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> The alternative was to let Greece go bankrupt, as it has done many times before and not repay the banks. Yes, but this is the very systemic contagion of the

by tpm 10y ago

> The alternative was to let Greece go bankrupt, as it has done many times before and not repay the banks. Yes, but this is the very systemic contagion of the Eurozone financial sector they (the architects of the rescue) were trying to prevent, in the turbulent crisis of that time. Because that would cause much bigger problems. We don't really know whether it really would, and now we will never know, but it is possible. Also a bankrupt Greece in the Eurozone is very different to a bankrupt Greece with its own currency, which it can devalue, limit capital outflows etc. And when you let a country go bankrupt, you have to somehow still pay for the medicine food energy etc., and nobody has a plan how Greece would do that - the Greek governement didn't have primary surplus (without debt repayment) for years, so it needed outside money just to (somehow) properly function. What would be the source of this money - or should people just die because of lack of essentials? > There is no country in the EU, not a single one, that has followed the spending rules of the EU. Probably no country follows them all the time (with the possible exception of Estonia, with a government debt of 10% GDP and usually an yearly surplus), but most of the countries at least aim to do that. The ones you mention are the worst offenders and as a result, their financial possibilities are severely constrained. And it shows - they are stagnating. > And yet, far worse spending than Greece. And yet they didn't have to be rescued on such a scale. > like claiming the EC and the council aren't the same organisation They are not though. They are two different organisations.

