Ship of Fools: Greece and the Euro

Thread: Greece and the Euro Board: Oblivion / Ship of Fools.

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Posted by Palimpsest (# 16772) on :

I am curious how people who live in Europe feel about the current looming default of Greece.
Does it matter to the rest of Europe? Is it going to shake the market or lead to other countries leaving? Or will it end in some fudged compromise?

Posted by Eutychus (# 3081) on :

I'm afraid it brings out my more cynical and paranoid side.

There have been several occasions already where the media have been forecasting an imminent Grexit, the collapse of the Euro, and so on, and at the eleventh hour the crisis has somehow evaporated, or at least been postponed. So it feels a bit like crying wolf.

I haven't looked in to all this very closely, but from what I understand Greece is seeking loans to pay off the interest on its debt; this doesn't seem very sustainable, but then again what does these days? We'll just have to wait and see.

Posted by Gee D (# 13815) on :

You're probably right Eutychus, but it's a good time to buy a villa on an island or one of the Peloponnese fingers.

Posted by Ad Orientem (# 17574) on :

Personally, I think Greece should just go ahead and default. Either that or Greece's creditors at some point are going to have to face the inevitable and just forgive Greece's debt. According to one article I read on the BBC website a couple of weeks back, under the current arrangement Greece is set for 30-40 years of austerity. That just can't be done.

Anyway, I'm no fan of the EU or the Euro, and I hope this marks the beginning of the end for both.

Posted by Ricardus (# 8757) on :

This article illustrates the nonsense of the IMF. They are producing a report saying inequality harms growth while demanding that Greece implements regressive policies to boost growth.

Posted by Sipech (# 16870) on :

It's shown the IMF to be little more than a legalised version of the mafia. At no point have they themselves would be in financial difficulty if Greece paid a bit less, a bit later. Rather, they just demand that the Greek government kow-tow to their ideology of inflicting cruelty upon the Greek citizens. The IMF are demanding money that is desperately needed by Greece simply so that they can tick a box to say the debt as been paid.

Posted by lowlands_boy (# 12497) on :

It's not just the IMF though is it? They just happen to be the subject of the most imminent repayment. The Greeks are expected to stump up about 1.5 billion Euro to the IMF, and then promise to slash more expenditure, in order that they can then receive another 7 billion Euro in bailouts.

Quite how that's different from not bothering to pay 1.5 billion and then "only" receiving 5.5 billion in another lump of bailouts, I don't know. Other than to perpetuate the farcical notion that they can actually get better by carrying on like this.

Most commentaries that I've read suggest that the EU are desperate to keep the Greeks in the Euro because once one country leaves the Euro, the notion that Euro membership is permanent for every member is gone, and that will harm the long term credibility of the Euro project (and indeed the EU).

I don't know how credible the Euro project continues to look if it appears that the EU is prepared to do just about anything to keep them by just lending them more and more money all the time. So I can see why the EU might insist the Greeks have to suffer.

But if I were Greek man or woman in the street, I'd probably think I didn't deserve any of that and my government should tell them where to stick it all.

There also seems to be many suggestions that the Greeks have a massive black economy and an aversion to sensible tax paying, with ridiculous retirement and pension arrangements.

My money is on another fudge. But not 1.5 billion Euro though.

Posted by Honest Ron Bacardi (# 38) on :

There's no way the Euro is going to collapse - the Greek economy represents only a small part of the Eurozone in total. You can expect wobbles if the Grexit happens, but collapse? I don't think so.

That said, the Eurozone is an unstable entity in its current configuration. Without fiscal authority, its constituent member states lack the controls that sovereign states could normally take to weather such storms successfully. If Greece goes, another country will replace it at the bottom of the pile and in time the same thing will happen.

Meanwhile, at the top of the pile, for example Germany, the Eurozone serves to pull down the value of what would otherwise be the Deutschmark, making Germany ever more financially dominant within the ensemble.

The solution to that is greater political integration, though whether citizens of the appropriate states have any stomach for that is questionable. Once upon a time it may have happened but the mood music has changed.

But back to the Grexit - if it doesn't happen this month the problem won't go away. The loans are for paying off interest and that is due every month during this summer (and presumably beyond). Sooner or later somebody is going to throw the towel in. The sounds coming out of Germany suggest it will be them. Quite what that would look like I don't know - a partial default plus rescheduling of the remainder perhaps. But unless it is radical, it will just be another "kick the can down the road" exercise.

Posted by fletcher christian (# 13919) on :

Posted by Lowlandsboy:

quote:

There also seems to be many suggestions that the Greeks have a massive black economy and an aversion to sensible tax paying, with ridiculous retirement and pension arrangements.

I think it might be a little more than a 'suggestion'! The vast majority of Greek citizens don't seem to have paid any tax since 2009. That's not exactly what you would call a sustainable economy when a government is owed something in the region of €100 billion in unpaid taxes. It's a total farce and Europe has been more than patient in waiting for reform and implementation - which has actually been great for Greece because if they hadn't it would have been consigned to a veritable economic dustbin a very long time ago. If they leave Europe there can be little hope for them - they still have debts to pay off - the country will likely collapse and require truly massive foreign aid and investment just to feed its citizens, there will be no social services to speak of, medical care will be non-existent and no amount of tourists and devaluing of currency is ever going to fix any of that. Europe is their only hope, but sadly they have buffoons in power who seem quite happy to play with an entire nations future and well being for the sake of silly politicking.

[ 16. June 2015, 10:49: Message edited by: fletcher christian ]

Posted by Sioni Sais (# 5713) on :

The whole issue is one where politics and economics are in conflict. The politics are pretty much contained within the EU while, thanks to the IMF the economic aspects are not.

If I remember my history right, the last country put under orders to repay the proportion of GDP that Greece is now asked to do, was the old Weimar Republic. Greece hasn't always had an elected government, let alone a democratic one, in recent times too. That could influence the politics, which in turn affect the banking aspects.

Posted by Ad Orientem (# 17574) on :

quote:
Originally posted by fletcher christian:
Posted by Lowlandsboy:

quote:

There also seems to be many suggestions that the Greeks have a massive black economy and an aversion to sensible tax paying, with ridiculous retirement and pension arrangements.

I think it might be a little more than a 'suggestion'! The vast majority of Greek citizens don't seem to have paid any tax since 2009. That's not exactly what you would call a sustainable economy when a government is owed something in the region of €100 billion in unpaid taxes. It's a total farce and Europe has been more than patient in waiting for reform and implementation - which has actually been great for Greece because if they hadn't it would have been consigned to a veritable economic dustbin a very long time ago. If they leave Europe there can be little hope for them - they still have debts to pay off - the country will likely collapse and require truly massive foreign aid and investment just to feed its citizens, there will be no social services to speak of, medical care will be non-existent and no amount of tourists and devaluing of currency is ever going to fix any of that. Europe is their only hope, but sadly they have buffoons in power who seem quite happy to play with an entire nations future and well being for the sake of silly politicking.

Could you live with decades of austerity?

Posted by fletcher christian (# 13919) on :

Posted by Ad Orientam:

quote:

Could you live with decades of austerity?

Lol, I live in Ireland.

But seriously though; what is the choice? Greece can either implement a proper system of taxation (which is essentially the austerity we ares talking about), or it can be flushed down the dunny and become a failed state with problems of starvation, health, no education, no future and no economy.

The other important thing to consider is that debts do not somehow magically disappear or get taken away by the fairies when you leave the EU

[ 16. June 2015, 11:02: Message edited by: fletcher christian ]

Posted by Albertus (# 13356) on :

Greece should never have been let into the Euro in the first place: the Euro should have been kept as a club for grown-up stable effective economies, with a fairly high entrance bar*. I know nothing of the detail of this but I wonder whether it wouldn't be better to get the pain over with and get Greece out now, and then start again.

I did think that Mr Tsipras showed extraordinary chutzpah when he said recently that

quote:
“We will wait patiently until the institutions accede to realism. We do not have the right to bury European democracy at the place where it was born.”

Some might say that if the Greeks has shown a bit of realism by paying some taxes and working to a reasonable retirement age, and an understanding of the European project instead of spending the last 35 years pissing European structural funds up the wall, they might not be in the state they're in today.

*Mind you, I sometimes think that Germany and Austria should form the core of a new high-quality currency union using the Maria Theresa Dollar.

Posted by fletcher christian (# 13919) on :

Posted by Albertus:

quote:

Greece should never have been let into the Euro in the first place:

I think I would go much further to say that they should not have been allowed in the EU at all until a level of political and economic reform had been achieved. You can see this approach in relation to Turkey today and it makes a lot of sense. I guess at the time Europe was on the crest of wave at the prospect of being united in peace after many, many centuries of hideous warfare, insidious politics and economic instability. In other words, it might have rushed in a bit too quickly.

Posted by Albertus (# 13356) on :

Yes, the Turks seem to be doing pretty well, don't they?
I don't have a problem with bringing in countries to the Union as part of the process of getting them up to scratch in terms of stability and decent governance after a period of undemocratic rule. That's what the whole European project was about and it did a very good job, above all with Germany, and then with countries like Spain and Portugal and some of the post-Soviet countries. But Greece has been in the EEC/EC/EU since 1980, and what have they achieved? Nothing, that I can see.

I suppose this has all at least given Greek politics students at UK universities something else to write their dissertations on. All the ones I've ever met seemed to be writing variations on either why the Elgin Marbles should be repatriated or why Turkey should never be let into the EU. Now I suppose they have the third choice of writing about why none of this mess is Greece's fault.

Posted by Jolly Jape (# 3296) on :

quote:
Originally posted by Fletcher Christian
The vast majority of Greek citizens don't seem to have paid any tax since 2009.

Hmmn, I wonder why that might be? (Clue - unemployment in Greece is now knocking on 25%, with the usual side effect of depressing all wages)

Seriously, do we really want to fix the problem, or do we just want to shaft the Greek people? When we decide what the answer to that question is, we can begin to make progress towards a resolution. We all like to belong to clubs when things are going well; when we can reap the benefits (as the Northern European governments undoubtedly have). What about solidarity in the hard times? Where is the spirit of Bretton Woods?

Posted by Alan Cresswell (# 31) on :

I suppose it depends on why Greeks haven't been paying taxes. I would be surprised if a majority of the 75% of the population in employment are earning below whatever the tax threshold is in Greece. Which implies either willful non-payment of taxes or extremely inefficient tax collection, or both. If the people of Greece should have paid taxes but haven't then surely it's only right that arrangements are made to pay their back-taxes. And, the current government is in a politically good position if the problem was lack of will with previous governments to collect the taxes owed - because they had no role in previous governments they can blame it on their predecessors.

Posted by fletcher christian (# 13919) on :

Posted by Jolly Jape:

quote:

Hmmn, I wonder why that might be? (Clue - unemployment in Greece is now knocking on 25%, with the usual side effect of depressing all wages)

25% doesn't amount to the vast majority of the population, nor the fact paying tax appears to all intents and purposes to be a voluntary and almost philanthropic activity in Greece.

quote:

Seriously, do we really want to fix the problem, or do we just want to shaft the Greek people?

Tempting as it may be for some to see them kicked out of Europe and descend into a circle of hell for the next hundred years and be used as a political pawn for some in the UK (and elsewhere) to argue for the terrible atrocities of EU domination and mind control, I would tend to be of the opinion they should stay in Europe, make the necessary reforms and become a functional state. I think into the future Europe will have to help them freely in some form or another and I'd support that, but it becomes difficult (some might say untenable) when the Greek government seem to want to do absolutely nothing to help themselves and in fact continue as they have been without even a nod to basic reform. All we have is silly political posturing of the kind that says, 'Look daddy, I stood up to big boy Europe and punched him in the nose'.

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by Jolly Jape:
We all like to belong to clubs when things are going well; when we can reap the benefits (as the Northern European governments undoubtedly have). What about solidarity in the hard times? Where is the spirit of Bretton Woods?

The Greek inclusion in the Euro was an entirely political fix driven by the Federalists (France, Germany, Belgium,...) They broke the rules to further their political aims, they can pay the price now.

Posted by L'organist (# 17338) on :

It wasn't, after all, the first time they'd 'fixed it' for the Greekes: the first fix was letting them into the EEC when all the evidence was that they were going to be a disaster and that catastrophic corruption was at the heart of the state.

Posted by betjemaniac (# 17618) on :

The worry of course, from a geopolitical point of view, is if it does exit the Eurozone, does it become a satellite of the, er, rouble-zone?

Mr Putin's economy is in a mess, but not so much that he couldn't bung a few billions of structural funds Greece's way in return for a couple of air bases, or access to a Mediterranean naval base.

Lease Lend all over again.

Posted by Jolly Jape (# 3296) on :

According to the Economist, the black economy in Greece is 24% of economic activity, ahead of the European average of 19%, but not that much ahead, considering the overall depressed state of the Greek economy, where formal economic activity is at a premium, and where you would expect people to be doing what they can to supplement their meagre income by unofficial trading, familiar to two-thirds worlds countries, for example, selling home produced vegetables and so on. No doubt the Greek taxation system is inefficient, I don't know one way or the other, but we are talking here about a drop in the ocean. Maybe they could do better at tax collection, maybe they couldn't, but even if every penny were collected, they would still be in deep doodoo.

Posted by Jolly Jape (# 3296) on :

quote:
Originally posted by Leorning Cniht:

quote:
Originally posted by Jolly Jape:
We all like to belong to clubs when things are going well; when we can reap the benefits (as the Northern European governments undoubtedly have). What about solidarity in the hard times? Where is the spirit of Bretton Woods?
The Greek inclusion in the Euro was an entirely political fix driven by the Federalists (France, Germany, Belgium,...) They broke the rules to further their political aims, they can pay the price now.

Precisely so, but not just political aims. Economic too. I understand there are plenty of Mercedes in Greece. Problem is, they don't want to pay the price.

Posted by Jolly Jape (# 3296) on :

quote:
Originally posted by betjemaniac:
The worry of course, from a geopolitical point of view, is if it does exit the Eurozone, does it become a satellite of the, er, rouble-zone?

Mr Putin's economy is in a mess, but not so much that he couldn't bung a few billions of structural funds Greece's way in return for a couple of air bases, or access to a Mediterranean naval base.

Lease Lend all over again.

There is no doubt that, rightly or wrongly, the Greeks feel that they have been betrayed by their western "friends". I'm pretty sure that they would be casting around for any help they could get. Versailles or the Marshall plan, which had the better outcome, even from a financial pov?

Posted by lowlands_boy (# 12497) on :

quote:
Originally posted by Jolly Jape:
According to the Economist, the black economy in Greece is 24% of economic activity, ahead of the European average of 19%, but not that much ahead, considering the overall depressed state of the Greek economy, where formal economic activity is at a premium, and where you would expect people to be doing what they can to supplement their meagre income by unofficial trading, familiar to two-thirds worlds countries, for example, selling home produced vegetables and so on. No doubt the Greek taxation system is inefficient, I don't know one way or the other, but we are talking here about a drop in the ocean. Maybe they could do better at tax collection, maybe they couldn't, but even if every penny were collected, they would still be in deep doodoo.

According to
this Guardian article then a conservative guess is that they lose 5 billion Euro per year

It also says that taxpayers currently owe 72 billion Euro. If they stumped up a good portion of that then they wouldn't be struggling to repay 1.7 billion would they?

Finally, it quotes...

quote:
“In Greece people try to get round tax because they feel that they get a very poor level of public service in return,” says Theoharis. “They need to understand that if tax revenue increases the country’s creditors will be less likely to impose new austerity measures.”

So yes, it seems they need to become a functioning state, but there's a bit of a chicken and egg problem.

Posted by Ricardus (# 8757) on :

Ok...

1) Tackling tax evasion is one of the few things on which Syriza and the EU are in agreement. Syriza are as full of righteous anger about rich people not paying taxes as any other leftist group. A refusal to tackle tax evasion is not the issue.

2) The sticking points are VAT, pensions and budget surpluses. In other words, regressive taxes, shafting the poor, and an argument over the application of Keynes.

3) The average wage in Greece is £450 per month, which is a long way below the UK personal allowance. Most Greeks would not pay tax in the UK either.

4) Most of the bailout cash went to banks, not to the Greek government's welfare programme. The reason why there is rioting in the streets is that the IMF and chums want ordinary Greek citizens to pay for the crimes of corrupt politicians and bankers.

5) Yanis Varoufakis is not a buffoon. His problem is that he is not enough of a politician. His problem is that he is a professor of economics who thinks, probably correctly, that the IMF etc proposals are based on junk economics and will necessarily fail unless the underlying economic nonsense is addressed. Unfortunately he is trying to make a case for this to the international equivalent of Dilbert's pointy-haired boss.

6) The Greek retirement age is based on contributions. It is very very hard to retire 'early'. The pension budget is high because few people have private pensions.

[ 16. June 2015, 14:15: Message edited by: Ricardus ]

Posted by Albertus (# 13356) on :

So what would happen if they awere just cut adrift and left to get on with sorting themselves out like the grown-ups that they claim, in spite of all the evidence to the contrary, to be? What would the economic impact on the rest of us be?

Posted by lowlands_boy (# 12497) on :

quote:
Originally posted by Albertus:
So what would happen if they awere just cut adrift and left to get on with sorting themselves out like the grown-ups that they claim, in spite of all the evidence to the contrary, to be? What would the economic impact on the rest of us be?

Cheap holidays.

Posted by Gwai (# 11076) on :

quote:
Originally posted by Ricardus:
2) The sticking points are VAT, pensions and budget surpluses. In other words, regressive taxes, shafting the poor, and an argument over the application of Keynes.

I like what you say a lot. One question though. Do you really think the poor will do better under Grexit? That's where I begin to doubt the wisdom of Greece's current course.

Posted by Albertus (# 13356) on :

Will they do any worse? And might the rest of us benefit from it?
Ricardus, are you saying that Greece has always been quite a poor country, or that things like low incomes and limited personal pension provision (pension provision requiring some surplus income) are largely recent, post-crash things? Because if the former, what on earth have the Greeks been doing with all that money that the EEC/EC/EU has been chucking at them since 1980?

[ 16. June 2015, 14:46: Message edited by: Albertus ]

Posted by fletcher christian (# 13919) on :

Posted by Ricardus:

quote:

Most of the bailout cash went to banks, not to the Greek government's welfare programme.

Was it meant to go to the Greek Governments welfare programme? I was under the impression it was given specifically to the banks to stop the entire country imploding, because there wouldn't be a government, let alone a welfare programme if you have bugger all cash.

It's all well and good to say that now Greece is trying to turn things around. Well, yes, of course they are because they bloody well have to. But it perfectly suited them to live off loans they had no intention of ever paying off for quite a long time. The rest of Europe will take the hit because that is part of the purpose of Europe in the first place, but there needs to be reform enacted. To force action on reform Europe is reminding Greece that it has a considerable debt that it must pay off and it must enact reform before there is further bailouts. It wants to see genuine commitment to what Europe is and what it means to be part of it. I can't honestly think of any other possible approach without removing their sovereignty as a nation state. Either that, or the exit Europe, which wouldn't have much of an effect on Europe as a whole, but the result for Greece would be utterly catastrophic.

Posted by Albertus:

quote:

....what on earth have the Greeks been doing with all that money that the EEC/EC/EU has been chucking at them since 1980?

As with Ireland - they 'sessuined' (partied) and continued to sessuin through recession. They pandered to the idea of low or non existent taxes, ploughed European money into basic social services, built roads everywhere, fancy hotels and more houses than there were people, sheep and cattle put together and then took their eyes off the banks who gave enormous loans to people on low incomes and cynically thought someone else would foot the bill. They emptied the public coffers, drinking hundreds of thousands of euros worth of fancy bottled water from a filthy tap on some God forsaken island while the Victorian lead pipes in the towns and cities rotted in the ground. They had a laugh, it was fun, greed was their god; but the greed genie didn't have an endless wish pot and everyone eventually had to wake up from the silly fairy tale and face the truth. We weren't the only ones. Britain experienced something of it, Spain too even the great U S of A and now Greece.

[ 16. June 2015, 15:52: Message edited by: fletcher christian ]

Posted by lowlands_boy (# 12497) on :

Well, that's one for the quotes file....

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by fletcher christian:
Posted by Ricardus:

quote:

Most of the bailout cash went to banks, not to the Greek government's welfare programme.

Was it meant to go to the Greek Governments welfare programme? I was under the impression it was given specifically to the banks to stop the entire country imploding, because there wouldn't be a government, let alone a welfare programme if you have bugger all cash.

It's all well and good to say that now Greece is trying to turn things around. Well, yes, of course they are because they bloody well have to. But it perfectly suited them to live off loans they had no intention of ever paying off for quite a long time. The rest of Europe will take the hit because that is part of the purpose of Europe in the first place, but there needs to be reform enacted. To force action on reform Europe is reminding Greece that it has a considerable debt that it must pay off and it must enact reform before there is further bailouts. It wants to see genuine commitment to what Europe is and what it means to be part of it. I can't honestly think of any other possible approach without removing their sovereignty as a nation state. Either that, or the exit Europe, which wouldn't have much of an effect on Europe as a whole, but the result for Greece would be utterly catastrophic.

Posted by Albertus:

quote:

....what on earth have the Greeks been doing with all that money that the EEC/EC/EU has been chucking at them since 1980?
As with Ireland - they 'sessuined' (partied) and continued to sessuin through recession. They pandered to the idea of low or non existent taxes, ploughed European money into basic social services, built roads everywhere, fancy hotels and more houses than there were people, sheep and cattle put together and then took their eyes off the banks who gave enormous loans to people on low incomes and cynically thought someone else would foot the bill. They emptied the public coffers, drinking hundreds of thousands of euros worth of fancy bottled water from a filthy tap on some God forsaken island while the Victorian lead pipes in the towns and cities rotted in the ground. They had a laugh, it was fun, greed was their god; but the greed genie didn't have an endless wish pot and everyone eventually had to wake up from the silly fairy tale and face the truth. We weren't the only ones. Britain experienced something of it, Spain too even the great U S of A and now Greece.

Posted by Crœsos (# 238) on :

quote:
Originally posted by fletcher christian:
Posted by Albertus:

quote:

....what on earth have the Greeks been doing with all that money that the EEC/EC/EU has been chucking at them since 1980?
As with Ireland - they 'sessuined' (partied) and continued to sessuin through recession. . . . They had a laugh, it was fun, greed was their god; but the greed genie didn't have an endless wish pot and everyone eventually had to wake up from the silly fairy tale and face the truth. We weren't the only ones. Britain experienced something of it, Spain too even the great U S of A and now Greece.

This explanation is itself a fairy tale. It's one that's familiar to everyone (government spends lavishly because it's spending someone else's money, and suffering ensues when the crunch comes), which I guess is why it's conjured up even in situations where it's inapplicable. It's basically economics-as-a-morality-play.

Irish public debt stood at 25% of GDP in 2008, before the financial crisis hit. Spain was at about 36% of GDP back then as well. These are not numbers that we typically associate with fiscally profligate governments on a spending binge. So what happened? Basically the global financial crisis. There was some increase in spending during the recession years, because helping people during a crisis is one of the reasons we have governments, but mostly it was the shrinking of the denominator (the GDP). In short, attributing the economic downturn to government spending is an attempt to try to pass off what was a classic financial crisis as a fiscal crisis, something very different.

Yes, I didn't deal with the U.S. or the U.K. That's because nations that borrow in currencies they control are in a completely different fiscal position that nations that borrow in currencies controlled by someone else (Greece, Ireland, Spain).

Posted by Ricardus (# 8757) on :

quote:
Originally posted by Albertus:
Because if the former, what on earth have the Greeks been doing with all that money that the EEC/EC/EU has been chucking at them since 1980?

I think talking about 'the Greeks' as some kind of homogeneous body that bears collective responsibility for the sins of its leadership is one of the reasons why there is rioting in Athens.

The only recourse of the average Greek against the wastefulness, corruption and mismanagement of their political classes is to throw them out and vote for someone outside the political class. Which they duly did, in the shape of Syriza. Who, thanks to their lack of political experience, immediately get dismissed as amateurs and buffoons.

Posted by fletcher christian (# 13919) on :

I agree with that, and I know I'm painting it in a flippant way, but there was a moral aspect to it. There was nothing in the coffers to see us through difficult times. Back at the very beginning of the Celtic Tiger time and again various commentators, financial bods and economists all warned of the importance of a 'cushion' and repeatedly posed the question here of what will the next generation say we did with our wealth?

So what did we do with it? Well, we had a hell of a lot of corruption, brown envelopes, jobs for the boys that really didn't need done and nobody particularly wanted, under-investment in social services and tax breaks for the rich and wealthy. That was the government end of things. But for the general joe public, we contributed and did our part. We bought second homes, apartments to rent and fancy huge petrol drinking cars and the best bit was we did it all on credit; on someone elses' money! We had loans for everything and anything. It was like Christmas every day. Then one day we realized we might actually have to pay this back and the balloons popped and deflated.

We would undoubtedly have been hit by a world recession, but we might have weathered it a little better if we hadn't been so bloody greedy and foolish.

(cross posted with Ricardus)

[ 16. June 2015, 17:33: Message edited by: fletcher christian ]

Posted by Crœsos (# 238) on :

quote:
Originally posted by fletcher christian:
I agree with that, and I know I'm painting it in a flippant way, but there was a moral aspect to it. There was nothing in the coffers to see us through difficult times. Back at the very beginning of the Celtic Tiger time and again various commentators, financial bods and economists all warned of the importance of a 'cushion' and repeatedly posed the question here of what will the next generation say we did with our wealth?

