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Poll: Will Greece default?

Q: Will Greece default?

Here are the possible answers for the poll (embedded below on the site)?

  • No, they will take the necessary austerity measures plus receive enough support from the EU and IMF.
  • Yes, but they will stay in the euro-zone after a managed restructuring
  • Yes and it will be a messy involuntary default
  • Yes and they will leave the euro-zone

Feel free to sound off in the comments as to why you answered as you did.

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.

28 Comments

  1. Jack says:

    They might not default because of the bailout, but they definitely won’t be borrowing any more money from the market at these rates.

    • Michael Jung says:

      Euro-Zone members can not indefinitely give millions as needed as austerity is implemented. Not more than once. Otherwise Germany, France & Co who ‘give’ them money would pay Greeces’ premium on their future rounds of debt raising.

      • Greg says:

        It is not clear that the Euro-Zone members are giving anything. They are extending loans to Greece at lower-than-market-spike rates. They certainly can do that indefinitely, at least if indefinitely means the scale Greece would need, since Greece is relatively small compared to the GDP of the entire EU.

  2. Greg says:

    I think it is just a question of when they default. I don’t see much chance of them being able to voluntarily make the changes necessary to reduce their deficit. They will probably get some money from someone (I would call it a subsidy, not a bailout since whatever they get, it won’t fix the problem), but eventually all will tire of subsidizing their spending.

  3. Michael Jung says:

    x Yes, but they will stay in the euro-zone after a managed restructuring.

    History doesn’t repeat itself, but it rhymes.

    Exclusion of the Euro-Zone is impractically politically and economically. What if Greece is excluded, all the sudden Spain, Portugal & Co would have to go as they are on the ‘wanted-list’ of credit markets too.

  4. Mark Wadsworth says:

    The other Euro people won’t let them default.

    • Greg says:

      Exactly. If the EU allows Greece to default, then hedge funds would start targeting its other weak EU members. The EU has to stop the threat.

      The easiest thing to do is offer loans at around 5%, below current market rates but still high, with a condition of fiscal cuts. There should be a real threat of Greece being kicked out of the EU if the fiscal cuts are not implemented to tie Greece’s hands.

      • There’s another point. Greece seems ready to “restructure”, which I take to mean that the banks will take haircuts on Greek debt as there will be pricing transparency.
        If Greece defaults, you can do extend and pretend – “well, we can’t pay now, but we’ll do so when we get this bailout”, which effectively preserves the illusion. So the restructuring course is potentially more destablising to the European banking system.

      • Greg says:

        And, look at that, four days later, what I predicted is exactly what happened. Loans at 5% extended in exchange for fiscal cuts.

        • Greg, that’s not exactly a shocker since most people expected this outcome. The question is whether Greece will default down the line. Having made the 3-year commitment, the EU has pushed this question out a long ways and done a great deal to avert a crisis. But, if we do see a European/Global double dip, I suspect the issue will then turn to Spain, Ireland and Portugal.

          • The more interesting question at this stage is, if it costs 110 billion
            euros to sort out Greece, how much for Spain? Italy? France?

            In a message dated 5/3/2010 12:38:13 Mountain Daylight Time,
            writes:

            Edward Harrison wrote, in response to Greg (unregistered):

            Greg, that’s not exactly a shocker since most people expected this
            outcome. The question is whether Greece will default down the line. Having made
            the 3-year commitment, the EU has pushed this question out a long ways and
            done a great deal to avert a crisis. But, if we do see a European/Global
            double dip, I suspect the issue will then turn to Spain, Ireland and Portugal.

            Link to comment:
            http://www.creditwritedowns.com/2010/04/poll-will-greece-default.html#comment-48199792

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          • That’s the right question. With Greece out of the woods (for the next year and a half), what happens next? Spain is the real worry here. And the Spanish press is very concerned/annoyed that they have ponied up 10 billion euros they don’t have to bail out Greece. They better get the aid they need if they fall on hard times because the Euro-zone will definitely break apart if they don’t (and I suspect they won’t because they are too large).

            Here’s a Spanish language article showing how much is being allocated for Greece per EU citizen per country. Germany is below Spain on a per capita basis.

            http://www.expansion.com/2010/05/03/economia-politica/1272886177.html

          • Yes, Spain and Italy ponying up money for Greece is akin to Bank of America
            wrecking its own balance sheet by buying Countrywide and Merrill Lynch.

            In a message dated 5/3/2010 14:41:03 Mountain Daylight Time,
            writes:

            Edward Harrison wrote, in response to Marshall Auerback:

            That’s the right question. With Greece out of the woods (for the next
            year and a half), what happens next? Spain is the real worry here. And the
            Spanish press is very concerned/annoyed that they have ponied up 10 billion
            euros they don’t have to bail out Greece. They better get the aid they need
            if they fall on hard times because the Euro-zone will definitely break
            apart if they don’t (and I suspect they won’t because they are too large).

