A Greek exit: How would it work? -- Report from ABC Australia Online
G'day All,
I don't usually post entire articles but this one I thought was too important to merely link to.
How's this for a sample:
It can be read here.a Greek exit from the eurozone could cost anything from 350 billion euro to a trillion euro
If you take the time and visit the original there is an interview with a Greek MP and professor of economics at the University of Athens, Euclid Tsakalotos, from the ABC Australia show Lateline (transcript available here) where Tsakalotos states:
It's just good to hear someone looking at the history of the problems in the economic "system" (at least as far back as the 70's and 80's) and explaining their relevance to the present "crisis" while placing the blame squarely at the feet of the bankers, corporations and oligarchs. I get sick of people who only think within the context of their lifetime and have little or no knowledge of historical influences that create the environment that forms our "present" and provide a way of understanding what will happen based on historical review.
Most economists in 2007 would not have believed that a world wide recession was at hand.
Most economists didn't understand the history of the boom/bust cycle because they thought it couldn't happen under the modified Friedman/neo-coinservative model.
Guess they were wrong.
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A Greek exit: How would it work?
By Amy Simmons
Imagine for a moment you live in Greece.
You wake up one morning to the news your country is no longer part of the eurozone.
You were meant to buy groceries and pay bills today, but what happens to your money now?
You may feel a glimmer of hope, or you may actually be in the middle of a "financial holocaust".
If Greece exited the eurozone, there would be several advantages, but experts say the move would also catapult the country into a chaotic abyss.
First, they say Greece would go into lockdown. It would close its borders and freeze its entire banking system. It would also be impossible for Greek businesses to trade internationally.
Then an emergency currency would be brought into effect. This would hold Greece over until it could print enough drachma - Greece's former currency - to replace the old euro.
A tsunami of economic effects would roar across Europe. All euro notes and coins which originated in Greece would no longer be legal tender, and Greece's debt would potentially double.
ABC News Online spoke to two economists who say, logistically, a Greek exit from the eurozone would be a nightmare, and economically, the consequences would be dire.
Satyajit Das, a financial risk analyst, former banker and author of Extreme Money, says one thing is for sure - the announcement would come as a surprise.
"The first thing is you have to do it unannounced, because if you do it announced everybody in Greece will take their money out of the country to preserve its purchasing power," he said.
"Twenty per cent of the deposits in Greek banks have left already, and if they got a wiggle that this was going to occur that would double almost over night.
"So basically you have to do it by surprise. What you would do is effectively close the borders and shut down the entire banking system, pretty much the whole economy, for a few days.
"Then you would take all the euro in circulation within Greece and stamp them as Greek euro, and then you would have a process of replacing them with your new currency, but that's going to take two to six months.
"The stamped euro would be a temporary currency. Overseas people would never accept it because the value of those Greek euro would be different, so they could only be spent internally."
'Destruction of wealth'
Mr Das says the Greek currency would fall anywhere between 20 and 50 per cent in value.
"After you introduce the new currency, the Greek euro, which would now be the new drachma, would fall in value like a stone," he said.
"Basically you’re talking about people's life savings, their wealth, their incomes being completely wiped out.
"The price of all imported goods in Greece would go through the roof - and Greece imports a lot of stuff.
"So the Greek debt will potentially double, and they won't be able to pay it back.
"They will default on their debt so all the people who have lent to them will suffer losses - these are German banks, French banks, investors."
He says a Greek exit from the eurozone could cost anything from 350 billion euro to a trillion euro.
"It would be the cost of the absolute total destruction of wealth and purchasing power of the Greeks," he said.
Mr Das says it would be the "financial equivalent of the holocaust".
He says because such a move is unprecedented, the full impact is impossible to predict.
Take this analogy, he says: "If you want to be at Hiroshima to watch what an atomic bomb does, stand at ground zero and look up, this is what you're doing when you're exiting from the euro, because none of us know how this will work.
"We know what the mechanics are, but we don't know what the full effects will be.
"But at the end of it all, the average Greek citizen would be considerably poorer."
Chaos and violence
Dr Oliver Hartwich, editor of the New Zealand Initiative and former employee of the Centre for Independent Studies in Australia, paints a similar picture for Greece.
He says Greek people are "torn" over whether they want to leave the euro, but if it does happen, violence and chaos will reign.
He largely agrees with Mr Das on the mechanics of the move.
"The most likely scenario is that they would take in the old euro notes and stamp them so that on that day all the euro notes in Greece would have some sort of magnetic ink stamp that would render them useless outside Greece.
"It would serve as an emergency Greek national currency.
"They'd have to have some kind of check at the border so nobody could take their euro out of the country. All the Greek bank accounts would be frozen and there would be a bank holiday for maybe a week so nobody could access their funds."
Dr Hartwich agrees printing a new currency could take months, but he is not sure if Greece could even pay for it.
"What would also happen outside Greece is that the other European countries would have to remove all the coins and bank notes from Greece, because you can still recognise where these coins have come from in Europe - the Greek 2 euro coin has an owl on the back and the bank notes have serial numbers on them and a country code.
"So all of them would need to be taken out of circulation in the rest of Europe.
"Banks would advertise these are no longer legal tender and people would probably take their money into the banks and get it exchanged for say German or French euro."
'Massive operation'
Dr Hartwich estimates about 2 to 3 per cent of the total euro in circulation is from Greece.
He says if recent times are anything to go by, the exit would not be pretty.
"It could be quite chaotic, it could be violent, there could be people storming banks to try and get their money out," he said.
"Once you tell Greek people their savings in the bank are no longer worth what they though it would be worth, it could become ugly.
"It would take a lot of police and military effort - it would be a massive operation."
But it isn't all doom and gloom.
Mr Das says there would be at least two advantages for Greece if it did leave the eurozone - tourism would increase and its debt would be waived.
"Their tourism industry, which is their main industry, would benefit because they would become cheaper, so people who are now going to Turkey may come back to the Greek islands," he said.
"Also, the amount of debt they have would be reduced because they would essentially be unable to pay their debt, so they would just default."
Both Mr Das and Dr Hartwich say they have no idea whether Greece will leave the eurozone.
They say the decision to stay or go rests in the hands of Greek politicians, but that essentially, every remaining option is a bad one.
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Centralisation causes instability and breeds structured systems of control. Decentralise, decentralise, decentralise. How long will it take before people realise that any centralised structure is designed to consolidate and concentrate power in the hands of the few and that it automatically breeds the money/control/power structures that reinforce each other to increase and further centralisation. **shakes head in dismay**
Kind Regards,
Panopticon
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