Greek Banks, Stock Exchange to Remain Closed From Monday

http://www.bloomberg.com/news/articles/2015-06-28/running-out-of-cash-greece-counts-on-ecb-to-avert-black-monday

by randomname2 • 11 years ago

130 162 11 years ago

bloomberg.com

randomname24• 11 years ago

Banks are to remain closed until at least July 6th: http://en.protothema.gr/breaking-capital-controls-taken-bank...

The stock exchange will also remain closed according to Reuters: http://www.cnbc.com/id/102793367

zatkin• 11 years ago

Did you mean July 6th?

randomname24• 11 years ago

Yes, thanks. I have updated the comment.

As a sidenote, this doesn't have to be a huge deal necessarily. Recall the US closed every bank for 8 days in March 1933. Life goes on.

pibefision• 11 years ago

As an argentinean, who lived the same experience in 2001, I can say this is very bad.

I live in Europe now, and most people in this part of the world does not understand the idea and consecuencies of an economic issue like this.

My hope is that the greek government, in some way, find a new agreement soon.

vonklaus2• 11 years ago

Can you provide some color on this? What was it like when a gov't closed banks to avoid a financial apocalypse?

edit: would be interested in your experience if you feel comfortable giving it. Interested if new mediums of exchange took place and just generally how it played out as I am not familiar with the Argentinean crisis at all.

the-dude• 11 years ago

Not OP, not Argentian but watched a proper Dutch documentary about it : http://tegenlicht.vpro.nl/afleveringen/2011-2012/Argentinie....

Teachers don't get paid : need to fabricate and sell souvenirs to tourists on the beach. Every day. Large black markets are created, adhoc currencies get created, lots of crime ( burglaries, robberies ), people living of collecting waste paper etc.

shkkmo2• 11 years ago

Argentina is still experiencing some monetary controls. When I visited Buenos Aires two weeks ago, the official exchange rate was ~9 pesos to the dollar, however there are prevalent 'blue' (black) market exchanges that will readily give you over 12 pesos (I got 12.3) to the dollar.

platz• 11 years ago

greece and Argentina are entirely different since Argentina had it's own currency (which it could devaule) and it also had a strong export (soy beans). greece has neither.

vellum• 11 years ago

Rioting, looting, blood in the streets.

https://en.wikipedia.org/?title=December_2001_riots_in_Argen...

molmalo2• 11 years ago

I can. Basically, the country collapsed at first. Political instability. Companies closed. Unemployment went up... Crime raised. Big money left the country.

Capital controls were imposed, but as it's predictable in this kind of situations, people with the right connections, banks and big investors, got the news before the controls were imposed. Banks closed for a few days, then, people could only extract a certain amount per week from ATMs (just enough to live). Sending money outside the country had to be authorized (and generally rejected)... Of course, they said that this would only be for a few weeks or months... (a lie)

Then, they devaluated the Peso (ARS). from 1 ARS = 1 USD, to 1.4 ARS = 1 USD.

Every bank account in USD was converted to ARS, with the new valuation.

For a few months, they let the ARS to float freely, and it devaluated heavily. So, people who had a few months before USD deposited in their bank accounts, now had ARS that were quickly loosing its value. And they couldn't get it out of their accounts, so it was terrible for them to see their life savings evaporating, without being able to do anything. Some reports indicate that suicides, hearth attacks and strokes peaked at the time.

A lot of companies, who had acquired credits (in USD) from foreign institutions during the previous years, were no longer able to pay them back, and had to close, letting lots of people unemployed. One interesting thing that appeared (from a social-experiment perspective) was the following: In some cases, the workers joined and formed cooperatives, took control of the facilities, and continued working without the approval of the former owners, distributing equally the gains of their production (it didn't matter what was the position, either manager or janitor, everybody earned the same), as a means to keep their jobs, increase morale and reduce costs. They kept paying their providers, so, from outside, those factories kept working as always. Some may argue that even better, because they were more motivated...

The exchange rate reached 4 ARS = USD, and of course, inflation went up. Having the same salaries, but with prices going up quickly, a lot of people (especially the most vulnerable sectors of society) were no longer able to survive.

So, reverting to the most basic form of exchange, some people started what was called "Club del Trueque" (barter clubs). People made food, pasties, handicrafts, and exchanged them with other people. Eventually, those clubs grew up, and they started using pseudo-currencies, only valid inside their own clubs, to make trading easier. Of course, the government deemed that activity illegal, because they could not collect taxes... That worked for a time (several months, the most critical), but eventually, fake pseudo-currencies started to appear. It was always suspected that the government was behind the printing of those fake papers as a means of ending that... but anyway, it ended up eroding the trust in the members of those clubs.

