Greece

[marko]

BTW Greece, LBYM.

I'd be happy with LWYM! (within)

 

[marko]

Well, at 10:50 EDT the Dow is down 135. Just a typical 'down day' IMO. Futures were down 300 last night so I was expecting Armageddon today...but it's still early.

 

[eytonxav]

Cramer brought up an interesting angle.

If Russia and China bring economic aid to Greece, as they are doing in Venezuela, Greece may leave NATO, which sounds unthinkable but Russia is preoccupied about NATO encroaching on its sphere of influence so getting Greece to leave NATO would be big.

Then does Merkel want to be known as the German chancellor who lost Greece out of NATO?

Russia wants assets in exchange for economic bailout (e.g. a port on the Mediterranean)

 

[marko]

Cramer brought up an interesting angle.

If Russia and China bring economic aid to Greece, as they are doing in Venezuela, Greece may leave NATO, which sounds unthinkable but Russia is preoccupied about NATO encroaching on its sphere of influence so getting Greece to leave NATO would be big.

Then does Merkel want to be known as the German chancellor who lost Greece out of NATO?

Just gets more interesting and fun to watch, doesn't it!

 

[karluk]

I hope I'm not being insensitive to a crisis which is likely to cause hardship in Greece and harm to the value of my investments, but my basic reaction to the unfolding Greek crisis is that it's a rare treat for spectators like me. Rarely does one see central bankers take the gloves off and tell us what they really think. My favorite moment was when Christine Lagarde said that the talks needed more "adults" in the room. A close second was when, at the end of a fruitless day of negotiations, spokepersons for both Greece and the EU said that no progress was possible until the other side "faced reality".

 

[ERD50]

Is Greece just the 'canary in the mine'? I recall hearing about the PIGS (Portugal, Italy, Greece, Spain). So is the market responding not just to the relatively small Greek economy, but to the sum of the PIGS?

-ERD50

IMO, they are not going to let Greece off the hook to keep the others in line.. they do not seem as bad, so just let Greece go to save the others...

I guess I wasn't thinking in terms of letting anyone 'off the hook'. Just that the problem is bigger than just Greece, so the market moves might be reflecting that?

Actually it is the PIIGS(Portugal, Italy, Ireland, Greece and Spain). Ireland has already taken its medicine and is well on the way to recovery so I doubt they will be too sympathetic towards Greece.


Ireland eyes lower deficit, quashes EU bank debt deal | Reuters

Thanks, I forgot about Ireland (and "PIIGS" looks a little less derogatory than "PIGS"!)

-ERD50

 

[Chuckanut]

Germany benefits as long as Greek problems keep the Euro down versus the dollar and other currencies. If Greece leaves the Eurozone and the Euro rises in value, the German exports will go down.

 

[explanade]

Not to mention, Germany apparently got the Southern European nations to buy a lot of German cars and other exports.

Meanwhile, Germans took their holidays in Southern Europe but didn't spend much money, for instance, bother to take back home €40 bottles of Italian wine.

Germany running a surplus with other EU nations is a problem.

 

[Meadbh]

Meanwhile, Germans took their holidays in Southern Europe but didn't spend much money, for instance, bother to take back home €40 bottles of Italian wine.

Germans are frugal. They LBYM. They save. We can hardly criticize them for that!

 

[robnplunder]

Then does Merkel want to be known as the German chancellor who lost Greece out of NATO?

Is that important to Merkel or EU or even to NATO? I don't think it is or matters that much.

 

[samclem]

Is that important to Merkel or EU or even to NATO? I don't think it is or matters that much.

On a practical level--no. Greece contributes very little.

On a perceptions/political level, it would be a blow. Putin would showcase this domestically as the tide turning against NATO/the Atlantic Alliance, and it would play well in Russia. The last thing NATO needs now is a Putin who feels more empowered, because that really does put NATO's equities at risk in a very real and unpredictable way.

Also, the history is important. Greece very nearly went "the other way" at the end of WW-II, it was the site of a lot of heavy intrigue by both sides. To have her slide back out of NATO and into the maw now would be ungood. She may wind up out of the eurozone and possibly even out of the EU (doubtful), but still in NATO.

