Greek debt crisis demonstrates perils of lending to your euro friends

[zenitzz]

After months of games and brinkmanship, and only a week after Greek voters rejected the conditions for a €7.5bn (£5.3bn) rescue package, the end came swiftly. The eurozone’s political leaders agreed to start negotiations on a much larger package, worth €86bn , almost half of Greece’s GDP. Unfortunately, the deal reveals Europe’s apparent determination to reenact the same tragedy in the future.

Over the past five years, a whopping €344bn has flowed from official creditors such as the European Central Bank and the International Monetary Fund into the coffers of the Greek government and the country’s commercial banks. But after six months of near-futile negotiations, exhaustion had set in and holidays were beckoning; so the actual conditions for a new Greek rescue were given short shrift. Although the European Financial Stability Facility (EDSF) had officially declared Greece bankrupt on 3 July, the eurozone’s leaders kicked the insolvency can down the road yet again.

The latest agreement did halt, or at least interrupt, the eurozone’s biggest crisis to date, culminating in an unprecedented period of antipathy, opprobrium, humiliation, pestering and blackmail within Europe. Greece came within a hair’s breadth of leaving the eurozone.

The former Greek finance minister Yanis Varoufakis revealed that after taking office, he assembled a group, with the consent of Greece’s prime minister, Alexis Tsipras, that met in secret to prepare the introduction of a parallel currency and the takeover of Greece’s central bank – effectively an exit (or “Grexit”) from the eurozone. Germany’s government also was ready to accept what appeared to be the inevitable. Had the French president, François Hollande, not advised Greece behind the German chancellor Angela Merkel’s back about how to negotiate, events could have taken an entirely different course.

The bitter dispute within the Eurogroup (comprising the eurozone countries’ finance ministers) not only strained relations among the monetary union’s members, but also fueled tensions within national governments. Many European leaders are still smarting and licking their wounds. But this should also be a time for them to reflect on what happened and why.

read more: http://www.theguardian.com/business/2015/jul/28/greek-debt-crisis-perils-of-lending-to-your-euro-friends-insolvancy

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[bitnanigans]

If Greece exits the eurozone, what actually happens to the existing debt? And will their currency actually have a lot of value? Just seems like a huge mess and I'm thankful I'm nowhere involved with it. I can't imagine what it's like for everyone involved.

[BillyBobZorton]

If Greece exits the eurozone, what actually happens to the existing debt? And will their currency actually have a lot of value? Just seems like a huge mess and I'm thankful I'm nowhere involved with it. I can't imagine what it's like for everyone involved.

A default happens and the rest of europe have to deal with it. Just like when a default happens when you lend money to someone. As far as I know, Greece isn't forced to pay back, they can leave anytime they want (and deal with the consequences of being outside of the EU).

[HarHarHar9965]

If Greece exits the eurozone, what actually happens to the existing debt? And will their currency actually have a lot of value? Just seems like a huge mess and I'm thankful I'm nowhere involved with it. I can't imagine what it's like for everyone involved.

A default happens and the rest of europe have to deal with it. Just like when a default happens when you lend money to someone. As far as I know, Greece isn't forced to pay back, they can leave anytime they want (and deal with the consequences of being outside of the EU).

Tsipras stressed on how important it is for Greece to be a part of the Eurozone, for all the benefits it shares regardless of the financial blessings they often receive. If Greece starts from scratch and have their own currency, it would be a really hard process for that to happen. Also, it would display mis-trust and be recorded as a default which would also eliminate them from any trades in the global market.  There will be no globalization in Greece, no foreign brands will be be sold in Greece.

[yayayo]

If Greece exits the eurozone, what actually happens to the existing debt? And will their currency actually have a lot of value? Just seems like a huge mess and I'm thankful I'm nowhere involved with it. I can't imagine what it's like for everyone involved.

Greece will very likely (at least to a significant part) default on the existing debt regardless if the country leaves the Eurozone or not. The debt burden is simply to big to be manageable any more.

If Greece exits and introduces its own currency, it will quickly devalue against the Euro and adjust to the real economic capability of the country which is very limited. I would not be surprised at all to see a devaluation of the new Drachma to 1/5 to 1/10 of one Euro.

ya.ya.yo!

[g1974ak]

The former Greek finance minister Yanis Varoufakis revealed that after taking office, he assembled a group, with the consent of Greece’s prime minister, Alexis Tsipras, that met in secret to prepare the introduction of a parallel currency and the takeover of Greece’s central bank – effectively an exit (or “Grexit”) from the eurozone. Germany’s government also was ready to accept what appeared to be the inevitable.

Only the inevitable could not be called this strategy. It is almost 1 year or even more that this option is in the table of the negotiations. Maybe not openly but under it for sure. It will be the most right thing to do for the Greece and for the Europe. Greece was entered in Europe falsifying its economic data and everything that is happened in these days has the origin on those days. Then the grabbing of enormous amount of credits without thinking that those credits are money that must be returned one day have closed the story and here we are. Greexit it will be the most intelligent move that Greeks can do. In this way they can have the possibility to healed their economy and to pretend to be a country with the right rights tomorrow when it will be again in EU.

