Grexit

[L.A.]

Plainly, the (new) agreement is not going to work either for Greece or the creditor organisations.

Probably not.  The more reason to call it a day, and let Greece leave the Eurozone, and try to make a go of it on their own.

Potentially, the Greeks could embrace this opportunity to create modern and prosperous economy - but somehow I suspect that that is not going to happen.

[Udayana]

No doubt they would like to, but too much money will be taken out for that to be possible. It's like bondage - you can only make enough to keep you in slavery - never enough to repay the debt and get out.

[L.A.]

No doubt they would like to, but too much money will be taken out for that to be possible. It's like bondage - you can only make enough to keep you in slavery - never enough to repay the debt and get out.

On the other hand, they are being told exactly what they need to do sort out their economy. Basic stuff like collecting (fair) taxes, having a proper labour market, reducing the bloated public sector, increasing completion.

All they need to do is follow the instructions and things will improve - but their problem is that that would annoy vested interests and their Loony Left.

[BashfulAnthony]

No doubt they would like to, but too much money will be taken out for that to be possible. It's like bondage - you can only make enough to keep you in slavery - never enough to repay the debt and get out.

On the other hand, they are being told exactly what they need to do sort out their economy. Basic stuff like collecting (fair) taxes, having a proper labour market, reducing the bloated public sector, increasing completion.

All they need to do is follow the instructions and things will improve - but their problem is that that would annoy vested interests and their Loony Left.

Things are so volatile at present that anything could happen, even civil unrest, which could prove explosive.

[L.A.]

No doubt they would like to, but too much money will be taken out for that to be possible. It's like bondage - you can only make enough to keep you in slavery - never enough to repay the debt and get out.

On the other hand, they are being told exactly what they need to do sort out their economy. Basic stuff like collecting (fair) taxes, having a proper labour market, reducing the bloated public sector, increasing completion.

All they need to do is follow the instructions and things will improve - but their problem is that that would annoy vested interests and their Loony Left.

Things are so volatile at present that anything could happen, even civil unrest, which could prove explosive.

That's the Loony Left for you, dead on cue - maybe they'll bring back Martial Law?

[ad_orientem]

No doubt they would like to, but too much money will be taken out for that to be possible. It's like bondage - you can only make enough to keep you in slavery - never enough to repay the debt and get out.

On the other hand, they are being told exactly what they need to do sort out their economy. Basic stuff like collecting (fair) taxes, having a proper labour market, reducing the bloated public sector, increasing completion.

All they need to do is follow the instructions and things will improve - but their problem is that that would annoy vested interests and their Loony Left.

Things are so volatile at present that anything could happen, even civil unrest, which could prove explosive.

That's the Loony Left for you, dead on cue - maybe they'll bring back Martial Law?

LOL! You are funny.

[L.A.]

I'll bet that Billy Bragg is penning a song as we speak.

[Jack Knave]

JK,
"If you think they are part of a failed and corrupt system then why do you want them stay in it, would you? They think they can pull it apart and so negate on their debts and this includes the others as well."

I don't think they should stay in it;  but whilst they are there, and they chose to be, they should obey the rules they agreed to in the first instance.

Then I suppose the question is why don't they want to leave?

My answer would be is that they like the idea of the EU etc. but not the one that has evolved that talks about solidarity but has none. So they want, I would surmise, to change it from within.

[BashfulAnthony]

JK,
"If you think they are part of a failed and corrupt system then why do you want them stay in it, would you? They think they can pull it apart and so negate on their debts and this includes the others as well."

I don't think they should stay in it;  but whilst they are there, and they chose to be, they should obey the rules they agreed to in the first instance.

Then I suppose the question is why don't they want to leave?

My answer would be is that they like the idea of the EU etc. but not the one that has evolved that talks about solidarity but has none. So they want, I would surmise, to change it from within.

Well, that won't happen, just as it won't happen for Cameron.  The whole EU project is a busted flush, and the sooner we get out the better, whatever Greece does.

[jeremyp]

JK,
"If you think they are part of a failed and corrupt system then why do you want them stay in it, would you? They think they can pull it apart and so negate on their debts and this includes the others as well."

