what happens to Greece if they default and leave the Euro?

boddismboddism Posts: 16,436
Forum Member
✭✭
Hi

Any economist types out there... we keep hearing that Greece cant default etc. But why?? What does it mean for the day to day lives of Greeks? (Apart from a change of currency that is)

This is pretty much a cert to happen now but what will it mean for Greece the country??
«13456729

Comments

  • OvertheUnderOvertheUnder Posts: 4,764
    Forum Member
    ✭✭✭
    Well quite simply the flow of leading/money into Greece will grind to a halt. In such a case the immediate problem becomes handling a nationwide bank run as cash funds dry up at variable speeds.

    As the country wholesale starts to run out of money, basic utilities will shut down as staff cannot be paid including the public sector - schools, hospitals, offices all will find it hard to hold onto their workers.

    possible food and fuel shortages, housing crisis, full scale rioting in the short to medium term. Long term no-one really knows - abject poverty is a high possibility for the average Greek.
  • [Deleted User][Deleted User] Posts: 18,071
    Forum Member
    ✭✭
    They have voted now semi extreme. If they go down even deeper, which is a cert, they will end up in a poverty stricken extremist State.

    Since they don't have nukes and aren't really enough people, it;s really only Turkey that has to worry besides obviously the average Greek punter that had no idea that the socialist State funded low taxation heaven was funded by irresponsible government debts.

    The ruins of this ex proud country will not even make a good holiday place unless you want to cope with loads of homeless people and illegal African immigrant compounds.

    Which more or less leaves olives as the main trading option.

    And that's not even mentioning the ongoing asset stripping called privatisation..
  • Phil 2804Phil 2804 Posts: 21,846
    Forum Member
    ✭✭✭
    Argentina and Iceland have both defaulted in the last 10 years or so. Argentina after suffering a short sharp recession has posted average growth of around 6% since it defaulted. Iceland after suffering the same fate has found no shortage of investers wishing to pump money into the country.
  • TouristaTourista Posts: 14,338
    Forum Member
    ✭✭
    Have to say that I just dont see Greece leaving the euro. While it was flawed from day one, I have always seen it like a spiders web that refuses to let you go once it has you in its grip.

    What I see happening, is that the next Greek election will return a more accepting parliament because many who voted anti cuts may decide to relent and vote more in line with previous years. Also, it is more than likely (for all of Merkels bluster) that Greece will be given another sweetener to allow any new administration to save face.
  • [Deleted User][Deleted User] Posts: 11,934
    Forum Member
    ✭✭
    Well quite simply the flow of leading/money into Greece will grind to a halt. In such a case the immediate problem becomes handling a nationwide bank run as cash funds dry up at variable speeds.

    As the country wholesale starts to run out of money, basic utilities will shut down as staff cannot be paid including the public sector - schools, hospitals, offices all will find it hard to hold onto their workers.

    possible food and fuel shortages, housing crisis, full scale rioting in the short to medium term. Long term no-one really knows - abject poverty is a high possibility for the average Greek.

    That's been happening for ages now in any case http://www.spiegel.de/international/europe/0,1518,802051,00.html
    Greeks are frightened to put their money in Greek banks for fear that they will wake up one morning to find it converted to New Drachmas. And that goes doubly for corporate account holders.
    Poor Greece is like a maiden who has lost her reputation without actually losing her virginity. They're getting all the shame and suffering with none of the fun.
  • apaulapaul Posts: 9,846
    Forum Member
    They've had the 'fun' of living beyond their means for years.
  • [Deleted User][Deleted User] Posts: 11,934
    Forum Member
    ✭✭
    apaul wrote: »
    They've had the 'fun' of living beyond their means for years.

    Less of the present perfect, please.
  • nottinghamcnottinghamc Posts: 11,929
    Forum Member
    ✭✭
    Phil 2804 wrote: »
    Argentina and Iceland have both defaulted in the last 10 years or so. Argentina after suffering a short sharp recession has posted average growth of around 6% since it defaulted. Iceland after suffering the same fate has found no shortage of investers wishing to pump money into the country.

    Iceland wasn't part of the Euro and Argentina has a massive problem with inflation currently which negates a lot of their growth;

    http://www.economist.com/node/21548229
  • CharlotteswebCharlottesweb Posts: 18,680
    Forum Member
    ✭✭
    apaul wrote: »
    They've had the 'fun' of living beyond their means for years.

    It makes nice headlines for sure, but the reality is quite different.

    You see , the austerity cuts include reduced pensions to existing pension holders to below poverty levels, wholesale sacking of teachers and the ruination of the education infrastructure for at least a generation, mass unemployment and the reduction of benefits to subsistence levels.

    There are already soup kitchens in Athens, not to mention orphanages filling up with children because parents simply cannot afford to feed them any more.

    Those people are suffering for 'austerity' , and then we get to the bailout fund.

    Where does that money go? Does it go to pay for the soup kitchens and orphanages, or anything else to help people living in close to third world conditions in a first world state?

