A bit of helpful advice for the Greek Government:

[Rave]

DEFAULT RIGHT NOW YOU FREAKIN' MORONS!

IRELAND, IF YOU'RE LISTENING, THAT GOES FOR YOU TOO!

Message ends.

[kalniel]

Heh, Germany should just buy Greece off the French banks, then they'd have a great place for their tourists to visit

[oolon]

Well that is a very simplistic argument, which would probably result in the collapse of the Euro, if Greece defaults it will be kicked out of the Euro, at that point Hard euros would be converted into soft drachma debt. The drachma would then drop in value (This is just fine and what should happen). The problem is the hard Euro would then be linked with the country issuing the debt, this would result in much higher interest rates being paid by the 4 remaining little PIIGS. When they would not be able to afford bring arround a second wave of defaults. The ECB would go bust as it is the largest holder of greek debt. While the UK is not exposed to Greek debt (to much) it, it is exposed to Irish debt, and our banking system would not be able to handle multiple Europian country defaults. We can print more money, however the inflation we are seeing now is due to all currencies being devalued. So Rage I would be be careful what you wish for, the pound in your pocket is not worth the same (no mater what they tell you). You just have to see the corrosive effect of inflationary money supply, in the 1930's Blechley park was bought for 7,500 pounds. That is not EVEN one hundred years ago.

I find it fascinating that the same people who don't want to play there debts are the same people who want to continue to live beyond there means, and the problem is soon or later people not want to loan you money any more.

[kalniel]

at that point Hard euros would be converted into soft drachma debt.

Would it? Why wouldn't the lending banks just insist the debt remains in the currency it was loaned in, so no matter how weak the dracma the banks would still be owed x€

[TheAnimus]

Message ends.

My dad was always a history buff. He has an impressive collections of texts, from the staples such as the un-abridged rise and fall of the roman empire to incredibly esoteric military texts looking at the usages of artillery. I never enjoyed any of that stuff as a kid. Ever. He always went on about those who never learn from history been doomed to repeat it, but what lessons can we learn from the ceasers?

However, I've never been so blind as to trivially encourage a default like that. Look at the effects on argentina, granted its a bit different because greece don't have their own currency to play about with but are you seriously suggesting going through that?!

For a nice simple comparision between the two:
http://www.northerntrust.com/pws/jsp...941043_858.xml

We are not talking about anything as minor as the russian one, what you are suggesting would impact them negatively for decades to come, as with soverign debt its not as simple as defaulting to be free of obligations.

I find it fascinating that the same people who don't want to play there debts are the same people who want to continue to live beyond there means, and the problem is soon or later people not want to loan you money any more.

Indeed.... Credit, I like how on the buy side it was always refered to as GEARING, it makes it much simpler to think about it. Your doing well, having used credit you'll do better, your doing bad, having used credit you'll do worse.... a lot worse.

So when people sell their childrens futures for pensions, retiring at 65....

[oolon]

Would it? Why wouldn't the lending banks just insist the debt remains in the currency it was loaned in, so no matter how weak the dracma the banks would still be owed x€

Ok let as assume you don't do that, that means everyone in Greece still has Euros, all debt is still in Euros, but they get kicked out of the Euro. Nobody would be using Dracma (and why should they), the ECB would not supply any money to Greece as it was not part of the Euro, you could well have a money circulation stall. If I lived in Greece I would be withdrawing my money in euros while I can, and storing them off shore.

If they don't convert everything the Dracma, what should be converted? Inter bank lending? Personal Debt? Savings accounts? Failure to convert debt to Dracma would result in Greece having more debt it could not afford.

However it sounds like the rating agencies are going to call it a default anyway, if Greece do anything but just pay the debt.

[TheAnimus]

Even Jack Straw (who must be jumping up and down saying "I TOLD YA, BUT YA WOULDNA LISTEN")
http://www.bbc.co.uk/news/uk-politics-13839381
Doesn't like the idea of a default for the people:

"For a nation to go bankrupt would condemn its people to a long period of distress and misery, which would only create further immigration flows as Greek workers are forced to get on their bikes and seek employment elsewhere,"

[kalniel]

So kick them out of Europe at the same time?

Horrible idea, really, but I'm sure some might think it.

