It's Monday-Greece

[Kathianne]

http://www.cbsnews.com/news/greece-slow-motion-crisis-suddenly-veers-toward-danger-zone/


ByALAIN SHERTERMONEYWATCHJune 29, 2015, 4:34 AMDesperate measures as Greece stares down default


Greece's festering debt crisis (http://www.cbsnews.com/news/at-an-impasse-with-creditors-greece-teeters-on-the-edge/) has put the country on the brink of default on its international loans, and possibly an unprecedented exit from the eurozone.

Here's a rundown of the latest developments, along with a look at their potential impact on Europe and on the global economy.
What is happening?

The Greek government on Sunday announced that the country's banks would stay closed for six business days, while limits were placed on cash withdrawals and on fund transfers overseas. The Athens Stock Market will also remain shut, according to The Associated Press. The closures are an effort to halt the flow of capital out of Greek banks and otherwise contain the kind of banking panic that could cripple Greece's already wounded economy.

The dramatic move followed Prime Minister Alexis Tsipras's decision the previous day to call for a July 5 national referendum on whether to accept a bailout offer from Greece's creditors that is conditioned on the government making deeper cuts to retirement benefits and imposing other "austerity" measures.

The gambit appeared to catch the country's international lenders by surprise. The European Central Bank responded by suspending funding for Greece's banks, a move Tsipras decried in a statement (http://www.primeminister.gov.gr/english/2015/06/28/prime-minister-alexis-tsipras-statement-concerning-on-the-latest-developments/) on Sunday as an "attempt to blackmail the will of the Greek people and hinder democratic processes, namely holding the referendum."

Why is this happening now?

Greece is on the hook for a 1.6 billion euro ($1.76 billion) payment to the International Monetary Fund by the end of Tuesday. If it fails to make good on that debt, the government will likely default on its loans. Greek officials asked for more time to make the payment over the weekend, but eurozone financial ministers refused.

...


What are the dangers over the longer term?

Less certain is how markets would react if Greece were to ultimately leave the eurozone. Many experts think the biggest danger in Europe is no longer the spread of economic crisis, but rather concerns that a default could spur Greece's exit from the eurozone, or "Grexit." No country has ever abandoned the euro since the currency came into effect in 1999, and there are fears that Greece's departure could set a dangerous precedent and undermine confidence on the union.

A Grexit also could encourage anti-austerity parties in Italy, Portugal and Spain -- whose economies remain deeply troubled -- to draw a hard line in negotiating their own countries' debt programs.

"While financial market contagion can be managed with adequate tools, political contagion is another matter," said Michala Marcussen, an economist with Societe Generale, in a note. "This tends to be slow moving, but is also the potentially the more dangerous issue."

​What happens next?

Greeks are scheduled to vote next Sunday on whether to accept or reject creditors' latest bailout offer. Although agreeing to those terms could stem the immediate financial crisis, it could cause political chaos by prompting Tsipras -- who stands opposed to the bailout -- to call for new elections. Alternatively, Greece's creditors could seek to resume bailout talks in hope of clinching a deal ahead of the referendum.

In the meantime, analysts say Greece is likely to restrict flows of money leaving the country. Yet while that would keep the country's economy running, such capital controls could also cause damage by, among other things, making it harder for businesses to make and receive payments.

A key question is whether the ECB will continue to provide emergency funding to Greek banks after Tuesday, when Athens is likely to default on its loans. Shutting the taps could cause Greece's banking sector to seize up and increase the chances of a Grexit.

[Perianne]

I am curious to see how the financial markets will respond if Greece defaults.

[Kathianne]

I am curious to see how the financial markets will respond if Greece defaults.

So are the markets. ;)

[Kathianne]

As I said originally, I don't get economics as I should.

What I'm understanding is that Greece closed the banks for 6 days. Payment due tomorrow they will likely not meet.

They may have to drop Euro. Others may follow in getting off Euro, that is the 'contagion?' Which other countries want off euro? I know Britain has considered out of EU, but didn't think the currency had much to do with it?

[Perianne]

As I said originally, I don't get economics as I should.


I don't "get" it either. I don't even get it enough to be a reasonable faker. But I have listened to an "expert" on the radio who said it could really shake up worldwide markets if the Euro fails.

[jimnyc]

I don't know anything about Greece, and am horrible with economics. What I do know, is that if all of a sudden the banks and ATM's were closed, we'd all be fucked. What about CC's, anyone know if they still work? Damn, folks gotta eat, and buy certain things to live, and gas...

[Kathianne]

I don't "get" it either. I don't even get it enough to be a reasonable faker. But I have listened to an "expert" on the radio who said it could really shake up worldwide markets if the Euro fails.

Oh no doubt on that, what I don't understand is why others would also get off euro? Do the brits want to return to their old standard currency?

[fj1200]

As I said originally, I don't get economics as I should.

What I'm understanding is that Greece closed the banks for 6 days. Payment due tomorrow they will likely not meet.

