GREXIT: "Greece’s exit from the eurozone – is the most likely outcome"

Markets are beginning to write off Greece

Excerpt:

Through all the bluster, deadlines and ultimatums, global investors have figured bankrupt Greece and its tight-fisted creditors in Europe would work out a deal. A sloppy deal, but at least a way to avoid the worst-case scenario. But now they’re starting to plan for the worst-case scenario — a Greek exit from the eurozone and a return to its former currency, the drachma. Citi, for instance, said in a July 8 research note, “We are changing our view and now believe that Grexit – Greece’s exit from the eurozone – is the most likely outcome.”

Greeks Under the Gun to Produce a Reform Plan to Keep Euro

Excerpt:

The continent’s most indebted country has never been closer to leaving the currency after more than six European leaders made clear this is Greece’s last chance. Failure to get a deal could result in the European Central Bank cutting funds to Greek banks, forcing the country to issue IOUs or some other form of exchange to prevent economic collapse. “Greece has to demonstrate a willingness to follow through and table some reforms extremely quickly,” Mujtaba Rahman, an analyst at Eurasia Group, said in a note to clients. Chancellor Angela Merkel, who as head of Europe’s biggest economy carries the most sway, is willing to let Greece go if Germany doesn’t consider its plans credible, according to two government officials familiar with her strategy who asked not to be identified discussing private deliberations.

Comment: Image source

The Greek Referendum

Greek Debt Crisis: Europe, Athens Race to Sway Greeks in Bailout Referendum

Excerpt:

Greeks now face an intense referendum campaign against the backdrop of an economy going into deep freeze. Over the coming days, the debate about the history-making consequences of voting “yes” or “no” is likely to polarize their crisis-bruised society. In the balance are the future of the nation and Europe’s 16-year experiment with a common currency.

Comment: The choice is less real money (austerity with the Euro) or an abundance of fake money (the Greek drachma). Image capture from The Financial Times

Kicking the Can: “If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.”

Greece: without compromise a tragedy awaits
Excerpt:

As noted more fully here the first instinct is for creditors and debtors alike to bury their heads in the sand and talk rather than act…effectively to kick the debt can down the road as they did over much of the last few years helped more recently by rate cuts and the introduction of QE.

Comment:Image is snapped from the article.

Germany awaits GREXIT

Greece Orders Banks Closed, Imposes Capital Controls to Stem Deposit Flight

Excerpt:

In Germany, which is Greece’s biggest creditor, Sunday newspapers led with headlines such as “Game Over?” and the word “Exit” in ancient Greek. Leading politicians who had called for leniency with Athens in the past voiced fury, and many conservatives said it was high time for a Greek exit from the euro to be prepared.

Comment: Image capture from German news sites.

Greece: staring down the barrel of a gun

Checkmate: Is this Greece’s final, final deadline?
Excerpt:

After nearly six years of bailouts and brinkmanship, Greece and its creditors are staring down the barrel of a gun Friday as they face a weekend deadline to seal a reforms-for-rescue deal -- or a default by Greece. In what analysts and markets see as the final deadline, Greece has to reach a deal with creditors Saturday or it will fail to make a crucial debt payment due to the International Monetary Fund (IMF), next week on Tuesday.

Comment: Image source.  Advice ... let 'em go ....

Greece debt crisis: Do I care?

Greece debt crisis: Why should I care?

Greece makes up just 2% of the eurozone economy, so stay or go, why care? Here are five reasons.:

1. 'Grexit' could be disastrous for Greece
2. Whatever the outcome, it will have a knock-on effect in other countries
3. The US is worried
4. If Greece goes, others could follow
5. The global economy won't like it

Comment: Image source. My take:

• First of all it looks like some sort of deal may be struck this week. I'm still skeptical although the stock market is responding today as if the deal is solid. I personally expect more broken promises (Greece) and more stuggles. 
• About disastrous for Greece? Yup! If the Greek populi is so unconcerned well then it is there problem.
• About the US being worried. The context there is about Greece running into the arms of Putin's Bear. Well that would be stupid! 
• The slo-mo train-wreck interests me because it, in my mind, foreshadows the US debt crisis that I may still be alive to witness. But I am concerned for my children and the country I love. There are lessons to be learned from this mess!

Greece's Circular Replayment Situation

Greek debt: Fears grow over Greek banks' health
Excerpt:

... the European Commission, the IMF and the ECB are unwilling to unlock bailout funds until Greece agrees to reforms. They want Greece to implement a series of economic changes in areas such as pensions, VAT and on the budget surplus before releasing €7.2bn of funds, which have been delayed since February.

Comment: Image capture from article. An analogy to this at a familial level would be parent to child: "your allowance will stop if you don't clean up your room"

The Greek Contagion - Numbers and Charts

Greece’s Debt Due: What Greece Owes When

Greece says deal on debt crisis unlikely at Thursday talks
Excerpt:

The Bank of Greece also warned that the country's economic slowdown would accelerate without a deal. "Failure to reach an agreement would... mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country's exit from the euro area and, most likely, from the European Union," it said in a report. The bank added that about €30bn was withdrawn from Greek bank deposits between October and April.

