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Sure. I agree that (morally) the EU shouldn't have bailed out Greece. Greece cooked its books and Greek debt holders at the time of the bail out were suffering

Sure. I agree that (morally) the EU shouldn't have bailed out Greece. Greece cooked its books and Greek debt holders at the time of the bail out were suffering the consequences of lending to a fiscally irresponsible state. That being said, the world was uncertain as to how much economic damage had yet to be done, and by shoring up Greece it assuaged investor confidence across the western world. Personally I think that the level of debt in the developed world is completely unsustainable because it relies on population growth and productivity growth in a manner that will one day lead to a massive global failure / inflation, but my opinion isn't really the majority opinion on economics. Essentially Germany shored up Greece for Germany's own interests: stabilize the Euro and investor confidence in Europe. That being said, Greece can afford to pay back its debts. The current debt to GDP of Greece is 175%. Before the populist clowns looked like they were about to win the government, the interest rate on Greek debt was around 5 or 6%, which is affordable, and the longer it is paid, the lower that rate will go. Look at Canada during the 90s, the interest rates plummeted as soon as the government paid off 10 points of the debt to GDP ratio, just because the government gained investor confidence. Greek pensions and benefits are unsustainable. Greek tax rates, while nominally high, are not uniformly paid due to corruption. That is the real real reason Greece can't afford this debt burden. And frankly, if they are going to default, they should do so soon, since the world is at a high mark financially right now.

