Nightmare foretold if Greece heads for euro exit

[FarCenter]

In Athens, the homeless are on the streets in growing numbers, soup kitchens feed twice as many people as a year ago, and the poor are diving into garbage bins in search of scrap they can sell.

Greece is close to breaking point as it struggles with austerity targets set by creditors, but this is just a foretaste of the nightmare of unrest, hunger and even anarchy that could engulf the debt-crippled nation if it is forced out of the euro.

If the exact economic impact of such a move is hard to nail down - newly issued drachmas devalued by up to 70 percent, runaway inflation, a banking meltdown, a collapse in trade - the implications for ordinary Greeks crushed by the debt crisis are even harder to predict.

Without international bailout cash, salaries and pensions would go unpaid and violence, political extremism and uncontrolled emigration could quickly follow.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_19/05/2012_442869

[dipsydoodle]

1. Their most recent bailouts were conditional on repayment at prescribed intervals

with those payments taking precedent over all other expenditure. No repayments no further bailouts and the current bailouts are secured against Greek state owned assets under international law unlike earlier funds which were covered only by Greek law. Its the cumulative effect of non payment of their taxes. The Greeks heroically regard payment of tax as a joke. It may well be that they no longer find their own joke quite so funny.

I'm guessing the whole fiasco will collapse like a pack of cards no later than the end of this year with bailouts replaced by international aid - non repayable. Back on the Drachma Greece and its islands will quickly be swamped with tourists like the old days and hopefully their economy will start to recover.

[FarCenter]

2. Niether the bailout, austerity nor a return to the drachma will work.

Their current account is in deficit: current government expenditures exceed current tax collections.

If ND and Pasok win they will attempt to impose austerity, but will fail, and the EU will stop funding the Greek central bank with euros. The politicians are unable to actually impose austerity. They attempted to collect property taxes on real estate by having the power company collect them along with the electricity bill. The Greeks stopped paying their electric bills. The power company ran out of money. So the government gave up on collecting the taxes that way.

If SYRIZA wins, then the same thing happens, but sooner and more transparently.

As the article says, Greece imports 40% of its food and all of its fossil fuels. So with foreign exchange frozen, chaos results.

[dipsydoodle]

7. chaos results........

Same thing in effect as Cuba where I've just been for 3 weeks - but they manage.

[abelenkpe]

3. Why can't Greece default and stay in the euro?

That's what they want. Or better yet Why not a debt jubilee for all? Is it preferrable that people starve and die and bankers get paid or that we wipe out debts, start over with real regulations and the rich are still rich but not quite as rich as they expected to be by enslaving and starving the rest?

[FarCenter]

4. It can't pay for its government expenditures nor its imports

Even if freed of its debt-cutting targets, the fact the country runs a primary deficit - spending more than it takes in taxes - means it would have to continue austerity measures and, because it would be shut out of international markets, it would have no one to borrow from.

"Even if you strip interest payments, with a primary current account deficit at about 10 billion euros, it would mean economic life would grind to a halt,» said Yannis Stournaras, head of Greek think tank IOBE.

"Greece would have a hard time to import oil, foods, medicines and other primary inputs. Imagine the navy, police, without fuel. Natural gas spigots would close. GDP would be hurt by a battered banking system. Public debt would increase."

[creeksneakers2]

10. Its not just the big banks

Small investors around the world have been hurt by the damage the Greeks did to the stock markets.

[Woody Woodpecker]

5. Take a look at Iceland

Doing fine.

Exited euro, ignored austerity, and rebuilt from within. Doing healthy

Just last week, Icelandair just launched a daily nonstop flight from Denver to Rekjavik. Hick and Hancock was part of the group that landed to Denver from Rekjavik for the first time. It is expected to bring over 500 million to both countries (and our fine city and state).

[FarCenter]

6. The krona was devalued by 80%

Iceland went through pretty severe austerity.

[muriel_volestrangler]

8. No. These myths about Iceland just won't die.

Iceland was never in the euro. It was never in the EU.
Iceland worked with the IMF.

Iceland completes IMF Programme

The objective of closing the budget gap and achieving fiscal sustainability has been achieved with a mixed methodology of reducing expenditure and increasing revenue. The cutbacks have intentionally and successfully protected the welfare system and revenue increases have spared low-income earners. Further Treasury indebtedness was prevented and debt as a proportion of GDP will decrease in the coming years. In light of this success and to further encourage the economic recovery, the State budget has now been revised and adapted to circumstances, in collaboration with the IMF. This is intended, among other things, to provide leeway to accommodate wage increases resulting from the collective bargaining agreements of the past spring.

http://www.ministryoffinance.is/Frontpage-fjr/nr/14568

Iceland's problem wasn't that its government owed too much; it was that its banks went bankrupt. What it did right was to refuse to try to rescue them. Greece's situation is not, and never has been, like this.

[dipsydoodle]

9. Exited Euro ?

They were never in it. Aside from that they can't join the EU or the Euro until the previous debts which remain unsatisfied are settled. Their unemployment rate peaked at over 12% in 2009 and has now settled to c. 8% - they'd been used to a figure of c. 1 %. Austerity as such was effected by substantial reduction in their public sector.

Your comments appear to be based on somewhat selective reading.

[RB TexLa]

12. Some will say anything to attack centralized European power or being responsible to creditors

[Woody Woodpecker]

13. I stand corrected.

Thank you for the resultant information.

I have learned a little bit more about Iceland today...

Cheers... or as they say in Icelandic: Skál.

[hack89]

15. Exactly the opposite - Iceland is joining the euro

they also submitted to an three year IMF bail out plan that required them to implement austerity measures and raise taxes in exchange for billions of loans from European countries.

[Zalatix]

11. Nightmare foretold if Greece accepts Germany's austerity plans.

What you're seeing now IS the end result of Germany's austerity plans.

[Liberal_in_LA]

14. this wont help: Germans book 30 pct fewer Greek holidays

Germans book 30 pct fewer Greek holidays

There had been an improvement up to the Greek elections in May, but with a looming reelection, talk of a euro exit and pictures of violent protests in cities, fears among Germans have returned, he added.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_19/05/2012_442919

[dipsydoodle]

16. They're not alone in that respect

but if Greece was to return to the Drachma holidays would become absurdly cheap there for the rest of us in Europe. The issue with that of course could completely screw Spain who need the tourists too.