Greece

[JoeWras]

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.....

We were there last month. It was a great visit. This will be nerve wracking for any visitor this week, for sure. But I suspect if you have cash in your pocket, it will be OK. The only thing that could really derail things is if the government calls a general holiday. In that case, the Parthenon will be shut.

Otherwise, life should go on. And any visitor there can say they witnessed history.

While we were there, there were demonstrations. But they were interesting and for the most part very civil. Ironically, there was chaos, with fires and riots, in Baltimore, USA and Milan, Italy.

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.

Yes. Cash is king there. If the ATMs are shut, this could cause some grief.

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.

The Greek people were so kind. It was a lot of fun to talk with them.

They spoke very openly about these issues. Some said: "Yes, Greeks are different. We don't hide our corruption. We embrace it."

Digging deeper, there was clearly a kind of divide of opinion about those with private sector versus public sector jobs. Pensions are an issue, if you have one or not, it is divisive. The police are not loved (read the graffiti). And it isn't all about oppression, it is also about their pay and very early retirement age. Etc.

We've heard it in America too. Someone else mentioned Illinois. There is some commonality there. However, Illinois has more going for it in manufacturing. It was painful to see the sorry state of manufacturing in Greece. Herein lies some of those structural issues.

 

[Ed_The_Gypsy]

Samclem, governments have always tried to evade responsibility for bad financial policies. They lie, they cheat. They print paper money. When was the last time congress passed a budget? They are forever trying to fix exchange rates, for example. The euro eliminated exchange rates but it did not eliminate human nature. Transparency is our best ally.

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[explanade]

With the amount of tax evasion going on, a lot of tourist businesses probably only take cash.

Sounds like a lot of the hospitality industry on the islands want to keep the gravy train going so would oppose anything that would disrupt business, especially now the peak tourist season.

 

[marko]

Just saw this article from Business Insider:

Among other follies, Greece's first default was in the fourth century BC. (so what are WE worried about, eh?) It's just another day for them.

13 mind-blowing facts about Greece's economy - Business Insider

 

[Alan]

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...

Any reference to the possibility of Greece being kicked out of the EU?

A few years ago, after the 2008 meltdown, Iceland defaulted on its debt causing quite a few problems in local government pension plans in the UK and other countries that were holding quite a lot of Icelandic government bonds. There was never even a whisper that Iceland would leave or be kicked out of the EU.

The UK government has promised a referendum on staying in the EU but I don't believe the government really wants to leave the EU, just a better deal, and those negotiations on a better deal are currently in progress. With a referendum upcoming it will be very interesting to see what new terms are proposed. We'll actually be back in the UK in time to vote on any referendum that comes up.

 

[Texas Proud]

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

It was in relation to either Russia or China coming in and 'helping' Greece... and how Germany is very concerned with either of them getting a foothold in Europe...

 

[redduck]

...on a side note, Greece having retirement at age 50 seems a little extreme...

They are too young to retire. What will they do all day?

 

[2017ish]

Latest:

The European Central Bank said Sunday it will freeze for now the level of emergency loans for Greek banks at Friday’s level, a step that could push the country closer to having to impose capital controls to halt a deposit flight that appeared to have accelerated over the weekend.

ECB to Keep Level of Emergency Loans for Greek Banks Unchanged - WSJ

 

[MichaelB]

Bloomberg reports Greece has temporarily closed it's banks. Greece Shuts Banks to Avert Collapse After ECB Freezes Support - Bloomberg Business

Greece ordered its banks shut Monday to avert a financial collapse after the European Central Bank froze emergency loans to the nation’s lenders.

I lived through a banking shut-down and partial collapse, and it is truly painful. I feel for the Greek people, there is much pain ahead and now no way to avoid it.

Edit to add: FT with more detail http://www.ft.com/intl/cms/s/0/49775bac-1d83-11e5-ab0f-6bb9974f25d0.html#axzz3eN7R3Ond

Officials said the bank closure would last for several days and would be accompanied by limits yet to be announced on bank transfers abroad and withdrawals from cash machines.

