Will There Be Another Last Minute Reprieve For Greece?

[Lord Jim]

Greece, who's profligate and irresponsible policies have left it careening from financial crisis to financial crisis may have run out of rabbits to pull out of its hat:

Greece imposes capital controls as crisis deepens

Greece moved to check the growing strains on its crippled financial system on Sunday, closing its banks and imposing capital controls that brought the prospect of being forced out of the euro into plain sight.

After bailout talks between the leftwing government and foreign lenders broke down at the weekend, the European Central Bank froze vital funding support to Greece's banks, leaving Athens with little choice but to shut down the system to keep the banks from collapsing.

Banks are expected to be closed all next week, and there will be a daily 60 euro limit on cash withdrawals from cash machines, which will reopen on Tuesday. Capital controls are likely to last for many months at least.



"The more calmly we deal with difficulties, the sooner we can overcome them and the milder their consequences will be," a somber-looking Prime Minister Alexis Tsipras said in a televised address. He promised bank deposits would be safe [I wonder who's stupid enough to believe that?]and salaries paid.

Even as Tsipras spoke, the lines forming at petrol stations and in front of the shrinking number of bank machines that still contained cash highlighted the scale of the disaster facing Greeks, who have endured more than six years of economic decline.

The failure to reach a deal with creditors leaves Greece set to default on 1.6 billion euros of loans from the International Monetary Fund that fall due on Tuesday. Athens must repay billions of euros to the European Central Bank in the coming months.

The impending default on the IMF loans leaves Greece sliding toward a euro exit with unforeseeable consequences for Europe's grand project to bind its nations into an unbreakable union by means of a common currency. It also carries broad implications for the global financial system.

After months of wrangling, Greece's exasperated European partners have put the blame for the crisis squarely on Tsipras' shoulders.

The 40-year-old premier caught them by surprise in the early hours of Saturday by rejecting the demands of lenders and calling a bailout referendum.

The creditors wanted Greece to cut pensions and raise taxes in ways that Tsipras has long argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.

After announcing the referendum, Tsipras asked for an extension of Greece's existing bailout until after the July 5th vote. Euro zone officials refused, and in his televised address Tsipras bemoaned the refusal as an "unprecedented act".[This guy wants to hold a referendum asking people if they want to pay their debts, and he's offended that the countries they owe the money to wont keep lending him money while he does it? Geez, what a moron...]

Despite the hardening of positions, officials around Europe and the United States made a frantic round of calls and organized meetings to try to salvage the situation.

U.S. President Barack Obama called German Chancellor Angela Merkel, and senior U.S. officials urged Europe and the IMF to come up with a plan to hold the single currency together and keep Greece in the euro zone. The German and French governments announced emergency political meetings.

http://www.bbc.com/news/world-europe-33307263

The Greeks have capped off decades of reckless spending and borrowing combined with a culture of tax avoidance (among both the upper and middle class; an estimated 40% of those eligible to pay income taxes don't.) by electing a complete idiot as Prime Minister because he told them what they wanted to hear. These folks would apparently rather do almost anything then face reality.

Seems to me that refusing to continue to float more money while they hold this moronic referendum is exactly the right thing to do. (I think we'll have a family meeting today and vote on whether or not we want to pay our debts; I'm expecting the vote will probably be no.) Let the Greeks get a little taste of life without financial bailout support.

The Greeks have basically two choices. They can finally be realistic and make the hard and painful but necessary decisions to get their economic house in order....

Or they can default, withdraw from the Euro, and let hyper-inflation do it for them.

[Long Run]

No good choices. If they do default, you can't feel too sorry for the lenders. I like the idea of repayment including Greek residents opening their homes for free vacations to citizens of countries still owed money, but I think this would do little more than cover a portion of the interest.

[rubato]

Unemployment is > 25% right now. Still more budget cuts will increase it.

