"Now that Greece has been declared a defaulter, experts are citing
that this might bring the entire country to a standstill.
Please help us understand the wider range of impact caused on any
economy when such a declaration from the creditors/IMF"
Most important - the country’s exit from the euro area
and—most likely—from the European Union
An exit from the euro would only compound the already
adverse environment, as the ensuing acute exchange rate crisis would send
inflation soaring.
All this would imply deep recession, a dramatic decline in
income levels, an exponential rise in unemployment and a collapse of all that
the Greek economy has achieved over the years of its EU, and especially its
euro area, membership.
At larger level - A default will pose questions about the
survival of the European monetary union and will also lead to confusion and
volatility in global financial markets
Will it benefit if in some way, more to US or China?
Politically,
yes, for sure....as it is a setback for d European nations to reassert
themselves.
Even
depreciation of euro is to the advantage of US/China.... but some initial volatility
will be there.
But it is also expected that the "state will collapse"- what
does that entail?
It refers to govt. As said above, inflation, unemployment, etc.
would lead to that.
How is it any different from the present scenario in Greece? The
country is already bankrupt, can't payback its sovereign debts, unemployment is
60%?
The terms of Greece's existing bail-out programme stipulate
that a default to the IMF would automatically constitute a default on the
country's European rescue loans.
Such a scenario would risk the European Financial Stability
Facility (EFSF) cancelling all or part of its facility or even declaring the
principal amount of the loan to be due immediately. Should the EFSF take such a
decisive move, it could activate a range of cross default clauses on Greek
government bonds held by private investors and the ECB. These clauses state a
default to one creditor institution applies to all.
Also A wave of defaults may force the ECB into finally
pulling the plug on the emergency assistance it has been providing in ever
larger doses since February.
ECB has forced Greek banks to shut down, can you please explain what
gives ECB that power? Because if banks are closed, I can see what they mean by
collapse?
That’s one
of d condition of previous bailout - The central bank (ECB) has kept Greek
banks on a tight leash, maintaining that it would only restore normal lending
operations to the country once "conditions for a successful completion of
the programme are in place".
so such is the grasp of a lending
institution that even private banks are not allowed to operate?
Greeks aam
admi are anti EU becouse of these harsh terms & conditions of bailout. Even
d referendum now is for –
1) to accept
harsh terms for further bailout
2) dont accept d terms & dont pay
can you please tell why a creditor that has loaned billions of dollars
allow a country to say "we're not going to pay"?
That’s all
geo-political equations, what else can be done?
What u will
get? Do they have anything left except probably gladiators?
Is all these happening because of not having set proper guidelines for
a defaulter state during formation of European Union..
I’m sure there must be some guidelines. Now I do not
know.... but it is very much likely. Will find out. (If I can give a guess -
may be elimination from EU).
From what I've read, there has never been a scenario like
this before. No state has ever been declared a defaulter within EU before.
Hence the guidelines are made and adopted as things progress (heard this from
the horse's mouth- Greek Finance Minister)
Secondly, the Greeks were given a bailout after 2009 which
was unsustainable, especially on the condition of austerity that beats
Keynesian economics. This is seen as muscle flexing of Troika and other lenders
of EU and accepted by the then Greek government because some money is better
than no money regardless of what measures one is put through (austerity, social
cuts etc.).
The previous government was as much incapable of paying
their debt back, as this govt. The only difference is that this government has
challenged the lenders and hence ended up getting declared as a defaulter.
They are also contemplating to join Russia or China by exiting EU...I
hope it is just a pressure tactic
Could be a tactic
