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If Greece Exits, Here Is What Happens
Now that the Greek exit is back to being topic #1 of discussion, just as it was back in the fall of 2011, and the media has been flooded by groundless speculation posited by journalists who have never used excel in their lives and are merely paid mouthpieces of bigger bank interests (long live access journalism and the book sales it facilitates), it is time to rewind to a step by step analysis of precisely what will happen in the moment before Greece announces the EMU exit, how the transition from pre to post occurs, and the aftermath of what said transition would entail, courtesy of one of the smarter minds out there, Citi's Willem Buiter, who pontificated precisely on this topic last year, and whose thoughts he has graciously provided for all to read on his own website. Of course, take all of this with a huge grain of salt - these are observations by the chief economist of a bank which will likely be swept aside the second the EMU starts the post-Grexit rumble.
From Willem Buiter
What happens when Greece exits from the euro area?
Were Greece to be forced out of the euro area (say by the ECB refusing to continue lending to Greek banks through the regular channels at the Eurosystem and stopping Greece’s access to enhanced credit support (ELA) at the Greek central bank), there would be no reason for Greece not to repudiate completely all sovereign debt held by the private sector and by the ECB. Domestic political pressures might even drive the government of the day to repudiate the loans it had received from the Greek Loan Facility and from the EFSF, despite it having been issued under English law. Only the IMF would be likely to continue to be exempt from a default on its exposure, because a newly ex-euro area Greece would need all the friends it could get – outside the EU. In the case of a confrontation-driven Greek exit from the euro area, we would therefore expect to see around a 90 percent NPV cut in its sovereign debt, with 100 percent NPV losses on all debt issued under Greek law, including the debt held, directly or directly, by the ECB/Eurosystem. We would also expect 100 percent NPV losses on the loans by the Greek Loan Facility and the EFSF to the Greek sovereign.
Consequences for Greece
Costs of EA exit for Greece are very high, most notably the damage done to balance sheets of Greek banks and nonfinancial corporates in anticipation of EA exit.
We have recently discussed at length what we think would happen should Greece leave the euro area (Buiter and Rahbari (2011)), so we shall be brief here. Note that we assume that Greece exits the euro area and does not engage in the technical fudge discussed in Buiter and Rahbari (2011), under which it technically stays in the euro area but introduces a second, parallel or complementary currency.
The instant before Greece exits it (somehow) introduces a new currency (the New Drachma or ND, say). Assume for simplicity that at the moment of its introduction the exchange rate between the ND and the euro is 1 for 1. This currency then immediately depreciates sharply vis-à-vis the euro (by 40 percent seems a reasonable point estimate). All pre-existing financial instruments and contracts under Greek law are redenominated into ND at the 1 for 1 exchange rate.
What this means is that, as soon as the possibility of a Greek exit becomes known, there will be a bank run in Greece and denial of further funding to any and all entities, private or public, through instruments and contracts under Greek law. Holders of existing euro-denominated contracts under Greek law want to avoid their conversion into ND and the subsequent sharp depreciation of the ND. The Greek banking system would be destroyed even before Greece had left the euro area.
There would remain many contracts and financial instruments involving Greek private and public entities denominated in euro (or other currencies, like the US dollar) that are not under Greek law. These would not get redenominated into ND. With part of their balance sheet redenominated into ND which would depreciate sharply and the rest remaining denominated in euro and other currencies, any portfolio mismatch would cause disruptive capital gains and losses for what’s left of the Greek banking system, Greek non-bank financial institutions and any private or public entity with a (now) mismatched balance sheet. Widespread defaults seem certain.
As discussed in Buiter and Rahbari (2011), we believe that the improvement in Greek competitiveness that would result from the introduction of the ND and its sharp depreciation vis-à-vis the euro would be short-lived in the absence of meaningful further structural reform of labour markets, product markets and the public sector. Higher domestic Greek ND-denominated wage inflation and other domestic cost inflation would swiftly restore the old uncompetitive real equilibrium or a worse one, given the diminution of pressures for structural reform resulting from euro area exit.
In our view, the bottom line for Greece from an exit is therefore a financial collapse and an even deeper recession than the country is already experiencing - probably a depression.
Monetising the deficit
A key difference between the ‘Greece stays in’ and the ‘Greece exits’ scenarios is that we believe/assume that if Greece remains a member of the euro area, there would be official funding for the Greek sovereign (from the Greek Loan Facility, the EFSF and the IMF), even after the inevitable deep coercive Greek sovereign debt restructuring, and even if NPV losses were imposed on the official creditors – the Greek Loan Facility, the EFSF and the ECB. The ECB probably would no longer engage in outright purchases of Greek sovereign debt through the SMP, but the EFSF would be able to take over that role following the enhancement and enlargement of the EFSF later in 2011.4 If Greece remains a member of the euro area, the ECB would likewise, in our view, continue to fund Greek banks (which would have to be recapitalised following the Greek sovereign debt restructuring), both through the regular liquidity facilities of the Eurosystem and through the ELA.
In the case of a (confrontational and bitter) departure of Greece from the euro area, it is likely that all official funding would vanish, at least for a while, even from the IMF (which would, under our most likely scenario, not have suffered any losses on its loans to the Greek sovereign). The ECB/Eurosystem would, of course, following a Greek exit, cease funding the Greek banks.
This means that the Greek sovereign would either have to close its budget gap through additional fiscal austerity, following its departure from the euro area, or find other means to finance it. The gap would be the primary (non-interest) general government deficit plus the interest due on the debt the Greek sovereign would continue to serve (the debt issued under foreign law other than the loans from the Greek Loan Facility and the EFSF, and the debt to the IMF), plus any refinancing of this remaining sovereign debt as it matured. We expect the Greek General Government deficit, including interest, to come out at around 10 percent of GDP for 2011, while the programme target is 7.6 percent. General government interest as a share of GDP is likely to be around 7.2 percent of GDP in 2011, which means that we expect the primary General Government deficit to be around 2.8 percent of GDP. We don’t know the interest bill in 2011 for the IMF loan and for the outstanding privately held debt issued under foreign law. If we assume that these account for 10 percent of the total interest bill on the general government debt – probably an overestimate as interest rates on the IMF loan are lower than on the rest of Troika funding – then we would have to add 0.72 percent to the primary deficit as a percentage of GDP to obtain an estimate of the budget deficit that would have to be funded by the Greek government, say 3.5 percent of GDP. We would have to add to that any maturing IMF loans and any maturing privately held sovereign debt not under Greek law. This is on the assumption that even those creditors under international law that continue to get serviced in full, would prefer not to renew their exposure to the Greek sovereign once they have been repaid. In addition, future disbursements by the IMF under the first Greek programme would be at risk following a Greek exit. This would create a further funding gap.