Real wages have been cut by 22%:



More austerity will depress wages further.


they have already cut pensions by 40%:



More cuts will accelerate poverty and suffering among the elderly.


The current level of austerity is killing Greece and removing any possibility of a better future. They have paid enough.


yrs,
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[oldr_n_wsr]

They have paid enough.

And borrowed so much more.

[Lord Jim]

I think this is a pretty good analogy showing how they got in this fix:

Let's say you don't have very good credit, so you have a credit card with a high rate of interest. Just as you've maxed out that card, and might finally have to start paying the consequences for that and stop borrowing, along comes a nice person with good credit, offering to co-sign on a new credit card that would give you a whole new line of credit at a much lower rate.

But there's one catch. This person has heard that you've been very irresponsible with your money, and so they want to see your financial records first. You know that if you show them all the actual numbers, they probably won't sign for the card. So you fudge your numbers, making it look like you're in better financial shape then you really are.

So then you get the card, and what do you do? Do you do the responsible thing, and pay down the debt you have on the older card with the higher interest rate? Not you. You proceed to run up new debt on the new card and max that one out too.

And then you tell the person that co-signed for you that if they don't lend you more money to at least pay the interest on the cards for the debt you ran up, you'll just stop paying and that will hurt their credit.

Then rather than telling you to fuck off, they say, okay I'll do that, but there are going to be some conditions so that ultimately you get out of this mess. You're going to have bring in more income, (maybe work more hours or take a second job, get anyone who owes you money to pay you, etc.) and you're going to have to cut your expenses. (No more vacations, no more eating out, etc.)

And then you agree, but you don't really do much to bring in more income or cut expenses, so now you need to borrow even more money to pay for your debt. And then when the person you've been suckering all this time again says okay, but this time you're really going to have to do what you agreed to do or I'm cutting you off, you become indignant and act like you're the wronged party.

That pretty well sums it up....

[oldr_n_wsr]

But but but.... Lord Jim

They have paid enough.

[MajGenl.Meade]

They're on the skids

[Gob]

The Greeks were demanding a loan so they could pay back some of the loans they had already defaulted on, can anyone else see a problem here?

From 1929 to 1980 the Greek economy’s average growth rate was 5.2 percent. In that time period Greece experienced dictatorships, occupation, civil war, and a military junta. It was only in 1974 that Greece began to resemble something like a liberal democracy. Some years later Greece was accepted into the European Community, as Hatzis explains:

"Seven years after embracing constitutional democracy the nine (then) members of the European Community (EC) accepted Greece as its tenth member (even before Spain and Portugal). Why? It was mostly a political decision but it was also based on decades of economic growth, despite all the setbacks and obstacles. When Greece entered the EC, the country’s public debt stood at 28 percent of GDP; the budget deficit was less than 3 percent of GDP; and the unemployment rate was 2–3 percent."

In 2011 Greece’s public debt reached 165.4 percent of GDP, the budget deficit was 9.1 percent of GDP, and the unemployment rate was 17.7 percent. What happened?

[Gob]

BTW If anyone has a few thousand to invest, holiday homes in Greece are at bargain prices!!

[Gob]

Did you know that after Athens, the city with the largest population of Greeks is Melbourne?

Australian Greek communities are preparing for an influx of migrating relatives as Greece's economy crumbles and its banks bolt their doors.

Global sharemarkets suffered from panic selling on Monday in the wake of Greek Prime Minister Alexis Tsipras pulling out of negotiations late last week for emergency funding in order to put the options to a referendum. Almost $40 billion was wiped off Australian equities markets on Monday, in the exchange's biggest one-day fall since early May.

Greece has been buffeted by austerity measure such as pension and service cuts for years while its political leaders remain locked in negotiations with its many creditors, to which it owes upwards of $400 billion.

But fear of a Greek collapse are being felt beyond the ASX, and perhaps more keenly, in the homes of hundreds of thousands of Australians of Greek heritage, many of whom still have family living in the struggling nation.

