Financial Crisis in Greece

[Onur]

I am not happy about your country`s situation Voltron. In fact, i am sad about it. But the thing is; you Greeks are happy to be capitulated by your European masters. You think like you are part of the western world when you do that. You are full of hate towards all your neighbors, mainly Turkey and you think like you will be fine when you hand over your asses to Germany, France, Brussels. You are wrong, you were always wrong and we showed you that several times, like in 1974 but you are persistent to not see this reality.

Regarding Cyprus, they do the exact thing Greece does, trusting their masters in Brussels but it wont work in the end again. Like i told you several times here; when things reaches a pretty pass, they leave you alone vs Turkey. You cannot find neither Brussels, Germans, French, Israeli behind you. You will be alone in the end.

It`s same for your economical situation. They will leave you all alone in the end.

[lavce pelagonski]

[Voltron]

I am not happy about your country`s situation Voltron. In fact, i am sad about it. But the thing is; you Greeks are happy to be capitulated by your European masters. You think like you are part of the western world when you do that. You are full of hate towards all your neighbors, mainly Turkey and you think like you will be fine when you hand over your asses to Germany, France, Brussels. You are wrong, you were always wrong and we showed you that several times, like in 1974 but you are persistent to not see this reality.

Regarding Cyprus, they do the exact thing Greece does, trusting their masters in Brussels but it wont work in the end again. Like i told you several times here; when things reaches a pretty pass, they leave you alone vs Turkey. You cannot find neither Brussels, Germans, French, Israeli behind you. You will be alone in the end.

It`s same for your economical situation. They will leave you all alone in the end.

This is espescially rich coming from a country that for so many years has been the lapdog of the USA in the region. You were the goldenboy of the Americans just as much as you were with Isreal. That all came to a grinding halt when your islamic party had been elected. For you to preach to me that we have "masters" is the most ironic comment i have heard to date from you. Is it the same masters you are so desperatly eager to submit to ? Seems to me it is when your leaders are traveling to the EU on a regular basis to get negotiations.

How many years have Greeks and Cypriots been blindsided by America's pro Turkish policy in the region. How many years has Israel protected you from getting the Armenian Genocide recognised in Congress. How many years have you been on their heels being the best US-Isreali pawn there ever could be. Greece has always been the maverick of the region which not to many ppl liked. We were never good at taking orders hence what is happening now in our country. You can only wish you had the integrity we do. As far as the Cypriots, God bless them, finally the tables have turned and you can no longer bully them with force. They now have the same backing you had used against them not too long ago.

[Onur]

Voltron, you are dreaming again as you always does.

Turkey is the most anti-USA state in the world by public opinion for decades. This has been proven many times by the polls organized by US and EU. If US has interests with us, it`s because of our geo-political position in the world, nothing else. Turkish people knows that very well.

Are you idiot? When EU&USA supported us against Greece? never!!! When we did military operation to Cyprus for saving our people from the hands of your US-backed junta terrorists in 1974, US officials came to beg us to stop it and all the western world embargoed Turkey for two years afterwards. Turkey was and always will be alone in world politics. We never get support from anyone except other Turkic states.

Greeks on the other hand, you love being capitulated by them and you are happy with it. You are nothing more than a satellite state for them since your country`s creation and you will always remain so. About the picture of Papandreu in front of German Reich; You just returned to your roots, remember the Bavarian king Otto of Greece. So, nothing changed for you in ~200 years.

[Voltron]

Voltron, you are dreaming again as you always does.

Turkey is the most anti-USA state in the world by public opinion for decades. This has been proven many times by the polls organized by US and EU. If US has interests with us, it`s because of our geo-political position in the world, nothing else. Turkish people knows that very well.

Are you idiot? When EU&USA supported us against Greece? never!!! When we did military operation to Cyprus for saving our people from the hands of your US-backed junta terrorists in 1974, US officials came to beg us to stop it and all the western world embargoed Turkey for two years afterwards. Turkey was and always will be alone in world politics. We never get support from anyone except other Turkic states.

Greeks on the other hand, you love being capitulated by them and you are happy with it. You are nothing more than a satellite state for them since your country`s creation and you will always remain so. About the picture of Papandreu in front of German Reich; You just returned to your roots, remember the Bavarian king Otto of Greece. So, nothing changed for you in ~200 years.

Dont play ignorant Onur.

