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You do know that printing money only causes inflation and does not actually increase the availability of goods right?
Greece - SYRIZA, in the margin of the Eurozone
- Thread starter arpakola
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Greece imports goods worth almost 20% of its GDP. With Drachma having zero value, it would not even get enough to buy food for some years, forget about paying pensions!
I will be here to see and probably laugh.
You are an insult to those European hardworkers,that pay for you while you do nothing. You want others to pay at your own. Now you got what you expected. I hope Greece will get out,you are Kaput bro.
Let's see what that clown Tsipras prepares.
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Not really.
Greek banks have no cash, to print more cash they need bonds and these bonds need to be purchased by ECB (which allows you to print/get Euros)
ECB stops buying your bonds and off you go no more printing. Had you not joined Eurozone, you would suffer inflation. But you don't have the right to print money.
No pensions. Unless you introduce the drachma.
But as soon as you introduce the drachma it's gonna suffer hyperinflation as value of greek bonds in junk and it will take greece multiple decades to recover
You won't be able to import $hit. and since you lack forex, you'll open up your market ( property/tourism) to China which will keep you on the edge of poverty while giving you just enough to survive.@Sakal Gharelu Ustad Anything else to add?
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Well, I would not be so harsh on Greece.
Germany has been the single biggest beneficiary of the Euro experiment. Yes, they are hardworking but their currency would have appreciated a lot and made them less competitive if Euro did not cushion their currency appreciation. Losers of the EU are the less productive people like in Greece. So, in a way currency union makes no sense without political transfers.
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http://blogs.wsj.com/brussels/2015/06/30/greeces-five-possible-future-currency-arrangements/
1. Greece stays in the eurozone: This is the option likely to cause the smallest short-term disruption to the Greek economy. The Greek central bank would retain access to liquidity from the European Central Bank, and the Greek banks would stay on life support. This looks increasingly likely to be accompanied by some kind of further negotiated debt relief. To get it, Greece would almost certainly have to agree to more conditions of the sort successive Greek governments have found it hard to accept.
2. Greece keeps the euro, but sits outside the eurozone: Jacob Funk Kierkegaard of the Peterson Institute for International Economics in Washington calls this the “Montenegro option” and argues this is the most likely outcome should Greece exit the eurozone. This would not be “a new drachma, but Montenegro—i.e. Greece becomes just another relatively poor unilaterally euroized non-EU Balkan economy,” he writes here. In some ways, this would be the worst of all worlds because Greece would lose access to the ECB. Countries using a foreign currency as legal tender have no access to a lender-of-last-resort, which means that every bank liquidity crisis becomes a solvency crisis. They therefore tend to have stunted domestic financial sectors — which almost every academic study shows is bad for growth — or have a banking system owned by foreigners, which exports the lender-of-last resort role to other countries’ central banks. (Mexico didn’t adopt the dollar after the 1994-95 financial crisis — but in order to avoid an undue shrinkage of its banking sector, it allowed most of its banks to be bought by foreigners.)
3. A currency board: In this case, Greece would create a new currency but lock it to the euro – as Estonia did with the German mark in 1992 after it gained independence from the Soviet Union. The amount of new drachmas in circulation would be limited by the size of Greece’s international reserves: about $5.8 billion at the last count. Advocates argue that this would impose discipline on the Greeks — poor economic policies lead to an outflow of reserves and therefore of the domestic monetary base, which pushes up drachma interest rates, while good policies have the reverse effect. The drawback is that again the central bank is limited in its lender-of-last resort powers because it cannot create money freely. It also imposes discipline that, for now, may make it look unappetizing to Greece’s current rulers. It’s not much talked about, has a few enthusiastic and long-standing cheerleaders, but is a theoretical possibility. Here’s Steve Hanke arguing in favor.
4. A dual system: Here the drachma and the euro would circulate side-by-side. This has many historical precedents going back centuries. In practice, a dual system is likely to emerge when the Greek government runs out of euros and has to pay its domestic bills in government IOUs. The IOUs could at some future date be redeemed in euros, or could be eventually redeemed in drachmas, but they would initially be euro-denominated obligations of the government that would have a lesser value in the public mind than euro notes or coins. This state of affairs could continue for a long time, but there is an economic tendency called Gresham’s Law: ”Bad money chases out good.” Over time, euros would disappear from circulation because people would hoard them as a store of value – and people would spend the government IOUs. De facto, the drachma, whether or not it would so be called, would become the main means of exchange.
