# 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:** 9
**Author:** ![Gary\_Kumquat](https://avatars.discourse-cdn.com/v4/letter/g/4491bb/32.png) [@Gary\_Kumquat](https://boards.straightdope.com/u/Gary_Kumquat)\ **Post date:** [July 5, 2015, 6:45pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/161 "2015-07-05T18:45:50Z")
> [@Measure\_for\_Measure](#): > > Again-no. Greece is too tiny to affect the value of the Euro. Add in the Spanish and Portuguese economies and the Rest of Europe still dominates. Just because Germany doesn’t give a shit doesn’t mean they are benefiting from Greek suffering. For starters, the PIIGS economies account for 32% of the Eurozone. That is more than enough to affect the trading value of the Euro. Secondly, for fairly obvious reasons, Germany does benefit significantly from a low Euro. Most of its exports are to none Euro countries (making it’s goods cheaper) while most of its imports are from Euro countries (meaning it doesn’t see any price rises for food, etc). ---
**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, 6:49pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/162 "2015-07-05T18:49:15Z")
> [@Donnerwetter](#): > > It is noteworthy that there is no legal process, there are no rules for either expelling a country from the eurozone or for a country to leave on its own account. Nobody thought of that. No, there isn’t. From what I’ve been reading however, Greece will have little choice unless they are given an injection of cash (i.e. a bailout), since they are having a sever liquidity crisis atm and there isn’t any relief in sight without said injection. Obviously, the Greek government thinks that this ‘no’ vote will give them a stronger hand in negotiating for that liquidity, but if they are wrong then they will almost have to leave the EZ on their own because they will need to rapidly build their own currency just to survive. The government says the banks will be back open again on Tuesday, and maybe folks will be so happy with the ‘no’ vote that there won’t be runs on those banks as Greeks scramble to take out everything they can…but, again, if they are wrong about that then it could rapidly turn into a huge run on the banks and drain off what funds are still in those banks, leaving anyone who doesn’t move fast holding the bag with no cash on hand. Hope this works out for them, but doesn’t seem likely to me. ---
**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, 6:51pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/163 "2015-07-05T18:51:25Z")
> [@XT](#): > > The government says the banks will be back open again on Tuesday, and maybe folks will be so happy with the ‘no’ vote that there won’t be runs on those banks as Greeks scramble to take out everything they can…but, again, if they are wrong about that then it could rapidly turn into a huge run on the banks and drain off what funds are still in those banks, leaving anyone who doesn’t move fast holding the bag with no cash on hand. The government is lying through its teeth (no surprise). Greek banks have enough money reserves to maybe go on with the maximum 50 Euro withdrawals for a couple of days. Maybe. But definitely not to open the banks. ---
**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, 6:52pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/164 "2015-07-05T18:52:35Z")
> [@clairobscur](#): > > They defaulted already in the sense that they didn’t pay their instalment in time. I meant defaulting completely : stating that they won’t pay back any of their existing debts. Well, they will have to pay some of it back…I don’t think it’s possible for them to get out of repaying all of it even if they go to a new currency. Not if they ever want to trade with anyone again (from what I recall they import like 70%+ of their goods and services, so that probably won’t work out in the short term at least). ---
**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, 6:58pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/165 "2015-07-05T18:58:42Z")
> [@Gary\_Kumquat](#): > > For starters, the PIIGS economies account for 32% of the Eurozone. That is more than enough to affect the trading value of the Euro. But the EZ and ECB have firewalled and put measures in place in the other countries, so I’m not sure that because Greece goes down that means the others will fall as well. ---
**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, 7:01pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/166 "2015-07-05T19:01:08Z")
> [@Terr](#): > > The government is lying through its teeth (no surprise). Greek banks have enough money reserves to maybe go on with the maximum 50 Euro withdrawals for a couple of days. Maybe. But definitely not to open the banks. I don’t know how much they have, but it will all hinge on whether the public panics or not I’d say. The banks were basically closed except for very limited withdrawals last week, so I guess it will depend on the mood of the people who voted ‘no’ (and those who voted ‘yes’) as to how confident they REALLY are with what their government has been telling them about being in a stronger negotiating position if there was a ‘no’ vote. ---
