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Seeming ignored in these discussions is that right up to the bailout Greece's problems were entirely self inflicted. When you're unable to take responsibility f

Seeming ignored in these discussions is that right up to the bailout Greece's problems were entirely self inflicted. When you're unable to take responsibility for or support yourself you suffer the whims of others. That's the real lesson here.

rsj_hn 8y ago
That's just not the case. When Greece had its own currency, it could devalue against the Deutsche Mark and keep people employed. That devaluation would cause some inflation and it would also raise interest rates a bit -- no debt bubble, no collapse of Greek industry. Rather, German industry finds that it's currency is more expensive to counteract increased Germany productivity and Germany fails to export more, and thus does not accumulate excess savings. There is no flow of jobs from Greece to Germany -- Greece keeps its jobs, Germany keeps its jobs, Greece is forced to consume a bit less with the lower Drachma relative to Germany, and Greece is forced to borrow a bit less with the higher interest rates. With a forced peg against the DM, money was just being vacuumed out of Greece, which created a recycling problem in which excess German savings could be used to purchase Greek bonds. That lowers the interest rate in Greece artificially, creating more debt in Greece even while Greek production becomes less competitive and Greek jobs leave for Germany. That never ends well, and was only caused by the Euro. The crisis was just the unravelling of the above unsustainable trends, but these trends were created by the Euro. You can't "until the crisis, Greece was creating these problems" -- the problems were created by the Euro. The same thing for Greece's problems collecting taxes. When governments can't collect taxes efficiently, they print more money, creating more inflation, which is basically a tax on financial assets. So the money is still collected by the Greek government. Now that the Greek government was no longer able to print money, it was at the mercy of financial markets -- international financial markets, which of course can't help the Greek government collect money in the same way that an inflation tax can. Greece simply has never been in a position where it could give up its own currency and join a pegged regime with Germany. All of this was foreseen as part of the folly of the European project. There are other bad effects, too.
- tormeh 8y ago
  Well, the Greek government cooked the books in order to be allowed to join. This is clearly Greece's fault. The real lesson is that weak and corrupt governments are bad for most involved with them and very hard to fix, even if you try very hard. So, if you can, keep them at arm's length. They should never have been allowed to join the euro. In fact, given their conflicts with Turkey and Macedonia, they shouldn't have been allowed to join the EU at all.
  - jaclaz 8y ago
    >Well, the Greek government cooked the books in order to be allowed to join. This is clearly Greece's fault. Yes and no. Those reviewing those books (and originally allowing Greece to enter the Euro) were rather blind (selective or politically induced blindness).
  - StavrosK 8y ago
    > their conflicts with Turkey What conflicts are these, pray tell? If you think Erdogan is just sitting quietly, minding his own business, while the evil Greeks plot to expand their empire into Turkey, you're either dangerously misguided or a troll.
    - mikeash 8y ago
      Nothing about that comment implied anything about which side is right or which side is the aggressor.
      - StavrosK 8y ago
        That's what "they shouldn't have been allowed to join the EU at all" means. Unless you're saying that countries bordering aggressive nations should be banned from joining.
        mikeash 8y ago
        Why not say that? International relations isn’t a morality play. Joining into a union with a nation likely to get pulled into a conflict you don’t want isn’t a good idea. EU membership isn’t an award for good behavior, it’s a strategic choice made to achieve certain goals.
RobertoG 8y ago
Your narrative imply that the Euro works perfectly, what is ridiculous. The reason for the the debt crisis is that the Euro countries are working with what is, essentially, a foreign currency. There is not fiscal capacity that will solve the possible problems, like, for instance, there is in the USA. So, the Central European Bank is, against the spirit and probably the letter of the agreements, doing the work that a federal government should be doing. They are buying public debt in the secondary market and that is what have saved the Euro (for now). The design of the Euro is flawed from the beginning and comments like yours show that fixing the issue is probably impossible, because it feels good to blame others instead of facing the issue, and because when we feel so above other countries, who would like to share a fiscal capacity with those losers? So, interesting times ahead. That's the real lesson here.
- jevgeni 8y ago
  The design of the Euro is intentional. This is why countries have to adhere to some pretty strict fiscal requirements to join the Euro: specifically to avoid BS like the one happened in Greece. Well, Greece lied about their compliance with those requirements (Goldman helped, but hey...), but now it's somehow Euro's fault?...
  - RobertoG 8y ago
    The point is that Euro is dysfunctional because there is not a enough fiscal capacity implemented in the design. Some of us think that it's probably politically implausible to implement that capacity because the narrative of the 'lazy neighbor'. Presumably some lands in Germany are deficitary (or states from the USA) why the population there don't experiment the same problems? Because they have a real union. Currently the ECB is covertly financing countries of the European Union buying their debt in the secondary market [1]. This is against the agreements [2], but if it's not done will be the end of the Euro. How is not that a dysfunctional currency area? [1] https://www.bloomberg.com/view/articles/2015-12-04/the-ecb-s-new-policy-sets-a-dangerous-precedent https://www.bloomberg.com/view/articles/2015-12-04/the-ecb-s... [2] https://elpais.com/elpais/2012/10/24/inenglish/1351097206_055104.html https://elpais.com/elpais/2012/10/24/inenglish/1351097206_05...
kartan 8y ago
> Seeming ignored in these discussions is that right up to the bailout Greece's problems were entirely self inflicted. False. Greece was in need of high rates to lower consumption and debt increase. Instead of that, and for the benefit of Germany that was in need of more debt to pay for the reunification, rates were lowered to historical minimums. If your debt is increasing like crazy and your currency lowers the rates the result is well known. Greece could not change the rates, so they were not in control anymore. That does not mean that Greece has not big problems. But to blame all on them makes no sense. German banks could have stopped lending money at any time, but they are seen just as victims instead of greed instigators.
- nmeofthestate 8y ago
  Your crazily increasing debt is a function of your spending, so Greece was in fact in control if they chose to be.
  - abduhl 8y ago
    What a joke of a statement. You make $1000 a month but have a credit card that offers you increasingly poor rates due to your inability to make payments on time. Your monthly expenditures on medicine, food, and rent are $1500. Are you at fault or is the system at fault? Obviously you just need to decrease your spending - so it's you. Just move somewhere cheaper, eat less, and don't get sick. Obviously it's your choice.

