Opinion

Felix Salmon

Counterparties: The ‘hunt for a government’ in Greece

May 15, 2012

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At a time when it’s facing an ultimatum from Europe, Greece has given up its “nine-day hunt for a government.” New elections are on the way in June, and Greece’s anti-austerity left is expected to win.

For now, Greece’s lame-duck transition government can’t respond to Germany’s open threats to accept crippling budget cuts or leave the euro zone. This is happening as Greece’s deputy prime minister is warning that his country could run out money in six weeks, the Greek stock market fell 4.5% in seconds – and have we mentioned a Greek leader is now warning about civil war?

Quite suddenly, we’re back to last summer: pondering the implications of (another) Greek default and dealing with (another) potential debt-ceiling standoff in America.

This time, in Europe at least, is actually a bit different. After days of speculation about euro officials pondering a Grexit, IMF chief Christine Lagarde admitted that an “orderly” Greek exit from the euro zone is a possibility. “It is something that would be extremely expensive and would pose great risks but it is part of options that we must technically consider,” she told France24. (Lagarde left the door open to examining “the details” of Greece’s bailout program.)

There are also some very specific ideas of the costs involved if Greece exits the euro. Losses for French banks could reach $25 billion; German banks could see a $6 billion loss, according to one estimate. JPMorgan estimates the immediate costs for Europe could be $513 billion. UBS figures that leaving the euro zone could cost a country like Greece $12,000 to $14,000 per citizen and lead to a 50% drop in its volume of trade.

Much harder to tabulate is the longer-term domino effect a Grexit could have. James Bianco, building on Paul Krugman’s reasoning, pictures a bleak scenario: freaked-out bank depositors moving their money from Greece, then from Spain and Italy, raising these countries’ borrowing costs and necessitating more bailouts.

All of which makes it somehow fitting that new French President François Hollande’s plane was struck by lightning today. Hollande was on his way to discuss Europe’s economic governance with Germany’s Angela Merkel; he’d just been sworn into office. – Ryan McCarthy

On to today’s links.

JPMorgan
Dept. of Justice and FBI open criminal investigation into JPMorgan trading losses – Bloomberg
A modest proposal: Put Jamie Dimon on televised trial hosted by Judge Judy – Alex Pareene

Must Read
Absolutely outrageous report on a government-subsidized non-profit that collects on student debt – Bloomberg

Hackgate
Rebekah Brooks charged over concealing evidence in phone-hacking case – The Guardian

Right On
The economic case for same-sex marriage – Bloomberg

UGH
Healthcare costs for family of four with insurance exceed $20,000 per year – Huffington Post

You Say That Now
High returns on equity in banking are a sign of trouble – Sallie Krawcheck

Awesome
A nerdtastic breakdown of NYC’s bikeshare locations – Spatiality

Video
Nations get states: A time lapse of European borders – YouTube

EU Mess
Default now or later? Greece’s four options – FT

New Normal
California’s governor is calling for a 4-day workweek to close a $16 billion deficit – Bloomberg

Facebook
Facebook ups the price of its IPO, may stop accepting orders today – DealBook

Comments
10 comments so far | RSS Comments RSS

The last statistic I remember is that commercial airliners are struck by lightning 1-3 times a day on average. To even note this happening to Hollande’s plane, let alone draw significance from it is silly.

Posted by Curmudgeon | Report as abusive
 

headline I read in the WSJ earlier today:
Greek Depositors Withdrew $898 Million From Banks Monday.

That just tells you a whole lot, doesn’t it?

Posted by Strych09 | Report as abusive
 

In what sense are those multibillion dollar projected losses “real”? $513 billion loss projected by JPMorgan is essentially a recognition of Greek default and the fact that it won’t repay its existing debts (the outstanding Greek public debt is right around $500 billion). It is a paper loss by the European banks and it can be mostly absorbed by the ECB.

Posted by Nameless | Report as abusive
 

First objective is to quit digging the debt and risk hole deeper. Take the defaults now and the currency exits now before the debt is so large it will take the entire EMU down, including Germany and Finland. You have to take the pain and cut out the cancers of Greece, Spain, Portugal, and probably Italy also – not just take more painkillers while the cancers grow and spread.

The 17 member EMU absolutely will not survive, so it is crucial to have the surgery now and take this pain rather than delay and make the pain and damage worse – or kill the patient entirely.

Posted by mark_kaskin | Report as abusive
 

Senior Students from the political persuasion should be put in charge those of vision rather than the lack of vision Bank accounts in Swiss pre war and others should be made available for all to see as much is missing from the Greek economy keeping all on a honest footing as it will show problems in the future of Greed

Posted by collieknocks | Report as abusive
 

Senior Students from the political persuasion should be put in charge those of vision rather than the lack of vision Bank accounts in Swiss pre war and others should be made available for all to see as much is missing from the Greek economy keeping all on a honest footing as it will show problems in the future of Greed

Posted by collieknocks | Report as abusive
 

solar and desalination plants should be put into practice in Greek mythology a soldier stood with a shield and with the Suns rays set fire to a ship if this type of metal was used in warmer climates it would help with evaporation good for plant life in dryer continents it was proven correct by a Greek professor in the 70s and could be used wet dry areas to produce food and drinking water also in farming the Ocean of depleted fish stocks has no fear of drought nor flooding

Posted by collieknocks | Report as abusive
 

solar and desalination plants should be put into practice in Greek mythology a soldier stood with a shield and with the Suns rays set fire to a ship if this type of metal was used in warmer climates it would help with evaporation good for plant life in dryer continents it was proven correct by a Greek professor in the 70s and could be used wet dry areas to produce food and drinking water also in farming the Ocean of depleted fish stocks has no fear of drought nor flooding

Posted by collieknocks | Report as abusive
 

flooding the Dead SEA from the Mediterranean in the wet season would help with the flooding of venice in flooding the Dead Sea evaporation would help in dryer areas Iran Iraq putting water into the atmosphere would help with crop growth in these areas making them self sufficient bringing them back to former self

Posted by collieknocks | Report as abusive
 

where the Euphrates runs through Syria and Iraq from where it excesses into the sea building water catchments and dams all the way through Iraq and then into syria could be used for fish stocks and irrigation purposes helping to reduce water levels in our Oceans and seas putting water from ice thaws where most needed

Posted by collieknocks | Report as abusive
 

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