Greece Watch...

[Little John]

Some people are going to make a stock-market killing on the back of the Greek election results. The market's bouncing up and down worse than a whore's knickers at the moment. That will only intensify leading up to the election results. My guess is that the market will initially bomb or shoot through the roof (if only temporarily) immediately following announcement of the results (unless the outcome is easily determinable via pre-election polls, in which case I guess it will be priced in beforehand). Depending which way one bets, it'll be lose one's shirt or make a packet time.

[UndercoverElephant]

To be fair to the Germans, I think it is reasonable of them to point out to the Greeks that if they don't accept the EU bailout terms, then they face national bankruptcy, economic isolation and massive poverty. These things are simply the case and any Greek who thinks it is possible to remain in the Euro and, at the same time, get a bailout on their own terms and not on terms that are in the interests of the EU zone as a whole are deluded.

I'm not sure this is true. It looks to me like Greece is in a position akin to that of a suicide bomber. Yes, Greece faces a catastrophe, but everybody also knows that if this ends with a messy Greek default then the consequences for the rest of the eurozone will also be catastrophic.

[Little John]

To be fair to the Germans, I think it is reasonable of them to point out to the Greeks that if they don't accept the EU bailout terms, then they face national bankruptcy, economic isolation and massive poverty. These things are simply the case and any Greek who thinks it is possible to remain in the Euro and, at the same time, get a bailout on their own terms and not on terms that are in the interests of the EU zone as a whole are deluded.

I'm not sure this is true. It looks to me like Greece is in a position akin to that of a suicide bomber. Yes, Greece faces a catastrophe, but everybody also knows that if this ends with a messy Greek default then the consequences for the rest of the eurozone will also be catastrophic.

Oh yes, if Greece defaults then the rest of Europe, including German banks who lent to much to Greece, will go down in flames as well. That's life. The Greeks taxpayers are no more responsible for propping up German banks than the German taxpayers are for propping up Greek ones.

Don't misunderstand me. I am not advocating an "every man for himself" strategy for all of Europe. What I am saying, though, is that when push comes to shove, you look after your own first and then your neighbor second. But, you do look after your neighbor if you can. For me, this comes down to the basics; food shelter and medicine. There is not and should not be any moral or legal imperative to prop up your neighbour's corrupt lifestyle (in this case, their corrupt banking systems). And the same is true for them.

[Aurora]

The Independent - 15/06/12

Greece confronts its future – and recoils in fear

Article continues ...

As Greeks prepare to vote in the most important election in their history in two days' time, people in Athens fear they are facing a future full of uncertainty, poverty and violence. Well-publicised crimes help create an atmosphere of violence as the wealthy and vulnerable immigrants alike come under attack. In one incident this week two robbers armed with a gun and a knife took over the house of a shipping tycoon in the well-guarded suburb of Kifisia in north Athens. Evading all security measures, such as high walls, guards and CCTV cameras, they tied up his staff and stole a fortune in cash and jewels before escaping.

On the other side of the capital near the port of Piraeus there was a different and more political crime. A house in which four Egyptian fishermen were living was broken into by 10 men who were evidently inspired by anti-immigrant hatred. As the occupants screamed for help from the windows, the attackers almost beat to death one of the Egyptians who owns a fish shop and has lived in Greece for 20 years.

"Violence is escalating tremendously," says Liana Kanelli, a Communist MP who can speak with some authority since she has been punched on TV by the leader of the Golden Dawn neo-Nazi movement. She claims that half of the police special forces detachment had voted for the Golden Dawn, going by analysis of the polling stations where they were located.

Golden Dawn may not be large, though it did well in the elections on 5 May. But the extremism of its actions and words speaks to a rage felt by many Greeks over the disasters that have hit them. Others may rudely berate a corrupt political elite, but the Golden Dawn slogan is "Burn the Brothel called Parliament". It may even win support by claiming that its first action on forming a government would be to throw immigrant pensioners out of old age homes and immigrant children out of kindergartens to make way for Greeks.

This article can only hint at the levels of fear and despair now being exerienced by the Greek people. It's all very sad.

[Totally_Baffled]

Bear with me.

If Greece effectively defaults by leaving the eurozone - then that lets say that leaves a gazillion euro gap in a bunch of French/German etc banks.

When this happens - the ECB prints a gazillion euros and replaces in said banks.

This isnt inflationary as no new money has been created, it has just replaced money that has disappeared via a default?

Defaults are deflationary, so you reinflate with the printing presses?

Not saying its right by the way - just asking!

[SleeperService]

If you can isolate the Eurozone then that will work, at least for a while, after all it's exactly what the BoE has been doing.

But the reprinted Euros can then cause inflation and the Euro WILL move against other currencies. The markets have already built in the defaulted Greek Euros for the most part although the stock market will still twitch.

