Greece about to default

[UglyCasanova]

About time. This will be better for them in the mid/long term. Will suck in the short run however..

 

[UglyCasanova]

Crazy this topic isnt receiving as much attention on here, it is way more important and potentially impactful than the gay marriage ruling.

 

[nageov3t]

Crazy this topic isnt receiving as much attention on here, it is way more important and potentially impactful than the gay marriage ruling.

what's to really talk about? at this point, it's just "wait and see"

 

[unokitty]

Anyone think that the above represents a long term solution?


Five years ago, Michael Lewis reported that Greece, a nation with 2 million fewer people that Los Angeles, was $1.2 trillion dollars in debt. That's a quarter million dollars of debt for every working Greek. In Greece:

The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true.

The retirement age for Greek jobs classified as “arduous” is as early as 55 for men and 50 for women. As this is also the moment when the state begins to shovel out generous pensions, more than 600 Greek professions somehow managed to get themselves classified as arduous: hairdressers, radio announcers, waiters, musicians, and on and on and on. The Greek public health-care system spends far more on supplies than the European average—and it is not uncommon, several Greeks tell me, to see nurses and doctors leaving the job with their arms filled with paper towels and diapers and whatever else they can plunder from the supply closets.

“The Greek people never learned to pay their taxes .... because no one is ever punished. It’s like a gentleman not opening a door for a lady.”

Where waste ends and theft begins almost doesn’t matter; the one masks and thus enables the other. It’s simply assumed, for instance, that anyone who is working for the government is meant to be bribed. People who go to public health clinics assume they will need to bribe doctors to actually take care of them. Government ministers who have spent their lives in public service emerge from office able to afford multi-million-dollar mansions and two or three country homes.

What is going to happen in Greece was never in doubt.

When it was going to happen was the unknown.

Uno

 

[DucatiMonster696]

what's to really talk about? at this point, it's just "wait and see"

Maybe because we have to wait until Tuesday. For which this is when the actual default occurs and all offers made to Greece officially become null and void according to the IMF president Christine Lagarde in a video interview she gave to the AP. After that point the speculation on what will actually occur will begin in earnest because the EU will have to act in some manner to deal with Greece and its default, i.e. kick them out or offer new terms but with even harsher requirements due to their default, etc.

Even if Greece leaves/is kicked out of the EU, it (Greece) is still fucked. It will be cut off from lending markets (or at least to any lending markets which would offer them reasonable rates), its new currency will have the value approaching toilet paper and they still will need to make cuts to their welfare and social services because their government will not have enough cash reserves needed to fund all their entitlements.

 

[Blanky]

The average government job pays almost three times the average private-sector job.

Sounds implausible so I had to check. NYtimes article from 2012 says the same. Incredible.

It's bad in the US too, though not as bad as that, but there is also a huge discrepancy between private/public wages.

 

[Newell Steamer]

Why don't they just do what Iceland did?

http://www.independent.co.uk/news/b...rn-from-icelands-banking-crisis-10329085.html

And, if Greece doesn't do anything, we'll have to wait and see what happens next.

 

[DucatiMonster696]

Why don't they just do what Iceland did?

http://www.independent.co.uk/news/b...rn-from-icelands-banking-crisis-10329085.html

And, if Greece doesn't do anything, we'll have to wait and see what happens next.

Timing is everything. Iceland pulled off the right move at the right time when it was needed. Also they had full control of their currency and were not part of the EU Greece actually could of accomplished gone a parallel route when the first crisis hit but they didn't so they are out of sync here and attempting a Icelandic model in defaulting is going to present them a with huge challenge. Furthermore even the article notes that most of this debt is publicly held debt where Iceland's debt was mostly in the hands of private individuals. So this still wouldn't free them from having to make painful cuts to all the government services that Greeks want but are reluctant to pay for via taxes. Then there is the point that even with a default it still does not automatically force them out of the EU. There has to be some sort of official mechanism or process to get them out either on their end or by the EU. Prior to that they will still be within the constraints of what exactly they are able to do within the guidelines set by the EU of which most Greeks want to be a part of according to the latests polls.

 

[Newell Steamer]

Timing is everything. Iceland pulled off the right move at the right time when it was needed.

Gotcha - thanks.

 

[Jaskalas]

Wave of contagion expected after dramatic weekend raises 'Grexit' chances
Euro, stocks slide on looming Greece default

Getting quite frothy out there in the Euro economic seas.

