# Greek default seems to be inevitable...what's the fallout? **URL:** \ **Category:** Great Debates\ **Created:** [June 29, 2015, 8:24pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811 "2015-06-29T20:24:18Z")\ **Posts on this page:** 20\ **Page:** 10
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [July 5, 2015, 8:44pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/181 "2015-07-05T20:44:44Z")
> [@Measure\_for\_Measure](#): > > Well, with a democratic mandate, Greece can make a more credible threat to leave the Euro. And there’s a good case that Greece is suffering from a liquidity crisis, rather than a solvency crisis as I noted upthread. So personalities and bad tempers aside, things look hopeful for Greece. All of this is do-able. > > (“Personalities and bad tempers aside”, BWHAHAHAHAHA ha ha I kid.) > > Yeah, it looks like we’re headed for a Grexit. Recall though that the austarians policy prescriptives are bankrupt: under _any_ scenario Greece is in for a couple of rough years. The difference is that monetary control gives them some chance of leaving basket case status in 2017. In the meantime, they will be reverting to barter for many transactions. No joke there: I expect more barter transactions during the transition to the new drachma. My concern is that Greece is a far smaller and less diversified economy than Argentina was, so sharply higher prices on imported food could really hurt. Also unknown unknowns. They are also, from what I’ve been reading, very reliant on imported goods and services, so that’s going to make this much harder on them. One thing I’ve seen some write about is a possible economic trade alliance between Greece and Russia, with Russia buying many of their agricultural goods and possible some other goods and services the Greeks can provide and Russia possibly giving them some hard currency that will allow them to leverage at least some other trade while they try and get their house in order. I don’t know how realistic that is, but seemed at least vaguely plausible to me, except that Russia isn’t in a particularly strong economic position right now either. As for the domino effect (i.e. Greece falls, and that causes Italy who is on the edge to fall, which causes Portugal to fall, causing Spain and Ireland to fall, causing everyone else to fall including the US and we all give up and re-learn the joys of hunter gathering societies), I’ve seen it go both ways in the various discussions, with some saying that the ECB has put firewalls in place while others say this could be MUCH worse than the 2008 financial crisis kicked off by the US, which I guess the point the Greek government is playing chicken over. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [July 5, 2015, 9:08pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/182 "2015-07-05T21:08:40Z")
> [@Gary\_Kumquat](#): > > The EU is not the Eurozone. I suck. Inflate all my GDP percentages by about 50%. Your figure was better. ---
**Author:** ![up\_the\_junction](https://avatars.discourse-cdn.com/v4/letter/u/f1d935/32.png) [@up\_the\_junction](https://boards.straightdope.com/u/up_the_junction)\ **Post date:** [July 5, 2015, 9:26pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/183 "2015-07-05T21:26:31Z")
> [@Terr](#): > > But you know what, if you think this is all propaganda, how about a little bet? $100 to winner’s favorite charity, on whether Greek banks open to normal business on Tuesday. You can pick Greek treasury as your favorite charity if you like. You’re conflating things that I’m not. Before the vote, the Telegraph and others talked of ‘Argageddon’ if thee was a no vote etc in headlines. That was nonsense, scaremongering propaganda. Has it slowed down a little now? I have as much idea as all but a handful of bankers. But I’m wary of the same nonsense because it serves the doomsday narrative, and I’m not going to be convinced by “quoted people” quoting unnamed sources. ---
**Author:** ![up\_the\_junction](https://avatars.discourse-cdn.com/v4/letter/u/f1d935/32.png) [@up\_the\_junction](https://boards.straightdope.com/u/up_the_junction)\ **Post date:** [July 5, 2015, 9:29pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/184 "2015-07-05T21:29:51Z")
> [@Measure\_for\_Measure](#): > > \*\*Unemployment: \*\* > Greece: 25% > Spain: 23% > Italy: 12% > Germany: 6.4% The game is the game. #omarlittle ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [July 5, 2015, 10:16pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/185 "2015-07-05T22:16:08Z")
