Greeks having a referendum on bailout

Scofflaw

carveone wrote: »

I know everyone knows already but I feel like posting it:

Papandreou has won the confidence motion. By 153 votes to 145.

It is interesting to draw parallels between Greece and Ireland. Given that Greece was essentially a nuclear button for the US banks, my personal opinion is that they would have given Greece the 8 billion rather than accept the losses that activating a half trillion dollars of default swaps would have entailed. There's a separate argument for saying that it was ridiculous to be in that situation in the first place, but Goldman Sachs are twats...

I don't think Ireland has that kind of button shape about it. Given the talk about the treaties and exiting the euro equalling exiting the EU, one might be forgiven for thinking that any talk about Ireland defaulting or going back to the Punt is just that, talk. Can you imagine all Irish citizens suddenly being outside the EU? It's just ... unspeakable. You'd need a work permit to work in France! A visa to enter Spain!

Am I wrong? Maybe I am wrong. But that's what exiting the EU actually means in reality as far as I know...

That and suddenly facing quite steep import tariffs. I can't really see the Irish ever voting to leave the EU in any form where such a vote is meaningful, because leaving the EU doesn't solve any Irish problems. The EU provides us not only with the practical benefits you allude to, but is also the only arena in which we have any form of equality with the larger European nations.

The idea that if we left, France and Germany would mysteriously cease to be many times larger than us and more relevant to everyone else than us, and that we would somehow cease to be affected by their actions, is an incredibly silly one - the only real excuse for anyone holding it is that membership of the EU has managed to create a situation where by and large we are able to ignore that vast disparity most of the time.

At times like this, when Europe operates intergovernmentally, we're suddenly reminded of how important the Franco-German axis is, and the moaning level goes up about being in the EU with them - something that completely ignores the fact that what we're seeing is how Europe operates when the EU is mostly taken out of the picture. The EFSF - Europe's bailout fund - isn't an EU fund, so decision-making on it bears no relation to the EU decision-making we're used to. Bizarrely, though, some people seem to leap from the observation that in such a situation we're relegated to more or less insignificance to the idea that what would be nice is if things were like this all the time. As they say, it takes all kinds to make a world.

cordially,
Scofflaw

carveone

It's late for this, but Sand has some valid points. Dunno if I'm about to help but I typed this in a fit of pique so I'm posting it.

First, austerity doesn't generally lead to growth. Growing your way out of debt isn't going to happen. Inflation, however, is. Anyone preparing for that?

Second, we're three years on from 2008. Indeed. And we're repeating the history of the 30s nicely - the iBanks (as I like to call them - the Wall Street Investment Banks) are still at it.

They broke banking with CDSs on CDOs (aren't acronyms great) causing the biggest crash since 1929. So rather than fix that and make sure you couldn't bet on someone else's house burning down (ie: make sure you could only have a default swap if you had a direct interest in the underlying debt), the US government decided to pretend it was fixing the problem. So GS, DB, JPM and rest of the messers went and underwrote $500bn of CDS on EU debt.

In other words, they did it again! I've been watching this for the last 6 months as they chase the sheep investors in and out of the market - Greece is Fixed! No wait, it's broken! No, it's OK! No wait, Italy might be broken! Chase Oil up to $113. Down to $75! Up to $95. These guys actually have tankers anchored offshore of the US to make playing oil games easier. It's in their interest to make Greece almost, but not quite, default. Jesus, make it stop...

If I was a more suspicious type, I'd consider this was all prearranged. Especially given that it was Goldman Sachs who helped Greece cook its books in the first place,

You try this in China and they shoot you. Now that's hardball financial regulation.

But Greece was never in a situation where bankruptcy was an option. For one thing, I don't believe it would have been let. For another, exiting the EU would have been a nightmare. Outside the EU they would have become like Syria or Tunisia - a country near the EU but not in it. I cannot imagine anybody rational (except the equivalent of Sinn Fein) actually voting for this in a referendum.

(You start typing and all this pours out).

As to the 10 days - there is the feeling that you could declare bankruptcy and it would all be over quickly and happiness would reign and you wouldn't owe anyone any money. In reality I think, without being too facetious, that it would be like being stripped naked and airdropped into Bolivian jungle. I don't think your life just got better. And you'd still have bills to pay if you made it out alive...

carveone

Scofflaw wrote: »

That and suddenly facing quite steep import tariffs.

Oh yes, and them too. Thanks Scofflaw. So US foreign direct investment goes away too probably. I wonder would the border go back up or would our relationship with the UK survive. Anyway, it's like guessing what would happen if aliens landed. Not happening

My last post is mostly a big waffly rant. Just the last two paragraphs are relevant really!

opo

Scofflaw wrote: »

The EU provides us not only with the practical benefits you allude to, but is also the only arena in which we have any form of equality with the larger European nations.

That's one opinion, I think the core and fundamental inequality of European nations trying to play USA has f**ked every one of us up. And that's on a economic front alone.

Scofflaw

opo wrote: »

That's one opinion, I think the core and fundamental inequality of European nations trying to play USA has f**ked every one of us up. And that's on a economic front alone.

OK - allow me to justify my claim that the EU has provided a more level playing field, and then you can justify what you're claiming there, and maybe explain it a bit more, too?

I say the EU gives Ireland with a framework for existence in Europe that provides the following:

1. equality for Ireland before the law: Germany and Ireland are subject to the same body of law, and where that requires adjudication, are equal before the court that adjudicates those disputes (the ECJ)

2. an equal voice on the Commission to Germany

3. where voting is weighted according to population, Germany's vote is much less per person than Ireland - true in both the Council and the Parliament

4. the only place where the relative size of economies counts is in the considerations of the ECB - and even there the needs of the smaller eurozone countries are factored in

5. a ready-made framework for alliances of interest with other small countries

6. the backing of a very much larger currency than our domestic economy provides

7. Ireland has an input into nearly all legislation that affects us in Europe

8. the disallowing of state aids to companies means that richer nations can't outfund their national companies compared to ours

Now, any alternative to the EU has to take into account Ireland is part of Europe, because that's unavoidable. So I can't see an alternative system that provides a better deal for Ireland in Europe than the EU (if we leave off fantasies of a greater Irish Reich or the like). All I can see as an alternative is a system in which Ireland possesses none of those equalities and gets the weight of the tiny peripheral economy it actually is - one where we get along by being a mouse scurrying amongst the feet of monsters. As a trading nation, we would in any case have to follow standards set by our trading partners, but without the input we now have.

cordially,
Scofflaw

opo

Scofflaw wrote: »

So I can't see an alternative system that provides a better deal for Ireland in Europe than the EU (if we leave off fantasies of a greater Irish Reich or the like).