Still think they should sell off the beaches though

[petercook7]

Even Jack Straw (who must be jumping up and down saying "I TOLD YA, BUT YA WOULDNA LISTEN")
http://www.bbc.co.uk/news/uk-politics-13839381
Doesn't like the idea of a default for the people:

didnt he say last year the eurozone was stable etc...
and yes Greece needs to defualt, the Germans are hoping that Greece doesnt, German has destroyed the southerns economic system, the euro was aimed for the Germans. German are now running with their pants down if Greece defaults, the germans are after cheap state assets, just like they did in the UK.

[oolon]

So kick them out of Europe at the same time?

Horrible idea, really, but I'm sure some might think it.

Still think they should sell off the beaches though

I can understand why they no country would want to sell them, however a 100 year lease is not unreasonable, perhaps China would like one, which would be amusing as that is how to got Hong Kong... all be it with a lot more guns and less money.

[TheAnimus]

didnt he say last year the eurozone was stable etc...

Not a quote I know, as much as I dislike the fellow, he was always a sceptic, that said he did go along with the party line a bit, and I was meaning to openly mock him by saying he'd be claiming to be a casandra.

and yes Greece needs to defualt

Good logically reasoned argument there.

the Germans are hoping that Greece doesnt, German has destroyed the southerns economic system

This is a view that isn't shared by many people in the field, I'll go as far as to say I've not seen anyone say that.

the euro was aimed for the Germans. German are now running with their pants down if Greece defaults

Very true, probably more so than you appreciate, I don't know if you ever read any of the german papers, the population are pissed off, because the greeks work less hard and are seen as scrongers who have a better lifestyle at their expense. This public outrage is not helped by the fact Commerzbank which was forced to buy dresdner is in dire straights with its governmentally recommended exposure to the greek debt.

the germans are after cheap state assets, just like they did in the UK.

Now this I'm completely confused by? Like they did in the UK? We've not had a bond crisis! Our debt trades rather well (helped by this euro feck up!).....

The issues of a default are very complex and far reaching, its not like bankrupcy where its oh well administrators come in, or it just folds completely and a few fraction of a percent are out of a job. Its really gresume. You know we (as in brits) are still after the state of missuri? Some 150+ years later its not traded in London...

[Saracen]

DEFAULT RIGHT NOW YOU FREAKIN' MORONS!

IRELAND, IF YOU'RE LISTENING, THAT GOES FOR YOU TOO!

Message ends.

It really irritates me the way you always sit on the fence, Rave.

Jut say what you think, already.

[MadduckUK]

i like the way he did Ireland in green and Greece in blue - this wasn't an outburst, this was formulated

i don't think they can see this though, all their computers are at cash converters.

[b0redom]

Would it? Why wouldn't the lending banks just insist the debt remains in the currency it was loaned in, so no matter how weak the dracma the banks would still be owed x€

I saw this very conversation on the BBC yesterday. Apparently 90% of Greek loans are deemed to be under Greek law, so they would convert them into Drachma and tell the debtors to swivel. BBC Daily Politics if you're interested.

[Saracen]

I saw this very conversation on the BBC yesterday. Apparently 90% of Greek loans are deemed to be under Greek law, so they would convert them into Drachma and tell the debtors to swivel. BBC Daily Politics if you're interested.

The problem is, even if they do that, will it help?

And, by the way, that is also an argument for neither the EU nor the IMF extending so much as another cent in aid to Greece. You have to be a complete idiot when, if someone tells you they're going to refuse to pay back what they've already borrowed, you then lend them a shed-load more. i.e. if they're going to default, and the same guy that made that point (Prof Costas Meghir) also made the point that if they do that, i.e. re-dominate the debt into Drachmas, then even if they pay it back in Drachmas, it [I]would/I] still be a default, with all that follows, for Greece and everybody else, from a default.

It's not clear, for example, whether Greece would be able to stay in the EU if it left the Euro, and even if that was possible, it's FAR from clear that any EU aid would still be possible in that situation.

And the IMF has upped the ante somewhat by making it clear that the next tranche of IMF funding, without which Greece will be defaulting within a few weeks anyway will not be forthcoming, without both firm commitments from other EU nations on on-going commitments and effective restructuring within Greece, which even if the government are committed to, seems to be a dubious proposition to get past the protesters and rioters.