Assume the Greek authorities end up (very optimistically) having to find a further 5 percent of GDP worth of financing. This could be done by borrowing or by monetary financing. Borrowing in ND-denominated debt would likely be very costly. Nominal interest rates would be high because of high anticipated inflation – inflation that would indeed be likely to materialise. Real interest rates would also be high.
Although the Greek sovereign’s ability to service newly issued debt would be greatly enhanced following its repudiation of most of its outstanding debt, the default would raise doubts about its future willingness to service its debt. Default risk premia and liquidity premia (the market for ND-denominated Greek debt would be thin) would raise the cost of borrowing in ND-denominated debt. Even if the Greek authorities were to borrow under foreign law by issuing debt denominated in US dollars or euro, default risk premia and liquidity premia would likely be prohibitive for at least the first few quarters following the kind of confrontational or non-consensual debt default we would expect if Greece were pushed out of the euro area.
So the authorities might have to finance at least 5 percent worth of GDP through issuance of ND base money, under circumstances where the markets would inevitably expect a high rate of inflation. The demand for real ND base money would be very limited. The country would likely remain de-facto euroised to a significant extent, with euro notes constituting an attractive store of value and means of payment even for domestic transactions relative to New Drachma notes. We have few observations on post-currency union exit base money demand to tell us whether a 5 percent of GDP expected inflation tax could be extracted at all by the issuance of ND – that is, at any rate of inflation. If it is feasible at all, it would probably involve a very high rate of inflation. It is possible that we would end up with hyperinflation.
The obvious alternative to monetisation is a further tightening in the primary deficit through additional fiscal austerity (of something under 5 percent of GDP), allowing for some non-inflationary issuance of base money. Because Greek exit would be in part the result of austerity fatigue in Greece, this outcome does not seem likely.
A collapsed banking system, widespread default throughout the economy, a continuing non-competitive economy and high inflation with a material risk of hyperinflation would make for a deep and enduring recession/depression in Greece. Social and political dislocation would be certain. There would, in our view, be a material risk of a downward spiral of dysfunctional politics and economics.
Consequences for the remaining euro area and EU member states of a Greek exit
For the world outside Greece, and especially for the remaining euro area member states following a Greek exit, the key insight would be that a taboo was broken with a euro area exit by Greece. The irrevocably fixed conversion rates at which the old Drachma was joined to the euro in 2001 would, de facto, have been revoked. The permanent currency union would have been revealed to be a snowball on a hot stove.
Not only would Greek official credibility be shot, the same thing would happen for the rest of the EA member states in our view. First, monetary union is a two-sided binding commitment. Both sides renege if the accord is broken. Second, Greece would only exit from the euro area if it was driven out by the rest of the euro area member states, with the active cooperation of the ECB. Even though it would be Greece that cuts the umbilical cord, it would be clear for all the world to see that it was the remaining euro area member states and the ECB that forced them to wield the scalpel.
It does not help to say that Greece ought never to have been admitted to the euro area because the authorities during the years leading up to Greek membership in 2001, knowingly falsified the fiscal data to meet the Maastricht criteria for EMU admission, and continued doing so for long afterwards.6 After all, what Greece did was just an exaggerated version of the deliberate data manipulation, distortion and misrepresentation that allowed the vast majority of the euro area member states to join the EMU, including quite a few from what is now called the core euro area7. The preventive arm of the euro area, the Stability and Growth Pact (SGP) which, if it had been enforced would have prevented the Greek situation from arising, was emasculated by Germany and France in 2004, when these two countries were about to be at the receiving end of its enforcement.
Euro area membership is a two-sided commitment. If Greece fails to keep that commitment and exits, the remaining members also and equally fail to keep their commitment. This is not just a morality tale. It has highly practical implications. When Greece can exit, any country can exit. If we look at the austerity fatigue and resistance to structural reform in the rest of the periphery and in quite a few core euro area countries, it is not plausible to argue that the Greek case is completely unique and that its exit creates no precedent. Despite the fact that both Greece’s fiscal situation and its structural, supply-side economic problems are by some margin the most severe in the euro area, Greece’s exit would create a powerful and highly visible precedent.
As soon as Greece has exited, we expect the markets will focus on the country or countries most likely to exit next from the euro area. Any non-captive/financially sophisticated owner of a deposit account in that country (or in those countries) will withdraw his deposits from banks in countries deemed at risk - even a small risk - of exit. Any non-captive depositor who fears a non-zero risk of the future introduction of a New Escudo, a New Punt, a New Peseta or a New Lira (to name but the most obvious candidates) would withdraw his deposits from the countries involved at the drop of a hat and deposit them in the handful of countries likely to remain in the euro area no matter what - Germany, Luxembourg, the Netherlands, Austria and Finland. The ‘broad periphery’ and ‘soft core’ countries deemed at any risk of exit could of course start issuing deposits under English or New York law in an attempt to stop a deposit run, but even that might not be sufficient. Who wants to have their deposit tied up in litigation for months or years?
Apart from bank runs in every country deemed, by markets and investors, to be even remotely at risk of exit from the euro area, there would be de facto funding strikes by external investors and lenders for borrowers from these countries. Again, putting under foreign law (most likely English or New York) all cross-border (or perhaps even all domestic) financial contracts and instruments could at most mitigate this but would not cure it.