5. The new drachma: The move to the new drachma may well not come with a bang, but gradually — as described in 4 above. But an eventual formal switch of the currency would give Greece control over its own monetary policy. However, a new currency — which would likely float against the euro and other major currencies — would likely create enormous short-term disruption, not least because a heavy devaluation would follow and the banks would in effect be insolvent. Longer-term, it could be a motor for future growth of the Greek economy — because it would stimulate demand for Greek exports by lowering in real-terms the price of goods and services produced in Greece. Longer term, the effects of a devaluation depends on the quality of economic policies that accompany it. It will create inflation, by increasing the costs of imports. One important issue is how much the government raises wages and pensions to compensate for higher inflation. The more domestic wages and pensions are allowed to rise, the less impact the devaluation will have in simulating Greek exports longer term and the lower the benefits to economic growth.
1. Greece stays in the eurozone: This is the option likely to cause the smallest short-term disruption to the Greek economy. The Greek central bank would retain access to liquidity from the European Central Bank, and the Greek banks would stay on life support. This looks increasingly likely to be accompanied by some kind of further negotiated debt relief. To get it, Greece would almost certainly have to agree to more conditions of the sort successive Greek governments have found it hard to accept.
2. Greece keeps the euro, but sits outside the eurozone: Jacob Funk Kierkegaard of the Peterson Institute for International Economics in Washington calls this the “Montenegro option” and argues this is the most likely outcome should Greece exit the eurozone. This would not be “a new drachma, but Montenegro—i.e. Greece becomes just another relatively poor unilaterally euroized non-EU Balkan economy,” he writes here. In some ways, this would be the worst of all worlds because Greece would lose access to the ECB. Countries using a foreign currency as legal tender have no access to a lender-of-last-resort, which means that every bank liquidity crisis becomes a solvency crisis. They therefore tend to have stunted domestic financial sectors — which almost every academic study shows is bad for growth — or have a banking system owned by foreigners, which exports the lender-of-last resort role to other countries’ central banks. (Mexico didn’t adopt the dollar after the 1994-95 financial crisis — but in order to avoid an undue shrinkage of its banking sector, it allowed most of its banks to be bought by foreigners.)
3. A currency board: In this case, Greece would create a new currency but lock it to the euro – as Estonia did with the German mark in 1992 after it gained independence from the Soviet Union. The amount of new drachmas in circulation would be limited by the size of Greece’s international reserves: about $5.8 billion at the last count. Advocates argue that this would impose discipline on the Greeks — poor economic policies lead to an outflow of reserves and therefore of the domestic monetary base, which pushes up drachma interest rates, while good policies have the reverse effect. The drawback is that again the central bank is limited in its lender-of-last resort powers because it cannot create money freely. It also imposes discipline that, for now, may make it look unappetizing to Greece’s current rulers. It’s not much talked about, has a few enthusiastic and long-standing cheerleaders, but is a theoretical possibility. Here’s Steve Hanke arguing in favor.
4. A dual system: Here the drachma and the euro would circulate side-by-side. This has many historical precedents going back centuries. In practice, a dual system is likely to emerge when the Greek government runs out of euros and has to pay its domestic bills in government IOUs. The IOUs could at some future date be redeemed in euros, or could be eventually redeemed in drachmas, but they would initially be euro-denominated obligations of the government that would have a lesser value in the public mind than euro notes or coins. This state of affairs could continue for a long time, but there is an economic tendency called Gresham’s Law: ”Bad money chases out good.” Over time, euros would disappear from circulation because people would hoard them as a store of value – and people would spend the government IOUs. De facto, the drachma, whether or not it would so be called, would become the main means of exchange.
