Praise the Heavens - Greece is holding a referendum

[LemonDifficult]

I was wondering when someone would, like, mention Democracy.

The Greek PM has played a political blinder. He's refusing to take the historical buck for the austerity measures, he's making the people listen to his message, and he's making sure that whatever details get thrashed out on the latest Euro Zone Package have to go Greece's way so that the Greeks will approve it.

Oh, and he's also doing the morally correct thing in a democracy and putting this massive piece of legislation to the Greek people. Respect.

And proof that the markets don't like democracies (not really) they're falling. Not good that bankers thought we lived in a world where they really did have the last word.

CC: I don't see how the EU can offer a larger haircut on Greek debt without the creditors agreeing to this, and afaik, this will be the subject of protracted and slow negotiations, as some won't be willing to play.

I think Greece is between a rock and a hard place, and there is little difference in the outcomes, but at least, if they left the Euro, they would have some control over their own destiny, and not feel that this had been imposed by the troika.

I think the IMF can do more with Greece outside the Euro than it can with it in. However, Lagarde is French and having just been the French Finance minister, will be all too aware of where all the Greek debt is held.

Part of the problem with the Greek public sector is their bloated military. Greece considers itself to be at war (Cyprus, Turkey etc) and each group of Islands has to have a Brig-General in charge. Normally one would expect just a few from each intake to achieve this high rank. It's 50% one year from an intake and the rest get promoted the next year. That's a lot of salary and pensions to pay for.

Dh used to work for a Greek in NATO...

I'm not sure that the creditors will accept the haircut as I had read they'd get more from a default via the insurance you mention above. This is also a pissing up the wall contest between the EU (esp Merkel) and the markets.

I watched this earlier, which i thought was interesting. Glad we are not in the Euro.
www.youtube.com/watch?feature=player_embedded&v=5CZr17HLH5U#!

CustardCake talks lots of sense and has summarised the issue well, which is why the referendum is terrible news - the people will vote against the measures, the Euro will be destabilised, and Greece will end up in a worse situation in international terms. It is Germany who will benefit most from this (and to an extent, that's how it should be - they have integrated the whole of East Germany without fuss and are now expected to fund everyone else's mess when their own citizens are probably the most efficiently taxed in the Eurozone).

Greece will just end up beholden to the IMF and could well end up over-devaluing in order to prop up exprts and hasten their national recovery quicker (at the expense of other nations). The spectre of devaluations also leads us down a path where hyper-inflation becomes a possibility across Europe.

Grim.

I would argue Squiffy that this mess is of Germany's making in that Merkel's hands are tied by the Bundestag and the Constitution. They had no problems with the UK exiting ERM in the 90s, so why not let Greece exit the Euro (effectively ERM in a purer form) now? They also let Greece join in the first place when they knew the Greek figures were a fudge.

Custard - the link scared me too. I can well believe that it is written in those terms though; why do you think the Eurocrats don't like referenda? They might just get found out, is why.

I think the Euro's had it. It's just timing now. Fuck.

Why why why why why why why did they let Greece, Italy, Portugal etc join???

I'm really annoyed that I can no longer find a really great article which explained very clearly and succinctly the consequences of a Euro collapse, and how it would almost certainly result in a dissolution of the EU in it's current form and a massive recession. The major point was that a return to country specific currencies would initially necessitate protectionism on a massive scale- i.e. an end to free movement of goods and labour.

Given that we had a fairly free movement of goods and labour with mainland Europe from medieval times at least onwards, I don't think that it is the disaster that is predicted. I think there is a lot of political capital invested in the Euro and they don't want to see it fail because if they were wrong about that, what else were they wrong about?

A dissolution of the EU in its current form and a return to a common market might be no bad thing. We wouldn't be paying massive precepts to Brussels for a start; and we could save a packet there. We would also be moving away from the dictatorship that the EU will inevitably become.

scary I know what you mean, and I agree that the EU should never have gone beyond a common market, but this was about the conditions required to re-establish your national currency post Euro, rather than if the Euro hadn't existed. I'm not sure it's that easy to just "go back" to what we had before- would that it were.

