20 ms·

They took them on the express condition that the vast majority was used to pay the bankers. So the former greek government was the willing participant in moving

by biehl 12y ago

They took them on the express condition that the vast majority was used to pay the bankers. So the former greek government was the willing participant in moving bankers losses onto public books. But that makes it no less the bankers losses that were covered with public money.

pooper 12y ago
Is Greece willing to say that it does not back decisions and agreements made by the previous government? How can anyone trust they won't do the same when this government bows out? Greece will lose all credibility in the international market if it keeps playing victim. No, the debts will not go away. Everyone loves to crap on big banks but in this case Greece owes money to EU nations. Unrelated side note: Bringing up the second world war makes Greece sound even more petty. What's wrong with you people?
- _delirium 12y ago
  > Greece owes money to EU nations Only because the private debts were nationalized in the last bailout round, which was basically a joint bailout of Greece's public finances and German/French banks, all of which were on the brink of insolvency. The bonds were previously mostly held by French and German banks, and the agreement did two things: 1) Greece was given a big chunk of money on the condition that most of it be sent back north to pay off a portion of their bonds; and 2) much of the remaining bad debt was shifted to public books, in the process being restructured with more generous terms. Greece has a large part of the fault in this whole saga, but they are not the only reason these originally privately held debts have now ended up on public books. I do think from a realpolitik perspective Greece is playing hardball at the wrong time: they had a much stronger negotiating position in 2010 than they do now, when much of the "contagion" problem has been contained. But the government at the time stupidly agreed to a set of terms that solved the German/French problem while containing but not solving the Greek problem. Few serious economists at the time believed the package was a workable one for Greece, unless you thought some extremely optimistic projects of Greek GDP growth were realistic; it was seen as at best kicking the can down the road. But by 2015 when Greeks realized that and voted in a government willing to play hardball, they are no longer in a good negotiating position.
  - NotableAlamode 12y ago
    I don't think Greece is playing hardball. I think the game is "chicken": everybody involved knows that Greece cannot and will not pay back that money and will leave the Euro. But both sides want to avoid being the first mover: both want the other side to make the first move and admit that Greece is bankrupt. Syriza wants to be forced out of the Euro so they can continue to play the xenophobic game and blame Europe, or rather Germany. The rest of the EU wants Greece to decide to leave, so they don't have to go to their voters and say "we tried everything, they didn't want help ..." and avoid admitting that the critics of the bailout were right all along. In this game, time is on Greece's side, because as long as nobody blinks, all that sweet EU money is still raining down on Athens.
- biehl 12y ago
  There are many layers here, as I see it sitting in a northern european non-eurozone country: Moving bankers bad investments onto public books is a monumentally poor decision for everyone, and the effects of the decision should be undone. However, if France and Germany have no appetite for holding their bankers responsible for their poor investments, and if they can honestly convince their citizens to pay for the bankers poor investments, then that is a (poor) decision they can make (and have so far made). The better decision is to require repayment of bonusses, let the losses materially affect banks shareprices, and let bank-shareholders lawsuits handle the rest. On the other side, pushing the financial burden of a bankers bailout onto the greeks is counterproductive to everyone (who is not a banker) in the eurozone, and is morally disgusting.
  - NotableAlamode 12y ago
    Are you not in effect saying: never pay back debt at all? For whenever you don't pay back debt, then it's the lender's fault, nobody forced them to lend, it's their own risk. While this is a consistent position that has historically been held by some, it's incompatible with any modern economy. In particular it is incompatible with the modern concepts of old-age pension, health insurance, unemployment insurance etc.
    - biehl 12y ago
      No - as a citizen I'm saying. Don't let bankers buy risky papers to a degree that they cannot cover their own losses. The german and french bankers should not have bought greek government bonds at the prices they did considering the greek levels of public debt.
      - NotableAlamode 12y ago
        Why do you keep talking about German and French banks only? As Atropos pointed out, Greek banks had the highest exposure. German banks had quite a low exposure. In the light of this (and the power structure of the EU/ECB) the German taxpayer is bailing out French and Greek banks. Anyway, what is deemed risky is highly subjective and easy to see only in hindsight.
Atropos 12y ago