**Author:** ![Donnerwetter](https://avatars.discourse-cdn.com/v4/letter/d/b2d939/32.png) [@Donnerwetter](https://boards.straightdope.com/u/Donnerwetter)\ **Post date:** [July 5, 2015, 7:02pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/167 "2015-07-05T19:02:18Z")
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. ---
**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, 7:04pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/168 "2015-07-05T19:04:19Z")
> [@XT](#): > > I don’t know how much they have, but it will all hinge on whether the public panics or not I’d say. The banks were basically closed except for very limited withdrawals last week, so I guess it will depend on the mood of the people who voted ‘no’ (and those who voted ‘yes’) as to how confident they REALLY are with what their government has been telling them about being in a stronger negotiating position if there was a ‘no’ vote. They were down to[500M Euros](http://www.telegraph.co.uk/finance/economics/11714655/Greek-banks-down-to-500m-in-cash-reserves-as-economy-crashes.html) - three days ago. If they still have $100M Euros left today, I’d be surprised. ---
**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, 7:10pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/169 "2015-07-05T19:10:05Z")
LOL at Telegraph citing: You guys have got to stop reading propaganda from the Barclay brothers. ---
**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, 7:19pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/170 "2015-07-05T19:19:47Z")
[Greek banks ‘days away from running out of cash’](http://www.bbc.com/news/business-33403008) ---
**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, 7:26pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/171 "2015-07-05T19:26:48Z")
> [@Terr](#): > > [Greek banks ‘days away from running out of cash’](http://www.bbc.com/news/business-33403008) > [@](#): > > “How on earth can banks and an economy be starved of cash like this, in a civilised developed country? The banks need money to keep the economy functioning, and we’re almost out.” Dunno, ask the Germans. This is their bullshit. ---
**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, 7:28pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/172 "2015-07-05T19:28:33Z")
> [@up\_the\_junction](#): > > Dunno, ask the Germans. This is their bullshit. What, you’re not going to deride the source? And yes, the economy can be starved of cash. That is what happens when you give away your currency control and then refuse to pay your bills. I don’t really see Greece getting more cash right now from Europe. If only for the “pour encourager les autres” reasons. ---
**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, 7:33pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/173 "2015-07-05T19:33:22Z")
> [@Terr](#): > > What, you’re not going to deride the source? An unnamed 3rd party source? What’s to deride, it speaks for itself. ---
**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, 7:36pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/174 "2015-07-05T19:36:39Z")
> [@up\_the\_junction](#): > > An unnamed 3rd party source? What’s to deride, it speaks for itself. Didn’t stop you from deriding The Telegraph, and their source was named: "Constantine Michalos, head of the Hellenic Chambers of Commerce, said lenders are simply running out of money. “We are reliably informed that the cash reserves of the banks are down to €500m. Anybody who thinks they are going to open again on Tuesday is day-dreaming. The cash would not last an hour,” he said. " 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. ---
**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, 8:08pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/175 "2015-07-05T20:08:53Z")
> [@up\_the\_junction](#): > > An unnamed 3rd party source? What’s to deride, it speaks for itself. Unlike your own counter cited source, right? Oh, I must have missed it…do you have a cite that says that Greece isn’t having a capital crisis? Or, well, anything at all except drive by one liners that don’t say anything? [Reuters](http://www.reuters.com/article/2015/07/05/us-eurozone-greece-idUSKBN0P40EO20150705) also seems to agree that there is a cash crunch btw: > [@](#): > > Greek banks, which have been closed all week and rationing withdrawals from cash machines, are expected to run out of money within days unless the European Central Bank provides an emergency lifeline. Finance Minister Yanis Varoufakis is due to meet top Greek bankers later on Sunday and State Minister Nikos Pappas, one of Prime Minister Alexis Tsipras’s closest aides, said it was “absolutely necessary” to restore liquidity to the banking system now that the vote is over. > > ``` > However the European Central Bank, which holds a conference call on Monday morning, may be reluctant to increase emergency lending to Greek banks after voters rejected the spending cuts and economic reforms which creditors consider essential to make Greek public finances viable, central bankers said. > > ``` Certainly it’s all just anti-Greek propaganda, though. Fuck those greedy Germans and all that…yay Greece! ---
