Twenty-nine-year-old Thom Feeney has set up a crowdsourcing page asking people to "chip in a few Euro then we can get Greece sorted and hopefully get them back on track soon".Comment: Greek Bailout Fund
The first thing to know about the Greece story is that it's not really about Greece. Not, at least, in the big financial picture, where the country's measly $242 billion economy is only a shade larger than Connecticut's, and where its debt, the equivalent of $360 billion, would be a rounding error of the nearly $18 trillion in U.S. obligations. Why Greece and its likely debt default and possible exit from the euro zone matters is as a symbol—of how far the global community will go towards rescuing Greece from its debts, and ultimately, perhaps, for whether similarly debt-laden weak sisters in the euro zone should simply leave the union, go back to their original currencies, and inflate their way out of trouble.
... Default is the simplest way out of the crisis from a financial standpoint, but the ramifications could be substantial. "If Greece were a company and it had creditors, there would be a default," Krosby said. "But it's not a company, it's a country, and even though as a country that's very small ... the fact of the matter is geopolitically it plays an important role."
... Never mind that the long-term prospects for the state to satisfy its creditors remain dubious, the markets are willing to buy into the extend-and-pretend scenario.
... "A failed outcome in Greece would also have negative implications for the rest of the euro area," Credit Suisse added. "For us, the risk of contagion would be more prevalent through the banking system than through sovereign debt. But it's important to be humble: there may be unanticipated or underappreciated channels of contagion and risk that could prove surprisingly powerful." Consider, then, the ensuing period of deals and nondeals, news of breakdowns and rumors of break-ups, to be more of the financial kabuki theater that has permeated the euro debt crisis.Comment: Per Wiki the estimated 2015 GDP is $ 294 Billion. Image source (snap from article)
Negotiations over how to keep Greece afloat broke down abruptly Monday, demonstrating a wide gulf between Athens and its European creditors and triggering a new, heightened state of uncertainty about the country’s future inside the currency bloc. The collapse in talks among eurozone finance ministers leaves Greece and its lenders racing to reach a new financing deal for the indebted country before its existing bailout plan expires. The ministers called off the negotiating session just a few hours after it began, saying Greece left them little hope of securing an agreement. The ministers, in turn, presented the new left-wing government in Athens with an ultimatum: Agree to an extension of the current €240 billion ($272 billion) bailout by the end of the week or lose the lifeline of rescue loans that have sustained Greece for nearly five years. Greek Prime Minister Alexis Tsipras and his finance minister, Yanis Varoufakis, oppose the terms of the rescue deal from the eurozone and the International Monetary Fund, saying they are hurting its economy and society. “It’s not a bluff, because it’s the only option we have,” Mr. Varoufakis said of his government’s position after the meeting. “It’s plan A, there is no plan B.” If the bailout ends as scheduled on February 28, the Greek government will lose access to the last €7.2 billion slice of its current bailout, potentially leaving it unable to make debt repayments looming in March. That could, in the worst case, trigger a series of events that would force Greece out of the eurozone.Comment: The Eurozone would be better off without Greece. But the West is concerned Greece will align with Putin. But Greece's finances would be a drag on the Russian economy. Image source.
Creating a currency which could be used across such disparate economies was always a difficult task. The idea for a single currency was promoted by Jacques Delors, a former French minister of finance, who held the European Commission presidency from 1985 to 1995.
The aim was to stamp a European identity in the markets, bringing, among other things, price stability, growth and trading benefits. The Delors report of 1989 defined a monetary union objective as being, in part, a "complete liberalization of capital movements."
...
The Greek economy has been in trouble since the country joined the euro, due to a mix of overspending and inability to raise enough revenue. In 2004, it admitted that the country's financial position was worse than reported and had breached the eurozone entry requirements.
By 2008 the government had narrowly passed a belt-tightening budget, designed to trim its massive national debt burden, triggering massive protests. In 2009, Greece admitted its deficit would be more than 12% of gross domestic product -- far higher than previous estimates and more than four times the requirements of entry into the eurozone.
The country was hit with ratings downgrades, pushing its sovereign bonds into so-called "junk" territory, and the damage continued to spiral. Despite the introduction of brutal austerity measures -- which have prompted waves of violent protests -- Greece has been unable to balance its books. There is a risk it could be forced out of the eurozone.
ING to cut 2,700 jobs, takes Greek bond hit
Excerpt:
ING took a 467 million-euro pre-tax writedown on Greek government bonds in its third-quarter results and said it had now written down all of its bonds to market value and reduced exposure to "peripheral" euro zone bonds by more than 5 billion euros.
"Does Greece want to remain part of the euro zone or not," German Chancellor Angela Merkel said. "That is the question the Greek people must now answer."