Comments: The first link, from the WSJ, has the numbers and charts.  Image source. Observations:

• This has been a slow moving train wreck for a number of years
• Likely to come to a head
• One wonders how much more can be squeezed out of Greece.
• My view is that GREXIT should and will happen - for the sake of the integrity of the EURO.
• The geo-political risk is that Greece will run into the arms of Putin. And that would have impact to NATO.

Impasse: "Athens insists it will never give in to demands for more pension and wage cuts"

Greece and creditors fail in 'last attempt' to reach deal

Excerpt:

European Union officials blamed the collapse on Athens, saying it had failed to offer anything new to secure the funding it needs to repay 1.6 billion euros ($1.8 billion) to the International Monetary Fund by the end of this month. Greece retorted it was still ready to talk, but that EU and IMF officials had said they were not authorized to negotiate further. Athens insists it will never give in to demands for more pension and wage cuts. "This is very disappointing and sad. It was a last attempt to bridge our differences but the gap is too large. One can discuss a gap, but this is an ocean," said a person who was close to the talks. Both sides acknowledged the talks had lasted less than an hour, although even here accounts differed: Greece put the length at 45 minutes, EU officials at half an hour. Following what it called this "last attempt" at a solution, the EU's executive Commission said euro zone finance ministers would now tackle the issue when they meet on Thursday. With no technical deal apparently possible, the ministers are likely to have to make difficult political decisions on Greece's membership of the currency bloc. Failure to keep Greece in the euro, after years of arduous negotiations and two emergency bailouts totaling 240 billion euros, would send it lurching into the unknown and mark a historic blow to the EU's most ambitious project.

Comment: Getting interesting.

Greece: A lesson in socialist failure

Greece has become an object lesson in how not to run an economy
Excerpt:

The first Greek problem is that a huge percentage of its able-bodied population is not working and simply collecting state pensions. It goes without saying that Greece’s economy is in recession, and its official unemployment rate is 26.6%, something the U.S., for example, hasn’t seen since the Great Depression. But fully four fifths of Greece’s budget goes to pensions and state wages, and 10 percent of the nation’s entire economic output comprises pensions alone.

... The second problem is that Greek taxes are sky-high, killing incentives for hard work, enterprise, and industry. It seems likely that so few people are bothering to work because so much of their income is sacrificed to other people’s pensions and government wages. The IMF’s Rice pointed out that "[t]he policy of increasing already-high rates on a low tax base again is not sustainable. It is critical to significantly broaden the tax base." Rice did not point out that the tax base is broadened only by more people working in the private sector, which itself can be accomplished only by lowering the tax rates.

Comment: Image source and license information. See also: Greece struggles to address its tax evasion problem

The new government of Greece, led by Alexis Tsipras, has promised to tackle tax evasion. It hopes this strategy will yield €3bn ($3.4bn) in the coming months in order to cover part of the cost of its €12bn Thessaloniki anti-austerity programme. This would entail various measures – a gradual increase in the minimum wage to reach €750, an extra month’s income for pensioners receiving less than €700 a month, and various welfare benefits – to help the most vulnerable members of the community. “If this government thinks it can change the system in a few weeks it is underestimating how complicated it is to collect tax in Greece,” says Haris Theoharis, narrowly elected to parliament for the centrist To Potami party. Between January 2013 and June 2014 he was secretary general for public revenue, a job imposed on the then conservative New Democracy government by the country’s creditors, increasingly irritated by slow progress against fraud and tax dodging. “In Greece more than two-thirds of the population – private- and public-sector employees – pay tax in the normal way, because it is deducted at source,” Theoharis explains. “The problem is that it’s still too easy for contractors, people in the professions and some big companies not to declare all or part of their earnings.” He claims the state misses out on between €10bn and €20bn in revenue. Direct and indirect taxation should bring in an average of €50bn a year.

The Greek "Zombie" State

Greece, a Financial Zombie State

Excerpt:

Greece and the other countries in the eurozone are once again at an impasse days ahead of a crucial deadline. If the two sides do not reach an agreement on how to extend a 240 billion euro ($270 billion) loan program beyond June 30, Greece will most likely default on its debts and would probably be forced to abandon the euro. ... Whether Greece will have to go on in this zombie financial condition will also depend on the International Monetary Fund and the European Central Bank, both of which have lent money to Greece. I.M.F. officials have been privately pressing the eurozone for debt relief for Greece, but the fund’s managing director, Christine Lagarde, should do more to convince European leaders that the country cannot succeed unless there are major changes to the loan program. The president of the E.C.B., Mario Draghi, recently said “growth with social fairness and fiscal sustainability” had to be a part of any deal between the eurozone and Greece. More than five years have passed since European officials reached the first loan agreement with Greece. Yet instead of moving toward recovery, the country has been trapped in an economic calamity with no end in sight.

