Greece

[LitGal]

We had a tour scheduled for Greece but changed it to Italy after the election in December. Didn't want to deal with the uncertainty of it all.Just watching the news makes me cringe.

As Grandma always said, "The chickens will come home to roost; you just wait and see."

My understanding of economics is also limited. But I do understand that, if you continually spend more than you have, your pockets eventually go empty.

We see this daily in our own society, with people living beyond their means. Our own nation has enormous debt....but we can print our own currency.

Greece depends on the policies and practical sense of the EU, yet they are unwilling to face their own empty pockets.

I've always wanted to go there, and have friends who would hop on a plane to go tomorrow. But, right now, I'd be uneasy hanging out in a nation where the general population is unwilling to face the hard facts presented by the EU. Will that lead to anger in the streets?

Not a time for me to visit the Parthenon, I think.....

 

[tulak]

When something like this occurs I want to convince myself that the risk to me is very low. There could be contagion or some unforeseen correlated event that affects the average US investor. But I'm hoping not.

I had the same thought working for a tech company in 1999/2000. The company made lots of money and is sure to be somewhat immune to all of the tech companies with no profitability. I was wrong.

If Greeks leaves the Euro then Europe/Intl will get hit, maybe quite a bit. Uncertainty always generates a ton of volatility. I think all equity markets will be affected to some extent (collateral damage) with recovery occurring quicker in markets less affected by Greece/Europe, such as the U.S./Asia. Overall, I look at it as a buying opportunity.

 

[growing_older]

I don't know about all the observation about getting government that you deserve or not, and know next to nothing about Greek taxes, pensions, economy or why their fiscal problems are so deep. But it does seem like these are not new problems, yet supposedly sophisticated big money lenders gave them lots of loans that always looked like they would be difficult if not impossible to pay back. What were these supposed knowledgeable lenders thinking with all that money to put it in such peril?

 

[mpeirce]

If Greeks leaves the Euro then Europe/Intl will get hit, maybe quite a bit.

Maybe.

But it's also possible that since most investors are well aware that there is a very strong possibility that Greece will exit the Euro this year, that it's already baked into stock prices. Removing the uncertainty might lead to a nice uptick of the general European market.

Maybe.

 

[Lsbcal]

I had the same thought working for a tech company in 1999/2000. The company made lots of money and is sure to be somewhat immune to all of the tech companies with no profitability. I was wrong.
...

Yes, it's hard to see it coming until it happens to you. I was working for a tech company in 2003 and in an R&D job that seemed to be secure and a project that was well funded. It wasn't.

I'm hoping that if Greece affects general indexes, it will happen somewhat slowly and my methodology will work to mitigate losses. We will see.

 

[samclem]

What were these supposed knowledgeable lenders thinking with all that money to put it in such peril?

There are lots of entities to blame. Europe's larger economies wanted easy money for Greece (and others) so these weak economies would continue to buy exports from the larger economies. Greek politicians and business leaders saw no reason to turn down the money, and actively worked to cook the books to keep it coming (this is not in dispute). Once Greece was in really deep and began to teeter economically and politically, European politicians rushed in to extend favorable terms on the debt--they were worried abotu Greece and contagion to other countries (like the old saying: If you owe the bank $100, they call the shots. If you owe the bank $100 million dollars, you call the shots).

Private entities lent more than they ever would have loaned a "loan wolf" Greece because they figured the stronger European economies would keep the money flowing to avoid a worse situation.

Whenever we de-link authority and responsibility/accountability, there will be problems.

 

[Texas Proud]

There's a difference between the EU and the Euro. They won't be kicked out of the EU. There are many countries in the EU that are not part of the Euro. What is being discussed is if they will be kicked out of the Euro.

From what I am reading it is both.... just a matter of when...

It looks like the UK might take a vote on getting out of the EU... and someone was commenting that it would hurt the EU more the Greece leaving...

Edit to add: It is a bit vague... but I remember an article about how the EU has 'rules' that every nation agreed to follow to stay in the EU... Greece has never followed them... they cooked the books to make it look like they were but in reality were not... so if Greece cannot follow the EU rules, they would be kicked out...

 

[audreyh1]

I too have little understanding about the situation and zero understanding of what the solution is. It's really amazing though how the US markets go up and down almost daily much in part on the optimism or pessimism of what's going on in Greece, at least according to the talking heads, if there's no other economic news. And how many months this has been going on. Poor Greece.

That's the key - there is really no other economic news. The markets churn to the "news de jour" no matter how small. There is rarely any sense of proportion. The newscasters certainly lack it - their job is to make anything sound like life or death for investors.

 

[Alan]

From what I am reading it is both.... just a matter of when...

It looks like the UK might take a vote on getting out of the EU... and someone was commenting that it would hurt the EU more the Greece leaving...