**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, 8:16pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/176 "2015-07-05T20:16:08Z")
> [@](#): > > Secondly, for fairly obvious reasons, Germany does benefit significantly from a low Euro. Most of its exports are to none Euro countries (making it’s goods cheaper) while most of its imports are from Euro countries (meaning it doesn’t see any price rises for food, etc). I agree with all that. Exporters benefit from a lower currency and the Euro was overvalued during most of the 2000s. > [@Gary\_Kumquat](#): > > For starters, the PIIGS economies account for 32% of the Eurozone. That is more than enough to affect the trading value of the Euro. Interesting if true. The PIIGS are Portugal, Italy, Ireland, Greece and Spain. They comprise 23% of the EU’s GDP. That’s lower than 32%, but still enough to matter. In Euros: European Union 13,920,541 Italy 1,616,048 Spain 1,058,469 Ireland 185,412 Greece 179,081 Portugal 174,384 That’s 2014 data, which is distorted from the recession. Still, basically the numbers are driven by Spain and Italy: you can ignore the last 3 countries for the purposes of exchange rate determination since as a group they account for 4% of the EU’s GDP. Frankly, I think we have to split the difference in some sense. I had ignored Italy in my analysis. In some ways that’s ok, as their unemployment is way below that of Spain and Greece. But it’s also a lot higher than Germany - something that I missed. Here are the numbers \*\*Unemployment: \*\* Greece: 25% Spain: 23% Italy: 12% Germany: 6.4% Take out Italy, and PIGS are 11.4% of GDP, which isn’t large. But give some sort of partial credit for Italy, and I think that the PIIGS as a group may very well deflate the Euro currency to some extent. It’s plausible. So with those caveats I reverse my blanket dismissal of up\_the\_junction’s claim. ---
**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, 8:31pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/177 "2015-07-05T20:31:15Z")
> [@XT](#): > > No, there isn’t. From what I’ve been reading however, Greece will have little choice unless they are given an injection of cash (i.e. a bailout), since they are having a sever liquidity crisis atm and there isn’t any relief in sight without said injection. Obviously, the Greek government thinks that this ‘no’ vote will give them a stronger hand in negotiating for that liquidity, but if they are wrong then they will almost have to leave the EZ on their own because they will need to rapidly build their own currency just to survive. … > > Hope this works out for them, but doesn’t seem likely to me. 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. ---
**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, 8:36pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/178 "2015-07-05T20:36:03Z")
> [@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. Sucker bet. Even if the Greek banks are open on Tuesday (possible, though I’d expect another holiday), it won’t be normal business. There will be withdrawal limits, just as there were last week. ---
**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, 8:38pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/179 "2015-07-05T20:38:01Z")
> [@Measure\_for\_Measure](#): > > Recall though that the austarians policy prescriptives are bankrupt: under _any_ scenario Greece is in for a couple of rough years. [Exactly](http://ak-hdl.buzzfed.com/static/2015-06/30/12/enhanced/webdr13/enhanced-buzz-wide-28740-1435681599-7.jpg). ---
**Author:** ![Gary\_Kumquat](https://avatars.discourse-cdn.com/v4/letter/g/4491bb/32.png) [@Gary\_Kumquat](https://boards.straightdope.com/u/Gary_Kumquat)\ **Post date:** [July 5, 2015, 8:39pm UTC](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811/180 "2015-07-05T20:39:33Z")
> [@Gary\_Kumquat](#): > > For starters, the PIIGS economies account for 32% of the **Eurozone.** > [@Measure\_for\_Measure](#): > > The PIIGS are Portugal, Italy, Ireland, Greece and Spain. They comprise 23% of the **EU** ’s GDP. That’s lower than 32%, but still enough to matter. The EU is not the Eurozone. [Previous page](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811.md?page=8) [Next page](https://boards.straightdope.com/t/greek-default-seems-to-be-inevitable-whats-the-fallout/723811.md?page=10)