France and Greece Election results!

[LadyWithEDS]

So, what do you think it means for Europe?

There have been large withdrawals of cash form Bankia, a Spanish bank that got into difficulties last week, and ongoing withdrawals from Greek banks. Indeed, as of yesterday, there are 4 Greek banks that the ECB is now refusing to lend money to. The threat of widespread runs on banks is growing in the Eurozone.

Betelguese

I know what they're saying in public. It doesn't matter what they say. Greece has to leave, as do Portugal and Spain. There isn't enough money in the productive part of the Eurozone to save the unproductive part. Italy may have to go, too.

Sorry, but it is inevitable. By this time next year the Greeks will be on the Drachma.

On the plus side, in five years' time your economy will be booming. The Euro is a millstone around Greece's neck.

Withdrawals from Greek banks totalled 1.2 Billion Euros on Wednesday - 0.75% of total deposits - according to the excellent ZeroHedge blog.

In the UK, the loss of Greece from the Euro would probably mean a short term dip as markets take a battering but I expect it would recover pretty quickly given the Greece economy is pretty small and to be honest most traders have probably already factored in Greece defaulting.

The bigger concern is contagion and specifically onto Spain. Spain is too big to be saved so if they fall, we all will take a big hit.

I don't really understand it.
Is Greek debt about 300 billion?
Our deficit was about 147 billion.

We were told that the banks were too big to fail, and the UK alone loaned or bought shares or promised or something, somewhere approaching 850 billion to stop our banks failing.

So can all of Europe not loan or something enough to cover 300 billion?
Are the banks to big to fail, but a whole country of millions of people is too small to be bailed out?

And any failure of Greece may affect European banks which Europe spent so much to bail out in the first place.

Channel 4 News says that the Greek left is using a sort of drachmail, implying that a failure of Greece will do more harm to the Euro than to Greece. Are they just using the "too big to fail" argument?

It looks like Greek debt is quite a bit less than 300 billion even.

www.guardian.co.uk/business/2011/jun/16/greek-debt-crisis-key-questions-answered

So why so much doom?

'The money being promised to Greece is offered in the form of repayable loans, not handouts, so there is only an economic impact if the Greek government reneges on its debts some time in the future. The purpose of the bailout is to prevent a default. We lent Ireland an extra £7bn to top up the EU and IMF funds and we expect to get that back with interest. Some economists believe Greece and Ireland could follow Iceland, which is refusing to repay the UK a £2bn "loan".

Could this be the old 'ordo ab chao' to drive through a closer union?
I think the Euro will end up stronger in the end, when the money is found and the drums of doom no longer sound.

It may help Greece long term not to be in the Euro but it will also mean that personal bank accounts will devalue and the ordinary Greek will again suffer. Furthermore, Greece will be isolated - never there when big decisions are taken.

If countries default you wonder how borrowing will carry on in the future.

I don't think anyone knows the best way forward for the Euro right now - hindsight as foresight would be a wonderful thing - we will all know in ten years what should have happened!

As for Greece - they are damned whatever they do for forseable future.

The problem is Claig is that despite all the pain the Greeks are going through and all the cuts implemented, the government still are unable to balance their books. So they will STILL need to continue to borrow money.

Imagine Greece is your younger cousin who is heavily in debt and continues each month to overspend (deficit) completely. You have lent him money but despite all the cuts he's made to his lifestyle, he still can't make ends meet.

At what point do you stop throwing good money after bad and admit the best thing to do is for him to go bankrupt (default).

And the EU governments (notably Germany) have not really implemented a real solution. All they've done is in effect say "Well if you make more cuts, I'll lend you some more money". Germany could make the problem go away tomorrow by simply guaranteeing Greece's debts. But of course they won't want to do that anymore than you would guarantee your cousin's big debts. Besides, that would be political suicide in Germany where the general opinion is that Greece has been living the high life for too long and taking the piss for too long and the modest living German's don't see why they should now pay for their excesses.

So yes, the EU could have a whip round and raise enough money to support Greece but not indefinitely. More worryingly for everyone is that the EU couldn't do the same for Spain since they are much much bigger. If they run out of money then we're all screwed.

The humane thing to do now is to let Greece exit the Euro. It all but has! People are pulling money out left, right & centre. Few will lend to Greece. They cooked the books to join the Euro and now are paying the price. Personally I believe the previous leaders should be jailed for their negligence.

Yes, I agree about their previous leaders.

"the government still are unable to balance their books. So they will STILL need to continue to borrow money."

We are in a similar position. We can't balance the deficit immediately. I think we are expecting that it will take about 5 years and in the meantime Labour says thaqt Osborne has had to increase borrowing since growth is not happening.

Greece must be making huge cuts, as there are 25% now unemployed, pensions have been cut, people have to pay for their medicines up front, some people are abandoning their children and teh suicide rate has increased.

The amount of money that Greece needs is small fry in European terms and when growth eventually returns, they will be able to pay back debt. However, the banks etc. have probably whacked up the interest rate that Greece needs to pay. Surely, govts could tell them to cut the interest rate.

For this relatively small amount of money, we are told that all of Europe risks doom and a 10 year depression and a banking crisis, that of course will mean that we all have to bail the banks out once again, because we know that they are always "too big to fail". Recently we have heard that another trader lost about 1 billion, in spite of all the regulation and checks etc. that are in place.

It seems strange that they all pooled together to bail out banks with untold billions, but don't seem to be able to stop what would seem to this smaller crisis, which will end up having to be bailed up down the line anyway, if it affects the banks.

Greece won't be able to pay back its debt. It hasn't managed to balance its books for decades.

The interest rate is a reflection of risk. If governments 'order' banks to offer money at lower interest rates then people simply won't buy the debt because they'll know that it's rigged. Low interest rates (ie cheap credit) were the primary cause of the last housing bubble, so you'd just be creating another.

It isn't just Greece, of course. It's Portugal, Italy, Spain, Ireland, Belgium and France who are in equally difficult positions. If it was just one country it wouldn't be a problem, but it's seven with a combined GDP of 45% of the EU's total.

Spain's banks have been downgraded last night. DM is running a scarmonger headline about Santander this morning.

claig, if the banks had failed, the UK govt would still have to payout to savers whose money they guarentee. also if the banking system failed, we would have wider economic failure and probably rioting.

the banks were viable businesses with a short term problem. greece's problems started before they joined the euro and wont end with whatever happens this year.

the banks have paid half their debts back so far. greece still cannot live within its means.

But can most European banks really live within their means? Aren't they all just sitting on a mountain of bad debt, because they lent beyond their means to banks, people and countries they knew they shouldn't have done? Aren't they only viable businesses because they've been allowed to remain viable, rather than pulling each other down? I have a very clear memory at the time Greece joined the Euro of it being widely believed that they must have cooked their books to be able to do it, so it's not as if it wasn't known by the entire world at the time it happened?... So since when did banks' problems not start a long time ago, when they decided not to pay much attention to risk? I don't understand this idea that banks just had a short term problem.

By the way, total liabilities to the banking system if Greece defaults is said to be Euro 1.3 trillion. It is not just the Govt debt of Euro 300 bn.

So how did the banking system manage to create such colossal liabilities out of such small amounts? Is that the fault of the country which borrowed the small amounts or the fault of the banks which played about with small amounts and turned them into colossal liabilities?

The banks buy and sell huge quantities of derivative contracts based on the underlying debt that multiplies the original risk many times over.

Do you think the Greek's can last until their elections?