

Choices for Greece, All of Them Daunting - nopinsight
http://www.nytimes.com/2011/07/10/business/economy/greeces-choices-in-debt-crisis-are-all-daunting-economic-view.html?_r=1

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nodata
The article could be more informative:

"If it left the euro zone, Greece could reap the substantial benefits of a
currency depreciation, but doing so would also set off huge runs on banks. And
the country has no alternative paper currency ready for use."

This is the only part of the article that considers not repaying debts.

~~~
JulianMorrison
A run on the banks, or a surprise lock-out followed by exit and devaluation =
poor now.

Decades of austerity measures = poor for the rest of your life.

I know which sounds more sensible to me.

~~~
quanticle
Its a false choice. Both options lead to poverty, because neither option deals
with the fundamental problem: the Greek government doesn't make enough money
to cover its yearly expenses without borrowing. Either we can have an orderly
devaluation, or we can have a disorderly devaluation. Austerity measures allow
for the first. A hasty exit from the Euro makes the second inevitable.

Now which option looks more appealing?

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skyhyve
Option one, banks will join in the rescue effort and the ECB will allow for a
temp default of greece. Ewald Nowotny hinted this today.

Option two, "Eurobonds" will be issued. This will allow Germany to lend money
for Greece at a very low interest. (costs Germany a lot of money as their
national interest will be increased, last resort)

Option three, some of the debt will be dropped and reissued as longer ten year
loans releasing the choke hold. Paul Achleitner from allianz hinted.

Option four, EFSF will buy Greek bonds.

Unemployment rates went down in Greece from 16,2% to 15,8% last month. Which
hints their economy is growing a bit. There's talk of a banking tax, which let
banks pay a small % to help build a buffer for these situations. I'm
personally more worried about the United States then the euro zone.

~~~
nhaehnle
_Unemployment rates went down in Greece from 16,2% to 15,8% last month. Which
hints their economy is growing a bit._

Careful: The implication "unemployment rate goes down => economy is growing"
is not true in general.

The rate of unemployment is always defined relative to the active part of the
population, where active means either employed or looking for work.

In extreme downturns, as Greece has experienced, the participation rate
naturally drops because people become disillusioned. This can have the bizarre
effect that the unemployment rate drops even though the total number of jobs
actually decreases. So the absolute number (and then also the rate) of
unemployed decreases not because the unemployed become employed, but rather
because they become economically inactive (i.e., they give up).

I am not sure if this is what is happening in Greece, but I wouldn't be
surprised if it was. The interfaces of most national statistics institutions
are really horrible, so I haven't looked at the numbers.

I assume you got those numbers out of some newspaper or similar, and I just
wanted to point out that especially in extreme economic circumstances,
reporting only the unemployment rate is irresponsible - but unfortunately,
that's what most media is.

Final thought: Comparing the United States to the Eurozone is to misunderstand
the nature of the beasts. Both have a common currency, but the US has a
significant central monetary sovereign. The Eurozone has no monetary
sovereign. The differences this implies are enormous.

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harywilke
If Greece leaves the euro zone, don't expect it to stop using the euro. it
will become like Andorra, Kosovo and Montenegro who use the euro as their De
Facto currency even though they are outside the euro zone. Would you want to
get paid, as a company or an employee, in a currency that is designed to loose
value? Devaluation will only happen if people accept using the new currency.

------
ristretto
The scenarios for the greek crisis are turning more and more to be science
fiction. To me it's inconceivable how it can be expected that us greeks will
have to put up with "austerity measures" for what is essentially the rest of
our lives. I 've been a supporter of an immediate exit from the euro from the
onset of the crisis. Greece is not ready to compete with the rest of europe,
let alone with the rest of the world, so it's best to introspect, build a
diversified internal economy which will bring true sustainable growth. People
are just not interested in putting up with the terms of the additional loans,
it's going to take a shift of generations for the change in attitudes. Trying
to fake a developed economy via the introduction of the euro was an experiment
that failed miserably. There is a middle-eastern-style business culture in
which corruption has been promoted to a science. Income taxes are higher than
Germany, yet financial law enforcement is virtually non-existent. As a small
startup owner, i don't see any reasons to keep my business in this country.

~~~
quanticle
>I 've been a supporter of an immediate exit from the euro from the onset of
the crisis.

The problem with changing currency is that its impossible to pull off without
having bank runs that would make the Great Depression look like a bad ATM
line. Changing a country's currency takes a _lot_ of preparation. New bills
have to be printed. New coins have to be minted. The currency has to be
distributed to banks. Exchange rates between the new and old currencies have
to be set. Do you really think that this can be done in secret?

No, if Greece decided to go back to the drachma, there would be a massive
financial panic as everyone with a Greek bank account tried to pull their
Euros out and move them overseas. The civil unrest that would cause would make
the current protests look like a small crowd of rowdy teenagers.

~~~
nhaehnle
The comparison with the Great Depression in connections with bank runs is not
a good one. Yes, there may have been one or the other bank run bank in those
days, but the main feature of the Great Depression was rampant unemployment -
more or less exactly what Greece is already experiencing.

Greece _must_ exit the Euro to avoid prolonged Great Depression-style
unemployment.

So this becomes a short vs. medium term tradeoff. Introducing a new currency
will most likely be chaotic, but in the medium term it allows Greece the
flexibility to restart the internal economy. Without introducing a new
currency, the short term chaos can be avoided at the cost of a very prolonged
downturn that is destructive for the country's prospects and may lead to
political chaos in the medium-to-long term.

~~~
quanticle
The massive unemployment was a result of the bank runs, not a cause. The bank
failures caused the economy to seize up and people to hoard money, leading to
a massive wave of foreclosures and business closings, leading to massive
unemployment. It wasn't until FDR declared a bank holiday and brought the FDIC
up that people were confident enough in their savings to put money back into
banks.

