Opinion: Two-tier euro would lower holiday prices – but at what cost?

Ian Taylor, executive editor, Travel Weekly

Anyone attending Abta’s Travel Convention in Palma in the hope of escaping the harsh financial realities of the industry back home will have been cruelly disappointed, but surely not surprised.

What did appear to surprise some of those attending was the pessimistic view of the economy outlined by two of the headline speakers: Daily Telegraph economics commentator Jeremy Warner and leading economist Douglas McWilliams.

Warner spoke of “the dawning reality that the world has fundamentally changed”. “Many advanced economies, including the UK, have been living in a fool’s paradise,” he said. “It is as plain as a pikestaff that the UK and US are slipping back into recession.”

Warner acknowledged the convention organisers had requested he “be more upbeat”, then spoke directly to the argument that we are talking ourselves into recession.

He said: “We cannot ignore reality. . . There is the biggest and most-prolonged squeeze on living standards since the 1920s. . . Europe is paralysed. The UK and US are drowning in debt. The UK is particularly vulnerable to financial contagion. The UK economy will not return to the way it was.”

International Airlines Group chief executive Willie Walsh did not agree. His ringing denunciation of Air Passenger Duty went down a storm and he placed himself firmly in the ‘don’t let’s talk ourselves into recession’ camp, arguing: “It is doom and gloom all over. The gloom is holding people back from doing the things they normally do.”

However, Walsh’s plea for optimism was dealt a blow by McWilliams, who is chief executive of the Centre for Economics and Business Research. It should be said that neither he nor Warner are wild-eyed critics of capitalism. They are not even terribly critical of the current government.

Here is a taste of what McWilliams had to say: “We will have to pay a lot more for primary commodities. Wages will be squeezed – people are going to be paid less for doing what their predecessors did, and will have to get used to it. The rising cost of energy is changing consumption patterns. Transport is becoming more expensive.

“We are in a sustained period of weak growth. There will have to be a huge bail-out of European banks. People will have their income squeezed for some time. Your [tourism] product will become more expensive . . . You will be winning if in 10 years time you have 90% of the business you had in 2006 and 2007.”

McWilliams predicted “the euro won’t survive in its current format” and a two-tier euro zone was the most likely outcome – with one ‘hard’ currency, one ‘soft’. He said: “The only silver lining is that some destinations may become less expensive. Southern Europe will become cheap again – [in Greece] probably by 30%-40%.”

Sadly, confirmation of Warner and McWilliams’ outlook came immediately. The UK Office for National Statistics (ONS) reported the recession of 2008-09 had been more severe than thought. The economy contracted by 7.1% rather than 6.4%.

The ONS also revised down the GDP figures for the first half of this year, which were lousy anyway, declaring the UK economy has stagnated for the past year. So the economy is about 5% down on its size pre-recession.

At the same time, the International Monetary Fund reported €200 billion might be required to protect Europe’s banks from collapse. Analysts suggested the banks might need more. The European Financial Stability Fund (EFSF) now being finalised to bail them out will contain €250 billion – which leaves not too much margin for error, especially considering that in July the European Banking Authority’s ‘stress test’ of Europe’s banks identified a mere €2.5 billion shortfall in funds. By this calculation, the situation is 100 times worse than three months ago.

But back to McWilliams: consider what his forecast of a two-tier euro and 30%-40% cut in wages means as a way to make some destinations more attractive for the UK industry. The government and employers in Greece, Portugal and possibly Spain and Italy will attempt to drive down living standards on a scale that is obviously very bad news for millions of people.

If successful, the UK industry would benefit from the reduced wage bills in hotels, transport and tourism services. However, where would this leave the social objectives of Abta’s Travelife system, which include the material well-being of staff in destinations? Where would it leave the similar objectives of industry charity The Travel Foundation, which Abta and its leading members support?

