Talk:Greek government-debt crisis/Archive 5

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the banks lack of paper currency, is the crisis

It's not that the banks are out of cash, rather, they are out of paper Euros.

The amount of total deposits is a function of the amount of loans, ie. (bank multiplier effect / modern banks lend IOUs deposited back into the banks) -- creates always that the amount of paper cash is a tiny percentage compared to total deposits. Thus, even a small percentage of paper euros when withdrawn from the banks, equal a shortage.

Conclusions. The European Union must not exploit this normal happening as leverage against Greece that its banks are short of paper Euros.

Fixes. Greece must employ an electronic cash card that deposits can be withdrawn onto a card, thus most withdraws are not in paper euros. The European Union MUST sponsor this additional layer to its currency permitting digital withdraws.

The article should mention the bank multiplier effect and contrast the amount of deposits to paper ratio. --Banker1236 (talk) 19:56, 12 July 2015 (UTC)

Please provide RS that make that point specifically.Jbower47 (talk) 22:25, 20 July 2015 (UTC)

options and effects missing, especially bankruptcy

this article is not so good. greece has dept, and not even the options out are listed. especially "the typical option" in case somebody cannot pay any more, bankruptcy, and its effect, is not there. disappointing. --ThurnerRupert (talk) 21:53, 27 June 2015 (UTC)

Incorrect. Greece had a orderly default to its privately held debt in March 2012, which the article mention in full detail, which subsequently made its debt sustainable both in the short term and long term, provided the attached conditional bailout agreement had been implemented in full at its noted deadlines. Greece managed to overcome its economic crisis in 2014, where it achieved economic growth plus falling unemployment, paving the way for a return to use the private capital market as a supplementing financing source. The new Greek 4th recession and associated liquidity crisis starting in Q4-2014, has nothing to do with your claim that "Greece can not pay anymore and is destined to phase bankruptcy".

The current 2015-crisis is entirely linked to the question, whether or not the Greek government is willing to abide implementing the needed structural reforms and terms outlined in its second bailout agreement (which were agreed with the previous Greek government in 2012), so that frozen funds can be released and liquidity for the Greek government and financial sector fully restored. If a mutual agreement is reached for "updated terms ensuring completion of the 2nd bailout programme" - and subsequently adhered to, Greece will find itself in a position being "fully debt sustainable" (able to service its debt both in the short term and long term). Here you should also be aware, the Eurogroup has promised (by its Nov.2012 statement) in return to implement automatic debt relief for Greece to the extent the debt-to-gdp ratio will be ensured not being higher than maximum 124% in 2020 and maximum 110% in 2022, and on top of this promise even signaled in May 2015 a willingness to offer an additional third bailout programme to support Greece further beyond the second half of 2015 - if the Greek government can deliver a successful conclusion of its second programme (meaning fully implementing the new renegotiated mutually agreed terms for completion).

With all this support being offered to Greece, they are fully capable to service their debt both in the short term and long term. The real question is whether or not Greece prefer not to say yes for continued conditional macroeconomic support and membership of the eurozone, or by a no in their upcoming referendum want all offered bailout support immediately to be withdrawn - leading to a collapse of Greek banks and Greek economy - for the only prospect of returning to have a free 50% devalued Drachma while however being free not to respect the existing fiscal rules of the eurozone (which the 18 other eurozone members all agree are fully flexible and sane, and therefor should not be changed to a new set of Marxist inspired fiscal rules advocated by the radical left Greek government). To conclude, the Greek government-debt crisis is not (at least yet) about alternative options for restoring Greece after bankruptcy. If Greece defaults and split from the eurozone (which I sincerely hope never happens), then such a chapter can be opened in the article. At present where no other alternative options to a "negotiated solution" are proposed on the table (not even by the Syriza government), the article can only be about how bailout agreements and terms are agreed and implemented to restore both the Greek economy, liquidity situation and debt sustainability. Danish Expert (talk) 10:47, 29 June 2015 (UTC)

User:Danish Expert, very complicated sentences you are formulating here, which i fail to understand. i hope you do understand them ;) how many options do you see? first, nobody signs anything - then they stay in the euro, and are bankrupt (banca rotta), i.e. payments stall, or what do you mean by "collapse"? second, not pay and exit from the euro - how? who needs to sign what for that to happen? and third, sign an agreement with "the eurozone"? who needs to sign what, and who needs to agree to make it valid? who pays what sum to whom in the next 50 years? where is the money coming from? --ThurnerRupert (talk) 06:42, 4 July 2015 (UTC)

@ThurnerRupert: This Bloomberg article elaborates on the potential scenarios. To answer short, Greece only needs to be enrolled in an active bailout programme with its International public creditors, in order to solve their current bank liquidity crisis and governmental liquidity crisis. The signing of a new bailout support program after the 5 July referendum will immediately solve the current Greek crisis, as sufficient amounts of extra cheap funds then will be flowing again from ECB to Greek banks while the government gets its liquidity restored through transfer of bailout funds from its public creditors. When these two liquidity crisis are solved, then the economy will switch back from recession to growth. As I said in my previous reply, the Eurozone has granted Greece basically an unlimited promise for future (yet to be implemented) debt relief - through an extra "extending of maturities" (date for repayments), "lower interest rates" (in average currently 2%, which in principal still can be lowered to 0%) - only conditional Greece complete its signed bailout programs. By this guarantee, the Greek debt-to-GDP ratio is ensured to be below 124% in 2020 and 110% in 2022 (meaning it will be fully short-term as well as long-term sustainable, with the Greek government assessed to be fully solvent by the "private markets"), if only the Greek government manage to comply with the terms it agreed to in its bailout program (so that the offered automatic additional debt-relief is implemented). IMF recently noted, that the amounts of additional "debt relief" the Eurozone needs to implement towards Greece to reach those two noted targets, could be fully achieved through the instruments which I noted in parenthesis, without needing to implement those direct "haircuts of nominal debt" that the Greek Syriza government had demanded. As for the duration of the recently proposed third bailout program, its important to stress Greece in Q2-Q3 2014 was perceived by markets to have regained full solvency on "private market terms", as they began again to lend money to Greece at reasonable interest rates. However, the market shut off again, when the parliamentary election was called and the current bailout program got frozen. This underlines how regaining solvency on "private market terms" and "completing a bailout program" is intertwined (two sides of the same coin).

