Greece

Greek P.M. Tells Europe What It Can Do With Its Debt Repayment Deadline

Alexis Tsipras is officially calling for a referendum.

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Alexis Tspiras
Wikipedia

Greek Prime Minister Alexis Tsipras has refused the terms being offered to him for unlocking the remainder of Europe's bailout of his country. His creditors want promises of austerity, with an emphasis on reducing spending rather than simply hiking taxes. Tsipras' far-left Syriza party continues to balk.

Today, he announced he was calling for a referendum on July 5 so the Greek people can vote on the package of proposed reforms.

The problem? The deadline for Greece to make a multibillion-euro loan repayment to the International Monetary Fund (IMF) is June 30. That's almost a week before Greek voters will be able to have their say on whether to comply with the European community's demands.

Unless Tsipras and the IMF can come to an agreement before the end of this month—which is Tuesday—Greece won't be able to make the required loan repayment. It doesn't have the cash and was relying on the bailout money being available by now. The IMF has said it will not offer the beleaguered Mediterranean nation a grace period.

Will Greece's creditors relent? There's been no indication they're inclined to.

What will happen if Greece fails to make the payment to the IMF? The European Central Bank could cut off the flow of money that's currently keeping Greek banks afloat. A banking collapse is the worst-case scenario.

We're now just four days away from finding out if that's what's in the cards.

More coverage here.

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  1. A back collapse is a best-case scenario.

    1. Bank. There’s a new phone in my near future.

      1. “Back” works if you are talking about the rest of Europe who would like to get this monkey off of their backs.

    2. Drachma trading par with Charmin is another.

      1. Somehow combined with a predictable toilet paper shortage, is that what you are chipping in with? I mean, I bet making toilet paper somehow involves chipping wood.

  2. So who’s holding the bag when Greece stops paying?

    1. You mean who’s finally free from the illusion they’ll ever get their money back?

  3. It’s easiest to explain this to people in terms of the EU has been lending Greece its credit card to pay off Greece’s credit card debt.

    There is no avoiding the pain here, or down the road with other countries going down the same trajectory. The idiots on the left want to talk about sustainability, they can start with sustainable government spending and economic policies.

    1. Surely, you can’t be serious?

      1. Looks like I picked the wrong week to quit sniffing glue.

    2. Francisco, how ‘ bout some more coffee?

  4. Didn’t the PASOK regime collapse when they tried this?

  5. Tso, Tsipras ist tsaying, tsend ust tsome money or we’ll tjump off thist tcliff?

    Why would anybody in their right minds lend more money to tsomeone who not only said they can’t pay, but have no intention of paying?

    1. Because they already lent Greece so much money that if Greece goes down, it will be catastrophic for the banks themselves. And Greece isn’t alone there. If they default, what the hell is going to happen for the other countries with massive debt?

      So that’s how we get this ridiculous scenario where the EU is lending money to Greece to pay back banks.

      Better question is – what is the incentive for banks not to make stupid loans to nations like Greece if they aren’t allowed to suffer the consequences? But then banks have been strongly pushed to make those risky lending choices by governments. So, it’s what happens when ever the government/central planners get involved.

      1. Agreed.

        But now they are merely compounding their eventual losses rather than taking their lumps and move on.

        IMHO, the most absurd part of modern political economy is the notion that a recession must be avoided at all costs. The result is that they are just building for an even worse one down the road.

        FWIW, I am waiting for the Grexit then putting some money in Deutsche Bank shares. (THIS IS NOT ADVICE!)

      2. Eh, this isn’t 2008. We’ve had several years of the banks being shored up against Greek default, largely on the basis of the other countries, ECB, and IMF buying the Greek debt from the banks. This isn’t about the banks anymore.

        This is about those other high-debt countries. Every euro sent to the Greeks in the last couple of years has been aimed at developing a consensus (especially among the marginal non-Greek countries and creditors of those countries) that the Greeks have chosen disaster on their own, alone, despite Europe’s willingness to help. The goal is to establish that the problem isn’t with the EU, or any other EU states, but solely the Greeks.

        That consensus is definitely firming up (Ireland’s PM just came out and severely criticized the Greeks and opposing debt relief for the Greeks), at which point a default won’t be a big issue; everybody else just redirects the bailout money from Greece directly to the institutions that get hurt by the default, and let the Greeks figure out how to live within their means.

