Furious Greeks press for country to default on debt, Violence on the streets as backlash grows

[stockholmer]

http://www.guardian.co.uk/world/2011/apr/17/greece-debt-default-bailout

"A growing chorus of voices is urging the Greek government to restructure its debt as fears grow that a €110bn bailout has failed to rescue the country from the financial abyss and is forcing ordinary people into an era of futile austerity.

"It's better to have a restructuring now … since the situation is going nowhere," said Vasso Papandreou, whose views might be easier to discount were she not head of the Greek parliament's economic affairs committee.

Other members of prime minister George Papandreou's party have said that Greece is locked in a "vicious cycle", unable to dig itself out of crisis with policies that can only deepen recession.

International fears of a Greek default rose last week after the German finance minister, Wolfgang Schäuble, refused to rule it out and markets, sensing upheaval, sent Greek borrowing costs soaring............................................"




Protesters clash with riot police in Keratea over plans for a landfill site in the Athens suburb. Photograph: Thanassis Stavrakis/AP

[Cali_Democrat]

1. So if they default, the bond holders on don't get paid

Right now they keep on jacking up the yields for Greek bonds and it's costing Greece more and more money to rollover the debt as they have to pay higher interest rates.

I think the best rout is default rather than austerity. Let the bond holders eat the losses. They are leeches anyway, sucking the lifeblood from economies.

[aquart]

4. Isn't that what Finnland is saying, too?

[stockholmer]

16. I think you mean Iceland, Finland (along with Sweden, Norway, Denmark) is doing well economically

Also, Iceland is disputing a private debt (the twice-voted-down IceSave settlement between UK/Holland and Iceland) that is being unsuccessfully forced unto the public.

Greece's debts in dispute are public, sovereign debts (some were private in origin - banking debts that were dumped onto the backs of the citizens), and were made much worse by chicanery from Goldman Sachs, et al. Now, the IMF is imposing draconian austerity programmes on the citizens, just like they have done for 50+ years in the 3rd world. The IMF works hand-in-hand with the bond market (via rising bond yield spreads which make borrowing money incredibly expensive for a nation) to enforce the current terms of the sovereign debt chattel yoke.

[aquart]

49. Iceland. All those blonds look alike to me.

Thanks. I knew it was one of them.

I don't actually understand the difference between public and private debt though.

[stockholmer]

57. public debt is debt accumulated directly by a government, private debt is owed by people and firms

The problem occurs under the fascistic practice now going on where the losses of big banks and firms are now being transferred unto the backs of the nation's people, yet these same companies and banks get to keep all their so-called profits.

TARP and the other bank bailouts, basically interest-free loans from the US Fed for the same banksters (many of them not even in the US) takeovers (GM, Fannie Mae, Freddie Mac, etc in the USA) are perfect examples. The US Fed basically gave away trillions of dollars to foreign banks and firms, even one owned by Qaddafi in Libya. http://rt.com/usa/news/federal-reserve-gaddafi-owned-bank/

You, as an American, now will have to pay all these trillions back, plus your 'official national debt' of $14+ trillion. Fannie Mae and Freddie Mac alone have debts well over $6 trillion, and these are not even counted yet, they are kept 'off-balance sheet'. It is a giant ponzi scheme, and we all pay for it, some counties like mine (Sweden) not much at all, others, like yours, will pay dearly, through drastic decline in your way of life (look at what is happening in Ireland, Greece, Portugal, etc), as this is coming full steam to America.



FED GAVE BANKS 23.7 TRILLION NOT 700 BILLION -DYLAN RATIGAN
http://www.youtube.com/watch?v=4g6fk7KqxvI


ps- we are not all blondes here, lolololol, Iceland, Denmark, and Norway especially, as we have huge immigrant percentages (especially Sweden), and also many brunettes/redheads of ethnic Icelanders, Norse, Swedes, and Danes. Finland is the most blonde of the nordic.

:hi:

[aquart]

69. Yes. We have been robbed. Yet we hang no one.

I really feel they will not relinquish a dime until they see a few startled heads on pikes.

[badtoworse]

5. Do you think things would be any better if the government is unable to borrow?

Bondholders are leeches? How so? Would the economies in question be better off if they couldn't borrow money?

[girl gone mad]

7. Yes, things would be much better.

They need to get away from the Euro and go back to having a sovereign currency. They got screwed in that deal.

