Greece, EU and why we can't have nice things

[Bartimaeus]

 

BTW Bruce, won't get much more west than Greece, cradle of western civilisation and that. Oh,*

 

 

Cradle of Western civilization...not the pinnacle. The Renaissance kept moving on without the Eastern Roman (Greek) Empire for a reason, after all. Possibly something to do with a kebab, last I heard...

Edited July 2, 2015 by Bartimaeus

[Sarex]

Possibly something to do with a kebab, last I heard...

 

LOL

[Meshugger]

 

 

BTW Bruce, won't get much more west than Greece, cradle of western civilisation and that. Oh,*

 

 

Cradle of Western civilization...not the pinnacle. The Renaissance kept moving on without the Eastern Roman (Greek) Empire for a reason, after all. Possibly something to do with a kebab, last I heard...

 

 

Sadly, kebab has had a terrible influence in european culture:

 

https://www.youtube.com/watch?v=ocW3fBqPQkU

[BruceVC]

 

Do you think this should motivate Germany to do the same now with Greece due to this historical decision? I can see the point but the circumstances are vastly different

Really Bruce, even for you that is particularly... unique* perspective given how many Greeks the Germans outright killed, let alone the damage they did to the country and its economy over WW2. Blame me for mentioning Lidice, I guess, even if I couched it as a economic comparison I clearly should have used Kondomari/ Kalavryta/ Kandanos instead- just on Crete, mind you.

 

Just in case anyone doesn't know the details, Germany declared war on and conquered Greece during WW2 with commensurate deaths in combat, mass murder, starvation,  destruction of property, mass appropriation and the like. 12 years after that they forgave Germany their debt. Bruce is right, that's not really similar circumstances- half a million (7% of pop) Greeks died as a result of WW2, I'm pretty sure not a single German has died due to issuing stupid loans that can't be paid back.

 

BTW Bruce, won't get much more west than Greece, cradle of western civilisation and that. Oh,*

 

*

I see him trollin', I hatin', natch

 

 

 

I am not looking at this whole Greek crisis in the context of WW2 or what the Nazis did. That is actually a complete distraction that seems to be gaining some semblance of support based on that excellent article Jaded posted. That article did raise some good points but it hasn't fundamentally changed my view on what Germany is expecting from Greece

 

But just to add something to your point, after the disastrous implementation of the Versailles Treaty the European countries realized that punitive economic steps actually led to the rise of Hitler. So yes I agree the Greeks were magnanimous to be so reasonable to the Germans 10 years after WW2 but that also made economic sense. Sometimes integration is a better way to get a country like Germany to become a important member of Europe again. And that was the right decision considering how Germany now contributes to the overall EU. So without sounding dismissive of how the Greeks suffered in WW2 I still don't see how what Greece did for Germany in the 1950's should somehow influence what Germany does now around the Greek bailouts and austerity expectations? Honestly tell me what you would like Germany to do?

 

I am going to be honest but  I think most of  this criticism from the European members on these forums towards Germany is actually based unintentionally on something that article mentions that Jaded posted. I think there is a strange and historical resentment towards Germany from many Europeans because end of the day some people don't like how the EU strategies seem to be  influenced by a seemingly "belligerent and forceful " Germany .." we beat the Germans in two world wars but now they are telling us what to do " mentality 

 

I can understand this but its misplaced. Germany has become an economic powerhouse ..not a military one. The only ideology they are concerned with is good governance and member states adhering to necessary austerity. People should be grateful that Germany is being so forceful around the Greek issue..someone has to. What do you think would happen if the other countries in Europe undergoing austerity also had far left parties come to power and they also just decided they wanted to rewrite the austerity agreements. This contagion would lead to serious issues for the EU and its economic stability 

 

So once again Germany has to be relatively strict with Greece because of the consequences of them deciding not to continue to pay the required loan amounts. That would lead to a dangerous precedent and set a very bad example for other countries.   

[JadedWolf]

 

 

Do you think this should motivate Germany to do the same now with Greece due to this historical decision? I can see the point but the circumstances are vastly different

Really Bruce, even for you that is particularly... unique* perspective given how many Greeks the Germans outright killed, let alone the damage they did to the country and its economy over WW2. Blame me for mentioning Lidice, I guess, even if I couched it as a economic comparison I clearly should have used Kondomari/ Kalavryta/ Kandanos instead- just on Crete, mind you.

 

Just in case anyone doesn't know the details, Germany declared war on and conquered Greece during WW2 with commensurate deaths in combat, mass murder, starvation,  destruction of property, mass appropriation and the like. 12 years after that they forgave Germany their debt. Bruce is right, that's not really similar circumstances- half a million (7% of pop) Greeks died as a result of WW2, I'm pretty sure not a single German has died due to issuing stupid loans that can't be paid back.