rsj_hn 8y ago

That's just not the case. When Greece had its own currency, it could devalue against the Deutsche Mark and keep people employed. That devaluation would cause some inflation and it would also raise interest rates a bit -- no debt bubble, no collapse of Greek industry. Rather, German industry finds that it's currency is more expensive to counteract increased Germany productivity and Germany fails to export more, and thus does not accumulate excess savings. There is no flow of jobs from Greece to Germany -- Greece keeps its jobs, Germany keeps its jobs, Greece is forced to consume a bit less with the lower Drachma relative to Germany, and Greece is forced to borrow a bit less with the higher interest rates. With a forced peg against the DM, money was just being vacuumed out of Greece, which created a recycling problem in which excess German savings could be used to purchase Greek bonds. That lowers the interest rate in Greece artificially, creating more debt in Greece even while Greek production becomes less competitive and Greek jobs leave for Germany. That never ends well, and was only caused by the Euro. The crisis was just the unravelling of the above unsustainable trends, but these trends were created by the Euro. You can't "until the crisis, Greece was creating these problems" -- the problems were created by the Euro. The same thing for Greece's problems collecting taxes. When governments can't collect taxes efficiently, they print more money, creating more inflation, which is basically a tax on financial assets. So the money is still collected by the Greek government. Now that the Greek government was no longer able to print money, it was at the mercy of financial markets -- international financial markets, which of course can't help the Greek government collect money in the same way that an inflation tax can. Greece simply has never been in a position where it could give up its own currency and join a pegged regime with Germany. All of this was foreseen as part of the folly of the European project. There are other bad effects, too.

