Posted on 01/04/2015 12:15:44 PM PST by Kaslin
There's an amusing pair of headlines back-to-back today on what a Greek exit from the Eurozone might mean.
One view is catastrophic, the others is along the lines of no problem. Let's start with the catastrophe.
Economic historian Barry Eichengreen says Greek Euro Exit Would be ‘Lehman Brothers Squared.
A decision by a new Greek government to leave the eurozone would set off devastating turmoil in financial markets even worse than the collapse of Lehman Brothers in 2008, a leading international economist warned Saturday.Limited Contagion Thesis
A Greek exit would likely spark runs on Greek banks and the country’s stock market and end with the imposition of severe capital controls, said , an economic historian at the University of California at Berkeley. He spoke as part of a panel discussion on the euro crisis at the American Economic Association’s annual meeting.
The exit would also spill into other countries as investors speculate about which might be next to leave the currency union, he said.
“In the short run, it would be Lehman Brothers squared,” Eichengreen warned.
Martin Feldstein [professor of economics at Harvard University], a longtime critic of the euro project, said all the attempts to return Europe to healthy growth have failed.
“I think there may be no way to end to euro crisis,” Feldstein said.
The options being discussed to stem the crisis, including launch of full scale quantitative easing by the European Central Bank, “are in my judgment not likely to be any more successful,” Feldstein said.
The best way to ensure the euro’s survival would be for each individual eurozone member state to enact its own tax policies to spur demand, including cutting the value-added tax for the next five years to increase consumer spending, Feldstein said.
He predicted that European politicians would “swallow hard once again” and make the compromises necessary to keep Greece in the currency union.
“While holding the eurozone together will be costly and difficult and painful for the politicians, breaking it up will be even more costly and more difficult,” he said.
The German government believes that the euro zone would now be able to cope with a Greece exit if that proved to be necessary, Der Spiegel news magazine reported on Saturday, citing unnamed government sources.Competing Views on Funding Needs
Both Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble believe the euro zone has implemented enough reforms since the height of the regional crisis in 2012 to make a potential Greece exit manageable, Der Spiegel reported.
"The danger of contagion is limited because Portugal and Ireland are considered rehabilitated," the weekly news magazine quoted one government source saying.
In addition, the European Stability Mechanism (ESM), the euro zone's bailout fund, is an "effective" rescue mechanism and was now available, another source added. Major banks would be protected by the banking union.
According to the report, the German government considers a Greece exit almost unavoidable if the leftwing Syriza opposition party led by Alexis Tsipras wins an election set for Jan. 25.
Analysts at Bank of America Merill Lynch, “think Tsipras will face a budget black hole of at least 28 billion euros in the first two years of his government, with nowhere to borrow from and 17 billion euros of repayments to make in the first year.”In contrast, the Wall Street Journal reports Greece Expects Primary Budget Surplus for 2015.
Greece’s 2015 budget, submitted by the government to parliament on Friday, aims to meet the fiscal demands of the country’s creditors but comes without the prior approval of its troika of international inspectors.Primary Account Surplus or Not?
According to the budget, Greece will achieve a primary budget surplus—before taking into account debt payments—of €3.3 billion ($4.1 billion), equal to 3% of gross domestic product, next year, which is in line with the country’s bailout program.
Overall, the government will record only a minor budget deficit of €338 million—equivalent to just 0.2% of gross domestic product—next year, in effect marking the first balanced budget Greece has produced in four decades.
Despite surpassing its budget targets for three years running, Greece is at loggerheads with the troika—made up of representatives from the European Commission, the International Monetary Fund and the European Central Bank—over further fiscal measures the country must take, as well as a number of promised overhauls.
Eventually, there will come a time when a populist office-seeker will stand before the voters, hold up a copy of the EU treaty and (correctly) declare all the "bail out" debt foisted on their country to be null and void. That person will be elected.Possibilities
Le Pen may be too early, and France may not be that country, but the time will come.
Greece, Finland, Germany, Belgium, and even France are possibilities. All it will take, is for one charismatic person, timing social mood correctly, to say precisely one right thing at exactly the right time. It will happen.
it’s kinda like if detroit left the usa.
Great Britain may want to consider it next, although it would present many risks, and Frau Merkel will not be tickled.
The only way out is for those foolish to have lent Greece the money to eat their losses. Greece will have to then have budgets that are balanced budgets entrenched in law.
Britain could join NAFTA.
No worry’s...
Obama will just print some more Obama bucks backed by nothing, give it the Democrat-connected and donating bankers/bilionaires, and all will be well in the world.
Of course, YOU could very well be standing in line to buy bread at $200 a loaf, but the people that really matter will still have plenty of champagne and Wagyu beef for the yacht.
After Obama leaves, they may as well. Chances are good that we get a better president next time, from either party.
lol!
“The only way out is for those foolish to have lent Greece the money to eat their losses.”
Now, unfortunately, most of those “Losses” (with the profits booked, and bonuses paid on, long ago), will be eaten by YOU and ME, the AMERICAN taxpayer, because the primary holders are Citi, Goldman, and the IMF, while a myriad of US banks and Dem-connected billionaires hold the derivative papers for it all.
And, they are just too big to fail, doncha know.
Well, 1. Great Britain is the island on which you have Scotland, England and Wales -- I presume you mean the United Kingdom which consists of Scotland, England and Wales as well as Northern Ireland (which is not on Great Britain) but doesn't include the Isle of Man or the Channel Islands
2. The UK is not part of the Eurozone, unlike Greece which is part of the Eurozone
“200 dollars a loaf”
Could be, according to the bible...
A days wages for a loaf a bread-
(which may or may not be $200 bucks)
England isn’t part of the Euro.
Thank you for clarifying that. I was under the impression that the EU exerted some authority over England, but I guess that’s just not the case.
>>Chances are good that we get a better president next time, from either party.<<
Pretty low bar there...
Plenty of people already live by this formula. They earn nothing, and they get their bread for free.
The article is about Greece's exiting the Euro-zone -- not leaving the EU. The UK never joined the Euro.
Let them go! They were just a drain on countries that amounted to something.
Britain just has to work to convert the Commonwealth of Nations into a trading bloc. The Commonwealth comprises most of the former Empire (53 nations, 2.4 billion people). The Empire was essentially a trading bloc — albeit based on mercantalist theory, and heavily favouring Britain. A modern “Commonwealth Free Trade Agreement” (CFTA) would benefit every member nation. If Britain hadn’t gotten sidelined with the EU, there’s a good chance we’d have CFTA now. The EU prevents Britain from negotiating for a CFTA — but, that could soon change (possible British referendum on EU membership in 2017).
There are two kinds of leaders in the world — those whose highest priority is the welfare of their people, and those whose highest priority is the welfare of the world’s bankers.
Greece is a small country of only 11 million people. Other countries with significantly larger populations — Argentina, for example, with a population of 41 million — have defaulted on loans, with no catastrophic, end-of-the-world consequences such as the hysterical Chicken Littles are now predicting if Greece should exit the euro and then fail to repay its loans at full value.
What is the reasonable thing for the descendants of Socrates to do in their current situation? Vote for a leader who will continue to help Goldman Sachs and Citigroup make more money, or one who will liberate them from their slavery to the world’s banking elites and let them rebuild their country, with their own currency, on their own principles, of, by, and for, the Greek people?
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