That kind of begs the question of what it means to have something "in the coffers" for a country operating on a fiat currency it doesn't control. Most modern governments don't have large amounts of currency they've pulled out of the economy just sitting idle in vaults somewhere. A modern state's "coffers" are usually its ability to borrow against the taxable portion of its future GDP or its ability to simply print more money. (This latter course is obviously unavailable to those in the Eurozone.)

quote:
Originally posted by fletcher christian:
So what did we do with it? Well, we had a hell of a lot of corruption, brown envelopes, jobs for the boys that really didn't need done and nobody particularly wanted, under-investment in social services and tax breaks for the rich and wealthy. That was the government end of things.

Sorry, but if you've only run up government debt equal to 25% of your GDP, I have to say the people looting your treasury aren't really trying that hard!

quote:
Originally posted by fletcher christian:
But for the general joe public, we contributed and did our part. We bought second homes, apartments to rent and fancy huge petrol drinking cars and the best bit was we did it all on credit; on someone elses' money! We had loans for everything and anything. It was like Christmas every day. Then one day we realized we might actually have to pay this back and the balloons popped and deflated.

You'd think that kind of assessment is more the sort of thing that should be by the folks making the loan. I'm pretty sure "ability to repay" and "risk of default" are things that are supposed to be taken in to account by lenders, but maybe I'm just old fashioned that way.

Posted by PaulTH* (# 320) on :

quote:
Originally posted by L'organist:
It wasn't, after all, the first time they'd 'fixed it' for the Greekes: the first fix was letting them into the EEC when all the evidence was that they were going to be a disaster and that catastrophic corruption was at the heart of the state

This is right. Everything to do with Greece's membership of the EU and the eurozone was a political decision made by Europe's federalist
elite. So to suggest that 40 years of austerity
are needed to change Greek financial culture is nonsense. Greece can't and won't pay its debts. The eurozone has two realistic choices.

Either expel them from the "club" not necessarily from the EU, and let their own currency take the strain of the economy's inefficiency with a long term devaluation. Or accept that it's a basket case that will need to be supported long term. It's only 2% of the EU GDP and costs peanuts. What they should stop doing is expecting Greece to become another Netherlands. It isn't going to happen.

Posted by Crœsos (# 238) on :

quote:
Originally posted by PaulTH*:
Everything to do with Greece's membership of the EU and the eurozone was a political decision made by Europe's federalist elite. So to suggest that 40 years of austerity are needed to change Greek financial culture is nonsense. Greece can't and won't pay its debts.

Just to clarify, you're not saying "financial culture" when you really mean "fiscal culture"?

Posted by Albertus (# 13356) on :

quote:
Originally posted by Ricardus:
...The only recourse of the average Greek against the wastefulness, corruption and mismanagement of their political classes is to throw them out and vote for someone outside the political class. Which they duly did, in the shape of Syriza...

After the money stopped rolling in and the mismanagement of their political classes ceased to be advantageous.

Posted by Enoch (# 14322) on :

A few thoughts on this:-

First of all, if you were a Greek taxpayer, with the political class in your country's recent record for financial mismanagement, wouldn't you want to make sure the government got its hands on as little as possible of your taxes?

Second, much of the bailout money seems to have gone not on trying to stabilise the Greek economy, so much as directly to assorted northern European banks that have lent to the Greek state, particularly German and French, to protect them from being dragged down the plug with the Greek insolvency and taking the German and French financial systems, together with the euro with them.

quote:
Originally posted by Crœsos:
... You'd think that kind of assessment is more the sort of thing that should be by the folks making the loan. I'm pretty sure "ability to repay" and "risk of default" are things that are supposed to be taken in to account by lenders, but maybe I'm just old fashioned that way.

Isn't that any example of nobody being willing to accept the uncomfortable logic of what they have created.

Back in the days when money was gold or silver, states that couldn't pay their debts defaulted. It was a regular problem in the C17. Then we've had the fond belief that if you have control of your paper currency, inflating it will get you out of the hole - except that if you borrow of foreign creditors rather than your own, they will insist on being repaid in their currency, not yours.

Along comes the euro, with rules that are supposed to stop states borrowing what they can't repay - except that states don't obey the rules, and there's no power that can make them. But creditors lend to states on the assumption that the loan is backed by the creditworthiness of the euro, not the borrower.

That doesn't apply to ordinary commercial debtors. the logic of the euro ought to be that it shouldn't apply to state creditors either. Perhaps it would be better, at least in future, to accept that if states in the euro can't repay their debts, their creditors just have to whistle.

What we have here is banks who have lent to subprime borrowers assuming that somebody else will guarantee the risk, the dark side of Keynes.

If the euro to make sense, doesn't it have to operate like a more sophisticated and managed version of precious metal. But if so, that means risk of default has to be shifted from the currency to the creditor and debtor.

Posted by fletcher christian (# 13919) on :

Posted by Croesos:

quote:

That kind of begs the question of what it means to have something "in the coffers" for a country operating on a fiat currency it doesn't control.

Like Mr Osborne's big new shiny idea. Just because we share a currency in the EU doesn't mean we are compelled to spend all of what we get.

quote:

Sorry, but if you've only run up government debt equal to 25% of your GDP, I have to say the people looting your treasury aren't really trying that hard!

Maybe not in your book. We've had long running tribunals here at great cost to the state to discover....or try and discover, what happened 'off the books'.

quote:

You'd think that kind of assessment is more the sort of thing that should be by the folks making the loan. I'm pretty sure "ability to repay" and "risk of default" are things that are supposed to be taken in to account by lenders, but maybe I'm just old fashioned that way.

No, not old fashioned at all, but that isn't what they did. It was a major part of the Irish economic woes and yes, the banks should have operated professionally and soundly, but they didn't. You would also think that someone getting a loan would try at least a little to figure out if they could pay it off, but again, they didn't. There was such a surge and pressure to get on the property ladder, to build houses and sell, sell, sell and have the latest big petrol guzzler and the best new kitchen from Finland that was carved out by glacier from fossilized wood...or something; and idiots bought into it and more to the point they bought it on credit they couldn't afford.

All that said, I'm not sure that it comparing Ireland's situation with that of Greece is comparing like with like, but there are some similarities certainly.

Posted by Crœsos (# 238) on :

quote:
Originally posted by Enoch:
Then we've had the fond belief that if you have control of your paper currency, inflating it will get you out of the hole - except that if you borrow of foreign creditors rather than your own, they will insist on being repaid in their currency, not yours.

This is actually not usually the case. For instance, the U.S. and the U.K. (two examples that have come up here recently) do not denominate their government debt in any currency but their own. Foreign creditors may ultimate convert their U.S. bonds into their native currencies by selling them, but they cannot buy bonds thus denominated.

There are cases, mostly in the developing world, where government debt is denominated in foreign currency, but this is usually done as a bulwark against inflation and some stable currency is chosen for denomination, which may not be the creditor's native currency.

quote:
Originally posted by Enoch:
Along comes the euro, with rules that are supposed to stop states borrowing what they can't repay - except that states don't obey the rules, and there's no power that can make them. But creditors lend to states on the assumption that the loan is backed by the creditworthiness of the euro, not the borrower.

Which tends to suggest that the European Central Bank should play the role central banks usually play in countries that borrow in their own currencies, that of lender of last resort. The ECB's failure to do so until relatively late in the crisis doubtless exacerbated the situation.

Posted by Enoch (# 14322) on :

quote:
Originally posted by Crœsos:
... Which tends to suggest that the European Central Bank should play the role central banks usually play in countries that borrow in their own currencies, that of lender of last resort. The ECB's failure to do so until relatively late in the crisis doubtless exacerbated the situation.

That doesn't follow at all. Should states automatically be able to borrow from somewhere? Ordinary commercial or private borrowers that aren't sufficiently creditworthy reach a stage that they pay punitive rates of interest or can't borrow at all.

Posted by Crœsos (# 238) on :

quote:
Originally posted by Enoch:

quote:
Originally posted by Crœsos:
... Which tends to suggest that the European Central Bank should play the role central banks usually play in countries that borrow in their own currencies, that of lender of last resort. The ECB's failure to do so until relatively late in the crisis doubtless exacerbated the situation.
That doesn't follow at all. Should states automatically be able to borrow from somewhere? Ordinary commercial or private borrowers that aren't sufficiently creditworthy reach a stage that they pay punitive rates of interest or can't borrow at all.

"Should" goes beyond the realm of economics and strays in to political theory. Historically states have been able to borrow much more heavily than private or commercial entities. Think of Britain financing the Napoleonic Wars or both World Wars. Or the U.S. financing its Civil War (and again, both World Wars). They were able to obtain financing at levels that would put any private borrower in the "not approved" column.

In more everyday terms, states' control of the currency supply gives them a more or less unlimited ability to borrow (though not an unlimited ability to avoid interest or inflation). Some states try to put a "lock box" on this ability by isolating their central banks from the rest of the government's fiscal architecture, but that kind of power is always going to be in the hands of whoever sets monetary policy, either directly or at a remove.

Posted by Ricardus (# 8757) on :

quote:
Originally posted by fletcher christian:
Posted by Ricardus:

quote:

Most of the bailout cash went to banks, not to the Greek government's welfare programme.

Was it meant to go to the Greek Governments welfare programme? I was under the impression it was given specifically to the banks to stop the entire country imploding, because there wouldn't be a government, let alone a welfare programme if you have bugger all cash.

I don't know about 'meant'. There is an unpleasant narrative that the bailouts are so that German taxpayers can subsidise Greeks to retire at 58. The reality is that very little of the bailouts went to finance the operations of the Greek state. Very little even went to recapitalising Greek banks. Most of them went to repaying foreign creditors who should have known better than to lend to Greece in the first place. Analysis.

Posted by fletcher christian (# 13919) on :

It does indirectly do that though when there is no change in economic policy. It would be the equivalent of Ireland continuing to have enormous infrastructure expenditure, continuing to prop up a bubbled, falsely inflated housing market and continuing to usher in tax breaks while at the same time taking a bailout that was either partly caused by or at least exacerbated by the above issues. When Ireland got itself into trouble there was no great love for the country throughout Europe as all the grubby little greedy details emerged. It was thankfully and mercifully spared the problem of tourism and non-nationals buying up property and being non-residents in the country - a problem faced by Spain and now Greece. Why should every other country in Europe have to make the effort, pay off its debts and make reforms to strive towards a more sustainable and secure economy while Greece sits in the Med and says to itself, 'We'll do whatever we like'. This is not in the spirit of what Europe even is, so they will need to ask themselves at some point if they wish to stay in it. Then they can face their creditors without the buffer of Europe or its help in making the repayment of their debt manageable. Every fool in Europe knows that won't end well for them, but they seem to be determined to go that direction and to play a political game where Europe is seen to be the one to push them out. As Europe has already said, they are playing a game of cards and the gambling chips are peoples' lives and futures. I'm afraid I have very little sympathy with that approach.

Posted by Enoch (# 14322) on :

quote:
Originally posted by Crœsos:
... "Should" goes beyond the realm of economics and strays in to political theory. Historically states have been able to borrow much more heavily than private or commercial entities. Think of Britain financing the Napoleonic Wars or both World Wars. Or the U.S. financing its Civil War (and again, both World Wars). They were able to obtain financing at levels that would put any private borrower in the "not approved" column. ...

That isn't because states are entitled to borrow freely or deserve to be able to do so. It's because lenders think states are richer, can tax at will, and so people think they are less likely to default. They think they are a good risk. But how much were Confederate Bonds worth in 1866 and years since? Or for that matter, since their revolution, bonds that had been issued by the Russian Empire before 1917?

Countries can and do go bust. If wealth is independent of their paper currencies, this brings down their creditors but doesn't automatically take all their subjects with them as well - though it's usually fairly unpleasant for them. Since currencies have been dependent on a state's creditworthiness, national bankruptcy takes everyone with it.

quote:
... In more everyday terms, states' control of the currency supply gives them a more or less unlimited ability to borrow (though not an unlimited ability to avoid interest or inflation). ...

Which is what happens when countries don't abide by basic financial discipline and spend more than they can raise on current account.

The eurozone needs now to find a different way of squaring this particular circle - if such exists, which it may not.

Posted by alienfromzog (# 5327) on :

There is so much nonsense here. To be fair, that's a lot to do with the way this story's been reported. But if you dig a little deeper and look for the numbers it becomes a bit clearer.

The first thing to say it's that whilst it is true that Greece should probably not have been allowed into the Euro in the way that it was and that there has been corruption and poor tax receipt issues, this is all almost irrelevant.

The main problem is that the IMF/EU interventions have made Greece far worse off than they were before.

Greece has been extremely effective at austerity - there has been a massive shrinkage of the Greek economy and hardship as a consequence - and still the creditors are not satisfied.

The first thing to say is that the European central bank ran policy leading up to the crisis which suited the northern Europeans very well. Yes Greece borrowed more than it should be this also supported German exports. Laying all the blame at Greece is inaccurate.

The reason for the bailouts in the first place was to save private lenders (French and German banks mostly). The lenders have been totally removed from any risk.

In return for loans Greece has crippled itself to meet the IMF/EU demands. Apart from interest payments Greece has been running a surplus for the last 4 years.

The problem for Greece is that if they default (as they should) they face a banking crisis. This could be prevented if the European Central Bank did its job properly and acted as lender of last resort.

The lenders stand to lose very little and Greece stands to lose so much. And they cannot possible sustain the levels of austerity they've managed so far without economic and social chaos internally.

The reason was the EU is so worried appears to be twofold. The direct effect of a Greek exit is minimal. The direct effect of a Greek default or proper restructuring is minimal. But, but, the worry is Italy and Spain. If Greece leaves the Euro there will be fears about other countries - they are big enough to pose a risk to the Eurozone entirely. And for political reasons the lenders - who never should have taken on the debts in the first place and should have let the private lenders take the hit - refuse to allow proper restructuring. So Greece is being held to ransom by the international equivalent of Wonga.

The IMF has lots of form in this regard - just ask pretty much any South American country. The EU has a lot to answer for too.

It's interesting how Greece have a finance minister who is an economic expert - he must feel like he's negotiating with idiots.

Greece should be allowed to relax the austerity enough to grow it's economy. They will still manage to run a small surplus (excluding interest payments) and then some deal to pay back some of the debt will be possible. The European central bank needs to stand behind the Greek banks.

Alternatively Greece should call their bluff and leave the Euro. Will be bad for Greece in the short term maybe but so much better that the last 5 years which have just made things worse - if they'd left in 2010 they'd be thriving by now.

Greece are not blameless but they have more than payed the price - several times over.

It's time for the other players to do their bit.

AFZ

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by alienfromzog:

Alternatively Greece should call their bluff and leave the Euro. Will be bad for Greece in the short term maybe but so much better that the last 5 years which have just made things worse - if they'd left in 2010 they'd be thriving by now.

Greece are not blameless but they have more than payed the price - several times over.

AFZ

To be honest I think Greece leaving the Euro is the only sane option left - for both sides.

There's enough true believers in the EU project standing in the way of sanity because it will damage/weaken their ideals, but it really really REALLY ought to happen nevertheless.

Posted by lowlands_boy (# 12497) on :

There seems to be more than a few people concerned that they'll get chummy with the Russians though.

Posted by L'organist (# 17338) on :

My Greek friends love the idea that their black economy is 'only' 24% - quoted by Jolly Jape.

As one put it, by his calculation the black economy in his home town used to run at about 45-50% but that shifted to something more like 60% after Greece entered the EU. In some more rural areas the access to various subsidies brought an explosion of 'wealth', much of which has been sensibly invested in portable wealth so is unknown to the authorities.

Since the first banking crisis many rural communities have gone over to a barter system for most things: as my mate Theo says, its a bit like the traditional fakelaki but more honest!

Posted by Honest Ron Bacardi (# 38) on :

One of the problems of the current Greek position is that there are so many factors involved that you can construct almost any narrative you like to try and join the dots up. There's an element of that visible in this thread. It's not that anyone is wrong overall, rather that their explanation is incomplete.

It may be that that itself leads to a temptation to cut the Gordian knot by one side or the other, which I guess is what a forced Grexit is.

Posted by Ricardus (# 8757) on :

quote:
Originally posted by fletcher christian:
Why should every other country in Europe have to make the effort, pay off its debts and make reforms to strive towards a more sustainable and secure economy while Greece sits in the Med and says to itself, 'We'll do whatever we like'.

Who is saying they'll do what they like? Not Varoufakis.

Who is saying economic reforms are unnecessary? Not Varoufakis.

There are however a number of words for arguments such as 'economic reform is necessary, this is an economic reform, therefore it is necessary.'

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by lowlands_boy:
There seems to be more than a few people concerned that they'll get chummy with the Russians though.

yes, I'm one of them. However, the point is they're in a continent wide financial straitjacket that does nothing for them in circumstances like this because there aren't the things which logically should be there for one size to fit all ie:
1)common financial policy
2)central political union
3)genuine fiscal transfer from the rich areas of the union to the poorer as part of harmonisation (try getting that one past the German taxpayer for starters).

For the historians there's echoes here of the British/Maltese scheme to bring Malta into the Uk in the 1960s with county status. The conclusion reached was that union meant that everyone would have to be treated at least theoretically equally across the UK. Apparently HM Treasury took one look at how much it would cost to integrate Maltese health care into the NHS, Maltese schools into the education system, Maltese social security into etc, and scotched it.

However, both sides did at least recognise it was probably doomed and pull back rather than haring off and doing it anyway.

Either Germany (as the paymaster) takes a haircut, and the principle is set in stone that Euro members are bailed out regardless of the circumstances; or Greece goes. I think it has to be the latter, but ideally with "sweeteners" as a goodbye to kickstart them and hedge against Russian attempts to get their feet under the table.

Posted by fletcher christian (# 13919) on :

Posted by Honest Ron B:

quote:

One of the problems of the current Greek position is that there are so many factors involved that you can construct almost any narrative you like to try and join the dots up. There's an element of that visible in this thread. It's not that anyone is wrong overall, rather that their explanation is incomplete.

This is very true and is further compounded by the fact that various press agencies throughout the world in reporting it are happy to heavily bias their reporting with a particular agenda; whether that be support of Europe or implying that Europe is the nastiest most evil thing since a certain angel realised he was beautiful.....and everything in between.

Posted by L'organist (# 17338) on :

We in the UK should look at the Greek meltdown and learn a few lessons in relation to pensions.

With only 30 years of contributions required to fund a full state pension, our own system is on pretty shaky ground.

Granted, we have raised the pension age, granted we have reduced the age at which HRP (home responsibilities protection - basically making contributions on a parent's behalf to acknowledge that it is valid for the children to be the first priority) stops, but we still give a full pension for only 30 years of contributions when even in Greece that level has been raised to 40 years. We are planning to raise this to 35 years of contributions but that won't make much difference.

In the meantime, the taxpayer will continue to pick up the bill for unfunded public sector occupational pensions, almost all of which are final salary schemes so it is almost impossible to put a brake on the losses.

Should Greece remain in the Euro? Probably not but IMO the EU has a moral duty to do all it can to prevent complete meltdown in Greece - not least because the current Greek government perhaps offers the first genuine chance since the second world war for public life in Greece to get a handle on corruption and graft.

Posted by lowlands_boy (# 12497) on :

There are a few strands to that though aren't there. How long you need to pay in should really be related to how long the state expects to pay out. Sticking up the age at which you can start to claim (as we have done) therefore reduces the amount of time the state will need to pay out. Although I agree that it's unlikely to close the gap in life expectancy.

The Greeks are also notorious (in the recent press bashings at least) for very young retirement ages. If they were dying young as well, maybe that's OK, but if they need to now do 40 years, is that just overcompensating, or are we a long way behind too as you suggest.

There was clearly an assumption when state pension provision started that the state would only be paying out for a few years, as people would die not too long after retiring.

I know of someone retired early on a public sector pension who in the next couple of years will have been retired for the same number of years that he worked. That's clearly untenable, unless the same workers are putting at least 50% of their salary aside.

Posted by alienfromzog (# 5327) on :

At the end of the day, the only question that really matters is what's the right thing to do now?

This from Paul Krugman I think cuts through the noise very well.

AFZ

Posted by Honest Ron Bacardi (# 38) on :

AfZ - all those articles were written around 5 months ago. I think a surprising amount of things have moved on since then. But - correct me if I'm wrong - the "think flows, not stocks" argument only works when the accountancy is principally inter- or intra- governmental. It breaks down at the point when that condition ceases to apply, as for example when say Greece leaves the Euro.

Posted by alienfromzog (# 5327) on :

Absolutely, if Greece leaves the Euro it changes the game very significantly.

But I think Krugman's summary very helpful - particularly as he refers to the numbers. Basically Greece has done an heroic job at achieving austerity at huge cost to the citizens and still they're being treated as a naughty child. I wouldn't mind so much but as Krugman points out the economic idiocy behind the IMF/EU policy prescriptions mean that it's all so self-defeating for all sides. So the right thing to do is to give Greece some room for maneuver to restore their economy to some extend and make some sensible, balanced adjustment of the debt.

The Troika have always successfully bullied Greece in the past as seem to believe they can do so again. FWIW (i.e. not much) IMHO (or not so humble) Greece should stand up to them - and I'll give you three reasons 1) Greece will be much better off 2) Anything else is doomed to failure 3) It's the mandate that the government was elected on.

I know the IMF has lots of form at overriding democratically elected governments all over but that doesn't make it right.

AFZ

Posted by Palimpsest (# 16772) on :

If Greece does leave the EU does that change anything with the U.K. trying to decide if it should leave?

Posted by alienfromzog (# 5327) on :

quote:
Originally posted by Palimpsest:
If Greece does leave the EU does that change anything with the U.K. trying to decide if it should leave?

I don't think anyone is talking seriously Greece leaving the EU, just the Euro. I cannot see it having any real effect of the UK position. It may have propaganda value for the euroskeptics.

AFZ

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by Palimpsest:
If Greece does leave the EU does that change anything with the U.K. trying to decide if it should leave?

Not really, although counter-intuitively it's quite good news for the In camp.

Greece won't leave the EU, but it may leave the Euro. This will be fuel to the fire of the sceptics who've been saying for the best part of 3 decades that monetary union was a political decision *not* an economic one - because when it comes down to it they'd rather a country was sovereign than prosperous.

A sovereign country can do something to address its prosperity (or lack of), but a poor country shackled into a monetary union not run with one eye on its particular circumstances doesn't have the sovereignty to start pulling leavers.

A poor sovereign country can default, or more importantly devalue its currency. Greece can't do the latter because it hasn't got one, and the first is already presented as the "nuclear option" when in fact it's the only rational option left for them.

So, why is this positive for the UK "in" camp?

The inexorable logic of the federalists is that they have to do something to stop this happening again - which means faster and deeper political, fiscal and economic integration to go with the social and monetary integration. Arguably the former should have happened first anyway, with monetary union as the icing on the cake at the end, not the main ingredient.

However, there are enough realists in Brussels to know that some countries are just not going to wear this, so it's more likely that the de facto 2 speed Europe will be made formal. The core countries can go ahead and become Eurozonia/The Gerspanfrantalyluxbelportlands*, or whatever, with the others remaining in a mutually beneficial trading alliance with a few other bits. The UK can be in the latter, with Denmark, Sweden, Poland, Greece, Ireland, etc.

This is basically the reform that even Labour want, let alone the Tories. To be honest, give that to the British people and you'd get an in vote by the truckload - even many of the Tory Euroheadbangers want the EEC back, just not an integrationist "ever closer union" EU.

*please can it be this!

Posted by itsarumdo (# 18174) on :

I'd tend to agree with that.

The only caveat I have (not that it means anything - que sera, sera) is that the monetary ripples of a Grexit will probably be bigger than the Grexit itself. Great BBC R4 series on the history of debt - apparently we have had no basis for currency other than some rather dodgy institutionalised belief system ever since de Gaulle demanded gold in exchange for dollars and the USA refused. If Greeks have accumulated transportable wealth (like the Chinese), they may be better off than other Europeans who have not done so.

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by itsarumdo:
I'd tend to agree with that.

The only caveat I have (not that it means anything - que sera, sera) is that the monetary ripples of a Grexit will probably be bigger than the Grexit itself. Great BBC R4 series on the history of debt - apparently we have had no basis for currency other than some rather dodgy institutionalised belief system ever since de Gaulle demanded gold in exchange for dollars and the USA refused. If Greeks have accumulated transportable wealth (like the Chinese), they may be better off than other Europeans who have not done so.

Maybe, although to be honest I think even that's more of a problem for Greece (and consequently manageable by them and the wider world because localised).

Unless the "ripples" cause a global existential crisis about the meaning and value of currency as currency, then it might not be too bad. If that happens then all bets are off.

It might make people jittery about the eurozone (although even then people are likely to be more sanguine about the French and German governments' likelihood to honour credit/debt say than some of the others if the whole Euro imploded), but sovereign countries with their own currencies should be ok (absent the putative existential breakdown).

A knock-on potentially might be that Scotland say became much less keen on leaving the UK without keeping the pound, or even on leaving the UK at all; because it would be given a sobering worked example on what happens when a country either:
a) leaves a currency union
or
b) is in a currency union without a political and fiscal one.

