Comment by fennecfoxen | Hacker News Reader

Comment by fennecfoxen | Hacker News Reader

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The problem with Greece is that you can't just forgive its debts. Its deficit is still like 9-10% of GDP. Who's going to lend them money after a sovereign default? It's not lending anymore, it's donating. Heck, all they've been loaned so far is basically donations so that Europe could say to Eurozone members, "well don't anyone say we didn't try".

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).

"Its deficit is still like 9-10% of GDP."

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...

Apparently the deficit is more like 3% (depending on whether you believe Greece's own stats, or the EU'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.

Years of primary surpluses are clear evidence that Greece is capable of funding its own ongoing spending. This year is an aberration due to the crisis. If the debt were forgiven, I don't think Greece would need outside funds in 2016. Greece isn't asking for forgiveness though—they're asking for restructuring.

Greek fiscal policy is not unsustainable. Much of it is unwise, but still affordable.

Can you cite some sources for the years of primary surplus? I'm looking for them, and the stats I'm seeing all suggest years of severe deficits.

2013: http://www.wsj.com/articles/SB100014240527023045495045793203...

2014: http://www.wsj.com/articles/greece-misses-target-on-budget-s...

2013 caveat: http://yanisvaroufakis.eu/2014/04/24/greek-statistics-are-ba...

The second of those articles seems to imply that aid to Greece is a key part of the income in the calculation of "primary surplus" and the third says "Alas, the Greek government’s 2013 primary surplus is a statistical mirage" - not exactly positive messages!

You can find WSJ stories suggesting that the 2014 primary surplus is also dubious; under what the WSJ says is a "conventional" definition of primary surplus, not the one tailored to Greece, they apparently ran a deficit of over 8% of GDP in 2014.

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.

Googled, "greece primary surplus". First result: http://www.forbes.com/sites/timworstall/2015/02/16/greece-st...

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?

The title of that article you have linked to is "Greece Still Has A Vast Problem; It Doesn't Have A Primary Budget Surplus"

Nobody says Greece is running a surplus today. It has been paying loans for a year without external assistance. Plase read the thread and what I was responding to.

That seems to depend entirely on who you ask. Greece claims to have run a 2014 primary surplus. The EC and ECB appear to recognize a smaller 2014 surplus (smaller than Greece claims).

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?

First, as long as you're retracting your original statement about 8-10% deficit, we're good. I'm not going to argue 1.5% down or up.

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.

I think you've responded to the wrong comment. I never claimed an 8-10% deficit.

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.

You said there was no surplus, which I take to mean expenses == receipts. In that case, it's obvious how it will support itself (if you ignore the loans). Do you have sources for a deficit?

That was 2014. In 2015 they're apparently tracking towards an actual primary deficit.

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.

Yes, I think you will concede that 2015 is not a year to use for forward projections. The country has been paying loans without external help, the uncertainty means no investment incoming, tourism is hit, and people in the country are withdrawing cash from the banks and hiding it in their houses, not spending 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.

Why would I concede that? 2015 Greece has begun privatization and should be feeling the impact of other reforms started in the preceding years. We're only talking about primary budgets, not debt service. Why would I think Greece in 2015 would have poorer intrinsics than in the preceding years?

It's not the intrinsics. It's the whole list of special one-off factors at play. By the way, Greece started privatization in the 90's, not in 2015.

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.

Whatever privatization they started in the 90s, there was a newsworthy spike in it after the troika negotiations started; here's the Reuters piece I was thinking of when I mentioned privatization earlier:

http://www.reuters.com/article/2015/01/28/us-greece-politics...

Another reason why you shouldn't take this year as idicative. However, you said "2015 Greece has begun privatization" whereas the article says the exact opposite. I'm not sure what point you're debating at this point.

Greece most assuredly has not had years of primary surpluses!

There has been a single quarter so far -- and that's assuming we can trust Greek accounting!

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