Greeks Reject Bailout Terms
nytimes.com
nytimes.com
All the while, there is absolute ZERO condemnation for banking entities making risky loans. There is not even a tacit nod towards acknowledging that if banks make loans that fail, it is their loss to eat. Not a whisper about how taxpayers have been surreptitiously bailing out banks, and not Greece.
Somehow, a creditor is deemed morally superior to the debtor. What repulsive rhetoric!
Right now, I feel sorry for the people in Greece, it seems like they work long hours for nothing and their government is completely underwater.
they'll take your pensions from the pension pot, etc.
This deal is about giving predatory lenders political power over nation-states.
And with this rejected, who will give Greece money now? I mean, who's going to lend money to someone when you know they're going to tell you that you were a sucker if you thought they'd pay you back?
It is perfectly normal for countries to default. That is an expected part of lending.
Here's the list: https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises
If you read the section under IMF on the Latin American debt crisis, you'll see quite a few parallels with the Greek situation:
Not sure you really understand the situation. Everything which you said "isn't happening" already happened. There was already a massive haircut on privately held Greek debt (but not the publicly held greek debt), and the banks already ate a huge loss. Something like 80% of Greek debt is now owed to the "troika", with much of the remainder held domestically.
The reason that EU governments focus on debt repayment, and why people talk about taxpayers is because they own the debt, and it's their taxpayers who will eat the loss.
> Not a whisper about how taxpayers have been surreptitiously bailing out banks, and not Greece.
Probably because that didn't happen. Private investors lost something north of 75% of the value of the loans they've made; what haircut has the IMF or French government taken on their holdings of Greek debt? (Hint: Zero.)
http://www.cnbc.com/id/102371294
I could definitely be wrong, just want to know where you're getting your information from.
"A year later, a worsened recession along with a delayed implementation by the Greek government of the agreed conditions in the bailout programme revealed the need for Greece to receive a second bailout worth €130 billion (including a bank recapitalization package worth €48bn), while all private creditors holding Greek government bonds were required at the same time to sign a deal accepting extended maturities, lower interest rates, and a 53.5% face value loss."
When you do the math (the maturity extension and interest rate cuts were steep), the total haircut was 75%+, with the bulk of the losses absorbed by French banks. It got a HUGE amount of press back in 2012—at least in the financial press. Google for "greece", "2012", "bond swap", "haircut", "debt swap", etc., you'll find hundreds of articles. Many of which boiled down to "um, if the troika doesn't take a haircut too, it won't fix the core problem, and we'll be right back here in another 2-3 years". They were right too. :(
Edit: Your link is part of that. All that's left is government held debt, and they STILL insist on avoiding any haircut, just as they have been this entire time. They were happy to see other people lose their money, but by now we're out of people with skin in the game. All that's left is the troika. Their insistence on avoiding a haircut is why everyone else had to have a 75%+ haircut..and why even that wasn't enough.
[1]: https://en.wikipedia.org/wiki/Greek_government-debt_crisis#2...
Even if I agree with your argument, I guess what we should say is that the haircut wasn't enough. The lenders should have lost all their money because they debtors are insolvent. There was no reason to involve taxpayer money in this mess.
> The lenders should have lost all their money
"The lenders" are mostly the Troika, and always has been. You seem to be working on a mental model where most Greek debt in foreign hands is owned by private banks (or was owned by private banks, or was originally lent by private banks). Not so.
> There was no reason to involve taxpayer money in this mess.
Also untrue. A currency union ABSOLUTELY requires large fiscal transfers from richer to poorer regions, probably in the neighbourhood of 30% of GDP for a region like Europe. This has been known for decades. EU taxpayer money was on the hook from the moment the Euro project started. (If EU voters were never told that, that's a separate issue.)
You have not done what I asked, which is to mark the flow of money to establish your point, nor have you cited a single source apart from Wikipedia. Let me do it for you. Here's an article from WP that claims most bailout money went to pay off bondholders who were in large part european banks and pension funds. http://www.washingtonpost.com/business/economy/most-greek-ba...
Do you have an agenda here? You seem to be repeating the same thing over and over without providing any sources.
To your second point, sure. Why are taxpayers in Germany crying about it now? Let them lubricate their eyes instead with the inevitability of fiscal transfer.
In any case, I am not interested in debating this issue. My concern in the original post was the moral discourse surrounding debt, that treats the rhetoric of the moneylender to be the dominant rhetoric.
You asked why people are talking about taxpayers having to bail Greece out, and why we don't try and punish the banks. The answer is because the debt is overwhelmingly owned by taxpayers, not banks[1]. (Which, in turn, is in large part because in 2012 we punished the banks still holding Greek debt pretty severely.)
If you persist in thinking that foreign banks hold the bulk of Greek debt, or that no haircut ever happened, then EU politics will continue to be a mystery to you.
[1]: http://money.cnn.com/2015/01/28/investing/greek-debt-who-has...
There is nothing more to discuss. By all means continue posting if you are a last-word freak.
>Now you're just claiming I said stuff I never said.
Oh really?
> More often than not, you'll hear stuff like: [...] "Why should taxpayers bail Greece out?"... All the while, there is absolute ZERO condemnation for banking entities making risky loans. There is not even a tacit nod towards acknowledging that if banks make loans that fail, it is their loss to eat.
Please.
TL;DR - the European bail out of greek debt is really a public bail out of the private banks -- Deutschebank, Goldman Sachs, etc. -- who made the stupidly risky bets in the first place. DB and GS are getting face value* for their worthless greek bonds, and the taxpayers are left on the hook.
But good luck getting that side of the story ever told in the media. DB and GS shareholders need their profits.
* There was a haircut by the private debt holders at one point in time, but interest on that debt has basically made up for it. It was still a profitable investment.
(Lesson for anyone aspiring for a profitable career in international finance: find the weakest member of an organization like the Eurozone, and offer them as much debt as you can get them to take. It will have stupidly high interest rates (e.g. >7%) because it will be so risky. But importantly, make sure that you take on so much debt that a default would ruin you. This is vitally important. Now wait for the inevitable to happen and your own government to bail you out because you are Too Big To Fail. Be sure to have a golden parachute in place in case a socialist is in power when it happens, but don't worry at worst you might lose one year's bonus. You will never go to jail.)
Second: "There was a haircut by the private debt holders at one point in time, but interest on that debt has basically made up for it." That's utterly wrong. It's so wrong, I'm not even sure how you could make that sort of error in good faith. Private banks lost 75%+ of the value of their Greek debt, in large part due to a forced reduction in interest rates. It's almost worthless because they have no ability to make it up via interest.
As a result, the private sector has basically written the entire thing off as a bad idea and walked away; the only real holders of Greek debt left are the troika and domestic Greek institutions.
We're discussing matters of public record. BNP Paribas loss on it's greek debt holdings is in their accounts in black and white. Who owns the debt, what the terms are, what the yield is; all of that is readily available, and none of it is what you imply.
If you want an example of publicizing private debts, look at the Irish bailout, not the Greek haircut.
2) The haircut was in 2012. Interest rates in the decade-long run-up leading to the crisis was 5-7%. I'll leave it as an exercise to the reader to calculate how long it takes to make up a 25% loss at those rates (hint: less than the 10-year maturity period of the bond).
> the only real holders of Greek debt left are the troika and domestic Greek institutions.
Which was my point.
But not the ones who actually held significant amounts of greek debt.
> Any guesses why France is the strongest supporter of Germany in the Troika?
French banks already lost the money. At best this might explain why they supported Germany in 2010-2012, and that's assuming that France was acting in the interests of French banks and not the French government which, as already covered, they weren't. You're suggesting an explanation which makes no sense to explain things that didn't actually happen.
> 2) The haircut was in 2012. Interest rates in the decade-long run-up leading to the crisis was 5-7%. I'll leave it as an exercise to the reader to calculate how long it takes to make up a 25% loss at those rates (hint: less than the 10-year maturity period of the bond).
First, it was a 75%+ loss, not a 25% loss. Best case, if a bank made a 10 year bond, sat on it for 9 years and 11 months, and then went through a haircut, they still lost a bunch of money.
Second, even if it had been a 25% loss (which, again, it wasn't), they still wouldn't have come out ahead; you're ignoring their opportunity cost, cost of capital, etc. You're also ignoring the fact that the people who made the loans were mostly not the people holding them when the music stopped. It's the same mistake you made when you mentioned Goldman Sachs, who made money helping Greece cook their books but didn't hold Greek debt*
Third, BNP Paribas and the other banks lost billions of euros; it did not come out ahead, or even close to it.
I was under the impression that the German banks were the biggest holders of Greek debt followed by France and Italy.
After the disaster that was the bond swap (more than 50% of face value removed, and swapped for bonds with 30 year terms, AND the interest rate slashed to almost nothing), most of the banks cut their losses and ran.
The exception is, yes, the German banks (along with US and UK banks). Their exposure has climbed, with each now holding around €10b, with Germany slightly in the lead ([2]).
So at the time of the 2012 haircut, French banks were most exposed (among banks) and lost a lot of money. Today German banks are most exposed (among banks), but it's a lot less than it was; private sector debt is way below its peak.
But keep in mind! Something like 80% of all Greek debt is held by public institutions, aka, the troika. All foreign banks, added up, are still something like...I dunno, 10% of total Greek debt. Greek is in hoc to the EU, the ECB, and the IMF; the €10b owed to German banks is peanuts in comparison, to the extent that the banks don't even have a seat at the negotiating table any more.
[1]: http://www.telegraph.co.uk/finance/financialcrisis/9125614/G...
[2]: http://www.theguardian.com/world/datablog/2015/jun/19/the-gr...
And yes, all numbers are face value. The market value of all that greek debt is...well, VERY much an open question right now. :)
Sometime in the last 10 years many people and the media in the "core" countries got all smug and uppity towards those lazy "peripherals" and so on forgetting exactly why the project was started, overnight we stopped being "Europeans" and became "undustrious Germans", "smart and holier than thou Nordics", "lying Greeks", "lazy Spanish" and in case of my own little peripheral island country "reckless Irish".
Yeh :(
As with all similar noble initiatives, the EU has much less to do with fairness and much more with power concentration (as is becoming exceedingly obvious).
GP is right that the EU is the result of a long process that started with the goal of preventing another big European war. You are also right in that a large part of what is happening is a result of power politics.
Hyperbole? The E.U. is a project spearheaded by the same 3-4 nations that had the biggest colonies on earth, enslaving over 2 billion people in horrendous conditions (including mass executions when they misbehaved). And that was going on, not in the middle ages, but until the sixties (and in a different form today).
Betweem them, the country that had the less colonies, started 2 world wars in order to expand. EU was created, among other things, to contain that country (and you can find that as an explicit goal from prominent French politicians advocating for its creation)...
Powerful empire-building nations are not about fun and love...
After all, you write: "EU was created, among other things, to contain that country", while my post was in reply to somebody who claimed that peace-keeping was totally irrelevant to why the EU (and its predecessors) were formed.
https://en.wikipedia.org/wiki/French_European_Constitution_r...
It looks like the Treaty of Versailles story. Very dark perspectives...
However, I do agree that it is sad that fighting is happening along national lines and that ugly stereotypes and propaganda play the role they do.
Just recently I was watching serious and respectable German TV and some expert was – probably unintentionally, but hey that’s stereotypes and toxic thinking for you, it worms itself into your heads – talking about Greeks “hiding” money at home after withdrawing it that would be inaccessible and as such money the creditors would have to pay. This toxic way of framing the conversation is just so sad. Greek people who withdraw their very own money from banks because they are unable to trust those banks are not hiding anything or doing anything immoral or unethical or even slightly impolite. They are the victims in that situation – and we have to be very careful how we talk about people, especially if we generally talk about “Greeks” or “Germans” or whatever.