 

BTW Bruce, won't get much more west than Greece, cradle of western civilisation and that. Oh,*

 

*

I see him trollin', I hatin', natch

 

 

 

I am not looking at this whole Greek crisis in the context of WW2 or what the Nazis did. That is actually a complete distraction that seems to be gaining some semblance of support based on that excellent article Jaded posted. That article did raise some good points but it hasn't fundamentally changed my view on what Germany is expecting from Greece

 

But just to add something to your point, after the disastrous implementation of the Versailles Treaty the European countries realized that punitive economic steps actually led to the rise of Hitler. So yes I agree the Greeks were magnanimous to be so reasonable to the Germans 10 years after WW2 but that also made economic sense. Sometimes integration is a better way to get a country like Germany to become a important member of Europe again. And that was the right decision considering how Germany now contributes to the overall EU. So without sounding dismissive of how the Greeks suffered in WW2 I still don't see how what Greece did for Germany in the 1950's should somehow influence what Germany does now around the Greek bailouts and austerity expectations? Honestly tell me what you would like Germany to do?

 

I am going to be honest but  I think most of  this criticism from the European members on these forums towards Germany is actually based unintentionally on something that article mentions that Jaded posted. I think there is a strange and historical resentment towards Germany from many Europeans because end of the day some people don't like how the EU strategies seem to be  influenced by a seemingly "belligerent and forceful " Germany .." we beat the Germans in two world wars but now they are telling us what to do " mentality 

 

I can understand this but its misplaced. Germany has become an economic powerhouse ..not a military one. The only ideology they are concerned with is good governance and member states adhering to necessary austerity. People should be grateful that Germany is being so forceful around the Greek issue..someone has to. What do you think would happen if the other countries in Europe undergoing austerity also had far left parties come to power and they also just decided they wanted to rewrite the austerity agreements. This contagion would lead to serious issues for the EU and its economic stability 

 

So once again Germany has to be relatively strict with Greece because of the consequences of them deciding not to continue to pay the required loan amounts. That would lead to a dangerous precedent and set a very bad example for other countries.   

 

 

I agree that bringing WW II into this is very unfortunate.

 

That being said, I still think that a large part of the responsibility lies with the other Euro countries that quite honestly made a huge mistake by letting Greece into the Euro zone to start with. For as long as the bubble didn´t burst, other countries and especially Germany have in fact profited very much from the inclusion of Greece, by the fact that Greece´s economic weakness kept the Euro relatively weak, which was good for Euro zone countries´export. They gambled that Greece would somehow magically turn fiscally responsible, even though plenty of people warned at the very beginning that they were cooking the books from the very start. And the truth is that within the Euro zone, there just is no way for Greece to even have a competitive economy. 

 

I compare it to lending the town drunk money so he can buy a Porche off you, then getting angry at him for not repaying the loan.

[teknoman2]

let me make somethings clear

 

of the original 360B of debt that greece had to pay, only 150 were public debt. the rest were private debts from banks and big companies on the verge of bankrupcy that the government decided to take off them and load them on the tax payers (for a price of course). also, much of that debt was created by falsifying economic reports and intentionally spreading rumors and seeding chaos on the international markets

 

in 2010, the greek government has agreed to take certain measures in order to fix the economy. these measures included new laws that would improve the efficiency of the tax system and facilitate the generation of new income from production and trade. most other countries that were in the same situation passed (or were forced by germany to do it) these laws and within 2 years could generate enough income to pay their debts. the greek government of the past 5 years though did not pass these laws and instead kept increasing the taxes while lowering the salaries to make ends meet. why? because they did not want to lose the support of the big companies that own the media, because in greece's case germany did not insist on the passing of these laws since most companies that would be affected are owned by germans and because relatives of the ministers could use the fluctuation on the market created by the government to make bilions. nobody gave a flying F about the country, the people, the economy or even the debt itself

 

all money that was supposedly taken by tax payers of other european countries and given to greece is vaporcash (like vaporware). the EU countries did not give a single cent to greece, they simply singed as guarantors for what greece had to pay. each time greece had to pay an installment, the part that greece could not pay was divided and added to the debts of the others. right now each EU country has payed 0€, has about 2 or 3B of extra debt while they have loaded an extra 300B on greece (since greece has to pay for the 3B of each country that nobody actually gave to the loan sharks).

also greece has no need of EU support to survive. since august 2014, greece did not get any EU support but schools, hospitals, police, army and all other public services worked fine, salaries and pensions were payed in full and in time and the debt collectors got 17B. so if greece were to simply stop paying the IMF and the rest of the loan sharks, it could have 15-20B left over each year. as for the installment to the IMF missed a few days ago, EU law states that the ECB has to pay for a country that missed a payment to the IMF and get even with that country later. so even if greece does not pay, the IMF will get its money so there is no actual bankrupcy like they say.

