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Tangentially, what is the main reason for all the protest against the EU? I understand that people in Greece are suffering and that's a terrible thing. Howeve

Tangentially, what is the main reason for all the protest against the EU? I understand that people in Greece are suffering and that's a terrible thing. However from a lay perspective it seems Germany et al are just trying to help.

fennecfoxen 12y ago
Germany has asked Greece's government to raise taxes to pay bonds, and spend less than they earn in taxes. This is a problem for a country like Greece, because the economy is stagnant and government services were an unhealthy amount of their economy to begin with. Before the crash, the economy was mostly growing because the government was borrowing money (unsustainably) and spending it, producing most of their recent economic growth. What Greece actually needs is growth in the real economy, where there are businesses where people make things and do things and ship things around and otherwise trade with the rest of the world efficiently, but the current economy is insanely overregulated. The classic story of oliveshop.com comes to mind, where company shareholders were expected to submit lung x-rays and stool samples to the health department before the company could sell pre-bottled olive oil online. (Greek shipping is actually one sector which has escaped this, but it's had its own issues because of reduced global trade in the wake of the recession.) Of course, half the reason for the overregulation is so that people in the government can collect bribes to expedite your permit processing. (The rest is classic special-interest stuff). So real reform in these areas probably isn't going to happen, and the Greeks are unwilling to countenance that their previous economic gains were illusory. Which means Germany gets to be the bad guys, asking them to actually pay for what they borrowed (gasp!) and Greece is at extreme risk of doing something incredibly stupid and not just stagnating at 1995 levels but running the economy further into the ground.
- photex 12y ago
  This has been what I've been worried about during all of this. I'm not entirely sure why Germany has to be "damned if they do and damned if they don't". It's as if people forget that the country has had to learn how to recover from total catastrophe and might be offering realistic and practical solutions to the problem.
- glesica 12y ago
  No, Germany forced the Greeks into a program of austerity even though it has been shown, very clearly, that austerity simply doesn't work (see references). The economic forecasts on which the German (really the EC, ECB, and IMF) analysis relied didn't account for the fact that reduced government spending would cause a reduction in GDP. They assumed that reduced government spending would somehow (magic?) increase private sector investment and result in economic growth. The forecast for the WORST unemployment would get was around 12%, and by this point the recession was supposed to be a distant memory. They were so, so, so wrong. Greece probably made mistakes, but don't pretend the Germans are innocent and being painted as the "bad guys" unfairly. The Germans ignored all reasonable economic logic and forced austerity on Greece for ideological reasons. That's exactly the kind of thing "bad guys" do and the Greeks are justified in their anger. http://www.amazon.com/Austerity-The-History-Dangerous-Idea/dp/019982830X http://www.amazon.com/Austerity-The-History-Dangerous-Idea/d... http://www.theguardian.com/business/2013/jun/05/imf-underestimated-damage-austerity-would-do-to-greece http://www.theguardian.com/business/2013/jun/05/imf-underest... http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/an-amazing-mea-culpa-from-the-imfs-chief-economist-on-austerity/ http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/a...
  - fennecfoxen 12y ago