Posted by Honest Ron Bacardi (# 38) on :

betjemaniac - I think the main thing that's missing from your argument about Eurozone vs. sovereign currency is that it is immensely beneficial to those countries whose performance is above-average, in exactly the same way as it is detrimental to those below-average. Without the euro, the Deutschmark would have been trading somewhere around where the Swiss Franc is at present, and the financial pain would be much more evenly distributed.

The reason Germany has been the biggest net contributor to EU structural funds is to try to counteract that tendency, and assist bringing the lower-performers into the range where their economies are convergent with the average. That that hasn't happened is due to the many factors already discussed of course.

But on this analysis, if we are to have a two-speed Europe (or perhaps more accurately a two-zone Europe), then it might make more sense for the Eurozone to expel Germany into the outer zone, as rather perversely its success has made its economy pronouncedly divergent from the norm.

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by Honest Ron Bacardi:

The reason Germany has been the biggest net contributor to EU structural funds is to try to counteract that tendency, and assist bringing the lower-performers into the range where their economies are convergent with the average. That that hasn't happened is due to the many factors already discussed of course.

But on this analysis, if we are to have a two-speed Europe (or perhaps more accurately a two-zone Europe), then it might make more sense for the Eurozone to expel Germany into the outer zone, as rather perversely its success has made its economy pronouncedly divergent from the norm.

Indeed, but then you have to question whether the ECB's in Frankfurt for a reason. Can't remember who it was that described the Euro as "the continuation of the DM by other means"...

Like imposing "austerity" on Greece which conveniently (and explicitly) exempts the order for new submarines being built in German shipyards. Which are clearly a pressing need for Greece in the current climate.

Just highlights the fact that there's a monetary union in which all the players continue to act in their own interests, not collectively, because there's no concommitant fiscal and political union. Which is lunacy.

[ 18. June 2015, 10:03: Message edited by: betjemaniac ]

Posted by Honest Ron Bacardi (# 38) on :

Oh, I don't consider it remotely likely, betjemaniac - to a degree I'm just chucking it out to show how much other factors are at play here. But I do think it is true nevertheless.

By the way, for those following current developments, there was a very important interview with Euclid Tsakolotos (head Greek negotiator) on Radio 4 this morning. If you haven't heard it it is almost essential listening.

iPlayer link here - interview starts at 02h10 in and runs for about 15 minutes. I think that radio iPlayer also works outside the UK.

Posted by itsarumdo (# 18174) on :

Personally I don't understand the economic basis on which it is constructed. Probably the main purpose of local currency is so that local values can be adjusted to offset imbalances with regional norms. Any fule know that the larger the economic block and the greater the regional disparities. We even see that in the UK, but currency also requires boundaries, borders and some degree of autonomy, so entities such as Scotland and Wales are possibly not big enough to seriously support their own currency with the administrative overheads, but in regional terms of trading balance that might be justifiable . The Eurozone essentially prohibits local economic structures on a massive scale. Up to the point that I might even hazard a guess that the increase in Greek black economy on entry to the Eurozone was a local attempt to normalise value when the Drachma no longer filled that role.

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by itsarumdo:
Personally I don't understand the economic basis on which it is constructed.

I don't want to be overly flippant, but that's largely because there isn't really one.

The euro is a construct, an article of faith in the European project. It's the supreme global example of putting the cart before the horse in the 21st century thus far.

Rationally, it (and a flag) should be the last thing to be set up, when everything else has been completed along the road to European integration. Unfortunately, the cheerleaders decided instead that it and a flag should be the engine of integration.

It probably will be, but not remotely in the way the enthusiasts wanted.

Posted by L'organist (# 17338) on :

posted by alienfromzog

quote:
I don't think anyone is talking seriously Greece leaving the EU, just the Euro. I cannot see it having any real effect of the UK position. It may have propaganda value for the euroskeptics.

A few people are talking about Greece leaving the EU - more should be doing do.

What a lot of the 'older' EU members fail to understand is just how different the government of Tsipras is from anything that has gone before - but then they never understood why there was a coup in the 1960s.

A fundamental part of the problem is that there is a deeply held, romantic subliminal notion of current day Greece being directly in line from the so-called 'cradle of democracy': this is wrong and blights much of ensuing arguments about Greece.

There was never a satisfactory solution to the civil war that erupted at the end of WW II: there was bitter resentment about the actions of Metaxas and the so-called 4th of August goverment, and always a suspicion that the Italians were invited into Greece by their fellow fascist Metaxas. The fact that George II supported Metaxas and his party didn't help; there was virtually no contact between the monarchy once they fled to Egypt and occupied Greece, and almost all of the resistance to the Italians and then the Germans was from left-wing groups.

Even after the civil war and subsequent restoration of the monarchy, the only member of the royal family to be regarded with any respect was Princess Andrew (mother of our Duke of Edinburgh) for her bravery in staying in Athens throughout the occupation and her humanitarian efforts during and after the war.

The present government is a coalition of 19 different leftist parties/movements and Tsipras has already indicated that any negotiations must be approved by his coalition partners - that was why the talks between him and Jean-Claude Juncker, which had been described as 'positive' and 'nearing a settlement' were suddenly repudiated: Tsipras couldn't get agreement from his coalition partners.

There is strong support within the Greek cabinet for reaching an independent settlement with Russia over sanctions - in fact that are members of the cabinet who would welcome a move to have a Russian fleet make its home in the med in a Greek port in return for financial support.

As for whether or not Greece leaving the Euro (or the EU) having an effect on UK attitudes: make no mistake, if Greece moves closer to Russia this will hand a huge club to the OUT campaign with which they'll be able to beat the pro-Europeans. The argument will go somewhere along the lines of "after 14 years in the Eurozone and 35 in the EU Greece now feels closer to Vladimir Putin and has left the EU with debts that will never be repaid." Bearing in mind the exposure of many banks based in the City of London, this will be something almost impossible to counter.

Face it: the over-rapid expansion of the EU from 1981 onwards, and the inclusion in the Eurozone of countries with massive problems of debt and fraud only shine a light on the incompetence and lunacy of much of the central Euro bureaucracy such as Juncker, Delors, etc.

Is there a solution? Yes, but only if every country in the EU is prepared to keep bankrolling Greece for at least another 15 years, maybe more. I can't see that playing well with the public in Germany or France and as for here in the UK - you'd get more positive response if it were suggested that we ditch the pound and join a US dollar zone.

Posted by L'organist (# 17338) on :

WHOOPS!

I didn't spot that a section was missing from the above: should be inserted between "humanitarian efforts during and after the war." and "The present government..."

Most of the governments in Athens since the end of the civil war have been fatally tainted by two things: being closely associated with neo fascist movements during the 1930s and 40s, and/or with being responsible for corruption and graft on a scale unimagineable in most of the rest of the world. And even when evidence was found and people put on trial and found guilty nothing was done, no one was punished. Look at the record of Andreas Papandreou - found guilty and remained at liberty, nothing paid back; there is ongoing scandal about the premiership of George Papandreou - you can best his mother's appearance on the so-called Lagarde list as having no obvious source for her €550 million Swiss bank account.

The EU itself sent in several investigators, one of whom simply vanished, others refused to return to Athens because of threats.

It has taken 40+ years but much of the Greek population has had enough and won't tolerate any backsliding from the current cabinet. Indeed, the reason why they voted for Tsipras at the last election was because they felt that every other party was riven with corruption and incapable of reforming itself, never mind Greek natonal life or finances.

And, of course, other EU governments still haven't taken on board that

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by L'organist:
WHOOPS!

I didn't spot that a section was missing from the above: should be inserted between "humanitarian efforts during and after the war." and "The present government..."

Most of the governments in Athens since the end of the civil war have been fatally tainted by two things: being closely associated with neo fascist movements during the 1930s and 40s, and/or with being responsible for corruption and graft on a scale unimagineable in most of the rest of the world. And even when evidence was found and people put on trial and found guilty nothing was done, no one was punished. Look at the record of Andreas Papandreou - found guilty and remained at liberty, nothing paid back; there is ongoing scandal about the premiership of George Papandreou - you can best his mother's appearance on the so-called Lagarde list as having no obvious source for her €550 million Swiss bank account.

The EU itself sent in several investigators, one of whom simply vanished, others refused to return to Athens because of threats.

It has taken 40+ years but much of the Greek population has had enough and won't tolerate any backsliding from the current cabinet. Indeed, the reason why they voted for Tsipras at the last election was because they felt that every other party was riven with corruption and incapable of reforming itself, never mind Greek natonal life or finances.

And, of course, other EU governments still haven't taken on board that

I agree with most of your 2 posts (although my own knowledge is more Crete-centric and as with many things, it's all a little different there to the rest of Greece.

However, I'd be interested though in how you think they're going to square the apparent dichotomy between the Greek people being unwilling to tolerate backsliding from the elected position, and their simultaneous spectacularly high levels of support for the EU/Euro projects?

Which one do you think is going to give first?

Posted by L'organist (# 17338) on :

Yes, it is an oddity - until you look at it through Greek eyes.

They want Tsipras and Co to refuse any more austerity measures because people are hurting. Fact is, not everyone is but the people who've done very well for the past 15+ years and who've got a substantial bit of financial padding to fall back on are keeping schtum - not least because among some sections of government supporters there is increasing talk of forcible seizure of assets/wealth.

The support for EU projects is because they're perceived as being the country getting something for nothing and with no accountability, and some would say that the EU has encouraged this attitude from day one.

To find an example, look no further than the vast fraud that went with the building of 'Motorway 1', the European motorway grade road that was supposed to run from Kilkis (on the border with what is now Macedonia) to Piraeus. Started in the mid 1970s as a pre-accession project, the original target date for completion was 1989; that date was pushed back to 1992, then 1996, then it was made a 'millennium aim' - but that got missed as well.

As of today it is still not complete - there is a section missing between Leptokaria and Evangelismos of approximately 150km. Moreover, for much of the motorway you'll look in vain for central barriers, hard-shoulder, emergency telephones.

As at 1990 the EU had given Greece funds that should have been sufficient to build the road to EU standard twice over - but at that stage less than 20% had been built and only 15km was to standard.

God only knows how much this road has cost so far - but you can see who has benefited from the palatial villas in the hills to the north of Athens in places like Ekali and Stamata.

Posted by Ricardus (# 8757) on :

quote:
Originally posted by lowlands_boy:

The Greeks are also notorious (in the recent press bashings at least) for very young retirement ages.

They have already raised the retirement age to 67.

Posted by Albertus (# 13356) on :

When and from what? 'Cos if the answers were, say, (and I've no idea whether they would be) 'last year' and '55', I wouldn't be too impressed.

Posted by alienfromzog (# 5327) on :

I've learnt a lot from the above posts. Thank you.

I think this by Simon Wren-Lewis is important.

quote:
Wren-Lewis, Oxford Economics Professor:
What that means is that the involvement of European governments has not helped Greece at all. With only IMF support, Greece would have suffered the same degree of austerity that has actually occurred. The additional money provided by the European authorities has been used to pay off Greece’s creditors,
<snip>
It is pretty clear why the European authorities were so generous to Greece’s creditors. They were worried about contagion.
<snip>
The key point is that the European authorities and the IMF were wrong. Contagion happened anyway, and was only brought to an end when the ECB agreed to implement OMT (i.e. to become a sovereign lender of last resort).This was a major error by policymakers - they ‘wasted’ huge amounts of money trying to stop something that happened anyway. If Eurozone governments had needlessly spent money on that scale elsewhere, their electorates would have questioned their competence.

AFZ

Posted by Ricardus (# 8757) on :

quote:
Originally posted by Albertus:
When and from what? 'Cos if the answers were, say, (and I've no idea whether they would be) 'last year' and '55', I wouldn't be too impressed.

It was raised in 2013 from 65.

Playing around with the graphs on this page would suggest that the average Greek retirement age is in line with the EU average and in some years has been above average. It has mostly been below Germany and the UK but above France.

It is true that some special interest groups (including hairdressers apparently) have previously managed to wangle early retirement packages from the government. I don't think anyone is justifying these and both Syriza and their predecessors made efforts to close these concessions. The problem is when sensation-seeking media decide to whip up outrage by pretending this is normal for all Greeks.

Also, insofar as we are discussing the current negotiations, I am not sure how reforms that took place last year or the year before could be described either impressive or unimpressive when the current administration was not in place. It's like complaining that David Cameron didn't increase the personal allowance in 2009.

Posted by alienfromzog (# 5327) on :

Well, this is the Jubilee Dept Campaign's position:

quote:
Jubilee Dept Campaign:
The Greek people are burdened by an enormous and unpayable debt caused by the lending of irresponsible European banks, the borrowing of the corrupt Greek elite, and a global network of tax havens allowing money to flow out of the country

[link removed]

AFZ

[ 20. June 2015, 09:40: Message edited by: Eutychus ]

Posted by Eutychus (# 3081) on :

hosting/

alienfromzog, inviting people to sign a petition, no matter how worthy the cause is deemed to be, falls foul of Commandment 9, so I have removed your link.

For your information, there is a tolerance for such invitations in people's sig lines.

/hosting

Posted by L'organist (# 17338) on :

Even allowing for the fact that the school holidays began on Wednesday, I'm told that the more prosperous suburbs of Athens are very quiet at what should be the rush hour and that traffic on Kifisias Avenue (the equivalent of the Edgware Road) is not at its usual level.

Word is that people with their own villas outside greater Athens/on an island have decamped early, taking unusually large amounts of day-to-day essentials with them.

Meanwhile, most people with relatives elsewhere in Europe are on their way (or have already left) for a long visit: in fact I spent last evening making arrangements for my Greek SiL to stop-over on her way to her husband's family in Cork.

Meanwhile, the reckoning is that over €1 billion was withdrawn from banks on Thursday alone.

Alexis Tsipras may want to do a deal but word is that the majority of the cabinet are not minded to (as they see it) give in to the ECB, IMF and other creditors. Opposition within Syzira to any deal has firmed considerably over the past three months and the list of ministers who are likely to be resistant to any deal is significant

Yannis Dragasakis - Deputy PM
Nikos Kotzias Foreign minister
Yanis Varoufakis - Minister of Finance
Panos Skourletis - Minister of Labour
Panagiotis Lafazanis - Minister for Industry & Commerce

And if opposition from within his cabinet isn't enough to stiffen the resolve of Tsipras, then it will come from his partner: Peristera Batziana was the person who got Alexis Tsipras interested in politics and has always been far more radical than him. 'Betty' has let it be known that any backsliding on what she sees as a fundamental question of Greek sovereignty will mean an end to their relationship, and Tsipras is likely to be more wary of upsetting the woman who insisted on naming their younger son Ernesto in honour of Che Guevara than Chancellor Merkel.

If the other EU prime ministers think that Tsipras is going to back down they can think again, because if he does he's going to be deposed at the head of Syriza - which is, after all, a coalition of 19 mainly far-left factions - and someone much more radical will take his place.

From the outset the Brussels machine has misunderstood Greece and 35 years of Greek EU membership hasn't given most of them any more insight than they had back in the 1970s.

Posted by alienfromzog (# 5327) on :

quote:
Originally posted by Eutychus:
hosting/

alienfromzog, inviting people to sign a petition, no matter how worthy the cause is deemed to be, falls foul of Commandment 9, so I have removed your link.

For your information, there is a tolerance for such invitations in people's sig lines.

/hosting

My apologies. I meant to highlight the position rather than push the petition per se. Sorry won't happen again.

AFZ

Posted by L'organist (# 17338) on :

alienfromzog

At first glance the idea of something along the lines of the 1953 London Conference deal being worked out for Greece is attractive: the Jubilee Debt Campaign aren't the only people urging that it is given an airing.

However, what the JDC and other proposers ignore is that, unlike 1950s Germany, Greece doesn't have a well-developed industrial sector capable of producing exports to earn their way out of debt and into prosperity.

Moreover, in 1950s Germany you had a population which saw working their way out of the situation as a realistic possibility - that isn't the case in Greece today, even if they had the industrial base.

As I posted above, the colossal rule-bending that went on in the late 1970s to allow Greece to join the EU has come back to bite those people in Brussels who have steadfastly refused to look at the reality of the Greek economy.

The so-called Jenkins commission - particularly Claude Cheysson and Antonio Giolitti - have a lot to answer for.

Posted by alienfromzog (# 5327) on :

quote:
Originally posted by L'organist
However, what the JDC and other proposers ignore is that, unlike 1950s Germany, Greece doesn't have a well-developed industrial sector capable of producing exports to earn their way out of debt.

I don't really know Greece well enough but don't forget that Tourism is an export.

AFZ

Posted by Ricardus (# 8757) on :

quote:
Originally posted by L'organist:
alienfromzog

As I posted above, the colossal rule-bending that went on in the late 1970s to allow Greece to join the EU has come back to bite those people in Brussels who have steadfastly refused to look at the reality of the Greek economy.

The so-called Jenkins commission - particularly Claude Cheysson and Antonio Giolitti - have a lot to answer for.

Indeed. What happened to due diligence? Institutions have been fined for not checking out Bernie Madoff properly even though they weren't themselves party to the fraud. And Madoff seems to have been a bit more subtle than the people the EU was showering with money.

Posted by Ricardus (# 8757) on :

Incidentally, does anyone else find it mildly amusing that Jean-Claude Juncker presumes to lecture the Greeks on paying their taxes, after having himself been instrumental in turning Luxembourg into the EU's own tax haven?

Posted by L'organist (# 17338) on :

Anyone who doubts that one of the biggest successes of the EU is news management need only look at the heralding of the 'deal' that is being sorted out at the moment and then pause for, oooh, 10 seconds thought.

If the Greek government cannot collect taxes at the moment, especially from the commercial sector, how is it magically going to increase its tax take from that same group of businesses and industries by 6 % to meet the latest EU demand?

The money-go-round that is Greek indebtedness and repayment has been given a couple more months, at most.

One of the reasons why its got this far is because of the IMF which, contrary to its usual practice, allowed itself to get embroiled in the Greek madness and is now desperate for a face-saving way out of the mess it walked into under its last head, Strauss-Kahn. Christine Lagarde is determined that Greece doesn't join Cuba and Zimbabwe as one of the few countries thats been able to make a mockery of the rules of the IMF.

Meanwhile people in Athens are still quietly withdrawing as much money as they can from banks and making contingency plans because they know, even if EU finance ministers don't, that nothing has altered: Tsipras hasn't a mandate or support, never mind the will, to change the whole basis on which he was elected which was 'no more austerity to be imposed on the Greek people'.

[ 23. June 2015, 13:15: Message edited by: L'organist ]

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by L'organist:
Anyone who doubts that one of the biggest successes of the EU is news management need only look at the heralding of the 'deal' that is being sorted out at the moment and then pause for, oooh, 10 seconds thought.

If the Greek government cannot collect taxes at the moment, especially from the commercial sector, how is it magically going to increase its tax take from that same group of businesses and industries by 6 % to meet the latest EU demand?

The money-go-round that is Greek indebtedness and repayment has been given a couple more months, at most.

One of the reasons why its got this far is because of the IMF which, contrary to its usual practice, allowed itself to get embroiled in the Greek madness and is now desperate for a face-saving way out of the mess it walked into under its last head, Strauss-Kahn. Christine Lagarde is determined that Greece doesn't join Cuba and Zimbabwe as one of the few countries thats been able to make a mockery of the rules of the IMF.

Meanwhile people in Athens are still quietly withdrawing as much money as they can from banks and making contingency plans because they know, even if EU finance ministers don't, that nothing has altered: Tsipras hasn't a mandate or support, never mind the will, to change the whole basis on which he was elected which was 'no more austerity to be imposed on the Greek people'.

That was my thoughts exactly as I drove to work this morning and they were talking about it on the Today Programme - if one of Greece's besetting problems has been heroic levels of tax avoidance, in what possible world is upping the tax rates a workable solution??

Posted by L'organist (# 17338) on :

I love the way that everyone is talking about Greece yet few are joining up the dots and looking at Cyprus.

Cyprus exports over 25% of its goods to the Greek mainland and over a fifth of its imports come from there. In addition, two of its biggest banks (Alpha and Laiki) are either junior branches of a Greek parent or are heavily exposed in Greece.

The icing on the Cypriot cake is the collapse in property values: most property built in the past 20 years has fallen in value by 60% and all Cypriot banks have huge numbers of properties it has repossessed and cannot sell. Meanwhile, in 2013 rents were cut by 20% by Government decree and there are rumours that this may happen again: even if it doesn't average rents are now approximately 25% of what they were ten years ago, so the prospect of investors bailing out the property sector are nil.

And the EU persuaded itself that Greece and Cyprus were a better bet for membership than Turkey [Killing me]

Posted by Crœsos (# 238) on :

quote:
Originally posted by betjemaniac:

quote:
Originally posted by L'organist:
If the Greek government cannot collect taxes at the moment, especially from the commercial sector, how is it magically going to increase its tax take from that same group of businesses and industries by 6 % to meet the latest EU demand?
That was my thoughts exactly as I drove to work this morning and they were talking about it on the Today Programme - if one of Greece's besetting problems has been heroic levels of tax avoidance, in what possible world is upping the tax rates a workable solution??

This seems to be conventional wisdom, but is contradicted by the fact that Greece is currently running a primary surplus, something they wouldn't be able to do if "the Greek government cannot collect taxes at the moment". If the Greek government lacks the ability to collect taxes, where did that primary surplus come from?

quote:
Originally posted by L'organist:
Meanwhile people in Athens are still quietly withdrawing as much money as they can from banks and making contingency plans because they know, even if EU finance ministers don't, that nothing has altered: Tsipras hasn't a mandate or support, never mind the will, to change the whole basis on which he was elected which was 'no more austerity to be imposed on the Greek people'.

This seems to be the point of major frustration for those outside Greece. The way it's supposed to work is that the leader of an indebted country is supposed to betray his people in favor of foreign investors, after which he can retire to a nice sinecure in Davos or someplace similar. I think one of the reasons there's so much anger directed at Prime Minister Tsipras is that he's refusing to play along and is actually following through on his electoral platform.

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by Crœsos:

quote:
Originally posted by betjemaniac:

quote:
Originally posted by L'organist:
If the Greek government cannot collect taxes at the moment, especially from the commercial sector, how is it magically going to increase its tax take from that same group of businesses and industries by 6 % to meet the latest EU demand?
That was my thoughts exactly as I drove to work this morning and they were talking about it on the Today Programme - if one of Greece's besetting problems has been heroic levels of tax avoidance, in what possible world is upping the tax rates a workable solution??
This seems to be conventional wisdom, but is contradicted by the fact that Greece is currently running a primary surplus, something they wouldn't be able to do if "the Greek government cannot collect taxes at the moment". If the Greek government lacks the ability to collect taxes, where did that primary surplus come from?

no, it can collect taxes, I'm suggesting it might struggle to collect significantly more of them. Particularly across 6 regional rates of VAT (VAT being one of the things they're hoping to put up) at a time when there are an awful lot of Euros in suitcases....

Posted by Honest Ron Bacardi (# 38) on :

Croesos wrote:

quote:
This seems to be conventional wisdom, but is contradicted by the fact that Greece is currently running a primary surplus, something they wouldn't be able to do if "the Greek government cannot collect taxes at the moment". If the Greek government lacks the ability to collect taxes, where did that primary surplus come from?

Presumably from the people who are currently saying "no more", i.e. the employed. Though more accurately, the word on the streets about that is that there is indeed a problem with Greek tax collection. The part that isn't down to inefficiency is structural. The above as compared with OECD peers.

(Though it is also worth pointing out that this is a growing trend everywhere, with companies like Apple, Amazon, Starbucks et al avoiding taxation in many countries of operation by canny company registrations in tax havens.

Still, you know the solution to the latter. Just don't buy from them. More of a problem for Greece and its shipping industry.)

Posted by L'organist (# 17338) on :

The so-called 'primary surplus' is nothing of the sort: these figures include the amount pumped into the Greek economy by the ECB to cope with the huge amounts being drawn out at ATMs (which is well publicised) and the transfers to banks elsewhere (which is kept pretty quiet).

To put it into some sort of context, the amount taken out of banks at ATMs alone last week was more than the total amount repayable to the ECB and the IMF in June and July.

As for any further cuts in pensions: wait and see. Tsipras and Varoufakis presented their latest 'plan' to the EU meeting so late that no one had a chance to look at it properly and do any number crunching to see if it would work.

Jean-Claude Juncker made sure that the simple existence of the plan (which started with the word correction) was hailed as if a major deal had been done, which is far from the case. The finance ministers of Germany and the Netherlands, in particular, are going to be very hard to convince that further bailout monies should be given to Athens: Germany's Schäuble because he knows he can't sell it to a home electorate who were sceptical at the whole Euro project from the outset, Dijsselbloem because he realises that the Cypriot 'bail-in' that he helped devise in 2013 has't worked and that a Greek deal is going to fail.

Whatever so-called deal is reached, the spin put on it by the EU bureaucrats is going to be that it is a good deal for everyone, which is not going to be the case.

Quite apart from anything else, the production of accurate statistics is as far beyond the capabilities of the present Greek government as it has been for its predecessors. And any deal based on increasing the tax revenue ignore the fact that no Greek government has been able to collect taxes properly since the demise of the Ottoman Empire.