 

most of the stuff that are asked of the new government of greece (and are to be voted on the referendum) are tailored to suit the interests of german companies. i.e in all europe, islands have tax reductions but they ask greece to remove them. why? because if tax reductions are removed, the prices on islands will go up by 30-50% and all tourists will move to the coast of turkey that is littered with german owned hotels and restaurants.

Edited July 2, 2015 by teknoman2

[Ineth]

A currency union that encompasses both export-driven manufacturing economies and third-world-level nice-beaches-and-no-businesses economies was doomed from inception.  

Meh, the US also has different regions with very different levels of export-dependency, and yet it does reasonably well with a single currency.

 

I also don't buy the whole black-and-white "weaker currency = good for economy, stronger currency = bad" meme. There are both advantages and disadvantages to each.

 

at least in the opinion of one Paul Krugman (Boo! Hiss!). It is more of this austerity (pensions cuts, VAT raises) that the Greek government and the troika disagree on.

 

Like that article demonstrates, "austerity" (Boo! Hiss!) is actually a conflation of two different things:

• Trying to balance income & expenses by cutting government spending
• Trying to balance income & expenses by raising taxes

I guess for the likes of Krugman, it's convenient to obscure that distinction in cases like the current Greece crisis, because the analysis of which of the two is really hurting the economy, might not turn out to their liking.

 

[Zoraptor]

But just to add something to your point, after the disastrous implementation of the Versailles Treaty the European countries realized that punitive economic steps actually led to the rise of Hitler. So yes I agree the Greeks were magnanimous to be so reasonable to the Germans 10 years after WW2 but that also made economic sense. Sometimes integration is a better way to get a country like Germany to become a important member of Europe again. And that was the right decision considering how Germany now contributes to the overall EU. So without sounding dismissive of how the Greeks suffered in WW2 I still don't see how what Greece did for Germany in the 1950's should somehow influence what Germany does now around the Greek bailouts and austerity expectations? Honestly tell me what you would like Germany to do?

 

Ideally they would have decided that Greece could not pay back their debt under any reasonable circumstance in 2008- they already have the largest primary (ie before interest payments) surplus at 5% in Europe and by a reasonable margin, plus the harshest austerity; if they aren't going to pay money back in those circumstances you've got to just face reality instead of continuing bullheadedly. Even more ideally in 2002 you either have a proper Euro zone with a proper common fiscal policy like aggregated borrowing and rules that are followed by everyone*, or decide to have no Euro.

 

Since you cannot do either without a time machine and more political will than anyone in Europe has that leaves two options, reduce the debt to a reasonable level via a 'haircut', which is what happened for Germany post WW2, or let Greece leave the Euro on terms as amicable as possible and just take the damage from default. Increasing debt levels on Greece and increasing debt levels of your own when it cannot in any reasonable sense be paid back is simply stupid and benefits no one except those ideologically wedded to the ideal of the Euro for whom a grexit is simple anathema and the death knell of out and out integrationism.

 

In the more general sense, there's no literal obligation on Germany to remember and reciprocate their debt being forgiven, that's a part of it being forgiven after all. Morally though? One of the fundamentals not just of 'good manners' but of diplomacy and all other forms of balanced relationships is reciprocity, the idea that you don't just do stuff to benefit yourself all the time and that when you benefit from another's action, well, one good turn deserves another. If Greece helped Germany out under circumstances where they'd be justified in saying "no" emphatically there is a moral obligation of reciprocity on Germany's part for precisely that reason.

 

*And it should be noted, even the rules that do exist now are regularly ignored by nearly everyone.

[Raithe]

For some perspective of things from back in 2011...

 

Greek Reporter -The 11 Reasons Why Greece Went Broke in 2011/

 

 

ATHENS – Unless you were rich, a business executive, a celebrity, or among the few privileged elite who run the country and for whom every year is a banner year of profiteering, 2011 was the worst year for most Greeks since the American-backed junta of repressive Right-Wing Colonels fell in 1974. The economic crisis rolled on, along with more pay cuts, tax hikes, slashed pensions and scores of thousands of layoffs in a bloated public sector that conspired with politicians for years for a sweetheart deal of lifetime employment in no-heavy lifting, no-show jobs, nice pay checks and early retirement until the day of reckoning came.

 

The country finished a fourth consecutive year of recession that brought some sad numbers to the country that invented math but couldn’t count when it counted: 17.5 percent unemployment, 500,000 people with no income;  500,000 who gave up and ran screaming to other countries looking for a better life (many of the country’s young and best and brightest among them stifled by a system in which lackeys and troglodytes with political connections get the best jobs and then do nothing);  the fastest increase in the rates of suicide and homelessness in Europe; a $460 billion debt that shows no signs of abating; a 10 percent deficit that is three times higher than the ceiling set by the Eurozone, the 17 countries that use the euro as a currency; and an as-yet unmeasured and incalculable number of people who have lost hope.

