Help - a question on Greece

[Dunk]

What will the possible repercussions be when the Greeks give the finger to the Troika and defaults on it's loans?

For Greece, for Europe, and the global economy?

[PhoenixAsh]

welll...if we have to believe the troika then we are in for fire and brimstone and eternal damnation if that ever happens.

First thing you need to understand is that there is no way, short of war and international sanctions, which can force a country to repay loans. The reason why loans are repaid is because it is cheaper than defaulting and because we all operate on the honour system. If we didn't we wouldn't loan anybody anything.

Defaulting however will cost countries access to international money loans. If Greece defaults then the IMF and ECB will not be offerig Greece any credit soon....and foreign investors will pull out.

And that is NOT a good thing for a country which is structurally over budget. (remember...we are NOT arguing home economics here...we are arguing the capitalist system and (il)logics of it. Countries overspend and borrow money to fill the gap...the stupidity of this can be seen in borrowing money by consumers...the more you borrow, the more you owe...and the more you need to pay from your income to pay it back)

Apart from this the only real effect will be a drop in international trade. If I remember correctly...this will be approximately 3% in output decrease....which will last for roughly a year...

IF the government can balance the budget and balance its import and export...there will be no long term negative effects on Greece. In fact...most of the negative shit Greece is in is caused by being part of the Euro and EU which prohibits Greece from taking unilateral stimuli packages to boost their economy. Stepping out of the Euro would free Greeces hands in this....and the scenario will unfold probably like I said. Though austerity measures will still be necessary...because...after all...we are still good cappies. That is not to sat Greece will be scot free. THere will be a decrease in trade and economic output. There will be unemployment.

Monetarilly speaking the rest of Europe...will not be as "lucky". Because the money is gone. This will lead to bankrupcies and increased austerity measures in the countries whose economy will suffer from the default. Furthermore...if Greece is kicked out of the Euro or steps out of it. This will not bode well for Portugal, Ireland and Spains chances to remain in the Euro. Some banks will fall...(thats why everybody is so intent on making Greece pay...its definately NOT because we have their best interest in mind. All they care about is their money..."fuck the Greeks; give us our money", thats their deal).

We would be back two years in time...national and international money lending will come to a halt. Trade will suffer, bussinesses will not get any more loans...

International money lending will probably get a serious blow and less European countries will be inclined to loan money to other countries in serious economic troubles.

Internationally the loss of credit ratings for the whole of the EU will impact the US. But the global economy overall will not be hit too much....because the countries who have no dealings with the organisations and banks that loaned and lost money in the default will benefit from their increased position towards their competitors.

There is great money to be made in these kind of disasters....for the ones with the balls to do so. Isn't capitalism grand? Everything will be allright as long as you are not a tax paying worker or dependent on government benefits.

God..what a fucked up world.

In Dutch schools we are now teaching home economics and the sanity of not borrowing money on a whim and on balancing your home budget....in the real world...our governments serve as an utter fail when it comes to this simple fact of life....and they make us pay for it.

Also...members with a lot more knoweldge of economics may add to or correct me when needed.

[Feodor Augustus]

Hindsight, I think you are a little hard on the practice of borrowing, and there can be sound economic reasons for running up a deficit, which can in turn act as a stimulus for growth. However I think it would be quite fair to say that over the last twenty or so years governments have borrowed excessively, and used this money inefficiently. (One only needs to think here of the growth in back office management in public services, alongside the practice of hiring private contractors at huge expense - when in fact the money should have been much more strongly directed towards front line services.)

Still, on the issue of a Greek default I think you are quite right to suggest that Greece may be far more capable of economic recovery outside of the Eurozone; and I think you are also right to say that this could contribute the eventual collapse of the common market. The key here is what Germany chooses to do, and I think that a lot of people forget that this is the first time in over sixty years that a strong and unified Germany will be free from the shackles of the western alliance. Germany's relative weakness (in political terms) vis a vis the other imperialist powers, alongside its relative strength in economic matters, makes it a thorn in the natural balance of imperialist power.

I'm not suggesting that we are about to see another war, but there are major geo-political strategical matters related to the balance of power in Mitteleuropa that were obscured and shelved by the alignment of international rivalries between 1945 and 1991. Over the last two decades German reunification has been cemented, and I think over the next few decades we will see a revitalised Germany increasingly challenge the Anglo-French political hegemony.