Posted by Crœsos (# 238) on :

quote:
Originally posted by L'organist:
The so-called 'primary surplus' is nothing of the sort: these figures include the amount pumped into the Greek economy by the ECB to cope with the huge amounts being drawn out at ATMs (which is well publicised) and the transfers to banks elsewhere (which is kept pretty quiet).

You seem to be confusing a lot of different topics. You start off saying the Greek primary surplus (a measure of government fiscal activity) is false because of cash flows in the general economy (a financial act, not a fiscal one) due to the ECB acting in the way we typically expect central banks to act when faced with bank runs. For the sake of clarity could you make another run at it and try to stick to either fiscal or financial analysis and not try to pass the one off as the other?

Unless your point is just "Greece bad!", in which case I think we've all got it.

Posted by Honest Ron Bacardi (# 38) on :

Croesos - it certainly is confusing, but I don't think it's l'organists fault. Rather it is due to the prolonged financial engineering of the accounts in these latter years, especially involving the transformation of off-balance sheet liabilities into balance sheet assets, as aided and abetted - and audited - by EUROSTAT, the EU statistical office.

A right-wing neocon assertion? Er, no - that would be Yannis Varoufakis, the current minister of finance, and former Professor of Economics at the University of Athens. Basically, assertions of Greek primary surplus are worthless. Especially worthless are those such as "cyclically adjusted primary surpluses", as cited by Paul Krugman. Effectively they take an error then multiply it by a correction factor that assumes that Greece's economy is cyclically in line with other OECD peers. Having just been kicked into heavy austerity, it isn't obvious what cycle it is currently reasonable to expect it to be in.

I like Paul Krugman, but he is distinctly naive about the so-called audited figures. I also like Yannis Varoufakis. And here I may part company with L'organist, because I feel the current Syriza negotiators are doing the best they can to clear out the Augean stables of Greek finances, whilst avoiding too much grief for the Troika who, let's face it, merit a thorough pummelling in public opinion.

Posted by Crœsos (# 238) on :

quote:
Originally posted by Honest Ron Bacardi:
Croesos - it certainly is confusing, but I don't think it's l'organists fault. Rather it is due to the prolonged financial engineering of the accounts in these latter years, especially involving the transformation of off-balance sheet liabilities into balance sheet assets, as aided and abetted - and audited - by EUROSTAT, the EU statistical office.

Which is interesting and relevant, but not really connected with "huge amounts being drawn out at ATMs . . . and the transfers to banks elsewhere". As far as I can see, this kind of activity by private citizens has little to do with current Greek government balance sheets. I'm still wondering what the connection is that L'organist is trying to make.

Posted by Honest Ron Bacardi (# 38) on :

Agreed, Croesos. It's just the way it was handled last time, but I hope and trust the Syriza govt. will do the right thing so far as accounting is concerned this time round.

Posted by Palimpsest (# 16772) on :

I think years of Congressional deadlock have left me with the feeling that the Drama Queens will always push thinks to brink just to feel important. I'm wondering if this is the case now with Greece; that they won't cave till the last moment and then back down. Or it may be out of the control of the government at this point.

Posted by Alan Cresswell (# 31) on :

There certainly seems to be a strong element of brinkmanship within modern political practice. No one can afford to seem to back down, they need to maintain standing at home in front of a usually hostile press. Ultimately a solution is needed that needs to be sold as a success by all parties. Some small concessions at the last minute allow everyone to go home and present themselves as standing up to for their principles and forcing a last minute concession, and that what they gave was insignificant.

Posted by L'organist (# 17338) on :

posted by Croesos

quote:
You seem to be confusing a lot of different topics. You start off saying the Greek primary surplus (a measure of government fiscal activity) is false because of cash flows in the general economy (a financial act, not a fiscal one) due to the ECB acting in the way we typically expect central banks to act when faced with bank runs. For the sake of clarity could you make another run at it and try to stick to either fiscal or financial analysis and not try to pass the one off as the other?

Well, that depends: the two have become inextricably linked because the National Bank of Greece hasn't been able to back-up the money it is having to release to retail banks and so the funds that are being pumped in are coming from the ECB.

Yes, I'm well aware that the formula for a country's primary surplus is government spending, minus current tax income, and not including interest paid on bonds (government debt). The situation in Greece now is the same as it ever has been since a brief period under the Colonels junta: figures for tax income are debatable because successive governments have tended to use the figure of what they think they should be collecting, rather than what they really get. Similarly figures for government spending are unreliable because, just like the EU, no one has been able to produce audited accounts for Greek government accounts for years.

Since a true primary surplus would need to exist if the Greek government was going to be able to pump money into its retail banking sector, the ECB has stepped in because they know that the money being printed at the moment is otherwise backed up by nothing.

The Augean Stables simile is spot on.

Posted by alienfromzog (# 5327) on :

Paul Krugman's latest Greek thoughts This is why I have so much contempt for the IMF: after forcing Greece to adopt policies that have made things much worse, they object to an economically literate Greek government insisting on something else...

[brick wall]

AFZ

Posted by Enoch (# 14322) on :

quote:
Originally posted by L'organist:
... figures for tax income are debatable because successive governments have tended to use the figure of what they think they should be collecting, rather than what they really get. ...

I'd agree, but I don't think a fiscal economist can - certainly not a UK one. Since the Inland Revenue have over the last few years been aggressively insisting everyone keep their accounts so that they are taxed on a 'bills delivered' or even a 'work in hand', rather than 'cash received' basis, how can anyone official object when the Greek government presents its fiscal income that way?
[Killing me]

Posted by Ricardus (# 8757) on :

quote:
Originally posted by alienfromzog:
Paul Krugman's latest Greek thoughts This is why I have so much contempt for the IMF: after forcing Greece to adopt policies that have made things much worse, they object to an economically literate Greek government insisting on something else...

It's the literacy of the people involved that I find a little disturbing.

OK this may be a bit of an adolescent way of thinking, but look at the economic credentials of the negotiators on the European side.

Mario Draghi (President of the ECB): No problem with him, but he doesn't seem to be the one making all the noise.
Christine Lagarde (Managing Director, IMF): A lawyer.
Jean-Claude Juncker (President of the European Commission): Qualified as a lawyer but never practised. A career politician.
Jeroen Dijsselbloem (President of the Eurogroup): "Studied agricultural economics at Wageningen University (1985–1991), majoring in business economics, agricultural policy, and social and economic history" according to Wikipedia - a step up from Lagarde and Juncker, but not exactly the same as the macroeconomics of a country suffering from experimental monetary policy.
Angela Merkel (Chancellor of Germany): Has a doctorate in physical chemistry but went into politics instead.
Wolfgang Schäuble (German Finance Minister): Studied law and economics in the sixties but spent his subsequent career in law and politics.
François Hollande (President of France): Graduated from the Ecole nationale d'Administration, which makes him a professional senior civil servant.

Meanwhile on the Greek team, Alexis Tsipras qualified as a civil engineer before going into far-left politics, but the other Greek negotiators whose names I've seen in the media:

Yanis Varoufakis: Professor of Economic Theory, University of Athens
Euclid Tsakalotos: Professor of Economics, University of Athens
Giorgos Stathakis: Professor of Political Economy, University of Crete

Also as an aside, if Greece's problem is decades of political graft and corruption, how does it make sense to undermine the one party qualified to make a break with the past?

[ 26. June 2015, 16:35: Message edited by: Ricardus ]

Posted by Crœsos (# 238) on :

quote:
Originally posted by L'organist:
Well, that depends: the two have become inextricably linked because the National Bank of Greece hasn't been able to back-up the money it is having to release to retail banks and so the funds that are being pumped in are coming from the ECB.

<snip>

Since a true primary surplus would need to exist if the Greek government was going to be able to pump money into its retail banking sector, the ECB has stepped in because they know that the money being printed at the moment is otherwise backed up by nothing.

It sounds to me like your problem isn't with Greece per se, it's with the ideas of fiat currency, fractional reserve banking, and depositors' insurance. Your criticisms could just as easily apply to any other country that uses these three financial structures.

Posted by fletcher christian (# 13919) on :

......and yet, the same 'qualified' people claimed at election that they would get rid of Greek debt problems by reducing (or completely ridding) the economy of austerity measures. Maybe they meant that they would get rid of them by not paying them, therefore no need for austerity measures.

Posted by Ricardus (# 8757) on :

quote:
Originally posted by fletcher christian:
......and yet, the same 'qualified' people claimed at election that they would get rid of Greek debt problems by reducing (or completely ridding) the economy of austerity measures. Maybe they meant that they would get rid of them by not paying them, therefore no need for austerity measures.

Syriza manifesto.

Their election pledge was to renegotiate, or at least seek to renegotiate, their debt mountain such that they would have the space to reduce austerity measures, bring the economy back into growth, and pay off the debt. And that is what they are trying to do. That is what this standoff is about.

I don't see anything in that manifesto that suggests they thought reducing austerity measures without renegotiation would solve the Greek debt crisis.

Posted by alienfromzog (# 5327) on :

quote:
Originally posted by Ricardus:
...seek to renegotiate, their debt mountain such that they would have the space to reduce austerity measures, bring the economy back into growth, and pay off the debt. And that is what they are trying to do. That is what this standoff is about.

This.

The complete lack of sanity in the Troika position is that they make it impossible for Greece to even come close to paying anything towards its debts as has been clearly demonstrated the IMF prescription has made Greece's position much worse.

So minimal rational thinking will lead to one of two conclusions:
Either: The Troika have no idea what they are doing - in which case they should be ignored as much as possible
Or: They do know and they are basically trying to punish Greece (for what, I'm not entirely sure but) they should be ignored as much as possible.

Either way, whilst Greece has some issues and past history etc. etc. there is no real moral equivalency here. And even if there was, it is so long past the point where the vital question is simply "What will work?"

FWIW the answer is not more austerity

AFZ

Posted by fletcher christian (# 13919) on :

As this Wall Street journal article points out the debt is not in any way unmanageable for Greece, but rather it is reform that is at the heart of the issue. It also notes that all other countries in the EU have been effected by the global recession and the various property crashes and the debt crises and the abuse of credit and the mismanagement of lending, etc, etc, etc. So it begs the question; why is it that the special case should be made for Greece? Do they really want to face their creditors without the help of a bailout? No - it's mainly silly posturing and political maneuvering. Taking a bailout is hard and has been hard for all those in Europe who had to do it. I very much doubt there has been a single country in the EU that has not felt the pain austerity, but why should Greece be permitted to remain a part of Europe when all of its actions seem to suggest it only wants to be part of it on its terms - and currently those terms seem to be we want the bailout and we don't want to have to make any of the sacrifice that the other 18 members states have made and we'd rather not enact reform?

Posted by Ricardus (# 8757) on :

Yeah, we've already kicked eighteen cats - why should the nineteenth get off scot free?

Posted by Ricardus (# 8757) on :

OK, less flippant response follows. I can't respond to the WSJ article because it's behind a paywall but regarding the rest of your post:

1.) I may be misreading you, but how can you argue that 177% of GDP is manageable when earlier in the thread you seemed prepared to argue that 35% (Ireland) was a sign of wanton profligacy?

2.) I think economists of all persuasions agree that the Greek state had problems that weren't present even in the other troubled nations of the periphery. Therefore, what 'worked' for Spain, Portugal or Ireland won't necessarily work for Greece. The fact that the Greek economy contracted by a quarter would seem to be empirical confirmation of this hypothesis.

3.) Reason for scare quotes above: Syriza's position is that any solution to the debt problem shouldn't fall disproportionately on the shoulders of people who are already poor and vulnerable and who weren't responsible for the crisis. This seems to me just and reasonable. I don't get the impression that the Spanish and Portuguese bailouts have been particularly successful in this regard either.

4.) Syriza never wanted the bailout in the first place. They thought the Greek government should have negotiated directly with its creditors.

5.) More to the point - and this I think gets to the heart of the issue - an overt nationalist like Mr Farage or Ms Sturgeon can talk about 'countries feeling the pain' or 'the Greeks seem to want such and such' but that's not an attitude the EU can take. For a nationalist, the nation-state exists as objectively real moral collective above the level of the individual and therefore what is done by or to part of the collective is necessarily done to the whole - so a crime by some Greeks is necessarily a crime by all Greeks, and a punishment on some Greeks is necessarily a punishment on all Greeks. (Just as a crime by my brain can be punished by a restriction on my bodily freedom.) Socialist movements such as Syriza have traditionally been internationalist because it sees class-distinctions as more important than nation-divisions, and the EU is also supposed to be about transcending nationalist groupings, so there should be lots of common ground between them. For the EU to punish Greek pensioners for the sins of Greek industrial magnates and politicians is a betrayal of its own commitment to internationalism.

[ 27. June 2015, 07:16: Message edited by: Ricardus ]

Posted by fletcher christian (# 13919) on :

You seem to suggest that because Greece is now some kind of 'internationalist' socialist heaven that it should be allowed to approach its lenders directly when dealing with its debts. If I suspend my disbelief in certain aspects of that, then maybe so; maybe Greece should be allowed to do what no other member state of Europe was permitted to do and go it alone and ignore what it means to be part of Europe. What is the result of that? Greece declares itself bankrupt? It drops out of the Euro? It creates its own currency again only to massively devalue it? It becomes economically isolated? That happened in Europe once before if I recall, and it didn't end well. The nationalism you speak of tends to go hand in glove with difficult economic times. I very much doubt that for any German in Europe right now that this is a thought far from their minds, because essentially there is more to Europe than economics.

Posted by Ricardus (# 8757) on :

quote:
Originally posted by fletcher christian:
You seem to suggest that because Greece is now some kind of 'internationalist' socialist heaven that it should be allowed to approach its lenders directly when dealing with its debts.

This is conflating several separate arguments, which is probably my fault for cramming too much stuff in a single paragraph. I am saying that both Syriza and the EU supposedly subscribe to an internationalist philosophy and therefore there should be common ground between them, but in practice the EU's way of dealing with Greek is decidedly nationalist.

I am also saying, as a separate and unrelated argument, that Syriza did not want the bailout programme to have started. This is a direct response to your comment that the Greeks seem to want bailouts but not the austerity that goes with it. It is a separate argument to the argument about internationalism.

quote:
If I suspend my disbelief in certain aspects of that, then maybe so; maybe Greece should be allowed to do what no other member state of Europe was permitted to do and go it alone and ignore what it means to be part of Europe. What is the result of that? Greece declares itself bankrupt? It drops out of the Euro? It creates its own currency again only to massively devalue it? It becomes economically isolated? That happened in Europe once before if I recall, and it didn't end well. The nationalism you speak of tends to go hand in glove with difficult economic times.

My point is that it is Angela Merkel and François Hollande and Jeroen Dijsselbloem and Jean-Claude Juncker who are behaving in a nationalist way, and thus violating what it means to be part of Europe.

As for 'what's the alternative', in the short and medium term Syriza want a debt restructure. In the medium and long term Varoufakis has spelt out a fairly detailed proposal of how he thinks the Eurozone should address systemic crises here. It would involve resolving those parts of the euro concept which, as other posters have noted, have no economic foundation or which exist in defiance of economic reality.

Posted by L'organist (# 17338) on :

posted by Ricardus

quote:
I think economists of all persuasions agree that the Greek state had problems that weren't present even in the other troubled nations of the periphery. Therefore, what 'worked' for Spain, Portugal or Ireland won't necessarily work for Greece. The fact that the Greek economy contracted by a quarter would seem to be empirical confirmation of this hypothesis

Spot on - in fact a Greek friend (works for a merchant bank over here) said that even trying to get a true picture of the economic problems, or their scale, in Greece was like a blind man trying to read insurance small-print while wearing a blindfold in a completely dark room.

As for what would 'work' for Greece - I suspect nothing. Don't forget, Syriza based a fair bit of its manifesto on re-negotiating its reparations from Germany after WWII - and the arguments used against that by some of the other parties were based on the uneasy political truce reached at the end of the civil war in 1949.

Fact is, Greek society in general (and political society in particular) is still fighting the battles of the 1930s and 40s.

As for whether or not the Greek economy contracted by 25%, its anybody's guess how much it contracted by.

As for the proposed 'solution' of increasing VAT rates on the islands, the only part of the Greek economy that is working at the moment is the tourist industry: increasing VAT on the islands would damage the only part of the Greek economy that is producing much: total madness.

Posted by fletcher christian (# 13919) on :

Varoufakis' 'proposals' are pie in the sky. The first option he spells out is to take each one case by case. Well yes, you could do that, and you might complete it before the next millennium comes around; meanwhile most of your citizens will have starved to death within the first few years. I guess that would technically be less mouths to feed.

Proposal two involves permitting member states to service their own debts without any interference and without any guarantee from Europe as a whole. Well, that's a lovely idea, but it's not quite how it works and it wasn't the understanding that lenders had when Greece borrowed money. Maybe an idea that has legs for the future in European reform, but I kind of doubt that its workable.

Proposal three is the stuff of fairy tales. Somehow Greece will magic up all the money it doesn't have through all the new jobs it doesn't have in a booming economy it doesn't have.

Proposal four would love us all in the future to consider Greece's debt problems an 'idiosyncratic event'. Well, I'm sure they would.

Meanwhile, the lenders have already stated they are willing to return to the offer made back in 2012 to extend loan maturities, to lower interest rates and to extend the interest rate moratorium all in favour of economic reform (things like, no tax breaks for tourists who buy fancy holiday homes) to enable Greece to function as a sate into the future in a sustainable way. The EU has also committed money - not Greece's money - to ensure that it can service it's debt while it enacts reform and doesn't become a bankrupt failed sate that no one on earth will ever want to invest in. They have decided they don't want that and now they are going to have a referendum on whether or not they want to remain in Europe or become a failed state. If they leave, it won't just be 50 year old pensioners and the non-nationals in holiday villas that will feel the hurt.

Posted by L'organist (# 17338) on :

THE TALKS ARE OVER.

Alex Tsipras says the offer reached with the EU will be put to a referendum on Sunday 5th July.

The reaction of some EU leaders is that this means Greece is now leaving the Eurozone.

Some in Greece are saying the referendum should not be just about the offer from the EU but should be about EU membership itself: KKE (the Greek communist party) is saying that is what should be on the referendum paper and they're a member of the Syriza coalition.

Posted by Palimpsest (# 16772) on :

From what's been reported in the US, the Greeks are doing a referendum July 5, but have not gotten an extension for payments due July 1st.

Is there a later development?

No extension on Greek Payments

Posted by Martin60 (# 368) on :

They get to stay in and blame the nasty ECB for their woes. Tsipras gets to wash his hands above Syntagma Square. And start paying their taxes like grown ups. And stop having the highest teacher-pupil ration in Europe with one of the lowest educational standards. And stop retiring at 62. Like Cyprus did. Or they can collapse in to the Drachma and the arms of that nice Mister Putin.

Posted by alienfromzog (# 5327) on :

What is the Greek government supposed to do?
The creditors who never should have intervened in the first place want the Greek government to adopt policies which are totally opposite to the mandate they were elected on and are economic madness and will reduce Greece's ability to pay anything back.

And remember Greece has far more to loose - the creditors can easily absorb the loss but if Greece gets a banking crisis they could be in a lot of trouble.

The solution is not easy but it is simple. 1. Relax the austerity so the Greek economy can grow. 2. Put interest payments on hold. 3. The European Central Bank needs to do its job and stand behind the Greek banks. 4. Then worry about a sensible repayment plan.

With this, all sides will be better off. It is a tradegy that the EU has so cornered itself such that the above is (almost certainly) politically impossible.

I admire the Greek government for not giving in to this blackmail.

AFZ

Posted by alienfromzog (# 5327) on :

quote:
Originally posted by Martin60:
They get to stay in and blame the nasty ECB for their woes. Tsipras gets to wash his hands above Syntagma Square. And start paying their taxes like grown ups. And stop having the highest teacher-pupil ration in Europe with one of the lowest educational standards. And stop retiring at 62. Like Cyprus did. Or they can collapse in to the Drachma and the arms of that nice Mister Putin.

quote:
source
Greece increased to 67 in 2015 from 66 in 2014. Retirement Age Men in Greece averaged 64.29 from 2009 until 2015, reaching an all time high of 67 in 2015 and a record low of 57 in 2009

It's very convenient to paint Greece as unreformed and as Skivers or Shirkers but the Greek people as a whole have really paid the price of austerity. I wouldn't mind so much if it actually worked.

AFZ

Posted by Ricardus (# 8757) on :

quote:
Originally posted by fletcher christian:
Varoufakis' 'proposals' are pie in the sky.

So what phrase describes austerity policies that were supposed to reinvigorate the Greek economy and instead caused it to contract by 25%, wasting an enormous amount of German taxpayers' money in the process?

What phrase describes the belief that cutting solidarity payments to the poorest pensioners will somehow resolve the chaotic state of Greek governance and finance?

What phrase describes the total inability of the Eurozone, more than seven years after the crisis first broke, to resolve the structural weaknesses in the euro, such as the consequences of forcing divergent economies onto a single base rate, or the fact that as soon as the crisis hit, most member states (including the euro's golden boys of France and Germany) were obliged to break their Maastricht spending limits?

As for the extraordinarily generous offer which you mention, unless I have missed something all that would do is drag out the current crisis till November. At best it offered a payment holiday, not a debt restructure. Does any economist seriously believe that the Greek economy will be magically turned around in five months, even with the most competent government in the world and an unrestricted mandate?

Posted by Martin60 (# 368) on :

I'm glad they finally got there AFZ, from the same source: 'Greece Retirement Age - Men ... a record low of 57 in 2009'.

The poor of Greece are reaping what their rulers all the way up to Brussels have sown.

Posted by alienfromzog (# 5327) on :

quote:
Originally posted by Martin60:
I'm glad they finally got there AFZ, from the same source: 'Greece Retirement Age - Men ... a record low of 57 in 2009'.

The poor of Greece are reaping what their rulers all the way up to Brussels have sown.

Yes indeed. And, as I said a few posts back there clearly have been issues with Greece's economy and governance but
a) that's not the whole story and if we're apportioning blame, there's plenty to go round
b) It's fairly irrelevant as this point as the far more important question is what will work.

Moreover the key point is - and retirement age is just one measure - Greece has done lots of reforms and heroic austerity.

To expect more of Greece is not only totally unfair, it is also ridiculous.

If you read Mark Blyth's Austerity, the history of a dangerous idea (very good read by the way) he predicted this - in the sense that he said, there is only so much austerity a democracy will actually tolerate.

AFZ

Posted by fletcher christian (# 13919) on :

Posted by Alien from Zog:

quote:

1. Relax the austerity so the Greek economy can grow. 2. Put interest payments on hold. 3. The European Central Bank needs to do its job and stand behind the Greek banks. 4. Then worry about a sensible repayment plan.

1. There is no economy to grow because currently Greece does not have a properly functioning economy. What they have is a huge uncontrolled black market, non payment of VAT, non payment of tax, tax exclusions for the extremely wealthy buying up houses and huge villas on islands and huge public spending on credit to name but a few of the issues that everyone already involved in talks have already put their finger on as issues that need attention and should not be permitted to continue indefinitely. That is not sustainable for any country. Don't get me wrong, I am not for punishing Greek's poor nor would I have any such desire to see Greece in any sense punished, but they have to move towards a sustainable and responsible economic policy. If they don't then we will all be here again in a decade or less giving them another bailout. If they make reforms they will have an economy, they will be able to move towards a sustainable future, they will have other countries around the world still willing to invest.

2. They were offered reduced interest rates and the moratorium and they rejected it. We know that one of the issues highlighted back in 2012 was regarding one particular island. Did this island have a disproportionate amount of Greece's poor? Did it have people who would be isolated, left starving and without basic services due to austerity measures? Like heck it did - it was an island that operates as a tax haven and playground for the world's super rich.

3. Ummm, that's basically what they are doing. They are provided bailouts to help Greece manage its debt repayments and because the situation has persisted for some time they have set conditions; namely reform. Again, nobody wants to be here again in ten years time;least of all Greece.

4. Manyana, manyana! Come on, you can't be serious! Much as I have a distaste for capitalism, sadly it waits for no man...or country. We can't somehow erase their debts and pay off all their troubles and keep doing it all again every ten years. They can't keep pretending to be a third world country. They have to take responsibility for the management of their own state.

Posted by L'organist (# 17338) on :

There is no way that Mr Tsipras can deliver agreement on anything proposed by either the IMF, the ECB or the European Council of Ministers. SYRIZA took the majority of the seats in the Greek parliament at the last election on a manifesto of no more austerity measures the would mean cutting benefits or adding to taxes on everyday items; their partners in the coalition government, ANEL, may be poles apart when it comes to political theory but whe you get to the specifics of Greece's economic woes they are of one mind with Syriza - indeed, they're even more extreme, believing that previous governments who reached agreements on finance with the IMF and ECB were acting illegally and that ministers who signed up to such deals should be prosecuted.

There will be a referendum and the vote will go against any 'deal'. Greece is going to default - that's been clear since January.

The reason why Tsipras and Varoufakis are so relaxed about it is that they (and others in the coalition) see this as a golden opportunity for some sort of Year Zero and for the Greek governance and its economy to be re-started.