Crucially, where would it leave the argument that travel and tourism raise living standards? Far from doing so, such wage cuts would destroy many of the benefits tourism has brought to countries such as Greece and Portugal which were once among the poorest in Europe.

If the industry were to benefit from a 40%-reduction in wages it would shatter an argument that forms the bedrock of travel and tourism lobbying: that tourism brings economic development and raises living standards.

This week, at the Abta Travel Convention, we learned that tourism may not necessarily do that at all. On the contrary, tourism would benefit from a savage reduction of wages in destinations.


Travel views of the week: October 1-7 2011

We understand Sally Newall’s worries about her mother’s travels. Our children
gave us a grilling over going to Zimbabwe and now we are off to India, they
have insisted that our insurance policies contain a clause covering
repatriation of our bodies should the worst befall us! We watched with envy
and some trepidation when they did the same 20 years ago. So to other senior
gappers – go for it, enjoy and you will be wealthy in ways beyond money.

Margaret Byrne, by email

Marrakesh attractions

Alison Bing’s feature on Marrakesh
(“Where
to stay, Marrakesh
“, October 1) brought back some great memories.
Anyone who has ever visited Marrakesh says you have to visit the souks and
the Djemaa-el-Fna. They are absolutely right, but having negotiated your
purchases over an obligatory glass of mint tea, head to the 12 acres of
tranquillity provided by the Jardin Majorelle – the perfect contrast to the
bustling Medina. The gardens, previously owned by the late fashion designer
Yves Saint Laurent, were originally created in the Twenties by the French
painter Jacques Majorelle. The signature colour of cobalt blue is said to
have been inspired by the colour of French workmen’s overalls.

Judith Sutton, by email

Alison Bing’s comment apparently linking the summer and Ramadan is rather
misleading: Ramadan currently falls in the summer, but is slowly and
inexorably moving earlier in the year. By 2020, for instance, it will start
in April. On a different note, we would heartily recommend the Riad
Alwachma, which is a bit cheaper than Alison’s cheapest recommendation. It
is very central, but attractive and peaceful with a nice roof terrace.

Charlotte Clarke, by email

Ski chalets

I disagree with Peter Hardy (“Season
to be cheerful
“, October 1) when he says “the inclusive chalet
holiday still remains the most economical option”. We own a chalet in
the Thyon region of the Four Valleys in Switzerland. To cut costs, we always
drive (it takes nine hours from Calais) and carry as much food with us as we
can. I believe this to be much more economical for a skiing holiday in these
tough financial times. This is backed up by our German friends, who can’t
understand why anyone would pay for a catered chalet – self-catering is what
almost everyone in Germany does.

Katharine Maxwell, by email

Cuba road hazards

Further to Gill
Charlton’s recommendation
(Gill Charlton, October 1) to drive through
lovely countryside to the old colonial town of Trinidad in Cuba, in April we
travelled by private transfer from Havana to Trinidad, with a diversion to
see the Bay of Pigs. This took us along the coast road from Cienfuegos
towards Trinidad, where we encountered thousands of crabs crossing from land
to water and back. Our driver’s attempts to miss the creatures on the road
were futile. Readers should be aware that many taxi drivers, keen to avoid
punctures, will not take this direct route at that time of year; on our
return from Trinidad, the driver took us west to Sancti Spiritus before
joining the A1 back to Havana, adding additional miles and time to the
journey. Our hotel in Trinidad was the small-scale five-star Iberostar Grand
Hotel which has a beautiful central patio and a giant pineapple lampshade in
the dining room. We thoroughly recommend it.

Maureen and Tony Carney, by email

Cash crisis in Greece

Liz Hylton’s letter about the benefits of car hire (Travel views, October 1)
as a way to remain mobile and independent during strikes in Italy
demonstrates only one side of the coin. We have just arrived back from two
weeks in Cephalonia. Car hire was an integral part of our package deal as it
allowed us to seek out hidden gems. However, the travel company did not tell
us before we left that, as a result of the economic situation in Greece,
petrol and diesel have to be paid for in cash. We were there for two weeks
and had planned to use credit/debit cards. In addition, most tavernas and
shops only accepted cash, which meant a long drive to find an ATM. I suspect
that this is only going to get worse as the financial crisis escalates. I
believe the travel companies have a responsibility to inform their customers
prior to travel.

