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PM Papademos: Disorderly Bankrucpty Would Mean No Wages & Pensions, No Fuel & Medicine

Greek PM Lucas Papademos was as dramatic as he could. Speaking at the cabinet meeting under the shadow of the resignations of six members of his government, Papademos stressed that he will do “whatever it takes ” to get the ratification of the new loan agreement and the austerity package by the parliament. “We cannot allow Greece to go bankrupt,” Papademos told his cabinet and warned that whoever disagrees and will not vote in favor of the programme cannot remain in the government.”

Further he revealed the impact of a Greek default, criticizing at the same time those claiming “Better Default than painful austerity measures”, as he said describing them as “grievously mistaken” and dangerous demagogues”.

Papademos: Impact of Disorderly Default

 “A disorderly bankruptcy would throw our country into a disastrous adventure. Circumstances would create economic chaos and uncontrollable social explosion. The adverse consequences of a disorderly bankruptcy would be multiple and extremely painful for the Greek economy and society.

The state will be unable to pay salaries, pensions, to cover basic functions, such as hospitals and schools, as it still has a primary deficit of 5.2 billion euro.. That the state revenues are insufficient to cover expenses, even if we would stop to serve the debt.

The direct spending cuts, to which we would proceed in case of a disorderly bankruptcy, would result into real wages and pensions collapse, especially since it would be even more difficult to collect taxes.

The import of basic goods such as medicines, oil, machinery, etc., would be particularly problematic, as the country, both the public and the private sectors, would lose all access to borrowing and liquidity would  shrink. Businesses would close in mass, unable to raise financing.

In case of a disorderly default the living standards of the Greeks  would collapse and the country would drift into a long spiral of recession, instability, unemployment and destitution.

These developments would lead sooner or later to Euro exit. ….

We look the Greek people in the eyes under full sense of the historical responsibility. The social cost that rises from the [austerity] programme will be limited in comparison with the economic and social collapse that will occur, if we do not accept it.” (sources: To Vima, Proto Thema)

Papademos had recently asked Finance Minister Evangelos Venizelos to prepare a report about the impact of the default to the Greek society.
It looks as if the report was aiming more to convince cabinet ministers and coalition government parties MPs to vote in favor of the programme, than the citizens to accept it.
Lucas Papademos will submit the new loan agreement for the second bailout and the package of harsher austerity measures for voting to the Greek Parliament over the weekend. The voting will take place on Sunday, Feb 12, on Monday a government reshuffle is expected. 

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  1. It looks as if the report was aiming more to convince cabinet ministers and coalition government parties MPs to vote in favor of the programme, than the citizens to accept it.

    Tell me, how much clearer can he be when he, rightly so, states that when we go bankrupt there will be no more money to pay salaries and pensions, no oil and medicines? And that the time it will take to recover from the disorderly default will be much longer and the ‘elend’ much deeper than under the measures now proposed… And this will even be so if we stopped serving the debt.
    When nobody believes him, then he is finished. And when people want to believe one of those three stooges, then they deserve everything that will come.
    And still there is NOBODY here that has made viable alternatives to the proposed measures. All are busy with either holy anger and being self righteousness or they are busy trying to buy time because they hope every problem will just vanish…

  2. Don’t trust him. He’s a EU/ECB puppet.

  3. Even in times before the disorderly default there are people here without wages and pensions, with zero income, no fuel and heating oil, no access to medicine. Only Papademos doesn’t know it. #ask_me
    BTW: between disorderly and orderly default, there is harsh austerity.

  4. This is all lies, the best thing Greece could of done was to default on it’s insatiable debt load years ago, and the creation of a new Greek currency backed by Gold. Greek people would need to be educated about what real money should look like, and not this paper trash that everybody thinks will protect their wealth. The Greek politicians are murdering your economy with their ridiculous austerity measures. These austerity measures are only serving the elite interests of the IMF, and the Greek people are suffering and becoming poorer as a result. If you were to divide the Greek economy and examine your productivity, you would see that over 50% of the money produced by your people is being pumped into the ‘debt bubble’. For crying out loud, it doesn’t take much logic to see how unsustainable this is. How big does the Greek debt need to grow and how poor do the Greek people have to become before enough is enough? There’s only one real variable here, and that’s when poverty levels in Greece reach breaking points and civil unrest literally explodes. The disorderly default is coming, now you can see that all your suffering has been in vein.

