Financial Crisis in Greece

[lavce pelagonski]

ό, τι πηγαίνει γύρω έρχεται γύρω.
1913 έχει έρθει για να τους δαγκώσει στο γάιδαρο

[George S.]

greece will never get out of the debt short of selling everything .

[Onur]

What happens when Greece defaults

It is when, not if. Financial markets merely aren’t sure whether it’ll be tomorrow, a month’s time, a year’s time, or two years’ time (it won’t be longer than that). Given that the ECB has played the “final card” it employed to force a bailout upon the Irish – threatening to bankrupt the country’s banking sector – presumably we will now see either another Greek bailout or default within days.

What happens when Greece defaults. Here are a few things:

- Every bank in Greece will instantly go insolvent.

- The Greek government will nationalise every bank in Greece.

- The Greek government will forbid withdrawals from Greek banks.

- To prevent Greek depositors from rioting on the streets, Argentina-2002-style (when the Argentinian president had to flee by helicopter from the roof of the presidential palace to evade a mob of such depositors), the Greek government will declare a curfew, perhaps even general martial law.

- Greece will redenominate all its debts into “New Drachmas” or whatever it calls the new currency (this is a classic ploy of countries defaulting)

- The New Drachma will devalue by some 30-70 per cent (probably around 50 per cent, though perhaps more), effectively defaulting 0n 50 per cent or more of all Greek euro-denominated debts.

- The Irish will, within a few days, walk away from the debts of its banking system.

- The Portuguese government will wait to see whether there is chaos in Greece before deciding whether to default in turn.

- A number of French and German banks will make sufficient losses that they no longer meet regulatory capital adequacy requirements.

- The European Central Bank will become insolvent, given its very high exposure to Greek government debt, and to Greek banking sector and Irish banking sector debt.

- The French and German governments will meet to decide whether (a) to recapitalise the ECB, or (b) to allow the ECB to print money to restore its solvency. (Because the ECB has relatively little foreign currency-denominated exposure, it could in principle print its way out, but this is forbidden by its founding charter. On the other hand, the EU Treaty explicitly, and in terms, forbids the form of bailouts used for Greece, Portugal and Ireland, but a little thing like their being blatantly illegal hasn’t prevented that from happening, so it’s not intrinsically obvious that its being illegal for the ECB to print its way out will prove much of a hurdle.)

- They will recapitalise, and recapitalise their own banks, but declare an end to all bailouts.

- There will be carnage in the market for Spanish banking sector bonds, as bondholders anticipate imposed debt-equity swaps.

- This assumption will prove justified, as the Spaniards choose to over-ride the structure of current bond contracts in the Spanish banking sector, recapitalising a number of banks via debt-equity swaps.

- Bondholders will take the Spanish Banking Sector to the European Court of Human Rights (and probably other courts, also), claiming violations of property rights. These cases won’t be heard for years. By the time they are finally heard, no-one will care.

- Attention will turn to the British banks. Then we shall see…

May 20th, 2011, Andrew Lilico
Andrew Lilico is an Economist with Europe Economics, and a member of the Shadow Monetary Policy Committee. He was formerly the Chief Economist of Policy Exchange.

http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/what-happens-when-greece-defaults

[George S.]

The Greek government will forbid withdrawals from Greek banks,

Every bank in Greece will instantly go insolvent.
Just these two things is enough for the greek citizens will go bezerk.Can you imagine no money in the banks why every citizen will revolt.
If the greek government forbids withdrawals there will be such a revolt that banks will be torched looting in the streets panic.I think there will be a complete collapse of greece as we know it.

[Phoenix]

The Greek government will forbid withdrawals from Greek banks,

Every bank in Greece will instantly go insolvent.
Just these two things is enough for the greek citizens will go bezerk.Can you imagine no money in the banks why every citizen will revolt.
If the greek government forbids withdrawals there will be such a revolt that banks will be torched looting in the streets panic.I think there will be a complete collapse of greece as we know it.

I wonder how much savings the average 'greek' has in the banking system.
Modern greece is the ultimate polished turd, a deluded society built on very shaky foundations, on rabid corruption and every type of thievery imaginable, totally lacking substance of any kind.

The charade is almost over, unfortunately greece's slide into the abyss will ultimately be felt by many others, including Macedonia and Macedonians all over the world through their exposure to superannuation funds...

[Bill77]

You know you are rat shit, when your credit rating is worse than Pakistan and just above Ecuador.

Credit Agencies Slam Greece, Rank it worse than Pakistan...

Thursday, 02 June 2011
Greece entered a league of debt- market pariahs when Moody’s Investors Service downgraded its credit rating to Caa1, leaving only Ecuador as a worse sovereign risk. Ecuador, now Caa2, defaulted in 1999 and again in 2008.

