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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsIMF chief warns on cost of Greek exit from euro
ATHENS - IMF chief Christine Lagarde warned of "extremely expensive" consequences were Greece to leave the euro zone, a once taboo possibility that European leaders have begun to discuss openly after the nation descended into political chaos.
Fears that Greece's dire state could drag the euro zone deeper into crisis rattled financial markets across the globe, as a little-known judge was installed to head an emergency government which will lead the nation to new elections on June 17.
Ms Lagarde yesterday called on Greek leaders to show their resolve to keep the country in the euro by sticking to its bailout deal with the International Monetary Fund and European Union, the terms of which have inflicted great suffering on its people.
However, she told Dutch television that any Greek departure from the euro "would be extremely expensive and hard, and not just for Greece".
Greece's economic crisis turned into a full political crisis after an inconclusive election on May 6 when parties opposed to the austerity terms of the 130-billion (S$209.8-billion) bailout made strong gains, raising the chance that the rescue funds could be halted, pushing the country towards bankruptcy and out of the euro.
A failure of pro- and anti-bailout parties to agree forced President Karolos Papoulias to call the second election in as many months, and prompted him to say that the chaos risked causing panic and a run on bank deposits.
http://www.todayonline.com/Business/EDC120517-0000091/IMF-chief-warns-on-cost-of-Greek-exit-from-euro
Zalatix
(8,994 posts)MindMover
(5,016 posts)Greece will cost the ECB about $1 trillion;the firewall of capital reserves may not be able to handle hit &unraveling of debt deal....
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Poll_Blind
(23,864 posts)Thanks for posting it.
PB
sabrina 1
(62,325 posts)whining about the consequences, ALL OF WHICH they brought on themselves. The people are not responsible for the Global Meltdown. But the leaders of the EU and our own Government, and European Governments, chose to bail out the criminals at the expense of millions of people.
They had the gall to choose Greece's PM without an election, a Goldman guy, again, not for the sake of the Greek people, but to once again try to protect the Banks.
I don't get all the soft pedalling around all of this. Austerity = 'Protect the Banks by bailing them out and make the people pay, until they die of starvation'.
What needs to be done is to replace ALL of these tecnocrats who work for the Banks with people who represent the people. Then start the investigations and prosecutions and retrieval of the funds they have hidden in safe havens.
It will be rough for a while, but continuing down this 'cover the tracks of the economic criminals' path has absolutely no hope of ever resolving the PEOPLE'S problems. So they are beginning to take matters into their own hands now, in Greece, in France and soon in Spain and Portugal, in Britain already and everywhere else. The Game appears to be ending. But way too late for far too many people.
What's hilarious is how up to now they were threatening Greece with throwing it out of the EU. Now the Greek people have called their bluff, and it's clear they never intended to do that. They intended to enslave them forever to the IMF and World Bank, as they have been doing in third world countries for so long.
Greece should use this now to get what they want. Do what Iceland did, refuse to bail out the banks, nationalize them, put any borrowed money into GROWTH, not into BAILOUTS and in a few years like Iceland, things would have a chance of improving.
MindMover
(5,016 posts)Zalatix
(8,994 posts)raouldukelives
(5,178 posts)jwirr
(39,215 posts)sabrina 1
(62,325 posts)already affected. That is why Geithner et al have been running back and forth to Europe, hoping to influence the outcome in favor of the Banks. I guess they are still clinging to the notion that if the Banks are okay, that's all that matters, the 'market' will take care of everything else.
I don't know much about economics, but over the past few years I've learned this much, that the 'brilliant' people we were told were so smart only they knew how to deal with such important issues as the world's economies, were not only 'not so smart', I'm beginning to think they may be below average in intelligence.
What they were was ruthless, willing to do things most decent people would not do, NOT because they are not smart enough not to think about them, but because they are too decent to be willing to destroy their own countries and/or millions, maybe billions of lives in order to profit from these 'brilliant' ideas.
