
Greek Banks, Stock Exchange to Remain Closed From Monday - randomname2
http://www.bloomberg.com/news/articles/2015-06-28/running-out-of-cash-greece-counts-on-ecb-to-avert-black-monday
======
ucha
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...](http://www.economist.com/news/leaders/21654598-greece-and-euro-zone-
are-stuck-abusive-relationship-my-big-fat-greek-divorce)

~~~
crdoconnor
>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](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.

~~~
evanpw
> 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.

~~~
crdoconnor
What's left for them to fear?

After years of enormous unemployment and the country's slow decline into
near-3rd world status, even having your savings seized and forcibly devalued
loses its sting.

~~~
evanpw
1\. I'm not sure what you mean by "near-3rd world". Their economy has fallen
to about the pre-Euro trend-line
([http://www.vox.com/2015/6/28/8858727/greece-gdp-
chart](http://www.vox.com/2015/6/28/8858727/greece-gdp-chart)). There's still
plenty of room for them to fall
([https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)...](https://en.wikipedia.org/wiki/List_of_countries_by_GDP_\(PPP\)_per_capita)).

2\. If The Economist is too capitalist for you, the current Greek finance
minister also thinks (thought?) default would be very bad:
[http://yanisvaroufakis.eu/2012/05/16/weisbrot-and-krugman-
ar...](http://yanisvaroufakis.eu/2012/05/16/weisbrot-and-krugman-are-wrong-
greece-cannot-pull-off-an-argentina/).

~~~
gull
The Greek finance minister recommends defaulting in (2). Also note one of his
points is defaulting would poison the Eurozone. That's one more reason this
isn't as simple as "default would be bad" for Greece. It's a lesser evil for
Greece and it's bad for the Eurozone. It gives Greece leverage.

" _Does this mean that Greece ought to grin and bear the massive and
misanthropic idiocy of the bailout-austerity package imposed upon it by the
troika (EU-ECB-IMF)? Of course not. We should certainly default._ "

Defaulting could lead to further negotiations if Greece stays in the Eurozone,
like slashing a big part of a loan handed out when projections showed Greece
would not be able to pay it.

Why do you loan to a country when projections show the country can't pay? Is
it to keep the country economically enslaved for years?

That's probably why the second-to-top-level comment translated the following
as FUD. The gains for Greece from defaulting would be better than accepting
the austerity measures.

    
    
      >For Greece the gains from defaulting would be slight, and
       the costs potentially vast.
    
       Translation: FUD.

~~~
evanpw
1\. He's talking about default within the Euro, which doesn't seem to be in
the cards any more. As he notes (in a linked article), their ability to stay
would depend on the ECB continuing to support the Greek banks. In reality, the
ECB froze their Emergency Liquidity Assistance program yesterday, and Greece
has imposed capital controls to avoid further bank runs.

2\. This article was written three years ago, when the rest of Europe was in
worse shape. It's not clear how a Greek default would affect the rest of the
continent right now.

3\. I have nothing against a reasoned argument that default is Greece's best
remaining option (like yours, thanks!). What I object to is the semantic
stopsign "FUD" in response to a situation that is legitimately uncertain and
scary.

------
pibefision
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.

~~~
vonklaus
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.

~~~
shkkmo
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.

~~~
tzs
Argentina has a notorious counterfeit currency problem. Did you have any
problems on the black market exchanges ensuring that all the currency you were
getting was real?

~~~
shkkmo
I took a local with me on my first visit (as I had been advised). There are
people on the street hawking exchanges 'cambio cambio cambio' and they will
lead you off the street into a store where the shop does the actual exchange
(in my case it was a jewelry store). After completing the exchange, the man in
the store took a moment to show me the security features of the bills and what
I should be looking for to spot counterfeits. I had no problem spending any of
the money I exchanged there.

------
drinchev
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.

~~~
elorant
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.

~~~
argumentum
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.

~~~
s3nnyy
Dude living in Switzerland here.

Could you elaborate more on the structural similarity to Greece?

Yes, Switzerland has tourism but - unlike Greece - I doubt that they depend on
it. Also, watches and cheese are only the tip of the iceberg. Switzerland's
wealth probably derives from mega-banks like UBS and the not well-known, but
enormous industrial sector (e.g., Nestlé, Novartis, Roche, ABB).

Before I moved here, I thought Switzerland is only about cheese and chocolate,
but it really is an oasis of wealth unparalleled in Europe due to various
reasons; here is my medium blog post about how it is living and working here:
[https://medium.com/@iwaninzurich/eight-reasons-why-i-
moved-t...](https://medium.com/@iwaninzurich/eight-reasons-why-i-moved-to-
switzerland-to-work-in-it-c7ac18af4f90).

~~~
argumentum
For sure, Switzerland is an amazing wealth-generator. In addition to all you
mentioned, it also exports great tennis players, my personal favorite Swiss
product :)

I meant that it is a strategically situated, naturally beautiful, culturally
strong state of about 10 million people.

Greece shares all of these traits, and can build up industries like
Switzerland has if it has a more independent state and implements Swiss-like
policies.

They won't be the exact same industries .. they both attractiveness for
tourists, but people come to Switzerland to ski and trek, and go to Greece to
sail and relax on the beach. Similarly Switzerland might make drugs, chocolate
and watches, while Greece excels in shipping & shipbuilding.

Certainly Switzerland is far ahead of where Greece is now. But it's proof that
a similar state can become a economic powerhouse without the Euro. With a
devalued currency, in addition to boosting existing industries, Greece will
become an attractive place for foreign multinationals to setup factories, so
it can grow new industries from scratch as well.

