Is Greece Going To Default?

Greece will default?


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Alchemist

Administrator
Staff member
#2
I am sure that Greece will default.

Even if IMF and other EU members do manage to save Greece this time, the austerity measures that Greece will be forced to take, will push Greece into a long-term recession.

A long-term recession would mean that Greece would need a bailout every second year.

I don't see any other way out for Greece except to leave the Eurozone and devalue its currency.

I am not sure about what will happen to Spain and Italy.

As of now, these two countries are in a better condition than Greece.

However, a financial "accident" in Greece or some other European country can change things very fast for countries like Spain, Italy, Portugal etc.
 
#3
I think the matter of Greek default is just a technicality. In practice Greece is insolvent. They need to borrow money to repay money they borrowed earlier.
 

man4urheart

Well-known member
#4
I am sure that Greece will default.

Even if IMF and other EU members do manage to save Greece this time, the austerity measures that Greece will be forced to take, will push Greece into a long-term recession.

A long-term recession would mean that Greece would need a bailout every second year.

I don't see any other way out for Greece except to leave the Eurozone and devalue its currency.

I am not sure about what will happen to Spain and Italy.

As of now, these two countries are in a better condition than Greece.

However, a financial "accident" in Greece or some other European country can change things very fast for countries like Spain, Italy, Portugal etc.

Read these nice article with technical chart evidence

Debt Man's Curve, It's No Place to Play | Elliott Wave International

AND

European Sovereign Debt: What Do We See Ahead? | Elliott Wave International

This is an eye opening chart, once 5 wave starts, Spain is next in line!

EU Bailouts Fail To Keep European Sovereign Debt Markets Afloat | Elliott Wave International

This is nice comparison of Greece, Portugal and Spain yields on 10 year bonds!

One can regularly follow the yields by plotting chart on Bloomberg website!

I think we have chaos ahead in Europe sooner or later. It looks quite scary! The maximum guarantee of bailouts are given by Germany and France and they also won't be left unscathed!
 
#5
It would be in the best interest of both Greece and the Eurozone for Greece to leave the Eurozone and have its own currency. Though it will cause some initial shock, it would in the medium term to long term benefit both Greece and the Eurozone.

1) It would result in Greece having its own currency making it relatively better protected against speculative attacks and there would be no question of a default then. (It can print its way out of a default - there would be inflation then but not a default)

2) The undervalued resultant currency would make Greek exports more competent.

3) After an initial speculative attack, the Euro would actually strengthen in my opinion as it would become more of a "pseudo-Deutsch Mark."

All in all, I am against unpegged fiat currency (lot of inflationary problems). It would make more sense to return back to the pegged gold standard in my opinion.
 
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Alchemist

Administrator
Staff member
#6
French banks have agreed to rollover their Greek debt.

They will reinvest their current Greek holdings into newer Greek bonds of longer maturity.

Technically, such a rollover can't be called a default.

Practically, it's a default.

French President Nicolas Sarkozy revealed that major banks in France agreed to a rollover that would see them reinvest their Greek bond holdings in new issues with longer maturities. The plan is voluntary, though Eurozone governments are putting enormous pressure on their banks to contribute to the rescue package for fear that Greece’s inability to pay its debt charges would trigger a second financial crisis.
"If it wasn’t voluntary, it would be viewed as a default, with huge risk of catastrophic results," Mr. Sarkozy said.
French banks seek support for Greek debt rollover plan - The Globe and Mail
 

Alchemist

Administrator
Staff member
#7
There is no Plan B for Greece.

With the Greek parliament debating a raft of spending cuts, tax rises and privatizations, the EU's top economic official, Olli Rehn, dismissed reports that Brussels was working on fallback options to keep Greece afloat if the plan was rejected.

"The only way to avoid immediate default is for parliament to endorse the revised economic program ... They must be approved if the next tranche of financial assistance is to be released," he said in a statement.

"To those who speculate about other options, let me say this clearly: there is no Plan B to avoid default," Rehn said.
EU warns Greece rejecting austerity means default.
 

man4urheart

Well-known member
#9
Looks like a life time event we will watch in our life time, second to Lehman default.

Point is can they pass austerity measure?

I was a kid back in 1991 when India had that trouble. Any insights can that be compared to this default? I hear stories our gold was air lifted to IMF for bailout.

Any experience sharing from veterans?
 