 

[imoldernu]

While Greece is the current bellwether for movement in the market, the wider view is still in the state of flux, as the investment community is shuffling the possibilities.
Greece does not exist in a vacuum, and the overall instability is not necessarily in the Euro. Puerto Rico seems far removed, but the numbers volatility, and Banks throughout the world, Italy, Spain and yes, China (down 20%) and Russia are building larger ripples in the recent International money seas.

Watching the VIX needs be a big part of the overview. With individual "experts" and Money Gurus making statements, nudges are occurring in many sectors, but much of this is so short term that volatility shows on an hourly basis, only to adjust with rapid, opportunistic trading.

The "on the fence" experts (TV and Opinion articles) are driving towards a 10% market correction/buying opportunity. Oil on troubled waters.

Can the US stabilize the world markets? Seems to me that liquidity will be the key. Can the Fed adjust by continuing to support the dollar? Watch bond prices as foreign exchanges struggle to mitigate their own interests. Watching US banks valuation, as far removed from the Greek crisis as it might seem, could expose low levels of real liquidity.

More than just a foreign crisis, cash as a medium of exchange has to be "a", if not "the" biggest factor going forward. Cue bond rates.

 

[explanade]

One account of the past 5 years:

A number of academics, including former Archibishop of Canterbury Rowan Williams, have written to us to support the Greeks and calling on the European union to recommit to the principles of democracy:

Over the past five years, the EU and the IMF have imposed unprecedented austerity on Greece. It has failed badly. The economy has shrunk by 26%, unemployment has risen to 27%, youth unemployment to 60% and, the debt-to-GDP ratio jumped from 120% to 180%. The economic catastrophe has led to a humanitarian crisis, with more than 3 million people on or below the poverty line.

Against this background, the Greek people elected the Syriza-led government on 25 January with a clear mandate to put an end to austerity. In the ensuing negotiations, the government made it clear that the future of Greece is in the Eurozone and the EU. The lenders, however, insisted on the continuation of their failed recipe, refused to discuss a write down of the debt – which the IMF is on record as considering unviable – and finally, on 26 June, issued an ultimatum to Greece by means of a non-negotiable package that would entrench austerity. This was followed by a suspension of liquidity to the Greek banks and the imposition of capital controls.

 

[samclem]

One account of the past 5 years:

. . .that completely ignores how the situation developed. Understanding the causes of the failures in the Greek economy is key to a real solution that endures and ultimately benefits the people of Greece in the long term.

 

[HFWR]

Let 'em eat cake!

Perhaps it's better to "enforce" austerity at a much earlier phase, rather than to keep throwing money at a dysfunctional system. Though it's a bit late for that now...

 

[explanade]

Oh Greece certainly deserves its share of the blame.

But the medicine imposed on Greece has caused a depression in the country and they were imposing things like higher taxes on tourist services -- tourism is the #1 industry in Greece -- and taxes on food and medicine.

How does that help the country regain it's economic footing?

There are accounts of families seeing their incomes drop by over 50% over the past 5 years, not to mention all the job losses as the unemployment rates indicate. It's no wonder they're unwilling to continue with the same terms.

If there are sound economic reasons for imposing more austerity, the creditors would be more defensible. But a lot of it looks punitive as well as greedy. The loans Greece gets go straight to German and French banks, to pay off interest. So the country is continually stuck with paying interest on growing debt and then on top of that, they want to increase taxes on its number one industry, making Greece as a tourist destination less competitive.

 

[ERD50]

Oh Greece certainly deserves its share of the blame.

But the medicine imposed on Greece has caused a depression in the country and they were imposing things like higher taxes on tourist services -- tourism is the #1 industry in Greece -- and taxes on food and medicine.

How does that help the country regain it's economic footing? ....

If there are sound economic reasons for imposing more austerity, the creditors would be more defensible. But a lot of it looks punitive ...

Tough question, but what is the alternative? Are the Ants just supposed to say "oh, you poor Grasshoppers didn't save up for winter, here have some of our stash"?

I don't know that the actions are meant to be 'punitive', but sometimes you reap what you sow (or maybe better for this case, 'you don't reap what you don't sow'). If Greece doesn't suffer for its actions, then what other country will want to work to tighten their belts? They'll just count on a bail-out.

