Greece II or: How I learned to stop worrying and love the euro.

[Mr Fixit]

Gotta love BBC. The referendum question and the design of the ballot apparently remind them of Hitler's referendum on Anschluss of Austria.

http://www.bbc.com/news/world-europe-33311422

Really smooth. Seems that these days it's not only Putin, Gaddafi, and the like that have to fear the Hitler card popping up in the media. One ring to rule them all?

[jarl the climber]

Cutting them a deal probably wouldn't be worse per se. In fact, it might well be the cheaper way to go. It doesn't seem politically viable, however...

Why isn't it viable especially if what Fragile Bird is saying is accurate about Greece becoming a client state of the Russians? Would the richer Northern countries feel like they are losing face or is it because they could not afford the bailouts in larger southern countries like Spain and/or Italy if they had to do it on the same terms as they gave the Greeks?

[Altherion]

If it going to cause waves like this, why allow it to happen? Then I suppose you get the argument if you cut the Greeks a sweet deal you have to give Spain and the others a great deal as well. Is that worse than the alternative?

Yes. Spain's economy is nearly an order of magnitude larger than that of Greece and Spain also has 24% overall unemployment and 50% youth unemployment as well as a leftist party called Podemos. At the moment, Podemos is a relatively minor force, but if Syriza manages to get anything that can be interpreted as an easing of austerity, they will almost certainly make great gains at the expense of the incumbents as the latter have not even tried to resist the EU and its corporate overlords. Even worse, if the leftists get their way and things actually improve (not very likely, but, given that nobody can reliably predict macro economic conditions even a year in advance, not impossible), they will have demonstrated an alternative to the accepted order which can then spread elsewhere.

[The guy from the Vale]

What Alterion said is at least part of the point. For most conservative northern European politicians, Syriza success would mean a paradigm shift away from the austerity they have promoted throughout the banking crisis and even before. They can't have that, so Syriza has to be denied any and all success pour encourager les autres (i.e. Spain, Portugal, Italy).

On top, many people in northern Europe see Greece in particular as undeserving of further help because they consider the Greek government to be corrupt and having squandered all the money they already received during the last 5 years. (Not necessarily incorrectly, but simultaneously they are of course punishing the Greek on the street, not the oligarchs...). There's a certain tendency to talk about the Greece crisis like about individual bankrupcy with the Northern European "friends" helping the Greek "spendthrift junkie who can't pay his bills" out but then "asking him to reduce his expenses because he can't afford them. I.e., the role of investment is largely ignored, along with the issue of existential poverty in Greece.

[Relic]

Nah, most people who go there from northern/western Europe are only concerned with a cheap package holiday where they have a pre-booked flight, and a pre-booked bus to the hotel where they have pre-booked rooms and often pre-booked meals. They go for the sun (the weather here is dodgy) and the booze and to spend a week or two away from the grind. They are often minimally interested in the fact that there is often a whole interesting country outside of their hotel swimming pool. Potentially they might go to the beach or go shopping, but that is generally about it. I know, cos I come from an area of white middle class to low middle class and this is de jeur. This goes for package holidays to locations like Mallorca, the Canary islands or Crete, as well as quite a few Turkish locations, mainly Antalya for Scandinavians (cos God forbid you'd have to mingle with other nationalities!! Oh and it is so inconvenient to not have the restaurant menus in your own language, natch).

While I personally would never do something like this, it is extremely common. I used to express bafflement at this behaviour which made people think I was an elitist.

/tangent, but a lot of tourists going to these locations go on package holidays and price is really important, cos they don't really care about much apart from sun + booze

I know plenty of people going to Turkey to explore the glories of Istanbul and the richness of its culture. I don't thin either of us can speak for "most people."

Aside from that, the poster i was replying to made it seem like Turkey has been a dangerous destination for years, and that people valued cheap tour packages to safety. Which is absurd.

[Hayyoth]

So, most posters seem to think that the No vote will take the referendum and that its hard to predict the fallout from this to the international financial system. I suppose this should be interesting to watch, its hard to see a small country like Greece really causing waves in the worldwide economy. I guess if other countries are facing some of the same problems and its just the tip of the iceberg it sort of makes sense.