Aegean Issues
Cyprus (see Kissinger)
Kurds
Armenian Genocide
Energy Issues

These are a small sample where they have supported you. Regarding Cyprus the world condmened you on your second invastion for a greedy cheap land grab. Not necessarily the first one. The same land you occupy now when there was no need to. And today you are trying to negotiate that as part of a "whole" package. Classic bazaar tactics as always. Getting any new Super Cobra's lately ? Any new software for F-16's ? I wonder why ? Then your on here preaching how they selling us weapons. Regading the 3rd reich, we did a great job holding them off which the whole world recognizes. Even Hitler himself. You guys just sat and watched the show. Pathetic.

[Soldier of Macedon]

http://www.bloomberg.com/news/2011-11-04/bunds-snap-two-day-drop-on-signs-regional-growth-slowing-greece-concern.html

German 10-year bonds fell for a third day after Greece scrapped a referendum on its bailout, moving the country closer to receiving aid as Prime Minister George Papandreou prepares to face a confidence vote.

German notes were little changed as Markit Economics revised down its index of euro-area services and manufacturing output for October and before a separate report economists said will show European producer-price inflation slowed in September. Italy’s notes slipped amid speculation international auditors may monitor its budget-cutting efforts.

“When it comes down to it, this referendum idea has been a good thing because it has speeded up the debate,” said Steven Major, global head of fixed-income research at HSBC Holdings Plc in London. “There doesn’t seem to be any evidence from the opposition party or even the ruling party in favor of pulling out of the euro or anything silly like that.”

German 10-year yields were two basis points higher at 1.94 percent at 9:40 a.m. London time. The 2.25 percent security due September 2021 slipped 0.205, or 2.05 euros per 1,000-euro ($1,383) face amount, to 102.785.

Papandreou scrapped the plebiscite to avert a split in his party before the confidence vote today, after European leaders said the move may determine the nation’s membership in the currency union and will threaten aid payments.

Italian Credit
The Group of 20 economies, whose leaders are gathered in Cannes, France, is considering three options to increase the resources of the International Monetary Fund, a European Union official said.

The proposals include increasing the lender’s special drawing rights or setting up a trust fund, the official said on condition they not be named. The boost in resources will not be earmarked for tackling the euro-area debt crisis, the official said.

Italy doesn’t want to use a credit line from the IMF, news agency Ansa reported after government officials met fund representatives.

The yield on two-year Italian notes increased four basis points to 5.26 percent.

Royal Bank of Scotland Group Plc has written down the value of its Greek sovereign holdings to 37 cents on the euro, Chief Financial Officer Bruce Van Saun said in a Bloomberg Television interview today. The bank reduced its “total exposures to central and local governments in Portugal, Greece, Italy, Spain and the Republic of Ireland” in the third quarter to 1.1 billion pounds ($1.8 billion) from 4.6 billion pounds, it said today in a statement.

Bunds have handed investors a return of 7.7 percent this year, underperforming Treasuries, which have gained 8.7 percent, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.

[Sputnik]

Modern Greece’s real problem? Ancient Greece. (PART 1)



By George Zarkadakis, Published: November 5

Athens

Greece is the cradle of democracy, but, as the world saw this past week, a financial crisis is no time to put important questions to the people. Prime Minister George Papandreou’s proposed referendum on the country’s loan deal with the European Union, called off quickly after intense international opposition, illustrated that perfectly. Plato and Aristotle would have approved of dropping the referendum. They didn’t like democracy of the direct kind. Neither trusted the people that much.



Sinking deeper into the gravest economic crisis in its postwar history, Greece is no nearer to finding an exit from its woes, despite the vote of confidence that Papandreou narrowly managed to win Friday night. A toxic mix of anxiety and fear hangs in the air in Athens. The ordeal shows that living up to lofty idealism is never easy. Modern Greeks know that well, for we are, in many ways, the imperfect reflection of an ideal that the West imagined for itself.

When the Greek crisis began two years ago, a popular German magazine printed an image of Aphrodite of Milo on its cover. She was depicted gesturing crudely to German readers, with the headline: “The fraudster in the euro family.” The story led to protests in the streets of Athens. In the article, modern Greeks were described as indolent sloths, cheats and liars, masters of corruption, unworthy descendents of their glorious Hellenic past. The irony of the article, and of the angry Greek protests against it, was that modern Greece has little in common with Pericles or Plato. If anything, it is a failed German project.

