5 ms·

They are guilty. They have paid a hefty price. Bail them out, so that they can start again. They will continue to pay a hefty price nevertheless - bailing out a

They are guilty. They have paid a hefty price. Bail them out, so that they can start again. They will continue to pay a hefty price nevertheless - bailing out a country does not magically make them prosper. Your moral sense of justice will not be severely offended, don't worry. We will bail them out, or they will default. What is the best option for the Greeks? What is the best option for the Euro-zone? I argue that, for both parties, the best option is to bail them out and keep the Euro-zone alive.

marcoperaza 11y ago
They are being bailed out, but they don't like the strings attached. They will never be a prosperous country if they don't reform their bloated public sector and onerous regulations on businesses, particularly those regarding labor. And yet those are the very reforms they refuse to implement. Without serious reforms, I don't think it's in the EU's interests to prolong this sorry drama.
- gonvaled 11y ago
  What the Greek are arguing is that those strings attached are not going to make any difference macro-economically speaking, and that they are going to be extremely painful to an already suffering population. Those measures amount to nothing if you compare it with the cost of servicing the debt. Basically, they are bankrupt. To "end the sorry drama", either you let them fall on their own (out of the euro, maybe out of the EU), or you bail them out. I think it is in the interest of Europe (and surely of Greece), to bail them out. Even if it on the surface creates so-called moral hazards: nobody really wants to be in the situation of Greece to be bailed out. There are more aspects to the issue: - monetary: the whole world is running on the printing press. The Americans are doing it, big time. Isn't California bankrupt too? Why should Europe not do it? Just restructure the debt, print the money, create a huge investment program and start funding projects in Greece - and other parts in Europe. We will get some inflation long-term, but who cares? Why should Europe be applying a harsh monetary policy while the US is rigging the markets, just because they can? - humanitarian: do we really want to have a fallen first-world country in the middle of Europe, with third-world poverty levels? What does that say about our "community"? Can't we help one of our partners, once it has become clear that they can not get out the hole by themselves? - reciprocity: parts of Europe have been bailed out in the past (Marshall Plan). Why can't we do it now, when the economy is doing much better, comparatively? You can argue that that was a different situation, and a looong time ago. But crisis happen (luckily) once every so many decades. Now we have a big crisis: let's show that the European project is there in case of trouble too. - geopolitical: do we really want the Russian or the Chinese help one of our European partners? Do we really want to tell the world: we do not care about Greece, even if we can help them, while the Russians or the Chinese, with much looser ties to Greece and with a comparatively weaker economy, are willing (thinking on geopolitical interests, of course) to help them? How long will the European project survive if we are not there to help each other whenever a crisis arises? Greece has to make reforms. Greece has made reforms. More reforms are not going to amount to much of anything. Let's bail them out.
  - marcoperaza 11y ago
    How can anyone claim that more reforms won't amount to much? They've barely reformed at all. The public sector is still bloated and spending too much, the tax burden is much too high, productivity across the economy is dismal, and they refuse to cut welfare programs that they can't afford going forward, let alone with the massive amount of debt they already have. The Marshall Plan was about building up the western alliance in the aftermath of the most destructive war in history; the US was also trying to counter the USSR's expanding influence. Greece is being bailed out because they spent other people's money so irresponsibly that no one will extend credit to them and they can't afford to service their existing debt. Two very different situations.
    - gonvaled 11y ago
      Well, they are paying around 4% GDP in debt (2.5% real, since some creditors are allowing for a non-service period), which is actually not that much. But they have a huge debt/GDP ratio (around 200%), which has dramatically increased during the crisis, specially during the austerity period imposed by the creditors. So, austerity is not working, there is not much more that can be squeezed, and the Greek worry is that squeezing more public spending will actually further reduce GDP, making the ratios all the worse. A big chunk of the Greek economy is based on public spending now, and lots of people are living off the state, because unemployment has soared. This situation is far from ideal, but what can be done? Sure, you can just force all those people under bridges, but is that in the interest of Greece or Europe? Faced with that prospect, Greece would leave the Euro, which would be a blow to the Euro-project. We have a terminal patient, and we can help it. With a bit of luck, in a couple of decades it will become a productive member of society again. The Marshall Plan had a lots of good reasons going for it, and probably some critique too. In the end it proved to be a good solution, which increased prosperity worldwide. It was a political decision. You could have very well argued: "those Germans, they looked for it and they got what they deserve: let them rot", but we didn't, and we are all the better off. Regarding countering the USSR: as I have argued above, geo-politically the situation is right now very similar. The Greeks are courting the Russians and the Chinese (or the other way around). Do we want to split the European project at the Balkans?

