Greece could exit eurozone, IMF chief tells FRANCE 24

[Andrea]

I just got a bulletin from France24. Christine Lagarde says that Greece could make an orderly exit from the Eurozone, but even that would pose great risks. Greece seems unable to form a coalition government, and they will probably have to hold another round of elections next month.

Lagarde told FRANCE 24 the people of Greece were being failed by the country’s politicians.

“They have undertaken important reforms, they have made a certain number of sacrifices,” she said. “To throw all this away because of profound political disagreements, it’s really a shame for the Greek people.”

So I'm trying to visualize what this would all mean. If Greece walks, they will probably be on their own. I take it that they are unable to produce adequately (or to an acceptable level) for their own country, or they would not have had to borrow so much in the first place. The degree of austerity measures being demanded along with the loans would seem to indicate that without the loans, things would be even worse - eventually.

I think that the immediate result would be like a bankruptcy: Greece would be free of the burden of debt, the rest of the Eurozone would absorb the losses, and Greece's credit would be ruined for a long time. That leads me to many questions. Could Greece make adjustments now (which would be acceptable to the bulk of it's citizenship) which would change the trajectory of it's long term financial situation? How many years would this buy? Could it actually prevent Greece from ever falling into this situation again?

How severe would the effect be on the rest of the Eurozone? Would countries like Spain and Italy, already in trouble, be pushed over the edge? Is there any way that the EU could force Greece into a kind of financial receivership, or is that basically what they have been trying to do? Could this lead to higher taxation of corporations and the wealthy throughout the EU, in order to gain funds to cover the losses?

Does anyone care to speculate on what this would mean?

I am of the belief that the Earth and it's people are perfectly capable of producing all we need. That's evident. The reason there is so much poverty and depression now is because so much of our output is being translated into instruments held by the obscenely wealthy. Instead of putting them into circulation to keep the entire economy of the world healthy, the wealthy misers keep them out of reach and use them only when they can gain an even greater proportion of the world's wealth. If the situation becomes so dire, in a kind of domino drop from Greece's bankruptcy, that other countries cannot remain afloat, might there be an urgent move toward fair taxation? That would solve everything immediate in my opinion. Then we would all have breathing room to restructure and move to a more social democratic footing.

[ecarina]

First of several.

The bottom line is that what the banksters and their wholly owned politicians and subsidiaries err... stenographers in the corporate media have been pushing isn't working.

In the end, what counts is what works- and what doesn't.

This despite what media whores are paid to say.

[enufalready]

I found this article to be a good take on the possibilities.
http://www.abc.net.au/news/2012-05-16/a-...490?WT.svl

"Imagine for a moment you live in Greece.

You wake up one morning to the news your country is no longer part of the eurozone.

You were meant to buy groceries and pay bills today, but what happens to your money now?"

It's going to be interesting, no doubt about that.

[ecarina]

(05-17-2012 04:44 AM)enufalready Wrote:  It's going to be interesting, no doubt about that.

Indeed.

Quote:The amazing thing about the Greek banking system since 2009 is not just the 25 to 30 per cent of deposits that have left, but the 70-75 per cent which have stayed. They have stayed through two years of Greece transparently getting closer to leaving the euro and turning these deposits into drachma. We’re being serious. It’s a real challenge to prospect theory. Up to €170bn remained in banks at the end of March.

http://ftalphaville.ft.com/blog/2012/05/...in-athens/

In other words- how do you unwind i.e. devolve and re-nationalise from a common multinational currency?

On the household level, are all bank deposits going to be devalued vis a vis the Euro as they're converted to devalued Drachma's?

If so, won't there be bank runs (yes) and when they occur- how will the banks remain solvent- and how will we mitigate the damages for those who "didn't get out" in time?

[Andrea]

Thanks to both of you for the links. Reading more about this makes it seem more scary. It is nearly an intractable problem at this point.

I have been wondering for some time why there have not been bank runs in Greece.

Interesting that they project chaos and violence, but also increases in tourism. I was thinking that if the drachma was considerably weaker than the dollar, Greece could become an attractive place for U.S. expats, and something I would love. To be able to live affordably anywhere in Europe would be good, given the proximity of all the countries. It sounds like it might be a long time before the conditions are really attractive to me, though.

I am glad I am not there now.

[girl gone mad]

(05-17-2012 11:07 PM)Andrea Wrote:  Thanks to both of you for the links. Reading more about this makes it seem more scary. It is nearly an intractable problem at this point.

Don't be afraid. Greece is in for more hard times, no matter what path they take. I believe exiting the Euro is the best option for them at this time. Greece should follow the example set by Iceland with respect to capital controls and managed devaluation.

Imagine being a young person in Greece, just starting on your own in the world and already paying 30% or 40% of your income to foreign banking interests, having to take a significantly reduced salary and paying high costs for basic services compared to the rest of Europe. This is a huge net drain on the Greek economy that must be dealt with. Since the ECB has no plan to act rationally, the "Grexit" is the only truly workable solution for the people, as difficult as it will be.

The irony is that once Greece fully defaults and gains control of its currency, it will be a better credit risk than it is now.

[reggie the dog]

there are only 5 million greeks and over 300 million people in the euro zone. i cant see greeces actions really harming us.

[Andrea]

(05-18-2012 01:56 AM)reggie the dog Wrote:  there are only 5 million greeks and over 300 million people in the euro zone. i cant see greeces actions really harming us.

But it's not just a matter of population. If Greece defaults, you will all be left holding the bag. Germany and France and England are in much better shape, but do you really want to take on that debt? It will probably lead to higher unemployment.