Thread: Greece Threatens To Leave Eurozone, Reintroduce Own Currency

Breaking: Greece Threatens To Leave Eurozone, Reintroduce Own Currency

Submitted by Tyler Durden
05/06/2011 11:57 -0400
62 comments

• GREECE THREATENS TO LEAVE EURO AREA, GERMANY'S DER SPIEGEL SAYS
• FINANCE MINISTER FROM EUROZONE AND EU COMMISSION HOLDINGS CRISIS MEETING TODAY IN LUXEMBOURG
• MEETING AGENDA INCLUDES POSSIBLE NEAR-TERM DEBT RESTRUCTURING FOR GREECE
• EUROGROUP CHAIRMAN JUNCKER "TOTALLY DENIES" MEETING TO BE HELD TODAY TO DISCUSS GREECE

◦And cue panic and furious denials:

• French finance ministry official cannot neither confirm or deny Spiegel report of emergency Eurozone meeting
• Austrian Finance Minister spokesman says Eurozone breakup "absolutely unthinkable"
• German government source says theres no plan for Greece to leave the Eurozone

Full google translated Spiegel Article: http://www.spiegel.de/wirtschaft/sozial ... 36,00.html

Greece is considering withdrawal from the Euro-zone

The debt crisis in Greece is getting worse. The government of the country considered to information from SPIEGEL ONLINE, leaving the euro zone. The finance ministers of the monetary union and representatives of the EU Commission will meet on Friday evening secret to a crisis meeting.

Berlin - The economic problems of Greece are huge, almost daily protests against the civil government. Now Prime Minister Georgios Papandreou, apparently sees no other way: According to information from SPIEGEL ONLINE considered his government to abandon the euro and reintroduce its own currency.

Alarmed by the efforts of the European Commission on Friday evening an emergency meeting in Luxembourg has loaded. Apart from the possible withdrawal of Greece from the monetary union and a speedy rescheduling of the country is on the agenda. A year after the outbreak of the crisis in Greece this means for the European Monetary Union an existential turning point - regardless of what option they choose.

Because of the tense situation has been prescribed for the meeting in Luxembourg the highest confidentiality, only the Finance Minister and one close associate may. For Germany participate Finance Minister Wolfgang Schäuble (CDU) and Financial Secretary Joerg Asmussen.

Schäuble wants to hold the Greeks in all circumstances from € outlet. An internal presentation of his ministry, which he took to Luxembourg, warns of the consequences. "It will be a significant depreciation of the new domestic currency against the euro," it states. Was estimated using an exchange rate loss of up to 50 percent can be expected. This debt is growing dramatically in Greece. Schäuble experts expect that the national debt would increase following the devaluation of around 200 percent of gross domestic product. "A restructuring was inevitable," they warn. In plain language: Greece would be bankrupt.

Massive implications for the economy in Europe

While controversy is whether a Euro-Greece's exit would be legally possible at all - in the opinion of legal experts would have to leave the country for the same time the European Union as a whole. It is doubtful whether the other members of the Monetary Union of the government in Athens would preclude a unilateral withdrawal from the euro area actually.

This reveals that the measure had been estimated by the officials Schäuble massive impact on economic life in Europe. "The currency change would trigger a capital flight," they write. Greece may be forced to introduce capital controls. "This would be the fundamental freedoms of the single European market not to bring into line." Moreover, the country would be cut off for many years by the capital market.

Furthermore, would the withdrawal of a country from the monetary union, "damage the trust in the functioning of the euro zone difficult," it said. International investors have to expect that emissions in the future further € members wanted. "This would lead to contagion effects in the euro zone."

The German taxpayer would step dearly

Had a severe impact on the swerving of Greece still ailing banking sector, especially at home. By the currency cut "all of the equity would be eaten up the banking system, the country's banks would be instantly insolvent." But the banks in other countries would suffer. "German and foreign banks would have expected a substantial loss to their demands," says the paper.

The European Central Bank (ECB) would be affected. It would have "a substantial portion of their assets to write off as uncollectible. Among the loans to banks without counting the stocks added to Greek government bonds, which the ECB has bought in recent months. Their volume estimate Schäuble officials to at least 40 billion euros. "Germany would contribute according to its ECB capital share of 27 percent most of the losses."

The bottom line is an exit followed by Greece would bankrupt the country euro-zone countries and their taxpayers are even more expensive. Together with the International Monetary Fund, they have the land grant assistance amounting to 110 billion euros - around half of which was already paid. "The euro-zone countries would have to surrender to the bankruptcy of the country on some of their claims."

http://www.zerohedge.com/article/breaki ... n-currency

Greece Denies

Submitted by Tyler Durden
05/06/2011 12:31 -0400
40 comments

From Reuters: Senior Greek government official denies report that Greece raises possibility of leaving Eurozone. So pretty much everyone has denied this, the EUR has crashed, and in a worst case the EUR is one step closer to reverting to its fair value: the DEM? Of course, with a record number of EUR longs, meaning the spec bandwagon in the EURUSD is orders of magnitude greater than the silver trade, the kneejerk response was down, and likely wrong. And yes, if Greece has gotten so far, German banks are certainly now happy to write off their exposure, and convert their EUR-denom Greek exposure to the drachma. The only question is what the impact to the ECB would be. As per Spiegel: "The European Central Bank (ECB) would also feel the effects. The Frankfurt-based institution would be forced to "write down a significant portion of its claims as irrecoverable." In addition to its exposure to the banks, the ECB also owns large amounts of Greek state bonds, which it has purchased in recent months. Officials at the Finance Ministry estimate the total to be worth at least €40 billion ($58 billion). Of course, the ECB can simply print, print, print.

http://www.zerohedge.com/article/greece-denies

Here Is Why A Voluntary Greek Restructuring Makes No Sense

Submitted by Tyler Durden
05/06/2011 13:14 -0400
37 comments

While on one hand nobody can predict what the downstream effects on the European financial system will be from a Greek restructuring, and if Lehman is any indication, they would be quite dramatic to say the least, the biggest reason why Greece would likely never voluntarily initiate a pull out of the eurozone (which would mean an immediate default for all EUR-denominated Greek debt, which is all of it), comes courtesy of Credit Sights: http://www.creditsights.com/ "The reality from Greece's perspective is that if it unclear why restructuring would be a politically astute option. More than a quarter of Greek debt is held domestically - primarily social security (€28 billion) and banks (€31 billion), but even Greek households are holding €6 billion in short-dated securities. While those are relatively small amounts, we don't believe that asking those sectors to accept losses on their holdings of government securities would be a vote winner. What's more, Greece has the liquidity it needs until some time in 2013 thanks to the EU and IMF loan facility. There is €83 billion within Greece' EU-IMG facility that has not yet been drawn."

And along those lines a reader submits:

I'm convinced Greece is jealous that the portuguese got a much better deal. They want the same deal arguing that they have already suffered long enough... Monday they announce that Greece is getting better terms and we are off to the races... by early 2012 greece restructures debt.


http://www.zerohedge.com/article/here-w ... s-no-sense