What will happen to Greece?

[Winker]

It's quite ironic that the country that invented democracy - Greece, has been threatened by Germany with expulsion from the EU if they hold a referendum on the rescue package. The EU was designed and built by countries like Germany, rather than by democracies......

 

[beorhthelm]

It's quite ironic that the country that invented democracy - Greece, has been threatened by Germany with expulsion from the EU if they hold a referendum on the rescue package. The EU was designed and built by countries like Germany, rather than by democracies......

on the other hand, no German ever voted to subsidise the greeks and other EU nations. the EU isnt big on democracy, beyond the fig leaf of the parliament, but thats another issue.

 

[Mutts Nuts]

What should Greece do?
Leave the Eurozone?
Leave the EU completely?
Stay and fight it out?
Could you give a shit?

Is this the beginning of the end for the EU?

If they leave they will be fine that is why france and Germany are shitting themselves, the EU is there new Bible. They are using it as a form of control through fear, if you do not join you are doomed , if you leave you are doomed.But in reality you will be fine if Greece leave others will follow, there will be no global ramifications as the Germans would have us beleive .

 

[Albion Dan]

The best thing the Greeks cpuld possibly do from an internal perapective is deafault and f*** off the Euro. Iceland defaulted 2 years ago and are now in a much better position.

The Euro is destined to become a non meditteranean currency. Mostly because those cointries should never have joined and wete always at a disadvantage in the system. Bring back the peseta and cheap exchamge rate hols!

 

[Guy Fawkes]

And aren't British banks into French banks for £m's too.. ? I think that the real fear; Greece going would have a huge domino effect on all of us.

A quick search found this:

UK exposure to Greek debt is relatively small. According to figures from the Bank for International Settlements, UK banks hold $3.4bn (£2.1) worth of Greek sovereign debt, compared with banks in Germany, which hold $22.6bn (£14.1), and France, which hold $15bn (£9.3).

When you add in other forms of Greek debt, such as lending to private banks, those figures rise to $14.6bn (£9.1) for the UK, $34bn (£21.2) for Germany and $56.7bn (£35.4) for France.

As for the domino effect, if the Eurozone is affected and a lot of European banks are hit hard when Greece fails to repay its debts due to bankruptcy then they will simply make it more expensive and much harder for normal people to borrow money from them (like our High Street banks have done here following the credit crunch here)

This would mean less spending power and therefore our export business would suffer and this could lead to job losses here as businesses here struggle to make ends meet and possibly further Government cut backs to try to balance the books here.

However I believe Greece will accept the recent offer of a bail out and make some very unpopular decisions to be able to repay there obligations (cuts, longer working life, better tax collection, etc..) - I bet all the Greeks who thought there were no consequences to their tax dodging and Government overspending over the years are beginning to have second thoughts now

 

[Guy Fawkes]

What will it mean for the UK if Greece leaves the euro and defaults?
If Greece leaves the euro, a default is inevitable.

David Buik, of the brokers BGC Partners, says there would be "horrible connotations" if Greece left at this point.

While we still do not know exactly how much Greece owes the banks, he suggests a figure of 490bn euros. If the debt is not repaid, "that has terrible effects on the banks; it makes recapitalisation incredibly difficult", he says.

UK banks are linked to the other European banks through the sale of insurance and other guarantees on debt default. A new "credit crunch", meaning less money available for banks to lend to businesses and individuals, would have a direct impact on UK manufacturing, UK exports and overall economic activity in the country, leading to a lower GDP growth.

Reduced economic growth would mean that the government also had less money to spend on the services that it provides.

"Frankly, it means we're heading nose-first straight into recession", says Mr Buik.

Another big concern from the UK perspective is that it would trigger a chain reaction, as the other "peripheral" eurozone economies - Portugal, Spain, Ireland and Italy - would find it impossible to service their own debts. Fathom Consulting estimated in the early summer that UK exposure to these countries is around €70bn (£60.2bn).

What about UK trade with Europe?
More than 50% of the total UK trade is done with the EU and the UK enjoys the benefits of the European single market. As part of the measures to stop the eurozone crisis, the eurozone leaders are likely to move towards an even closer co-operation on economic issues for their 17 countries.

That could potentially undermine the single market that all the EU members, regardless of whether they use the euro as their currency or not, benefit from.

This is why David Cameron insisted on being part of the summit on 26 October, despite French President Nicolas Sarkozy's opposition - to safeguard against measures that could, in the future, lead to protectionism within the eurozone, to the detriment of those EU countries which are not part of it.

It is not possible to quantify how much UK/EU trade will be lost if the EU does not come up with a solution to the crisis, but less money in Europe would certainly mean less trade between the UK and its most important trading partner.

What would the collapse of the euro mean for the UK?
A Europe entirely without a euro is unlikely, so it would all depend on which countries would leave the currency - and therefore the extent of UK banks' exposure to their debt.

Any country leaving the euro would have to replace it with some sort of currency, and this would take time - during which there are likely to be banking casualties.

Politically, a collapse of the euro would be a massive boon to Eurosceptics who are a growing influence within the Conservative Party.

The collapse of the euro would also increase pressure for treaty changes within the EU, allowing David Cameron to call for EU powers to be repatriated to Britain but also re-opening demands for a referendum on the UK's membership.

BBC News - QA: What does the Greek debt crisis mean for the UK?