Should Greece remain in the euro-zone after they default?

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Post by Yuri Yukuv Tue Nov 01, 2011 6:36 pm

Dow jones just said that prez recalled it but that the goverment is collapsing

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Post by kiranr Wed Nov 02, 2011 5:39 am

It is best for Greece to opt out of the Euro, devalue their currency and make their exports and tourism competitive again. Atleast, their economy will grow and then they can rise out of insolvency. However, reverting to the Drachma is easier said than done.

Germany and France will oppose this tooth and nail as the Euro will fall and it will lead to a domino effect where every country struggling with its economy will choose to opt out.

It will lead to a crisis only if the parties who have bet against Greece defaulting are major financial institutions, and i think, there are some.

What solution do you see for Greece if they choose not to opt out? Is there a way to strengthen their economy with Germany refusing Eurobonds and lower interest rates?
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Post by VivaStPauli Wed Nov 02, 2011 12:25 pm

Bailing out of the Euro wouldn't just devalue their currency enough to benefit tourism and exports, it'd send Greece straight into a hyperinflation, 1920s style - it would cost Greece, and Europe, far more than any bailout ever could.

Just too late to opt out now, simple as that. The Eurozone has to stick together.
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Post by kiranr Wed Nov 02, 2011 12:35 pm

Then what is the point of this referendum? Do they expect a positive vote on the bailout package when the Greeks have been resisting the austerity drive for some time now?

Even if they stick together, how will Greece survive when they are insolvent? Cutting costs will not help if it affects development in Greece.
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Post by VivaStPauli Wed Nov 02, 2011 12:59 pm

It's a politically motivated move. Nothing good can come from this referendum.

We better all hope the Greek people approve - because this NEEDS to happen, and if they disagree, the President can either ignore the voice of the people, which will lead to riots, or attempt to crash the Eurozone, which will lead to riots f*cking everywhere.

I honestly think the referendum was just a selfish move to strengthen the Presidents own position domestically - it serves no productive purpose, sadly.
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Post by kiranr Wed Nov 02, 2011 1:42 pm

According to recent polls, even though 60% Greeks do not want austerity measures, 70% do not want to leave the Euro. So that is definitely a silver lining.
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Post by Yuri Yukuv Wed Nov 02, 2011 7:05 pm

kiranr wrote:It is best for Greece to opt out of the Euro, devalue their currency and make their exports and tourism competitive again. Atleast, their economy will grow and then they can rise out of insolvency. However, reverting to the Drachma is easier said than done.

Germany and France will oppose this tooth and nail as the Euro will fall and it will lead to a domino effect where every country struggling with its economy will choose to opt out.

It will lead to a crisis only if the parties who have bet against Greece defaulting are major financial institutions, and i think, there are some.

What solution do you see for Greece if they choose not to opt out? Is there a way to strengthen their economy with Germany refusing Eurobonds and lower interest rates?

I dont agree with you there, both of greece's main industries are supercyclical (Tourism and Global Shipping), they will take a while to come back. Shipping in particular is oversupplied as many of the ships that were commissioned to be built during the boom years of 2006-early 2008 are coming online now.

We cant forget about two effects of defaulting then bringing back the drachma (and then devaluing it).

First, there is alot of private debt to foreign creditors that is euro denominated. That debt will remain euro denominated as long as the euro is still around, if they devalue their currency it will become harder and harder to pay that debt in foreign hard currency.

Second, all owners of foreign assets in greece will try to sell their assets as they wouldnt risk a collapse this will result in devaluation of local assets in local prices, huge capital outflows and many greeks themselves will further push down this trend as they try to hold value in foreign currency.

This along with weak supercyclical greek exports will cause huge devaluation even without goverment easing. I am willing to bet that the wealth of the average greek will fall by more than 60% in USD terms.

Its an income vs wealth equation for the greek citizen really, if I had the choice between a cut in either I know which I would choose.

Structural changes were always badly needed in greece anyway, I would look at this as an opportunity and not that big of a problem really.
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Post by Yuri Yukuv Wed Nov 02, 2011 7:43 pm

VivaStPauli wrote:It's a politically motivated move. Nothing good can come from this referendum.

We better all hope the Greek people approve - because this NEEDS to happen, and if they disagree, the President can either ignore the voice of the people, which will lead to riots, or attempt to crash the Eurozone, which will lead to riots f*cking everywhere.

I honestly think the referendum was just a selfish move to strengthen the Presidents own position domestically - it serves no productive purpose, sadly.

Actually im shorting the euro, cheers
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Post by Yuri Yukuv Wed Nov 02, 2011 8:14 pm

G20: All aid to greece frozen until referendum (CNBC)

Move over France and Germany, the big boys are in town
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Post by kiranr Sat Nov 05, 2011 1:37 am

Is Berlusconi off his rockers??

"Berlusconi, facing defections from his own party, insisted he had invited the IMF to offer advice. Berlusconi said on Friday he had rejected an offer of funds from the IMF – "I don't think Italy needs that" – and said his country was more solid than France or the UK."