The funding strike and deposit run out of the periphery euro area member states (defined very broadly), would create financial havoc and mostly like cause a financial crisis followed by a deep recession in the euro area broad periphery. The counterparty inflow of deposits and diversion of funding to the ‘hard core’ euro area and the removal (or at least substantial reduction) of the risk of ECB monetisation of EA sovereign and bank debt would drive up the euro exchange rate. So the remaining euro area members would suffer (at least temporarily) from an uncompetitive exchange rate as well from the spillovers of the financial and economic crises in the broad periphery.
As noted by the new IMF Managing Director, Christine Lagarde (Lagarde (2011) and confirmed by Josef Ackerman (Ackermann (2011, p.14)), the European banking sector is seriously undercapitalised. It would not be well-positioned, in our view, to cope with the spillovers and contagion caused by a Greek exit and the fear of further exits. Ms Lagarde was arm-twisted by the EU political leadership, the ECB and the European regulators into a partial retraction of her EU banking sector capital inadequacy alarm call.10 However, this only served to draw attention to the obvious truth that despite the three bank stress tests in the EU since October 2009 and despite the capital raising that has gone on since then both to address any weaknesses revealed by these tests and to anticipate the Basel III capital requirements, the EU banking sector as a whole remains significantly undercapitalised even if sovereign debt is carried at face value. In addition, the warning by Ackermann that “… many European banks would not be able to handle writing down the sovereign bonds they hold on their banking books to market levels…” (Ackermann (2011), see also IMF (2011, pp. 12 -20)) serves as a reminder of the fact that Europe is faced with a combined sovereign debt crisis in the euro area periphery and a potential banking sector insolvency crisis throughout the EU.
A banking crisis in the euro area and in the EU would most likely result from an exit by Greece from the euro area. The fundamental financial and real economy linkages from the rest of the world to the euro area and the rest of the EU are strong enough to make this a global concern.
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Ok, now we get it...
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"instead of staying and dealing with what will likely be a long long depression."
I don't think that it'll really make a difference, the outcome will be, for everyone everywhere, a long, long depression (that'll never "end," that is, there will be no recovering to some past height).
The ONLY thing that could be different is that the Greeks themselves could rid themselves from the suspense.
“More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.” - Woody Allen... if only a roach motel could work this well ...
Nationalize the banks, greece should take care of the people and companies of greeces first, fuck the rest of the world and its banks ( as they have and will continue to try to punish the people of greece). Sorry, this article is nothing but banker bullshit.
Greece should see this for what it is... war.. They need to protect themselves first and see the enemy for who they are. Greece you have a long history, beautiful land and resources, you dont need another mans fake currency, make your own and do an organized default. The world needs to nationalize its banks, and put the printing of money back into the governments hands.
Fuck the banks. Purge this TBTF banks and the world will be on to recovery.
"Greece has defaulted on its external sovereign debt obligations at least five previous times in the modern era (1826, 1843, 1860, 1894 and 1932)."
Plus ça change, plus ça reste pareil
comme les belles femmes!
five time woman; no money, no woman, no cry! Its bye bye life!
Only one solution for Greece : Let financial reality now dictate to Historically fed delusion its ugly truth; ABOLISH THE PEOPLE. LET FOREIGN OLIGARCHIES RULE. There, problem solved!
The writing will then be on the wall for the rest of the first world; we will recalibrate to the norms of third world. Palestine, Irak, Afghanistan, Pakistan; the new norm for human rights and world Oligarchy play. Your labour and RM, our Extractive Empire!
And first world Fiat mega bubble is just a MEANS to that end, all people worldwide will be on the same page. Islands of feudal wealth in a sea of misery. The true face of Reganomics Big Bang and NWO outsourcing.
What a clever sleight of hand and people don't realise it.
Even in Germany the sheeple now growl; watch out for local election results there today...Los Indignados!
"A key difference between the ‘Greece stays in’ and the ‘Greece exits’ scenarios is that we believe/assume that if Greece remains a member of the euro area, there would be official funding for the Greek sovereign (from the Greek Loan Facility, the EFSF and the IMF)"
WHERE WOULD SUCH FUNDING COME FROM? Do these people not get it that the tensions are BECAUSE there's not enough "money" to do such things?
The music has stopped. There's no more growth to prop things up. Everyone is starting to retrench, and those who don't have real shovels aren't going to be able to borrow any anymore. The rotting corpses will be there for all to see...
agter ww2, the world forgave the crushing debt of germany, and what happened, did the world fall apart because bankers and so forth got a hair cut? umm no
Quit living in the past!
Post WWII there was suppressed consumption and growth. There was a LOT or resources yet to mine (oil etc). THIS ISN'T THE SAME TODAY!
If Europe escalates it's likely to put pressure on gold prices initially as the dollar gains. Personally since I sold my gold last summer I can't wait for low prices to buy again so bring it on.
Greece has made it's choice. The majority don't want to be slaves any longer. The new elections will confirm it. The default will come, Greece will recover soonest, and the apologists will turn their attention to the next nation with empty threats that will be shown for what they are. They will again use their childlike religion against adults to scare them into bowing and praying and donating their future to the church. After Iceland, Greece. After Greece Spain. Entropy will prevail.
Amen. America's turn at defaulting again (technically America defaulted after fighting a civil war and playing right into the bankster's hands again in 1913) will be spectacular. He who defaults/come clean first, will recover first. This is why JPM is coming clean, or atttempting to make it look as such, now. JPM has always had only one mantra-"Gold is money and everything else is credit." These guys are the market, is it any wonder that they (essentially The Fed and U.S. government) are so good at front-running themselves.
Time for a happy Hugo.
1- "Greece will become like Venezuela, but without oil and without an army. Are the Germans willing to pay for someone who wants to imitate Chavez?"
-Mr. Pangalos (Greece's deputy prime minister)
http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&i...
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2- Venezuela's Maldonado wins Spanish GP
If I lived in Europe, I would be putting all my savings into gold. I do not understanding fleeing to either the ND or the Euro banked in a different Euro country. Get out of the fiat. That is all Greece is doing. They are pointing out that the Euro is a fiat currency. The paper does not have the stored value of either Gold, Silver, or Copper coinage. Why those living in Europe, either in or out of Greece are not fleeing the fiat is incomprehesible.
