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| | |-+  Why Greece Should Stay in the EuroZone
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Author Topic: Why Greece Should Stay in the EuroZone  (Read 485 times)
Beet
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« on: May 12, 2012, 06:55:09 pm »
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"Opinion polls show that 70% of Greeks want to remain part of the eurozone. Only the parties of the extreme left and right want it to exit. Four-fifths voted for parties that would prefer to keep Greece in, although their views on the price to be paid to achieve that goal differ.

It is not in the interests of either Greece or the rest of the eurozone to reinstate the drachma. An exit from the euro would lead to a run on the banks and the collapse of the Greek banking system. If Greece was shut out of international money markets, the temptation would be to meet the government deficit through printing money, leading to rapid inflation. People's savings would be wiped out. And an effective devaluation might do little for Greece's balance of payments anyway, except possibly through tourism. Poverty would become increasingly widespread."

http://www.guardian.co.uk/business/2012/may/13/greece-must-stay-eurozone

If Germany doesn't want to offer any more aid to Greece - that's fine. But keep Greece in the euro zone.
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ag
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« Reply #1 on: May 12, 2012, 10:13:25 pm »
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The default will lead to a run on the banks anyway.

I mean, the might continue calling it Euro, but the exchange rate of a Greek Euro to the other euros is extremely unlikely to stay 1:1 at this point Smiley))
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Beet
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« Reply #2 on: May 12, 2012, 11:09:30 pm »
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Well the last default didn't lead to a run on the banks.

The banks can continue to be supported through the TARGET2 system. Regardless, it's terribly irresponsible for some Greek parties to be promising something to make the Greeks think they can get more than they really can, that the situation is not as bad as it really is.
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ag
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« Reply #3 on: May 13, 2012, 12:09:09 am »
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Why, exactly, should the Greek banks be supported in that case? I mean, from the standpoint of the other European countries?

As long as Greece, actually, negotiates what it does, of course all steps should be taken to soften the impact of the measures taken - and that includes trying to make sure Greek banks remain solvent.

On the other hand, if Greeks decide they want to default unilaterally, they are, of course, free to do it, but it would seem natural that they are cut off at that point. Once that happens, any money in Greek bank accounts, even if it is formally denominated in euros, will, in fact, be in Greek euros: there won't be an easy convertibility between the two. Whether they want to call them euros, drachmas, pounds or ducats at that point becomes largely immaterial.  This is the point that should be made very clear to all leading Greek politicians personally and TODAY: at the very least, to make sure they are planning for that contingency (you know, the bank holiday; the emergency distribution of the staples during the transition period, when there is little or no money in circulation: it would be a shame if people can't get bread for a week; the printing and distribution of the new bills, etc., etc. - these things require planning).
« Last Edit: May 13, 2012, 12:11:48 am by ag »Logged
Gustaf
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« Reply #4 on: May 13, 2012, 04:14:49 am »
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Good thing that Greek politicians are known for their foresight and expert planning...
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Beet
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« Reply #5 on: May 13, 2012, 12:15:02 pm »
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Why, exactly, should the Greek banks be supported in that case? I mean, from the standpoint of the other European countries?

Simple man, contagion. The other European countries' own banks are the ultimate target here. It's always easier to dam the water in one place than in 100 places.
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« Reply #6 on: May 13, 2012, 01:30:33 pm »
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If Germany doesn't want to offer any more aid to Greece - that's fine. But keep Greece in the euro zone.

Greece can't stay in the Eurozone without some combination of more aid and more austerity.  If the Greeks are unwilling to accept more austerity, and the Germans are unwilling to offer more aid, then Greece leaving the Eurozone is inevitable, and the painful object lesson it provides hopefully keeps a second country from leaving anytime soon.
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