Greek PM calls referendum on bailout terms
theguardian.com
theguardian.com
The real underlying issue is: who has budgetary authority in Greece, and what does that mean?
State debt does not usually come with strings attached. Even if the repayments cannot be made, debtors don't get to make policy. The big exception is the IMF. The ECB is now also trying to take on that role.
The ECB is trying to run Greece like a chapter 11 bankruptcy. Not only a repayment plan, but dictating who wins and who loses in Greek society. The critical issue is pensions, which are considered "high" despite that not really being true: http://blogs.wsj.com/brussels/2015/02/27/greeces-pension-sys...
There is an extra factor in the pension system that out-of-work benefits are really not generous or even functioning at all: http://greece.greekreporter.com/2014/06/16/85-in-100-unemplo... So it has become common for elderly people to support younger ones. Cutting pensions too deeply will blow up the unemployment problem.
The question is really poverty+independence vs vassal status. Quite a lot of people are saying they are willing to put up with poverty to preseve their dignity.
- poverty+bad_government+continued_corruption+leftish_dreaming+failure
- poverty+listen_to_advices+reform+better_life
Just look at what kind of better life the "good advice" and "reforms" of the West has brought the people in Africa, the Middle East and the various western supported military dictatorships around the world.
This way of thinking (we are always good and mean good) is the fundamental underlying issue in the conflict between the west and the east that has been raging now for more than a thousand years.
Western way of thinking is all about superiority, cruelty and power disguised as good advice because we know best whats good for others.
That way of thinking also applies to west entities: the powerful one is always right.
Nope. It's the European periphery vs Western European powers, especially Germany, who profit from being boss hogs in the E.U. and save their "too big to fail" financial institutions.
It's also Greece vs. (e.g.) Ireland, Spain, Lithuania which are located on the periphery.
E.g. http://www.bbc.com/news/world-europe-31072139
And it's especially Germany, because Germany is calling the shots in the Eurozone. France plays second fiddle, and Britain is more concerned with its Atlantic allies.
Mind you, we're speaking of a nation of 11 million. The whole former USSR got an order of magnitude less financial aid throughout the 1990s with an order of magnitude more population, and being in worse shape than Greece to start with. I don't think it's unreasonable for creditors to care how the money are spent with this type figures.
Errata: for "ECB" read "EU as represented by the Commission. The ECB are providing life support for the Greek banking system and trying desperately not to either get dragged into the politics, lose all their money, or blow up the EU banking system.
Most of the aid to Russia was structured as loans throughout 1990s as well, but much of these were written off as it often happens.
> It's not the size of the debt that matters in absolute terms, but the ability to make payments.
Well this is what the fuss is about, isn't it? The lenders don't see Greece being able to repay unless they implement austerity measures.
It's not aid per se though (like the Marshall plan you compared it to).
First, it still is in the forms on loans. Yes, the "aid" is just further loans (with lower rates), that are piled up on the previous debt (with interest on them repaid normally all these years).
Second, the aid goes this way: from EU taxpayers and the Greek state (its payback to the aid loans), to EU banks. The aid money are not given to Greek government to pay salaries, etc. or any such purose. They go directly to the creditors. Like the "too big to fail" Wall Street bailout, this is too about siphoning money to central European banks to protect them from toxic assets they had accumulated.
Third, this "non-aid" aid (essentially letting Greece near-default and then lenting them money month-to-month to repay its debt under certain conditions), was used to bully Greece to take a number of tax hikes, austerity measures etc, who killed its economy (30% unemployment and up to 50% youth unemployment, 40% loss of wages, etc) to give money for the "aid" loans (which never touched Greece), and to
Fourth, all this is even more damning considering that Germany in WWII invaded Greece, resulting in 700.000 deaths from famine, thousands of deaths from executions, and massive destruction of infrastructure. They also took a "loan" from the occupied country, which they never repaid, without also repaying their war recuperations. Germany was absolved from doing so in the early fifties, despite the harm they caused to Greece, because they were new cold war darlings and valuable US allies (and ditto for Eastern Germany / USSR). And what could Greece do about it anyway?
Here are some thinking points: http://www.forbes.com/sites/afontevecchia/2012/02/21/greek-b...
http://in.reuters.com/article/2012/06/29/spain-germany-bailo...
Now he realizes that his plan failed and is trying last minute to shift responsibility to the Greek public (i.e. "let them decide what the right path is"). In any outcome event (Greece leaving Eurozone or Greece accepting Troika terms) he would be able to point to the referendum and tell everyone that it wasn't "his fault".
Apparently this didn't work out (ultimatum by the EU), but how could they find out without at least trying to negotiate with the EU.
He wasn't voted into power to leave the Eurozone, he was voted into power to end austerity and stay in the Eurozone.
When should he have called for a referendum? After the first negative response they received from the EU? This would be silly.