Pssst, they are fleeing the Euro. That is the only eason the Euro has not come gone to parity with the dollar. See the numerous articles on the CHF pegs failing.
Absolutely correct. Former depositors shouldn't be hiding euros under their mattress, but instead buying precious metals. There is no safety in the Euro currency.
The "gold bugs" and JPM killing silver stackers realized the value of the Federal Reserve note long ago and have been adding to their collections for years (sometimes decades). I fear that we'll see the classic "flight to dollars" when the EU/Euro shitstorm hits. I've got to wonder, are the people who run to another fiat just idiots with a lot of money? After taking losses up the butt for a few years, why flee to the currency where you know they can (and will, and must) legally print money into oblivion?
Definately not safe to invest in land in Greece. With an unstable, weak, non existant govt with lack of domestic security, it makes no sense to own something that will likely be taxed into oblivion or seized arbitrarily.
Gold and silver should be bottoming right now because they just cannot be realistically manipulated much lower. I think we're about to see the next upside move in both metals. Cheers to the patient.
Because people just don't understand. And thats why there is no bubble in precious metals, not even a small one. No one has gold. Just imagine what the potential is if just a small % finally understands that fiat = fail and starts buying PM.
It's all gone to Switzerland and the Swiss Franc. So has mine. Gold coming out of their fekking ears over there.
The law demands that we atone
When we take things we do not own
But the bigger thief we will not bother
Who steals the value from the dollar
A proper Greek exit will be determined when it is decided where the gold is gonna reside.
If they print the drachma, what do they base it on?
A "promise to pay"? LOL
The only credible promise they can make at this point is a promise to print.
The problems that Greece faces could be solved by three things:
- Change to the drachma over a weekend, with no warning - this would prevent a run on the banks, since there would be no point. If there was a run on the banks, just print up enough ND to satisfy the run.
- pass a law that says that all contracts, even the ones denominated in Euros with foreign counterparties, are now denominated in drachmas
- take all of the Euros that were confiscated from the Greek banks during the conversion to the ND, and use them to sop up excess drachmas and prevent too big of a devaluation.
Your scenario sounds entirely plausible. Expect it to occur this summer.
Buiter is obviously a complete moron.
Look at this nice analysis of his mindlessness:
More BuiternomicsWe have commented on the monetary crankery of Citigroup chief economist Willem Buiter before. In his latest research missive (pdf), Buiter reiterates several of his most 'out there' ideas regarding how the central banks could engage in intensified monetary pumping. Much of this stuff comes originally from Silvio Gesell, who was an economic crank of the first order. Buiter may well surpass him.
A few snips from his report:
(emphasis added)
As noted above, this is certainly not the first time that such nonsense has been spouted. As we pointed out to friends in an e-mail discussion group after looking at Buiter's missive:
Just as a reminder: the universal phenomenon of time preference can not 'go below zero'. Future goods will always trade at a discount to present goods, it can not be otherwise! If we knew that the earth was going to be struck by an asteroid in a week's time, our time preference may rise to something approaching infinity, but there is no situation conceivable in which it could actually go negative.
It is utterly amazing to us that the 'chief economist' of one of the world's biggest banks is capable of putting such crankery to paper. But wait, it gets better:
Well, thanks for giving us a complete list of cranks to avoid! And he really has revived Gesell again! This is truly beyond belief. As an aside, it seems there is finally a reason to cheer for the 'central banking establishment' if only because it has actually so far refused to go along with this crankery.
He continues (hold on to your hat):
'We fear it won't'! Bwahahahaha! We thought we had seen it all! Can whoever has the key to Buiter's office please lock him in and throw away the key?
We would be remiss not to mention his 'helicopter money' rant as well (put down the coffee before continuing):
(emphasis added)
You couldn't make this up if you tried. 'As any well-informed monetary economist would have done' - really? If that is so, then what we said above is hereby confirmed:
The science of economics has been taken over by a coven of witch doctors.
Just drop money from the sky and if people refuse to spend it, add zeroes until they do! Apparently Buiter has been instructed by Gideon Gono on how to 'revive the economy'.
Economic activity is not funded by money. Money is merely the medium of exchange – and if we want to have a fair degree of certainty in economic calculation, money must be sound. Obviously when the helicopter drops begin, monetary calculation will be thrown for a loop. The result would be utter economic chaos.
In short: the 'chief economist' of Citigroup recommends that we should adopt total chaos as the 'solution' to the economy's woes.
http://www.acting-man.com/?p=16782
I feel certain a currency tax will be the solution. I believe japan already has a 0.25 percent annualized tax on bank checking and savings account balances
It can be sold by the dim ocrat party as a tax on selfish rich misers who refuse to do their part to help the economy
"It can be sold by the dim ocrat party as a tax on selfish rich misers who refuse to do their part to help the economy"
PROTECT THE BANKSTERS!
Either you really are Joe the Plumber, or you write well in character. LOL, love the technique!
There already is a currency tax. It's called inflation.
Every newly created dollar gains its value by stealing value from dollars already in existence.
"It's magic!" --Keynes
@teacherdude Strangely, SYRIZA didn't want to be part of ND/PASOK electoral suicide pact.
THE 25 STEPS TO BE TAKEN IMMEDIATELY AFTER THE EXIT FROM THE EURO IN ORDER GREECE BE ALIVE!
1. Develop and implement a plan of accelerated production reconstruction with a flagship public sector and an enhanced program of public investment, geared primarily to develop production, increase production and value prostthemenis stable employment free from the constricting bonds of major projects 'Community' choice 'and the Circuits kratikodiaiton business.
2. Substantially increase all wages, salaries and pensions, so as to replenish the large losses on long-term austerity and effectively revived the internal market. The economy does not suffer from lack of loans but dies due to extinction in the purchasing power of population
3. Regulating the lower earnings to cover the annual real basic needs of family and ergatoupallilikis lower pensions at 80% of these earnings.
4. Establishment Cost of Living Allowance genuine importance on an original price index, which measures the true cost of living for the worker household.
5. Elimination of all forms of 'flexible', 'temporary' and 'part time', both public and private sectors and rigid base consolidation of stable and permanent employment.