Hazel Liptrot, by email

From Brittany Ferries

With Brittany Ferries, holidays begin the moment you step on board. The
company’s modern ships offer elegant surroundings, stylish bars and lounges
and superb restaurants.

Being a French company, Brittany Ferries takes great pride in its cuisine.
There are five routes from the UK to France and three to Spain, taking you
much closer to your holiday destination, saving you miles of unnecessary
driving. Book online at www.brittanyferries.com
or call 0871 244 1400.

  • This week’s prize is a pair of return tickets for a car as well as two people
    from Portsmouth to Cherbourg. Travel can be taken at any time between
    now and December 31 2012, excluding July and August and bank holiday
    weekends.

How to enter

To enter the competition, email relevant feedback and comments to [email protected];
write to Travel View of the Week, Travel Desk, The Daily Telegraph,
111 Buckingham Palace Road, London SW1W 0DT; or visit telegraph.co.uk/yourtravels,
where you will find full terms and conditions.

Please keep your submissions to 200 words or fewer, and include contact
details. The deadline is 12am on October 11.


Opinion: Two-tier euro would lower holiday prices – but at what cost?

Ian Taylor, executive editor, Travel Weekly

Anyone attending Abta’s Travel Convention in Palma in the hope of escaping the harsh financial realities of the industry back home will have been cruelly disappointed, but surely not surprised.

What did appear to surprise some of those attending was the pessimistic view of the economy outlined by two of the headline speakers: Daily Telegraph economics commentator Jeremy Warner and leading economist Douglas McWilliams.

Warner spoke of “the dawning reality that the world has fundamentally changed�. “Many advanced economies, including the UK, have been living in a fool’s paradise,� he said. “It is as plain as a pikestaff that the UK and US are slipping back into recession.�

Warner acknowledged the convention organisers had requested he “be more upbeat�, then spoke directly to the argument that we are talking ourselves into recession.

He said: “We cannot ignore reality. . . There is the biggest and most-prolonged squeeze on living standards since the 1920s. . . Europe is paralysed. The UK and US are drowning in debt. The UK is particularly vulnerable to financial contagion. The UK economy will not return to the way it was.�

International Airlines Group chief executive Willie Walsh did not agree. His ringing denunciation of Air Passenger Duty went down a storm and he placed himself firmly in the ‘don’t let’s talk ourselves into recession’ camp, arguing: “It is doom and gloom all over. The gloom is holding people back from doing the things they normally do.�

However, Walsh’s plea for optimism was dealt a blow by McWilliams, who is chief executive of the Centre for Economics and Business Research. It should be said that neither he nor Warner are wild-eyed critics of capitalism. They are not even terribly critical of the current government.

Here is a taste of what McWilliams had to say: “We will have to pay a lot more for primary commodities. Wages will be squeezed – people are going to be paid less for doing what their predecessors did, and will have to get used to it. The rising cost of energy is changing consumption patterns. Transport is becoming more expensive.

“We are in a sustained period of weak growth. There will have to be a huge bail-out of European banks. People will have their income squeezed for some time. Your [tourism] product will become more expensive . . . You will be winning if in 10 years time you have 90% of the business you had in 2006 and 2007.�

McWilliams predicted “the euro won’t survive in its current format� and a two-tier euro zone was the most likely outcome – with one ‘hard’ currency, one ‘soft’. He said: “The only silver lining is that some destinations may become less expensive. Southern Europe will become cheap again – [in Greece] probably by 30%-40%.�

Sadly, confirmation of Warner and McWilliams’ outlook came immediately. The UK Office for National Statistics (ONS) reported the recession of 2008-09 had been more severe than thought. The economy contracted by 7.1% rather than 6.4%.

