The future of the Euro

[helene_t]

Greece will have to default if they don't get IMF/EU help. It means it will be very difficult for them to borrow money but at the moment they have a primary surplus so it is not a big deal. But I wonder if the creditors have any legal means to get some of their money? If a private borower defaults, the creditor can seize assets. Could the same happen here?

 

The idea of Greece leaving the Euro is maybe a good long term solution but it doesn't remove the debt and won't make it any easier to repay the debt.

[Mbodell]

Greece will have to default if they don't get IMF/EU help. It means it will be very difficult for them to borrow money but at the moment they have a primary surplus so it is not a big deal. But I wonder if the creditors have any legal means to get some of their money? If a private borower defaults, the creditor can seize assets. Could the same happen here?

 

The idea of Greece leaving the Euro is maybe a good long term solution but it doesn't remove the debt and won't make it any easier to repay the debt.

 

Well presumably the foreign debt holders will be mostly screwed, but the domestic debt holders will be made whole (at least the pensioner types). But countries defaulting on debt aren't exactly unprecedented. And if the domestic debt (and any other) is converted to Greek currency, and the currency sinks the way it should to balance trade, then it will be much easier to pay off too.

[mike777]

Well presumably the foreign debt holders will be mostly screwed, but the domestic debt holders will be made whole (at least the pensioner types). But countries defaulting on debt aren't exactly unprecedented. And if the domestic debt (and any other) is converted to Greek currency, and the currency sinks the way it should to balance trade, then it will be much easier to pay off too.

 

Note inflation, run away inflation

 

It will help if the 11 Million greeks allow germans, French, English, americans and Russian and Chinese, etc to buy

 

Yes this may mean fewer Greeks and more aliens at the richy rich spots.

 

I expect, fully expect all of this will lead to a greater gene pool of non-Greeks.

 

I expect, fully expect the Greek dna gene pool to expand around the world, to mix and match.

[kenberg]

It seems difficult to predict even a day or two down the road. As I get it, Tsipras has announced he will be in Brussels bright and early Monday to begin negotiations. The obvious question is whether or not anyone else will be there to negotiate with him. I am guessing that Monday at least the answer will be no.

 

Listening to the tv for ten minutes I can get at least five predictions of what will happen. There is so much money, so much politics, so many powerful people, anything could happen. My guess? Some sort of negotiated withdrawal of Greece. No one, I hope, wants to see Greece collapse. But in the other direction Tsipras speaks as if, with the Greek vote in his favor, he will now fly into Brussels and explain to one and all what everyone can do for him. This seems unrealistic. Sometimes in a dispute everyone comes to realize that it no longer matters whose fault it all was, it's just time to wrap it up as cooperatively as possible and go in separate ways.

 

But, as I say, ask ten people and you get ten predictions. I really have no idea what is going to happen.

[mike777]

11million greeks...

 

 

if they allow for more aliens to dilute/ezpand gene pool that is all that really matters.

 

Greeks famous for expanding their gene pool, see history.

 

If Greeks willing to open they will thrive..if not will not.

 

Note the worry, concern that non greeks will enter Greece and expand....

 

 

dilute the greek gene.

---------

 

In reality this is a huge opportunity to expand greek genes, expand greek culture.

[akwoo]

Assuming these are Epaminondas's Thebans on the march I would expect the same result that Sparta suffered.

 

I'm not saying they'll be more successful than, say, the Bonus Army(*), but what are the practicalities here? For example, shooting them all is out of the question. They can't figure out how to handle a few thousand boat people coming out of Libya. How do they handle 100,000 Greeks, who, after all, are currently part of Schengen?

 

(*) About 50,000 World War I veterans and supporters marched on Washington, DC in 1932 to demand that the remainder of their war service bonuses (which were originally supposed to be paid in 20 yearly installments 1925-1945) be immediately paid.

[y66]

Guest post from Paul Krugman:

 

Tsipras and Syriza have won big in the referendum, strengthening their hand for whatever comes next. But they’re not the only winners: I would argue that Europe, and the European idea, just won big — at least in the sense of dodging a bullet.

