Greece Back in the News. FUD or Really Scary This Time?

[OROBTC]

...

Even though Greece recently made a payment, I keep reading of more and more problems piling up even as their .gov keeps obstructing and delaying payments.  Promises, promises.  Cozying up with Russia (Russia may want to re-think loaning money to Greece, even for the pipeline to transit Greece).  But maybe Russia would get a warm-water naval base...?  China too (after a "contribution")?

I have been reading about how Greece "will bring down the Euro" since 2010, yet nothing seems to happen.  Yet, they now have Syriza, apparently hard-left (?) regime.

Today their central government has asked the municipalities to send their "excess cash" to the Greek central bank...


Anybody here know much about Greece and their financial system (in particular the consequences on non-payments)?

Would a Greek default really bring larger but similar problems like Spain and Italy?

If Italy falls then France will.  France falls, Germany will.  Then it hits our shores...

[Cluster2k]

Well, confiscating 'excess funds' from local governments by the central bank sounds a little bit like desperation to me.  What's next?  Telling private citizens to move their 'excess cash' to the central bank too?  Sooner or later they'll run out of funds to temporarily requisition and send to Germany and France.

Building the Euro system without also planning for what happens when a country would run foul of the rules was a terrible mistake.  It was a system built without enough foresight.  It's like fission nuclear reactor engineers.  Great design and engineering, but no one thought about how a melted down reactor core could be cleaned up.  Contained, yes, but not actually removed and made safe.  Everyone just assumed it wouldn't ever happen.

The one thing I'm confident about is that governments will do everything in their power to kick any contagion down the road to the next government or generation of taxpayers.  We have been on the 'real soon now' brink with Greece for almost four years now.  It's like waiting for the Japanese economy to wilt under massive government deficit spending.  Everyone knows it's coming, we have been waiting for a decade or more, but will continue to wait...

[qiwoman2]

Both the Eurozone and Corrupt Greek politicians and tax evaders are to blame for all this chaos and the brainwashing of the people into borrowing money and living a life in debt. Also the urbanization of a huge amount of the Greek population into the Big cities was another key mistake which now has millions of Greeks suffering, especially a ton of them who went into higher education and who cannot get a job or won't get a job 'beneath' their status because that's how they were brainwashed by the parents, I know because I got Fam over there.. Now they are sitting at home living off their parent's minuscule and shriveling pensions. The whole system in Greece needs a overhaul. SYRIZA is the only government in post Junta Greece that has the guts to change the status quo and combat corruption but Everyone, including the EURO NORTHERN Partners want to bring it down.

[tabnloz]

The problems here are many. Rational actors would assume that greece will not be allowed to exit as the ramifications are huge. Large Euro institutions are owed billions by Greece and not only would they be unwilling to take the monetary loss, they also do not want a contagion risk or the losses to other financials over the globe who are invested in Greek bonds etc.

Juncker is hard right, rules based. He does not want to budge an inch as in his mindset the Greeks need to pay for their misdeeds. Syriza are left and don't think the citizens should continue to be economically brutalised in order for the Troika & big German / Euro financials to profit (which they have done so far). While the dance of economic chicken is being played out, everyone is getting their money out of Greece at an alarming rate, obviously further accelerated by this news today.

Bail in plans are in place and its one almighty staring contest to see who backs down first.

[deisik]

Germany has limited independence for 70 years by now and no one seems to be much complaining about it, so if Russia backs off from buying Greece, they can always sell their sovereignty to China ("a buyer of last resort"). Since we don't see anything like this right now, therefore the Greek government apparently still has enough room for maneuvering...

[johnyj]

All the countries can not repay their national debt, that is impossible by design. The only way is to print more and more money and borrow more and more to pay the debt. But the problem with Greece is that they lost the power to print money to pay for their debt as other countries like US, Japan, UK

To regain that power they must quit EMU and issue their own money, which is the best solution for them, but other countries will follow suit thus the EMU will be dismissed

The essential of Greece crisis is not something about fiscal policy but a fight for the right to create money. Once Greece have the right to create their own fiat money, the fiscal problem will disappear since they can provide endless credit line from their own central bank

However, I doubt that even Greek government do not control their central bank, their central bank might belongs to some guy from ECB, just like FED never belongs to US government

There is on going talk about Greek government creating their own currency, an IOU from Greek government that can be used to pay tax

[tabnloz]

The Troika are taking the hard line. They want to destroy Syriza more than Greece itself.

I think of it this way - if they can humiliate Syriza, by way of having them backflip on their voting pledges, then no other party of similar ideals in Europe stands a snowflakes chance in hell of getting in. It's a high stakes game of chicken but the Troika has the power.

Syriza doesn't want to leave the Euro as it is catastrophic to do so, at least in the short term, and they are a political party. Greece would survive as Argentina has done without capital market access, but Syriza wants a softening of the terms which would be seen by the Troika as letting them get away with their past sins.

With the news of the collateral haircut incoming, it looks as though the ECB is forcing Greece down a path without options and they hope Syriza will shoulder the bank run , defaulting blame.

[tyz]

In my opinion, it is very serious this time. Greece has to pay more than 13 billion Euros of debt back in the upcoming three months.

[johnyj]

In my opinion, it is very serious this time. Greece has to pay more than 13 billion Euros of debt back in the upcoming three months.

Just a number game. Right now, ECB is creating 60 billion Euros every month, just give some to Greece then problem solved

[OROBTC]

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johnyj had an interesting statement above that I have seen just a couple of times before, but is probably completely correct.  The debts cannot be paid.  And were probably designed that way, never possible to do so.

