Posted on Jun 29, 2015
Is the crisis is Greece going to take down the Euro?
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http://www.foxnews.com/world/2015/06/29/world-markets-plunge-bank-lines-grow-amid-greece-financial-crisis/
Greece was denied an extension on the emergency bailout that has been ongoing for the past couple years. Now there are calls for a referendum to even continue being a member of the Euro zone. Looks like the Greek leadership is playing chicken with the rest of Europe in the hopes that a desire to keep the EU together will keep the gravy train flowing.
I think there are several telling items. Greece has restricted "capitol extractions" basically trying to prevent a run on the banks - without success. Greece recently was actively courting Russia, signing an energy deal in exchange for bilateral trade agreements in violation of EU sanction in the wake of Russian operations in Ukraine. Tourists are being told that they will be able to withdraw money from Greek ATMs just fine... of course Greece knows it would flounder without tourism.
My personal opinion is that the EU should have thrown Greece out two years ago when it was obvious that Greece had no intention of reducing spending on its vast social programs. Greece had to cook the books to get into the Euro currency in the first place, having never met guidelines established by the EU for spending, debt ratio, and budget deficits.
The risk that greece defaults is a very real danger to the French and German bank systems, and it would put real pressure on the world's economy. Greece is not alone in having a sovereign debt problem. If national debts go into default there is real risk to other fragile economies. We could see 2008 all over again, only bigger and with geo-political implications.
Greece was denied an extension on the emergency bailout that has been ongoing for the past couple years. Now there are calls for a referendum to even continue being a member of the Euro zone. Looks like the Greek leadership is playing chicken with the rest of Europe in the hopes that a desire to keep the EU together will keep the gravy train flowing.
I think there are several telling items. Greece has restricted "capitol extractions" basically trying to prevent a run on the banks - without success. Greece recently was actively courting Russia, signing an energy deal in exchange for bilateral trade agreements in violation of EU sanction in the wake of Russian operations in Ukraine. Tourists are being told that they will be able to withdraw money from Greek ATMs just fine... of course Greece knows it would flounder without tourism.
My personal opinion is that the EU should have thrown Greece out two years ago when it was obvious that Greece had no intention of reducing spending on its vast social programs. Greece had to cook the books to get into the Euro currency in the first place, having never met guidelines established by the EU for spending, debt ratio, and budget deficits.
The risk that greece defaults is a very real danger to the French and German bank systems, and it would put real pressure on the world's economy. Greece is not alone in having a sovereign debt problem. If national debts go into default there is real risk to other fragile economies. We could see 2008 all over again, only bigger and with geo-political implications.
Posted 9 y ago
Responses: 3
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1SG (Join to see) No risk to the Euro as a currency, I think it will continue to get weaker against the dollar, heading toward parity.
I believe the Greek left is prepared to shift to the Russian Ruble if necessary and default on all EU debt. Without any debt payments and a moderately weak currency of the Ruble they can keep their current system of cronyism, payoffs and generous pensions for another year or so until Russia doesn't need them to block the Ukraine vote.
Then the EU will have to decide to remove the Greek's from the EU structure before the Ukraine vote.
Russia gets what they want for a few Billion and the Greek left gets to hang with their apologist friends who will rail against the 'corrupt' Western banking system.
I believe the Greek left is prepared to shift to the Russian Ruble if necessary and default on all EU debt. Without any debt payments and a moderately weak currency of the Ruble they can keep their current system of cronyism, payoffs and generous pensions for another year or so until Russia doesn't need them to block the Ukraine vote.
Then the EU will have to decide to remove the Greek's from the EU structure before the Ukraine vote.
Russia gets what they want for a few Billion and the Greek left gets to hang with their apologist friends who will rail against the 'corrupt' Western banking system.
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1SG (Join to see)
Yup. Stunning how transparent all of that is, while we can't be bothered to engage.
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It'll be interesting to see, for sure. The Grexit could cause problems but it might not. I think a lot of it hinges on just how badly the EU sinks Greek as they exit. A loss of the Euro and a shuttering of open trade will be devastating. If other countries choose to exercise a similar exit, it'll be the end.