Europe has treated its "citizen" like rubbish since the crisis. You can hardly blame the push of Eurosceptic parties across Europe - in time of crisis, Europe is really ugly.
Voting against austerity and restructuring policies is not standing behind your goverment/nation. Trusting it with your money is.
Promiscuous expansion made ever closer integration harder and less likely and thus actually hurt the purposes for which the union was originally created.
It's like when people complain about the Security Counsel and its permanent members. They are missing the point of the UN. It isn't supposed to be a fair body for global quasi-governance. It is supposed to prevent World War III.
States are able to compete economically. People are able to move within the country to states with policies more in line with their own views. States have to have balanced budgets while the Federal government...well...doesn't.
There's a push in this country lately to do everything at a Federal level though, which creates constant tension because effectively people are trying to push their views on each other rather than simply pushing them on their own states and bearing the consequences internally.
At the same time, people become righteously offended at this concept. For every New Yorker I ask "Would you like Texas to govern New York?" I get another who is determined that New York should be able to dictate policy in Texas.
The cognitive dissonance is maddening.
Is that really the same thing? For certain economies, the impacts of state-level decisions have federal ramifications. California can remain relatively autonomous when making decisions about how best to regulate an information economy, but I do think that Calfornians and New Yorkers have an interest in how resource-extraction economies, say in the South or in Appalachia, do business.
The logical conclusion of your argument is that a non-exporting, environmentally neutral area should, again for reasons that you have not made clear, have increased legal precedence over other areas.
> The logical conclusion of your argument is that a non-exporting, environmentally neutral area should, again for reasons that you have not made clear, have increased legal precedence over other areas.
Come on, man, now who's being half-assed?
I am completely unclear how this is the conclusion you jump to. If you earnestly want to argue with someone, process their argument by pretending it was your position, and consider what would the most advantageous interpretation of the argument be. If you want to set up straw men for me to knock down, then that's just wasting both of our time.
A more obvious conclusion would have been: being that natural resources -- air quality, water purity, natural beauty, etc -- are non-renewable resources, which once polluted cannot easily be recovered, and are not owned: they exist, then, to be enjoyed and consumed by all citizens equally. Therefore, no particular state -- even the state in which they are found -- has exclusive right to them.
Put in other words:
* California can decide, largely on its own, to export sites onto the internet, because the internet is (mostly) not a consumable resource
* but it cannot unilaterally decide to export oil onto its beaches, because the beaches are non-renewable and belong to more than just Californians
I don't know why you would assume that: There's a whole host of tensions that come with decisions made at the state level. Reciprocity is a huge one that comes up semi-frequently (for example with firearm laws).
> People are able to move within the country to states with policies more in line with their own views.
"Just move" is an ok answer if your beef is, say, with Oregon's gas pumping laws.
It's a really awful answer if your problem is that your state allows "separate but equal" bathrooms for black people. Those suffering at the hands of those extreme policies are also the least likely to have the means to move.
> States have to have balanced budgets
I don't know why you think that. State budget crises aren't unknown or even all that uncommon.
> There's a push in this country lately to do everything at a Federal level though
Because for most of the history of the United States, human rights issues have only been resolved at the federal level. Slavery, segregation, women's suffrage, and same-sex marriage have all been framed as "States Rights" issues.
There are and those get to be negotiated and worked out. The tensions arise, such as with firearms laws, because states don't see eye to eye on those issues so they get to dictate exactly how things work in their own states. That is entirely the point. Firearm laws are a great example because just because I might wish your state did things differently...it's not my state and therefore I don't really get a vote.
> People are able to move within the country to states with policies more in line with their own views. >>"Just move" is an ok answer if your beef is, say, with Oregon's gas pumping laws.
"Just move" becomes a much more difficult proposition when your beef is with the entire country. I have neighbors who moved their kids out of Colorado as soon as marijuana was legalized. That was a choice they were able to make with a policy they disagreed with.
>>It's a really awful answer if your problem is that your state allows "separate but equal" bathrooms for black people. Those suffering at the hands of those extreme policies are also the least likely to have the means to move.
The extreme example counter response is never far behind in political discourse. Civil rights / human rights issues are a different ballgame and those absolutely are things that need to be resolved at the federal level. There's a whole host of other policies that don't though.
> States have to have balanced budgets >>I don't know why you think that. State budget crises aren't unknown or even all that uncommon.
They are crises because they have to be balanced. That is the point. If your state's budget doesn't work there are furloughs, layoffs and immediate budget cuts to balance it. At the Federal level that doesn't happen unless Congress fails to pass ANY budget regardless of whether it's balanced.
> There's a push in this country lately to do everything at a Federal level though >>Because for most of the history of the United States, human rights issues have only been resolved at the federal level. Slavery, segregation, women's suffrage, and same-sex marriage have all been framed as "States Rights" issues.
Again, above answer applies. Those ARE the issues that are Federal issues. There's a wide gap between those issues and virtually every other policy in the country being effected by a broad reading of the interstate commerce clause.
That causes some AWFUL problems for people traveling between states, which is incredibly common nowadays because of air travel.
Google for the myriad of really terrible stories involving people accidentally traveling to New Jersey with a firearm. In at least a few cases they were forced to travel to New Jersey because of an airline mistake (unexpected layovers, misplaced luggage, etc.). Reciprocity is a much bigger issue than you're making it out to be.
> The extreme example counter response is never far behind in political discourse.
"States Rights" almost always comes up as an argument in the context of human rights violations. I don't think it's too extreme to remind people of that.
> There's a whole host of other policies that don't though.
Where's that line get drawn? If I frame marijuana as a human rights issue (see: the racial discrepancies in conviction rates for drug offenses), does it become ok for the federal government to resolve then?
> They are crises because they have to be balanced.
Errr no? There are plenty of states that are "balanced" only because the federal government gives them copious amounts of money, well in excess of their GSP.
They're "balanced" but to call it anything other than artificially balanced is silly.
> There's a wide gap between those issues and virtually every other policy in the country being effected by a broad reading of the interstate commerce clause.
Those are the primary issues anti-federalists bring up when States' rights comes up as a discussion, both historically and currently (not slavery obviously, but same-sex marriage is an incredibly recent one).
If you're talking about things like the drinking age (which isn't even really a mandate, just an extreme carrot on a stick), then sure, whatever - but who cares? Those are trivial issues in comparison.
That's not about reciprocity so much as it is about NJSP thumbing their noses at FOPA (federal law since 1986) I think
Firearms/Jersey: That is true and it's one of the big reasons that if you are going to transport a firearm you have to know the laws. I'm not arguing that it doesn't have problems.
People disagree about things all the time. People argue about things. The way cities setup laws causes issues and confusion for people, especially travelers. It can be annoying but it's less annoying than having outside parties make those decisions for you without the local residents having a say in the matter.
States/Human Rights: Fair enough. I take no real issue with that outside of a branding/labeling political perspective.
Line: Honestly as often as possible. The line is supposed to be hard, difficult to overcome and argued to a point of undeniable certainty before the Supreme Court or to the point that it gets past both houses of congress AND the president. If something can't be argued convincingly enough to pull that off, it's left up to the states. Framing anything as a human rights issue would depend on backing up an almost total lack of demographic free will in order to do so. That's why a lot of Indian reservations are dry though. The native american population doesn't handle alcohol well (https://en.wikipedia.org/wiki/Alcohol_and_Native_Americans). Doesn't mean the whole country shouldn't have it, but it makes complete sense for them to want to ban it locally.
Balance: Federal programs that create an exercise of redistribution are out of the hands of state budget control but the funds are still limited, budgeted and when the money runs out somebody is still left holding the bag.
Issues/Gap: There's a number of issues that go well beyond the drinking age and it usually has to do with aiming a federal monetary firehose at an industry with no regard for the after effects. The Farm Bill is a great example of this because of the disruption that it caused globally and played a huge part in Mexico's farming industry struggles, which had cascade effects eventually helping us get to the immigration issue we have today.
Others revolve around tax policies around businesses and the lack of understanding of how money flows in different areas. Tax policies are huge, especially when talking about business tax policies because the big guys who everybody envisions when talking about taxing the 1% or forcing businesses to provide benefit X can actually afford it. The smaller businesses caught in the middle are the ones that can't and they are your eventual potential competitors. Small businesses employ 2/3 of the people in this country and every tax increase hits them harder than anybody else because most of them are 1 or 2 bad months from going under completely.
We can look at how we got to the medical issues we have today, when the federal government incentivized businesses to provide health insurance and never gave citizens the same ability to simply pay for it directly pretax. That removed insurance from the consumer market and was the first big step in creating the cluster that led to needing an overhaul.
We can look anywhere from student loans and education prices in conjunction with national campaigns that made it undesirable to just learn a trade rather than getting a degree...ANY degree regardless of its ability to help you earn a living. Increase demand, create money out of thin air to pay for it and wonder why prices keep out pacing inflation...
Let's not forget military spending while we're on the subject.
We can look at housing prices and the issues on both sides of the federal isle that led up to creating that debacle.
These are not trivial issues. They are massive economic disruptions that happen when a federal financial firehose is aimed at a problem and they always have consequences.
Right now the TPP is squeaking its way through the system with barely a blip on the radar. That legislation is scary but all anybody on my Facebook feed cares about right now is rainbows and confederate flags - the issues that let people for one reason or another feel better about themselves.
The issues that have serious consequences that involve math, numbers and logical exposition of the worst case scenarios in trade agreements...those are boring. Those are federal. Those are out of reach and we don't immediately FEEL how those affect us. We'll deal with that when we have to.
Just like credit card debt.
Just like the 30 year mortgage that will result in paying more than double the price of the house but we could fit it in the cash flow.
Just like the degree with zero job prospects that we just took on $50,000 worth of debt to get.
Just like how we really stuck it to those greedy businesses owners to get them to give us stuff that we assume they can afford...because after all they own a business and by default, that makes them rich.
There are a lot of fundamental issues that we need to address at a federal level. I don't think it is decided that a strong central government causes a break down in the union of states.
Off-topic: I blew a zero in three different breathalyzers. Who comes up with idiotic rules like if you have an open container in the vehicle (that I never touched) I am automatically guilty of drunk driving?
"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."
I'm aware of the Supreme Court interpretation of it but there are also a number of people who contest that particular interpretation, as people do on multiple Supreme Court rulings.
Totally agree with you on the highway funding thing. That's basically the tax equivalent of taking your wallet and then telling you what you have to do to get it back. It was one of the earliest recent examples of a Federal power grab and if I'm not mistake that was actually Reagan.
The problem isn't whether you allow some things to be decided at the state level and some things to be decided at the federal level. The problem is this: WHO gets to decide what level is correct?
There's a very large portion of the US that feels that voting rights issues should be decided at the state level. Same with abortion rights. Same with firearm ownership/possession. Same with gay marriage (and reciprocity is a big one there). I'd lay odds that if not for that pesky meddling Federal Government there's at least one state with a legislature that would be willing to ban miscegenation again, and refuse to recognize marriages that wouldn't be legal in their state.
I believe, the reason there seems to be a push to do everything at the 'Federal Level' these days is because extremism in political views is really LOUD and the more people are getting into a frenzy by living in communal echo chambers. The more people believe that the 'world is ending RIGHT NOW' the more urgent and forceful the 'solution' becomes.
