Greek Crisis continues

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Chen
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Re: Greek Crisis continues

Postby Chen » Wed Jul 15, 2015 11:53 am UTC

So even if Greece does decide to default, how do they go from there? Do they just start printing their own money again? I'm not sure how you'd be able to sustain yourself if they can't seem to balance their budget without some austerity. So what exactly would the plan be if they defaulted?

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Re: Greek Crisis continues

Postby elasto » Wed Jul 15, 2015 2:58 pm UTC

I thought that, when excluding interest and capital repayments, they were running a budget surplus?

Anyhow, I guess the plan would be to hope things went similarly to when Argentina defaulted and floated their currency:

First the bad stuff and, yeah, sure, it's bad:

spoilered by Zamfir. Next time you want to infodump a wikipedia article, just post a link
Spoiler:
Wikipedia wrote:After much deliberation, in January 2002 Duhalde abandoned the peso–dollar parity that had been in place for ten years. In a matter of days, the peso lost a large part of its value in the unregulated market. A provisional "official" exchange rate was set at 1.4 pesos per dollar.

In addition to the corralito, the Ministry of Economy dictated the pesificación, by which all bank accounts denominated in dollars would be converted to pesos at an official rate. This measure angered most savings holders and attempts were made to declare it unconstitutional.

After a few months, the exchange rate was left to float more or less freely. The peso further depreciated, which prompted increased inflation (since Argentina depended heavily on imports, and had no means to replace them locally at the time).

Inflation and unemployment worsened during 2002. By that time the exchange rate had reached nearly 4 pesos per dollar, while the accumulated inflation since the devaluation was about 80%; considerably less than predicted by most orthodox economists. The quality of life of the average Argentine was lowered proportionally; many businesses closed or went bankrupt, many imported products became virtually inaccessible, and salaries were left as they were before the crisis.

Since the supply of pesos did not meet the demand for cash (even after the devaluation) complementary currencies kept circulating alongside them. Fears of hyperinflation as a consequence of devaluation quickly eroded their attractiveness, originally stated in convertible pesos. Their acceptability now ultimately depended on the State's irregular willingness to take them as payment of taxes and other charges.

While the Patacón was frequently accepted at the same value as the peso, Entre Ríos's Federal was among the worst-faring, discounted by an average 30% as even the provincial government that had issued them was reluctant to accept them. There were also frequent rumors that the Government would simply banish complementary currency overnight (instead of redeeming them, even at disadvantageous rates), leaving their holders with useless printed paper.

Immediate effects

Depositors protest the freezing of their accounts. Their mostly dollar-denominated accounts were converted to pesos at less than half their new value.
Aerolíneas Argentinas was one of the most affected Argentine companies, canceling all international flights for various days in 2002. The airline came close to bankruptcy, but survived.[citation needed]

Several thousand newly homeless and jobless Argentines found work as cartoneros, or cardboard collectors. An estimate in 2003 put the number of people scavenging the streets for cardboard to sell to recycling plants at 30,000 to 40,000 people. Such desperate measures were common given the unemployment rate of nearly 25%.[70]

Argentine agricultural products were rejected in some international markets, for fear they might arrive damaged by the chaos. The United States Department of Agriculture put restrictions on Argentine food and drug exports.


But then the good stuff:

Recovery

Duhalde eventually stabilised the situation to a certain extent, and called for elections. On 25 May 2003, Néstor Kirchner took office as the new president. Kirchner kept Duhalde's Minister of Economy, Roberto Lavagna, in his post. Lavagna, a respected economist with centrist views, showed a considerable aptitude at managing the crisis, with the help of heterodox measures.

The economic outlook was completely different from that of the 1990s; the devalued peso made Argentine exports cheap and competitive abroad and discouraged imports. In addition, the high price of soy in the international market produced massive amounts of foreign currency (with China becoming a major buyer of Argentina's soy products).

The government encouraged import substitution and accessible credit for businesses, staged an aggressive plan to improve tax collection, and allocated large sums for social welfare, while controlling expenditure in other fields.[71]

The peso slowly rose, reaching a 3-to-1 rate to the dollar. Agricultural exports grew and tourism returned. The huge trade surplus ultimately caused such an inflow of dollars that the government was forced to begin intervening to keep the peso from rising further, which would have adversely affected budget balances by limiting export tax revenues, and discourage further reindustrialisation. The central bank started rebuilding its dollar reserves.

By December 2005, foreign currency reserves had reached US$28 billion (they were later reduced by the payment of the full debt to the IMF in January 2006). The downside of this reserve accumulation strategy is that the dollars had to be bought with freshly issued pesos, which risked inflation. The Central Bank sterilized its purchases by buying Treasury letters. In this way the exchange rate stabilised near 3:1.