The proof of their stupidity is Global. The devastation they have caused is everywhere. And the solution seems simple enough to me, when people fail so spectacularly, when they manage to create so much devastation, they need to be removed from any positions that allows them to do any further damage, immediately. Then they need to be prosecuted. Meanwhile, we do have intelligent people in this world. Most of them predicted what is now happening, but were ignored.
I only hope they did not screw things up so badly that there is no fixing them before things become so out of control, that violence will be the reaction.
hack89
(39,171 posts)if you don't have the funds to run government services and you can't borrow more money what other result can there be other than severe cuts in everything?
ProgressiveProfessor
(22,144 posts)The middle class is trying by pulling all their euros out, but there are some limits.
Hard times are coming for Greece no matter what happens.
hack89
(39,171 posts)it won't be long before Greece has a domestic banking crisis as their banks become insolvent.
ProgressiveProfessor
(22,144 posts)sabrina 1
(62,325 posts)And how has the repeated bailouts helped to stop the problem? Repeating the same thing over and over again with worse results each time, for the PEOPLE, is called 'insanity'. Of course the Banks benefit, but so far, just look at Europe and tell me with a straight face that constantly bailing out crooked Wall Street criminals, killing jobs in the public sector, forcing the PEOPLE to pay the gambling debts of crooked Wall St. Banks, has solved the problems Europe is STILL facing only now it is worse than it was when they began.
The truth is, these people are ruthless, NOT smart, they are in fact quite stupid as we can see. The results of their 'brilliance' is evident now all over Europe and right here in the US.
They collapsed the World's economy, not just ours or Europes. And you want to trust them again to solve the problems THEY created?
Greece will default, it's inevitable. It has always been inevitable. Kicking the can down the road just puts off the inevitable, but it doesn't solve the problems.
Now it's time for the people to take over and start prosecuting those who are responsible for this Global mess.
hack89
(39,171 posts)sabrina 1
(62,325 posts)But have you been following what is happening in Europe at all? There has been a run on a Spanish Bank eg, over the past week, for over one billion dollars. Soon, unless some savior comes along, the contagion from the failed policies throughout Europe, starting with Greece, will spread, and it will spread over to the US because all of them are inter-connnected.
The system is imploding as was predicted several years ago. Propping it up has only delayed the inevitable. Maybe if someone with a few brain cells still functioning had been in charge of all of this rather than the very same people who CREATED the problems in the first place, we would not be seeing this now.
You simply cannot enslave millions of people, billions actually, to forever debt to Global Institutions, remove their sovereignty, do nothing to create growth, keep 'saving' the top 1% and NOT expect it all to come tumbling down.
This is what happens when you have zero interest in the wellfare of the people. Sooner or later they people will and always have, wake up and only then, will things begin to change. That is where the world is now.
Italy, eg, is talking about deploying its military against its own citizens.
They destroyed the world's economy, and not one of them has been held accountable. They are unable to undo the damage using the same old tactics, protecting the rich, forcing the people to pay their bills. The house of cards is collapsing. Too bad it didn't happen several years ago and that they were allowed to keep funneling money into bailouts.
I hope the necessary and painful, because they will be painful, changes can happen without too violence.
4th law of robotics
(6,801 posts)everything will magically be ok.
Their debts will of course disappear and this will mean their economy rebounds and they can continue spending more than they take in forever and it will be just fine . . . somehow.
I get the disdain for bankers. I do. But saying "fuck 'em" isn't the same thing as having a working solution. A lot of people don't get that.
Nuclear Unicorn
(19,497 posts)It's depositor money. That's the money lost that people are cheering.
No one will build a house if the homeowner cannot pay for it. The homowner cannot pay for it unless he gets a mortgage. He cannot get a mortgage if the bank has no assets. The bank cannot get assets if people do not deposit their earnings. People won't deposit their earnings if the banks lose their money.
tralala
(239 posts)but a house does not presuppose a homeowner
sabrina 1
(62,325 posts)There is a distinction. What you are proposing is that the people continue to reward those who created this massive, global disaster by continuing to bail them out. To continue to do what has clearly failed is no longer an option.
