4 ms·

Greece is broken, and can’t be fixed

9 points by bootload 15y ago

Gravityloss 15y ago
Björn Wahlroos, a leading banker in Finland says roughly that Germany's just propping up Greece with Euro countries' help packages so that German banks that loaned careless money to Greece wouldn't fail. Why not just default Greece and those German banks? It's sad for the citizens EU countries that did not lend to Greece. In just today's announced package, my share as a taxpayer is around 2000 euros. "The world is currently living through the crisis of the euro. According to banker Wahlroos, banks are at the core of the crisis. “Perhaps the most central unrecognised fact of this crisis is that Germany’s banking system is rotten to the core.” “For most European banks Greece’s lack of creditworthiness, or its bankruptcy, would not be too harmful – except for the Landesbank, which is owned by the German states, and Commerzbank, which is partly owned by the central federation, which – after being forced to reduce their receivables from Greece – are in a situation in which their capital is not sufficient for engaging in banking activities.” Wahlroos feels that “Mrs. Merkel made the wrong decision in the spring of 2010”." http://www.hs.fi/english/article/Bj%C3%B6rn+Wahlroos+%E2%80%93+a+portrait+of+a+capitalist/1329103438342 http://www.hs.fi/english/article/Bj%C3%B6rn+Wahlroos+%E2%80%...
- ahi 15y ago
  A default is inevitable. However, last time I read about it (month or two ago) government expenses less debt payments was still greater than government revenues. So they still need financing. If they can get revenues and (non-debt) expenditures balanced they can stop pretending they will pay the Germans back.
- batista 15y ago
  Björn Wahlroos, a leading banker in Finland says roughly that Germany's just propping up Greece with Euro countries' help packages so that German banks that loaned careless money to Greece wouldn't fail. Well, that's one way to see it. Another is that Germany is exchanging the "careless loans" which written assurances and claims on Greek public property and priority payments on any future state earning well in the century. So, in essence, they are buying the whole country for cheep. (I'm a Greek. I'm also for letting Greece and the German banks default). Germany especially has a bad history with giving loans. The German (Bavarian) appointed government when the Greek nation state was established took several loans with terrible terms, like, the lender keeping 70% of the loan amount as insurance and only giving the rest, while expecting the full repayment with interest for 100% of the amount. On top of that, those state loans were stolen by members of the bavarian government. So, not only the Germans had their government appointed to rule the new Greek state, but they took huge loans in the state's name, of which the state only ever got less than 10%. That happened around 1830-40. In another famous case, during World War 2, the German occupation forces forced Greece to give a loan to Germany, that they never repaid. Here's the story from Wikipedia: Greece suffered greatly during the occupation. The country's economy had already been devastated from the 6-month long war, and to it was added the relentless economic exploitation by the Nazis. Raw materials and foodstuffs were requisitioned, and the collaborationist government was forced to pay the cost of the occupation, giving rise to inflation. This was further exacerbated by a "war loan" which Greece was forced to grant to the German Reich. This "loan" was never paid back