I don't think they should stay in it;  but whilst they are there, and they chose to be, they should obey the rules they agreed to in the first instance.

Then I suppose the question is why don't they want to leave?

Because for quite a while Greece did very nicely with the Euro, thank you very much.  They were able to borrow money on the same terms (i.e. as cheaply as) Germany. 

Furthermore, leaving the Euro will be a short term disaster.  Imagine you run a Greek company that got a loan from a German bank in euros but whose income is paid for  by the locals in new drachmas. 

[Jack Knave]

JK,
"If you think they are part of a failed and corrupt system then why do you want them stay in it, would you? They think they can pull it apart and so negate on their debts and this includes the others as well."

I don't think they should stay in it;  but whilst they are there, and they chose to be, they should obey the rules they agreed to in the first instance.

Then I suppose the question is why don't they want to leave?

My answer would be is that they like the idea of the EU etc. but not the one that has evolved that talks about solidarity but has none. So they want, I would surmise, to change it from within.

Well, that won't happen, just as it won't happen for Cameron.  The whole EU project is a busted flush, and the sooner we get out the better, whatever Greece does.

I said what they, the Greeks, want. I agree we the Brits should leave the EU.

How can Brussels rule if all the people rise up and rebel? That is, the left in Greece, Spain, Portugal etc. and the hard right in other countries. Tsipras is showing the EU people what the EU elites are about; bullying for their own gain and not caring about the people. As I have said before Spain and Portugal have elections at the end of the year. If this occurs then the EU would have to change as chaos would follow.

[Jack Knave]

JK,
"If you think they are part of a failed and corrupt system then why do you want them stay in it, would you? They think they can pull it apart and so negate on their debts and this includes the others as well."

I don't think they should stay in it;  but whilst they are there, and they chose to be, they should obey the rules they agreed to in the first instance.

Then I suppose the question is why don't they want to leave?

Because for quite a while Greece did very nicely with the Euro, thank you very much.  They were able to borrow money on the same terms (i.e. as cheaply as) Germany. 

Furthermore, leaving the Euro will be a short term disaster.  Imagine you run a Greek company that got a loan from a German bank in euros but whose income is paid for  by the locals in new drachmas.

I'm not too sure what your point is. All Euros would be converted into drachmas and there is no reason why Greece should revert to them anyway as there are countries using the Euro who are not in the EZ. There are always ways round these things if planning is made for them but the real threat here is an unplanned Grexit.

[jeremyp]

I'm not too sure what your point is.

It's fairly obvious.  Leave the Euro and there will be a lot of short term pain caused by the certain devaluation of the new drachma.

All Euros would be converted into drachmas and there is no reason why Greece should revert to them anyway as there are countries using the Euro who are not in the EZ. There are always ways round these things if planning is made for them but the real threat here is an unplanned Grexit.

The whole point of doing Grexit at all is to leave the Euro. 

[Jack Knave]

I'm not too sure what your point is.

It's fairly obvious.  Leave the Euro and there will be a lot of short term pain caused by the certain devaluation of the new drachma.

All Euros would be converted into drachmas and there is no reason why Greece should revert to them anyway as there are countries using the Euro who are not in the EZ. There are always ways round these things if planning is made for them but the real threat here is an unplanned Grexit.

The whole point of doing Grexit at all is to leave the Euro.

There's going to be pain anyway. Stay in and be in perpetual decline and ruin or come out and endure some short term pain but with the chance to devalue and grow again.

And your second point means what? We have to deal with the Euro it's called Forex.

[BashfulAnthony]

The furore seems to be dying down, now the Greeks have more money.  But how long before they need even more?  They are in such a mess, that even if they do implement the conditions imposed on them, they will still be in trouble, even in the short term.

[wigginhall]

The IMF criticism of the Greek deal is interesting, as some journos are saying that behind the IMF stands the US, which thinks that Greece will never pay off its debts, and therefore has to have a partial write-off.