Intriguing. Please divulge your fantasies of what an "Irish Reich" might actually entail.

An "Irish Reich" might, for example have decided some years ago that the interest rates here were far too low and the economy or even property prices were exploding and unsustainable, maybe saving the banks and the rest of us.

Would that have been a bad thing? Would that have been "anti-European"?

I accept your arguments along broader European lines and integration ideals, but that is still not dealing with the wholesale economic destruction of nation states we bear witness to, or the core and fundamental inequalities that preceded events as I originally suggested.

Scofflaw

opo wrote: »

Intriguing. Please divulge your fantasies of what an "Irish Reich" might actually entail.

Actually, I was referring rather derisively to the idea of a Europe in which Ireland's weight is larger than Germany's. It's a fantasy that need not detail us long!

opo wrote: »

An "Irish Reich" might, for example have decided some years ago that the interest rates here were far too low and the economy or even property prices were exploding and unsustainable, maybe saving the banks and the rest of us.

Would that have been a bad thing? Would that have been "anti-European"?

No, but on the other hand, it would have been quite possible without control of interest rates. Not as easy as wielding that particular blunt weapon, but had the government chosen to gear its strategy towards tax breaks for business borrowing rather than property, and had it regulated the banks properly to ensure they were lending prudently, the outcome might well have been different. As it was, every tool in the government's toolbox was aimed at fostering and exacerbating the property bubble rather than containing it - making it impossible for me to accept any scenario in which they would have, had they had control of interest rates, done anything with them bar more of the same.

On top of that, the evidence that property bubbles followed the euro in small economies is pretty poor. Some small euro countries had bubbles, others didn't - and those that did were characterised by slack banking regulation and pro-bubble policies like ours. On the other hand, countries like Iceland had property bubbles at the same time as us, as did other non-euro countries - and again the common theme was a slack or 'light-touch' regulatory environment for the banks.

So while "the euro caused the property bubble" is a very common mantra, I don't think it holds up, because it doesn't explain how different small euro economies had different outcomes, despite having the same interest rates. To me, it seems more likely that the interest rates being the same was something the different countries handled differently - we went on a private credit spree that produced a property bubble with the enthusiastic support of government policy, the Greeks went on a public credit spree that didn't produce a property bubble.

To be honest, it looks to me like one of those "explanations" that Fianna Fáil benefits from - if it was the euro that did it, then it wasn't their fault - and that always makes me suspicious, particularly given the way it's peddled by FF-associated economic pundits like David McWilliams.

Could we have controlled the private credit splurge that fuelled the property bubble without control of interest rates? Yes, we could have done - enforcing prudential lending would have largely done it. Look at the situation now - the ECB has interest rates on the floor, but you'd be lucky to get a mortgage, and the rates would be high. You certainly won't get a 100% mortgage for many multiples of your salary now, and the bank won't help you fudge your income - instead, they'll put you through the wrnger, and lend you as little as they can. So clearly low ECB rates don't actually dictate furious lending and minimal mortgage rates!

opo wrote: »

I accept your arguments along broader European lines and integration ideals, but that is still not dealing with the wholesale economic destruction of nation states we bear witness to.

Well, my view is that the nation states did it to themselves. The euro is coping with the resulting crisis very badly, but that's not the same as having been the villain of the piece to start off with. That charge I would lay at the door of the individual nations, some of whom took the implied backing of their debts by the major eurozone economies as a simple licence to go on government borrowing sprees, while others like ourselves took "business-friendly" to ludicrous levels and deregulated our consumer and commercial credit environment to a point which allowed the banks to swell to multiples of GDP.

cordially,
Scofflaw

cyberhog

Arfan wrote: »

That's an excellent summary of what didn't happen.

Scofflaw wrote: »

But the narrative requires it to happen directly - Sarkozy & Merkel bully Papandreou into withdrawing his referendum. It didn't happen that way, ....

You guys need to get over your infatuation with our EU overlords because your ability to see the big picture is sorely lacking!

Papandreou blinks first in euro poker game


ATHENS - The last 24 hours have seen all manner of political gyrations here. If one had to sum up what it has all meant, it is that the government of George Papandreou has felt the heat from Europe's most powerful players and realised that it cannot take it.

...

the prime minister seems to have realised that either he, or his plan to put the European Union's bail out package to a national referendum, will have to go.

German Chancellor Angela Merkel on Wednesday characterised Mr Papandreou's proposed vote as a game of poker, and she was evidently determined that he should blink first.


...


The linkage between a possible No vote and continuing membership of the union proved too much for many of Mr Papandreou's supporters, including his Finance Minister Evangelos Venizelos, who this morning withdrew his support from the referendum plan.


...


Speaking to his party in parliament on Thursday evening, the Greek leader said he had been told during those Cannes talks that not only would a "no" in the referendum mean leaving the euro, but that the question of rejoining would be off the agenda for at least a decade.


...


A decision by Mr Papandreou to backtrack on the referendum plan would suggest that Mrs Merkel has won her poker game.

http://www.bbc.co.uk/news/business-15584091

Scofflaw

cyberhog wrote: »

You guys need to get over your infatuation with our EU overlords because your ability to see the big picture is sorely lacking!

http://www.bbc.co.uk/news/business-15584091

Yes, but then it was pretty obvious that a No at the referendum would mean a Greek exit - you'll find it on this thread, amongst other places. If you want to characterise pointing that out as 'bullying', that's up to you (and it would hardly be the first time someone has characterised facts as bullying!).

I'd agree, though, that if Papandreou believed it wouldn't, I've been giving him a little too much credit - not a lot too much, though, because the decision to call a referendum was still a good one and a brave one.

cordially,
Scofflaw

cyberhog

Scofflaw wrote: »

Yes, but then it was pretty obvious that a No at the referendum would mean a Greek exit - you'll find it on this thread. If you want to characterise pointing that out as 'bullying', that's up to you.