The year was 1832, and Greece had just won its independence from the Ottoman Empire. The “Big Powers” of the time — Britain, France and Russia — duly appointed a Bavarian prince as Greece’s first king. His name was Otto. He arrived in his new kingdom with an entourage of German architects, engineers, doctors and soldiers — and set out to reconfigure the country to the romantic ideal of the times.

The 19th century had seen a resurgence of Europeans’ interest in ancient Greece. Big names such as Goethe, Shelley, Byron, Delacroix and many other artists, poets and musicians sought inspiration in classical beauty. They marveled at the white marble and solemn temples of Hellas, and longed for a lost purity in thought, aesthetics and warm-blooded passion. Revisiting the sensual Greece of Orpheus and Sappho was ballast to the detached coolness of science or the dehumanizing onslaught of the Industrial Revolution.

Otto saw to it that modern Greece lived up to that romantic image. Athens, at that time a small hamlet of a few goatherds, was inaugurated as the new national capital. The architects from Munich designed and built a royal palace, an academy, a library, a university and all the beautiful neoclassical edifices that contemporary Greek anarchists adorn with graffiti. There was no Sparta in Otto’s kingdom, so a new Sparta was constructed from scratch by the banks of the Eurotas River, where brave Lacedemonians used to take their baths. Modern Greece was thus invented as a backdrop to contemporary European art and imagination, a historical precursor of many Disneylands to come.

http://www.washingtonpost.com/opinions/modern-greeces-real-problem-ancient-greece/2011/11/01/gIQACSq9mM_story.html

[Soldier of Macedon]

The irony of the article, and of the angry Greek protests against it, was that modern Greece has little in common with Pericles or Plato. If anything, it is a failed German project.

True.

Modern Greece’s real problem?

Modern Greeks. At least those that have been milking the system and lapping it up at the expense of others. Oh, and those idiot politicians who waste millions on a useless propaganda campaign against Macedonia and the Macedonians.

[Sputnik]

a historical precursor of many Disneylands to come.

Well this German romantic theme park called "Modern Greece" will soon be no more. And the people of Greece have only them selves to lame, for being "fraudsters, indolent sloths, cheats and liars, masters of corruption".

Oh, and lets not forget "Silly" for believing they had something in common with Pericles or Plato.

[Soldier of Macedon]

Rather than blaming Germany, Greece should ask itself where it would be if the Germans weren't there for them during the last 180 years.

[Onur]

Sputnik, thanks for the post but i saw that you only posted a half of it, so i am posting it again in full;

Modern Greece’s real problem? Ancient Greece
Greece is the cradle of democracy, but, as the world saw this past week, a financial crisis is no time to put important questions to the people. Prime Minister George Papandreou’s proposed referendum on the country’s loan deal with the European Union, called off quickly after intense international opposition, illustrated that perfectly. Plato and Aristotle would have approved of dropping the referendum. They didn’t like democracy of the direct kind. Neither trusted the people that much.

Sinking deeper into the gravest economic crisis in its postwar history, Greece is no nearer to finding an exit from its woes, despite the vote of confidence that Papandreou narrowly managed to win Friday night. A toxic mix of anxiety and fear hangs in the air in Athens. The ordeal shows that living up to lofty idealism is never easy. Modern Greeks know that well, for we are, in many ways, the imperfect reflection of an ideal that the West imagined for itself.

When the Greek crisis began two years ago, a popular German magazine printed an image of Aphrodite of Milo on its cover. She was depicted gesturing crudely to German readers, with the headline: “The fraudster in the euro family.” The story led to protests in the streets of Athens. In the article, modern Greeks were described as indolent sloths, cheats and liars, masters of corruption, unworthy descendents of their glorious Hellenic past. The irony of the article, and of the angry Greek protests against it, was that modern Greece has little in common with Pericles or Plato. If anything, it is a failed German project.

The year was 1832, and Greece had just won its independence from the Ottoman Empire. The “Big Powers” of the time — Britain, France and Russia — duly appointed a Bavarian prince as Greece’s first king. His name was Otto. He arrived in his new kingdom with an entourage of German architects, engineers, doctors and soldiers — and set out to reconfigure the country to the romantic ideal of the times.

The 19th century had seen a resurgence of Europeans’ interest in ancient Greece. Big names such as Goethe, Shelley, Byron, Delacroix and many other artists, poets and musicians sought inspiration in classical beauty. They marveled at the white marble and solemn temples of Hellas, and longed for a lost purity in thought, aesthetics and warm-blooded passion. Revisiting the sensual Greece of Orpheus and Sappho was ballast to the detached coolness of science or the dehumanizing onslaught of the Industrial Revolution.