In the not-so-long run, I think the 'tough love' approach will actually be the least punitive approach of all. Without it, the problem will continue to snowball and even more people will be affected even more harshly.

It's similar to our SS system. I understand we could make very minor changes now that will greatly improve things in the long run, but more likely we will wait until it is a crisis, and takes a painful adjustment.

-ERD50

 

[explanade]

Look at how much the markets went down today, especially the EU markets.

Then look at what happens if Greece defaults on its debts to EU creditors. Talking about hundreds of billions there.

Then what kind of measures will they have to take to reassure the markets that it won't spread to other countries like Spain, Italy and Portugal? If they have to give more generous assistance to those countries.

All this may add up to way more than it would have cost them to give Greece better terms.

 

[pb4uski]

Tough question, but what is the alternative? Are the Ants just supposed to say "oh, you poor Grasshoppers didn't save up for winter, here have some of our stash"?

I don't know that the actions are meant to be 'punitive', but sometimes you reap what you sow (or maybe better for this case, 'you don't reap what you don't sow'). If Greece doesn't suffer for its actions, then what other country will want to work to tighten their belts? They'll just count on a bail-out.

In the not-so-long run, I think the 'tough love' approach will actually be the least punitive approach of all. Without it, the problem will continue to snowball and even more people will be affected even more harshly.

It's similar to our SS system. I understand we could make very minor changes now that will greatly improve things in the long run, but more likely we will wait until it is a crisis, and takes a painful adjustment.

-ERD50

+1 Glad to see that we found something that we could agree on today.

 

[ERD50]

...

All this may add up to way more than it would have cost them to give Greece better terms.

Or maybe not. Who is to say? Can you really predict the longer term economic outcome (not just the short term market gyrations) of a bail-out and what that means for other countries down the road?

-ERD50

 

[samclem]

Perhaps it's better to "enforce" austerity at a much earlier phase, rather than to keep throwing money at a dysfunctional system. Though it's a bit late for that now...

Yes, it is late. But "enabling" the Greek system to go on in its present state for even longer will be worse yet. This should have stopped a long time ago.

Reading the comments from "man on the street" interviews in Athens is not encouraging.

"We can't take any more of this, so we have to keep saying no to the EU masters."

"The EU can't afford to let us fail so we should continue to say no and they will blink and give us a better deal."

The sooner the public starts directing their anger and disgust at their own pols, the faster the healing will begin. And, Tsipras (or, more likely, his successor) probably needs for the public to feel the pain, see the situation as it really is, in order to have a mandate to fix their problems. Giving the Greeks a fresh needle and a fix ain't the road to prosperity. And it sure wasn't "austerity" that is the root cause of their present woes--quite the opposite.

 

[NW-Bound]

Kick the can down the road? They have been doing it for a few years. They are now at the dead end.

 

[explanade]

The Greek people have suffered. Look at the unemployment numbers and the figures for how much the GDP has shrunk, during these past 5 years when they abided by the troika's terms.

Do they deserve to keep suffering? Maybe but really the question should be more what would be the most economically effective way to make Greece close its deficits and return towards growth?

 

[NW-Bound]

Yes, it is a tragedy when people who want to work cannot find a job. It's a shame that human resources are wasted, as young people stay idle when they could be doing something productive to help themselves.

I do not know the full story, but the fact that the political system can be so destructive to a nation had been seen with the communist countries. Perhaps the populace was just naive, but it shares the responsibility for voting or keeping their leaders in the office.

PS. By the way, in 2010 Greece was talking about raising the legal retirement age from 61 to 63. At the same time, Germany was raising its own from 65 to 67. In Greece, a civil servant was able to retire with 1/2 benefits after working only 17.5 years. If you work 35 years and are 58 yr old, you can retire with 80% of pay. That's a lot more than Germans get. No wonder Germans are mad.

 

[brewer12345]

The Greek people have suffered. Look at the unemployment numbers and the figures for how much the GDP has shrunk, during these past 5 years when they abided by the troika's terms.

Do they deserve to keep suffering? Maybe but really the question should be more what would be the most economically effective way to make Greece close its deficits and return towards growth?

They should be allowed to default and go their own way. If they do it right, they could follow Iceland's path.