4 ms·

It's fair to argue about the European economy being a mess and all the crazy fiscal policy issues (personally, I think the only sane choice for Greece last year

• disordinary 10y ago
  How could Greece leave the EU if they owe 20 Billion to the European Bank and a couple of hundred Billion to individual European countries? They are stuck there because of the debt, if they left the EU they would have gone bankrupt.
  • lhl 10y ago
    Considering their 8+ years of negative GDP growth, there's not a lot to point out that they won't go bankrupt or will be able to service their debt when they have to start paying again (2022) anyway. From the most recent IMF projections (May 2016 [1]), without debt restructuring: "Gross financing needs cross the 15 percent-of-GDP threshold already by 2024 and the 20 percent threshold by 2029, reaching around 30 percent by 2040 and close to 60 percent of GDP by 2060." [1] https://www.imf.org/external/pubs/ft/scr/2016/cr16130.pdf https://www.imf.org/external/pubs/ft/scr/2016/cr16130.pdf
  • iofj 10y ago
    And for a sovereign state, bankruptcy means ... nothing. Yes they couldn't borrow for a while (judging by the Cyprus experience ... about 6 months), but they can't borrow right now either. A lot of banks would close off financial channels for a while, as a bargaining chip to get their own finances in order. This would be bad for rich Greek citizens, but would be fine for normal people who don't deal with non-Greek companies directly. And of course, the ECB would have to write off a massive amount of debt (about 1.5% of Eurozone total debt), which would devalue the Euro. A lot of Euro banks that bought Greece's debt because it was backed by the Eurozone and still had high interest rates (in a sort of carry trade) would go bankrupt. Because that's the big secret, of course. A Greek bankruptcy would be far worse for other countries, especially Eurozone countries, then it would be for Greece [1]. As an American you should appreciate the situation Greece is in. Greece's economy is destroyed, because of externally imposed taxes that cannot possibly work. I am saying, maybe Greece should have a little Tea Party. I am scared to think of how badly Europe is currently being perceived in any of the PIIGS countries, but in Greece it's probably by far the worst. [1] https://www.youtube.com/watch?v=mxXKDaIKkhk https://www.youtube.com/watch?v=mxXKDaIKkhk (worth watching, even if you don't care about the reference itself)
    • disordinary 10y ago
      That is an interesting video, of course there are multiple sides to every story. It could very well be that the loans were designed to force Greece under the thumb of Germany, kind of like a hostile takeover. However the Greek government has also lived beyond its means for years. For instance, they are a country of only 11 million yet they had multiple presidential jets. In most countries of a similar size the politicians either fly on airforce planes or fly commercial airlines. I know bankruptcy means different things in different countries, when I worked in the US it appeared as though it was relatively common place. At least if you paid attention to the ads on the radio, here in NZ it's less common and has more of a stigma around it so there is obviously a cultural viewpoint on how acceptable bankruptcy would be. The thing is that the German (and French, and Italian) people loaned Greece that money, these countries all have a high debt ratio and therefore any money they pay for the Greek debt would be added to their own. They are borrowing money to pay for other peoples loans. Now I know that it isn't as simple as that, a lot of debt for the bigger countries is domestic debt, they've borrowed from themselves to pay another country in order to pay back to themselves. But on the actual balance sheet its a net loss for the tax payer. What I really want to know is how all of these countries have let themselves get into this state. Pretty much every country in the west is hovering around 100% debt to GDP or over. the only exceptions being Sweden, Norway, Switzerland, New Zealand, and Australia. I just look at this map and wonder how anybodies lifestyle is sustainable: https://en.wikipedia.org/wiki/Debt-to-GDP_ratio#/media/File:Government_debt_gdp.jpg https://en.wikipedia.org/wiki/Debt-to-GDP_ratio#/media/File:...