Edit to add: It is a bit vague... but I remember an article about how the EU has 'rules' that every nation agreed to follow to stay in the EU... Greece has never followed them... they cooked the books to make it look like they were but in reality were not... so if Greece cannot follow the EU rules, they would be kicked out...

I think you keep confusing the EU with the Eurozone. Fewer than half of EU countries are in the Eurozone.

To join the Eurozone then financial requirements were set in the late 90's, and I don't know if Greece met the criteria or not but they weren't the only country to fudge the numbers to meet the Eurozone requirements. (Italy was another IIRC)

Criteria for Joining the Euro Zone: Year In Review 2004 | euro zone | Britannica.com

1. Government deficit must not exceed 3% of GDP. If it does exceed that level, it must have declined “substantially and continuously and have reached a level close to 3%.”
2. Gross government debt must not exceed 60% of GDP. If this is not the case, the ratio must have declined significantly and be moving rapidly toward 60%.
3. The member state must have achieved exchange-rate stability for at least two years according to the rules of the European exchange-rate mechanism, which defines the permitted levels of fluctuation.
4. The nominal long-term interest rates of applicant nations must not have exceeded by more than 2% the average of the interest rates in the three member states with the best records on price stability.

 

[Meadbh]

Greece never fulfilled all the criteria when it joined the Eurozone in 2001. They made an exception. In retrospect, a bad decision.

Greece's membership in the single currency

I find it interesting that this website will be closed down on June 30th. Hiding the evidence?

 

[tulak]

Greece never fulfilled all the criteria when it joined the Eurozone in 2001. They made an exception. In retrospect, a bad decision.

Greece's membership in the single currency

I find it interesting that this website will be closed down on June 30th. Hiding the evidence?

As Alan mentioned, I think Italy also didn't meet the requirements. Or maybe they didn't meet the ongoing requirements regarding debt/GDP ratio? My memory on this is a bit hazy. I know one of the other concerns is that if Greece leaves the Euro, could they possibly be followed by bigger countries such as Italy? Portugal/Ireland also have tons of debt, even though they are smaller countries. Europe is trying to stay together for good reasons, but I think they got a bit carried away in the 2000s. I doubt the Euro will go away and all we are seeing are growing pains. It happens. In the end, the Euro will be stronger.

In responding to this thread, I was reading a little bit about the Euro and learned that EU countries are required to join the Eurozone once they meet the criteria. The exception is the UK and Denmark, which have opt-out clauses in the Maastricht treaty. But it looks like it's easily avoidable, since one of the requirements is membership of the European Exchange Rate Mechanism (ERM II) for two years, which a country has to voluntarily join. This is how Sweden, for example, can choose to stay out of the Eurozone, even though they should be required to join. I never realized that the Maastricht treaty attempts to require all EU countries to join the Eurozone. It sure makes exiting the Eurozone - for which no provision exists - more interesting.

 

[explanade]

It does affect US markets. If the Euro declines vs. the dollar, it makes US companies less competitive and could cause the markets to sell off.

So you wonder if the EU really cares about keeping Greece in the Euro. They can't say it would be better for the rest of the EU but they may actually believe it.

Greece's complaint was that the troika imposed austerity on them back in 2010, stringing things along. Greece is now in depression, high unemployment and so on.

Germany seems to be high on moral hazard and schadenfreude at the moment.

Some of the terms they couldn't agree to include raising VAT on hotels and restaurants to 23%. Tourism is the biggest industry in Greece so make it more expensive and more difficult to generate revenues is a good idea?

Syriza proposed raising taxes on the high earners and businesses but the creditors shut that idea down. Seems like they wanted to impose more of the pain on the people without the money.

 

[samclem]

Greece never fulfilled all the criteria when it joined the Eurozone in 2001. They made an exception. In retrospect, a bad decision.

Greece's membership in the single currency

And even the figures provided by Greece in 2001 were very fishy. The Greek government later admitted they used an incorrect set of accounting rules. And lots of finger pointing about other nations that also cheated. It's a Gordian's Knot of Greek and European political intrigue. Summary here.

 

[Bamaman]

I feel sorry for the tourists with confirmed flights going into Greece upcoming weeks. I saw one gentleman on the internet asking if he should take Euros with him on Monday.


Absolutely. It may take a while for this mess to come to a head.

 

[samclem]

Having individual national currencies allows markets to decide if a nation's monetary and fiscal policies are good or bad (relative to the policies in other countries). It happens quickly, without committee meetings and favor-trading, and the results aren't subject to whining and negotiating. And it breeds less inter-nation animosity than what we are seeing here.

In some cases, the euro is a solution much worse than the problem.

 

[Sunset]

It does affect US markets. If the Euro declines vs. the dollar, it makes US companies less competitive and could cause the markets to sell off.

So you wonder if the EU really cares about keeping Greece in the Euro. They can't say it would be better for the rest of the EU but they may actually believe it.

Greece's complaint was that the troika imposed austerity on them back in 2010, stringing things along. Greece is now in depression, high unemployment and so on.