The referendum is irrelevant, Greece has effectively defaulted and now this is taking on a life of it's own.

Other related news, Puerto Rico defaults

http://www.usatoday.com/story/money/2015/06/29/puerto-rico-debt-crisis-default/29458475/

Not as big a deal as Greece but 72 bil is not chump change.

Chinese share market has been collapsing for the past week

http://www.wsj.com/articles/asian-shares-fall-as-greece-unravels-1435540973

Now this is, to quote a great philosopher, a big fucking deal.

[karaddin]

I'm sure there are plenty of people that do go to Turkey to experience the culture, and the further away people are coming from the more likely that is to be, but I don't think individual anecdotes necessarily challenge that the bulk of the money in tourism comes from nearby Europeans going there for their sunny holiday. Both these things coexisting is possible.

[mashiara]

The financial crisis should be contained to Greece. Greece only represents 2% of the European economy. The EU should focus on Italy, Spain and Portugal now to make sure the contagion doesn't spread.

More worrisome are the geopolitical consequences if Greece turns to Russia for help. There are many left wingers in Greece who are either Marxists or sympathetic to Marxism who will likely push the government to go to the Russians. The idea that the Russians would say no does not seem reasonable. The Greek PM has already had discussions with the Russians about letting them build a pipeline through Greece to supply Europe with oil. Greece is strategically important, and letting the Russians have a foothold in Greece is very worrisome.

Wait, what? Is this the Cold War all over again?

Russia is not bailing us out, you can stop worrying about that.

Anyway, I don't think it's a foregone conclusion that the vote will be a No. A lot of people are passionate about Yes as well, with whatever it brings, because they are too terrified of what a No vote will bring. It's safe to say that if the vote is Yes the odds of Tsipras and his government resigning are pretty high, which will mean new elections -and then who gets to lead? We're running out of one-eyed men...

Personally, I have no idea what I'll vote and I'm not sure it will matter at all by then. My gut says to take the plunge and go with No, because I'm fed up with all that's happened in the past 5 years and people like me have taken suffered the most from the austerity measures that have suffocated the country without helping it one bit. But, I've always considered myself European, I've grown up thinking of myself as a member of the EU, I remember rejoicing when we joined the euro... going back to the drachma, even potentially leaving the Union seems like a nightmare most of the time. Seeing the banks closed, seeing the lines at the gas stations and the ATMs... Even with all the extreme measures imposed on us, there is some sort of security in being part of the eurozone -or so we thought, but maybe we're wrong.

It doesn't help that the government isn't telling us straight away that a No vote is a vote against the euro. They keep insisting that a No vote will just give them extra negotiating strength and will give us a better deal -and you have to be pretty naive to believe that.

I don't know. I've been sleeping badly, my thoughts don't often make sense. Need more coffee.

ps On a humorous note, I realized yesterday that if I vote No I'll have to lie to my family and numerous uncles and cousins about it, or suffer their harassment for years to come, and if I vote Yes I'll get incredulous stares and silent or not so silent accusation from my friends and co-workers.

[A Horse Named Stranger]

The financial crisis should be contained to Greece. Greece only represents 2% of the European economy. The EU should focus on Italy, Spain and Portugal now to make sure the contagion doesn't spread.

More worrisome are the geopolitical consequences if Greece turns to Russia for help. There are many left wingers in Greece who are either Marxists or sympathetic to Marxism who will likely push the government to go to the Russians. The idea that the Russians would say no does not seem reasonable. The Greek PM has already had discussions with the Russians about letting them build a pipeline through Greece to supply Europe with oil. Greece is strategically important, and letting the Russians have a foothold in Greece is very worrisome.

Russia won't bail out Greece. I am inclined to bet on that statement.

Correct Russia will build that pipeline through Greece, which was more of a business decission for Gazprom, who want another safer pipeline, that does not lead through the Ukraine.

