Greece Says Goodbye to the Euro

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    May 10, 2012 7:07 PM GMT
    And yet there are those who continue to believe that austerity is not the answer... we will soon find out how well that turns out for them.

    http://247wallst.com/2012/05/09/greece-says-goodbye-to-the-euro/

    Greece already has left the eurozone. The formality of the paperwork is only a few months away, at most. The notion it can remain in the alliance is based on the fantasies that either the political parties that have gained strength in Greece, through their objections to austerity, will suddenly embrace existing cost cuts or that Germany will agree to a renegotiation of Greece’s bailout terms. Neither has any chance of occurring.

    Several research firms and investment banks currently put the chance that Greek will strike out on its own at 50% to 75%. Those figures are optimistic and reflect more hope than reality. Alexis Tsipras of the leftist Syriza party has been given close to a mandate by voters. He says that Greece has had its back pinned to a wall by its financially stronger neighbors. He hopes to create a coalition of other political parties that largely will support his view. That probably will not happen. Another round of elections will begin and, based on the results of the latest election, Syriza and other groups that have rejected austerity are highly likely to gain more power. The formal repudiation of government cost cuts will come before the end of summer.
  • conservativej...

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    May 10, 2012 9:55 PM GMT
    Long term -- as in 6 to 8 years -- it is best Greece drop out of the Eurozone. It will immediately stop the hemorrhage of wealth from the stronger, i.e. Germany, countries whose illusion is they can support the populace of Greece.

    Sometimes, it is best to take the demanding child who wants his diaper changed, out of the diapers. They either continue to piss on themselves or become self-reliant.
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    May 16, 2012 4:33 PM GMT
    conservativejock saidLong term -- as in 6 to 8 years -- it is best Greece drop out of the Eurozone. It will immediately stop the hemorrhage of wealth from the stronger, i.e. Germany, countries whose illusion is they can support the populace of Greece.

    Sometimes, it is best to take the demanding child who wants his diaper changed, out of the diapers. They either continue to piss on themselves or become self-reliant.


    Um make that imminently. The run on Greek banks has begun.

    http://finance.fortune.cnn.com/2012/05/16/greece/

    The pressing problem isn't a splintered legislature that may balk at delivering the reforms that the IMF and European Community are demanding in exchange for the next tranche of bailout money. It's a disastrous, old-fashioned run-on-the bank. "For a year, Greeks have been sending their savings from Greek banks to foreign banks," says Robert Aliber, retired professor of international economics from the University of Chicago. "Now, the flood has reached a crescendo." Indeed on Monday alone, outflows from the Greek banks reached almost $900 million.

    The flight of capital is sapping the deposits needed to refinance mortgages and small business loans, causing a full-blown credit crisis. Greeks are also extremely reluctant to spend their Euros on cars, dining or anything else, since they reckon those Euros will buy more at the supermarkets and auto lots in the weeks or months ahead. The disappearing consumer is further crippling the economy.

    Greece's exit is absolutely necessary. "Its prices and costs are far too high under the Euro, so it just cannot compete on international markets," says Aliber. "The Greeks have suffered far more through all these misguided bailouts than they've gained by lowering prices or costs." The political gridlock, argues Aliber, is actually a good thing because it will hasten abandoning a disastrously overvalued currency, just what's needed to get Greece growing again.

    The mechanics of shelving the Euro for its own currency are pretty predictable. One day soon, imagine it's late on a Friday afternoon, the Greek government will declare all banks closed for the following week. By Monday, the legislature will vote an emergency law that designates a fixed exchange rate of, say, 1 drachma –– the Greek pre-Euro currency –– for each Euro. By Monday, all corporate and personal savings in Greek banks will be denominated in drachma.

    The drachma will tumble in value, so that almost immediately, Greek consumers will need at least 1.5 Drachma to buy one Euro. A savings account that held 15,000 euros is now 15,000 Drachma. But those drachmas will soon fetch just 10,000 Euros. That's a "devaluation" of 33%. "That number is the low-end of the range for countries that exit a common currency," says Uri Dadush, an economist at the Carnegie Endowment.


    The good news, expect vacations in Greece to get considerably cheaper soon.
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    May 16, 2012 4:41 PM GMT
    More here -

    http://www.economist.com/blogs/freeexchange/2012/05/euro-crisis-4?fsrc=gn_ep

    SO MUCH of modern finance is a confidence game. Banks borrow short and lend long. A perfectly solvent bank can therefore go bust if depositors panic and rush to pull money out. This is why modern financial systems have backstops, despite the moral hazard cost; in their absence, the economy is at risk of irrational destruction.