tormeh 8y ago
Well, the Greek government cooked the books in order to be allowed to join. This is clearly Greece's fault. The real lesson is that weak and corrupt governments are bad for most involved with them and very hard to fix, even if you try very hard. So, if you can, keep them at arm's length. They should never have been allowed to join the euro. In fact, given their conflicts with Turkey and Macedonia, they shouldn't have been allowed to join the EU at all.
- jaclaz 8y ago
  >Well, the Greek government cooked the books in order to be allowed to join. This is clearly Greece's fault. Yes and no. Those reviewing those books (and originally allowing Greece to enter the Euro) were rather blind (selective or politically induced blindness).
- StavrosK 8y ago
  > their conflicts with Turkey What conflicts are these, pray tell? If you think Erdogan is just sitting quietly, minding his own business, while the evil Greeks plot to expand their empire into Turkey, you're either dangerously misguided or a troll.
  - mikeash 8y ago
    Nothing about that comment implied anything about which side is right or which side is the aggressor.
    - StavrosK 8y ago
      That's what "they shouldn't have been allowed to join the EU at all" means. Unless you're saying that countries bordering aggressive nations should be banned from joining.
      - mikeash 8y ago
        Why not say that? International relations isn’t a morality play. Joining into a union with a nation likely to get pulled into a conflict you don’t want isn’t a good idea. EU membership isn’t an award for good behavior, it’s a strategic choice made to achieve certain goals.

RobertoG 8y ago

Your narrative imply that the Euro works perfectly, what is ridiculous. The reason for the the debt crisis is that the Euro countries are working with what is, essentially, a foreign currency. There is not fiscal capacity that will solve the possible problems, like, for instance, there is in the USA. So, the Central European Bank is, against the spirit and probably the letter of the agreements, doing the work that a federal government should be doing. They are buying public debt in the secondary market and that is what have saved the Euro (for now). The design of the Euro is flawed from the beginning and comments like yours show that fixing the issue is probably impossible, because it feels good to blame others instead of facing the issue, and because when we feel so above other countries, who would like to share a fiscal capacity with those losers? So, interesting times ahead. That's the real lesson here.

jevgeni 8y ago
The design of the Euro is intentional. This is why countries have to adhere to some pretty strict fiscal requirements to join the Euro: specifically to avoid BS like the one happened in Greece. Well, Greece lied about their compliance with those requirements (Goldman helped, but hey...), but now it's somehow Euro's fault?...
- RobertoG 8y ago
  The point is that Euro is dysfunctional because there is not a enough fiscal capacity implemented in the design. Some of us think that it's probably politically implausible to implement that capacity because the narrative of the 'lazy neighbor'. Presumably some lands in Germany are deficitary (or states from the USA) why the population there don't experiment the same problems? Because they have a real union. Currently the ECB is covertly financing countries of the European Union buying their debt in the secondary market [1]. This is against the agreements [2], but if it's not done will be the end of the Euro. How is not that a dysfunctional currency area? [1] https://www.bloomberg.com/view/articles/2015-12-04/the-ecb-s-new-policy-sets-a-dangerous-precedent https://www.bloomberg.com/view/articles/2015-12-04/the-ecb-s... [2] https://elpais.com/elpais/2012/10/24/inenglish/1351097206_055104.html https://elpais.com/elpais/2012/10/24/inenglish/1351097206_05...

kartan 8y ago

> Seeming ignored in these discussions is that right up to the bailout Greece's problems were entirely self inflicted. False. Greece was in need of high rates to lower consumption and debt increase. Instead of that, and for the benefit of Germany that was in need of more debt to pay for the reunification, rates were lowered to historical minimums. If your debt is increasing like crazy and your currency lowers the rates the result is well known. Greece could not change the rates, so they were not in control anymore. That does not mean that Greece has not big problems. But to blame all on them makes no sense. German banks could have stopped lending money at any time, but they are seen just as victims instead of greed instigators.

nmeofthestate 8y ago
Your crazily increasing debt is a function of your spending, so Greece was in fact in control if they chose to be.
- abduhl 8y ago
  What a joke of a statement. You make $1000 a month but have a credit card that offers you increasingly poor rates due to your inability to make payments on time. Your monthly expenditures on medicine, food, and rent are $1500. Are you at fault or is the system at fault? Obviously you just need to decrease your spending - so it's you. Just move somewhere cheaper, eat less, and don't get sick. Obviously it's your choice.