and severely devalued the Drachma. Requisitions, together with the Allied blockade of Greece, the ruined state of the country's infrastructure and the emergence of a powerful and well-connected black market, resulted in the Great Famine during the winter of 1941-42, when an estimated 300,000 people perished in greater Athens. Instead of repaying their WWII debt, and helping rebuild Greece that their war, occupation and forced loaning devastated, it was Greeks that were forced by poverty to immigrate in great masses to Germany after the war, to work as "guest workers", i.e minimum wage factory workers. It was on these "guest workers" (Greeks, Turks, etc, plus money from the US that wanted to keep West Germany happy as an ally against the USSR/East Germany) that the "German recovery miracle" was build. That said, the initial German loans in the EU era were not that "careless" in the first place: not only have the base loan amounts have been repaid (the huge debt is mostly about compound interest upon interest) but the loans were also used, along with political pressure, to ensure Greece buys mostly German products, from food and cars to construction services and weapons, and structures it's economy accordingly (EU directives, mostly devised by Germany, ensured that with laws that regulated more or less the de-industrialization of Greece and the slowdown of the Greek agricultural production). So, the German's got their money back twice (the loan payments, plus the money from the loans used for buy stuff from them), and they still have the interests and debt to ensure that they also get assurances for the repayment of the rest of the loans/interest. Of course, they don't expect Greece will ever find a way to repay those huge amounts, they mostly want to buy assurances in the form of claims to Greek public property and political pressure to have their way in the country.
Robelius 15y ago
Since Greece accepted the new bailout they will have to cut government employment, and employee salaries. And since a large number of Greeks are government employees, the result will be less spending. Less spending leads to a weaker economy. If they choose to o back to their old currency, the drachma, their currency would be weak. A weak currency would lead to less spending, which leads to a weaker economy. It's almost laughable, either way they would be, well you know. I feel sorry for the politicians right now.
- D_Alex 15y ago
  Well.... in the end, the underlying cause is the fact that the "social contract" in Greece - http://en.wikipedia.org/wiki/Social_contract http://en.wikipedia.org/wiki/Social_contract - was pretty much screwed up. And so they will be you-know-what, either way, until THAT is fixed up. But not for much longer.
- draggnar 15y ago
  They would also have the power however to inflate their way out of any debt crisis. This is enormous leverage over any debt issuers. Lenders would be much less willing to lend to Greece, but at the same time their exports would be much more competitive.
- MaysonL 15y ago
  Actually, a weaker currency leads to a stronger economy through more exports and greater tourist income. It only hurts if you owe foreign currenty, and are unwilling to default on those debts. See Argentina after going off the dollar peg, and Iceland after its banks collapsed.
  - Robelius 15y ago
    But it is the psychological effect of having a strong currency being substituted with a weaker currency that will lessen consumption. Economics is more of the psychology of the consumer than anything else, at least in my opinion.

