Well I'll be - Greece might actually do it...

[Lyosha]

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_12674_19/09/2011_407137

 

[bigbadwolf]

Greece will leave the common currency (euro). Just a question of time.

 

[D C]

Greece will leave the common currency (euro). Just a question of time.

What does Greece have to gain by doing so? This will only increase their debt as the drachma should be valued less than the euro if reinstated...I understand it would allow Greece to regain control of its Central bank, but does Greece really have the infrastructure to restructure their debt alone?

 

[Mentor]

Greece will probably be kicked out of the Euro zone. The Euro was not a practical idea with so many states having so many different cultures, per capita incomes etc..

 

[bigbadwolf]

What does Greece have to gain by doing so? This will only increase their debt as the drachma should be valued less than the euro if reinstated...I understand it would allow Greece to regain control of its Central bank, but does Greece really have the infrastructure to restructure their debt alone?

Michael Hudson keeps repeating, "A debt that cannot be paid will not be paid." That debt will either not be paid or only a small fraction of it. Germany and maybe France are already looking at a scenario where Greece has defaulted and they are trying to bolster the balance sheets of their banks which have exposure to that debt. Forget the debt. That debt is history.

 

[bigbadwolf]

They will certainly not repay their debt in Drachma. If they go to Drachma, imo default is imminent and unavoidable. So is the transformation of the country into a third world state. It's people will live at the consumption equivalent of the people of Cuba, except with far worse healthcare.

What good are the pensions if you can't even buy a loaf of bread for them? Do the people not realize this?!?

The austerity measures that seem to be necessary to service the debt also seem to be leading to exactly the same outcome. If they default on the debt, switch to the drachma, there will be some difficult times -- as for Argentina in 2001. But eventually they will recover -- not to a first-tier advanced European state, which they never were.

 

[sason]

What would be the repercussions on the Euro zone if Greek defaults and moves out:

Analysts at UBS recently estimated the cost of leaving the euro for a peripheral member of the euro zone such as Greece could cost between 40 percent to 50 percent of gross domestic product in the first year alone, but Roubini believes the sitatution could be managed—albeit with some heavy losses for euro zone banks.
http://www.cnbc.com/id/44590461


Heavy losses on already stretched banks ... we could be in for a spiral ... looks like time to make Euro a thing of past

 

[sason]

another "Too big to fail" case .
When Euro zone was formed , I was too young to understand the underlying factors. But later I failed understand the
reason of its existence. As most of the states didn't fulfill the "strict criteria" required to remain a member it was destined to fall.
Joining economies based on geographical locations ... speechless

 

[bigbadwolf]

Euro will not go by way of Greece. Too many countries have too much invested in it.

I agree. I have faith in the euro.

 

[sason]

... is logical due to logistical costs? Like it or not, geographical economic denominations exist, for very concrete reasons (logistics, immigration).

You realize if the Eurozone fails, ALL of the countries within it will suffer. None will be better off.

More like an earthquake, Europe is the epicenter but the shock waves will travel to far east and across Pacific.
Saying this, I too believe that Euro wont collapse, not because of its strength but because we simply wont let it collapse. Countries will
keep on infusing more and more into it believing that one day we may see a turnaround. We might see a turn around but the process
will be very slow and painful. So, 2010-2020 a lost decade for Europe ?

 

[sason]

Dont target the "leader". He promised "change" in his campaign and within three years he changed the debt ceiling limit :p
Oh and even his stance :D

Keeping US aside, I believe the weak economies of Eurozone are actually pulling the stable one's down and at present there are number of weak economies. Today we are talking about Greece moving ahead we have a host of other countries lined up Italy, Spain, Portugal etc. Better to take some stern steps now than wait for the future.

 

[D C]

Michael Hudson keeps repeating, "A debt that cannot be paid will not be paid." That debt will either not be paid or only a small fraction of it. Germany and maybe France are already looking at a scenario where Greece has defaulted and they are trying to bolster the balance sheets of their banks which have exposure to that debt. Forget the debt. That debt is history.

Then the EU would do well by immediately restructuring it's own debt against Greece instead of waiting for Greece to default. Does Sarkozy care at all? Seems like Frankfurt has been the central peg thus far. Is the ECB preparing for a shock to the system? They should be.

 

[bigbadwolf]

Then the EU would do well by immediately restructuring it's own debt against Greece instead of waiting for Greece to default.

It will take place in tandem: that is to say, Greek default will not come out of the blue. The Germans (and perhaps also French) are already preparing to recapitalise their banks.