 

This doesn’t happen by accident. There are reasons why the most glorious country of ancient times has become the pariah of the world in the 21st Century. So how did Greece get from Pericles to Papandreou some 2,500 years after Greeks created democracy, arts, literature, science, math, medicine, philosophy and a system called democracy it has abandoned in favor of being a plutocratic oligarchy? Greece is being kept alive on $152 billion in bailout loans it can’t repay and needs a second bailout of $175 billion it can’t repay, hoping to write off 50-65 percent of the debt, ensuring there will be far fewer foreign investors taking a chance on a country which can’t pay its bills. Here then are Greek Reporter’s top 11 reasons why the sky kept falling, and why this time next you can repeat them because the people running Greece, and those who go along with them, never learn.

 

11. DENIAL, DENIAL, DENIAL – The Irish may have the best drinking songs, and the saddest, but nobody beats Greeks when it comes to denying there’s trouble on the road ahead, a bad moon rising, or hell at the doorstep. After years of cheating on its economic numbers to get into the Eurozone and stay there, successive incompetent Greek governments of the alternating PASOK Anti-Socialists and New Democracy conservative Uber-Capitalists who created the crisis and decided to make workers, the poor and pensioners pay for it, denied there was any problem. That despite abundant concrete evidence that showed the country was going down faster than a German submarine bought by Greece with bribe money. It reminded of Bugs Bunny’s line about someone who didn’t get it: “Ultra-maroon, what an embezzle.” It was all made easier by the loans from the Troika of the European Union-International Monetary Fund-European Central Bank determined to keep throwing good money after bad and keep Greece afloat – not to save Greece, about which it doesn’t care, but to prevent the Greek Contagion from being down the rest of the Eurozone. The government missed every optimistic assessment it made and even the IMF admitted its own grim predictions were rosy because everyone hoped the problem would go away. It didn’t and it won’t because no one wants the truth.

 

10. LAWLESSNESS – We’re not talking bank robbery here, unless you count how Greek banks cripple customers with hidden clauses that make them pay for a loan they’ve already paid unless they ask for a letter of discharge, a favorite tactic of Eurobank, which deserves to go bust, but the little, petty everyday law breaking that leads from the proverbial broken window to murder. Greeks park on sidewalks, double park the wrong way, smoke where they want despite five smoking bans in 10 years, go through red lights at will, and simply ignore laws and are allowed to because, as they say when they shrug their shoulders and smile: “This is Greece.” Yes, it is, and that’s why this is Greece today: bereft, broke and still lawless because when there are laws and they aren’t enforced, that’s a textbook definition of lawlessness. Park on a sidewalk one day, get away with murder the next, it’s all the same here.

 

9. CORRUPTION – Transparency International annually ranks Greece among the most corrupt countries, not just in Europe, but in the world and there’s a good reason for it. Nearly everyone is on the take, from tax inspectors to politicians, doctors, lawyers, architects, engineers, clerk, driving inspectors and anyone who has something to gain by making someone else pay for it. When nearly everyone’s corrupt, who’s going to turn them in? Nothing rots a soul faster than corruption, the sense of entitlement that you’re allowed to take bribes and get away with it. Former Defense Minister Akis Tsochatzopoulos was indicted by Parliament on charges of taking money for a submarine deal with a German company and cited by a German court for the same. He’s still waiting to go to court, scheduled for the 12th of Never and in the meantime is among former Members of Parliament suing his country to get a bigger pension.

 

8. PERCEPTION: Not Inception, the surreal movie, but almost as insane. The world thinks of Greeks as lazy, corrupt, inefficient, ouzo-chugging, cigarette chain smoking (the world’s highest rate) sun-loving beach layabouts, not unlike in the the movie Shirley Valentine, and while it’s generally not true (Greeks have the longest working hours in Europe but many, of course, sit at their desks the whole time) Greeks perpetuate it with their laissez-faire attitude toward everything and now believe it of themselves, which makes it so much easier to do nothing, get away with it, and feel okay about it. So as you sow, so also shall you reap, etc.  Even worse, you couldn’t hear the word “default” without having “Greece” before it and that became the reality, even if we’re still waiting for it to inevitably happen.

 

7. UNCOMPETIVE/UNPRODUCTIVE – Less than half of Greeks work, nearly 50 percent of those under 25 are unemployed, 25 percent of the estimated Gross Domestic Product is in the undeclared underground black economy, and the government spends 42 percent of its limited funds on social benefits, the Socialist state created by former Prime Minister Andreas Papandreou 30 years ago that was dismantled by his son, former Prime Minister George Papandreou, who resigned on Nov. 11 after 18 months of social unrest and turned over the reins of a dead horse to a coalition government headed by former European Central Bank Vice President Lucas Papademos. Greeks are less productive than their peers, producing only $35 per hour worked compared to $55 in Central Europe. With a workforce of nearly 1 million in the public sector, including state-owned entities that were outside the books, there are too many alleged workers trying to prop up an economy in which even the country’s best products – olive oil, honey, saffron, lamb – aren’t marketed properly. Greek olive oil, the world’s best,  is sold to Italian companies, which re-brand it and things are so bad that Greece is importing olive oil – from Germany – which gets it from Greece and sells it back. Of 193 countries in the world, Greece ranks 101st in the Ease of Doing Business Index from the World Bank. Of course, it’s easier if you hand over a “fakelaki,” a little envelope stuffed with bribe money.

