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Greece Votes "No"


Parsad
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Greece will probably be the example that shows that leaving is a bad idea

 

Feels like it. There is no way (or no sensible way) to now go ahead and offer Greece a fancy deal. Cut your losses. Maybe a few weeks of pain without any economy, food shortages and civil unrest will make something possible in the end but it's looking bleak.

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We are in for some very interesting times. This kind of reminds me of a very public messy celebrity divorce. Both sides will lose.

 

Greece's political culture is too far from Germany's and a majority of Greeks are not going to change that much that fast. At the same time Northern Europe is also not going to change and allow a Euro member to default.

 

There is no middle ground on this one. The next couple of days and weeks will be very interesting as I expect the Greek government to continue to be very belligerent.

 

How will markets react? We had a small sell off this past week. Now that No has won perhaps we get another small sell off. What would it take to get a larger sell off?

 

I wonder if the crashing Shanghai stock market might impact world markets the next week or two more than Greece (should Shanghai continue to crash). I have largely ignored macro event the past 2.5 years or so and this has helped my investment returns in a big way. Paying attention to macro has also helped me at other times (I only owed FFH when the Great Recession hit the U.S. in 2009).

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Varoufakis blog sums it up nicely. It seems EU doesn't really budge and pensions would have to be cut further (beyond lowering pension age). It seems Greece has come quite a long way towards EU (unless Varoufakis is full of shit).

 

http://yanisvaroufakis.eu/2015/06/18/greeces-proposals-to-end-the-crisis-my-intervention-at-todays-eurogroup/

 

I dont think this means they will not pay anything. It just means they come short for the next payment, so they would cut debt by some %. This is purely for extensions to not technically default on loans.

 

Honestly their government spending as a % of GDP is not that much out of control at a little over 50% . If you consider the fact that over a 100 billion euro's was pulled out of their banks. A lot of their economy is not registered on official GDP numbers because of a cash black economy.

 

So if you consider that, their government spending as a % of GDP is the same as rest of Europe (around 40-45%)

 

 

This is also funny for the EMH believers. An entire country voted against this deal! that must mean it is a shit deal!

 

Im in the school of thought that letting Greece bleed further when a somewhat rational government is in place now would do enourmous damage to the country. At this point the country could fall apart and become dysfunctional for the next 50 years as every drop of talent flees the country and becomes a second Argentina.

 

Here is the most hypocrite thing, Greece would have to run a surplus to start paying off that debt. But when will Italy do that? Or France? Or the US for that matter? They have similar massive debts. Just looking at the numbers, and being rational, you would have to see that you need either massive inflation (money printing) which is not happening, or you would have to cut into those loans. So why would Greece suddenly have to start paying a lot of those loans back (at the worst possible time), when other countries still go on running their deficits?  Im probably biased a littled bit for Greece, since I like rooting for the underdog, but it all seems a bit off to me. Especially looking at the numbers.

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Im in the school of thought that letting Greece bleed further when a somewhat rational government is in place now would do enourmous damage to the country. At this point the country could fall apart and become dysfunctional for the next 50 years as every drop of talent flees the country and becomes a second Argentina.

..

 

I'm Greek American and both sides of my family are from Greece and got the heck out of there for better opportunity. The talent drain has been going on for decades already.

 

While I think they need a debt haircut, there are structural problems with their economy and government that can not be worked through quickly. The reasons they got to these unsustainable levels of debt are the primary forces at work here more so then any pension cuts or such. It shouldn't be a surprise that things have not improved quickly when you're dealing with decades of government mismanagement, tax avoidance and sweeping the problems under the rug.

 

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..

Im in the school of thought that letting Greece bleed further when a somewhat rational government is in place now would do enourmous damage to the country. At this point the country could fall apart and become dysfunctional for the next 50 years as every drop of talent flees the country and becomes a second Argentina.

..

 

I'm Greek American and both sides of my family are from Greece and got the heck out of there for better opportunity. The talent drain has been going on for decades already.