Of course they tried to negotiate and to explore all possibilities until they either reached a mutually acceptable agreement with the EU or they received a final ultimatum.
They simply don't have a democratic mandate to accept continued, worsened austerity. Everyone basically agrees that if the vote is "yes", that will be the end of the Syriza government. If it's "no", well, then they have the support to continue rejecting austerity.
they were elected this January (democratically)
If they continue down the path of their mandate it will result in Greece exiting the Eurozone. This should not be a surprise to anyone.
The other choice is to accept Troika terms, keep Greece in the Eurozone, and potentially lose face.
In any case it is a situation that the Tsipras government caused, a situation that was predictable and a situation that they should have to deal with and stand by themselves.
The whole point of having a government is that the people should not be faced with having to make these kinds of decisions that involve many complexities and have long-ranging consequences. Calling in a referendum for precisely these decisions is a declaration of incompetence.
I disagree with you. He was democratically voted into power 5 months ago to end austerity, but NOT to leave the Euro currency or the EU.
Now that he came to the conclusion that leaving the Euro currency is inevitable if Greece wants to end austerity he does the right thing any person in power should do:
He lets the population decide thereby giving him a mandate to either continue austerity or leave the Euro currency, both of which he didn't get the mandate for when he was voted into power.
Tripras promised to end austerity without having to leave the EU. This was completely illusory in the first place. Politicians overpromise and fail, that's part of the game. The right response is to either be a man and continue to fight for the values you believe in or to admit defeat and step down.
But you can't call in referendums every time the situation gets too hot, particularly not in circumstances like the current and within a couple of days. That's just ridiculous.
Greece could default, revert back to their national currency or keep the Euro currency and STAY in the EU at the same time.
He declared what he wanted to do, this of course meant that he had to convince the other EU elites which required open ended negotiations in good faith.
I'm sure that no one in their right minds in Greece believed that Tsipras simply could dictate something to Brussels.
Apparently negotiations failed, that can always happen, but at least he tried.
Also It is never ridiculous to let the people of a country decide especially on hard questions after the facts on the ground have changed. I never understood the mindset of people who loathe on democratic decision-making.
You seem to believe that there never was the possibility to reach a mutually beneficial agreement to begin with, and Greece should simply roll over and let their economy contract another 25% after it has already contracted 25% in the last years.
If this were the case (I disagree) then maybe it's for the best to exit the EU and work with the Russians and Chinese on building a better future for the Greek people.
> Also It is never ridiculous to let the people of a country decide especially on hard questions after the facts on the ground have changed.
"After the facts have changed". Sorry but I have no idea what you are talking about. The facts have been on the table for about five years now, in plain sight for everyone.
> You seem to believe that there never was the possibility to reach a mutually beneficial agreement to begin with, and Greece should simply roll over and let their economy contract another 25% after it has already contracted 25% in the last years.
There was that possibility but Greece just simply didn't have any real leverage in the discussions. Tsipras mislead his own people in that regard and now he needs to face reality.
And yes the Greek economy will contract. But never was real to begin with. It was all just built on other people's money and it wasn't built to sustain itself after that flow of money dries up. So of course, what's not sustainable will deflate.
So with that in mind, what happens after 5 July? The rest of the EU will be placed in the uncomfortable position of either caving to the demands of the Greek citizens or somehow taking the position that the referendum is irrelevant--which will look very undemocratic. But to cave to Greece would mean the rest of the EU taking on an indefinite financial drain.
I don't see how this ends any way other than Greek banks collapsing or Greece leaving the EU.
In reality, they're just keeping their word. They were elected to prevent austerity. By not signing up for even more austerity, they are just fulfilling their democratic mandate.
A new government that accepts the terms of yet another loan they can't pay back is just going to end up in the same mess two years down the line.
Germany wants them to turn into some German style mini-clone. Germany needs to accept that other states are like children; naively, you think you can bend them to your will and force them to behave in this bmanner you think is acceptable, but you are a fool if you believe that to be the case.
I honestly did not expect this one :-)
Inhave spent some time trying to wrap my head round this and it does seem that the Greek government, fairly or unfairly, is going to have have its legs broken over this, but if serious fiscal Union of other steps towards solving the fixed exchange rate and debt issues across all of Europe are not included then the ECB is at fault - they need to turn round to the rest of the council of ministers and say "you need to include this - we don't have the authority"
A programmer spelled it out on a blog entry, its the same currency the Euro, German productivity is rising with x percent per year versus the Greece are falling in comparison with Germany. Combine that with unwillingness to pay taxes in Greece and you have bad funding, non efficient government with high debt.
My suggestion, let the Greece people default on their debts, let the original bond holders take their investment losses on the investment. Give the Greece people back their local currency the Drachma it will then become a cheap country to have a vacation in and people will go there instead of other countries.
The Greeks have issues, just like a lot of homeowners got in too deep, but if your bank, or your banking sector can't deal with bankruptcies then its not really the bankrupts fault, They took the deal they were offered with interest on one side balanced against risk on the other.