You are using the anti-bailout and anti-banker rhetoric from the bailouts in the financial crisis, but this situation here is totally different: Greece borrows 100€ from a bank, cannot repay it, so there is a huge debt haircut and Greece only has to repay 50€. Now an argument can be made that the haircut should have been even bigger, but there was no shifting of "bankers losses onto public books". You can make the argument that the other EU countries taxpayers had to cover Greek debt to banks (including Greek banks) with their own taxpayer money - but that is something that only the other EU countries could complain about!
- biehl 12y ago
  Hmm, you do realise that when you say "Greece borrows 100 EUR from a bank ... " you actually mean, "bankers bid competitively for greek government bonds - and were so eager to buy them that the spreads to german bonds were ridiculously low 2000 to 2008". And there was very clearly a shifting of "bankers losses onto public books" when Greece was pushed to repurchase bonds from banks at values far above their market value with money lent to Greece for that express purpose. And yes I think that we exactly agree that other countries could cover the losses that the banks incurred on their bad investments in greek bonds. But I, very clearly, think that the other countries should not cover those losses on bad investments, but rather demand payback of bonuses paid 2000-2008 to anyone responsible for the greek government bond investments.
  - Atropos 12y ago
    Sometimes using fewer words enhances clarity. Country A has debts of 100 Euro. The debt gets restructured by 50% so that Country A now only has debts of 50 Euros. How has this transaction magically pushed losses onto public books of Country A?
    - peterfirefly 12y ago
      It pushed them onto the public books of countries B, C, D, E, F, G, etc, who took over (part of) the debt. Since they also provide financing at lower than market rate, they are also providing a continuous subsidy to country A (in a manner that they hope their own voters/tax payers won't notice -- and in a manner that the entitled voters of country A certainly haven't noticed). (I wrote "part of" because there was a haircut involved for the private lenders. They /did/ take a loss.) Edit: tpyo.
danmaz74 12y ago
Do you think that if Greece had defaulted on those loans they would have been better off today? Are you aware that that situation would have meant MUCH bigger cuts to public spending than those requested from the so called Troika?
- sgift 12y ago
  > Do you think that if Greece had defaulted on those loans they would have been better off today? Yes. > Are you aware that that situation would have meant MUCH bigger cuts to public spending than those requested from the so called Troika? No, I am not, that's because this scenario is nothing but fear-mongering without any base in reality. It is always put up when an alternative to the current course is discussed but is nothing but hot air. If you are "aware" that your scenario would have happened provide a proof.
  - danmaz74 12y ago
    It's not fear-mongering, it's just looking at historical precedents (eg Argentina). Do you think you can just default, and then everybody will do business with you as usual? Do you think that Greek bonds were only in stupid French and German banks, or that they were the main investment of Greek banks - which would have all defaulted, leaving Greek people and businesses without any money, and forcing the government to leave the Euro (as to be able to start printing money). There is no mathematical proof for what I'm saying, but even the economists who suggested that Greece should have defaulted and left the euro were saying (I would say they were aware) that things would have become much worse before they became better. That is as certain an economic forecast as one can be - the point some economists were/are making is that in the long run Greece will come out better from a fresh start with a default and outside the euro, with a devalued Dracma that would make Greeks poorer but more competitive internationally. But there is no guarantee that Greece would actually recover from an event like that and come back to the first world - especially if it alienates the whole EU in the process.
    - peterfirefly 12y ago
      A default would not just lower the Greek wages down to where they ought to be. It would also de facto quickly lead to massive deregulation, reductions in the number of people working for the state, subsidies for political cronies, etc. It might also break various political stalemates. All those factors will help Greece rebuild but it is a very unpleasant way of reforming a country that has had an urgent need for reforms for decades. Unpleasant as in: people will die. A smarter country with better voters would grab the chance it has been given to do those reforms in a slower and more orderly fashion and say "Thank You!" to the IMF and the EU. And then spend the next 30 years apologizing :)

by biehl 12y ago

pooper 12y ago

Is Greece willing to say that it does not back decisions and agreements made by the previous government? How can anyone trust they won't do the same when this government bows out? Greece will lose all credibility in the international market if it keeps playing victim. No, the debts will not go away. Everyone loves to crap on big banks but in this case Greece owes money to EU nations. Unrelated side note: Bringing up the second world war makes Greece sound even more petty. What's wrong with you people?

