What Happens When Greece Defaults?

Generali

This bloke thinks he knows:

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

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.
[continues]

lemonjelly

Government bans withdrawals from banks?:eek:

What would the effects of that be?:eek:

Anyone aware of the implications for something like this for the UK?

Generali

lemonjelly wrote: »

Government bans withdrawals from banks?:eek:

What would the effects of that be?:eek:

Anyone aware of the implications for something like this for the UK?

Utter chaos. Fortunately it is highly unlikely for the foreseeable as the UK Government borrows in a currency she can print. Why default when you can crank up the printing presses?

Poshbird

Generali wrote: »

This bloke thinks he knows:

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

Isnt it still an 'if' not yet a when they default?

That could spell a currency crisis for the Euro as there is a rush out of it!

purch

Isnt it still an 'if' not yet a when they default?

Not when 2 year Greek Government Debt yields 25% more than mainstream EUR Government paper.

purch

Anyone aware of the implications for something like this for the UK?

We can always watch on, with a smug satisfied look on our faces because we are not part of the EUR farce :eek:

Generali

Poshbird wrote: »

Isnt it still an 'if' not yet a when they default?

That could spell a currency crisis for the Euro as there is a rush out of it!

It's when the way things look at the moment.

Currently, investors want 25% a year to lend to Greece for 2 years. At rates like that and with Government debt sitting at 160% of GDP, to refinance the lot would cost 40% of GDP each year just to service the debts.

If you think that the Germans will continue bailing out the Greeks then 25% a year is possibly the best investment you'll ever make.

Mrs_Bones

I remember talk a while back about Spain being the big one and if they wanted help, it wouldn't really matter what the others did as Spain would tip the balance anyway. Is that all ok now?

If Greece did default what would it mean for us, even though we are not in the Euro we still seem to be paying large sums of money to try and keep it afloat, I'm assuming that this is because the Euro failing would cause us big problems too?

Kennyboy66

Generali wrote: »

It's when the way things look at the moment.

Currently, investors want 25% a year to lend to Greece for 2 years. At rates like that and with Government debt sitting at 160% of GDP, to refinance the lot would cost 40% of GDP each year just to service the debts.

If you think that the Germans will continue bailing out the Greeks then 25% a year is possibly the best investment you'll ever make.

You wonder why any Greek has any money in a Greek bank a/c, when easyjet and Ryanair are about.

Also, would you want to hold many "greek Y" euro notes ?

No wonder the Gremans like to have notes with a X starting the serial number.

michaels

Would they not just ban transactions over a certain size rather than freezing all accounts?

Also back of a fag packet calc but a 2%% risk premium and a default likely to cost 50% suggests a 50% chance of default.

As a Greek individual given those odds surely you would be already whether pulling all your money out of the bank and in to euro notes (assuming they remain convertible) or else buying CDS's from a non-Greek financial institution to hedge your default risk - both of which would surely already have prompted a run on Greek banks?

lemonjelly wrote: »

Government bans withdrawals from banks?:eek:

What would the effects of that be?:eek:

Anyone aware of the implications for something like this for the UK?

Procrastinator333

If I were Greece, I would opt for default. The current debts and austerity are just too much, they will never recover. It is only a matter of when they accept this, not if. Take the pain now. Split from the Euro. Devalue the debts by 90% and just start again. If they do this they likely wouldn't have to worry about running up more debt for a while as I doubt anyone would lend to them.

I don't think this would be in the interests of the rest of the eu, but I think it would be the best thing for Greece itself.

Once one shows the way, I can see others following.