“Loudmouth” Joe suggested a thread on Greece.
http://forum.onlineopinion.com.au/thread.asp?article=17492#309238

Here are some thought-starters.

Greek case for Grexit
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The “troika” imposes unreasonable, harsh conditions on Greece in return for bailout funds. Austerity has exacerbated Greece’s economic crisis. Undemocratic institutions are dictating Greek domestic policies. Greece can’t repay its debts.

Other countries have recovered from crises through loan default and/or devaluation (Argentina, Iceland). It will cause short-term recession and inflation, but eventually creates a sounder economic platform.

BUT
The Greeks don’t only have to devalue their currency, they have to reintroduce one. This is complex and will take some time. The economy could implode in the meantime.

Exports are a small proportion of the Greek economy. A lower currency won’t provide much economic stimulus.

No-one will lend Greece new money. The crisis will remain unresolved.

The Greeks refuse to reform their economy/budget. Until they do, devaluation/default will provide only temporary relief.

EZ case for Grexit
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Monetary unions can only work if everyone obeys the rules. Greece hasn’t, and has not implement reforms agreed in past bailouts. Its credibility is shot, especially after the referendum.

The Euro is at stake, especially if other PIIGS countries see Greece as a precedent.

The rich Northern and poor Eastern EZ members are sick of subsidising Greek profligacy and its failure to comply with bailout conditions.

Greek case Against Grexit
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Greece benefits from Membership of the EZ and access to European markets. Losing this would be a long-term disaster. Greece needs the reforms and fiscal discipline the “troika” advocates, not just as a trade-off for further loans. If Greece defaults, its credit rating will be junk for years.

EZ case Against Grexit
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The EZ is not designed to allow countries to leave – there are technical barriers to Grexit. It could create a precedent for other intransigents to exit. Allowing a country to leave undermines the founding principles of the EZ and could imperil monetary union or even the EU itself as an association of nations agreeing to abide by certain common rules for mutual benefit. This would have serious consequences for all members

Thanks, Rhian, well-laid-out too.

So what might happen ? The EU probably holds all the cards: Greece can stay in the EU or not, either way the EU will cope. Tsipras may keep trying to bluff them that he has something up his sleeve, but I think he has nothing, and he knows it. And so do they.

Yes, it's a bit like credit card companies who offer you higher and higher limits - and you get a dozen of them, paying little back. So up goes your total debt, year by year. Immoral of them, but for all that and all that, YOU have to pay it all back somehow, sooner or later.

This would mean drastic re-structuring of the Greek pension system, public service numbers, enforcement of income tax procedures, etc. It may mean an EU overseeing committee of audit to make sure those mechanisms are put in place.

But China is a much more serious problem: the Greek economy is as big as Melbourne's, but China's is half as big as that of the US. It's our biggest trading partner, at least in exports. If China stumbles, our economy is crushed.

So we're not that different from Greece. Don't kid yourself otherwise.

Cheers,

Joe

Hi Joe
I agree China is a much bigger issue, especially for Australia (and more especially here in WA). I don’t think China is likely to implode as Greece might, but the pessimists’ warnings about the solvency of its financial sector are worrying.

You’re right that Greece exiting the EZ/EU won’t have much direct impact, but I wonder about its long-term effect on the credibility of the European project. Concern about undemocratic centralisation of power and unsustainability of the EZ without central fiscal control used to be heard predominantly from the right fringe, but are now being raised increasingly by the left and mainstream. Greece is a fascinating case study, though horrible for the Greek people.

The greek now what they voted for, so there should be no 'problem.' I say the problem has changed hands. It has to be up to the creditors to give Greece a handleable repayment scheme . Which is what they wanted all the time. You can't get multi millions where there is none.

What choices do the creditors have : Force Greece to go to Russia, that will breed more problems than Europe wants.

It's stones and blood : Dismantle Greece and absorb their population under another European flag. Bankruptcy means someone has to forfeit :


Some checks and balance from creditors in the past would have been handy.

Hi Doog

I think everyone would agree it could have been handled better in the past.

From media reports, it looks like Tsipras has tabled something that includes most of the rejected austerity measures, but will ask for some debt relief.

http://www.bbc.com/news/world-europe-33472699

Whether it will be accepted, and whether it will provide a lasting resolution, remain to be seen.

Loudmouth,

".... YOU have to pay it all back somehow, sooner or later."

Ahem....the one country which has "never' paid off its debts is Germany.

Greece's debt is recognised by the IMF as "unsustainable" - meaning that it is not expected that Greece can pay off its debt....some of it needs to be written off - and the rest restructured.

http://www.newyorker.com/news/john-cassidy/greeces-debt-burden-the-truth-finally-emerges

(btw, in 1953 Greece wrote off 50% of Germany's debt)