5. The new drachma: The move to the new drachma may well not come with a bang, but gradually — as described in 4 above. But an eventual formal switch of the currency would give Greece control over its own monetary policy. However, a new currency — which would likely float against the euro and other major currencies — would likely create enormous short-term disruption, not least because a heavy devaluation would follow and the banks would in effect be insolvent. Longer-term, it could be a motor for future growth of the Greek economy — because it would stimulate demand for Greek exports by lowering in real-terms the price of goods and services produced in Greece. Longer term, the effects of a devaluation depends on the quality of economic policies that accompany it. It will create inflation, by increasing the costs of imports. One important issue is how much the government raises wages and pensions to compensate for higher inflation. The more domestic wages and pensions are allowed to rise, the less impact the devaluation will have in simulating Greek exports longer term and the lower the benefits to economic growth.
Zebra
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pmaitra
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Correct me if I am wrong. I think a it is not the ECB per se, but individual entities that hold bonds. A lot of Greece's bonds are held by France. ECB acts only as a conduit.Not really.
Greek banks have no cash, to print more cash they need bonds and these bonds need to be purchased by ECB (which allows you to print/get Euros)
ECB stops buying your bonds and off you go no more printing. Had you not joined Eurozone, you would suffer inflation. But you don't have the right to print money.
No pensions. Unless you introduce the drachma.
But as soon as you introduce the drachma it's gonna suffer hyperinflation as value of greek bonds in junk and it will take greece multiple decades to recover
@Sakal Gharelu Ustad Anything else to add?
amoy
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Paul Krugman Is Right; Greece Should Leave The Euro
What with the nearing denouement of the Greek debt crisis the real question is, well, what actually should be done? And that in turn means that we’ve got to decide whose interests should be paramount. There’s perhaps three groups that we should be thinking about and how we weight their interests is going to tell us what should in fact happen.
The first group are those who insist that the European Union is the culmination of history, that ever closer union is something near holy. I know that sounds excessive but having actually worked in EU politics there really are people who think that way. Absolutely anything can be, and is, justified by this need to keep the juggernaut rolling to one unitary state. The euro is of course an aspect of this and allowing a country to leave the eurozone would be a terrible betrayal of this dream. Given that I’m a eurosceptic (to give you a sense of my bias on this issue, I’ve worked for and been a candidate for Ukip, the British political party saying we should leave the EU altogether) I place very little weight indeed on the demands of the federasts.
The second group is the citizenry of the other eurozone nations. If Greece defaults and or leaves the euro then many billions (hundreds of billions of euros in fact) of theirs will disappear along with the country’s departure. And we might indeed place good weight on their hopes, desires and cash. However, the turth here is that this money has already been lost. All that remains is to work out when and how that loss is going to be recognised. That it’s gone is already known. There’s no way at all that Greece is going to pay back €330 billion or so. And that money is almost all owed (whether through the EFSF, ECB, Target TGT -0.56% 2 funds or whatever) to the citizens, the taxpayers, of other eurozone countries. It might be that the losses come as the result of inflation. The very long maturities and the low interest rates of the current loans are going to mean significant real losses over the decades. Or it could be that Greece leaves now, or defaults, and the losses are crystalised and made obvious right now. So while we might place weight on their desires and interests, it doesn’t really make much difference. That money is already lost.
And then there’s the Greek people themselves. They, obviously, would like to see an economy that was growing, one that can employ their children, create the tax revenues to pay pensioners and all the rest. And as Paul Krugman points out, that really does mean leaving the euro:
Suppose that there were a way to end this depression. Then Greece’s fiscal problems would melt away, with no need for further cuts. But is there any way to do that?
The answer is, not as long as Greece remains in the euro. It can pursue reforms that might make it more competitive, but anyone promising dramatic, quick results has no idea what he is talking about.
On the other hand, Grexit would produce a rapid improvement in competitiveness, at the cost of possible financial chaos.This is not a route anyone has been willing to go down, but one does have to say that as the crisis worsens it becomes a more plausible outcome.
Greece should never even have applied to be in the euro in the first place. The country’s then government fiddled the figures to get into it (and everyone else was complicit in not looking too closely at those numbers). The Greek government then connived with various banks (including Goldman Sachs) to paper over the numbers again after entry and even as late as 2011 were still being a great deal less than truthful about the budget deficit and so on. The bailouts were done the wrong way, alleviating not the unpayable debt burden but removing the risks from the commercial banks and on to the taxpayers’ books. It has simply been a series of extraordinarily bad decisions by all involved all along.