The problem, essentially, is that Greece is structurally bust. Broke, completely boracic, skint, and what's more, not got two brass farthings of it's own to run together. They need EU and/or IMF money just to keep the lights on. They've been running on ever-increasing debt for some years, acquired by relying on interest rates that came from being an EU zone member that their own 4economy and economic performance just simply did not justify, and could not afford. The civil service was huge and hugely inefficient, and still is. Far too many taxpayers didn't pay what they owed and a corrupt a government did naff-all about it, and lied to the EU about the situation. Basically, the whole nation has been leading a champagne lifestyle of a ginger beer income. And when you do that, eventually, the bill comes home to roost, which of course, is what's now happened.

They have awarded themselves a level of public service and a size of public sector that is simply not sustainable. The government have worked this out, and are trying, or at least saying their trying though with a marked lack of any progress, to trim their cloth to suit the means available, but it isn't happening, not least because of public resistance.

The problem is, the public resistance doesn't yet seem to have noticed that not only has the gravy train stalled in the station, but the engine has fallen out and anyway, protesters have nicked all the track it runs on.

The Greek nation is, for a a good many years, up poop creek without a paddle. They just need to acclimatise to the notion that first rule of being stuck in a hole is to damn well stop digging.

If they accept bailouts, paying it back is going to involve years of very hard cuts and austerity, and it won't be nice at all. If they don't accept bailouts, and the austerity that MUST accompany it, then they'll be an international financial pariah for a very long time, they won't be able to borrow to protect the services they've been funding off the back of unsustainable debt for years, and they're going to be facing that austerity anyway.

In other words, they don't have the money (i.e. level of economic productivity) to keep "public service" levels where they are and have been, and aren't going to be lent the money to keep that up either. Either way, austerity (and pretty sever austerity at that) lies ahead.

Whether they stay in the Eurozone or not, whether they default or not, austerity lies in the future, because the government lies of the past have caught up with them.

A lot of financial opinion is that, one way or the other, sooner or later, Greece will default, and that all further bailout money will do is put off the day, and expensively put it off too. Which begs the question for the lenders of .... why do it? The answer is because when Greece defaults, it's going to huge some very large, potentially huge, problems in other places too, most notably France and Germany, but yes, in the UK too, and elsewhere, and it could trigger another financial crisis, and a confidence crisis, when everything is still very weak elsewhere, and that cut trigger another recession in may parts of the world, and at the least, will damage already fragile growth elsewhere, not least, here.

And if Greece were to re-demoninate all that debt, what does that imply for the stability of the newly emerged new Drachma? It's already going to be a hugely volatile currency because if the structural problems, and the state of the economy, and because Greek banks would have to hugely re-capitalise. And, if you were Greek and saw any possibility of your existing savings and investments being "re-demoninated", wouldn't you want it out in Euro form while you had the chance? If I had money in Greek banks, personally I'd already have had it out of Greeks banks and either invested abroad in Euro form, or stuffed into the mattress is Euro noted, just in case. And I doubt the average Greek citizen is any more stupid that me, and will or already has done exactly that. Because any "re-denomination" has to be accompanied by a significant devaluation of the new Drachma against the Euro and other currencies, or there's no benefit from redenominating. And even if they do, it's still a default.The rating agencies have even told France and Germany that the "restructuring" plans they had for Greek debt would class as a distressed or compulsory restructuring, and if they went ahead, the result would be classified as a default and Greek as a nation have it's credit rating reduced yet further to "default".

However we look at it, and whatever Greece does, there's no happy ending to the current mess, and no avoiding the austerity that's coming, riots or not, because unless credible provision is made for austerity and restructuring of the underlying problems, the money is going to dry up, and if not right now, then shortly. Other EU taxpayers will not let their governments keep paying for bailouts, and the Greek economy as the permanent welfare basket case of Europe funded by taxpayers of other countries is not something citizens will let their governments do indefinitely, and those politicians in power know it only too well. Whether now or soon, the money tap will get turned off if the Greek government and people don't knuckle down and get on with serious, hard and painful reform. There are NO other options left, and not much time either.

[Rave]

I'll formulate a longer reply when I get home, on my phone at the moment, but it boils down to this: the debt cannot be repaid, and to pretend otherwise is foolhardy. Given that fact, they may as well get it over with.

This European debt crisis simply cannot be unwound in an orderly fashion. In a crisis, you want to be the first to panic