Reason why I have been hesitant to elaborate more in details about alternative scenarios compared to the "bailout acceptance scenario" (i.e. "what happens if Greece decide to exit the euro?"), is that such scenarios at least at present time seem to be premature, as opinion polls show 82% Greeks want to stay in the euro - while not even Syriza (at least not yet officially) have proposed the alternative scenario of leaving the euro. However, I agree we are soon approaching the borderline for the appropriate time to list the alternative scenarios, as they might soon materialize as a Greec-cident (Greece leaving the euro by accident) - if the referendum on 5 July ends with a "No". But as long as all sides only work to find a solution based on a new bailout extension or a new bailout program, I think its premature to write long paragraphs about what potential alternative scenarios could bring. Danish Expert (talk) 08:14, 4 July 2015 (UTC)

many thanks for the info User:Danish Expert! independent of the probability, do you know what happens if nobody signs anything, i.e. no agreement, or have link for it? --ThurnerRupert (talk) 08:47, 12 July 2015 (UTC)

@ThurnerRupert I am out of time at present to give you a link. But I know for sure, that in the event no 3rd bailout program will be signed, then ECB will decide to withdraw their present €90bn of Emergency Liquidity Assistance to Greek Banks (because their rules dictate they can only inject ELA to banks if the economy of the Member State of the beneficiaries either is assessed to be above "junk status" in credit rating or "enrolled by an ongoing bailout program"). A withdrawal of the ELA to Greek banks would make them all go bust from one day to the next, because they do not have liquidity to pay back a single euro of the emergency funds which ECB transferred to them throughout the period in Februar-June 2015. In essence this would mean ECB would start liquidate all the collateral assets they received in return from their granted ELA funds, and by doing this ECB by time would get all their money back again without suffering any loses. But the Greek economy as well as the liquidity of the Greek government would collapse as a consequence of shutting down the entire bank sector of Greece. GDP could decline as much as 25% further down, compared to where it stands today, EU would need to arrange humanitarian aid to Greece so that it can continue operating basic health care services, and the Greek government would not have sufficient liquidity to continue paying public wage and pensions in euro - but would be forced to do this by issuing Drachma's or a temporary currency referred to as IOUs. This is why this frightful "no bailout solution" scenario has been dubbed the Grexit scenario, because by the end of the day - regardless of how much the Greek government or Greek people want to remain part of the euro - then in such scenario it would be unavoidable to exit the euro as they would be forced to start printing their own local type of money (only other alternative would be i.e. from one day to the next to make all public wages and pension payments 50% less compared to their current levels - to ensure their existing amount of liquidity would be sufficient - which would result in social unrest and strikes to the extent that such alternative would never even be considered as a realistic alternative by the Greek government).
To say it short, the Greek government needs a bailout solution to avoid a collapse of their banking sector, not because Syriza has any love for the banks, but because a collapse of the banking sector would cause a harsh collapse of the Greek economy and an unintended Grexit (which most experts agree by the end of the day would cause a 50% decline of the purchasing power for ordinary Greeks). In addition, the government also very soon need access to sufficient amounts of liquidity, in order not to be declared bankrupt by its private creditors, which could give them rights to collect their credit (or part of their credit) by imposing immediate liquidation (fire sale) of government assets given in return as collateral. This is all together why, I personally expect the Greek government soon will sign a third bailout agreement with its public creditors, simply to avoid the economic caos they otherwise would enter. It would be very> expensive for Greece not to sign a 3rd bailout program. This said, I think there could still be a 15% risk Tsipras think its a price Greece should pay (preferring to tare a part any offer for a bailout), for the sole purpose of imposing a radical anti-capitalistic revolution in Greece under a new Drachma regime, as this risk can be read into the picture based on the fact that a fraction of Syriza (among others represented by the Greek energy minister) actually publically support and speak in favor of such ideology now to be pursued. However, currently I give it a 85% chance that economic sanity by the end of the day will prevail in Greece (so that they accept a new conditional bailout), and a 99% chance for the Eurogroup to approve a new round of graceful solidarity towards Greece by offering them a new 3rd bailout programme under strict conditionality. Danish Expert (talk) 11:15, 12 July 2015 (UTC)

This section is quite informative. It explains the link between a debt default and a change in currency, with the regulatory links and steps in between, which the article does not. Could the information here be made explicit in the article, please?

Encyclopedia articles are intended as introductions (what is this greek crisis?), so we must expect that most readers of this article know little; an understanding of terms like labour productivity is useful, but apparently can't be assumed. I hope that most substantial contributors to this article are substantially better-informed :), and I can see that they are trying to bridge the gap. While this is not a forum for discussing the crisis, it is very much a forum for asking people to clarify points that the article doesn't explain clearly. Thanks to ThurnerRupert for asking questions, to Danish Expert for his patience in answering them, and to everyone who has worked here to explain a complex topic simply. HLHJ (talk) 12:01, 23 July 2015 (UTC)