
Greece to Default on $1.73B IMF Payment - tormeh
http://www.wsj.com/articles/european-union-prepares-for-potential-fallout-from-greek-bank-shutdown-1435573213
======
netcan
I've sort of turned around in my opinion o Greece.

I started out by seeing this as the Greek Government being cynical, corrupt or
incompetent and running public finances into a wall. I still think that's
true. That happened and the greek government including the electorate are to
blame.

But that is not the main story here. The main story here is what happens when
a government does go bust. Sovereign debt doesn't come with these kinds of
strings attached. If your debtor can't repay, you don't get to run the
country. I think there are two bigs aspects to this whole greek story.

First, is that taking away national currency is taking away the ability to
print and devalue your way out of trouble, which really increases the risk of
government insolvency.

Second (this is where I've kind of turned around), I do think Germany and the
EU are in the wrong. First, is the very german/west european idea that instead
of a contingency plan, you need to make sure nothing goes wrong. Regulations
and controls. This may work for germany, but it will not work everywhere.
Other EU governments _will_ go bust in the future. It's inevitable.

Third, banks run the world. Governments were already very cosy with banks. All
the big markets and big fortunes go up and down with the slightest hint of
bank health. Everyone is paranoid of banking issues causing wider collapse.
Since the banking collapse, bank health has become completely equivalent to
economic health. The economies are being nudged and designed to suit them.
Central banks and finance ministries top priority is bank health. They are the
favoured child.

Backing up a little, Greece's no strings soveriegn debt was converted into EU,
Germany & IMF debt _with_ strings in the panic phase of the crisis. Private
banks were granted immunity from their bad debts to Greece and the IMF/EU is
now acting like a leg-breaker loan shark demanding impossible payments or
else. They are tying EU membership to repayment. That is not fair.

The EU needs a bankruptcy procedure. A way for insolvency to be resolved and a
way for bad loans to absorb their due share. Greece's government did run the
country into insolvency. But equally, these banks did a bad job valuing risk
and making loans. Who says sovereign bonds need to be risk free anyway?

~~~
tosseraccount
The Greek people are responsible.

Greeks overspent and did not want to stop. So they kept spending. It's their
own fault.

They can default, start printing their own money and go the way of Argentina.

Ask Argentines how that went.

Or ... they can cut spending and live within their means.

The narrative of "Greeks as victims" is "okay" as long as you point out that
they are also the victimizers.

Evil outsiders did not force them to not collect taxes.

People can get public pensions before age 50, for heaven's sake. [ source :
[http://greece.greekreporter.com/2014/12/04/75-of-greek-
pensi...](http://greece.greekreporter.com/2014/12/04/75-of-greek-pensioners-
enjoy-early-retirement/) ]

~~~
gonvaled
They overspent. Their economy is dysfunctional. They share a big part of the
blame.

But they have been following the Troika's plan for over 7 years now, they have
reduced spending, they have done a huge effort, and still their GDP has
collapsed. It seems that the Troika's plan is not working.

That is what Tsipras is saying: we can not continue doing this, and the rest
of Europe/Troika has to recognize part of the blame. Not only that: it seems
it has the support of his people (we'll see on Sunday)

If Greece had defaulted (or restructured the debt) at the beginning of this
crisis, as Iceland did, the situation would be much better. But nobody was
interested, since big banks where holding big chunks of high-paying Greek
debt, and they needed some time to unload it.

I still remember how the Iceland success story was completely ignored by
European media - and still is.

~~~
dragonwriter
Austerity plans _always_ fail to produce results. They never work. They never
worked in any of the dozens of countries the IMF and World Bank forced them on
in the developing world, they didn't work in Ireland, and they aren't working
in Greece.

Austerity isn't just faith in the absence of evidence, its face _in spite of_
overwhelming evidence.

~~~
tosseraccount
"Austerity" worked in Britain and Ireland.

Fiscal responsibility is good policy ... for individual, households, companies
and governments!

