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comment by laus
laus  ·  4426 days ago  ·  link  ·    ·  parent  ·  post: Greece Is Burning
What would happen if Greece defaulted? Would it be worse than the austerity measures?




mk  ·  4426 days ago  ·  link  ·  
It very well may be initially. There are a number of issues with it, and I believe that runs on the banks is one. For that reason, I think that governments like to default by surprise.

It may also be very hard for Greece to sell debt for some time.

That said, in the long run, it may very well be the less painful choice. By defaulting, they do get to clean the slate to and extent, and they do gain the new option to print currency as a method of financial stimulus.

Argentina defaulted in 2002, here are some effects:

http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999...

But, things seemed to work out in the end for them:

http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999...

laus  ·  4426 days ago  ·  link  ·  
Thanks for the reply. Another question if you don't mind.

Would Greece be 'kicked out' of the EU if they defaulted? Is this the reason their Government is for the austerity measures?

mk  ·  4426 days ago  ·  link  ·  
I don't think they risk being kicked out of the EU. The United Kingdom is part of the EU, but they don't use the Euro. But they would be kicked out of the Eurozone, which is mostly comprised of the countries that use the Euro.

http://en.wikipedia.org/wiki/Eurozone

Here's a map: http://en.wikipedia.org/wiki/File:Euro_accession.svg