Greece downgraded to CCC by S&P, Greek MPs plan their getaway!

michaels

Somewhere I read Greece is running a primary surplus and it is the interest on the debt that is crippling it. If this is the case then there seesm a good arguement for the Greeks to default as being frozen out of the debt markets should not be a problem if they don't need to borrow to meet current expenditures.

This would also suggest that if the EU were to refinance their debts at German interest rates rather than the Greek risk adjusted ones then the Greek economy might actually be able to service and eventually repay the debts.

I have long argued that the Greek debt crisis is simply the flip side of the German economic 'miracle' and that the Germans were equally as in trouble as the Greeks - the Greeks have borrowed and spent whilst the Germans have produced and saved. The choices for Germany now - give up their savings by bailing out the Greeks or give them up by Greece defaulting.

ILW

If they are running primary surplus, surely they would not have any debt.

The_White_Horse

personally, i think they should all retire at 21 on a final salary scheme and that we should work until we are 85 to pay for it all. its their human rights innit.

my teacher mate is up in arms that he has to contribute a bit more to his final salary scheme!!! he has no concept of the fact he is amazingly fortunate to have a final salary scheme at all.

lefties and public sector workers. sickening guardian reading morons.

Graham_Devon

Not sure how good Jack Straw is with his predictions, but he has now predicted the collapse of the eurozone.

Jack Straw has predicted the collapse of the eurozone and urged the UK to consider the "alternatives" as the Greek debt crisis worsens.
The Labour MP and former foreign secretary said the euro was facing a "slow death" and the 17-member eurozone "cannot last" in its current form.
He was speaking as MPs discussed the prospect of a fresh bailout for Greece.

Jack Straw suggested the eurozone was facing a potentially terminal crisis.

"What the government should do instead of sheltering behind the complacent language, weasel words that 'it is not appropriate, we should not speculate' is recognise that this eurozone cannot last," he said.

"And it is the responsibility of the British government to be open with the British people now about the alternative prospects.
"And since the euro, in its current form, is going to collapse is it not better that this happens quickly rather than a slow death."

http://www.bbc.co.uk/news/uk-politics-13839381

Graham_Devon

And now theres this from the IMF...

The International Monetary Fund (IMF) has expressed its growing concern about the deepening crisis in Greece, stressing that a failure by the European Union to take decisive action could lead to a domino effect through the single-currency zone and result in a second global financial meltdown.

In its starkest warning yet that Greece has the potential to replicate the system-wide shock triggered by the collapse of Lehman Brothers in September 2008, the IMF told Europe's policymakers to stop squabbling over the terms of a bailout and act immediately to prevent contagion.

"While courageous attempts have been made to address the crisis, policymakers are yet again facing uncomfortable dilemmas, raising uncertainty about the final outcome," the fund said in its annual health check on the eurozone.

"With deeply intertwined fiscal and financial problems, failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers."

http://www.guardian.co.uk/business/2011/jun/20/eurozone-must-act-greek-debt-crisis-imf

diable

ahhhh let them go bust and lets see what happens, holidays are far too expensive in the Euro zone, I'd like to see some other fcukwit nation suffer instead of being carried by the rest of Europe, just visualise Greece as a nation of Estate Agents, Bankers and Insurance Sales Persons...........

Mr_Mumble

Graham_Devon wrote: »

Loan has been delayed.

Surprised at that to be honest.

Down to the greeks now. Interesting few days ahead.

Its a "clever" political step, the Greeks don't want austerity but they do want to be in the Euro according to a weekend poll:

In a nationwide survey of 1,208 voters, 47.5 percent of respondents said they wanted parliament to reject the reform package and for Greece to hold early elections.

Just over a third -- 34.8 percent -- wanted it to be approved so Athens could receive a new loan tranche and secure the second bailout.

...

Just under 90 percent of those polled said they were not optimistic about the direction in which Greece was heading, but 80 percent favored being in the euro zone.

By not rubber stamping the next 12bn euros eurozone politicians are putting a lot of pressure on Greek politicians to say yes to the austerity measures (and the vote of confidence in the ruling party that happens tomorrow).

michaels wrote: »

Somewhere I read Greece is running a primary surplus and it is the interest on the debt that is crippling it.

I thought Greece was close to achieving a primary surplus but the recent numbers don't look so good. This blogpost has details of Greece's current primary deficit and projected surplus. The revised number (currently on Eurostat's website*) for 2010 was a primary deficit of 4.9% (up from 3.2% in the blog's chart). So, it is probably 2013 before Greece has a primary surplus based on, the often too optimistic, projections.

This is all rather theoretical imho, Greece will never use the nuclear option of reneging on all debt for two very simple reasons:

1. Its the Greek financial institutions who are the largest creditors! Outside of Russia in 1917 and North Korea in the mid 1980s its hard to recall such a wide ranging default and even in these cases it was mainly foreigners who were wiped out. I find it implausible the Greeks would go down this rabbit hole since they are in favour of staying in the Eurozone and to wipe out most creditors while keeping a functional financial system would require a neo-Drachma.

2. As Generali recently said tax revenue is lumpy and Greece would need external help, probably some money from the IMF, even if Greece ran a small primary surplus. But if they burnt all creditors that would now include the IMF!

*The table I'm looking at is "General government primary balance (teina230)" which can be found in the "Government deficit and debt (t_gov_dd)" folder.

michaels

Thanks very much for the data and comments.

relic

diable wrote: »

ahhhh let them go bust and lets see what happens, holidays are far too expensive in the Euro zone, I'd like to see some other fcukwit nation suffer instead of being carried by the rest of Europe, just visualise Greece as a nation of Estate Agents, Bankers and Insurance Sales Persons...........

Are you really that idiotic?

If Greece goes bust, nearly every country in the EU (including the UK) will have massive financial pressure put on them. Liked the previous credit crunch? Well if what you say goes ahead, then look forward to an even worse one.

The Greek people are being ridiculous, protesting against cuts, saying that they should just default.. Don't think they quite realise what position they would be in after something like that. It would be interesting to see their position on protesting cuts after they have been declared a third world country.

michaels

Argentina defaulted and was very quickly enjoying a boom and higher living standards than before the default. With a weaker currency and the ability to ignore some of the European restrictions Greece could also see a period of rapid growth.

Also criticising the protestors ignores the impact on individuals compared to the country as a whole - suppose you had borrowed 200k to buy one of the limited number of taxi permits which will then earn you an income for life top pay off the loan and you can then sell the permit to provide a pension and then you are told that the issue of permits will no longer be restricted so effectively your 200k is lost - wouldn't you protest. Similarly, as here, it is the PAYE payers who will bear the brunt of tax increases as they can not manipulate their incomes or 'go offshore' which may not seem very fair to see those who have always dodged taxes getting away Scot free.