------
randomname2
Banks are to remain closed until at least July 6th:
[http://en.protothema.gr/breaking-capital-controls-taken-
bank...](http://en.protothema.gr/breaking-capital-controls-taken-banks-to-
remain-closed-for-one-week/)

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

~~~
zatkin
Did you mean July 6th?

~~~
randomname2
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.

~~~
nkozyra
Well that was a pretty huge deal in the U.S. in 1933.

Life goes on, but as many can attest having gone through the crisis worldwide
at varying levels from 2008 -> 2013/2014/present, it's not always pleasant.

~~~
agiamas
exactly. Life will always go on, but I can attest that it is a big deal,
especially for businesses that already have a hard time surviving in the
hostile Greek environment...!

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

~~~
spacefight
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.

------
fweespeech
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
History is full of examples of disallowed things happening.

~~~
VLM
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.

------
lordnacho
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.

------
filereaper
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](https://www.youtube.com/watch?v=C8xAXJx9WJ8)

~~~
gizmo
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.

~~~
adventured
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.

~~~
gizmo
Not so.

Spain's gov't spending to GDP ratio developed in the same way as the
Netherlands:

[http://imgur.com/I5AZaN9](http://imgur.com/I5AZaN9)

Spain had a housing bubble, of course. And the housing bubble was the primary
cause of the crisis. But there was a bubble in the responsible northern
countries too. And in the USA. So it's not the case that Spain was an outlier
in terms of fiscal responsibility.

Don't forget that Spain had a lower debt to GDP ratio than Germany at the
start of the crisis:

[http://krugman.blogs.nytimes.com/2012/03/07/finally-
spain/](http://krugman.blogs.nytimes.com/2012/03/07/finally-spain/)

If Spain was irresponsible, then Germany and the Netherlands moreso. Private
and commercial borrowing in Spain was a big part of the problem, but because
the Eurozone has no trade barriers the government in Spain can't stop it. I'm
not saying Spain isn't partially to blame for the mess, but it's not a case of
fiscal irresponsibility.

~~~
adventured
Yes, it is so.

Spain's total government spending increased by 60% from 2002, to 2008. That is
a fact [1].

Spain's household debt to income ratio, increased from 70% to 125% from 2000
to 2007, another fact. [2]

Both are clear indications of fiscal irresponsibility. How could increasing
total government spending by 60% in six years, be anything but? How could
households taking on so much leverage so quickly, be anything but?

You reference the Netherlands, which has the most indebted households in the
Euro zone, and is in the midst of a debt disaster. That's a really bad example
[3]. Their GDP hasn't increased in nearly eight years.

[1] [http://i.imgur.com/tSu2htA.jpg](http://i.imgur.com/tSu2htA.jpg)

[2] [http://i.imgur.com/z8VUtFs.png](http://i.imgur.com/z8VUtFs.png)

[3] [http://www.cnbc.com/id/100905782](http://www.cnbc.com/id/100905782)

~~~
gizmo
I don't dispute the accuracy of your numbers.

Spain's household borrowing was unwise/irresponsible, no question about it. No
good comes from a housing bubble like that. Of course, this housing bubble was
funded by foreign banks. When people see an opportunity to live in a big house
for cheap they just sign on the dotted line. That's human nature for ya.

Household debt in the Netherlands also way too high, although it's unclear
whether it will become a disaster in any meaningful sense. Stagnant GDP caused
by austerity. No surprise there. I specifically mentioned the Netherlands
because they're portrayed as a responsible country, in contrast to GIPS
countries.

Spain's labor costs also increased by 50% during the boom
([http://i.imgur.com/pdHgmf4.png](http://i.imgur.com/pdHgmf4.png)), so gov't
spending had to go way up just to provide the same services. Besides, spending
a lot of money for a couple of years is no big deal when the country doesn't
have a big national debt, and Spain didn't. Doesn't mean Spain's fiscal policy
was beyond reproach, of course. Ideally speaking a government should have
anti-cyclical fiscal policy.

Bubbles followed by recessions happen all the time in Western Europe and the
US, but the consequences are usually pretty manageable. When it comes to Spain
the government was no more irresponsible, but because of the Euro they got
pulled into a crushing depression.

If you want to argue that _every_ modern government is irresponsible, fine.
But if you want to demonstrate that Spain was fiscally irresponsible compared
to the rest of Europe or the US you're going to need better stats.

------
chinathrow
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](https://en.wikipedia.org/wiki/Fractional-reserve_banking)

------
TheAlchemist
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.

------
jayess
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?

~~~
chinathrow
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.

------
guelo
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
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?

~~~
guelo
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.

------
swanson
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
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.

------
randomname2
Official now, latest headline:

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

------
elmar
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...](http://techcrunch.com/2015/02/28/why-greece-
should-not-switch-to-bitcoin/)

------
bjourne
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.

~~~
raesene9
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
_...more of the gap should be filled with cuts to benefits as opposed to
increases in taxes._

What's their reasoning behind this?

~~~
smitherfield
Because tax evasion is so rampant in Greece, the IMF reasons (correctly) that
tax increases wouldn't raise anywhere remotely as much revenue as Syriza
claims they would.

------
Alkim
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...](http://www.reuters.com/article/2015/06/05/us-digital-currency-
greece-idUSKBN0OL0JR20150605)

~~~
raesene9
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.

~~~
Alkim
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.

~~~
raesene9
Those were 2 very specific cases, I don't think you can usefully extrapolate
to a government level ability to track blockchain transactions to real
identities, especially when one of the main selling points of bitcoin
transaction is that (if done correctly) they cannot be tied to a real
identity!

