Tuesday, May 15, 2012

Greece in crisis as new elections loom; President reports bank runs have begun

Europe’s financial crisis lurched into a perilous new phase as dire predictions emerged of a collapse in Greece’s economy, with a run on its banks bringing an inevitable end to its membership of the euro.

As leaders in Athens accepted the need for a new general election to end a national stalemate, the International Monetary Fund said Europe’s leaders should prepare for the possibility of a Greek departure from the single currency.

Christine Lagarde, head of the IMF, warned she was “technically prepared for anything” and said the utmost effort must be made to ensure any Greek exit was orderly. The effect was likely to be “quite messy” with risks to growth, trade and financial markets. “It is something that would be extremely expensive and would pose great risks but it is part of options that we must technically consider,” she said.

Raising tensions still further, Germany warned Greek voters that the wrong result in next month’s election will force their country out of the single currency.

Greece’s president warned, perhaps most alarmingly, that its banks risk running out of money, posing a “threat to our national existence”.
Read the rest here.


Eurasleep said...

Why can't Greece just default, ignore the debts and walk away from the situation, meanwhile reverting back to the drachma and independence from the EU machine? Sort of like Iceland did: they basically said, "debt? What debt... bite me!". And now Iceland's on its feet again. It seems to me that this "debt" is a big stick bankers hold in order to threaten countries, but if the countries just walk away, what could possibly happen? Are the bankers/other EU countries going to invade Greece and take it over? That's unlikely. If debt obligations are basically upheld by "good faith" and "propriety", what if everyone just said, "screw it" and walked away? "Suppose they gave a war and nobody came?" Go Galt, indeed...

Jason said...

If Greece did that - and I think they should - then the house of cards that is the EU comes crumbling down as other nations on the brink follow their lead.

Steve said...

I had a very interesting conversation yesterday with a Greek gentleman of my acquaintance, now living (and retired) in the UK, but until 3 years ago ran a reasonably large company with interests throughout Europe, primarily in Greece and the UK.

He does not believe that Greece will be allowed to leave the Euro for one reason: Russia.

It can be argued that Russia and Greece, both being Orthodox countries, have more cultural commonality than Greece and most of the rest of the EU. He forsees the following happening if Greece leaves the Euro:

1) leave Euro
2) leave EU
3) Russia "invests" in Greece
4) Greece subsequently leaves Nato
5) Nato military bases in Greece are politely asked to vacate.
6) Russia further "invests" in Greece by stationing its own military there "for exercises".

I'm not wholly convinced, but I think that it is at least a plausible prediction.

Visibilium said...

3) Russia "invests" in Greece

Greek humour is so much more charming than her corrupt and incompetent statecraft. She reminds me of a literate wino mooches spare change from passersby to finance a continuous bar crawl.

Russia is nothing more than a proud, impoverished, small-potatoes bully. Kicking Georgia's ass is about the limits of Russia's military might nowadays. Harnessing Putin's hot air and covert assassination techniques could possibly enable Russia to elevate its military status, but it wouldn't solve Russia's problem of "all show, no dough". Even a numbskull like Joe Biden has Russia pegged.