Otto saw to it that modern Greece lived up to that romantic image. Athens, at that time a small hamlet of a few goatherds, was inaugurated as the new national capital. The architects from Munich designed and built a royal palace, an academy, a library, a university and all the beautiful neoclassical edifices that contemporary Greek anarchists adorn with graffiti. There was no Sparta in Otto’s kingdom, so a new Sparta was constructed from scratch by the banks of the Eurotas River, where brave Lacedemonians used to take their baths. Modern Greece was thus invented as a backdrop to contemporary European art and imagination, a historical precursor of many Disneylands to come.

Despite the Bavarian soldiers who escorted him, King Otto was eventually expelled by a coup. But the foundations of historical misunderstanding had been laid, to haunt Greece and its relations with itself and other European nations forever.

No matter what Otto may have imagined, the truth was that my real forefathers, the brave people who started fighting for their freedom against the Turks in 1821, had not been in suspended animation for 2,000 years. Although their bonds with the land, the ruined temples, the living Greek language, the names and the myths were strong and rich, they were not walking around in white cloaks wearing laurels on their heads. They were Christian orthodox, conservative and fiercely antagonistic toward their governing institutions. In other words, they were an embarrassment to all those folks in Berlin, Paris and London who expected resurrected philosophers sacrificing to Zeus. The profound gap between the ancient and the modern had to be bridged somehow, in order to satisfy the romantic expectations that Europe had of Greece. So a historical narrative was put together claiming uninterrupted continuity with the ancient past. With time, this narrative became the central dogma of Greek national policy and identity.

As a kid growing up in Greece in the 1970s, I had to learn not one, but three Greek languages. First, it was the demotic parlance of everyday life, the living words people exchanged at the marketplaces and in the streets. But at school, we were taught something different: It was called “katharevousa” — “cleansed” — a language designed by 19th-century intellectuals to purify demotic from the cornucopia of borrowed Turkish, Slavic and Latin words. Finally, we had to study ancient Greek, the language of our classical ancestors, the heroes of Marathon and Thermopylae. We were supposed to learn “The Iliad” and “The Odyssey” in the original, by heart, in case some time machine transported us back to Homeric times. As it happened, most of us managed to learn none of the three, ending up mixing them in one grammatically anarchic jargon that communicated mostly the confusion of our age.

Like its language, Greek society suffers from an equal number of divisions. First, there is the political class that, for almost two centuries now, has shown great subservience to foreign masters. They discovered early that claiming to be Euripides’ relative goes a long way toward procuring handsome loans and diplomatic sympathies. The geopolitical position of Greece, controlling shipping routes from the Black Sea to the Mediterranean, also helps. No wonder that modern Greece never became truly independent. It has always been much too easy to be dependent on foreign power and capital. Although there have been periods of vigorous economic development and industrial renaissance, our economic history is one of successive defaults. Becoming a member of the European Union and of the euro zone, only to amass a titanic debt, has been the latest chapter in this modern odyssey.

Second, the intellectuals, mostly foreign-educated and well traveled, dream of a truly westernized Greece through some miracle of economic and social science. When the loan referendum was announced, like a thunderbolt out of a clear sky, most of them opposed it. Greece had to show that it belonged to the European family of nations, whatever that may mean. Rebellion was not to be tolerated, lest the country was kicked out of the euro, the symbol of Greek westernization. In the end, the intellectuals and politicians — with a lot of persuasion from angry European leaders and technocrats — had the referendum quashed. Besides, the invention of fantastical modern Greece demanded that its people, the third division of society, also remained imaginary.

Naturally, they are real as anything. They despise the loss of their sovereignty, particularly to the Germans, as well as the bitter medicine prescribed by their European brethren for their “rescue.” Austerity enforced by unelected officials from the troika — the European Commission, the International Monetary Fund and the European Central Bank — is perceived not as a remedy but as a punishment, an alien and distasteful concept to the orthodox Greeks whose core value is mercy.

Burdened with the improbable weight of forefathers who supposedly laid the foundations of Western civilization, driven by strong cultural undercurrents that undermine the authority of the state, they long for the realization of a dream promised by their political class: that Greece can somehow be something different from the rest of the world, a utopia where mortals can live like Olympians. Like the children of famous parents they could never possibly surpass, they bask in impossible desires, unable to summon the self-confidence to make their own, independent way in the world.