    I don't think we strictly disagree about the ineffectiveness of austerity. The core reason the economic growth didn't show up from austerity is all the stuff I was complaining about. And it's true, you don't get a stronger economy by having the government spend less: you get it when you tax less, more money stays in the economy and it gets reinvested effectively - which it won't do in a nasty regulatory environment with high taxes, not that Greece is taxing less to begin with. But what exactly would you have the Germans do? Say "no bailout" and oversee the exit of Greece from the Euro? Still the bad guys, and it wouldn't have made Greece any better off today. Try to demand substantial economic reforms to actually grow the economy? Sure, that's totally going to happen, never mind that pesky "sovereignty" business and upcoming elections (which are now past elections). And they're the bad guys again. Or maybe they should have just asked German citizens to sacrifice instead, and committed to throwing bad money after good for the next N decades, subsidizing things like a socialist healthcare system where you actually have to bribe the doctor to get an appointment.
senthil_rajasek 12y ago
Germany wants Greece to cut spending and wants the Greek debt to be paid back. Greece wants more spending and the debt to be forgiven (like in a bankruptcy). Germany wants austerity and the new Greek party that won the election wants more spending hence the protests and disagreements. Disclosure: casual observer's opinion not a professional opinion.
photex 12y ago
My limited understanding is that this help came with a lot of stipulations as to how the money was to be used and these stipulations were enormously unpopular. Personally, I can find some understanding of both sides to this. On one hand, if I were greek I'd be utterly and totally committed to replacing every member of the government that so royally screwed me and I'd be insulted by the entities who are offering bail outs at the expense of my quality of life (I don't fully understand the details of how this impacted people on individual levels, this is only my attempt to epathize). On the other hand, if I had a lot of money to help people in need, and someone came to me asking to pay their loan sharks after an epic binge I would certainly have a number of stipulations placed on this and would in no way consider handing them a check without some extensive scaffolding around that exchange. As I learn more about this situation I might feel differently about either side, so please understand I'm just sharing my opinion given what little I know about it so far.
krisdol 12y ago
> Tangentially, what is the main reason for all the protest against the EU Austerity measures hit workers the hardest -- the people most responsible for creating economic wealth. To them, the EU is trying to take wealth and opportunity from the already-suffering average person to balance for mistakes and losses made by leaders and other nations. And the punishments have been pretty severe. I'm confident the level of austerity measures, if they faced the American people, would not go over peacefully (assuming we had much of a social net left to give up at this point).
atmosx 12y ago
Ahm, no. That's absolutely not true. As a prominent example of German Help, here is the history of the Siemens scandal[1][3]. Also, German's choice for PM when Papandreou quit, was Loukas Papademos. It's the guy who in 2001 acted as a bridge between Goldman Sachs and Greece to false statistics and allow Greece into the EUR. Isn't a kind of strange choice? There are many more situations (military equipment, MAN, etc.) where the German government actively undermined Greece. Germany, unfortunately, is seen as the arch-enemy along with Brussels in Greece. After 6 years of austerity measures and governments who followed policies dictated by the troika (ECB, IMF, EU but mainly it's Germany) we rank #1 in Europe in suicides, the economy is worse then ever and the public debt has gone up instead of down. At this point many Greeks don't care what a Grexit would bring because they already trespassed the point X of "caring". They are already poor by all means. That said, it's true again that Germany flushed billions of EU in saving the Greek economy. But almost all of that money was used to keep foreign banks happy by paying high yield Greek bonds owned by German and French banks mainly. The rest of the money was flushed to Greek banks owned by heavily corrupted bankers (e.g. Latsis - Eurobank). Even in situations of small banks like ProtonBank[2] were kept because declared of "national interest" (Ev. Venizelou - Leader of PASOK former Finance Minister and Vice-President) and thus bailed-out in the sound of millions while some pensions