It may look and sound insane to people outside Greece - and to a fair few inside the country as well - but once you know the scale of the problem when it comes to corruption, it makes sense. No, not just the ramblings of a UK based musician but a thesis proposed years ago by a team investigating fraud at Government level in Greece on behalf of the EU. Like so many things that the Eurocrats find unpalatable, it was suppressed because they didn't approve of what was being discovered and funding was pulled before they could complete their work.

Posted by fletcher christian (# 13919) on :

Posted by Ricardus:

quote:

So what phrase describes austerity policies that were supposed to reinvigorate the Greek economy and instead caused it to contract by 25%, wasting an enormous amount of German taxpayers' money in the process?

What phrase describes the belief that cutting solidarity payments to the poorest pensioners will somehow resolve the chaotic state of Greek governance and finance?

What phrase describes the total inability of the Eurozone, more than seven years after the crisis first broke, to resolve the structural weaknesses in the euro, such as the consequences of forcing divergent economies onto a single base rate, or the fact that as soon as the crisis hit, most member states (including the euro's golden boys of France and Germany) were obliged to break their Maastricht spending limits?

As for the extraordinarily generous offer which you mention, unless I have missed something all that would do is drag out the current crisis till November. At best it offered a payment holiday, not a debt restructure. Does any economist seriously believe that the Greek economy will be magically turned around in five months, even with the most competent government in the world and an unrestricted mandate?

I don't disagree with you that the whole situation sucks, but it is a situation that has sucked since 2008. Since that time Greece has been given opportunity time and time again to make reforms. They didn't.

Then Tsipras comes along and announces his new reforms that will help everyone out: laid off workers will be re-hired, the minimum wage will rise and public and social spending will see unprecendented rises since levels in 2003. You can see why the lenders and Europe started to shift nervously in their seats and you can see why the man is in the position he is in. Now he can blame it all on Europe and those nasty loan sharks without having to ruffle the feathers of the upper middle class and the super rich and tackle their habit of fakelaki and rousfeti, not to mention the off shore accounts (poor Mr Kantas for example, took so many bribes while in office he can't actually remember them all!). These are not the Greek poor, they are the Greek uber wealthy who through their own corruption and evil are pressing the genuine poor of Greece to take the hit. If Greece chooses to play it this way then that is their choice. I find it despicable and immoral, but corruption is like that, and one thing is certain, it cannot continue.

So lets be clear, Europe is not talking about punishing the poor of Greece. The Greek government may want to play it that way, but it's not what is at stake. They seem to have this stupid idea that they can become the Cayman Islands of Europe, but they want to do it through gross corruption and by punishing the poor and blaming it on bad Europe and nasty lenders. It's nothing more than a political game in which they are happy to gamble away the livelihoods and lives of their poor. It's disgusting.

Posted by alienfromzog (# 5327) on :

Fletcher Christian,

No, no, no, no.

1. No one is saying that the Greek economy doesn't have issues and has major problems. But according to the IMF, yes the IMF! Greece currently has a primary cyclically adjusted surplus of 5.2%. Unfortunately the IMF-imposed austerity that was supposed to only minimally harm the economy before leading to growth has caused a contraction of over 20% and massive, massive unemployment. So yes there is much that needs to be done but Greece clearly has capacity to grow - it's biggest problem is the externally imposed austerity.

2. They are not being allowed to not make the payment due this week.

3. Clearly not. If the IMF was acting as lender of last resort there wouldn't be an issue of Greek banks potentially collapsing. This is a political decision.

4. I am totally serious. Simply because if you look at Greek's dept-to-GDP ratio is 2010 and compare it now you see how much the Troika has really helped them. [brick wall]

AFZ

Posted by fletcher christian (# 13919) on :

Posted by Alien from Zog:

quote:

No one is saying that the Greek economy doesn't have issues and has major problems.

I know that, but the question is why do they not tackle the issues? Why is it that Greece refuses to tackle the issue of non payment of tax, vat and raft of other things? Corruption maybe? Someone is getting a brown envelope they don't want to give up? What is it that seems to have stopped Greece for the last decade to even begin to enact reforms towards being a normal functioning state with a sustainable economy?

quote:

But according to the IMF, yes the IMF! Greece currently has a primary cyclically adjusted surplus of 5.2%.

I know that. there are a number of economists (not least a few in Europe) who think the debt is in fact manageable.

quote:

Unfortunately the IMF-imposed austerity that was supposed to only minimally harm the economy before leading to growth has caused a contraction of over 20% and massive, massive unemployment

The corruption is so rife and the black market so huge and the tax dodging so endemic that its somewhat hard to know the real picture. The austerity required was not to punish, but to force the hand of the Greek government in enacting reform - they haven't.

quote:

So yes there is much that needs to be done but Greece clearly has capacity to grow - it's biggest problem is the externally imposed austerity.

I agree with your former point but strongly disagree with the latter. The biggest problem is corruption and reform. Greece is rewarding its wealthy and punishing its poor and they are doing it on the vote of the poor. Words cannot express my contempt for that.

quote:

They are not being allowed to not make the payment due this week.

Have you been following the talks? Granted, we don't know the details of the deals that were on the table, but they certainly appear to have rejected everything and chosen of their own will not to take an option open to them.

quote:

Clearly not. If the IMF was acting as lender of last resort there wouldn't be an issue of Greek banks potentially collapsing. This is a political decision.

The Greek banks are collapsing because the whole country is about to go into free fall. They have the insane idea that somehow and at sometimes their debts are all going to magically disappear and the lenders aren't going to come knocking. Currently they are only asking for the interest and at reduced rates with no increases. I truly wish I had this option on loans I have.

quote:

I am totally serious. Simply because if you look at Greek's dept-to-GDP ratio is 2010 and compare it now you see how much the Troika has really helped them

Greece took loans and loans accrue interests - that's how loans work. If Greece does not want to reform then sadly they will likely have to face their creditors on their own and without the help of Europe. If that happens Greece will need all our prayers and will likely be the recipients of massive foreign aid for decades to come,

[ 28. June 2015, 15:30: Message edited by: fletcher christian ]

Posted by Martin60 (# 368) on :

Aye AFZ. What's to be realistically done? I'm a third way man, the poor are your biggest market, liberate them, empower them WHILST enforcing a long term fiscal policy. The latter is NOT being done. Greek taxation is an absolute bloody shambles. The appeals to democracy are utterly bankrupt: "It can only exist until the majority discovers it can vote itself largess out of the public treasury." (Elmer T. Peterson in The Daily Oklahoman (9 December 1951)).

I have a lurking prejudice that this is ALL Germany's fault, as they have massive previous on this: the pretence of parity of the Ostmark with the Deutschmark, the vastly premature recognition of Slovenia and Croatia.

And I suspect that under a socialist government,
Greece is going to have a yard sale.

Posted by itsarumdo (# 18174) on :

It's interesting reading AFZ and Ricardus's posts

This also highlights the fact that The Euro is primarily a political venture rather than an economic one, and whilst Greece is presenting an economic case, Europe (and the ECB is dealing in politics.

Posted by alienfromzog (# 5327) on :

I don't know Greece well enough but from what I've read Greece have tried to enact reforms. They are clearly collecting some Tax and there are plans on the books for more in this area. The increase in the retirement age is a marker that its simply not true to say nothing has been done.

In terms of austerity as a punishment, I think the Troika do actually believe in the austerity myth but that doesn't change the fact that they are completely wrong about it.

The data also suggests that Greece has been heroic in achieving austerity so it seems to me to be rather churlish to suggest they haven't done enough when the prescription is so deeply flawed to begin with.

AFZ

Posted by fletcher christian (# 13919) on :

quote:

The data also suggests that Greece has been heroic in achieving austerity so it seems to me to be rather churlish to suggest they haven't done enough when the prescription is so deeply flawed to begin with.

Yep; they've been truly and amazingly adept at passing the austerity onto the poor.

Posted by alienfromzog (# 5327) on :

quote:
Originally posted by fletcher christian:

quote:

The data also suggests that Greece has been heroic in achieving austerity so it seems to me to be rather churlish to suggest they haven't done enough when the prescription is so deeply flawed to begin with.
Yep; they've been truly and amazingly adept at passing the austerity onto the poor.

That's virtually universal though.

AFZ

Posted by chris stiles (# 12641) on :

quote:
Originally posted by fletcher christian:
Yep; they've been truly and amazingly adept at passing the austerity onto the poor.

This isn't particularly insightful or deep. The prescriptions of the troika (cutting social spending, axing departments full of mostly low level civil servants), is obviously going to hit the poor disproportionately.

I think Syriza have been fairly open and vocal about this being an issue.

Posted by fletcher christian (# 13919) on :

Posted by AFZ:

quote:

That's virtually universal though.

It is, but in Greece it all falls solely on the poor because they are doing nothing to tax the rich, look for vat from big business and doing nothing to halt the march of the black market and those who have vast wealth who would use Greece as a haven and a playground. It suits Greece to do nothing and punish their own poor and blame someone else.

Posted by Ricardus (# 8757) on :

quote:
Originally posted by fletcher christian:

I don't disagree with you that the whole situation sucks, but it is a situation that has sucked since 2008. Since that time Greece has been given opportunity time and time again to make reforms. They didn't.

But I don't really see the link between austerity policies and tackling endemic corruption. And that doesn't seem to be the line the Troika are taking.

Syriza have done more than the last lot to tackle tax evasion. They are actually making some use of the Lagarde List, unlike whichever lot who refused to look at it on the high-minded grounds that it was obtained by theft and arrested the journalist who published it. And it's kind of hard to argue simultaneously that they should be doing more to collect taxes and that they should pare the civil service, including the tax office, down to the bone.

Having said that, if the Troika's argument was that Greece can't have any more money because Syriza should be coming down harder than they are on tax evasion, my paean of self-righteousness would probably be more muted. 'Doing better than the last lot' isn't a very high standard. However - unless I've missed something - that is not what the Troika are saying; they are saying that Greece can't have any money unless they raise VAT and cut pensions. Which seem to me irrelevant to the roots of the Greek malaise. (In fact I have a vague recollection that Syriza's original proposals did include increasing revenue by cracking down on tax evasion and the Troika rejected it because they didn't think Syriza would be able to - I might have garbled that though.)

In short: I agree with you 100% that Greece needs deep and intensive reforms; I just don't see that it needs these reforms.

(Bien-pensant liberals have always complained that the IMF thinks every single problem in the world, no matter what the circumstances, can be cured by market liberalisation, privatisation, cuts to public spending, and keeping the Reds out. It looks like they are right ...)

[ 28. June 2015, 21:39: Message edited by: Ricardus ]

Posted by alienfromzog (# 5327) on :

quote:
Originally posted by Ricardus:
In short: I agree with you 100% that Greece needs deep and intensive reforms; I just don't see that it needs these reforms.

(Bien-pensant liberals have always complained that the IMF thinks every single problem in the world, no matter what the circumstances, can be cured by market liberalisation, privatisation, cuts to public spending, and keeping the Reds out. It looks like they are right ...)

I was a little remiss above - austerity always falls most on the most vulnerable but in this specific case is was prescribed this way. Calling that Greek incompetence is simply misleading.

Precisely and when austerity makes things worse, the IMF prescribes more austerity. They have significant form in this regard.

The argument that Greece is to blame for Greece's current malaise is deeply flawed at best, but even if it wasn't, the fact that the outside powers have made things so much worse makes we intensely sympathetic to one side rather than the other.

I think the Greek government is actually being quite smart by calling a referendum; The IMF has a lot of form at over-riding democracy (especially in South America) but the EU allegedly is built on an absolute belief in defending it, so the EU is being hoisted on their on petard, and they will be shown up for what they are if the Greek people vote no.

AFZ

Posted by orfeo (# 13878) on :

quote:
Originally posted by fletcher christian:
So it begs the question; why is it that the special case should be made for Greece?

Greece shouldn't be a special case.

But if you rip off 20 people and only 1 of them decides to take you to court, that's the one that gets their money back. If you slap 20 people across the face and only 1 of you slaps you back, that doesn't mean that slapping the other 19 people was okay.

It's not about pleading a special case. It's about saying "we think your policies are wrong". If other countries thought those policies were okay, then fine and dandy, the can live with them. If other countries DID think those policies were wrong but felt powerless to say so, then that's unconscionable bullying.

It's not as if Greece objecting is without precedent. First off there's Iceland, which didn't make paying back its creditors a priority. Then there's Malaysia back in the 1997 Asian financial crisis, which refused the IMF's prescriptions and went its own way.

Posted by itsarumdo (# 18174) on :

quote:
Originally posted by alienfromzog:

quote:
Originally posted by Ricardus:
In short: I agree with you 100% that Greece needs deep and intensive reforms; I just don't see that it needs these reforms.

(Bien-pensant liberals have always complained that the IMF thinks every single problem in the world, no matter what the circumstances, can be cured by market liberalisation, privatisation, cuts to public spending, and keeping the Reds out. It looks like they are right ...)
I was a little remiss above - austerity always falls most on the most vulnerable but in this specific case is was prescribed this way. Calling that Greek incompetence is simply misleading.

Precisely and when austerity makes things worse, the IMF prescribes more austerity. They have significant form in this regard.

The argument that Greece is to blame for Greece's current malaise is deeply flawed at best, but even if it wasn't, the fact that the outside powers have made things so much worse makes we intensely sympathetic to one side rather than the other.

I think the Greek government is actually being quite smart by calling a referendum; The IMF has a lot of form at over-riding democracy (especially in South America) but the EU allegedly is built on an absolute belief in defending it, so the EU is being hoisted on their on petard, and they will be shown up for what they are if the Greek people vote no.

AFZ

I was campaigning against IMF excess in this regard back in the 1980's. Then (I'm sure not because of my efforts) eased back on austerity measures because (?) they realised they were destroying economies rather than building them. Which is one reason I find all this a bit strange - and as you say - a case of bullying. It looks more and more like everyone is frightened that the genie will be let out of the bottle. World currencies have had no basis since the Gold standard was dropped, and until a replacement is found there is a lot of bluster going on. It's not about Greece - it's about preserving some myths, which if everyone stopped believing they would see a naked emperor

Posted by Martin60 (# 368) on :

This nicely swirling nebula of greys has to get black and white. Iceland and Malaysia don't count. Ireland, Portugal, Spain, Italy are the dominoes lined up after Greece. Greece gets NO mercy. Or sympathy from the other bullied, let alone the bullies. Only if she wins. Which is a childish fantasy.

We are addicted to debt. Treasuries wave a bit of paper about and declare its worth a billion, who wants a part of it at X%, we'll justify its existence at 1+n (where n is at best a gnat's whisker above 0 and can't be, what, above 0.1666?) x X% from taxation. That's on a good day. Greece still can't do that. A Greek referendum affects that HOW?

The troika are now playing hard ball. They will not blink. Merkel is preparing to wash her hands in public. 'Democratically'.

We theoretically non-economic liberals can wring our hands all we like. How can we subvert Babylon's rapacity? This is economic warfare. The enemy's casualties are ... irrelevant. His lookout.

Syntagma Square soup kitchen anyone?

Posted by betjemaniac (# 17618) on :

did anyone hear the Syriza MEP on the Today Programme this morning upping the stakes again?

I'm sure none of this will be news to those on here who've been following the story closely, but it was still alarming to see it spelled out in as many words (assuming I heard correctly):

- as far as they're concerned it's NOT a referendum on whether Greece should be in the Euro or not
- in the event of a Yes vote the proposals on the table will be implemented
- in the event of a Yes vote it won't be Syriza doing the implementing because they will have been rejected and will go

so they've actually just turned it into a confidence vote in the government (where No is the right answer).

I'll take nothing away from their skill as politicians - this is going to be a head on collision between the Greeks' love of the Euro and their massive support for the current government.

Anyone care to put their cards on the table and call which way this is going to go?

[ 29. June 2015, 08:41: Message edited by: betjemaniac ]

Posted by mr cheesy (# 3330) on :

On a certain level, I think this is about who will be blamed for the (apparently) inevitable mess in Greece. Voting "No" will not suddenly mean that the debt will disappear or that hard times are avoided. I am no expert, but it seems to me that it is highly likely that a no vote would lead to a Greek exit and harder times in Greece outside of the Eurozone.

But the trouble is that accepting the conditions with a "Yes" do not seem to promise that the problems will go either. It is certainly true that under the conditions, life will become even more difficult in Greece, and without economic growth I cannot see how anyone is expecting the Greek economy to dig itself out of the mess.

To the Germans, it looks like they are paying either way, and that the Greeks are not prepared to make changes in their lifestyles needed to develop a sustainable economy - and that ultimately they have been living off German assistance for a very long time.

The perfect storm would be if Greece becomes a total basketcase - either within the Eurozone or with a totally devalued currency outside of it - and at the same time is forced to cope with a massive increase in immigrants from N Africa and the East.

The problem is that the EU is not designed to face this kind of problem - there is not enough central control to take over the organisation of Greece and yet too much to see a way to let Greece go alone. Allowing it to stay looks bad, but forcing it to leave looks worse - when other economies, notably Cyprus, are in a pretty bad state too. Only a couple of notches above are Spain, Italy etc.

My guess is that we have gone past the point of no return and that all bets are off with where this will end up.

Posted by lowlands_boy (# 12497) on :

Well, ignoring the referendum discussion, it's already gone the way of the Greek banks being closed all this week (and the stock exchange for at least today), with capital controls to the tune of a maximum 60 euro withdrawl from cash machines per card per day.

So I think insolvency is here.

I would still (just about) guess that there can be some accomodation made to keep the Greeks in the Euro and the EU, principally because of the threat of them taking up with Putin.

It is all just a farce really though isn't it. Sensible solutions are available if everyone can just stop waving their dicks around (metaphorically!).

Posted by Martin60 (# 368) on :

it's ...

Posted by mr cheesy (# 3330) on :

What sensible solutions, lowlands_boy?

Posted by Martin60 (# 368) on :

And Putin's going to use Piraeus as a naval base? Biiiig deal. He can help with the refugees then.

Posted by mr cheesy (# 3330) on :

I don't see what Russia gains from investing in Greece. I'd bet that they're interested in talking to keep the EU rattled, but they're more canny with their money than throwing it something with very limited returns.

Posted by Martin60 (# 368) on :

Absolutely mr cheesy. He'll send a gunboat tho'. The Rouble's stronger than the Drachma after all.

Posted by fletcher christian (# 13919) on :

Posted by Ricardus:

quote:

But I don't really see the link between austerity policies and tackling endemic corruption. And that doesn't seem to be the line the Troika are taking.

Syriza have done more than the last lot to tackle tax evasion. They are actually making some use of the Lagarde List, unlike whichever lot who refused to look at it on the high-minded grounds that it was obtained by theft and arrested the journalist who published it. And it's kind of hard to argue simultaneously that they should be doing more to collect taxes and that they should pare the civil service, including the tax office, down to the bone.

I guess I keep looking at it through the lens of my own experience in Ireland. We had a problem with corruption. We had a truly crazy amount of civil servants, all so that we could say people had employment and the government had created jobs and we did it all on credit. It amounted to nothing more than jobs for the boys. We had unchecked bonuses, unregulated banks and industry, tax cuts galore for the wealthy. I could go on and on and on. The government made appeals too nationalism, the importance of preserving our sovereignty, xenophobia about Germany wanting to dominate Europe again and how Europe was a big bully. The told us they would create jobs, they would tackle the tax issue, they would regulate the banks and all manner of promises to stay in power; but they did nothing. Then, as Europe and the IMF started to ratchet up the pressure, we began to realise that the alternative to not taking the bailout and enacting reform wasn't really all that great. We had essentially been a bankrupt country before back in the 80's - we knew only too well what it meant. The world has changed since the 80's and its capitalism is a lot less forgiving now than it was then. We voted in a new party and got with the programme. It is far from perfect and there are still issues and the poor and the wealthy have both taken the hit here, but we are getting somewhere. The alternative was just too horrible to contemplate and the attachment to being 'European' and part of a larger is strong. We also had the added benefit that we tend to have referendums for everything. We have referendums on whether the Taoiseach can wipe his own ass. The result of that was that we have had referendums on the whole processes of Europe and how it is governed leading to the rather famous moment when we rejected one of them (the Lisbon Treaty); so we know that we have bought into something to which we agreed the terms.

If we had not had that outside pressure and the variance of opinion around all the events at our disposal, I think we probably would have become a bankrupt country and descended into the same chaotic mess of corruption and black market economies that we saw signs of before. The first five years here were very, very tough - on everyone; but now we are seeing the fruits of the labours. We no longer have the hugely unwieldily civil servant workers operating on credit, we no longer have the same recklessness in the banks, or the insane house prices, or the vast tax breaks for the super rich. There is a hell of way to go and it's not perfect by any means, but the tackling of corruption in the areas of tax are showing enormous rewards here. It has not been easy and there are problems with tackling poverty, but the alternative was just too horrific to contemplate.

Posted by Orfeo:

quote:

It's not about pleading a special case. It's about saying "we think your policies are wrong". If other countries thought those policies were okay, then fine and dandy, the can live with them. If other countries DID think those policies were wrong but felt powerless to say so, then that's unconscionable bullying.

Did they not sign up to Europe? Did someone force their hand in joining? Do they not have any representation in European parliament?

Posted by Martin:

quote:

We are addicted to debt

You got it in one.

I'm not for defending Europe as a perfect institution - it's not, but I do like its ideals and what it represents and I do think that is worth preserving. I think they also know that the alternative for Greece has a strong likelihood of being very, very bad for Greece. I'm not for punishing Greece either; in fact I feel deeply, deeply sorry for them. I know from experience in Ireland of the pressure brought to bear from all angles and from those who for whatever reason would like to see either the Euro collapse or the whole European ideal collapse. I know the confusion that causes and the straw man arguments and the unsettling nature of it all. When it all actually happened it was fairly smooth and there have been times since when I have positively rejoiced at the tackling of corruption. All the doom mongerers were proved wrong and it is painfully apparent now that we would truly have been up shit creek without a paddle and nobody in the world would have given a toss or come to our aid because the global economies primary and sole aim is in making money.

Posted by lowlands_boy (# 12497) on :

quote:
Originally posted by mr cheesy:
What sensible solutions, lowlands_boy?

Well, I think a number of them have been highlited in this thread, by other posters who probably know more about it than me.

As some have pointed out, the can has been getting kicked down the road in Greece's case for quite a while, but the most immediate sabre rattling has been over the relatively paltry repayment due to the IMF of less than 2 billion euro, and more to the point, whether they could be lent more money to make that repayment.

It seems to be (as a computer programmer, rather than an economist), that once you are arguing over borrowing more money to repay what you already owe, it's all gone rather wrong. Of course, we in the UK refinance our own debts all the time as government bonds mature, but we have inflation to erode them, and have our own currency that we can at least theoretically impact the value of.

It seems to me that less austerity could lead to more economic growth (as argued by others on this thread), and that would lead to more ability by Greece to repay. That seems to have been offered by the Greeks relatively recently, when everyone ended up arguing about further austerity to the tune of just 0.5% of Greek GDP.

So all these issues seem to arise as short term disputes when it's time to kick the can again, with no long term view of what should happen, and how Greece could/should fit in to the long term vision of what the EU and the Euro are about.

Now, in the longer term, Greece needs to decide whether they want to be in the EU and the Euro or not. Here in the UK we are supposed to be getting offered that choice in a couple of years time. I'll be voting to stay in the EU then as the benefits are clear enough to me.

But what do the Greeks think? Is someone able to clearly articulate to them why they should stay or go? More fundamentally, what has actually changed for them since they joined? Do they really have a monster "black economy" as L'Organist's friend has alluded to?

How has the actual man on the street been affected? If they can't discern anything positive after all this time that's quite telling. What do they actually want from their lives, and can the EU and the Euro contribute towards that? That's the sort of debate we are supposed to be having, and it seems that the "home of democracy" should be able to have it to.

Is anyone in Greece willing and able to say "OK, it's a big mess but if we want it to better, we need to do X, Y and Z" ? If there was, then they might actually be able to invite in some outside help to achieve it. You know, genuine co-operation. There seemed to be plenty of outside help on offer when they wanted to join the Euro didn't there?

So, I think a bit less short termism and a bit more long termism would help, with some clear vision of what it's all about. I might have missed Merkel or someone else of stature giving a rousing speech about why all this is good for Greece, but if not, then that's quite telling.

Posted by fletcher christian (# 13919) on :

Posted by LB:

quote:

So, I think a bit less short termism and a bit more long termism would help, with some clear vision of what it's all about. I might have missed Merkel or someone else of stature giving a rousing speech about why all this is good for Greece, but if not, then that's quite telling.

I think this is very true and it certainly what helped negotiate things for Ireland. On the other hand I doubt that rousing speeches from European bods at central levels would go down too well to be honest. You might get accusation that Merkel et al would be acting like a president of a United States of Europe and over riding the sovereignty of a state. The economic pressures have been the weapon of choice up to now. I would like to think there is a better way, I'm just not sure what it is, but currently it's a little too close to sanctions for my liking.

Posted by orfeo (# 13878) on :

quote:
Originally posted by mr cheesy:
The problem is that the EU is not designed to face this kind of problem - there is not enough central control to take over the organisation of Greece and yet too much to see a way to let Greece go alone.

I tend to agree. I am actually becoming a little bit of a Eurosceptic at the moment, not because I think that there's something inherently bad about the EU but because I think there are real difficulties in having an international organisation that tries to bind its constituent nations to the degree that the EU does.