The currency exchange issue was complicated by two mutually opposing factors: a sharp increase in imports since 2004 (which raised the demand for dollars), and the return of foreign investment (which brought fresh currency from abroad) after the successful restructuring of about three quarters of the external debt. The government set up controls and restrictions aimed at keeping short-term speculative investment from destabilising financial markets. The country faced a potential debt crisis in late July 2014 when a New York judge ordered Argentina to pay hedge funds the full interest on bonds they swapped at a discount rate during 2002. If the judgement proceeded, Argentina argued, it would render the country insolvent and cause a second debt default.[72]

Argentina's recovery suffered a minor setback in 2004 when rising industrial demand caused a short-lived energy crisis. Argentina continued to grow strongly, however: GDP jumped 8.8% in 2003, 9.0% in 2004, 9.2% in 2005, 8.5% in 2006 and 8.7% in 2007.[71] Though wages averaged a 17% annual increase from 2002–2008 (jumping 25% in the year to May 2008),[73] inflation ate away at these increases: 12.5% in 2005; 10% in 2006; nearly 15% in 2007 and over 20% during 2008.[citation needed] The government was accused of manipulating inflation statistics leading for example, The Economist magazine to turn to private sources instead.[74] This prompted the government to increase export tariffs and to pressure retailers into one price freeze after another in a bid to stabilize prices, so far with little effect.

While unemployment has been considerably reduced (it has hovered around 7% since 2011), Argentina has so far failed to reach an equitable distribution of income. Nevertheless, economic recovery after 2002 was accompanied by significant improvements in income distribution: in 2002, the richest 10% absorbed 40% of all income, compared to 1.1% for the poorest 10% (36 times);[75] but by 2013, the former received 27.6% of income, and the latter, 2% (14 times).[76] This level of inequality compares favorably to levels in most of Latin America, and in recent years the United States as well.[75]

Living standards recovered significantly after growth resumed in 2003. Even using private inflation estimates, real wages rose by around 72% from their low point in 2003 to 2013.[77] Argentina's domestic new auto market recovered especially quickly, growing from a low of 83,000 in 2002 (one fifth the levels of the late 1990s) to a record 964,000 in 2013.[78]


Take a look at some of those headline figures (wages up 72% in real terms from the low point, virtual double-digit growth in GDP year-on-year, unemployment down from 25% to 7% etc., as well as 70% of debt being written off) and ask yourself if the current plan being offered to Greece will deliver those kind of results in that kind of timeframe...

---

ADDITION:

Varoufakis has made a commentary on the latest EU agreement, and it's pretty scathing.

I won't quote any significant subsections here, to save the internets from getting too full; follow the link if you're interested: http://yanisvaroufakis.eu/2015/07/15/th ... aroufakis/

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Re: Greek Crisis continues

Postby sardia » Sat Jul 18, 2015 3:50 pm UTC

Chen wrote:So even if Greece does decide to default, how do they go from there? Do they just start printing their own money again? I'm not sure how you'd be able to sustain yourself if they can't seem to balance their budget without some austerity. So what exactly would the plan be if they defaulted?

Devaluation of currency and forced austerity due to no access to the credit market. You pretty much pay as you go. It sounds simple, but it's an awful thing for a country to go through.

It's pretty apparent that the people who think (punishment and austerity is the main answer) have won this round, and the rounds for the last 5 years. That's a shame how the outrage from Greece's misconduct means that punishment is more important than solutions.

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Re: Greek Crisis continues

Postby Zamfir » Mon Jul 20, 2015 8:59 am UTC

@ Sardia, at what point would you no longer consider a plan "punishment"?

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Re: Greek Crisis continues

Postby elasto » Mon Jul 20, 2015 11:19 am UTC

If the EU wants to avoid the perception of the plan being punishment, it would probably help for them not to insist on one plan, the Greeks call a referendum on it and generally trash talk it, then the EU insists on a harsher plan.

---

Came across an article on Quora about whether the UK should enter the Eurozone, and as a response, one writer detailed the differing trajectories of three European countries post-crash - Ireland, Cyprus and Iceland.

https://www.quora.com/Why-wont-the-UK-j ... cesco-Wang

Here are the tl;dr highlights:

The Irish financial crisis saw the near-failure of its entire banking sector. Ireland bailed out its banks, partly at the behest of the European Union, which was concerned that Irish bank failures would destabilise the European banking system. The bailout wrecked the Irish economy and forced the Irish government to accept assistance from the combined European Union and IMF , the price for which has been five years of tax hikes and spending cuts exceeded in severity only by those in Greece. Ireland has now left the EU/IMF “program”, although fiscal austerity continues. But its economy remains depressed, and despite substantial emigration it still has nearly 12% unemployment. And both its banks and its sovereign are still highly indebted and vulnerable to further shocks.

...

The financial sector was Cyprus’s largest industry, and its collapse ripped the heart out of the economy. Cyprus’s use of capital controls created an implied currency devaluation that protected the economy to some extent, but as with Ireland, membership of the Euro meant there was no functioning central bank that could reflate the economy. Cyprus’s economy shrank by 5.4% in less than a year: the damage was felt directly by Cypriot businesses, households and ultimately by the sovereign because of falling tax revenues. Cyprus was forced to restructure its domestic sovereign debt in 2013 – the second sovereign default in the Euro area (the first was Greece)

But Cyprus is actually doing considerably better than the IMF’s prediction of 8% gdp contraction, and far better than Ireland, Greece, Portugal or Spain. This is no doubt because it forced bank creditors to take losses and used capital controls to protect its economy from damaging capital flight.

...

But Iceland’s government had a big advantage over Ireland and Cyprus. It had its own currency and full control of monetary and fiscal policy. It could protect its economy. It allowed its banks to fail and refused to honor foreign liabilities: there was legal action against it, of course, but it won. It allowed its currency to devalue by 50% and imposed capital controls, most of which are still in place. And it provided fiscal support to businesses and households. Six years later, Iceland’s economy has recovered fully from its crisis and is expected to grow at a rate of 2.5% over the next year.