I would imagine that you do the reverse of what you did when you changed to the Euro!

Good lord - that is very eye-opening what you say scary about the senior Greek military. Do you think that that would increase the chance of a military coup?

Frightening for the Greeks.

I'm glad I'm not alone in thinking that the referendum is a seriously BAD idea. I felt ill when I heard it on the TV last night. The repurcussions of Greece leaving the Euro & going down the pan are enormous. Some great explanations on here from the financially knowledgeable.

I think it's a bad idea. A bit like Churchill holding a referendum after Dunkirk and asking if people wanted to fight on. If you're a leader in an emergency, you don't waste time asking people to vote!

I thought this article was pretty good, particularly

"The initial misstep by European leaders, of course, was lashing their nations to a common currency without integrating other critical policies, such as government borrowing and regulation."

I remember learning about the ERM when I was at uni and going "isn't that very much like the Euro, and why are they doing a similar thing again, considering it was such a disaster?"

It's not just France and Germany that are threatened - Cyprus apparently has huge exposure to Greek government bonds, so they're pretty screwed as well.

TheBrideofFrankenstein should of been us, france, Germany and the Nordic countries not these tin pot places who don't collect their taxes have sesitas and drink wine all bloody day

Personally I think they secretly want to leave the euro but of course not able to come out and say it

Turkeys don't vote for christmas
They will never go for it

Also they have to be worried about Greek flight money and skills wise if I was a Greek with any skill such as nursing ECt I would be out like a shot also I suspect all the middle classes are putting their money into other banks other than greek ones as we speak

I would imagine that you do the reverse of what you did when you changed to the Euro!

But it's not that simple, because

1 The world is a very different place to when the Euro was formed

1. It won't happen in a vacuum- confidence is very important and the collapse of the euro will bring about a temporary collapse of confidence in Europe

3 Most importantly - It's unprecedented. The European currencies that existed before the Euro did not come into existence within the structure of the EU. They predated it, so we don't actually know what will happen when we try to dismantle a monetary union within an increasingly interdependent financial system.

I still think it will happen, and LT it's for the best, but I don't think the consequences will be positive on, say, a 5-10 year horizon.

If all the EU member states were in the Euro I might agree, but they aren't; and, the Euro is the newcomer, and therefore unprecendented; not the older currencies.

Greece leaving the Euro doesn't necessarily mean that the Euro will unravel, any more than ERM did when the UK left; it means that those who have political pride invested won't like it, but they are politicians and should be used to egg on your face moments.

I understand all that Custard, but the Euro is teetering on the brink anyway. You cannot yoke countries like Italy, Greece and Portugal together financially with countries like Germany and the Netherlands and expect it all to work.

I would suggest that Greece either leaving the Euro, or defaulting (which is what the bond markets want so they can claim on the insurance) might be the best option. If not, Greece staying in the Euro and having more money loaned to them will not improve the situation, it will just drag on, and you will see even more civil unrest (and perhaps a coup), than you have seen already.

I don't see that Greece should be flung to the lions because France needs to keep its AAA rating and because its banks are in the shit. I also don't see why Germany should keep bailing everyone out. In fact, the whole thing is illegal as Lagarde has said as it contravenes Lisbon. If they don't stick to the rules in the treaty, then that treaty is null and void surely, and all bets are off.

There is of course the argument that if there is no Govt in Greece (Belgian precedent for this, we still don't have one), then there can be no decision, so the turmoil will continue. If the Greeks were smart they would go for this and stymie the EU.

www.telegraph.co.uk/finance/financialcrisis/8866617/Greek-PM-George-Papandreou-calls-emergency-meeting-after-ministers-revolt-over-euro-referendum.html was interesting, as it is all 'Merkozy' calling the shots. I thought the Eurozone was more than just France and Germany? The comments are interesting, and this was quite funny

scary, the Eurozone is more than just France & Germany - but I think they are two of the biggest economies & therefore the roots that keep the tree in the ground. Greece could be the tornado that uproots it all!