    No, it goes to the banks, the same people who fiddled greece's books to allow them to join the euro in the first place.

    Heres another thing, the european central bank loans out money at 1%, to people who then loan that money to greece at 6%, everyones making a nice profit, barring the man on the street.

    Whos queuing at a soup kitchen so he doesnt starve.


    The people who were irresponsible in Greece are , in order

    Goldman Sachs for fiddling the books.
    The poltical class for borrowing endlessly
    The bankers lending money they knew couldnt be repaid.


    None of them are being asked to pay for it, just the greek people. And rightly, there is a point where they say enough is enough.
  • AbrielAbriel Posts: 8,525
    Forum Member
    Doc Shmok wrote: »
    They have voted now semi extreme. If they go down even deeper, which is a cert, they will end up in a poverty stricken extremist State.

    Since they don't have nukes and aren't really enough people, it;s really only Turkey that has to worry besides obviously the average Greek punter that had no idea that the socialist State funded low taxation heaven was funded by irresponsible government debts.

    The ruins of this ex proud country will not even make a good holiday place unless you want to cope with loads of homeless people and illegal African immigrant compounds.

    Which more or less leaves olives as the main trading option.

    And that's not even mentioning the ongoing asset stripping called privatisation..

    BIB why do you say this will follow?:confused:
  • DaisyBumblerootDaisyBumbleroot Posts: 24,763
    Forum Member
    ✭✭✭
    It makes nice headlines for sure, but the reality is quite different.

    You see , the austerity cuts include reduced pensions to existing pension holders to below poverty levels, wholesale sacking of teachers and the ruination of the education infrastructure for at least a generation, mass unemployment and the reduction of benefits to subsistence levels.

    There are already soup kitchens in Athens, not to mention orphanages filling up with children because parents simply cannot afford to feed them any more.

    Those people are suffering for 'austerity' , and then we get to the bailout fund.

    Where does that money go? Does it go to pay for the soup kitchens and orphanages, or anything else to help people living in close to third world conditions in a first world state?

    No, it goes to the banks, the same people who fiddled greece's books to allow them to join the euro in the first place.

    Heres another thing, the european central bank loans out money at 1%, to people who then loan that money to greece at 6%, everyones making a nice profit, barring the man on the street.

    Whos queuing at a soup kitchen so he doesnt starve.


    The people who were irresponsible in Greece are , in order

    Goldman Sachs for fiddling the books.
    The poltical class for borrowing endlessly
    The bankers lending money they knew couldnt be repaid.


    None of them are being asked to pay for it, just the greek people. And rightly, there is a point where they say enough is enough.

    Nicely put :)
  • jmclaughjmclaugh Posts: 63,988
    Forum Member
    ✭✭
    They would very probably after the initial shock be better off than the current plan the Eurocrats have earmarked for them.
  • grassmarketgrassmarket Posts: 33,010
    Forum Member
    ✭✭✭
    Goldman Sachs for fiddling the books.
    The poltical class for borrowing endlessly
    The bankers lending money they knew couldnt be repaid.

    .

    No, Goldman Sachs only did the job they were told to do. The Eurocrats and the Greek Politicians told them to fiddle the books, so they did. As for the bankers, the only thing they can be blamed for it believing politicians' promises. If the bankers hadn't coughed up the money, the EU would have made trouble for them.
  • paulschapmanpaulschapman Posts: 35,536
    Forum Member
    Well one thing that is going to happen is that it will have to re-adopt the Drachma - that is then going to lose value rapidly - leading to inflation.

    As the country has no money - people in government and on benefits are going to that they too cannot be paid.

    Young workers are going to look to other countries for work and under the free movement of labour will move out - leaving the country with an ageing population.

    With an economy largely based on tourism and agriculture it is going to find it difficult to get out of.
  • [Deleted User][Deleted User] Posts: 11,934
    Forum Member
    ✭✭
    No, Goldman Sachs only did the job they were told to do. The Eurocrats and the Greek Politicians told them to fiddle the books, so they did. As for the bankers, the only thing they can be blamed for it believing politicians' promises. If the bankers hadn't coughed up the money, the EU would have made trouble for them.

    "I was only taking orders" is not a sustainable defence.
  • [Deleted User][Deleted User] Posts: 11,934
    Forum Member
    ✭✭
    Well one thing that is going to happen is that it will have to re-adopt the Drachma - that is then going to lose value rapidly - leading to inflation.

    As the country has no money - people in government and on benefits are going to that they too cannot be paid.

    Young workers are going to look to other countries for work and under the free movement of labour will move out - leaving the country with an ageing population.

    With an economy largely based on tourism and agriculture it is going to find it difficult to get out of.

