Here’s the deal:
The creditors grant Greece an indefinite grace period for all the debts that have accumulated so far. Greece may pay back as much or as little it wants, whenever it wants. If this means never, so be it.
Greece agrees to leave the eurozone voluntarily and signs a binding treaty in which the legal details are laid out.
I do not see how this deal should be attractive to Greece. If Greece leaves the EZ, it is likely that they will default on at least some of their debt. Thus an indefinite grace period for repaying it would not be very tempting.
Greece can do both steps unilaterally. Why do you need a “binding treaty” to leave Eurozone? Of course, it will destroy its credit for the foreseeable future, but then that’s unavoidable.
And this is coming from someone whose most persistent contribution to this thread has been “Fuck the Germans”. Really?
Because currently, there is no legal process either for expelling a country from the eurozone, nor for leaving voluntarily. There is speculation that Greece wants to exploit this and make life as miserable as possible for the other countries.
You don’t need a legal process to start printing your own currency and using it when there is no way you can not possibly continue with Euro.
Speculation without much substance IMHO. I do not think that the Greek government is harbouring any such devious longterm plans. In fact it seems to me that at this point they are really just improvising.
You have to look at where they are coming from. They got elected on the promise that they would nix most of the austerity measures their predecessors had (grudgingly) agreed to and still get the EZ partners to extend their credit line. It didn’t happen.
By the end of June the negotiations were at a point where Tsipras could either have agreed to terms that he had promised not to agree to or leave the table empty handed - no deal, no bailout package, grexit. Another thing he had promised his voters wouldn’t happen.
He sidestepped this by coming up with the referendum, which really did not do more than buy him another week. (A week with closed banks though.) Now that week is over. Tsipras has won the referendum, but that has not brought him any closer to a deal with the EZ.
What is he going to do now? My guess is he will be looking for someone to keep his banks solvent for a little while longer. The problem is, that he seems to have little to offer that someone in return.
I don’t really understand the “keep his banks solvent for a little while longer” thing. So maybe he can extend this torture of “no more than $60 a day” for a week longer. Then what?
I do not know. And I suppose neither does he. As I said: At this point they seem to be just improvising.
Have you seen official documents of the European Union, dealing with almost every possible, arcane subject under the sun? A change of currencies is a legal nightmare even under the best of circumstances.
I admit ignorance on this topic and have had trouble finding good articles that seem fair. Is there an over/under on Greece leaving the Euro and if they do, what the most likely outcomes are in the Eurozone and the rest of the world? I’ve read a range from no big deal, to global calamity.
That is really the several hundred billion dollar question at this point. And the answer is: Noone knows for sure.
The “global calamity” scenario plays out like this: Greece exits the EZ and declares that it can’t and won’t repay (some/most/all of) its debt. Some of the countries that have lent to Greece and are not too stable themselves have to write off that debt but cannot afford to, so they go bust as well. And so forth - chain reaction.
Of course that scenario has been on the table for a while, and the EZ and other countries have taken steps to make such a chain reaction unlikely. From what I’m reading most experts seem to believe they have succeeded in that. But of course there is only one way to be sure.
As for Greece: Leaving the Euro will give them control over their own fiscal policy. They can produce money and decide what to spend it on. That of course comes at a price. The new currency would suffer rapid inflation - which would help exports and might make Geece a more attractive tourist destination. But the Greeks would suffer a massive price hike on all imported goods, and in Greece many goods used in everyday life are imported. The result could be a situation that hits the average Geek much harder than any austerity measure did.
Is it an accurate simplification to say that Greek debt is like the bad mortgages of the 2008 housing crisis, and the rest of the Eurozone is like Lehman and Washington Mutual?
Except in this case, the reset of the Eurozone has tried to take steps to limit its exposure, so maybe the Greek collapse will only destroy them?
If Greece leaves the Euro, will it be hyperinflation and wheelbarrows full of cash in Greece? that would make it a great place to visit, if the rule of law still prevailed.
If you’re referring to the fallout, probably not, since everyone has had ample time to see this coming and limit exposure. Plus, unlike the real estate boom, whole nations have not built their prosperity on loaning Greece money. Even if banks had limited their exposure to the worst financial instruments, the fall in housing prices would have been extremely damaging, since real estate is always heavily leveraged even when all mortgages are non-speculative.
If you’re referring to the moral aspect, no comparison there either. Greece is a sovereign nation that knowingly borrowed money it knew it couldn’t pay back. Investors in Greek bonds knew the bonds were risky. There are no perps and no victims here. Unless a more responsible country’s taxpayers have to foot the bill, which is what Greece and its investors are probably hoping for.
Well - it is a simplification. Whether you vie it as an accurate one somewhat depends on your political stance. The European left would probably follow you on that one. Personally I would beg to differ.
I doubt that we will see an inflation to the extent that you are describing. And even so: the beneficial effects for foreign tourists would be limited, because many of the goods they consume are imported. Still, overall tourists would probably feel a price cut.
To an extent, yes. In both cases cheap credit was rather too easy to come by.
At the end of the day, yes. But you have to look at who gave that credit and when it was given. The countries that are now viewed as potentially endangered by the chain reaction effect are mostly mediterranean countries like Greece. For them lending to Greece was just doing business with a neighbour. They must have known that Greece’s financial foundation was not too solid - but neither was their own, and they are still paying their debts. Could and should they really have known that Greece was much more unstable than they were themselves? Not so sure.
The Greek Govt were fiddling their own financial books during the pre crisis era. So they are to blame to some extent. They also overborrowed and overspent. Perhaps the lenders should have taken more precautions over who they lent to. However, at the time the Euro was viewed as permanent. Greece was benefitting from the widespread belief in this permanence of the Euro. The rate at which Greece was able to borrow was therefore artificially low.
I am a long term opponent of the Euro. To me this crisis is evidence that politics and economics shouldn’t mix. Both sides must take their own fair share of blame. Both sides deserve each other imo.
Any idea what happened to the Telegraph’s Tuesday Armageddon?
“Prospects of new Greek rescue rise at euro zone summit”