    European leaders have been playing their game with Greece like confidence doesn't matter. They have behaved as if an adjustment is necessary, and the only question at issue is which side will bear its costs. But confidence matters. As time has gone on, markets have become less sure of the talk that Greece would never be allowed to leave the euro area. The euro zone's chief leaders have been more concerned about moral hazard than this confidence dynamic. We know what happens in such cases; the lack of confidence destroys the system.

    The slow hiss of capital leakage has been a problem for Greece since relatively early on in the crisis. That problem seems to have intensified significantly in the wake of the recent election. From May 6th to May 15th, for instance, Greeks were yanking deposits from their banks at a clip of approximately €700m per day. Why wouldn't they? If everything turns out all right, they can simply put their money back in the bank later. If Greece tumbles out of the euro area, well, they have protected their savings from huge losses. A bank run is the logical development.

    The question is how long this can continue. Greece has no money. Revenue collections are falling short, and one suspects Gresham's Law may begin operating. One doesn't turn over precious euros to the Greek government if an exit is looming; one hoards them, bringing forward the day when an alternative scrip begins circulating. The mere prospect of bad money may drive out good money. Meanwhile, the flow of euros into depositors' hands ultimately originates at the European Central Bank, and the ECB is no doubt very nervous about continuing to supply them for fear of huge, open-ended exposure to a Greece that is potentially on its way out. The ECB may already be rationing euros to Greece. If that continues or scales up, we are then talking about effective capital controls—the ATMs no longer dispense euro notes—and more pressure for the introduction of alternative scrip in Greece. Exit, in other words, becomes a fait accompli.
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    May 16, 2012 5:15 PM GMT
    Good for Greece. The Euro has been an epic failure.
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    May 16, 2012 6:34 PM GMT
    Christian73 saidGood for Greece. The Euro has been an epic failure.


    Um no, the problem wasn't ever the Euro itself, it was the level of unrestrained deficit spending that achieved no impact (or negative impact) to economic growth. Instead of creating a better environment for businesses to create jobs, they hired more government workers, increased benefits and kept ridiculous entitlement programs.
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    May 16, 2012 6:35 PM GMT
    And now for the anticipated fallout - expect things to get worse - possibly a lot worse before they get better:

    http://www.telegraph.co.uk/finance/financialcrisis/9268330/Italys-banks-shaken-as-economic-slump-deepens.html

    Hans Redeker from Morgan Stanley said the EU's mishandling of Greece has put Italy in grave danger. "The irrevocability of the eurozone is a valuable asset, and they are throwing it away. Global investors are preparing for the day Greece leaves," he said.

    The IMF said Italian bank exposure to the state is 32pc of GDP, including all forms of lending. "We are looking at this number very closely," said Mr Redeker. Almost half of this is owed to foreigners. Italy's central bank owes a further €278bn in 'Target2' claims to peers in Germany, Holland, Finland and Luxembourg, reflecting capital flight.

    Italy's former premier Romano Prodi said the EU risks instant contagion to Spain, Italy, and France if Greece leaves. "The whole house of cards will come down", he said

    Angelo Drusiani from Banca Albertini said the only way to avert catstrophe is to convert the European Central Bank into a lender of last resort. Otherwise Italy faces "massive devaluation, three to five years of hyperinflation, and unbearable unemployment."

    The ECB's emergency lending may have made matters worse, encouraging banks to buy their own states' debt. It has led to an incestous inter-linkange of fragile banking systems and fragile sovereign states, each propping the other up. Many of the banks used ECB money to buy state bonds until they need to roll over their own debt. They are now nursing stiff losses.

    Moody's downgraded 26 Italian lenders on Monday night saying the slump itself is the killer, joining a chorus of voices warning that too much austerity may be self-defeating. "Banks are vulnerable to the renewed recession in Italy, given their already elevated levels of problem loans and weakened profitability," it said. Moody's expects the economy to contract 1.9pc this year.
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    May 16, 2012 6:45 PM GMT
    JPtheBITCH said
    riddler78 said
    Christian73 saidGood for Greece. The Euro has been an epic failure.


    Um no, the problem wasn't ever the Euro itself, it was the level of unrestrained deficit spending that achieved no impact (or negative impact) to economic growth. Instead of creating a better environment for businesses to create jobs, they hired more government workers, increased benefits and kept ridiculous entitlement programs.

    "When you're a hammer ,everything looks like a nail."----Abraham Maslow
    "Especially if you're a Rand-loving idiot from Canada."---JP's corollary


    Once again illustrating how inept you must have been as a trader only superceded by your, we'll call it limited, knowledge of history.
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    May 16, 2012 6:59 PM GMT
    JPtheBITCH said
    The Ridiot said
    You know, JP, I've finally realized what a moron I am.

    Well, at last we agree.

    Beyond desperate fabricating a quote. And highly dishonest as well.
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    May 16, 2012 7:05 PM GMT
    socalfitness said
    JPtheBITCH said
    The Ridiot said
    You know, JP, I've finally realized what a moron I am.

