Greece is stuck in a vicious cycle of insolvency, low competitiveness and ever-deepening depression. Exacerbated by a draconian fiscal austerity, its public debt is heading towards 200 per cent of gross domestic product. To escape, Greece must now begin an orderly default, voluntarily exit the eurozone and return to the drachma.
The recent debt exchange deal Europe offered Greece was a rip-off, providing much less debt relief than the country needed. If you pick apart the figures, and take into account the large sweeteners the plan gave to creditors, the true debt relief is actually close to zero. Its best current option would to reject this agreement and, under threat of default, renegotiate a better one.
Yet even if Greece were soon to be given real and significant relief on its public debt, it cannot return to growth unless competitiveness is rapidly restored. And, without a return to growth, its debts will stay unsustainable. Problematically, however, all of the options that might restore competitiveness require real currency depreciation.
The first of these options, a sharp weakening of the Euro, is unlikely while America is economically weak and Germany über-competitive. A rapid reduction in unit labour costs, via structural reforms that increased productivity growth in excess of wages, is just as unlikely. Germany took ten years to restore its competitiveness this way; Greece can't wait in depression for a decade.
The third option is a rapid deflation in prices and wages, known as an "internal devaluation". But this would lead to five years of ever-deepening depression, while making public debts more unsustainable.
Logically, therefore, if those three options aren't possible, the only path left is to leave. A return to a national currency and a sharp depreciation would quickly restore competitiveness and growth, as it did in Argentina and many other emerging markets which abandoned their currency pegs.
Of course, this process will be traumatic. The most significant problem would be capital losses for core eurozone financial institutions. Overnight, the foreign Euro liabilities of Greece's government, banks and firms would surge. Yet these problems can be overcome. Argentina did so in 2001, when it "pesified" its dollar debts. America actually did something similar too, in 1993 when it depreciated the dollar by 69 per cent and repealed the gold clause. A similar unilateral "drachmatization" of Euro debts would be necessary and unavoidable.
Major eurozone banks and investors would also suffer large loses in this process, but they would be manageable too - if these institutions are properly and aggressively recapitalised. Avoiding a post-exit implosion of the Greek banking system, however, may unfortunately require the imposition of Argentine-style measures - such as bank holidays and capital controls - to prevent a disorderly fallout.
Realistically, collateral damage will occur, but this could be limited if the exit process is orderly, and if international support was provided to recapitalise Greek banks and finance the difficult fiscal and external balance transition. Some argue that Greece's real GDP will be much lower in an exit scenario than in the hard slog of deflation. But this is logically flawed: even with deflation the real purchasing power of the Greek economy and of its wealth will fall as the real depreciation occurs. Via nominal and real depreciation, the exit path will restore growth right away, avoiding a decade-long depressionary deflation.
Those who claim contagion will drag others into the crisis are also in denial too. Other peripheral countries have Greek-style debt sustainability and competitiveness problems too; Portugal, for example, may eventually have to restructure its debt and exit too.
Illiquid but potentially solvent economies, such as Italy and Spain, will need liquidity support from Europe regardless of whether Greece exits; indeed, a self-fulfilling run on Italy and Spain's public debt at this point is almost certain, if this support is not provided. The substantial official resources currently being wasted bailing out Greece's private creditors could also then be used to ring-fence these countries, and banks elsewhere in the periphery.
A Greek exit may have secondary benefits. Other crisis-stricken eurozone economies will then have a chance to decide for themselves whether they want to follow suit, or remain in the Euro, with all the costs that come with that choice. Regardless of what Greece does, eurozone banks now need to be rapidly recapitalised. For this a new EU-wide programme is needed, and one not reliant on fudged estimates and phoney stress tests. A Greek exit could be the catalyst for this approach.
The recent experiences of Iceland, along with many emerging markets in the last 20 years, show that the orderly restructuring and reduction of foreign debts can restore debt sustainability, competitiveness and growth. Just as in these cases, the collateral damage to Greece of exit will be significant, but it can be contained.
Like a broken marriage that requires a break-up, it is better to have rules that make separation less costly to both sides. Breaking up and divorcing is painful and costly, even when such rules exist. Make no mistake: an orderly Euro exit will be hard. But watching the slow disorderly implosion of the Greek economy and society will be much worse.
http://blogs.ft.com/the-a-list/2011/09/19/greece-should-default-and-abandon-the-euro/?
99,9% sikkerhed for bankerot. Det mener jeg er overgjort.
http://www.business.dk/oekonomi/999-pct.-sandsynlighed-for-graesk-bankerot
http://www.business.dk/oekonomi/999-pct.-sandsynlighed-for-graesk-bankerot
19/9 2011 15:16 RoxyTrooper 0
46484 det er vel set i forhold til selve markedets logik ... men hvis Tyskland og Frankrig fortsat vil lege julemænd så er alt selvfølgelig muligt ...
19/9 2011 18:33 oneofakind 346489 Pt. køber de europæiske lande "tid", bankerne kan benytte til at afdække deres risiko inden Grækenland kollapser...! Dyrt.. men mindre dyrt end hvis flere store banker i Tyskland og Frankrig kollapser!..For det vil skabe totalt økonomisk kaos i Europa.. Når bankerne er solvente igen.. kollapser Grækenland med garanti!.. Min forventning er, at det vil tage 2-3 måneder for bankerne at sikre likviderne! mvh.
20/9 2011 08:30 Solsen 046497 Det var vel det vi så begyndelsen til i sidste uge, da europæiske banker fik tilført doller fra US.
Hvis ikke der arbejdes hurtigt får vi frosne kapitalmarkeder igen - http://www.reuters.com/article/2011/09/20/idUSB9E7K102K20110920
Men hvem er den næste i rækken (Italien, Spanien, Portugal, Irland......?)
Det er store sager at løse !
Hvis ikke der arbejdes hurtigt får vi frosne kapitalmarkeder igen - http://www.reuters.com/article/2011/09/20/idUSB9E7K102K20110920
Men hvem er den næste i rækken (Italien, Spanien, Portugal, Irland......?)
Det er store sager at løse !
Italien må gøre ondt med sin Downgrade idag. Men listen må være i prioriteret risiko rækkefølge...
Portugal
Spanien
Italien
Irland
Portugal
Spanien
Italien
Irland
US skal over de næste 5-10 have trykt flere dollars, så de kan betale deres egen gæld.
http://www.teknisk-analyse.dk/blog/index.php?id=qc9
http://www.teknisk-analyse.dk/blog/index.php?id=qc9
20/9 2011 13:04 246515 15 konkrete krav. Det var dejligt!
Greek media reports that the troika representatives are demanding a series of 15 new measures to be immediately implemented. The moves include cuts in civil servant pay, closure of some 30 unprofitable public enterprises, lower healthcare spending, limits on pensions, 20,000 civil servant lay-offs and corralling some 150,000 state workers into a "labour reserve" in which they will receive lower wages before being fired.
(EU OBSERVER) http://euobserver.com/19/113675
Greek media reports that the troika representatives are demanding a series of 15 new measures to be immediately implemented. The moves include cuts in civil servant pay, closure of some 30 unprofitable public enterprises, lower healthcare spending, limits on pensions, 20,000 civil servant lay-offs and corralling some 150,000 state workers into a "labour reserve" in which they will receive lower wages before being fired.
(EU OBSERVER) http://euobserver.com/19/113675
