Comment by RobertoG | Hacker News Reader

Comment by RobertoG | Hacker News Reader

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"[..] That demagogic rhetoric comes up commonly and it makes the same fundamental mistake or perhaps not wanting to understand that serving your creditors [..]"

Insisting that the path taken with Greece was the good decision is what looks like demagogic rhetoric to me:

-In a country of 10 million persons, half a million have immigrated (probably the young and with more studies).

-They had a fall of their economy bigger than the USA in the Great Depression, for longer.

-They had been (and are being) forced to sell assets that belong to all the Greeks.

-Their industrial capacity is in its way to disappear totally.

-Of course, the quality of life have fall and unemployment is very high.

-Their economy have been directed by foreign powers.

-All the previsions done from the IMF, EuroArea and company were totally wrong.

-Their public debt is the same, if not bigger, that when the crisis started.

So, my question: what have to happen for you understanding that the option taken was wrong?

Counter question: what would have been the alternative? Default, exit €, and then all of the above but worse? I know that there are lots of people out there that think more debt is just the answer, but consider two things:

1. Your today's debt is other people's pension fund. So with what right shall a Greek pensioner retain her quality of life at the expense of a Dutch pensioner? 2. Exiting the Euro would undoubtedly shut down imports. At least for a while it would be effectively the same as cutting wages, savings, and pensions by some massive margin. Also the state would have no one to lend money from just after a default. Hence it would be forced into an even stronger austerity program.

> Default, exit €, and then all of the above but worse?

Says who? The economists who did not even seen the financial crisis coming and were clamoring that the real estate market was solid and totally fine even as late as 2007??

Just wondering...

The troika's handling of Greece was despicable, vengeful, irrational, and counterproductive.

> what would have been the alternative?

An early writedown of some debt and extension of other, enabling the economy to return to growth and service the remaining debt.

Re 1.: Pension funds and other institutional investors invest in equity and debt world wide, taking into account risk and return. Sometimes they make mistakes (or even not - sometimes the dice fall badly), and an investment goes sour. That's the market at work. In this case, however, European put massive amounts of money into Greece that were not used to prop up the economy, but to bail out investments by German and French banks. So, basically a transfer from the European tax payer to some banks.

2. It would make imports very expensive, but free up the domestic economy and make it more competitive.

"Optimum currency area" describes what's necessary for a currency union: homogeneity wrt external shocks (not the case in the EU), high factor mobility (limited in the EU, due to language/culture), or internal transfer payments.

In my view, Europe sat down for a nice dinner (10 years ago with the introduction of the Euro) in a restaurant and enjoyed it over a decade (with massive growth financed by cheap debt in many "peripheral" countries), and when the bill came (oops, we need these internal transfers now) - refused to pay. Shameful.

> European put massive amounts of money into Greece that were not used to prop up the economy, but to bail out investments by German and French banks. So, basically a transfer from the European tax payer to some banks.

Could you elaborate a little bit more? I never heard about it before.

https://www.esmt.org/pub/where-did-greek-bailout-money-go

> Could you elaborate a little bit more? I never heard about it before.

Where are you from?

No need to be snarky. Most media reporting on that crisis was histerical rhetoric about "lazy Greeks who won't pay their debts" -- a narrative enabled by North-European politicians like Schäuble and Dijsselbloem to cover their actions. A lot of well-meaning people fell into that propaganda trap.

I wasn't snarky...

Another good source, if you want a necessarily subjective, but I think sincere inside view, is the tell-it-all by famed former Greek finance minister Yanis Varoufakis Adults in the Room: My Battle With Europe’s Deep Establishment.

It's a bit technical occasionally, but really riveting and full of drama (unfortunately not fictional).

>but to bail out investments by German and French banks. So, basically a transfer from the European tax payer to some banks.

This is what gets me. What is an "investment" after all? Some amount of potential profit with some amount of risk. If the risk just gets eliminated (win: keep the money, lose: taxpayers cover your losses) then what the fuck kind of game are we playing?

I want in too! I want to go to the casino, if I win I keep the money, if I lose people I will pick everyone's pockets until I'm in the green again.

If you want to play that kind of the game, you better be friends with the casino boss.

In short, here you better be friends with the politicians, so that you can be bailed every time you need them. That doesn't come for free either, when you are winning you need to share some spoils with them.

That is what is supposed to happen though. If you have your own currency you have more control over your economic destiny. Greece's monetary policy was set by their creditors, and they were insolvent, that is a highly irregular situation for a country to be in. Instead of weakening their currency which at least brings in more foreign investment, they had to sell assets off, which serves nobody but their creditors.

The Euro is, for all purposes, a foreign currency.

You are making the (in my opinion wrong) assumption that Greece default has been avoided instead of delayed.

There is no way Greece can pay that, the only difference is that the money is now owned to international institutions instead of French and German private banks.

You make also the assumption that a Greek government with it's own floating currency would follow a pro-cyclical fiscal policy, like the one force on them now, instead of a sane one.

1. I don't know anything about the Netherlands pension system, but I doubt is based in only private institutions. If they have a public system, the dutch pensioners could receive whatever the Netherlands decide through its democratic institutions, only constrained by the real resources available to the Netherlands. Of course, being an Euro country, that could be decided outside of Netherlands.

2. A country that works with its own floating currency don't need to borrow its own currency. So the problem would not be money.

The biggest problem for a Greece outside the Euro, would be that they are very dependent of imports. In order to fix that you have to develop an industry. In order to develop an industry you need investment and industrial policy. That's it: the opposite of what is being forcing now in Greece.

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