Greece is still, by most descriptions, a sovereign country (as are all the other countries of the EU). They have an elected government. That government ran on certain platforms. It got a mandate to act in certain ways (as much as I don't like the whole concept of a "mandate", there's probably a stronger case for that notion with this particular Greek election than with most elections).

And yet, by being part of the EU they are severely hamstrung from acting on their policies. Whether I agree or disagree with those policies, I see this as a problem.

The EU does have its own Parliament. But the EU still doesn't seem to act like a federal state, not as I recognise a federal state (I live in one). It is this weird cross between an international organisation and a federation, and being neither flesh nor fowl gives rise to these sorts of problems.

Posted by itsarumdo (# 18174) on :

One gets the impression of a lack of meeting of minds.

Here we have Greece, which considers itself to be the birthplace of democracy - whose Minister for Finance is told by the collective heads of the EU lined up in front of him that a Referendum is not an option because "this issue is too complex and ordinary people are not able (unlike ourselves) to understand the issues".

Get that. If Westminster had made that kind of statement before the Scottish referendum, we would be looking for a different name ... Lesser Brittania, or the Not-United Kingdom.

And if Syriza has any integrity they are more or less forced into a referendim because they were voted in an anti-austerity mandate and Brussels is forcing them into either Austerity or Nothing.

If Greece leaves the Euro, I can't say that it will be completely the fault of Greek politics.

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by orfeo:

quote:
Originally posted by mr cheesy:
The problem is that the EU is not designed to face this kind of problem - there is not enough central control to take over the organisation of Greece and yet too much to see a way to let Greece go alone.
I tend to agree. I am actually becoming a little bit of a Eurosceptic at the moment, not because I think that there's something inherently bad about the EU but because I think there are real difficulties in having an international organisation that tries to bind its constituent nations to the degree that the EU does.

Greece is still, by most descriptions, a sovereign country (as are all the other countries of the EU). They have an elected government. That government ran on certain platforms. It got a mandate to act in certain ways (as much as I don't like the whole concept of a "mandate", there's probably a stronger case for that notion with this particular Greek election than with most elections).

And yet, by being part of the EU they are severely hamstrung from acting on their policies. Whether I agree or disagree with those policies, I see this as a problem.

The EU does have its own Parliament. But the EU still doesn't seem to act like a federal state, not as I recognise a federal state (I live in one). It is this weird cross between an international organisation and a federation, and being neither flesh nor fowl gives rise to these sorts of problems.

Which is exactly how I've felt about it for as long as I've been old enough to understand how it works (which was about the mid 1990s I suppose).

I've got no time for the Tory headbangers, no time whatsoever for UKIP, and in general think the European unity is a good and noble idea. But even when all these problems were just theoretical things that could happen, there was no one that could ever give a more sensible answer than "it'll be ok" or " it won't be a problem."

Of course now it is a problem, and still no-one's got a clue. The EEC was awesome. The EU, and the Euro (without any other integration), not so much. I'll probably vote In when we get a referendum in the UK, but Out seems like a more and more sensible idea every time the drinking and brewery organisational interface is so visibly shown to be misaligned.

[ 29. June 2015, 10:47: Message edited by: betjemaniac ]

Posted by itsarumdo (# 18174) on :

Care to form a political party? I'll vote for that.

Posted by lowlands_boy (# 12497) on :

quote:
Originally posted by itsarumdo:
Care to form a political party? I'll vote for that.

Sorry - not sure who you mean, but I'll happily assume it's not me. In the mean time, Junker has made it quite clear whose fault he thinks it is

EU chief feels betrayed

Posted by itsarumdo (# 18174) on :

Yes, well - as a statement from a statesman, that translates as "It isn't my fault, mum".

How about we have a rule that it should be illegal to occupy a position of power in a political elite for more than (say) 8 years at a time, and in order to be able to return, one has to spend at least 6 months working in a soup kitchen.

Getting worried - I'm starting to have a slight flavour of Chaiorman Mao here. OK - I can see maybe where he was coning from - it would have been better without the purges and imprisonments, but faced with this, I definitely have a greater sympathy for Chairman Mao.

Posted by betjemaniac (# 17618) on :

quote:
Originally posted by itsarumdo:
Yes, well - as a statement from a statesman, that translates as "It isn't my fault, mum".

How about we have a rule that it should be illegal to occupy a position of power in a political elite for more than (say) 8 years at a time, and in order to be able to return, one has to spend at least 6 months working in a soup kitchen.

Getting worried - I'm starting to have a slight flavour of Chaiorman Mao here. OK - I can see maybe where he was coning from - it would have been better without the purges and imprisonments, but faced with this, I definitely have a greater sympathy for Chairman Mao.

although of course he was in charge for more than 8 years without running a soup kitchen...
[Biased]

Posted by lowlands_boy (# 12497) on :

quote:
Originally posted by itsarumdo:
Yes, well - as a statement from a statesman, that translates as "It isn't my fault, mum".

How about we have a rule that it should be illegal to occupy a position of power in a political elite for more than (say) 8 years at a time, and in order to be able to return, one has to spend at least 6 months working in a soup kitchen.

Getting worried - I'm starting to have a slight flavour of Chaiorman Mao here. OK - I can see maybe where he was coning from - it would have been better without the purges and imprisonments, but faced with this, I definitely have a greater sympathy for Chairman Mao.

Well, as a Methodist I'd have to say 6 years of course. No return unless... Oh no, wait a minute, there's never a queue for the job is there, so you can just carry on.

Posted by orfeo (# 13878) on :

This article posted today has a similar flavour to what we've been talking about in recent posts, about how this mess really results from the structure of the EU.

Posted by lowlands_boy (# 12497) on :

Meanwhile, it's another deadline day, this time for the IMF repayment.

This BBC article has some interesting points about Chinese interest in the goings on.

Posted by Martin60 (# 368) on :

quote:
Originally posted by orfeo:
This article posted today has a similar flavour to what we've been talking about in recent posts, about how this mess really results from the structure of the EU.

I mean, well, duhhhh. Currency union means yo sovereignty don't mean diddly-squat. Fancy that!

Posted by Crœsos (# 238) on :

quote:
Originally posted by orfeo:
This article posted today has a similar flavour to what we've been talking about in recent posts, about how this mess really results from the structure of the EU.

A ship-based discussion of related points from nearly three years ago can be found here.

Posted by itsarumdo (# 18174) on :

The necessity to have floating values for local monetary systems (amd what went wrong when this was not available) was recognised in Mediaeval times - I just DO NOT get it that some suppposedly intelligent people in charge of countries and banks thought they could rewrite the textbooks by ignoring them.

I'm just glad we had such an unassailable emotional tie to the £ that the Euro never had a chance.

Posted by L'organist (# 17338) on :

All the news reports today have in them somewhere the line that the Greek delay in repayment of the IMF loans is "The first time a developed economy has defaulted...".

Which just goes to show that people - journos, IMF, ECB et al - still don't get it: Greece doesn't have a developed economy, which is part of the reason the shit hit the fan so fast.

Because of Greece being, more or less, under Tourkokratia (Ottoman or Turkish rule) until 1821 Greece developed very differently from the other Mediterranean countries in the EU, and the difference in religion only highlighted the difference - plus the long-standing hostility over what the Greeks saw as the abandonment of them by the Catholic countries when Constantinople asked for help.

Whatever they may like to think, Greece has far more in common with the near east than western Europe, and people like Juncker and Merkel should try to get their heads round that.

Posted by John Holding (# 158) on :

I fully believe that more austerity will just make matters worse in Greece. Austerity won't begin to touch the endemic corruption and widespread disregard for anything relating to normal competent administration and government which is the real problem, it seems to me. Why the rest of europe isn't engaging with that is a mystery, unless the governments of some or many of europe's countries feel themselves to be in glass houses on this issue and so don't want to throw stones.

I also take l'Organiste's point that Greece isn't really a european country. I might ask her, then about Macedonia, Albania and most of the rest of the Balkans, though that's not relevant in a discussion about Greece.

Her criticism of Juncker and the rest is well made, it seems to me...and yet.... Greece lied, cheated and stole in its anxiety to get into the European project, both the community and the currency. Europe closed its eyes and its ears and held its nose in accepting Greece's membership. Admitting it was clearly a mistake.

It's all very well, and right, to criticise the masters (and mistress) of europe. What's Greece going to do now to fix its own problems, and those of the European community?

John

Posted by Crœsos (# 238) on :

quote:
Originally posted by L'organist:
All the news reports today have in them somewhere the line that the Greek delay in repayment of the IMF loans is "The first time a developed economy has defaulted...".

It takes a very special definition of "developed" to exclude Germany in 1933 from the list of developed economies.

Posted by Stetson (# 9597) on :

quote:
Originally posted by Crœsos:

quote:
Originally posted by L'organist:
All the news reports today have in them somewhere the line that the Greek delay in repayment of the IMF loans is "The first time a developed economy has defaulted...".
It takes a very special definition of "developed" to exclude Germany in 1933 from the list of developed economies.

Well, if they mean "defaulted on an IMF loan", the IMF didn't exist in 1933.

Posted by itsarumdo (# 18174) on :

Good discussion on this in The Moral Maze, R4 this evening - even Melanie Phillips was aware of the ambiguities and contradictions.

Posted by alienfromzog (# 5327) on :

Simon Wren-Lewis' assessment

AFZ

Posted by Alan Cresswell (# 31) on :

The fact (if it is indeed verified) stated in that article that the pre-crisis Greek government secretly borrowed from banks is also a reflection on the banks themselves. What sort of business were they running, lending money under the counter to Greece? To me that reads as just another part of the general low levels of competence shown by banks seeking to out-compete their rivals by whatever means necessary - which included lending to a lot of private individuals through mortgages and unsecured loans without taking enough concern over their ability to repay, and all the various strange markets they were involved in. So, it seems, the Greek people are also paying for some of the financial mismanagement of banks.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by Alan Cresswell:
The fact (if it is indeed verified) stated in that article that the pre-crisis Greek government secretly borrowed from banks is also a reflection on the banks themselves. What sort of business were they running, lending money under the counter to Greece? To me that reads as just another part of the general low levels of competence shown by banks seeking to out-compete their rivals by whatever means necessary.

In some cases it was down to active collusion rather than incompetence:

http://wallstreetonparade.com/2015/06/goldman-sachs-doesnt-have-clean-hands-in-greece-crisis/

Links to various news articles, books, TV programmes on the topic there.

A similar thing happened in the private sector.

http://www.vanityfair.com/news/2010/10/greeks-bearing-bonds-201010

(though bear in mind that every VF article reads like a frustrated great American novel)

[ 02. July 2015, 10:39: Message edited by: chris stiles ]

Posted by L'organist (# 17338) on :

Interesting article in The Times today pointing out how little the likes of Merkel, Hollande, Juncker, etc 'get it' when it comes to Greece - indeed, it lambasts them for their smugness and hypocrisy when they attack Tsipras and his government for refusing to impose even more austerity measures.

The most interesting this it highlights is the complete absence of a genuine, professional civil service, capable of and being allowed to govern Greece.

But if you wanted an illustration of how this impacted things, you didn't even need to look at the long-standing tradition of fakelaki (brown envelopes), you just needed to look at how they dealt with one of the many problems that beset Athens before the Olympics were held there in 2004.

For years teams from the IOC had worried about the number of stray dogs around the olympic sites - not just because of the look of it but because of the almost certainty that some, at least, would be carrying rabies. But, this being Greece, nothing was done other than promises were made which no one had either the intention or the means of carrying out. Then 6 weeks before the games were due to begin, the national government and City of Athens authorities 'dealt' with the problem. After a notice was put in local newspapers to warn dog owners, all local parks, wasteland, beaches, etc, were spiked with poisoned meat; to back that up, teams of gunmen (not marksmen but national service army personnel) were on the streets at night for 2 weeks shooting every dog they saw. I visited at this time and it was like being in a war zone - but, to Greek eyes, it was a success and got the job done.

THAT is what the troika, etc, are up against: a completely different mindset.

Posted by Crœsos (# 238) on :

quote:
Originally posted by L'organist:
For years teams from the IOC had worried about the number of stray dogs around the olympic sites - not just because of the look of it but because of the almost certainty that some, at least, would be carrying rabies. But, this being Greece, nothing was done other than promises were made which no one had either the intention or the means of carrying out. Then 6 weeks before the games were due to begin, the national government and City of Athens authorities 'dealt' with the problem. After a notice was put in local newspapers to warn dog owners, all local parks, wasteland, beaches, etc, were spiked with poisoned meat; to back that up, teams of gunmen (not marksmen but national service army personnel) were on the streets at night for 2 weeks shooting every dog they saw. I visited at this time and it was like being in a war zone - but, to Greek eyes, it was a success and got the job done.

THAT is what the troika, etc, are up against: a completely different mindset.

Yes, only complete savages would act in such a way.

quote:
Diego Garcia was first settled in the late 18th century. At least 2,000 people lived there: a gentle creole nation with thriving villages, a school, a hospital, a church, a prison, a railway, docks, a copra plantation. Watching a film shot by missionaries in the 1960s, I can understand why every Chagos islander I have met calls it paradise; there is a grainy sequence where the islanders' beloved dogs are swimming in the sheltered, palm-fringed lagoon, catching fish.

<snip>

As the Americans began to arrive and build the base, Sir Bruce Greatbatch, the governor of the Seychelles, who had been put in charge of the "sanitising", ordered all the pet dogs on Diego Garcia to be killed. Almost 1,000 pets were rounded up and gassed, using the exhaust fumes from American military vehicles. "They put the dogs in a furnace where the people worked," says Lizette Tallatte, now in her 60s," ... and when their dogs were taken away in front of them, our children screamed and cried."

Yes. A completely different mindset!

Posted by Martin60 (# 368) on :

Muh Lord Crœsos - chalk and oranges.

Posted by Enoch (# 14322) on :

Tangent alert
Crœsos, I'd agree with you that the records of the governments of both the UK and US in respect of Diego Garcia are shameful, but that's because I've already heard of the case. Unless one has prior knowledge of the story, citing an article by someone who over here is well known for being predictably partisan in rather an uncritical way, would, I regret to say, normally be counter-persuasive.

Posted by Enoch (# 14322) on :

Greece has answered 'No'. We prayed at church yesterday for Greece. Obviously we should go on doing so.
[Votive]

What do Shipmates think is going to happen next?

Where does this leave ordinary people in Greece, particularly poor people?

What is your medium of exchange if there isn't any money?

Posted by Karl: Liberal Backslider (# 76) on :

quote:
Originally posted by itsarumdo:
Good discussion on this in The Moral Maze, R4 this evening - even Melanie Phillips was aware of the ambiguities and contradictions.

I wonder who she is and what she's done with the real Mad Mel?

Posted by lowlands_boy (# 12497) on :

quote:
Originally posted by Enoch:
Greece has answered 'No'. We prayed at church yesterday for Greece. Obviously we should go on doing so.

What do Shipmates think is going to happen next?

Where does this leave ordinary people in Greece, particularly poor people?

What is your medium of exchange if there isn't any money?

The Greek PM has cleverly sacrificed the finance minister. I think that's just a game - he'll no doubt still be in the background and could make a return. He's had the push because the other European players apparently didn't like him too much - doubtless 'cos he knew what he was on about. So now the PM can say "look, I've sacked him, now let's do a deal".

I really wouldn't like to guess which was it'll go though - it will cost a huge amount to do a debt write off - both in the amount of Euros, and in the amount of political consequence for places like Ireland that never got their own write off.

But it'll also cost a fortune to cut Greece adrift back to the Drachma - nobody will want to accept that internationally, so they'll need some sort of parachute payment in Euros to keep them going for a while - and therefore I think it's more likely that somehow a way will be found to keep them in.

As for your ordinary man in the street, I guess you go back to bartering... Although that's not really going to work for anything sophisticated like medcine I suppose.

Posted by L'organist (# 17338) on :

What do I think will happen next? Good question.

The result of the referendum has left the EU and the IMF with egg all over their faces, for several reasons, not the least of which is that the petulance of those two institutions is on display for the whole world to see.

The EU and IMF also have some explaining to do about why they deride the decisions taken by the Tsipras government. Quite apart from anything else, you have a Greek cabinet which has more economics graduates than any other comparable institution in the world, plus you have a number of people who are actually pro-european, plus people with expertise and a good track record of fighting corruption and graft.

The first question that Tsipras and his cabinet should be asking, very publicly, is just how much profit the IMF has already made on the loans it has made to Greece - and with a supplementary question as to why the IMF (under the leadership of two lawyers, Strauss-Kahn and Lagarde) decided to break its own rules and make loans to Greece. Indeed, the IMF approached Greece, not the other way round.

Then they should highlight that the austerity measures undertaken so far, all of which were approved by (and sometimes designed by) the EU have resulted in rocketing unemployment and the near destruction of the Greek economy. What does the EU and its negotiators - a Scientist (Merkel), Geographer (Sapin), agricultural economist (Dijsselbloem), economist (Draghi of the ECB) and lawyer-politician (Juncker) - propose the Greeks should do?

For 40 years the EU colluded with corrupt politicians in Athens and turned a blind-eye to massive state incompetence, fraud and greed. It knowingly welcomed into the Eurozone and country which not only met none of the economic criteria for membership but which had by then been shown to be an economic disaster waiting to happen. The ECB approved loans to Greek institutions that could never have repaid them, ignored the fact that now even lip service was paid to how they should be financed, and when initial difficulties arose lent more money. Then the EU approached the IMF, knowing that Greece was a basket case in dire straits.

Greece needs the slate to be wiped clean so that a fresh start can be made. This could be done at a stroke by the simple expedient of saying that the amount owed to the ECB and IMF will be written down as the final settlement of the contentious post WWII reparations.

A new Greek currency should be founded - either a new Drachma or a Greek Euro, with a normal floating exchange rate against the Euro.

The Greek relationship with the rest of the EU should be on the same basis as, say, Switzerland, with the possibility of greater integration at a later stage if both sides want it.

Posted by Doublethink. (# 1984) on :

It seems to me that Tsipras is a canny negotiator and I think his primary goal was always the debt restructure. That's entirely rational, and I think he is going to get it - regardless of whether they stay in the euro or not.

The Greek government position is basically right, which is that their economy will never grow enough to pay off the debt under the conditions imposed. There are only two logical solutions either you change the conditions to allow more growth, or you default on the debt.

No matter what you think about how they got into this position, that is the current situation. He is banking on the creditors wanting some of their money back, as opposed to bugger all. Tsipras has also created wiggle room for the creditors to save face, which is wise, in offering some change to pensions and ditching the finance minister.

[ 06. July 2015, 16:03: Message edited by: Doublethink. ]

Posted by quetzalcoatl (# 16740) on :

Yes, I think they will get some kind of restructuring, as the alternative is presumably leaving the euro, which seems to freak out Merkel et. al. I suppose it would be a big gamble for the Greeks.

Posted by Beeswax Altar (# 11644) on :

Maybe, the Greek gamble works out for them. On the other hand, Greece isn't the only democracy in Europe. Why believe Greece will be the last nation to demand an end to austerity? Spanish elections are happening this fall. Why believe German voters will not demand the hammer be dropped on Greece?
How is it that Germany lost two world wars and now virtually controls Europe? Yeah, I would have voted No too.

Posted by Doublethink. (# 1984) on :

I think the corruption argument re Greece is a little shaky.

There is a lot more obvious bribery and tax evasion by individuals, but, how much has the libor fraud cost the uk government or the massive corporate tax avoidance we have seen over the last few years ?

Then there are things like the massive undervaluing of assets sold by the UK state (e.g. The post office), the ppi scandals, pension raids, mortgage mis selling etc etc

I think the the corruption is just differently distributed. The current massive land grabs and stich-ups over affordable housing are also effectively costing the public purse hundreds of millions of pounds.

Posted by L'organist (# 17338) on :

But Tsipras hasn't offered to change anything to do with the pension age because that reform was already in place.

In fact, if you look at the biggest moans cited by some of the other EU finance ministers, you find that Greece has already brought in changes to deal with them under previous governments, and that neither Tsipras nor Varoufakis has suggested reneging on the change.

The more you look at it, the more it becomes clear that the EU, and in particular the unelected mob under Juncker, don't approve of Tsipras and his coalition and that they've done everything to try to force them into a situation where the Syriza government falls. What has just happened is that Tsipras called their bluff and they lost.

Similarly, Tsipras hasn't sacked Varoufakis, he has stood down because Juncker and Dijsselbloem made it very clear they refused to talk to him. Yet another case of the EU, or people at its head, not accepting valid, democratic decisions on the part of it member countries - see past referenda in Ireland, France and the Netherlands that have been re-run because they didn't produce the "correct" decision.

Word in Athens now is that Tsipras is talking to the heads of Greece's other political parties with a view to having in his cabinet people from even more parts of the Greek political spectrum. If he can pull that off, it really will leave the EU with a massive headache because they'll be no body in Greece they can either bully or hold out as an alternative.

Posted by Mere Nick (# 11827) on :

Maybe Greece will become a large Monaco or Grand Cayman and a host to a small Russian military base. Just spit ballin'.

Posted by Doublethink. (# 1984) on :

[crosspost]

He is an extremely smart man, and I think he was who Greece needed at this time.

[ 06. July 2015, 16:36: Message edited by: Doublethink. ]

Posted by L'organist (# 17338) on :

posted by Beeswax Altar

quote:
How is it that Germany lost two world wars and now virtually controls Europe?

Look no further than the 1953 London conference which effectively wrote off 50% of Germany's massive post-war debts to give them a clean slate.

Other European countries (including Greece) were persuaded to forego reparations for the destruction of their economies by the Nazis by the US, which used blatant strong-arm tactics to get their own way in building up West Germany as a bulwark against the Warsaw Pact countries and Soviet Russia.

The post-war German economic 'miracle' owes an enormous debt to the refounding of their automotive industry, partly done under the leadership of a British army officer, and the lack of any effort being made to claw back from German industries the money they'd made on the backs of their wartime slave labour force.

Plus, of course, there was plenty of money to invest in German industry coming from Swiss banks, whence it had been sent having been stolen from European jewry who were (conveniently) not around to fight for their economic rights, having disappeared in smoke up the chimneys of the death camps.

Posted by Doublethink. (# 1984) on :

[crosspost again]

quote:
Originally posted by Beeswax Altar:
Maybe, the Greek gamble works out for them. On the other hand, Greece isn't the only democracy in Europe. Why believe Greece will be the last nation to demand an end to austerity? Spanish elections are happening this fall. Why believe German voters will not demand the hammer be dropped on Greece?
How is it that Germany lost two world wars and now virtually controls Europe? Yeah, I would have voted No too.

Wasn't it Italy, Greece and Spain who offered a fairly generous bailout to Germany after WWII - perhaps Germany/Europe should give them now the terms Germany was given then ?

What strikes as particularly stupid is loaning money from an institution to papy interest on the capital borrowed from that same instituion - surely it is better in that situation to cut the rate of interest on the capital, or its rate of repayment ? I believe that is what the Greek government wants to do, and it makes more sense to me.

[ 06. July 2015, 16:45: Message edited by: Doublethink. ]

Posted by RuthW (# 13) on :

quote:
Originally posted by Beeswax Altar:
How is it that Germany lost two world wars and now virtually controls Europe?

After WWI, Germany's debt was not forgiven, their economy went to hell in a handbasket, and they got behind Hitler to fight WWII. After WWII, they got the Marshall Plan, their debt was forgiven, and they became an economic powerhouse. Thomas Piketty has slammed Germany for its hypocrisy in an interview given to a German-language newspaper; if I can find the English translation I read this morning I'll post a link.

ETA: The translation on Medium.com has been taken down pending working out copyright issues.

[ 06. July 2015, 16:49: Message edited by: RuthW ]

Posted by Doublethink. (# 1984) on :

That of course is the non-economic argument for dealing better with Greece, deprivation drives crime and extremism - absolutely the last thing we need now is more terrorist movements, race supremicists and organised crime.

(Hmm thinks a fellow far away: I am skint, we have a coast line - I could build a boat, I am sure Germany needs more people ...)

Posted by alienfromzog (# 5327) on :

quote:
Originally posted by Beeswax Altar:
Maybe, the Greek gamble works out for them. On the other hand, Greece isn't the only democracy in Europe. Why believe Greece will be the last nation to demand an end to austerity? Spanish elections are happening this fall. Why believe German voters will not demand the hammer be dropped on Greece?
How is it that Germany lost two world wars and now virtually controls Europe? Yeah, I would have voted No too.

This is a valid point - the German voters have been sold a lie - i.e. that the right thing to do is force austerity on Greece. I would argue quite strongly why that's far too simplistic and morally wrong but all that's irrelevant. In the final analysis the Troika's position is untenable as it doesn't work.

I think the Greek government did very well by taking it to their people, as it makes it impossible for them to back down - and now the Troika must know this too and will be forced to find a way to save face but allow the Greek economy to grow.

It was a also a very brave thing to do. Greece has a lot to lose. The other side have very little to lose - at least initially. In the longer term the worry about Spain, Italy Portugal and Ireland needs sorting.

What is unconscionable is the ECB not acting as lender of last resort - which is their job. Thereby creating the current banking (nearly-)crisis. It is difficult to see that action as anything other than a deliberate ploy to try and force the Greeks into conceding.

