Thailand should welcome the unavoidable 'Grexit'

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STREETWISE
Thailand should welcome the unavoidable 'Grexit'
Achara Deboonme

BANGKOK: -- It looks more likely than ever that Greece will exit the euro zone, though however "voluntarily" it does so remains to be seen. The process could take considerable time following the referendum on Sunday in which 61.3 per cent of voters rejected an austerity package proposed by the country's creditors.

Analysts at Tisco Securities caution that the "no" vote won't automatically lead to the "Grexit", as it's been dubbed. Instead they expect Greece to try and renegotiate its debt, especially ahead of a payment due on July 20 of 3.5 billion euro (Bt132 billion) to the European Central Bank.

"You made a very brave choice," Prime Minister Alexis Tsipras told voters in a television address. "The mandate you gave me is not the mandate of a rupture with Europe, but a mandate to strengthen our negotiating position to seek a viable solution."

Without further progress, Greece is facing its second debt default in a month, but many economists are calling for creditors in the euro zone, the US, Britain, Japan and various other financial institutions that have invested in Greek bonds to give Athens more time. They are advised to provide for greater "impairment loss" to stave off the risk of default and thus avoid a "debt haircut".

Tsipras has asked that 30 per cent of the debt be trimmed and for a 20-year grace period to repay the remainder. There are sceptics, however, who believe Greece will press for a more substantial haircut - it previously asked for fully half of its debt to be forgiven.

According to a Reuters assessment, Sunday's vote leaves Greece in uncharted waters - risking a bank collapse that could force it out of the euro. Without more emergency funding from the European Central Bank, its own banks could run out of cash within days, following a week of rising tension after they stayed shut and cash machines ran dry. Forced to abandon the euro, the government would have to revive the drachma, printing fresh notes in order to cover citizens' pensions and wages.

At the advent of the euro in 2001, it was worth 340.75 drachma. Gross Domestic Product was about half last year's US$237.6 billion. But a return to the drachma would cause chaos now that all bills are paid in euro, and investment in financial and physical assets would be curtailed.

It remains to be seen how domestic spending might buoy the economy in the short term. Greece now owes about 200 billion euro to banks elsewhere in Europe, and if they're not repaid, they face troubles of their own. Worse, a Grexit would renew fears that other weak economies in the zone might balk at tough repayment rules.

So it was no surprise that European markets were in tailspin yesterday. Political leaders are to convene today to "discuss the state of play", as Eurogroup President Jeroen Dijsselbloem put it. Fresh initiatives from Athens are eagerly hoped for.

Affairs in Greece have prompted numerous policy meetings since 2011, when the first bailout package was approved. I believe there have been fewer meetings on the crisis in Ukraine, in which a country's very existence is at stake.

Italy's Finance Ministry was optimistic in its statement yesterday, saying the euro zone "is capable of coping with a crisis of confidence and possible speculative attacks", and some investors coolly concur. The euro weakened by 1.5 per cent against the US dollar in New York electronic trading right after the referendum result became known, but that soon narrowed to 1.2 per cent. And in Asian trade yesterday, the euro held up well.

Shinya Harui of Nomura Securities in Tokyo told AFP that the common currency was indeed holding solid as traders "assess the spill-over risks", though he predicted that the Grexit is 70 to 80 per cent likely to happen.

Thailand thus far is feeling little impact, given its small investment in Greek assets, but, in the event of a Grexit, the consequences would be immense should the euro's value against the dollar drop, since Thai exports run on dollars. Exporters would be smiling because Thai products would fetch more in dollars. At one point yesterday the baht weakened to 33.84 per dollar, but gained against the euro, to 37.29.

It all sounds quite promising for Thais planning trips to Europe as well. With the sole exception of Switzerland, they could be spending much less on food and hotels.

If Greece were to reintroduce the drachma, it would be painful for the country but a boon to its tourists. Out of the euro zone, Greece would no longer require a Shengen visa, instead stamping visitors' passports the way it used to and raking in 100 per cent of the foreign exchange.