More evidence to the cause that Greece is better out than in - indeed better if it had never been in.

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Re: Greek Crisis continues

Postby maybeagnostic » Mon Jul 20, 2015 11:52 am UTC

So just a few days after the Greek government accepted the new plan, Merkel is talking about debt relief in the near future. Towards the end, the article says
Merkel said Greece’s wish to remain inside the euro rules out a “classic haircut, writing down 30 or 40 percent of the debt,” since it violates European law.
but I am not sure what they mean by that. Debt relief cannot be "classic haircut" can either mean it will be partially forgiven or that they will just push back the fall date/reduce interest rates. Either way, the fact that she said this much mere days later probably means that actual debt relief is virtually guaranteed if the Greek government sticks to the plan for the next months.

On that note, I've seen many people agreeing debt relief will be necessary if Greece is to get back on its feet in the next years but I have seen almost no numbers discussed. I have no idea what amount of relief is necessary for the debt to become sustainable.
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Re: Greek Crisis continues

Postby Zamfir » Mon Jul 20, 2015 12:36 pm UTC

@elasto, I want to ask you the same question as sardia: suppose the current plan is punishment (or the perception of punishment). Then what should be changed, roughly, so that it would not be punishment anymore?


The comparison to Iceland is a bit misleading. A hard-currency policy is beneficial most of the times, at the cost of reduced flexibility in bad times. The comparison just shows the part about the bad times.

There's also a beg-your-neighbour aspect to devaluations. Iceland can vaguely get away with that, because they're too small to bother. Devaluations are a lot less attractive when other countries match them, leading to competitive devaluation spirals. That's how the old drachma lost a factor 10 of its value compared to the dollar since the days of Bretton Woods. And those spirals also lead to harsh political tensions within Europe - it's not like the old days were just wine and roses.

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Re: Greek Crisis continues

Postby Diadem » Mon Jul 20, 2015 1:12 pm UTC

elasto wrote:Came across an article on Quora about whether the UK should enter the Eurozone, and as a response, one writer detailed the differing trajectories of three European countries post-crash - Ireland, Cyprus and Iceland.

https://www.quora.com/Why-wont-the-UK-j ... cesco-Wang

Here are the tl;dr highlights:

Honestly this sounds a lot like cherry-picking. Comparing countries is hard, because there are always many different variables at play. If you look hard enough you can always find some data that fits your desired story.

Cyprus and Iceland are both very small countries. That completely changes the relevant dynamics. The UK can't let its banks go the way Iceland did, euro or no euro. It's also simply not true that a country like Iceland is doing much better. Look at the Eurostat data on per capita GDP. Over the past 10 years the eurozone did slightly worse than the EU average (going from a relative 109 to 107), but better than the UK, Iceland, Japan or the US. The euro average being below the EU average is not surprising. The non-euro EU countries are mostly in Eastern Europe. Being poorer, they can grow faster.

I'm sure the numbers can be interpreted in many different ways, but I see no clear indication that Euro adoption slows economic growth.

Two more important points. First, in case you mistook the author of the article for anything other than a complete idiot: They call the UK a 'relatively small economy'. They are the fucking 5th economy in the world. How anybody can be that clueless and still write about economy is beyond me.

Secondly: The Euro, and indeed the entire European Project, was never about economic growth. It's about achieving permanent peace by creating economic interdependence and destroying nationalism. We are doing well on the former, but, sadly, not so well on the latter.
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Re: Greek Crisis continues

Postby sardia » Mon Jul 20, 2015 4:47 pm UTC

Zamfir wrote:@elasto, I want to ask you the same question as sardia: suppose the current plan is punishment (or the perception of punishment). Then what should be changed, roughly, so that it would not be punishment anymore?


The comparison to Iceland is a bit misleading. A hard-currency policy is beneficial most of the times, at the cost of reduced flexibility in bad times. The comparison just shows the part about the bad times.

There's also a beg-your-neighbour aspect to devaluations. Iceland can vaguely get away with that, because they're too small to bother. Devaluations are a lot less attractive when other countries match them, leading to competitive devaluation spirals. That's how the old drachma lost a factor 10 of its value compared to the dollar since the days of Bretton Woods. And those spirals also lead to harsh political tensions within Europe - it's not like the old days were just wine and roses.

Mostly the reflexive reaction against reducing debt because it would imply the Greeks got away with acting irresponsibly and now the others have to bail them out. After a certain point, you're just beating a dead horse and aren't accomplishing anything meaningful. Well I suppose the beatings serve as a reminder to all the other horses to stay in line. That's not too day the Greeks didn't do anything wrong, there some messed up crap over there.

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Re: Greek Crisis continues

Postby Tyndmyr » Mon Jul 20, 2015 5:13 pm UTC

Chen wrote:So even if Greece does decide to default, how do they go from there? Do they just start printing their own money again? I'm not sure how you'd be able to sustain yourself if they can't seem to balance their budget without some austerity. So what exactly would the plan be if they defaulted?


Pretty much that. If they decide to give up the Euro, the options are either.
1. Default, print new currency.
2. Print currency to pay the bills, avoiding a technical default.

Generally, 1 is superior. Both are hard on the economy, and will result in much reduced access to international credit, but the latter tends to risk heavy inflation as well. Given that they *already* are facing limitations with regards to international credit, and the economy isn't doing super well right now, thanks to reduced access to cash, etc, 1 isn't that unthinkable. Could even be better in the long term, if well managed.