The ONS also revised down the GDP figures for the first half of this year, which were lousy anyway, declaring the UK economy has stagnated for the past year. So the economy is about 5% down on its size pre-recession.

At the same time, the International Monetary Fund reported €200 billion might be required to protect Europe’s banks from collapse. Analysts suggested the banks might need more. The European Financial Stability Fund (EFSF) now being finalised to bail them out will contain €250 billion – which leaves not too much margin for error, especially considering that in July the European Banking Authority’s ‘stress test’ of Europe’s banks identified a mere €2.5 billion shortfall in funds. By this calculation, the situation is 100 times worse than three months ago.

But back to McWilliams: consider what his forecast of a two-tier euro and 30%-40% cut in wages means as a way to make some destinations more attractive for the UK industry. The government and employers in Greece, Portugal and possibly Spain and Italy will attempt to drive down living standards on a scale that is obviously very bad news for millions of people.

If successful, the UK industry would benefit from the reduced wage bills in hotels, transport and tourism services. However, where would this leave the social objectives of Abta’s Travelife system, which include the material well-being of staff in destinations? Where would it leave the similar objectives of industry charity The Travel Foundation, which Abta and its leading members support?

Crucially, where would it leave the argument that travel and tourism raise living standards? Far from doing so, such wage cuts would destroy many of the benefits tourism has brought to countries such as Greece and Portugal which were once among the poorest in Europe.

If the industry were to benefit from a 40%-reduction in wages it would shatter an argument that forms the bedrock of travel and tourism lobbying: that tourism brings economic development and raises living standards.

This week, at the Abta Travel Convention, we learned that tourism may not necessarily do that at all. On the contrary, tourism would benefit from a savage reduction of wages in destinations.


Internet searches for Greece, Italy, Ireland, Portugal and Spain surge, says …

Friday 7, October 2011

Interest in crisis-hit Eurozone countries has soared from budget-conscious British travellers hunting for a bargain break, according to new figures.

Hotels.com has seen internet searches for five of the most indebted countries increase dramatically in the period from June 1 to September 28.

The leading online travel retailer says searches for hotels in Spainwere up 85%, Portugal up 80%, Greece up 78%, Italy up 72% and Ireland up 50% on the same period in 2010.

The capital cities of those countries also saw substantial jumps with searches for Madrid up 67%, Lisbon 61%, Rome 41%, Athens 37% and Dublin 8%.

Alison Couper of Hotels.com said: “There areundoubtedly some good deals on hotel rooms at the moment and this applies tothe Eurozone as much as anywhere else.

“Hoteliers in some of the affected countries have cut their room rates to attract visitors because demand has slumped as domestic consumers tighten their belts. It could well be that savvy UK travellers are shopping around and targeting those destinations affected by the Euro crisis in the hope of bagging a bargain.”

Hotels.com’s latest Hotel Price Index – a global report tracking the prices paid by guests in the first six months of the year – revealed that the average room rate in Athens fell by 15% to £80 and by 3% in Lisbon to £79. Dublin appeared to buck this downward trend with a 7% rise to £73, helped by the high-profile visits of the Queen and Barack Obama in May as well as thestabilisation of prices which had fallen 35%, the heaviest slump in Europe,over the past three years.

There was a 4% drop in Greece generally to £96 and a 1% fall in Portugal to £81 although prices rallied in Italy and Spain – up 5% and 3% to £113 and £83 respectively – as travellers switched their holiday plans away from the North African troublespots of Egypt and Tunisia.

Couper commented: “A range of factors affect the popularity and price of hotel destinations, including political unrest, natural disasters and economic turmoil.

“There seems no doubt that the debt upheaval besetting parts of the Eurozone has played, and will continue to play, a significant part in influencing prices as hoteliers discount room rates in an attempt to attract both domestic and overseas visitors.

