If Greece left the Euro, how many Drachma to the Euro would there be?

[BlackCat]

Oerdin, the assumption behind any talk of greece leaving the euro as precipitated by a debt crisis is that they would redenominate debts in the new currency in order to allow themselves to inflate away debt (both for sovereign debt as well as debt issued by their banks and individuals' debt)

Uhm, that might be true for government loans, but private loans taken outside greece wouldn't, so companies and privates would be seriously ****ed.

[Aeson]

Please specify the irony, ****...

The irony.

[Dinner]

I could certainly see if sovereign debt (well, and private debt) obligations were converted to drachma then that would be a great thing for Greece but are we sure that is exactly what would happen? I know what happened in other sovereign debt crisises (example: Mexico, Argentina, and Thailand) were brought about because the lenders had insisted the loans be denominated in US dollars not local currency so that the governments in question could not inflate their way out of the debt by devaluing the local currency. That would fine until there was a credit crisis which made the borrower governments unable to roll over long term debt with new long term debt (thus refinancing the debt), this forced the governments to resort to paying long term debt with high interest short term debt obligations (once again denominated in dollars) so that all it took was an increase in Federal Prime Interest Rates to bring about a currency crisis and defaults all around the third world. The key that started it all is that in order to sell their bonds on international markets countries had to agree said bonds would repay investors in dollars not local currency; I'm highly suspicious that Greek bonds specify repayment in Euros and I'm not sure the Greek government can simply modify the terms of bonds expost facto like that. Or rather I'm curious how such a thing is possible and would like to read more if someone has a link.

[Barnabas]

The currency would float, how much it would devaluate would depend on how many dollars Greece is able to attract through exports, tourism, foreign investment, and if thet get poor enough, remittances from Greeks outside Greece.

The two big issues is what would happen with the Greeks who have saved money in Euros (Banks will probably not be able to return that money), and what happens with private loans.

In Argentina we decided to turn the private loans into Pesos and screw instead the people who saved money in dollars by turning their savings into Pesos, at a very low rate. Someone will have to get screwed.

[KrazyHorse]

I could certainly see if sovereign debt (well, and private debt) obligations were converted to drachma then that would be a great thing for Greece but are we sure that is exactly what would happen? I know what happened in other sovereign debt crisises (example: Mexico, Argentina, and Thailand) were brought about because the lenders had insisted the loans be denominated in US dollars not local currency so that the governments in question could not inflate their way out of the debt by devaluing the local currency. That would fine until there was a credit crisis which made the borrower governments unable to roll over long term debt with new long term debt (thus refinancing the debt), this forced the governments to resort to paying long term debt with high interest short term debt obligations (once again denominated in dollars) so that all it took was an increase in Federal Prime Interest Rates to bring about a currency crisis and defaults all around the third world. The key that started it all is that in order to sell their bonds on international markets countries had to agree said bonds would repay investors in dollars not local currency; I'm highly suspicious that Greek bonds specify repayment in Euros and I'm not sure the Greek government can simply modify the terms of bonds expost facto like that. Or rather I'm curious how such a thing is possible and would like to read more if someone has a link.

Oerdin, sovereigns can do whatever the **** they want. If the Greeks did it, it would be treated as a sovereign default by the international credit markets.

[KrazyHorse]

The irony.

[Aeson]

It was a rather obvious joke, but... well... if you don't like obvious jokes about a person's character...

"The irony."

[Dinner]

Oerdin, sovereigns can do whatever the **** they want. If the Greeks did it, it would be treated as a sovereign default by the international credit markets.

I'm curious why the EU hasn't taken a harder line on banks agreeing to write downs since that seems the only way (well, short of Germany pawning all it's silverware) to avoid a default. When the US bailed out Mexico in the 1994 Clinton made all the banks agree to a certain percentage of debt reduction right off the bat plus agree to roll everything remaining over at the current terms or the US wouldn't agree to co-sign anything. The end result was the banks had to give something to get something so Mexico's financial position actually improved. The EU isn't taking on any Greek debt and none of the debt is getting written down so all they're doing is agreeing to backstop loses should Greece default; that does kick the can down the road a bit but it doesn't solve the real problem (they owe more then they can reasonably pay) and that's unlikely to change any time soon especially since they're stuck with the same interest rates as far better run countries with completely different economies.

[C0ckney]

the short answer is because the banks are up to their necks in it and if a country defaults, the powers that be are extremely concerned that the resulting crisis might bring the whole house of cards crashing down. the EU/ECB/IMF rescues/bailouts have and have always had two aims. keeping the euro together and saving the european banking system.

a cynical person might suggest that the whole rescue scheme has been an enormous bank bailout by another name.

[Dauphin]

I've just been reading about the Latin monetary union. I don't think I was ever aware of it before.

[C0ckney]

i remember it being referred to in one or two pieces of socialist literature, but i couldn't tell you much about the details.

i see there's a wiki article, may have to read it.

[Ben Kenobi]

do you know how desperate the greeks were to get into the euro? like italy, they had to cook the books...

And therein lies the problem...

[Main_Brain]

The currency would float, how much it would devaluate would depend on how many dollars Greece is able to attract through exports, tourism, foreign investment, and if thet get poor enough, remittances from Greeks outside Greece.

The two big issues is what would happen with the Greeks who have saved money in Euros (Banks will probably not be able to return that money), and what happens with private loans.

In Argentina we decided to turn the private loans into Pesos and screw instead the people who saved money in dollars by turning their savings into Pesos, at a very low rate. Someone will have to get screwed.

Very True. As soon as concrete Rumors about a Currency Exchange manifest there should be a Bank Run to rescue the Greek Savings due to Inflation Risk. I wonder how much Capital has been moved since the Crisis started.

[Provost Harrison]

The question still stands...how much is a Greek Urn?

[Dauphin]

How much is ode to a grecian urn?