Nationalize the banks, as Iceland did, then investigate what caused the problems, arrest and prosecute the perpetrators, put in place strict regulations to end the crooked practices that caused all of this. Borrowed money should be put into growth not bailouts.
The current failed policies are the equivalent of lending money to someone with no job, expecting him/her to be able to repay it WITH interest, without any plan to ensure he has the means to do so, in fact, sabotaging every chance of employment he may have. It is the definition of insanity.
And because they screwed up so badly, there is no GOOD cure for what they've done that won't cause even more pain before there is a turnaround. But one thing is certain, now apparent even to the most formerly trusting individuals, is that those in charge, need to go and that repeating the same 'solutions' is not an option.
NNN0LHI
(67,190 posts)Last edited Thu May 17, 2012, 12:04 PM - Edit history (1)
What happens when a huge container ship pulls up at one of their docks to unload their goods and the Greeks pull out a big stack of newly printed Drachmas? And the ship captain asks what are Drachmas? And then refuses to accept the Drachmas?
I could see the Drachma working inside of Greece but will they work for outside the country trade? Anyone know how this works?
Don
coalition_unwilling
(14,180 posts)holiday in Greece. Said tourist will bring either Euros or British pounds with him- or herself and exchange those currencies for Drachma. I am not familiar with the Greek economy to know what, if anything, it exports (aside from brilliant philosophers and historians), but anyone wishing to purchase a bottle of Ouzo would presumably have to exchange his or her currency for Drachmae before the exchange could take place.
NNN0LHI
(67,190 posts)What happens if Greece doesn't have enough dollars, Euros or British pounds to cover the cost of what they need imported?
Will someone give them a line of credit for a shipment of goods after Greece just defaulted on its loans?
Don
coalition_unwilling
(14,180 posts)a higher nominal (and\or real) interest rate to lend money to Greece.
Instead of Greek debt having AAA status, it might slip to below investment grade or even junk bond status. But there are usually buyers for junk - they willingly accept the risk of default in return for a higher rate of return.
NNN0LHI
(67,190 posts)That makes sense.
Don
coalition_unwilling
(14,180 posts)plead mea culpa. I do find it useful in considering economic questions to simplify matters but I also understand that such simplification carries its own set of risks and costs. It is definitely interesting observing developments and trying to discern lessons from them.
girl gone mad
(20,634 posts)Whether the capital markets would decide to punish Greece (as they did Argentina) is a different matter.
Greece will have its work cut out in restoring production to a point where they could compete against trade giants such as Germany. On the other hand, they can attract more tourism and they do have strong agriculture (plus livestock and fisheries), and shipping. I'm optimistic that they could recover in good time, but it won't be simple.
hack89
(39,171 posts)and about half of their medicines. Prices for those markets are pegged to either the dollar or the euro - switching to the drachma will increase the price of those things dramatically in Greece.
Xolodno
(6,410 posts)Sounds like a wonderful business opportunity. The comparative advantage before all this was probably to import....but, with this crisis, it could reverse with cheaper costs of labor, capital, etc. granted meds will still cost more, but I'm curious if developing domesticaly vs. importing would be more advantageous.
Now the cost of energy is a problem and I don't know what they have available in reserves or available areas. However, that presents another start up opportunity in solar and wind energy. And I'm assuming the cost of energy will exceed the cost of developing renewables.
Either way however, the Greek people will have to suffer for awhile. Iceland had the benefit of being very remote and already having infrastructure in place to be self suficient, kind of like Hawaii where milk and some staples cost more (due to costs of shipping) and if they became prohibitively expensive, grow more native foods to replace whats lost......don't know enough about the infrastructure of Greece to make any reasoned economic assesment.
hack89
(39,171 posts)and import the raw materials needed to make more medicines? Business expansion requires capital and credit - which means the international financial market.
Solar and wind exists no where without substantial government subsidies - the Greek government is broke and can't afford them.
4th law of robotics
(6,801 posts)those Greek shop owners may be desperate for British pounds or Euros as their own currency will lose value by the hour.