Alchemist

Administrator
Staff member
#10
There is no Plan B for Greece.
This report says there is a Plan B:

European Union officials are working on a contingency plan for Greece if its parliament rejects an austerity program and the country cannot receive the next installment of EU/IMF emergency loans, three euro zone sources said on Monday.
EU has contingency plan lined up if Greece rejects austerity: Report - The Economic Times

I was a kid back in 1991 when India had that trouble. Any insights can that be compared to this default? I hear stories our gold was air lifted to IMF for bailout.

Any experience sharing from veterans?
The solutions to 1991 problems were obvious. Devalution of the rupee and opening up of the economy did the trick. Fiscal prudence also helped.

Greece is already an "open" and a "developed" economy and it can't devalue its currency. The Austerity package also facing a lot of resistance.

(There was a lot less social unrest in India during the 1991 crisis).

Finding a solution for Greece is much more difficult.

Only thing common to both India in 1991 and Greece today is that temporary liquidity is available to both. India was supported by IMF. Greece is supported by IMF and EU. However, temporary liquidity is temporary and not a long term solution.
 
#11
I don't know exactly where I read today. But the Information is: Germany wants to bring back their old Currency instead of Euro.

What they mentioned is, Germany currency was the most popular currency after USD. And now due to this Greece problem, they strongly believe that it will devalue the Euro Currency.

Germany's thinking is that EU won't be able to stop Greece from defaulting.

And Germany thinks that this situation will spread to other EU nations, then Euro will collapse. And it will degrade their Economy.

These are all the above reason they mentioned for their stands for backing their old currency.

But I am not sure, how true that story all about. But I feel it will again make the other EU country to think about the EURO as their Currency. It will create a really question mark on future of EURO currency.
 

Alchemist

Administrator
Staff member
#12
I don't know exactly where I read today. But the Information is: Germany wants to bring back their old Currency instead of Euro.
I am not sure why Germany would want its old currency back.

Germany is the biggest beneficiary of a weak Euro.

Exports make 40% of Germany's GDP.

A weak Euro has allowed Germany to stay competitive in the global markets.

"As long as southern Europe is under fire, the euro is being shaken and falling and the conditions under which they (Germany) can win massive exports to the third world, to the rest of the world, are improving," Pangalos said at a conference in Athens.
Greek deputy PM says weak euro suits German firms | Reuters
 

man4urheart

Well-known member
#13
Italy is also raising it's head, sooner or later they would also be ready with their begging bowl to EU for aid.

Check out the rising yields on their debt!
 

Alchemist

Administrator
Staff member
#15
According to the German finance minister, Greek default is inevitable and as much as 50% of the debt may have to be written-off.

Asked in the interview with ARD whether there could be a Greek debt write-down of as much as 50-60 percent, Schaeuble said: "A lasting solution for Greece is not possible without a debt write-down, and this will likely have to be higher than that considered in the summer."

In July, private creditors agreed to a voluntary write-down of 21 percent on their Greek debt, a figure which now looks insufficient. Euro zone officials said last week losses are now likely to be between 30 and 50 percent.
Greek debt write-down must be larger - German finmin | Reuters

The problem is that if some huge amount of debt is written-off, other troubled economies like Portugal, Ireland and Spain may find it difficult to borrow money from private investors.

If Greece is allowed to default, then the others won't be saved too.
 

Alchemist

Administrator
Staff member
#16
Eurozone countries are trying to decide whether Greek's debt should be written-down by 40% or 60%.

Euro-zone countries Tuesday remained divided over the size of the writedown that banks will have to take on their Greek government bonds, underscoring the last-minute snags still facing the next day's euro-zone summit on a package to stem the currency bloc's debt crisis.

Germany is "pushing hard" for banks to take a 60% writedown on their holdings of Greek government bonds, but France insists the cut shouldn't be much higher than 40%, a view which is shared by banks.
UPDATE: Germany Pushing Hard For 60% Writedown On Greek Debt-Sources - WSJ.com

Rakesh Jhunjhunwala is sure Greece is not going to default.

Nothing which is beyond what the market has already discounted will happen. I am quite sure Greece is not going to default.
FY12 has been worst trading year of my life: Jhunjhunwala - CNBC-TV18 -

Amazing. :D.
 
#17
I believe the real question surrounding Greece is not, "if they are going to default", but rather, "how are they going to default".

Meaning, how much of their public assets and infrastructure are they going to sell and privatise before they default. How much of their nation is going to be sold off to a small bunch of "intellectual thieves" before they actually default.
 
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