[badtoworse]

11. Unless they live within their means, that would not help

They would still have to buy foreign currency (euros, dollars, yen, etc.) to purchase imports because it's highly unlikely any foreign supplier would accept a sovereign Greek currency in payment.

[girl gone mad]

58. Look at Argentina's example.

They have one of the strongest economies in the world right now because they defaulted on debts they could not pay. Everybody wants to do business with Argentina today.

[Cali_Democrat]

8. Greek 2 year bond yields just hit 20% today

As Greece is suffering through financial crisis and fiscal issues, the bond holders and speculators are charging Greece more and more to borrow and rollover the debt. It's the same situation that many homeowners in the US were/are facing. The crappier your credit, the higher interest rates you get charged.

Borrowing money is good up to a point, but after a while it can become a vicious cycle as a government tries to continue to refinance the debt yet they are charged higher and higher interest rates. It all depends on when you think that point is and I think Greece has reached that point.

If the bond holder don't renegotiate on favorable terms, then Greece should default and not pay them. That's the only language the bond holders will understand. Greece defaulting on debt would be like a homeowner refusing to pay a mortgage. Sometimes you have to play hardball with the leeches.

[yawnmaster]

10. The risk of default is built into the high rates. Who is going to loan money with a high...

default risk. That being said, and since those buying those bonds know the risk, default may be a viable option.
Of course there will be repercussions and probably some unintended consequences.

[Cali_Democrat]

13. Indeed. The people buying Greek debt knew what they were getting into

Now, 20% yield is well into high risk territory for bonds.

[sixmile]

17. Plenty of junk bond investors out there to eat these up

the yields are up because the bond prices are down. Banks aren't 'charging' 20% for new borrowing, the yields have risen because they are inversely related to bond price.

[Cali_Democrat]

22. "the yields are up because the bond prices are down".

Yes, but why are the bond prices down? Because of Greece's fiscal situation and the likelihood of default. Bond prices go down, yields go up and the Greek government is charged more money to borrow.

[truedelphi]

67. So in other words, it all works perfectly for

The Ultra Rich.

[badtoworse]

68. There is nothing more to it than simple math

The interest payments are fixed. If you're willing to sell it for less than you paid for it, the yield on the bond will be higher for the person that bought it at the lower price.

[badtoworse]

14. Living without credit is very difficult for individuals and for governments

If they default, they can forget about borrowing money. How would they deal with that? The government is broke.

[NashVegas]

29. And Yet, Is So Very Liberating

More people ought to try it.

[girl gone mad]

66. The evidence does not support that claim.

From "http://bilbo.economicoutlook.net/blog/?p=11444">Defaulting on public debt as a way to progress":

In the aftermath of its financial crisis in 2001-02, Argentina defaulted on a portion of its external debt – a decision which contributed to Argentina’s ability to restore economic growth in the year.

While it is frequently argued that default on debt is dangerous because future access to credit will be denied, that does not appear to be the case, historically. Indeed, entering formal bankruptcy proceedings often eases access to credit markets for households and firms for the obvious reason that relief from debt burdens makes it easier to service new debt.

Bankruptcy laws are adopted not only to protect borrowers, but also to protect creditors by establishing clear procedures regarding the allocation of losses. Bankruptcy laws are also in the social interest, because excessive debt hinders economic performance.

[yawnmaster]

12. I don't think they are leeches, but they do know the risks. Interest rates are high because of...

the default risk. If default is better for the country, in the long run, they should do it.

[badtoworse]

18. It isn't clear to me how they would manage with no credit.

Obviously, anyone who is buying their debt now is speculating.

[former9thward]

19. You do know that bond investors would no longer lend Greece money, don't you?

That is what would happen in a default. Where would they get their money? If you don't think that would lead to austerity you don't know economics.

[Cali_Democrat]

25. 4 options

1) Renegotiate the terms with the bond holders and threaten default and no repayment whatsoever
2) Continue to borrow at astronomical interest rates.
3) Default.
4) beg for another bailout from the EU or IMF

What other options do they have? How can they get out of this hole?

[badtoworse]

30. They have to spend less money (austerity)

Sorry, but you can't keep spending more than you make indefinitely. They only reason we're getting away with it is because the dollar is the world's de facto reserve currency. If and when that changes, we will be in the same boat as Greece (i.e. in deep, deep shit).

[Cali_Democrat]

31. Austerity isn't the only option

How about some austerity AND raising taxes? There are two sides to the ledger. That's what the US needs to do. Bring in more money from taxes.

