There seems to be an overwhelming consensus in the media that Greece could well be leaving the Euro. Even bookmakers are placing high odds on the prospect of a Greek exit.
I personally remain sceptical and I think it is far more likely that Germany will come up with yet another bailout plan to save Greece.
Matthew Lynn of Marketwatch has written a great article on this which I recommend you read on why Germany will not allow Greece to exit the Euro.
However, I do disagree with Lynn on one point.
I do not think Greece leaving the Euro will bring utter catastrophe for the entire Euro-zone as a whole. Let’s not forget that the economy of Greece is probably no bigger than that of the State of Virginia.
In fact, to some extent it is possible that the markets have already “priced in” the possibility that Greece could be leaving the Euro.
Even if Greece did leave the Euro, as tumultuous the result may be for the markets and Europe, we will be able to recoup and somehow move on.
What are your own views on this matter? Let me know by leaving me your comments below – even if you disagree.
Greece should have left the EU themselves since the beginning of the problems.
Argentina had the similar economic situation 10 years ago and plainly turned away from the IMF.
http://www.liberation.fr/economie/01012390907-nous-avons-sauve-les-gens-plutot-que-les-banques
A French article on how Argentina dealt with the matter.
I think it becomes a psychological phenomena once Greece leaves. What traders think or price in has no effect on the populous who will queue up at banks in their droves to get their Euro exchanged to dollars or sterling.
Hello Rastini.
IMO…I dont think that EU want Greece to continue in the Euro because of the size of their economy. But it probably has to do with a domino effect, or how the markests/rating agencies would react on the Portuguese and Irish issue. I think they do want to protect them.
Any way, It would be nice to hear from you, what do you is the best of the GREEK, I mean, the ordinary Greek Citzen. To try re-building from 0 or to try paying the debt for the next possibly,20-30 years ??
Victor
I think what matter most now is the greek reaction toward the whole mess, they cannot afford to have more austerity anymore but if they have to if they want to receive bailout, and Germany wouldn’t give them a cent if they didn’t follow the austerity plan, so Grexit is the most likely scenario, personally I don’t think they can kick the can down the road again as there are already no road left. And it is also better for Greece to default and reset their economy, without all these debt being a burden they can recover within 3-5 years, look at Iceland, they defaulted on their debt, restructure the banking system and start recovering.
Yes the economy of Greece is not that big, but many European banks have credit exposure to Greece debt and if Greece exit eurozone that means Spain and Portugal might exit too, this is what they fear-contagion risk. Greece is just the start, the real deal is Spain.
There will need to be a restructuring of the EU. Greece defaulting is only a matter of time. It is the domino effect that has markets spooked. Also, what people are not taking into account is when people are at the breaking point social unrest can take unexpected turns. I don’t know the exact timing but keeping Greece in the EU is a dumb idea and with the new President in France I am not sure Germany will be as bold about yet another package.
As a Greek, I will tell you my point of view..
Most of the Greeks face a dilemma. Both ways (in or out of Euro) are difficult!
The dilemma is which one will make things better for the future.. We all know until now that we have big responsibility of this situation. Both like citizens and voters. We are all (almost) ready to leave behind the way of life that brought us to this point. And that we deserve or that we must go through a difficult economic period, like the one we face now, although the main thieves in this country are/were politics.. OF COURSE we prefer to stay in Europe and the Euro zone. It is safer for a lot of reasons, much more than economic stability. But if we have to live with 300 or 400 Euro salary, in a market with prices like Germany or France, and all this for keeping the Banks happy, then f… Europe. Excuse me for my language, but I left behind family, I left behind friends that face all these problems, and I am working in Saudi Arabia.
So for me to return to the topic: If Greece leave the Euro and manage to move on, then together with Argentina it will be a big proof to Spain, to Portugal, to Italy that Europe or IMF is not the ONLY way! And I have the feeling that Banks will not allow this to happen..
Its not the size(economy) that matters but sentiments which will create ripple effect on portugal, italy and spain. Technically speaking, all traders have already priced the current fiasco but none could foresee the multiplier effect should Greece decide to exit. Its a game of Emotions vs fact where emotions will dominate by the Germans as saviour of EU where as fact says get rid of the appendix from the body else you will die.
I feel greece has no other option if it does want a civil war – and so once they do leave – it will open the door for others because it will show that the system was never meant for the betterment of the citizens.
IMO, it will be the beginning of the end – finally!
A question: if Greece will kicked out there are two possibilities:
a) the following day greek citizens won’t be allowed to open a deposit denominated in euro
b) the following day greek citizens will be allowed to open a deposit denominated in euro
If a) will happen greeks will be held as b-euro-citizens: it will be legally unacceptable.
If b) will happen then
– any previus conversion from euro to drachma would be absurd
– any greek would be stimulated to hold euro savings.
Hi Alessio
Europe is facing a problem because the structure of the Eurozone is flawed. Greece’s failure would mean that the European Monetary Union is desintegrating. So the fact that Greece is only about 3% of the European economy in essence means very little. Also, the bail out system which is designed by the troika is a total failure in every country in which it is implemented so far.