They may have to drop Euro. Others may follow in getting off Euro, that is the 'contagion?' Which other countries want off euro? I know Britain has considered out of EU, but didn't think the currency had much to do with it?

I think that they need to "dollarize" their economy with the Euro as many Latin countries do with the dollar. Keep the Euro to maintain the safety of bank deposits and tell the EU and the IMF that they will be dropping austerity. Austerity is killing them.

[fj1200]

Oh no doubt on that, what I don't understand is why others would also get off euro? Do the brits want to return to their old standard currency?

The Pound is alive and kicking. :) If Greece, and other countries, were able to drop the Euro then they could weaken their currency over time to remain competitive. Of course that doesn't really work in actuality and just causes inflation.

[Kathianne]

The Pound is alive and kicking. :) If Greece, and other countries, were able to drop the Euro then they could weaken their currency over time to remain competitive. Of course that doesn't really work in actuality and just causes inflation.
That I knew. I've never understood keeping the pound, while using the Euro.

So, what is this contagion idea that has so many in an uproar?

[fj1200]

That I knew. I've never understood keeping the pound, while using the Euro.

So, what is this contagion idea that has so many in an uproar?

I think keeping the Pound was thumbing their nose to the EU and wanting to keep their nationality. I'm sure drummond has something to add.

Nevertheless, if Greece leaves with little pain or disruption then it opens the door to Portugal, Ireland, and Spain to do the same.

[Kathianne]

I think keeping the Pound was thumbing their nose to the EU and wanting to keep their nationality. I'm sure drummond has something to add.

Nevertheless, if Greece leaves with little pain or disruption then it opens the door to Portugal, Ireland, and Spain to do the same.

Thanks, but why would they want to do so?

[Perianne]

Thanks, but why would they want to do so?

Maybe because it's a made-up currency that the individual countries don't like?

[Kathianne]

Maybe because it's a made-up currency that the individual countries don't like?
Any currency fits that description. They have 'worth' only because of agreement.

[fj1200]

Thanks, but why would they want to do so?

Leave the Euro? Currency flexibility, and tell Germany to go pound sand.

[Perianne]

Any currency fits that description. They have 'worth' only because of agreement.

I disagree to some degree. The dollar has been around for a looooong time, as has the pound and other European currencies. The Euro is not even 20 years old.

[Kathianne]

I disagree to some degree. The dollar has been around for a looooong time, as has the pound and other European currencies. The Euro is not even 20 years old.
I hear you, but the concept for all hold.

[Perianne]

I hear you, but the concept for all hold.

Absolutely. The concept holds, but the appreciation does not.

Anyway, it will be interesting (or not) to see how this situation unfolds.

[fj1200]

I disagree to some degree. The dollar has been around for a looooong time, as has the pound and other European currencies. The Euro is not even 20 years old.

It's all fiat currency. We just have a better central bank and more integrated economy.

[Perianne]

It's all fiat currency. We just have a better central bank and more integrated economy.

And tradition, which is very important.

[fj1200]

And tradition, which is very important.

I disagree. Our currency sucked in the 30's and 70's and we had loads of tradition.

[Drummond]

Oh no doubt on that, what I don't understand is why others would also get off euro? Do the brits want to return to their old standard currency?

On that last point, Kathianne .. we never gave it up in the first place ! The UK may be part of the EU, but that's not the same as signing up to the Euro. We never did, and you'd be hard-pressed to find anyone - EVEN our Lefties (!!) who now regret that decision.

I've never used the Euro freely in any British store, nor have I ever seen anyone else try it. I'm not actually sure if all stores would refuse it if offered .. though certainly the vast majority would (Gabby, kindly take notes) .... The Euro is treated as foreign currency, and can be (and it is) converted to British Pounds in a Bureau de Change, or our banks, as other foreign currencies would be.

I think the very existence of the Euro is fundamentally stupid. It's possibly understandable as a medium usable as a 'bargaining chip' for control freaks in the EU to employ ... it helps free trade across member State borders, this in turn helping to make those borders increasingly irrelevant, this consolidating the idea of the EU as a single entity - which isn't great news for national identity concerns !

But Greece helps show us the flaw in the very existence of the Euro. Currencies are only as stable as their originating economies, surely ... and the more countries you have joining the Euro, so the greater the chance of instability occurring through the DIVERGENT stabilities each country would, to a greater or lesser degree, introduce.

Who can argue that Greece is doing anything more, at present, than weakening the whole Euro 'edifice' ? Payouts to Greece .. loss of confidence in the Euro, in currency speculation markets ... lots more being involved of a deleterious nature, besides. Who actually NEEDS that ?

The only real answer, when you get down to it, is that a certain control-freak contingent at the centre of the European colossus must've had a dream of breaking down differences between Member States, to the ultimate purpose of creating one enormous power bloc; and unification of currencies to create just the one overriding one must've been seen as a necessary stepping-stone to that aim.