It's a little more complicated than simply accusing the other party of cognitive dissonance. There actually is a right answer and a wrong answer to some of these questions.
K-12 education, for instance, has no business being a state-level issue. It is grossly unfair if a kid in New York learns about evolution while her cousin in Texas learns that Jesus rode a dinosaur to work. (Especially considering the disproportionate influence that Texas has on the textbooks that every other state must buy.) Yet Federal control of educational standards is one of the most contentious issues of all.
This is contentious because there's no constitutional basis at all for the Federal government having any say over education per the 10th Amendment.[1] The Constitution doesn't mention education at all, which means the states should have control. This was mostly the case until the 1980s.
[1] https://en.wikipedia.org/wiki/Tenth_Amendment_to_the_United_...
For what it's worth, I grew up in South Carolina, went to a Christian school up through 5th grade and grew up in a Southern Baptist Church. At no point during any of this did anybody try to convince me that the world was 10,000 years old. We learned dinosaurs lived 65 million years ago. We learned everything we needed to learn. I now have a masters degree.
This school brainwashing stuff that floats around the internet is a scare tactic at best and an isolated minority of people at worst who actually believe their children aren't going to have internet access one day. Most of the best schools in my area now spend more time focussing on teaching kids HOW to learn effectively and core life skills because there is an assumption that the bulk of the information is a few clicks away.
Somebody teaches a kid a made up story, that kid is eventually going to have Google and question just about everything those people ever told him.
Yes, pretty much. See http://www.nytimes.com/2013/09/29/education/creationists-on-... and plenty of other articles. The National Center for Science Education (http://www.ncse.com) is a good place to pick up further insights.
This scenario is a sufficient argument for placing K-12 education under Federal control, in my view. Local control makes absolutely no sense where teaching objective facts in a standardized curriculum is concerned.
For what it's worth, I grew up in South Carolina, went to a Christian school up through 5th grade and grew up in a Southern Baptist Church. At no point during any of this did anybody try to convince me that the world was 10,000 years old. We learned dinosaurs lived 65 million years ago.
At this point I'd say you're an exception, but I don't have access to the statistics I'd need to make the case. Most Christian denominations may not specifically encourage their followers to toe the "Intelligent Design" line, but among Southern Baptists, my experience is that they do. (Of course, the Earth was only 6,000 years old when I was a kid.)
This school brainwashing stuff that floats around the internet is a scare tactic at best and an isolated minority of people at worst who actually believe their children aren't going to have internet access one day. Most of the best schools in my area now spend more time focussing on teaching kids HOW to learn effectively and core life skills because there is an assumption that the bulk of the information is a few clicks away. Somebody teaches a kid a made up story, that kid is eventually going to have Google and question just about everything those people ever told him.
I'd like to agree with you (and did at one point) but the opposite seems to be happening. The rise of the Internet has disintermediated us from our teachers, so to speak. Every moron with an opinion and a Facebook account is an "authority" now.
This isn't just a right-wing phenomenon, either -- look at the childhood vaccination rates in places like Marin County. It's another example of something that should have gotten better, but instead has gotten worse. As you said elsewhere, it's not a partisan issue.
Depending on the economic climate and regulatory environment, this kind of "competition" tends to be a race to the bottom. Those who have even a slight advantage anyway (i.e., the rich) are given concessions such as tax cuts or eroded worker's rights that increase their advantages over time.
The great human project of using technology to lift everyone up equally requires some force against this race to the bottom.
It kinda makes me think of a chart showing which states benefit more from federal tax dollars than they pay in (https://www.flickr.com/photos/michaelpinto/2987025203/ which politifact says is "mostly true" http://www.politifact.com/truth-o-meter/statements/2012/jan/...).
I don't think there's much resentment from the blue states towards the red states for this specific difference, though.
http://www.theatlantic.com/business/archive/2014/05/which-st...
California is almost parity for dollars in versus received.
The bigger question is if that is even a valid comparison to make that 14 states get back less in federal dollars than input.
If it is then you'll have to concede that Wyoming, Kansas, and Utah, aka: decidedly not blue states, are in the same boat as "we blue states".
I grew up in one of those states that is in the top 5 of dollars received. Main reason is the entire state has next to no population. I'm not sure how you get it to parity without a population to do so. That and despite being quite liberal, I have to admit this argument that this is a blue versus red state thing based on dollars received is maddeningly annoying and disingenuous.
If America loses those red states, we lose a lot of our ability to feed ourselves on our own. The grain belt is a huge asset, even given its cost. Giant cities are not islands unto themselves.
/squirrel banter mode off.
Surely what matters is actual dollars. Delaware has less than a million people living in it. California has almost forty million. So long as CA is contributing a net positive percentage to the federal government, it's very likely that they are contributing more overall to the well being of the nation than Delaware is.
If i put in 1k in federal taxes and get 800 back, what matter is it what state i'm in? Or are we saying Delaware residents getting 70 cents on the dollar is not as bad as Californians getting 95 cents because there are more people, thus Californians are more important?
I'm honestly not trying to be a dick here but what exactly is the argument outside of if you aren't California or New York, you're not important to the conversation.
Give me numbers not supposition, how much has California invested in federal dollars versus the other 14 states getting less than their input. Without that this amounts to a pointless discussion.
> If i put in 1k in federal taxes and get 800 back, what matter is it what state i'm in? Or are we saying Delaware residents getting 70 cents on the dollar is not as bad as Californians getting 95 cents because there are more people, thus Californians are more important?
Californians aren't more important individually, but California is. Obviously a million people with $5 each is a larger sum than twenty people with $10 each.
Eliminate NYC from new york state and what happens? Same Chicago and LA in their respective states. Likewise, many western states have huge flows of government spending for reasons that don't make sense on the surface. Those states, tend to have military installations, and huge allocations of national parks and national forest land.
In other words, that type of government spending is not social policy handouts. But rather is the US paying to keep up assets that it owns already (basically security and maintenance).
Rural appalachia is an exception (eg, west va = highly democratic; TN home of senator gore, etc) as these states were the target of many early government projects (like TVA and Food Stamps).
Lastly, huge amounts of governmnet spending are on healthcare
(& social security, which again have nothing to do with modern red state/blue state issues).
Same happens in India, states with separate rules, completely different culture and still functions under one federal umberalla..
Constantly repeating the lie doesn't suddenly make it true.
Also, trying to force people who prefer to remain sovereign and independent (and maybe most of all: democratic) is not a good recipe for a future without "disastrous fighting between states and people".
Quite the opposite.
Or rather that might have been the project of those in power designing the E.U., but it was never a stated goal or a desire of the people of the E.U. nations.
It was mostly bureacrats and technocrats making the decisions for this -- and it has had very undemocratic infrastructure and rules in place from the start because of that.
The prospect of a united Europe (which sounds rather nice when put this way, let's rephrase it, the prospect of an involuntary integration to a larger empire-like unit) was rejected several times by member nations in EU referendums (for the EU-constitution and such).
The problems with the Greek economy that lenders are complaining about now, about the lowest tax collection rate in Europe, the "overly generous" retirement plans all existed before banks made the loans and fixing these problems should have been made a condition of making the loans in the first place.
It will be impossible for Greece to pay off the debt and now instead of the bank management (and the shareholders who appointed them) taking the hit for their incompetence in making the loans the taxpayers will take the hit.
The German and other taxpayers should not have a problem with Greece, but rather that Merkel and other governments decided to pay off the banks 100% instead of insisting that they take a large "haircut."
Ideally, the banks should have been made to take a "haircut" on the loans and the shareholders should have fired the management. Instead Merkel and other leaders let the banks off the hook putting the burden on the taxpayers. Now the taxpayers should fire Merkel and the leadership of other countries that OK'd the 100% payout to the banks in the next elections.
Japan has been extending and pretending for about 25 years now. They are far more indebted than Greece but their interest rates are even lower. There is no conceivable way that Japan is ever going to repay that debt, and it's still growing at a pretty rapid pace. The circumstances are different (very few JGBs are held by foreigners, and Japan issues its own currency), but it's pretty clear from experience that extend and pretend leads to lengthy periods of anemic economic activity. The question is whether default and workout will be any better; the record there is mixed at best.
That's effectively what Japan is doing, by having its central bank loan money at 0.1%.
Does that make it more conceivable that Japan will eventually pay down its debt?
In the case of Japan, since most of their debt is held by residents, it's even a stretch to call this an implicit default; a better characterization would be "wealth tax effected by inflation". Either way, if the Japanese government could maintain a balanced budget, their central bank policy of flooding the market with Yen would eventually allow them to pay off the existing debts.
The Troika indeed has made private creditors take much more than a "say 50%" haircut, in their second bailout package from the 21st of February 2012, the "Second Economic Adjustment Programme for Greece". The private creditors took a 53% cut in principal payments, a massive extension of the term and a reduction in interest rate - they lost maybe 70-75% of their money in present value terms.
And of course, if the Greeks would have been forced into default in 2010 as you demand, none of the subsequent €200bn+ Troika bailouts would have happened - the starvation would have set in 5 years earlier as the country would have had no chance to cover their primary deficits - even without debt repayments.
http://www.newyorker.com/news/john-cassidy/greeces-debt-burd...
'As long ago as 2010, when Greece was first bailed out, many knowledgeable observers, including some members of the I.M.F.’s board of directors, worried that Greece would never be able to pay back all of its debts—its total debt burden is about a hundred and seventy five per cent of the country’s G.D.P.—and advocated imposing a haircut on its creditors. Rather than doing this, the European Union, the European Central Bank, and the I.M.F. loaned the Greek government money to pay its creditors, which were mostly European banks, at a hundred cents on the dollar. In the now-famous words of Karl Otto Pöhl, a former head of the Bundesbank, the bailout “was about protecting German banks, but especially the French banks, from debt write-offs.”'
It's true that later in 2012 there was a "haircut" (as the article states) but that should have been done as part of the 2010 agreement. The funds paying off the banks in 2010 became part of government and government agency debt not covered by the haircut of 2012. They should have made the banks take the haircut in 2010 and thus the taxpayers would have been held accountable for far less debt.
Now as I write this, I realise how totally lost everyone is in this matter. We can only have an opinion, I doubt anyone actually understands what the hell is going on and what to do next.
There's the financial situation, the historical wounds, the pride, the desperation, the fear, the two sides of the coin. And also the freaking heat wave that's scorching us here in Europe.
Many Europeans blame the "lazy" Greeks, Greeks blame the "heartless" Germans, what I've been noticing is a ridiculous amount of million dollar yachts in the ports of Europe.
So maybe that has anything to do with it ?
I really wish that legislation regarding the financial industry were much closer to Canada's, as an example.
Facts are: Greece had a spending deficit for several decades now. This spending deficit accumulated to such a big dept, that no investors were willing to lend greece any more money. 18 european countries transferred billions of euros in the last couple of years to greece, to help the country and the people. In return they had an agreement that greece would cut their spending. Greece never lived up to the agreements it made. In the last weeks 18 european countries offered greece another bailout, where greece would receive several bilions again. In return they asked greece to finally cut spendings.
Now greece voted against this bailout. There are a lot of people in europe (myself included, I am from Germany by the way) who are not willing to transfer further billions of euroes to greece, just so that a socialist party can fullfil its "promises" and increase their deficit.
Edit: spelling
Overall, I agree - greece needs to get its house in order and that involves making tough decisions, cutting jobs, lowering benefits, etc. They don't have the revenue to support the quality of life that they want to provide.