Stock investors are crying foul over the crippling volatility this fiasco has caused, but in the end they'll just have to play with the cards they're dealt. If Greeks have had enough of the agony of austerity and if their creditors won't soften, there is nothing else to be done.

We can only adhere to Buddhism's middle path: hope for positive developments - and brace for the worst.

Source: http://www.nationmultimedia.com/opinion/Thailand-should-welcome-the-unavoidable-Grexit-30263862.html


-- The Nation 2015-07-07

[trogers]

I say, "Let them print their Monopoly money!"

[davehowden]

"should the euro's value against the dollar drop, since Thai exports run on dollars. Exporters would be smiling because Thai products would fetch more in dollars"

You've lost me there sunshine!

[NeverSure]

He's lost me too. The BOT was recently trying to lower the value of the baht to help exports. This would increase the value of the baht against the Euro, making Thai products more expensive in the Eurozone. The Eurozone countries and Thailand trade in USD because it is the international unit of trade. No one wants to try to juggle all of these different currencies around the world and do fx every time.

I get the math that it would result in more USD's paid (if the Eurozone kept buying,) but I don't get how that would be an advantage when major currencies have been in a race to the bottom to boost exports. Dunno.

[PepperMe]

But a return to the drachma would cause chaos now that all bills are paid in euro

Well they did it back in 2001 when they changed from the Drachma to the Euro.... Just the same in reverse.

Bank accounts will be converted to Drachma at the push of a button and the people will likely have 3 months to surrender their Euros to the banks to exchange for Drachma. Not so hard really.

Then they have control of their currency and their future. They devalue making all their exports much cheaper than their EU competitors who are still chained to the very expensive Euro which to be honest is valued to suit the huge German and French economies.... ONLY.

Tourism will explode as it will be a very cheap destination for the near future at least.

If they stay in the Euro, they will face more misery and their economy will NEVER recover.

[PepperMe]

"should the euro's value against the dollar drop, since Thai exports run on dollars. Exporters would be smiling because Thai products would fetch more in dollars"

You've lost me there sunshine!

Who writes this stuff and more importantly, who employs these people?

Is all Thai commerce being moved over to Athens then?..... Lol

[PepperMe]

He's lost me too. The BOT was recently trying to lower the value of the baht to help exports. This would increase the value of the baht against the Euro, making Thai products more expensive in the Eurozone. The Eurozone countries and Thailand trade in USD because it is the international unit of trade. No one wants to try to juggle all of these different currencies around the world and do fx every time.

I get the math that it would result in more USD's paid (if the Eurozone kept buying,) but I don't get how that would be an advantage when major currencies have been in a race to the bottom to boost exports. Dunno.

I did quite a lot of trade within the EU from the UK.

Nobody traded in USD, it was all in Euros.

The wider world, yes... always in USD, but inside the Eurozone was always the Euro as the official trade currency.

Make a trade enquiry to any company in the EU for any product and I guarantee you will get a Euro price.

Edited July 7, 2015 by PepperMe

[ratcatcher]

"Thailand should welcome the unavoidable 'Grexit'

There, "but for the grace of God" goes Thailand.

Let's hope Thais don't get too smug about the misfortunes of Greece.

[Prbkk]

Why all this focus on Greece. The story for Thailand is what's happening in China...pretty scary and of far greater relevance

[Artisi]

Why all this focus on Greece. The story for Thailand is what's happening in China...pretty scary and of far greater relevance

China, no problem, she'll be right mate, no worries, Thainess can fix all things.

[Daniel Boon]

I say, "Let them print their Monopoly money!"