marcoperaza 11y ago

They are being bailed out, but they don't like the strings attached. They will never be a prosperous country if they don't reform their bloated public sector and onerous regulations on businesses, particularly those regarding labor. And yet those are the very reforms they refuse to implement. Without serious reforms, I don't think it's in the EU's interests to prolong this sorry drama.

gonvaled 11y ago
What the Greek are arguing is that those strings attached are not going to make any difference macro-economically speaking, and that they are going to be extremely painful to an already suffering population. Those measures amount to nothing if you compare it with the cost of servicing the debt. Basically, they are bankrupt. To "end the sorry drama", either you let them fall on their own (out of the euro, maybe out of the EU), or you bail them out. I think it is in the interest of Europe (and surely of Greece), to bail them out. Even if it on the surface creates so-called moral hazards: nobody really wants to be in the situation of Greece to be bailed out. There are more aspects to the issue: - monetary: the whole world is running on the printing press. The Americans are doing it, big time. Isn't California bankrupt too? Why should Europe not do it? Just restructure the debt, print the money, create a huge investment program and start funding projects in Greece - and other parts in Europe. We will get some inflation long-term, but who cares? Why should Europe be applying a harsh monetary policy while the US is rigging the markets, just because they can? - humanitarian: do we really want to have a fallen first-world country in the middle of Europe, with third-world poverty levels? What does that say about our "community"? Can't we help one of our partners, once it has become clear that they can not get out the hole by themselves? - reciprocity: parts of Europe have been bailed out in the past (Marshall Plan). Why can't we do it now, when the economy is doing much better, comparatively? You can argue that that was a different situation, and a looong time ago. But crisis happen (luckily) once every so many decades. Now we have a big crisis: let's show that the European project is there in case of trouble too. - geopolitical: do we really want the Russian or the Chinese help one of our European partners? Do we really want to tell the world: we do not care about Greece, even if we can help them, while the Russians or the Chinese, with much looser ties to Greece and with a comparatively weaker economy, are willing (thinking on geopolitical interests, of course) to help them? How long will the European project survive if we are not there to help each other whenever a crisis arises? Greece has to make reforms. Greece has made reforms. More reforms are not going to amount to much of anything. Let's bail them out.
- marcoperaza 11y ago
  How can anyone claim that more reforms won't amount to much? They've barely reformed at all. The public sector is still bloated and spending too much, the tax burden is much too high, productivity across the economy is dismal, and they refuse to cut welfare programs that they can't afford going forward, let alone with the massive amount of debt they already have. The Marshall Plan was about building up the western alliance in the aftermath of the most destructive war in history; the US was also trying to counter the USSR's expanding influence. Greece is being bailed out because they spent other people's money so irresponsibly that no one will extend credit to them and they can't afford to service their existing debt. Two very different situations.
  - gonvaled 11y ago
    Well, they are paying around 4% GDP in debt (2.5% real, since some creditors are allowing for a non-service period), which is actually not that much. But they have a huge debt/GDP ratio (around 200%), which has dramatically increased during the crisis, specially during the austerity period imposed by the creditors. So, austerity is not working, there is not much more that can be squeezed, and the Greek worry is that squeezing more public spending will actually further reduce GDP, making the ratios all the worse. A big chunk of the Greek economy is based on public spending now, and lots of people are living off the state, because unemployment has soared. This situation is far from ideal, but what can be done? Sure, you can just force all those people under bridges, but is that in the interest of Greece or Europe? Faced with that prospect, Greece would leave the Euro, which would be a blow to the Euro-project. We have a terminal patient, and we can help it. With a bit of luck, in a couple of decades it will become a productive member of society again. The Marshall Plan had a lots of good reasons going for it, and probably some critique too. In the end it proved to be a good solution, which increased prosperity worldwide. It was a political decision. You could have very well argued: "those Germans, they looked for it and they got what they deserve: let them rot", but we didn't, and we are all the better off. Regarding countering the USSR: as I have argued above, geo-politically the situation is right now very similar. The Greeks are courting the Russians and the Chinese (or the other way around). Do we want to split the European project at the Balkans?