stefantalpalaru 12y ago
> The current debt to GDP of Greece is 175%. The GDP is not exactly a good economic indicator because in its expenditure-based determination it includes government spending which can be increased by increasing the debt. Add to that the EU habit of making up numbers for the output of black markets like drug traffic and prostitution and adding it to the GDP and you'll see why it's useless when trying to decide the solvency of a state.
guelo 12y ago
What I don't understand about this type of logic is the refusal to acknowledge the damage being done by the forced depression. It's like a 19th century leech therapy, keep sucking out blood until they get better. If Greece's economy is allowed to recover everybody will be better off, the banks, the politics, the people living in Greece and even the German taxpayer.
- jellicle 12y ago
  It's economics as morality play: http://krugman.blogs.nytimes.com/2010/09/28/economics-is-not-a-morality-play/ http://krugman.blogs.nytimes.com/2010/09/28/economics-is-not...
  - quonn 12y ago
    Exactly. It's about controlling the politics of Greece, because the EU/Germany don't trust them to change and use this to put pressure on Spain and Italy. Tsipras hinted at this fear himself ("returning to the bad old ways"). Still, the price being payed for this by Greece is too high. There has to be a better way. For example: Better contracts, better checks, and active support by investing in parts of Europe that are struggling. Or by creating a Fiscal Union, effectively admitting that permanent transfers are needed. This would be more honest, but German politicians are too afraid that this will be unpopular with voters.
- john_b 12y ago
  > "forced depression" Nothing about Greece's current situation was forced on them. Sure, lots of politicking went on and the current situation was definitely engineered to benefit others, but Greece was effectively bankrupt and in default prior to the bailout. You just can't tolerate the level of corruption [1], tax avoidance, and union greed that Greece tolerated for so long. A normal sovereign default would have been just as painful, but in different ways. Greece as a country decided it wanted to stay in the Eurozone, thus picking its poison. Comments like this remind me of people like Cristina Fernandez of Argentina, obsessed about the pain of their economic situation to the extent that awareness of how they got there in the first place is lost. Greece got itself into a very deep shithole with only two main ways out. People look at the hardship of the current path out and see that it's obviously painful, then make the classic fallacy of the-grass-is-greener-on-the-other-side. [1] http://www.independent.co.uk/news/world/europe/greece-most-corrupt-eu-country-survey-reveals-8386456.html http://www.independent.co.uk/news/world/europe/greece-most-c...
  - deleted 12y ago
    [deleted]
quonn 12y ago
> populist clowns Calling a dissenting party clowns is not helpful. It's also wrong, since they argue their points well and their economics are backed by such people as Paul Krugman. Now you might disagree with him, but would you call him a clown, too?
- 3pt14159 12y ago
  Paul Krugman is overrated, and you're drastically simplifying to say he's backing their economics. I'm mostly calling them clowns for the disservice they do their own cause by calling debt repayment economic waterboarding.
  - dash2 12y ago
    Why is that unreasonable? Greek GDP has shrunk by a quarter: https://www.google.co.uk/search?q=greece+gdp https://www.google.co.uk/search?q=greece+gdp
  - sanderjd 12y ago
    Yeah I found that to be a very poor part of an otherwise compelling argument. It eliminated their benefit of the doubt in my mind and made me think a lot harder about everything else they were saying. I still think the main points of the article make a lot of sense, and find the idea that they attempted to treat insolvency as if it were illiquidity particularly difficult to counter.
  - gaius 12y ago
    It must be driving Krugman up the wall that his panacea of just printing more money, isn't applicable here.
  - antman 12y ago
    Economic waterboarding was leaving just enough air to the economy to think it can breathe. Forcing a 4.5% budget surplus which evem countries in better financial position can support is meaningless. You might consifer him overrated but regarding the European crisis his predictions were pretty much accurate although against most financial institutions' predictions
jacquesm 12y ago
Greece may have cooked the books but the rest of the EU is complicit in not doing their due-diligence in their haste to include Greece in their attempts to declare 'largest economy in the world'. It was a stupid pissing-match and the EU definitely carries a fair chunk of the blame here.
- seszett 12y ago
  I'm really not sure how the accession of Greece in 1981 has anything to do with being the "largest economy in the world", and "the EU" today has little to do with the EEC at the time (especially since about 2/3 of the EU countries today were not part of the EEC then). Greece was among the first countries to join the EU (the fourth one if I count correctly) and at the time, the EU (actually, the EEC) was still rather far from being the largest economy in the world. It was actually more based on the historical and cultural place of Greece in Europe than economical grounds, as well as a way to help them recover from the previous dictatorship.
  - jacquesm 12y ago
    Greece did not become part of the Euro zone in 1981 because at the time the Euro was a distant dream in the heads of some politicians and bankers. Please refer to the introduction of the Euro, not Greece joining the EU, those two have absolutely nothing to do with each other. You can be part of the EU but not part of the Euro zone just fine.
- notahacker 12y ago
  Absolutely. The project was doomed from the start, and the ECB and it's fondness for excessively tight monetary policy (given the situation) and utter refusal to consider the sort of debt-reduction-through-monetary-expansion any sane national government would consider even when faced with widespread deflation is a bigger deadweight on Euro area economic growth than Greece (which for all its staggering fiscal ineptitude, isn't particularly significant to Eurozone growth figures overall)
  - nhaehnle 12y ago
atmosx 12y ago
> Greece cooked its books and Greek debt holders at the time of the bail out were suffering the consequences of lending to a fiscally irresponsible state. You (and many others) are doing again the same mistake: Everyone KNEW that the books were cooked. When Germany had to choose a pm for Greece after Papandreou's resignation, he choose the guy (Papademos) who acted as a bridge between Greece and Goldman Sachs in 2001. Do you that it is a coincidence? It's propaganda, politics to justify what was about to happen in Greece! I'm not saying Greece had no fault. It sure as hell Greece has it's own false, but don't for a moment believe that at some point in time Germany (or other major EU partners) were deceived by a Greece.
phkahler 12y ago
>> That being said, Greece can afford to pay back its debts. The current debt to GDP of Greece is 175%. Not relevant. The only way Greece can pay back the debt is to have a trade surplus - more money coming in than going out. End of story. GDP is an interesting number but money circulating within the Greek economy increases GDP without helping the debt in the slightest. OK, taxes on the circulating money can be used to pay the debt, but if they took 100 percent of the GDP they still could not repay the debt.
antman 12y ago
German pension system is also unsustainable [0] and [1]. Form [1] "State pension obligations in France and Germany are three times the size of their economies, according to data compiled by Mercer. It’s more sustainable in France than Germany because of France’s higher birthrate. " It is just that during the Greek system villification, equivalent problems in German economy are suppressed in German media. [0] http://www.frdb.org/upload/file/boerschenglish.pdf http://www.frdb.org/upload/file/boerschenglish.pdf [1] http://www.bloomberg.com/news/articles/2012-01-11/europe-s-39-trillion-pension-threat-grows-as-regional-economies-sputter http://www.bloomberg.com/news/articles/2012-01-11/europe-s-3...