 

I know that’s not how most people see it. But think of it this way: we have just witnessed Greece stand up to a truly vile campaign of bullying and intimidation, an attempt to scare the Greek public, not just into accepting creditor demands, but into getting rid of their government. It was a shameful moment in modern European history, and would have set a truly ugly precedent if it had succeeded.

 

But it didn’t. You don’t have to love Syriza, or believe that they know what they’re doing — it’s not clear that they do, although the troika has been even worse — to believe that European institutions have just been saved from their own worst instincts. If Greece had been forced into line by financial fear mongering, Europe would have sinned in a way that would sully its reputation for generations. Instead, it’s something we can, perhaps, eventually regard as an aberration.

 

And if Greece ends up exiting the euro? There’s actually a pretty good case for Grexit now — and in any case, democracy matters more than any currency arrangement.

[mike777]

I'm not saying they'll be more successful than, say, the Bonus Army(*), but what are the practicalities here? For example, shooting them all is out of the question. They can't figure out how to handle a few thousand boat people coming out of Libya. How do they handle 100,000 Greeks, who, after all, are currently part of Schengen?

 

(*) About 50,000 World War I veterans and supporters marched on Washington, DC in 1932 to demand that the remainder of their war service bonuses (which were originally supposed to be paid in 20 yearly installments 1925-1945) be immediately paid.

 

I have no idea what you are saying

 

 

61% no vote.

 

 

So what do you say now?

 

1) confusion?

2) inflation?

3) sell what you have now fast?

4) allow greek gene pool to expand to vast more than Greece?

5) sell to rich non greeks yes yes yes....

 

I vote yes yes yes yes

[Aberlour10]

That Western European banks lend money to the Greek government I can also understand. They probably expected to be bailed out.

 

They were sure to be bailed out . Especially after the experiences in the Lehman crisis. If Merkel says such a political move is "without the alternative" than we can be sure, it will be done!

 

The first steps in the Greece crisis were fast and precise. Merkel and Hollande transformed pivate greek debt into the public one, guaranteed by the european tax payers. After 5 years, the european banks ( french and german at the top) are save, all these money flew back.

[blackshoe]

Once upon a time, businessmen said 'laissez-nous faire'. Now apparently they're saying 'if we screw up, you must bail us out'. :(

[Aberlour10]

Once upon a time, businessmen said 'laissez-nous faire'. Now apparently they're saying 'if we screw up, you must bail us out'. :(

 

Not generally. The deciding point here is the relevance of the player to the system-

 

Are we too big to fail? too interconnected to fail?

 

If yes, result many actions of these players in Moral Hazard.

[MrAce]

Can someone please enlighten me about the ***** Greek gene pool, about why it being expanded or diluted matters, and the relevance of it with the Euro?

[Vampyr]

Can someone please enlighten me about the ***** Greek gene pool, about why it being expanded or diluted matters, and the relevance of it with the Euro?

 

Ummm.... You saw who wrote those posts, didn't you?

[cherdano]

Once upon a time, businessmen said 'laissez-nous faire'. Now apparently they're saying 'if we screw up, you must bail us out'. :(

If businessmen screw up, they declare bankruptcy. Anyone lending to them is aware of that possibility.

[billw55]

I wonder how much of the concern with Greece is political, beyond strictly economics. If Europe holds the hard line, and/or if Greece exits the Eurozone, will they then seek connections with or fall under the influence of other powers, most notably Russia? Is this a big concern for Merkel, Hollande, etc?

[Gerben42]

I like Europe. I am Dutch working in Germany for a French company. I think the Euro is a great idea, however there have been mistakes in the implementation and in what was done during the time we had it.

 

The first mistake was to take Greece into the Euro for ideological reasons. Greece was not checked properly to meet the criteria. This was the first step to the current problems.

 

The next fatal mistake was made by Germany, when it didn't follow the stability pact. This weakened the stability of the Euro.

