http://i.imgur.com/mHgxQeQ.png
They're in worse shape than the US was at the same time into the Great Depression. Six years after the GFC, and Greece's GDP is still 25% lower than it was pre-crisis.
This is really unprecedented stuff. Hard to blame them for taking extreme positions to end the suffering.
Rather than 'tightening belts,' FDR responded with Social Security, the TVA, banking reform, relief funds, the housing administration, new tax policies, the list goes on.
Amusingly, even then, those on the right charged him with attacking business and even communism, but unlike the left-wing policies of the last couple of decades, he actually stuck to his guns and rode the goodwill of the people into the first and only third term in the history of the presidency.
About the only case I know of for austerity ever actually leading to anything half-good is Finland, the only country in WWII ever to pay off the full extent of its war debt. But while the eventual result was to turn the country into a proper industrial power, the intervening decades are still remembered as one of significant poverty, of literally making bread flour from tree bark because wheat was too expensive. One even wonders if this was the start of Finland's lingering reputation for depression and alcoholism, from which it is only now starting to recover.
The ugly truth about austerity politics is that it is very much about making a handful of very rich people even richer, and little else. Look at Britain, where the party of some of the richest people in the country are blabbering about tightening belts. You think David Cameron's cutting back at home?
Or hell, look at Germany. The biggest bully for austerity politics in the whole EU is also literally it's richest country. And you can damn sure bet they aren't playing the same game at home.
And oh look, just as last time Europe tried to squeeze a country into bankruptcy for its debts, there's suddenly all these new fascist parties gaining popular support, and an iron-fisted tyrant consolidating power in Russia. It's almost like we've all forgotten the 30s ever happened already ...
Inform yourself which reforms where enacted in Germany in 2004/2005 which lead to a nearly uninterrupted decade of economic growth and a very practically balanced-out federal budget. Maybe cutting spending and increases taxes actually leads to a sensible economic state and a more-or-less working public sector. Unless, of course, austerity always fails!
Germany has not implemented austerity, yet it feels the need to lecture other countries on the need to do so.
Greece is part of the single market, that means that people can leave. All the smart, qualified people left Greece a long time ago.
Germany failed to collect 2.3% of its tax receipts, Greece failed to collect 89.5% [1]. If Greek people want to continue not paying taxes, they’ll have to make cuts elsewhere, yes.
> Germany has not implemented austerity, yet it feels the need to lecture other countries on the need to do so.
Greece has not contributed financially to the bailout programmes, yet it feels the need to lecture other countries on the need to do so.
> Greece is part of the single market, that means that people can leave. All the smart, qualified people left Greece a long time ago.
So? I don’t mind Greeks moving to Germany for jobs, they’re welcome here just as any other person from the EU. What exactly are you trying to say?
[1] https://img.washingtonpost.com/wp-apps/imrs.php?src=https://... fromhttp://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/03/w...
I should think after WWI, Germans of all people would see the danger in driving a European country to ruin with onerous debts, but maybe everyone there just forgot about that after the little dictator just decided he didn't want to pay them anymore?
Harz IV. Kurzarbeit. Eurojobs. Stable currency for decades/no devaluations.
Lo and behold, it actually worked for them (although it was quite unpleasant for many Germans).
The first decade or so after reunification was in all respects unusual so I'd rather not try to draw any conclusions from that. They /did/ have trouble around 2000 or so and Schröder was brave/dumb enough to make drastic reforms in order to improve things.
https://en.wikipedia.org/wiki/Hartz_concept
(And it turns out that I don't know how to spell Hartz. Rather embarrasing.)
The way I as an outsider understand the economic history of Germany, Hartz IV was the one that really mattered.
Whether or not you agree that Hartz IV helped or that it was necessary, I think you can at least agree that it hurt :/ -- in which case one can't complain that Germany wants drastic measures to be undertaken in Greece without being willing to taste the same medicine itself.
That can be attributed to the influence of wealthy business lobbies. Austerity puts downward pressure on wages, which in turn creates upward pressure on profits.
Economists, like everybody else, respond to incentives.
A) The relative position of the owners still improves.
http://isites.harvard.edu/fs/docs/icb.topic620591.files/Indi...
B) Businesses in the rest of the Eurozone can reap the benefits of suppressed Greek wages (in the form of a more cut-throat labor market), without facing the consequences of lower demand themselves.
So I'd say looking at that graph they're in exactly the same place the USA was ~4 years after the 'start', depending on where you measure it from.
E.g. if a country started with a GDP of 100, dropped to 10 in a single year, and then over the next 90 years grew its GDP by 1 each year, it would be 90 years of economic growth but still a recession?
http://www.debtdeflation.com/blogs/2015/07/06/discussing-syr...
Somewhere round the 1:00 mark.
As such, it seems more reasonable to compare the current GDP with a reference in, say, 1990. Back then, Greece’s GDP was at 98,251,934,651, whereas for 2014 you have 299,615,364,238 (USD), or roughly a 305%-growth. In comparison, France stood at 1,275,300,566,196 and is now at 2,829,192,039,171, i.e. 221%.
In other words, Greece borrowed too much and now people are upset that they can’t continue their just-achieved standard of living because people don’t give them any more money. But even now, their cumulative GDP growth over 24 years is still larger than that of France, one of the primary lenders in the ongoing debacle (comparison to Germany is difficult, due to reunification complicating everything).
(Source for all numbers: http://data.worldbank.org/indicator/NY.GDP.MKTP.CD )
http://www.bruegel.org/nc/blog/detail/article/1647-is-greece...
Several Eastern European countries took a similar dive after they got rid of their socialist governments in the 90s. Then their economy started to grow a bit later.
http://i.imgur.com/7zPvyKo.png
For Greece, an equivalent amount of debt relief (a reduction of 46% on an NPV basis) would equate to something like $150 billion in forgiven loans.
I think they'd be much more competitive, don't you?
If I understand Wikipedia correctly, Greece was indeed given a 106.5 + 48.2 = 154.7 billion haircut in 2012:
"The haircut alone lowered the government debt pile by €106.5bn (equal to a debt-to-GDP ratio decline of 55.0 percentage points), but as Greek banks at the same time were holding almost one third of the restructured debt, this also created the need for the Troika and Greek government to pay for a €48.2bn bank recapitalisation in 2012"
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/06/05/i...