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Who Will Lend Them the Money?

ILW
ILW Posts: 18,333 Forumite
in Debate House Prices & the Economy
If Greece and Frances new governments go ahead with their promises to spend their way out of the problems, who is going to lend them the money to do it with?
«1

Comments

  • chewmylegoff
    chewmylegoff Posts: 11,469 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    The European central bank will press a button, create some money out of thin air, use it to buy existing bonds from banks. The central bank then makes some rules which means that the banks will then have to buy some more govt debt with that cash they now have, which is lucky because the French and germans happen to be auctioning off some new bonds.

    It's like magic but !!!!!! (or if like me you think magic is !!!!!!, then it's just like magic).
  • pqrdef
    pqrdef Posts: 4,552 Forumite
    ILW wrote: »
    If Greece and Frances new governments go ahead with their promises to spend their way out of the problems, who is going to lend them the money to do it with?
    Same people who always lend them money. A lot of people have a lot of money to stash away in a safe place, and the French treasury is still one of the safest places in the world. What else should French pension funds buy? Gold?
    "It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis
  • ILW
    ILW Posts: 18,333 Forumite
    pqrdef wrote: »
    Same people who always lend them money. A lot of people have a lot of money to stash away in a safe place, and the French treasury is still one of the safest places in the world. What else should French pension funds buy? Gold?

    Fair point, what about Greece though?
  • ffacoffipawb
    ffacoffipawb Posts: 3,593 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    ILW wrote: »
    Fair point, what about Greece though?

    www.wonga.com
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    ILW wrote: »
    If Greece and Frances new governments go ahead with their promises to spend their way out of the problems, who is going to lend them the money to do it with?

    The markets.
  • ILW
    ILW Posts: 18,333 Forumite
    Thrugelmir wrote: »
    The markets.

    Would anyone in their right mind lend to Greece, knowing they have already defaulted and are likely to again?
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    it would seem unlikely that anyone (except IMF and ECB) would lend to greece

    so they would have to default completely if they upset Merkel
  • ILW
    ILW Posts: 18,333 Forumite
    CLAPTON wrote: »
    it would seem unlikely that anyone (except IMF and ECB) would lend to greece

    so they would have to default completely if they upset Merkel

    I believe IMF and ECB are insisting on austerity measures before lending. So where does this leave any new government who has been voted in on a no more austerity promise?
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    ILW wrote: »
    Would anyone in their right mind lend to Greece, knowing they have already defaulted and are likely to again?

    Greek banks, pension funds and insurance companies.

    Banks are increasingly retrenching capital to protect their own national interests.

    US banks out of Europe. European banks out of the US.
  • pqrdef
    pqrdef Posts: 4,552 Forumite
    The point of bailing a country out is to avoid a default and protect its credit. For Greece, it's too late now, it's defaulted already. It can now default on the bailout money and its debt servicing costs will be reduced to almost nothing, so it should be able to manage. It's got nothing to lose by telling the troika where to go.
    "It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis
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