Marina Glinatsis is part of the Greek community in Earlwood, and says her local Baptist church has been praying and planning for family members in Greece at every meeting for months.

"It's heartbreaking. Greece is really suffering. We are very concerned and many people are sending money, anything and everything they can to help," she said.

Ms Glinatsis said many local families were exploring the options for supporting their Greek relatives to emigrate to Australia

"A lot of families are trying to help people to migrate to Australia, but this is expensive and Greek families are often large. How do you pick?"

Even those in Greece who have international support networks may find it hard to access funds sent to them. Greek's banks remain closed, ATMs withdrawals are capped below $100 and people are lined up for blocks, often to find their queue disbanding when the machine runs out of cash before they reach it

President of the NSW Greek Orthodox Community Harry Danalis said those sending funds were relying on international money transfer services.

Mr Danalis, who has an uncle and cousins in Greece, led a protest outside the International Monetary Fund offices in Martin Place over the weekend.

"Feeling is very high in the local community. The Greek people need to be heard without the blackmail from leaders of the European Union."

Mr Danalis said between 10,000 and 15,000 Greeks had moved or returned to Australia since the ongoing Greek financial woes spiked in 2013.

He said this new crisis and the referendum this weekend could cause a mass exodus of Greeks from their homeland. Greek voters will decide whether to accept cost-cutting measures and higher taxes proposed by the struggling nation's creditors.

"If they vote 'yes', the slow drain will likely continue. But if they vote 'no', that will be the impetus that pushes whoever can leave the country to do so."

A 'no' vote would effectively indicate the Greek population no longer wanted to remain part of the European Union, which could upset markets even further.

While most polling indicates a 'yes' vote is more likely, Greece could exit the European Union through defaulting or collapsing. Former chief executive of bond giant Pimco Mohamed El-Erian said there was an 85 per cent chance of Greece exiting the union.

[Long Run]

Did you know that after Athens, the city with the largest population of Greeks is Melbourne?
Australian Greek communities are preparing for an influx of migrating relatives ...

You may want to beware if they bring gifts.

[Lord Jim]

BTW If anyone has a few thousand to invest, holiday homes in Greece are at bargain prices!!

Like I said before, if the Greeks decide to default and go back to the Drachma, it will be a great time for anyone with US dollars to spend to go on a vacation in Greece...

You'll be able to book a suite in their most luxurious hotels on the Mediterranean for about the nightly price of a Motel 6....

[RayThom]

To answer the question -- NO!

I get a feeling they truly believe in divine intervention. They'll need to become highly frustrated and disappointed before reality slaps them in the face.

This might be a good opportunity for ISIS to step in.

[Lord Jim]

They'll need to become highly frustrated and disappointed before reality slaps them in the face.

Perhaps the next few days of having the banks closed, and having to line up every day in front of an ATM to get their $66, will finally give them that wake up call...

If it does, and the Greeks vote in favor of the bailout conditions, then Mr. Tsipras (who is calling for a "no" vote) should see that as a vote of "no confidence" in his government and resign, and the Greeks should have a new election to replace him with someone who will act responsibly...

If they vote against the bailout conditions, they will deserve everything that will follow...

[rubato]

Puerto Rico isn't the problem.

The states of the old Confederacy have all been on life support, sucking up billions in subsidies per year, since the Great Depression.


Maybe 60 years is enough and the rest of the US should cut them off and make them pay their way?


http://taxfoundation.org/article/federa ... -1981-2005


yrs,
rubato

[Lord Jim]

LMAO

Did you post this bit of nonsense in the wrong thread?

Just to remind you, this thread is about Greek debt default...

Not Puerto Rico, or The Confederacy...

