Ops! It seems I have missed this important news. Greek Prime Minister Lucas Papademos has warned us that the country may face an uncontrolled default in March should we be unable to sign a second bailout agreement with our lenders, the esteemed members of the International Monetary Fund and our European partners. The €130 aid to Greece will help us survive even though we will be bound to huge debt repayment for the rest of our lives, our children’s and grand-children’s lives.
Lucas Papademos made his warning while meeting the so-called ‘social partners’, trade unions and employers associations, in order to persude them to accept the end of the labour rights and workers’ income. And open the way for the brazen profitability of those ‘investors’ who will come to buy my grandma’s last sock.
“Prime Minister Lucas Papademos told Greeks that cuts in income are the only way to stay in the euro and get more financing (GKCPIUHY) from international creditors to avert an economic collapse that may otherwise come as soon as March.
“We have to give up a little so we don’t lose a lot,” Papademos said, according to an e-mailed transcript of his statements to union and business leaders yesterday. Talks later this month with officials from the European Union, International Monetary Fund and European Central Bank, the so-called troika, will focus on a “credible” economic plan for 2012 to 2015.
“Without this agreement with the troika and subsequent financing, Greece in March faces the immediate risk of a disorderly default,” he said. (Bloomberg)
The policy of blunt blackmail and permanent dilemmas has been applied every three months since the country sought the Troika aid, in May 2010. Caretaker PM Papademos seems to follow the same strategy as his predecessor George Papandreou. Greeks might take up the challenge should they see important structural reforms occur. However. Everything changes and everything remains the same…
I fail to understand why a possible default of Greece is equated with an exit from the Eurozone. I would argue that those are 2 separate issues.
A default by Greece may very well happen; a Euro-exit cannot happen, at least not very easily (and certainly not automatically). EU-treaties provide neither for the expulsion of a country from the Eurozone nor for a country’s voluntary retreat.
Greece might be better off today if she had never given up the drachma and she might be better off if she returned to the drachma at some point in the future when stability has returned. However, a Euro-exit at this point, particularly an uncontrolled one, would bring havoc upon the country.
A default is not the end of the world if one deals with it properly and responsibly (Greece has been in default for more than half the time since her independence). The major difference with the present rescue effort is that the debt rescheduling following a default is no longer voluntary; it is mandatory and it has to be negotiated with existing creditors (risk takers remain risk carriers).
Large European banks will be in trouble? Perhaps, but that is not Greece’s problem. CDS-traders will be in trouble? Perhaps, but that is not Greece’s problem.
The Greek banking sector will collapse because of a run on banks? Not if deposits are frozen for the duration of the rescheduling negotiations.
Greece won’t be able to pay salaries and/or pensions in case of a default? I doubt that very much. First, the government will certainly have “put aside” enough Euros to finance day-to-day operations for some time and, secondly, if Greece negotiates a rescheduling in good faith, she will probably receive bridge financing from the EU in the meantime.
The major problem with a default is that it wrecks a country’s creditworthiness and makes it impossible for a country to return to capital markets for quite some time. Well, Greece has already paid that price.
http://klauskastner.blogspot.com/2011/12/closing-2011-with-minority-view.html
my ideal model is the Eurozone collapses and therefore everybody exits! I choose the collective default model than the individual one.
EU-treaties provide neither for the expulsion of a country from the Eurozone nor for a country’s voluntary retreat
The Lisboa treaty has a provision (§50) for a country leaving the EU.
Think that depense on which economist you think about. If its the vandals from the EU who constantly bombard people with their horror, if we dont do as told, or if you take those who are outside the cirkus!!..
its not exactly like they didnt get enough warnings!! Before this damn thing was created. Since then its been downhill. And we will all pay for some fancy politicians idea of a united Europe. Many where not even asked. It was just pulled down our throats. Because politcians knows best…
Do the powers that make the decisions take the same cuts in wages ? It has long been noticed that these “Mandarins” seem to get a reasonable salery from Brussels. Do they live in the same world as us, the EU has been the biggest scam since it’s interception. I am all right Jack, let the peasants pay.