    We have a worldwide debt problem and the camel’s back is well in the process of being broken. If one is to study history carefully, one would understand most of today’s currency is backed by nothing but ‘faith’ and ‘debt’, yet 100 years ago almost all currency in existence was backed by Gold. This problem of global debt is well over 90 years in the making, kicked into gear by huge government expenditure during World War 1 and World War 2. This notion of being worried about savings account is irrational, because debt and currency are becoming one in the same thing. All that money you have saved up is a large part debt currency. It’s a ponzi scheme that only works as long as all the particants are willing and cooperating. It’s done well to last 90 years, but in the next decade the empire of debt will come to an end.

  5. Yes, there are people without anything. And until now it was possible, through initiatives like Oloi mas mporoume, family chains, or just as good neighbors, to help a lot of them. Even harsh austerity is unlike anything in the case that the whole country will not have any of the imported, but oh so life-important, goods. When that would happen now, we would just run out of heating oil. Firewood would stop from being transported into the cities. Food production and distribution would just stop. Medicine would run out. And people would die in droves. It’s as simple and as hard as that.
    Ok, Red Cross and other aid-agencies would come in and set up basic supply. But then we are really in 3rd World territory. Others I hear talk about sending the kids abroad and getting help from their family there. Yes they probably will help. But the few Greeks abroad I was able to talk with this winter all had one clear message for their family here: over my dead body will I spent all my hard earned money on them.
    A lot of people seem to think that after default, everything will be tough for a while, but then… But nobody wants to realize how tough that while will be. Deadly tough. And how long.
    We are already in a state that that everything has to be paid in advance. Printers I was working with here in Greece now ask you to pay in advance so they can buy ink or else they even can’t print! We have to call the veterinarian two weeks in advance if we want dog food. He has to order it and pay it before they even consider shipping it to him. The economy is grinding to a trickle. But it is still a trickle and this trickle keeps us all alive. When that simply stops because there is no fuel, no credit no nothing, then nobody will be able to help anybody.
    And on this pleasant and optimistic note, I say to everybody kali nichta! 🙂

  6. If the LAOS are out, isn’t it the same as no more vote this weekend, and the deal is dead, and the only outcome next week when people wake up is the near certainty of default anyway?

  7. Here is the central statement:

    “The state will be unable to pay salaries, pensions, to cover basic functions, such as hospitals and schools, as it still has a primary deficit of 5.2 billion euro.. That the state revenues are insufficient to cover expenses, even if we would stop to serve the debt.”

    This means that saving 5.2 billion euro a year (or increasing tax revenues by this amount) is the absolute minumum necessity for the Greek budget. This or the abyss. And it needs to happen within months, better weeks. Then declare default und re-introduce the Drachma. Yes, it will be a disaster. But any other way will be disaster squared. The suggestion of better solutions is welcome.

  8. so it is. you have to pay in advance because vendors have no momeny to buy supplies. and things get worst.

  9. the LAOS ministers are out, but the coalition is still valid- at least at 9.47 am Feb 11,2012.

  10. very good. thanks.

  11. Either-Or it is a disaster. Nobody seems to have better solutions.

  12. No politician will have a better solution, the real solution put forward by our politicians will be a one world currency. Understand when this happens, your children and grandchildren will never know freedom again. Greece is just the testing ground for bigger things to come.

    Problem -> Reaction -> Solution

    Problem: Unsustainable Global Debt Levels

    Reaction: Fear & Mass Panic

    Solution: One World Currency

    You have to understand economic history spanning back hundreds of years to understand where we are heading next. Politicians are not your friends, and they certainly won’t deliver the solution you were hoping for. If you want a free Greece, you have to get on the streets and fight for it, educate your fellow followers and bring home the revolution. The pages of history are being written.