went as down as 350 EUR/month at the same time. So to make a long story half-long: The German government is an extreme supporter of the old, highly corrupt, heavily bribed (by many german corporations) Greek government which doesn't make sense. Merkel is crying home for the Greman tax-payer when indirectly the only thing she really did was just handing money indirectly from the German taxpayer to the German banks via Greece (with huge interests). Truth is that given the results, Germans were more than happy to vote Merkel, so in a strictly political her policy was extremely successful. The only problem is that now all over Europe there is a strong anti-German feeling: Italy (M5S), Spain (Podemos), UKIP (Farage), France (LePen). So give it another ~ 2 years and Greece will be the least of Germany's problem. Now the real problem Germany and EU is facing is this: If they bailout Greece, they must bail-out Italy and Spain too. Maybe France will follow. But the Greek debt is small so it can be done, if there's political will and a sort of promise that Greeks won't fuck up their economy again anytime soon! But for Italy it's a different matter, if Italy and Spain require a cut oh well... I'm not sure it's even possible mathematically speaking. On the other hand mathematics was never a part of economics, it's mostly politics. There are logistical ways (e.g. the EU buys bonds from failed states and hides them in a locker room for eternity at a very low rate which the countries could start paying God-knows-when...) to bypass this, but the problems are at the level of politics mostly. If Merkel concedes now, the opposition inside Germany will literally trash her and she will not be able to come up with answers, since the story of the poor Greek who spends more than he could afford is the one she choose a couple of years ago. Sorry the long answer! Jesus I didn't realise I produced so many chars :-P [1] http://en.wikipedia.org/wiki/Siemens_Greek_bribery_scandal http://en.wikipedia.org/wiki/Siemens_Greek_bribery_scandal [2] http://www.reuters.com/article/2012/01/12/us-greece-proton-idUSTRE80B14820120112 http://www.reuters.com/article/2012/01/12/us-greece-proton-i... [3] https://anestis.quora.com/Links-to-credible-sources-about-Greek-euro-crisis https://anestis.quora.com/Links-to-credible-sources-about-Gr... <-- link shared by user @realunreal a couple of posts up. Summaries very well my points in the first paragraph!
therealunreal 12y ago
For anyone interested, here's a few links collected by someone I know that point out why it's not so simple. It's not help, it's business. https://anestis.quora.com/Links-to-credible-sources-about-Greek-euro-crisis https://anestis.quora.com/Links-to-credible-sources-about-Gr...
tomp 12y ago
Germany is a nation that has benefited enormously from a single currency (according to my understanding). A large source of currency fluctuations are trade imbalances. If a country exports more than it imports, its currency appreciates. If it imports more than it exports, it depreciates. For example, if USA imports from the UK are bigger than it's exports to the UK, then USA will be buying GBP with USD (on average), so the value of GBP will go up relative to USD. This would in turn make UK products more expensive to Americans, so they would buy them less, correcting the trade imbalance. If Greece, Italy, Spain etc. still had their own currencies, they could simply depreciate them (actually, it would happen naturally, as a consequence of trade imbalance) and so reduce their debt in real terms (similar to what has happened to Iceland). If Greece's currency would depreciate, imports would be more expensive for Greeks, so they would import (spend) less, while Greek exports would be cheaper worldwide, so they would export (earn) more. Conversely, Germany's currency would appreciate, again because of trade imbalances (they export more than they import). Because of EURO, this hasn't happened, and won't happen - the trade balances are averaged, making Germany's currency (EUR) less valuable than it should be, and Greece's currency (again EUR) more valuable than it should be. This benefits Germany, because it can sell its cars cheaper, but isn't helping Greece, because Greek olive oil and tourism experiences are more expensive than they should be. The short-term solution is for Germany to admit this advantage and help the under-performing countries (by giving them money, not just loans, and correcting the trade imbalances this way). In the long term, a single currency should lead to a single fiscal government (like in the US).
