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>For Greece the gains from defaulting would be slight, and the costs potentially vast. Translation: FUD. >True, the country could walk away from debts of €317
by crdoconnor 11y ago
>For Greece the gains from defaulting would be slight, and the costs potentially vast.
Translation: FUD.
>True, the country could walk away from debts of €317 billion, or almost 180% of GDP. But that is worth less to Greeks than it sounds.
Translation: pretty please don't.
>Although the debt is huge, it is at bargain-basement interest rates and repayable over decades. Interest payments until the early 2020s are just 3% of GDP a year. Even for Greece, that is manageable.
Translation: You may have had to do with massive unemployment and without life saving drugs by kowtowing to creditor demands ( http://www.digitaljournal.com/article/325955 http://www.digitaljournal.com/article/325955 ), but you'll "manage" if you continue doing it.
>Nor would leaving the euro do much good. In theory, with a new drachma and its own central bank, Greece could devalue and gain competitiveness. But Greece’s trade is modest. And it has already lowered nominal wages by 16% without a boom in exports.
Translation: we believe so fervently in the power of suppressing wages to improve economic performance, that the idea of trying anything else is literally unthinkable.
>The costs of Grexit still outweigh the benefits By contrast, the cost of Grexit would be exorbitant: bust banks, slashed savings, broken contracts and shattered confidence (see article). Politics could be devastated. Syriza, Mr Tsipras’s hard-left party, is anti-market and anti-enterprise.
Translation : Attention target readers of the Economist - elites, captains of industry, rapacious financiers - Mr Tsipras is your masked villain.
>Neo-fascist Golden Dawn and the Communists, with a combined 12% of the vote, would thrive.
Translation : please ignore the fact that they already are thriving thanks to the Economist-stamp-of-approval austerity measures.
- randomname2 11y agoI agree The Economist isn't exactly unbiased here, thanks for pointing that out.
- evanpw 11y ago> Translation: FUD The Greeks have always been perfectly free to stop paying their existing debts, at the cost of not being able to borrow any more money. The only reason they've been negotiating with the Troika and agreeing to the austerity measures you disagree with is that they believed that defaulting would be _even worse_. Even if default is currently the best option, there is plenty of actual uncertainty, and some amount of fear seems justified.
- crdoconnor 11y agoWhat's left for them to fear? After years of enormous unemployment and the country's slow decline into near-3rd world status, even having your savings seized and forcibly devalued loses its sting.
- evanpw 11y ago1. I'm not sure what you mean by "near-3rd world". Their economy has fallen to about the pre-Euro trend-line (http://www.vox.com/2015/6/28/8858727/greece-gdp-chart http://www.vox.com/2015/6/28/8858727/greece-gdp-chart). There's still plenty of room for them to fall (https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)...). 2. If The Economist is too capitalist for you, the current Greek finance minister also thinks (thought?) default would be very bad: http://yanisvaroufakis.eu/2012/05/16/weisbrot-and-krugman-are-wrong-greece-cannot-pull-off-an-argentina/ http://yanisvaroufakis.eu/2012/05/16/weisbrot-and-krugman-ar....
- gull 11y agoThe Greek finance minister recommends defaulting in (2). Also note one of his points is defaulting would poison the Eurozone. That's one more reason this isn't as simple as "default would be bad" for Greece. It's a lesser evil for Greece and it's bad for the Eurozone. It gives Greece leverage. "Does this mean that Greece ought to grin and bear the massive and misanthropic idiocy of the bailout-austerity package imposed upon it by the troika (EU-ECB-IMF)? Of course not. We should certainly default." Defaulting could lead to further negotiations if Greece stays in the Eurozone, like slashing a big part of a loan handed out when projections showed Greece would not be able to pay it. Why do you loan to a country when projections show the country can't pay? Is it to keep the country economically enslaved for years? That's probably why the second-to-top-level comment translated the following as FUD. The gains for Greece from defaulting would be better than accepting the austerity measures. >For Greece the gains from defaulting would be slight, and the costs potentially vast. Translation: FUD.
- 11y ago
- trevelyan 11y agoYou are right. Once Greece leaves the Euro its recovery will begin in about six months, the average time it took countries to rebound after leaving the gold standard in the 1930s. Then as now the same vague arguments about the benefits of austerity (confidence!) were presented by debt-holders and shown by history to be disastrously wrong.
- asabjorn 11y agoWith an estimated 24% of the economy being shadow economy vs 13% in Germany, which adds up to 37 billion euros in tax evasions a year, they could pay their debts solely by lowering the shadow economy by 5.5%. This would put Greece shadow economy half-ways between where it is now and the German rate. I think Greece is more like the friend that keeps raking up debt rather than the person that gets pummeled by medical bills.
- lifeisstillgood 11y agoThis was addressed by Yanis Varoufakis' recent post. He explained that if you want to see more people move to the shadow economy, raise taxes on the honest portion to compensate for the loss. But to get the money back, needs amnesty, negotiation, education and time
- scurvy 11y ago">Neo-fascist Golden Dawn and the Communists, with a combined 12% of the vote, would thrive. Translation : please ignore the fact that they already are thriving thanks to the Economist-stamp-of-approval austerity measures." No, it just means Greeks gonna Greek. If you think most of this has anything to do with logic, I invite you to spend a week with my in-laws. 90% wild emotion and knee-jerk responses with 10% self pity.
- oxymoron 11y agoThe economist has been pretty skeptical about austerity recently.