When it comes to the topic of Greece, by now everyone is sick of prevaricating European politicians who even they admit are lying openly to the media. and tired of conflicted investment banks trying to make the situation appear more palatable if only they dress it in some verbally appropriate if totally ridiculous phrase (which just so happens contracts to SLiME ). The truth is Greece will fold like a lawn chair: whether it's tomorrow (which would be smartest for everyone involved) or in 1 years, when the bailout money runs out, is irrelevant. The question then is what will happen after the threshold of nevernever land is finally breached, and Kickthecandowntheroad world once again reverts to the ugly confines of reality. Luckily, the Telegraph's Andrew Lilico presents what is arguably the most realistic list of the consequences of crossing the senior bondholder Styx compiled to date.
What happens when Greece defaults. Here are a few things:
- Every bank in Greece will instantly go insolvent.
- The Greek government will nationalise every bank in Greece.
- The Greek government will forbid withdrawals from Greek banks.
- To prevent Greek depositors from rioting on the streets,
Argentina-2002-style (when the Argentinian president had to flee by
helicopter from the roof of the presidential palace to evade a mob of
such depositors), the Greek government will declare a curfew, perhapseven general martial law.
whatever it calls the new currency (this is a classic ploy of countriesdefaulting)
around 50 per cent, though perhaps more), effectively defaulting 0n 50per cent or more of all Greek euro-denominated debts.
high exposure to Greek government debt, and to Greek banking sector andIrish banking sector debt.
to recapitalise the ECB, or (b) to allow the ECB to print money to
restore its solvency. (Because the ECB has relatively little foreign
currency-denominated exposure, it could in principle print its way out,
but this is forbidden by its founding charter. On the other hand, the
EU Treaty explicitly, and in terms, forbids the form of bailouts used
for Greece, Portugal and Ireland, but a little thing like their being
blatantly illegal hasn’t prevented that from happening, so it’s not
intrinsically obvious that its being illegal for the ECB to print itsway out will prove much of a hurdle.)
over-ride the structure of current bond contracts in the Spanish bankingsector, recapitalising a number of banks via debt-equity swaps.
Court of Human Rights (and probably other courts, also), claiming
violations of property rights. These cases won’t be heard for years. Bythe time they are finally heard, no-one will care.