Greece euro exit worse than catastrophic

Greece is hitting headlines again with warnings of catastrophic consequences if it exits the euro. Talks between Greece and its creditors apparently broke down after agreement could not be reached on settling losses on Greek debt, and "warning of disastrous results if a bond swap deal is not reached soon".

In other dramatic commentary on Greece is the following....

Reuters

A Greek exit from the euro zone would be worse than catastrophic and could provoke greater social unrest, Zimbabwe-style inflation and a military coup, said London-based hedge fund firm Toscafund.

In a stark note to clients, chief economist Savvas Savouri said introducing a new currency instantaneously in the wake of a euro exit would be impossible and the delay would lead to "a run on banks and evacuation of capital that would make what has already been seen as nothing by comparison".

"The word catastrophic would not do it justice enough," said Savouri, who comes from a Greek Cypriot background.

"Those who imagine some post-euro-exit stability would be restored ... quite simply fail to understand the magnitude -- social, economic and political -- of such an eventuality."

Savouri said he would expect the euro to remain the currency of choice in Greece even if it left the euro and for the official exchange rate with the euro to be quickly undercut on the black market.

He predicted a range of problems for the country, from hyperinflation, extreme difficulty for the government in raising money on bond markets and an evacuation of people able to leave the country, taking as much wealth as they can with them.

"Inflation in Greece would quite frankly spiral in a way resembling Zimbabwe's experience,"said Savouri, who also predicted severe poverty amongst the elderly.

"The social unrest seen up until now in Greece would be nothing compared with what would be seen in the dawn of a new drachma."

"It would not be hyperbole to argue that the denouement of a Greek exit from the euro would be at worst the rise of poisonous political extremists and at best a military coup."

Greece looks like the country that will be the first to destroy the otherwise integrity of the euro in its current form should it need to exit.

Lots of hogwash designed to scare people into submission. That's all I see. You'll notice that this commentary is coming out of London, one of the financial centers of the world. They just don't want to lose their britches in those bad back door deals they've made.

Oh well ,the Greeks are also sounding alarms of imminent catastrophe should creditors not take a big hit on their returns.

"If you don't, it will be catastrophe!!"
"No! If you don't, it will be catastrophe!"

Catastrophe!!!

Hogwash x hogwash = hogwash squared

Debt talks falter, Greeks warn of disaster

Talks between Greece and its creditor banks to slash the country's towering debt pile broke down on Friday, with the Greeks warning of "catastrophic" results if a deal to swap bonds is not reached soon.

The two sides are divided over the interest rate Greece will end up paying, which determines how much of a hit banks take.

Athens needs an agreement, seeing creditors voluntarily giving up a lot of their promised returns, to reduce its debt to more sustainable levels and convince the European Union and International Monetary Fund to keep lending it cash.

Both sides appeared to be digging in their heels in what analysts said looked like a high stakes poker game in a final attempt to convince private bond holders to take some losses to avoid a disorderly default that could threaten the entire euro zone.

It would come via a swap between old bonds teetering on the brink of default and new ones for which banks would take a big write-down. Without a deal, banks could lose even more and Greece would be threatened with default and possibly euro zone ejection.

Is that by chance one of the Hedge Funds holding some of the 70 Billion EUR in Greek debt?




It's just one guys very interest.conflicted opinion. Not gospel.

Originally posted by AnIntellectualRedneck
Lots of hogwash designed to scare people into submission. That's all I see. You'll notice that this commentary is coming out of London, one of the financial centers of the world. They just don't want to lose their britches in those bad back door deals they've made.

Sorry dude, its not hogwash. Greece is the first domino, once it falls will start a chain reaction that will collapse the worlds economy. Ive know of this for a year now. get your head out of the sand and start preping before April

It's bound to happen, sooner or later. It's not a matter of if, but when.

reply to post by surrealist


Why are we letting thousands upon thousands of people suffer over a debt that is owed to crooked financial centers when most of the money is just made of of thin air?!?!

All countries need to default and start over. Let the banks fail, it will be really hard at first bu in the long run it will be much better for mankind.

Default all debt now!

Didn't we hear the 'Tanks in the streets' speech before? If congress didn't act in 24hrs (then the WhiteHouse sat on TARP for weeks), then the money was not tracked and went elsewhere, if we didn't bail out xyz bank the world would end, etc., etc..

Originally posted by Dbriefed
Didn't we hear the 'Tanks in the streets' speech before? If congress didn't act in 24hrs (then the WhiteHouse sat on TARP for weeks), then the money was not tracked and went elsewhere, if we didn't bail out xyz bank the world would end, etc., etc..

I don't remember anyone saying if we didn't bail out xyz bank that the world would end. You might of read it on the little green martians forum.

reply to post by surrealist


Greece, Italy and the other failing economies should take a look at Island who crashed in the 2008 "crisis" and stop listening to the fearmongering from Eurozone poleticians and their associates.