Comment: Image source  Night of the Living Dead. Instead of brains, Greece wants bailouts. Some nice Zombie sound effects

Tsipras’s brinkmanship

EU Prepares for Worst as Greece Drives Finances to Brink

Excerpt:

European officials are preparing for the worst as Prime Minister Alexis Tsipras’s brinkmanship pushes Greece’s finances to the limit. Chancellor Angela Merkel urged Tsipras to accept the framework for financial aid as the German public turns against supporting Greece and euro-area officials demanded a proposal for stabilizing the country’s debt by the end of Friday. The International Monetary Fund team left Brussels earlier this week, despairing of Tsipras’s tactics. In response, Greece ruled out cutting pensions and demanded a debt restructuring. Bank stocks plunged. “People are really fed up with this,” UniCredit SpA Chief Global Economist Erik Nielsen said in a television interview. “They’ve never seen anything so completely ridiculous, frankly speaking, from a debtor country.”

Comment: To use a Poker analogy, Alexis Tsipras has a "handful of nothing"

Kρίση σύλλογος

Greece Is the Crisis Club’s Odd Man Out

Excerpt:

Spain, Greece, Portugal and Ireland all entered the crisis with huge current account deficits—the balance on all exports, imports and income between a country and its partners. Such deficits are typically corrected via currency devaluation, which boosts exports and curbs imports. But membership in the euro makes devaluation impossible. Instead, prices and wages must decline, a painful process called “internal devaluation.”

Comment: Kρίση σύλλογος = Crisis Club. Image source

Greece: Timeline of Debt Crisis

Greece crisis live: borrowing costs soar as Athens looks to Moscow - Greece will have to pay €1.6bn to the IMF and €1.5bn in pensions and wages by the end of the month

Comments:

• Screen shot from article. Best to view in the article itself
• Lesson: Delaying addressing debt magnifies the crisis downstream
• Chinese proverb: Question: "When is the best time to plant a tree?" Answer "20 years ago!"
• Same goes for debt. Whether it is personal debt, corporate debt or government debt. 
• I personally think that GREXIT will happen, that it will be better for the EURO. A generation of Greeks will suffer from mistakes made today and a generation ago. 

Updated: Greece would suffer if it left eurozone. But would Europe?

Economist Holger Schmieding at Berenberg Bank in London predicts a period of "disorientation" while investors figure out what the impact will be. The first word of an impending departure would likely roil markets, especially in Europe. Stocks and the euro might fall. And borrowing costs for other eurozone governments with shaky public finances, such as Italy and Portugal, might rise, at least temporarily. Yet Schmieding foresees no serious long-term damage and dismisses talk of a comparison to Lehman's collapse. The risk for Europe as a whole, he says, "is very, very small — virtually zero."

Greece's "Chicken Run"

The James Dean Movie That Explains the Greek Debt Negotiations

Excerpt:

The negotiations between Greece and its creditors are a classic game of chicken, a rather more complex version of the one in “Rebel Without a Cause.” Jim Stark, James Dean’s character in that film, is challenged to a “Chickie Run,” in which he and his rival, Buzz, drive stolen cars toward a cliff, with the loser being the young man who jumps to safety first. What makes a game of chicken scary is that each competitor needs to risk his life to get the best outcome. The safest thing for the rivals to have done would have been to jump out of their cars to safety immediately (or perhaps never get in them at all), but that would mean conceding total victory to their opponent. Similarly, the Greek government is most likely to get agreeable terms the closer a Greek exit from the eurozone, with its attendant unpredictable fallout, appears. Part of what has been happening the last several weeks is that everyone is trying to assess just how bad that outcome would be. If their cars go over the cliff, does it mean certain death or mere injury? If the latter, both parties are likely to hold out longer, and the risk of going over the cliff thus would become higher.

Comment: Rebel is one of my favorite films!

Greece channels Wimpy

Greece’s Loan-Agreement Bluff
Excerpt:

On Tuesday night, when Greek officials began briefing that they would seek an extension to the country’s rescue deal from the rest or the eurozone, they insisted journalists understand a clear distinction: “The request is going to ask [for] the extension of the loan agreement and not the bailout,” one of them said. The difference, the officials explained, was that extending the loan agreement would give Greece access to its last installment from the eurozone’s bailout fund, the European Financial Stability Facility. But it wouldn’t mean, the officials stressed, that the government actually had to accept all the “toxic” austerity measures listed in the Memorandum of Understanding (the legal name of the document that has ruled Greek policymaking for almost five years). This insistence on making that distinction gave some journalists pause. Was the government of Prime Minister Alexis Tsipras asking for money without any conditions, even though it had been told over and over again that that was a no-go? Or was this yet another euphemism, the proverbial old wine in a new bottle, similar to referring to the “troika” of the European Commission, the European Central Bank and the International Monetary Fund simply as “the institutions”?

Comment: Image source. More on the Wimpy character.

Coming - GREXIT (Greek existing the Eurozone)

Greece rejects extension of bailout under terms offered by eurozone finance ministers

Excerpt:

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.
This article is 5 years old but probably about accurate: Greece's economy is same size as Dallas-Fort Worth's