If Russia was already that eager to help Greece it would have lifted the ban on Greek fruits. Putin has not done that. And Russia does not have unlimited financial resources, remember there's an embargo in place. So they have some economical problems of their own.

For the record: I would not consider Putin a leftist (not to mention Marxist or Communist) leader by any reasonable standard either. Putin is a rightwing autocrat. His close ties to the Orthodox Church is also rather atypical for a Marxist. But that is another discussion.

Technically speaking, Greece has not defaulted yet. The IMF gives a period of time to pay up on a delayed payment (30 days I think). If they do not repay it within that grace period, then they are default.

Waves on the stockmarket? 5% is more of bad day at the office. It's not like all stocks plummeted.

It's very incovenient for Eurzone Countries who are Greek's creditors. Any halfway reasonable private sector investor has sold Greek treasure bonds long ago. And they have taken a cut of 50% in 2012 already, if I recall it correctly. And for the fellow Eurozone countries, those Greek debts are on a rational level probably sunk cost. They won't be able to salvage the money they put into the "rescue" of the Greek economy anyway. Something that does not neither Tsipras nor Varoufakis deny. They want a haircut. Deep down all the Eurozone countries know that, too. From an economic perspective extending the credits is throwing good money after bad money (check sunk cost).

Giving Greece another haircut, good luck try explaining that to your electorates at home. It's not just the Germans that won't be happy with that, the Finns, the Baltic countries, none of them will cheer in joy. Note, the ECB money that Greece needs to keep the Banks running are also financed by the other Euronzone countries. So that's another write off. So from an economic/rational perspective, there's little that screams out for bailing out Greece.

Now there's the political dimension. If Greece defaults, there's some fear that if Greece fails, then Italy might be next, and that the whole Eurozone will fall apart. I don't know how much merit there is to that. The Eurozone leaders claim, that is not the case. There's a definite political will to keep Greece in the Eurozone, whether this is sensible or not is another question. But all the big ones said, they are open for further negotiations. But the patience of the stronger European economies with Greece and Syriza has grown rather thin. And one argument is, that if they give in to Syriza, that would create a bad precedence and would entice other countries like Italy or Spain to follow Greek's example. That the Eurozone is more talking about relief measures for the Greek people instead of financial measures hints that the Eurozone is willing to let Greece go bust. As stated above, Putin as Boogeyman or White knight does not fly in my opinion.

Now back to the referendum.

Syriza was elected to end austerity while keeping Greece in the Euro. That was never going to work. I am not sure whether Tsipras was really believing it, or just telling the tale to get elected. The Greek state was/is a debtor afterall, and a debtor telling the creditors on what terms they are allowed to lend more money or getting their money back... Esp. the IMF has a very clear procedure, and is very clearly in its demands what needs to be done from countries who want money from them. They might bend the rules a bit, but they were never going to throw the manual out of the window. Expecting that to happen, Tsipras might as well have promised Unicorns carrying bags of Gold. Correct me if I am wrong, but the involvement of the other creditors (namely the Eurozone) is strongly tied to the approval of the IMF. The IMF says no, the Eurozones are forced to say no, too.

Now the referendum simply says: Do you accept the terms of the Eurozones for lending new money to Greece. No or Yes. The entire Eurozone has made it clear, there won't be a significantly better deal. The other nations probably couldn't sell it. And hardliners are already cursing that the ECB did not cut the funding. Let's play it through. Yes, means Tsipras will have to step down. It's just not compatible with everything he was elected to do. Austerity would continue, but Greece would need another election. Not even the Greek deities know who will be the one ruling the country after that. Maybe Syriza would even win that election after losing the referendum. Ofc Greece could hold a referendum and an election every 6 months, but that's not particularly helpful. To say the least.