“This in turn appears to be generating interest from Britons looking for a good deal on the Continent.”

The Hotels.com HPI tracks the real prices paid per hotel room (rather than advertised rates) for 125,000 properties across more than 19,000 locations around the world. The latest HPI looks at prices in the first half of 2011 compared to those in the first half of 2010.


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Germany, Greece sign agreement to boost investment

(AP) VOULIAGMENI, Greece — Germany and Greece signed an agreement on Friday aimed at boosting investment in the debt-drowned country and getting its economy growing again.

German Economy Minister Philipp Roesler and Greek Development Minister Michalis Chrisohoidis said the agreement was part of a strategy to help Greece deal with its crisis by helping its real economy rebound.

“We believe that Greece can become a very important investment destination,” said Roesler, who is on a two-day visit to Greece with a delegation of dozens of German businessmen. “We’re sending out the message that we can implement those things that we have decided on.”

Roesler said deals worth


Important Points to Mull Over for Expanding Your Business in Greece

Greece might not be in the same sphere with the European giants, in terms of a flourishing economy but then we must realize that not every country would be like a European giant. The country ranks 109 out of 183 countries round the globe and has witnessed economic fluctuations owing to the recent economic downswing and political complexities. However, that does stop an entrepreneur from planning to expand his business here as the state of affairs has improved manifold and the government is taking initiatives to reform the country.

Why expand your business in Greece?

It is said that, Greece would take time to match up to the level of Germany in terms of business and commerce, yet it does well for people who want to expand their business here with its attractive and soothing climate. This draws in the foreign investors to the country. As long as the price is attractive, British services and products have a good image with Greece. The principal economy here is travel and tourism. You will find tourists from round the globe visiting the country to explore its rich culture depicted in the archaic museums, being a part of the archeological sites, monuments or just to sooth themselves along the breathtaking coastline.

What are the prospective business opportunities?

Greece being the UK’s 30th largest export market, foreign investors have a huge scope in expanding their business here. The general standard of living is high and the economy is fast expanding, this gives a boost to the foreign investor. However, a well-researched market analysis will make it possible for you to thrive in any aggressive or passive marketplace anywhere. This apart, an expert guidance would also be helpful when you are expanding business overseas .

 


Australian Gourmet Traveller Praises Greece

“There’s far more to the Greek capital than ancient history. If one looks beyond the city’s gritty façade he will uncover its culinary heart and soul” told award-winner George Calombaris, Australia’s most renowned Greek-Australian chef, to Austalian Gourmet Traveller Magazine.

The last issue of the Australian magazine holds a celebrating travel feature on Greece, its cuisine and products.

George Calombaris, known for having introduced the Greek cuisine into the modern dining scene of Australia added that the Greek products and cuisine are one of the best in the world. “We’ve got to start pushing our food, being affordable, doing all those things that need to be done for a country to push itself out of recession” added Mr. Calombaris.

Another Greek Australian, Mr. Napoleon Perdis famous make-up artist and businessman told the Magazine that he travels each year to Greece with his family in order to relax and be inspired, while at the same time he provides Australians with advice on which places to visit in Greece.

The latest Australian Gourmet Traveller issue includes several Greek recipes with classics and modern twists on old favourites from famous chefs Tess Malos, George Papaggellou and John Rerakis. Furthermore, Russell Crowe’s assistant, Mr. Nikos Pappas’ travel report on Kastelorizo is also published in this month’s issue.

All in all, experts agree on this: Greece is a country of endless beauty and wealth. History, antiquity, culture, tradition, natural beauty, wonderful climate and amazing products are only some of the aspects Greece uncovers.


Crete Cooking with Getaway! – e

Greece and Mediterranean Travel Centre is a boutique wholesaler and we are true specialists in our field. Call our friendly staff for more information on Greece, Turkey, Croatia, Spain, Italy, Cyprus, Egypt, Jordan, Israel, Dubai, Abu Dhabi and Oman – benefit from our excellent destination knowledge to ensure you make the right product choices!

