Posted on 05/24/2012 12:35:03 AM PDT by bruinbirdman
Pressure on Greece increased dramatically on Wednesday night after Germany's central bank called for a suspension of financial support to Athens and eurozone finance ministries agreed to draft contingency plans for a Greek exit from the euro.
In a blunt warning to Athens, the Bundesbank said a Greek withdrawal from the eurozone would be disruptive but "manageable", undermining claims by Greece's radical anti-austerity leader, Alexis Tsipras, that Europe would not dare pull the plug.
"When the Eurosystem provided Greece with large amounts of liquidity, it trusted that the programmes would be implemented and thereby ultimately assumed considerable risks," said the bank. "In the light of the current situation, it should not significantly increase these risks."
The German financial daily Handelsblatt said the Bundesbank was "holding a gun to Greece's head", hammering home the message that Germany will not submit to blackmail from populist politicians in Athens.
Berlin also leaked news that their member on the European Central Bank board, Jürg Asmussen, is to head an ECB taskforce to handle the Greek crisis.
There was confusion in Brussels over leaks that EMU finance ministry officials had agreed in a meeting on Monday – allegedly in the name of Eurogroup executives – that each state should draw up a national plan to cope with a Greek exit.
Athens issued an angry denial, saying the claims were false. The European Commission stressed that it was not told about the meeting, even though it is a member of the working group. "We are not preparing such a plan, though we are ready to face any eventuality," said an official.
There were suspicions that Germany had leaked its own proposal without gaining the assent of other EU states. The move has further poisoned the atmosphere, though officials played down the exit
(Excerpt) Read more at telegraph.co.uk ...
Another slanted British article.
Let’s review the facts. You as a nation have about six weeks of cash left in the pot to run your government, your police, your fire departments, and all essential services. You have only one true option on the table....accept a loan from your neighbors and promise to live under austere conditions for the next couple of years. Most political parties are pleading with you to deny the loan and to fall into some kind of chaotic pit of government operation. Your neighbor says...stop stalling and just get on with cleaning up your mess.
If you follow the British attitude here...you should never tell your weak-kneed neighbor how to fix their problems. If you only have six weeks to settle on some answer....I wouldn’t be sitting around debating much at this point, unless of course...I was a Greek.
Everyone has a gun to everyone’s head.
Yesterday I read an interesting article on how the Greeks would have a roughly 46-hour window to manage a default and exit from the Eurozone. The gist of the article is that the Greeks would have a window from when the markets close on Friday until the re-open in Asia/Pacific Monday morning, assuming this event were to happen on a Friday. Here’s a link to the original: http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_23/05/2012_443463
Given the Greeks seeming inability to do much of anything in a reasonable timeframe, the idea of them suddenly being able to pull this trick off is laughable, and I’m being charitable when I say that. In 46 hours, the Greeks would likely still be debating how much baklava to order for the conference committee.
Hilarity ensues.
As to timing, the practical question has to be will doing it earlier rather than later bring an even greater flood of tourists with strong euros in their pockets over the summer? It's already late May, so the upheaval from an exit needs to be either done quickly, or postponed until after tourist season.
Greece's economy could become 30% tourism if the drachma becomes cheap enough quickly enough. It's already between 15%-20%, depending on whose numbers you use.
“Everyone has a gun to everyone’s head.”
Quite so. And no matter who pulls the first trigger, they will all go off.
Perhaps we should all turn our history books to Argentina 2000-20001 to see some of the possible twists and turns of a rapid currency/banking switcheroo.
It takes time to print all the cash (fiat) money Greece needs. Unless they have already started in secret, it won't happen this weekend.
They can't wait until summer. The interesting thing is that there really is no government in charge. No one is willing to make this call and take the blame for the result. It's like watching a train wreck in slow motion.
The best long-term solution is to leave the Euro and not accept more “loans” with draconian measures with Germany controlling interest rates with a one track mind of a southern sea
There has been no, nana, zero ‘Austerity’ in any of the Western Governments, it is a false meme proffered by the bankrupt left. The pEEEUUU is doomed to fail just like all fractional reserve bank based economies.
I found that an odd phrase for the title. Threatening to stop giving unlimited money to someone who is spending so far beyond his means just doesn’t strike me as a gun to the head. It’s more the reverse. Greece has been trying to shoot itself in the head for years, and Germany, after years of giving Greece money to keep them from pulling the trigger has decided to get out of the way so Greece can decide whether they really want to accept the consequences for what they have been doing.
A skateboarder punk playing "chicken" with a Mack truck.
Socialist governments aren't known for their economic savviness.
I suspect that, if the drachma is revived, the Greeks will run the presses to pay for anything they can buy with drachma, default on obligations that cannot be paid in drachma, and hope for a flood of tourists with lots of (relatively) hard euros in their wallets.
If that scenario develops, of course it will be hard to pay for imports (about 40 billion euros per year) but a drastically devalued drachma is going to make their manufactured and agricultural goods attractively priced relative to the euro. I wouldn't be surprised to see some continued upsurge in their exports (currently about 20 billion euros per year) if the drachma is revived.
Ever see Reservoir Dogs?
yitbos
Even if Merkel loses a working coalition, Deutschland has no other leader.
Merkel would probably remain Chancellor of a national unity coalition.
yitbos
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