This is a real challenge - capital controls when the gov't does not manage the currency.

 

[2017ish]

The Athens stock exchange will also be closed according to the latest....

And, following up on MichaelB, the even greater challenge is getting the capital back in the door after it fled!

 

[imoldernu]

My view hasn't changed since last year, in this post:

A little bit of the abstract, but looking at the situation in Greece today, could be a microcosm of what could happen to the US as the FED stops selling bonds, and goes away from quantitative easing. Greece is considering some options to stop relying on the IMF, World Bank, and the European Central Bank. They are also looking at departing the Euro. None of these options are good, and could result in bankruptcy.

In any case, Greece could be a bellwether for the US... not today or tomorrow, but in the years ahead. The current US Debt is $18 trillion, or about $56K per US citizen, while the total unfunded liabilities are more than $115 trillion, which works out to nearly $1 million per Taxpayer. It's not possible for the FED to print that much money.

So, just for curiosity's sake, watching what happens with Greece in the next year, should prove interesting. Of all the PIGGs plus Ireland, Greece may be the closest parallel with the US.

Nothing to fear in the near time, but 5 to 10 years is well within current company's lifespan.

http://www.early-retirement.org/forums/f44/roller-coaster-73991.html#post1504168

The only recent factors that seem to be potentially influential in the transition might be the new position of Cash, and negative interest rates. It appears that banks will not be required to mark to market, avoiding the ultimate danger.

Imagine... prognostications from one who has been wrong about the market for four years.

 

[clifp]

Bloomberg reports Greece has temporarily closed it's banks. Greece Shuts Banks to Avert Collapse After ECB Freezes Support - Bloomberg Business

I lived through a banking shut-down and partial collapse, and it is truly painful. I feel for the Greek people, there is much pain ahead and now no way to avoid it.

Edit to add: FT with more detail http://www.ft.com/intl/cms/s/0/49775bac-1d83-11e5-ab0f-6bb9974f25d0.html#axzz3eN7R3Ond

This is a real challenge - capital controls when the gov't does not manage the currency.

I know you mentioned this before and I forget what South American country it was.

This has been such a slow moving drama, I don't know why any moderately intelligent citizen wouldn't have taken all of their money out of short term checkings and savings months ago. Plus moved any long term money to another country. Or is is more complicated and harder to do this than I'm imagining.

Could you explain what happened to you before and during the bank shut down and default.

 

[explanade]

Where would they be taking the money?

Most of the affluent Greeks probably already have accounts in other countries.

 

[clifp]

Where would they be taking the money?

Most of the affluent Greeks probably already have accounts in other countries.

Clearly sticking it under the mattress is a better spot than having it in a Greek bank. Depositor lost money in Cyprus, no reason to suspect it won't happen in Greece.

 

[MichaelB]

I know you mentioned this before and I forget what South American country it was.

This has been such a slow moving drama, I don't know why any moderately intelligent citizen wouldn't have taken all of their money out of short term checkings and savings months ago. Plus moved any long term money to another country. Or is is more complicated and harder to do this than I'm imagining.

There are many reasons to have cash or liquid assets in the country, "take the money out" is much easier said than done and really isn't an option for most people or enterprises. Most people and businesses in Greece and the rest of the world are just like we are in the US - not a lot of cash or liquid assets sitting there doing nothing. People on this forum are different.

The banking system needs to reopen quickly - Wednesday or Thursday. The continuous flow of money is critical for an economy to work, and this one has been interrupted. The gov't will want to allow the flow of currency for day to day needs and business operations but interrupt the flight of large amounts. Easier said than done, eh? They will probably attempt to impose transaction limits. The problem is that business operates on credit, that has come to a halt, so the recession in Greece is now a reality. It will get much worse from here unless Greek banks can extend credit when they reopen, and for that they need the ECB backstop.

