IMF staff made misjudgments in Greece, became cheerleaders for the euro (2016)

And for the inhabitants, this is a good thing. Look at Venezuela to see what happens when a country devalues its currency to pay its debts.

The situation would have been even better (for the Greek people) if the European Union hadn't permitted Greece to introduce capital controls (which negated some of the advantages of a currency not tied to the Greek economy).

Misinformation is easy when people don’t think through what they are hearing.

And maybe there's a consensus that everything is lower priority than ever-closer integration. Great for Commissioners, not so great for Greek pensioners.

> There were two decent solutions that would have ended this crisis within a year or two. One would have been that Greece default on its debts, paying back for example 30% of outstanding loans. Another would have been for Greece to leave the Euro Zone and go back to using the drachma (their currency before the Euro), and pay its creditors in the new currency. This new drachma would quickly fall in value as the Greek central bank would print more drachmas, making it easier to repay the devalued drachma loans.

How would defaulting on debts have solved any problems? Still nobody would have bought new Greek debt and since Greece was running at a deficit before it still would have run at a deficit, just without any additional funds. They still would have had to get their administration in order to actually collect taxes etc.

The second proposition is even more ridiculous, nobody would have bought the new debt, the Drachma would have been entirely worthless and any sort of import (of, e.g., medicine) would have been impossible.

Edit to add: And what happened of course proves that these two "alternatives" would have been ridiculous. Greece could easily have (on its own) decided to default or switch to a new currency. No outside power could force them to stay in the euro or pay their incurred debts. Yet somehow they decided against these measures and instead took the horrible low-interest loans offered to them.

When Greece had its own currency, it could devalue against the Deutsche Mark and keep people employed. That devaluation would cause some inflation and it would also raise interest rates a bit -- no debt bubble, no collapse of Greek industry. Rather, German industry finds that it's currency is more expensive to counteract increased Germany productivity and Germany fails to export more, and thus does not accumulate excess savings. There is no flow of jobs from Greece to Germany -- Greece keeps its jobs, Germany keeps its jobs, Greece is forced to consume a bit less with the lower Drachma relative to Germany, and Greece is forced to borrow a bit less with the higher interest rates.

With a forced peg against the DM, money was just being vacuumed out of Greece, which created a recycling problem in which excess German savings could be used to purchase Greek bonds. That lowers the interest rate in Greece artificially, creating more debt in Greece even while Greek production becomes less competitive and Greek jobs leave for Germany. That never ends well, and was only caused by the Euro.

The crisis was just the unravelling of the above unsustainable trends, but these trends were created by the Euro. You can't "until the crisis, Greece was creating these problems" -- the problems were created by the Euro.

The same thing for Greece's problems collecting taxes. When governments can't collect taxes efficiently, they print more money, creating more inflation, which is basically a tax on financial assets. So the money is still collected by the Greek government. Now that the Greek government was no longer able to print money, it was at the mercy of financial markets -- international financial markets, which of course can't help the Greek government collect money in the same way that an inflation tax can.

Greece simply has never been in a position where it could give up its own currency and join a pegged regime with Germany. All of this was foreseen as part of the folly of the European project. There are other bad effects, too.

The reason for the the debt crisis is that the Euro countries are working with what is, essentially, a foreign currency. There is not fiscal capacity that will solve the possible problems, like, for instance, there is in the USA.

So, the Central European Bank is, against the spirit and probably the letter of the agreements, doing the work that a federal government should be doing. They are buying public debt in the secondary market and that is what have saved the Euro (for now).

The design of the Euro is flawed from the beginning and comments like yours show that fixing the issue is probably impossible, because it feels good to blame others instead of facing the issue, and because when we feel so above other countries, who would like to share a fiscal capacity with those losers? So, interesting times ahead.

That's the real lesson here.

False. Greece was in need of high rates to lower consumption and debt increase. Instead of that, and for the benefit of Germany that was in need of more debt to pay for the reunification, rates were lowered to historical minimums.

If your debt is increasing like crazy and your currency lowers the rates the result is well known. Greece could not change the rates, so they were not in control anymore.

That does not mean that Greece has not big problems. But to blame all on them makes no sense. German banks could have stopped lending money at any time, but they are seen just as victims instead of greed instigators.

Should all the countries to be net exporters at the same time? Sounds mathematically impossible.

More interestingly, should Greece to become Germany without making any investments? only by reducing their economy? All this is craziness.

In any currency union is going to be imbalances, that's unavoidable. I don't think I have to cite examples here, only think in your own country, whatever it is, and you will see that it's true. The solution is a fiscal capacity that compensate those imbalances. If you are not ready to finance those lazy Greeks, then you can't be in the same currency union that they are. So simple like that.

I agree that the arrangement is probably by design. It makes it even more evil, in my opinion.

Their suffering and other countries suffering are empowering extremism around Europe. And the lesson people learn is to not trust the government and to not trust economists. And they learn that for good reasons.

To punish people to make them learn does not work. Dog trainers have known for long that punishing dogs to change their behaviour only create abnormal behaviour. It is even worse. As citizens have been punished while bankers, the main culprits, have been saved creating a dangerous moral hazard.

I agree with the post that "made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory".

Also, while it’s correct the British media has been using the mistakes the EU made during the financial crisis (which were the same as the mistakes the British made, who self-imposed austerity and continue to do so), the reality is none of these actually apply to the UK which has its own currency and as a result has/had dramatically more financial freedom.

The UK essentially had the best of the EU and had avoided the worst of it. It’s amazinf that they voluntarily gave up that deal.