Assuming the referendum turns out to result in a No. Greek really goes default. They will need to leave the Eurozone, if they don't get a new bailout deal. How likely that is going to happen, is up to your imagination. Tsipras seems to be fairly convinced he will get a new (much better) deal. No, new bailout deal and staying in the Eurozone is practically impossible. The Greek state would run out of money rather sooner than later, and wouldn't be able to pay pension or wages. The ECB would also be forced to rather sooner than later cut the funding of the business banks in Greece. Strictly speaking they are already funding Greece, which they weren't supposed to do. The ECB can't accept Greek Bonds as security assets, because they would be even more worthless than now. The Euro is a hard currency, so Greece can't mint new coin or realistically hope for an inflation of the Euro.

Can't say I envy the choices the Greek people will have at the referendum. Neither choice looks promising. Voting Yes means austerity. Voting No will in all likelihood mean leaving the Euro. Though to create a new currency will take time, too.

Editorial note. Post represents my personal opinion (obviously). If you find something factual incorrect feel free to point it out.

[Fragile Bird]

The referendum is irrelevant, Greece has effectively defaulted and now this is taking on a life of it's own.

Other related news, Puerto Rico defaults

http://www.usatoday.com/story/money/2015/06/29/puerto-rico-debt-crisis-default/29458475/

Not as big a deal as Greece but 72 bil is not chump change.

Chinese share market has been collapsing for the past week

http://www.wsj.com/articles/asian-shares-fall-as-greece-unravels-1435540973

Now this is, to quote a great philosopher, a big fucking deal.

They will have defaulted on their payment, but that doesn't trigger anything until the 30 day grace period expires. And even after 30 days, the IMF and the EU do not have to declare Greece in default. I expect continued negotiations.

Wait, what? Is this the Cold War all over again?

Russia is not bailing us out, you can stop worrying about that.

Anyway, I don't think it's a foregone conclusion that the vote will be a No. A lot of people are passionate about Yes as well, with whatever it brings, because they are too terrified of what a No vote will bring. It's safe to say that if the vote is Yes the odds of Tsipras and his government resigning are pretty high, which will mean new elections -and then who gets to lead? We're running out of one-eyed men...

Personally, I have no idea what I'll vote and I'm not sure it will matter at all by then. My gut says to take the plunge and go with No, because I'm fed up with all that's happened in the past 5 years and people like me have taken suffered the most from the austerity measures that have suffocated the country without helping it one bit. But, I've always considered myself European, I've grown up thinking of myself as a member of the EU, I remember rejoicing when we joined the euro... going back to the drachma, even potentially leaving the Union seems like a nightmare most of the time. Seeing the banks closed, seeing the lines at the gas stations and the ATMs... Even with all the extreme measures imposed on us, there is some sort of security in being part of the eurozone -or so we thought, but maybe we're wrong.

It doesn't help that the government isn't telling us straight away that a No vote is a vote against the euro. They keep insisting that a No vote will just give them extra negotiating strength and will give us a better deal -and you have to be pretty naive to believe that.

I don't know. I've been sleeping badly, my thoughts don't often make sense. Need more coffee.

ps On a humorous note, I realized yesterday that if I vote No I'll have to lie to my family and numerous uncles and cousins about it, or suffer their harassment for years to come, and if I vote Yes I'll get incredulous stares and silent or not so silent accusation from my friends and co-workers.

I don't think Putin could resist being a fox in the henhouse. After all, Greece is a member of NATO as well.

I feel for you, Mash, being in the damned-if-you-do, damned-if-you-don't position can't be a happy place to be.

I've been hearing interviews with Greeks today on tv and the radio, supporters of the No side saying things like, "If Europe doesn't care about us, we don't care about Europe". Not a good sign. :(

What can I say, except best of luck to Greece as it tries to wend it's way through this morass.

[Horza]

I don't think Putin could resist being a fox in the henhouse. After all, Greece is a member of NATO as well.

$200 billion is a steep door charge to get into a henhouse.

[Shryke]

Also, I suggest this as a good primer:

http://faculty.chicagobooth.edu/anil.kashyap/research/papers/A-Primer-on-the-Greek-Crisis_june29.pdf

It's got a few fresh-water slants in a few places, but nothing I'd call major and it's a very concise but very clear breakdown of the situation imo.