 

[Fanatical Meat]

I predict they'll default, there will be some kind of extension offered multiple times, European markets will be erratic for months, Greece will ultimately leave the European Union then everything will be fine except high inflation and big budget cuts in Greece.

 

[fskimospy]

Maybe because we have to wait until Tuesday. For which this is when the actual default occurs and all offers made to Greece officially become null and void according to the IMF president Christine Lagarde in a video interview she gave to the AP. After that point the speculation on what will actually occur will begin in earnest because the EU will have to act in some manner to deal with Greece and its default, i.e. kick them out or offer new terms but with even harsher requirements due to their default, etc.

Even if Greece leaves/is kicked out of the EU, it (Greece) is still fucked. It will be cut off from lending markets (or at least to any lending markets which would offer them reasonable rates), its new currency will have the value approaching toilet paper and they still will need to make cuts to their welfare and social services because their government will not have enough cash reserves needed to fund all their entitlements.

Greece is currently close to or is running a primary surplus. That means no cuts to government spending would be necessary in the case of a default.

Now as a practical matter a default will wreck havoc with Greek banks and other such things, which will probably lead to further recession and then more required cuts, but at least in that case they can start over instead of just continuing with mindless austerity.

 

[glenn1]

Greeks will look back fondly on austerity after they default. Not only will devaluation completely wipe out savings and pensions and hugely spike consumer costs, but the post-Grexit recession will make poverty and the resulting social spending even more bloated than now. I wouldn't even be surprised if they go through a few cycles of default/devalue with their standards of living decreasing each time, it's as inevitable as the sun rising in the East until they balance their accounts by getting spending under control (or hugely increasing revenues, but who are we kidding on either side).

http://www.reuters.com/article/2015/02/12/us-eurozone-greece-grexit-idUSKBN0LG1QM20150212

 

[Blanky]

Greeks will look back fondly on austerity after they default. Not only will devaluation completely wipe out savings and pensions and hugely spike consumer costs, but the post-Grexit recession will make poverty and the resulting social spending even more bloated than now. I wouldn't even be surprised if they go through a few cycles of default/devalue with their standards of living decreasing each time, it's as inevitable as the sun rising in the East until they balance their accounts by getting spending under control (or hugely increasing revenues, but who are we kidding on either side).

http://www.reuters.com/article/2015/02/12/us-eurozone-greece-grexit-idUSKBN0LG1QM20150212

The good thing about eu membership is those Greeks with the brains to leave have no problem doing so. A lot already have and they are seeing many educated people and youth leaving.

 

[CPA]

Greece is currently close to or is running a primary surplus. That means no cuts to government spending would be necessary in the case of a default.

Now as a practical matter a default will wreck havoc with Greek banks and other such things, which will probably lead to further recession and then more required cuts, but at least in that case they can start over instead of just continuing with mindless austerity.

A couple things you failed to mention about that "primary surplus". First, for 2015, it's a "budget" primary surplus - made at the end of 2014. No idea what numbers look like for the year yet, but the government not having money to hedge withdrawals from the bank may give an indication to their standing. Second, that primary surplus budget included bailout funds, but not interest payments. Skewed numbers that don't tell the whole story. Oh, and by the way, Greek economy contracted in Q1 putting a further strain on meeting the budgetary numbers.

 

[fskimospy]

A couple things you failed to mention about that "primary surplus". First, for 2015, it's a "budget" primary surplus - made at the end of 2014. No idea what numbers look like for the year yet, but the government not having money to hedge withdrawals from the bank may give an indication to their standing. Second, that primary surplus budget included bailout funds, but not interest payments. Skewed numbers that don't tell the whole story. Oh, and by the way, Greek economy contracted in Q1 putting a further strain on meeting the budgetary numbers.

Where did you get the idea that bailout funds are being used to give Greece a primary surplus? And of course you don't include debt payments in a primary surplus calculation, as that's the entire point. A primary surplus means no net borrowing, excluding debt payments. If bailout loans were being counted as part of their primary surplus, that would mean there was no primary surplus.

You are right that their budget numbers could very well be wrong now considering the events that have transpired, but saying the numbers are skewed by not including things that are not and should not be included in a primary balance calculation is not correct.

 

[cabri]

In order to get Greece into the EU; they (Greece) skewed their numbers, manipulated debt classifications, etc.