The transfers to greece of the last few years were to a large extent a way of transferring private debt of german and french banks to the general EU populace.
Moreover, taking on Greek debt is a massive gift to Greece, for this money no longer needs to be paid back, hence is a gift.
https://www.cesifo-group.de/de/ifoHome/publications/docbase/...
It seems to me, as an outsider, that the political problems and ESPECIALLY the tax collection problems need to be addressed for any permanent change. Perhaps rather than austerity measures, the EU should have targeted the Greek public directly and tied the bailout funds to the citizens willingness to fund their own government.
The tax and corruption situation is an interesting one, it's not particularly new there. Who'd have ever guessed that a country with nearly 50% tax evasion might reneg on some debts? It's really bad when the local banks just factor that in when handing out loans. It's become part of the culture. I don't know how you fix that. I wish the Greek people the best though, it's a beautiful place
There isn't a single EU country where 'correcting government deficits' with taxes and spending cuts helped the economy.
You'd have been better off without austerity. The reason the Greek situation is now so terrible is exactly because of the austerity measures. They caused the 'economic armageddon.' Count your blessings that the austerity in most EU countries was not so bad, though in most of them GDP never has recovered and unemployment is in the low double digits.
Not exactly a miracle story. Compare with the US, which managed a tepid stimulus.
Your money went mainly to your Banks, via Greece.
Concluding, I'd rather go back to the Drachma and blow the Euro project than die starving becuase it suits your country's political class.
ps. Even if Greece doesn't put the last nail on the coffin of the EU-project, I'm 100% sure that the UK will.
These bailouts in the past were signed from the greece government in the best interest of its people. A lot of people make it seem that we (non-greece european) somewhat forced theses agreements onto greece. In fact these bailouts where were unpopular in Germany, because it cost us a lot of our money, we could have spent on infrastructure, education, etc.
Therefore I would love Greece to give up the Euro currency and leave the European Union, so that these other 18 countries don't feel any obligation anymore to transfer more money to greece.
I believe that Europe will be stronger that way. Because a vision of a truly united European Union can only be reached if all countries play by the same rules and abide to their agreements.
Also "Greece" is not a single entity. Making Greece pay does not mean making the people that created the debt pay - it means taking the available money and you should know that "available money" is generally not rich people money.
So yes, you are right that you do not want to reward such behaviour. Letting the actual responsible get away with it and punish somebody else is not the way to do it though.
There is no abdication of responsibility in a democracy and the Greeks should know that better than anyone.
You get history sadly backward. The no abdication of responsibility is what dragged the world in 2 world wars and what Europe is supposed to fix.
> The point of democracy is that the people appoint representatives to act on their behalf
in a perfect world, yes this should happen. But look around, the system isn't perfect. Look at america, money buys power. The money isn't evenly distributed. The system is broken.
AFAIK there are countries (NL?) that traditionally could not elect self-contained governments so parties were forced to cooperate with other, which in turn created politics of accommodation. I think this is healthier than blocking minorities out of parliament.
Syriza got elected with 36.3% back in January, while ~64% of Greeks voted.
Also, what happens if a voter agrees with none of the choices (parties)? Is he responsible for what their government does? (Legally yes, that's democracy, but ethically he should be given the right to object)
Oh, let's not forget that Greeks leaving outside Greece (some say we're another 10mil out here) were not given the chance to vote neither in the elections or referendum. We had to travel back to do so...
Typically a system works okish if only the people at the top skim, because they are rather few. If the rest starts showing the same behaviour, that's when the system crashes.
That's not how that works though. People one level under the top will try to get their cut too, then the level under until you get to the bottom. The system is ok-ish if the overall level of corruption is somewhat reasonable. In the case of Greece, the amount of corruption at the bottom level is not the cause, but the symptom of the fucked up state all the way up.
Now, there is a difference between the top and bottom. The whole bottom level is creating a black economy. Not as good as a regular market, but something that self sustain itself. See Greece pre-euro.
The few people a top though are the one that forged the accounts of Greece and pushed the country in its death spiral.
Besides - why should other countries be equally or more responsible for Greece's problems than the people of Greece themselves? It just doesn't make any sense.
Perhaps everyone in Germany would be better off still re-paying that 50% that was just removed.
What if a country destroys, literally, the entire continent killing around 80 million ppl, 70 years ago.
What should we do with this country? Should show some solidarity and pardon it's debt or "abide to the rules" and ask them to pay their dues to all the countries they created damages?
The IMF already noted that the "plan" was wrong. Every single forecast was out by a huge margin, what exactly more do we need to die? Stop breathing?
WHat Varoufakis says is that we don't want money under terms the country can't honor, and the troika asks repeadetly for him to be removed. Maybe someone like Stournaras who signs any paper without asking questions would be more fit.
What I'm saying is that solidarity towards Germany was key in 1945. Now it's time to make a Marshall plan for Greece that will bring 'justice' to the country, fix our tax-system, etc. Every Greek would welcome that sort of change even it came from abroad.
The troika didn't do that at any point. It just sucked money from Greek tax-payers.
I don't believe that it sets any sort of precedence where everyone in the union can just not pay their debts. In society, we allow people to negotiate debt repayments in a way that isn't harmful to them and their families. People who can pay their debts and don't need this facility do so. That is the only precedent we should look at: if debt is unsustainable for individuals they are given the opportunity to restructure repayments in a way that is affordable to them without detriment to their life.
In Greece, this isn't what's happening. We see relentless spending cuts, stupidly high unemployment and a group of people who know what to do but are being told they can't do it.
That and I don't downvote based on something I don't agree with, I just wanted you to know I didn't downvote even though I don't agree with that approach, as much as I really want to. I use downvoting on comments without substance, especially ones that are overtly negative without substance.
Unfortunately, right now, everyone in Greece is paralyzed, because they don't know if, a few months from now, a new tax or law will be instituted that will kill their business, or mean they will no longer be able to feed their family (for the ones that still can). I think this prolonged uncertainty is the biggest problem right now.
The original Marshall plan was worth 5.2% of German GDP (of 1952). Greece has already received 185% of its GDP, in other words, other countries have given Greece already 36 Marshall plans!
Piketty: "When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.(https://medium.com/@gavinschalliol/thomas-piketty-germany-ha...)
Greeks make nearly nothing that anybody wants, but they want the goods everyone else makes. They are not adjusting themselves to the realities of the modern world. You want cell phones, computers, cars, shoes, t-shirts, refrigerators ... all these things ... but you want to not actually make anything ... just sit at desks in secure government jobs doing nothing productive. This has to stop.
But politically there is no will to stop it, because people there don't seem to understand that secure, easy jobs for life, where you don't make things, don't actually create wealth for the country. They think jobs are some thing where you just show up in the morning for work, do some paper shuffling and go home at night. And get your secure paycheck from government.
How do we change this attitude? The same attitude is in India's public sector too. The way is you have to cut off the money faucet for the government.
If the issue is poverty in Greece ... then let Europe provide basic needs for the Greek citizens as they reorganize the country. But feeding the Greek bureaucracy really shouldn't be done. Also continuing to perpetuate this attitude towards what employment is and what jobs are should also not be done.
European taxpayers aren't going to be willing to permanently transfer money to a country if they feel some of the government's problems are caused by widespread tax evasion.
Do you feel an obligation to pay for the debts of Greece? No? Then why would a German, or me as a Dutchman feel such an obligation?
As a result, we don't have to "bail out" Mississippi so much as continually pay for its mismanagement.
And so, again, isn't "paying for mismanagement" part of what you sign up for when you try to unify Europe?
In other words, if you ask whether the EU aims for a single financial and regulatory regime the answer is "yes and no"
No, you tried to do that 203 years ago, but we burnt down your White House.
I'll give you that you unified somewhat less than half of the continent though. ;-)
Very few current EU countries signed up for a "unification of Europe", it started as a trading bloc and escalated from there.
As for Germany... as Piketty told Die Zeit, Germany never repaid its debts and has "no standing to lecture other nations." They're hilariously wagging their fingers at far more responsible people. (https://medium.com/@gavinschalliol/thomas-piketty-germany-ha...)
What that implies to external financing negotiations is that even if Greece's debt is forgiven (economists from across the spectrum seem to agree this should happen), unless Greece adjusts its fiscal policy --- inconveniently, to something more akin to what Germany is demanding --- the bailout just delays the inevitable.
What do you think about points like: "I am much more afraid that the conservatives, especially in Germany, are about to destroy Europe and the European idea, all because of their shocking ignorance of history. [...] Look at the history of national debt: Great Britain, Germany, and France were all once in the situation of today’s Greece, and in fact had been far more indebted. The first lesson that we can take from the history of government debt is that we are not facing a brand new problem. There have been many ways to repay debts, and not just one, which is what Berlin and Paris would have the Greeks believe."
Or how about the fast way for a state to leave delinquency: "Germany proved it in the 20th century. Essentially, it consists of three components: inflation, a special tax on private wealth, and debt relief."
Have you read David Graeber's book which he recommends elsewhere ("Debt: The First 5000 Years") which covers how debt is just a promise, and it's fetishized (more than say promises from politicians to their constituents) when it's a promise from the weak to the powerful?
I'm not moralizing debt. I am, however, according sovereign states and their constituent organizations the agency to decide whether or not to finance other sovereign states.
However much honor you accord to debt service, the prospect that (expensive) debt forgiveness will simply generate the need for more debt forgiveness in the future is actually material to the question of how to finance Greece.
(I am, in this instance, parroting something Tyler Cowen wrote yesterday; not that I agree with Cowen on everything [I'm not a libertarian].)
As for Greece's finances, that's exactly what the negotiations are about. A political issue. (After all, money is a purely social construct, not some law of physics. Underlying it is power relations and violence.)
Greece isn't simply arguing that, morality being relative and all, they've decided not to pay back their debts.
They are demanding more money from their creditors. It seems like they have to: they're running a primary deficit; they're losing money even before you take debt service into account.
Whatever the moral dimension of paying back their debt is has nothing to do with the question of whether Germany (ie, the EC) or the IMF (to whom Greece just defaulted) or the ECB (which doesn't want to be in this particular lending game to begin with) is going to give them more money.
If Greece can't persuade the EC, IMF, or ECB to lend them more money, it's doesn't look like they can just walk away from this whole scenario. "Oh well! Debt is just politics and morality!" That might be true, but if they want to allow people to retire in their early 60s, or pay half the nominal tax rate, or not regressively tax the poor through punishing VAT increases, they're going to need to convince someone in the world of some kind of compatible morality, right? They require additional financing, don't they?
The current hovernment wants to add at least 30% debt reatructuring (which Germany says it s off the table) and pay back only when reasonable primary surpluss has been achieved.
I think the history is full of misinterpreted debts, especially Germany's (Versailles > WWII...)
But I think one basic understanding of debt should not be discredited:
There's a difference between ...
- A debt that was agreed upon by both parties in a free market (Greece defaulted on that in 2012)
- A debt that was agreed upon by both parties's representatives as an act of embezzlement - i.e. favoring Europe's banks/Greek oligarchy (Greece is about to default on that right now)
- A debt that was agreed upon by the winners of a war over a defeated country
You can say what you want about a "level playing field" not being in place when battered Greece gets to negotiate with its Creditors, but even trying to compare that with a war-looser situation is disingenuous.
Enjoy the reading. Oh feel free to share the take-away.
For the Euro to work, the rich member countries must be willing to accept massive transfers from countries like France and Germany, to the Mediterranean countries. In addition, the ECB must be a lender of last resort.