Could explain what happened to you before and during the bank shut down and default.

I lived through capital controls twice and one banking system default. The banking crisis was easy enough, The top 2 banks collapsed one week, then 8 of the next 12 went over a few months. The total cost was about 30% of the GDP. The gov't announced an FTIC type solution where it guaranteed some deposits, and was good to it's word - a year later, after about 65% inflation, people got back some of their money.

A few of us were fortunate to have our bank accounts in one of two banks that took personal accounts and paid less than half the interest everyone else paid but was balance sheet strong made it through without any paper losses. Over the following year we all still lost from 65% inflation and 25% interest, and around a 70% loss in currency value. Crime skyrocketed as people were forced to shop with cash - no checks or credit cards.

It was a real blow to one's net worth, but there was no way out.

 

[JoeWras]

With the amount of tax evasion going on, a lot of tourist businesses probably only take cash.

Sounds like a lot of the hospitality industry on the islands want to keep the gravy train going so would oppose anything that would disrupt business, especially now the peak tourist season.

In Athens, just about everyone will take credit. But cash is encouraged, many times you'll get a generous discount. Think about that...

In rural areas, some only take cash. But still, credit is accepted most places.

 

[brewer12345]

Worldwide, Greece has the largest commercial fleet than any country (including US & China), and that income is untaxed by international treaties.

Except the moment they try taxing that fleet it will be gone. Easy to change a ship's flag and once that is done Greece can try taxing foreign tonnage, but it will be pretty much impossible to make it stick for more than 6 to 12 months.

 

[explanade]

In Athens, just about everyone will take credit. But cash is encouraged, many times you'll get a generous discount. Think about that...

In rural areas, some only take cash. But still, credit is accepted most places.

In Italy, some businesses will shake their head if you try to use a card, especially on a small transaction, or say their terminal is broken, or just ask for cash.

Of course the Italians are also known for tax evasion.

I've gotten to asking restaurants before I sit down or order whether they will take credit cards. I think they get the hint that if they say no, I may go elsewhere or not order as much.

 

[explanade]

The Guardian is tracking the event here:

Greek crisis: Banks shut for a week as capital controls imposed - live updates | Business | The Guardian

Some of the interesting items being claimed, which I haven't seen elsewhere:

1. Banks will be closed until July 7th.
2. ATM withdrawals may be limited to €60 a day.
3. Jack Lew has urged the IMF, France and Germany to act.

Oh and this, Dow futures off by over 320 points, S&P by 40 points, NASDAQ by over 70 points Sunday evening.

 

[brewer12345]

The Guardian is tracking the event here:

Greek crisis: Banks shut for a week as capital controls imposed - live updates | Business | The Guardian

Some of the interesting items being claimed, which I haven't seen elsewhere:

1. Banks will be closed until July 7th.
2. ATM withdrawals may be limited to €60 a day.
3. Jack Lew has urged the IMF, France and Germany to act.

Oh and this, Dow futures off by over 320 points, S&P by 40 points, NASDAQ by over 70 points Sunday evening.

Considering the market moves I saw in 2008, that seems like peanuts.

It isn't obvious to me why Greece should not be left to default and leave the Euro. They don't seem to want to stay in and it would be a good object lesson for any other periphery nations thinking about backsliding.

 

[marko]

Sounds like a buy opportunity

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[explanade]

So the thing to look for is not the Euro but the periphery bond markets.

IOW, look for signs of contagion or investors betting on contagion.

 

[brewer12345]

So the thing to look for is not the Euro but the periphery bond markets.

IOW, look for signs of contagion or investors betting on contagion.

Just a guess, but before the Euro bond markets open I would expect the EU finance apparatus to announce support measures for non-greek bonds.

 

[explanade]

So that means they would support other countries which are also in trouble but it's just Greece they want to cut loose?

 

[imoldernu]

As of now: Banks to close

Greece will close banks Monday as panic spreads - The Washington Post

From crisis to crisis...