Even further, some journos are saying that the US disapproves of the whole EU neo-liberal approach, although this sounds like conjecture.   But I guess that some senior US figures are leaking this stuff, all very convoluted.   The US tends to favour more Keynesian measures, although European economies are quite prepared to do this surreptitiously, when they think no-one is looking. 

Maybe also the US is fearful of Greece going into the Russian orbit.   Of course, most of this stuff is hidden away, not for prying eyes, that is you and me!

[wigginhall]

Stories now that Obama himself is pushing the EU to cut Greece some slack.  Didn't realize it went to the top, so not really leaks from American officials, but the big wahoonie himself, don't ask me what the hell this means, dunno.  Partly to do with the Euro neo-liberal approach (e.g. austerity, privatization), which the US is saying, stinks.

[jeremyp]

There's going to be pain anyway. Stay in and be in perpetual decline and ruin or come out and endure some short term pain but with the chance to devalue and grow again.

I agree with this assessment, but I was responding to your query about why the Greeks seem to be so inexplicably keen to stay in the Euro.  The reason is twofold:

• The Greeks did very nicely out of the Euro for several years.
• There will be a lot of pain involved in leaving.  In fact, it will be pretty chaotic, but, for Greece, I think it is the best option still available. The Greeks themselves don't seem to believe this.

And your second point means what? We have to deal with the Euro it's called Forex.

I was responding to this from you:

All Euros would be converted into drachmas and there is no reason why Greece should revert to them anyway as there are countries using the Euro who are not in the EZ. There are always ways round these things if planning is made for them but the real threat here is an unplanned Grexit.

which seems to imply that Greece could continue to use the Euro after Grexit, but that is a contradiction in terms:  the thing that Grexit means exiting is the Euro.

[Jack Knave]

Stories now that Obama himself is pushing the EU to cut Greece some slack.  Didn't realize it went to the top, so not really leaks from American officials, but the big wahoonie himself, don't ask me what the hell this means, dunno.  Partly to do with the Euro neo-liberal approach (e.g. austerity, privatization), which the US is saying, stinks.

I would guess that the US doesn't want the EU to go into chaos as this would upset the banking system which is globally linked like a house of cards.

[Jack Knave]

There's going to be pain anyway. Stay in and be in perpetual decline and ruin or come out and endure some short term pain but with the chance to devalue and grow again.

I agree with this assessment, but I was responding to your query about why the Greeks seem to be so inexplicably keen to stay in the Euro.  The reason is twofold:

• The Greeks did very nicely out of the Euro for several years.
• There will be a lot of pain involved in leaving.  In fact, it will be pretty chaotic, but, for Greece, I think it is the best option still available. The Greeks themselves don't seem to believe this.

And your second point means what? We have to deal with the Euro it's called Forex.

I was responding to this from you:

All Euros would be converted into drachmas and there is no reason why Greece should revert to them anyway as there are countries using the Euro who are not in the EZ. There are always ways round these things if planning is made for them but the real threat here is an unplanned Grexit.

which seems to imply that Greece could continue to use the Euro after Grexit, but that is a contradiction in terms:  the thing that Grexit means exiting is the Euro.

To your last point: The countries that use the Euro but are not in the EZ are pegged to it. Greece could do the same but of course the question of what would be pegged is a valid question. This could be done by having an interim currency, a kind of IOU, which would find its level in the market; after they had defaulted on their debts, then peg it to the Euro. But one consequence of Greece leaving could be that the Euro itself could substantially fall.

[jeremyp]

The countries that use the Euro but are not in the EZ are pegged to it. Greece could do the same but of course the question of what would be pegged is a valid question.

If the Greeks continued to use the Euro, it would not be Grexit. 

This could be done by having an interim currency, a kind of IOU

All modern currencies are a kind of IOU. 

which would find its level in the market; after they had defaulted on their debts, then peg it to the Euro.

Why would they do that?  If they peg their new currency to the Euro, they have all the problems but none of the advantages of actually being in the Euro.

But one consequence of Greece leaving could be that the Euro itself could substantially fall.

It is a possibility.  If the Euro does fail, don't be misled into thinking that is good news though.

[L.A.]