Time to disappoint the federasts, acknowledge that the money is already lost, and get the Greek economy growing again by a combination of default and exit from the euro. And yes, I agree that I’m hugely biased here: but still right on the economics as Paul Krugman is pointing out.
What with the nearing denouement of the Greek debt crisis the real question is, well, what actually should be done? And that in turn means that we’ve got to decide whose interests should be paramount. There’s perhaps three groups that we should be thinking about and how we weight their interests is going to tell us what should in fact happen.
The first group are those who insist that the European Union is the culmination of history, that ever closer union is something near holy. I know that sounds excessive but having actually worked in EU politics there really are people who think that way. Absolutely anything can be, and is, justified by this need to keep the juggernaut rolling to one unitary state. The euro is of course an aspect of this and allowing a country to leave the eurozone would be a terrible betrayal of this dream. Given that I’m a eurosceptic (to give you a sense of my bias on this issue, I’ve worked for and been a candidate for Ukip, the British political party saying we should leave the EU altogether) I place very little weight indeed on the demands of the federasts.
The second group is the citizenry of the other eurozone nations. If Greece defaults and or leaves the euro then many billions (hundreds of billions of euros in fact) of theirs will disappear along with the country’s departure. And we might indeed place good weight on their hopes, desires and cash. However, the turth here is that this money has already been lost. All that remains is to work out when and how that loss is going to be recognised. That it’s gone is already known. There’s no way at all that Greece is going to pay back €330 billion or so. And that money is almost all owed (whether through the EFSF, ECB, Target TGT -0.56% 2 funds or whatever) to the citizens, the taxpayers, of other eurozone countries. It might be that the losses come as the result of inflation. The very long maturities and the low interest rates of the current loans are going to mean significant real losses over the decades. Or it could be that Greece leaves now, or defaults, and the losses are crystalised and made obvious right now. So while we might place weight on their desires and interests, it doesn’t really make much difference. That money is already lost.
And then there’s the Greek people themselves. They, obviously, would like to see an economy that was growing, one that can employ their children, create the tax revenues to pay pensioners and all the rest. And as Paul Krugman points out, that really does mean leaving the euro:
Suppose that there were a way to end this depression. Then Greece’s fiscal problems would melt away, with no need for further cuts. But is there any way to do that?
The answer is, not as long as Greece remains in the euro. It can pursue reforms that might make it more competitive, but anyone promising dramatic, quick results has no idea what he is talking about.
On the other hand, Grexit would produce a rapid improvement in competitiveness, at the cost of possible financial chaos.This is not a route anyone has been willing to go down, but one does have to say that as the crisis worsens it becomes a more plausible outcome.
Greece should never even have applied to be in the euro in the first place. The country’s then government fiddled the figures to get into it (and everyone else was complicit in not looking too closely at those numbers). The Greek government then connived with various banks (including Goldman Sachs) to paper over the numbers again after entry and even as late as 2011 were still being a great deal less than truthful about the budget deficit and so on. The bailouts were done the wrong way, alleviating not the unpayable debt burden but removing the risks from the commercial banks and on to the taxpayers’ books. It has simply been a series of extraordinarily bad decisions by all involved all along.
Time to disappoint the federasts, acknowledge that the money is already lost, and get the Greek economy growing again by a combination of default and exit from the euro. And yes, I agree that I’m hugely biased here: but still right on the economics as Paul Krugman is pointing out.
pmaitra
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The European press has been going ballistic in protraying Frau Bundeskanzlerin as being the saviour of the EuroZone while itself taking a lot of hits.
However, the EuroZone crisis might actually help German products become competitive again.
Germany benefits from weak euro policies it deplores
However, the EuroZone crisis might actually help German products become competitive again.
Germany benefits from weak euro policies it deplores
pmaitra
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Greece should call Europe’s bluff
If a multi-billionaire runs into a financial crisis and cannot repay his or her debts to the banks, the banks don’t put him in debtor’s prison.
Society allows debtors to declare bankruptcy, the banks write down losses and restructure their loans, while the debtor often walks free.
Case in point, the collapse of Lehman Brothers in 2008, after accumulating $619 billion in debt.
While millions of Americans suffered, the company’s top executives found lucrative jobs elsewhere on Wall Street.