 

6.  RIOT CITY – Most of the images the world saw in 2011 were the riots in downtown Athens, particularly Syntagma Square, where protesters regularly massed to oppose austerity measures, and where for weeks thousands of so-called “Indignants” occupied the area across from the Parliament. When Papandreou called out the riot police, they swarmed into the crowd swinging batons, firing tear gas and chemical weapons and attacking anyone in their way, not just the cowardly anarchists who hide behind hoods and toss Molotov ****tails, but legitimate protesters. This is the Greece people saw on their televisions and it created a huge public relations problem. Despite those horrific scenes, tourism went up inexplicably by 10 percent because not even the televised nightmare, nor shoddy service and cheap hotels could keep people away from a country whose beauty transcended the ugliness of its rulers.

 

5. DEAD ENTITIES – Remarkably, Greece does have some good companies – mining, pharmaceutical, health and beauty aids, construction supplies, agricultural products, and even state-run enterprises such as Hellenic Petroleum. But the government operates some dead entities, such as the multiple-bankrupt OSE railway system which is useless, runs near empty trains, pays workers five times the $18,000 annual salary of teachers and has almost no value on the open market. Still, the Troika believes Greece can raise as much as $70 billion by selling or leasing state-owned properties and privatizing state-owned entities, but so far has raised only $3 billion because buyers don’t think there’s any worth in them or are waiting for the prices to fall even further. Germany and China are already licking their chops at picking up some of those of value for rock-bottom prices, but in the meantime, most of the enterprises are big money-bleeders because they are packed with dead weight feather bedded political patronage jobs.

 

4. INJUSTICE – If people believe they are sacrificing for the common good, they are more likely to accept sacrifice, but all Greece does is sacrifice its best and most decent, creating outrage. Pensioners have to wait months for their first check and years for lump sums they earned – unless they work for companies such as Hellenic Petroleum, and then they get it fast and in full. Finance Minister Evangelos Venizelos imposed an avalanche of taxes on everyone except the rich and privileged, and will make the poor pay while the country’s vaunted shipping industry of Captains and Kings pay nothing  – zero, tipota – in taxes. No one goes to jail in Greece it seems except the poor and immigrants, further fostering the belief by most Greeks that the government protects its own while making workers, pensioners and the poor pick up the tab. That makes ethical people become unethical and undermines any sense of a nation’s people pulling together because they’re all pulling in different directions.

 

3. TAX EVADERS – And the biggest injustice, one infuriating enough to make the Dalai Lama want to punch someone, is that while people are paying through the nose – two income taxes, two property taxes, a Value Added Tax of 23 percent that has crippled restaurants, closed hotels, and a pending tax on bank deposits, tax evaders are costing the country more than $60 billion and as much as $13 billion a year more and have escaped with near impunity despite a recent public relations crackdown in which 50 were arrested but none prosecuted. Venizelos has in his pocket a list of 6,000 of them but won’t release it and it wasn’t until the country’s two top tax evasion prosecutors resigned after citing political interference in their work – and then were promptly reinstated – that there was any real momentum toward trying to take the albatross off the neck. None of it will work because tax evasion isn’t limited to the rich and celebrities and politicians, but everyone from fruit and vegetable sellers to mechanics and professionals. As a journalist hired by a British TV show which is designed to promote an image of Greeks as tax cheats put it: “If you pay taxes in Greece, you’re stupid.” Maybe that should be the country’s new slogan.

 

2. POLITICAL INFIGHTING – After Papandreou threw in the towel, some 75 percent of Greeks gave Papademos their approval, but he’s just like Obama keeping Bush policies and there’s not a dime’s worth of difference between what he’s doing and what Papandreou did on the orders of the Troika because international  lenders own the mortgage on Greece and the coalition administration that includes PASOK holdovers like Venizelos, New Democracy and the just-shy-of-cuckoo far Right-Wing LAOS party are its puppets and are busy fighting amongst themselves and trying to position themselves for the next  elections, now set back from February to April, in which –if they are held – a new government will take over that will look like all the previous governments and nothing will change. Meet the new boss, same as the old boss. Greece has no leaders anyone would want to follow into a dark alley. The Greek City States are still waging war but now they are political parties.