In other words, the medicin which Merkozy are prescribing is killing the patients rather than healing them. The absurdity though is not simply the fact that this whole bail out deal is not working, but that there are sides which have been considerably profiting from this whole crisis while the societies in crisis hit countries (especially in Greece) are torn apart under severe stress.
At the moment there is a discrepancy in Greece. The people want to remain in the eurozone, while at the same time they want to reject the memorandum of the troika. Something has got to give and the Greek people have come to a point where they will vote against the memorandum even if that would mean the exit of the eurozone.
Before this happens there is a good chance Germany will probably come up with a sort marshall plan for Greece (bail outs are for the banks), because:
-so far, German exports have profited a whole lot from the Greek crisis
-they won’t risk the desintegration of the eurozone
-Greece is actually becoming a german satelite. They have been investing in renewable energy projects like ‘project Helios’, and German companies are keen in privatising a lot of Greece’s puplic sector (which in turn invested a lot in the Balkans )for a bargain price.
-Greece is very rich in minerals. Many international companies want those minerals for a penny on the dollar.
The former two main parties of Greece – who are in the pockets of the elites – want to sell off most of the Greece wealth to save the country from destruction, but have to endure severe resistence from the Greek people. If you read the memorandum of the Troika you will see what this whole “bail out” is actually about. It’s basicly about taking over Greece for a cheap price.
So, we are now at a juncture, and if the Greeks choose to default, Germany and the banks can loose everything. The Greek debt, the Greek sell-off, the end of a trading partner, as well as a possible destruction of the eurozone.
On the other hand Greece has to choose between the rath of bankruptcy or the total sell-off of their country and the loss of their sovereignty. Not to mention that many people already are suffering.
What do you think it’s going to be? In any case, Germany has too much to loose by letting Greece go. My guess is that they will give in to some of Greece’s requests and then go with plan B.
I hope the Greeks really did this and I really hope Draghi actually said this too. Frankly I have my doubts that some is true but there is truth in everything…
http://www.thedailymash.co.uk/news/international/greeks-apologise-with-huge-horse-2012051527146
I believe Greece will leave the euro but not just yet, time must pass for the fear factor across Europe to grow and get out of proportion. That allows greater market control and almost certainly some false flag events are going to occur, we have the Olympics coming, Diamond Jubilee. The rising nuber of distractions for the UK is very apparent. Frankly I hope the Greeks leave the euro, for themselves and go back to what they were, grounded in nature for the greater part. Already there are signs that this has already happened with one town bartering with local credit notes/money. Good luck to them, they have been naive and the minority at the top have been very greedy drawn by the allure that money buys everything. They have been made fools out of and in my view will be the first western country to go back to how life should be lead, where they were not so long ago. The first world will swap places with the developing world in time, sadly the current first world will be clueless as to what to do. The new first world will however know exactly how to balance life.
my concern is more about what to do with the euros that we have in the bank … how big will be the devaluation .. maybe the best is buy gold and silver .. what do you think ?
I think Greece should have gotten out of the Euro when they were being framed into taking “bailouts” to “save” them. Greece should leave the Euro just like Iceland told the EU to screw themselves, then started prosecuting everyone that was involved in the destruction of the Icelandic economy, and then topped it off by rewriting their constitution. What Greece has to make sure is that they don’t permit the Germans from taking over Greek land or the country, since the Germans have been very jealous of the Greek country for many years now.
My biggest concern is not for the financial markets:if Greece exits the €, they will be already set to speculate on their next target. I am more worried about the consequences of any scenario on the Greeks and thus support what already in the short-term will better for them: exiting the € and regain monetary sovereignty!
Dear Sir,
I have no doubt that Greece will eventually leave the Eurozone. It is inevitably nasty on the part of Greece to go against the wishes of the other members in the Eurozone. Greece is supposed to swallow the austerity pill. It is supposed to tighten its belt. Should Greece leave the Eurozone, the domino effect is going to be very great. Even Greece starts to use Drachma for the business transactions. It is going to start from scratch. However, the worth of Drachma is going to be unattractive and ridiculously low.
The sovereign debt phenomenon is not going to go away. It will remain with Eurozone for a long, long time to come. Since the members in the Eurozone depend on each other to survive, once Greece leaves the Eurozone, other members such as Spain, Portugal, Italy and even France may follow suit.
http://www.zerohedge.com/news/jpmorgan-estimates-immediate-losses-greek-exit-could-reach-400-billion
This is why germany, not greece should be the one to leave the eurozone look at the charts in this article. I think they pretty much speak for themselves. Also because Germany is going bankrupt trying to bail out the other parts of the eurozone, have you seen the deutsche bundesbanks target2 chart? Otherwise look here; http://www.zerohedge.com/news/europes-most-parabolic-chart-goes-probolic-er
Have a nice day, Alessio!