_delirium 12y ago
> Greece owes money to EU nations Only because the private debts were nationalized in the last bailout round, which was basically a joint bailout of Greece's public finances and German/French banks, all of which were on the brink of insolvency. The bonds were previously mostly held by French and German banks, and the agreement did two things: 1) Greece was given a big chunk of money on the condition that most of it be sent back north to pay off a portion of their bonds; and 2) much of the remaining bad debt was shifted to public books, in the process being restructured with more generous terms. Greece has a large part of the fault in this whole saga, but they are not the only reason these originally privately held debts have now ended up on public books. I do think from a realpolitik perspective Greece is playing hardball at the wrong time: they had a much stronger negotiating position in 2010 than they do now, when much of the "contagion" problem has been contained. But the government at the time stupidly agreed to a set of terms that solved the German/French problem while containing but not solving the Greek problem. Few serious economists at the time believed the package was a workable one for Greece, unless you thought some extremely optimistic projects of Greek GDP growth were realistic; it was seen as at best kicking the can down the road. But by 2015 when Greeks realized that and voted in a government willing to play hardball, they are no longer in a good negotiating position.
- NotableAlamode 12y ago
  I don't think Greece is playing hardball. I think the game is "chicken": everybody involved knows that Greece cannot and will not pay back that money and will leave the Euro. But both sides want to avoid being the first mover: both want the other side to make the first move and admit that Greece is bankrupt. Syriza wants to be forced out of the Euro so they can continue to play the xenophobic game and blame Europe, or rather Germany. The rest of the EU wants Greece to decide to leave, so they don't have to go to their voters and say "we tried everything, they didn't want help ..." and avoid admitting that the critics of the bailout were right all along. In this game, time is on Greece's side, because as long as nobody blinks, all that sweet EU money is still raining down on Athens.
biehl 12y ago
There are many layers here, as I see it sitting in a northern european non-eurozone country: Moving bankers bad investments onto public books is a monumentally poor decision for everyone, and the effects of the decision should be undone. However, if France and Germany have no appetite for holding their bankers responsible for their poor investments, and if they can honestly convince their citizens to pay for the bankers poor investments, then that is a (poor) decision they can make (and have so far made). The better decision is to require repayment of bonusses, let the losses materially affect banks shareprices, and let bank-shareholders lawsuits handle the rest. On the other side, pushing the financial burden of a bankers bailout onto the greeks is counterproductive to everyone (who is not a banker) in the eurozone, and is morally disgusting.
- NotableAlamode 12y ago
  Are you not in effect saying: never pay back debt at all? For whenever you don't pay back debt, then it's the lender's fault, nobody forced them to lend, it's their own risk. While this is a consistent position that has historically been held by some, it's incompatible with any modern economy. In particular it is incompatible with the modern concepts of old-age pension, health insurance, unemployment insurance etc.
  - biehl 12y ago
    No - as a citizen I'm saying. Don't let bankers buy risky papers to a degree that they cannot cover their own losses. The german and french bankers should not have bought greek government bonds at the prices they did considering the greek levels of public debt.
    - NotableAlamode 12y ago
      Why do you keep talking about German and French banks only? As Atropos pointed out, Greek banks had the highest exposure. German banks had quite a low exposure. In the light of this (and the power structure of the EU/ECB) the German taxpayer is bailing out French and Greek banks. Anyway, what is deemed risky is highly subjective and easy to see only in hindsight.

