Brace, brace. Dark times ahead as Greece heads for the exit

Is a Greek exit from the Eurozone looking like an inevitability? Apparently Merkel has told Greece to back cuts or face euro exit. So if any new Greek government fails to comply with meeting the conditions for their third bailout, they will be forced out of the Euro. Even worse is the threat of contagion with capital flight elsewhere once a Greek exit is confirmed, as I understand, and a precedent set for other countries to follow. This could get very interesting or we'll see yet another rabbit pulled out of a hat to contain the threats and be largely another non-event at all.

UK Telegraph

European policymakers are about to commit another major blunder in their handling of the eurozone debt crisis, and this time it could well be fatal.

Mistakenly, they have convinced themselves that it won't much matter if Greece leaves, and indeed that it might even help resolve the wider crisis to get rid of this persistent thorn in the flesh.

Bring it on, they mutter callously; it will be a lot worse for them than for us. On one level, this is just bravado. It's an attempt to put as nonchalant a face as possible on the now apparently inevitable. But they also seem to believe in their validity of their own analysis – that they have indeed used the past two years well, and are now fully prepared for a Greek exit.

Believe it if you will. The ineptitude to date of the eurozone's crisis response strongly suggests a different conclusion – both that the likely contagion from an exit has been hugely underestimated, and that by prompting a wider breakup, thereby tipping Europe into depression, it may end up as bad for everyone else as it is for Greece.

The Greek problem has been consistently misdiagnosed and mismanaged right from the start. First there was the suggestion a year ago from Angela Merkel and Nicolas Sarkozy that if Greece didn't buckle under and agree austerity it might be chucked out. Markets reacted logically by selling bonds in any country that looked vulnerable, thereby making it much harder for all periphery governments to fund themselves.

This disastrous admission was compounded by attempts to underpin confidence in the financial system by forcing banks to mark their sovereign debt to market. This destroyed the concept of the "risk free asset", forcing banks for the first time to apply capital to their sovereign debt exposures. Unsurprisingly, they stopped buying sovereign bonds in the distressed countries, again making it harder for governments to fund themselves.

Let's just briefly deconstruct the increasingly desperate position that Greece finds itself in. Greeks have voted to reject austerity but remain in the euro. They won't be allowed both.

If they don't continue with the programme, they'll be denied the remainder of the bail-out money. Unable to pay wages, pensions, healthcare costs and bills, government will quickly grind to a halt. The state could theoretically force the banks to buy its bonds, but the ECB would soon in such circumstances refuse further funding. At that stage Greece would have no option but to return to the drachma.

Hyperinflation would replace grinding deflation. The effect on living standards would be equally catastrophic. It's true that properly managed, leaving the euro does in the long term have the potential to return Greece to competitiveness and growth.

The threat comes instead from market contagion to other eurozone countries worst hit by the debt crisis. To Germany, Greece has always been a special case, a nation which cheated its way into the euro, whose citizens are lazy and won't pay their taxes, and is in any case basically ungovernable. There is a very different attitude to Spain and Italy. Germany's determination to make the rest of the eurozone work should not be underestimated.

The trouble is that once one has left, and the principle has been established that it is indeed possible to leave the euro, it's going to be tough to impossible to contain the crippling capital flight which is certain to set in elsewhere. Greece is just the canary in the mineshaft, an outrider for the much wider problem of imbalances and divergent competitiveness.

Time is running out. There's little doubt where Francois Hollande finds himself in Churchill's famous dictum that Germany is either at your throat or at your feet. On his first day as President of France, he's off like a poodle to Berlin for crisis talks. Can he persuade Angela Merkel of some kind of cunning, alternative plan? Does he even have one? Now why does this seem so unlikely? What a mess.

reply to post by surrealist


I really wish they would just get on with it. We all know it's coming and there are going to major changes in the market and in life in general. The anticipation crap is like a lead up to some wrestling match (and we all know how real they are LOL). Like Anon, the Eurozone needs to sh*t or get off the pot and it might be wise if they all get over themselves.

Cheers - Dave

I wish Greece would just drop out and get this over with. It's like watching a slow motion train wreck. We all know it's coming, we see it slooowly crumbling day by day. By fighting the inevitable, they are going to make it worse. Lying to each other, believing they can somehow save the EU, is going to make the fall, when it comes, that much more painful. THEY will not suffer. It's the average citizen that's going to be in a world of s#@!.