But every Crisis can also be an opportunity:

As people was not able to extract their money from their bank accounts, (and believe it or not, most real state operations here are done in cash... big piles of cash), the real state market went down. And If you happened to have money (in foreign currencies) saved in a strong box, suddenly, your money had more value. I have friends who bought their first apartment back then. Others took credit in pesos at the beginning of the crisis (before indexation), and after a few years, the can say that they bought their house for 1/5 of their current value. (because the indexation they had was much much lower than inflation).

At a country level, it was a reboot. Which can be bad, and it can also be good. Having most of the indebted companies closed, new stronger companies had space to flourish. Given that now Argentina was a "NO-NO" place to invest for foreign companies, local companies had more chance to grow and expand. During the previouse years, most factories were not able to compete with Asian competitors, because of their cheaper prices. But having devaluated, and imposing imports restrictions (to avoid loosing foreign currency), factories had a new chance to increase regain the local market, with cheaper labor costs.

And being defaulted and bankrupted, the country was able to renegotiate most of the debts, reducing heavily the external debt.

All of this, worked for a few years. GDP Growth was high (>8). Unemployment descended. Social stability started to come back. Capital controls were relaxed. Central Bank's currency reserves went up year after year.

But eventually, that fast growth ended up being poison in the long term. As new industries started to work, it turns out that we didn't have the infrastructure to support them (and what's worse, we didn't make plans and started to invest with time). Power shortages came back (something that became uncommon since the privatizations). Roads were collapsed. And our cargo train lines were almost destroyed. But the real deadly bullet came with oil. As petrol prices started to go up, transport became expensive (this is a big country, mainly connected by roads). And with our new energy requirements, (to fuel our power plants) we passed from being a net oil exporter to beign a net oil importer... And with oil imports, currency reserves started to go down again.

So, here starts the story again: heavier import controls, it's harder to send money out of the country, very hard again to buy foreign currencies... but at least, this time around, it's not a financial crisis. Banks are not at risk, and people and local companies are not indebted in foreign currencies. So, it's bothersome, but not nearly as bad this time around as it was in 2001. There's simply no comparison.

But of course, Argentina is not comparable with Greece. Argentina is MUCH larger (8th, vs 97th), bigger population, and lots of natural resources (gas, oil, mining, agriculture, fishing, uranium). So, if forced, Argentina can survive totally on its own. But sadly, I don't think Greece can do the same.

Phew!. that was a large post...

fweespeech2• 11 years ago

Well this is terrible for the Greek people in the short term but its probably for the best in the long term. They have to default and the ECB just won't allow that.

fiatmoney• 11 years ago

History is full of examples of disallowed things happening.

fweespeech2• 11 years ago

Of course but that doesn't change the fact the ECB would cut off the tap in that scenario.

VLM4• 11 years ago

This a really good system design example, if a situation is possible and you don't design that situation into the system, then you will run the system in uncharted territory, eventually. Probably running it off the rails.

spacefight2• 11 years ago

This is really bad for the people of Greece. I have seen small bank runs with my own eyes where folks queued for hours to get their savings rescued. ($bigCorp going down with internal bank). Bad sad bad.

matt4077• 11 years ago

It worked out quite well in Cyprus in 2012. So just by itself, capital controls aren't the end of the work.

spacefight2• 11 years ago

Greece is much larger than Cyprus, their debt is much bigger in absolute values and the outcome of the current status so unknown that it's very difficult to compare the current capital controls against those implemented in Cyprus.

drinchev• 11 years ago

Hey there, are there any Greeks in startup/tech scene that want to express opinion on whether the government is doing the right thing about this referendum?

I'm really short on quality, direct feedback about what Tsipras is doing. All I can read about the topic is politics influenced.

mhb• 11 years ago

I don't know why Greek geeks, in particular, would have any insight, but here is what some economists think:

http://marginalrevolution.com/marginalrevolution/2015/06/the...

orless• 11 years ago

Not sure if it's of much relevance, but my ex-collegue blogs on Greek start-ups: * http://eulenausathen.com/ * https://twitter.com/eulenausathen

geonik• 11 years ago

Greek startup owner here. Our government is trying to recover from a mistake by commiting a bigger one. Our Varoufakis-illusioned prime minister thought that he could force a better deal from Eurozone members by blackmailing with a worldwide economic Lehman Brothers moment. This obviously didn't work, and the referendum theatre was setup to cover up the failure. That in turn, is a huge gamble, putting the country's prospects for generations to come at risk.

crdoconnor7• 11 years ago

Our Varoufakis-illusioned prime minister thought that he could force a better deal from Eurozone members by blackmailing with a worldwide economic Lehman Brothers moment.

"Better deal" meaning "a deal which doesn't involve breaking promises they made to the electorate".