Stories now that Obama himself is pushing the EU to cut Greece some slack.  Didn't realize it went to the top, so not really leaks from American officials, but the big wahoonie himself, don't ask me what the hell this means, dunno.  Partly to do with the Euro neo-liberal approach (e.g. austerity, privatization), which the US is saying, stinks.

As many people have pointed out, on the face of it Greece could be 'forgiven' a portion of it's debt without causing a major financial crash. The problem would be that Spain, Portugal and probably others would immediately jump on that bandwagon - and if that happened - it would cause very big problems for Eurozone, the EU and probably the whole world economy.

So the logic is inescapable:  it's better for everyone if the Greeks suffer.

[Jack Knave]

The countries that use the Euro but are not in the EZ are pegged to it. Greece could do the same but of course the question of what would be pegged is a valid question.

1) If the Greeks continued to use the Euro, it would not be Grexit. 

This could be done by having an interim currency, a kind of IOU

2) All modern currencies are a kind of IOU. 

which would find its level in the market; after they had defaulted on their debts, then peg it to the Euro.

3) Why would they do that?  If they peg their new currency to the Euro, they have all the problems but none of the advantages of actually being in the Euro.

But one consequence of Greece leaving could be that the Euro itself could substantially fall.

4) It is a possibility.  If the Euro does fail, don't be misled into thinking that is good news though.

1) Being in the EZ is more than just using the Euro, you have to keep to the conditions for being a part of it.

2) There you go then it could be done as a short term measure.

3) True! Though I was thinking it being as a short term measure whilst they planned for a permanent currency. The thing is a Grexit hasn't been planned for, as they all play out their game theory madness, and so would cause unnecessary chaos and hardship. If they planned for it they could more easily slip back to the drachma, though easily is relative here.

4) I said fall not fail.

[jeremyp]

1) Being in the EZ is more than just using the Euro, you have to keep to the conditions for being a part of it.

If you are not in the EZ, you don't get any input into policy, you don't get the cheap loans (which admittedly didn't do Greece much good as it turns out) and on a practical note, you don't get any physical currency to use in the cash economy.

3) True! Though I was thinking it being as a short term measure whilst they planned for a permanent currency.

Why peg it to the Euro when having to cope with Euro exchange rates has made this crisis so much worse than it would have been.

The thing is a Grexit hasn't been planned for,

It wouldn't surprise me if it had been planned for.  If you are going to leave the Euro, it needs to be a complete surprise to most people.  If they announced that next week they are going to leave the Euro, in the intervening period, everybody who can will move their money abroad which will collapse their banking system. 

4) I said fall not fail.

It amounts to the same thing.  Whether you call it falling or failing, the resulting recession will destroy economies and as a trading partner to all the EZ members, we would feel it.

[Jack Knave]

1) Being in the EZ is more than just using the Euro, you have to keep to the conditions for being a part of it.

If you are not in the EZ, you don't get any input into policy, you don't get the cheap loans (which admittedly didn't do Greece much good as it turns out) and on a practical note, you don't get any physical currency to use in the cash economy.

3) True! Though I was thinking it being as a short term measure whilst they planned for a permanent currency.

Why peg it to the Euro when having to cope with Euro exchange rates has made this crisis so much worse than it would have been.

The thing is a Grexit hasn't been planned for,

It wouldn't surprise me if it had been planned for.  If you are going to leave the Euro, it needs to be a complete surprise to most people.  If they announced that next week they are going to leave the Euro, in the intervening period, everybody who can will move their money abroad which will collapse their banking system. 

4) I said fall not fail.

It amounts to the same thing.  Whether you call it falling or failing, the resulting recession will destroy economies and as a trading partner to all the EZ members, we would feel it.

Regards point 2, pegging is used to 'hold' a currency that is rapidly falling so it freezes it in time. If Greece left the Euro/EZ its new drachma could plummet so I was thinking that this could be an interim holding measure as Greece gets its economy going. You are right that pegging has its problems but may be this interim measure could help.

Point 3 : I think it would be hard to plan for a Grexit and keep it secret. These things tend to leak out.

Point 4 : Depends how far it falls.