stefantalpalaru 12y ago

> The current debt to GDP of Greece is 175%. The GDP is not exactly a good economic indicator because in its expenditure-based determination it includes government spending which can be increased by increasing the debt. Add to that the EU habit of making up numbers for the output of black markets like drug traffic and prostitution and adding it to the GDP and you'll see why it's useless when trying to decide the solvency of a state.

guelo 12y ago

What I don't understand about this type of logic is the refusal to acknowledge the damage being done by the forced depression. It's like a 19th century leech therapy, keep sucking out blood until they get better. If Greece's economy is allowed to recover everybody will be better off, the banks, the politics, the people living in Greece and even the German taxpayer.

jellicle 12y ago
It's economics as morality play: http://krugman.blogs.nytimes.com/2010/09/28/economics-is-not-a-morality-play/ http://krugman.blogs.nytimes.com/2010/09/28/economics-is-not...
- quonn 12y ago
  Exactly. It's about controlling the politics of Greece, because the EU/Germany don't trust them to change and use this to put pressure on Spain and Italy. Tsipras hinted at this fear himself ("returning to the bad old ways"). Still, the price being payed for this by Greece is too high. There has to be a better way. For example: Better contracts, better checks, and active support by investing in parts of Europe that are struggling. Or by creating a Fiscal Union, effectively admitting that permanent transfers are needed. This would be more honest, but German politicians are too afraid that this will be unpopular with voters.
john_b 12y ago
> "forced depression" Nothing about Greece's current situation was forced on them. Sure, lots of politicking went on and the current situation was definitely engineered to benefit others, but Greece was effectively bankrupt and in default prior to the bailout. You just can't tolerate the level of corruption [1], tax avoidance, and union greed that Greece tolerated for so long. A normal sovereign default would have been just as painful, but in different ways. Greece as a country decided it wanted to stay in the Eurozone, thus picking its poison. Comments like this remind me of people like Cristina Fernandez of Argentina, obsessed about the pain of their economic situation to the extent that awareness of how they got there in the first place is lost. Greece got itself into a very deep shithole with only two main ways out. People look at the hardship of the current path out and see that it's obviously painful, then make the classic fallacy of the-grass-is-greener-on-the-other-side. [1] http://www.independent.co.uk/news/world/europe/greece-most-corrupt-eu-country-survey-reveals-8386456.html http://www.independent.co.uk/news/world/europe/greece-most-c...
- deleted 12y ago
  [deleted]

quonn 12y ago

> populist clowns Calling a dissenting party clowns is not helpful. It's also wrong, since they argue their points well and their economics are backed by such people as Paul Krugman. Now you might disagree with him, but would you call him a clown, too?