Of course, that caveat is pretty significant. They haven't managed particularly well to this point, so I wouldn't lay odds on that suddenly changing.

Long story short is that regardless of the systemic changes, a lot of smaller changes need to be made to fix the underlying issues. If everyone's evading taxes, that has consequences, and unless they address those issues, they'll keep struggling either in the EU or out.

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Re: Greek Crisis continues

Postby Zamfir » Mon Jul 20, 2015 6:11 pm UTC

@sardia, debt reduction is mostly a long term issue. Current debt service is low, and the new loans are even more backloaded. I fully understand why the greeks want commitment on debt writedowns, to have a light at the end of the tunnel. But hose writedowns won't have much effect on austerity today.

That's why I am pushing on specifics with regards to punishment. The present hard line is definitely harder pour encourager les autres. But suppose the Eurozone was negotiating in perfect good faith, with everyone's best interests at heart. Political Nirvana. How might that look like?

A noticably reduced 'punishment' for Greece would cost money today, and it can't be loans if you also want reduce the debt load. What shape should that money have? Money for the greek government without strings attached? That's pushing the goodwill political nirvana quite far...

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Re: Greek Crisis continues

Postby sardia » Mon Jul 20, 2015 11:13 pm UTC

Zamfir wrote:@sardia, debt reduction is mostly a long term issue. Current debt service is low, and the new loans are even more backloaded. I fully understand why the greeks want commitment on debt writedowns, to have a light at the end of the tunnel. But hose writedowns won't have much effect on austerity today.

That's why I am pushing on specifics with regards to punishment. The present hard line is definitely harder pour encourager les autres. But suppose the Eurozone was negotiating in perfect good faith, with everyone's best interests at heart. Political Nirvana. How might that look like?

A noticably reduced 'punishment' for Greece would cost money today, and it can't be loans if you also want reduce the debt load. What shape should that money have? Money for the greek government without strings attached? That's pushing the goodwill political nirvana quite far...

It would look like an investment program and a debt write off, freeing up money to grow the economy. So yea, it would be pretty much be giving money with little strings attached from the Eurozone into Greece. The idea of just writing off debt is always controversial, it doesn't mean it doesn't work. (at least it works better than the stuff we already tried)

The bigger question is, what is everyone's best interest here? Is it for Germany to get it's money back? For the Euro to grow stronger? For Greece to be better off? If the goal is just to get Europe's money back, we're looking at a lost cause. If the goal is to make the Euro stronger, we have some options. (kick out or reform Greece. If we're just trying to make Greeks stop suffering, we have different options (kick out, or maybe eventually help by reforming Greece).

Of course, this assumes that Greeks somehow get their shit together, which is a daunting task, even without the debt crisis. Once we get past those obstacles, there's the issue that Greece doesn't really have anything to offer besides tourism and yogurt.

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Re: Greek Crisis continues

Postby BattleMoose » Tue Jul 21, 2015 2:22 am UTC

@Sardia, you wrote a lot of words for basically what boils down to, give them money, nsa.

If I had a bucket of money, to give, to reduce suffering, it's not going to Greece. Malaria prevention in the third world will have much greater impact on the quality of life of humans and economies of countries, than would maintaining a first world quality of life in Greece.

The bigger question is, what is everyone's best interest here?


That countries in the EUzone borrow responsibly and responsibly manage their finances. Again, not talking post GFC but pre GFC.

Greece has fundamental issues with its Tax system and banking systems. Which as far as I can tell, it still hasn't taken real efforts to address. It certainly didn't help that Tsipras was perceived to be light on taxes. Do what you can to help yourself, then ask for help from others, seems apt. From the creditors perspectives, they have allowed Greece to have the opportunity to address these issues but it seems not to be taken advantage of. This isn't a problem you can keep throwing money at.

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Re: Greek Crisis continues

Postby Tyndmyr » Tue Jul 21, 2015 2:54 pm UTC

sardia wrote:The bigger question is, what is everyone's best interest here? Is it for Germany to get it's money back? For the Euro to grow stronger? For Greece to be better off? If the goal is just to get Europe's money back, we're looking at a lost cause. If the goal is to make the Euro stronger, we have some options. (kick out or reform Greece. If we're just trying to make Greeks stop suffering, we have different options (kick out, or maybe eventually help by reforming Greece).


Everyone's best interest is not identical. Free money is totally in Greece's best interest. This does not appear to be true for anyone else. They seem to be much better served by NOT completely bailing out countries until they demonstrate will to improve.

Agreed that even if I had a bucket of extra money that showed up somehow that I couldn't use myself, Greece isn't the #1 place to spend it.

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Re: Greek Crisis continues

Postby LaserGuy » Tue Jul 21, 2015 5:02 pm UTC

BattleMoose wrote:@Sardia, you wrote a lot of words for basically what boils down to, give them money, nsa.


I think if you want to attach strings, you need to attach strings that actually do something useful and productive, not just make the problem worse. Austerity at this point has been, and will continue to be, an absolute disaster. Greece doesn't have a spending problem (as was noted early in the thread, their spending is not out-of-line with the rest of Europe); Greece has a revenue problem. Taxes are too low and the government seems to have a problem actually getting people to pay the tax. That's the problem that really needs to be addressed.

