So, in short: Nothing at all like the interbellum.
>The PR outfall of that debacle is probably what pushed the Brits to vote for exit.
But yes, the Brits are very wise to exit, because (especially if they enter the eurozone, which is clearly the next step in ever closer union) they are definitely the "next germany". And that might even happen without joining the eurozone, by fiat.
http://www.oecd.org/els/soc/OECD2014-Social-Expenditure-Upda...
The UK is our #1 source of tourism (that contributes 2.7% of our GDP) - it's sad that brexit is making it harder for them to visit.
I realize it's a bit more work, but is there any EU authority that could block member states from doing this?
I wish the best for Greece; I think they will be able to overcome their current situation and be better for it in the end. It used to be a place that people longed to vacation in and saw as a gem of Europe. It is still the same country, regardless of their financial situation. Put up tens of thousands of travel posters that say, "Greece, Beauty on a Budget" around Europe, and you could solve that problem in a decade or less, perhaps.
> a system whereby the government undertakes to protect the health and well-being of its citizens, especially those in financial or social need, by means of grants, pensions, and other benefits.
The above is standard in all of the northern-European countries typically lauded for their economic success. Clearly, this was not what caused the collapse of the Greek economy. Of course, there are many alternative theories, but the most convincing one I am aware of is that it was the result of subprime lending by north-European (predominantly German) banks.
That has not been going particularly well for France or Spain either.
What they are doing to Greece is actually much worse then Versaille. It has to do with the issue that Greece should have defaulted years (I was arguing this even in 2008) and change their government. Because of EU (EMU) logic this can not happen. So Greece is forced to change its government in the context of huge debt and even worse a flat demand curve (look at EU NGDP and Greece NGDP). Greece is about the only country that actually did significant Austerity but its not working. The EU should have let them default or take over their debt completely.
You are probably right that PR is the main issue. It was with 'Versaille' as well. German government PR is the main reason why you use 'Versaille' as an example of evil practice. Maybe the most successful example of PR in the last 100 years.
Germany actually was on the road to economic recovery when the Great Depression hit.
Then the Great Depression hit and Germany, wanting to stay on gold, got hit really hard. By 1934-1935 they overcame the shock and Hitler earns the credit.
Fantastic book on this stuff:
- The Deluge: The Great War, America and the Remaking of the Global Order, 1916-1931
http://www.statista.com/statistics/275335/government-revenue...
Without external input, decreased spending would decrease demand, which would decrease output, which would reduce the expected revenue:spending increases from the initial spending cuts, which would require further spending cuts to hit ratio targets, etc etc.
Importantly for a country used to borrowing every year living within their means will seem like a huge sacrifice even if it's not optional. The further drop to paying down debt is even further, but it's that or default. And no you can't grow the economy with stimulus spending when you got used to decades of stimulus spending in the first place.
Back in the specific case of Greece, I think it may well be that the loan was taken in bad faith. But even though previous Greek governments committed fraud that doesn't mean anyone's better off now kidding themselves about the chances they'll pay.
Frankly, I'd argue that official lender's are already effectively forgiving loans by subsidizing indirectly via unreasonably good loan terms. No commercial entity would have given loans like the IMF and ECB have; they're worth far more than greece is paying. The question is then whether you're better off pretending that you are lending X principle at terms Y, or bookkeep that as the equivalent lending some fraction of X at fair-market terms Z. Even if greece can keep to the letter of the current deals, that's equivalent to having probably the majority of its debt forgiven, and the rest generating fair market returns.
It's just politics as to why that's not publically admitted - northern European voters might go bannanas. The downside is that the current situation might contribute to European instability, because southern Europe (and especially Greece) really believes they're paying all that unsustainable debt, when in fact, they aren't not really, not even today.
The Keynesians believe that you can increase demand by government spending but that was not an option for Greece anyway. The EU would have to pay for it but its hard to do that and do fiscal reforms at the same time.
The only solution you have left is really harsh reforms, and most importantly wage cuts. A flexible labor system is the best defence against extend recession. Check out some of the Baltic states, they took pretty harsh wage cuts. They were lucky that they did not yet have such large governments and debt that this could be done and they did not have to face default at the same time.
Greece was institutionally not capable of these things, and their situation was bad to begin with.
The should have defaulted and set up a tmp government in 2008 that could do sweeping reforms. Had they had a high change of being more or less stable right now. But the EU is against that and Greece was faced with the impossible task of both do structural reforms, debt payback and terrible monetary policy from the ECB. Its an economic shit show of epic proportions.
I certainly don't want the EU to put a government there.
Even if that was not possible, a default would have been good. Normal election would also cause some changes after such a period.
What the EU is doing is just terrible. Not letting them default and making all lending depend on the countries complaints with the EU.
Had they had their own currency that was well handled their problem would still have been considered, but reforms could have actually helped.
Just because it did not work, does not mean it was not Austerity.