Not so if you are a country, as the Greeks have discovered.
For five years their creditors have imposed their will, shrinking the country’s economy by 21% and forcing 25% of the people into joblessness.
There is no doubt that successive Greek governments mismanaged the economy with corruption filtering down to political patronage networks.
In 2009 alone, Athens borrowed abundantly: A whopping 15 % of the GDP.
But who were the bankers involved and why should they get off free and clear?
As Philippe Legrain, senior fellow at the London School of Economics (LSC) says in Foreign Policy magazine:
“By the time Greece was cut off from the markets in 2010, its soaring public debt of 130% of GDP was obviously unpayable in full. It should have been written down, as the IMF later acknowledged publicly.”
Legrain says 90% of what Eurozone governments and the International Monetary Fund (IMF) have lent to the Greek government after 2010 has not gone to help Greece, but to rescue French and German banks on the backs of ordinary Greeks.
For five years, the Greeks have complied with the demands of the banks, but no more.
The difference this time is that facing the bankers today is a group of young, Greek populist politicians, led by Prime Minister Alexis Tsipras, who don’t scare easily.
They are Europe’s new left, free of the ideological constraints of their predecessors — the dinosaur communists and socialists who also played their part in creating this mess.
On Tuesday, Greece refused to pay $1.73 billion it owed to the IMF.
On Sunday, Greeks will vote to reject or accept the bail-out plan put forward by the IMF, the European Commission and the European Central Bank, known as the Troika.
The situation in Greece is being followed closely and with grave concern by Greek Canadians.
Costas Manios, a former board member of the Greek Community Centre of Toronto, told me, “it’s time for Greeks to take their destiny into their own hands and stop being slaves of European bankers”, a widely-held view that cuts across political party lines.
Sipping coffee in Toronto’s Greektown on the Danforth, Manios notes he is not on the political left, but backs Tsipras’ stand.
“Greece should get rid of the clutches of the euro and embrace the drachma. This may cause a bit of pain, but will free the Greeks from IMF, Wall Street and Europe’s bankers,” he says
Others disagree. “Chris”, sitting across the table, interrupts Manios declaring: “Are you serious? Syriza (the ruling party in Greece) will leave the country in ruins ... they’re communists.”
If Greece votes “No” and the Troika refuses to write down part of Greece’s debts, then Tsipras should walk away from the euro, impose strict capital controls and call Europe’s bluff.
Let those who referred to Greece as one of the PIGS (Portugal, Ireland, Greece and Spain) see the Greek lion, Nemea, roar.
If a multi-billionaire runs into a financial crisis and cannot repay his or her debts to the banks, the banks don’t put him in debtor’s prison.
Society allows debtors to declare bankruptcy, the banks write down losses and restructure their loans, while the debtor often walks free.
Case in point, the collapse of Lehman Brothers in 2008, after accumulating $619 billion in debt.
While millions of Americans suffered, the company’s top executives found lucrative jobs elsewhere on Wall Street.
Not so if you are a country, as the Greeks have discovered.
For five years their creditors have imposed their will, shrinking the country’s economy by 21% and forcing 25% of the people into joblessness.
There is no doubt that successive Greek governments mismanaged the economy with corruption filtering down to political patronage networks.
In 2009 alone, Athens borrowed abundantly: A whopping 15 % of the GDP.
But who were the bankers involved and why should they get off free and clear?
As Philippe Legrain, senior fellow at the London School of Economics (LSC) says in Foreign Policy magazine:
“By the time Greece was cut off from the markets in 2010, its soaring public debt of 130% of GDP was obviously unpayable in full. It should have been written down, as the IMF later acknowledged publicly.”
Legrain says 90% of what Eurozone governments and the International Monetary Fund (IMF) have lent to the Greek government after 2010 has not gone to help Greece, but to rescue French and German banks on the backs of ordinary Greeks.
For five years, the Greeks have complied with the demands of the banks, but no more.
The difference this time is that facing the bankers today is a group of young, Greek populist politicians, led by Prime Minister Alexis Tsipras, who don’t scare easily.
They are Europe’s new left, free of the ideological constraints of their predecessors — the dinosaur communists and socialists who also played their part in creating this mess.