Clearly such a deal wasn't possible, hence here we are.

The idea that this is somehow blackmail is ludicrous.

ak1394• 11 years ago

What your perception of Varoufakis is? He seems reasonable in his assumption that more austerity will not work, and Greece needs a new approach to solve its economical woes?

Dimitris• 11 years ago

I suggest that you follow this Twitter account: http://twitter.com/GreekAnalyst

Summarizing in a post the Greek problem is almost impossible, but I would say that the referendum is a terrible idea, especially at this moment.

(greek student/developer)

mahouse• 11 years ago

That guy really looks biased.

crdoconnor7• 11 years ago

"Tsipras turning this into a "fundamental democratic issue" (his words) is the most shameful populist trick in the book."

This ("shameful populism!") is kind of just another way of saying "I don't like this democracy thing. Stop it!"

elorant4• 11 years ago

Greek here. It seems that Tsipras is trying to pull his last card by going nuclear but the general consensus amongst non government supporters is that he did more harm than good. There was a belief that even a bad deal with EU was far better than a non-deal and it seemed that finally they’ve found some common ground and an agreement was a matter of days. The referendum announcement caught pretty much everyone by surprise.

There is a strong trend towards the Yes vote in the referendum and most people I’ve talked to view it as a consensus towards Euro regardless of how the government will try to put it. And there is still hope that even in the last minute a deal will be made for the sake of everyone involved.

You have to understand that to most people in the tech industry or any other person with some kind of liberal thinking, Tsipras is like an alien. An idealist of a communist era that was never popular in Greece and whose decisions and actions seem insane. We don’t understand what his strategy is and whether he’s bluffing or really want to take us out of the euro.

roymurdock4• 11 years ago

Do you think it is better to stay in the Eurozone and continue to pay down interest on a $300bn debt over the next decade, or to default on the debt, leave the Eurozone, and try to begin anew?

Would the Greek economy even be strong enough to support the latter?

quonn5• 11 years ago

My impression is that is does not _want_ to take Greece out of the euro. He hoped that the 'institutions' would change their mind, but they didn't. So now it is a choice between trying to keep going despite impossible conditions and a huge debt burden that can never be repaid or leaving the eurozone with a small chance that the EU gets scared and actually changes course. In any case, leaving the euro is bad for Greece and possibly fatal for the eurosystem, but for Greece it looks increasingly like the lesser evil.

argumentum4• 11 years ago

I'm a (classical) liberal, but a lot of the current Greek position makes sense.

1. To get future investment, it's more important that Greece starts growing again than that it pays off existing debt. While socialist policies can stifle growth, it seems in the current situation growth is stifled more by a strong Euro than by tax evasion, corruption or overspending.

2. Greece was the fastest growing state in Europe before the Euro. With all its natural advantages, there's no reason why it couldn't return to fast growth w/a devalued currency.

3. Syriza doesn't seem as "far left" as described. I certainly don't think they will go down the totalitarian communist route, vs becoming a democratic welfare state like the Nordic states.

4. As constituted, the Euro favors exporting economies over tourist/shipping economies like Greece. Switzerland is in many ways similar to Greece structurally .. a tourist mecca of about 10 million people and a service oriented economy. It does export a lot, but mainly specialty items (watches, cheese, chocolate etc). Greece would seem to be better off as a Switzerland on the sea, with strong EU relations but independent monetary policies.

therealunreal• 11 years ago

It's really not easy to answer if it is the right thing or the wrong thing. I will try to enumerate a few key points while being as objective as possible.

a) Most Greeks feel that they have been wronged or cheated. Their anger is usually against 1) other Greeks (i.e. public sector employees against freelancers for not paying taxes, or private sector employees against public for being lazy) 2) against Germany, for austerity, the WWII and the loans they haven't repaid 3) against large multinational interests, etc.

b) All (recent) governments, including this one (so far), have fallen victim to voting in policies that benefit special interests, large or small, instead of making a few basic reforms that are necessary. What is necessary and what is just is debatable, of course. It's a constant battle between different social groups, where everyone is right.

c) There are a lot more and deeper problems in Greece that I can't go into, that fuel an endless feeling of injustice. Things that are taken for granted in other European countries do not work like that over here. This is why some of the analogies made when criticizing Greeks are false.

Now, about the referendum. One side, the government, is saying that a "No" will give them more power to continue the negotiations and bring in a better agreement. They are trying to reduce the issue to democracy in the EU, national pride and independence. Other sides say that the government's proposal and troika's proposal are very similar and this is a false dilemma that only serves the ruling party's interests, and some vague Drachma lobby. The previous prime minister even went out and said that the deal offered by Troika is "unacceptable" (while the one they had made was better but they were forced out) but we have to accept it.

