2015 - Greece drops Euro?

[gnk]

Re: 2015 - Greece drops Euro?

As for Greece, one cannot get blood from a turnip.
Eventually the loans to Greece must be acknowledged as bad, admitted to be in default, and written off.
The amount of them that are listed in Target2, or any other bank or clearinghouse, would be zeroed out.
While Germany probably holds some Greek bonds on the books in the Target2 system, all of the German balance in Target2 can't be Greek debt, just some small fraction.
That entire half-a-trillion Euro number should not vanish.

Right?

What modern country really expects to pay off their debt? That's not how it works. No country will ever pay their debt down to zero. It's all about managing the debt. But more importantly, when it comes to Greece, what is the annual debt service? Everyone is complaining that Greece can never pay off its debt, and the debt is strangling its economy. But what percent of gdp goes to service Greek debt? Greece actually pays less than Italy and Spain, and not much more than France, as a percentage of gdp.

Here's a good article.

The biggest issue Greece has, IMO, is the mandatory 4.5% budget surplus. That's a lot. If Tsipras were smart, he would have only haggled over that, or at least have that as his ultimate goal. Everything else, was a non-starter and much of it Marxist/noncompetitive, basically, what got Greece into this mess beginning with Andreas Papandreou in 1981.

I have said it a million times. The real problem with Greece is competitiveness. The prior bailouts were all about lengthening maturities, lowering interest payments, and returning interest paid to the ECB to Greece. The Structural Reforms? Not going so well. Greece still has along way to go.

Greece hit the ceiling with the public sector years ago. Greece actually had an extremely bloated public sector. The private sector and foreign sector of the economy were always ignored. Greece is not foreign investment friendly nor is it business friendly. The Keynesian method has been tried relentlessly, with catastrophic results because until Greece becomes competitive and investment friendly, it will always be a patronage filled money pit. Seems to me that only the Germans understand this.

Plan A was working until Tsipras came into the picture. The Tsipras threat started around late November and grew through out December, and coincidentally, that's when Greece's economy and bond yields started changing direction.

The EU will be fine. If anything, the Germans understand the coming global currency crisis better than most countries, as Germany is not as reliant on the financial sector (or should I say "captured" by it) as the UK and US is. They are preparing Europe, and the Euro accordingly. It is a long term thing that most don't get. Unfortunately, it makes Germany look like the "bad guy" for now.

[jk]

Re: 2015 - Greece drops Euro?

if i'm not mistaken, greece already proposed that the expected primary surplus be lowered to 1.5%, and that proposal was rejected.

[thriftyandboringinohio]

Re: 2015 - Greece drops Euro?

What modern country really expects to pay off their debt? That's not how it works. No country will ever pay their debt down to zero. It's all about managing the debt....

...The biggest issue Greece has, IMO, is the mandatory 4.5% budget surplus. That's a lot...

Both excellent points, gnk.
The primary surplus percentage is totally absurd. Only a tiny handful of nations have ever held at 3% for a few years, and most of them discovered oil, like Norway.

[GRG55]

Re: 2015 - Greece drops Euro?

if i'm not mistaken, greece already proposed that the expected primary surplus be lowered to 1.5%, and that proposal was rejected.

Perhaps Greece is a modern day William Dorrit?

[gnk]

Re: 2015 - Greece drops Euro?

if i'm not mistaken, greece already proposed that the expected primary surplus be lowered to 1.5%, and that proposal was rejected.

Yes, that is true.

Unfortunately, Tsipras and Varoufakis mishandled just about everything from the beginning. Too many promises, too confrontational, too many miscalculations, a lack of understanding on how the EU works, and an underestimation of the populations' viewpoints of other EU member countries, and how their elected representatives work under both domestic and EU constraints. In the EU, a "no" is a thousand times easier done than a "yes." And that is a good thing, IMO.

The funny thing is, all those mistakes played real well in Greece.

I don't rule out an adjustment to the 4.5% yet. Unfortunately, as I have said before, these elections were a tremendous waste of time, energy, and money. Whatever Tsipras gains will be outweighed by the costs incurred: a banking system weakened by capital flight, withered tax collections due to a wait and see attitude by taxpayers, lost or cancelled investments, frozen projects, an inactive Parliament, and most importantly, this ridiculous, unnecessary escapade further worsened the already negative perception of Greece as a place to invest.

Back to square one for Greece... And they only have themselves to blame.

[touchring]

Re: 2015 - Greece drops Euro?

I don't rule out an adjustment to the 4.5% yet. Unfortunately, as I have said before, these elections were a tremendous waste of time, energy, and money.

You're not the only one to say this. The authorities in Singapore have said that elections are a waste of time and for the time spent campaigning and debating policies in parliament, they could spend it on implementation or gambling with the country's retirement savings, if you are familiar with that.

To think about it, Singapore is a direct contrast of what Greece is in almost every aspect.

[GRG55]

Re: 2015 - Greece drops Euro?

You're not the only one to say this. The authorities in Singapore have said that elections are a waste of time and for the time spent campaigning and debating policies in parliament, they could spend it on implementation or gambling with the country's retirement savings, if you are familiar with that.

To think about it, Singapore is a direct contrast of what Greece is in almost every aspect.

And given a choice I would rather live in Greece than in Singapore...by far.