 

1. ZELEVOUNAI – Michael Lewis, the Vanity Fair magazine financial writer who came to Greece and was overwhelmed at the sheer magnitude of corruption, inefficiency and just don’t-give-a-damn attitude, put it best when he said the bottom line problem is that, “Greeks just don’t trust Greeks” and jealousy and envy rule. The favorite game is Poneeros, in which everyone tries to be more clever than everyone else and isn’t happy until they both win and someone else loses. In this case, it’s the whole country.

Edited July 2, 2015 by Raithe

[BruceVC]

 

But just to add something to your point, after the disastrous implementation of the Versailles Treaty the European countries realized that punitive economic steps actually led to the rise of Hitler. So yes I agree the Greeks were magnanimous to be so reasonable to the Germans 10 years after WW2 but that also made economic sense. Sometimes integration is a better way to get a country like Germany to become a important member of Europe again. And that was the right decision considering how Germany now contributes to the overall EU. So without sounding dismissive of how the Greeks suffered in WW2 I still don't see how what Greece did for Germany in the 1950's should somehow influence what Germany does now around the Greek bailouts and austerity expectations? Honestly tell me what you would like Germany to do?

 

Ideally they would have decided that Greece could not pay back their debt under any reasonable circumstance in 2008- they already have the largest primary (ie before interest payments) surplus at 5% in Europe and by a reasonable margin, plus the harshest austerity; if they aren't going to pay money back in those circumstances you've got to just face reality instead of continuing bullheadedly. Even more ideally in 2002 you either have a proper Euro zone with a proper common fiscal policy like aggregated borrowing and rules that are followed by everyone*, or decide to have no Euro.

 

Since you cannot do either without a time machine and more political will than anyone in Europe has that leaves two options, reduce the debt to a reasonable level via a 'haircut', which is what happened for Germany post WW2, or let Greece leave the Euro on terms as amicable as possible and just take the damage from default. Increasing debt levels on Greece and increasing debt levels of your own when it cannot in any reasonable sense be paid back is simply stupid and benefits no one except those ideologically wedded to the ideal of the Euro for whom a grexit is simple anathema and the death knell of out and out integrationism.

 

In the more general sense, there's no literal obligation on Germany to remember and reciprocate their debt being forgiven, that's a part of it being forgiven after all. Morally though? One of the fundamentals not just of 'good manners' but of diplomacy and all other forms of balanced relationships is reciprocity, the idea that you don't just do stuff to benefit yourself all the time and that when you benefit from another's action, well, one good turn deserves another. If Greece helped Germany out under circumstances where they'd be justified in saying "no" emphatically there is a moral obligation of reciprocity on Germany's part for precisely that reason.

 

*And it should be noted, even the rules that do exist now are regularly ignored by nearly everyone.

 

Fair enough, you make some good points. I guess we need to wait and see

[213374U]

 

at least in the opinion of one Paul Krugman (Boo! Hiss!). It is more of this austerity (pensions cuts, VAT raises) that the Greek government and the troika disagree on.

 

Like that article demonstrates, "austerity" (Boo! Hiss!) is actually a conflation of two different things:

• Trying to balance income & expenses by cutting government spending
• Trying to balance income & expenses by raising taxes

I guess for the likes of Krugman, it's convenient to obscure that distinction in cases like the current Greece crisis, because the analysis of which of the two is really hurting the economy, might not turn out to their liking.

 

Let me guess: you approve of the former but not of the latter. It doesn't really matter because Greece has done a lot of the first too.

 

I didn't think Krugman particularly obscured anything; his point is that, as things are, Greece is now past the point where it can ever repay the debt because its economy has shrunk (~20%) as a result of austerity measures. You may argue that cutting government spending cannot possibly hurt the economy, but in a country heavily dependent on government spending and with an oversized public sector, laying off public employees and giving the rest salary cuts is going to have a net negative effect because it stifles spending across the board. Much like the oft-repeated fiscal fraud fallacy, simply ramping up tax collection efficiency (slash fiscal fraud by 1/3 and Greece could repay its debts NAO!) would do more harm than good because of the sheer amount of money that would be removed from circulation.

 

At any rate, the scope of the problem extends far beyond Greece. It's a problem with the financial system itself, a system based on exponential debt growth and perpetual borrowing of money from the future. Not quite a Ponzi scheme (we'll leave that for Social Security) but unsustainable all the same. A Greek financial crash is something the global economy can soak up. A US debt crash? Not so much.

 

It doesn't matter how much you make from tax revenues, slash government spending, and spur economic growth. You will never keep up with the rate at which debt accrues. They are simply different mathematical functions, Michael Hudson (Boo! Hiss!) says, and that is why periodic defaulting is not just a thing, but a necessary and inevitable thing. This fact is known at least as far back as Hammurabi's Code, but we apparently no longer care because innumeracy one must honor their commitments!

Edited July 2, 2015 by 213374U

[PK htiw klaw eriF]

Meh, the US also has different regions with very different levels of export-dependency, and yet it does reasonably well with a single currency.