This would be probably true for all the developed countries...

"What cannot be paid back will not be paid back."  (Mike (Mish) Shedlock?)

"When people lose everything, they completely lose it!" (paraphrased from Jim Rickards or Gerald Celente I believe)

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I still think that if Greece brings down Spain, then Spain brings down Italy, Italy brings down France, the Germany goes...  And within 48 hours the storm hits US shores...

[Q7]

Right now they are struggling to raise the money to pay back the creditors. I don't know how they are going to do that. Raising taxes and having tightening monetary policy is not going to make any difference. If this continues there is a high probability that Greece may default on its debts, forcing it to exit as a last resort. What goes from here is a catastrophic chain of collapse.

[JohanM]

Without wanting to offend anybody, I see the situation as follows:
The Greek government: they say to Europe that the austerity program did not work (for them) and want to get rid of it. They offer no alternative (outside of erasing their complete debt) whatsoever.
The Greek people: are doing a bank run to get all their Euro's in Cash, not paying taxes
The Greek wealthy: the Greek church alone can pay most of their foreign debt, but refuse to let go of any money. Many Greek have enormous amounts of money in foreign (Swiss) banks.
The Europeans just want to make sure that money does not go into a bottomless pit (as it does now). The austerity progam did work for Portugal and Ireland

This all means that the negotiations between EU and Greece are going nowhere.

Conclusion:
Greece forcing itself outside of the monetary union, followed by a Greek default on their debt.
On a friday the banks will close and on monday people will have new Drachme worth 50 to 90% less then their Euro's.
There are some extended weekends coming up in may, ideal for such a move.

[Amph]

Right now they are struggling to raise the money to pay back the creditors. I don't know how they are going to do that. Raising taxes and having tightening monetary policy is not going to make any difference. If this continues there is a high probability that Greece may default on its debts, forcing it to exit as a last resort. What goes from here is a catastrophic chain of collapse.

the only thing they can do is raising the amount of work for everyone(adding more work positions) and maintain or reducing the taxes(rising taxes is never the answer, it only makes worse your position like printing more money...) but pay slighlty less everyone, this mean that their pil will increase and the debit will be payed slowly

[maku]

Would a Greek default really bring larger but similar problems like Spain and Italy?

If Italy falls then France will.  France falls, Germany will.  Then it hits our shores...

If the Greece situation has any effect on other countries it's mostly by financial markets having uncertainty about other low rating countries.
If Spain or Italy has financial problems it's because their economy is poorly managed. Germany is solid, France is doing average but both countries have major position in EU so they will do just fine.

[galdur]

Well, it certainly wouldn´t have a healthy effect on the balance sheets of German banks that have the loans now booked at full value along with Italian, Spanish, Portuguese ones.

[tabnloz]

Would a Greek default really bring larger but similar problems like Spain and Italy?

If Italy falls then France will.  France falls, Germany will.  Then it hits our shores...

If the Greece situation has any effect on other countries it's mostly by financial markets having uncertainty about other low rating countries.
If Spain or Italy has financial problems it's because their economy is poorly managed. Germany is solid, France is doing average but both countries have major position in EU so they will do just fine.

Deutsche Bank is technically insolvent if they marked to market (like plenty of others). DB et al make up such a large part of the economy and is so interconnected in the Eu and globally that a proper Greek default could cause the much hyped 'contagion'. No one really knows though how it would play out.

Today it seems like varoufakis is on the outer and a new negotiating team is stepping up. A deal is probably close.

[maku]

Today it seems like varoufakis is on the outer and a new negotiating team is stepping up. A deal is probably close.

Prime Minister Alexis Tsipras says that the deal is close and expects "an interim deal will be in place by 9 May."
He Also added "If the solution falls outside our mandate, I will not have the right to violate it, so the solution to which we will come to will have to be approved by the Greek people,"
I'm no expert but if they keep asking Greek citizens their opinion it's going to take way too long, and they will spend more unnecessary money just for increasing loan repayment

http://www.bbc.com/news/world-europe-32493005

[galdur]

Why the Cost of Hedging European Banks Stocks Has Soared

Anyone wondering why it costs so much to protect against losses in European bank stocks in the options market saw the reason on Monday.
Shares of Deutsche Bank AG slid 4.6 percent to 30.13 euros, the biggest drop in 15 months, as the lender lowered a profitability target and set a plan to cut costs, in a sign that the industry may be poised for declines. That’s even after first-quarter earnings exceeded analyst estimates and the Frankfurt-based company posted near-record revenue. It had rallied 26 percent this year through Friday. .... more

http://www.bloomberg.com/news/articles/2015-04-27/this-is-why-the-cost-of-hedging-european-banks-stocks-has-soared

[mrhelpful]

Conclusion:

They shut out greece, and the problem goes away but learned as a lesson to themself leaving greece shit out of luck to find other ways to get some sort of bail out money. Country goes under and forces to leave the country.

Or they start doing what china does with their cheap labor costs attracting more business.

[manselr]

Conclusion:

They shut out greece, and the problem goes away but learned as a lesson to themself leaving greece shit out of luck to find other ways to get some sort of bail out money. Country goes under and forces to leave the country.

Or they start doing what china does with their cheap labor costs attracting more business.

Well somebody will have to accept the write-offs, 'cause the default is coming like it or not. The thing is, Greece is just one from a long line of insolvent EU countries which will all have to default at some point, or they'll simply cease to exist as functional societies. It doesn't matter what the morons in power (of countries, banks, or EU institutions) want or talk, in the end gravity always wins...