As an aside, I'm amused by the proposed solution that Germany leave the euro, rather than Greece, as Germany's presence in the union is artificially inflating the currency above a point where most of the other member states are uncompetitive.

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Re: Greek Crisis continues

Postby morriswalters » Tue Jul 21, 2015 6:02 pm UTC

someone wrote:Greece doesn't have a spending problem (as was noted early in the thread, their spending is not out-of-line with the rest of Europe); Greece has a revenue problem. Taxes are too low and the government seems to have a problem actually getting people to pay the tax. That's the problem that really needs to be addressed.
This statement caused my ears to buzz. If you are spending more than you can generate, isn't that a spending problem.

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Re: Greek Crisis continues

Postby Dark567 » Tue Jul 21, 2015 6:55 pm UTC

morriswalters wrote:
someone wrote:Greece doesn't have a spending problem (as was noted early in the thread, their spending is not out-of-line with the rest of Europe); Greece has a revenue problem. Taxes are too low and the government seems to have a problem actually getting people to pay the tax. That's the problem that really needs to be addressed.
This statement caused my ears to buzz. If you are spending more than you can generate, isn't that a spending problem.
I also don't think Greece can spend as much as the rest of Europe, as their GDP isn't as big as many other countries in Europe, even if they fixed the tax issues.
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Re: Greek Crisis continues

Postby Negated » Tue Jul 21, 2015 7:15 pm UTC

The reason why Germany is adamant on not giving a debt write-off, besides being an unpopular solution among the German voters, is to deter other heavily in debt countries from following the Greece example. Greece's economy is just a small fraction of the entire EU. The major private banks are no longer exposed to the bad debts. The current creditors (IMF, ECB, other European governments) can easily take the hit even if Greece defaults. But if Greece gets the haircut, the voters in Italy and Spain will be encouraged to vote for their own version of Syriza, to blackmail the rest of Europe with their own mountain of debt, and bargain for new deals more favorable to them. Even the possibility of this happening is enough to destabilize the Eurozone and badly fracture the EU.

So there is a dilemma. Greece has no realistic chance to pay back the debt. It badly needs a lower debt burden to let money flow to more constructive purposes than paying off interests. But if the Greeks get that favorable treatment with the sort of tactics used by Syriza, Europe will only run into a bigger crisis somewhere else.

What I think needs to happen is a debt write-off under the right conditions. It's hard for Angela Merkel to sell the debt write-off to German voters if the image of "lazy Greeks" persist. But if somehow the Greeks show the will to reform and produce actual results, they can make a stronger case that they deserve to be rescued.

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Re: Greek Crisis continues

Postby Tyndmyr » Tue Jul 21, 2015 7:23 pm UTC

morriswalters wrote:
someone wrote:Greece doesn't have a spending problem (as was noted early in the thread, their spending is not out-of-line with the rest of Europe); Greece has a revenue problem. Taxes are too low and the government seems to have a problem actually getting people to pay the tax. That's the problem that really needs to be addressed.
This statement caused my ears to buzz. If you are spending more than you can generate, isn't that a spending problem.


Yes. Regardless of what level that is. If framing is particularly important to you, I suppose you could call it a finance problem.

But, in some leftist circles, ANYTHING that sounds like criticism of spending is taken as a threat. Spending good, austerity bad, always, the end.

But, in reality, spending quite a lot over what you're taking in is an actual problem, and not one solvable by changing the framing of the problem. Responsible money management can be done in a few different ways, but managing spending is always a part of that.

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Re: Greek Crisis continues

Postby LaserGuy » Tue Jul 21, 2015 10:45 pm UTC

Dark567 wrote:
morriswalters wrote:
someone wrote:Greece doesn't have a spending problem (as was noted early in the thread, their spending is not out-of-line with the rest of Europe); Greece has a revenue problem. Taxes are too low and the government seems to have a problem actually getting people to pay the tax. That's the problem that really needs to be addressed.


This statement caused my ears to buzz. If you are spending more than you can generate, isn't that a spending problem.


I also don't think Greece can spend as much as the rest of Europe, as their GDP isn't as big as many other countries in Europe, even if they fixed the tax issues.


When you compare economies of different sizes, you typically compare spending as % of GDP. As of 2014, Greece was spending ~52% of GDP. Denmark is highest of European countries at 57%. France is 56%, Belgium is 53%. Notably, however, Greece only collect 31% of GDP in tax revenues, compared to 48% in Denmark, 44% in France, 44% in Belgium. If you look at the linked table, you will find that most European countries (including Germany, 45%) hover around 50% GDP in spending. The differences come primarily on the revenue side.

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Re: Greek Crisis continues

Postby BattleMoose » Wed Jul 22, 2015 7:03 am UTC

LaserGuy wrote:
BattleMoose wrote:@Sardia, you wrote a lot of words for basically what boils down to, give them money, nsa.


I think if you want to attach strings, you need to attach strings that actually do something useful and productive, not just make the problem worse. Austerity at this point has been, and will continue to be, an absolute disaster. Greece doesn't have a spending problem (as was noted early in the thread, their spending is not out-of-line with the rest of Europe); Greece has a revenue problem. Taxes are too low and the government seems to have a problem actually getting people to pay the tax. That's the problem that really needs to be addressed.

As an aside, I'm amused by the proposed solution that Germany leave the euro, rather than Greece, as Germany's presence in the union is artificially inflating the currency above a point where most of the other member states are uncompetitive.


