So what actually happens if the nation of Greece fails financially?

[AsburySkinsFan]

Ok, straight up honest question here and I simply don't know the answer. Over the past two years there has been a ton of talk about Greece and its financial woes, they are constantly having to get bail outs etc from the EU to pay their bills. So my question is simply what happens if their nation's finances do actually fail? Do they turn into a third world country, sell of public land etc, drastically scale back the size of the government, armaggedon? I have no clue here.

[deejaydana]

I just had this conversation during a house party last week with some friends. Does the World Bank take over Greece once they default? Do they lose their status as a member of the European Union? None of the outcomes seem to end well here. They don't, as far as I know, have oil reserves that some surrounding nations can count on (correct me if I'm wrong on this count). I've also read that gov't employs approximately 75% of the workforce which just seems astounding. Once they implement some level of austerity expect more public protests and rioting. Again, it's going to be painful and I don't see how it doesn't have come kind of ripple effect on global markets. From what I've read I don't see how they cannot fail, the hole they've dug seems unavoidable.

[Major Harris]

I just had this conversation during a house party last week with some friends.

sounds like a fun party.

[twa]

There are large potential NG and oil deposits in their offshore territory(abuts the Israeli Leviathan find)

What happens depends on the exact choices made,the EU and World Bank will demand additional reforms and discipline as usual

[KAOSkins]

There will be a period of pretty hardcore social unrest and then the Euros will ride to rescue (read Germany) along with some regulations that make the self imposed ones seem like a walk in the park. The level of a society living without putting back In Greece is the extreme case. They'll eventually evolve a service based economy that sets its sights a little more realistically. And who knows maybe someone there will initiate some other industry. It will take a couple of generations to get over it and forget the "νόστος ἄλγος" times. /crystal balling based on this hypothetical

I can't imagine they'll let it come to that, but it could happen. The Germans are real eager to give it to the socialists/radical leftists all over the continent. The French are climbing on that bus too.

[HeluCopter29]

From the United States point of view, we have a lot of investments tied up in Greece, Italy, and Spain as well as other parts of Europe.

Basically, since all three of those countries are failing economically we as a nation are at major risk for getting ****ed in the ass.

[PeterMP]

I'd guess that partly depends on the condition and inclanation of their creditors.

Let's consider if they default. If this seriously damages the conditions of their creditors to the point that they can't help (i.e. loan them money), then Greece is going to go backwards quickly, and while potentially not become a 3rd world country, will have a huge and pretty rapid decrease in their standard of living.

The samething will happen if their creditors are able to and just don't want to loan them more money at a rate that is similar to other countries.

If they default and their creditors will still loan them more money at a rate that is similar to other countries, but only what they can reasonably actually pay, then there is no reason to believe that they won't remain similar to other European (poor) countries.

---------- Post added April-14th-2012 at 03:07 PM ----------

From the United States point of view, we have a lot of investments tied up in Greece, Italy, and Spain as well as other parts of Europe.

Basically, since all three of those countries are failing economically we as a nation are at major risk for getting ****ed in the ass.

I thought that our exposure was more second level (i.e. we have money invested in Germany, and they have money invested in Greece, Italy, and Spain so if Greece Italy, and Spain fall, then Germany will be at risk, which would affect us).

Do you have a link related to our direct exposure in the relevant countries?

[HeluCopter29]

I thought that our exposure was more second level (i.e. we have money invested in Germany, and they have money invested in Greece, Italy, and Spain so if Greece Italy, and Spain fall, then Germany will be at risk, which would affect us).

Do you have a link related to our direct exposure in the relevant countries?

Not one that I could easily find. I know that we are very heavily invested in Germany, Italy, and Spain. You may be right about the "second hand exposure" with regards to Greece.

One way or another, none of those investments are good.

[visionary]

They start discussing naming rights to the Parthenon....





But seriously I don't know what's going to happen there.
There's plenty of anger and unrest already at what's been done to attempt to fix things.

[Hubbs]

Interest rates on government bonds issued by Portugal, Ireland, Spain, and Italy all jump, reinforcing a somewhat self-fulfilling prophecy that each of those countries will also default.

Thus, German, British, French, and non-European banks will once again double down their efforts to convince all politicians to squeeze the PIIGS into fulfilling their debt obligations by all means necessary.

