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National Bank Report: Greece’s Euro Exit Would Halve Incomes

OMG! Even Greece’s biggest bank, the National Bank, joined the anti-SYRIZA chorus. You know SYRIZA don’t you? The party whose leader Alexis Tsipras “threatens” to ruin Greece, the eurozone, the global economy from the humblest hut in a remote sub-Saharan village to a impressive glass skyscraper in Wall Street. How? He wants to cancel the Memorandum of Understanding, the loan agreement between Greece and its lenders, should he win the June 17 elections. The presence of Tsipras triggered the dilemma : euro or drachma. A dilemma with fatal consequences either way.

In order to hinder this terrible guy to gets lots of dangerous votes, there is a massive enlightenment of the Greek voters: Euro exit and return to Drachma will ruin even those already ruined by the MoU…

Greek euro exit would halve incomes, report warns

An exit from the euro would see Greeks lose more than half their annual income and prompt a dramatic rise in unemployment and inflation, a report from the country’s largest bank has warned.

The National Bank of Greece study was published Tuesday as Greece heads to new general elections on June 17, amid Europe-wide concern of broader financial turmoil if Greece’s place in the single currency is threatened by a victory for an anti-austerity party.

“An exit from the euro would cause a significant drop in the living standards of Greek citizens — with a reduction of at least 55 percent in per capita income,” the authors of the 17-page report wrote.

“This would affect those on a lower income the most, with a significant devaluation of the new currency, by 65 percent, and financial contraction of 22 percent on top of the (GDP) reduction of 14 percent that occurred between 2009 and 2011.”

Amid global concern over the euro, a senior U.S. Treasury official was in Athens on Tuesday to start a round of European consultations. Lael Brainard, a Treasury Undersecretary for International Affairs, met top Greek finance officials and is due to travel on to Frankfurt, Germany, and Madrid, Spain for more talks.

Debt-crippled Greece has been kept afloat by huge international rescue loans, granted on condition of harsh cutbacks and reforms that slashed living standards that have driven the country into political stalemate.

Political parties failed to form a coalition government after May 6 elections, triggering another contest between the pro-bailout New Democracy conservatives and left-wing Syriza party that has promised to cancel the terms of the country’s rescue loan agreements.

The bank report also warned that if Greece did exit the euro, unemployment would rise to 34 percent while inflation would hit 30 percent and then higher. Unemployment in Greece currently stands at around 22 percent while inflation is 2 percent.

However, news that New Democracy had taken a slight lead in the weekend opinion polls sent shares on the Athens Stock Exchange up by 6.9 percent on Monday and a further 1.9 percent on Tuesday.

“New Democracy has regained the lead in several opinion polls, ahead of its main rival, the left-wing Syriza party. Given that the party that comes first in the election gets a 50-seat bonus in the 300-member Parliament, coming first is crucial,” Martin Koehring of the Economist Intelligence Unit said.

He said the next government would face “a very challenging fiscal austerity agenda.”

But he added: “It is likely that a new government will be able to get some concessions on the pace of implementing the agenda.”

The country’s caretaker government, meanwhile, is battling a sudden slide in state revenues and said it will do all it can to ensure the state does not run out of cash amid the protracted political turmoil.

“The first issue we are addressing is to increase revenues and restrain spending, to ensure we remain within budgetary targets,” government spokesman Dimitris Tsiodras said.

“Right now, that is the government’s basic concern. But we will do anything necessary so that there is no problem with state payments and obligations.”

He did not comment on a warning by former prime minister Lucas Papademos — leaked to Sunday’s To Vima newspaper — that Greece risked running out of funds just after the election (AP via Seattle Pi)

PS Cutting Incomes into half? It’s interesting only if one does have an income, right? I remember this song “Nothing from nothing means nothing…”

Side notice: US Treasury Lael Brainard met also PASOK-leader Venizelos

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5 comments

  1. This is fear mongering and one of the worst type actually as this is what troika is doing in Greece already through the internal devaluation by cutting salaries and pensions, by lowering minimum wage and increasing taxes.
    Scaring the Greeks against a 55% drop in incomes is kind of…late?
    The 55% mark is kind of good news as a matter of fact. Iceland devalued by 75% when their banks collapsed.
    And finally, this is where Greece is heading.
    Which is not always bad news as a lot of economists believe that a devalutaion (drop in overall values) will have a positive effect on the Greek economy by making both exports and incomes more competitive. Internal devaluation does the same thing but concentrates the losses on the working people and the more vulnerable.

    • keeptalkinggreece

      a 75% drop in overall values includes also “moral” values? Guess who will benefit and profit from this devaluation…

  2. Ok, I meant to say exports and services there, but with so many ‘the end is near’ articles I m starting to get shaky hands from fear!

  3. people have no idea what a default would mean in the short run.
    Nowadays Merkel, Germany is the scapegoat of the indebted europeans. Just ridiculous. Who asked for the portuguese and Greek loans ? Merkel !!!??? The Germans..? Adolf Hitler ? People should be responsible for their own actions and the Greeks and Portuguese are behaving like small children. They are blaming the evil witch merkel . for their own errors.
    They were democratically Ellected Portuguese and Greek Governments that asked for the loans that are now crushing the Greeks. You should blame no one but yourselves ( And besides half of the Greek debt was already pardoned ) . If I were the Germans I would campaign for german to leave the EU . If people is not mature enought to take responsability for their own actions , they do not deserve to belong to a union. They should go alone and fend for themselves.

  4. Terry Squire Stone

    Nice to read a piece with no bias whatsoever! Good honest balanced reporting, commenting, is a real art.