I wasn't positing a solution or endorsing strings. Just distilling Sardia's suggestion.

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Re: Greek Crisis continues

Postby elasto » Wed Jul 22, 2015 8:39 am UTC

BattleMoose wrote:I wasn't positing a solution or endorsing strings. Just distilling Sardia's suggestion.

I don't think Sardia's suggestion was quite that - but, you know what? Even if it was, sometimes the right thing to do inside in a currency union is to give money with no strings attached. Many red states couldn't survive without many blue states giving them handouts year-on-year.

Likewise, sometimes the right thing to do is to let the wealth-owners take the hit instead of the taxpayers, as Iceland showed us. Wealth-owners sometimes seem to forget that investments can go down as well as up - and demand that the working poor bail them out for decades to come.

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Re: Greek Crisis continues

Postby BattleMoose » Wed Jul 22, 2015 10:35 am UTC

elasto wrote:Many red states couldn't survive without many blue states giving them handouts year-on-year.


Yeah, and they also have the same laws, and social welfare and pensions and have legal and financial institutions that connect them together. The Greek Euro thing is wholly incomparable.

Likewise, sometimes the right thing to do is to let the wealth-owners take the hit instead of the taxpayers,


Who are these ethereal "wealth owners"? Ultimately is it the tax payers in the other European countries. Not that I am against some debt reduction.

as Iceland showed us.


Iceland wasn't drowning in sovereign debt. Even if Greece decided not to bail out their banks, they would still have obscene amounts of debt to manage.

Wealth-owners sometimes seem to forget that investments can go down as well as up - and demand that the working poor bail them out for decades to come.


The language here is just wrong. Greece borrowed huge amounts of money. If Greece wants to adjust its tax codes to focus on getting more money from the Rich, thats up to them. If they want to continue trying to get money from the poor, that's okay too but its on them to choose. But this isn't a bailout at all. In Greece paying back its debts, there is no bail out from the working poor or anyone else in Greek society, it would just be Greece paying back its debts.

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Re: Greek Crisis continues

Postby Tyndmyr » Wed Jul 22, 2015 4:41 pm UTC

elasto wrote:
BattleMoose wrote:I wasn't positing a solution or endorsing strings. Just distilling Sardia's suggestion.

I don't think Sardia's suggestion was quite that - but, you know what? Even if it was, sometimes the right thing to do inside in a currency union is to give money with no strings attached. Many red states couldn't survive without many blue states giving them handouts year-on-year.


And that's really not a *good* thing for the US. They come to expect it. They see it as normal, and instead of using it as a means to improve, just factor it into spending. Hell, they may brag about how responsible they're being without any sense of irony.

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Re: Greek Crisis continues

Postby CorruptUser » Wed Jul 22, 2015 9:29 pm UTC

It gets WORSE; the red states intentionally create the poverty they have to bring in more out-of-state "revenue", via abstinence only education and restriction on abortion. If Reagan could tie highway funding to the the drinking age, there is no reason Medicaid funding couldn't be tied to access to abortions and sex ed.

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Re: Greek Crisis continues

Postby JudeMorrigan » Wed Jul 22, 2015 9:43 pm UTC

CorruptUser wrote:It gets WORSE; the red states intentionally create the poverty they have to bring in more out-of-state "revenue", via abstinence only education and restriction on abortion. If Reagan could tie highway funding to the the drinking age, there is no reason Medicaid funding couldn't be tied to access to abortions and sex ed.

As entertaining as it is to imagine the right-wing histrionics if Obama tried something like that, that's pretty obviously not something that's actually a viable option.

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Re: Greek Crisis continues

Postby elasto » Thu Jul 23, 2015 2:59 am UTC

BattleMoose wrote:But this isn't a bailout at all. In Greece paying back its debts, there is no bail out from the working poor or anyone else in Greek society, it would just be Greece paying back its debts.

What you're conveniently overlooking is that this whole crisis was caused by wealth-owners getting too greedy. A decent portion of Greece's debts was caused by bailing out the banks, and another decent portion was caused by a multi-year recession caused by the banks.

Some countries didn't let the banks get away with it, and have bounced back, but Greece was forced to let them - with Greece's poor and working poor now taking the brunt of it.

Tyndmyr wrote:And that's really not a *good* thing for the US. They come to expect it. They see it as normal, and instead of using it as a means to improve, just factor it into spending. Hell, they may brag about how responsible they're being without any sense of irony.

Meh. One part of the difference in red/blue spending is that blue has a higher proportion of efficient cities and red of inefficient countryside.

I don't actually have a problem with someone wishing for a different lifestyle, if others are happy to subsidise it, which largely seems to be the case in the US. Economic efficiency shouldn't be the only benchmark for human life.

Imo, so long as there is a free movement of people - ie. Germans could go and live in Greece just like New Yorkers could go live in Idaho - I don't have an issue with permanently different outlooks and lifestyles within the EU, like for the red and blue states. I don't think all countries should be expected to follow the German economic model.

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Re: Greek Crisis continues

Postby BattleMoose » Thu Jul 23, 2015 3:28 am UTC

What you're conveniently overlooking is that this whole crisis was caused by wealth-owners getting too greedy. A decent portion of Greece's debts was caused by bailing out the banks, and another decent portion was caused by a multi-year recession caused by the banks.