Source
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Post by Yuri Yukuv Sat Nov 05, 2011 5:45 pm

What do you do for a living kiranr?
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Post by kiranr Sun Nov 06, 2011 2:11 am

Yuri Yukuv wrote:

I dont agree with you there, both of greece's main industries are supercyclical (Tourism and Global Shipping), they will take a while to come back. Shipping in particular is oversupplied as many of the ships that were commissioned to be built during the boom years of 2006-early 2008 are coming online now.

We cant forget about two effects of defaulting then bringing back the drachma (and then devaluing it).

First, there is alot of private debt to foreign creditors that is euro denominated. That debt will remain euro denominated as long as the euro is still around, if they devalue their currency it will become harder and harder to pay that debt in foreign hard currency.

I agree with this. The government will have provide a lot of support in this case.

Second, all owners of foreign assets in greece will try to sell their assets as they wouldnt risk a collapse this will result in devaluation of local assets in local prices, huge capital outflows and many greeks themselves will further push down this trend as they try to hold value in foreign currency.

Assets will devalue in the local currency only if there is a rush for the exit. Considering the state of the global economy and high risk-aversion, this will be true in the beginning. The good effect of this is it will result in a lot of assets that becoming cheap. If there is value in those assets, investors will come and the economy will start to grow. However, short-term pain will be there.

This along with weak supercyclical greek exports will cause huge devaluation even without goverment easing. I am willing to bet that the wealth of the average greek will fall by more than 60% in USD terms.

Its an income vs wealth equation for the greek citizen really, if I had the choice between a cut in either I know which I would choose.

Structural changes were always badly needed in greece anyway, I would look at this as an opportunity and not that big of a problem really.

What sort of structural changes are you looking at? In particular, what structural changes could Greece make to improve the productivity of the nation?

p.s. I am a financial analyst working in Mumbai. I track the indian equity market.
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Post by Yuri Yukuv Tue Nov 08, 2011 12:50 am

Hows the P/E there? I know that consumer confidence in India has been the highest in the world for a while
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Post by kiranr Tue Nov 08, 2011 1:43 am

Yuri Yukuv wrote:Hows the P/E there? I know that consumer confidence in India has been the highest in the world for a while

Yeah, hence all the consumer cos are expensive quoting at 20-30 P/Es. The index is at 14 P/E though and the infrastructure and financials are relatively cheap. Infrastructure is dirt cheap, but the debt/equity ratios are upwards of 1. There is value in the market, but you wont find it in the consumer companies.
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Post by Yuri Yukuv Tue Nov 08, 2011 1:56 am

Is there a mechanism to short the consumer sectors?
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Post by kiranr Tue Nov 08, 2011 3:13 am

Yes, through the derivatives market. You can trade futures and options contracts for a list of stocks that have the highest liquidity. There are around 220 stocks in the list currently. There are several consumer cos in the list.

Where are located yuri?
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Post by Yuri Yukuv Tue Nov 08, 2011 4:14 am

London, Im thinking of shorting the worst consumer stocks with the higher P/E to the best of the rest with the lower P/E's. Im afraid of market risk right now.
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Post by ProXima Sun Jan 25, 2015 10:26 pm

Communists won parliament elections in Greece. When the iron curtain? Cool

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Post by VivaStPauli Mon Jan 26, 2015 1:14 am

Technically they aren't communists, though.
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Post by Dante Mon Jan 26, 2015 5:02 am

Well , they weren't / aren't communists at their core either.

The core and body of Syriza came from the party called Synaspismos , which always lead the coalition ; in its vast majority socialists , with some greens and a few centre . Syriza is still 90% them today . In any case , the communistic trait was never in charge , it never was the essence neither the main body of the coalition and won't be part of the goverment they will form . Their presence , or leverage , has always been minimal , but it's called coalition of the radical left for a reason , obviously some communism and that would be their most decent part , must be heard and represented within their ranks .  

But yeah , Syriza aren't 'communists' by any stretch of the imagination , the difference between the real hardcore communists is simply night and day . I mean , the communistic branch that was part of the initial merge was called ,
Renewing Communist Ecological Left , i don't even get wtf is that to be honest . Laughing
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Post by iftikhar Mon Jan 26, 2015 7:57 am

ProXima wrote:Communists won parliament elections in Greece. When the iron curtain? Cool
:facepalm: :brickwall:
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Post by ProXima Mon Jan 26, 2015 11:06 am

Communism, socialism, almost the same shit.

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Post by VivaStPauli Mon Jan 26, 2015 3:03 pm

ProXima wrote:Communism, socialism, almost the same shit.

No, not really. Also, they're a catch-all umbrella movement for leftists of all couleur, from commies to democratic socialists, and including libertarians as well as greens.
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Post by BarrileteCosmico Mon Jan 26, 2015 3:35 pm

I wish Yuri and Kiranr were still around to see Greece default not once but twice Proud
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Post by Dante Mon Jan 26, 2015 6:19 pm

doesn't matter had Euro Proud

doesn't matter had austerity Proud

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Post by Art Morte Sat Jan 31, 2015 9:36 pm

So, they want more jobs and better wages and ease-offs in some taxes while hoping to cut the debt burden... my question is, with what money and economic situation are Syriza going to do this?
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