Not bagging America ... just stating a fact

THE USA has been printing worthless paper for more than 20 years; many of its States are bankrupt and even paid government employees with IOU's, which, for intents and purposes, is what money is and IOU

When Argentina was stripped by the Americans (IMF, World Bank et al) they started a sub-currency other than the Peso (1 peso = 15 cents AUD), can't remember its name, but it was a cross between IOU and barter

[Chao Lao Beach]

"should the euro's value against the dollar drop, since Thai exports run on dollars. Exporters would be smiling because Thai products would fetch more in dollars"

You've lost me there sunshine!

Would some Thaivisa News guru please explain the bold above please ? I am confused how a weaker Euro (hence a relitivly stronger Baht) is going to help a exporting nations such as Thailland with Europe ?

[TheAppletons]

I say, "Let them print their Monopoly money!"

Not bagging America ... just stating a fact

THE USA has been printing worthless paper for more than 20 years; many of its States are bankrupt and even paid government employees with IOU's, which, for intents and purposes, is what money is and IOU

When Argentina was stripped by the Americans (IMF, World Bank et al) they started a sub-currency other than the Peso (1 peso = 15 cents AUD), can't remember its name, but it was a cross between IOU and barter

Are you speaking for all Australians or only the mentally deranged Australians?

[Rob8891]

"should the euro's value against the dollar drop, since Thai exports run on dollars. Exporters would be smiling because Thai products would fetch more in dollars"

You've lost me there sunshine!

Would some Thaivisa News guru please explain the bold above please ? I am confused how a weaker Euro (hence a relitivly stronger Baht) is going to help a exporting nations such as Thailland with Europe ?

It seems to me that this is a typical Thai assumption, that as Thai exports become more expensive, prospective importers will continue to buy the same quantities at the new higher price.

Dangerous assumption!

[micmichd]

I say, "Let them print their Monopoly money!"

Not bagging America ... just stating a fact

THE USA has been printing worthless paper for more than 20 years; many of its States are bankrupt and even paid government employees with IOU's, which, for intents and purposes, is what money is and IOU

When Argentina was stripped by the Americans (IMF, World Bank et al) they started a sub-currency other than the Peso (1 peso = 15 cents AUD), can't remember its name, but it was a cross between IOU and barter

Are you speaking for all Australians or only the mentally deranged Australians?

What does "mentally deranged' mean in times of deranged economic systems?

[phuketandsee]

I say, "Let them print their Monopoly money!"

Not bagging America ... just stating a fact

THE USA has been printing worthless paper for more than 20 years; many of its States are bankrupt and even paid government employees with IOU's, which, for intents and purposes, is what money is and IOU

When Argentina was stripped by the Americans (IMF, World Bank et al) they started a sub-currency other than the Peso (1 peso = 15 cents AUD), can't remember its name, but it was a cross between IOU and barter

Are you speaking for all Australians or only the mentally deranged Australians?

Are there any other types?

[h90]

I say, "Let them print their Monopoly money!"

They already discuss to print 20 Euro themself uncontrolled......

[h90]

"should the euro's value against the dollar drop, since Thai exports run on dollars. Exporters would be smiling because Thai products would fetch more in dollars"

You've lost me there sunshine!

Would some Thaivisa News guru please explain the bold above please ? I am confused how a weaker Euro (hence a relitivly stronger Baht) is going to help a exporting nations such as Thailland with Europe ?

It seems to me that this is a typical Thai assumption, that as Thai exports become more expensive, prospective importers will continue to buy the same quantities at the new higher price.

Dangerous assumption!

Or they think they want 100 Baht per kg now and later from Europe no price increase But all that things the Europeans quote in Euro will be cheaper

[Cats4ever]

I say, "Let them print their Monopoly money!"

Not bagging America ... just stating a fact

THE USA has been printing worthless paper for more than 20 years; many of its States are bankrupt and even paid government employees with IOU's, which, for intents and purposes, is what money is and IOU

When Argentina was stripped by the Americans (IMF, World Bank et al) they started a sub-currency other than the Peso (1 peso = 15 cents AUD), can't remember its name, but it was a cross between IOU and barter

Are you speaking for all Australians or only the mentally deranged Australians?