[dalThor]

Yes. Spain's economy is nearly an order of magnitude larger than that of Greece and Spain also has 24% overall unemployment and 50% youth unemployment as well as a leftist party called Podemos. At the moment, Podemos is a relatively minor force, but if Syriza manages to get anything that can be interpreted as an easing of austerity, they will almost certainly make great gains at the expense of the incumbents as the latter have not even tried to resist the EU and its corporate overlords. Even worse, if the leftists get their way and things actually improve (not very likely, but, given that nobody can reliably predict macro economic conditions even a year in advance, not impossible), they will have demonstrated an alternative to the accepted order which can then spread elsewhere.

In my opinion, this is why the Powers That Be (PTB) have been so recalcitrant. They can't allow the rest of the remaining PIIGS to think they they can get a sweeter deal. Spreads on Spain, Portugal and Italy inched up yesterday and I doubt that's going away any time soon either. If they get out of control the EU runs the risk of collapse.

On top, many people in northern Europe see Greece in particular as undeserving of further help because they consider the Greek government to be corrupt and having squandered all the money they already received during the last 5 years. (Not necessarily incorrectly, but simultaneously they are of course punishing the Greek on the street, not the oligarchs...). There's a certain tendency to talk about the Greece crisis like about individual bankrupcy with the Northern European "friends" helping the Greek "spendthrift junkie who can't pay his bills" out but then "asking him to reduce his expenses because he can't afford them. I.e., the role of investment is largely ignored, along with the issue of existential poverty in Greece.

There is a misconception that Greeks are living (continue to live?) high on the hog at the expense of their neighbors.

We should be clear: almost none of the huge amount of money loaned to Greece has actually gone there. It has gone to pay out private-sector creditors – including German and French banks. Greece has gotten but a pittance, but it has paid a high price to preserve these countries’ banking systems. The IMF and the other “official” creditors do not need the money that is being demanded. Under a business-as-usual scenario, the money received would most likely just be lent out again to Greece.

http://www.project-syndicate.org/commentary/greece-referendum-troika-eurozone-by-joseph-e--stiglitz-2015-06

What I object to is the never ending revolving door of debt. Greece has gotten a haircut and the lenders got hit but let's be honest. The only entities really benefiting from this unmitigated cluster fornication are the lenders.

I have been staunchly in the EU camp for the duration. A few weeks ago I began to change my mind thinking that starving on own own terms might be better than starving on someone else's. There are valid reasons to vote 'No' on Sunday. Regardless, I won't get the opportunity because I am not a citizen. I've had enough of the PTB dictating terms that do little if anything to ameliorate the problem(s) here. All too often it seems (to me) that they are acting only in their own best interests and, despite Mr. Juncker's saying he loves the Greek people, they seem to act in ways which dismiss as unimportant or worse, completely ignore the conditions on the ground here in Greece. A return to a sovereign currency is, in many ways, a viable alternative. I have in the past few days supported a Grexit.

However, having witnessed the illustrious Mr. Tsipras behave as a petulant child last night on Greek TV, I realize he and his government have also failed the Greek people, not unlike to two prior governments have. He's done it in a remarkably different fashion but, in the end, his gambits have failed, he has failed and, despite his panache, Mr Varoufakis has failed. They played a weak hand very badly and their bluff was called..

In closing, I'd urge anyone interested in the topic to read the following article. It describes the contradictory, even paradoxical attitudes towards austerity, the euro and the lenders.

Greece Referendum: If you want to be executed vote YES, if you would rather commit suicide say NO

http://greece.greekreporter.com/2015/06/29/only-god-can-save-greece-referendum-capital-controls-crisis/

[Solmyr]

Not my referendum to vote at, but I would have probably voted "No". Had the referendum been a few years ago, I might have voted "Yes", but the cycle has been repeating for far too long and prolonging it any further seems meaningless. Greece has to move beyond, even if it means entering into an endgame scenario. Of course this is my interpretation of the situation and it is skewed through the lenses of someone, who has grown up and lived in a country that was ravished by hyperinflation, continuously plundered by government after government and having a standard of living far below the Greeks despite being in the EU.