Jesus now you're rewriting history.

Jonathan Loynes, chief European economist at the thinktank Capital Economics, commented: ‘‘The fact that a Greek exit has been so openly discussed among the euro-zone elite is a seismic shift from the previous position in which it was widely argued ... a country could not possibly leave because of insurmountable hurdles. The cat, it would seem, is well and truly out of the bag.’’

But, while it has been possible to bully a weak Greek government into accepting reform in return for funding, it’s rather harder to make credible threats elsewhere.

http://www.smh.com.au/business/world-business/it-was-the-greeks-who-blinked-20111104-1mz98.html

No matter how much you try to deny it, it remains evident Papandreou was bullied into scrapping the referendum.

Scofflaw

cyberhog wrote: »

Jesus now you're rewriting history.

http://www.smh.com.au/business/world-business/it-was-the-greeks-who-blinked-20111104-1mz98.html

No matter how much you try to deny it, it remains evident Papandreou was bullied into scrapping the referendum.

And no matter how much you try to claim nobody could have seen that a No would lead to a eurozone/EU exit, the evidence is there in the first couple of pages of this thread:

31.10.2011

Boskowski wrote:

I don't think it will be a disaster for the eurozone? Why would it be?
Greece will simply have to leave the Euro. Disaster for Greece if anything.
Mad kind of move anyway. Apparently the Greek constitution specifically forbids referendums on financial matters?!?

01.11.2011

bauderline wrote:

At long last we enter the end game, this should have happened two years IMHO, it has caused untold damage by dragging on this long simply so that Germany and France could shield their banks from the hit.

They all now need to face reality and take preemptive action rather than wait for a greek vote, letting this drag on to the new year would be utter madness, time to reach for the eject button....

Goodbye and good luck Greece...

bmaxi wrote:

I think Papandreou is taking a huge risk and not just with his own future or the future of Greece. I don't see what Greece has to gain from leaving the Euro as will surely be the case but I can imagine it will only be bad for those weaker countries remaining in it. Not being a financial expert, I'm not even sure how leaving the Euro would affect, in legal terms, their sovereign debt, presumably the debt would then be owed in drachmas, which would be a worthless currency.

murphaph wrote:

Imagine the dilemna though of the Greek electorate. They know (at least I hope they do) that without EU/IMF cash, the atms will run empty and it is then really time to exit the Euro for them.

Like I said - you tend to interpret people pointing out consequences as 'bullying'.

cordially,
Scofflaw

cyberhog

Scofflaw wrote: »

And no matter how much you try to claim nobody could have seen that a No would lead to a eurozone/EU exit,

Actually that's not what I'm claiming. All I disagree with is your contention that it is "pretty obvious that a No at the referendum would mean a Greek exit "

It doesn't appear to have been "pretty obvious" to the Greeks.

Briefing from European Central Bank and EU officials that failure in the referendum would force Greece out of the euro and, some suggested, of the EU itself has startled many people here.

Nor does the linkage between a No vote and a Greek exit match the pre-referendum position where " it was widely argued ... a country could not possibly leave because of insurmountable hurdles."


Nor does the linkage between a No vote and a Greek exit match Sarkozy and Merkel's pre-referendum conviction “ that the future of Greece is in the euro zone,”.

http://www.businessweek.com/news/2011-09-15/sarkozy-merkel-say-greece-s-future-is-in-the-euro-region.html

The only reason it has become "pretty obvious" now that a No vote would mean a Greek exit is because of the threats Merkel and Sarkozy made when Papandreou was summonded to Cannes.

If one had to sum up what it has all meant, it is that the government of George Papandreou has felt the heat from Europe's most powerful players and realised that it cannot take it.

K-9

cyberhog wrote: »

Actually that's not what I'm claiming. All I disagree with is your contention that it is "pretty obvious that a No at the referendum would mean a Greek exit "

It doesn't appear to have been "pretty obvious" to the Greeks.



Nor does the linkage between a No vote and a Greek exit match the pre-referendum position where " it was widely argued ... a country could not possibly leave because of insurmountable hurdles."

The No vote would be a game changer, it would mean a rejection of the bail out by the Greeks.

Nor does the linkage between a No vote and a Greek exit match Sarkozy and Merkel's pre-referendum conviction “ that the future of Greece is in the euro zone,”.

http://www.businessweek.com/news/2011-09-15/sarkozy-merkel-say-greece-s-future-is-in-the-euro-region.html

The only reason it has become "pretty obvious" now that a No vote would mean a Greek exit is because of the threats Merkel and Sarkozy made when Papandreou was summonded to Cannes.

The future would be in the Euro if they agree to the bailout terms, a No vote makes things uncertain as to what exactly the Greeks want, renegotiation, default or exit.

beeftotheheels

cyberhog wrote: »

Actually that's not what I'm claiming. All I disagree with is your contention that it is "pretty obvious that a No at the referendum would mean a Greek exit "

It doesn't appear to have been "pretty obvious" to the Greeks.

Some context. There is no treaty provision for being forced out of the euro or being forced out of the EU. The ECB has a paper on this http://www.ecb.int/pub/pdf/scplps/ecblwp10.pdf which was actually drawn up in response to us failing to ratify Nice.

However, J-CT had a look at the paper and disagreed with it, he put his thinking hat on and figured out how to do it, and it seems that we were his first test case but our government had the good sense not to call his bluff. Since then, it has been blindingly obvious to anyone who is remotely interested in this stuff that while Merkozy cannot force Greece out, the Member States cannot do it (per the ECB paper) J-CT and now super Mario can create a situation where a Member State has no option but to leave (their banking sector destroyed, all credit dried up means they need a printing press and fast).

So, faced with the possibility that Greece would refuse to participate in the programme the Troika laid out for them, and remembering that one of the troika is the ECB it has been obvious since our bail out that continuing membership of the Euro and indeed the EU carries rights and obligations and is not to be taken for granted.

If the general Greek populace didn't get this then I'm sorry for them, but some Greeks must have. I was in fact taught EU law as an undergraduate by a Greek and I have no doubt but that he could grasp this (he teaches in Oxford these days).

cyberhog wrote: »

Nor does the linkage between a No vote and a Greek exit match the pre-referendum position where " it was widely argued ... a country could not possibly leave because of insurmountable hurdles."