French President Nicolas Sarkozy said the Greeks would get no more euro-zone rescue aid—"no French taxpayer money, no German taxpayer money"—until the question is answered. Without aid, Greece would be bankrupt within weeks.
Immediately after the referendum, Greece will still be a member of the EU: their implicit decision to default on loans from the EU ought to carry the automatic sanction that there will be no further disbursements of EU structural funds, agricultural subsidies, EIB loans and the like. Planned capital injections of this type currently total about 7% of Greek GDP.
Moreover, it would be quite unlikely that the private sector would be willing to lend to any Greek entities -- unless secured by cast-iron collateral (and contracts) outside Greece.
The current Greek external deficit would then have to move into balance as there would be no financing available for excess imports. Indeed, imports would drop by around a quarter -- and swiftly. That would be an exceptionally painful process.
Greece cannot leave the eurozone under the terms of the existing treaty. In principle, that treaty could be changed if all other countries agreed but that would be a lengthy process and as the risk became widely known every sensible Greek depositor would withdraw euro deposits from the Greek banks and move them abroad.
Such a bank run would be the liquidity crisis that triggered the rapid collapse of the entire Greek banking system. Again, dramatically painful consequences for the economy would ensue.
If opinion polls were still pointing to rejection as the day approached, any other eurozone members at risk would see these dire consequences unfolding, encouraging them to take all necessary steps to avoid a similar fate.
....
The unfolding Greek tragedy will only encourage such states to put their probity beyond doubt, and their voters would have a very clear understanding of why their leaders were asking for such efforts.
Bottom line: the eurozone "political union" that effectively emerged completely at the October 26 summit would see a powerful advantage in standing closely behind such members, and the eurozone in aggregate would be transformed fiscally -- especially in comparison with say the US and the UK.
For the unfortunate Greeks, most of the bad news would develop in advance of the vote if the markets expected a No.
But such ghastly developments might encourage voters to say Yes and accept the offers of help.
However, it could just be a bit too late to avert a genuine Greek tragedy.
European leaders produced a rescue plan last week aimed at bailing out Greece, heading off possible defaults by other cash-strapped governments such as those of Italy and Spain, and shoring up shaky European banks that had bought risky government bonds. The deal had sent global markets soaring on hopes that it would resolve the chief threat to the world’s economic recovery.
But the euphoria vanished with Papandreou’s announcement that he would ask his populace to vote on the plan, which has been widely criticized by Greeks. An earlier Greek bailout, which required the government to enact sharp cuts in spending and other austerity measures, prompted violent protests in the streets of Athens.
Papandreou’s cabinet, after a marathon meeting Tuesday night, concluded with his ministers’ unanimous support for the referendum. It will be held “as soon as possible,” government spokesman Ilias Mossialos said Wednesday.
I've heard of "beware of Greeks bearing gifts?", but how about "beware of Greeks who won't even take the gifts?"
Headline in a German tabloid this morning:
"You don't need our money? Fine, we don't need your problems."
Autolycus obtained most of the same skills that his supposed father Hermes possesses, such as the art of theft, trickery ... He was given the gift that his thievery could not be caught by anyone
He put his skills to the test when he stole the helmet of the great warrior and his grandson, Odysseus, "he had broken into the stout-built house of Amyntor, son of Ormenus; and he gave it to Amphidamas of Cythera to take to Scandeia, and Amphidamas gave it to Molus as a guest-gift, but he gave it to his own son Meriones to wear; and now, being set thereon, it covered the head of Odysseus" (Homer 10.254 I). Autolycus, master of thievery, was also well known for stealing Sisyphus' herd right from underneath him. Sisyphus, who was commonly known for being a crafty king that killed guests, seduced his niece and stole his brothers' throne (Hyginus 50-99) and was banished to the throes of Tartarus by the gods.
Prime Minister George Papandreou announced Monday night that his Socialist government would hold a rare national referendum on a new debt agreement for Greece that was hammered out with the country’s foreign creditors last week, raising questions about Greece’s ability to follow through on its part of the hard-won deal to stabilize the euro.
The surprise announcement, made to lawmakers in Athens, again chained the health of the European Union to Greek domestic politics. Standard & Poor’s 500-stock index fell almost 2.5 percent and the Dow Jones industrials fell about 2.3 percent. European markets, which closed before the announcement, were also down sharply on Monday.
Mr. Papandreou said that the decision on whether to adopt the deal, which includes fresh financial assistance for the country but also imposes unpopular austerity measures, belonged to the Greek people. “Let us allow the people to have the last word, let them decide on the country’s fate,” he said, describing the vote ahead as “an act of patriotism.”
The move effectively pushes responsibility for painful economic choices from the Socialist party onto the public.