The Greek financial crisis is a crisis of identity as much as anything else. Unless the people redefine themselves, this could become the perfect catastrophe: a country designed as a romantic theme park two centuries ago, propped up with loans ever since, and unable to adjust to the crude realities of 21st-century globalization.

5th November 2011

George Zarkadakis; is the author, most recently, of the novel “The Island Survival Guide” and the play “The Imitation Game.” He divides his time between Athens and London.

http://www.washingtonpost.com/opinio...9mM_story.html

It`s not easy to find sane Greeks like this author. I wanted to post it again in full because the Greek author confirms my words above here when we argued with Voltron. Especially these lines;

• When the Greek crisis began two years ago, a popular German magazine printed an image of Aphrodite of Milo on its cover. The irony of the article, and of the angry Greek protests against it, was that modern Greece has little in common with Pericles or Plato. If anything, it is a failed German project.

• Modern Greece was thus invented as a backdrop to contemporary European art and imagination, a historical precursor of many Disneylands to come.

• First, there is the political class that, for almost two centuries now, has shown great subservience to foreign masters. No wonder that modern Greece never became truly independent. It has always been much too easy to be dependent on foreign power and capital.

• Burdened with the improbable weight of forefathers who supposedly laid the foundations of Western civilization, they long for the realization of a dream promised by their political class: that Greece can somehow be something different from the rest of the world, a utopia where mortals can live like Olympians.

• a country designed as a romantic theme park two centuries ago, propped up with loans ever since, and unable to adjust to the crude realities of 21st-century globalization.

[George S.]

Papandreou and Samaras end Greek unity government talks

George Papandreou has made clear his willingness to step aside
Continue reading the main story
Global Economy

How might Greece leave the euro?
Eurozone crisis explained
Euro deal at a glance
Q&A: How Greek crisis affects UK
The Greek president has hosted crunch talks between the beleaguered prime minister and main opposition leader.

PM George Papandreou has been trying to build a national unity government to lead Greece through its debt crisis.

Antonis Samaras, of the New Democracy party, is refusing to negotiate unless Mr Papandreou resigns first.

The talks ended with no immediate word on the outcome. Reports say Mr Papandreou may step aside if agreement can be reached on a new leader.

There has been speculation that a new governing coalition could be led by Finance Minister Evangelos Venizelos.

News of the talks involving President Karolos Papoulias emerged after an emergency cabinet meeting led by Mr Papandreou.

Both Mr Papandreou and Mr Samaras have held separate talks with the president during the weekend.

Mr Papandreou has continued to insist that a general election should not be held for several months, while Mr Samaras has demanded snap elections.

Referendum plan
Mr Papandreou narrowly won a confidence vote on Friday night, but has been under continuing pressure to resign amid chaos over the debt crisis.

A bailout deal agreed by the European Union last month must be ratified by Greece before more funds will be released to stave off bankruptcy.

The deal gives the government 130bn euros (£111bn; $178bn) and imposes a 50% write-off on private holders of Greek debts, in return for deeply unpopular austerity measures.

But Mr Papandreou faced the wrath of fellow EU leaders when he announced that he would put the deal to the people of Greece in a referendum.

Continue reading the main story
Eurozone deal

Private banks holding Greek debt accept a 50% loss
European Financial Stability Facility (EFSF) to be boosted to 1tn euros ($1.4tn:£880bn)
Banks told to recapitalise by 106bn euros
Eurozone emergency deal: Key elements
Profile: George Papandreou
Q&A: Greek debt crisis
The idea was dropped days later, but not without sparking a deeper financial crisis and triggering the political crisis which led to a confidence vote on Friday night.

Mr Papandreou narrowly won the vote, but the calls for his resignation from the main opposition group did not cease and Greece faced pressure to quit the euro if it could not deliver acceptance of the EU deal in parliament.

The BBC's Mark Lowen in Athens says Mr Papandreou's time in office appears to be drawing to a close.

Reuters news agency said he had told an emergency cabinet meeting he was not interested in staying on as PM.

The country has come under huge international pressure to resolve its political crisis, in order to calm the markets.

A meeting of EU finance ministers is taking place on Monday, adding to the pressure on Greece to agree on a new government.

Although the Greek public has strongly resisted the austerity measures, a recent opinion poll in a newspaper showed 70% wanted to remain within the eurozone.

Other polls have suggested most people want a government of national unity rather than immediate elections.

http://www.bbc.co.uk/news/business-14818439

[George S.]

