It’s the conversation of the year: Greece is (almost) bankrupt. The (almost) part should have been (finally) a long time ago, but because of the support that´s been offered (financially), Greece is able to keep its head above waters. But is that fair? The money that’s being offered to Greece is earned by other citizens of Europe who’ve been working hard for that money. We (the citizens of Europe) have been – and are – paying for the comfort of Greece. Why should we not kick them out?
Yeah, why?
The major reason why the EU has decided to support Greece in its difficult times is because otherwise (supposedly) our bank system would collapse and, with it, the Euro. However, many doubt the theory simply because we’re losing a lot of money as it is. ‘Brinkmanship’ is the perfect term for what is happening right now: the practice of pushing dangerous events to the verge of disaster in order to achieve the most advantageous outcome.
Greece has relied on a package of 110 billion Euros, or $152.6 billion, agreed to by its richer European neighbors in May 2010. The price was a series of austerity measures meant to cut its bloated deficit and restore investor confidence. It cut the pay of its public workers — a quarter of the work force — by 10 percent but continued to miss deficit targets as its economy sank.
‘The cost of living is 30% lower compared to other European countries’ haunts most other European countries, as they try to rescue their neighbor.
So what are the consequences right now?
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The retirement age is being raised. (affects some EU countries)
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The rich are going to pay (even) more taxes.
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Money that is stored for pension, is gone. (affects some EU countries)
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The financial market and the banking systems are unstable. And don’t think Americans will be able to enjoy watching this horror movie from a safe distance across the pond. In our globalized world, all the big banks are connected.
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Europe is in violation of a European treaties: they forbid a teamed (financial) rescue operation. (This is solved by using different terms on paper)
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The euro zone countries are tight together, now more than ever.
What would be the (possible) consequences, should Greece default?
- The bank system in Greece will collapse. All banks will go insolvent.
- A number of French and German banks will make sufficient losses that they no longer meet regulatory capital adequacy requirements.
- The Greek government will nationalize every bank in Greece and forbid withdrawals from any Greek bank.
- Although there is no mechanism to ‘force’ a country to step out of the euro, it is likely that Greece will leave the euro zone.
- Currency devaluation will occur.
Mr. Ostwald notes, however, that the long-term outlook for the Euro might be more positive, with Greece out of the picture
- Investments into the Greek government will not be returned.
- A Greek default would prompt the rest of the euro area to come up with a plan for restructuring.
- Greece will re-denominate all of its debts into “New Drachmas” or whatever it calls the new currency.
If people just wake up one morning and the government has converted all deposits into drachma, which would still represent a default against the depositors, people who have loans from the banks will stop paying interest.
- ‘A Greek default would just be another hit to consumer and business confidence.’
Would it be better to kick Greece out of the euro?
There is a lot of arguing going on about whether it’d be better to let Greece solve its mess on its own or not. Especially those who have invested in Greece, are against this ‘solution’ (for obvious reasons). And it’s more dangerous now than ever, with all of the money that’s been given to Greece by the euro zone countries. However, “The sooner it happens, the better” has been used as a slogan much too often, to rule out the possibility of letting Greece go default. Perhaps it’s better to look at the arguments both parties give, to decide what your opinion is:
Greece should go default (= bankrupt)
- If Greece went bankrupt, it will clean up the system. And after some time, the Euro will be a very strong currency (once again).
- The move will demonstrate that Europe does not tolerate fiscally irresponsible countries.
- Greece will never repay its debts.
- The numerous aid plans, even if they have so far succeeded in avoiding default, failed to clear the long-term liabilities.
Greece should stay in the care of the euro zone countries
- If we let Greece go bankrupt, the euro will disappear. (theoretically)
- “The very principle of the European Union will be challenged”
- Unemployment will rise again.
- “What lies ahead is an economic and political crisis worse than that of 2008.”
- It will undermine the European banking system within days and increase the public debt of other European countries.
What I think
For me, it’s a pretty easy question. Greece has screwed up badly, living a luxurious life that was beyond their means. Now the rest of Europe is paying for this bullsh**. I think it’d be better indeed, if Greece would leave the euro and make use of a self-created currency. Then the euro could reorganize this mess and create a brighter looking future.


