 

Then there was the financial crisis, and now everyone was scared of banks defaulting, which led to the third fatal mistake: The rules of the Euro were again bent to save the Greek banks who held most of the Greek bonds. The people of Greece gained absolutely nothing by this. The only thing what this did was to move the ownership of the bad bonds from the banks (who had made healthy profits from them) to the other European governments.

 

Instead, what SHOULD have been done is to let those banks that cannot survive a deficit cut in Greece (i.e. those who have taken too much risk) really take a hit just to the boundary of defaulting, and putting them under public supervision (i.e. salaries on public servant level, no bonuses, etc.)

 

Then the wrong policies have been put into place in Greece. Tax increases can work, but only if the people who have to pay tax really do. Still this is not happening. There is no directory where the government can see immediately who owns which piece of land.

 

I feel sorry for the Greek people, and they have taken the right decision to vote "no". What should happen next?

Greece will hopefully for them finally return to the Drachme (which unfortunately will be much more painful than it would have been if this had been the strategy already 5 years ago - but more of the same will just prolong the suffering), then there will be another state deficit cut (since the state is still defaulting). Then, it can have a fresh start in which we can finally really support the people of Greece, not their banks and elite.

 

The best possible support is to buy their products, visit their beautiful country, and to invest in new businesses.

 

Will other countries follow up on the "Grexit"? I doubt it. The other weaker Euro countries won't want to go through this mess. And the Euro will come out of it strengthened and more mature.

[kenberg]

Tell me if this is crazy, no need to be shy. First a quote from the Krugman guest quote above:

 

And if Greece ends up exiting the euro? There's actually a pretty good case for Grexit now — and in any case, democracy matters more than any currency arrangement.

 

Perhaps this plebiscite and all of this talk about how the Greeks are giving us needed instruction in democracy is simply an exit strategy? Perhaps Tsipras decided some time back it is time to get out? I have read that most Greeks like being in the Eurozone, so he cannot easily yank the country out. But if he can make the exit look like the unfortunate consequence of failed negotiations, well, then, that's just the breaks.

 

A lot of what has been said and done seems to make more sense if seen as an exit strategy.

 

I imagine that this possibility has occurred to the negotiators as well.

 

At any rate, I am now more strongly of the opinion that Greece will be exiting.

[Aberlour10]

I wonder how much of the concern with Greece is political, beyond strictly economics. If Europe holds the hard line, and/or if Greece exits the Eurozone, will they then seek connections with or fall under the influence of other powers, most notably Russia? Is this a big concern for Merkel, Hollande, etc?

 

some short points to that

 

- the decision about joining Greece to the Eurozone had strictly political reasons. And this is why nobody proofed strongly greek makro economic and financial data. The bilance tricks of the greek goverment and their "helper" from Goldman Sachs would be never successful in this case.

 

-Greece is a member of the Eurozone, EU and not at least NATO. An important pilar in south-east Europe. Yes its big concern not only for the european NATO-member, but the USA too. Washington admonishs from time to time both sides to get finally to the agreement...not very loud... but there are NATO interests involved.

 

-China seeks a gateaway for south Europa, buying strategic harbour of Piraeus, Russia plans an important pipeline connecting Turkey with Europe...

 

There are a lot geostrategic interests in this current game.

[y66]

Tell me if this is crazy, no need to be shy. First a quote from the Krugman gues quote above:

 

 

 

Perhaps this plebiscite and all of this talk about how the Greeks are giving us needed instruction in democracy is simply an exit strategy? Perhaps Tsipras decided some time back it is time to get out? I have read that most Greeks like being in the Eurozone, so he cannot easily yank the country out. But if he can make the exit look like the unfortunate consequence of failed negotiations, well, then, that's just the breaks.

 

A lot of what has been said and done seems to make more sense if seen as an exit strategy.

 

I imagine that this possibility has occurred to the negotiators as well.

 

At any rate, I am now more strongly of the opinion that Greece will be exiting.

I believe you are familiar with the game of chicken? This is definitely part of an exit strategy from continuing intolerable economically depressed conditions in Greece that have no end in sight unless debts are restructured or canceled.

[Vampyr]

The people who voted for the most popular poll choice are clearly super optimistic.