candiodari 10y ago
Ah the old specter of "everyone dies when debts aren't paid". Needless to say ... no that doesn't happen. First of all quite a bit of revenue becomes available to the state if debt repayment is suspended. That can cover at least some stuff for some time. Second money markets will immediately be prepared to re-loan to said country. The only thing in danger from Greece's bankruptcy was Deutsche Bank shares and executive bonuses. Ditto for a number of other European banks. And of course ECB credibility (it had, after all, used it's legal power to force banks to buy Greek shares. If they were bad ... well) By the way, you do realize that part of the rescue of the Eurozone that happened was letting European banks leverage up ? Right now they're allowed to be levered up 40:1, and that's ignoring the result of the enforcement organizations looking the other way. In practice therefore it would be fair to say that Euro banks are more levered than that. That means that if the Eurozone economy goes down by 1%, and bad loans go up by 1% as a result (history teaches that it will in fact be more than that if a recession happens), that every European bank as a result will lose 40% of it's value ... Does that sound like reasonable and safe financial management ? 8 years since the last recession (historically they happen about every 8 years). And yet, no complaints from you. The EU is even fighting (and fighting VERY dirty I might add) in organizations like the WTO against people insisting on more safety. And yet, you don't seem to care, or even know, that this has happened. > Probably no country follows them all the time First of all, most countries never follow them. It is literally exceptional for any country in the EU to make it's agreed to spending goals. Second this is NOT the point. The point is that the rules are selectively enforced (or should I say, they have been enforced once, on Greece, and never again), and therefore aren't the real rules. http://ec.europa.eu/eurostat/tgm/table.do?tab=table&plugin=1&language=en&pcode=teina200 http://ec.europa.eu/eurostat/tgm/table.do?tab=table&plugin=1... The only countries that have not built up extra debt every single year in the past decade are Germany, Estonia and Denmark. None of them have 5 years of surplus. Only one has 3. Summing all the numbers up comes to 3 digits negative, and a massive amount of extra debt (and each of those countries agreed not to increase it's debt load) Your conclusion is VERY invalid "And it shows - they are stagnating". If that's true, why isn't every rule violator stagnating ? Allow me to give you an alternative explanation: because they lack the political power to force the ECB to inject billions into their economy. THAT is their failure, and not their spending habits. > And yet they didn't have to be rescued on such a scale. WTF ? EVERY EU country got more bailout from the ECB than Greece. And if you count the money they saved because of the interest rate interventions by the ECB, oh my God did they get more money than Greece. Again you keep blaming this on the victims. The difference is so great that if you count the interest cost, one can comfortably assert that Luxembourg got more bailout than Greece. So what have we established : Greece was not a bad spender, compared to other EU countries Greece was not an inefficient spender, and in fact could serve as an example for at least France, Italy and Spain Greece did not make financially unsound decisions, it just had it's interest rate hiked on it and no support from anyone, creating a debt spiral it is still in. Mind you the same happened to a lot of other countries, and the ECB immediately intervened to force interest rates back down to prevent it. The ECB is still at it, and at this point has transferred more than 2 TRILLION euros to banks. In other words, the big difference between Greece and other countries, is not the Greeks' doing. It is the deliberate actions of the ECB. In other words, government intervention. If you meet a Greek and he is very angry at you, know that you deserve it, as you are in fact responsible, in the democratic sense, for the decision that made the difference. For the decision that caused the misery Greece is currently experiencing. The Greeks very much aren't responsible for it at all. > They are not though. They are two different organizations. Only in the same sense that Google Inc has only 6 employees. Yet when people say Google has 80000 employees people tend to find that accurate. The EC is the equivalent of "wholly owned" by the council, as the council hires and fires the commissars, therefore saying they're one and the same is not even slightly a stretch.
- tpm 10y ago
  > First of all quite a bit of revenue becomes available to the state if debt repayment is suspended. Good to know you completely disregarded what I wrote about Greece's primary deficit - their government could not pay for itself even before debt repayments. There would have to be very deep cuts, deeper than now. > Second money markets will immediately be prepared to re-loan to said country. No. When you look at Argentine's debt default in 2001, in 2013 their foreign currency debt was still only 8.3%, which means that money markets still don't believe them. > Does that sound like reasonable and safe financial management? I am not saying EU is in a good financial health - it obviously is not. But letting Greece go bankrupt could very well be a start to a European economic suicide chain-reaction. > 8 years since the last recession It's not 'since' - the stagnation still has not ended. > The EU is even fighting (and fighting VERY dirty I might add) in organizations like the WTO against people insisting on more safety. More safety of what? There are several currents of activities going on and yes, some are less than ideal, but on the other hand the EU regulations on e.g. food safety are among the best in the world. > First of all, most countries never follow them. No. > The point is that the rules are selectively enforced Yes > The only countries that have not built up extra debt That is not the point of the rules. The point of the rules is that public debt should be manageable (total debt less than 60% of GDP, less than 3% yearly deficit, ideally hovering around 0%). > If that's true, why isn't every rule violator stagnating? See above. > because they lack the political power to force the ECB to inject billions into their economy. France lacks political power? Please :) Anyway ECB cannot do it directly, but through QE and other instruments it does exactly that, for years. Without that, Italy and France would be in a much worse state, probably bankrupt.

