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I don't see why the Greeks can't continue to import food and fuel

With what hard currency?

The tourist and property industries should be hugely boosted by the devaluation and could result in a very immediate economic kick start without any expensive retooling required.

The tourist industry will not recover until the rest of Europe recovers. Which, given current German policies, will not happen in the foreseeable future.

Sure, housing could boom, but I thought the point of leaving the Euro was to avoid having a repeat performance ten years down the road...

I'm also not convinced that a Greek default will totally destabilise the EU banking system

It does not have to. But the Franco-German response almost certainly will.

sure some politically unpopular bail-outs may be required, but ultimately a heavy dose of quantitative easing should solve the problem.

QE is basically a fancy word for discount window operations, invented by people who don't like the discount window. Like all discount window operations, it requires collateral. It is possible to overvalue this collateral, but pretending that Greek bonds are viable collateral becomes tenuous when they have been explicitly defaulted on.

(Economists who are dead against QEbailouts to save the profligate Greeks and Irish will achieve a Damascene conversion when it is German banks which have to be baled out.

Probably. But if the banksters panic and send the real economy into a tailspin while they're being bailed out, you'll need Keynesian stimulus. And the EPP-PES prefers AusterityTM, so they won't do that.

Don't forget the ECB will be blamed for forcing the Greek default

You have a lot more faith in the public's and the press' ability and willingness to connect the dots than I do.

A Greek default will be blamed on the moral turpitude of brown people who speak funny. That's the narrative that's been pushed since this crisis started, and it's a comfortable one for TPTB in Germany and the other cargo cult countries.

BuBa?

BundesBank.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 30th, 2011 at 08:14:29 PM EST
[ Parent ]
With what hard currency?

Emergency food supplies from Turkey? Just imagine the reaction in Germany....

by gk (gk (gk quattro due due sette @gmail.com)) on Tue May 31st, 2011 at 02:13:33 AM EST
[ Parent ]
Yeah, that would be a lot easier to see happening if the Turkish-Greek relationship had been one of sunshine, happiness and mutual trust.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 02:22:05 AM EST
[ Parent ]
Recall UpstateNY's Greece and Turkey: a major peace initiative (October 26th, 2010)
The article is so short that I'll just paraphrase: Greece and Turkey agreed in principle to compromise on the International Law of the Sea. Rather than Greece taking what is allowed to Greece by International Law, a proper sea buffer, Greece has reduced its buffer around the islands by half, while Turkey will respect a full buffer off the Greek mainland.
I was skeptical, but here we are 6 months later...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 03:37:05 AM EST
[ Parent ]
And there are some signs that Turkish businessmen see the opportunities.
In the face of serious risks, the debt-ridden country plans rapid privatizations which Göktuna believes would create a good opportunity for Turkish businesspeople. Papaconstantinou said Greece will "immediately" start selling state assets in several major enterprises and take more than 6 billion euros in additional fiscal measures this year to tackle its debt crisis after a seven-hour emergency cabinet meeting on Monday. Among the sectors it is planning to privatize are telecom firms, ports, lottery companies and airports. Part of the state companies planned to be privatized are the OTE telecoms company, Hellenic Postbank, the ports of Thessaloniki and Piraeus and the Thessaloniki water company.

At this point, the best method to invest in Greece for Turkish firms is to go into partnership with Greek counterparts, Göktuna says. "I was present during Prime Minister Recep Tayyip Erdoğan's visit to Greece where Greek business people invited Turkish firms to invest in their country," Göktuna recalls.

The Germans may not like this....
by gk (gk (gk quattro due due sette @gmail.com)) on Tue May 31st, 2011 at 05:12:02 AM EST
[ Parent ]
gk:
The Germans may not like this....

The Germans will be the first to invest when Greek asset prices are further reduced by devaluation.  What else can Germany do with its surpluses?  What fascism couldn't do corporatism sure as hell can.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 05:34:26 AM EST
[ Parent ]
The Germans should like it if they know what's good for them.

Because it will massively complicate Putin'ing the new foreign owners of Greek national interests.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 08:02:24 AM EST
[ Parent ]
But it would not be the first time:

SS Kurtuluş - Wikipedia, the free encyclopedia

Greece experienced the "Great Famine" (Greek: Μεγάλος Λιμός) during the time the country was occupied by Nazi Germany starting April 1941, as well as a sea blockade by the Royal Navy at the same time. The famine is reported to have caused the death of 70,000 people according to the official, Nazi-controlled, Greek sources of the period and over 300,000 according to the historian Mark Mazower.[1]

The National Greek War Relief Association, an organization formed in October 1940 by the Greek Orthodox Church, started to raise funds in the United States and to organize relief efforts to supply the population with food and medicine. The British were initially reluctant to lift the blockade since it was the only form of pressure they had on the Axis Powers. However, a compromise was reached to allow shipments of grain to come from the neutral Turkey, despite the fact that it was within the blockade zone.