Nor does the linkage between a No vote and a Greek exit match Sarkozy and Merkel's pre-referendum conviction “ that the future of Greece is in the euro zone,”.

http://www.businessweek.com/news/2011-09-15/sarkozy-merkel-say-greece-s-future-is-in-the-euro-region.html

The only reason it has become "pretty obvious" now that a No vote would mean a Greek exit is because of the threats Merkel and Sarkozy made when Papandreou was summonded to Cannes.

With all due respect this is politics. The Member States do not have the power to expel Greece, they never wanted that power so never reserved it for themselves. They wanted to create the view that the euro would last forever and was stable and so to the world they could point to their lack of power. Just like I can point to Santy visiting boys and girls up and down Ireland every Christmas as evidence that the great man exists.

If no one in Greece thought to question the evidence, if no one in Greece paid any attention as to how we ended up in the programme then more fool them. I just don't think that that was the case, not least because Greek people write for, and read, the Financial Times and Reuters and Bloomberg. A Greek was the former vice president of the ECB and another Greek sits on the board as Governor of the National Bank of Greece.

There are very many fine educated Greek people who are more than capable of understanding this without it being spelled out for them. That it wasn't obvious to you does not mean that it wasn't obvious.

ei.sdraob

If ECB does anything to try to "expel" or "punish" a member it would result in the collapse of the currency, the moment they attempt any stunt like that the markets would question who is next and the whole house of cards falls apart

beeftotheheels

ei.sdraob wrote: »

If ECB does anything to try to "expel" or "punish" a member it would result in the collapse of the currency, the moment they attempt any stunt like that the markets would question who is next and the whole house of cards falls apart

Eh?

Firstly they can only do it to Member States already on the brink, the ECB could not, for example, collapse Germany's banking sector in the morning.

Secondly, why do you think they have not done it to date? But times have changed, markets are already in panic, in fact equity markets rallied at the thought that the Greek Government was to fall. There comes a time when there is no more that the EU can do to help Greece without any Greek buy-in. We may not be at that time yet, but it is coming in the not too distant future. The fact that euro exit is now being openly discussed as an option is telling.

The ECB's job relates to the whole of the Eurozone and the point will come (has come) where protecting Greek banks is just too expensive for the rest of the club.

I don't for one moment think that any reasonable person would see a Greek exit as necessitating an Irish exit, we're compliant, we're cleaning up our mess. Portugal (Maderia aside) are compliant, Spain and Italy and trying to get their houses in order. You can distinguish Greece and that is what every one is currently trying to do, to ensure that any action relating to a Greek default is not seen as the first step on a slippery slope.

But to clarify, there needs to be a tangible Greek failure to adhere to the programme which the ECB can hang their hat on. Given their apparent failure to create a genuine national unity government because the opposition want to create one for just long enough to get the next tranche of cash and then create more uncertainty, it is looking more and more likely. A lack of political stability in Greece justifies not giving them further EU/ IMF cash, they default on the December bonds and the ECB collapses the system. The ECB is not being fickle, or punishing them, the ECB is simply doing its job in the face of a non-compliant programme State.

But I do realise that this is painful reading for any one who would like to think that we should have told the ECB to stuff it last year, and uncomfortable reading for any one who would like to believe that we didn't need ECB permission to burn the Anglo bondholders, because I suspect a lot of people who hold such positions really think we need to stay in the EU so appreciating that the ECB has the power to render that otherwise must be a little uncomfortable. If we're in a club with benefits there are also obligations, and obligations which we are complying with so we're pretty safe.

carveone

Thank you to beeftotheheels for clarifying a lot of points for me. It would be nice if the media could do this...

It's rather interesting to see the disparity between the politics and the reality. It's also rather discomforting to realise that people on TV really don't know the first thing about the EU structures.

People have been blaming Merkel and Sarkozy for "bullying" the Greeks but it's obvious that the member states really have no power to bully anyone. Just because there is an emergency meeting doesn't mean anyone is "summoning" anyone else to kneel before them. This is all politics - it suits the politicians to blame the messenger rather than read the message. And it suits the media to ignore the message entirely and just make things up.

It seems to me that a situation could arise where Greece defaults and refuses to leave the EU. The Treaties specify that it has to voluntarily do so.

But beeftotheheels says that Jean-Claude Trichet could do it as head of the ECB - do you have any more details? (sorry - I'm posting before googling!) I can see that credit would be suspended, and their banking system would implode but would that create a smoking zombie country or would they be able to hang on in there...?

I'm thinking I should start selling my financial stocks...

beeftotheheels

carveone wrote: »

Thank you to beeftotheheels for clarifying a lot of points for me. It would be nice if the media could do this...

It's rather interesting to see the disparity between the politics and the reality. It's also rather discomforting to realise that people on TV really don't know the first thing about the EU structures.

People have been blaming Merkel and Sarkozy for "bullying" the Greeks but it's obvious that the member states really have no power to bully anyone. Just because there is an emergency meeting doesn't mean anyone is "summoning" anyone else to kneel before them. This is all politics - it suits the politicians to blame the messenger rather than read the message. And it suits the media to ignore the message entirely and just make things up.

It seems to me that a situation could arise where Greece defaults and refuses to leave the EU. The Treaties specify that it has to voluntarily do so.

But beeftotheheels says that Jean-Claude Trichet could do it as head of the ECB - do you have any more details? (sorry - I'm posting before googling!) I can see that credit would be suspended, and their banking system would implode but would that create a smoking zombie country or would they be able to hang on in there...?

I'm thinking I should start selling my financial stocks...

It is not a question of whether they "can" hang on in there, they would be mad to even try.

Lets say that Greece doesn't get the next tranche of bailout cash so they "default" on the December bonds. The ECB states that it cannot accept bonds that are in default as collateral so the emergency funding which is currently being made available to Greek banks dries up over night. At its most basic this is just the ECB doing their job, no other bank would be accepting CCC rated bonds as collateral and the ECB is arguably breaking the rules to help Greece this far. Greek banks have no money, and only the ECB board can authorise the Greek National Bank to print euro which it won't do.

Their banks are insolvent because of the default (Greek banks holding a lot of Greek bonds) so every Greek person tries to get their cash out (which makes the banking insolvency worse). The Greek State cannot borrow to give money to their banks, and they have no cash, so their only option at that stage is to leave the Eurozone and start printing Drachma so that they have cash to recap the banks, and pay public sector salaries as they fall due.