6. Ensuring equal rights in employment and social insurance for all employees without any preconditions, divisions and exclusions.
7. Transformation of the Public Employment to fund the unemployment insurance by redirecting all the resources to effectively support the unemployed, with unemployment at 80% of basic salary for the full period of unemployment and social security guaranteeing the full rights of the unemployed.
8. Repeal all anti-insurance laws, rules and regulations, repayment of the indebtedness of the state and individuals in the social security system, complete independence of the social security system by the government guaranteeing the redistributive character and substantial increase in employer contributions and state.
9. Securing a real public health and social welfare will not be a hall for private health, nor the individuals are subdivided suppliers and multinationals.
10. Ensure a single free public education under the compulsory public school and twelve years of public higher education in light of current requirements for education, research, academic and social life.
11. Remove all exemptions and forokinitron to large companies and cumulative imposition of taxation on corporate profits, the financial transactions of all kinds and in large movable and immovable property values, not just physical and legal persons.
12. Slashed in half of the direct taxation of micro businesses and full utilization of the development, investment and other subsidies of state for direct support of small and medium enterprises in the production plan for the reconstruction of the economy.
13. Radical overhaul of the tax system by direct inversion of the relationship - indirect taxes and to stop bleeding serves as a mechanism of labor and popular income, small business and individual producer.
14. Radical overhaul of all expenditure by the State government first and foremost a drastic cut and non-obvious costs associated with the government, ministers, councilors, MPs and parties, reviewing the entire public procurement policy, the abolition of administrative ydrokefalismou intentionality, of subcontracts and assignments, the retrospective claiming the whole of government property, movable and immovable, which was gratuitous, sold out or broken occasionally by governments, the abolition of secret funds and all "special accounts" for the immediate termination of all Leonteio , colonialist and gratuitous contracts and agreements with the public "imeterous' and business interests, the elimination of funding for NGOs and other" voluntary "or private organizations, a thorough review of all military spending on the basis of real needs for national defense .
15. Nationalisation of all old utilities and independence from private interests that are subdivided in order to redefine the role and their relationship to both the government and to the acquisition, rationalization in the interests of social workers, enforcing labor and social control, provision of utilities will not be an unbearable burden for the folk household and the protection of basic social and public goods by speculation and private monopolies.
16. Nationalization of the Bank of Greece, like the big banks to significantly reduce the financial burden on the economy, the banking system by redirecting usury and speculation with "toxic" and non-credit products to support the productive restructuring of the economy combined with removing the barriers and the secrets of the banking system and ensuring total transparency of social control of banking operations.
17. Tackling over-indebtedness of households and small businesses by removing all private debts of those households and small businesses are unable to serve, with the immediate establishment of developmental and social criteria for bank financing, the elimination of all extra charges attached to loans and imposing higher levels of interest rate financing which will be determined by the rate of the interbank market and the strength of the national economy.
18. Hitting the monopolies, oligopolies and cartels in the market, through the dynamic development of the productive role of the state, non operating coastal companies, the elimination of trade and other secrets, the Registration of the shares, enforce labor and social control in very large enterprises - particularly the multinationals-for preferential strengthening of the cooperative, small and medium enterprises as well as direct producers.
19. Direct income support for farmers together with the support of their production means levying a competitive protection of domestic production based on criteria of quality and productivity, direct all debts to producers heavily in debt, hit the dictatorship of wholesalers and middlemen of all sorts so the farmer to ensure adequate producer prices and consumer low market prices.
20. Exploiting the full potential of the global economy and international relations with all peoples and all states on the basis of full freedom of trade and mutual benefit, against the monopolization of technology and market by multinationals, against the shackles and constraints posed by international organizations and "economic integration" of strengths and markets.
21. Providing a fixed proportional representation electoral system for national and local elections by abolishing all undemocratic laws, regulations and measures that distort the genuine and equal participation and expression of the people.
22. Upgrading of parliament to repeal the existing regulation and undemocratic party funding, institutional guarantee fairness MPs and parties to ensure effective accountability of government, removing all the barriers and secrets, inclusion of public administration, police and armed forces in direct control of the House.
23. Publicity and public repudiation of all secret or other agreements, commitments and conditions accepted by governments at various times, both within NATO and unilaterally by the U.S. and other countries, which harm the immediate interests of the people and country undermine national sovereignty and jeopardize the national integrity.
24. Prompt return of all military missions have been sent abroad and adopt all necessary measures not to allow any foreign power to use its territory on their own political and military purposes.
25. Notice of elections for Constituent Assembly representing a broad measure of his own people and for the sole purpose of drafting and adoption of a new democratic constitution.
"A flagship public sector"..Sir what have you been smoking for the last years? "Substantially increase all wages, salaries and pensions" "Direct income support" "Establish allowance" LOL x 3
There is no easy way out based on populistic slogans (no matter how seductive collectivism is) and the people better wake up to that and start thinking philosophically about whether the government should be entrusted to screw up anything more than they have already done. The Greek government needs to shrink ASAP and not try to start 25 new projects when it can't even pass the essentials of Governance 101 such as running a balanced budget like any organization or household has to do.
What is this "government" you are speaking off in Greece?
The one appointed by the ECB? That's not a government, that's called accounts payable.
But agreed, Greece needs to get to sharpening their pencils and figuring out how to live without certain modern conviences for a long time.
Wouldn't it be easier to restore the Monarchy and adopt feudalism? It would certainly take less space here.
Tyler,
Thanks for the SnorgTees ads...!!!!!!!
RE: Timing
This reminds me of calculating the amount of time necessary to complete a home improvement project. Take the original estimate, triple it, and you're a bit closer. Whatever most pundits predict for EU collapse, triple the amount of time and you're getting close. Never underestimate the MSM and EU bankers' ability to postpone, delay, and obfuscate.
When Greece fails, the Fed and the ECB will gear up the printing press. All the banks Euro banks and depositors will be bailed out. If they money printers want to control the printing presses for a little longer, bailouts are the only options.
This thing isn't going to end through a systemic collapse. The collapse simply won't be allowed. Literally an unlimited amount can and will be printed. The course of hyperinflation has already been chosen.