- Patrick_Devine 12y ago
  I wish more people understood this. Germany has benefited enormously because of the euro, and yet you see a lot of belly aching about the southern European countries. Countries really only have two valves to throttle their economies. Interest rates (which Greece now has the highest in the European Union), and printing more money. Right now because the Greek economy is in a log jam, they're suffering from deflation and a shrinking economy. Interest rates have to be high so that the government can continue to borrow money to keep the country running, but that means companies aren't leveraging capital to expand. If Greece weren't part of the Euro, it could simply print more cash, which would reverse the deflationary pressure and allow the government to bring down interest rates. It would also mean the flow of trade from Germany to Greece would probably balance out more because the domestic economy in Greece would be cheaper than importing German goods.
antientropic 12y ago
Paul Krugman helpfully explains the situation here: http://www.nytimes.com/2015/01/26/opinion/paul-krugman-ending-greeces-nightmare.html http://www.nytimes.com/2015/01/26/opinion/paul-krugman-endin... In short, the EU and the IMF demanded savage spending cuts from the Greek government. Turns out that cutting in a depressed economy makes the depression worse (despite the wildly optimistic predictions by EU officials, who decided to ignore textbook economics). As a result, Greece now has enormous unemployment, a vastly shrunken economy, and a debt-to-GDP ratio that is only going up despite the huge spending cuts. This is clearly an unsustainable course, something now recognized by the Greek voters. Unfortunately, there appears zero chance that EC and German politicians are going to acknowledge that austerity doesn't work.
- MatthiasP 12y ago
  >In short, the EU and the IMF demanded savage spending cuts from the Greek government. Let's also mention WHY those spending cuts were demanded: Because Greece was on the verge of bankruptcy, the interest rates for their bonds were exploding and the EU and IMF had to pump more than 300 billion € into this 11 million people country.
  - lotsofmangos 12y ago
    I was talking to someone who knows some of the Whitehall mandarins and he was saying that bond ratings are the primary reason for austerity policies in the UK. Although we aren't actually spending less money, due to the continuing injection of capital into banking, as long as we are throwing the money upwards then our bonds are worth more.
  - bildung 12y ago
    > Let's also mention WHY those spending cuts were demanded: Because Greece was on the verge of bankruptcy[...]. That, while true, leaves out the quite important fact that Greece was only on the verge of bankruptcy because they bailed out their banks. One can nicely see that on charts displaying the debt/GDP ratio: While high for quite a few years, it was more or less constant. The bailout was the one factor that created the explosive dept growth. Now it gets interesting: Whose money was in these banks, invested in high risk/ high yield projects? Mostly investments of european upper class/upper middle class (because small Greece had an even smaller upper class). That's why so many German banks like Commerzbank, Deutsche Bank and the now defunct Hypo Real Estate hold so many Greek government bonds. By bailing out the Greek (and Spanish, Irish etc.) banks the European population indirectly subsidises the risky investments of its own upper class. That's also the reason why the austerity measures are so inconsequential: While pensions get cut and hospitals closed, profiteers like Germany have no qualms to sell German tanks and submarines worth billions of € to Greece (the German submarines alone cost 3 billion) [1]. [1]: http://www.theguardian.com/world/2012/apr/19/greece-military-spending-debt-crisis http://www.theguardian.com/world/2012/apr/19/greece-military... edit:typo
NotableAlamode 12y ago
You are right, Germany has already flooded billions to Greece. But they didn't use it to make themselves competitive. Instead the retired early.