Everyone appreciates that Greece is now going to print money so the new Drachma falls in value meaning Greek people still want to get their cash out of Greek banks and into German ones. So Greece needs to introduce capital controls and break all of the fundamental freedoms of the EU.

But EU law is not traditional international law, it confers rights on individuals so ever Greek person/ foreign business who lost out on the Greek default/ Eurozone exit can line up and sue Greece.

In addition to that, and potentially a bigger issue, is that the money Greece gave to her banks is a Sate Aid which is illegal under EU law, and absent the Commission blessing it up front the Greek banks actually cannot accept it because they can be forced to give it back with interest.

So, to my mind, Greece would be mad to try a unilateral default within the EU. When investors and others have no other choice some of them will sue, and if they sue in e.g. the UK they can set up a GLO (essentially a class action). If they sue in Greece then Greece can change her domestic laws a to make it more difficult. So Greece benefits by having litigation starting in as few foreign jurisdictions as possible.

Greece cannot be forced out, but if the ECB takes certain steps then Greece would be completely mad to try to stay, madder than we actually have any evidence of them being to date. To effect a unilateral default your hand is a whole lot stronger if you only have your own laws to deal with and not any supranational laws such as we find in the Treaties.

carveone

Thanks beeftotheheels. That's a very terrifying interesting post! Without the capital controls you mentioned, I guess the nearest parallel would be then with the Weimar Republic where money was destroyed through hyperinflation leading to very significant suffering.

Duke Leonal Felmet

Duke Leonal Felmet wrote: »

If it's any consolation, I don't get it either. It would appear that Sand has a magic solution to solve Greece's economic malaise in ten days.

If he does, he should share it, and collect his Nobel Prize next year.

I am absolutely salivating at the prospect of Sand's impending thesis.

Can't wait!

carveone

Duke Leonal Felmet wrote: »

I am absolutely salivating at the prospect of Sand's impending thesis.

Can't wait!

TBH I think he's just suggesting that a default and exit would be quite fast. Certainly compared to the current malaise continuing for another 10 years.

However, noone here really believes Greece would be better off joining the surrounding nations (Albania, Serbia, Turkey, Libya, Egypt et al) outside the EU. Ireland lost 15% of GDP between 2008 and 2009. Greece would, according to UBS, lose 50% of GDP in one year.

On the other hand, reading the Guardian articles, there is some argument among economists on the exact scenario that would play out. And by arguing that Greece should stay in, the EU and the US are certainly considering their own interests first.

Who knows. Not me, that's for sure. The more I read here, the more I realise how much I'm missing... Maybe the people should have decided after all

Duke Leonal Felmet

carveone wrote: »

TBH I think he's just suggesting that a default and exit would be quite fast.

Nope, he is suggesting that there are two choices:

1) 10 years of austerity - reduces deficit, at a high cost to society

2) 10 days of ????????? - ???????????????????????????????????????

So, he hasn't suggested anything. Only questions. No answers.

FreudianSlippers

Duke Leonal Felmet wrote: »

carveone wrote: »

TBH I think he's just suggesting that a default and exit would be quite fast.

Nope, he is suggesting that there are two choices:

1) 10 years of austerity - reduces deficit, at a high cost to society

2) 10 days of ????????? - ???????????????????????????????????????

So, he hasn't suggested anything. Only questions. No answers.

Don't hold your breath, anyone on boards that promotes default and/or leaving the Euro and/or it's impending doom has a serious case of underpants gnome logic.

I'd like to see one reasonably thought out answer on how it works practically and why it's better for us and Greece. Preferably also not based on the usual false assumptions (such as our situation being comparable to Greece)

Duke Leonal Felmet

carveone

Ah, I see. South Park. Thank God for google!

FreudianSlippers

carveone wrote: »

Ah, I see. South Park. Thank God for google!

Oh when you put it that way it sounds condescending lol

carveone

FreudianSlippers wrote: »

Oh when you put it that way it sounds condescending lol

Nah, just never heard it before! Never really watched South Park which makes me think I'm missing things in Family Guy - you can see where's a reference is being made fun of, but you don't know what it is!

I was thinking the picture above should be printed out and hung in the Dail!

beeftotheheels

carveone wrote: »

Thanks beeftotheheels. That's a very terrifying interesting post! Without the capital controls you mentioned, I guess the nearest parallel would be then with the Weimar Republic where money was destroyed through hyperinflation leading to very significant suffering.

Not necessarily and I'm not sure that an EU exit/ suspension of membership wouldn't actually be in the best interests of Greece in the short to medium term. But that comment has to be put into the context that Greece is ****ed which ever way they jump. Things are bad, things are really bad for them. And with Italy in play things are really bad for every one else.

Back when the Greeks first came clean Germany could, had they wanted to, have saved Greece. Germany cannot save Italy and the Italians make a much better case for being worthy of being saved.

If Greece exited the EU and printed Drachma (and imposed capital controls etc) they would still have to undergo austerity to balance their budgets, but they would know that they had to keep inflation under some kind of control (just not 2%, maybe 5%).

But Greece doesn't benefit from EU membership in the way we do, or Belgium does, or Germany does. Their exports aren't all that significant, they benefited from low interest rates as a sovereign.

Yes they'd lose through CAP but if they become insular then their agricultural economy will survive. They never managed to draw down much of their structural funds because they lacked the required matching local investment.

I think Greece loses whichever way they jump right now, and they face decades of depression (especially since they lack Argentina's resources so comparisons to Argentina are misplaced). So perhaps the decades of depression that the Greek people feel they own is preferable to the decades of depression that they feel has been foisted on them.

Also it is worth noting that I personally struggle to sympathize with the savers in Greece (savers being the ones most hurt by hyperinflation) given the stats on tax payers earning more than €50k vs Porsche owners http://blogs.telegraph.co.uk/finance/ianmcowie/100012894/fast-cars-and-loose-fiscal-morals-there-are-more-porsches-in-greece-than-taxpayers-declaring-50000-euro-incomes/.

cyberhog

@beeftotheheels

Trichet gave an interview in May where he was asked the question

Is it conceivable that a euro country might leave the single currency?

