ΡΑΝΤΕΒΟΥ ΣΤΟ ΛΟΥΞΕΜΒΟΥΡΓΟ
reposted from here αναδημοσίευση απο εδω
Athens Mulls Plans for New Currency
Greece Considers Exit from Euro Zone
Greece’s economic problems are massive, with protests against the government being held almost daily.
Now Prime Minister George Papandreou apparently feels he has no other option:
SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou’s government is considering abandoning the euro and reintroducing its own currency.
Alarmed by Athens’ intentions, the European Commission has called a crisis meeting in Luxembourg on Friday night. The meeting is taking place at Château de Senningen, a site used by the Luxembourg government for official meetings. In addition to Greece’s possible exit from the currency union, a speedy restructuring of the country’s debt also features on the agenda. One year after the Greek crisis broke out, the development represents a potentially existential turning point for the European monetary union — regardless which variant is ultimately decided upon for dealing with Greece’s massive troubles.
The European Central Bank (ECB) would also feel the effects. The Frankfurt-based institution would be forced to “write down a significant portion of its claims as irrecoverable.” In addition to its exposure to the banks, the ECB also owns large amounts of Greek state bonds, which it has purchased in recent months. Officials at the Finance Ministry estimate the total to be worth at least €40 billion ($58 billion) “Given its 27 percent share of ECB capital, Germany would bear the majority of the losses,” the paper reads.
FRIDAY, MAY 6, 2011
Euro Whacked by Reports that Greece May Leave the Eurozone?
But with the hair shirt that Greece is being asked to wear, all bets may be off.
SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou’s government is considering abandoning the euro and reintroducing its own currency.Alarmed by Athens’ intentions, the European Commission has called a crisis meeting in Luxembourg on Friday night…Sources told SPIEGEL ONLINE that Schäuble intends to seek to prevent Greece from leaving the euro zone if at all possible. He will take with him to the meeting in Luxembourg an internal paper prepared by the experts at his ministry warning of the possible dire consequences if Athens were to drop the euro.“It would lead to a considerable devaluation of the new (Greek) domestic currency against the euro,” the paper states. According to German Finance Ministry estimates, the currency could lose as much as 50 percent of its value, leading to a drastic increase in Greek national debt. Schäuble’s staff have calculated that Greece’s national deficit would rise to 200 percent of gross domestic product after such a devaluation. “A debt restructuring would be inevitable,” his experts warn in the paper. In other words: Greece would go bankrupt.It remains unclear whether it would even be legally possible for Greece to depart from the euro zone. Legal experts believe it would also be necessary for the country to split from the European Union entirely in order to abandon the common currency. At the same time, it is questionable whether other members of the currency union would actually refuse to accept a unilateral exit from the euro zone by the government in Athens.
So what will they do if Greece refuses to observe niceties and bolts anyhow?
Send in tanks?
I’m curious as to what punishments might be visited on Greece if it chooses to exit.
Iceland had a very rocky six months when its banking system failed but it is now on track for a solid recovery. This example cannot have been lost on Greece. Back to the story:
What is certain….is that the measure would have a disastrous impact on the European economy.“The currency conversion would lead to capital flight,” they write. And Greece might see itself as forced to implement controls on the transfer of capital to stop the flight of funds out of the country. “This could not be reconciled with the fundamental freedoms instilled in the European internal market,” the paper states. In addition, the country would also be cut off from capital markets for years to come.
This “you’ll never borrow again” threat is greatly exaggerated. In fact, investors like borrowers who have cleaned up their balance sheets. That’s why Chapter 11 works. Argentina’s default and end of dollarization proved salutary, with the country now performing better on virtually every economic indicator than its Latin American peers. The big difference is that it did not have to recreate a stand-alone currency, which would be a huge operational hurdle for Greece. Back to the article:
In addition, the withdrawal of a country from the common currency union would “seriously damage faith in the functioning of the euro zone,” the document continues. International investors would be forced to consider the possibility that further euro-zone members could withdraw in the future. “That would lead to contagion in the euro zone,” the paper continues.Moreover, should Athens turn its back on the common currency zone, it would have serious implications for the already wobbly banking sector, particularly in Greece itself. The change in currency “would consume the entire capital base of the banking system and the country’s banks would be abruptly insolvent.” Banks outside of Greece would suffer as well. “Credit institutions in Germany and elsewhere would be confronted with considerable losses on their outstanding debts,” the paper reads.The European Central Bank (ECB) would also feel the effects. The Frankfurt-based institution would be forced to “write down a significant portion of its claims as irrecoverable.” In addition to its exposure to the banks, the ECB also owns large amounts of Greek state bonds, which it has purchased in recent months. Officials at the Finance Ministry estimate the total to be worth at least €40 billion ($58 billion) “Given its 27 percent share of ECB capital, Germany would bear the majority of the losses,” the paper reads.
6 COMMENTS:
Greece just wants some leverage to bargain for better terms on their debts. That’s all that’s going on IMO.
No credible threat of leaving the EU.
If Greece left I would immediately start planning a vacation there, assuming the exchange rate would heavily favor euro holders like me. And there might also be a boom for Greek agriculture because the prices in the EU for Greek exports can’t get much lower without disrupting their segments. I suspect they’ll stay about as high as they are now and the Greeks will party. I mean we now pay about 15 euros a kilo for organic Greek fish. I can’t imagine it dropping to 7.
Yves here. This “you’ll never borrow again” threat is greatly exaggerated.
Agreed. Furthermore, the ability to service debt is the ability to not borrow at all. When will governments realize this?
Furthermore, Greece should legalize private currencies to tempt its black market into the open and to provide a healthy check and balance on government spending. Who needs the discipline of a foreign central bank when Greece’s own private sector could provide that needed check and balance?
http://www.ft.com/cms/s/0/43801510-e10a-11de-af7a-00144feab49a.html?nclick_check=1
12/08/2009
Timebomb for the Euro
Greek Debt Poses a Danger to Common Currency
By Wolfgang Reuter
A national bankruptcy in Greece would have a serious impact on Germany, where many banks have invested heavily in the high-yield Greek treasury bonds — after borrowing the money to buy the bonds from the European Central Bank (ECB) or other central banks at rates of 1-2 percent. Making money doesn’t get much easier — as long as the Greeks remain solvent.
A London investment banker is betting on the continued decline of prices for Greek bonds in the short term, while simultaneously waiting for the right time to start buying the securities again. He jokes: “If someone has €1,000 in debt, he has a problem. If someone has €10 million in debt, his bank has a problem. And the bank, in this case, is Europe.”
I’m not getting my hopes up. Unfortunately, I agree that it’s probably a bluff.
But it’s a testament to how insane this world has gone that no amount of common sense or empirical experience seems to convince the citizenry of any of these prey countries (except Iceland, yet they too have only had a half-hearted response) that the Euro was a scam which is not in the interest of anyone but the banksters of Germany and France.
There’s hysteria screaming, “Why would Greece do this?” But a rational person would ask, why didn’t they do it a long time ago? And they’re probably not serious about doing it now…















Was there a story about a boy who cried, ‘It’s fine, no problem here,’ three times before he got eaten by the dragon, when doing otherwise would have alerted villagers to rush to his rescue?