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!