> [@Magiver](#): > > Yes but if you’re line of work was specifically lending money then you’d be broke if you didn’t assign higher rates to higher risk. > > Greece is in serious serious trouble and nobody knows how bad it is except they are already rationing money and businesses are starting to shut down. If short term lending is interrupted then everything from payroll to the transport of goods stops. Yes. That’s why Greece needs either a real bailout program - one, for example funded by the ECB - or it needs to take back control of its own currency. ---
**Author:** ![PhillyGuy](https://avatars.discourse-cdn.com/v4/letter/p/ed655f/32.png) [@PhillyGuy](https://boards.straightdope.com/u/PhillyGuy)\ **Post date:** [July 5, 2015, 10:27pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/186 "2015-07-05T22:27:13Z")
> [@up\_the\_junction](#): > > Before the vote, the Telegraph and others talked of ‘Argageddon’ if thee was a no vote etc in headlines. That was nonsense, scaremongering propaganda. The Telegraph isn’t my favorite, but the ‘Argageddon’ headline was fairly summarizing what some influential people, quoted in the article, were saying: > **[EU warns of Armageddon if Greek voters reject terms](https://www.telegraph.co.uk/finance/economics/11718296/EU-warns-of-Armageddon-if-Greek-voters-reject-terms.html)** > > "Without new money, salaries won't be paid, the health system will stop functioning, the power network and public transport will break down," warns President of European Parliament Yes or no could not change the economic fundamentals pointing towards more Greek sovereign default and, apparently, exit from the Euro. The most probable economic effect of the no vote is that what was going to happen anyway will happen a bit faster. A bigger effect of the vote may have been internal to Greek politics: > **[Antonis Samaras announces departure from New Democracy presidency - ΤΟ ΒΗΜΑ](https://www.tovima.gr/2015/07/05/international/antonis-samaras-announces-departure-from-new-democracy-presidency/)** > > In light of the referendum result on Sunday, Antonis Samaras announced his departure from the helm of New Democracy... There could also be a short-term effect on world stock and currency markets. ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [July 5, 2015, 10:40pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/187 "2015-07-05T22:40:02Z")
> [@Measure\_for\_Measure](#): > > My quote was outlining the scenario whereby the Greeks vote yes. That’s a recipe for austerity and Greek depression. > > Or so I was claiming. Another scenario has occurred to me. The economist Paul De Grauwe argues that, “[Greece is solvent but illiquid](http://www.voxeu.org/article/greece-solvent-illiquid-policy-implications)”, which is interesting if true. He claims that _nominal_ Greek growth of 2% would be sufficient to exceed interest payments, which implies solvency. If that is the case I can see a path out. Greeks vote yes. Government falls. EU starts to play ball with mainstream Greeks. Austerity is eased up a little - basically Greece adopts the milder austerity of Latvia. That might be sufficient to secure shitty growth, enough to keep the creditors happy and unemployment declining at a slo-o-o-o-o-o-w rate. Maybe. > > ## Here’s another link sketching the problems Greece would have with a big devaluation. Greece is not Argentina. They import a lot of their food, 95% of their fertilizer, all of their fuel, etc. Recall the J-curve: devaluation hurts the trade balances before it helps and this won’t be a simple devaluation. [x.com](https://twitter.com/alexebarker/status/615917012452249600/photo/1) [Greece Referendum: Food Shortage and Supermarket Update - Business Insider](http://www.businessinsider.com/greece-referendum-food-shortage-and-supermarket-update-2015-7) > > Greek media is pushes Yes vote-- hard. Moguls don’t like the Greek President. [Greek Media Really, Really Wants Yes Vote On Euro-Bailout – Mother Jones](http://www.motherjones.com/kevin-drum/2015/07/greek-media-really-really-wants-yes-vote-euro-bailout) Sorry for the misunderstanding. Thanks for the links. Greece seems to [import more than it exports](http://www.tradingeconomics.com/greece/imports). It’s possible (I don’t know) that tourism makes up anywhere from a small to a substantial part of the difference. > [@](#): > > Greece main imports are mineral fuels (34 percent of the total imports); machinery and transport equipment (14 percent) and chemicals (13 percent). Others include: food and live animals (10 percent); manufactured goods (9 percent) and miscellaneous products (8 percent). If it’s relying on imports for energy, that’s really bad news if they leave the EU. If they stay, they need a sustainable way to pay back their debts. They need to be able to cut unemployment. You can’t cut off a man’s legs and tell him to run. ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [July 5, 2015, 10:44pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/188 "2015-07-05T22:44:46Z")