One important point I would like to make is that no one seems to know what either deal really says, but no one bothers to explain it to the people. The news only report the "bad" and everyone is spreading FUD.

I don't know what's best. I have an opinion but I'm afraid there are things in play that I do not understand. One thing I do know is that many of our youth want more Europe and less Greece, and a very large number have already left.

ucha• 11 years ago

I recommend reading this short article published on The Economist to get a grasp of the consequences of Greece defaulting.

For Greece the gains from defaulting would be slight, and the costs potentially vast. True, the country could walk away from debts of €317 billion, or almost 180% of GDP. But that is worth less to Greeks than it sounds. Although the debt is huge, it is at bargain-basement interest rates and repayable over decades. Interest payments until the early 2020s are just 3% of GDP a year. Even for Greece, that is manageable. Nor would leaving the euro do much good. In theory, with a new drachma and its own central bank, Greece could devalue and gain competitiveness. But Greece’s trade is modest. And it has already lowered nominal wages by 16% without a boom in exports.

The costs of Grexit still outweigh the benefits By contrast, the cost of Grexit would be exorbitant: bust banks, slashed savings, broken contracts and shattered confidence (see article). Politics could be devastated. Syriza, Mr Tsipras’s hard-left party, is anti-market and anti-enterprise. Neo-fascist Golden Dawn and the Communists, with a combined 12% of the vote, would thrive. Most of the parties in the middle, already discredited, would struggle. This week Mr Tsipras was due to play footsie with Vladimir Putin in Russia. Ejected from the euro, and possibly the EU, a country with a history of coups would risk becoming violent and even more corrupt.

http://www.economist.com/news/leaders/21654598-greece-and-eu...

toyg2• 11 years ago

Politics are already devastated, for the simple reason that all governments pre-Syriza put the country in this mess to begin with, and then simply couldn't find a way out that didn't involve huge social strife. The EU should help the new government correct the situation, if anything because they were elected with a relatively large mandate to do just that, and they clearly have the brains to do it (they took a smalltime ultraleft party and brought it in government, they can't be stupid). Instead, EU governments are scared of... What exactly?

jacquesm• 11 years ago

Instead, EU governments are scared of... What exactly?

Their own electorate.

VLM4• 11 years ago

Europe can financially afford Greece defaulting. Can't afford Spain and other markets. So an example has to be made of the Greek people, before other countries get any bright ideas. Its going to really suck for them.

This is a long, old crisis, many years. There is a famous graph I can't find (the world needs a graph search startup?) of the future promises of post-austerity growth vs actual results and the separation is staggering, like 30+ percent difference between promises and reality. Given the trends during the crisis the article seems to miss the point that trying year number eight, or whatever it'll be exactly, of even more austerity absolutely guarantees Golden Dawn taking over, despite that being a claimed result solely of grexit. Obviously continuing with the failed BAU strategies is a total non-starter. It is also possible that trying "anything else", which is finally a political necessity, will somehow make things even worse.

The fundamental problem is you can't have a partial union. Everything else, the root cause of the crisis, the attempts to fix it, the politics, all follow from that fundamental problem.

ZenoArrow• 11 years ago

"The fundamental problem is you can't have a partial union."

You can have a partial union. That's what EU members who aren't part of the Eurozone have. Greece defaulting will be damaging for its trade prospects, but they don't need to leave the EU to recover.

gizmo5• 11 years ago

This may be the chart you're thinking of:

http://krugman.blogs.nytimes.com/2015/06/25/breaking-greece/

nationcrafting• 11 years ago

The fundamental problem is you can't have a partial union.

I imagine you're talking about the monetary union, because it is of course possible to have partial unions in the EU (many EU countries are not in the Eurozone, and many non-EU countries are in the EEA or in the Schenghen zone, enabling free trade and free movement of their citizens in and out of the other Schenghen countries).

But even in a monetary union, you can absolutely have a common currency without a common fiscal policy. A currency is just a measure of account, a medium of exchange and a store of wealth. We've had centuries of common currency in the form of gold equivalence (i.e. a hard gold standard). The moments we got into trouble with gold currencies are not inherent in the gold standard itself, but in the attempts by sovereigns to jiggle around with it (seigneurage, mixing gold with other metals, creating pretend gold-standards that allow them to create more paper currency than there is gold backing it up, etc.)

J0-onas• 11 years ago

German scource in which the president of the ifo institute says that the Grexit is the best alternative for all involved parties. I heard him speak at talkshows and while his argumentation is a bit harsh, it made sense when I heard it.

Fact is, no one can prove that his stategy is the best alternative.

http://www.faz.net/aktuell/wirtschaft/eurokrise/griechenland...

chinathrow3• 11 years ago

The billion dollar question is, if the Grexit will be followed by Portexit, Spexit and Italexit at some point in the future.