I'm more worried about what Russia or China will do. A Russian bailout in exchange for certain concessions could have long-term strategic consequences.
I'm more worried about what Russia or China will do. A Russian bailout in exchange for certain concessions could have long-term strategic consequences.
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1SG (Join to see)
SGT Jeremiah B., national banks throughout the EU are leveraged pretty heavily on sovereign debt. If I am not mistaken, it was one of the founding pillars of the Euro being established that member nations would collaborate to ensure bond ratings on each other's sovereign debt, and on of the reasons the UK opted out.
The immediate threat would probably be first felt in Ireland, where they too have had to refinance their debt with outside assistance. If the interest rate on the short-term component of that goes up substantially, watch out.
I would also be concerned about that ripple effect hitting US Treasuries as well. A 1% jump would equate to $120 BILLION in interest alone. Don't think that China is aware of that? Think again.
The immediate threat would probably be first felt in Ireland, where they too have had to refinance their debt with outside assistance. If the interest rate on the short-term component of that goes up substantially, watch out.
I would also be concerned about that ripple effect hitting US Treasuries as well. A 1% jump would equate to $120 BILLION in interest alone. Don't think that China is aware of that? Think again.
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I think that it will also depends on how Spain falls. If Spain falls, too. The Euro is doomed. I don't know if I want to watch the dominoes...
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1SG (Join to see)
Two years ago, Spain, Ireland, and Portugal were in real trouble and Italy was in poor shape as well.
Honestly, I always felt that the Euro was ill-conceived as soon as they moved to incorporate countries in the East that had completely diffent costs of living than the western countries. Since prices and wages were so disparate, it was only a matter of time before people would migrate for higher wages and prices would skyrocket in countries with lower costs of living. The real issue is spending, though. Nationalism is not dead on Europe, and many of those countries chafe at the idea that they should conform to the German or French idea of prudent expeditures. Blaming others for your problemss is good politics in Europe. Looks like it might have real consequences this time.
Honestly, I always felt that the Euro was ill-conceived as soon as they moved to incorporate countries in the East that had completely diffent costs of living than the western countries. Since prices and wages were so disparate, it was only a matter of time before people would migrate for higher wages and prices would skyrocket in countries with lower costs of living. The real issue is spending, though. Nationalism is not dead on Europe, and many of those countries chafe at the idea that they should conform to the German or French idea of prudent expeditures. Blaming others for your problemss is good politics in Europe. Looks like it might have real consequences this time.
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SSgt (Join to see)
Yup. It appears that those in leadership in the 'at risk' countries don't have a clue about expenditure vs income. Not only that, but Greece has taken a highly Socialist view in recent years. I believe they have upped welfare & public assistance. It is to the point that they are now limiting the amount you can withdraw from an ATM to 60 Euros/day. Tomorrow they owe a payment to the IMF of way too much to fathom for them.
Here's a conspiracy theory for you: As the countries fail, one-by-one, they are incorporated into a true European Union, turning them into something akin to the United States - several separate countries (states) ruled by one body.
I'll take my tinfoil hat off now.
Here's a conspiracy theory for you: As the countries fail, one-by-one, they are incorporated into a true European Union, turning them into something akin to the United States - several separate countries (states) ruled by one body.
I'll take my tinfoil hat off now.
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1SG (Join to see)
A "United States of Europe" will not happen in our lifetime, SSgt (Join to see). The roots of those countries, language differences, etc will all conspire to keep that from happening.
What I do think is likely is that Russia will exploit fractures in the Euro Block for their own ends. As Europe turns inward, shenanigans ensue...
What I do think is likely is that Russia will exploit fractures in the Euro Block for their own ends. As Europe turns inward, shenanigans ensue...
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SSgt (Join to see)
I can see that scenario playing out as well. In fact, hasn't Putin already sewn the seeds to bring the eastern bloc back into the fold of old Mother Russia? I thought he has been extending some humanitarian-type assistance to many of them.
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