My advise to all Greek people is to vote for what they believe into, based on current facts and information available and not to regret their votes if after a few years hindsight proves them wrong. Mashiara mentioned the peer-pressure from family, friends and coworkers, but at the end of the day they will cast their vote and it is up to you to cast yours.

[JoeyBanana]

For the record: I would not consider Putin a leftist (not to mention Marxist or Communist) leader by any reasonable standard either. Putin is a rightwing autocrat. His close ties to the Orthodox Church is also rather atypical for a Marxist.

I don't think it's about Putin being a leftist. He is known to prefer the right wing europeans (particularly the crazy ones) as political allies and is far more active to recruit "friends" in that camp. But it's rather about Syriza being too cuddly with the Russian than vice versa.

[dalThor]

Solmyr, I value your input and that input has been good. I was leaning towards the 'No' for all the reasons you stated.

However, having mismanaged the situation this badly up to now, I don't believe the Tsipras government has even the slightest clue how to manage a considerably more complicated set of problems. They've had months to come up with an alternative and now, days away from a potential Grexit they still have nothing to offer in the way of, 'What next?', 'What happens after?'.

I wish nothing more than for Greece to escape its bonds (no pun intended) but frankly SYRIZA just doesn't instill any confidence - in me at least. Were things different I would still support the No vote.

[Solmyr]

I know little about how good of a political party SYRIZA is, hence I avoided commenting on that angle so far. It's easy to conclude they are bad, based on the situation that is unfolding, however, Greece has been in a predicament for quite some time and quite a few political parties have tried and failed at tackling the larger issue.

But the referendum is just that - a referendum. Oh sure, if the "No" vote wins it will provide SYRIZA with a tacit vote of confidence, although that need not be the case. If the Greek people as a whole are dissatisfied with the party they can easily demand early reelections right after the referendum has passed and regardless of the referendum's outcome.

[Arakan]

I think most people in this thread (and in the current political discourse) miss the essential point, the essential question. And this essential question is NOT whether Greece will repay its credits or not. Whether they will build up a functioning fiscal policy or not.

The REAL elephant in the room is: will Greece be able to build up a competitive economy within the current boundaries (Eurozone) which will enable the country to stand again on its own feet?

All the current talk is important, yes, but it's secondary. It's the painkiller but not the medicine for healing.

For the vast majority of objective economic analysts around the world it was clear since late 2010 at least that within the boundaries of a strong currency the Greek economic portfolio will not develop as neccessary.

Of course some countries like Italy or France actually would prefer a "soft" currency (in contrast to Germany or Netherlands e.g.). And this collision of antagonistic interests have put us in this situation. That the ECB became a political player by launching their bonds programme maybe acceptable in Italy or France but it contradicts evth the old Bundesbank stood for. Whose economic model was more successfull (Germany or France/Italy) speaks for itself.

People who like to bash Merkel should realize one thing: if shit hits the van, all that monopoly money will become REAL TAXPAYERS money. And I expect from MY government to protect MY interests! Whether some like it or not.

Merkel and Schäuble have been too soft anyway. The big debt cut should have come in 2010 when the debts were hold by those who thought they are clever enough to make a profit (i.e. the banks).

[Arakan]

I want to add: Greece will always stay a part of the EU which is a good thing. But Greece should not be a part of the Euro for now. Greece is more like Romania, Bulgaria. Less like Slovenia.

Unless we want to kill the Euro as a reliable international currency, we have to make a stand now. The agent provocateur in all of this is France. One more reason why UK should remain Part of the EU, as counterweight to the French.

[Prue]

Exactly. They shouldn't have rewarded the banks etc who bought risky Greek bonds, and shifted the risk to the EU taxpayers instead. They already knew in 2010 that Greece would never be able to repay the debts, and that being in the Euro was a bad idea because their economy needs a weak currency to be competitive. Greece should have declared bankruptcy. The ones who bought risky Greek bonds would have lost everything. Their risk. But after a return to the Drachma, Greece would probably have recovered by now.