Seeing as none of these criteria are currently (formally) met, the Euro can't function. The only way it could work was if the economies of the member states quickly converged. They didn't.
Does the term European Union mean anything to you? Does the term common currency mean anything to you? If Greece fails, Do you really think Germans won't suffer any consequences?
[1] https://en.wikipedia.org/wiki/Greek_Financial_Audit,_2004
The risk/reward curve is the fundamental idea of investment. If we privatize reward but nationalize risk, the cost of bonds/mortgages/etc. will never reflect reality. I shudder to think of a system where governments are implicitly assumed to insure everything that's "too big to fail."
I wonder what the EU expected.
The Euro was primarily a (french) political project to weaken Germany following reunification. This is strongly reflected on the ECB's board, where Germany has the same number of votes as Malta! In order to sell the Euro to conservative Germans who feared a "Transfer Union" (where they would perpetually have to bail out certain states that shall remain anonymous with a reputation for fiscal improbity) some vague promises were added about debt levels. But the promises were not accompanied by any enforcement mechanisms and soon fell by the way-side.
I used to ridicule Eurosceptics, seeing them as dinosaurs who are on the wrong side of history. But to my consternation, I have to accept now that most of their worst fears have come to pass.
As a historical aside, it is noteworthy that about a century ago a similar scenario played out: Greece (and others) crashed the Latin Monetary Union [1], a 19th-century attempt to unify several European currencies into a single currency that could be used in all the member states, at a time when most national currencies were still made out of gold and silver. It was established in 1865 and disbanded in 1927.
You should have. It would have been better for Greece if the former Greek government had not been strongarmed into being the fall-guy for a rescue programme for French and German banks.
https://medium.com/@gavinschalliol/thomas-piketty-germany-ha...
I bet we would have voted the same if given the opportunity.
I feel like I'm taking crazy pills when I see that no one from the financial sector went to jail for recklessly causing the biggest worldwide financial crisis since 1929, yet everybody is happily demonizing the Greeks, who in spite of having a made several errors were in no way responsible for the global crisis.
This shows how much journalism has been captured by financial interests, working hard to deflect attention from the true perpetrators.
Is it better for Greece to give up the euro and return to the drachma? Quite possibly. Iceland successfully rebooted its economy after the financial crisis (with a lot of pain involved) because it was not tied to the euro. Of course, that required a huge amount of willpower and effort (which Greece has not shown yet).
Is it better for the EU and the rest of the world for Greece to give up the euro and return to the drachma? Probably not. Why? Because it sets a precedent for giving up the euro and/or leaving the EU.
Greece is a relatively small country, and the upheaval resulting from its financial recalibration could be fairly manageable.
If Spain or Italy tries to go down the same road, it is a different story. Take a look:
http://www.bbc.com/news/business-15748696
Italy owes France a LOT of money. France owes the UK a lot of money. The UK owes the US and Germany a lot of money.
Greece, as you can see, is a drop in the bucket. It's the precedent that's important.
Private debts were made public. You should ask Mrs. Merkel and Mr. Schauble, why you should pay for debts that were private.
This kind of schadenfreude against EU/EZ/Germany is very common in greece this week. In a few months, nobody will want to admit they voted for "no".
Still, Greece allowed it to happen by not facing reality.
You may however start to feel very hungry soon holding a pile of worthless Drachma...
Your money went mainly to your Banks, via Greece.
your Banks
So French and German politicians did not want this to happen. Greece was not alone to have financial problems, Ireland, Spain and Portugal had some as well but after a long austerity cure they are now stable. But austerity just didn't work as expected in Greece.
Serious question: Why do you think switching currency to Drachma will solve anything? From what I've heard and read, Greece can't spend its way out of this problem because it lacks trust among creditors.
But... there's nothing wrong with swimming! Sure, the drachma will plummet against the euro, dollar, etc. So no one will be able to afford an iPhone. But their factories, farmers, and fisherman will be ideally placed to produce for and export to the rest of Europe, because they'll be selling cheap. They'll issue bonds denominated in drachma, and sure those will have to yield more than euro-denominated bonds in the short term, but that won't last forever.
When entitlements are denominated in drachma as well, they don't have to borrow anything to pay for them. (If they issue bonds for the purpose rather than just printing money, that's more honest but it doesn't change anything.) Entitlement ppp value just naturally drops and rises with that of their national currency. So, it will hurt at first, but after exporters start ramping up it will get better.
Greece doesn't need the euro, the euro doesn't need Greece, and the Grexit won't turn Greece into the Congo.
The rhetoric against austerity seems to be that we don't want to hurt the people (especially the economically disadvantaged) but I don't see a bright future in the near-term whichever way the Greeks vote. (I know, this is such a terrible thing to say. Good thing I am not in politics.)
Yes high food prices are a problem but without tyrannical corruption like we see in Egypt this problem fixes itself over time.
"Austerity" seems like a red herring to me. The Germans were only too happy about Greek entitlements when they were driving Greek borrowing. Now that they're shutting off the tap (and why now rather than five years ago?), the Greeks themselves will figure out how to distribute the food. I'm sure they'll come up with something, and that plan will have come from Athens rather than Brussels or Frankfurt.
Also much of anger on the street has been due to lower living standards (euphemistically referred to "internal devaluation") So a true devaluation via an independent drachma won't go over well either.
Of course, the rich keep their money far away from Greece. It's the masses who will suffer.
Worse, any political instability will cause more problems for their critical tourism industry.
Enter inflation. It sucks, obviously, but it's a great way to spread the pain around evenly between workers, pensioners, and creditors. And it doesn't cause unemployment. It causes a bit of additional pain through things like menu costs but that's small potatoes compared to everything else happening.
Of course this is all presupposing a carefully calibrated monetary policy. It worked great for Iceland but I'm not sure I'd trust the current crop of Greek politicians not to give into the temptation to print themselves out of debt. That way lies hyperinflation.
EDIT: I tend to think it would be good if the Euro zone could be dissolved somehow and it would probably be good for Greece in the long term to leave. However, I'm not at all convinced that in practice the "no" vote will work out well for Greece or anybody else over the next decade or so.
[1]http://econlog.econlib.org/archives/2013/09/why_dont_wages.h...
All of those tools are used in countries with their own currency all the time. Monetary policies change to match the health of the economy. But in the Eurozone, monetary policy did not match what Greece needed, neither in their boom, or in their bust. Greece should have never, ever, joined the Euro, given how different their economy is from Germany. Unified monetary policy without a fiscal union doesn't make any sense.
The debate among economists is not whether Greece should have joined the Euro, but now that it's in, and in dire straits, if the very high cost of leaving the Euro is worth the advantages, or it's better to suffer yet a second consecutive bad decade trying to become competitive with Germany.
Suppose you have a €500 credit card bill. That bill represents euros you have spent (plus interest). If I pay that bill for you it frees €500, which would have previously serviced debt, for other things. It would be disingenuous to say "I gave the money to the bank, so it only helped them and not you."
French and German banks did get bailed out of their bad credit decisions. But Greece gained substantially from its borrowings in the short-run.
> blow the Euro
The financial markets are not convinced that a Grexit would harm Europe significantly [1]. In the long-run, the union may actually be strengthened.
[1] http://www.businessinsider.com/deutsche-bank-greece-contagio...
You were quite lucky you were only non-communist country in that region 30 years ago and you joined EU. EU for last 30 years was sending you approximately 6 billions EUR every year.
At least you are popular tourist destination. Good luck, I wouldn't want to be a Greek.
PS: I am not a German.
From all the arguments I’ve read this is the most hilarious. Dude, have you opened a map lately? Half of Middle East is in flames including parts of northern Africa. And we have no strategic position? Greece is what stands between Europe and legions of refugees from Syria, Afghanistan and Iraq. Not to mention the fuckers from ISIS who want to infiltrate Europe. Thank God we’re in NATO otherwise we could allow Russia to build a naval base in Greece and watch EU and US go ballistic.
It also funny you mention you are what stand between immigrants and Europe but I guess you forgot to mention you don't protect your borders anymore because you cannot afford it anymore so thousands of immigrants through your country is flooding Europe.
Greece not failing to pay creditors is good for both Greece and Greek's creditors. I'm not sure why you feel that the two are mutually exclusive.
There are reports from the IMF and many other leading figures that now say austerity has had more of a negative impact than once thought. Greece has been cutting its spending or else it wouldn't have been given more money, as per the terms of the bail out. The effects of those cuts have been mediocre and, in fairness, harmful.
http://www.theguardian.com/business/2014/feb/26/imf-inequali... http://www.theguardian.com/business/2015/jun/15/focus-on-low... http://www.washingtonpost.com/blogs/wonkblog/wp/2012/10/12/i... http://www.washingtonpost.com/blogs/wonkblog/wp/2013/04/18/a... http://www.bbc.co.uk/news/magazine-22223190 http://www.bloomberg.com/bw/articles/2013-04-18/faq-reinhart...
Lots of projections in all these opinions. But for somebody that actually had to go through austerity measures, I am not happy to see others asking for a handout, with the only justification being "just because, Greek history".
EDIT: and if you downvote, at least be New Yorker enough, and justify your action. Otherwise, I would say that you just want a handout.
(http://nypost.com/2015/07/05/decades-of-fraud-have-swindled-...)
In Greece, A Hairdresser Can Retire At 50 With Full Benefits (http://www.businessinsider.com/in-greece-you-can-retire-at-5...)
That's not a "deficit." If that was a deficit, than every person in the US who pays less than $11,000 in tax would be running a "deficit." That's just the way governments work: the amount you pay in tax and the amount of services you get back from the government aren't always the same. But we do all have representation in the authority that chooses how to spend the pot of money.
Greece is different because they have sovereignty over their budget. Greece's taxes aren't collected by the ECB (with enforcement power) and there is no European body deciding how the taxes will be spent.
The Greek case of lying and spending way beyond any reasonable means does not compare to it.
The U.S. also, historically speaking fought a very bloody civil war to keep states in the Union... (first rule of U.S. club, is you can never leave/quit U.S. club). Where as EU's history of unity/separation even in the last two centuries is very different. It's mostly a cultural difference.
That said, I wouldn't mind seeing a bit more assertiveness to state level governments in the U.S. ... even though I don't agree with typical politics in, for example, Texas, I appreciate their assertiveness in recent years.
The better analogy is the handling of "deadbeat dads" who don't pay child support. The government's response is to confiscate their drivers license. It doesn't require a genius that then they really won't be able to pay child support. At least in the case when non-payment was the result of unemployment or lower salary, which was undoubtedly a significant number of cases.
I didn't mean to imply that. The only similarity I was relying upon was non-payment of their legal obligations.
The Greek position is relatively similar. There is blame on both sides of such a loan, and more for the banks if the number or size of these loans threatens their very business when people default.
I am sorry. You should never have had to go through austerity either. We know better and we have no excuse for putting countries through austerity. The impact of austerity policies is obvious when you look at the countries in Europe so afflicted.
But that doesn't mean because you suffered, others must continue to suffer. We should do better.
And now our TV's are showing images of Greeks celebrating that they've told us to f-off with our euros. That's going to kill any kind of sympathy they still had when what's left of the Greek economy is going to crash hard over the next few weeks and months.
This is game over. Any compromise that was still possible is now dead, even if EU leaders would be willing to compromise, they can no longer sell this to their own people.
Greece has in a way helped the ECB by distracting economic pundits from their various other failures in the recession and recovery process. The truth is that we're all so used to being mad at the ECB that liberals are now confounded by the least bad thing they've done in a while.