Germany seems to be high on moral hazard and schadenfreude at the moment.

Some of the terms they couldn't agree to include raising VAT on hotels and restaurants to 23%. Tourism is the biggest industry in Greece so make it more expensive and more difficult to generate revenues is a good idea?

Syriza proposed raising taxes on the high earners and businesses but the creditors shut that idea down. Seems like they wanted to impose more of the pain on the people without the money.

The big issue with Greece is they are structurally broken in terms of finances. Many of the populace rich and poor fail to pay their taxes and its easy to cheat and not enforced well.
So the gov't fails to collect a huge portion of taxes.

Nothing will change, and they will default, and all Greeks will empty their bank accounts if they are smart on Monday.

 

[Texas Proud]

I think you keep confusing the EU with the Eurozone. Fewer than half of EU countries are in the Eurozone.

To join the Eurozone then financial requirements were set in the late 90's, and I don't know if Greece met the criteria or not but they weren't the only country to fudge the numbers to meet the Eurozone requirements. (Italy was another IIRC)

Criteria for Joining the Euro Zone: Year In Review 2004 | euro zone | Britannica.com

Yes, I am confusing the two... but not as completely as you might think.... If Greece goes back to the dracma, they will be out of the Eurozone...

However, I have read where they are also at risk of being kicked out of the EU... and I know that the UK is looking to get out of the EU since they are not in the Eurozone... if you are in the EU, you still have to abide by the laws etc. that are passed by the EU...

 

[tulak]

However, I have read where they are also at risk of being kicked out of the EU... and I know that the UK is looking to get out of the EU since they are not in the Eurozone... if you are in the EU, you still have to abide by the laws etc. that are passed by the EU...

I haven't heard this about Greece. I'd be curious to know where you read this if you remember?

 

[Free_at_49]

I too have little understanding about the situation and zero understanding of what the solution is. It's really amazing though how the US markets go up and down almost daily much in part on the optimism or pessimism of what's going on in Greece, at least according to the talking heads, if there's no other economic news. And how many months this has been going on. Poor Greece.

Greece is not that poor.

Even though its GNP and personal incomes have declined, most high incomes are not declared (tax evasion) so they’re not part of the grim statistics. Worldwide, Greece has the largest commercial fleet than any country (including US & China), and that income is untaxed by international treaties. The country has great symbolic value to all western countries’ cultural origin, they still speak Greek, and the country has a critical geopolitical position in the EU. So unofficially, it’s still among the 25 richest countries, and... Greece is bigger than Lehman Brothers...

 

[eytonxav]

Seems to me like a classic wall of worry issue to the markets, but really should be much ado about nothing. The biggest concern was if Greece defaults that will bring about contagion, however, things seem to have improved in the other weaker euro counties, so doubt there will be much contagion. Of course I probably am wrong.

 

[pb4uski]

....So unofficially, it’s still among the 25 richest countries, and......

can't pay its obligations.

I seem to recall that this payment coming due soon is relatively small compared to other payments coming up over the next few months.

It's a corrupt society and deserves to go bankrupt. To assist Greece is like assisting your relative who habitually lives beyond their means and is looking for a handout.

 

[DEC-1982]

I suspect the people will vote for the austerity deal on July 5. Whether anybody outside Greece trusts the leftist Greek govt is a separate issue.

Although this is largely the Greeks fault (spending way beyond their means), I still feel empathy for them (the people). They are suffering. No matter what they do in the near future, it will become worse before it becomes better.

I cannot help but think of America and our own overspending. Healthcare spending is still out of control, and that will cause huge problems for Medicare. Social Security will require significant changes, causing pain all around. And a good portion of age 50+ Americans are unprepared for retirement.

 

[John Galt III]

I'm also fascinated by this drama. My interest is in the etiology of it, and who benefited financially. I remember hearing reports of Goldman Sachs doing a sort of "pump and dump" of Greek bonds, years ago, causing the whole problem, with GS walking away with full pockets, leaving Greece and European taxpayers taking the hit. Oversimplification?

 

[marko]

I just wish they'd settle it one way or another (PICK ONE!) and let the markets get on with it. Tired of getting jerked around in the market for the past year or two on this.

 

[karen1972]

Long term I think it best Greece get out of the Euro, however short term its going to impact the markets. My understanding it that it will hurt the Euro, which then means many of the US companies will miss their quarters (at least those with any significant Euro exposure) thus this could mean a rather choppy market ahead for the year. I for one leveraged out some of my more profitable stocks and hope to buy something during the downturn. Once that's done we can maybe stabilize a little; however that depends on Spain and Ireland.


on a side note, Greece having retirement at age 50 seems a little extreme as something they could do to improve their economic outlook rather quickly... I know the rest of the EU is not exactly excited that Greece says it can't pay its bills while it seems 1/2 the country is ERed.