Are there any other types?

Deranged is in the eye of the beholder.

When I was at school, I was often exposed to the story of the Weimar Republic and its money printing presses that led to taking a wheelbarrow full of marks down to buy a turnip. I would love to know how quantitative easing is not a modern form of money printing? If someone can explain it logically, I would appreciate it.

[Friendly Stranger]

I think they just wrote the story just for a smart arse to say "Grexit".

Why do I have this feeling they'll still get their bailout and have their cake and eat it too.

Reminds me of welfare in Canada.

[delgarcon]

But a return to the drachma would cause chaos now that all bills are paid in euro

Well they did it back in 2001 when they changed from the Drachma to the Euro.... Just the same in reverse.

Bank accounts will be converted to Drachma at the push of a button and the people will likely have 3 months to surrender their Euros to the banks to exchange for Drachma. Not so hard really.

Then they have control of their currency and their future. They devalue making all their exports much cheaper than their EU competitors who are still chained to the very expensive Euro which to be honest is valued to suit the huge German and French economies.... ONLY.

Tourism will explode as it will be a very cheap destination for the near future at least.

If they stay in the Euro, they will face more misery and their economy will NEVER recover.

Why would Greeks have to surrender their euro? The euro will still be legal tender and quite probably devalue much less than the drachma. I'd hold on to my euro just as shrewd Russians have avoided rouble ruin by holding on to dollars.

[Srikcir]

Thailand should welcome the unavoidable 'Grexit'

From a tourism perspective this would be a disaster.

With a drastically deflated drachma, Greece will attract more tourists from the EU, Africa, Middle East and Russia that would otherwise vacation in Thailand. While Thailand will still experience growth in tourism numbers largely from more Chinese, it will not get growth in revenues.

The good news for Thai tourism is that the Thai people will vacation more in Thailand - largely because of an economic depression.

[Jimlove]

"Thailand should welcome the unavoidable 'Grexit'

There, "but for the grace of God" goes Thailand.

Let's hope Thais don't get too smug about the misfortunes of Greece.

Is it a journalist that wrote this article ? or maybe a fifth grader ...

You can be sure that thais will smug over Greece, its the nature here ...

[ramrod711]

Seems simple to me, because most of the money in the world is worthless paper, which is manipulated daily, Greece should obviously adopt the Baht, pay Thailand to print the notes and have an equal exchange rate, problem solved. If there are other problems that can be solved by the simple minded, you can contact me at the WMF.

[SantiSuk]

Politics always nixes economics.

Economic (ie common) sense says the EU kicks them out.

Politics says it aint gonna happen.

The rattle of impending cans being kicked down the road is deafening.

[phantomfiddler]

Get rid of these selfish bums who seem to think the rest of Europe owes them the luxuries they demand like spoiled little children !

[micmichd]

Tell that to Big Money, they took the small money.

Edited July 9, 2015 by micmichd

[deckape]

Is it a journalist that wrote this article ? or maybe a fifth grader ...

You can be sure that thais will smug over Greece, its the nature here ..

I have lived here a long time and still, articles like these shock me. What a callous bunch of bull---t. Talk about being in your own head.

[rametindallas]

"Gold is money, everything else is credit"- J.P. Morgan 1912 to Congress.

"The problem with socialism is that, eventually, you run out of other people's money" - Margaret Thatcher

“A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse over loose fiscal policy, (which is) always followed by a dictatorship.” - Alexander Tyler in 1887, a Scottish history professor at the University of Edinburgh, said about the fall of the Athenian Republic some 2,000 years prior

The sooner the Greeks default and leave the Euro, the sooner everyone can lick their wounds and begin the recovery process. - me.

The IMF is on record as stating that there is no way the Greeks can pay their creditors; why prolong everyone's agony? Is someone making money, behind the scenes, to drag this process out?

.

[Thai at Heart]

What a completely nonsense article.