It's long since known and agreed that austerity policies were detrimental to the recovery. The thing is that Europe's failure to pursue expansionary monetary policyead to both diminished inflation (which means debts have larger real value) and diminished growth in the eurozone, both of which hindered Greece et al's ability to repay debts regardless of the terms they were given. That's added to the fact that inflation couldn't happen and internal devaluation wouldn't happen as chosen by the Greek people. And internal devaluation, what happened in Ireland, is a pretty ugly process, though Ireland would be okay right now if the ECB hadn't also blown the recovery in general, methinks.
Now the issue is whether Greece gets what everyone else got. It's fair, but it isn't exactly right. And the ECB has distracted everyone from their big failures.
This is also being tossed around as proof that currency unions don't work! That's kind of a strong conclusion. I think it could work if it were well managed and smaller and less diverse. A couple of economies in similar situations with proper economic management can probably keep things together with only a small chance of an Ireland-style devaluation (and no Greece events), and in the future the charter could predict these sort of things.
That it turned into a call for political fusion of Europe is scary. I get that nationalism is bad and all, but you want to redraw the map and the culture...
...so you can keep the money.
Oh, those wars and massacres weren't your decisions? Then, you think the average Greek took those Eurozone loans and bailouts themselves?
The IMF themselves have said that Greek debt is unsustainable and a significant haircut is needed (although their head Lagarde ignores their analysts). Keeping with the dysfunctional austerity plans would only make the debt ball, and the eventual inevitable default, larger and larger. So even from a purely egoistic point of view, you should support the OXI.
Easy there. The austerity measures and the troika only came into play in 2010. After Greek government called EC-ECB-IMF because it could not solve its own crisis.
By 2010 (prior to Troika-imposed austerity), as a result of the Global Recession, Greece had already lost about 15% of its GDP and its debt had risen to about ~150% of its GDP.
It is extremely disingenuous to say that austerity caused a 25% drop in GDP or that it caused the debt/GDP ratio to go from 105% to 175%.
This is actually not true. Based on the 2nd bailout terms from 2012 Greece doesn't have to pay interest on the loans until 2023 and does not have to start paying them back for the next 27 years.
For example, there's no mention at all in your remarks about the well-known shenanigans that led to Greece joining the Eurozone (and camouflaging its debts) in the first place (with the connivance of certain large foreign banks). Or of the naked arrogance and condescending, hoof-in-mouth verbiage we've been treated to by certain foreign leaders (like Angela Merkel) in recent months.
Just simply: "look at those Greeks -- they're irresponsible, they're overspending, and now they're looking for another handout", basically.
At no point in the El Mundo article did he call the Germans "terrorists", and -- worse than hyperbolic -- it's irresponsible for you to suggest that he did.
Here's what Varoufakis said:
What they’re doing with Greece has a name — terrorism
[...]
Why did they force us to close the banks? To instill fear in people. And spreading fear is called terrorism.
My point, of course, is that these were both hyperbolic arguments.
"αυτό που κάνουν (οι πιστωτές) στην Ελλάδα έχει ένα όνομα: τρομοκρατία"
In greek, τρομοκρατία is a much less loaded term than "terrorism", even though it translates the same way. It's more "terror campaign".
The word "terrorism" in its more original form is ruling by fear and it can mean many things, such as being given power because the population is afraid of what you might do if you don't get what you want. "Terorrism", by contrast, is a massively politically loaded word for a completely black & white "good vs evil" world.
I know bloody well what the original meaning of "terror" was (you translate lots of sentences about terror and tyrants when you start studying Latin). The shift in meaning in English from the Latin meaning to the current meaning happened a long time ago.
I can also inform you that I just tried googling "tromokratia" (which google and/or chromium helpfully offered to transliterate into proper Greek). I got all the expected hits for the current English/German/etc meaning. The Wikipedia page lists all the usual greatest hits: Lockerbie, Timothy McVeigh, 9/11, London, Madrid. There is no hint what so ever that the usual or even just non-obscure meaning would be "fear-monger", as MaysonL suggested.
I think Varoufakis /meant/ terrorism and some people are backpedaling for him...
Greece needs the equivallent of Marshall plan. The troika wants to keep the Greek oligarchy in power and does everything in their power to keep the current status quo.
So generally speaking, what the troika did was destroy a heavely indebted country instead of actually helping.
The Siemens scandal (google it please I'm too bored to write another summary) and Christoforako's case (Varoufakis talked about this with Scheuble) shows the real problem: Greece has it's issues of course, but the troika was never about helping, it was more about exploiting all along.
The Eurozone needs a vision for its future especially on the dept problem. Piketty said it correctly what we need now is a dept conference to renegotiate the dept of all EU states.
With this its possible to change the contracts of Maastricht and create new ways of financing the eurozone and implement ways of enforcing them as well.
In a few months Spain and Portugal will elect left wing parties into their government because these countries suffer under the austerity programs as well. Do we want them to exit as well?
Especially in about five years when it will be clear what a boon the Grexit will have been for the Greeks.
help them with what? One of the achievement of modern civilization is the recognition that bankruptcy is the preferable way than debtor prison to deal with non-ability to pay debts.
>Now greece voted against this bailout. There are a lot of people in europe (myself included, I am from Germany by the way) who are not willing to transfer further billions of euroes to greece, just so that a socialist party can fullfil its "promises" and increase their deficit.
if you noticed, Greeks have just agreed with you.
Wrong. The reason for a referendum is so, whatever comes next, the people and the governing party go in knowing they are together, with a level of bonding that is extremely rare in our cynically modern western democracies. Compare with Spain's recently gag law, which was passed by the government against the will of almost half of their own voters (and presumably against 100% of everyone else).
http://www.reuters.com/article/2015/07/05/us-eurozone-greece...
The "No" vote, to my understanding, strengthens their demand to have whole debt restructuring included in this deal - not put off till later.
Edit: this is a "strengthened hand", but subtly different to using that hand just to get more cash / debt. The ECB is like my bank manager wanting to give me an overdraft so I can make my mortgage payments so he does not have to foreclose. I want to have all debts up for discussion, he just goes on about overdrafts.
It is forcing the EU to face up to the realities of a single currency and fiscal union. But at least it is a democractic approach...
https://www.vox.com/2015/6/30/8870257/greek-crisis-myth-aust...
OK, but the eurozone control the finances of the eurozone in a way which actively harms Greece's finances and economy.
What will happen if Germany or France have an economic downturn? We already know the answer to this: the economies of small peripheral countries are thrown under the bus to protect the major ones.
It should not be this way. If a country in the Eurozone is in trouble, they should be protected by the other countries sufficiently that they might be able to protect other countries, in turn, when the situation is reversed.
[1] http://blog.mpettis.com/2015/02/syriza-and-the-french-indemn...
At the same time they sold us a “bad europe” story and sold you a “bad greeks” story. Most of the facts circling around (e.g Greeks average retirement age) are myths. Germany's minimum wage is double the average greek pension. Our prices in common goods don't differ much. One of the terms of our previous bailout was that people under 25 should work for 511 euros per month —that is gross salary. Can you survive on 400 euros per month (salary after deductions) in Germany? Neither can you in Greece. Now they want us to work for 300 euros a month. Do you think this is fair?
We have a common currency. The currency's main purpose is to be used for the citizens' well being. But we can't manipulate our currency anymore because the rest of the EZ members (particularly Germany) have different plans. What can we do?
1) Due to being in the monetary union, Greece is not able to print more money, devalue its currency or other monetary policies to help its economy. Greece is paying the price of being in a monetary union, and it should either get help from the other members of that union, or it is not really a union.
2) Also, take into account that Germany and other countries are benefitting from this monetary union by being able to use a currency that is devalued due to the poorer countries, and therefore is able to increase its export.
3) Much of the bailout went into the banks of other eurozone members therefore helping them as well.
4) Do not forget that Greece if not in the eurozone would be able to default on its debts, live on the primary surplus it is now generating and when it is considered a good debtor to get loans again. Instead of having to exit the eurozone (which would be a bad sign for the whole union) and default on its debts (which would mean other countries losing money) and THEN grow, it may be beneficial to everyone to do a debt restructuring.
5) Greece is paying an interest on the loan given to them to be able to pay the older debts to the ECB and others. They are not able to pay that interest on the subsequent loans and are asking to be able to use that for economic growth to pay the older loans! In a sense, you can see that as debt restructuring, which can also happen in other ways. This way creditors will also get their money back, altough restructured or payed later.
The potential long term political and financial cost of abandoning Greece far outstrip the 70B it owes Germany. It will leave the European project in tatters, despite what Merkel assures us.
Your comments are entirely reasonable when it comes to the rent-seeking corrupt upper classes in Greece who have run the country aground over 3 decades, costing both the European taxpayer and the honest working class Greek (who have voted NO).
Your comments are unreasonable when taking into account the fact that the bailouts so far have overwhelmingly supported the existing wealthy (Greek and German) at the expense of the middle and lower classes (again, Greek and German (taxpayers)), who cannot be blamed for Greece's existing travails.
The underlying issue here is that all European (and most American) banks are bankrupt, and that in order to support them we cannot let any of their assets go bad. Thus we must bailout their debtors (transfer of bad assets at inflated prices from the rich to the taxpayer). Watch this space. There is much more of this to come, and not only in Greece. It's what QE is all about.
We're witnessing the weakest domino fall but there are many in the chain, and in all cases, pretending that people should "just pay their debts" is simplistic and ignorant of the unfair transfer of wealth happening before our eyes.
Back to Mesopotamia: http://www.axel-troost.de/serveDocument.php?id=1967&file=5/5...
1. The ones bailed out have been private bankers, by public funds.
2. Austerity, demanded as the cure for deficit spending, has dragged Greece into a recession and achieved exactly none of its aims - spending is still high as a proportion of GDP, because GDP has crashed.
3. The creditors have stopped demanding austerity as a policy aimed at creating a viable economy, and switched to demanding it to punish the greeks for populist leftism, and to contain the anti-austerity parties in Europe, and because they have unprofessional snits against Tsipras.
4. The only sane answer is to write off a huge swathe of the debt, as patently irrecoverable, inject capital, give a decade long holiday from repayments, and let the Greek economy recover.
5. Only a NO vote could lead to this being on the table.
Moreover, can their economy recover without outside help? What does that actually look like? That's the bigger issue, any way you slice it, they got really used to making promises and living larger than they are. The wish or risk or whatever is that the ECB will want to recover some of that debt and in exchange for that wish, write off a large chunk of it and then continue to give them handouts. What does a viable Greek economy actually look like?
The reason we rejected the last bailout was because it didn’t include any terms of debt relief which is the only way for the economy to recover. That and Tsipra’s incompetence paired by an equal amount of incompetence and lies from EU officials. As the saying goes, it takes two to tango.
I’m not surprised that you are from Germany (I guess you read Bild a lot). Well I’m Greek and I have news for you. In 1954 we wrote off 50% of your debt to us. And we did it despite the fact that ten years ago you’ve invaded our country and wrecked havoc doing monstrosities like murdering whole villages including kids. We did out of solidarity to help your economy grow. It’s time now you do the same. It’s either that or we default and you can kiss your 70 bn loans goodbye. And then you can return to your miserable Mark because Euro will collapse sooner or later.
It ballooned because when you entered the euro your country was now able to acquire and spend much more debt then before.
The reason we rejected thelast bailout was because it didn’t include any
terms of debt relief which is the only way for the economy to recover.