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Alexandria NSW 2015
Tel 1300 661 666 or 02 8338 6900
Fax 02 9283 9480


Gone in 60 nanoseconds

— Joke circulating on the Internet

The world as we know it is on the brink of disintegration, on the verge of dissolution. No, I’m not talking about the collapse of the euro, of international finance, of the Western economies, of the democratic future, of the unipolar moment, of the American dream, of French banks, of Greece as a going concern, of Europe as an idea, of Pax Americana — the sinews of a postwar world that feels today to be unraveling.

I am talking about something far more important. Which is why it made only the back pages of your newspaper, if it made it at all. Scientists at CERN, the European high-energy physics consortium, have announced the discovery of a particle that can travel faster than light.

Neutrinos fired 454 miles from a supercollider outside Geneva to an underground laboratory in Gran Sasso, Italy, took less time (60 nanoseconds less) than light to get there. Or so the physicists think. Or so they measured. Or so they have concluded after checking for every possible artifact and experimental error.

The implications of such a discovery are so mind-boggling, however, that these same scientists immediately requested that other labs around the world try to replicate the experiment. Something must have been wrong — some faulty measurement, some overlooked contaminant — to account for a result that, if we know anything about the universe, is impossible.

And that’s the problem. It has to be impossible because, if not, if that did happen on this Orient Express hurtling between Switzerland and Italy, then everything we know about the universe is wrong.

The fundamental axiom of Einstein’s theory of relativity is the absolute prohibition on speed faster than light. Einstein’s predictions about how time slows and mass increases as one approaches the speed of light have been verified by a mountain of experimental evidence. As velocity increases, mass approaches infinity and time dilates, making it progressively and, ultimately, infinitely difficult to achieve light speed. Which is why nothing does. And nothing ever has.

Until two weeks ago Thursday.

That’s when the results were announced. To oversimplify grossly: If the Gran Sasso scientists had a plate to record the arrival of the neutrinos and a super-powerful telescope to peer (through the Alps!) directly into the lab in Geneva from which they were being fired, the Gran Sasso guys would have “heard” the neutrinos clanging against the plate before they observed the Geneva guys squeeze the trigger on the neutrino gun.

Sixty nanoseconds before, to be precise. Wrap your mind around that one.

It’s as if someone told you that yesterday at drive time Topeka was released from Earth’s gravity. These things don’t happen. Natural laws don’t just expire between shifts at McDonald’s.

Not that there aren’t already mysteries in physics. Neutrinos themselves are ghostly particles that travel through nearly everything unimpeded. (Thousands are traversing your body as you read this.) But that is simplicity itself compared to quantum mechanics, whose random arbitrariness so offended Einstein that he famously objected that God does not play dice with the universe.

Aphorisms don’t trump reality, however. They are but a frail, poignant protest against a universe that often disdains the most cherished human notions of order and elegance, truth and beauty.

But if quantum mechanics was a challenge to human sensibilities, this pesky Swiss-Italian neutrino is their undoing. It means that Einstein’s relativity — a theory of uncommon beauty upon which all of physics has been built for 100 years — is wrong. Not just inaccurate. Not just flawed. But deeply, fundamentally, indescribably wrong.

It means that the “standard model” of subatomic particles that stands at the center of all modern physics is wrong.

Nor does it stop there. This will not just overthrow physics. Astronomy and cosmology measure time and distance in the universe on the assumption of light speed as the cosmic limit. Their foundations will shake as well.

It cannot be. Yet, this is not a couple of guys in a garage peddling cold fusion. This is no crank wheeling a perpetual motion machine into the patent office. These are the best researchers in the world using the finest measuring instruments, having subjected their data to the highest levels of scrutiny, including six months of cross-checking by 160 scientists from 11 countries.