Different US regions aren't analogous to different European states. Perhaps if the Articles of Confederation were in use rather than the Constitution that would be a fair comparison, but that isn't the case here.

 

I also don't buy the whole black-and-white "weaker currency = good for economy, stronger currency = bad" meme. There are both advantages and disadvantages to each.

A weaker currency is better if your primary industries, tourism and agriculture in Greece's case, benefit from having a favorable exchange rate because it allows you to export goods at more competitive prices. Adopting the Euro was an utterly idiotic move on Greece's part, given that their primary industries heavily benefit from favorable exchange rates and are much less competitive without that benefit.

 

Like that article demonstrates, "austerity" (Boo! Hiss!) is actually a conflation of two different things:

 

• Trying to balance income & expenses by cutting government spending
• Trying to balance income & expenses by raising taxes

I guess for the likes of Krugman, it's convenient to obscure that distinction in cases like the current Greece crisis, because the analysis of which of the two is really hurting the economy, might not turn out to their liking.

Greece would be required, under the EU proposal, to both cut government spending and increase the tax burden on individuals. Assuming Greece functions like most other economies, this is going to reduce the economy. Which brings us to Krugman's point that Greece is being put in a position where it is impossible for them to pay back the loans, and a cynical interpretation would be that the Troika is extending the loan in exchange for Greece's public assests which it will most likely sell.

[Zoraptor]

 

Meh, the US also has different regions with very different levels of export-dependency, and yet it does reasonably well with a single currency.

Different US regions aren't analogous to different European states. Perhaps if the Articles of Confederation were in use rather than the Constitution that would be a fair comparison, but that isn't the case here.

 

I also don't buy the whole black-and-white "weaker currency = good for economy, stronger currency = bad" meme. There are both advantages and disadvantages to each.

A weaker currency is better if your primary industries, tourism and agriculture in Greece's case, benefit from having a favorable exchange rate because it allows you to export goods at more competitive prices. Adopting the Euro was an utterly idiotic move on Greece's part, given that their primary industries heavily benefit from favorable exchange rates and are much less competitive without that benefit.

 

 

A weaker currency also increases the costs of imports, which helps the other side of the equation and balances any tendency to buy too many cheap German imports (on credit) by increasing their cost.

 

There certainly are potential problems with a weak currency, especially if you're making it weak by printing more cash which is what Greece-with-Drachma would have to do as debt relief, as it's inflationary and strongly so if combined with money printing plus tends to reduce standard of living by effectively reducing wages; by and large though the problems they have with the Euro itself are far, far worse than that- they currently have strong deflation instead and 35% poverty rate, you can't get much worse than either.

 

If Greece had the drachma they'd have a lot more tools available to deal with things, essentially. They could adjust central bank interest rates to influence cost of internal lending, print money to pay debt and increase competitiveness via weakening their currency, and the drachma's value would be sensibly (more or less) influenced by what Greece is doing and how Greece is performing, not how Germany is. As it stands they cannot adjust their interest rates and cannot print money, the EU aspects of their fiscal policy ensure deflation, uncompetitiveness and high debt with no way to recover; and if they do adopt the drachma again it is not going to be sensibly valued and 'stable'- far more important as a concept than being 'strong' or 'weak'- but will implode in a singularity of emotion and financial panic. It's not that it would be a panacea and fix everything or conversely, stop everything going wrong if they'd kept the drachma, and certainly not if they go back to it. But it would be easier for them to have managed problems, and less bad than the situation under the Euro for everyone involved.

[213374U]

IMF says Greece needs extra €60bn in funds and debt relief

 

Is Tsipras' grandstanding starting to pay off?

 

Now, the Washington-based side of the troika is changing its tune. Greece requires "a reduction in debt of 30% of GDP to bring it down to sustainable levels" and debt restructuring. Can't have Greece leaving the Euro and having closer ties closer to Russia, hmm?

 

More power plays and in the end, it's always the taxpayer footing the bill, be it Greek or German.

[Meshugger]

Just smoke and mirrors, the Troika cannot be that stupid to not realize that Russia and China are already knocking on Greece's door at the very first moment they would leave the euro.....can they?

Edited July 3, 2015 by Meshugger

[BruceVC]

IMF says Greece needs extra €60bn in funds and debt relief

 

Is Tsipras' grandstanding starting to pay off?

 

Now, the Washington-based side of the troika is changing its tune. Greece requires "a reduction in debt of 30% of GDP to bring it down to sustainable levels" and debt restructuring. Can't have Greece leaving the Euro and having closer ties closer to Russia, hmm?

 

More power plays and in the end, it's always the taxpayer footing the bill, be it Greek or German.