Even though the european leaders vowed to their voters that all their money was going to be paid back to them, Greece had to pay back less than the european voters gave due to low interest and generous installments. Some earlier debts were written off already.
Also, if Greece would have started to give the creditors slight hints that they were actually making the economy more healthy, than it would be easier for the euro leaders to break their pledges and forgive debts.
The current economy doesn't suffer from the debts, it is suffering because it is structurally broken. Before Tsipras started to take over, the economy was getting better. He increased government spending.
Even if all Greece's debts were forgiven, it would still have the problem of a third world economy. RIGHT NOW Tsipras is asking for more money, because the economy is structurally not sustainable.
If you feel your country is owed money from Germany then by all means go and try to collect it so that you can apply it to your +350 Billion Euro debt. Although, I have a feeling that the money Germany owes you is just a drop in the bucket for what you owe.
Congratulations on your "No" vote and good luck on your exit from the Euro.
There's just this something that I can't help but add. There isn't a single country that has received more debt relief in modern history than Germany, but for a reason people seem to forget that. It's possibly because of that that you are now present. If one were to continue this would turn into some sort of debate/argument of you-did-that so I do-this. No, this isn't (again) about who's at fault, it's about realizing what is actually doable and what isn't and acting based on that. It's about not repeating a paraphrased form of history as we know it, which we so happily seem to indeed be doing.
Edit: Learning how to separate paragraphs.
A reasonable deal should be a stimulating one. Not one with just spending cuts. A major haircut of existing debt, and enough new money flowing in to actually stimulate growth.
There are no good options here. It's not like Greece will return to the Drachma and become a picturesque olive exporting tourist attraction. What will happen is that the following decade of poor economy will see extremists and Putin run the country. From a democratic and security perspective it's likely the lesser evil to just support the Greek economy. Those of us in the rest of Europe (not least in Germany) have made good money from having an artificially low interest rate for years, at the expense of the PIIGS countries.
That's a legend. The money went to the banks and to various arms companies.
You're not into the economy thing, are you?
Because even the most amateur scholar of economics is able to understand that having Greece within the eurozone has helped Germany's exports by about 80-90 billion (can't get the source now). Right now, even the UK would rather have Greece on its own currency, so that the euro will be strenghened and UK will be in a position to ease its exports.
And btw, you cant't really believe that you have given money to Greek citizens, money that otherwise would be in the pockets of german citizens. There's a thing called "banks".
Since you are German, act like it, and do some research.
https://www.youtube.com/watch?v=C8xAXJx9WJ8
I kept this in my bookmarks more than a year.
Euro is failed project by its core because monetary policy without fiscal polity doesn't work.
There is one big part I really don't get though. Why would Greece's creditors assume that Germany was going to cover a Greek default, just because they are both in the EuroZone? That would be like my bank assuming that the US Government would cover my mortgage if I default, just because it's denominated in dollars. That line of reasoning makes no sense to me.
Related to this, the video says: "The problem is, somebody has to pick up the tab, or else every country in the Euro area will suffer." I don't get this either. That would be like saying that me defaulting on my mortgage will make all my neighbors suffer, just because our mortgages are in the same currency. It doesn't seem like a Greek default should hurt anybody but Greece and their creditors.
Maybe an even simpler explanation for that link could be: a Greek default would make their borrowing costs so high that the government simply could not operate without being able to print money and inflate their currency.
You are nothing to a bank, a bank is huge, and fully expects some people to default on their mortgages. They can take it. However, what if everyone in California defaulted on their mortgages? Then it might cause many banks to fail, cause a financial crisis, and depress the entire US economy, including your neighbours.
The monetary union disguised the risk of lending, which was still there.
Yes, an entire country defaulting would screw a lot of creditors, but the risk of default should be priced into the loan/bond terms (interest rate, etc). That's part of the reason investors can make money on bonds, because there is a risk/reward curve they're riding, and the risk is that they won't get their money back.
I get the "too big too fail" argument, I just don't get the "monetary union puts us on the hook for our neighbors" part.
Monetary unions turn into transfer unions if the regions' productivity are not equal. This is clear from the union of states called the USA. Poor states constantly get federal money taxed from rich states. And there's nothing wrong with that; the whole country benefit from there not being ruined states in the union.
Monetary unions also don't work very well without a fiscal union, under which transfers are far more easily arranged...
Borrowing to spend without considering whether you can repay is irresponsible.
Lending money to someone so that they can buy from you, without considering whether they can repay is also irresponsible.
As much as Greece is guilty of the former, Germany is of the later.
Here's an other article putting a different spin on this: http://www.telegraph.co.uk/finance/comment/ambroseevans_prit...
http://www.reuters.com/article/2015/07/01/eurozone-greece-in...
Another proposal is 'eurobonds' [1] where there were two types of government debt. Blue debts would be backed by all the eurozone countries, but could only be issued up to a certain debt-to-gdp ratio. Beyond that, governments could issue red debts which aren't backed by any other country, and which come with an orderly default procedure.
That way, the Greek government would only enjoy the great interest rates the Germans get if they were following the same strict fiscal discipline - and red debt interest rates would reflect the fact they didn't have the German government standing behind them, so there wouldn't be a bunch of the cheap debt that Greek politicians seemingly can't resist.
Unfortunately this isn't a very popular proposal at the moment; if it had come out 15 years ago, when everyone had a clean slate and Greece didn't have all this debt, it might have prevented things getting to where they are now. But the proposals to institute this now basically amount to "give Greece a bunch more low-interest loans they can't pay back, but make Germany liable for them, and a while later when greece has spent all their eurobond money make their interest rates shoot up putting us back to where we are today" which Germany, quite reasonably, wasn't interested in going for.
Also, most of its facts are messed up: the US subprime mortgage crisis did not cause the crisis via a Spanish real-state market collapse, it just tightened credit and ultimately deflated public banks (cajas de ahorro) which have hidden political spending for several decades, and which have cost billions in the last few years. This is well documented, just as a data point: Bankia was bailed out for $29B http://content.time.com/time/world/article/0,8599,2115950,00....
The problem with Government spending cuts mandated from the outside is that they all go to health and education, instead of cleaning up the layers of bottom-feeding politicians and friends which have occupied most public companies and which are devouring the economy. The Spanish competition regulator estimates the cost of corruption in about €48b: http://www.elconfidencial.com/empresas/2015-02-10/la-cnmc-ci... (in Spanish, I found no good source in English). I can imagine that in Greece the situation will probably be similar or worse, it would be nice to have credible figures. Meanwhile inequality soars in Spain, and the number of millionaires increases: http://www.theguardian.com/world/2013/oct/10/spanish-wealth-... http://elpais.com/elpais/2015/05/21/inenglish/1432203309_060...
Any analysis which doesn't take into account these factors is superficial and will never reach the true causes. A shared fiscal policy would make European policy less transparent and easier to manipulate by the elites, unless it was accompanied by deep reform in all European institutions, which is highly unlikely. Revising the role of the ECB is much more interesting IMHO.
The theory of complex systems reminds us that aggregates can have properties that are not traceable to any individuals themselves. Game theory tells us that incentives and constraints can get so messed up that developments take on an eigendynamic which was nobody's intent nor interest.
Please, be civilized and don't let yourselves be infected by nationalistic passions.
Your moralizing nanny...
(No seriously, I am starting to get concerned.)
If I buy a home and am forced to eat ramen to pay for it, that's entirely separate from my estranged uncle's mafia loan shark forcing me to eat ramen.
Modern day slavery - debt bondage - also passes from generation to generation. You don't choose where you are born.
This is a very complex and ambiguous situation.
Greece is still in the top 5 state: of military spending per capita, and the list goes on.
No matter how much money you pour into this banana republic, it's just going to evaporate on the way there.
Still, their best option is probably where they are going already: a proper default and return to a weaker currency, just as it helped iceland.
http://netrightdaily.com/2015/06/icelandic-default-could-sav...
Still won't help, if they don't tackle corruption as well.
Iceland demonstrated that it's possible to say no to perpetual debt peonage and go on to do well. If Greece has to leave the Euro, so be it. The Euro made sense as the Deutschfranc, but that's about it.
If only other countries could be so brave.
Greece is not just insolvent, it's also practically a failed state.
Syria, Iraq - those are failed states. Greece just managed to organise a democratic referendum peacefully and efficiently - within a week. A failed state looks different to me.
The issue with Greece seems to be that they have an enormous public sector, and extraordinarily generous (literally: extra-ordinary) entitlements, "financed" by a nominal tax rate that is decoupled from their actual tax income. From the little reading I've done, it seems like there's been a theme throughout the 1990s of "raising tax rates" to fund a populist spoils-system government, with scare quotes deliberately applied to "raising tax rates".
Our private sectors are a lot freer than in Greece, though, which is why we can afford them and why Greece can't.
(I don't really understand the situation well enough to say whether or not they could possibly maintain the same level of activity outside of the Euro, but I think this is the logic behind that argument)
(I'm asking, not telling; I don't know what the answer is.)
What Greece needs is a mix of debt forgiveness, market reform (labor market and otherwise) to unfreeze a sclerotic economy which is more about bribing the bureaucracy than actual competitiveness, and a measure of austerity (starting with a later retirement age, and going from there). They were starting to go down that road! They made real progress with economic growth during the recovery! But the reforms were unpopular and might be impossible to do with their internal politics, leading us to the current crisis.
So instead they're going to do the alternate version of hard-and-mean austerity by replacing euros with worthless drachmas and making everyone poorer (hope you don't owe money in Euros). Then they'll either rot for a while in stagnation before gradually getting their act together after all, or they'll turn to Vladimir Putin for bailouts from the great petro-state as long as they last (with all the relevant geopolitical consequences and "screw you Europe" strings attached).
This is very wrong. Greece has run primary surpluses in recent years. They will probably miss that goal this year, but not by 9-10% of GDP. Forgiving Greek debts would solve the problem.
http://mainlymacro.blogspot.com/2015/02/greece-and-primary-s...
Forgiving debt by definition doesn't change the primary surplus, right? The primary surplus is the budget before taking interest payments into account.
And that's the whole premise of not bailing Greece out on Greek terms, right? That bailing them out doesn't accomplish anything if they're still on a course to rack up more debts due to unsustainable fiscal policy.
Greek fiscal policy is not unsustainable. Much of it is unwise, but still affordable.
http://blogs.wsj.com/brussels/2014/04/23/greek-primary-surpl...
So far, the narrative that Greece was chugging along running a surplus before accounting for debt service does not appear to square with the facts.
Second paragraph, krugman quote:
"Despite this catastrophe, Greece is making payments to its creditors, running a primary surplus — an excess of revenue over spending other than interest — of around 1.5 percent of G.D.P."
How much did you look, and where are you seeing the opposite information on primary deficit the last few years?
But IMF's most recent review suggests that there was no surplus: Greece had been counting privatization revenue (ie: the sale of utilities, ports, and airports) --- which they technically weren't supposed to, and those revenues turned out lower than Greece had projected. Further, Greece had accumulated additional liabilities from pensions and tax refunds than they'd apparently stated when they announced their surplus.
If you're not running a primary surplus, it's hard to see how you're paying loans without external assistance. Can you help me understand that claim a bit better?
Nobody's talking about paying the loans and keeping the country going without help.
What people are saying is that Greece can support itself, minus the loans.
Also: you haven't explained how Greece can support itself, minus the loans, while still running a deficit even before interest payments on those loans.
The point of discussing the 2014 and 2013 numbers is to rebut the notion that Greece had somehow found stable footing, and were being victimized by punitive negotiations from the troika. I didn't introduce that idea to the thread, but I did object to it.
