I guess the civil disobedience will continue, and the country will eventually default. I’m not sure what happens if a country goes bankrupt.

http://www.bbc.co.uk/news/world-europe-13960947

Interesting times ahead.....

It only passed by the thinnest of margins. 151 votes needed, 154 votes got.
Still, it's passed now. We shall have to wait and see what happens.

Mark

Very and very corrupt times ahead. I do not see this ending well. The greek economy is going to implode and mass emigration might be the result. If that happens then Greece will be mired for decades in debt. The issue for the core nations is to keep the troubles in the periphery, Though the banks are the cause of this crisis. Ireland defaulting will cost us dearly and we are doing nothing to mitigate against this crisis expanding. In fact I suspect eastern europe to collapse similarly. Slovenia is looking risky right now. In a year tehy could be asking for bailouts.

How is it going to be implemented? Is it going to be implemented?

Mark

A very pertinent question. Do they honestly expect civil servants to implement legislation that will result in thousands of civil servants being fired?

What I suspect will happen is that Greece will default anyway but will remain coupled to the Euro - because the Euro was always about politics, never about economics. The greek economy will go into spasm which will lead to high internal inflation. This will cause problems in neighbouring countries as what money is left will 'flee' Greece - anyone who can afford to cross the border to buy stuff at less hyper-inflated prices or can transfer their money will, because the currency is the same. In a year or two the Greek economy will crash altogether. After that.. well, anything from the IMF taking over the country pretty much to outright revolution is possible.

Either way, these actions will only delay the inevitable. The greek government can't fix their economy because they're coupled to the Euro. The rest of the Eurozone won't do to their own economies what is required to allow the Euro to fix Greece.

Jon

Another alternative may happen. The Greek people will start trading using a barter system - or even an unofficial underground currency - bypassing the economy and the Euro completely. While we happily talk about the Big Numbers; the trillions and the billions, mention the IMF as some kind of “Mr Fix-It”, your average Greek will be wondering where dinner will come from.

The people may well solve the problem by “starting again” while the government will press on into the quicksand, bringing other countries along with it.

Bizarrely the right wing greek parties wanted to cut taxes, to get the economy out of deficit.

If (when) Greece defaults it won't lead to a Mad Max wasteland patrolled by cannibals and financed by primitive barter systems. Creditors will just have to take a haircut as their debt is restructured. The Germans will recapitalise a couple of banks, the French will try to blame Anglo Saxon speculators for problems caused entirely by lazy corrupt Greeks, and the markets will ramp up lending rates to other weak countries, no doubt hastening a couple more defaults.

There's nothing new about a country defaulting on its debts, it's expensive for all involved and best avoided, but not a harbinger of the end of days. The effect on the Euro is less to do with the awfulness of default itself than it is a comment on the failure of the original architects of the Euro to create a mechanism for restructuring bad debt more gracefully than this.

I agree. Though I do think defaults are inevitable. Goldman Sachs were instrumental in getting Greece into trouble in the first place creating off balance sheet vehicles to allow them to get into the euro in the first place. Though I do think the claims of apocalypse are excessive. Argentina had one bad quarter after they defaulted and they recovered by more than 60% in 7 years after. The debts just held them back. I expect Iceland to do much better.

I have just been listening to a podcast with the outgoing head of the International Accounting Standards Board. He pointed the bank crisis at the banks failing to adequately make provision for potential losses. He still thinks that is a problem.

True, but of course his friends at KPMG, Delloite* etc are responsible for a lot of that.

* Bear Sterns auditors.

Yes the auditors should have stopped such measures. Though maybe the solution is to bankrupt the auditors of banks who collapse. Over time the numbers of auditors that can audit the big banks would fall and then the banks would either have to shrink to get audited or would have failed in the process.

Pity. I reckon Sky News would really get off on that kind of thing. "Coming up next, an exclusive interview with Lord Humungous!"


Not led by David Cameroniakos are they?

Jon

Yes, banks are [LIFTED], but if the Greek government had bothered to enforce tax collection things might be different.

I think rules preventing accountancy firms from selling consultancy services to the companies they audit are long overdue. As is some serious regulation to deal with rampant ethical abuses (such as forcing healthy firms into administration so they can claim fat administration fees, and fraudulently helping government agencies skew cost benefit studies to support PFI) in that industry.

And companies like KPMG certainly shouldn't be allowed to provide members of their own staff as special government advisers to help ministers draw up fat contracts for their real employers to reach into our wallets and just take whatever they want.

The Greek situation is complicated. After WWII, when everyone else was settling down to some peace and quiet, they decided to have a really dirty civil war instead. Later they had a hard ass military junta, which they only got rid of in the 70s. Like most countries that do that sort of thing, they subsequently bought peace by hiring a lot of old soldiers into public sector jobs, splitting them up so that fascists worked for one ministry, commies for another.

Most of those jobs were kind of fake, a pension with a uniform. A lot of the others really shouldn't have been, but the people who took them treated them as if they were. And everybody tried not to offend anyone, because of most of the guns were still in people's sheds and attics.

They can't adapt that system very easily, and the tensions left over from the civil war are still (or so I understand) apparent, even among the young. And in truth, their history of being [LIFTED] with money and relying on foreign bail outs goes back a lot further than that, they used to beg Queen Victoria for handouts. They aren't going to stop, they don't even understand that they should.