The Greeks to default next month

[Mega]

http://www.telegraph.co.uk/news/poli...o-go-bust.html

They have already done so, the Greek PM (Goldman employe) couldn't get the cuts though house, yes he going to try again next month....but the chances of the bill passing now are some where between Bob Hope & no hope.....so i suspect "it penciled in" for next Month.

Question is will they leave the Euro?
Mike

[slippery]

Re: The Greeks to default next month

Maybe they will adopt the pound sterling?

Seriously, the confidence vote tonight is the first hurdle, then passing the austerity package.

[aaron]

Re: The Greeks to default next month

What happens if Greece defaults on their debts? Can they continue to function just off of taxes? In other words, is the choice between paying foreigners or their own citizens? Or, is it so bad that they cannot function, even without having to make debt payments?

In other words, without the debt, can Greece function?

[unlucky]

Re: The Greeks to default next month

What happens if Greece defaults on their debts? Can they continue to function just off of taxes? In other words, is the choice between paying foreigners or their own citizens? Or, is it so bad that they cannot function, even without having to make debt payments?

In other words, without the debt, can Greece function?

Greece primary deficit quarterly figures:

2010Q4	-2357.000000	A
2010Q3	-1495.000000	A
2010Q2	-2149.000000	A
2010Q1	-5359.000000	A
2009Q4	-5512.000000	A
2009Q3	-5648.000000	A
2009Q2	-7437.000000	A
2009Q1	-5723.000000	A

Greece govt expenditure:

2010Q4	30649.00	A
2010Q3	29329.00	A
2010Q2	26898.00	A
2010Q1	27011.00	A
2009Q4	35122.00	A
2009Q3	29321.00	A
2009Q2	33068.00	A
2009Q1	26704.00	A

(from the ECB).

Before interest payments, they are short around 2Bn euro each quarter. Total spend including interest is around 30Bn each quarter.

[Techdread]

Re: The Greeks to default next month

Greece should default they are just adding fuel to the fire.

But European & American Banks would be in big trouble.
http://www.safehaven.com/article/212...o-get-outraged

And Hussman thinks it will happen late next year.
http://www.hussmanfunds.com/wmc/wmc110620.htm

However I see another Franco/German Fudge in the mix .

[aaron]

Re: The Greeks to default next month

So, just so I clearly understand: If they decided to not pay their debts, they are only short 2 billion a quarter? What are they waiting for!?

It seems to me the govt could get people to start paying taxes again to cover that 2 billion shortfall as well. They'd be in pretty good shape.

[we_are_toast]

Re: The Greeks to default next month

So, just so I clearly understand: If they decided to not pay their debts, they are only short 2 billion a quarter? What are they waiting for!?

It seems to me the govt could get people to start paying taxes again to cover that 2 billion shortfall as well. They'd be in pretty good shape.

I've always thought this should be the strategy of any country that is deep in debt, including the U.S.

When the interest on the debt = deficit, hit the default button. No austerity needed. And I don't believe the argument that you won't be able to sell bonds, holds water. A country with no debt and no deficit would certainly be a far better risk than a country that is struggling with austerity measures in order to keep making payments. Bond holders that didn't get burned will have short memories and see a great opportunity. I think Iceland is demonstrating that sticking it to the bond holders is not a bad deal for it's people. If Greece follows Iceland rather than Ireland, then Portugal, how many will it take before the Tsunami comes ashore?

[unlucky]

Re: The Greeks to default next month

The Greeks might have a problem with their banks if they default, as I believe the Greek banks hold a lot of the debt hence would be at risk of collapse. So they would need to re-capitalize their banks (or create new banks with new capital), which they could not do with euros. Unless the ECB agreed to print whatever money is needed to rescue them, they would presumably be forced to re-capitalize with drachmas, thereby effectively making a disorderly exit from the eurozone.

[aaron]

Re: The Greeks to default next month

Why do they have to recapitalize their banks? Why not just start some new ones? Why can't foreign banks fill in the gaps (loan to productive economy, keep things juiced)?

[unlucky]

Re: The Greeks to default next month

Why do they have to recapitalize their banks? Why not just start some new ones? Why can't foreign banks fill in the gaps (loan to productive economy, keep things juiced)?

Starting new ones would also require capital. I think you're right tho that small countries should now avoid having their own domestic banking sector - that's got to be one of the big lessons of this crisis. Iceland, Ireland and Greece must all be wishing they didn't have any domestic banks.

Rabobank is the kind of bank that these countries should be relying on now. Big, strong, international, and if it fails someone else will have to pick up the tab. In the case of Rabo the Dutch in theory will be on the hook, but these banks are so big that in practice only continent-sized entities (EU, US) can bail them out.

The Greeks should take the branch networks and deposits of all their domestic banks and offer them for sale to Rabo or others for next to nothing. Ireland should do the same.

[Alvaro Spain]

Re: The Greeks to default next month

The Greeks might have a problem with their banks if they default, as I believe the Greek banks hold a lot of the debt hence would be at risk of collapse. So they would need to re-capitalize their banks (or create new banks with new capital), which they could not do with euros. Unless the ECB agreed to print whatever money is needed to rescue them, they would presumably be forced to re-capitalize with drachmas, thereby effectively making a disorderly exit from the eurozone.

To anybody with an interest in the problems of Europe I can recommend, among others, to take a look at the site http://www.openeuropeblog.blogspot.com

It is not perfect but quite more objective and informed than zerohedge and similar USA-centric sites.

Per Open Europe, the problems following a greek default that would take them out of the euro would be:

- Massive bank run, money flows away from Greece and possibly EU
- Banking sector will need to be nationalised to avoid collapse
- Likely massive inflation from devaluation
- Legal issues over denomination of debt (both govt and commercial)
- Shut off from financial markets for substantial amount of time
- Massive contagion to other peripheral economies, borrowing costs skyrocket

But the most important observation about a greek default that would take them out of the euro, that might come as news to USA's readers is:

- Not currently being considered. Would need a disorderly default to force it at this point


Reference: http://www.openeurope.org.uk/researc...2ndbailout.pdf

[Chris]

Re: The Greeks to default next month

would anyone care to speculate on what would happen in one took out a Euro denominated mortgage on a Greek property and then Greece defaulted and adopted the Dracma? Would the mortgage be revalued into DM or would the bank still require Euro payments?

[tacito]

Re: The Greeks to default next month

would anyone care to speculate on what would happen in one took out a Euro denominated mortgage on a Greek property and then Greece defaulted and adopted the Dracma? Would the mortgage be revalued into DM or would the bank still require Euro payments?

My take. :-)

Basically, they will change all contracts under greek law to use the new currency. Mortgage contracts will be changed. Deposits and loans on greek banks, or greek branches of foreign banks too. And of course greek public debt. Deposits or loans in foreign banks, even from the euro zone will not be affected. So the deal for the greek people is to borrow from a greek bank and deposit the money in an european web based bank like "ING Direct".

The new dracma will start at parity with the euro, so software will not be afected for the first nanoseconds until its value tanks.

[unlucky]

Re: The Greeks to default next month

The new dracma will start at parity with the euro, so software will not be afected for the first nanoseconds until its value tanks.

I hope the Greeks have invested in some of these nanosecond trading platforms, they may need them!