 

While I think they need a debt haircut, there are structural problems with their economy and government that can not be worked through quickly. The reasons they got to these unsustainable levels of debt are the primary forces at work here more so then any pension cuts or such. It shouldn't be a surprise that things have not improved quickly when you're dealing with decades of government mismanagement, tax avoidance and sweeping the problems under the rug.

 

Wouldn't you say though that giving the current government a chance would be a good thing for Greece. With their finance minister saying very rational things like this:

 

-We need to adjust to a new culture of paying taxes, not to higher VAT rates that strengthen the incentive to cheat and drive law-abiding citizens into greater poverty

 

-We need to make the pension system sustainable by eradicating unpaid labour, minimising early retirements, eliminating pension fund fraud, boosting employment – not by eradicating the solidarity tranche from the lowest of the low of pensions, as the institutions have demanded, thus pushing the poorest of the poor into greater poverty and conjuring up massive popular hostility against another set of so called reforms

 

-An extensive (but optimised) privatisation agenda spanning the period 2015-2025

 

-The creation of a fully independent Tax and Customs Authority (under the aegis and supervision of Parliament)

 

-A Fiscal Council that oversees the state budget

 

-A short-term program for limiting foreclosures and managing non-performing loans

 

-Judicial and civil procedure code reforms

 

-Liberalising several product markets and services (with protections for middle class values and professions that are part and parcel of society’s fabric)

 

-Elimination of many nuisance charges

 

-Public administration reforms (introducing proper staff evaluation systems, reducing non-wage costs, modernising and unifying public sector payrolls).

 

-A major Anti-corruption Drive and relevant institutions to support it – especially in the area of procurement

 

-Liberalising the construction sector, including the market and standards of construction materials

 

-Wholesale trade liberalisation

 

-Media – electronic and press code of practice

 

-One-Stop Business Centres that eradicate the bureaucratic impediments to doing business in Greece

 

-Pension System Reform – where the emphasis is on a proper, long-term, actuarial study, the phasing out of early retirements, the reduction in the operating costs of the pensions funds, pension fund consolidation – rather than mere pension cuts.

 

Seems like a good list of things to put through. I have a feeling the EU wants to make an example out of Greece at this point, to scare of socialists in other PIIGS countries.

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Seems like a good list of things to put through. I have a feeling the EU wants to make an example out of Greece at this point, to scare of socialists in other PIIGS countries.

 

To be honest, I don't know what to make of the new government and whether they can execute or not. It's a bold list and bold merits skepticism to me. At first I thought they were being brilliant with negotiations.

 

There is a general frustration with the Greeks from the rest of the EU (particularly Germany) to begin with. Other countries don't like seeing this act and are worried about similar uprisings and chaos in their own country if this is rewarded. There is definitely something to the fact the EU doesn't like how they are playing the game. I'm not so sure I can blame them for that either.  The EU would rather they play the game and if it doesn't work they adapt later.

 

It's a lot easier as outsiders seeing what's rational here and splitting the middle.

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They are in a hairy situation (tsipras). Because if you give in, you will be kicked out by your own people, but if you stick to your guns, and it goes south your career is over in every way possible. I guess that is why he did the referendum.

 

 

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Greece will probably be the example that shows that leaving is a bad idea

 

Depends on if they can get rid of the debt outside of the €-zone. If yes they will be so much better of in 2-3 years, that italy will follow sooner or later. (Remember that they had a big surplus last year and they can tax all that €-money that is flowing back into the system.)

The problem this greece vote has created is that nobody will bail out any €-country in the future.

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Can somebody explain why Greece cannot stay in the EZ after default?

 

The most common argument I have heard is that if this were to happen, then there would be nothing stopping the other PIIGS countries from doing so -aka no punishment for default.

 

 

To me, this doesn't make any sense, when a country defaults, markets will punish them by raiding the cost of borrowing, so in that case, why not let this happen?

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Can somebody explain why Greece cannot stay in the EZ after default?

 

The most common argument I have heard is that if this were to happen, then there would be nothing stopping the other PIIGS countries from doing so -aka no punishment for default.