            Here’s a Spanish language article showing how much is being allocated for
            Greece per EU citizen per country. Germany is below Spain on a per capita
            basis.

            http://www.expansion.com/2010/05/03/economia-politica/1272886177.html

            Link to comment:
            http://www.creditwritedowns.com/2010/04/poll-will-greece-default.html#comment-48218379

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        • So, all eyes are on Spain now. That’s where the real action has always been. Spain would be Europe’s Lehman to Greece as Bear Stearns.

  5. Anonymous says:

    Yes & yes….eventually. The severity of any austerity measures necessary to comply with Maastricht will make it almost impossible to recover economically. Only way to compete is restructuring of the debt and devaluation of its own currency by leaving the EU. Otherwise the current situation will continue to happen over and over. Problem is…EU, IMF next may not have the stomach or means to bail them out. However, I think the can will continue to be kicked down road in the short term.

  6. Nick the Greek says:

    Greece has never run a budget surplus. Many Greeks have been able to retire at the age of 45 and many more as soon as they turn 55.
    The civil service is overstaffed and unproductve and the communist party seems to hav “still!!!” a firm hold on the labour movement. If they sniff something in the air that they don’t like they mobilise their forces and go on strike.
    They shut everything down and incovenience everybody, but they don’t seem to understand they indermine their positons and weaken their economy.

  7. Anonymous says:

    Re: Default and leave the Eurozone.

    I heard that the process of converting Greece to the Euro imposed very large cost increases on public consumption of many consumables. If this is the case the interest in abandoning the Euro inside Greece may be high.

  8. gigi says:

    I expect Germany to leave the Euro. I voted for Greece leaving the Euro as the closest as well as part of the eventual outcome (I don’t expect the Euro to survive)

    Germans are not stupid and they will see no point in bailing out EU state after state. Effectively the bailout is transfer of goods from Germany to club med for free. Why should the Germans work for Greeks to enjoy?

    The exact timing is unclear. There might be an attempt or two at bailing out Greece and/or Portugal but pretty soon the above dynamic will become clear and the Germans will decide that it is simpler to leave the Euro than to kick every other country out. Euro will disintegrate.

    Monetary union in such a disparate economic zone was a bad idea. The differences in the various countries are continuing to grow instead of shrinking, increasing the stress on the Euro. The differences are rooted in culture and they will not give (Germans becoming less efficient or club med coming closer to Germany? Not gonna happen). That leaves no option but a collapse of the Euro.

  9. gigi says:

    I expect Germany to leave the Euro. I voted for Greece leaving the Euro as the closest as well as part of the eventual outcome (I don’t expect the Euro to survive)

    Germans are not stupid and they will see no point in bailing out EU state after state. Effectively the bailout is transfer of goods from Germany to club med for free. Why should the Germans work for Greeks to enjoy?

    The exact timing is unclear. There might be an attempt or two at bailing out Greece and/or Portugal but pretty soon the above dynamic will become clear and the Germans will decide that it is simpler to leave the Euro than to kick every other country out. Euro will disintegrate.

    Monetary union in such a disparate economic zone was a bad idea. The differences in the various countries are continuing to grow instead of shrinking, increasing the stress on the Euro. The differences are rooted in culture and they will not give (Germans becoming less efficient or club med coming closer to Germany? Not gonna happen). That leaves no option but a collapse of the Euro.

  10. Corvetto says:

    Thanks. The EU is fighting for its life right now and have a clear picture of what they want to see from Greece. I doubt Greece can deliver the goods on their own. More troubling, as Yves Smith and others have noted, is the rot spreading to Portugal and Spain. A real upturn in demand and growth from China might provide the impetus to forestall a crisis US politicians appear unable to address.

    Investor and consumer confidence are ripe to take a massive hit. If that takes place, 2008-9 may look like the good old days.

  11. Anonymous says:

    I decided this would have to come all the way to an unavoidable crisis for Greece when I heard a snippet from an interview of a Greek worker where he complained about the hardship that now it appeared he would have to delay his retirement to some ungodly age like 57…

  12. bluemonkey9 says:

    Greece and Spain won’t pay back. The only thing Germans can do is:
    REPOSSESS 170 Leopard 2AEX Battle Tanks from Greece, and 190 Leopard 2A6E Battle Tanks from Spain.
    U.S.A must REPOSSESS 170 F-16 Jet Fighters from Greece, … the rest is gone with the wind …forever …
    Greece must stop paying lucrative pensions with borrowed money, reform the free health care system, and cut down, 4 times the military budged.