[badtoworse]

34. I would include raising taxes as part of an austerity package

That won't make it any more popular

[coalition_unwilling]

63. Actually, there's an old maxim that says you lend money at your

own risk. When the Greek government borrowed money (through issuing bonds), the lenders (those who purchased the bonds) did so at their own risk. I fail to see why austerity and raising taxes are not accompanied by bond holders having to take a haircut in the form of some type of default.

Maybe someone can explain why it is in the average Greek citizen's interest that its current government not default on its sovereign debt. I can't see it myself.

[yawnmaster]

36. Whether a good choice or not... 5. dump the euro and print your own currency.

I would expect huge repercussions.

[badtoworse]

38. What makes you think any foreign suppliers would accept it as payment?

[yawnmaster]

40. it would likely have to be converted to euro and I would expect the exchange...

rate to be very unfavorable. Of course, the low cost of Greek goods to the foreign community would bring outside funds into the country to act like a buffer, but since I know little of Greek production (except maybe olive oil) I don't know how much of a buffer this would be.
As I said, it is option 5, whether it is viable in actual execution is for those who know the Greek and Euro economies better than I.

[badtoworse]

45. It would work, provided they used restraint in managing the money supply

But that gets back to austerity.

[yawnmaster]

47. Can austerity be avoided? again this is coming from ignorance of the composition...

of the Greek tax base. I have no idea whether or not there are tax funds available in higher brackets or not.

[datan]

32. um

if bond holders are leeches, why do countries keep issuing debt?

For a country that wants to borrow money, would it prefer that:-
(1) there are no bond holders ("leechers" as you call them) around to buy its debt
(2) there are bond holder ("leechers") around to buy its debt?

simple question: (1) or (2)?

[girl gone mad]

61. Probably because political leaders are economically naive.

A country with a sovereign currency has no need to issue debt.

[xchrom]

2. Ruh-roh. Nt

[FLPanhandle]

3. Default may be the best long term option

However, in the short term, it'll require even more austerity measures as they won't be able to borrow (at least at a reasonable interest rate).

They also need to dump the Euro.

[sixmile]

6. The Greeks are wise to default

or at least renegotiate under current conditions.

The bondholders will have no choice if given no choice.

Tough shit!

[former9thward]

21. They will have a choice.

They will not lend Greece money in the future.

[sixmile]

24. I disagree

Respectfully, of course. Though there will be a period of austerity, the cradle of civilization still has a large tax base with which to guarantee future debt payments.

[badtoworse]

26. LOL. Like they guaranteed payment on these bonds?

[muriel_volestrangler]

41. I think Greece's problem stem from *never* having a large tax base

They didn't collect enough taxes to pay for their spending. For instance, their tax revenue, as percentage of GDP, was consistently one of the lowest in the EU: http://www.oecd.org/dataoecd/48/27/41498733.pdf

[FLPanhandle]

23. If it's tough to live within their means by borrowing

Wait until they have to live within their means with no one willing to lend them money.

[jwirr]

9. Isn't that what Iceland did? I am assuming their debt is to IMF? That

organization has given bad advice to it's clients and then wants their money back when it does not work. Globalization is not working for anyone except for the rich and when countries start defaulting the rich will also lose.

[Lydia Leftcoast]

20. The default has tanked Iceland's economy for the time being, but it was

already tanked.

I'm currently planning a trip to Scandinavia on Icelandair, and compared to the other countries, Iceland is now CHEAP. Until a couple of years ago, it was one of the most expensive destinations, but now, the krone (the main currency) is less than 1 cent, while the krone of Norway, Sweden, and Denmark are in the 15-20 cent range.

Because of this, I'm taking advantage of the free Iceland stopover and spending three days there.

If you're going to anywhere in northern Europe in the near future, I'd suggest flying via Icelandair and stopping over in Reykjavik to help support the country.

(I'm flying Icelandair first of all because they fly directly from Minneapolis to the Norwegian city where my extended family is holding a reunion, but the thought that I'm supporting a country that resisted the Big Money Boys is an added bonus.)

[jwirr]

28. Good. I sounds like the default has given them another chance to

regroup their affairs so they are more sustainable if an island in the middle of an ocean can be sustainable.

[Lydia Leftcoast]

65. They have fewer people than the city of Minneaoplis on an island the size of

Kentucky, so they're already treading rather lightly on the earth.