Does Sarkozy care at all? Seems like Frankfurt has been the central peg thus far. Is the ECB preparing for a shock to the system? They should be.

Ultimately I think it is Berlin that calls the shots. The ECB in Frankfurt is just a bunch of bureaucrats who listen to Berlin (my guess). That's why no real policy initiative has come from the ECB. Berlin hasn't wanted to say or do anything either. Hence the feeling that Europe is bereft of leadership and direction.

Till now the policy has been to somehow keep the status quo intact. That's proving impossible. The banks are going to get a "haircut."

 

[bob]

Well, the banks are getting a haircut, but the question as always is how close to the skin. I personally don't see a "controlled" default as possible here. Germany can rescue its own banking sector, but can Austria, Italy, France? If any of those were to go, then the entire Euro project is dead.

I personally do not take the possibility of Greece choosing to abandon the Euro seriously. It's been repeatedly found that Greeks pretty solidly prefer to remain part of the Euro, so a referendum would most likely be theater. It's basically presented in the article as a stealthy way for the current government to buy time for itself, because no doubt there is more support among the populace for the Euro than there is for the governing coalition.

I don't pretend to know what's going to happen, but what I do know is that the situation is so strained that no actual default--of a peripheral sovereign or a large continental bank--will be permitted if the ECB, Germany, etc. can prevent it. The degree to which the sovereigns and their banks are interconnected makes controlling the fallout look impossible, even if Europe were to decide to let the rest of the world (US, China, UK) go hang when it comes to questions of whose interests are to be protected. (This, too, is not likely.)

As much as capital markets seem to be agitating for a default in effect, I think this is a can that can be kicked a lot further down the road than anyone seems to be imagining. Controlling the consequences of a Greek default is something that requires a great deal of money more or less the instant it happens; keeping them on the hook for their debt may be more expensive in the long run, but it's a cost that can be borne over years, or decades.

 

[Daniel Duffy]

another "Too big to fail" case .
When Euro zone was formed , I was too young to understand the underlying factors. But later I failed understand the
reason of its existence. As most of the states didn't fulfill the "strict criteria" required to remain a member it was destined to fall.
Joining economies based on geographical locations ... speechless

The main goal was to have one common currency, for obvious reasons; just imagine the old days sending Dutch guilders to Irish punts by cheque. How much is really left? I understood what a currency swap just because of all the currencies, years ago

The union had more to do with history than geography; it was to avoid wars

I think Euro is the best thing that happened to Europe. Here are 10 good reasons
(I like 2,3,6,7 and 10 , Europe is a great place and so diverse).

http://www.magazine-germany.com/en/artikel-en/article/article/10-gute-gruende-fuer-den-euro.html

 

[DStahl]

And unlike Europe, we can't just kick Alabama and Arkansas out.

Alabama and Arkansas have the 8th and 4th least debt of all 50 states.

http://www.mainstreet.com/slideshow/moneyinvesting/credit/debt/most-debt-ridden-states-america
http://www.amazon.com/Fisher-Price-Zen-Collection-Cradle-Swing/dp/B0011MQLNQ/

 

[sason]

The main goal was to have one common currency, for obvious reasons; just imagine the old days sending Dutch guilders to Irish punts by cheque. How much is really left? I understood what a currency swap just because of all the currencies, years ago

The union had more to do with history than geography; it was to avoid wars

I think Euro is the best thing that happened to Europe. Here are 10 good reasons
(I like 2,3,6,7 and 10 , Europe is a great place and so diverse).

http://www.magazine-germany.com/en/artikel-en/article/article/10-gute-gruende-fuer-den-euro.html

The concept may be good, but picking every country that happens to be in Europe was not a good idea . They didn't follow the guidelines they themselves set and in the process messed up everything.

 

[Andy D.]

They didn't follow the guidelines they themselves set and in the process messed up everything.

That pretty much sums up the EU. Great idea, but he application of it got messed up along the way. Too many social issues as well as economic were not addressed as the zone was enlarged over the years.

Still if any good is to come from this, the EU will be reformed and hopefully a stronger entity in the long run.

 

[DStahl]

I meant more along the lines of...

By that logic California, Florida, and Michigan should also be dropped....and Arkansas shouldn't (its only at 8-8.9).

 

[DStahl]

Michigan is suffering from the Auto industry collapse, don't be so tough on it, its state isn't necessarily its own fault.

Fine, that still leaves California, Florida, and the rest of the traditional South. Not that I advocate dropping them as states, but by your logic we should (they have over 10 percent unemployment).

And I have lived in Michigan the past 4 years and I can say that much of their problems are their fault. The state government is beyond incompetent.