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Greek Euro Crisis

#1
Yazata Offline
Today (Monday June 29) dramatic events are taking place in Greece.

Tension among bank depositors in Greece has been rising. There wasn't any huge panic run on banks, but withdrawals were dramatically up. Lines were forming out the doors of banks and in front of ATMs. But it could have been worse and most people apparently figured that something would be worked out at the last minute.

The European Central Bank has already put Euros 89 billion into Greek banks as emergency liquidity assistance, Over the last week that was arriving at the rate of 1 to 2 billion Euros a day to help the banks cover withdrawals, indicating that Greek banks were operating near their limits.

On Sunday June 28, that ECB assistance was frozen.

So the Greek government has ordered Greek banks closed (supposedly for a week) and forbidden withdrawals. Reportedly ATMs will reopen tomorrow, with a 60 Euro ($67) withdrawal limit. It isn't entirely clear whether Greek banks have enough money on hand to even fund that. If everyone makes their 60 Euro withdrawal a day, that will cost the banks 3.5 billion additional Euros for the week.

Another problem is Greek pensioners. Pensions are paid through banks and many pensioners don't have ATM cards and take their money at the till. So they have no access to their money and the government says that it is working out a way for banks to service pensioners.

It's certain that Greece is going to default on its IMF loan repayment installment due Tuesday.

The plan now seems to be for the Greek government to hold a referendum next weekend on whether to agree to the austerity measures that other European countries are demanding in exchange for more assistance. Those measures include pension cuts and tax increases, designed to put the Greek economy on a sustainable basis. The leftist government calls those austerity measures inhuman and is recommending a 'no' vote. Many of the more Keynesian sort of economists say that these measures will shrink the Greek economy when what it really needs is stimulus.

If Greece votes 'no', it's hard to imagine how they can pay the pensions and provide government services without printing money themselves. So the Drachma would probably reappear (and would immediately plummet in value relative to the Euro.) My guess is that lots of Greeks are hoarding as many Euros as they can right now, wishing they had converted their Euro-denominated bank accounts to cash when they had the chance, fearing that their savings accounts may be converted to Drachmas at some unrealistic official exchange-rate before banks eventually reopen. The quick introduction of a new currency is going to be hugely complex and difficult.

A 'no' vote will effectively mean a Grexit, Greece leaving the Euro-zone. Presumably Greece will remain as a European Union member, just one that (like Britain) doesn't use the Euro as its currency.

Companies doing business in Greece are still trying to sort out the situation. Companies make payments to other companies for purchases and sales through banks. They depend on lines of credit to keep store shelves stocked. If Greek banks are off-line and are no longer providing business services, necessities like food might start to become scarce. There are already reports of long lines at gas stations as Greeks try to fill up their cars.
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#2
C C Offline
(Jun 29, 2015 03:51 PM)Yazata Wrote: [...] The leftist government calls those austerity measures inhuman and is recommending a 'no' vote. [...]


I have no idea if the Greek marxists have anything remaining to their ideology that still taps into the materialist traditions of the old guard. But it was always curiously conflicting how much it relied on the system to bring about magic or eventually induce magical resolutions of debt problems.
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