Anything coming out of the Greece government as a number to be used for cleanup of the mess, should be viewed very carefully.

 

[Charmonium]

From the BBC

In its decree bringing in the bank restrictions, the Greek government cited the "extremely urgent" need to protect the financial system due to the lack of liquidity.
The main points are:

• Banks closed till 6 July
• Cash withdrawals limited to €60 (£42; $66) a day for this period
• Cash machine withdrawals with foreign bank cards permitted
• Pension payments not part of capital controls
• Banking transactions within Greece allowed

The euro lost 2% of its value against the the US dollar in trading on Monday before recovering some ground. Government borrowing costs in Italy and Spain, two of the eurozone's weaker economies, have also risen.
The Athens stock exchange is closed as part of the emergency measures.

 

[maddogchen]

can't imagine what its like to go to a bank and be told you can't access your savings.

but a lot of these pictures of people standing outside closed banks in Greece seem to be pensioners....lots of old people

 

[Kwatt]

can't imagine what its like to go to a bank and be told you can't access your savings.

but a lot of these pictures of people standing outside closed banks in Greece seem to be pensioners....lots of old people

Think back to 07-08 in the US it was close to no access to banking.

Just so you know. Once you deposit it it is not really yours any more. You have made a uncollateraled loan to the bank.


.

 

[Phynaz]

Think back to 07-08 in the US it was close to no access to banking.

Just so you know. Once you deposit it it is not really yours any more. You have made a uncollateraled loan to the bank.


.

No.

US bank accounts are insured by the FDIC.

 

[sm625]

A greek default is just another license to print more trillions to give to the 1%. That is why the markets are only off 3% from their all time highs. The bad debt will simply be swept onto the central bank balance sheets.

 

[Kwatt]

No.

US bank accounts are insured by the FDIC.

No to what?

Insurance is not collateral.

.

 

[Charmonium]

A greek default is just another license to print more trillions to give to the 1%. That is why the markets are only off 3% from their all time highs. The bad debt will simply be swept onto the central bank balance sheets.

Well, the ECB has been printing money for a while now. Draghi, the ECB president, started doing this last year I think to help stimulate the economy in much the same way the fed did quantitative easing here in the US.

Here's a good article I just found that does a decent job of explaining what is going on now - http://www.businessinsider.com/report-greece-wont-pay-the-imf-on-tuesday-2015-6

It seems that the payment due tomorrow was for the IMF not the ECB. Since the IMF is international, missing this payment isn't that big of a deal. The payment due to the ECB on July 20th though is since that represents a default to other members of the EU.

Although as the article notes, failing to make either or both payments isn't technically a default yet so in theory won't trigger any credit default swaps - or so I'm assuming. I don't really know what DOES constitute a default but this is being described as just putting Greece in 'arrears' on their loans.

 

[DucatiMonster696]

Greece is currently close to or is running a primary surplus. That means no cuts to government spending would be necessary in the case of a default.

Now as a practical matter a default will wreck havoc with Greek banks and other such things, which will probably lead to further recession and then more required cuts, but at least in that case they can start over instead of just continuing with mindless austerity.

While it is true that they do have a primary surplus the fact is that this surplus has occurred as a result of the austerity measures imposed on Greece by their EU creditors.
However without those austerity measures Greece would of continued on a course of creating more debt for itself. So that surplus is a result of the austerity measures imposed on Greece not in spite of those measures. Lastly even though they ran a primary surplus it was still below the roughly 4.9 billion euros they were supposed to generate in surpluses in relation to the deal struck with their EU creditors for their bailout agreement. Of course part of the reason why they missed their target had to do with not receiving 1.9 billion in aid by the EU.

http://www.wsj.com/articles/greece-misses-target-on-budget-surplus-1421244654

ATHENS—Greece announced a primary budget surplus of €1.9 billion ($2.24 billion) for 2014 on Wednesday, falling short of the target set for the year, in a miss largely due to a delay in the payment of its next tranche of aid.

The country’s primary budget surplus—which doesn’t take into account interest payments—for the January to December period reached €1.9 billion, missing a €4.9 billion target set by the Greek government and its international creditors.

According to the Finance Ministry, Greece has not collected €1.9 billion from the European Central Bank’s Securities Markets Program—a government-bond purchasing program.

Those bond profits are part of a €7.2 billion installment from Greece’s €240 billion rescue package, that the country has yet to collect from its international creditors.