[http://www.tradingeconomics.com/ireland/gdp-growth-
annual](http://www.tradingeconomics.com/ireland/gdp-growth-annual)

[http://www.tradingeconomics.com/united-kingdom/gdp-growth-
an...](http://www.tradingeconomics.com/united-kingdom/gdp-growth-annual)

[ set start year to 2008 ]

~~~
the_why_of_y
The UK GDP actually performed better during the Great Depression of the 1930s,
and that was _despite_ deflation due to the gold standard in the early years -
doesn't sound like a success story to me.

[http://www.economicshelp.org/blog/7209/economics/comparing-d...](http://www.economicshelp.org/blog/7209/economics/comparing-
different-recessions/)

I've always wondered about Ireland - it seems they have a strategy for the
last decade or so of positioning their country as a tax haven, so that multi-
national corporations tend to incorporate in Ireland and move their profits
that are actually made in other countries there by creative accounting (like
Intellectual Property licensing deals between subsidiaries). What effect does
that have on GDP? Has anybody investigated this?

------
Shivetya
Honestly Greece needs to default if only for their citizens to have to own up
to the mess their politicians have made and continue to make. The EU has to
cut them off simply because bending to Greece's demands pretty much will open
Pandora's box.

Alexis Tsipras and his government have accelerated Greece's decline with their
rhetoric, driving bank money out which is reducing the money supply which
constrains any recovery. They had to lock down the banks because their economy
cannot simply exist on money the state has banked

The EU was never meant to be a transfer union, if it headed that way all the
rich nations would likely bail and current politicians would face political
defeat.

Close to home (US) Puerto Rico is having difficulties paying their bonds for
similar reasons, believing that they could get bailed out just because of what
they are.

~~~
afterburner
"The EU was never meant to be a transfer union"

And yet if nations are going to share a currency, they need to have a
coordinated economic policy, and that ends up happening. Wealthy states in the
US perpetually give money to the poorer states, but there isn't an uproar
about it. Seems like the EU was doomed to fail if it didn't allow for this.

~~~
yummyfajitas
It's unclear how much wealthy US states actually do pay poorer states.
Whenever I see statistics attempting to quantify this, they tend to include a
lot of questionable things. For example, a military base in Kansas which
defends the entire US is treated as a transfer to Kansas, and a person who
worked in NJ but retires to Florida has SS/Medicare treated as a transfer to
Florida.

If you know of good stats I'd love to see.

~~~
sologoub
This is an interesting post from WalletHub that was also quoted by the
Atlantic: [http://wallethub.com/edu/states-most-least-dependent-on-
the-...](http://wallethub.com/edu/states-most-least-dependent-on-the-federal-
government/2700/)

They took Federal contracts, grants, direct payments and insurance payments to
a given state and weighed it against the IRS data for the residents of that
state.

Interestingly enough, of the 50 states received back less that $1 for every $1
they paid in, meaning they were net payers. The rest of the states were net
receivers of federal money.

A bit easier to see this conclusion here:
[http://cdn.theatlantic.com/assets/media/img/posts/2014/05/Sl...](http://cdn.theatlantic.com/assets/media/img/posts/2014/05/Slide3/966724856.jpg)

------
lucaspiller
For anyone who hasn't seen it yet, there is a crowdfunding campaign on
Indiegogo to pay-off the debt. If everyone in Europe contributed, it would be
around €3 each. The campaign has raised over €150,000 today:

[https://www.indiegogo.com/projects/greek-bailout-
fund/x/1873...](https://www.indiegogo.com/projects/greek-bailout-
fund/x/1873961)

~~~
aquark
It's a nice thought ... but €3 each covers the immediate payment needed.

Total Greek debt is €323 B [1] and there are 503 million inhabitants in the
EU, making 'pay-off the debt' more like €642 per inhabitant

For context total EU sovereign debt [2] is €24,415 per inhabitant

[1] [http://www.bbc.com/news/world-
europe-33325886](http://www.bbc.com/news/world-europe-33325886) [2]
[http://www.eudebtclock.org/](http://www.eudebtclock.org/)

~~~
mikeash
That really puts the scale of the problem in a new perspective for me. That's
$715 (at the current exchange rate) for every person on the _continent_ just
for the debt of one tiny little corner of it.

------
hackuser
A few considerations:

1) Many arguments stem from assinging moral responsibility to the Greek
people. The people who will suffer most are and will be the poor in Greece,
including those on fixed incomes such as pensioners. Yet these are the people
with the least power over what their government does. Drive through a poor
neighborhood in your town; how responsible are those people for their national
government's economic policies? It's cruel and frankly evil to impose the
costs on them.