[rubato]

Its the right thread in a different way:


http://www.vox.com/2015/6/29/8863313/th ... ont-try-it

There's a simple solution to Greece's problems, but Europe won't try it

Updated by Ezra Klein on June 29, 2015, 3:50 p.m. ET @ezraklein
Tweet (248) Share (537) +

Adam Posen is president of the Peterson Institute for International Economics and, like every international economist right now, he's glued to the drama in Greece. There is, he says, a simple solution to the crisis: the Northern European countries should write a check and end it. But they won't, and in a conversation on Monday, he told me why. The interview has been lightly edited for length and clarity.

Ezra Klein: Imagine I haven’t been following this at all. What’s the simplest explanation for why the world is so concerned about Greece today?

Adam Posen: The simplest explanation is that for the euro to remain together, and therefore to remain a stable currency, you have to believe the membership pays their debts. Right now, the Greeks are not going to pay back what they owe the rest of Europe. Right now, there literally aren’t enough euros in the Greek financial system, public and private, to pay back what they owe.

So Greece will have to issue IOUs to their creditors and their businesses. And that will mean you have a currency in Greece that is not the euro. It will be a kind of scrip. And so the Greek people have been pulling their money out of the Greek financial system because they don’t believe this scrip will be worth as much as the euro.

The way we deal with this kind of problem in the US is we have fiscal transfers. Mississippi and Alabama never really pay back what they owe California and New York, and that's okay. So you can see the crisis in Greece two ways: you can believe it’s a failure because the Greeks are reneging on their debts or because Germany is not treating Greece like the US treats Mississippi, as a state they have to look after.

EK: Why is this happening right now though? What's changed from, say, six months ago?

AP: What has changed since a year ago is a breakdown in trust and a change in politics. The economic fundamentals really haven’t changed. But you have this new government in Greece that is taking a harder line with its creditors. They’re saying, basically, we can’t pay all this back, you need to be more realistic. And the European leadership has reacted to this first by saying, sorry, that deal is not on the table, and second, by saying, we basically just don’t trust you. You’ll tell us one thing and then go do something else.

So that’s the key: the economics didn’t change. It was a change in the Greek government, and then a change in the relationship between that government and the rest of Europe.

EK: One thing that makes this hard to follow from the US is it's not entirely clear which outcome to be rooting for. Greece can stay in the euro and try to endure grinding depression for years and years or they can leave the euro and endure a financial crisis. Which outcome is better?

AP: It’s easy to say what people should want to happen in Greece. It’s just impossible to get there. The Northern Europeans should write a check and make this go away. They should accept the fact that Greece is not going to pay most of its debts. They also need to accept that these debts are partly their fault. These loans were made by Northern European financial institutions, and the Northern Europeans should suffer for making stupid loans, too.

But that won’t happen. Northern European governments like Germany, Finland, Austria, the Netherlands, and Sweden don’t want their banks to lose money and they don’t want to tell their voters that they’re handing money to the Greeks.

EK: You often hear about how the Greek government is barely able to collect taxes. How big a contributor is that to this crisis?

AP: There is no question that the Greek system has done a terrible job of collecting taxes, and especially collecting taxes on the richest people. For instance, shipping is constitutionally protected from being taxed, and that’s where many of Greece’s great fortunes are. Taxation on real estate is also poorly collected. But in terms of Greece racking up all its debt, that isn’t the fundamental issue. The fundamental issue was the surge in capital from Northern Europe to Greece during the early and mid-2000s. Even if the Greeks hadn’t been able to collect much tax revenue they couldn’t have gotten into so much debt if people weren’t giving them all these loans.

EK: What do you think the financial consequences of Greece leaving the eurozone would be?

AP: I think the short-term consequences are going to be much smaller than people fear, with the huge, horrible exception of the Greek people themselves. It will be awful for them. But pretty much all the Greek debt is now in government hands. The total amount of debt, which is about $200 billion euros, is real money, but it’s really just about 1-2 percent of total euro area GDP. And every bank and every investor has known this has been coming for months.