The "drachma", an ancient Greek currency unit, translates as a "handful" - a lot less than what Greece will need to pay off its debts
Continue reading the main story
Greece crisis

Q&A: Greek debt crisis
Confronting suicide as problems mount
Austerity plans in full
Banks bristle at Greek haircut plan
Greece's latest woes have raised something that was previously unthinkable - the possibility of the Greek people rejecting the euro.

Prime Minister George Papandreou has said that rejection of the bailout would mean an exit from the euro. And the exasperated French leader, Nicolas Sarkozy, told Greeks: "Abide by the eurozone rules or leave."

So, for the first time, the subject of a country leaving the eurozone has been raised at the highest levels of the 27-member European Union.

With Greece unable to devalue its currency, the country is hobbled with crippling debt payments it can't afford.

Many economists (and Greek people taking to violent protests) think leaving the euro is the best way to get out of this mess.

So how would leaving the euro work?

New old currency

If Greece were to act unilaterally and just do it, the so-called "nuclear option" involves introducing a new currency - the new drachma - and letting supply and demand do what it does.

In this case, probably more supply than demand.

"The new currency would fall through the floor and inflation would go through the roof," says Peter Dixon, an economist at Commerzbank.


What went wrong in the eurozone?
It would be a legal minefield, as basic financial transactions such as mortgages would have to be redenominated. But that would not be the end of it.

"Living standards would be hit hard. It might seem like an attractive option, but the short-term costs are massive."

Wouldn't banks - who have already agreed to take a "haircut" of 50% - just accept the devalued new drachma-denominated debt?

"Well, no, because it may well halve in value again," Mr Dixon says.

The assets of banks inside Greece and those outside holding Greek debt would be devalued. And of course, they would not be able to borrow commercially.

Greece would probably have to impose capital controls to prevent all the money leaving, much as Malaysia did in 1998 after the Asian financial crisis.

So in the best-case scenario, Greece would have no buying power, everything would be extremely expensive and it would also be broke.

Lessons of the past

But the idea is that, with its currency so weak, Greece's economy would grow rapidly.

People often use Argentina as a comparison of such an outcome, which Nobel-prize winning economist Paul Krugman has said is "an imperfect parallel".

Argentina, which had its peso linked to the US dollar, defaulted on $102bn of debt during a financial crisis in 2001-02.

In 2005, the country persuaded 76% of creditors to accept a debt swap that reduced the value of their bond holdings by nearly two-thirds.

But Argentina had to go through years of pain, and at least had the advantage of its own currency. The mechanics of de-pegging were easier.

Greece has to start afresh.

One comparison is Iceland, which in 2008 had a run on its currency when its banks failed.

The Icelandic krona lost more than half its value in one summer. It quickly faced interest rates at 15%, and inflation at 14%.

But Mr Dixon suggests the closest recent parallel to a euro exit might well be the splitting of Czechoslovakia.

In February 1993, the Czechoslovak koruna was split into the Czech koruna and the Slovak koruna - at a par of one-to-one. (One version no longer exists; Slovakia adopted the euro in 2009.)

But in that scenario, as with the replacing all the major currencies of Western Europe with the euro, people had time to adjust to the concept of a new currency.

"You had a long period of time to get used to the single currency," Mr Dixon says. "You're not going to to get it the other way around.

Treaty of good-bye

One major issue is that there simply is no mechanism to leave the euro.

It was never envisaged by the bright-eyed politicians who created the impetus for the currency, which debuted in 1999.

"The treaties indeed confirm what we have been saying here: the treaty doesn't foresee an exit from the eurozone without exiting the EU," said a European Commission spokeswoman on Thursday.

The treaties she is referring to are the Maastricht treaty from 1992, which led to the creation of the euro, and its successor, the Lisbon treaty in 2007.

So under its current obligations, for Greece to exit the euro, it would have to leave the EU. This option was only added in Article 50 of the Lisbon treaty.

Leaving is straightforward; it involves a member state notifying the European Council - that is, the heads of state of the EU - that it wants to go.

The Council then agrees the terms of the exit via a qualified majority.

Would leaving the EU be the end of the world for Greece? Probably not.

The key part of Article 50 involves "setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union".

Iceland, Liechtenstein and Norway all do fine and they are not in the EU. They are part of the European Economic Area, meaning they get access to the single market.

Switzerland is not even a member of this organisation, and it trades with the EU with few problems - the odd tax exile aside.