by tpm 10y ago

candiodari 10y ago

Ah the old specter of "everyone dies when debts aren't paid". Needless to say ... no that doesn't happen. First of all quite a bit of revenue becomes available to the state if debt repayment is suspended. That can cover at least some stuff for some time. Second money markets will immediately be prepared to re-loan to said country. The only thing in danger from Greece's bankruptcy was Deutsche Bank shares and executive bonuses. Ditto for a number of other European banks. And of course ECB credibility (it had, after all, used it's legal power to force banks to buy Greek shares. If they were bad ... well) By the way, you do realize that part of the rescue of the Eurozone that happened was letting European banks leverage up ? Right now they're allowed to be levered up 40:1, and that's ignoring the result of the enforcement organizations looking the other way. In practice therefore it would be fair to say that Euro banks are more levered than that. That means that if the Eurozone economy goes down by 1%, and bad loans go up by 1% as a result (history teaches that it will in fact be more than that if a recession happens), that every European bank as a result will lose 40% of it's value ... Does that sound like reasonable and safe financial management ? 8 years since the last recession (historically they happen about every 8 years). And yet, no complaints from you. The EU is even fighting (and fighting VERY dirty I might add) in organizations like the WTO against people insisting on more safety. And yet, you don't seem to care, or even know, that this has happened. > Probably no country follows them all the time First of all, most countries never follow them. It is literally exceptional for any country in the EU to make it's agreed to spending goals. Second this is NOT the point. The point is that the rules are selectively enforced (or should I say, they have been enforced once, on Greece, and never again), and therefore aren't the real rules. http://ec.europa.eu/eurostat/tgm/table.do?tab=table&plugin=1&language=en&pcode=teina200 http://ec.europa.eu/eurostat/tgm/table.do?tab=table&plugin=1... The only countries that have not built up extra debt every single year in the past decade are Germany, Estonia and Denmark. None of them have 5 years of surplus. Only one has 3. Summing all the numbers up comes to 3 digits negative, and a massive amount of extra debt (and each of those countries agreed not to increase it's debt load) Your conclusion is VERY invalid "And it shows - they are stagnating". If that's true, why isn't every rule violator stagnating ? Allow me to give you an alternative explanation: because they lack the political power to force the ECB to inject billions into their economy. THAT is their failure, and not their spending habits. > And yet they didn't have to be rescued on such a scale. WTF ? EVERY EU country got more bailout from the ECB than Greece. And if you count the money they saved because of the interest rate interventions by the ECB, oh my God did they get more money than Greece. Again you keep blaming this on the victims. The difference is so great that if you count the interest cost, one can comfortably assert that Luxembourg got more bailout than Greece. So what have we established : Greece was not a bad spender, compared to other EU countries Greece was not an inefficient spender, and in fact could serve as an example for at least France, Italy and Spain Greece did not make financially unsound decisions, it just had it's interest rate hiked on it and no support from anyone, creating a debt spiral it is still in. Mind you the same happened to a lot of other countries, and the ECB immediately intervened to force interest rates back down to prevent it. The ECB is still at it, and at this point has transferred more than 2 TRILLION euros to banks. In other words, the big difference between Greece and other countries, is not the Greeks' doing. It is the deliberate actions of the ECB. In other words, government intervention. If you meet a Greek and he is very angry at you, know that you deserve it, as you are in fact responsible, in the democratic sense, for the decision that made the difference. For the decision that caused the misery Greece is currently experiencing. The Greeks very much aren't responsible for it at all. > They are not though. They are two different organizations. Only in the same sense that Google Inc has only 6 employees. Yet when people say Google has 80000 employees people tend to find that accurate. The EC is the equivalent of "wholly owned" by the council, as the council hires and fires the commissars, therefore saying they're one and the same is not even slightly a stretch.

tpm 10y ago
> First of all quite a bit of revenue becomes available to the state if debt repayment is suspended. Good to know you completely disregarded what I wrote about Greece's primary deficit - their government could not pay for itself even before debt repayments. There would have to be very deep cuts, deeper than now. > Second money markets will immediately be prepared to re-loan to said country. No. When you look at Argentine's debt default in 2001, in 2013 their foreign currency debt was still only 8.3%, which means that money markets still don't believe them. > Does that sound like reasonable and safe financial management? I am not saying EU is in a good financial health - it obviously is not. But letting Greece go bankrupt could very well be a start to a European economic suicide chain-reaction. > 8 years since the last recession It's not 'since' - the stagnation still has not ended. > The EU is even fighting (and fighting VERY dirty I might add) in organizations like the WTO against people insisting on more safety. More safety of what? There are several currents of activities going on and yes, some are less than ideal, but on the other hand the EU regulations on e.g. food safety are among the best in the world. > First of all, most countries never follow them. No. > The point is that the rules are selectively enforced Yes > The only countries that have not built up extra debt That is not the point of the rules. The point of the rules is that public debt should be manageable (total debt less than 60% of GDP, less than 3% yearly deficit, ideally hovering around 0%). > If that's true, why isn't every rule violator stagnating? See above. > because they lack the political power to force the ECB to inject billions into their economy. France lacks political power? Please :) Anyway ECB cannot do it directly, but through QE and other instruments it does exactly that, for years. Without that, Italy and France would be in a much worse state, probably bankrupt.