My crystal ball says, if that's going to happen, the EU or at least the Euro will be toast.

DominikR8• 11 years ago

Funny that the economist mentions the "history of coups" when in fact these military coups and dictatorships were instigated and supported by the US and UK to prevent a communist government. (like they did in Iran back then)

What would happen if Greece defaulted on western debt and aligned with Russia and China is certainly not a repeat of the fascist military dictatorship they had back then.

They most likely would have social-democratic governments in the next decades, exorbitant financial investment from both Russia and China and lots of Russian military bases on their territory.

This would most likely be the end of the EU (and NATO) as we know it, because from there Russia and Turkey would work on pushing the EU out of the Balkans, which would most likely work considering that all of the populations there have a strong preference and historic ties to either Russia or Turkey, depending on what country you look at.

Even in Bulgaria, which is currently in the EU and has a pro-EU government, about 80% of the population have pro-Russian sentiments regarding the conflict in the Ukraine.

This is why the EU and US will do whatever it takes to keep Greece in the EU, even if it means that they have to orchestrate a military coup in Greece or that they will have to print trillions to cover for the debt.

tosseraccount• 11 years ago

Bulgaria, Greece and Russia share an Orthodox Christian and Slavic heritage.

loxs4• 11 years ago

Actually you got the Bulgaria part a bit wrong. Currently the population is ~70% pro-EU.

Pamar• 11 years ago

What about Hungary? I doubt they would consider _strongly aligned_ to either Russia or Turkey...

barlescabbage• 11 years ago

It doesn't matter whose debt their defaulting on. They will be suspect borrowers for decades to come. They'll have a harder time getting loans from any country in the west or east. Their business and government infrastructure will suffer the consequences from the decisions of this current government. This will end badly for them and the ramifications will last decades.

If you don't believe me ask an Argentinian.

scurvy2• 11 years ago

Greece could try to align themselves with Russia and China, but I doubt they could get an appointment. Russia has no money to lend. Russia is already on the verge of financial collapse; they couldn't bail out Cyprus let alone Greece.

China has shown no real interest in countries that don't have significant mineral or natural resources.

Your stats on Bulgaria are also completely backwards. Bulgaria has a very pro-west citizenship.

crdoconnor7• 11 years ago

For Greece the gains from defaulting would be slight, and the costs potentially vast.

Translation: FUD.

True, the country could walk away from debts of €317 billion, or almost 180% of GDP. But that is worth less to Greeks than it sounds.

Translation: pretty please don't.

Although the debt is huge, it is at bargain-basement interest rates and repayable over decades. Interest payments until the early 2020s are just 3% of GDP a year. Even for Greece, that is manageable.

Translation: You may have had to do with massive unemployment and without life saving drugs by kowtowing to creditor demands ( http://www.digitaljournal.com/article/325955 ), but you'll "manage" if you continue doing it.

Nor would leaving the euro do much good. In theory, with a new drachma and its own central bank, Greece could devalue and gain competitiveness. But Greece’s trade is modest. And it has already lowered nominal wages by 16% without a boom in exports.

Translation: we believe so fervently in the power of suppressing wages to improve economic performance, that the idea of trying anything else is literally unthinkable.

The costs of Grexit still outweigh the benefits By contrast, the cost of Grexit would be exorbitant: bust banks, slashed savings, broken contracts and shattered confidence (see article). Politics could be devastated. Syriza, Mr Tsipras’s hard-left party, is anti-market and anti-enterprise.

Translation : Attention target readers of the Economist - elites, captains of industry, rapacious financiers - Mr Tsipras is your masked villain.

Neo-fascist Golden Dawn and the Communists, with a combined 12% of the vote, would thrive.

Translation : please ignore the fact that they already are thriving thanks to the Economist-stamp-of-approval austerity measures.

randomname24• 11 years ago

I agree The Economist isn't exactly unbiased here, thanks for pointing that out.

evanpw4• 11 years ago

Translation: FUD

The Greeks have always been perfectly free to stop paying their existing debts, at the cost of not being able to borrow any more money. The only reason they've been negotiating with the Troika and agreeing to the austerity measures you disagree with is that they believed that defaulting would be _even worse_. Even if default is currently the best option, there is plenty of actual uncertainty, and some amount of fear seems justified.

trevelyan• 11 years ago

You are right. Once Greece leaves the Euro its recovery will begin in about six months, the average time it took countries to rebound after leaving the gold standard in the 1930s. Then as now the same vague arguments about the benefits of austerity (confidence!) were presented by debt-holders and shown by history to be disastrously wrong.

asabjorn• 11 years ago

With an estimated 24% of the economy being shadow economy vs 13% in Germany, which adds up to 37 billion euros in tax evasions a year, they could pay their debts solely by lowering the shadow economy by 5.5%. This would put Greece shadow economy half-ways between where it is now and the German rate.

