We have seen this over and over again for years now but it does seem very likely that something will happen this coming Monday. The ECB has warned that the Greece banks may not open on Monday, this after the runs on the banks this week.
Perhaps an outlier solution but Russia has said they will loan Greece the money in exchange for "assets". This could end up as a new geo -political problem. Russia would love to have another base for their naval fleet and especially in the Med.
CNBC live blog here.
http://www.cnbc.com/id/102769772Full story.
http://www.cnbc.com/id/102772247
Comments
As for Russia, I honestly don't care. Tired of being "Team America: World Police" - if Europe is upset about Greece potentially siding with the Russians, let Europe deal with that.
Regards,
Ted
It Just Doesn't Matter: Bill Murray Meatballs:
Before the formation of a single currency across European Union, the EURO, someone said that "this is one hell of a social experiment". That statement still resonant today.
http://www.telegraph.co.uk/finance/economics/11407256/Germany-faces-impossible-choice-as-Greek-austerity-revolt-spreads.html
http://krugman.blogs.nytimes.com/2015/06/18/thinking-about-the-all-too-thinkable/?module=BlogPost-ReadMore&_r=0
... as [for] the persistence of the story line that it’s all about continuing Greek fecklessness, that the Greeks haven’t done anything. In fact, Greece has imposed almost inconceivable pain on itself. ...
The problem has been that severe spending cuts in an economy with no independent monetary policy and no ability to devalue lead to severe economic contraction, which in turn means that a large part of what’s gained fiscally at the front end gets lost via reduced revenue. This isn’t the fault of the Greeks, it’s basically a design flaw in the euro itself.
So what about Grexit? At this point quite a few people on the creditor/Troika side of the negotiations seem almost to welcome the prospect. But this is bizarre in terms of their underlying interests. Yes, the lives of the officials would become easier, for a while, because they wouldn’t have to deal with Syriza. But from the point of view of the creditors, Grexit would be a pure negative. They would almost surely receive less in payments than they would under any deal that keeps Greece in, and the proof that the euro is in fact reversible would grease the rails for future crises, even if the ECB is able to contain this one.
And as Martin Wolf points out, Greece will still be there, and will still need dealing with.
The Greeks, on the other hand, should feel conflicted. There would probably be a lot of financial chaos in the immediate aftermath of euro exit. And maybe the apocalyptic warning from the Bank of Greece that devaluation would push the nation back into the Third World is right, although I’d like to know about the model and historical examples that would justify this claim. But absent that kind of implosion, a devalued currency should eventually produce an export-led recovery — I understand the cynicism one hears, but demand curves do slope downward even in Greece.
The point is that nobody should be casual or confident here. But the creditors should actually be even more worried than the Greeks about a potential exit that has no upside for the rest of Europe.
A default doesn’t mean Greece being kicked out of the eurozone
"Regarding bankruptcy, there are several hints that a default might not be quite as catastrophic for Greece’s economy as many assume. "
An interesting analysis from The Guardian explores many alternatives open to Greece.
Suppose that there were a way to end this depression. Then Greece’s fiscal problems would melt away, with no need for further cuts. But is there any way to do that?
The answer is, not as long as Greece remains in the euro. It can pursue reforms that might make it more competitive, but anyone promising dramatic, quick results has no idea what he is talking about.
On the other hand, Grexit would produce a rapid improvement in competitiveness, at the cost of possible financial chaos.This is not a route anyone has been willing to go down, but one does have to say that as the crisis worsens it becomes a more plausible outcome.
The thing to understand, in any case, is that if Grexit does come, fiscal issues will immediately cease to be central to the story. Instead, it will all be about handling bank panic, managing the transition to a new currency, and possibly removing structural obstacles to increased exports (which would very much include tourism).
In truth, this has never been a fiscal crisis at its root; it has always been a balance of payments crisis that manifests itself in part in budget problems, which have then been pushed onto the center of the stage by ideology.
(PK blog today)
The country didn't have a major permanent symphony orchestra, which I thought spoke volumes regarding the civic values. Yet there were definitely pockets of wealth, here and there. Nothing visible in the way of major agriculture, either- just small subsistence types of farming. (Although you could probably say the same thing about France in that respect, also.) Hard to figure. The whole place just seemed to be very, very tired, and sort of living in the past. People very nice, though- "warm", as you so nicely put it.
Regards,
Ted
https://en.wikipedia.org/wiki/Communist_Party_of_Greece
Meanwhile, this seems wise and farsighted, more about outcomes than about being right:
http://www.ft.com/cms/s/2/9c27c84c-1751-11e5-8201-cbdb03d71480.html#axzz3dhqV7YuA
+++
if paywalled:
Greece is Europe's failed state in waiting
Lawrence Summers
June 20, 2015
When, as now appears likely, Greece financially separates from Europe it will at one level be no one's fault.
The Greek leaders will rightly explain that having imposed more austerity on themselves than any industrialised country has suffered since the Depression, they could not have done more without light at the end of tunnel in the form of a clear commitment to debt relief. European leaders will rightly explain that they adjusted their positions repeatedly to accommodate the Greeks. They will stress that their citizens would not permit Greece to play by different rules to the rest of Europe. And the I M F will rightly explain that it would have blessed any plan agreed by Greece and Europe that added up.
The trouble is that all the parties are going to get much more of what they fear from a breakdown than they would even from what they regard as an unacceptable compromise. Historians understand how the first world war was allowed to start but are still, a century later, incredulous that it happened. Financial historians may look back at the events of next week and wonder how Europe's financial unraveling was permitted.
Make no mistake about the consequence of a breakdown. With an end to European support and consequent bank closures and credit problems, austerity in Greece will get far worse than it is today and it will probably become a failed state to the great detriment of all its people and their leadership.
When Greece fails as a state, Europe will collect far less debt than it would with an orderly debt restructuring. And a massive northern out-migration of Greeks will strain national budgets throughout Europe - not to mention the challenges that will, come as Russia achieves a presence in Greece.
The I M F is looking at by far the largest nonpayment by a borrower in its history. True, there are good reasons to think enough foam has been placed on the runway to prevent financial contagion. Yet, this was asserted with respect to LTCM, subprime and the fall of Lehman.
Diplomacy fails and catastrophes happen when nations are preoccupied with their own concerns and fail to consider the political needs of their counterparts and become convinced that their counterparts will not take yes for an answer.
Here is an informed outsider's judgment as to what needs to happen if disaster is to be averted.
Greek prime minister Alexis Tsipras needs to do what is necessary to make reaching an agreement politically feasible for his fellow Europeans.
That means dropping ideological rhetoric about a new European approach. He must recognise that Greece's problems are significantly of its own making and make clear that he is absolutely committed to doing what is necessary to keep Greece in the euro area. He needs to be clear that he will accept further VAT and pension reforms to achieve primary surplus targets this year and next, but that he expects a clear recognition that if Greece does its part, debt will be written off on a large scale.
German chancellor Angela Merkel and the European authorities must do what is necessary to make policy adjustments politically tenable in Greece.
That means acknowledging that the vast majority of the financial support given to Greece has gone to pay back banks rather than to support the Greek budget. They must agree on debt relief and recognise the degree of adjustment in Greek spending that has taken place: with nearly 30 per cent of government workers laid off. It also means announcing their intention to accelerate economic growth throughout Europe.
The I M F needs to recognise that this is now not about the numbers. It is about the high politics of Europe. Its job is to stand behind any deal that avoids breakdown.
The hour is late. But it's often darkest before dawn. Let us all hope that Greece and Germany use this weekend to work back from the brink before Monday's summit.