  13. Propaganda from the EUSSR and it’s unelected mouthpiece here in Greece.


    “Greece is bust. We know that. And they will eventually default on 90 to 100 percent and if they exit it, if you just think it through quickly, if they exit it, every Greek entity with debt in euro to outside — to the outside world would probably be bust too and default 100 percent. The Greek banking system would be bust, have to be nationalized, have to be recapitalized with drachma, et cetera. The drachma would probably decline 50 percent. The first year it would be turmoil.

    The second year, I think the Greek economy would recover with a devalued drachma. Tourism would bloom and boom because they would be so much more attractive than Italy, Portugal and Spain, et cetera. They could even sell more olive oil and feta cheese in the world. And I think after four years or so, they could be back to the capital markets like Iceland. Iceland defaulted completely and after four years they are back to the capital markets.

    And probably after 8 to 10 years, they could be back to a situation, if they put their house in order with a flexible exchange rate where they could enter the euro again at a different place. That would be the right way to go.”

  15. Someone once wrote that a people gets the government it deserves. From some of the dangerously naive comments written here it seems to be true for Greece.

  16. What the programme really means:

    As of today, merely the ratio of the Greek DIP loan (Debtor In Possession, because Greece is after all broke) has reached a whopping ratio of 136% Debt to GDP. This excludes any standing debt which is for all intents and purposes worthless. This is secured debt, which means that if every dollar in assets generating one dollar in GDP were to be liquidated and Greece sold off entirely in part or whole to Goldman Sachs et al, there would still be a 36% shortfall to the Troika, EFSF, ECB and whoever else funds the DIP loan (i.e., European and US taxpayers)! Another way of putting this disturbing fact is that global bankers now have a priming lien on 136% of Greek GDP – the entire country and then some now officially belongs to the world banking syndicate…

    Finally ask yourselves this: what would have happened if Greece had been allowed to default in May 2010 and all debts wiped out, and instead of feeding its creditors, the funding sources had provided the country with €320 billion in new debt. It would mean that, assuming a dollar for dollar equivalency between GDP and debt, Greece would have grown by about 36% more in the past two years compared to where it is now. Something tells us the Greek people should have the right to know this.

  17. Robert, once upon a time I would of found that hard to believe, but I have dealt with a lot of nasty people in my time, deceptive, corrupt, just pure greedy, and will sadly have to say for a large part I agree with you. One could say it’s the citizens ability to become corrupt and obsessed with greed that promotes the kind of sadistic governments we are seeing around the world. But on the other hand, there seems to be something more sinister at a play, a global game of chess being played out and we the people are just the pawn pieces.

    When the issue becomes global and you watch your own savings account get robbed of most of the blood, sweat and hard work you put into it, I would be interested if you still hold by the philosophy of “people get the government they deserve” as you weep at the fact greedy banksters have caused you so much pain.

    My advice, do not try to narrow down the complexities of society into such short ‘phrases’. We live on a dualistic planet, with the potential for both great good and great evil.

  18. so it is, then the governments elected by 46+% rob the money also of those you did not vote for them for the shake of their own voters.

  19. “The only way out of the current mess is to “slam on the brakes,” to stop the monetary inflation in its tracks. Then, the inevitable recession will be sharp but short and swift, and the free market, allowed its head, will return to a sound recovery in a remarkably brief time….better yet, the (central bank) system should be abolished, and government at last totally separated from the supply of money.” Murray Rothbard

    End welfare addiction, slash the state (or the superstate).

    Socialism is serfdom, free markets and sound, debt-free money are liberty.

  20. Agreed, the government is now little more that a pawn in the hands of vested interests. Banks who want to extract the last drop of blood, and politicians who want to see their version of Europe realised. But it was the mis-management and corruption of the government that dug this hole we are in now and put them at the mercy of these interests, and if the “critical mass” hadn’t been reached they would have happily carried on digging. I don’t think the second bailout is the correct way to go, but I don’t believe that any of the political parties have the will or backbone, or enough backing from the populace, to help this country.