Correct, they will never learn. History is selectively remembered...
'When Greece fails, the Fed and the ECB will gear up the printing press.'
You betcha. If a flyspeck country like Greece thinks their crappy New Drachma is gonna win a devaluation race with Ben Bernanke, they are sadly mistaken.
We'll show them! USA #1!
Dead on SilverJournal. The CBs didn't go this far to turn back now. Their lifestyles and bonuses can't suffer for something as crazy as properly getting the situation under control.
Print and Hope, Print and Pray. Print until it all goes away. (I just made that up ... but I see the makings of a future children fright book)
This is the strategy and it is not going to change.
Plan accordingly.
George ... The Greek .... From Canada
"Peripheral countries" of the Euro Area are ALREADY in recession more likely depression with no signs of recovery in the short term. This is a freeking scenario either exiting the Euro Area or staying into it.
It involves far more than currencies, we all know that. It seems to me Greece exiting the Eurozone is just the big financial bubble's implosion and finantial blast's beginning. More than fireworks coming soon enough.
Better dead than a slave. If they come at you with armies set them on fire.
Summary:
"...the authorities during the years leading up to Greek membership in 2001, knowingly falsified the fiscal data to meet the Maastricht criteria for EMU admission, and continued doing so for long afterwards."
Imagine that!
I said it elsewhere in these pages, but there are a number of reasons to keep the Greeks on-side so to say, not the least of which is that Greece is a buffer zone between Europe and an increasingly hostile middle east and Greece is a potential transit country for one of the few supplies of natural gas to north central europe that does not transit the former Soviet Union. Greece doesn't need to be kept in the Euro, but I doubt they will be left totally swinging in the wind by the rest of Europe.
Greece needs to go back to the Drachma, and then set up a prop trading desk backed by the power of the printer.
That's where all the "money" they owe came from in the first place. That's what they should send back in return.
Orderly default is on the table. Finally. Safeguards were put in place but until the system is tested, nobody knows if these safeguards are worth a hoot.
For us ordinary mortals, the only safeguard is to own and accumulate more physical gold and silver. Nothing else is safe for us. If you're one of the super rich and you've got billions trying to convert to physical. SOL.
Amazing !
Banks prepare for the return of the drachma
Some banks never erased the drachma from their systems after Greece adopted the euro more than a decade ago and would be ready at the flick of a switch if its debt problems forced it to bring back national banknotes and coins.
Willem Buiter Ahaahahaahahaahahahaahaahahaahahahahahahaahahahahaahhahaahahahahaahahahaahahahahahaahahaha!!!
Guy doesn't know his head from a hole in the ground.
When Greece goes, there goes the dam. Aside from CNBC downplaying its significance, and Uncle Warren making a special guest appearance out of the bathtub stage left, assuring everyone that all is well. Look fo Spain and Italy to be next on deck (watch those yields AND riots). OTC swaps/derivatives will rear their ugly heads yet again---this means YOU, Jamie and Blythe. Then all bets are off, and it's a free for all!!
Got popcorn?
If Greece defaults and exits Euro, it will be like Iceland. They will be better off and on way to recovery as they will be rammed with tourists. If they stay in the ZEuro,the pain will continue until it is unbearable.
Hearing that Iceland now almost back to investment grade!!!
Say what you like about Krugman but he has been one of the most accurate forecaster of how events have panned out since the start of the financial crisis. Here's how he see's this thing playing out (from his latest blog):
Some of us have been talking it over, and here’s what we think the end game looks like:
1. Greek euro exit, very possibly next month.
2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.
3a. Maybe, just possibly, de facto controls, with banks forbidden to transfer deposits out of country and limits on cash withdrawals.
3b. Alternatively, or maybe in tandem, huge draws on ECB credit to keep the banks from collapsing.
4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:
4b. End of the euro.
And we’re talking about months, not years, for this to play out.
Krugman isn't a fool because of his predictions. He is a fool because of his prescription to solve the crisis. No one on this blog is surprised by Europe. A two year old could see what was coming.
Unlike Krugman, we don't have Nobel prizes....but we do have Noble Bitchez!!!
Plumple - No he hasn't ! You bullshitter !
Krugman has been blaming Germany, calling for Germany to bail out all in EUR, calling on IMF to bail EUR out, etc...same ole Keynesisn BS !
What you quote above from Krazy Krugman, ZH was talking about 2 years ago...definitely not Krugman.
Krugman is just jumping on the obvious to hide the fact that he has been wrong most of his career. Krugman is from the same school as Bobby Brusca.... Everything is great until it is not...
I told you not to touch those brown tabs Clown - they make you angry and irrational. It is Krugman:
http://krugman.blogs.nytimes.com/2012/05/13/eurodammerung-2/
Lets be honest here - all this 'bailout' money from the EU to Greece is really just for the benefit of the insolvent European banking system. The threat by the EU to shut the spiggot is an empty one.
Greece is a convenient scapegoat for the awful truth about the state of German and European banks. I wouldn't be so sure that Europe's banking elite are ready to press the self-destruct button just yet.
Expect a spike in the dollar to send Gasoline to $2.00 and gold to $1200. you betcha fer sher
Well one argument against this would be, Iceland already set up an example to default on debts and none of the countries in trouble have followed suit on their path until now. So if Greece defaults it may not follow that people in Portugal, Ireland, Spain, Itlay etc will assume that their country is next and cause the type of contagion that authors describe unless there another forcing function. It is still possible what the authors indicate may happen but Greece pulling out by itself may not be adequate to trigger that. If Greece exit by itself is a trigger, it may take a much longer time scale for the contagion to spread. One can only speculate as the authors do, but not useful for investement stragety
Why is Buiter assuming that debts denominated in dollars or written under English law have to be paid? Perhaps it's wishful thinking. Or, maybe he expects that after 5 years and a World Court judgement, JPM or GS (ie the gov't) will send in some marines to collect.
Greece should do an Iceland and screw the liar bankers.
Greece has plenty of oil and gas under the sea, same as Syria, Lebanon and Palastine(Gaza).
They need to open up the exploration rights to the Chinese exploration companies in exchange for Chinese financial aid until the oil and gas becomes available.