> [@Donnerwetter](#): > > One idea that was brought up is that Greece could just start printing Euros as they wish. Apparently, there are printing presses in Greece that could crank out 10 Euro bills. Wow. I hadn’t even considered that. What they’d be doing would be counterfeiting. I don’t know what the EU would do if they resorted to printing euros. ---
**Author:** ![camille](https://avatars.discourse-cdn.com/v4/letter/c/22d042/32.png) [@camille](https://boards.straightdope.com/u/camille)\ **Post date:** [July 5, 2015, 11:14pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/189 "2015-07-05T23:14:27Z")
> [@LinusK](#): > > Wow. I hadn’t even considered that. > > What they’d be doing would be counterfeiting. > > I don’t know what the EU would do if they resorted to printing euros. They’ve always printed their own euros; every country has a national central bank that prints their own. But how would anyone know which euros were the “counterfeits”, without going to the trouble of checking each serial number? And how would it affect the value of existing Greek issued euros? ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [July 5, 2015, 11:47pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/190 "2015-07-05T23:47:19Z")
> [@camille](#): > > They’ve always printed their own euros; every country has a national central bank that prints their own. > > But how would anyone know which euros were the “counterfeits”, without going to the trouble of checking each serial number? And how would it affect the value of existing Greek issued euros? Greek-issued Euros have a Y in the serial number. If they start printing Euros without authorization, all Y-numbered Euro banknotes will become invalid, I presume. In addition to poisoning the financial atmosphere and attitudes toward Greece beyond repair for decades, at least. ---
**Author:** ![PhillyGuy](https://avatars.discourse-cdn.com/v4/letter/p/ed655f/32.png) [@PhillyGuy](https://boards.straightdope.com/u/PhillyGuy)\ **Post date:** [July 6, 2015, 12:00am UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/191 "2015-07-06T00:00:13Z")
> [@LinusK](#): > > I don’t know what the EU would do if they resorted to printing euros. Here’s what the US does when North Korea prints dollars: > **[New $100 bill: why North Korea won't be very happy](https://www.csmonitor.com/World/2013/1008/New-100-bill-why-North-Korea-won-t-be-very-happy)** > > New $100 bill is aimed at staying ahead of counterfeiters. First and foremost, impoverished North Korea. How about kicking them out of the Schengen area? How about trying to keep people from going to Greece as tourists? There are lots of ways the EU could punish Greece without violence. So I don’t think the Greek government would dare something that looked like counterfeiting. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [July 6, 2015, 12:04am UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/192 "2015-07-06T00:04:04Z")
Maybe Greece could export Euro-celebration certificates which coincidentally look just like money. Free market and all that. Oh yeah, the OP. Over at Vox: [Greek referendum: 5 ways a “no” vote will change the country](http://www.vox.com/2015/7/5/8895937/greek-referendum-no-consequences). Also check out their card stack: [9 facts about Greece and the eurozone crisis - Vox](http://www.vox.com/cards/eurozone-crisis) Card 4: [INDENT]…looking backward, the key source of acute deficit problems in 2010 was the very weak economies in Portugal, Ireland, Italy, and Spain — not irresponsible budget practices. And the key source of those problems was the flawed design of the Eurozone itself. [/INDENT] (Note they left out Greece from that list.) Even better is card 5 which notes that Spain and Ireland benefited from bubblicious capital inflows during the 2000s - but unlike the Asian Crisis during the 1990s didn’t have devaluation soften the blow when international capital dried up. Linked to earlier: Matt Yglassias has a good primer on Greece: [http://www.vox.com/2015/6/30/8868363...ault-austerity](http://www.vox.com/2015/6/30/8868363...ault-austerity) And finally: The Greek crisis: 9 questions you were too embarrassed to ask. Includes musical interlude! [http://www.vox.com/2015/6/30/8867939/greece-economic-crisis](http://www.vox.com/2015/6/30/8867939/greece-economic-crisis) ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [July 6, 2015, 12:27am UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/193 "2015-07-06T00:27:17Z")
