50% of Greek debt absolved

New plan to make banks take the 50% loss on toxic Greek assets.

Color me pessimistic but I don't see how this will work in the long run under any standard Keynesian, Austrian or Chicago. It completely fails to address the issue of how they got into the situation in the first place (overspending) just like how in the US the bailouts of Chrysler and GM failed to address the problems that got them where they were.

In the long run, we're just going to see this again if this actually goes through.

It's a one fix, but not preferable. It makes it look like you can get away with stuff like this, not to mention it makes Greece future with banks difficult since they will remember this.

Still, if it safes Eurozone I guess it's OK, but we need to build a damn good system to prevent shit like this happening again.

I was listening to the Chancellor before and he said that they "hoped" the private sector would take the 50% hair cut so nothing has been confirmed yet.

Good for them!

Fuck the banks and fuck austerity.

Oh, I'm sure they will recover the debts in no time.

considering the ridiculously unfair situation to the greeks, I like the plan.

Hmmm... in context not too bad.

Let's hope that the school textbooks of the future say the same.

What this actually means is that all previous plans to bail out Greece have basically failed. All that money wasted, and yet half the debts have to be dropped anyway :-/

Bailouts were never the solution, despite claims. Everyone knew they were just attempts to buy enoughtime to find better way out. Too bad thigns are so bad they are resorting to extrememe measures.

Indeed. Only the future will tell us how things turn out. If this saves the Euro, I 'll be really proud to be from Germany for maybe the first time.

I think Greece will pay for it by ensuring a fiscal union is now more possible because of their actions. They won't get the chance to do this again.

Fiscal union? That's not a good thing or an achievement. Why not rather kick Greece and maybe also the other problem countries out?

edited 27th Oct '11 9:52:05 AM by Octo

Ditching a country whenever it has a problem is not a stable financial alliance. The rules in place should be robust enough to handle the bad times along with the good, if you want a functional entity that can survive for a meaningful period of time.

And whether you think the EU is the best way to do things or not, it's hard to argue that it has a measurable positive effect on many countries.

edited 27th Oct '11 9:54:53 AM by Karkadinn

Greece swindled its way in. It should never have been allowed in in the first place. Greece's crisis did not come out of sudden - it was in fact already visible when they joined. Or would have had they not produced false numbers. So it seems eminently fair at least in their case to kick them out.

No, it doesn't seem fair. If you have to, blame the previous governments for mismanagement the economy and generally screwing things up. The Greek people should not suffer because of the actions of previous governments.

Problem is, kicking them out now will collapse the market one way or another. There is also that other nations, that do not have that strong economoes, may suddenly declare that they will leave Euro in fear that they are left behind if such crisis happens again and they get hit with same force as Greece. Which futher destabilises the Eurozone markets.

@ Octo And now they pay for it. Dearly. Of course, I must admit it's sometimes funny to read Greece conspiracy therories, like Germany only let them join the Euro in order to plunder Greece later, or that Germany still has to pay reperations (someone really should show them the Two Plus Four Agreement

edited 27th Oct '11 10:27:46 AM by Zarastro

Do they in fact pay for it now? It seems to me with the increasing divide between state revenues and state spendings Greece would have collapsed with or without Euro. Difference is now that they're in the Euro they take everybody else down with them. So, cut them loose.

Nominally, the Greek people's wellbeing is the responsibility of Greek governments. And not of other European governments.

How would getting rid of the problems destabilize the markets? In fact it would IMO set a strong signal that Europe is even willing to do previously unconsiderable actions in order to save stability. It would hence be a good signal.

Consequences of Greece leaving the Euro:

• Immediate Lemman Brothers Style fiscal meltdown. i.e. The Great Recession all over again (thought it didn't really end)
• Greek economy shrinks by half in the first year alone
• Numerous banks go bankrupt, prompting bank runs around the world
• Hits to other european economies due to widespread bank failures, shrinking exports, investor panic, etc.

And that's not even the worst case scenario.

I'd prefer that in the future, they simply make the sale of Euro bonds contingent on being party to a Euro Auditor General. Greeks lied about their economic numbers using fake economic growth and they piled on debt no one knew about because of their idiotic low-tax laissez faire policies. The Greek people shouldn't suffer so they get a bailout but the banks should be destroyed for what they did, and politicians in on the scheme jailed for white collar crime. A good icelandic style solution would have been so much better.

If they were afraid of damage to the Euro, all they'd have to do is block Greek bond trading until the problem is fixed and just funnel bail out money until it is done. Then they'd have to be subject to an Euro auditor general so no political party in any country can go around lying about their numbers again.

edited 27th Oct '11 8:57:18 PM by breadloaf

The problem is not just the falsified numbers. Portugal openly went on a debt binge and noone did anything. Admittedly, it is nowhere near as extreme as Greece, but it's still a problem.

edited 27th Oct '11 9:39:58 PM by storyyeller

Well, a known debt binge means people will build their financial networks under that knowledge. Greece on the other hand blindsided the international financial community when a good chunk of the GDP vapourised because it never existed. Then everything that depended on that collapsed.

Of course they also got compounded with their low-tax policy, so then you have very little revenue coming in.

Then their economy isn't very robust, with high unemployment which they never solved. Well just about everything about the Greek economy was weak I suppose.

If only people wanted olives more!

@Octo For the most part yes, which doesn't exclude the EU's, and our, responsiblity to help them. Morally, it is the right thing to do. The EU was founded with the principle of solidarity in mind. We can't simply look away at the problems of member states and kick them out whenever they have financial or economic problems, especially when pragmatically our economies are so interdependent.

edited 28th Oct '11 2:03:32 AM by germi91

But Greece doesn't just happen to have a problem. It lied and cheated and has problem due to this, and that's about all there is to that.

As for the doom and gloom predictions: The banks won't get their money back anyway. Already now they have lost half of it.

Same thing with Spain, Italy, Hungary, Iceland, Ireland (to an extent), the UK...

Greece is not the only problem the EU or those close to the EU face. Worse, it's all the same problem, spending far beyond their means hoping everything will magically fall into place.

edited 28th Oct '11 4:59:29 AM by MajorTom