But that’s the short term. The long-term is the IMF will be out billions of dollars which they need to pay back to their poorer members. The euro will be seen as less safe a currency than it once was and that will permanently raise interest rates in many European countries. It will permanently reduce the appetite for euro assets. And it will mean that the so-called periphery countries in Europe — notably Portugal — will be looked at with suspicion going forward. And that will make it harder for them to get investment and funding.

EK: What about the political side of it? Do you think this raises the possibility of dangerous political backlash in Europe?

AP: Absolutely. Branko Milanovic had a nice essay about how bad the politics of Europe could get in the aftermath of this. It’s a bit extreme but it’s a good point. Basically what you’ve had is the undermining of European solidarity. There is this level of distrust and resentment. The Greek people feel the Northern Europeans are trying to get blood from a stone and the Germans feel they’re being exploited.
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yrs,
rubato

[Lord Jim]

Its the right thread in a different way:

LOL

The lengths you are willing to go to rather than simply admit that you fucked up, are central to what makes your presence here so damn amusing...

[rubato]

http://economistsview.typepad.com/

http://time.com/3939621/stiglitz-greece/?xid=tcoshare

Stiglitz: Troika has 'Kind of Criminal Responsibility'

From Time:

Joseph Stiglitz to Greece’s Creditors: Abandon Austerity Or Face Global Fallout: ... “They have criminal responsibility,” he says of the so-called troika of financial institutions that bailed out the Greek economy in 2010, namely the International Monetary Fund, the European Commission and the European Central Bank. “It’s a kind of criminal responsibility for causing a major recession,” Stiglitz tells TIME in a phone interview.

Along with a growing number of the world’s most influential economists, Stiglitz has begun to urge the troika to forgive Greece’s debt – estimated to be worth close to $300 billion in bailouts – and to offer the stimulus money that two successive Greek governments have been requesting.

Failure to do so, Stiglitz argues, would not only worsen the recession in Greece – already deeper and more prolonged than the Great Depression in the U.S. – it would also wreck the credibility of Europe’s common currency, the euro, and put the global economy at risk of contagion. ...

A few years ago, when Greece was still at the start of its slide into an economic depression, the Nobel prize-winning economist Joseph Stiglitz remembers discussing the crisis with Greek officials. What they wanted was a stimulus package to boost growth and create jobs, and Stiglitz, who had just produced an influential report for the United Nations on how to deal with the global financial crisis, agreed that this would be the best way forward. Instead, Greece’s foreign creditors imposed a strict program of austerity. The Greek economy has shrunk by about 25% since 2010. The cost-cutting was an enormous mistake, Stiglitz says, and it’s time for the creditors to admit it.

Stiglitz sees two possible outcomes to that scenario – neither of them pleasant for the European Union. If the Greek economy recovers after abandoning the euro, it would “certainly increase the impetus for anti-euro politics,” encouraging other struggling economies to drop the common currency and go it alone. If the Greek economy collapses without the euro, “you have on the edge of Europe a failed state,” Stiglitz says. “That’s when the geopolitics become very ugly.”

By providing financial aid, Russia and China would then be able to undermine Greece’s allegiance to the E.U. and its foreign policy decisions, creating what Stiglitz calls “an enemy within.” There is no way to predict the long-term consequences of such a break in the E.U.’s political cohesion, but it would likely be more costly than offering Greece a break on its loans, he says.

“The creditors should admit that the policies that they put forward over the last five years are flawed,” says Stiglitz, a professor at Columbia University. “What they asked for caused a deep depression with long-standing effects, and I don’t think there is any way that Europe’s and Germany’s hands are clean. My own view is that they ought to recognize their complicity and say, ‘Look, the past is the past. We made mistakes. How do we go on from here?’”

Joseph Stiglitz
Economist
Joseph Eugene Stiglitz, ForMemRS, FBA is an American economist and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences and the John Bates Clark Medal. Wikipedia

yrs,
rubato

[RayThom]

A little over six hours to go:
http://www.theguardian.com/business/liv ... or-tsipras