His answer

Trichet: No, that is entirely unrealistic.

http://www.ecb.int/press/key/date/2011/html/sp110528.en.html


Trichet goes on to say

"It is not a working assumption that any government would leave the euro"

http://www.forexlive.com/blog/2011/06/13/trichet-ecb-has-its-own-collateral-framework/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+forexlive-rss+%28Forex+News+by+ForexLive.com%29

So for you to suggest it should have been "blindingly obvious" to the Greeks that they would be forced out of the euro is itself "entirely unrealistic". As much as the adherents of an EU superstate will try to deny it, it remains evident that Merkel and Sarkozy threatened Greece with eviction in order to get Papandreou to scrap the referendum.

beeftotheheels

cyberhog wrote: »

@beeftotheheels

Trichet gave an interview in May where he was asked the question



His answer



http://www.ecb.int/press/key/date/2011/html/sp110528.en.html


Trichet goes on to say



http://www.forexlive.com/blog/2011/06/13/trichet-ecb-has-its-own-collateral-framework/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+forexlive-rss+%28Forex+News+by+ForexLive.com%29

So for you to suggest it should have been "blindingly obvious" to the Greeks that they would be forced out of the euro is itself "entirely unrealistic". As much as the adherents of an EU superstate will try to deny it, it remains evident that Merkel and Sarkozy threatened Greece with eviction in order to get Papandreou to scrap the referendum.

And if anyone under the age of 10 asks me about Santa Clause my answer would be a hell of a lot more definitive.

Did you read his answers? "Not a working assumption", "entirely unealistic", these are not definitive Nos and bear in mind they reflect his position at the time, because you don't talk about something like collapsing a currency in advance of doing it if you can avoid it at all (Greece forced everyone's hand here).

But anyhow, if we're in the business of picking random quotes off the internet in order to "prove" that "no-one" could have foreseen what is apparently only blindingly obvious to very clever and well educated people try these for size.

From the BBC. Before Merkozy summoned Papandreou to Cannes.

http://www.bbc.co.uk/news/mobile/world-europe-15561153

One MP, Milena Apostolaki, has already defected from Mr Papandreou's Pasok party after the referendum announcement.
She told me: "At this extremely difficult time, the priority must be to make all the sacrifices of the Greek people worthwhile. But this plan divides the nation and puts at risk Greece's European perspective."

"The Prime Minister is tossing Greece's EU membership in the air like a coin", said a spokesman for the opposition New Democracy party.

So Greek politicians realized that the notion of having the referendum was risking Greece's future within the EU without needing to be told this by Merkozy. But you still insist that it was unforeseeable?

Sand

carveone wrote: »

TBH I think he's just suggesting that a default and exit would be quite fast. Certainly compared to the current malaise continuing for another 10 years.

I have looked at the last two pages, truly awestruck at how any other interpretation of my post could be taken - though I actually dont consider an exit (from the euro? EU?) neccessary. You get full marks, everyone else "Could do better".

Duke Leonal Felmet

Sand wrote: »

carveone wrote: »

TBH I think he's just suggesting that a default and exit would be quite fast. Certainly compared to the current malaise continuing for another 10 years.

I have looked at the last two pages, truly awestruck at how any other interpretation of my post could be taken - though I actually dont consider an exit (from the euro? EU?) neccessary. You get full marks, everyone else "Could do better".

Annnnnnnnnd, still no explanation of what the 'ten days' means.

Remember when teacher taught the importance of sticking to the question, when taking exams?

Didn't get through to you, it seems.

So, again, what does the alternative 'ten days' mean?

Sand

@Duke Leonal Felmet

Annnnnnnnnd, still no explanation of what the 'ten days' means

I'm going to have to revise your mark down to "Insufficient, failing".

Duke Leonal Felmet

Sand wrote: »

@Duke Leonal Felmet

Annnnnnnnnd, still no explanation of what the 'ten days' means

I'm going to have to revise your mark down to "Insufficient, failing".

A cowardly sidestep. Seems your rhetoric has no substance, as is usual with your kind.

Sand

The problem is Duke, I've already told you what I think. It's all there. It cant be incomprehensible because Carveone got it. So I'm literally completely puzzled by the last couple of pages of sheer insanity. That isnt rhetoric - short of breaking out sock puppets I cant break it down anymore than I have already.

Either you read what I have posted or you can continue tilting at windmills.

Seems your rhetoric has no substance, as is usual with your kind.

My kind? Can you explain what is meant by that?

let's take a bit of a step back here and not get so personal

Duke Leonal Felmet

Sand wrote: »

The problem is Duke, I've already told you what I think. It's all there. It cant be incomprehensible because Carveone got it. So I'm literally completely puzzled by the last couple of pages of sheer insanity. That isnt rhetoric - short of breaking out sock puppets I cant break it down anymore than I have already.

Either you read what I have posted or you can continue tilting at windmills.

Seems your rhetoric has no substance, as is usual with your kind.

My kind? Can you explain what is meant by that?

I'm afraid I can't explain it, as I have been warned not to.

cyberhog

beeftotheheels wrote: »

But you still insist that it was unforeseeable?

Way to move the goalpost there, dude. That just proves how utterly ridiculous your argument is and that the more you repeat it the less convincing it is.

beeftotheheels wrote: »

(Greece forced everyone's hand here).

Which infuriated our EU overlords who then decided to open the door to Greece leaving the euro zone in order to put Greece firmly back in its place.

oscarBravo

cyberhog wrote: »

...our EU overlords...

Is there any chance you could leave this sort of rhetoric out? Because I see a phrase like that, and I have to struggle not to file you in the same box as all the other people who have such a skewed worldview that it's impossible to have a rational discussion with them.

beeftotheheels

cyberhog wrote: »

Way to move the goalpost there, dude. That just proves how utterly ridiculous your argument is and that the more you repeat it the less convincing it is.

To you.

cyberhog wrote: »

Which infuriated our EU overlords who then decided to open the door to Greece leaving the euro zone in order to put Greece firmly back in its place.

Your arguments are best summarized as "This wasn't obvious to me, so I assume that it wasn't obvious to anyone. The fact that it was obvious to clever people, like those who posted earlier on on this thread, and Greek politicians, and god knows who else, must mean that a fast one was pulled on the Greek people." You seriously want to continue with that argument?