The other inflationary pressure is the newly printed Greek currency. All that purchasing ability will, in all probability, lead to inflation, then a revaluation of the New Drachma. The ND will then steadily decline against the Euro, more tourists will visit, the forgein currency will allow more borrowing and it'll all start again.

[Totally_Baffled]

Reference the vote in Greece, I must admit I am a bit confused between the parties in Greece and who is likely to form a coalition with who etc.

There are PRo and anti bailout parties, but most want to still stay in the Euro.

So if the eventual winner(or winners in a coalition), are anti bail out but pro euro/EU, are they in or out? loll

[UndercoverElephant]

Bear with me.

If Greece effectively defaults by leaving the eurozone - then that lets say that leaves a gazillion euro gap in a bunch of French/German etc banks.

When this happens - the ECB prints a gazillion euros and replaces in said banks.

This isnt inflationary as no new money has been created, it has just replaced money that has disappeared via a default?

Defaults are deflationary, so you reinflate with the printing presses?

Not saying its right by the way - just asking!

If Greece leaves the eurozone then the ECB has got much bigger problems than a Greece-sized hole in european bank balance sheets. The real problem is Spain. If Greece were either to fully default and/or leave the eurozone then the european powers that be will immediately face the question "what is going to happen to Spain?" They then have the Greek problem all over again, except this time several times bigger, and this time instead of Spain being a looming threat in the background, it will be with the threat of Italy and France following whatever path they decide to send Spain down.

The real relevance of Greece has always been the precedent. It is the test case.

[UndercoverElephant]

Reference the vote in Greece, I must admit I am a bit confused between the parties in Greece and who is likely to form a coalition with who etc.

There are PRo and anti bailout parties, but most want to still stay in the Euro.

So if the eventual winner(or winners in a coalition), are anti bail out but pro euro/EU, are they in or out? loll

IIRC....

All the Greek parties, without exception, want to stay in the euro. Nobody will join a coalition with the far right golden dawn, and the communist party is unlikely to join a coalition with anybody at all. So any coalition is likely to be composed of Syriza, New Democracy and/or Pasok, plus various smaller parties.

It probably doesn't matter who wins, because whoever has to take over the running of Greece will have to try to renegotiate the terms of the "bailout." If they do not do so, Greece will be ungovernable, and rightly so given what has just happened in Spain (an austerity-free chunk of money.) So your "if" isn't much of an if. I think we are guaranteed that the next Greek government will be anti the current agreement and pro euro/EU. So are they in or out? They will be in. They are unlikely to volunteer to leave the euro and they certainly won't want to leave the EU. But they will refuse to abide by the terms of the current agreement and that will leave the Germans/ECB/EU with the following choice:

(A) Allow Greece to fester as a cash economy, where it can only pay out what it takes in. Greece defaults on its sovereign debt. Greek banking sector collapses. But Greece remains officially within the eurozone, as the crisis reels out of control and the fate of Spain becomes the main issue.

(B) Renegotiate the terms of Greek bailout/austerity package so it is much easier on the Greeks (i.e. do exactly what Syriza are demanding and that everybody else is saying won't happen.)

(C) Kick Greece out of the EU completely, which would mean it can no longer officially claim to be in the eurozone.

These are three very different outcomes from a Greek perspective, but they all lead straight to the question "So can Spain avoid the same fate?", to which the answer will be "no."

[Little John]

Bear with me.

If Greece effectively defaults by leaving the eurozone - then that lets say that leaves a gazillion euro gap in a bunch of French/German etc banks.

When this happens - the ECB prints a gazillion euros and replaces in said banks.

This isnt inflationary as no new money has been created, it has just replaced money that has disappeared via a default?

Defaults are deflationary, so you reinflate with the printing presses?

Not saying its right by the way - just asking!

I don't think that's right.

If demand in the economy falls, then the money supply should fall in step with it. Otherwise you end up with situation where there is more money than is economically needed. This is inflationary, relatively speaking, all by itself. Thus, if an economy's monetary system is based almost entirely on credit (as ours is), then the credit supply should fall in line with a contracting economy. If, instead, as is happening now, our governments print the contracted credit supply back into existence in the absence of a growing economy to soak it all up, the net effect with be inflationary driven price rises.

In short, merely replacing credit-based money that has been extinguished via default is inflationary in the context of a contracting real economy which has no use/demand for it. Which is, of course, precisely when default occurs

[Little John]

Reference the vote in Greece, I must admit I am a bit confused between the parties in Greece and who is likely to form a coalition with who etc.

There are PRo and anti bailout parties, but most want to still stay in the Euro.

So if the eventual winner(or winners in a coalition), are anti bail out but pro euro/EU, are they in or out? loll

IIRC....

All the Greek parties, without exception, want to stay in the euro. Nobody will join a coalition with the far right golden dawn, and the communist party is unlikely to join a coalition with anybody at all. So any coalition is likely to be composed of Syriza, New Democracy and/or Pasok, plus various smaller parties.

