Greece - what a pickle - what would YOU do?

Mersey_2

As far as I know, the £40 daily withdrawal limit applies to all Greek accounts, ie not just at ATMs and those abroad ie here too.

nilrem_2

Greeks are frantically getting their money out of the banks ( I can understand why) but surely the bit's of paper (money) will not be much use to them if the whole Greek economy fails?

bowlhead99

nilrem wrote: »

Greeks are frantically getting their money out of the banks ( I can understand why) but surely the bit's of paper (money) will not be much use to them if the whole Greek economy fails?

The bits of paper are Euro notes.

The Euro is the national currency of Eurozone economies with a population of over 300 million people. There are hundreds of billions of paper and electronic transactions taking place in Europe every year, with a value of hundreds of trillions of Euro. A Euro note has a tangible value because there are 300 million people who want them (let alone billions of other people worldwide who live outside the Eurozone but would be happy to have a pile of them)

So, whatever you think of the prospects for the Euro or for the Greek economy, there is no denying that if a Greek person succeeds in getting €100 out of a cashpoint this week, they will find someone to take it off their hands next week even if Greece descends into Mad Max-style post-apocalyptic anarchy. A Euro banknote is certainly more practical than a bar of gold. For a start, you can burn it to keep warm when the public power company gets shut down.

Eco_Miser

The bits of paper are Euros, backed by Germany's economy, as well as Greece's and the rest of the Eurozone. They are spendable throughout the eurozone, so very useful if the holder decides to migrate.

Aretnap

Indeed, Euro banknotes remain Euro banknotes and will retain (most of) their spending power for the foreseeable future, whatever happens in Greece. In the worst case scenario I suppose the Greek government might attempt to confiscate them and replace them with Drachmas, but there are ways of avoiding that - you can bury them in the back garden and wait for things to calm down, or stick them up your bottom, take them out of the country and use them to buy useful things abroad.

OTOH there's a reasonable chance that deposits in Greek banks will end up being rednominated into Drachmas which will inevitably have lower spending power, or depositors could even be subjected to an outright haircut as happened in Cyprus.

So a Greek with a thousand Euros in his pocket is in a better position than a Greek with a thousand Euros in the bank.In fact Greece effectively has two currencies already - physical Euros and electronic Euros - with the physical ones having greater value. I imagine in the near future shops will be offering (at least under the counter) different prices for cash or credit card transactions - or just plain saying "sorry sir, card machine's broken, cash only".

kidmugsy

The Greeks are faced with a choice of two dire options. I suspect that the less dire one is to vote "no" and thereby presumably leave the Euro. But they will then be left with a socialist/communist government that is very unlikely to bring in the reforms that their economy needs. Just like any other Greek government, in fact. Oh dear, oh dear.

colsten

Aretnap wrote: »

"sorry sir, card machine's broken, cash only".

That's been happening for decades in Greece, hasn't it. Part of the problem.

kidmugsy

At least they'll get to make a drachma out of a crisis.

jimjames

At least the IMF has now said what was obvious to most others except EU that the situation is unsustainable and the debt levels cannot be repaid with the current bailouts

Maybe that realisation will finally lead to a situation where the debt becomes viable for them.

In any other situation if a debtor was reliant on new loans to pay back old debt they'd be considered bankrupt and not given more.

colsten

As to whose fault the entire shambles is, there is an excellent article from the Financial Times that makes a lot of sense to me. In summary:

The cause of Greece’s misery was many years of homegrown economic mismanagement and fiscal profligacy masked with lies over its accounts. When the global crisis exposed its economic misdemeanours, it lost the ability to borrow from financial markets and sought support from the international community. This was granted, largely by its European partners, ensuring much less austerity in Greece than any plausible alternative. Sure, the motives of creditors were not purely altruistic, but the money was lent with the aim of helping the country secure a better present and future.

Read it in full: http://www.ft.com/cms/s/0/1f036eb8-209b-11e5-ab0f-6bb9974f25d0.html#axzz3eoQP3W5z.

jimjames wrote: »

In any other situation if a debtor was reliant on new loans to pay back old debt they'd be considered bankrupt and not given more.

If you quote the IMF, you should quote them in full. They said yesterday that Greece will need at least €50bn in new loans over the next 3 years, and that probably €16bn of this needs to come from the IMF.

I can't see how Greece could continue without further external financial injection, even if they went for the drachma and could print megabucks of money themselves. The root cause of their problem isn't the amount of money they have available.

For the IMF's preliminary Debt Sustainability Analysis see http://blogs.ft.com/brusselsblog/files/2015/07/Greece-DSA.pdf