[leftstreet]

15. K&R

[blindpig]

27. And the financiers are coming for us next.

http://latimesblogs.latimes.com/money_co/2011/04/us-credit-rating-outlook-lowered-to-negative-by-standard-poors.html

Funny how this comes up just as it's being debated.

[badtoworse]

33. What do you mean "coming for us"? When it comes to fiscal policy, ...

ours is about as bad as it gets. We've been getting away with murder and I can't believe our bond rating hasn't been reduced already.

[blindpig]

35. So whose side are you on?

The working class people or the capitalists?

[badtoworse]

37. I'm on the side that wants the country to survive intact

We can't continue borrowing to fund a standard of living we cannot afford. The bottom line is that government has made a lot of promises that it cannot afford to keep. Unfortunately, no politician (of either party) has the guts to say that. The only question is when and how we are forced to deal with that.

It seems to me that few on DU appreciate the danger that the country is in. Once our debt gets substantially downgraded and / or the world stops using the dollar as a reserve currency, we will be in very deep shit. The cost of virtually everything could double or triple in a very short period of time, because borrowing costs will increase dramatically and we would not be able to just print more money (as we're doing now). You will see forced austerity when governments can't afford to provide basic services like EMS, police and fire protection. Anyone with any kind of a retirement nestegg will see the value of it reduced to a small fraction of what it is now. Guess who'll be hurt the most - working people and those most reliant on the government.

You may think it can't happen, but it can and you should be very worried about it.

[blindpig]

42. The country? What about the people?

The nation state is a creation of the bourgeoisie as a means of organizing capitalism.

How about we just take finance and the means of production out of the hands of seekers of personal profit and employ those things for the common good?

[badtoworse]

44. Thanks, I'll stick with the way things are laid out now

[blindpig]

48. We work for the future or we stand against it. n/t

[yawnmaster]

51. Are those really the only two choices? on second thought, can there even be two choices??

how do you stand against the future?
The future happens, whether better for an individual and society, the same, or worse.

[blindpig]

53. The future is a world without capitalism.

Without an end to capitalism the future is bleak beyond words.

[yawnmaster]

54. so your real question is, correct me if I'm wrong, please...

"we work for a future without capitalism or we stand against a future without capitalism"

[blindpig]

59. That's about it.

once ya understand this ya gotta choose.

[girl gone mad]

62. We don't need to borrow and we could pay off our debts tomorrow.

There is no crisis here.

[coalition_unwilling]

64. Hunh? Exactly what promises have we made that we can't afford

to keep? As far as I'm concerned, not enough promises have been made. That's why 50 million Americans lack any health insurance coverage at all.

You're not referring to Social Security by any chance, are you?

[datan]

39. hm

if you're on the side of the Greek working people who are complaining about all these austerity measures brought on by having to service their debt, you can help them out by buying Greek bonds. The more people buy Greek bonds, the less interest rates they have to pay.

And I'm sure that if you're on the side of the Greek working people, you won't mind that all this time you're holding to to the Greek bonds they are asking their government to default...

[blindpig]

43. Why would I do that?

I'm not a capitalist.

We should all do what the Greeks are doing, tell the financiers to go to hell.

[badtoworse]

46. Whatever you are, I'm glad you are not running things

I doubt living in a world that you laid out would be an enjoyable experience.

[blindpig]

50. What, you got a problem with sharing?

Capitalism can only bring pleasure to the capitalists and their suck-ups.

[badtoworse]

55. I share lots of things - both my time and money

I just want to be the one who decides what I share and what I don't. I'm sure you agree that is only fair.

[yawnmaster]

52. Most of the Greek debt is held by the Greek banks. I don't have knowledge beyond that on who...

holds the debt indirectly in those banks. A default would hurt the banks obviously, but how much of the bank funds loaned to Greece are actually owned by individuals and how much of the "middle class" have a piece of that debt?
Not rhetorical questions...I'd like to actually know.

[datan]

56. right

if they tell the financiers to go to hell, who is going to fund their debt?

[blindpig]

60. Blow off the debt. n/t

[BlueCheese]

70. I remember two articles from the NYT...

... about how Greece has a big tax evasion problem. The articles made it seem like a way of life. For example, in one part of Athens, only 300 people owned up to having swimming pools on their tax forms, while aerial photos showed over 16,000. I know the government is trying to step up tax enforcement, but I imagine that's only slightly less popular than other austerity measures.

"Greek Wealth Is Everywhere But Tax Forms"

http://www.nytimes.com/2010/05/02/world/europe/02evasion.html