        1. “everybody else just redirects the bailout money from Greece directly to the institutions that get hurt by the default, and let the Greeks figure out how to live within their means.”

          Which signals to the institutions lending money to the Greeks that they can keep lending money to the Greeks, because they’ll get their money back from the Germans.

          And… Yeah, you know where I’m going with this.

          1. Kick that can. It’s the economic policy of the grown-up political ideologies. Should just adopt it as a motto.

            They won’t lend to the Greeks for a good while, but they’ll keep pumping money into other sinkholes.

      3. It’s all the fault of greedy banks again. Because capitalism.

        1. Market failure, market failure!!!

      4. Because they already lent Greece so much money that if Greece goes down, it will be catastrophic for the banks themselves.

        Actually, no. Most of the debt has been bought from the banks by the IMF, ECB, and their respective governments.

        What the Eurozone countries are worried about is Greece leaving the Euro. Right now, the fact that the PIIGS are part of the Eurozone is one of the things keeping the Euro from trading like the old Deutschemark. While good for consumers, that would be a problem for export industries. That’s in addition to the loss of the Greek market and any market share Greek exporters were able to get with their devalued drachma. And, of course, there’s the rest of the marginal Eurozone counties that might start looking at a Euro exit as an attractive option.

        1. I pointed out the precedent issue, but regardless – a sizable portion is still owed to the banks. Nor is that simple and clean cut. Where did the loans given by the IMF and ECB come from if not central banks? And that’s still a big loss to eat for the member countries.

          The EU countries don’t want the shock and so they continue to kick the can.

        2. OK, I totally don’t understand. How does having the countries with the shitty economies in the EU help keep the value of the Euro up?

  6. The EU was a conglomeration of countries with varying degrees of development- economic and infra-structural. Former Soviet satellite countries had a lot of catching up to do and many in those populations were ready to make a go of free market economics. So they were eager to get access to funds to invest in necessary infrastructure and such.

    I get the sense it all went into promises of free goodies for all (vote buying) instead of credit for projects that represented a good ROI.

    1. Actually, a lot of the ex-Soviet bloc countries did make the necessary sacrifices and choices. They are among the ones most pissed off at the Greeks. (Poland and Slovakia in particular.)

      1. This. Western Europe is where the free shit has proliferated to the retarded. The ex Soviet bloc countries have a better understanding of markets and capitalism.

        1. The Mediterranean countries appear to be the worst, and I wonder if this isn’t in part because during the postwar era some of these countries (Italy comes to mind especially) were largely propped up by the west to keep them from falling into the hands of domestic communists, so they never learned to survive on their own.

  7. So, apparently the Greeks simply weren’t spending enough to stimulate the economy?

    /derp

    1. ^This is what Krugman actually believes!

  8. We refuse to embrace austrrity. Austerity is a failure! Our people will wind up poor. You must hate poor people if you think we’re going to prevent our government from running the economy, and making the necessary investments in our crumbling infrastructure, and all these other programs.

    Free markets have brought us to the crisis we are in. We will not embrace any more capitalism, because the evilness of such a system has reared its ugly head once again, hence the problems we currently have.

    We are making so much progress, but we need more money, and more of the right people to make our economy prosper.

    /gov’t

  9. Folks gobble things like this up. They ignore everything in front of them, and of course will vote for more of other people’s money.

    The failure of gov’t and fractional reserve banking are evident. No one wants to admit this. So to save face they blame freedom, and economic freedoms for the problems created by the direct results of their own socialistic fantasies.

    If only there were more regulations!! Blame freedom, and now the people will have to suffer from higher taxes as a punishment, and they will keep deflecting the blame away from themselves. They will never forget what “capitalism” did to their country and will repel any solution associated with it.

    They deserve the socialist they voted for. Cut off the spigot, and let them live in their socialist utopia. Many taxpayers (individuals extorted by gov’t ) were on the hook for all the money thrown at Greece. No more.

    1. That’s what should happen but not what is going to happen. EU always end up backing down. There is no reason to believe they won’t again. Europe is like an Orwellian apple dumpling gang.

      1. Taking the suckers in Quake City!

  10. Time to start selling off assets. Wonder what Mykonos or Santorini or other Greek Islands would bring in an open auction?

    1. Maybe they can sell the Parthenon to us and have it airlifted to the Smithsonian?

  11. Too bad the Greek Banks didn’t keep 100% reserves in their vaults; then the prospect of people retrieving their own property would be such a crisis.

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