Ask HN: Will Greece go bankrupt?
6 comments
"If something can't go on forever, it won't" (some famous economist I'm too lazy to look up).
Of course that says nothing about the timing....
The fiscal policies of Greece are unsustainable. Ditto for some of the PIIGS (Portugal, Italy, Ireland, Greece, Spain). A bailout without an austerity program will only delay the end ... that the latter looks somewhere between unsustainable to a non-starter.
A bailout would be very bad for the Eurozone, since it will increase the moral hazard for the rest of the PIIGS (well, maybe not Ireland). A failure to bailout Greece (now or later) will likely put the rest of the PIIGS in dire straits as their sovereign debt is put into question.
Greece can't make its creditors take an implicit haircut by devaluation as long as it uses the Euro. In the long run it's hard to see it both keep the Euro and not give the creditors an explicit haircut, i.e. they won't get all their money back ... which will make the continued borrowing they need harder to impossible.
I don't see any prospect for a soft landing.
However as d2viant implies, there's a good change that any of the above problems can be managed. The world is a rather open place ... things you have to worry about more than an inflation (which will only happen, at least any time soon, if Greece goes of the Euro, and then only for Greece) are problems like currency export controls.
E.g. if you're in Greece, you might find it impossible to pay e.g. Amazon for AWS services, they might impose controls on your ability to remove money from the country. On the other hand, if you keep enough of a presence outside of Greece including payments going into your company and then out to AWS you might be able to pull it off.
It's all very iffy, we just don't know how the various governments in question will handle these problems. Be flexible, try to keep reserves for problem, avoid single points of failure WRT to individual countries. Also don't obsess on inflation, there's enough deleveraging going on or the potential of that continued deflation is very possible.
Of course that says nothing about the timing....
The fiscal policies of Greece are unsustainable. Ditto for some of the PIIGS (Portugal, Italy, Ireland, Greece, Spain). A bailout without an austerity program will only delay the end ... that the latter looks somewhere between unsustainable to a non-starter.
A bailout would be very bad for the Eurozone, since it will increase the moral hazard for the rest of the PIIGS (well, maybe not Ireland). A failure to bailout Greece (now or later) will likely put the rest of the PIIGS in dire straits as their sovereign debt is put into question.
Greece can't make its creditors take an implicit haircut by devaluation as long as it uses the Euro. In the long run it's hard to see it both keep the Euro and not give the creditors an explicit haircut, i.e. they won't get all their money back ... which will make the continued borrowing they need harder to impossible.
I don't see any prospect for a soft landing.
However as d2viant implies, there's a good change that any of the above problems can be managed. The world is a rather open place ... things you have to worry about more than an inflation (which will only happen, at least any time soon, if Greece goes of the Euro, and then only for Greece) are problems like currency export controls.
E.g. if you're in Greece, you might find it impossible to pay e.g. Amazon for AWS services, they might impose controls on your ability to remove money from the country. On the other hand, if you keep enough of a presence outside of Greece including payments going into your company and then out to AWS you might be able to pull it off.
It's all very iffy, we just don't know how the various governments in question will handle these problems. Be flexible, try to keep reserves for problem, avoid single points of failure WRT to individual countries. Also don't obsess on inflation, there's enough deleveraging going on or the potential of that continued deflation is very possible.
One minor detail I forgot: European bank exposure to the PIIGS is very substantial. So giving them a haircut on Greek sovereign debt would be ... suboptimal (no doubt this is why Germany is playing ball for now after first saying no). Problem is, there are no good options left at this point.
Greece and Spain won't pay back. This was a calculated Risk, and a Lesson for the Banking System. What is happening in Greece, is a very well orchestrated show, to get granted €110bn aid, to avert meltdown.
The only thing Germans can do is:
REPOSSESS 170 Leopard 2AEX Battle Tanks from Greece, and 190 Leopard 2A6E Battle Tanks from Spain.
U.S.A must REPOSSESS 170 F-16 Jet Fighters from Greece, … the rest is gone with the wind …forever …
Greece must stop paying lucrative pensions with borrowed money, reform the free health care system, and cut down, 4 times the military budged.
Greece’s problem is too much debt. Greece has a budget deficit of 12.7% of GDP – meaning that the country is spending 12.7% more than the value of one year’s economic output.
Greece is no different to a serial credit card borrower who can’t pay back his loans. But just like a serial credit card borrower, as long as Greece keeps relying on borrowed money to fund itself, the problem won’t go away. It will just get worse.
http://www.defenseindustrydaily.com/Greece-in-Default-on-U-2...
But don't worry; the ECB, the Fed or both will print the money.
And all of us will share the pain, with our hard-earned money.
Bad is never good until worse happens.
Greece will only be bankrupt if they don't get bailed out again either by the EU, the IMF or both.
The measures demanded by the IMF & EU (which is necessary for political will & arguably 'right') will cause the economy of Greece to contract.
There has been much squabbling within the EU about how to structure a loan and the whole thing has been a mess given differences within the EU.
The stability of the Euro is certainly much on the minds of the Germans given their experiences with the mark and the loan can be challenged in the German supreme court if it undermines the Euro.
I frankly wouldn't worry about which way the Euro will go. Especially when compared to the problems other wealthy nations will face.
The measures demanded by the IMF & EU (which is necessary for political will & arguably 'right') will cause the economy of Greece to contract.
There has been much squabbling within the EU about how to structure a loan and the whole thing has been a mess given differences within the EU.
The stability of the Euro is certainly much on the minds of the Germans given their experiences with the mark and the loan can be challenged in the German supreme court if it undermines the Euro.
I frankly wouldn't worry about which way the Euro will go. Especially when compared to the problems other wealthy nations will face.
the corruption in Greece is big that even the smallest government run department is infected so the only way out for Greece is either to deal with corruption which I think is impossible the other way to default on the loans and declare bankruptcy and go back to a devalued the greek dragma around 500 drs to the euro which will help the tours men industry and maybe will stop importing everything from abroad and start producing I want to go in a store and see a label made in Greece!!!!!!!!!!!
thank
If you have a great idea and think you can build a business around it, do it. Don't let macroeconomic issues that are out of your control influence your decision to go for it.
What do you believe/know/speculate about the future of Greece and especially the Euro?(I think a lot about this because I do not want to found a startup in a potential european inflation.)