It is simple. There is a club. That club has rules. If you fail to comply with those rules you put your club membership in jeopardy. On what planet could the Greek people think otherwise?

That is not bullying. That is just life.

djpbarry

ei.sdraob wrote: »

If ECB does anything to try to "expel" or "punish" a member it would result in the collapse of the currency...

I really fail to see at this point how excising Greece could do anything other than increase confidence in the Euro.

Sand wrote: »

The problem is Duke, I've already told you what I think. It's all there. It cant be incomprehensible because Carveone got it. So I'm literally completely puzzled by the last couple of pages of sheer insanity. That isnt rhetoric - short of breaking out sock puppets I cant break it down anymore than I have already.

We’ve all understood the same bit that Carveone has understood – 10 days versus 10 years and all that - but what’s lacking is the substantive detail. You might think you’ve spelled it out, but the fact that nobody really gets where you’re coming from should probably act as a subtle hint that your argument is coming up short somewhere.

Scofflaw

djpbarry wrote: »

I really fail to see at this point how excising Greece could do anything other than increase confidence in the Euro.
We’ve all understood the same bit that Carveone has understood – 10 days versus 10 years and all that - but what’s lacking is the substantive detail. You might think you’ve spelled it out, but the fact that nobody really gets where you’re coming from should probably act as a subtle hint that your argument is coming up short somewhere.

Or, to put it another way, we get that you can do the necessary cuts - "austerity" - over 10 days or 10 years. What we don't get - and what, perhaps, you're not claiming - is why anyone would choose the 10 days, or even regard the 10 day approach as an option to put on the table.

cordially,
Scofflaw

carveone

Scofflaw wrote: »

Or, to put it another way, we get that you can do the necessary cuts - "austerity" - over 10 days or 10 years. What we don't get - and what, perhaps, you're not claiming - is why anyone would choose the 10 days, or even regard the 10 day approach as an option to put on the table.

cordially,
Scofflaw

My ears are burning

Without dragging it out, beeftotheheels gave some possiblilities as to why the 10 day approach would be a possiblity in this post. He did qualify the comment by saying that he thought Greece loses whichever way they jump right now.

I think noone really agrees on what would happen in that case. You are trying to forecast an entire economy's future - and that's pretty hard to do if the books I was browsing over the weekend in Hoggis Figgis are anything to go by.

You could write an entire thesis on this subject; which is why I brought it up again. It's terribly interesting to speculate

But a couple of things are quite clear. Firstly, the Greek people don't seem to be all that interested in leaving the EU, going by the polls that were taken. It did become clear that a referendum on "accepting the bailout" would be effectively a referendum on "leaving the EU". Which would be political suicide. Possibly literally given the people's mood at the moment.

carveone

Secondly, I don't think things are quite as grim as they first appear. Greece has been in a similar debt position before but before they joined the Euro. At that time (early 90s) they had absolutely no choice - the free market economy was a far more onerous overlord than any one being conjured up presently. For several years they were unable to borrow on the market at all - they had to settle for 3 and 6 month bonds. And... they made it through.

As soon as they joined the euro, they appeared to relax. Currently 25% of workers are in the public sector, which accounts for 40% of GDP. Perhaps if they toned down the socialism a bit, they'd be a little better off.
Sand earlier said that "There is absolutely no magical escape hatch where they can continue to spend in excess of the revenue they raise." But I think they thought there was, through a bailout. But that temporary patch didn't seem to hold against the pressure of public spending and the resistance against any sort of reductions in it.

Just to try and prove my point above, I went looking for data on the sustainability of various countries debt. I figure this to be "Debt interest repayments/GDP". I had some difficulty tracking anything down other than US graphs so I had to trawl the OECD data and make my own graph. Which was a pain:



I hope it's illustrative. One thing to note that isn't quite shown on the graph is that US debt interest to GDP maintained a 4% level for the entirety of the 80s and 90s, through those huge bull markets... The other thing is that Greece's and Ireland's debt load was previously double the current load.

I'm an engineer, not an economist, so that data just seems logical to me, but actual economics guys are free to correct me. Please do

carveone

Last post honest!

I was told that the problem with that graph data isn't the current position but the trend. Yeah ok. Whatever.

The point was that Greece (and Ireland) can be fixed. I'm getting pretty tired of hearing the pundits on TV telling us how we should just accept that Greece will default and the EU will explode and we're all screwed. Months and months of "banks are thieves, the Greeks' are crooks, the Germans are bullies, blah blah blah". Yeah, it's really helping. The negative waves man...

Well I don't accept any of it. WWIII was "inevitable" in the 80s. I remember programs on TV describing how to build bomb shelters. They were selling Geiger counters in shops for goodness sake. Scared the hell out of people. And... then everyone decided that was a stupid idea, let's not do that.

So I've decided (ta da!) that Greece will not default. It won't be allowed to so we might as well figure out how to fix it. Might as well fix the financial system while we're at it. And Europe can help instead of pointing paws. Let me think...

- Tax evasion. The US seem to do a pretty good job of taxing US citizens everywhere. Dual nationality isn't a way to get out of it for them and it seems to be a way for Greeks. Several posters have mentioned the number of Porche Cayennes versus number of higher earners. Start publishing their owners online and see how many of them get turned in. Stuff privacy! If tax evasion is their national pastime, let's see how well they play it then!

- Tax havens. Enough said. The use of these for tax evasion is well known. Shut them down.

- Land and house registries. In Greece and in Ireland. Makes it easier to see who needs to pay some tax...

- What are Greece's main industries. Do they pay tax? Shipping seems to be an excellent way of avoiding tax by flying different flags.

- Their army seems to be a large expense. They have conscription according to wikipedia which also says their budget is 7 billion or 3% of GDP. Sounds too high. Ours is 0.7% of GDP which sounds nice and non-threatening. It's probably something to do with Turkey - the EU and US can help there with some sort of assurance or guarantee.


Europe, the US and the WTO can help massively on point 2, 4 and 5. Germany can help by reducing its trade surplus - be nice if they actually bought something from the rest of us for a change. The EU and US can do something about the credit default swap market which has long since got out of hand. Along with HF Trading - you should be made hold a transaction for a minimum of 10 seconds to avoid a punitive tariff. The stock markets are to invest not to speculate for 10 milliseconds.