 

 

To me, this doesn't make any sense, when a country defaults, markets will punish them by raiding the cost of borrowing, so in that case, why not let this happen?

 

I think their banking system would face insolvency and illiquidity on an enormous scale post-default - the country would likely face a choice between allowing its financial system to completely collapse or recapitalizing it. With no access to any Euros, recapitalization would presumably have to occur in a different currency. The alternative of financial system collapse just seems untenable.

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Can somebody explain why Greece cannot stay in the EZ after default?

 

 

Because there is no rule to leave just the €-zone, they have to exit completly and then can ask to get back into the EU.

 

Why's that?  It's clearly possible to be in the EU but not the Euro (e.g. UK) and as I understand it there are *no* provisions stating how a country would leave the Euro.  I could very well be wrong but if there are no provisions then they can basically do it however they are allowed.

 

I think it is more that the central bloc will want to punish Greece to discourage the other PIIGS.  They don't want the idea to get hold that you can have the best of both worlds, EU membership without the Euro.

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Why's that?

 

Because introducing the € should have been an act that is not reversible, so they made no rule for an exit. No politician has thought about the current situation, politicians generally only think about what happens until the next polls.

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Varoufakis blog sums it up nicely. It seems EU doesn't really budge and pensions would have to be cut further (beyond lowering pension age). It seems Greece has come quite a long way towards EU (unless Varoufakis is full of shit).

 

This is one of my all-time favourites... One can you think that Varoufakis was not full of shit? The guy promised three days ago on BBC that the negotians would be resumed on Monday "With 100% chance of success" and that "banks will reopen for sure on Tuesday". now that the got what he campaigned for, he just disappeared.

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Varoufakis blog sums it up nicely. It seems EU doesn't really budge and pensions would have to be cut further (beyond lowering pension age). It seems Greece has come quite a long way towards EU (unless Varoufakis is full of shit).

 

This is one of my all-time favourites... One can you think that Varoufakis was not full of shit? The guy promised three days ago on BBC that the negotians would be resumed on Monday "With 100% chance of success" and that "banks will reopen for sure on Tuesday". now that the got what he campaigned for, he just disappeared.

 

Agreed! I am having more fun watching this than Breaking bad or other TV shows. Tsipras promised that if he gets the no vote, he will get a great deal from EU within 48 hours, guaranteed. And this guy Varoufakis also said that if referendum comes out as an YES, he would resign immediately because he cannot play the hide and pretend game anymore. Now he got this NO result and he resigned right away? WTF?

 

Now we will see how this clown Tsipras is going to pull out a better deal within 48 hours.  :D

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Varoufakis blog sums it up nicely. It seems EU doesn't really budge and pensions would have to be cut further (beyond lowering pension age). It seems Greece has come quite a long way towards EU (unless Varoufakis is full of shit).

 

This is one of my all-time favourites... One can you think that Varoufakis was not full of shit? The guy promised three days ago on BBC that the negotians would be resumed on Monday "With 100% chance of success" and that "banks will reopen for sure on Tuesday". now that the got what he campaigned for, he just disappeared.

 

Agreed! I am having more fun watching this than Breaking bad or other TV shows. Tsipras promised that if he gets the no vote, he will get a great deal from EU within 48 hours, guaranteed. And this guy Varoufakis also said that if referendum comes out as an YES, he would resign immediately because he cannot play the hide and pretend game anymore. Now he got this NO result and he resigned right away? WTF?

 

Now we will see how this clown Tsipras is going to pull out a better deal within 48 hours.  :D

 

It's almost as if you expected them to tell the truth? If politicians were held accountable for their lies, there'd be few left outside of prison. The majority say whatever is necessary to achieve their ends. In this case, both of them said things to help achieve a "No" vote. What actually happens after they get it is in no way tied to what was promised before they had it. I don't know why anybody would put any weight on a promise that requires multiple parties cooperate when those parties aren't controlled by the individual making the promise.

 

That's not say a deal won't get done - it just won't be because it was promised by the PM.

 

 

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