Atropos 12y ago

You are using the anti-bailout and anti-banker rhetoric from the bailouts in the financial crisis, but this situation here is totally different: Greece borrows 100€ from a bank, cannot repay it, so there is a huge debt haircut and Greece only has to repay 50€. Now an argument can be made that the haircut should have been even bigger, but there was no shifting of "bankers losses onto public books". You can make the argument that the other EU countries taxpayers had to cover Greek debt to banks (including Greek banks) with their own taxpayer money - but that is something that only the other EU countries could complain about!

biehl 12y ago
Hmm, you do realise that when you say "Greece borrows 100 EUR from a bank ... " you actually mean, "bankers bid competitively for greek government bonds - and were so eager to buy them that the spreads to german bonds were ridiculously low 2000 to 2008". And there was very clearly a shifting of "bankers losses onto public books" when Greece was pushed to repurchase bonds from banks at values far above their market value with money lent to Greece for that express purpose. And yes I think that we exactly agree that other countries could cover the losses that the banks incurred on their bad investments in greek bonds. But I, very clearly, think that the other countries should not cover those losses on bad investments, but rather demand payback of bonuses paid 2000-2008 to anyone responsible for the greek government bond investments.
- Atropos 12y ago
  Sometimes using fewer words enhances clarity. Country A has debts of 100 Euro. The debt gets restructured by 50% so that Country A now only has debts of 50 Euros. How has this transaction magically pushed losses onto public books of Country A?
  - peterfirefly 12y ago
    It pushed them onto the public books of countries B, C, D, E, F, G, etc, who took over (part of) the debt. Since they also provide financing at lower than market rate, they are also providing a continuous subsidy to country A (in a manner that they hope their own voters/tax payers won't notice -- and in a manner that the entitled voters of country A certainly haven't noticed). (I wrote "part of" because there was a haircut involved for the private lenders. They /did/ take a loss.) Edit: tpyo.

danmaz74 12y ago

Do you think that if Greece had defaulted on those loans they would have been better off today? Are you aware that that situation would have meant MUCH bigger cuts to public spending than those requested from the so called Troika?

sgift 12y ago
> Do you think that if Greece had defaulted on those loans they would have been better off today? Yes. > Are you aware that that situation would have meant MUCH bigger cuts to public spending than those requested from the so called Troika? No, I am not, that's because this scenario is nothing but fear-mongering without any base in reality. It is always put up when an alternative to the current course is discussed but is nothing but hot air. If you are "aware" that your scenario would have happened provide a proof.
- danmaz74 12y ago
  It's not fear-mongering, it's just looking at historical precedents (eg Argentina). Do you think you can just default, and then everybody will do business with you as usual? Do you think that Greek bonds were only in stupid French and German banks, or that they were the main investment of Greek banks - which would have all defaulted, leaving Greek people and businesses without any money, and forcing the government to leave the Euro (as to be able to start printing money). There is no mathematical proof for what I'm saying, but even the economists who suggested that Greece should have defaulted and left the euro were saying (I would say they were aware) that things would have become much worse before they became better. That is as certain an economic forecast as one can be - the point some economists were/are making is that in the long run Greece will come out better from a fresh start with a default and outside the euro, with a devalued Dracma that would make Greeks poorer but more competitive internationally. But there is no guarantee that Greece would actually recover from an event like that and come back to the first world - especially if it alienates the whole EU in the process.
  - peterfirefly 12y ago
    A default would not just lower the Greek wages down to where they ought to be. It would also de facto quickly lead to massive deregulation, reductions in the number of people working for the state, subsidies for political cronies, etc. It might also break various political stalemates. All those factors will help Greece rebuild but it is a very unpleasant way of reforming a country that has had an urgent need for reforms for decades. Unpleasant as in: people will die. A smarter country with better voters would grab the chance it has been given to do those reforms in a slower and more orderly fashion and say "Thank You!" to the IMF and the EU. And then spend the next 30 years apologizing :)