Iceland experienced one of the most severe recessions in the world when the markets crashed in 2008. Economic output fell by about 12 per cent over two years. But the latest report on Iceland by the International Monetary Fund shows that growth is resuming. GDP is expected to increase by a relatively healthy 2.5 per cent in 2011. The Icelandic public finances are on a sustainable path too with government debt projected to fall to 80 per cent of GDP in 2016.

The turnaround should not be exaggerated. Iceland is still more than 10 per cent below pre-crisis output levels. Unemployment remains at about 6.7 per cent, considerably higher than before 2007. The standard of living of most Icelanders is well down. Access to foreign currency is tightly controlled. And risks to recovery remain. Central bank interest rates are going up in order to curb inflation. This could stifle growth. Yet the fact remains that the outlook for the Icelandic economy is looking rather healthier than other distressed economies in Europe such as Greece, Portugal and Ireland.

So how did Iceland manage it? There were four pillars to Icelandic policy in the aftermath of the bust: external assistance, debt repudiation, currency depreciation and capital controls.Iceland: The broken economy that got out of jail

The text continues with what has happened in Island to turn this around, inclueding letting three of the big national banks go bankrupt instead of bailing out.

Really the powers that be must have known that there was a possibility that an member of the eurozone could exit from the euro and contingency plans for this. The also apply to the downgrades.

reply to post by Mimir


Yes, indeed. The other countries in recent history include Russia and Argentina defaulting circa 2000.

I think one major difference with regard to Greece is that they have the euro which could complicate things in the event of a Greek default.

reply to post by LoneGunMan


Because like it or not, as hard as it is for some people to believe the current financial system has some very rigid principles. If you have debt, it must be paid.

Also as 'surrealist' has pointed out, you have to look at the possible implications it would have for the Euro, as well as any ramifications for some of the other EU countries that are in a bad way with regards to their debt problems. Think of it like a game of dominoes, if one goes, chances are they'll all go.

If you were cynical you may have thought the timing of the S&P downgrade announcements, on Friday 13th, reflected some kind of intentional Euro AAArmageddon attack, given the news on the same day about the breakdown in Greece's private bank negotiations.

The impact of the downgrades on the EFSF and the Franco/German core and German politics may be just as significant as the Greek negotiating wrangle. There's much talk of Greece exiting, but I read this yesterday and it allerted me to an alternative tipping point to consider - for Germany. Germany's government and pundits are currently adament they will see through Euro unity, but for how long? Especially if/when Sarkozy loses this year's election to a leader commited to exiting the EFSF? [*Remember, Sarkozy is quoted as saying he is 'dead' politically if he loses their AAA rating - as he just has. That would potentially leave just Germany as the substantial economic prop to any EFSF plan...]

zerohedge.com "Is German Anger Finally Coming To A Boil? Even Local CEOs Say Time To Exit Euro May Have Arrived" Submitted by Tyler Durden on 01/15/2012 15:31 -0500

reply to post by curioustype


Will Greece get thrown another lifeline, perhaps just to keep them going until after the French elections (22 April and 6 May 2012)?

I could see that being in Germany (and other AAA states') interests, and perhaps viewed as a bid to promote/defend a EFSF supporting Sarkozy for re-election?

On the other hand, if Sarkozy loses, or looks vulnerable, perhaps that may be the point? Well he looks vulnerable now, soooo.....?

Moody's has their eyes on France now too:

Moody's Sees Pressure on French Rating Outlook

Ratings agency Moody's said on Monday that France's debt metrics and potential contingent liabilities were putting pressure on the stable outlook for the country's Aaa credit rating and said it would update its position on France later this quarter.

"The deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook of the French government's Aaa debt rating," Moody's said in a credit opinion on France.

France's Aaa rating might come under pressure if the public debt [cnbc explains] keeps rising or if Europe's debt crisis worsens, Moody's also said, three days after rival rating agency Standard & Poor's cut its AAA rating on France by one notch to AA+.

reply to post by Mimir


The main difference being the scale of the population in the respective countries and the fact that Greece and Italy are more years down the line, therefore exposed to more debt.

Greece is screwed whatever happens and that is both a tragedy and unavoidable. But Greece has caused most of its' own problems which is where it differs from the other struggling Euro countries (they have merely caused a lot of their own problems, rather than most!).

If i was Greek, i would not be deluding myself into thinking anything positive is around the corner. Whilst the warning is from a hedge fund manager, it is a fairly accurate of what dropping out would mean. However, what he doesn't say is that remaining in the Euro and continuing to struggle will result in similar outcomes anyway. Greece - definitely between a rock and a hard place.

Well we won't have long to wait to see what is going to happen if Greece does default, yeah I know it's not an "if" but a "when"

I have a gut feeling that mysterious humming sound people have been hearing lately, that's Draghi warming up the printing presses

Originally posted by Mimir
reply to post by surrealist

 

Greece, Italy and the other failing economies should take a look at Island who crashed in the 2008 "crisis" and stop listening to the fearmongering from Eurozone poleticians and their associates.

Iceland's ability to devalue their currency is a luxury " Greece, Italy and the other failing economies" do not have.