I think Greece is more like the friend that keeps raking up debt rather than the person that gets pummeled by medical bills.

scurvy2• 11 years ago

">Neo-fascist Golden Dawn and the Communists, with a combined 12% of the vote, would thrive.

Translation : please ignore the fact that they already are thriving thanks to the Economist-stamp-of-approval austerity measures."

No, it just means Greeks gonna Greek. If you think most of this has anything to do with logic, I invite you to spend a week with my in-laws. 90% wild emotion and knee-jerk responses with 10% self pity.

tomp4• 11 years ago

The Economist is quite neo-liberal.

Syriza, Mr Tsipras’s hard-left party, is anti-market and anti-enterprise.

Only if by "market" you mean no social security and zero-hour contracts, and by "enterprise" you mean a fire-sale privatisation of state assets.

joosters3• 11 years ago

They are definitely being disingenuous by stating this as a fact rather than an opinion. What political party would ever describe itself as anti-enterprise, for instance?

adebtlawyer• 11 years ago

For longer, drier background reading, recommend "This Time It's Different." One key insight the researchers shared was that outright defaults (complete failure to repay) on sovereign debt are rare. The Soviets did it on the Tsar's debt, but usually what happens is that repayment is delayed. My guess is that Greece will do that rather than switching currencies. The exact terms depend on what their creditors will allow, but their creditors have a lot to lose from failure to reach agreement, too.

argumentum4• 11 years ago

In theory, with a new drachma and its own central bank, Greece could devalue and gain competitiveness. But Greece’s trade is modest

Greece is the most enticing tourist destination in the world. It has everything .. history, culture, beaches, food etc. A devalued Drachma would draw an increasing portion of an industry that is poised for dramatic growth as more Indians & Chinese become rich enough to catch the tourist bug.

It's world-class shipping industry would also become more competitive against Korea, Scandinavia and Japan.

Syriza is not as "far left" as portrayed, and they are not as corrupt as previous Greek governments. Their finance minister, though he has described himself as a "libertarian marxist", has received strong praise from free-market institutions for various proposals.

https://en.wikipedia.org/wiki/Yanis_Varoufakis

The big problem for establishment magazines like the Economist has become, is that he dares to think for himself.

elmar2• 11 years ago

libertarian marxist https://en.wikipedia.org/wiki/Libertarian_Marxism

derriz3• 11 years ago

Unfortunately tourist infrastructure determines how much tourism can grow and Greece already has 70-80% hotel bed occupancy so I don't see the scope here to prove a huge economic boost.

On the other hand, Greece imports energy, food, medicine and technology and those things will all have to be paid for with hard cash. The result of a 50% devaluation of the new Drachma will be a doubling in prices for basic life necessities.

It's clear to me that Syriza's policies have been and will be absolutely disastrous for the ordinary Greek person. Things may have been bad last year but at least there was a small uptick in GDP and employment and seemingly a small improvement in government finances. With a busted bank system, capital controls and no cash to pay for essential imports, I can see Syriza turning Greece into a fully failed state.

marcusgarvey• 11 years ago

And I recommend reading this rather long, 4-part series from Der Spiegel for anyone who wants to know how we got to this point. http://www.spiegel.de/international/europe/the-ticking-euro-...

randomname24• 11 years ago

Official now, latest headline:

GREEK PM TSIPRAS SAYS ECB'S ACTIONS HAVE FORCED THE CENTRAL BANK TO RECOMMEND A BANK HOLIDAY AND CAPITAL CONTROLS

filereaper• 11 years ago

I'm not very well educated in this area, for anyone else like me, this infographic video really helped explaining the European Debt Crisis.

[0] https://www.youtube.com/watch?v=C8xAXJx9WJ8

gizmo5• 11 years ago

The first half was reasonable, the second half just bad.

It literally portrays Greek people as drinking grappa on the beach while hardworking Germans pay for their lifestyle. Greek people as immoral, Germans as respectable and responsible. That kind of cultural stereotyping is toxic.

It's also analytically bad. It argues the problem is fiscal irresponsibility, even though Spain had a budget surplus before the crisis hit. Spain was a model of fiscal responsibility (and was lauded as such), and yet they too went into a deep depression with 50% youth unemployment.

The video doesn't even mention the most important cause of the crisis: balance of payments between the north and south.

adventured3• 11 years ago

Spain was wildly fiscally irresponsible in numerous ways.

Their total government spending went from $280 billion Euros in 2002, to $450 billion Euros just six years later in 2008. That's a 60% increase in government spending in six years.