But there must be some error. Because otherwise everything changes. We shall need a new physics. A new cosmology. New understandings of past and future, of cause and effect. Then shortly and surely, new theologies.

Why? Because we can’t have neutrinos getting kicked out of taverns they have not yet entered.



[email protected]


How Greece Could Escape the Euro

So why not get out now?

One answer is the same one that was given when Greece’s cheating was revealed: Legally, there is no way out. The euro was designed to be the Roach Motel of currencies. Once you enter, you can never leave. There is no provision for departure.

But, of course, there is a way out. It would be messy, and perhaps disastrous. But no one is going to send an army to Athens to force it to keep the euro.

If Greece were to follow the example set by Argentina nearly a decade ago, it would simply convert its debts from euros into its old currency, the drachma, at the old exchange rate of 340.75 drachmas to one euro. It could also convert euro currency in the country at the same rate. So if you owned one million euros in Greek bonds, they would be converted to bonds with a face value of 340.75 million drachmas.

With a printing press available, Greece could meet those obligations. Of course the drachma would soon be worth a lot less — perhaps 1,000 to the euro. So bondholders would have lost two-thirds of face value. Greece might do O.K., but for reasons we will see, the move could be devastating to the rest of Europe.

In 2002, Argentina’s currency, the peso, was officially tied to the dollar at a one-to-one parity. There was a “currency board” that was supposed to assure the tie could never be broken, and it had worked for a decade. But Argentine inflation had outpaced that of the United States, and the peso was seriously overvalued.

In early 2002, a new Argentine government ended the peg and did much more. It defaulted, and it required its citizens to do the same. If you had a dollar deposit in an Argentine bank, it became a peso deposit, soon to be worth about 30 United States cents to the peso. That was true regardless of who owned the bank. If you wanted to get dollars back from your Citibank deposit in Buenos Aires, you were out of luck.

Argentina was cut off from international credit. Imports plunged and the country entered a deep — but relatively brief — recession. The peso lost two-thirds of its value within a few months. Argentina was sued by everyone in sight.

But devaluation worked, as it often does. Argentine exports became competitive thanks to lower costs, and the economy rebounded. There are international judgments still outstanding against the country, but when it comes to sovereign states it can be easier to get judgments than to collect on them. Diplomatic assets are off limits — no one can grab the Argentine Embassy in Washington — and monetary assets can be kept with the Bank for International Settlements in Switzerland, which will not allow them to be seized.

Argentina’s decision to abrogate private contracts was a crucial part of the package, said John Hempton, an Australian hedge fund manager who has studied what happened. “The Argentine banks all had lots of U.S. dollar funding,” he said. If they had to repay those dollars, while their assets were devalued, “then they would all have uncontrolled defaults, a true disaster, and the country would lose its institutions.”

The Argentine experience was not pretty, but it may well be more attractive than the seemingly endless rounds of austerity, strikes and missed fiscal targets that seem to be leaving the Greek economy in a permanent recession. From the Greek perspective, the course could seem attractive.

There are some important differences, of course. Argentina had a currency that still existed, and there were peso notes. There are no drachma notes floating around Athens or anywhere else. If the drachma suddenly became the legal currency again, currency would be needed. Printing new notes in secret would be a challenge.

Would the bond switch be legal? For some bonds, clearly it would not be. British courts “would enter judgments saying Greece owes x billion euros,” said Whitney Debevoise, a lawyer with Arnold Porter, “but would then have to find assets.”

But British courts would have jurisdiction only over the minority of bonds issued under British law. Most Greek bonds were issued under Greek law, and presumably Greece can change that law to legalize what it does. Greek bonds already trade for less than 40 percent of face value, so it is possible that their actual value might not decline all that much, assuming investors believed the drachmas would be repaid.

Greece would suddenly be forced to run a balanced budget, or to borrow from its own citizens, whose savings would have lost much, if not most, of their value.

Floyd Norris comments on finance and the economy at nytimes.com/economix.