 

So I was reading these  new required loans  that Greece needs over the next 3 years

 

For those people who are opposed to the lending of money to Greece and blaming Germany for actually lending money to Greece what is the next step around this? Where does Greece get this money from ? Because this has always been the issue, Greece has needed billions of Euros in relief to stay afloat yet when this money is then lent to Greece this is also criticized. So clearly  institutions like the ECB and IMF are out this equation because they also been attacked for lending the money to Greece ....so what next?

[PK htiw klaw eriF]

Just smoke and mirrors, the Troika cannot be that stupid to not realize that Russia and China are already knocking on Greece's door at the very first moment they would leave the euro.....can they?

If you have to ask, the answer is probably "they can".

[BruceVC]

Just smoke and mirrors, the Troika cannot be that stupid to not realize that Russia and China are already knocking on Greece's door at the very first moment they would leave the euro.....can they?

You seem to think that Russia with its economic woes is just going to jump in to be able to give Greece billions of Euros ?

 

The current Greek government has already  been Russia to discuss this but we aren't privy to what was discussed yet clearly it wasn't ideal because Tsipras would have jumped ship to the Russians if he could have as he clearly doesn't like the EU that much

 

And the Chinese? They have the money but generally don't interfere in these types of international events so I don't expect them to get involved ?

[Meshugger]

Of course not they are going purchase or help Greece in euros. They will wait for them to leave the euro and then buy in Drachmas...meaning pennies on the dollar. Lets not forget the RealPolitik here as well, the Russians can play Greece like a fiddle against EU interests if they know what they are doing. Enough to get influence but not too much to make NATO too nervous. But the end result is the same, a weakened EU and a stronger Russia/China.

 

If the Troika haven't forseen such a scenario, then i almost hope that it happens, because stupidity should never go rewarded.

[BruceVC]

Of course not they are going purchase or help Greece in euros. They will wait for them to leave the euro and then buy in Drachmas...meaning pennies on the dollar. Lets not forget the RealPolitik here as well, the Russians can play Greece like a fiddle against EU interests if they know what they are doing. Enough to get influence but not too much to make NATO too nervous. But the end result is the same, a weakened EU and a stronger Russia/China.

 

If the Troika haven't forseen such a scenario, then i almost hope that it happens, because stupidity should never go rewarded.

Okay I see your point , funny enough there is a real view that a EU without Greece is a stronger EU under the circumstances. So if Russia wants to inherit the Greek issues in the unlikely event they leave the EU this is fine...it will be to there detriment

 

But for me this isn't about geo-politics, this is about the best future for the Greek people and that lies with the EU and the painful but necessary austerity measures  

[HoonDing]

[213374U]

^ That's surprisingly accurate. Varoufakis has appeared on an Irish radio saying that a deal is "almost done", something echoed by Tsipras, who has assured that 48 hours after the referendum, there will be an agreement. This has prompted Juncker to go on record as "omg wtf no".

[teknoman2]

Of course not they are going purchase or help Greece in euros. They will wait for them to leave the euro and then buy in Drachmas...meaning pennies on the dollar. Lets not forget the RealPolitik here as well, the Russians can play Greece like a fiddle against EU interests if they know what they are doing. Enough to get influence but not too much to make NATO too nervous. But the end result is the same, a weakened EU and a stronger Russia/China.

 

If the Troika haven't forseen such a scenario, then i almost hope that it happens, because stupidity should never go rewarded.

and they dont even need to give money... russians want the reserves of un-mined gas under greece. they simply sign a deal and Gazprom can pay for the excavation rights through taxes.

china on the other hand has (almost) a monopoly on rare earths and would give and arm and a leg to get exclusive mining rights for the rare earths recently found in greece

and the Arabs that always had a good relationship with greece, knew for over 30 years now that there is oil in both  the aegean and ionian sea, but due to US "pressure/bribery" on the greek governments, all notions about the oil's existence were dismised. now that that pressure is off because the US aims for that oil, they suddenly all remembered the 30 year old geological surveys... and that is another reason why they pushed for greece to be in this situation: to get the oil for a piece of bread

[teknoman2]

^ That's surprisingly accurate. Varoufakis has appeared on an Irish radio saying that a deal is "almost done", something echoed by Tsipras, who has assured that 48 hours after the referendum, there will be an agreement. This has prompted Juncker to go on record as "omg wtf no".

actually before the anouncement of the referendum, they had almost reached a deal. they agreed on what is to be done late at night and they went to sleep. the next morning they gathered to make a final review of the deal and sign it, and the greek PM found a completelly different deal waiting for him with the pen ready next to it. 

the thing is that Merkel, Draghi and the rest dont like the new greek government. they were too used to dealing with yes-men, and having someone say NO is painful to them like  a vampire bathing with holy water

[Ineth]

the thing is that Merkel, Draghi and the rest dont like the new greek government. they were too used to dealing with yes-men, and having someone say NO is painful to them like  a vampire bathing with holy water

Wanting to pretty much be given billions of EUR as a gift, is a strange position from which to say "NO" and be proud of it.