And all this time I thought it was caused by irresponsible politicians borrowing too much money so they could spend it on the electorate who would then vote for them and repeat every election cycle. So that by the time that the GFC happened, Greece was in serious trouble. But I guess you must be right. It is all these evil bankers...

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Re: Greek Crisis continues

Postby maybeagnostic » Thu Jul 23, 2015 10:52 am UTC

elasto wrote: A decent portion of Greece's debts was caused by bailing out the banks, and another decent portion was caused by a multi-year recession caused by the banks.

I'm a bit at a loss here. To the best of my knowledge, Greece never bailed out its banks, they have just had liquidity problems because people lost trust in the government and tried to withdraw their deposits. The cause of the recession was irresponsible and even fraudulent government borrowing and the bonds they issued weren't exclusively bought by banks. It seems like the only "banks" you could be talking about are the US and UK institutions that started the whole global recession which brought this problem to the forefront but that is a tenuous connection at best and the Eurozone has no right or ability to sanction them anyhow.
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Re: Greek Crisis continues

Postby elasto » Thu Jul 23, 2015 11:24 am UTC

The Economist wrote:SLOVENIA’s banking bail-out announced on December 12th followed a familiar pattern. Having driven over the edge thanks to reckless lending, the country’s three big banks are being hauled back onto the road by taxpayers. European governments want to stop this happening. They made some progress in the past week in their efforts to forestall future costly bail-outs. But the euro zone is moving only slowly towards acting in concert when banks get into trouble, even though this is a crucial component of the banking union that is supposed to make the single-currency club work better.

The expense of bail-outs both during the financial crisis of 2007-09 and the euro crisis that followed has been immense. State-aid figures from the European Commission show that between October 2007 and the end of 2011, European governments injected €440 billion ($605 billion) into their teetering banks and also provided guarantees of €1.1 trillion. Since then Spain has had to shore up its wobbly savings banks with €41 billion, which the government itself had to borrow from the European Stability Mechanism (ESM), the euro-zone’s rescue fund.


link

During the financial crisis, an absolutely enormous amount of risk and debt was transferred from failing banks onto the backs of taxpayers - that's a big reason why the EU could survive a Grexit now whereas they couldn't back when the crisis kicked off.

Businessweek puts the figure even higher at €3T.

Sure, not all that money was needed, and much of it will be repaid, some of it with interest, but to pretend it's not a big reason why countries like Greece have unaffordable levels of sovereign debt is disingenuous.

Yes of course Greece borrowed and spent too much - however not out of line with many other EU countries - but the bank-led crisis - and subsequent enforced austerity causing the economy to go into freefall - is the only reason sovereign debt levels became unaffordable. Had the economic wisdom of government spending rising during recessions been followed, Greece would not be in this mess. There would be plenty of time to force Greece to engage in austerity measures once the crisis had passed - assuming the political will was there to do so.

But we are repeating ourselves...

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Re: Greek Crisis continues

Postby BattleMoose » Thu Jul 23, 2015 11:41 am UTC

That article that you posted doesn't even mention Greece at all...

Yes of course Greece borrowed and spent too much - however not out of line with many other EU countries


Just no. Greek borrowing was outrageous between 1980 and 1995.

http://dbfchicago.com/wp-content/upload ... e_1977.png

Precrisis, Greek debt was over 100% of GDP. Compared to POST crisis, only a few European countries are carrying that much debt and only because of the crisis.

http://blog.thomsonreuters.com/wp-conte ... v-debt.jpg

Had the economic wisdom of government spending rising during recessions been followed


This wasn't possible because no one was stupid enough to lend the money. It literally just wasn't an option.

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Re: Greek Crisis continues

Postby Diadem » Thu Jul 23, 2015 12:51 pm UTC

elasto wrote:link

During the financial crisis, an absolutely enormous amount of risk and debt was transferred from failing banks onto the backs of taxpayers - that's a big reason why the EU could survive a Grexit now whereas they couldn't back when the crisis kicked off.

Businessweek puts the figure even higher at €3T.

Sure, not all that money was needed, and much of it will be repaid, some of it with interest, but to pretend it's not a big reason why countries like Greece have unaffordable levels of sovereign debt is disingenuous.

Yes of course Greece borrowed and spent too much - however not out of line with many other EU countries - but the bank-led crisis - and subsequent enforced austerity causing the economy to go into freefall - is the only reason sovereign debt levels became unaffordable. Had the economic wisdom of government spending rising during recessions been followed, Greece would not be in this mess. There would be plenty of time to force Greece to engage in austerity measures once the crisis had passed - assuming the political will was there to do so.

But we are repeating ourselves...

There is just so much wrong here.

Yes, bailing out the banks meant an enormous transfer of risk and money from the taxpayer to these banks. But this didn't cause the crisis. The crisis caused the bailout. You yourself admit that these bailouts were necessary in the very next sentence. Without them things would have been even worse. So pointing to them as the reason for Greece's woes is silly. (Personally I think that together with bailing out the banks, we should have gone after the bankers. The worst offenders amongst the top bankers should have been made personally liable, perhaps even thrown in jail. But that is a matter of justice, not economics. It would have made absolutely zero difference to Greece's or any other country's economic position).

