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tomandlu

Can The Eurozone Survive The Greek Debt Crisis?

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Long article - most of it fairly self-evident (at least to long time users of this board).

Can the eurozone survive the Greek debt crisis?

So this is the new plan A: the Greeks borrow another €120bn, the bondholders allow their debt to be rolled over, Papandreou's government introduces further austerity measures and privatisations, rich Greeks start paying their taxes, the Greek economy recovers, and by the time the next huge chunks of debt repayment are due – from mid-2012 – Greece can afford to pay back its lenders and the crisis is over.

Does that sound plausible? It shouldn't. This scenario is somewhere on the spectrum of unlikely to impossible, because, while nobody questions Papandreou's intentions, the Greeks are showing clear signs that they are unwilling to submit to the programme. Protests against the measures began with furious far-left agitations of a sort with which ordinary Greeks are weary, but the protesters now include the Indignati, middle-class Greeks who have had enough austerity already, thanks, and who take a Dario Fo attitude to Greek debt: can't pay, won't pay. The vote on the latest round of austerity measures took place in the middle of a 48-hour general strike.

The Indignati are not stupid, and are well aware of two salient points. First, the "bailouts", as they are always called, are no such thing. Taxpayer-funded capital injections into otherwise bankrupt banks were bailouts. The Greek "bailouts" are loans, pure and simple. The money will have to be repaid, and repaid at ungenerous rates of interest: in this case, 5.2%. These short-sighted and grasping interest rates, motivated by the need to provide political cover for other governments, make an already critical problem significantly worse. The Greeks know they are being lent money just so they can work very hard for lower wages and higher taxes in order to pay it back at great cost. The outstanding Greek debt is mainly owned by French and German banks, which is why the western European governments are especially keen on the "bailout": it's helping to keep their banks solvent. The Indignati do not find that a compelling reason to embrace a decade or so of abject misery. They want the Greek government to default, and the banks to accept losses for loans they shouldn't have made in the first place.

Edit to add - the article is by John Lanchester, who wrote the excellent "Whoops!: Why Everyone Owes Everyone and No One Can Pay"

Edited by tomandlu

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"No one doubts Papandreous intentions" he says.

Well I doubt them.

His intentions being to keep things together long enough for the big western banks to asset strip Greece down to the bones and then get a set of ultra well paid 'advisory' jobs, probably based a very long way from Greece? I think he is sincere in that.

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These sort of questions should have been asked twenty years ago before the whole crackpot scheme got off the ground.

But how then would Germany annexe Greece, Portugal, Ireland, Spain and probably Italy?

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"No one doubts Papandreous intentions" he says.

Well I doubt them.

Doubt away, but his intentions may be good. The trouble with politicians, imho, is that they never realise that, sometimes, admitting that they cannot fix something and acting on that admission, is not just the best but also the only option.

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Doubt away, but his intentions may be good. The trouble with politicians, imho, is that they never realise that, sometimes, admitting that they cannot fix something and acting on that admission, is not just the best but also the only option.

I will doubt them. No one sane and any sort of mathematical ability could possibly come to the conclusion that Greece's debts are payable. In the UK we have a much flouted law against trading whilst insolvent. I think also, that if you borrow money that you know that you cannot repay, other than through more borrowing, then you are actually committing a crime.

Tell me, is Greece now going to borrow money that it knows it cannot repay?

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Tell me, is Greece now going to borrow money that it knows it cannot repay?

Hard to see how it can repay. Consequently, quite a sensible choice. It's the lenders who are being stupid.

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Hard to see how it can repay. Consequently, quite a sensible choice. It's the lenders who are being stupid.

Perhaps not entirely stupid, since money was thrown at the peripheral countries to keep them on side for geopolitical clout. It was probably understood that the EU - the self-styled Superstate - would see the banks alright, via support for those countries.

I think where this falls down is that the banks are still national. In the event of collapse, especially Greece and Spain, who recapitalises the French and German banks? Why should a country like Denmark, which opposes taxpayer bailouts of banks, be involved in any direct or indirect scheme to rescue other countries' banks? Denmark, by the way, is also in favour of re-introducing border controls.

Maybe they'll have to have another referendum on this issue, the kind where you can only vote yes. But it might look a bit too obvious this time.

Edited by copydude

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The contagion is moving up the foodchain toward France & Germany. It's inevitable that they will wobble because of their banks' exposure to the PIIGS.

If there is no fix, it's all about kicking the can down the road. What damage limitation steps can you & I take in the meantime? GBP will not survive the implosion of our biggest trading partner.

BTW we see the case for gold on a daily basis, I'm really looking for alternatives......

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Long article - most of it fairly self-evident (at least to long time users of this board).

SNIP

Germany has to put the broader European interest on the same level as its own national interest, or the euro is toast.

Yep, and I know where my money is :)

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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