[GRG55]

Re: 2015 - Greece drops Euro?

if i'm not mistaken, greece already proposed that the expected primary surplus be lowered to 1.5%, and that proposal was rejected.

Perhaps Greece is a modern day William Dorrit?

https://foreignpolicy.com/2015/02/19...el-varoufakis/

"...More immediately, Greece can save itself. Left in the clutches of its EU creditors, it is not destined for the sunlit uplands of recovery, but for the enduring misery of debt bondage. So the four-point plan put forward by its dashing new finance minister, Yanis Varoufakis, is eminently sensible. This involves running a smaller primary surplus — that is a budget surplus, excluding interest payments — of 1.5 percent of GDP a year, instead of 3 percent this year and 4.5 percent thereafter. Some of the spare funds would be used to alleviate Greece’s humanitarian emergency. The crushing debts of more than 175 percent of GDP would be relieved by swapping the loans from eurozone governments for less burdensome obligations with payments tied to Greece’s GDP growth. Last but not least, Syriza wants to genuinely reform the economy, with the help of the Organization for Economic Cooperation and Development (OECD), notably by tackling the corrupt, clientelist political system, cracking down on tax evasion, and breaking the power of the oligarchs who have a stranglehold over the Greek economy...

...Seven years into the crisis, the eurozone economy is doing much worse than the United States, worse than Japan during its lost decade in the 1990s and worse even than Europe in the 1930s: GDP is still 2 percent lower than seven years ago and the unemployment rate is in double digits. The policy stance set by Angela Merkel’s government in Berlin, implemented by the European Commission in Brussels, and sometimes tempered — but more often enforced — by the European Central Bank (ECB) in Frankfurt, remains disastrous. Continuing with current policies — austerity and wage cuts, forbearance for banks, no debt restructuring or adjustment to Germany’s mercantilism — is leading Europe into the ditch..."

[Polish_Silver]

the primary surplus

Both excellent points, gnk.
The primary surplus percentage is totally absurd. Only a tiny handful of nations have ever held at 3% for a few years, and most of them discovered oil, like Norway.

Hong Kong has one of the longest running surpluses, and Singapore is close. However, these island nations are afflicted with governments that actually do long term planning.

I'd like to see the US run even a 1% primary surplus!

Not that this would be impossible in principle, but there is so much wasted money, so many entrenched interest groups, etc.

Hong Kong does it again!

http://www.thestandard.com.hk/breaki...l.asp?id=32407

[gnk]

Re: 2015 - Greece drops Euro?

You're not the only one to say this. The authorities in Singapore have said that elections are a waste of time and for the time spent campaigning and debating policies in parliament, they could spend it on implementation or gambling with the country's retirement savings, if you are familiar with that.

To think about it, Singapore is a direct contrast of what Greece is in almost every aspect.

Don't know much about Singapore, so I'll have to wiki that...

Let me explain why I am calling the recent Greek election worthless before people jump to conclusions. You also have to understand how a Parliamentary system works, which is very different from the US System. In a Parliamentary system, governments may crumble overnight and snap elections are held as a result.

Regarding this recent worthless Greek election - you know why Greece recently had an election in the first place? It was due to three failed parliamentary votes for the position of "President" of the Hellenic Republic (Greece) which took place from December 2014 to January 2015.

What does the President of the Hellenic Republic do? Practically nothing. He is merely a ceremonial figure whose existence serves as an Achilles heel for any government in power. Should he resign, or leave, there is a vote for the next President. If that vote does not go well, and three chances are given, then Parliament is dissolved, and new elections are held.

What did the President of the Hellenic Republic, a largely ceremonial role, make per year pre Troika? Pre 2012, and the "annoying" Troika from Brussels, he made 23,000 Euros a month - with today's lower USD/EU exchange rate that's $312,000 a year! That's more than what Joe Biden makes! And this is a country with 11 million people and a gdp of around 240 billion. When the Euro was higher compared to the dollar, the President of Greece was making almost as much as Obama!

The crisis forced the Greek government to cut that salary in half in 2012.

The Greek election we recently had was due to a failed vote for a largely worthless, ceremonial government position. It was not an end of term election.

This is how things are done in Greece. That's why I am constantly describing the Greek government as dysfunctional.

[touchring]

Re: 2015 - Greece drops Euro?

And given a choice I would rather live in Greece than in Singapore...by far.

Definitely, Singapore is not for living, it is only for working.

[lakedaemonian]

Re: 2015 - Greece drops Euro?

And given a choice I would rather live in Greece than in Singapore...by far.

Although I would think the secret would be to earn a Singapore income while living in Greece ;)

[vt]

Re: 2015 - Greece drops Euro?

Or have a career in California and retire to Nevada.

A career in New York or Massachusetts and retire to Florida.

[touchring]

Re: 2015 - Greece drops Euro?

Although I would think the secret would be to earn a Singapore income while living in Greece ;)

No need to go so far, Vietnam and Thailand is only 2 hours flight away.

[lakedaemonian]

Re: 2015 - Greece drops Euro?

No need to go so far, Vietnam and Thailand is only 2 hours flight away.

Sihanoukville in Cambodia is pretty nice and cheap, albeit light in western infrastructure. The airport is supposed to start taking 737 and Airbus equivalent "soon".