Likewise enforced austerity is not the source of the current economic problems, but a result of them. Do you think that if Europe hadn't demanded strict austerity from Greece that somehow magically money would have fallen out of the sky to fund the Greek government? You can't spend more money than you make unless someone borrows you money. Without European aid Greek would have had to go through an even stronger austerity regime. Without the euro they still would have had to go through this regime. "Inflating away debt" is just another way of lowering wages and pensions, after all.

And as BattleMoose points out: Yes, Greece did in fact borrow much more than other European countries. And Greece has a number of systemic problems that other European countries do not suffer from. Sure if there had been no economic crisis Greece wouldn't be in the current mess. But just because things could have gone right, under perfect circumstances, doesn't mean it wasn't utterly irresponsible. When borrowing money you're supposed to take into account that things don't always go according to plan.
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Re: Greek Crisis continues

Postby Tyndmyr » Thu Jul 23, 2015 1:37 pm UTC

CorruptUser wrote:It gets WORSE; the red states intentionally create the poverty they have to bring in more out-of-state "revenue", via abstinence only education and restriction on abortion. If Reagan could tie highway funding to the the drinking age, there is no reason Medicaid funding couldn't be tied to access to abortions and sex ed.


Lots of games are played to maximize federal dollars flowing in.

In addition to questions of need, there is also the simple fact that due to senate seat apportionment, these rural red states have somewhat more pull than their population alone would give. That's at least partially why they get more dollars per capita.

BattleMoose wrote:
What you're conveniently overlooking is that this whole crisis was caused by wealth-owners getting too greedy. A decent portion of Greece's debts was caused by bailing out the banks, and another decent portion was caused by a multi-year recession caused by the banks.


And all this time I thought it was caused by irresponsible politicians borrowing too much money so they could spend it on the electorate who would then vote for them and repeat every election cycle. So that by the time that the GFC happened, Greece was in serious trouble. But I guess you must be right. It is all these evil bankers...


Yeah...describing this all as greedy bankers seems...wildly inaccurate. Are there not clearly visible governmental fiscal issues?

Don't get me wrong, I'm sure bankers want all the money they can get, and will cheerfully accept/demand bailouts and handouts, but giving them all the credit for this seems unfair.

elasto wrote:Had the economic wisdom of government spending rising during recessions been followed, Greece would not be in this mess. There would be plenty of time to force Greece to engage in austerity measures once the crisis had passed - assuming the political will was there to do so.

But we are repeating ourselves...


Well, obviously, the only problem the greeks have is an unwillingness to spend money. :roll:

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Re: Greek Crisis continues

Postby PolakoVoador » Thu Aug 20, 2015 7:24 pm UTC

PM Alexis Tsipras quits and calls early polls
Greece's Prime Minister Alexis Tsipras has announced he is resigning and has called an early election.
Mr Tsipras, who was only elected in January, said he had a moral duty to go to the polls now a third bailout had been secured with European creditors.
The election date is yet to be set but earlier reports suggested 20 September.
Mr Tsipras will lead his leftist Syriza party into the polls, but he has faced a rebellion by some members angry at the bailout's austerity measures.

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Re: Greek Crisis continues

Postby Vahir » Fri Aug 21, 2015 12:45 am UTC

That's just what Greece needs, more political instability.

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Re: Greek Crisis continues

Postby BattleMoose » Fri Aug 21, 2015 6:11 am UTC

They (the Greek people) elect a party with obviously unrealistic goals and then get upset when obviously unrealistic goals cannot be achieved. This political instability is of their own making.

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Re: Greek Crisis continues

Postby Zamfir » Fri Aug 21, 2015 6:19 am UTC

BattleMoose wrote:They (the Greek people) elect a party with obviously unrealistic goals and then get upset when obviously unrealistic goals cannot be achieved.


Huh? Tsipras thinks the people will support him. That's why he wants new elections. He thinks most people are not opposed to the agreements. He thinks the parliamentarians who oppose the agreements will lose out in the elections.

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Re: Greek Crisis continues

Postby BattleMoose » Fri Aug 21, 2015 6:50 am UTC

What's the point of this? The Greek parliament approved the bailout package. He isn't even a year into his term. If he thinks the people support what he's doing he should just keep on carrying on leading the country.

Resigning and calling very early elections, is a bold strategy to get, what you already have. I guess he is hoping that Greek parliamentarians will become more amicable to what they are trying to do? If that's the case, its a very expensive way to achieve that. And this is after a recent snap referendum.

http://www.smh.com.au/world/greek-prime ... j47s1.html

This article at least suggests that the motive is to quell rebellion within his own party. Which is hardly surprising as they betrayed the main point that they campaigned on.

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Re: Greek Crisis continues

Postby Carlington » Fri Aug 21, 2015 7:37 am UTC

He ran on the promise of getting the Greek people through this without unreasonable austerity measures. He obviously now wants to gauge whether he's done that in the eyes of the electorate or not. Sometimes the aim of a politician is to pursue actual democracy, not to do all in their power to secure power for themself.
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Re: Greek Crisis continues

Postby BattleMoose » Fri Aug 21, 2015 7:42 am UTC

Carlington wrote: He obviously now wants to gauge whether he's done that in the eyes of the electorate or not. Sometimes the aim of a politician is to pursue actual democracy, not to do all in their power to secure power for themself.


That is literally the exact opposite of my life experiences so far. I think there are two possibilities: 1) His position is totally untenable at the moment or, as Zamfir suggests 2) He is trying to strengthen his position.


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