One final thought - you do have to love the irony. The only economist in the group of financial ministers won the argument and resigned because the others couldn't cope with him. I would have loved to be a fly on the wall when he flew to London to be lectured at (by all accounts) by the idiot Osborne. However, as mentioned above, I also think that a canny move.

The short term danger of Greek exit and immediate crisis remains. The Troika have to find a way to back down enough to keep Greece in. If they don't Greece may have a horrible time but in the long term will be much better off and the EU's reputational damage will be huge. The alternative is painful for many in the EU, especially Merkel but has the key advantage of being workable.

We shall see.

AFZ

Posted by itsarumdo (# 18174) on :

Interesting comment by a Greek minister on R4 today - he said that the European Bank's job is to assist with liquidity, and whereas it could and should have done so at the end of last week, it didn't. Which is why the ex Finince minister called the EU "terrorists" - they were deliberately causing a panic and potential harm to Greece's economy in the hope of changing Greek internal politics. And if you think that's a distortion of the facts, the last time that this happened to Greece (yes - this isn't the first) was just before their last election. Cand you imagine the ECB refusing any other country Liquidity?

Posted by Crœsos (# 238) on :

Here is a fairly good analysis on how the EU got here. An excerpt:

quote:
It is difficult to overstate how deeply Europe’s leaders betrayed the ideals of European integration in their handing of the Greek crisis. The first and most fundamental goal of European integration was to blur the lines of national feeling and interest through commerce and interdependence, in order to prevent the fractures along ethnonational lines that made a charnel house of the continent, twice. That is the first thing, the main rule, that anyone who claims to represent the European project must abide: We solve problems as Europeans together, not as nations in conflict. Note that in the tale as told so far, there really was no meaningful national dimension. Regulatory mistakes and agency issues within banks encouraged poor credit decisions. Spanish banks lent into overpriced real estate, and German banks lent to a state they knew to be weak. Current account imbalances within the Eurozone — persistent and unlikely to reverse without policy attention — implied as a matter of arithmetic that there would be loan flows on a scale that might encourage a certain indifference to credit quality. These were European problems, not national problems. But they were European problems that festered while the continent’s leaders gloated and took credit for a phantom prosperity. When the levee broke, instead of acknowledging errors and working to address them as a community, Europe’s elites — its politicians and civil servants, its bankers and financiers — deflected the blame in the worst possible way. They turned a systemic problem of financial architecture into a dispute between European nations. They brought back the very ghosts their predecessors spent half a century trying to dispell. Shame. Shame. Shame. Shame.

The whole thing is an interesting mix of economics and analysis of what this means for the EU as a whole.

Posted by L'organist (# 17338) on :

Pablo Iglesias, the leader of Spain's Podemos, is reported as saying that he expects a "sensible" solution to the Greece-EU difficulty within days. It is also reported that he has had meetings with Euclid Tsakalotos, who has just been appointed Greek Finance Minister in succession to Varoufakis.

The Schauble, Merkel, etc, must be tearing their hair out: Greece having accepted the resignation of one internationally respected economist as Finance Minister has now appointed another who has, if anything, an even higher profile and is regarded even more highly by his peers.

And, as has been pointed out above: how does the ECB explain denying liquidity to one of its member banks?

The EU and ECB have been caught out interfering in the internal politics of a member state - again - only this time the member state isn't going to lie down and take it.

Over to you, Mrs Merkel...

Posted by Doublethink. (# 1984) on :

I think the politicians think its cheating to appoint people with the expertise to analyse their portfolio.

Imagine having a negotiator who has expertise in how people make decisions, a finance minister with training in economics, what next a sociologist in charge of the welfare state !?!

Posted by Alan Cresswell (# 31) on :

There is, of course, no reason why any government minister needs to be an expert in the part of government they have responsibility for. Providing they have qualified advisers who they listen to.

Posted by Doublethink. (# 1984) on :

Indeed, but, politicians are often not good at listening.

Posted by Ricardus (# 8757) on :

quote:
Originally posted by Alan Cresswell:
There is, of course, no reason why any government minister needs to be an expert in the part of government they have responsibility for. Providing they have qualified advisers who they listen to.

This works in a democracy. The elected ministers say what outcome they want as the people's representatives, and the civil servants work out how to do it. (In theory at least.)

In the current situation it doesn't work at all. Dijsselbloem et al weren't elected to represent the people of the Eurozone, but they aren't specialists either. Like orfeo said earlier they are neither fish nor fowl - neither democrats nor technocrats.

Posted by Ricardus (# 8757) on :

quote:
Originally posted by L'organist:

The first question that Tsipras and his cabinet should be asking, very publicly, is just how much profit the IMF has already made on the loans it has made to Greece - and with a supplementary question as to why the IMF (under the leadership of two lawyers, Strauss-Kahn and Lagarde) decided to break its own rules and make loans to Greece. Indeed, the IMF approached Greece, not the other way round.

Interesting analysis by the Daily Telegraph - not a paper that is known for opposition to austerity or support for the radical left.

Lagarde in its view is not interested in the Greek economy, only in protecting the euro. IMF contributors across the world are paying to paper over the crevices in a nonsensical project by the richest economies in the world.

Posted by L'organist (# 17338) on :

What we have with the Greek debt is an eternal triangle of ECB, EU Commission and IMF.

The first monies were lent by the Commission; once it became clear that the Greek government was unable to pay them, they strong-armed the ECB into making loans to the Greeks so they could at least pay the interest to the Commission.

The first time there were whisperings about the IMF was when DSK was in charge, but that was all it was; and of course Christine Lagarde knew of them because she was French minister of finance at the time so would have been involved in economic talks at EU level about Greece. Then DSK leaves the IMF, Christine Lagarde takes over and Greece suddenly gets IMF money.

So the triangle is complete: EU Commission money is repaid by loans from the ECB which, in turn, have their interest paid by money from the IMF.

Heads should roll over this nonsense and those heads should notbe Greek - rather they should be French, Luxmebourgeois and Italian.

I only hope people in the UK are looking at what is going on, seeing the role being played by the EU Commission and committing it to memory against the time we have our EU referendum.

Posted by Doublethink. (# 1984) on :

What I don't understand is why the Greek government is not allowed, as a Euro country, to print more Euros and devalue the currency somewhat.

Posted by Enoch (# 14322) on :

quote:
Originally posted by Doublethink.:
What I don't understand is why the Greek government is not allowed, as a Euro country, to print more Euros and devalue the currency somewhat.

I assume that only the European Central Bank can decide how many notes it prints. If countries, or anyone else, make paper or balance payments on the credit of non-existent Euros, then those payments aren't backed. If someone calls them in and the entity that issued the credits is a state, then it's bankrupt in the same way as a private individual or company is.

That seems to me to be the self-evident consequence of having a common currency. States forgo the safety valve of being able to inflate themselves out of a hole. Whether one believes this is a terrible thing, fool's liquor, or a discipline to which all states should be subject depends on how much inflation you have experienced.

Logic, though, would say that with a currency that is not tied to individual states, it should be possible for a state to go bust without taking the banks with it, since they are circulating money which is not linked to the state's credit. That doesn't seem to be happening though at the moment.

Logic would also say that if the European Central Bank has any obligations at all as a lender of last resort, that is part of its function to back the Euro, not the Greek state.

Incidentally, in the USA, what happens if a state's liabilities vastly exceed its assets and its ability to raise taxes?

Posted by Doublethink. (# 1984) on :

But who is the ECB answerable to ? They shouldn't be taking political decisions.

Posted by L'organist (# 17338) on :

The reason Greece can't print more Euros is because the printing of the currency is shared out around the various countries. Since 2011 the larger denomination notes have only been printed in either Austria or Germany; Greece prints either 5, 10 or (rarely) 20 euro notes.

Moreover, although some notes are nominally printed (or issued) by National Central Banks, that doesn't necessarily mean they're printed in that country. For example, a large number of Euro notes are printed at the De La Rue works in Gateshead, as well as the Bank of England printing works in Loughton: these two produce notes on behalf of several countries, including Finland and Portugal. The Netherlands national bank printing works produces notes for more than 10 other Eurozone countries.

This system has evolved partly because of security, partly because the production of plates and printing of hard-to-counterfeit banknotes is a skilled job that isn't necessarily within the capability of some countries - the machinery is expensive and can't be used for anything else.

Even when Greece had the drachma it only ever printed its own currency from 1949 to 2001, when it changed over to the Euro.

The National Bank of Greece printing works has plates to produce 5 and 10 Euro notes - the 20 Euro notes that are 'issued' by Greece are in fact printed in either the Netherlands or Germany.

So its not just that Greece can't print more money without funds to back it up, they physically can't produce sufficient notes for the country's needs.

Posted by Doublethink. (# 1984) on :

I think I meant electronic money as per quantative easing (which given the ecb planned something like 1trillion QE I am not sure why they can't just pay Greece's creditors out of QE).

Posted by Stephen (# 40) on :

quote:
Originally posted by L'organist:

I only hope people in the UK are looking at what is going on, seeing the role being played by the EU Commission and committing it to memory against the time we have our EU referendum.

That has crossed my mind as well. The EU is looking like a less than benign institution.....and in the past I've been - broadly - supportive of belonging to the EU. Now I'm not so sure

But whoever thought it would be a good idea to link countries whose culture and languages are quite different in a single currency? Once you do that you lose a control over your economic affairs as an independent country it seems to me
Of course this was the argument at the time of the Scottish referendum, now I come to think about it

Posted by L'organist (# 17338) on :

You miss the point about the single currency, Stephen. It is seen as but a step on the road to (using the words of the EU Commission) "ever-closer union". Mario Draghi rather gave the game away when he pointed out that the only way for the Euro to really work was with unity of economic and monetary policy for all the countries of the Eurozone - in other words, those countries which use the Euro should forfeit the right to set their own economic goals, set their own tax rates, interest rates, etc, etc, etc.

With the beginning of an EU armed unit, the so-called EU foreign ministry, it should now be clear to anyone with half a brain that a federal united states of Europe is being formed right in front of us.

When I voted in the 1975 referendum it was on membership of a trade bloc, nothing more.

Posted by no prophet's flag is set so... (# 15560) on :

Was hearing a piece on CBC when travelling that Greece was the European subprime nation, i.e., bought bad investments sold by the likes of Goldman-Sachs and came up holding worthless assets, how the investment companies made large amounts while screwing over Greece, but also colluding with Greek politicians who were covering up bad economic decisions.

I think the banks, which have been massively bailed out, should eat much of the debt. "No" was the correct decision I think.

Is there some comparison with Iceland in 2008?

Posted by L'organist (# 17338) on :

The gloves are coming off in the EU: now other leaders are briefing against Tsipras, more or less saying that he has got Greece into this mess (!) and that the situation can't be solved with him as PM.

If that isn't attempting to interfere in the politics of another sovereign state, I don't know what is.

In the 2015 election Tsipras's party got over 36% of the vote, more than 8% higher than the next party. In the referendum on Sunday the OXI (NO) vote polled more than 61% of the vote with a 62% turnout. Whether or not the rest of the EU like it, Tsipras has a clear mandate to be PM of Greece and the Greek electorate have backed his rejection of even more austerity.

The ECB, IMF and other lending parties would have us believe that there is no link between the imposition of swingeing cuts they demanded and the collapse of the Greek economy and the staggering rise in unemployment, when it is plain for anyone to see that they are directly related.

In this instance, the inaccuracy of Greek figures is working in the EU's favour: unemployment across the EU is taken as the number of people registering as unemployed so they can receive benefit, but in Greece there are thousands for whom that safety net doesn't exist and so they don't appear in the statistics. The best guess is that overall unemployment is c36% and that youth (under 25) unemployment is c50%. When you factor in the number of people who are in season jobs connected to the tourist industry who won't have work in the winter months it is frightening.

Posted by Dave W. (# 8765) on :

quote:
Originally posted by L'organist:
In this instance, the inaccuracy of Greek figures is working in the EU's favour: unemployment across the EU is taken as the number of people registering as unemployed so they can receive benefit...

Do you have a reference for this? That's not the way the figures are compiled in the US.

Posted by Ricardus (# 8757) on :

I'm pretty sure that's how it's done in the UK. In fact one of the complaints against Thatcher's government was that it tacitly encouraged unemployed people to claim sickness benefit instead in order to massage the unemployment statistics - thus allowing the next generation of Tory politicians to complain about healthy scroungers on the sick.

Posted by L'organist (# 17338) on :

If you go to the Eurostat website they give this as the basis for their figures:

quote:
There is currently no specific legal basis for producing and disseminating monthly unemployment data. However, these monthly data are estimates based on results of the European Union Labour force survey (EU LFS), which is a continuous household survey carried out in all Member States in accordance with European legislation and on the basis of harmonised definitions. These results are interpolated/extrapolated to monthly data using national survey data and/or national monthly series on registered unemployment. The quarterly LFS results are always used as a benchmark to ensure international comparability. As for most Member States the results from the LFS for a full quarter are available 90 days after the end of the reference period, the most recent figures are usually provisional.

There are then various notes about which months the figures apply to for which country., including that the figures up to and including May 2015 are, in the case of Greece, only up to March.

Unemployment benefit is only paid to people with full employment and social security contribution payments having been made during the previous two years, and the self-employed get nothing. No 'credit' is made for people who register as available for work (as in the UK) so the figures are only for those drawing money from the system.

So if you've been self-employed - even if you've paid into the state social security and unemployment system - you get no financial help and don't appear in any statistics.

Posted by Dave W. (# 8765) on :

Your quote makes no mention of benefits, and says the figures are based on a household survey. This suggests that the unemployment figures are largely computed as in the U.S., and that registration for benefits is not the basis - if it was, the survey would hardly be necessary.

Posted by Philip Charles (# 618) on :

A quote from Brian Easton, one of our top economists.

On this criterion the Greek economy is doing reasonably well. The ‘primary government surplus’, which is its revenue less its spending, would be around 5 percent of GDP if the economy was not so depressed, higher than any other country in the Eurozone. Despite the economy being depressed the surplus is still a healthy 3 or so percent of GDP. You could argue the Greek government is paying its way.

Except that the primary deficit does not include debt servicing, which is expensive because Greek debt is high (around 180 percent of GDP) and, because there is a possibility of default, the interest rates the sovereign state is paying are high. Its budget deficit including interest payments is large as a result. It is a terrible situation because the Greeks have taken aboard austerity and yet their debt is rising.

Posted by alienfromzog (# 5327) on :

This I think says it all:

"Right now, the Greek government is being asked to put a gun to its head and pull the trigger.”

from Open letter to Angela Merkel jointly published in the Guardian, Le Monde, The Nation and Der Tagesspiegel

AFZ

Posted by orfeo (# 13878) on :

quote:
Originally posted by Philip Charles:
It is a terrible situation because the Greeks have taken aboard austerity and yet their debt is rising.

And this is the fundamental problem: that Greece is being asked to do things for the sake of form, not because they'll actually achieve a substantive result. To me there is a definite air of "you'll do this because this what you're supposed to do" without asking about what the outcome will be.

I've seen plenty of commentary saying that some of the tactics employed about 5 years ago had exactly this problem - they ticked various boxes in economic textbooks without considering the practical effect, and the practical effect was just to defer the crisis by about 5 years and make it worse when it arrived. And similarly, some of the proposals now would give everyone room to breathe for 1-2 years but just cause an even larger crisis at that point.

I'm becoming increasingly persuaded that the Euro in its present form is a fundamentally bad idea: it advantages the strongest economies in the bloc and disadvantages the weakest economies, and for exactly the same reason, by creating a disparity between what your currency ought to be worth in the view of the market and what your currency value actually is.

I just don't think you can have a currency union as a stepping stone to a unified state. It reminds me of quite a few situations presented to me by clients where I've had to point out that picking half of option A and half of option B means neither option actually works properly.

Posted by quetzalcoatl (# 16740) on :

It's also becoming quite dangerous, isn't it? I mean, there is a risk of Greece becoming a failed state, prey to all kinds of extremist groups, terrorism, and with a door swinging open to migrants wanting to move into Europe.

Still, as long as the French and German banks get their money, that's the main thing. Loan-sharks tend to have powers of persuasion.

Posted by L'organist (# 17338) on :

If Greece ends up in the tender embrace of the likes of Vladimir Putin it will be because Mrs Merkel and other EU heads of state pushed them there.

If other EU states really want to help Greece, and if they find the idea of giving more in the way of money not acceptable to their electorate, then direct aid - for example in the form of supplying consumables for hospitals - should be looked at.

Long-term, they should look at easing the tough (but often flouted by, say, France) EU rules on subsidising specific industries so that Greece can attract start-up industry so that it actually has a developed industrial sector to produce income.

Posted by Ricardus (# 8757) on :

Interesting article in the latest Private Eye about the extent to which German companies, especially in the defence industry, got their business by bribing the Greeks.

Turns out that this is old news - Spiegel article from 2010.

And funnily enough, although Germany's position is that corruption is bad, and unnecessary spending is bad, they still insisted that despite austerity measures, Greece still had to honour contracts with German arms dealers obtained by corruption. Telegraph article.

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by Doublethink.:
But who is the ECB answerable to ? They shouldn't be taking political decisions.

The ECB's remit is to maintain price stability, with an average inflation rate of below, but close to, 2%. It is explicitly isolated from national and EU governments.

The statement "Greece can't print more money and devalue the Euro a bit" is not a decision made by the ECB - it is part of the fundamental basis of setting up the Eurozone, and as such is a political decision made by the governments of the Eurozone countries on their accession to the Euro.

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by orfeo:
And this is the fundamental problem: that Greece is being asked to do things for the sake of form, not because they'll actually achieve a substantive result.

To a point, all lenders do this. Lenders need to discourage reneging and renegotiation of debt, otherwise they'd never get their money back from anyone. So to a point, they have to make this painful for Greece - pour encourager les autres if nothing else.

Posted by Doublethink. (# 1984) on :

quote:
Originally posted by Leorning Cniht:

quote:
Originally posted by Doublethink.:
But who is the ECB answerable to ? They shouldn't be taking political decisions.
The ECB's remit is to maintain price stability, with an average inflation rate of below, but close to, 2%. It is explicitly isolated from national and EU governments.

The statement "Greece can't print more money and devalue the Euro a bit" is not a decision made by the ECB - it is part of the fundamental basis of setting up the Eurozone, and as such is a political decision made by the governments of the Eurozone countries on their accession to the Euro.

But inflation is currently about zero, people are worrying about deflation even, so currently - printing more money would not neccessarilly be an issue.

Posted by alienfromzog (# 5327) on :

quote:
Originally posted by Leorning Cniht:

quote:
Originally posted by orfeo:
And this is the fundamental problem: that Greece is being asked to do things for the sake of form, not because they'll actually achieve a substantive result.
To a point, all lenders do this. Lenders need to discourage reneging and renegotiation of debt, otherwise they'd never get their money back from anyone. So to a point, they have to make this painful for Greece - pour encourager les autres if nothing else.

Sort of. But the creditors of Greece never should have taken on the debt - it was privately lent, mostly by French and German banks relecklessly and possibly fraudulently. So, the claim to the moral high-ground is optimistic at best. Furthermore it's insane to in the interest of making a point, force on the debtor nation a policy that actually CANNOT work.

It is not an exageration to suggest that the Troika are acting as a Loan Shark.

quote:
Originally posted by Doublethink.:

quote:
Originally posted by Leorning Cniht:

quote:
Originally posted by Doublethink.:
But who is the ECB answerable to ? They shouldn't be taking political decisions.
The ECB's remit is to maintain price stability, with an average inflation rate of below, but close to, 2%. It is explicitly isolated from national and EU governments.

The statement "Greece can't print more money and devalue the Euro a bit" is not a decision made by the ECB - it is part of the fundamental basis of setting up the Eurozone, and as such is a political decision made by the governments of the Eurozone countries on their accession to the Euro.
But inflation is currently about zero, people are worrying about deflation even, so currently - printing more money would not neccessarilly be an issue.

Indeed. Deflation is a big problem for the Eurozone at the moment. A bit of inflation around 3-4% would be really good right now.

AFZ

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by Doublethink.:
But inflation is currently about zero, people are worrying about deflation even, so currently - printing more money would not neccessarilly be an issue.

I might well agree with you. The ECB might even agree with you (earlier this year, it began a 1.1 trillion Euro program of Quantitative Easing).

But Eurozone monetary policy is in the hands of the ECB - that was part of the treaty that every Euro member country signed up to. Greece does not have the authority to unilaterally change the Eurozone's monetary policy. If it wants its own monetary policy, it needs its own currency.

Posted by Doublethink. (# 1984) on :

Allow me to rephrase my question, if we are making 1 trillion euros, why can't we both give Greece 30 billion euros to shore up its liquidity *and* pay its creditors all of what they are owed - which will come to considerablly less than a trillion euro, we'd still have change to help out other economies across the eurozone ?

[ 08. July 2015, 23:10: Message edited by: Doublethink. ]

Posted by Ricardus (# 8757) on :

quote:
Originally posted by Leorning Cniht:

quote:
Originally posted by orfeo:
And this is the fundamental problem: that Greece is being asked to do things for the sake of form, not because they'll actually achieve a substantive result.
To a point, all lenders do this. Lenders need to discourage reneging and renegotiation of debt, otherwise they'd never get their money back from anyone. So to a point, they have to make this painful for Greece - pour encourager les autres if nothing else.

But I think it's also true that if a customer can show that they are genuinely in financial difficulty, mainstream lenders may or may not send lots of unpleasant letters in red ink but they will generally accept some form of renegotiation, not out of generous compassion, but simply because they are more likely to get more of their money back that way. It doesn't make commercial sense to spend money pursuing impossible repayments.

The exception is payday lenders and their ilk, who make most of their profits from rollovers and interest on arrears. Of course the troika cannot be compared to a payday lender ...

Posted by Beeswax Altar (# 11644) on :

Tsipras should resign. The referendum was a stunt that backfired. The new plan will only lead to a showdown and even more austerity later. At this point, the best thing to do is leave the Eurozone with at least your hope and dignity.

Posted by Alan Cresswell (# 31) on :

Why should he retire? He's still got the overwhelming support of the Greek electorate to continue to negotiate for a solution that results in the minimum increase in austerity measures, even better an easing of the existing austerity. Whether he can achieve that is, of course, upto non-Greek players. While he's doing what he was elected to do resignation shouldn't be on the cards.

Posted by Sioni Sais (# 5713) on :

quote:
Originally posted by Beeswax Altar:
Tsipras should resign. The referendum was a stunt that backfired. The new plan will only lead to a showdown and even more austerity later. At this point, the best thing to do is leave the Eurozone with at least your hope and dignity.

If he should go then the CEOs, presidents and directors of the ECB, IMF, the commercial banks who now demand their pounds/dollars/euros of flesh, and the people at the top at the European Commission should do so too. Mistakes have been made and there's no moral high ground to be had whatsoever.

Posted by Beeswax Altar (# 11644) on :

Calling the referendum for the reason he apparently did and then campaigning for a no vote when he wanted a yes vote was cowardly and only made things worse. His party should throw him out. Greece is in bad shape and it's only going to be worse after Tsipras betrayed the Greek voters. This is the sort of thing that gets politicians assassinated.

Posted by Doublethink. (# 1984) on :

I thought he was holding out for debt restructure primarily. Is that in the submitted plan ?

Posted by Beeswax Altar (# 11644) on :

Germans will allow only token debt relief at best if that. If he was going to fold, then the time to do it was two weeks ago. Heck, the other party was doing a fine job as German lap dog. Why even run at all? The time for brinksmanship was 5 years ago when Greece could have taken the rest of Europe down with it.

Posted by Anglican't (# 15292) on :

It's ok: Deidre's got it covered. She's going to send Angela a leaflet.

Posted by Beeswax Altar (# 11644) on :

Now would be the time to hit Putin up for a deal.

Posted by L'organist (# 17338) on :

Don't be so quick to call for Tsipras to go because he could be replaced with far worse - a far-right coalition, for instance.

Or a government based around Pasok if you really want a nightmare scenario - Pasok are the shower responsible for so much malfeisance greed and financial insanity.

Posted by Beeswax Altar (# 11644) on :

Oh...eventually the right will get their chance.

Posted by Ricardus (# 8757) on :

quote:
Originally posted by Beeswax Altar:
Germans will allow only token debt relief at best if that. If he was going to fold, then the time to do it was two weeks ago. Heck, the other party was doing a fine job as German lap dog. Why even run at all? The time for brinksmanship was 5 years ago when Greece could have taken the rest of Europe down with it.

The view from Mr Schäuble seems to be that although even the IMF think Greece needs debt relief, to do so would be against some unspecified EU treaties.

Er ... is that really supposed to maintain the credibility of the EU?

Posted by Beeswax Altar (# 11644) on :

I would think that folks in the UK might think twice about voting to stay in the EU. What will this upcoming referendum be used to justify in 20 years? No...no...you aren't voting to give up your sovereignty to the EU. Then, it turns out you were because it was obvious at the time Europe was moving in that direction. Be careful! You won both wars, remember. [Biased]

Posted by Sioni Sais (# 5713) on :

quote:
Originally posted by Beeswax Altar:
I would think that folks in the UK might think twice about voting to stay in the EU. What will this upcoming referendum be used to justify in 20 years? No...no...you aren't voting to give up your sovereignty to the EU. Then, it turns out you were because it was obvious at the time Europe was moving in that direction. Be careful! You won both wars, remember.