    Well, at last we agree.

    Beyond desperate fabricating a quote. And highly dishonest as well.


    JP's like the crazy great uncle who sits in the corner and curses with a decreasing number of moments of sober lucidity. At times you pity him, others, you just have to laugh.
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    May 16, 2012 8:49 PM GMT
    riddler78 said
    socalfitness said
    JPtheBITCH said
    The Ridiot said
    You know, JP, I've finally realized what a moron I am.

    Well, at last we agree.

    Beyond desperate fabricating a quote. And highly dishonest as well.


    JP's like the crazy great uncle who sits in the corner and curses with a decreasing number of moments of sober lucidity. At times you pity him, others, you just have to laugh.

    This was a pretty obvious false quote, probably not intended to be taken seriously. But modifying a quote, even when obvious is bad regardless because it sets a precedent for less obvious quote modifications.

    I was the target of one done by that mentally disturbed nutcase who thinks conservatives are agent provocateurs sent to RJ. He inserted the word "hen" after "liberal" in a quote of mine, then criticized others and me for using the term. Amazing. When I called the fatass on it, he justified it saying I could have used it so it wasn't a stretch.

    When I quote, I will even use ellipses to indicate omitted material so others can check if I took anything out of context.

    BTW, I haven't used the term "liberal hen" yet in normal discourse (this time doesn't count), but I'm evolving, so I may start to use it. icon_lol.gif
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    May 16, 2012 8:57 PM GMT
    So Riddler still doesn't understand why the Euro was always doomed to failure, and neither he nor Socal are bright enough to get the joke JP made.

    Any other lessons from this thread?
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    May 16, 2012 9:01 PM GMT
    Mother England needs to break away from the EU too, before it engulfs it, in creating something like the old Holy Roman Empire.
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    May 16, 2012 9:22 PM GMT
    Christian73 saidSo Riddler still doesn't understand why the Euro was always doomed to failure, and neither he nor Socal are bright enough to get the joke JP made.

    Any other lessons from this thread?


    Lol - what a pleasant world of denial you must live in. You attempt to belittle us as stupid when your arguments lack coherence let alone reason.

    I don't blame you for your anger of course - or your shallow grasp of reality. It must be difficult as you watch fiscal realities descend on Europe. Oh how irrelevant you have become - I have to imagine that's what bothers you the most icon_wink.gif
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    May 16, 2012 9:55 PM GMT
    riddler78 said
    Christian73 saidSo Riddler still doesn't understand why the Euro was always doomed to failure, and neither he nor Socal are bright enough to get the joke JP made.

    Any other lessons from this thread?


    Lol - what a pleasant world of denial you must live in. You attempt to belittle us as stupid when your arguments lack coherence let alone reason.

    I don't blame you for your anger of course - or your shallow grasp of reality. It must be difficult as you watch fiscal realities descend on Europe. Oh how irrelevant you have become - I have to imagine that's what bothers you the most icon_wink.gif


    Riddler - Do you have a word document where you keep these tired and inane comments that you constantly recycle? Or do you write them fresh each time?

    Europe is electing leftists all over, so those fiscal realities will be changing soon.
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    May 16, 2012 10:06 PM GMT
    Christian73 said
    riddler78 said
    Christian73 saidSo Riddler still doesn't understand why the Euro was always doomed to failure, and neither he nor Socal are bright enough to get the joke JP made.

    Any other lessons from this thread?


    Lol - what a pleasant world of denial you must live in. You attempt to belittle us as stupid when your arguments lack coherence let alone reason.

    I don't blame you for your anger of course - or your shallow grasp of reality. It must be difficult as you watch fiscal realities descend on Europe. Oh how irrelevant you have become - I have to imagine that's what bothers you the most icon_wink.gif


    Riddler - Do you have a word document where you keep these tired and inane comments that you constantly recycle? Or do you write them fresh each time?

    Europe is electing leftists all over, so those fiscal realities will be changing soon.


    Lol yeah - go with that. Even a number of their "right wing" politicians have been fairly left-ish. Their options are however constrained. After spending on unsustainable social welfare programs all these years, it's now time to face reality - it really doesn't matter what governments they elect.

    I am sort of glad with respect to France and Greece though - it is through their fiscal incompetence and disaster that could result in Romney in the White House this fall. Either way, they stand as examples of what the alternatives to fiscal restraint are.
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    May 16, 2012 10:50 PM GMT
    riddler78 said
    Christian73 said
    riddler78 said
    Christian73 saidSo Riddler still doesn't understand why the Euro was always doomed to failure, and neither he nor Socal are bright enough to get the joke JP made.

    Any other lessons from this thread?


    Lol - what a pleasant world of denial you must live in. You attempt to belittle us as stupid when your arguments lack coherence let alone reason.