fennecfoxen 12y ago

Germany has asked Greece's government to raise taxes to pay bonds, and spend less than they earn in taxes. This is a problem for a country like Greece, because the economy is stagnant and government services were an unhealthy amount of their economy to begin with. Before the crash, the economy was mostly growing because the government was borrowing money (unsustainably) and spending it, producing most of their recent economic growth. What Greece actually needs is growth in the real economy, where there are businesses where people make things and do things and ship things around and otherwise trade with the rest of the world efficiently, but the current economy is insanely overregulated. The classic story of oliveshop.com comes to mind, where company shareholders were expected to submit lung x-rays and stool samples to the health department before the company could sell pre-bottled olive oil online. (Greek shipping is actually one sector which has escaped this, but it's had its own issues because of reduced global trade in the wake of the recession.) Of course, half the reason for the overregulation is so that people in the government can collect bribes to expedite your permit processing. (The rest is classic special-interest stuff). So real reform in these areas probably isn't going to happen, and the Greeks are unwilling to countenance that their previous economic gains were illusory. Which means Germany gets to be the bad guys, asking them to actually pay for what they borrowed (gasp!) and Greece is at extreme risk of doing something incredibly stupid and not just stagnating at 1995 levels but running the economy further into the ground.

photex 12y ago
This has been what I've been worried about during all of this. I'm not entirely sure why Germany has to be "damned if they do and damned if they don't". It's as if people forget that the country has had to learn how to recover from total catastrophe and might be offering realistic and practical solutions to the problem.
glesica 12y ago
No, Germany forced the Greeks into a program of austerity even though it has been shown, very clearly, that austerity simply doesn't work (see references). The economic forecasts on which the German (really the EC, ECB, and IMF) analysis relied didn't account for the fact that reduced government spending would cause a reduction in GDP. They assumed that reduced government spending would somehow (magic?) increase private sector investment and result in economic growth. The forecast for the WORST unemployment would get was around 12%, and by this point the recession was supposed to be a distant memory. They were so, so, so wrong. Greece probably made mistakes, but don't pretend the Germans are innocent and being painted as the "bad guys" unfairly. The Germans ignored all reasonable economic logic and forced austerity on Greece for ideological reasons. That's exactly the kind of thing "bad guys" do and the Greeks are justified in their anger. http://www.amazon.com/Austerity-The-History-Dangerous-Idea/dp/019982830X http://www.amazon.com/Austerity-The-History-Dangerous-Idea/d... http://www.theguardian.com/business/2013/jun/05/imf-underestimated-damage-austerity-would-do-to-greece http://www.theguardian.com/business/2013/jun/05/imf-underest... http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/an-amazing-mea-culpa-from-the-imfs-chief-economist-on-austerity/ http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/a...
- fennecfoxen 12y ago
  I don't think we strictly disagree about the ineffectiveness of austerity. The core reason the economic growth didn't show up from austerity is all the stuff I was complaining about. And it's true, you don't get a stronger economy by having the government spend less: you get it when you tax less, more money stays in the economy and it gets reinvested effectively - which it won't do in a nasty regulatory environment with high taxes, not that Greece is taxing less to begin with. But what exactly would you have the Germans do? Say "no bailout" and oversee the exit of Greece from the Euro? Still the bad guys, and it wouldn't have made Greece any better off today. Try to demand substantial economic reforms to actually grow the economy? Sure, that's totally going to happen, never mind that pesky "sovereignty" business and upcoming elections (which are now past elections). And they're the bad guys again. Or maybe they should have just asked German citizens to sacrifice instead, and committed to throwing bad money after good for the next N decades, subsidizing things like a socialist healthcare system where you actually have to bribe the doctor to get an appointment.

senthil_rajasek 12y ago

Germany wants Greece to cut spending and wants the Greek debt to be paid back. Greece wants more spending and the debt to be forgiven (like in a bankruptcy). Germany wants austerity and the new Greek party that won the election wants more spending hence the protests and disagreements. Disclosure: casual observer's opinion not a professional opinion.

photex 12y ago

My limited understanding is that this help came with a lot of stipulations as to how the money was to be used and these stipulations were enormously unpopular. Personally, I can find some understanding of both sides to this. On one hand, if I were greek I'd be utterly and totally committed to replacing every member of the government that so royally screwed me and I'd be insulted by the entities who are offering bail outs at the expense of my quality of life (I don't fully understand the details of how this impacted people on individual levels, this is only my attempt to epathize). On the other hand, if I had a lot of money to help people in need, and someone came to me asking to pay their loan sharks after an epic binge I would certainly have a number of stipulations placed on this and would in no way consider handing them a check without some extensive scaffolding around that exchange. As I learn more about this situation I might feel differently about either side, so please understand I'm just sharing my opinion given what little I know about it so far.

krisdol 12y ago

> Tangentially, what is the main reason for all the protest against the EU Austerity measures hit workers the hardest -- the people most responsible for creating economic wealth. To them, the EU is trying to take wealth and opportunity from the already-suffering average person to balance for mistakes and losses made by leaders and other nations. And the punishments have been pretty severe. I'm confident the level of austerity measures, if they faced the American people, would not go over peacefully (assuming we had much of a social net left to give up at this point).