We entered two wars because of our commitment to European alliances and European nations. Now there is a European alliance that has prevented war between its members for seventy years which must be an all-time record.

I will agree with anyone who suggests that aspects of the EU are undemocratic and need reform; the European Commission is at the top of the list IMHO, but that peace statistic, in addition to our trade connections which are overwhelmingly to Europe, ought to be sufficient to persuade any rational person that "in" is the lesser evil.

Posted by John Holding (# 158) on :

Quoth Sioni Sais

quote:
We entered two wars because of our commitment to European alliances and European nations. Now there is a European alliance that has prevented war between its members for seventy years which must be an all-time record.

The current European Alliance (if by that you mean the European Community) has not been around for 70 years -- in its present form for a lot less than 70 years.

Fear of further war and exhaustion were far more important in the years immediately after 1945. And the absence of any will to go to war, I would suggest, is still a far more important guarantee of continued peace -- the European Union can't legitimately claim an absence of war in Europe as one of its results.

John

[ 12. July 2015, 19:57: Message edited by: John Holding ]

Posted by Beeswax Altar (# 11644) on :

Given half of Europe was controlled by the Soviet Union for much of that time and the Warsaw Pact wasn't in the EU, something other than the EU is responsible for a lack of war in Europe. For instance, most of the traditional European powers now have nuclear weapons. Germany doesn't but they are the most powerful nation in European Union and have three other nations with nuclear weapons protecting them. Should have offered them that deal at Versailles and avoided World War 2.

Posted by Beeswax Altar (# 11644) on :

As to trade, Europe isn't a nation. The UK exports more to the EU as a whole than it imports however that isn't true of every single nation. A punitive trade war with the UK would hurt some nations in Europe and help others. How many people in say France are willing to make economic sacrifices for the greater good of the European Union?

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by Sioni Sais:
We entered two wars because of our commitment to European alliances and European nations. Now there is a European alliance that has prevented war between its members for seventy years which must be an all-time record.

Well, if the absence of war is the only thing that matters then we should have just surrendered to Germany seventy years ago and let them run the whole continent thereafter. Or why not go back further and just let Napoleon have his way?

Of course, that seems to be what most of the continent is doing this time around anyway. I for one don't fancy having Germany running the whole shebang though - I prefer self-determination.

Posted by moonlitdoor (# 11707) on :

quote:

originally posted by Doublethink

Allow me to rephrase my question, if we are making 1 trillion euros, why can't we both give Greece 30 billion euros to shore up its liquidity *and* pay its creditors all of what they are owed - which will come to considerablly less than a trillion euro, we'd still have change to help out other economies across the eurozone ?

The short answer to this is that quantitative easing isn't about giving people money. It generally consists of central banks buying assets from private financial institutions. Most central banks are legally prohibited from buying government debt directly, they can only buy debt that is already held by private institutions. This rule applies to the ECB under the terms of the Maastricht treaty.

Quantitative easing is also intended to be reversed, so that after it has hopefully done its job of stimulating the economy, the central bank will sell the assets it has bought back into the market. For that reason high quality assets will be bought, which can reliably be resold for a similar value. Greek government debt doesn't fall into that category.

Posted by Ricardus (# 8757) on :

How can you have a temporary withdrawal from the euro? Did Mr Schäuble think 'wait, the euro concept isn't nonsensical enough, better add a bit more craziness in case people confuse it with sanity'?

Posted by Sioni Sais (# 5713) on :

quote:
Originally posted by Ricardus:
How can you have a temporary withdrawal from the euro? Did Mr Schäuble think 'wait, the euro concept isn't nonsensical enough, better add a bit more craziness in case people confuse it with sanity'?

The story I have heard (and it could easily be just a story) is that a new Greek currency, let's call it the EuroDrach, be created at parity but then allowed to float against the Euro until some unspecified time in the future.

Posted by lowlands_boy (# 12497) on :

So this morning's proposals after an all night discussion in Brussels consist of everything that the Greek PM urged his people to reject recently.

The Greeks suposedly have just three days to approve all this, including rolling back all the anti austerity laws from February, and sticking 50 billion of assets in some sort of trust fund to be run for them.

It's going to be fascinating to see how Tsiparis sells this to them.

Posted by Beeswax Altar (# 11644) on :

All that Tsipras told them to reject and more. The fund will be housed in Athens not Luxembourg. So score one for Tsipras. Shame Greeks will have to vote for bona fide communists or fascists to maintain any dignity at all.

Posted by Ricardus (# 8757) on :

Realistically all Tsipras had was a mandate to carry on fighting. Which he did, and lost.

Not sure what I think about that.

Posted by Alan Cresswell (# 31) on :

To me it looks like a compromise - so no real winners at all. Greece has secured (subject to approval in various parliaments) a cash input to keep the immediate problems of total economic collapse at bay for a short while, hopefully long enough to allow economic growth so they can start digging their way out of the pit the country is in.

The international financiers get to wring some concessions from Greece, but not the extreme extensions to the existing austerity measures.

I don't know how privatisation of national assets such as the electricity grid will go down with the more left leaning members of the Greek parliament. But, it is a way of raising cash - though it needs to be handled to get the best possible price (so, don't get advice from the UK Conservative party who have mastered the art of underselling assets so that their chums who buy our assets get a bargain).

Posted by Dave W. (# 8765) on :

quote:
Originally posted by Alan Cresswell:
To me it looks like a compromise - so no real winners at all. Greece has secured (subject to approval in various parliaments) a cash input to keep the immediate problems of total economic collapse at bay for a short while, hopefully long enough to allow economic growth so they can start digging their way out of the pit the country is in.

The international financiers get to wring some concessions from Greece, but not the extreme extensions to the existing austerity measures.

A compromise? What did the creditors want that they did not get?

Posted by Doublethink. (# 1984) on :

Debt restructure was agreed in principle.

Posted by Bibliophile (# 18418) on :

Greece should leave the Euro. It would have been better if they had left some time ago and it would have been better still if they had never joined.

Interview here of Nigel Farage getting it absolutely right

https://www.youtube.com/watch?v=5O6aoeHxhWs

Posted by John Holding (# 158) on :

Alan -- just how does the deal encourage growth?
It's a recipe for further recession, IMO., with further declines in employment and personal income.

Moreover, though this is not always the case, in an economy like that of Greece, increasing consumption taxes like VAT is simply an incentive to take yet more activity into the black market. I would expect a net decline in tax revenues as a result.

From well outside the game, it looks to me as if Frau Merkel decided to crucify Greece in order to punish a man she clearly loathes.

I'd go further, and suggest that an essentially Western/Northern (German largely, but other nations as well) approach to laws is being imposed on people, Greece in this case but not exclusively, who do not understand that approach. Primarily this is being done out of ignorance, I believe -- the Western/Northern paradigm is "Well, it's the law so people will of course simply obey it". That's never been the case south of the Pyranees/Alps, and it won't be now in Greece.

All this has done is postpone Greek bankruptcy...if they're lucky. If they're not, I fear major political unrest in Greece, possibly extending well beyond what a democracy can tolerate. It's not inconceivable, in my view, that the present government may fall, it will be impossible to find a successor, and elections in a month or so will produce no party with enough seats even to be the core of a new government. Greece, that is, will become ungovernable -- and the effective takeover of what is supposed to be a sovereign member of the European Union (which is what there now it) will have to be followed by a political takeover of the country by a bunch of unelected bureaucrats in Brussels who are anxious to do whatever Frau Merkel decides is best for the Greeks.

Perish the thought that the Greeks might have an opinion or a say.

John

Posted by Beeswax Altar (# 11644) on :

quote:
Originally posted by Doublethink.:
Debt restructure was agreed in principle.

Yes but Greece needed debt forgiveness not restructuring. This isn't much of a compromise at all. Tsipras bluffed and lost. He needed to go all in. Again, Greece really needed to abandon the Euro five years ago when they could have everybody else down with them. Instead, the rest of the Europe spent the five years transferring Greek debt from private bankers to the government. Being a German investment banker is like playing craps with the casino's money.

Posted by MarsmanTJ (# 8689) on :

quote:
Originally posted by Beeswax Altar:
Tsipras bluffed and lost. He needed to go all in.

According to Varoufakis, that was what he wanted to do. I think they'd've done fairly well out of it, actually, since it would have scared the French and Italians enough to get some screams to Merkel to improve the deal.

Posted by Alan Cresswell (# 31) on :

quote:
Originally posted by Dave W.:

quote:
Originally posted by Alan Cresswell:
To me it looks like a compromise - so no real winners at all. Greece has secured (subject to approval in various parliaments) a cash input to keep the immediate problems of total economic collapse at bay for a short while, hopefully long enough to allow economic growth so they can start digging their way out of the pit the country is in.

The international financiers get to wring some concessions from Greece, but not the extreme extensions to the existing austerity measures.
A compromise? What did the creditors want that they did not get?

As far as I can tell, no demand to cut government expenditure even further. They got a commitment to improve tax collection efficiency, but Greece would have needed to do that anyway. The Greeks got control over that €50billion fund, rather than it being administered by the debtors, and if used wisely that would hopefully allow a small boost to the economy - though it would only bring longer-term benefits if that economic growth results in increased tax revenue.

Posted by Enoch (# 14322) on :

Might not a larger black economy be just what might rescue Greece from the hole it's in?

Posted by John Holding (# 158) on :

quote:
Originally posted by Enoch:
Might not a larger black economy be just what might rescue Greece from the hole it's in?

It might indeed, except that actual economic activity is not the object of the current plan. The objective of the plan is to increase the amount of revenue raised from taxes, and specifically, from the increase in VAT.

John

Posted by Dave W. (# 8765) on :

quote:
Originally posted by Alan Cresswell:

quote:
Originally posted by Dave W.:

quote:
Originally posted by Alan Cresswell:
To me it looks like a compromise - so no real winners at all. Greece has secured (subject to approval in various parliaments) a cash input to keep the immediate problems of total economic collapse at bay for a short while, hopefully long enough to allow economic growth so they can start digging their way out of the pit the country is in.

The international financiers get to wring some concessions from Greece, but not the extreme extensions to the existing austerity measures.
A compromise? What did the creditors want that they did not get?
As far as I can tell, no demand to cut government expenditure even further.

I'm pretty sure that "ambitions pension reforms" means the same thing as further cuts to government expenditure - see page 3 of the text of the agreement.

quote:
The Greeks got control over that €50billion fund, rather than it being administered by the debtors [sic]

(By the creditors, I think you mean.) The fund that comes from the forced sale of Greek government assets? I suppose the Greeks can also congratulate themselves that the victors have graciously allowed them to keep the Parthenon. For now, at least.

Posted by Alan Cresswell (# 31) on :

quote:
Originally posted by Dave W.:
I'm pretty sure that "ambitions pension reforms" means the same thing as further cuts to government expenditure - see page 3 of the text of the agreement.

I read that section as mostly about further clarification over existing proposals, rather than introduction of new steps. In particular the pension section refers to 2012 reforms that still haven't been completely implemented (I admit to not knowing what the Constitutional Court ruling is, however).

Maybe that's because the document was drafted to allow scope for both sides to claim they'd stood up to the other side, and hence be able to sell it to their own constituencies.

Posted by Enoch (# 14322) on :

quote:
Originally posted by John Holding:

quote:
Originally posted by Enoch:
Might not a larger black economy be just what might rescue Greece from the hole it's in?
It might indeed, except that actual economic activity is not the object of the current plan. The objective of the plan is to increase the amount of revenue raised from taxes, and specifically, from the increase in VAT.

Yebbut.

The argument is that increasing VAT and tax collection to pay off debt will throttle the economy's ability to regenerate itself. That's probably true. If so, though, the black economy is economic activity which escapes its compass and which wouldn't otherwise happen.

The bad feature about it, isn't that it happens. That's understandable. It's difficult really to condemn people from finding that way round the problem.

The bad features are that the effort needed for people to find their way through the interstices of the system would be better expended directly on the economic activity itself. It confuses commercial ethics because it becomes harder for people trying to be honest to be clear where the boundaries are. It is also likely to discourage people from commercial enterprises that involve significant capital investment rather than just buying and selling.

Posted by fletcher christian (# 13919) on :

Posted by Enoch:

quote:

The bad feature about it, isn't that it happens. That's understandable. It's difficult really to condemn people from finding that way round the problem.

Maybe I'm misreading this, but I'm presuming this statement relates to a 'black economy? If so (and if not then this can all be ignored), then I would have to ask if a 'black' economy where you live would be something you would be happy to see continue unchecked and unregulated. To my mind it amounts to robbery. It is removing money that would otherwise go towards the running of a state for the benefit of all and keeping it for a greedy self. I'm not sure I'd have any difficulty condemning that.

Posted by Alan Cresswell (# 31) on :

VAT income can be increased without increasing the VAT rate. It can be increased by reducing the proportion of black market activities. Which will need an investment in enforcement.

Posted by Enoch (# 14322) on :

quote:
Originally posted by fletcher christian:
Posted by Enoch:

quote:

The bad feature about it, isn't that it happens. That's understandable. It's difficult really to condemn people from finding that way round the problem.

Maybe I'm misreading this, but I'm presuming this statement relates to a 'black economy? If so (and if not then this can all be ignored), then I would have to ask if a 'black' economy where you live would be something you would be happy to see continue unchecked and unregulated. To my mind it amounts to robbery. It is removing money that would otherwise go towards the running of a state for the benefit of all and keeping it for a greedy self. I'm not sure I'd have any difficulty condemning that.

That depends on how far you trust the state and identify with it as your state or not.

Posted by John Holding (# 158) on :

And now I see that the BBC is reporting that the IMF itself doesn't want to participate in the loans because it believes what is really needed is a massive write-down of debt, without which, it reportedly says, the rescue attempt is doomed to failure.

John

Posted by Doublethink. (# 1984) on :

Yup, they've apparently just noticed the Greek finance minister was right. Now do we think it would have helped to mention this earlier ...

[ 15. July 2015, 07:04: Message edited by: Doublethink. ]

Posted by Alan Cresswell (# 31) on :

About 10% of the Greek debt is to the IMF. But, I'm not seeing the IMF taking a lead by cancelling some of that debt.

Posted by Barnabas62 (# 9110) on :

I don't think the deal will hold for long, even if the Greek parliament passes the necessary measures today. It looks as though Tsipras thought that "horrible and humiliating" was better than the massive uncertainties of Grexit (from the Euro and possibly the EC also). And he didn't have a Grexit mandate anyway.

The IMF announcement did surprise me. I thought Christine Lagarde was "in on the act", which I thought was the French and the Germans colluding over "good cop bad cop" tactics to drive Tsipras into the ground. But apparently not. Unless this is just another bit of public show-setting.

But it's a typical EC deal. Plenty of smoke and mirrors about, so the truth can be as many-sided as people feel they need for their various political purposes.

Posted by L'organist (# 17338) on :

Athens is beginning to burn. [Votive]

Posted by Sioni Sais (# 5713) on :

quote:
Originally posted by L'organist:
Athens is beginning to burn.

I was afraid of that. Let's hope it doesn't turn out too serious. [Votive]

Posted by orfeo (# 13878) on :

quote:
Originally posted by Doublethink.:
Yup, they've apparently just noticed the Greek finance minister was right. Now do we think it would have helped to mention this earlier ...

Aargh. Just... aargh.

I'm beginning to feel as if Germany is never going to want to change the situation because, fundamentally, the situation is good for Germany.

Posted by Beeswax Altar (# 11644) on :

Somewhere, Bismarck is smiling.

Posted by alienfromzog (# 5327) on :

Seumas Milne in the Guardian this week is spot on, I think.

quote:
Seumas Milne:
That this is about politics more than economics should now be obvious. It’s not just that the austerity imposed on Greece has delivered a 1930s-style depression, or that Ukraine was recently bailed out with generous debt write-offs but without any crucifixions or waterboarding. One part of the troika, the IMF – dominated by a US anxious to keep Greece in the Atlanticist camp – has now revealed it is well aware Greece’s debts will never be repaid without massive relief and that this week’s deal could swell them to more than 200% of GDP. In other words, it won’t work. But pre-Keynesian balanced-budget economics has the eurozone’s rulers in its grip, as they seek to overcome the crisis by restoring corporate profitability.

AFZ

Posted by quetzalcoatl (# 16740) on :

Yes, there are some interesting stories now about the IMF criticism of the Greek deal. Not only that the IMF thinks Greece cannot pay off its debts, and so therefore should get some kind of write-off, but that the whole European neo-liberal approach is a slow-motion car-crash.

Some journos are saying that behind the IMF stands the US, which is now critical of EU approaches, but this sounds like conjecture to me.

But presumably some senior US figures are leaking this stuff to the press, no idea who. I wonder if they are saying that it's time to go back to Keynesian measures - that will go down in Europe like a lead pancake, although of course, European economies do go Keynesian surreptitiously, when they think no-one is looking.

Posted by Dave W. (# 8765) on :

quote:
Originally posted by quetzalcoatl:
But presumably some senior US figures are leaking this stuff to the press, no idea who.

Why do you presume this? Surely the reports are distributed to others, and U.S. officials aren't the only ones who think the debt is unsustainable.

[ 19. July 2015, 14:11: Message edited by: Dave W. ]

Posted by quetzalcoatl (# 16740) on :

quote:
Originally posted by Dave W.:

quote:
Originally posted by quetzalcoatl:
But presumably some senior US figures are leaking this stuff to the press, no idea who.
Why do you presume this?

Because when journalists start doing stories such as this, 'IMF critical of Greek deal', 'US stands behind IMF', 'US critical of EU neo-liberalism', they are not just getting this stuff out of their own heads. And they are not getting it just from European sources, I would bet. But maybe it is not from leaks, but from open sources, I wonder who.

Posted by quetzalcoatl (# 16740) on :

Possibly Jack Lew, US Treasury secretary, who has been travelling round Europe recently.

Old story - Jack Lew warns of European 'lost decade' with present economic policies, do not count on US as an engine of economic recovery.

Posted by Dave W. (# 8765) on :

quote:
Originally posted by quetzalcoatl:

quote:
Originally posted by Dave W.:

quote:
Originally posted by quetzalcoatl:
But presumably some senior US figures are leaking this stuff to the press, no idea who.
Why do you presume this?
Because when journalists start doing stories such as this, 'IMF critical of Greek deal', 'US stands behind IMF', 'US critical of EU neo-liberalism', they are not just getting this stuff out of their own heads. And they are not getting it just from European sources, I would bet. But maybe it is not from leaks, but from open sources, I wonder who.

But again, other people also have access to the reports and agree that the debt is unsustainable, so why do you only suspect American officials? And can you provide a link to any of these examples? They don't seem to turn up in Google searches.

Thanks for the Jack Lew itinerary tip, though - now I'm envisioning him skulking about the great cities of Europe, meeting journalists in darkened parking garages with a bundle of illicitly mimeographed IMF reports tucked under his arm.

Posted by quetzalcoatl (# 16740) on :

http://www.theguardian.com/business/2015/jul/15/imf-greece-future-analysis-bailout

But this seems to be saying that Obama is actually pushing the EU to cut Greece some slack.

There's a similar story in today's Observer, but I can't find it online yet. Maybe it will become a film, with Deep Throat II.

[ 19. July 2015, 15:34: Message edited by: quetzalcoatl ]

Posted by Dave W. (# 8765) on :

quote:
Originally posted by quetzalcoatl:
http://www.theguardian.com/business/2015/jul/15/imf-greece-future-analysis-bailout

No actual sources quoted or even claimed, really. "Fingerprints," eh? Not so much a story, article, or report as an opinionated blog post.

quote:

But this seems to be saying that Obama is actually pushing the EU to cut Greece some slack.

Well, yes - that was the whole thrust of the IMF analysis, whoever supplied it to the reporters.

Posted by Enoch (# 14322) on :

quote:
Originally posted by quetzalcoatl:
Because when journalists start doing stories such as this, 'IMF critical of Greek deal', 'US stands behind IMF', 'US critical of EU neo-liberalism', they are not just getting this stuff out of their own heads. ...

Perhaps, but why not? Sadly, experience of the press means that as an argument - 'we don't know where they are getting the story from; therefore they must be getting it from somewhere' is a non sequitur.

A lot of unattributed stories start of as a journalist or commentator's wishful thinking.

Posted by Eutychus (# 3081) on :

The BBC currently has a headline saying "Greek debt relief possible - Merkel" while Le Parisien French news site has one saying, of the same TV interview, "Merkel repeats her opposition to any reduction of Greek debt".

I haven't seen the two nation's media report such differing versions of reality since the Iraq war.

[ 19. July 2015, 21:38: Message edited by: Eutychus ]

Posted by Dave W. (# 8765) on :

Those two positions aren't contradictory - as the BBC story says, she's ruling out reductions in the face value of the debt, but willing to consider other forms of relief like maturity extensions and rate reductions.

Posted by Ricardus (# 8757) on :

Maybe the plan is to push the bulk of repayments to some point in the future when Greek debt relief is no longer politically toxic - or when it may still be toxic but someone else will have to deal with it.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by Ricardus:
Maybe the plan is to push the bulk of repayments to some point in the future when Greek debt relief is no longer politically toxic - or when it may still be toxic but someone else will have to deal with it.

That may be the plan in the minds of some - and at least in the English media, the most optimistic commentators are assuming that that is what will happen ('Everyone knows .. unsustainable etc')

I think the past few weeks have shown that what is obvious to some is generally not obvious to the eurogroup.

Posted by Ricardus (# 8757) on :

quote:
Originally posted by lowlands_boy:
So this morning's proposals after an all night discussion in Brussels consist of everything that the Greek PM urged his people to reject recently.

The Greeks suposedly have just three days to approve all this, including rolling back all the anti austerity laws from February, and sticking 50 billion of assets in some sort of trust fund to be run for them.

It's going to be fascinating to see how Tsiparis sells this to them.

Apparently he sold it very well - his approval rating is at 60%.

Posted by alienfromzog (# 5327) on :

I think this ( Mainly Macro: 'German self-interest') is important. Not so much for the analysis of German policy (although that's interesting as there is a very broad consensus in economists except in Germany) but for the data about where the German economy is at. I knew that this was the case but this blog brings the numbers together in an easily accessible way.

There are many who like the wax lyrical about how awful Greece are, the how dare they complain about the bail out terms? - they should just be bloody grateful! mentality. Two things to note here.

1) Part of the problem for Greece (and Spain, Portugal, Italy) is how the Euro setup benefited Germany at their expense...

quote:
Perhaps the largest benefit Germany has received from the Eurozone has been as a result of undercutting its fellow members around ten years ago. Everyone knows about the ‘excess inflation’ in the periphery during those years, but the story of insufficient wage inflation in Germany at the same time is not often told. This policy - which if it had occurred via exchange rates rather than domestic inflation would be called beggar my neighbour - may well have been accidental, but it is a key reason why Germany is the only Eurozone economy that has not suffered since 2010.

2) The current policies further benefit Germany.

quote:
In fact in many ways Germany has done rather well out of the EZ crisis. Henning Meyer points us to a study which suggests that, as a result of the crisis and Germany’s ‘safe haven’ status, the German government has saved more than E100 billion from 2010 to 2015 in debt interest. As Henning notes, this has helped Germany ‘set an example’ on deficits without having to do anything too painful. That is slightly more than its total loss if Greece completely defaults. It has also not done badly as a result of the profits the ECB has made on its lending.

As such the morality play argument that Germany are the good-guys and Greece should just be grateful is deeply flawed.

As I have said on previous pages, the fact that we currently have self-defeating policies is quite depressing and we really should be looking just for what-works. However, if you are looking for a justice argument - the fact the previous and current Euro policy significantly favours Germany is surely an argument for magnanimity of their part - the very antithesis of their current approach.

AFZ

Posted by lowlands_boy (# 12497) on :

And in the meantime Tsiparis is getting hammered in the Greek parliament. In the most recent vote for the third bailout, more then 120 of his own MPS didn't support him, and this could trigger a confidence vote.

Former finance minister Varoufakis gives the deal a good kicking in
this document

Posted by lowlands_boy (# 12497) on :

So, Tsipiras has resigned and called snap elections as a referendum on the way he is trying to get Greece out of the crisis.

Bit of a turnaround from the man who was the anti-austerity candidate.

Posted by L'organist (# 17338) on :

I don't know why its only now that people are waking up to the fact that the main beneficiary of the set-up of the Euro is the German economy: if you cast your mind back, there was massive disquiet in Germany before the Eurozone came into existence and it was only the promise that the Eurozone would be run as tightly as if it were the Bundesbank and the Mark that made it possible for German politicians to 'sell' the Euro project to the German electorate.

So, they set it up so that the ECB was run as tightly as possible - but with the fatal flaw that the currencies allowed into the Eurozone would not be vetted as thoroughly as they should be. After that, disaster was bound to happen.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by L'organist:

So, they set it up so that the ECB was run as tightly as possible - but with the fatal flaw that the currencies allowed into the Eurozone would not be vetted as thoroughly as they should be. After that, disaster was bound to happen.

.. and this was partly by design, there had been numerous breaches of the rules, followed by temporarily ignoring them (France and Germany breaching the Stability and Growth Pact in 2003 being a notable example). There was also a drive to make the market covered by the currency as large as possible - hence Germany intervention to allow Italy in.

All of this wasn't the best foundation to build a currency union.

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