    I don't blame you for your anger of course - or your shallow grasp of reality. It must be difficult as you watch fiscal realities descend on Europe. Oh how irrelevant you have become - I have to imagine that's what bothers you the most icon_wink.gif


    Riddler - Do you have a word document where you keep these tired and inane comments that you constantly recycle? Or do you write them fresh each time?

    Europe is electing leftists all over, so those fiscal realities will be changing soon.


    Lol yeah - go with that. Even a number of their "right wing" politicians have been fairly left-ish. Their options are however constrained. After spending on unsustainable social welfare programs all these years, it's now time to face reality - it really doesn't matter what governments they elect.

    I am sort of glad with respect to France and Greece though - it is through their fiscal incompetence and disaster that could result in Romney in the White House this fall. Either way, they stand as examples of what the alternatives to fiscal restraint are.

    Even Calif Gov Jerry Brown says we can't be like Greece with the spending, but he still doesn't get the tax part yet. It is certainly possible with the turmoil in Europe, especially what is likely in the coming months, people will start to really get scared and throw the Socialist out.
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    May 18, 2012 6:12 AM GMT
    A warning ... that if Europe abandons Greece after it leaves the eurozone, it may run straight into the arms of Russia

    http://blogs.the-american-interest.com/wrm/2012/05/17/the-geopolitics-of-greeces-exit-from-the-euro/

    And if Europe cuts Greece loose, Russia may fill the void there as well. There are close cultural ties between these Orthodox countries, and both are like to join in a feeling of bitterness and exclusion vis-à-vis the West.
    Americans often don’t “get” the Russia-Greek connection. In Ottoman times, Orthodox Russia was the protector of Orthodox Christians in the great Islamic empire and frequently used its diplomatic clout to defend the rights of its co-religionists. Greece looked to Russia as a reliable ally during much of the troubled period after modern Greece gained independence from the Turks.

    The feeling is reciprocal. Russia received the gospel from Greek Christians. The Russian tsars married into the Byzantine royal house; the word tsar (or czar) is the Russian form of Caesar, indicating the strong Russian sense that Orthodox Moscow, after the fall of Constantinople, was the “Third Rome.” Much of modern Russian identity and sense of a unique place in the world is wrapped up in its civilizational connection with Byzantine culture and religion.

    Mount Athos, the center of Orthodox monasticism and the spiritual heart of Greece, looms large in Russia. No less a person than President Vladimir Putin has made pilgrimages to this site.

    There are other connections as well. Much of the Russian oligarchy’s money has been moved through Greek Cyprus, where the banking system has long been very close to post-Communist Moscow.

    Israeli interests are also involved. As Turkish-Israeli relations have cooled, Greco-Israeli ties have warmed. The discovery of vast natural gas deposits in Cypriot and Israeli waters have pushed those countries closer together; indeed, the gas reserves may be large enough to make Cyprus self-sufficient in energy and turn Israel into a major gas exporter for the next several decades. Turkey doesn’t like this.

    Meanwhile, the very large wave of immigration from post-Communist Russia to Israel has created new networks of business, investment, and trade between Russian-speaking Israelis and their families and friends in the old country.

    The European Union is in retreat in the eastern Mediterranean. Turkey no longer sees its destiny in EU membership; if Greece and Cyprus either jump or are pushed from the euro, they will remain members of the EU, but that membership will mean something much less than it formerly did.

    By reaching out to Cyprus and Greece in their hour of need, Russia may build some important new relationships to help compensate for their lost contracts and connections in Iraq, Libya, and perhaps now Syria. If Greece is floundering with a weak drachma and an economic meltdown, a relatively small amount of Russian aid and trade could go a long way.

    The creation of the euro was a political as well as an economic event. Its break up will be a political event as well.
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    May 18, 2012 4:01 PM GMT
    Greece to hold a new legislative election after failure to form a coalition government

    http://en.wikipedia.org/wiki/Greek_legislative_election,_June_2012

    The following parties will be in the election:
    -ND
    -SYRIZA
    -PASOK
    -ANEL
    -KKE
    -XA
    -DIMAR
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    May 18, 2012 4:26 PM GMT
    geographic_info_systems saidGreece to hold a new legislative election after failure to form a coalition government

    http://en.wikipedia.org/wiki/Greek_legislative_election,_June_2012

    The following parties will be in the election:
    -ND
    -SYRIZA
    -PASOK
    -ANEL
    -KKE
    -XA
    -DIMAR



    Hopefully the far-right party won't get more power. I just read they'd suggested, in order to stem the flow of illegals from Turkey that mines be placed along the border. And no, they don't mean gold, diamond or coal mines.

    Great.

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    May 19, 2012 1:08 AM GMT
    Greece should be part of Middle Eastern Countries... Europe don't know how to play with money.