Is Greece going to set off the long feared next wave of the Great Recession?

Europe is a dense concentration of different languages, cultures and history. For all its visible defects the EU has done a pretty good job maintaining peace, stability and rconomic growth. If you doubt that, just consider the two previous 50 year periods.

Asked on whether the IMF would participate in a third bailout for the country, Lagarde said the Fund wanted to see a "complete" programme for Greece and listed what that should involve.

"This complete package has two legs, a Greek leg that entails an in-depth reform of the Greek economy. That means holding a budgetary position that is sound and gives the country solidity; and the second leg is that of the lenders, which entails supplying finacing and restructuring the debt to ease its
burden," she said.

Lagarde also reaffirmed her view that the country needed some form of debt relief, arguing that this did not have to be an outright write-off but could involve measures such as a significant extension of loan maturities, stretching of repayment schedules, and reducing interests charged.



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http://economictimes.indiatimes.com/articleshow/48109924.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

“The end, for all intents and purposes, is here. Greece will exit the eurozone. Whether the departure is couched as temporary or not is irrelevant. Europe’s once irrevocable and irreversible currency union is now being undone by falling confidence.

The problem with [the July 11-12] Grexit message was that it yelled “fire” in a crowded theater. Much as the threat of bank closures triggers bank runs, the threat of a currency debasement foretells its collapse. When Greek banks reopen, citizens will rush for their money — not only because they are worried about the safety of the nation’s banks, but because they are frightened by the potential devaluation of their deposits. By their most recent actions, European policymakers turned what was already a bank run into a country run.”



http://blogs.barrons.com/emergingmarketsdaily/2015/07/17/greece-will-exit-the-eurozone/?mod=yahoobarrons&ru=yahoo&ref=yfp

That said, the lead creditor, Germany, has done Europe a service: By proposing the Greece exit the euro, it has broken a political taboo. For decades, politicians have peddled the common currency as a symbol of European unity, despite the flawed economics pointed out as far back as 1971 by the Cambridge professor Nicholas Kaldor. That changed on July 11, when European finance ministers agreed that it could be both sensible and practical for a member country to leave. "In case no agreement can be reached," they said, "Greece should be offered swift negotiations for a time-out."



Now that the idea of exit is in the air, though, it's worth thinking beyond the current political reality and considering who should go. Were Greece to leave, possibly followed by Portugal and Italy in the subsequent years, the countries' new currencies would fall sharply in value. This would leave them unable to pay debts in euros, triggering cascading defaults. Although the currency depreciation would eventually make them more competitive, the economic pain would be prolonged and would inevitably extend beyond their borders.


If, however, Germany left the euro area -- as influential people including Citadel founder Kenneth Griffin, University of Chicago economist Anil Kashyap and the investor George Soros have suggested -- there really would be no losers.

A German return to the deutsche mark would cause the value of the euro to fall immediately, giving countries in Europe's periphery a much-needed boost in competitiveness. Italy and Portugal have about the same gross domestic product today as when the euro was introduced, and the Greek economy, having briefly soared, is now in danger of falling below its starting point. A weaker euro would give them a chance to jump-start growth. If, as would be likely, the Netherlands, Belgium, Austria and Finland followed Germany's lead, perhaps to form a new currency bloc, the euro would depreciate even further.

but continuing to loan money (many times for 150+ years) to a country that seems to have no idea how to manage itself does seem odd.

Lenders seem to get this notion that they are going to get all of their money back with high interest rates even after making stupid and/or predatory lending decisions.

hawkeye10 wrote:

Lenders seem to get this notion that they are going to get all of their money back with high interest rates even after making stupid and/or predatory lending decisions.

I thought the interest rate was 3.5%. That's high?

Maybe if they didn't need bailouts, they wouldn't be having these problems. Did the lenders wreck their finances in the first place?

One of the first lessons I was taught on Wall Street was, “Know who the fool is.” That was the gist of it. The more detailed description, yelled at me repeatedly was, “Know who the ******* idiot with the money is and cram as much toxic **** down their throat as they can take. But be nice to them first.”

When I joined in Salomon Brothers in ‘93, Japanese customers (mostly smaller banks and large industrial companies) were considered the fool. My first five years were spent constructing complex financial products, ones with huge profit margins for us—“toxic waste” in Wall Street lingo—to sell to them. By the turn of the century many of those customers had collapsed, partly from the toxic waste we sold them, partly from all the other crazy things they were buying.

The launch of the common European currency, the euro, ushered in a period of European financial confidence, and we on Wall Street started to take advantage of another willing fool: European banks. More precisely northern European banks.

And after we watched what WallStreet did with credit default swaps and subprime mortgages no less.

Are you aware that bankers went out and gave loans to a lot of people who did not have enough income to pay them back, in some cases encouraged them to lie on the paperwork, and then when these often minority borrowers predictably defaulted they went and created fake paperwork for the courts to foreclose?

THis is the side you want to champion in the morality theater of Greek debt?