2) Making people suffer is not nearly enough of a response. Nor is saying
'their suffering is not our problem'. Those are non-responses and, I think,
moral failure. The people of Germany may need other Europeans' help some day
-- they got it after WWII and, for example, they expect their NATO allies to
defend them, with the U.S. bearing most of the burden -- they may want to set
a better precedent. EDIT: "You’ll never guess which hardline euro zone country
has had its debts repeatedly forgiven"[1]

3) This is a leadership failure of the entire EU. There is no way something
this critical should have gotten to this point. Part of it, I think, is the
failure of EU leaders to stand up for the EU's importance. The nationalistic
and xenophobic right-wing, along with Ayn Randian economic policies, are
ascendent and nobody is challenging them. Thus the public sees little reason
to protect the EU or those suffering in Greece.

[1] [http://qz.com/441187/youll-never-guess-which-hardline-
euro-z...](http://qz.com/441187/youll-never-guess-which-hardline-euro-zone-
country-has-had-its-debts-repeatedly-forgiven/)

------
laichzeit0
What recourse do the creditors have when Greece defaults? Invade the country
and physically reposes assets?

How is this different from borrowing money from a bank and not paying, except
being a country and all.

~~~
drzaiusapelord
They can kick them out of the EU/Eurozone and implement tariffs that will pay
off these debts. It'll take decades but its doable if the Greek economy
doesn't completely collapse.

~~~
sgift
No, they cannot. I have no idea where this lie started, but repeating it won't
make it true: There is NO mechanism to kick Greece out of the EU/Eurozone and
when the other governments try to do it the european courts will stop them.

~~~
cjensen
The EU Treaty has rules regarding government debt. Greece violated the treaty
by running a bigger deficit than permitted. Additionally, the Treaty does not
allow for default on debt. The EU courts will require repayment. Your
suggestion that the EU courts will stop a breakup with a country which is in
complete violation of EU law is optimistic.

~~~
kawakiole
The treaty says nothing about default, and say absolutely nothing about the
possibility of expulsion if a member goes over the deficit limit (or under any
other circumstance by that matter), which by the way already happened to many
countries including France without any major consequence.

Next time, you might want to actually read the treaty before commenting on it.

------
foliveira
Isn't the correct term entering into arrears instead of default? Doesn't the
Greek government have a couple of weeks to regularise their debts before going
into default?

Also someone needs to keep tabs on this:
[http://isgreeceindefaultyet.com/](http://isgreeceindefaultyet.com/)

~~~
hessenwolf
Under discussion.

"June 30, 2015 5:05 am Greece’s IMF payment: When is a default not a default?"

[http://www.ft.com/cms/s/0/3344581e-1eda-11e5-aa5a-398b2169cf...](http://www.ft.com/cms/s/0/3344581e-1eda-11e5-aa5a-398b2169cf79.html?siteedition=uk#axzz3eYkB6WL3)

------
gesman
I use to watch the price of bitcoin and gold to judge the impact level of such
news on the world's economy:

[https://markets.blockchain.info/](https://markets.blockchain.info/)

Apparently not that of a big deal.

~~~
aqme28
Bitcoin is not super affected because people are fleeing to the Euro.

~~~
eastbayjake
There was a spike in Bitcoin prices when Cyprus, another EU member state,
imposed capital controls during a potential default and driving Bitcoin prices
up 400%. Greece is following almost the exact same path, limiting bank
withdrawals to €60 per day.

~~~
chinathrow
How would you transfer money into a bitcoin wallet when the withdrawals are
that limited?

~~~
eastbayjake
It's very hard -- there's only one Bitcoin ATM in all of Greece and six
businesses to spend it at -- but Bitcoin exchanges are reporting huge spikes
in Greek usage:

[http://money.cnn.com/2015/06/29/technology/greece-
bitcoin/](http://money.cnn.com/2015/06/29/technology/greece-bitcoin/)

------
toolsadmin
All this spending was basically German and French money recycling through
Greece, where previous German loans were paid with new ones. Default like
Argentina and Iceland did, and start of a fresh slate, keeping this
bloodsucking parasite called Brussels on the body of Greece is a travesty - 5
years of ruined lives already.

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sp4ke
I need to register to read this article, can we please stop sharing locked out
content on the internet. Thank you

~~~
tummybug
Search for the link in google and click the result for it.

