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.
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.
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.
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.
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.
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.
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.
European leaders may allow a "selective default" by Greece.
"Selective default" is a term used by credit rating agencies when the terms of a bond, such as the repayment deadline or interest rate, have been altered. It falls short of an outright default rating, which is usually triggered when the borrower stops making payments.
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.
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.
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.