Good night!

cyberhog

beeftotheheels wrote: »

It is simple. There is a club. That club has rules. If you fail to comply with those rules you put your club membership in jeopardy.

There is no rule against holding a referendum my friend, the fact the proposal came out of the blue in no way invalidates the Greek people's democratic right to decide on their destiny.

However it is clear that our EU overlords were mystified by the decision to consult the people.

The referendum proposal “surprised all of Europe,” Sarkozy told reporters in Paris. “The plan adopted unanimously by the 17 members of the euro area last Thursday is the only possible way to resolve the problem of Greek debt.”

The thought of allowing the people to have their say was just a damaging distraction to our EU overlords.

Whereas, in Canada, where they still value democratic decision making we saw clear support for Papandreou’s proposal.

Bank of Canada Governor Mark Carney said the Greek government is right to seek broad democratic support on whether it should accept the financial-rescue plan....

Mr. Carney notes that it is “imperative that there is widespread support” for tough decisions to implement major fiscal austerity measures

“If it’s the judgment of the Greek government that this is the best approach to validate that support, we fully respect that,” Mr. Carney said.

http://www.theglobeandmail.com/report-on-business/economy/carney-says-greece-right-on-referendum/article2220900/

But all Greece got from our EU overlords were threats about withholding aid and being kicked out of the euro zone, they have shown no respect for the Greek people's right to have their say. The EU overlords have meddled in Greek domestic affairs and have clearly undermined democracy in that country.

Scofflaw

cyberhog wrote: »

There is no rule against holding a referendum my friend, the fact the proposal came out of the blue in no way invalidates the Greek people's democratic right to decide on their destiny.

However it is clear that our EU overlords were mystified by the decision to consult the people.



The thought of allowing the people to have their say was just a damaging distraction to our EU overlords.

Whereas, in Canada, where they still value democratic decision making we saw clear support for Papandreou’s proposal.


http://www.theglobeandmail.com/report-on-business/economy/carney-says-greece-right-on-referendum/article2220900/

But all Greece got from our EU overlords were threats about withholding aid and being kicked out of the euro zone, they have shown no respect for the Greek people's right to have their say. The EU overlords have meddled in Greek domestic affairs and have clearly undermined democracy in that country.

Frankly, that's a quite hysterical reading of things - reflected in the repetition of "EU overlords". If that's "interference", then so is the comment from Canada - and this one too:

Federal Natural Resources Minister Joe Oliver says he's hopeful a "blocking minority" in the European Parliament will prevent the EU's fuel quality standards — which would penalize the oilsands — from being adopted in the short term.

Oh noes! The Canadian Minister is trying to influence the course of the European Parliament! Let's all have a hissy fit!

Nobody has interfered in Greek democracy - they have made their positions clear, and Greece's parliamentarians have responded to those positions. The Greeks could have held their referendum - they chose not to because they'd rather have the money. Germany is not only entitled to make any stipulations it likes about its money, but must do so, because it the money comes from its citizens.

Countries comment on, urge, and make demands on other countries all the time. Democracy doesn't mean you're able to dictate what happens outside your country, only inside it. The Greeks cannot decide how the Germans will react to what the Greeks want to do - they can only decide for the Greeks.

regards,
Scofflaw

jonniebgood1

Scofflaw wrote: »

Nobody has interfered in Greek democracy ...

Scofflaw wrote: »

...- they have made their positions clear, and Greece's parliamentarians have responded to those positions. The Greeks could have held their referendum - they chose not to because they'd rather have the money. Germany is not only entitled to make any stipulations it likes about its money, but must do so, because it the money comes from its citizens.

Countries comment on, urge, and make demands on other countries all the time. Democracy doesn't mean you're able to dictate what happens outside your country, only inside it. The Greeks cannot decide how the Germans will react to what the Greeks want to do - they can only decide for the Greeks.

Do you not see a contradiction between the 2 elements quoted? I agree with what you are saying in the second part but the ultimate result of it is interference in Greek democracy, whether rightly or wrongly.

Scofflaw

jonniebgood1 wrote: »

Do you not see a contradiction between the 2 elements quoted? I agree with what you are saying in the second part but the ultimate result of it is interference in Greek democracy, whether rightly or wrongly.

Only if one defines "Greek democracy" as "the right to make choices without consequences" or "the right to ignore reality when voting" - definitions one does regularly find used here for sovereignty.

Otherwise, no, I can't say I see a contradiction. Greece wants German money. They made certain commitments to the Germans to get the money. Both parties signed off on the deal. Without consulting the Germans, Papandreou decided on a referendum on the deal. The Germans pointed out that a referendum on the deal was not included in the agreement already made, and that the agreement would not necessarily remain in play - they also pointed out that there would be no new deal, so if the Greeks said no to the deal on offer, they would be on an exit trajectory from the eurozone.

To my mind - and, again, I should perhaps point out that I think a Greek referendum is right, and that the Germans are wrong to oppose it - those are simply consequences being pointed out.

What should the Germans have done? Should they have said nothing for fear of being accused of interference, and then when the Greeks, thinking there were no real consequences - except perhaps a yet better deal - voted No, suddenly turned round and said "oh dear, that means the deal's off, there isn't a new deal, the door is over there"? Or should they have let the Greeks veto the deal, and then offered them an even better one?

The German government is responsible to the German people, not to the Greek people. That means the German government has the right to set and make public whatever terms it may choose in respect of its money (indeed, not to do so would be deceptive). The effect of that on how - and whether - the Greeks vote is up to the Greeks.

Democracy is a method for making decisions. To interfere with it requires one to engage in electoral fraud, either at the public level so as to distort the outcome of elections or referendums, or at the parliamentary level to distort the outcome of parliamentary votes. Another country setting out the terms it will deal with you on is not part of that - it's diplomacy.

cordially,
Scofflaw

KerranJast

Scofflaw is on the ball as usual. The Germans didn't stop the Greek referendum. They simply outlined the consequence of a No vote. That this new bailout deal is all that's being offered and the alternative is Greek default and expulsion from the Eurozone.

What stopped the Referendum is the Greek opposition parties suddenly realised they couldn't be responsible for the entire destruction of the Greek economy (bad enough as it is right now its nowhere near as bad as it would be if they had no external help) and so they went along with a Unity Government plan.