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European leaders have been playing their game with Greece like confidence doesn't matter. They have behaved as if an adjustment is necessary, and the only question at issue is which side will bear its costs. But confidence matters. The euro zone's chief leaders have been more concerned about moral hazard than this confidence dynamic. We know what happens in such cases; the lack of confidence destroys the system http://econ.st/JTiKdv
SO MUCH of modern finance is a confidence game. Banks borrow short and lend long. A perfectly solvent bank can therefore go bust if depositors panic and rush to pull money out.
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Bert Vermeulen's profile photoStephanie Syfrett's profile photoAlberto Martins's profile photoGiulia Zilio's profile photo
16 comments
 
If Greece cannot get out of their debt, and doesn't do anything, they will have to get out of the Eurozone and/or EU. I'm glad my country Belgium and others are still in the Eurozone.
 
Greece is the guy in the group everyone else stopped calling.
 
It is rather hard to compute long time predictions in difficult problems like Greece and Europe etc. But do people try to do? Do they build computer modelling etc. Or just everybody say on their own opinion basing on their experience without firm base. Even in the cases which nobody have experience before?
 
I don't know everything, sometimes opinions don't count, especially from outsiders.
 
+Terris Linenbach , we don't know and we won't judge, some people from the outside would say that they shouldn't have joined the Eurozone, it's unpredictable.
 
Great analysis. The current situation is not sustainable, and bears a striking similarity to what happened during the interwar gold standard.

The only solution (not just Greece, but the entire Eurozone), is for:

1. The financial industry of all member states forced to conduct a real "mark to market", and institutions that become undercapitalized as a result recapitalized (through massive dilution) by the EFSF, with a bank charter, backstopped by the ECB;

2. Countries with "cyclical" as opposed to "structural" deficits allowed to continue in deficit during the down cycle, and those with "structural" deficits allowed a longer time period to reduce the structural component;

3. Countries with excessive debt to GDP ratios forced to reduce the debt through a combination of asset sales/divestitures and debt write downs.

For more on the issue see: http://alejandrorivasmicoud.com/wp/saving-the-euro
 
Don't compare it to anything please, you're outsiders. You only know what you hear. I'm in the Eurozone. Anyone's comments doesn't really make a difference.
 
As painful and chaotic as it will be, a Greek default won't crater their economy much more than it already is. Sober analysis seems to view staying in as being the less painful choice but it's politically impossible... the Euro has its allure but dreams about what might-have-been won't outweigh the indignity of continued austerity being inflicted at the behest of foreign banks/governments. You don't need to be a Euroskeptic to have seen this coming.

The threat of contagion, I fear, is very real. I see nothing from the technocrats and politicians that leads me to believe they are genuinely prepared for the worst. The exposure to Greece is a relatively small thing and has largely already been factored in, but all you need is to get the ball rolling... Spain, Italy... not so much. And then who knows. Hopefully someone more intelligent than me does.
 
Our opinions don't matter, they won't change anything.
 
It,s complicated and part of me thinks (The Troika ) wants to get their hands on the Greek Islands for nothing or close to nothing.
 
Nellie you are right, our comments don’t make a difference, but we like to talk.
 
Thank you, +Tereza Martins , whether we are insiders (part of Europe) or outsiders (non-EU, or from other countries), it doesn't mean a thing, it would just be talk. I'm both, I'm form Brussels, Belgium (born in 1981), I live in the United States since 1994. So, we come with our own conclusions, it's not for us to judge, I repeat.
 
yes, markets are based on confidence, when they lose it they sell their shares
 
Thank you, +Grant Melville for agreeing with me, it's easier said than done, we can criticise everything and everyone all we want, but it won't solve the problem.
 
In my opinion, European states supposed to establish regional cooperation in terms of eliminating tariffs, financial investment, locating production in countries in accordance with their resources and other cooperation in the economy, which would create economically strong Europe as a whole,as such which would be a strong competitor in the global market. Creating a common currency and the idea of European Union budget i consider as wrong, if we take in consideration the unequal economic development of member states.
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