Otherwise, you would call every spending cut and or reductions in future growth Austerity. If your living above your means your living the high life not practicing asceticism.
Greece needed EU loans not to pay down debt but to continue to make payroll. Defaulting would have left them with less money on day 1.
> Otherwise, you would call every spending cut and or reductions in future growth Austerity. If your living above your means your living the high life not practicing asceticism.
Its totally false to say that Austerity is reduction in future growth. Normally decrease in the size of government leads to better growth.
You cant take the moral definition of Austerity, in economic Austerity means spending cuts and maybe some other measures to decrease debt.
The government was spending up to 15.2% of GDP based on borrowing money. That's never going to be sustainable and a default would have also forced them to make deeper cuts.
http://www.tradingeconomics.com/greece/government-budget
Also, several other countries have made deeper cuts. It's failure to collect and raise taxes that's been Greece's issue.
> Cutting spending is basically Austerity.
Also, even if Greeks do start saving, that will only handle the symptom and not the root cause, which is corruption, and corruption comes from lack of discipline, which in turn is a state that comes from a certain way of thinking, a mentality.
Ironic that the very nation which once embodied discipline and higher cognitive thinking now lacks both, is it not? I weep for Greece, truly I do.
There was no remotest chance in hell it could have worked without fixing tax evasion problems.
Greece did not do any austerity; just like the Croats, the Greeks lived on debt and piled up more and more... and I watched some hidden camera documentaries on Greece (VICE comes to mind), that secretly filmed how nobody in Greece issues one a receipt upon payment, basically eschewing paying taxes and committing tax fraud... on a systemic and massive scale... why? Because Greece has a corrupt government, so the citizens want to "stick it to the man". Why does Greece have a corrupt government? Because they tolerate one, and the guys which replaced them, and the guys which will replace them, will be just as undisciplined and just as corrupt.
Meanwhile, German citizens were footing Greeks' systemic embezzling through German taxes and by German government fiat; and now all of a sudden when the Germans demand Greeks pay back their debts, you think it's okay to default?
It is not okay to not pay one's debts. That's German citizens' money. They didn't embezzle, they pay their taxes, they work hard, they save, and they deserve to have their loans paid back.
How would you like it if you lent someone money, and they purposely defaulted, with the intent of not paying you back?
> The EU should have let them default or take over their debt completely.
No! That would mean Greeks would have lived on someone else's labor and walked away with financial and material gain scott-free, or supported corruption by people who did. That is not okay!
By not lending this person any money in the future... A default has very harsh consequences and is not pleasant at all, but it is a normal process in capitalism. It happens all the time, everywhere. This is why banks make risk assessments (normally).
> It is not okay to not pay one's debts. That's German citizens' money.
No its not. Its german banks money, they made the wrong decision in lending money to an untrustful debtor. German tay payers money only came into play when the state worked out the 'rescue packages' for greece. These 'rescue packages' were only meant for the greece government to pay back the banks. About 90% of the money given to greece goes directly into the debt-payback. So if anything german tax payers are financing the flawd descision making process of 'Deutsche Bank' and others.
And about the level of corruption in greece. Yes it exists, and is systemic. But so are the shady deals of Bilfinger Berger, the whole Berlin Airport-farce, the quicksand investments of the Landesbanken and virtually every public building project conducted in germany.
First of all. The EU is responsable for Greece having such low bond yields to begin with (back in pre-2008). This was a direct effect of the widely held believe that debt would be common to the EU. This gave a lot of countries bad incentives. When it became clear that debt was not held in common, mayhem ...
Then they did not let Greece default. German banks did not actually hold that many Greek assets, but they acquired more and more. The ECB equally started to accept bad Greek bonds as collateral. The German banks made deliberately bad investments because they believe the government would pay it. You can now of course argue evil banks, but the real problem is the constraints on Greece.
During the gold standard times it was actually common that countries could default and then come back.
> How would you like it if you lent someone money, and they purposely defaulted, with the intent of not paying you back?
They did not purposely default. They literally could not lend anymore money and could not pay back. They only were in this problem in the first place because they had the such low bond yield and now had to refinance with bond yields having reason 4x.
Notice the red line: https://inthelongrunwerealldead.files.wordpress.com/2014/04/...
Just to make it clear, the Greek have a shitty system and they are a terrible government that should have never be let into the EU. But the EU is equally a total shit show and they are largely responsable for the collective trouble.
> Your analysis is terrible and full borderline racist
> crap.
By the way, I have nothing against Greeks. I wouldn't lend them any money is all, not because they are Greek, but because of the way they think, hence ---> current situation.
And on a further note, I am actually rooting for you, and I hope you pay back all your debts and come out of the hard times better for it.
> Then they did not let Greece default. German banks did
> not actually hold that many Greek assets, but they
> acquired more and more. The ECB equally started to
> accept bad Greek bonds as collateral. The German banks
> made deliberately bad investments because they believe
> the government would pay it.