The government premised their spending on the real estate bubble, which was floating their growth for years prior to the crash. The fall-out from that behavior of course was a tripling of their debt to GDP ratio in just seven years when the crash hit.

Their household debt to income ratio went from about 70% in 2000, to 125% by 2007.

Spain was living far beyond its means for years, with the bubble temporarily holding off the consequences of that behavior. They weren't being fiscally prudent, they were being fiscally irresponsible by spending as though the bubble would go on forever.

Confiks• 11 years ago

In addition to gizmo's comment the story also seems unreasonable in another way. The very last chapter, starting at 10m18s, presents a false choice between establishing a fiscal union and pending doom. That union is modeled as the Frankfurt ECB office and is characterized as "The United States of Europe".

From the story:

"This brings us back to that fundamental division of monetary policy and fiscal policy. Ultimately, the euro area requires a fiscal union to match its monetary union, or neither. That is, there must be a political organization with authority to set fiscal policy within every euro area country. It must have the power to cut spending, raise taxes and set laws."

The authors of the story clearly believe that a fiscal union will solve all problems of deficit across the European union, but plainly fail to articulate why beyond presenting an animated hand which is cutting state spending.

lordnacho• 11 years ago

The worst thing is the duration of this. If you're a young Greek, like some of my friends, you're screwed. You either leave your family and go to a foreign country, or you stay and try against hope to get a job so you can start a family. Now it's been several years of this crap and it's going to leave a lasting scar on just about everyone who's old enough to remember it.

Whatever they decide, they should have decided it long ago. Go bankrupt, or get a (sensibly sized) haircut from the creditors. But decide before everyone's life is ruined living in a zombie economy.

TheAlchemist• 11 years ago

At this point, we can safely say that whatever the scenario, it's going to be very ugly for Greece and not only in the short term.

In Europe, there is little compassion for this country though, due to their reputation for laziness and huge tax evasion schemes. I actually remember my holidays there some years ago (beautiful country btw) - most things were paid in cash and in many grocieries I didn't even see a cash register.

swanson• 11 years ago

This sounds terrible but how should I invest to capitalize on this? Is there something on Vanguard I can throw some money at and be glad I did in 5+ years?

ghaff• 11 years ago

If you feel the need to ask on an Internet discussion board where you should invest to profit from $X, that's probably a good sign that you should just keep your money where it is. Flippancy aside, the most likely result is going to be downward pressure on stocks generally and European stocks in particular.

Alkim3• 11 years ago

Some think the modest rise in bitcoin prices is a consequence of the Greek difficulties. For example:

http://www.reuters.com/article/2015/06/16/us-eurozone-greece...

tomp4• 11 years ago

It's really hard to capitalize on this, because noone really know what's going to happen. The only thing you can bet will happen is an increase in volatility in financial markets, but I'm sure that the counterparty would take that into account and appropriately increase the price of volatility bets. The only thing you can really do is take a one-sided bet (e.g. short/buy Greek bonds), you win if you're right, lose if you're wrong.

elmar2• 11 years ago

Bitcoin is not the solution for the Greek government, but could probably be the solution for the Greek people.

Why Greece Should Not Switch To Bitcoin http://techcrunch.com/2015/02/28/why-greece-should-not-switc...

bjourne2• 11 years ago

I really hope Greece does not cave in to ECB:s demands. Because if they do, it will spread first to Portugal and then to the rest of the EU. And I don't want to have to work until I'm 75, have my vacation weeks cut and my future pension decimated.

And I don't think the EU should interfere in how Greece wants to raise their state's income. If they think it is better to raise corporate taxes rather than decrease pensions, the ECB can't just say that's wrong and if you don't do as we say you won't get any money.

raesene96• 11 years ago

As far as I'm aware it wasn't so much the ECB that were worried about the debt sustainability of the latest greek proposals as the IMF, who felt that more of the gap should be filled with cuts to benefits as opposed to increases in taxes.

The problem with not "caving in" to the demands of their creditors is that if Greece defaults, it's likely to have serious consequences for the affordability of their pension arangements. Whether those are more, or less, serious than the consequences of acceding to the requirements of their creditors is unknown.

MisterWebz• 11 years ago

...more of the gap should be filled with cuts to benefits as opposed to increases in taxes.

What's their reasoning behind this?

bjourne2• 11 years ago

No, it was the ECB that decided not to extend Greece's credit because the government didn't implement the cuts they demanded. Maybe their government will lead them into ruin or maybe it will not. But it was democratically elected and has strong popular support. It's not the job of the ECB to bully other countries into doing what they think is best.

crocowhile• 11 years ago

Portugal has 22 statutory leave days; Germany has 20; France (whose productivity is actually very high) 25. Being efficient does not mean being always at work - actually quite the opposite

adventured3• 11 years ago

It's not in fact the opposite, there's no strong data correlation either way.