The EU could then bail out Greece at a lower exchange rate, even.

http://www.bbc.co.uk/news/business-14818439

But again, the chaos of going from inside the EU to a country outside of it but still slap bang in the centre of Europe could possibly be even worse than what it is going through right now.

"What happens then is that cure ends up being worse than the disease," Mr Dixon says.

And the question would then become whether a queue would form at the door to leave the EU.

Would other bailed-out nations say enough is enough and join Greece? Would we then get the new punt? The new escudo? The new lira?

[George S.]

Then and now: Washington thought pulling the plug on Lehman would send the right message; Brussels may face a similar decision over Greece
Continue reading the main story
Global Economy

How might Greece leave the euro?
Eurozone crisis explained
Euro deal at a glance
Q&A: How Greek crisis affects UK
Three years ago today, US Treasury Secretary Hank Paulson made a momentous decision - to let the investment bank Lehman Brothers fail.

The US government had helped to rescue a string of financial institutions, but markets kept pushing more to the wall.

Mr Paulson was running out of time and options. There was no political support in Washington to keep throwing money at the problem. Wall Street would just have to learn to bear the consequences of its own folly.

Today, many say that it was the wrong decision.

The resulting financial meltdown (the stock market plummeted 43%) forced the authorities to do exactly what they had been trying to avoid - commit trillions of dollars to rescue the financial system.

Plus ca change?
Now fast-forward to the present. The "troika" of lenders to Greece - the European Union, International Monetary Fund (IMF) and European Central Bank (ECB) - may soon face a similar moment of reckoning.

Continue reading the main story
“
Start Quote

Politics is not a rational process.”

Jerome Booth
Economist, Ashmore Investment Management
The government in Athens has consistently failed to cut its overspending as much as promised, and keeps coming back for more money.

The Greeks complain that spending cuts demanded by the troika are killing their economy, which in turn pushes their tax revenues down, stoking the need to borrow yet more.

But Germany and other lenders believe southern Europeans have lived beyond their means for years and must learn discipline.

Would they really pull the plug on Greece to make an example of it? Or, with daily protests on the streets of Athens, could Greece itself walk away from the table?

And if so, would it trigger another global meltdown?

Myopic politics
"In both cases, the authorities that could step in to rescue... don't want to commit," says former Bank of England economist Sir John Gieve.


Southern Europe and Germany are playing a game of brinkmanship over bailouts and austerity
Partly this is due to "moral hazard", he says, where rescuing a miscreant bank or government would just encourage more recklessness. Germany has one eye on Italy's half-hearted austerity attempts.

That creates a game of brinkmanship, with each side using the threat of catastrophe to win concessions - austerity versus bailouts.

"It's rational for everyone to take measures to prop the system up," says Sir John. "But because you're doing it on the brink of disaster, there is a risk you don't get your ducks in a row."

The bigger problem is political. The German government recently suffered a huge defeat in regional elections. Greek bailouts are not popular with German voters.

"Politics is not a rational process. Crisis creates myopia," says Jerome Booth, head of research at asset manager Ashmore. He thinks the bigger risk is of Greece pulling out: "All you need is for some politician to stand up and say 'vote for me and you don't have to pay your debts any more'."

Default and devalue
Certainly it would be irrational for Greece to stop playing ball. Cut off from the troika's bailouts, the country cannot borrow.

But even if it stopped paying its debts, Greece would still face enormous pain.

Last year the government borrowed the equivalent of 10.5% of annual economic output, just to fund general government spending.


Would cutting off emergency loans to Greece make a return to the drachma inevitable?
That overspend would have to stop immediately - far worse austerity than the troika demands. The Greek banks would also collapse, bereft of outside support.

Having crossed the Rubicon of unilateral default, many economists believe the Greeks would leave the euro altogether.

One reason is the need to devalue its currency to restore competitiveness. "Greece needs to move its exchange rate by at least 30% to have any chance of getting jobs back," says Mr Booth.

Another is that the Greek central bank could then fund the government's continued borrowing with freshly-printed drachmas. But inflation would soar, and imports especially would become very expensive.

Chain reaction
What would this mean for the rest of the world?

In 2008, banks worldwide had borrowed up to the hilt, and were unable to absorb the losses spreading from the US housing market.

That threatened a chain reaction of bankruptcies, which in turn caused a collapse of confidence throughout the financial system.

The resulting electronic bank run was the immediate cause of the meltdown. Banks, brokerages, insurance funds and speculators had relied on a steady supply of cheap, short-term funding, which suddenly vanished.