The simple problem here is that too much debt has been created. Not just in the Greek economy or the Irish economy or in the Spanish economy, but in all major (and plenty of minor) economies, ours included. The past couple of decades have seen the Great Debt Binge, when developed (and a few developing) economies have experienced a massive, unsustainable expansion of debt to pay for everything from housing to health care. So who has to pay the piper first? The little guy with the worst hangover, of course. That would be Greece. But Greece isn't actually a big deal. Greece merely symbolizes a big deal.

Those aforementioned German/British/etc. banks are levered up 30:1, and they lent the PIIGS, as well as their own governments, a great deal of money. The moment they throw in the towel, the moment they say that nobody can figure out a way for Greece to pay up, the moment they truly let Greece off the hook, the rest of the PIIGS (I guess it's PIIS at this point, but I'll stick with the common acronym) governments will come to realize that there's a way out of their obligations. Or, more importantly, the rest of the PIIGS populations will realize that there's a way out of their obligations. The masses will demand no less. "Cut my pension check in half so you can give that money to some foreign bank? Screw you!"

The major banks can't survive such a scenario. They would be bankrupt on top of bankrupt on top of bankrupt. And the major economies will go into full-blown depression mode if the major banks go under. So for the past four years, they've been giving their respective politicians the "lock everyone in a room and tell them the world will end if [bailout of the day] doesn't happen" routine that was so successfully employed by Hank Paulson. And for the past four years, these politicians have nodded their heads and agreed to whatever was necessary to prevent the day of reckoning. Only it's never prevented. It's only postponed. Because all of the so-called "solutions" involve "solving" a crisis of too much debt with more debt. That's why the bailouts keep coming.

So what actually happens if the nation of Greece fails financially? Not much, honestly. Yet. The world's political and financial leaders will appear on television and tell everyone that Greece is a unique case, that it's special, it's the worst of the bunch, that This Time Is Different and surely this isn't the sort of thing that will happen with Portugal or with Ireland, and surely on top of surely this isn't the sort of thing that will happen with the countries that mathematically can't be bailed out because they're simply too big, Spain and Italy. You know, kind of like they told everyone that Greece wouldn't need a bailout in the first place. Like they told everyone that Portugal wouldn't need a bailout in the first place. Like they told everyone that Ireland wouldn't need a bailout in the first place. Like they told everyone that Greece wouldn't need a bailout again. Like they told everyone that the European Central Bank wouldn't monetize anything. Like they told everyone that the ECB certainly wouldn't follow the reckless easing policies pursued by the Fed.

Greece is just a small domino in the slow, agonizing, unbearably dragged-out European debt collapse. And when Greece finally falls apart, the rest of Europe will be extraordinarily happy to tell you all about the "small" part without mentioning the rest. Because in the end, it all really comes down to what the Eurocrat of all Eurocrats, Jean-Claude Juncker, accidentally told the world in a candid moment that he undoubtedly wishes he could take back every day of his life: "When it becomes serious, you have to lie."

[zoony]

They get kicked out of the EU, which destroys the EU credit rating. Would you buy EU member bonds if you knew they allow defaults and simply kick members out when it happens? Or would you place more of a premium on, say, French bonds knowing that the full weight of the EU Central Bank is safeguarding your money?

Greece defaults, European bonds lose their value overnight which essentially pours gasoline over the coals of the broader EU debt crisis

As for actual monetary loss, not that big a deal in the grand scheme. Creditors are already settling for 20 cents on the dollar.

[Reic]

All I know is I got dibs

[Hubbs]

So, in the past 100 hours, we've gone from "Spain doesn't need a bailout" (the surest sign that any country really does need a bailout) to "Ireland demands a renegotiation of its bailout to match Spain's bailout".

Hope everyone's ready for the next phase of this slowly-unfolding crisis, because...

[deejaydana]

Imagine how Germany feels in all this. They've implemented fiscally conservative policies and yet due to the way the EU is constituted, they may be hosed anyway dues to the profligacy of the southern EU countries. In the span of the last week it was reported that Spain needed 50B, then it was 80B and now it's 125B. How do you dole out these absolutely crazy sums and not demand structural reforms? What a mess.

[thebluefood]

Imagine how Germany feels in all this. They've implemented fiscally conservative policies and yet due to the way the EU is constituted, they may be hosed anyway dues to the profligacy of the southern EU countries. In the span of the last week it was reported that Spain needed 50B, then it was 80B and now it's 125B. How do you dole out these absolutely crazy sums and not demand structural reforms? What a mess.

I know I'd be extremely upset if I were Germany. They seem to have their affairs in line but they have to continually bail out their less responsible EU neighbors. How frustrating it must be.