> [@Terr](#): > > Greek-issued Euros have a Y in the serial number. If they start printing Euros without authorization, all Y-numbered Euro banknotes will become invalid, I presume. In addition to poisoning the financial atmosphere and attitudes toward Greece beyond repair for decades, at least. Thanks, Terr. Consider ignorance fought. ---
**Author:** ![camille](https://avatars.discourse-cdn.com/v4/letter/c/22d042/32.png) [@camille](https://boards.straightdope.com/u/camille)\ **Post date:** [July 6, 2015, 12:27am UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/194 "2015-07-06T00:27:35Z")
> [@Terr](#): > > Greek-issued Euros have a Y in the serial number. If they start printing Euros without authorization, all Y-numbered Euro banknotes will become invalid, I presume. In addition to poisoning the financial atmosphere and attitudes toward Greece beyond repair for decades, at least. I don’t think it will happen. But if they decide to go back to Drachmas, what happens to the existing Greek issued Euros? They must be all over Europe. Will it affect the exchange rate? How could they become invalid if they were printed with ECB authorization? ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [July 6, 2015, 12:34am UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/195 "2015-07-06T00:34:11Z")
Presumably a continental bank might take a Euro note with a Y in it if it had authorized serial numbers. Merchants though would probably demure. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [July 6, 2015, 12:35am UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/196 "2015-07-06T00:35:27Z")
> [@camille](#): > > I don’t think it will happen. > > But if they decide to go back to Drachmas, what happens to the existing Greek issued Euros? They must be all over Europe. Will it affect the exchange rate? How could they become invalid if they were printed with ECB authorization? The existing Y-Euros are just as valid as any others. I am saying that IF (note the IF - an extremely unlikely IF that someone brought up) Greeks decide to print Euros without EU’s authorization, then all Y-Euros will probably be considered invalid, at least ones after a certain date. Of course, Greeks can also conceivably (stuff of wild imagination here) start printing Euros with different serial numbers and different dates. But that’s about as likely as France dropping a nuke on Greece. ---
**Author:** ![carnivorousplant](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/carnivorousplant/32/3563_2.png) [@carnivorousplant](https://boards.straightdope.com/u/carnivorousplant)\ **Post date:** [July 6, 2015, 1:00am UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/197 "2015-07-06T01:00:04Z")
> [@Terr](#): > > But that’s about as likely as France dropping a nuke on Greece. Hmmm. They _have_ The Bomb, and they\* are\* French. :dubious: ---
**Author:** ![Chief\_Pedant](https://avatars.discourse-cdn.com/v4/letter/c/a6a055/32.png) [@Chief\_Pedant](https://boards.straightdope.com/u/Chief_Pedant)\ **Post date:** [July 6, 2015, 2:50am UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/198 "2015-07-06T02:50:40Z")
> [@foolsguinea](#): > > You can keep saying this, but it won’t make it true. > > Greece has been working on reform. They tried austerity on the terms of “Europe,” and got massive depression from it. The argument between SYRIZA and the troika is not about whether to reform, but who gets to run it, and what it’s going to look like. Well, it’s moot. They’ll have to survive on their own money from now on. No one but a financial idiot is going to lend them any more. They obviously are not inclined to live to a level of austerity that represents actual productivity. It’s been too easy to borrow. But now they can skate from their crippling $400B debt. It will be kind of interesting to see if they thrive, or just dig another hole. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [July 6, 2015, 2:56am UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/199 "2015-07-06T02:56:32Z")
> [@Chief\_Pedant](#): > > No one but a financial idiot is going to lend them any more. Really. They will be floating government bonds within a year, and there will be takers at a premium interest rate. Furthermore, I’ll predict that the rate on short term Greek debt will dip below 10% some time during the next 5 years. Hope springs eternal among international financiers. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [July 6, 2015, 2:56am UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/200 "2015-07-06T02:56:45Z")
The could try and charge us all royalties for having invented democracy. Shamelessly stolen from Bill Maher. [Previous page](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811.md?page=9) [Next page](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811.md?page=11)