3pt14159 12y ago
Paul Krugman is overrated, and you're drastically simplifying to say he's backing their economics. I'm mostly calling them clowns for the disservice they do their own cause by calling debt repayment economic waterboarding.
- dash2 12y ago
  Why is that unreasonable? Greek GDP has shrunk by a quarter: https://www.google.co.uk/search?q=greece+gdp https://www.google.co.uk/search?q=greece+gdp
- sanderjd 12y ago
  Yeah I found that to be a very poor part of an otherwise compelling argument. It eliminated their benefit of the doubt in my mind and made me think a lot harder about everything else they were saying. I still think the main points of the article make a lot of sense, and find the idea that they attempted to treat insolvency as if it were illiquidity particularly difficult to counter.
- gaius 12y ago
  It must be driving Krugman up the wall that his panacea of just printing more money, isn't applicable here.
- antman 12y ago
  Economic waterboarding was leaving just enough air to the economy to think it can breathe. Forcing a 4.5% budget surplus which evem countries in better financial position can support is meaningless. You might consifer him overrated but regarding the European crisis his predictions were pretty much accurate although against most financial institutions' predictions

jacquesm 12y ago

Greece may have cooked the books but the rest of the EU is complicit in not doing their due-diligence in their haste to include Greece in their attempts to declare 'largest economy in the world'. It was a stupid pissing-match and the EU definitely carries a fair chunk of the blame here.

seszett 12y ago
I'm really not sure how the accession of Greece in 1981 has anything to do with being the "largest economy in the world", and "the EU" today has little to do with the EEC at the time (especially since about 2/3 of the EU countries today were not part of the EEC then). Greece was among the first countries to join the EU (the fourth one if I count correctly) and at the time, the EU (actually, the EEC) was still rather far from being the largest economy in the world. It was actually more based on the historical and cultural place of Greece in Europe than economical grounds, as well as a way to help them recover from the previous dictatorship.
- jacquesm 12y ago
  Greece did not become part of the Euro zone in 1981 because at the time the Euro was a distant dream in the heads of some politicians and bankers. Please refer to the introduction of the Euro, not Greece joining the EU, those two have absolutely nothing to do with each other. You can be part of the EU but not part of the Euro zone just fine.
notahacker 12y ago
Absolutely. The project was doomed from the start, and the ECB and it's fondness for excessively tight monetary policy (given the situation) and utter refusal to consider the sort of debt-reduction-through-monetary-expansion any sane national government would consider even when faced with widespread deflation is a bigger deadweight on Euro area economic growth than Greece (which for all its staggering fiscal ineptitude, isn't particularly significant to Eurozone growth figures overall)
- nhaehnle 12y ago

atmosx 12y ago

> Greece cooked its books and Greek debt holders at the time of the bail out were suffering the consequences of lending to a fiscally irresponsible state. You (and many others) are doing again the same mistake: Everyone KNEW that the books were cooked. When Germany had to choose a pm for Greece after Papandreou's resignation, he choose the guy (Papademos) who acted as a bridge between Greece and Goldman Sachs in 2001. Do you that it is a coincidence? It's propaganda, politics to justify what was about to happen in Greece! I'm not saying Greece had no fault. It sure as hell Greece has it's own false, but don't for a moment believe that at some point in time Germany (or other major EU partners) were deceived by a Greece.

phkahler 12y ago

>> That being said, Greece can afford to pay back its debts. The current debt to GDP of Greece is 175%. Not relevant. The only way Greece can pay back the debt is to have a trade surplus - more money coming in than going out. End of story. GDP is an interesting number but money circulating within the Greek economy increases GDP without helping the debt in the slightest. OK, taxes on the circulating money can be used to pay the debt, but if they took 100 percent of the GDP they still could not repay the debt.

antman 12y ago

German pension system is also unsustainable [0] and [1]. Form [1] "State pension obligations in France and Germany are three times the size of their economies, according to data compiled by Mercer. It’s more sustainable in France than Germany because of France’s higher birthrate. " It is just that during the Greek system villification, equivalent problems in German economy are suppressed in German media. [0] http://www.frdb.org/upload/file/boerschenglish.pdf http://www.frdb.org/upload/file/boerschenglish.pdf [1] http://www.bloomberg.com/news/articles/2012-01-11/europe-s-39-trillion-pension-threat-grows-as-regional-economies-sputter http://www.bloomberg.com/news/articles/2012-01-11/europe-s-3...