MEZZANINE wrote:
The EU leaders are saying if Greece has a referendum it should be to accept the deal or leave the EU. From what I've heard that is not the referendum Greece are planning, the Greek government want the question to be Accept the cuts & taxes to repay debts, or default on debts to maintain standards of living, not leaving the EU. Basically a veiled threat or bluff by the EU saying if you dont accept EU control of your economy overruling your own government and people then we will boot you out in the cold.
There is nothing veiled about the threat. If Greece is not willing to bring their finances in order, then they cannot expect the rest of us to pay for their bad state finances management. The banks and the governements in the Euro zone were/are willing to make a lot of sacrifices (and yes, that is my money they are giving away - mine as a tax payer paying the maximum income tax rate and mine as a share holder of different publically traded banks). The only thing that we demand in return for our commitment to support them with hundreds of billions, is that Greece should world towards a balanced budged.
If the Greek are not willing to do them, then the outcome is clear - after all, we are not dumb enough to let our money sink into a bottomless well.
If the Greek see their benefactors asking for a balanced budget as a loss of sovereinity, then I fear, there is no option left, but let them being sovereign in their monetary policy as well. Sucks for them, that their debt is issued in EURO/USD/JPY/.. though.
MEZZANINE wrote:
Assuming that Greece does leave ( or get booted ) from the EU ( and common currency ) for defaulting on debts you would be right, they will have immediate costs of reinstating a national currency ( though I suspect the Euro will still be used as unofficial currency regardless of what the EU say or do for a long time ), they will suffer from high interest rates & massive compulsory debt insurance on trade deficits, they will still need cuts & taxes to as their standards of living do currently exceed their incomes ( though the cuts & taxes will be significantly less than needed to repay debts ), they would have a huge dip in every way BUT people would still trade with them and in maybe 10 years they could recover to their pre-EU state, be free from this disastrous EU experiment, and be safe from the temptations of borrowing themselves into a hole like this again as no one would give them the unsecured credit to do so.
A more likely outcome of defaulting will be remaining in the EU and having debts frozen indefinitely, reason being the EU dream/ideology is to unite the countries of Europe into a single entity, to the true believers at the top this means all debts will eventually be federal EU debts anyway and not single nation/state debts.
Oh and I cant let this go lol
Do you really want to defend the 'Oh so evil banks' lol These banks loaned Greece far more money than they could repay, then kept lending them more just so they could make repayments. These banks were making loans for short term healthy balance sheets with lots of projected profit, they knew Greece could never repay but like a loan shark they dont want to be repaid, they wanted the debt to be so big that all Greece could do was work its guts out to make interest only payments. And you know what they deemed to be security on these loans, the fact that Greece was in the EU and the EU would bail them out.
Usually I would say people should repay their debts but in some cases like loan sharks I consider the lenders behavior to be criminal. The heads of these banks should be put on trial for crimes against humanity for the damage they're greed has done around the world.
A country cannot "default". When talking about a "default", all a country can do is stop interests and principal payments. This does not mean though, that their debt is gone. It is still there, the debitor is just not holding up to the agreements they made. What is commonly referred to as a default, is a restructuring of one's debts. Meaning, that the Greek have to get their creditors at the table and reach an agreement how they are supposed to pay off their debts. There might be a period with no interest rates being paid, or the maturity being prolonged etc. But point is, the debt is still there.
And trust me, without the pressure from the goverments, neither the German nor the French banks will agree to a haicut as high as 50%.
It is interesting, that you talk about "huge profits" from holding Greek bonds. Looking at Greek bonds issued in Euro, you see annual coupons ranging from 2 to 4.5%, and about 3 - 6% for private bonds guaranteed by the Greek government. Surely, that is not the huge profit a loan shark is after. Hell, a bank makes more profit when giving you a mortage and you know what, they even get your house if you cannot pay them back.
Banks do not make "huge" profits from government bonds. They usually buy them so they can use them as colleterals for their other trading activities or for covering their own debt obligations. Insureres actually HAVE to buy government bonds as they are not allowed to have portfolios made only of stocks as guess what, stocks are to risky and government bonds are safe lol.
Point is, in this case, the banks were not the bad guys lurking after some high profit high risk products and endangering the whole financial system with their trading activities. Governemnt bonds were deemed to be secure, and banks were given incentives by the regulators to invest in government and goverment guaranteed bonds.
Well, one debitor - Greece - cannot pay. **Filtered** happens. It is nothing that could kill they system. European banks will survive, just as will the the Euro as a currency. Maybe even stronger than now. The only ones who will be **Filtered** are the Greek - as you know what they say - about being fooled once ... or twice.
](./images/smilies/eusa_wall.gif "Brick wall")