Turkish president İsmet İnönü signed a decision to help the people whose army he had personally fought during the Turkish War of Independence 19 years previous. The people of Turkey thus became the first to lend a helping hand to Greece. Foodstuffs were collected by a nationwide campaign of Kızılay (Turkish Red Crescent), and were sent to the port of Istanbul to be shipped to Greece. SS Kurtuluş was prepared for her voyage with big symbols of the Red Crescent painted on both sides.



Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Tue May 31st, 2011 at 04:57:22 PM EST
[ Parent ]
The Drachma, being a convertible currency, will be as hard as the Euro.  It just won't be worth as much, and that value will take a while to be established at a stable level.

The recession makes most tourists much more price sensitive which gives Greece with a radically devalued currency a huge advantage in capturing market share.

The housing boom would be caused by foreigners buying up holiday homes at (for them) knock down prices - and also by wealthy Greeks repatriating their money to buy up assets (of all kinds) at very cheap prices for their (Euro) assets.

One of the negative consequences of devaluation - at least in the short term - is to exacerbate the relative inequality between foreigners and Greeks, and between wealthy Greeks (with foreign assets) and local Greeks. However the repatriated wealth should increase the tax base available to a (progressive) Greek Government.

My suggestion is that the Euro Crisis also spells the end of of the dominance of EPP politics/Austrian economics.

I don't read much German media, but I would hope that Merkel is being excoriated even in Germany for her racist comments. Certainly there seems to be a shift away from the CDU for all sorts of reasons, one of which is the mishandling of Germany's relations with the rest of the EU...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 03:10:41 AM EST
[ Parent ]
I don't read much German media, but I would hope that Merkel is being excoriated even in Germany for her racist comments. Certainly there seems to be a shift away from the CDU for all sorts of reasons, one of which is the mishandling of Germany's relations with the rest of the EU...
Well, there's that recent story from the Irish Times, which starts with
IF GERMAN chancellor Angela Merkel still reads the German newspapers, this was a good week to stop.

The bad reviews she has picked up around Europe in the first year of the euro zone crisis have finally begun to appear in the domestic media. "A boss without a vision" was the headline on a particularly bruising critique suggesting that, under Merkel, "Europe's largest and most economically successful country is afraid of a leadership role".

However, at the end, there's
It may be too late. Germany's relationship with the EU has deteriorated to such an extent that, among Berlin watchers, a popular parlour game is guessing who will try to scoop up Germany's new EU critical voters in the 2013 general election. A year into the euro zone crisis, the feeling around the continent is that Germany is falling out of love with Europe. But what if we are dealing with a problem of perception? Merkel has picked up the nickname "Madame Non" for her habit of stalling on bailout deals. At home critics could dub her "Frau Ja" for talking tough ahead of EU meetings and, in their eyes, returning home after apparently caving on every point.


Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 03:41:07 AM EST
[ Parent ]
Yea - I read that piece - Derek Scally generally writes well - but my impressions of shifts in German political sentiment are based on too small an evidence base for me to make confident assertions (contrary to habit and rumour!)

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 04:52:44 AM EST
[ Parent ]
The Drachma, being a convertible currency, will be as hard as the Euro.

"Hard currency," in this context, means "foreign currency."

You buy your imports in foreign currency, and since you can't print it yourself, you have to trade for it. And at the moment, they're running a trade deficit.

Hence, "with what hard currency?"

The recession makes most tourists much more price sensitive which gives Greece with a radically devalued currency a huge advantage in capturing market share.

But in a shrinking market, as long as the recession drags on.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 03:56:39 AM EST
[ Parent ]
Global tourism has been declining by 2-6% in the last couple of years, but Greek Tourism has been growing rapidly (even before devaluation) and now represents 15% of GDP and 16.5% of the workforce.

Tourism is a very dynamic market which can respond very quickly to changes in fashion or price competitiveness. Given the scale of the Greek devaluation I have envisaged, I wouldn't be surprised if Greek tourism grew by 50% (restricted primarily by transport capacity constraints) on a once off basis even in a declining global market.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 04:49:00 AM EST
[ Parent ]
before there was ibiza, there was greece as beacon magnet for low budget travellers.

europe needs more options for young people and small-pensioned retirees to go visit. if greece repicks up that role then a lot of american and european backpackers too will go fill their bars and beaches, who now go to asia.

zero snob value, but hey... it'll pay for a few wind turbines and solar panels.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Jun 1st, 2011 at 01:22:11 PM EST
[ Parent ]
Keynes on Hayek - "example of how, starting with a mistake, a remorseless logician can end up in Bedlam".
by rootless2 on Tue May 31st, 2011 at 11:03:46 AM EST
[ Parent ]

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