[ashour]

If Greece exits the eurozone, what actually happens to the existing debt? And will their currency actually have a lot of value? Just seems like a huge mess and I'm thankful I'm nowhere involved with it. I can't imagine what it's like for everyone involved.

Greece will still have to pay its debt even if they exit the Eurozone, although they will not pay their debt in euro but in drachma. The drachma will inflate and lose its value by 50% since the greek economy is non-existent.

[AtheistAKASaneBrain]

If Greece exits the eurozone, what actually happens to the existing debt? And will their currency actually have a lot of value? Just seems like a huge mess and I'm thankful I'm nowhere involved with it. I can't imagine what it's like for everyone involved.

Greece will very likely (at least to a significant part) default on the existing debt regardless if the country leaves the Eurozone or not. The debt burden is simply to big to be manageable any more.

If Greece exits and introduces its own currency, it will quickly devalue against the Euro and adjust to the real economic capability of the country which is very limited. I would not be surprised at all to see a devaluation of the new Drachma to 1/5 to 1/10 of one Euro.

ya.ya.yo!

I think they will remain in the Euro as long as they don't have a better alternative plan. Leaving the Euro without a clear route of action can be a total disaster and ruin the lives of tons of Greek citizens. Im sure Syriza is already secretly working on a plan B tho.

[Netnox]

Damn eu is desperately trying to keep greece in the game. $86b is nothing for them, they just type into the printing machine 86000000000 press enter lol.

[greBit]

Damn eu is desperately trying to keep greece in the game. $86b is nothing for them, they just type into the printing machine 86000000000 press enter lol.

Printing too much of euro will destory the currency and cause massive inflation. Also I don't think so that its nothing for them, I think they are not making any hard moves on Greece because they too desperately want Greece to stay in the eurozone. Otherwise Greece might develop relations with another country like Russia which will frown america too. Also, If Greece leaves, it won't take long for other countries to leave too.

[countryfree]

I know the problem so well. I'm still using the € as my main currency, for most of my income, and most of my payments. It's absolutely dramatic that the currency has lost so much value against the Sterling and the Swiss Franc this year. I wish Greece would have been kicked out of Europe, keeping it is the sign that the € is a currency of losers, even if there are only a tiny minority.

[n2004al]

I know the problem so well. I'm still using the € as my main currency, for most of my income, and most of my payments. It's absolutely dramatic that the currency has lost so much value against the Sterling and the Swiss Franc this year. I wish Greece would have been kicked out of Europe, keeping it is the sign that the € is a currency of losers, even if there are only a tiny minority.

The going out of the European Union the Greece doesn't resolve to much about euro. There are other nations that are near the situation of Greece and euro will suffer again. It is Italy and Portugal that have almost the same problems of Greece but at the same measure. It was told that euro was concepted not at the right way and for this suffer and will suffer again.

[g1974ak]

If Greece exits the eurozone, what actually happens to the existing debt? And will their currency actually have a lot of value? Just seems like a huge mess and I'm thankful I'm nowhere involved with it. I can't imagine what it's like for everyone involved.

If Greece exit the eurozone nothing happens with the existing debt. Greece will create a new money and will work to pay the debt. Only if the pays which are the proprietary of the debt decides to forget part of the debts only in this occasion that part of debt will not be paid. But not because want the Greece. But because the donators has decides to not taken that part.

[countryfree]

I know the problem so well. I'm still using the € as my main currency, for most of my income, and most of my payments. It's absolutely dramatic that the currency has lost so much value against the Sterling and the Swiss Franc this year. I wish Greece would have been kicked out of Europe, keeping it is the sign that the € is a currency of losers, even if there are only a tiny minority.

The going out of the European Union the Greece doesn't resolve to much about euro. There are other nations that are near the situation of Greece and euro will suffer again. It is Italy and Portugal that have almost the same problems of Greece but at the same measure. It was told that euro was concepted not at the right way and for this suffer and will suffer again.

Kicking Greece out of Europe would scare others. It would be a strong message. If you want to be in the € zone, you've got to behave and keep public finances in order. Allowing Greece to stay just means governments can keep on burning money forever. And they will.

[n2004al]

I know the problem so well. I'm still using the € as my main currency, for most of my income, and most of my payments. It's absolutely dramatic that the currency has lost so much value against the Sterling and the Swiss Franc this year. I wish Greece would have been kicked out of Europe, keeping it is the sign that the € is a currency of losers, even if there are only a tiny minority.

The going out of the European Union the Greece doesn't resolve to much about euro. There are other nations that are near the situation of Greece and euro will suffer again. It is Italy and Portugal that have almost the same problems of Greece but at the same measure. It was told that euro was concepted not at the right way and for this suffer and will suffer again.

Kicking Greece out of Europe would scare others. It would be a strong message. If you want to be in the € zone, you've got to behave and keep public finances in order. Allowing Greece to stay just means governments can keep on burning money forever. And they will.