A chain is only as strong as its weakest link. Greece is doing damage disproportionate to its own relatively 'local' problems. My guess ... Greece's membership of the Euro will have to be jettisoned, and we're at the opening-phase of the process right now.

There's one aspect of this which gives me satisfaction, in so far as any of it does. Greece elected a bunch of Lefties, Lefties who thought (or at least, publicly advanced the thought) that they could blackmail Europe into breaking the austerity measures Europe was insisting upon (.. because, of course, books MUST be balanced, to whatever degree it can be brought about). Lefties, being Lefties, will always fight austerity measures in favour of something far less realistic. They conned the Greek people into believing their moonshine. And now, it begins to look as though reality will burst the bubble of their illusionist rot.

Outcome: much suffering (to put it mildly). It's what you get when you have faith in Leftie cloud-cuckoo-ism.

[fj1200]

But Greece helps show us the flaw in the very existence of the Euro. Currencies are only as stable as their originating economies, surely ... and the more countries you have joining the Euro, so the greater the chance of instability occurring through the DIVERGENT stabilities each country would, to a greater or lesser degree, introduce.

...

There's one aspect of this which gives me satisfaction, in so far as any of it does. Greece elected a bunch of Lefties...

It wasn't the current lefties who subscribed to the austerity program. Nevertheless I disagree, Greece doesn't show the flaw in the Euro though it may show the flaws in how they've established the EU/Euro. The US covers very prosperous economies and very impoverished economies and we do not suffer from the same fate. We've had California on the brink of bankruptcy a few years ago and Detroit claiming actual bankruptcy and we do not suffer the same fate. A downturn in 2% of the US would barely be a blip in our currency.

I think the flaw is in demanding that Greece perform in whatever manner for funding to keep an essentially failed system afloat.

Greek Debt Crisis: Why Not Try Dollarization? (http://seekingalpha.com/article/200871-greek-debt-crisis-why-not-try-dollarization)
There have been suggestions that Greece leave the euro currency union, at least temporarily, and start reusing the drachma. This would be more than disruptive to say the least. I have seen no one recommend the obvious solution of dollarization. This doesn't mean Greece would use U.S. dollars; it would still use the euro, but not as a member of the currency union. Dollarization is the generic term for when one country uses another country's currency. Panama and Ecuador for instance use American dollars as their official currency, although neither is part of a currency union with the United States. In early 2009, Zimbabwe dealt with its hyperinflation problem by allowing foreign currencies to be used in the country. One of those currencies was the euro.

[Drummond]

I don't know anything about Greece, and am horrible with economics. What I do know, is that if all of a sudden the banks and ATM's were closed, we'd all be fucked. What about CC's, anyone know if they still work? Damn, folks gotta eat, and buy certain things to live, and gas...

Judging by a BBC report I've seen, the Greek ATM's still function. They've all been set to release no more than 50 Euros per customer (whether that's 'per day', or 'per transaction', or some other arrangement, wasn't made at all clear - I'd guess per day).

One possibly interesting feature .. the BBC reporter tried using an ATM, and because he was drawing on non-Greek funds, the ATM allowed him a payout of 200 Euros. It seems the Greeks are doing their best not to impact on the foreign tourist industry ...

Banks are closed to customers, though bank staff were still ordered to report for work as usual ... which baffled the reporter ...

[Perianne]

I disagree. Our currency sucked in the 30's and 70's and we had loads of tradition.

fj, you will argue with a stump. lol

[fj1200]

fj, you will argue with a stump. lol

I already do.

http://cdn.someecards.com/someecards/usercards/1339349657919_8805207.png

[Little-Acorn]

As I said originally, I don't get economics as I should.

What I'm understanding is that Greece closed the banks for 6 days. Payment due tomorrow they will likely not meet.

They may have to drop Euro. Others may follow in getting off Euro, that is the 'contagion?'
No, borrowing money they can't pay back is the contagion. Wouldn't matter if it was euros or drachmas or dollars or whatever.

You know, sorta like we're doing now.

It's just the Greeks' liberal govt-does-everything social policies coming to their natural conclusion. Their population has decided they want the govt do give them all that stuff, but they don't want to pay for it.

You know, sorta like we're doing now.

This result was inevitable.

Their creditor might even give them a short time extra to make the payment, I don't know. But they will default, and soon.

Do you wonder if we might wind up in the same position?

I don't.

[Kathianne]

No, borrowing money they can't pay back is the contagion. Wouldn't matter if it was euros or drachmas or dollars or whatever.

You know, sorta like we're doing now.

It's just the Greeks' liberal govt-does-everything social policies coming to their natural conclusion. Their population has decided they want the govt do give them all that stuff, but they don't want to pay for it.

You know, sorta like we're doing now.

This result was inevitable.

Their creditor might even give them a short time extra to make the payment, I don't know. But they will default, and soon.

Do you wonder if we might wind up in the same position?

I don't.

Nope. More than financial articles speak directly towards Greece failure as perhaps being a contagion to other countries via euro.