It probably doesn't matter who wins, because whoever has to take over the running of Greece will have to try to renegotiate the terms of the "bailout." If they do not do so, Greece will be ungovernable, and rightly so given what has just happened in Spain (an austerity-free chunk of money.) So your "if" isn't much of an if. I think we are guaranteed that the next Greek government will be anti the current agreement and pro euro/EU. So are they in or out? They will be in. They are unlikely to volunteer to leave the euro and they certainly won't want to leave the EU. But they will refuse to abide by the terms of the current agreement and that will leave the Germans/ECB/EU with the following choice:

(A) Allow Greece to fester as a cash economy, where it can only pay out what it takes in. Greece defaults on its sovereign debt. Greek banking sector collapses. But Greece remains officially within the eurozone, as the crisis reels out of control and the fate of Spain becomes the main issue.

(B) Renegotiate the terms of Greek bailout/austerity package so it is much easier on the Greeks (i.e. do exactly what Syriza are demanding and that everybody else is saying won't happen.)

(C) Kick Greece out of the EU completely, which would mean it can no longer officially claim to be in the eurozone.

These are three very different outcomes from a Greek perspective, but they all lead straight to the question "So can Spain avoid the same fate?", to which the answer will be "no."

I suspect an attempt will be made to cobble a fudge together along the lines of A and B. However, I think it will fail and we will eventually end up getting C anyway,

[Totally_Baffled]

UE

Where do you think the likely outcome will be on Monday/Tuesday - do you think there will be a repeat of the last election where there will be a few days/ or even weeks of trying to form a coalition government?

How long do you think before we will know for sure if they stay in the Euro, or get ejected?

Could there be a third election?>

[UndercoverElephant]

UE

Where do you think the likely outcome will be on Monday/Tuesday - do you think there will be a repeat of the last election where there will be a few days/ or even weeks of trying to form a coalition government?

How long do you think before we will know for sure if they stay in the Euro, or get ejected?

Could there be a third election?>

I think a third election is highly unlikely, simply because everyone is likely to believe that it won't produce a significantly different result. I don't think they have weeks to form a government either. I think it will happen by the end of next week, but the way things are going it is not clear whether the wider financial system can be held together while the negotiations are in progress, because everybody is also going to have one eye on Spain and the other PIIGS.

What I'm actually expecting to happen next week is for the debate to start changing - people are going to have to start talking seriously about what is going to happen instead of making calls for closer political and fiscal union that they know perfectly well can't possibly happen in the timescale required. I still haven't heard a single eurozone politician or official talking seriously about the eurozone being broken into smaller parts or about Spain or Italy leaving, or Germany leaving. At the same time, outside the eurozone there are media sources and politicians openly stating that the only way forward is for at least a partial breakup of the eurozone. Put it this way: the moment politicians/media within the eurozone start talking about such a breakup, then the actual breakup becomes inevitable and will probably happen quite quickly. That's why they don't want to talk about it.

[UndercoverElephant]

I said nobody within the eurozone was talking seriously about a Greek exit. That's not quite right. One source is:

http://online.wsj.com/article/BT-CO-201 ... 08789.html

Germany's Deutsche Bank AG (DBK.XE) said Friday it doesn't rule out the possibility of Greece leaving the euro zone and expects that such a move would lead to shrinking gross domestic product for the single currency bloc.

"Due to the high uncertainty surrounding the 'Greek drama,' we don't rule out an exit [of Greece] from the euro zone in our base line scenario anymore," the bank said in a research report.

It added that a Greek exit "and the tightening credit supply to periphery countries will lead to shrinking GDP" in the euro zone in the quarters thereafter.

The research report marks a change in tone of Germany's largest bank. Chief Financial Officer Stefan Krause said Thursday the bank sees a "very, very low probability of Greece exiting the euro zone."

Mr. Krause added that Deutsche Bank hasn't decided on any definite steps it would take should the country leave the single currency bloc, but has internally discussed the potential consequences. In such an event, "the first hours" thereafter would be crucial as capital outflows would have to be prevented, Mr. Krause said, adding that potential knock-on effects for other countries can't be foreseen.

Experts fear that many Greeks would withdraw money and bring it to safe havens outside Greece if the country decided to adopt the drachma again.

[UndercoverElephant]

http://www.telegraph.co.uk/finance/fina ... -euro.html

Angela Merkel will have to “invent a way” to kick Greece out of the eurozone, a leading Greek politician has claimed, as all political parties promise to renegotiate the country’s €130bn (£105bn) bail-out agreement after tomorrow’s pivotal elections.

Yet...

We will have to speak to any government. I can only warn everyone against leaving the currency union.

How crazy can it get? Angela Merkel is making threatening noises, gravely warning the Greeks not to leave the eurozone, whilst the Greeks themselves are making it crystal clear that they have no intention of leaving the eurozone and reminding Mrs Merkel that she has currently has no mechanism for forcing them out.