    At least a devalued currency should help the tourism industry.
  • AnnsyreAnnsyre Posts: 109,469
    Forum Member
    ✭✭✭✭
    Phil 2804 wrote: »
    Argentina and Iceland have both defaulted in the last 10 years or so. Argentina after suffering a short sharp recession has posted average growth of around 6% since it defaulted. Iceland after suffering the same fate has found no shortage of investers wishing to pump money into the country.

    Argentina and Iceland did not belong to a "club" with other members whose economies could be damaged.
  • jmclaughjmclaugh Posts: 63,988
    Forum Member
    ✭✭
    Annsyre wrote: »
    Argentina and Iceland did not belong to a "club" with other members whose economies could be damaged.

    Whenever a country defaults somebody must be owed money, in the case of Greece it is primarily French banks and the German government.

    The Greek economy is small so the impact of default would be on its main creditors and of course the grand European political project.
  • AnnsyreAnnsyre Posts: 109,469
    Forum Member
    ✭✭✭✭
    jmclaugh wrote: »
    Whenever a country defaults somebody must be owed money, in the case of Greece it is primarily French banks and the German government.

    The Greek economy is small so the impact of default would be on its main creditors and of course the grand European political project.

    Oh dear!

    So the new French President has something of a dilemma to face already which might affect his grand spending plans?:)
  • stud u likestud u like Posts: 42,100
    Forum Member
    Back to the old days of donkeys and olive oil.

    The Greeks should never have entered in the first place as I saw this coming.
  • [Deleted User][Deleted User] Posts: 226
    Forum Member
    It will be better for them in the long run if they leave,massive financial crash for us all if they do,and will put any recovery off in europe and most of the western world for at least a decade,but i really do think that they cant keep the austerity up much longer and i think the greeks are resigned to leaving the euro now!!
  • allaortaallaorta Posts: 19,050
    Forum Member
    ✭✭
    boddism wrote: »
    Hi

    Any economist types out there... we keep hearing that Greece cant default etc. But why?? What does it mean for the day to day lives of Greeks? (Apart from a change of currency that is)

    This is pretty much a cert to happen now but what will it mean for Greece the country??

    Greece will likely end up no worse than those countries like France and Germany whose banks been buying Greek bonds over the past three or four years and won't get paid even at the agreed reduced rate. If it dominoes to Italy, Spain and Portugal, woe betide.
  • jmclaughjmclaugh Posts: 63,988
    Forum Member
    ✭✭
    Gaz125 wrote: »
    It will be better for them in the long run if they leave,massive financial crash for us all if they do,and will put any recovery off in europe and most of the western world for at least a decade,but i really do think that they cant keep the austerity up much longer and i think the greeks are resigned to leaving the euro now!!

    The Greek economy isn't big enough to do that sort of damage, it would need Italy or Spain to default to plunge the world into that sort of situation which is the real concern.
  • [Deleted User][Deleted User] Posts: 3,569
    Forum Member
    ✭✭✭
    Back to the old days of donkeys and olive oil.

    The Greeks should never have entered in the first place as I saw this coming.

    when you think just how much debt they have managed to create its utterly staggering within the EU alarm bells didnt sound.

    there was no way that debt would ever be paid off its something the EU loves to forget about just how badly wrong they overlooked what was going on with Greece
  • TimCypherTimCypher Posts: 9,052
    Forum Member
    It makes nice headlines for sure, but the reality is quite different.

    You see , the austerity cuts include reduced pensions to existing pension holders to below poverty levels, wholesale sacking of teachers and the ruination of the education infrastructure for at least a generation, mass unemployment and the reduction of benefits to subsistence levels.

    There are already soup kitchens in Athens, not to mention orphanages filling up with children because parents simply cannot afford to feed them any more.

    Those people are suffering for 'austerity' , and then we get to the bailout fund.

    Where does that money go? Does it go to pay for the soup kitchens and orphanages, or anything else to help people living in close to third world conditions in a first world state?

    No, it goes to the banks, the same people who fiddled greece's books to allow them to join the euro in the first place.

    Heres another thing, the european central bank loans out money at 1%, to people who then loan that money to greece at 6%, everyones making a nice profit, barring the man on the street.

    Whos queuing at a soup kitchen so he doesnt starve.


    The people who were irresponsible in Greece are , in order

    Goldman Sachs for fiddling the books.
    The poltical class for borrowing endlessly
    The bankers lending money they knew couldnt be repaid.


    None of them are being asked to pay for it, just the greek people. And rightly, there is a point where they say enough is enough.

    An excellent and truthful post - to add further injury, the source of the bailout fund is the European taxpayer.

    So, really, this is just a transfer of wealth from taxpayers to financial institutions who refuse to take a hit for their unwise lending and investment decisions - then it's sold politically as 'helping the poor Greek people'.

    Still worse, it will prolong the recession across Europe - recession is a natural process whereby the economy liquidates bad debt and corrects misallocation of resource. This compounds it and, at this rate, we shall never be free of it - no matter how 'austere' or 'growth-chasing' macro-economic policy ends up being.

    Regards,

    Cypher
Sign In or Register to comment.