It seems like a bad idea to _me_ to default and leave the Euro. It will almost certainly be economically worse for the Greeks in the near-term than accepting the Troika's conditions for more loans, but it could be rational if the Greeks value independence very highly compared to maintaining their current standard of living. If you're going to do something with such dire consequences, though, a referendum seems like the way to go.
The government that acted like nagging teenagers doesn't want to grow up, and chooses to bail. It saddens me that i voted for them.
Truth be told, the EU is forced to look in the mirror this time: Despite all the rhetoric and despite most europeans liking the idea, the greeks do not become more like germans and the germans do not become more like spaniards.
Yes, and they should have done so much earlier. If the other Eurozone governments would have listened to popular demand, Greece would not have been bailed out, and the default would not affect their taxpayers as much as it does now. The whole bailout programme was hubris, and it is time to call the bluff.
And Germany should elect finally someone competent. Merkel is a joke.
Merkel is no joke, she is the most intelligent and gifted politician around. (Of course this is as subjective as your statement, but I'm right :-)).
She is entertaining Cameron's crazytalk of secession. Instead of just saying - go on, let me see you. And that means she has no idea what she is doing.
But his party also has lots of people who cling to dream of the British Empire, and don't like social democracy, who dislike what the EU stands for. Those people were threatening to defect to a smaller party, which under the UK's ridiculous first-past-the-post system meant that those single issue voters could heavily influence policy despite their relatively small numbers. As a result we're going to have a referendum, that Cameron didn't actually want to have, and which he's going to campaign on the pro-EU side for.
So Cameron needs to make it look like the EU is making concessions, so that he can return to the UK and campaign to stay in and make it seems like he's won some great victory. Note that he's being very vague about what he wants from the EU, this is because he's going to claim victory whatever happens, and he knows probably nothing will happen.
Merkel also knows this, and knows he knows, and so the only thing she needs to do is not embarrass Cameron too much in order for the UK to vote strongly to remain in the EU. Calling his bluff and exposing this nonsense for what it is would be fun, but not particularly smart.
Why would Germany leave the Eurozone and devalue their own money? Why would UK and its other rich friends let the euro and thus their money be devalued.
And even if Germany leave the Eurozone which is highly unlikely, there are still many strong economic powers in Eurozone, so the Euro wouldn't devalue enough to support weaker economies.
This situation is much more complex due to continuous delay by European powers to discuss this matter.
Also, wages would decrease relative to the rest of Europe because SEK is more valuable now (This would also result is movement of jobs out of Sweden to other European countries).
Now the imports are flourishing and export industry is dying out and wages are getting lower, unemployment may be rising. The in-country manufacturers would keep the prices same for their goods to be sold within the country, but people's wages has decreased, so in order to compete with competitive import industry they will reduce the goods prices, which in turn will decrease their staff's pay. Thus, even though SEK is strong compared to rest of Europe, but within Sweden, people are making less than before, which in turn will lead to inflation.
Also, I haven't yet accounted to another possible consequence of this, while SEK is stronger relative to Euro and Swedes might be making less money, American economy might not be affected and $ would still be the same. This will affect Swedes international buying power.
A strong control by government may change a few factors here. If I am wrong somewhere, I would be happy to be learn new things, please give reasons.
I think a couple of the arrangements put in place to bail out the French and German banks are basically a policy shift towards that.
If the goal is to make the Euro work, then yes. More realistic it would be better to roll back parts of the EU, and strengthen other. Environmental policies and free trade is really the stuff the EU needs to focus on and leave the rest to the individual countries.
I'm a big supporter of the idea of a European community and the ideas behind the EU, but I'm very much against what the EU has become. We also need to accept that many Europeans want small, more homogenous states and less EU interference.
It makes sense for Alexis Tsipras to call for a referendum, because on the one hand they don't want to fulfill the requirement from the ECB, EU and IMF, on the other they also don't want to leave the Euro. If those two options being mutually Tsipras can't win, and if they public believe that those two options are bad, they should get to pick which of those options they believe to be the lesser evil.
Greece can't stay in this perpetual economical limbo. There needs to be a plan that doesn't require the EU top politicians to meet every year and which let the Greek businesses know what to expect for the next 10 years.
(It doesn't have to be zero-sum, but it is in the current setup! It's not possible for all EU countries to run trade surpluses with one another)
IMO that's the sign of a weak leader.
I wish more political leaders would recognise that they're answerable to the electorate, and put more controversial laws to a public vote instead of just imposing their will.
The people want two contradictory things, based on the anti-austerity and "We want to stay in the Euro" protests. It seems fair to ask the people "Do you want the Euro, regardless of what austerity measures that might require" or "Do you want to avoid austerity and risk having to leave the Euro"?
If you put it that way he's not a leader at all. He's just an opportunistic liar taking advantage of a bad situation.