atmosx 12y ago

Ahm, no. That's absolutely not true. As a prominent example of German Help, here is the history of the Siemens scandal[1][3]. Also, German's choice for PM when Papandreou quit, was Loukas Papademos. It's the guy who in 2001 acted as a bridge between Goldman Sachs and Greece to false statistics and allow Greece into the EUR. Isn't a kind of strange choice? There are many more situations (military equipment, MAN, etc.) where the German government actively undermined Greece. Germany, unfortunately, is seen as the arch-enemy along with Brussels in Greece. After 6 years of austerity measures and governments who followed policies dictated by the troika (ECB, IMF, EU but mainly it's Germany) we rank #1 in Europe in suicides, the economy is worse then ever and the public debt has gone up instead of down. At this point many Greeks don't care what a Grexit would bring because they already trespassed the point X of "caring". They are already poor by all means. That said, it's true again that Germany flushed billions of EU in saving the Greek economy. But almost all of that money was used to keep foreign banks happy by paying high yield Greek bonds owned by German and French banks mainly. The rest of the money was flushed to Greek banks owned by heavily corrupted bankers (e.g. Latsis - Eurobank). Even in situations of small banks like ProtonBank[2] were kept because declared of "national interest" (Ev. Venizelou - Leader of PASOK former Finance Minister and Vice-President) and thus bailed-out in the sound of millions while some pensions went as down as 350 EUR/month at the same time. So to make a long story half-long: The German government is an extreme supporter of the old, highly corrupt, heavily bribed (by many german corporations) Greek government which doesn't make sense. Merkel is crying home for the Greman tax-payer when indirectly the only thing she really did was just handing money indirectly from the German taxpayer to the German banks via Greece (with huge interests). Truth is that given the results, Germans were more than happy to vote Merkel, so in a strictly political her policy was extremely successful. The only problem is that now all over Europe there is a strong anti-German feeling: Italy (M5S), Spain (Podemos), UKIP (Farage), France (LePen). So give it another ~ 2 years and Greece will be the least of Germany's problem. Now the real problem Germany and EU is facing is this: If they bailout Greece, they must bail-out Italy and Spain too. Maybe France will follow. But the Greek debt is small so it can be done, if there's political will and a sort of promise that Greeks won't fuck up their economy again anytime soon! But for Italy it's a different matter, if Italy and Spain require a cut oh well... I'm not sure it's even possible mathematically speaking. On the other hand mathematics was never a part of economics, it's mostly politics. There are logistical ways (e.g. the EU buys bonds from failed states and hides them in a locker room for eternity at a very low rate which the countries could start paying God-knows-when...) to bypass this, but the problems are at the level of politics mostly. If Merkel concedes now, the opposition inside Germany will literally trash her and she will not be able to come up with answers, since the story of the poor Greek who spends more than he could afford is the one she choose a couple of years ago. Sorry the long answer! Jesus I didn't realise I produced so many chars :-P [1] http://en.wikipedia.org/wiki/Siemens_Greek_bribery_scandal http://en.wikipedia.org/wiki/Siemens_Greek_bribery_scandal [2] http://www.reuters.com/article/2012/01/12/us-greece-proton-idUSTRE80B14820120112 http://www.reuters.com/article/2012/01/12/us-greece-proton-i... [3] https://anestis.quora.com/Links-to-credible-sources-about-Greek-euro-crisis https://anestis.quora.com/Links-to-credible-sources-about-Gr... <-- link shared by user @realunreal a couple of posts up. Summaries very well my points in the first paragraph!

therealunreal 12y ago

For anyone interested, here's a few links collected by someone I know that point out why it's not so simple. It's not help, it's business. https://anestis.quora.com/Links-to-credible-sources-about-Greek-euro-crisis https://anestis.quora.com/Links-to-credible-sources-about-Gr...

tomp 12y ago

Germany is a nation that has benefited enormously from a single currency (according to my understanding). A large source of currency fluctuations are trade imbalances. If a country exports more than it imports, its currency appreciates. If it imports more than it exports, it depreciates. For example, if USA imports from the UK are bigger than it's exports to the UK, then USA will be buying GBP with USD (on average), so the value of GBP will go up relative to USD. This would in turn make UK products more expensive to Americans, so they would buy them less, correcting the trade imbalance. If Greece, Italy, Spain etc. still had their own currencies, they could simply depreciate them (actually, it would happen naturally, as a consequence of trade imbalance) and so reduce their debt in real terms (similar to what has happened to Iceland). If Greece's currency would depreciate, imports would be more expensive for Greeks, so they would import (spend) less, while Greek exports would be cheaper worldwide, so they would export (earn) more. Conversely, Germany's currency would appreciate, again because of trade imbalances (they export more than they import). Because of EURO, this hasn't happened, and won't happen - the trade balances are averaged, making Germany's currency (EUR) less valuable than it should be, and Greece's currency (again EUR) more valuable than it should be. This benefits Germany, because it can sell its cars cheaper, but isn't helping Greece, because Greek olive oil and tourism experiences are more expensive than they should be. The short-term solution is for Germany to admit this advantage and help the under-performing countries (by giving them money, not just loans, and correcting the trade imbalances this way). In the long term, a single currency should lead to a single fiscal government (like in the US).