Caa1, four steps above Moody’s lowest rating and 16 from the highest, marked a brief stop for Argentina in 2001 on its way to default and devaluation. In 1998, Pakistan was cut to Caa1 after its nuclear-bomb tests isolated it internationally. Cuba, battered by a U.S. embargo and mounting debt to foreign exporters, has had the same rating since 1999.

Greece risks becoming the euro area’s first sovereign default, causing a chain reaction that could rock the financial system of the world’s second-biggest economic bloc. Last year’s 110 billion-euro ($158 billion) rescue of Greece failed to stem the contagion. With the country facing a funding shortfall of 30 billion euros next year, policy makers are trying to put together the latest financial lifeline by the end of the month.



“The Moody’s downgrade was absolutely right,” said Bill Blain, co-head of strategy at broker Newedge Group in London. “It confirms what we all knew.”

Moody’s said in a statement yesterday that there’s “at least an even chance of default over the rating horizon.”

Greece responded by saying the cut wasn’t warranted as it “overlooks” the nation’s commitment to meeting its 2011 fiscal target as well as an “accelerated” state asset-sales program. Greece has achieved “significant fiscal targets” and will submit to parliament its mid-term fiscal plan in the next few days, the government said in an e-mailed statement.
Series of Downgrades

Struggling to pay its creditors amid a third year of economic contraction, Greece has had its debt rating cut five times by Moody’s since December 2009 when the grade was A1.

Greek sovereign debt has been the world’s most expensive to insure since April, when it surpassed Venezuela. Credit-default swaps on Greece now cost 1,467 basis points, exceeding Venezuela’s by about 300 basis points and leading Pakistan, the next most expensive, by almost 600.

Credit swaps on Portugal and Ireland, which rose to records today, now round out the five most expensive sovereigns after overtaking Argentina in April. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

The Greek five-year swaps imply a 72 percent probability the country will default within that time, according to a standard pricing model used by traders. The calculation assumes investors would recover 40 percent on the underlying bonds if there were a default.

“Over five-year investment horizons, around 50 percent of Caa1-rated sovereigns, non-financial corporate and financial institutions have consistently met their debt-service requirements,” Moody’s said in yesterday’s statement. “Around 50 percent have defaulted.”

http://macedoniaonline.eu/content/view/18284/52/

[George S.]

greece will be begging it's neighbours for piece of bread pretty soon.

[George S.]

i forgot to mention when greece goes it will take other countries with it like bulgaria who borrows heavily from greece & romania.perhaps a few others like a domino effect.
This is enough reason for macedonia not to get mixed up in the eu it's going to go the same path as the others.

[Onur]

More than 150.000 people was in the front of the Greek parliement 2 days ago. More people expected to come for the general strike of June 15th. Anarchists and leftist groups are calling for the revolution in that day;

Athens sees its biggest gathering in years, more than 150,000 at Syntagma square as the build-up for the General Strike of June 15th begins






A crowd whose size is difficult to even estimate gathered in central Athens to protest against the crisis and the Memorandum tonight. The call to a pan-european call of action saw more than 100,000 (some estimates give much higher numbers) flooding Syntagma square and many central nearby avenues. In contrast to previous gatherings, police presence was much higher, with fencing erected around the parliament building and double, or triple rows of riot police around it.

The city is now building up for the General Strike of June 15th, which is also the next date of action announced at Syntagma square. Both mobilisations are aimed against the new agreement between the government and the troika (IMF/EU/ECB) which is planned to be voted at parliament on the morning of the 15th. The general assembly of Syntagma square has already called for a blocking of the parliament from the night of the 14th. In addition to the fencing installed around the parliament (see below), a police water canon has also appeared nearby.




Similar demonstrations took place in Thessaloniki, Patras, Heraklion, Larisa, Volos and many other Greek cities. In the Cretan city of Chania, fascists bearing arms appeared in the gathering, in a failed attempt to provoke the gathered crowd.

http://www.occupiedlondon.org/blog/2...e-15th-begins/

[rosetta]

Do you have a link? So, we're having a revolution in three days from now, and nobody has notified me.

[George S.]

Rosetta yes i know what your answer will be "denial".you don't beleive that it will happen it's unthinkable.I have met a lot of greeks who think like that & i have a lot of greeks who are realists.When it comes to the point when your government tells you can't take any money from banks also that you can't borrow.Then i think there will be riots in the streets & a revolution.Also do you expect to be notified before it happens.???

[lavce pelagonski]

Its not nice to say but what comes around goes around. Its time Greece feels some pain it doesnt matter how.

[julie]

Do you have a link? So, we're having a revolution in three days from now, and nobody has notified me.

do you enjoy special privileges Thessa??
Like, a direct line with God or something? You get invitations for revolts?

Onur, thanks for the above post

[Zarni]

Thanks for keeping us informed daily mass protests, murder, political assassinations have hit Athens for months but in the Western Media there is a complete media blackout of this whilst same people sit on this forum and deny knowledge

[julie]

Zarni, its typical and what we have come to expect