The US has a high productivity rate. So does Japan, Australia, Canada, South Korea and the UK - all work long hours, all have high per hour output

aioprisan• 11 years ago

Work until 75? Where do you see that? What we do see in Greece is hairdressers and policemen retiring at in their 50s and Germans have to work until 67 or 69 to pay for the Greek retirement age differences. What's needed is cross-eurozone retirement ages.

Alkim3• 11 years ago

It is interesting to speculate how the climate in Greece might be different if bitcoin had been more widely adopted there prior to this meltdown. No central control. No banks to close.

It is something that Greek officials joke about: http://www.reuters.com/article/2015/06/05/us-digital-currenc...

quonn5• 11 years ago

The greek people have made it very clear that they want the euro. They don't even want their own currency and they certainly don't want bitcoin.

raesene96• 11 years ago

In some ways it might improve things in the short term as financial transactions could continue absent banking requirements, however in the long term I would suggest it would be a bad thing for the greek economy.

One of the major recurring themes of the greek economic problem, has been tax avoidance/evasion which has reduced the amount of money that the government have to support themselves.

With bitcoin's less traceable nature, it seems likely that it's introduction would make the job of efficient tax collection even harder, which would in turn cause even more problems for the greek economy.

Alkim3• 11 years ago

Recent events in the Silk Road criminal trials suggest that governments have the ability to trace BTC transactions to a useful degree--witness the guilty pleas of two former federal law enforcement personnel for enriching themselves via extorting bitcoin. Yes, it does take a different mind set from conventional banking records, but ultimately everything is recorded in the blockchain.

marcosdumay• 11 years ago

A blockchain is a tracing device by construction. Bitcoin is as traceable as governments want it to be.

pjc50• 11 years ago

No banks to close.

MtGox was a bank that closed and never reopened.

guelo2• 11 years ago

What's crazy is that EU won't give Greece an extension for the referendum. The negotiations stalled over small issues like if they're going to raise the retirement age to 67 in 2022 or 2025. This all seems like political moves, the EU wants to force a failure of the leftist party and make an example of the country.

thesumofall• 11 years ago

I don't see it the same way. A referendum can be acceptable (but why so late and why behind the backs of the Eurogroup?). But what is not acceptable is that Tsipras is telling the public to vote No. Why would anyone want to extend loans to someone who does not want a deal to come through?

guelo2• 11 years ago

The EU is also free to tell the people how to vote, and they've already started doing this. But they don't like populism, they'd rather governments impose austerity via diktat.

tomp4• 11 years ago

Tsipras is telling the public that he does not support the agreement. The public will have to decide if they want to avoid the potential negative consequences of no agreement (exit of Euro, EU, ...) more than they dislike the agreement.

raesene96• 11 years ago

The problem with the extension for the referendum is that it would cost the ECB Billions of Euros in increased ELA support that would need to be provided (without capital controls this week, it's a fair bet that anyone who can get their money out of a greek bank, will get their money out of a greek bank).

when you have the ruling party actively campaigning for a No vote, that could be seen as throwing good money after bad, and at the end of the day the other member states will ahve to pick up the tab for any money that is lost if Greece defaults on their debts.

DangerousPie• 11 years ago

If they just wanted to have a referendum they could have planned this ages ago. Instead they suddenly announced it in the middle of negotiations, without even telling their own delegates. And then they set the date after the deadline and say they will campaign against it themselves.

To me this looks like either an attempt to stall for time or an attempt to shift the blame for to the EU, no matter what happens.

Why should the EU play along and extend the bailout any longer, throwing more good money after bad?

chinathrow3• 11 years ago

This is a perfect reminder for everyone about how the fractional reserve banking systems works and where the limitations and risks are.

We as a society (all of us including the rich and the poor, the bright and the dumb) need to rethink how we allow the banks to (be it accidentally or not) destabilize a financial system only by the volume of its debt.

Some say capital controls are only of temporary measures but still, I feel that this is something which must be avoided by future rules and regulations.

https://en.wikipedia.org/wiki/Fractional-reserve_banking

jayess• 11 years ago

I don't understand the munchhausen syndrome-like attachment to the Eurozone that Greece seems to have. Are we not noticing some hugely important positive benefit from eurozone membership that Greece has enjoyed? Enough to virtually completely give up sovereignty and self-determination? Enough to subject the nation to foreign oppression by technocrats and bankers? How is it even a close question?

chinathrow3• 11 years ago

No exchange rates for trade are considered "hugely important positive" for all countries within the EU who are part of the Euro.

But yes, your other points sure are valid remarks and I bet those questions are being posed nonstop within .gr.

Greek Banks, Stock Exchange to Remain Closed From Monday

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