Actually, the best thing that could happen is having Greece exit. Keeping them in the EU is basically rewarding them for bad behavior. The Greeks have made their decision. Now they should live with it. They believe they can have their cake and eat it too. Tough love is what they need.

From the article in the embedded link where Merkel is telling Greece to embrace cuts or exit...

An outgoing Greek minister warned that the country could descend into “civil war” amid the chaos of a euro exit. “If Greece cannot meet its obligations and serve its debt the pain will be great,” Michalis Chrysohoidis was quoted as telling a local radio station. “What will prevail are armed gangs with Kalashnikovs and which one has the greatest number of Kalashnikovs will count … we will end up in civil war.”

An outgoing minister is probably more likely to tell some truth as they are no longer obligated so much to sell positive spin to their constituencies.

Yes, it is going to happen - and once that train starts rolling you are going to see Italy, Spain and the entire Euro zone crash. Markets going to crash, then eyes will turn to the states.

SHTF, about to come to a neighborhood near you.

Yup, all news outlets today are saying that the EU is preparing for a Greek exit from the Euro, sooner rather than later.

It's expected that far leftist anti austerity parties will win any new election in Greece. It's really sad, because the only way to beat austerity measures in place is to spend money they don't have. The only way to do this is to go back to the Drachma and have the ability to print their own money.

Hyper inflation will follow, the Drachma will be absolutely worthless by the end of the year, and the Government will collapse again. People's life savings, pensions, property and land, and any other sort of investment will be completely worthless. It will cost a billion drachma to get a loaf of bread.

And to top it all off, public services will collapse completely, and the austerity will be much, much harsher than if the people had of simply let the previous Government's plans go ahead.

reply to post by ProfEmeritus



''They believe they can have their cake and eat it too''
Could you kindly tell us what the ''cake'' is? Have you lived in Greece? Do you have any personal experience on the social and political situation in Greece for the past 20-30 years?





''The Greek people are anarchic and difficult to tame. For this reason we must strike deep into their cultural roots: Perhaps then we can force them to conform. I mean, of course, to strike at their language, their religion, their cultural and historical reserves, so that we can neutralize their ability to develop, to distinguish themselves, or to prevail;thereby removing them as an obstacle to our strategically vital plans in the Balkans, the Mediterranean, and the Middle East.''


(As reported in the popular Greek magazine, Oikonomikos Tachydromos on 14 Aug. l997, Henry Kissinger, while addressing a group of Washington, D.C. businessmen in Sept.1974)

Originally posted by MidnightTide
Yes, it is going to happen - and once that train starts rolling you are going to see Italy, Spain and the entire Euro zone crash. Markets going to crash, then eyes will turn to the states.

SHTF, about to come to a neighborhood near you.

I don't think you'll see Eurozone crash, but I bet there will be a new treaty negotiated before long with those large debt countries taken out.

Hopefully, United Kingdom will see sense and use that as an opportunity to exit the European Union. If the UK were to hold the referendum that David Cameron promised to his lapdog Clegg during his negotiations for a coalition government, UK exit would likely be sooner rather than later anyway.

Finally it looks like a nation is actually thinking about doing what they should have done several years ago - leave the Euro.

I hope this is it. I want to see Greece leave the € and for the currency to collapse. It seems the majority of the people there want to see the same. And in ten years they will probably be the most stable and independent nation in Europe.

The people know that this is all just a game, and that it's all about continuing the extraction of wealth from their country. The insane bankers haven't stopped their practices, we're still seeing wealth being siphoned out of our communities. Governments won't stop them voluntarily, because they're all corrupt and owned by those same bankers, so it's up to the people to force them to.

If governments will not willingly do what the people are demanding of them, those governments will continuously fall until the bankers hand is removed from the pockets of the people.

One way or another, the people will not continue to allow their governments to plunder their populations to feed their bankster buddies. They can do it through choice, or they can be removed from office until the people get a true government representing the interests of their people.

We all know the saying "when the people have lost everything, and there is nothing left to lose, they lose it!"
I truly believe that we are on the cusp of a large number of people in all our countries completely losing it.

reply to post by ProfEmeritus


World governments in general are making, in my opinion, intentional bad decisions. It's not just Greece. We can hope they'll just exit, but I lay you odds that they don't. They're going to bring the whole damn thing crumbling down around them. Watch.

