Posted on 05/18/2012 2:16:47 PM PDT by bruinbirdman
Brussels is preparing plans for Greece to quit the euro, a senior official has revealed, as analysts warned that the country’s exit would cost European taxpayers at least €225bn (£180bn).
European Union trade commissioner Karel De Gucht said that both the European Commission and the European Central Bank (ECB) were working behind the scenes on contingency plans for a break-up.
“Today there are in the European Central Bank, as well as in the Commission, services working on emergency scenarios if Greece shouldn’t make it. A Greek exit does not mean the end of the euro, as some claim,” he said.
The first public declaration that preparations are in place came as economists at UBS said European taxpayers would have to swallow losses on Greece, whether or not it remains a member of the currency union.
Under a best case scenario, which would see Greece remain inside the euro but its colossal €274bn of outstanding debt put on a more sustainable path, UBS said European taxpayers would have to write-off €60bn of the €182bn of rescue loans they have provided.
If Greece was to leave the euro, however, the bill would jump to at least €225bn as the new currency would halve in value and €104bn of additional emergency funding by the ECB would be wiped out.
Contagion to the banking sector and across the eurozone, coupled with the economic damage that would cause, would lead to further unquantifiable costs. Other economists have estimated the final bill at nearly €800bn. UBS said the losses would cripple the ECB, which would need to be recapitalised.
The International Monetary Fund, which has contributed €22bn to the Greek rescue so far, would probably be treated as a preferential creditor and be protected, the analysts said, so UK taxpayers would not lose out directly.
However,
(Excerpt) Read more at telegraph.co.uk ...
I agree with everything you say, now let’s get down to business:
I’ll give you Goldman Sachs and 900 lampposts to hang them all for a decent gyros franchise.
Seriously, though, if you gotta pay off a debt, selling your assets is a reasonable course of action.
Selling Greek airports, seaports, museums and the Pantheon is a good start.
Ask me if I’m willing to sell the Grand Canyon, the US postal service and the Oakland port.
That only happens when they attempt to violate Gresham’s Law.
“Bad money pushes out good money.” when there are two currencies of different value, people spend the one worth less and save the one worth more.
That is, you get such things when you have two currencies of different values, which is why in this case you have a controlled exchange rate.
At first, Greeks would want Euros instead of Drachmas. But Euros would have limited value in Greece, since they could not be exchanged at banks, nor used by major retail stores. But outside of Greece, a Euro would just be a Euro, and a Greek who bought a lot of goods outside of Greece and wanted to bring it back in would be halted by ordinary customs controls.
And Drachmas would be worthless outside of Greece, unless exchanged for Euros at the going rate.
And all the while, mind you, there would be efforts to create parity of the two currencies.
This is also where it matters that Euros are a fiat currency, but Drachmas would be a reserve currency. This would tend to make Drachmas worth *more* than Euros.
Certainly there would be some black market, but the effort is to make the profit margin for such activities so small that it’s not worth it.
Salve
Lets get in to it friend.
Even if you try to sell the Grand Canyon, the US postal service and the Oakland port, the debt is so enormous it makes Greece Arkadias look as a small city.
Problem is Espanola and Italia are moving closer to collapse, economical issues are this in the world:
Rise of unprecedented debt creates on equation of devaluation of currency or purposely keep it above as well moving electronically assets within direverents to adjusts, and sell, in speculative mode is a short done deal, in long term is a disaster, for after all no matter what country you are in assets are base not real hard currency but on speculations, then you have a black hole effect, either you invest hoping on being good gambler your you loose, problem with this is, who has a lucky number.
Merci
Thanks for your reply.
What does the word “Salve” mean at the beginning of your posts?
Salve
Hello,
Merci
Salve
Hi like I would like to say hello
Merci
I was in Greece last year but managed to avoid the riots. It could be a lot worse this year--I don't think I would want to visit the country. Tourists from other countries may be wondering how safe it will be. Maybe it will be OK in the small towns.
Greece was supposed to sell $50B of state assets, from communications, water, electricity utilities to railroads, airports to harbors.
They sold about $500M.
Nobody wants the baggage that comes with the property. Greece needs to do the restructuring first (labor laws, property rights, tax collection, legal system, etc., etc.)
yitbos
not necessarily. Portugal may go out, but no more.
There is no more money to recapitalize anyone. Period.
It’s a tossup as to who goes first, but Spain or Portugal is next. Ireland will follow soon after. The the Euro is dead.
5.56mm
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