Much of the Greek reluctance to pull out of the EU is based on the fantasy that the Eurozone will continue to exist in it's present form after they leave.
When in actuality other counties such as Spain and Portugal will follow. A diminished EU will be in turmoil from bank failures and broader austerity causing other nations to raise the prospect of suspending their relationship. Once this happens the EU will no longer be the attractive option that Greece was so eager to join.Greece isn't going to leave the Euro. It's gonna happen like this:
*Hollande is gonna look to cover his ass, so he is gonna come clean about France's REAL deficit and debt levels.
*France will freak and push for printing.
*Germany will bow to the pressure to print... for a little while.
*Germany will grow weary of it all, figure out that it is cheaper to directly bail out their own banks (rather than indirectly do so by bailing out all of the rest of Europe).
*Germany leaves the Euro before the end of 2013.
The Syriza radical left bloc led by Alexis Tsipras, the biggest winner in last Sunday’s Greek vote, has advanced a highly effective program of class-based demands including: the rollback of wage, pension, and public employee austerity cuts; the rescinding of anti-union and anti-worker measures; democracy and social justice; investigations and indictments for financial crimes; and a debt freeze on onerous payment obligations of the Greek state. This winning program of resistance against the infamous troika of IMF-European Central Bank-European Commission contrasts with the programmatic impotence of the anarchist-dominated Occupy Wall Street, and should be carefully studied by every serious opponent of 1% rule worldwide.
Greece urgently needs a debt freeze within the euro. Last week’s elections open the perspective of a European anti-austerity bloc capable of defeating the neo-Bruening policies of Merkel, who may already be on her way out, and of seizing control of the European Central Bank for a policy of credit creation for job creation based on European-wide infrastructure.
Since neither zombie banks nor national budgets can finance a European economic recovery, the ECB must be forced to issue a series of trillion-euro tranches of 0%, 100-year credit to buy bonds devoted exclusively to great projects of infrastructure modernization. In this way, the required 40 million productive jobs at union wages can be created.
If Greece holds another round of early elections within a month or two, the latest polls indicate that Syriza can attain the majority needed to form the next government. Threats to expel Greece from the euro are scare tactics designed simply to intimidate Greek voters.
The crisis of the world finance oligarchy has started a new downwar lurch with the exhaustion of the €1 trillion of 1%, 3-year loans wasted by ECB boss Draghi of Goldman Sachs on the hopelessly insolvent Eurozombie banks. Banksters are apoplectic about the prospect of a Greek moratorium.
Two years after the New York Stock Exchange flash crash of May 6, 2010, Jamie Dimon of J. P. Morgan Chase has announced huge losses generated by the London proprietary trading desk of his bank. As usual, the losses come from bad bets on derivatives, in this case synthetic indices (CDX) based on credit default swaps, the ultra-toxic derivatives which destroyed AIG in 2008. Dimon has been raving against excessive regulation, but this latest debacle shows that Dodd-Frank and the diluted Volcker rule are so weak as to be worthless. To banish the specter of a new panic followed by more banker demands for bailouts, it will be necessary to outlaw credit default swaps and synthetic indices based on credit default swaps. A 1% across-the-board Eurotobin transfer tax must be levied on all financial transactions. A strengthened Glass-Steagall regime of separating commercial banking, proprietary trading/investment banking, and insurance should also be established to prevent future crises of this type.
The UN observer mission in Syria has now been attacked twice in the past week by NATO-backed terrorist death squads, who have also killed scores in Damascus with coordinated suicide bombs on government agencies. The killers are obviously al Qaeda fanatics in the service of NATO, but Norwegian NATO General Robert Mood of the observer mission refuses to pin the responsbility where it belongs – on his fellow NATO officers. The purpose of observers must be to observe and report, but the UN reporters have reported virtually nothing — because they are acting as tools of NATO.
Syrian UN ambassador Jafari has exposed the role of Turkey, Lebanon, Saudi Arabia, and Qatar in deploying terrorist fighters from Libya and Turkey into Syria. Jafari called attention to a CD prepared by the Syrian government showing the confessions of some of these foreign fanatics.
As for Kofi Annan, his Geneva press conference was another whitewash of NATO. If Annan wants to start reconciliation talks, he should announce a date certain for the convening of a national dialogue at the peace table in Geneva. The Syrian government is sure to attend. The congeries of fanatics, dupes, and foreign fighters calling itself variously Syrian National Council or Free Syrian Army is not likely to appear. If they do appear, they are likely to start killing each other before they enter the conference room. NATO, like Hitler before he swallowed Czechoslovakia in 1938, does not want a peaceful solution to the Syrian troubles, but rather wants to keep internal conflict alive sp it can be used as the pretext for invasion, regime chaange, and partition.
Ban Ki Moon, Kofi Annan, Navi Pillay, Valerie Amos, and Gen. Mood are thus imperialist operatives, not international civil servants. With corrupt personnel like this, the United Nations risks extinction on the model of the League of Nations, which perished because it refused to oppose fascist aggression in the 1930s. We are today witnessing the transition away from any concept of collective security in favor of naked appeasement and complicity with the US-UK-NATO aggressor coalition.
This writing style sounds very much like Webster Tarpley. Did you take this from Tarpley or are you Tarpley?
killswitch, thank you for your observations. it will be interesting to see how many of your projections play out.
The thing about Iceland was idiot Gordon Brown gave the game away when he used or more so the case 'abused' anti-terrorist laws on them. That had your everyday sheep pause for a second and think as we where given a glimpse of how these laws could be used to benefit the powers that be.
Don't put it past Germany to go down the same root out of desperation on Greece if they do decide to default.
Still in the denial stage that this situation is recoverable.
The Greek banking system would be destroyed even before Greece had left the euro area.
How would they be able to tell?
The EUR is actually up against the dollar after starting off down.
Really can't make this stuff up. The Euro is on the brink of extension and is gaining against the dollar. Amazing.
The day the euro goes down and eveyone runs to the dollar we will see a strong dollar, lower prices, and severe pain in the US economy due to all the debt. The markets will crash and the dominos of corporate default will start and pick up speed rapidly. The Fed will have to print to inflate and we will go into hyper-inflation.
