Out of the blue move by the Greek president has caused shock waves across Europe. Good news yesterday from UK recovery has been overshadowed by the presidents move. Last weeks summit was supposed to be a success now uncertainty in the markets.



http://www.bbc.co.uk/news/world-europe-15538809

So Greece will probably default leading to withdrawal from Euro. Is this a domino effect causing a collapse of the Euro?

Perhaps we should have faith in the greeks. Its like people in this country. People eff and blind about europe, but when it comes down to it and a referendum, most people would be in favour of it, cos they are scared about the economic consequences, hence, i predict that greeks will actually vote for the bail out.

What have the Greeks ever done for us...

The vote of confidence tomorrow will determine what happens in the short term. If the govt lose, which is very possible, then there will be an election and the EU bailout is finished. The Greek people want to stay in the Euro and the EU are pushing for any referendum on the bailout to be linked to staying in the euro.
My prediction:
Government scrapes through the vote of confidence
Referendum is adjusted so a rejection of the bailout would mean leaving the Euro and the EU.
Referendum is held and the Greeks vote yes to the bailout
Things settle down for a while
Italy needs a bailout but it is too big
Global recession which is much deeper and more prolonged than any that has gone before

From what I've read recently, seems like a majority of Greek citizens would prefer to leave the Euro - although that was in the International Herald Tribune on a flight.

What have the Greeks to lose? They are in for years of hardship if they stay in the Euro anyway so why not default?
Argentina did it a while ago and their economy is booming now.

The Greek PM has now lost his majority and has offered to resign.

I'm no economist but I can see this entire crisis going absolutely pear shaped. A global depression is coming down the road.

It was foreseeable, and avoidable - from the outset, Greece should have been allowed to drop out and go through a controlled default.

Hasn't the PM's family been in power for quite some time now like over a decade?

If the article is true then it all begins to make sense - Uk pays for Greek fiddlers.

Also not sure about the reference to Britain in 70's - things were never that good!

Greece is bankrupt, its economy is corrupt and dysfunctional and it will never be able to service its debts. It therefore cannot remain in the euro long-term (which it should never have been allowed to join in the first place). Any bail-outs just prolong the agony and postpone the inevitable. When that happens, the eurozone will collapse like a pack of cards. Sarkozy and Merkel and the whole rotten Eurocrat regime cannot accept this, so, until today a least, they have kept talking about bail-outs no matter what. But today has seen a significant change: Merkel has begun to think the unthinkable, that Greece might have to leave the euro.

The referendum was a red herring. It wouldn't have mattered which way the Greeks voted - the choice is between either a Greek-led eurozone collapse now, or at some later date. (Italy's debts make the Greeks' look like loose change) It's probably in Britain's interest that the collapse happens sooner rather than later, before we fork out tens of millions more to the IMF to buy up debt that will never be paid back.

On a lighter note, President Obama was overheard telling G20 ministers in Cannes this morning: "I was hoping to come and see some movies." And the funniest thing I've read today, from Reuter: Europe shares rally on Greek govt collapse talk. You know things are in a bad way when shares rally on bad news

This is a fascinating period to live through for students of economics, and it would all be hugely entertaining if it weren't for the fact that tens of millions of people are going to lose their livelihoods over this.

So if Greece go, what will happen to Italy. They will have to leave as well surely? Cos no way they can pay off there debts.

Maybe someone can tell me why the exchange rate £ to Euro is so low considering the Euro is in such trouble.

There is a HUGE difference between Greece and Italy. Greece is a total basket case and well described above by Sleuths link, BW etc. Italy despite being headed by an unpleasant untrustworthy clown is not in any way similar. In recent years its deficits have been reasonable and it has instituted some limited economic reform. It has an economy which is far far more soundly based than the Greek one. The main element of the Italian problem is the very high long term debt that was run up years ago, it is the repayments of that debt (rather than allowing its citizens to enjoy everything free in recent years as in Greece), that is the problem. Off the top of my head the debt is over 120% of GDP. The size of the debt both in percentage and absolute terms is the key problem. So the seriousness of the problem is sensitive to interest rates, whereas the Greek situation is simply irrecoverable and arose largely due to all sorts of Greek duplicity and the stupidity of Euro-crats and Euro politicians in believing the nonsense that the Greeks put forward in their case for joining the Euro. I've always believed that it would end badly simply because I read the Economist which published several convinciing articles at the time of Greek entry.