9 points by bootload 15y ago

Björn Wahlroos, a leading banker in Finland says roughly that Germany's just propping up Greece with Euro countries' help packages so that German banks that loaned careless money to Greece wouldn't fail. Why not just default Greece and those German banks? It's sad for the citizens EU countries that did not lend to Greece. In just today's announced package, my share as a taxpayer is around 2000 euros. "The world is currently living through the crisis of the euro. According to banker Wahlroos, banks are at the core of the crisis. “Perhaps the most central unrecognised fact of this crisis is that Germany’s banking system is rotten to the core.” “For most European banks Greece’s lack of creditworthiness, or its bankruptcy, would not be too harmful – except for the Landesbank, which is owned by the German states, and Commerzbank, which is partly owned by the central federation, which – after being forced to reduce their receivables from Greece – are in a situation in which their capital is not sufficient for engaging in banking activities.” Wahlroos feels that “Mrs. Merkel made the wrong decision in the spring of 2010”." http://www.hs.fi/english/article/Bj%C3%B6rn+Wahlroos+%E2%80%93+a+portrait+of+a+capitalist/1329103438342 http://www.hs.fi/english/article/Bj%C3%B6rn+Wahlroos+%E2%80%...

ahi 15y ago
A default is inevitable. However, last time I read about it (month or two ago) government expenses less debt payments was still greater than government revenues. So they still need financing. If they can get revenues and (non-debt) expenditures balanced they can stop pretending they will pay the Germans back.
batista 15y ago
Björn Wahlroos, a leading banker in Finland says roughly that Germany's just propping up Greece with Euro countries' help packages so that German banks that loaned careless money to Greece wouldn't fail. Well, that's one way to see it. Another is that Germany is exchanging the "careless loans" which written assurances and claims on Greek public property and priority payments on any future state earning well in the century. So, in essence, they are buying the whole country for cheep. (I'm a Greek. I'm also for letting Greece and the German banks default). Germany especially has a bad history with giving loans. The German (Bavarian) appointed government when the Greek nation state was established took several loans with terrible terms, like, the lender keeping 70% of the loan amount as insurance and only giving the rest, while expecting the full repayment with interest for 100% of the amount. On top of that, those state loans were stolen by members of the bavarian government. So, not only the Germans had their government appointed to rule the new Greek state, but they took huge loans in the state's name, of which the state only ever got less than 10%. That happened around 1830-40. In another famous case, during World War 2, the German occupation forces forced Greece to give a loan to Germany, that they never repaid. Here's the story from Wikipedia: Greece suffered greatly during the occupation. The country's economy had already been devastated from the 6-month long war, and to it was added the relentless economic exploitation by the Nazis. Raw materials and foodstuffs were requisitioned, and the collaborationist government was forced to pay the cost of the occupation, giving rise to inflation. This was further exacerbated by a "war loan" which Greece was forced to grant to the German Reich. This "loan" was never paid back and severely devalued the Drachma. Requisitions, together with the Allied blockade of Greece, the ruined state of the country's infrastructure and the emergence of a powerful and well-connected black market, resulted in the Great Famine during the winter of 1941-42, when an estimated 300,000 people perished in greater Athens. Instead of repaying their WWII debt, and helping rebuild Greece that their war, occupation and forced loaning devastated, it was Greeks that were forced by poverty to immigrate in great masses to Germany after the war, to work as "guest workers", i.e minimum wage factory workers. It was on these "guest workers" (Greeks, Turks, etc, plus money from the US that wanted to keep West Germany happy as an ally against the USSR/East Germany) that the "German recovery miracle" was build. That said, the initial German loans in the EU era were not that "careless" in the first place: not only have the base loan amounts have been repaid (the huge debt is mostly about compound interest upon interest) but the loans were also used, along with political pressure, to ensure Greece buys mostly German products, from food and cars to construction services and weapons, and structures it's economy accordingly (EU directives, mostly devised by Germany, ensured that with laws that regulated more or less the de-industrialization of Greece and the slowdown of the Greek agricultural production). So, the German's got their money back twice (the loan payments, plus the money from the loans used for buy stuff from them), and they still have the interests and debt to ensure that they also get assurances for the repayment of the rest of the loans/interest. Of course, they don't expect Greece will ever find a way to repay those huge amounts, they mostly want to buy assurances in the form of claims to Greek public property and political pressure to have their way in the country.

Robelius 15y ago

Since Greece accepted the new bailout they will have to cut government employment, and employee salaries. And since a large number of Greeks are government employees, the result will be less spending. Less spending leads to a weaker economy. If they choose to o back to their old currency, the drachma, their currency would be weak. A weak currency would lead to less spending, which leads to a weaker economy. It's almost laughable, either way they would be, well you know. I feel sorry for the politicians right now.

D_Alex 15y ago
Well.... in the end, the underlying cause is the fact that the "social contract" in Greece - http://en.wikipedia.org/wiki/Social_contract http://en.wikipedia.org/wiki/Social_contract - was pretty much screwed up. And so they will be you-know-what, either way, until THAT is fixed up. But not for much longer.
draggnar 15y ago
They would also have the power however to inflate their way out of any debt crisis. This is enormous leverage over any debt issuers. Lenders would be much less willing to lend to Greece, but at the same time their exports would be much more competitive.
MaysonL 15y ago
Actually, a weaker currency leads to a stronger economy through more exports and greater tourist income. It only hurts if you owe foreign currenty, and are unwilling to default on those debts. See Argentina after going off the dollar peg, and Iceland after its banks collapsed.
- Robelius 15y ago
  But it is the psychological effect of having a strong currency being substituted with a weaker currency that will lessen consumption. Economics is more of the psychology of the consumer than anything else, at least in my opinion.