[helene_t]

Well done greece. When the tabloid press says yes and two nobel price winning economists say no they probably made the best choice. Ok the" least awful "choice may be more accurate.

[Gerben42]

some short points to that

 

- the decision about joining Greece to the Eurozone had strictly political reasons. And this is why nobody proofed strongly greek makro economic and financial data. The bilance tricks of the greek goverment and their "helper" from Goldman Sachs would be never successful in this case.

 

-Greece is a member of the Eurozone, EU and not at least NATO. An important pilar in south-east Europe. Yes its big concern not only for the european NATO-member, but the USA too. Washington admonishs from time to time both sides to get finally to the agreement...not very loud... but there are NATO interests involved.

 

-China seeks a gateaway for south Europa, buying strategic harbour of Piraeus, Russia plans an important pipeline connecting Turkey with Europe...

 

There are a lot geostrategic interests in this current game.

 

Even though Greece will leave the Euro, they have no intent to leave either NATO or the EU. There are many countries in the EU which don't have the Euro, that's allowed.

 

Strangely the one good thing about there not having been any bank limits until Sunday, is that the rich Greeks, especially those involved in shipping, will be able to buy back the shipyards in Piraeus, keeping up the price.

 

Overall however, rich Greeks getting their money out of the country is of course highly unfair.

[kenberg]

There was a brief discussion between Paul Krugmand and Stephen Richter on the PBS Newshour last night:

http://www.pbs.org/newshour/videos/#149147

 

Mostly the points were the same as discussed here but I want to focus on one view presented by Richter. I don't have the transcript but I think I can accurately give the idea.

 

 

[My summary of this view]

Debt relief, he said, is not really the issue. German banks, and the German people, do not expect to be getting their money back from Greece. They have already written that off (in their minds) as a loss. The issue is where to go from here.

[End of my summary]

 

I have thought of it the same way. When money is gone, it is gone and it is not coming back. It then can be expected that the other 18 members of the Eurozone will look at this as deciding whether it is reasonable to write this off as a loss and keep Greece in, or write this off as a loss and kick Greece out. Either way, the money is gone.

 

It sounds as if the "Greece out" option has the most support among the major forces. Hopefully the exit can be managed as non-destructively as possible, but I think that there will be an exit and it will not go smoothly. I do not at all celebrate this fact, I would love to be wrong. But it is what I think will happen.

[mike777]

As many others point out the issue is not whether Northern Europe will lend more money to Greece. The question is will rich northern Europe give more money to poor Greece. No one expects to get the money back.

 

Should the rich of northern europe be required to provide the safety net to the poor in Greece and southern Europe. I think for many in Europe the answer will be YES.

 

No one really expects Greece to change their way of life, economy or government.

[hotShot]

The problems between the Eurozone and Greece goes deeper. Greece still does not have the kind of administration required e.g. to collect taxes. The "one size fits all" solution that kind of worked for Ireland, Portugal, Spain and Italy, could not work properly in Greece.

The decisions made 5 years ago did not work as intended. Even the IWF admitted that. Politicians don't like to state their failure, especially if they are 72 and under attack by some young smart-arse.

 

Actually the German and European economic and financial policy of the last 20-25 years have not been a success story. In Germany somewhere between 1/5 and 1/4 of the jobs are paid so little, that the employees won't get a pension that is at least the minimum income to exist.

To reach that a minimum wage of 10,50€ per hour in a full time job for 45 years would be required. The official minimum wage is 8.50€ and the list of exceptions is miles long.

Turning Germany into a low-wage country has put a lot of pressure on the other European countries, e.g. France has a minimum wage of 9.53€.

 

Years of reducing the unit labor cost have a deep impact on the state as its main tax income comes from taxing wages. The social security systems financial base is also bound to wages. This was ok 50 years ago when wages where a good measure for surplus values, but now with robots doing a lot of work, this is no longer true.

 

Europe will have to find a way to equalize economic and social standards within the EU. This is not because of the small economy of Greece, it will somehow be managed. It is because the Eurozone will fail otherwise.