Greece...

Thrugelmir

ciaccino wrote: »

This is not what David Cameron thinks.

The UK doesn't have the Euro as it's currency.

Froggitt

Presumably they will default and leave the Euro, leaving Germans etc with huge losses. If I was Germany etc, I would want them kicked out of the EU unless they promised to repay those loans.

antrobus

wymondham wrote: »

Does he have to make a decision? Seems there is no actual timescale whereby something has to happen or consequences occur.... just can kicking in the extreme!

Basically, yes.

Greece has run out of money. They have already gone through the fiscal equivalent of looking down the back of the sofa and raiding the children's piggy banks.

Froggitt wrote: »

Presumably they will default and leave the Euro, leaving Germans etc with huge losses. If I was Germany etc, I would want them kicked out of the EU unless they promised to repay those loans.

I strongly suspect there's a Super-Secret Plan B hidden somewhere in Brussels or Berlin that involves booting out the Greeks.:)

wymondham

so, with all this, at what point is it whereby something occurs... is there an actual date to which they have to pay back (or else!) ?

ChiefGrasscutter

michaels wrote: »

Similarly the Greek govt will not have any money to pay its bills (like pensions) assuming it is not running a primary surplus and under EUR rules they can't just print more to pay the bills.

So the Greeks simply tell the EU we will start printing Euro's and there is nowt you can do about it.
Should get the ECB's attention fairly rapidly.

antrobus

wymondham wrote: »

so, with all this, at what point is it whereby something occurs... is there an actual date to which they have to pay back (or else!) ?

30th June, I think.

That's when the €1.5bn repayment to the IMF is due. And that's when the bailout expires. But don't necessarily expect a bang; it may be a drawn out whimper.

antrobus

ChiefGrasscutter wrote: »

So the Greeks simply tell the EU we will start printing Euro's and there is nowt you can do about it.
Should get the ECB's attention fairly rapidly.

That suggestion has been made before. I'm not convinced it's all that practical.

Besides, Super-Secret Plan B might include a provision for the KSK to take out Greece's only bank note printing facility.:)

vivatifosi

Am having trouble getting a link from home as I've used my monthly allowance already, but read a good article today on FT website regarding the options that Greece has. It's called "Four games the Greeks may be playing" if anyone wants to take a look.

Sapphire

Given an exit, how could Greece be physically stopped from using the Euro, which is being used in the country right now?

Generali

Sapphire wrote: »

Given an exit, how could Greece be physically stopped from using the Euro, which is being used in the country right now?

It couldn't really.

The ECB could make things very hard for Greece to keep using the Euro but they couldn't stop it altogether.

For example, all international Euro payments have to go via the ECB. If I wanted to import a load of Retsina into Australia from Greece, the producer is going to want paying in local currency. In this example that would be the Euro.

As an importer, I earn money in AU$ so would go to my local bank and do an FX trade to convert my AU$ into EUR. The bank would then do a trade with a broker who had someone looking to convert EUR into AU$ but let's not get too bogged down in that.

The point is, my bank will now be looking to pay Tsantani Retsina Pty the Euro I have just bought (note the plural of Euro is Euro as Euros sounds like 'wee' in Greek apparently). To do that my bank will pay the money using Target 2, the Euro financial plumbing. The ECB could simply prevent any Euro from being paid on to Greek banks.

To get around that, the Greeks could use a shadow currency for international trade called something like a Eura. This could be converted on demand at 1:1 for Euro, a bit like the old Gold Standard. You'd buy exports using Eura as an external currency and pay those to the Bank of Greece, the Greek central bank.

Lots of countries use or have used different currencies for internal and external trade. Any country that has currency controls in place effectively has a dual currency system even if it calls the currencies the same thing and they have a 1:1 exchange rate!

My suspicion is that phase one of a Grexit would be a default. Then certain payments inside Greece would be paid with a sort of tradeable debt that could be used as a parallel currency. US States have done this in the past, most recently California I think.

The idea is that the state gives you perhaps 80% of your pension in cash as normal and the other 20% as an IOU. You can then take that IOU and spend it as if it were cash. Generally speaking, the IOU would pay little or no interest and would trade at a discount to its face value, that discount being connected to the likelihood of the Government (which has just defaulted to its other creditors so has a credit rating of D) repaying the IOU.