Banks have spent the past three years slimming down. They also rebuilt their capital, that is, their ability to absorb losses.

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Reliance on short-term borrowing has also reduced, and central banks stand ready to provide the emergency loans that rescued the system last time round.

Moreover, this time the surprise factor may be missing.

"[Unlike Greece] Lehman's death throes didn't last two years," points out Sir John Gieve. "Banks have already written down [Greek] debts substantially."

Legal mess
Even so, Europe's banks are still widely seen as the continent's Achilles' heel, with their share prices down 50-70% over the past six months.

European regulators conspicuously side-stepped the possibility of a government debt default when carrying out "stress tests" to check the resilience of banks.

But this has just increased uncertainty about who would suffer most after a default, undermining confidence in all banks.

There is evidence suggesting the European banks themselves have already been quietly shifting their cash out of Europe over the summer, while one French bank is now reportedly finding it impossible to borrow in dollars.

Mr Booth thinks some banks may not withstand deep losses on Greek government debt, say up to 75% of their original value, and a simultaneous collapse of Greek banks.

And a Greek euro exit would create a huge legal mess: does Greece have the right to leave the euro? Can companies convert contracts in euro into devalued drachmas? How would personal savings and borrowings be converted?

Financial drip
Economists say the greatest damage from a Greek default or euro exit could be from the example it sets. Unlike 2008, there is now a second and more worrying channel for financial contagion: government debt.

During the latest jitters, markets have been differentiating more sharply than ever between safe Germany and risky southerners. Why lend to a country that could follow Greece's lead and default, or convert your euro cash into e.g. devalued lira?

The concern at the front of every European leader's mind is that investors may stop lending to Spain and Italy - economies that together are more than ten times the size of Greece.

Continue reading the main story
Diverging fortunes

Rate at which markets are willing to lend to governments for 10 years:

Germany: 1.74%
France: 2.55%
Spain: 5.36%
Italy: 5.69%
Ireland: 8.45%
Portugal: 10.76%
Greece: 21.25%
Source: Bloomberg. Data as of 13 September

Already the two have been put on an ECB financial drip.

"There needs to be a clear perception that other countries do not have the same problem [as Greece]," says Mr Booth.

He thinks austerity programmes are going a long way to achieving this distinction.

Growing pains
But other economists warn that austerity worsens a different problem that many southern Europeans share with Greece.

Thanks to rising wages during the boom years, they all have seen their competitiveness versus Germany steadily eroded, but as they are in the eurozone, they cannot restore it by devaluation.

And with Germany insisting that all governments - including itself - slash spending, economic growth is under threat. That in turn makes their debts even harder to repay.

The problem is compounded by the ebbing away of confidence in their banks, making it harder for them to borrow the money needed to support the economy.

Indeed, without German financial support, it may be beyond the means of Italy and Spain, and even France, to rescue their banks while remaining in the euro, undermining confidence further.

Yet the failure of a major European bank would be as unmanageable now as in 2008, and liable to spread the financial crisis across the globe.

Economists say the solutions to the crisis are within Europe's means. The problem is the unwillingness of politicians to take the necessary steps because they rankle and lose votes.

So, just as with Lehman Brothers, the big question for markets now is: how big does the financial crisis need to get to create political resolve?

Or will the politicians run out of time first?

http://www.bbc.co.uk/news/business-14818439

[Voltron]

It`s not easy to find sane Greeks like this author. I wanted to post it again in full because the Greek author confirms my words above here when we argued with Voltron.

Ok, im not going to spend to much time on this one.
In case you didnt notice I will highlight this word for you

http://www.washingtonpost.com/opinions/modern-greeces-real-problem-ancient-greece/2011/11/01/gIQACSq9mM_story.html

Its an OPINION. This guy is a self hating politically correct globalist that obviously knows very little of the country he speaks about. The first capital was in fact Naphlion, NOT Athens but this fool probably doesnt even know the difference. He seems unhappy for learning katharevousa and ancient Greek while he was growing up and probably was picked on as a kid. Ive seen these types of people all to often and they come in all forms and ethnicities. The author also trys to portray the expectation that we should still be an exact replica of our ancestors failing to mention the dynamics of our region withing the last 2000 yrs. If a group of Germans had some high expectations for the inhabitants of Greece due to Renaissance is not so an issue, but to say they invented us is a completely different story. His view as yours Onur is an extremely simplistic one and ignores completely the evolution of our Ancient ancestors to who we are today. In short his guy is a moron.