As for the punitive Troika, they had 5 years to run the country and they failed in every single projection they made. Every memorandum was meant to be the last, and they had the governments of their choice. How many more years of full cooperation do they expect before they accept that yes, perhaps the system isn't working. But I refuse to believe they're idiots at this point. The programmes are meant to appease the average German voter and serve as a warning to the Spaniards and Italians. Basically, punitive.
When there's no external assistance and the government pays loans out of its budget, it means it's not paying something else internally, usually some business it owes money to. If you feel that that is a non-factor in economic destruction and therefore tax receipts, then sure, have your own numbers.
The question is how the country would fare if the debt wasn't there, but the rest of the economy was functioning properly.
As a disclosure, I am Greek and have intimate knowledge of facts of the ground. If we can't agree the past six months are not "normal" there's very little to talk about.
http://www.reuters.com/article/2015/01/28/us-greece-politics...
There has been a single quarter so far -- and that's assuming we can trust Greek accounting!
https://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_...
It's hard to be surprised by the financial troubles of a government that is so utterly feckless when it comes to collecting taxes that members of it's own finance ministry are suspected of hiding their funds abroad. It is also hard to have sympathy for Greeks, most of whom apparently view tax evasion as a virtue.
Now that they've burned Germany and the EU, where is Greece going to get the money it can't collect from it's own citizens?
But. You expect us to change all that in just five years. This is fucking impossible guys. Please, get a grip of reality. Countries don’t just change in five years. And then you get disappointed and become nihilists arguing that we haven’t implemented any reforms. All the effort Greece has done in the last five years, moving from a 14% deficit to 1% surplus doesn’t get enough credit. All we get is been constantly hammered for our failures. No wonder the NO vote took 60%. People here are so fucking tired. Six years of recession and we have the Troika constantly down on our throats without cutting us any slack. If EU leaders had shown some flexibility things would have turned up a lot better for everyone. We could extend the maturity of some loans, achieve a sustainable surplus and start repaying. Instead we’re facing the nuclear option of defaulting on most of our debt. How does that help anyone?
And if you think Tsipras is radical wait until Le Pen wins the French presidency. She has an open agenda of exiting the euro. Then we can talk what compromises Germans are willing to do.
October 7, 1989, DDR celebrating its 40th anniversary: https://www.youtube.com/watch?v=CeePo6BGmHc
October 3, 1990, reunification of Germany: https://www.youtube.com/watch?v=e4kpqKBbdic
Who are The People in Greece? Mad Communists or people who want freedom and prosperity and liberation from the old political class?
if you want a very simplified slightly hilarious explanation, https://www.reddit.com/r/OutOfTheLoop/comments/3bhwij/what_i... this will do.
https://twitter.com/cstross/status/617775611642257408 http://faculty.chicagobooth.edu/anil.kashyap/research/papers... http://www.truth-out.org/news/item/26112-an-economic-hit-man... http://www.interfluidity.com/v2/5965.html https://twitter.com/AP/status/616622654234169344 http://www.irishtimes.com/opinion/who-will-dare-say-out-loud... http://www.forbes.com/sites/niallmccarthy/2015/03/13/contrar... http://www.theguardian.com/business/2015/jun/30/greek-debt-t... https://fsaraceno.wordpress.com/2015/06/27/its-the-politics-...
I think we are seeing the effect of that policy. For the people who are demonizing the Greeks I would like to remind them that it takes two to party.
The drunk sailor who wastes all his money, and the fool who lends him more money, expecting to be repaid.
Either there is a full currency union with the transfers (meaning more and more federal like rule) or we will get some sort of collapse of the euro zone at some point in the future.
Milton Friedman, The Times, November 19, 1997
The EU was a step in this direction but it seems that yet again centralization of power ended up making things worst. So from one end I'm happy that Greece gets to go its own way and escape centralization that forced it into a shitty situation. On the other hand though, this breaks the dream I had of building a system which would allow better collaboration between nations, and most of all, better understanding of the real issues that we're facing as a species (overpopulation, climate change, food scarcity, etc..).
The world has gotten smaller and the effects nations have on each other larger. It's dangerous and it's not efficient. At the same time people have their local customs and laws (and spending habits). So let that be. But enforce bans on slavery, genocide, trade route monopolization, nuclear weapons, pollution etc. At an international level.
As it is, it seems national governments are in general problematic... both to local communities and to the global community. I think eventually they can be done without.
Take this for example: "... financial carpet bombing. The European Central Bank severely limited financial assistance to Greek banks, ... making it hard for retirees ..."
Calling it "financial assistance" helps in framing it as an assault on a guaranteed right the Greek Banks have. Especially if it's something that was "severly limited" by that evil Frankfurters.
I know perspectives fluctuate quite heavily from country to country. It is actually the reason why I read as broad as possible (including NYT) to get to know a possible different viewpoint on pending issues.
But the american progressive view on the Greek-Bailout-topic is so much flawed that I might call it derailed. It is not simply flawed by ideology but that ideology also decides what details are to be amplified over the distance-caused resistance. And more importantly, that ideology decides what details are not to be amplified.
The ECB is still lending money, it is just not legally allowed to issue new credits (credits are what those "financial assistances" really were) to a benkrupt country. And the whole american-progressive story of Germany/Rich-Europe enslaving the poor Greeks is just as stupid as the european-progressive story of America enslaving the third world. The world is not that simple to just blame everything on the fat cats.
And actually those uninformed progressive world-views (wether it be european progressives judging american foreign policies toward third parties or vice-versa) bear something deeply anti-progressive in them: framing a whole nation evil, accepting illiberal leaderships as long as they are anti-<evilnation> and often calling for harsh intervention.
Or in the case of the Greferendum: Making it a progressive virtue, that nation A's tax €s utilization ought to be decided by nation B's voters.
He claims that removing corruption is not the only problem, and that the rest of the EU are underestimating the lack of tax collection competence with regards to modern methods and processes, as well as the powerlessness and political isolation of the Greek tax chief, making his/her job impossible - e.g. by not even being allowed to pick his/her own employees.
Again, I don't know what's true or not, just providing the opinion of a former Tax Agency chief of a country that collects a lot of taxes and who apparently had the opportunity to take a closer look at Greece's tax collection.
Google Translate does a decent job with the article translation.
[1] https://translate.google.com/translate?sl=sv&tl=en&js=y&prev...
EDIT: Grammar.
Fiscal Union:
Would you lend me 10 million dollars?
No
If I was Warren Buffets adopted son (!) would you lend it to me?
Maybe.
Debt restructuring (ie fiscal Union "just this once")
If I am having to spend five months negotiating with the Bank Manager to get an overdraft that will let me pay him the next months mortgage payments with that overdraft, then we should stop talking about the cuts I need to afford the overdraft and look at how to deal with the mortgage.
Stuff TIPP - that's a serious agreement to hammer out. And don't do it in secret.
Sorry, but if I borrow a million dollars, build some business that generates profits which are less than the payments on the loan, it's not a surplus. It's called default.
That's the definition of primary surplus.
> but if I loan a million dollars, build some business that generates profits which are less than the payments on the loan, it's not a surplus
Greece does not get the loans now - that money is already gone. The key insight from the "primary surplus" is that a haircut would work, because Greece could be self-sufficient once the debt burden is gone.
> The key insight from the "primary surplus" is that a haircut would work, because Greece could be self-sufficient once the debt burden is gone.
And so would my hypothetical business that can't even cover the monthly payments on the loan. If we magically erase the debt, just like that, I got a profitable business I can brag about.
> Greece does not get the loans now - that money is already gone
Wow, just wow.
Both Varoufakis and Tsipras tweeted their agreement with the report. It seems pretty clear that Greece won't make it without another big bailout package.
http://www.dw.com/en/the-truth-about-greeces-primary-surplus... http://www.forbes.com/sites/timworstall/2015/02/16/greece-st...
It is a widespread knowledge (at least the US has it), that forceful saving in a crisis, will deepen the crisis.
As a German, I know that Germany got a dept-cut after the second World war, that the German nation could rise from misery. We should have allowed the Greek the same luxury.
Instead, the governments cared only for the banks.
Back in 2012 it was determined that Greek debt was unsustainable, and a large haircut was needed. But because the EU governments were unable/unwilling to accept any haircut on their holdings of Greek debt, that write down was borne entirely by private sector lenders.
> Instead, the governments cared only for the banks.
The banks lost 75%+ of their loans. The governments lost 0%. There's no way you can realistically spin that as a bail out of the banks.
When those sold loans later where haircut, than the lost value of 75% was on papers, but the value that those holders really lost very likely much smaller (if any), because they bought the loans with huge discounts.
That said, the vote means lots of pain coming their way, and Euro or not, their economy will take the hit now and the North will pretty much be able to buy half of the country at garage sale prices. Talk about some value investing for "deserving" German and French banks: you lend recklessly, get bailed out by your debtors, then you buy the damn farm.
From my personal it seems like if Europe had really wanted to help Greece tackle their debt they should have used the crisis to change Greek laws to make it easier to start and run a business there. Currently Greece is by far the hardest country in the Euro currency to run a business as it ranks just before Russia (61 vs 62) in the World Bank's "Ease of Doing Business Index"[3]. The other economies that are held up as examples of recoveries like Iceland and Ireland rank 12 and 13 respectively.
Having a monetary union without a political union is a questionable undertaking in general [4]. Given that the leaders of Europe know that they should either be working to get closer to a political union with similar laws and workings or looking for a way to gracefully exit economies that aren't working out. The current approach of bashing Greece with no real alternative to grinding economic suffering seems like the worst sort of denial about the reality on the ground.
[1] https://en.wikipedia.org/wiki/Treaty_of_Versailles [2] http://www.slate.com/blogs/moneybox/2015/02/18/how_bad_is_gr... [3] http://data.worldbank.org/indicator/IC.BUS.EASE.XQ [4] http://www.euro-know.org/europages/articles/rmu.html [5] http://www.theatlantic.com/business/archive/2014/05/which-st...
http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/05/7...
However that's a generational change: Greece can't and won't be fast enough to do this and will never be able to meet it's creditors. Greece shouldn't have been admitted into the Euro in the early 2000s, this is now the result of that unwise decision.
"A 32-year-old chef in Athens says his income taxes are automatically deducted from his monthly paychecks. But every time he buys something and is given an option to pay less if he doesn’t ask for a receipt, he says yes."
[1] http://www.wsj.com/articles/greece-struggles-to-get-citizens...
As of 2010, Greece collected annual taxes equal to about "34% of the country's total gross domestic product (GDP) - slightly below the EU average of 38.5%." from: http://www.bbc.com/news/magazine-33479946
I do not think that they are correct.
simple facts can't be avoided.
nobody is willing to lend greece money besides the ECB. tsipras tried putin and china, both turned him down.
the greek-style of socialism (coalition with the extreme right notwithstanding) relies on foreign capital. once that runs out, it is over.
greece has never built up any robust, modern facets of statehood. there is no central database of landownership. parties act like clans, hand out positions based on loyalty, not merit.
it's a second world country that thinks of itself as the leader of the first world, as witnessed in endless, tiresome discussions with various greek representatives. they're all so smart, yet their economy doesn't produce shit.
spain, portugal, the eastern europeans all got their act together and worked out plans to move along. greece decided to call the people they're borrowing money from nazis and terrorists.
greece never qualified as a member to the EU, it was a historic mistake to accept them. grexit, now. let the rest of europe govern and prosper in peace.
Not because I say so but because it makes your life happier.