Patrick_Devine 12y ago
I wish more people understood this. Germany has benefited enormously because of the euro, and yet you see a lot of belly aching about the southern European countries. Countries really only have two valves to throttle their economies. Interest rates (which Greece now has the highest in the European Union), and printing more money. Right now because the Greek economy is in a log jam, they're suffering from deflation and a shrinking economy. Interest rates have to be high so that the government can continue to borrow money to keep the country running, but that means companies aren't leveraging capital to expand. If Greece weren't part of the Euro, it could simply print more cash, which would reverse the deflationary pressure and allow the government to bring down interest rates. It would also mean the flow of trade from Germany to Greece would probably balance out more because the domestic economy in Greece would be cheaper than importing German goods.

antientropic 12y ago

Paul Krugman helpfully explains the situation here: http://www.nytimes.com/2015/01/26/opinion/paul-krugman-ending-greeces-nightmare.html http://www.nytimes.com/2015/01/26/opinion/paul-krugman-endin... In short, the EU and the IMF demanded savage spending cuts from the Greek government. Turns out that cutting in a depressed economy makes the depression worse (despite the wildly optimistic predictions by EU officials, who decided to ignore textbook economics). As a result, Greece now has enormous unemployment, a vastly shrunken economy, and a debt-to-GDP ratio that is only going up despite the huge spending cuts. This is clearly an unsustainable course, something now recognized by the Greek voters. Unfortunately, there appears zero chance that EC and German politicians are going to acknowledge that austerity doesn't work.

MatthiasP 12y ago
>In short, the EU and the IMF demanded savage spending cuts from the Greek government. Let's also mention WHY those spending cuts were demanded: Because Greece was on the verge of bankruptcy, the interest rates for their bonds were exploding and the EU and IMF had to pump more than 300 billion € into this 11 million people country.
- lotsofmangos 12y ago
  I was talking to someone who knows some of the Whitehall mandarins and he was saying that bond ratings are the primary reason for austerity policies in the UK. Although we aren't actually spending less money, due to the continuing injection of capital into banking, as long as we are throwing the money upwards then our bonds are worth more.
- bildung 12y ago
  > Let's also mention WHY those spending cuts were demanded: Because Greece was on the verge of bankruptcy[...]. That, while true, leaves out the quite important fact that Greece was only on the verge of bankruptcy because they bailed out their banks. One can nicely see that on charts displaying the debt/GDP ratio: While high for quite a few years, it was more or less constant. The bailout was the one factor that created the explosive dept growth. Now it gets interesting: Whose money was in these banks, invested in high risk/ high yield projects? Mostly investments of european upper class/upper middle class (because small Greece had an even smaller upper class). That's why so many German banks like Commerzbank, Deutsche Bank and the now defunct Hypo Real Estate hold so many Greek government bonds. By bailing out the Greek (and Spanish, Irish etc.) banks the European population indirectly subsidises the risky investments of its own upper class. That's also the reason why the austerity measures are so inconsequential: While pensions get cut and hospitals closed, profiteers like Germany have no qualms to sell German tanks and submarines worth billions of € to Greece (the German submarines alone cost 3 billion) [1]. [1]: http://www.theguardian.com/world/2012/apr/19/greece-military-spending-debt-crisis http://www.theguardian.com/world/2012/apr/19/greece-military... edit:typo

NotableAlamode 12y ago

You are right, Germany has already flooded billions to Greece. But they didn't use it to make themselves competitive. Instead the retired early.