The left ascends to power in Greece, creating uncertainty and hope

Yay for Greece. Happy for them that they don't have to pay their debts off. It's not fair when bullies make you pay them back

 

Grexit the Euro

 

how does one go about writing off a country's debt?

 

The debt holders basically reduce the principal on the loan. A Greek exit of Euro could cause all sorts of problems for the rest of Europe, which holds most of Greece's bonds. So Greece sort of has the EU at the point of a gun: reduce our principal or risk us leaving and causing all hell to break loose for both of us. It's their version of too-big-to-fail.

Normally, this doesn't work because you assume Greece wouldn't risk ruining Greece, and for a while, that was true. But they are already in a downward economic spiral caused by austerity, so they really have very little to lose. Europe's policies towards Greece were designed to save Europe at the expense of Greece and without a fluctuating currency, there is no way for austerity to fix Greece, so not surprisingly, the people are finally sick of it.

Syriza winning was mostly a foregone conclusion. The real question was whether they could get an outright majority, which projections said they would not. If they do, this gets more complex for Europe. I suspect at the end of the day, the EU writes off part of the debt and continues the bailout - there is too much at risk for them.

 

The Greeks and Russians of the world should stop listening to the Stiglitzes and Jeffrey Sachses of the world. These are the clowns who advised them into their respective debt crises.

 

You just walk it and 7 years later you're all good again.

 

Reduce our debt or we won't fulfill our bond obligations?

what's the difference?

I guess it's like a Sopranos episode where you don't kill the deadbeat because then he can't pay you back.

But Tony wouldn't be stupid enough to loan them more.

 

Yes, it happens all the time. There is default risk when you lend money to someone. So if someone can't pay you all of it back, you can choose to negotiate a settlement and get something, or nothing at all. This happens in virtually all bankruptcy proceedings.

People make the mistake of thinking that bonds are risk-free instruments. They are not - you get paid interest in exchange for taking on some tailrisk that the debtor will fail. We are at that point, so the bondholders have difficult choices to make.

Countries default on debt obligations all the time, start over, and are welcomed back into the marketplace. Greece has done it 5 or 6 times, if I remember correctly. Spain has done it more than a dozen times. Argentina did it about a decade ago. Sometimes, it works great; other times, it doesn't. Just depends on what reforms you undertake in combo with it.

Its no different than a personal bankruptcy. It lets you get a fresh start and get your finances in order. You'll have higher interest rates initially, but eventually, it goes "off your record" and you get normal rates again.

 

If Greece wasn't using the Euro, they would likely have defaulted long ago (or just hyper-inflated). It would have gotten them on stable footing, the weak currency would make their economy far more competitive, and then they would have been back on an upward path.

Their whole problem stems from the fact that they are tied to the Euro. They can't print or hyper-inflate because they don't control the currency. If they default, it causes all sorts of problems for the rest of Europe, so Europe keeps bribing them to stay - giving them money in exchange for austerity. But it was a doomed experiment because austerity only makes the problems worse, meaning they need Europe to give them even more, which comes with more austerity. It was a death spiral; Europe was benefiting but Greece was going further into the toilet. So now Greece is going to demand better terms or let Europe deal with the consequences.

Greece is in a powerful position. But how Europe handles this will be interesting. Because if they give in, there's incentive for some of the other countries in financial difficulties (Italy, Spain, etc) to take similar stances.

 

http://ekloges.ypes.gr/current/v/public/index.html?lang=en#{"cls":"level","params":{"level":"epik","id":1}}

Here are the real time results. The key is that # of seats. If they get 150, they get full control. If they don't, the result is a little less clear, because they have to find a governing partner. As of now, with 40% reporting, they are at 148.

 

Greece needs to default on the Germans and leave the Euro.

Argentina, Mexico and Iceland have told the banker to ***k off and been the better for it.

#grexit

 

JAN 25, 2015 3:35 PM EST
By Mohamed A. El-Erian
The Coalition of the Radical Left, known as Syriza, placed first in the Greek elections today, with at least 36 percent of the vote, according to exit polls. The result could even give Syriza an absolute majority and, if it wishes, allow it to govern without a coalition partner. With these outcomes going beyond what markets expected and priced in, here is a Q&A before trading resumes Monday.

QUESTION: What happened and why will it matter for markets?:

ANSWER: The early parliamentary elections have given Syriza a significant and historic victory that surpasses the market consensus.

This is the first time Syriza is in a position to form and lead a government. Its popularity reflects intensifying economic and social frustrations among Greek citizens, including the perception that their long sacrifice hasn't yielded any meaningful gains, let alone any hint of an end to what they see as years of austerity and deprivation.

An alternative economic approach was the core of Syriza's electoral campaign. Its program, which rejects austerity and seeks debt reduction, was pursued with vigor by the party's leader, Alexis Tspiras, who frequently took swipes at Germany, including personal attacks on Chancellor Angela Merkel. http://www.bloombergview.com/articles/2015-01-25/what-syriza-s-sweep-means-for-greece-and-europe

 

Maybe Greece can collect back royalties for inventing democracy.

 

obviously you are friends with a lot of Greeks!!!