If there was no crisis the Italian problem would not be a catastrophic problem, but at a time of crisis, as now, with the Italian government having to pay 6%, who knows?

Once the yield on Italian debt reaches 7% (that is, the Italian govt would have to pay 7% interest on any loans), it wouldn't be able to afford the interest payments, let alone service the debt. Consequently, no one in their right mind would lend to the Italian govt. Result: the govt would run out of money and, for example, be unable to keep its infrastructure going, or pay its civil servants, teachers, health workers etc. The only options would be massive bail-outs (which the rest of Europe couldn't afford) or Italy leaving the Euro. Once Italy starts defaulting on its debts there will be a domino effect as its creditors in turn run out of money.

Meanwhile prepare for mass migration north as the unemployed of southern Europe go looking for jobs in those EU economies that are still working.

We could just let them off their financial contribution to the next invasion of a Muslim country with a bit of oil

The £ to Euro exchange rate is poor because our Bank Rate has been so low (0.5% for the past two years) compared to the European Central Bank's rate of 1.5%. Investors get a better return investing in the Euro than they do in the £. As it happens, the European Central Bank reduced its bank rate to 1.25% today, in an attempt to encourage business activity and make European exports more affordable. It wasn't enough to affect the exchange rate though.

It's in our interests, in the current climate, for our Bank Rate to be low (even though it encourages inflation) and for sterling to be weak.

Italian government debt is also being shafted because of another myopic Eurozone decision - effectively knackering the sovereign CDS market.

Buying CDS is like an insurance policy in case the country defaults. But the relevant "independent" body refuses to declare a possible 50% writeoff/haircut an "event". so if your insurance won't pay out, why bother with the original investment in the first place? So Italian debt is being dumped by holders who can't hedge themselves. also note that France's BNP has sold all €8bn of its Italian govt. debt. Fraternite?

The Greece PM has played a dangerous but clever game. He agrees a bailout which the opposition is against. He then says there will be a referendum which causes shock waves within the Euro zone and Greece. He then says there will be no referendum IF the opposition back the bailout deal in a parliament vote. he has forced the oppositions hand ahead of tomorrows no confidence vote.

I wish it would go to a referendum. Although it would be temporary carnage on markets if Greeks rejected the bailout, it would at least accelerate the ultimate end result: Greece is bankrupt, and has been for along time. Plodding along with these bailout plans is tantamount to a slow, tortuous death. There will be more riots and bloodshed before the planned path is out.

This is the reason why European shares are always cheaper than the rest of the Western world - because, to use a technical term, Europeans are eff. Greece should have been excised when this broke 21 months ago. But, as always, the French and German banks were up to their eyeballs in the shite that even American banks shirk from.

And the solution? Central European bodies with the right to send in hit squads to impose financial rules on naughty nations. It's invasion by any other name, the surrender of sovereignty. It's a democratic disaster, and can only lead to violence. Sure, we won't see Panzer brigades moving in, but growing nationalism is a very real risk. Fancy being French or German in a peripheral nation wracked by Eurozone-imposed measures? I wouldn't. The Eurozone elite are ploughing onwards towards their long-dreamed goal. Thank Heavens we are aren't a part of it. It'll be bad enough just bracing for the collateral damage.

Vote of no confidence happening now

Currently 116 yes and 110 no

He's won it.

So let's hope he won't hold the referendum but he indicated in his speech that he still favoured it.
There will probably be a coalition government now but the leader of the opposition has ruled this out and stormed out of parliament in what critics have said is "ruling suicide". It will be, politically, a fascinating weekend.
Papandreou is a clever guy. He has played a massive gamble and won. He played it perfectly.