, Greece can't stay in the Euro and default or come out and refinance. It's one or the other.

Bob

rdt

Rick Chasey wrote:

For sure, but these guys aren't stupid right? If they've modelled the trading side, presumably they've modelled the financing side behind it and everything else. The financial institutions know they're exposed, and I'm sure they are as prepared as they can be. Ultimately no-one knows quite what will happen.

It's certainly the case that Greece is now a known unknown. Unlike in '10 and '11, where many people were in denial of the Greek position and the inevitability of default/restructuring, everyone now has a reasonable grasp of the situation, and thus markets are positioned defensively.

However, EZ leaders have a proven track record of mismanaging crises, so there is still every possibility they respond with yet more half-measures that fail to address the real issues, and which quickly get exposed by markets, forcing central banks to step in with more temporary sticking plasters to try to stem the fallout.

The great problem here is that the long term solution involves some type of formal EZ fiscal compact (some form of common bonds, e.g. red/blue bond proposal http://www.reuters.com/article/2011/09/ ... BF20110915 ), but as Germany would have the largest part of the bill to pay, they're not yet ready to sign up for that. They may well do eventually, but it might require a deeper crisis to prod them into agreeing to such a compact, where the writing is on the wall that their failure to bear the fiscal burden will mean the end of the EZ project (and the benefit Germany derives from it).

rick_chasey

I bow to rdt's knowledge. Is superior to mine.

In other news: What's going on in Greece? A run on the banks it seems.