On Tuesday, Greece refused to pay $1.73 billion it owed to the IMF.
On Sunday, Greeks will vote to reject or accept the bail-out plan put forward by the IMF, the European Commission and the European Central Bank, known as the Troika.
The situation in Greece is being followed closely and with grave concern by Greek Canadians.
Costas Manios, a former board member of the Greek Community Centre of Toronto, told me, “it’s time for Greeks to take their destiny into their own hands and stop being slaves of European bankers”, a widely-held view that cuts across political party lines.
Sipping coffee in Toronto’s Greektown on the Danforth, Manios notes he is not on the political left, but backs Tsipras’ stand.
“Greece should get rid of the clutches of the euro and embrace the drachma. This may cause a bit of pain, but will free the Greeks from IMF, Wall Street and Europe’s bankers,” he says
Others disagree. “Chris”, sitting across the table, interrupts Manios declaring: “Are you serious? Syriza (the ruling party in Greece) will leave the country in ruins ... they’re communists.”
If Greece votes “No” and the Troika refuses to write down part of Greece’s debts, then Tsipras should walk away from the euro, impose strict capital controls and call Europe’s bluff.
Let those who referred to Greece as one of the PIGS (Portugal, Ireland, Greece and Spain) see the Greek lion, Nemea, roar.
sob
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A very nice article from Vivek Kaul on where the Greeks went wrong and what the Germans did right in handling their economy with a strong currency.
The Greeks fiddled with their books, spent money beyond their means and made themselves uncompetitive in the global market while their bureaucracy and Government sector kept on bloating with ever increasing salaries/pensions.
Contrast to this were the Germans who spend nearly a Trillion Euro absorbing East Germany and investing in it's infrastructure. It too saw salaries rising and their exports dipping, as a direct result of them losing their competitive edge. How they worked around and regained their edge is fantastic. This is a country with a strong economy where exports account for almost 48% of the GDP.
Since the introduction of Euro the, Germany became 30% more productive than Greece.
No wonder the writer Michael Lewis said in an interview “The Greeks will never be as productive as…Germans, and the Germans will never be as unproductive as…Greeks.”
http://www.firstpost.com/business/w...-has-always-been-a-shaky-concept-2319280.html
The Greeks fiddled with their books, spent money beyond their means and made themselves uncompetitive in the global market while their bureaucracy and Government sector kept on bloating with ever increasing salaries/pensions.
Contrast to this were the Germans who spend nearly a Trillion Euro absorbing East Germany and investing in it's infrastructure. It too saw salaries rising and their exports dipping, as a direct result of them losing their competitive edge. How they worked around and regained their edge is fantastic. This is a country with a strong economy where exports account for almost 48% of the GDP.
Since the introduction of Euro the, Germany became 30% more productive than Greece.
No wonder the writer Michael Lewis said in an interview “The Greeks will never be as productive as…Germans, and the Germans will never be as unproductive as…Greeks.”
http://www.firstpost.com/business/w...-has-always-been-a-shaky-concept-2319280.html
LETHALFORCE
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I will give the Greeks a lot of credit they have the balls to stand up to the bullies in Europe to defend their national interests. Bravo Greece .
sob
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And who will trust them in the future. Let's face the fact Greece by sheer geography is a developed economy. In its own it will be at par with Pakistan or Zimbabwe.
LETHALFORCE
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Greece is in trouble either way. The leadership of Greece has to protect their national interests make sure their own people will still have a quality of life without crushing inflation and unbearable terms. This is why I commended the leadership. The problem is not going away but the government is doing its best to protect the people.
arpakola
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my dear friend, what has been proven so far is that even within EU we are by our own.
Every country in fact is by itself and must be based on it.
Russian used to say [ we have only two allies.. our army and our navy..] period
====================
as for the trust .. that was never an issue in international and financial relations..
the only issues are.. interest and profit
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I am sure creditors will line up to give credit to a proud unapologetic defaulter
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All their leadership has done is involve in populism and fool their public and make BS claims and made tall and useless promised about default.
A responsible govt should have stuck with their reform agenda and should have made at least some effort to get back on track instead of blaming others and promote victimhood.
And a responsible govt would not hide behind a referendum specially when they know their population is full of gullible idiots