Originally posted by babybunnies

Originally posted by MidnightTide
Yes, it is going to happen - and once that train starts rolling you are going to see Italy, Spain and the entire Euro zone crash. Markets going to crash, then eyes will turn to the states.

SHTF, about to come to a neighborhood near you.

I don't think you'll see Eurozone crash, but I bet there will be a new treaty negotiated before long with those large debt countries taken out.

Hopefully, United Kingdom will see sense and use that as an opportunity to exit the European Union. If the UK were to hold the referendum that David Cameron promised to his lapdog Clegg during his negotiations for a coalition government, UK exit would likely be sooner rather than later anyway.

I don't think the European Union should be confused with the € currency.

It's entirely plausible that all nations would remain under some influence of the EU, even when they have abandoned the single currency.

I personally hope that it is rolled back. I hope the currency is wiped from the face of the Earth and that the power of Europe is diminished. It should exist only in the sense of providing a collective defense of our nations, not as a single governing body. But that's just my opinion.

Originally posted by SpeakerofTruth
reply to post by ProfEmeritus

 

World governments in general are making, in my opinion, intentional bad decisions. It's not just Greece. We can hope they'll just exit, but I lay you odds that they don't. They're going to bring the whole damn thing crumbling down around them. Watch.

EXTREMELY well said.

reply to post by JustEve



that quote, I have no idea if it is true, though I have no reason to doubt you, and if so, another evidence of the sheer evilness of Kissinger, what a disgusting human being he is

Originally posted by babybunnies

Originally posted by MidnightTide
Yes, it is going to happen - and once that train starts rolling you are going to see Italy, Spain and the entire Euro zone crash. Markets going to crash, then eyes will turn to the states.

SHTF, about to come to a neighborhood near you.

I don't think you'll see Eurozone crash, but I bet there will be a new treaty negotiated before long with those large debt countries taken out.

Hopefully, United Kingdom will see sense and use that as an opportunity to exit the European Union. If the UK were to hold the referendum that David Cameron promised to his lapdog Clegg during his negotiations for a coalition government, UK exit would likely be sooner rather than later anyway.

unfortunately, Cameron appears to be Clegg's lapdog, he huffs and puffs in certain "conservative" newspapers about being a Tory constrained by the coalition, but a cursory look at his actions and statements would show he is very much of the liberal/left

reply to post by surrealist


More and more this is beginning to sound like one of those medieval conflicts that lasted for centuries. Europe is like that. Some day the Pope will be back in power as Roman Emperor and all the ducks will be in a row once more but until then, they will continue to do as the Romans do without a Holy Roman Emperor.

Greece will be better off if they just go back to sweeping everything all the time and forget about being rich.

reply to post by blueorder



He is such a sweetheart...I bet he feels the same way for pretty much every other nation on the face of the Earth that could obstruct his (their) plans.

reply to post by ProfEmeritus


When you look at Greece..The problem is simply that being tied to the euro they cant float the curency,Britain never joined the Euro in the first place, and is still a major player and contributor to the eurozone. If Greece exits the curency the drachma will plumet for a while, it would be a holiday magnet for the rest of the eurozone.Then it should rise. The Euro as a fixed curency could be the bigest problem to get over.That would be a better option than a default. At least for those that thought greece was a good investment bet.

reply to post by babybunnies


Hey, its one united world, everyone owns debt from each other. When an entire country defaults, and banks who are over leveraged start to fall - it is going to ripple across the entire globe.

Anyone see Art Cashin's view on a Greek exit on CNBC...

From the transcript....

i think that's what kind of held us together in some of the sell-offs. i wrote this morning about what i call the rationale input. after they let the mistake of letting lehman go under. they knew they had to step in and save aig. they've used the qes and the ltros. if greece leaves the euro it could be cataclysmic. it could be lehman on steroids

well, it will be a process. but it will be a rapidly moving process. and for today, today for example you saw the greek banks get hit very badly because one of the first steps in the process will be a run on the banks. people would say oh, my god -- not just in greece? not just in dwrooes. any peripheral country? it will start clearly, it's already begun somewhat in greece but it will access rate in greece. people will say, they're going to shut the banks for the week, print up the drachma and when i go to get my money out it's going to be in drachma. i want it in the euro. i want the buying power of the euro right now, i'm either going to buy something with it or try and store it away. that will spread almost instantly to spain and italy. that's the fear.