Agree totally. But Europe don't have the desire to go Greece out of Europe. Scare for other things or it is simple desire to not separate Greece from the other European countries because Greece is an European country this is know only by the powerful leaders of Europe. But Greece need a lesson; a strong lesson.

[johnyj]

No, it demonstrated that you can print money and lend to your euro friends and take over their country step by step 

http://www.marketwatch.com/story/germans-begin-the-looting-of-greece-2015-08-21

"Per provisions of the “agreement” imposed on Greece, the Athens government awarded the German company that runs the Frankfurt Airport, Fraport, a concession to operate 14 regional airports, mostly on the islands like Mykonos and Santorini favored by tourists, for up to 50 years in the first privatization of government-owned assets demanded by the creditors. "

"Fraport, which ironically is majority-owned by state and local governments in Germany, has cherry-picked among Greece’s network of regional airports to take over only those that make a profit. It is happy to leave the 30 other loss-making airports in the hands of a bankrupt state.

Greek Infrastructure Minister Christos Spirtzis told German television that this deal to take away the profitable airports and leave the ailing government with only those requiring subsidies “is more fitting for a colony than for an EU member state.”

"But the plundering that has now begun unmasks the whole euro charade for what it really is — a war of conquest by money rather than by arms."

"The war is over; let the occupation begin."

[n2004al]

"The war is over; let the occupation begin."

The occupation is wanted by Greeks thyself. If they didn't taken all those money (credits) without thinking that are not their money and that one day must be returned back (even with interests) now it wouldn't be in all this mess. But they wanted to make the good life without thinking to much about from where come the money which gave them this kind of life and that to make that needed work and not credits. I would tell better: let's work begin. If they work hard had chances to be free again.

[johnyj]

"The war is over; let the occupation begin."

The occupation is wanted by Greeks thyself. If they didn't taken all those money (credits) without thinking that are not their money and that one day must be returned back (even with interests) now it wouldn't be in all this mess. But they wanted to make the good life without thinking to much about from where come the money which gave them this kind of life and that to make that needed work and not credits. I would tell better: let's work begin. If they work hard had chances to be free again.

https://en.wikipedia.org/wiki/Government_debt

All the governments do this today, look at the national debt of US/Japan/Germany, they are magnitudes larger than Greece and they will never be able to repay. However all these other governments' central bank can always print new money and lend it to their government to pay back their old debt, while Greece central bank does not have this right because Euro is printed by ECB, that's the fundamental problem for Greece

Japan for example has much worse debt to GDP ratio than Greece, so they have experienced slow growth for almost 20 years, but still they do not need to ask for another nation's permission to print new money to pay back the old debt

[alani123]

On the part about 'occupation', I've heard many Greeks complaining about state-owned enterprises being sold and privatized. Especially in my town, the government received a lot of backlash by local municipalities for wanting to privatize our airport.

It almost seems like the government was forced by the institutions to rush privatizations. Even profitable ventures were sold or partly privatized after the outburst of the financial crisis. But for the government tant to move on with deals that are seemingly so bad, I bet that there must be background details we outsiders don't get to hear about.

[n2004al]

"The war is over; let the occupation begin."

The occupation is wanted by Greeks thyself. If they didn't taken all those money (credits) without thinking that are not their money and that one day must be returned back (even with interests) now it wouldn't be in all this mess. But they wanted to make the good life without thinking to much about from where come the money which gave them this kind of life and that to make that needed work and not credits. I would tell better: let's work begin. If they work hard had chances to be free again.

https://en.wikipedia.org/wiki/Government_debt

All the governments do this today, look at the national debt of US/Japan/Germany, they are magnitudes larger than Greece and they will never be able to repay. However all these other governments' central bank can always print new money and lend it to their government to pay back their old debt, while Greece central bank does not have this right because Euro is printed by ECB, that's the fundamental problem for Greece

Japan for example has much worse debt to GDP ratio than Greece, so they have experienced slow growth for almost 20 years, but still they do not need to ask for another nation's permission to print new money to pay back the old debt

Your analysis is not correct. No one of debt mentioned by you of the country above is like the Greek debt. Nor in structure and nor from where is. And nor (that is important) unsustainable like it is the Greek debt. Tell me from what country has taken money Germany or Usa and from which country they had impossibility to pay that debt (if exists). Greeks had money without worked, Greeks has cheated (with false financial data) to have that money, Greeks has cheated to enter in EU (falsified the balances and the financial data). Greeks has in its nature doing this things because is the five time that succeed this situation in its history. In the Greece half of the people don't pay the taxes of hide the financial data to not pay the taxes. Greeks had the money of the others and had voted to not give back the money to the owners. Do a search in internet and you will find all those data. Tell me which of countries mentioned by you had doing these things? Which, among others, are the countries (part of those) which have give the money to the Greeks.

To help you a little I give this article about the habit of the Greeks to take the money of the others and to not want to give them back those.

http://finance.yahoo.com/news/a-brief-history-of-financial-crises-in-greece-214114194.html