Greece and the Euro

[MichaelB]

There are already runs on other European banks. Spain is being particuarly hard hit. I suspect there is a concern that the "guarantees" on bank deposits may go the way of Iceland. Also, the fear of leaving the euro is credible in any number of countries. If that happens, you can expect all bank deposits to magically get converted to the new currency when it happens. This currency will then immediately be devalued in the market place. Governments can try to enforce price controls but the ultimate control will be whether anyone is willing to sell anything at the controlled price. Anything imported would have to be allowed to increase in price.

My foreign funds are all down 25% from their highs last year. It doesn't look good.

What runs on other European banks? Can you link to any credible data or sources?

 

[2B]

What runs on other European banks? Can you link to any credible data or sources?

Here's whatever I found quickly:

Spain's Bankia: Depositors have nothing to fear - MarketWatch

As European Bank Run Threatens, Fitch Says Global Firms Need Another $566B - Forbes

Prison Planet.com » The Bank Runs In Greece Will Soon Be Followed By Bank Runs In Other European Nations

I've been seeing articles over the last few days. Governments seem to be consistently denying everything but then no one will officially say Greek is heading towards exiting the euro.

 

[MichaelB]

None of the three report problems in Greece leading to runs on other European banks, which is what I understood your previous post to state.

- Bankia - is being taken over by the Spanish Gov't. News (unsubstantiated) of a run are about domestic solvency issues, not Greece. This is real estate bubble related.

- Fitch - says European Banks are undercapitaiized. Breaking news this is not.

- Prison Planet (what a name for financial news) Speculation about possible future runs. The end is near, etc.

Not saying there are no problems, just trying to distinguish between fact and speculation.

Here's whatever I found quickly:

Spain's Bankia: Depositors have nothing to fear - MarketWatch

As European Bank Run Threatens, Fitch Says Global Firms Need Another $566B - Forbes

Prison Planet.com » The Bank Runs In Greece Will Soon Be Followed By Bank Runs In Other European Nations

I've been seeing articles over the last few days. Governments seem to be consistently denying everything but then no one will officially say Greek is heading towards exiting the euro.

 

[ChiliPepr]

So my question is.. what happens to all the Greek debt?

Let's say I live in Greece and have credit cards and a mortgage with an international bank and both of them are in EUROs. I have to pay 1,000 EURO a month on this debt and I make 4,000 Euro a month, 25% of my monthly salary..

Now Greece drops from the EURO and I now make 4,000 Drakma a month... but due to the devaluation, 1 Euro equals 2 Drakma... So, now it costs me 50% of my monthly salary to pay my debts.

Or are people thinking that their debts will be converted also... I do not think that will be the case.

 

[Ed_The_Gypsy]

What debt?

Oh, you meant personal debt.

If it is debt in euros, one is screwed.

New debt in local credit cards (for example) will be at very high interest rates.

Greek individuals and businesses will face very high interest rates--if they can qualify for credit at all.

 

[BigNick]

So my question is.. what happens to all the Greek debt?

Let's say I live in Greece and have credit cards and a mortgage with an international bank and both of them are in EUROs. I have to pay 1,000 EURO a month on this debt and I make 4,000 Euro a month, 25% of my monthly salary..

Now Greece drops from the EURO and I now make 4,000 Drakma a month... but due to the devaluation, 1 Euro equals 2 Drakma... So, now it costs me 50% of my monthly salary to pay my debts.

Or are people thinking that their debts will be converted also... I do not think that will be the case.

Almost no regular consumer in Greece has direct international personal debt, so that's not so much of an issue - debts to local banks presumably would be converted. The problem, if they were to default and leave the Euro, would be that nobody will lend the country any money.

The more immediate problem is how to stop people moving their "Greek Euros" to German banks, where they would become "German Euros". AFAIK there is no credible mechanism to stop free movement of currency within the Eurozone.

 

[Ed_The_Gypsy]

The more immediate problem is how to stop people moving their "Greek Euros" to German banks, where they would become "German Euros". AFAIK there is no credible mechanism to stop free movement of currency within the Eurozone.

Right now. Want to bet on tomorrow?

 

[ChiliPepr]

Oh, you meant personal debt.

If it is debt in euros, one is screwed.

What else could it be? any person in greece that has debt, it is more then likely in EUROs

Almost no regular consumer in Greece has direct international personal debt, so that's not so much of an issue - debts to local banks presumably would be converted.

Really? what makes you say that? I do not think it will be converted, I think it will stay in EUROs. How many truly "local" banks are there? There have been no plans on how someone leaves the EU, I am not sure the consumer debt will be converted.

 

[2B]

What else could it be? any person in greece that has debt, it is more then likely in EUROs



Really? what makes you say that? I do not think it will be converted, I think it will stay in EUROs. How many truly "local" banks are there? There have been no plans on how someone leaves the EU, I am not sure the consumer debt will be converted.

The euro/swiss franc debt is a major problem in Hungary and Czech Republic. It probably is in some other eastern european countries as well but I've not seen this. The swiss franc debt is really crushing people. Generally, this is how people got mortgages. No one was willing to lend to them in local currency.

As for Greece, defaulting will make them outcasts for a number of years anyway. For personal debt, they could simply declare that all debts or converted to the new drachma. Banks/lenders could cry all they want but they'd have to take legal action against a Greek in Greece to get anything so they're screwed. They can get all the judgements they want in Brussels and they still have bumpkis.

 

[Koogie]

What runs on other European banks? Can you link to any credible data or sources?

Depends if you call this a credible source or not .... but our
national finance paper and Reuters are quoting stats saying that bank withdrawals are increasing heavily across Europe...

Rattled Greeks not alone in massive bank savings exodus | Economy | News | Financial Post

 

[MichaelB]

Depends if you call this a credible source or not .... but our
national finance paper and Reuters are quoting stats saying that bank withdrawals are increasing heavily across Europe...

Rattled Greeks not alone in massive bank savings exodus | Economy | News | Financial Post

It does say that. The only non-Greek number it gives, though, is Bankia. As stated previously, this bank was nationalized last week due to losses in domestic real estate loans.

I'm not at all trying to minimize this or say it isn't so, but we routinely criticize the media around here for it's sloppy ways and rumor mongering, and what's to say this isn't another example?

Is this a contrarian sign or a harbinger of things to come?

 

[Brat]

I heard an interview of a Cyprus bank official yesterday. If Greece leaves the Euro their banking system implodes.