Now do you understand why the euro is going up? The Fed can't let it go away......not without a fight.
I think the big point that everyone is missing here is the fact that the WORLD economy has hit the proverbial wall. It doesn't matter if they are bailed out with euros, leave and go to drachmas, pay the debt, default on the debt, increase retirement age or lessen it, increase or decrease pensions, etc. The bottom line is that the world is in trouble because there is too much debt for the economy to service. So packaging it differently, renaming it, and changing the time or place to pay isn't going to help.
Fact is, after all this austerity bs around the world, people are going to get zip for their "sacrifices". So everyone sucks it up takes a cut and we pay the greedy, bastard bankers off, then what? What is left? What do we get in return? Nothing. There will still not be enough jobs to go around, there will still not be enough demand to generate enough production to fund the world at current levels. There is a great correction coming and it won't matter what we call the currency, who is in control, or whether we have deflation or severe inflation, the Piper is about to collect for all the high living that has been going on all over the globe.
No way out. Pay we will.
+1 for being a regular ray of sunshine this morning...
Chart: http://link.reuters.com/zer28s
How to play this? Short US markets as they re-couple with the rest of the world. Greece leaving the EU (finally) + Asia meltdown/outflow worries should crash the market. Now every one is using the 1987 benchmark of a total equity wipe-out.
And these f*cking HFT dumb machines trading on air, watching some Asian markets now. Pitiful trading. These things should panic hard, cut trades, go short and short-wire. Gonna be brutal
WAR!?
FUD from a self-interested party. I don't believe a damn word of it.
Wake me up when the bank run starts.
Paul Krugman: If Greece goes (which could happen as soon as next month) then there will be a run on banks in Italy and Spain.
http://investmentwatchblog.com/paul-krugman-if-greece-goes-which-could-happen-as-soon-as-next-month-then-there-will-be-a-run-on-banks-in-italy-and-spain/#.T7CABrVe4dU
Krugman is sooo...insightful. he is only 2 years late with his call.
Another master of the obvious when it happens, otherwise his answer is always to print print print.
A real D_bag.
If the Grexit happens. I for one will be vacationing there this xmas and paying in ND.
Anticipatory repudiation From Wikipedia, the free encyclopedia
This articleneeds additional citations for verification. Please helpimprove this articleby adding citations toreliable sources. Unsourced material may bechallengedandremoved.(February 2008) Contract law Part of thecommon lawseries Contractformation- Offer and acceptance
- Posting rule
- Mirror image rule
- Invitation to treat
- Firm offer
- Consideration
Defenses against formation- Lack of capacity
- Duress
- Undue influence
- Illusory promise
- Statute of frauds
- Non est factum
Contract interpretation- Title-transfer theory of contract
Excuses for non-performance- Mistake
- Misrepresentation
- Frustration of purpose
- Impossibility
- Impracticability
- Illegality
- Unclean hands
- Unconscionability
- Accord and satisfaction
Rights of third parties- Privity of contract
- Assignment
- Delegation
- Novation
- Third-party beneficiary
Breach of contract- Anticipatory repudiation
- Cover
- Exclusion clause
- Efficient breach
- Deviation
- Fundamental breach
Remedies- Specific performance
- Liquidated damages
- Penal damages
- Rescission
Quasi-contractual obligations- Promissory estoppel
- Quantum meruit
Related areas of law- Conflict of laws
- Commercial law
Othercommon lawareasAnticipatory repudiation, also called ananticipatory breach, is a term in thelawofcontractsthat describes a declaration by the promising party to a contract, that he or she does not intend to live up to his or her obligations under the contract.[1]
Contents[hide]
[edit]Repudiation and retraction
When such an event occurs, the performing party to the contract is excused from having to fulfill his or her obligations. However, the repudiation can be retracted by the promising party so long as there has been no material change in the position of the performing party in the interim. A retraction of the repudiation restores the performer's obligation to perform on the contract.
If the promising party's repudiation makes it impossible to fulfill its promise, then retraction is not possible and no act by the promising party can restore the performing party's obligations under the contract. For example, if A promises to give B a unique sculpture in exchange for B painting A's house, but A then sells the sculpture to C before B begins the job, this act by A constitutes an anticipatory repudiation which excuses B from performing. Once the sculpture has left A's possession, there is no way that A can fulfill the promise to give the sculpture to B.
The question arises as to why any party would want to provide notice of anticipatory breach. The reason is that once the performing party is informed of the anticipatory breach, a duty is then created for the performing party to mitigate damages as a result of the breach. Another situation where anticipatory repudiation can occur is where a party has reason to believe the other party is not going to perform and requests reasonable assurances that the other party will perform (see UCC 2-609(1)). If such reasonable assurances are not given, it will constitute anticipatory repudiation, for which the performing party has various remedies, including termination. However, anticipatory repudiation only applies to a bilateralexecutory contractwith non-performed duties on both sides. Additionally, the repudiation must be unequivocal.
[edit]Measuring damagesUCC 2-713(1) tells us to measure damages at the time when the buyer learned of the breach. This is easy with a one transaction sale (e.g. a widget at my door step on X date), but when do you learn of the breach in an anticipatory repudiation? There are three main views:
- When the buyer learns of the repudiation
- When the buyer learns of repudiation plus a commercially reasonable time
- UCC 2-610(a) gives this indication, you would be waiting at your risk if we determined the market price at the time you learn of repudiation.
- UCC 2-723(1) would indicate this, but it would be superfluous with 2-713 so 2-713 must have something other than the plain meaning.
- (1) If an action based on anticipatory repudiation comes to 2-723 trial before the time for performance with respect to some or all of the goods, any damages based on market price (Section UCC 2-708 or Section UCC 2-713) shall be determined according to the price of such goods prevailing at the time when the aggrieved party learned of the repudiation.
- This is the majority view: when repudiation is accepted or within a commercial reasonable time
- Time of performance, when the trail that occurs after the time of performance
- This is different than the plain reading for UCC 2-713.
[edit]See also- Breach of contract
[edit]