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Honestly Greece needs to default if only for their citizens to have to own up to the mess their politicians have made and continue to make. The EU has to cut th

Honestly Greece needs to default if only for their citizens to have to own up to the mess their politicians have made and continue to make. The EU has to cut them off simply because bending to Greece's demands pretty much will open Pandora's box. Alexis Tsipras and his government have accelerated Greece's decline with their rhetoric, driving bank money out which is reducing the money supply which constrains any recovery. They had to lock down the banks because their economy cannot simply exist on money the state has banked The EU was never meant to be a transfer union, if it headed that way all the rich nations would likely bail and current politicians would face political defeat. Close to home (US) Puerto Rico is having difficulties paying their bonds for similar reasons, believing that they could get bailed out just because of what they are.

deciplex 11y ago
> The EU was never meant to be a transfer union, if it headed that way all the rich nations would likely bail and current politicians would face political defeat. Is that why it's so easy for the rich over there to hide all their wealth in tax havens like e.g. Luxemburg? To avoid transferring any wealth to the country where they actually made it all, via taxation?
drzaiusapelord 11y ago
My pet theory is that Tsipras is pretty much a communist-lite (Greece is very far to the left politically) and is pivoting to move to state controlled most things/everything under the guise of 'socialism' and 'fighting the evil Germans/Brits/French who steal our money.' I can't see his rhetoric making any sense outside of an extremist power grab. He could be bankrolled by Russian and Chinese interests (both autocracies he looks up to - he has made several secretive visits to Moscow), sell off Greek lands to pay for bills, and pretty much become Cuba. Perhaps even exit NATO as Russia and China pressure him. The funny thing most Greeks would be on board with this. Or maybe he's crazy like a fox and was courting Russia and China to counter the EU as gambler brinkmanship, but if that was true, there would be a deal by now, not a referendum that will, most likely, remove Greece from the EU. As a Greek-American I'm always shocked at how extremist the people are there when I visit. They're not like Germans who take something of a middle of the road approach, at least by Euro standards. They're an entirely different beast and I think other EU members are only starting to notice. The EU taking on Greece is like the US making Cuba the 51st state. The culture and governmental divides are huge. It was a bad idea from the start. I suspect Greece is lost to the EU and somewhat to the West for quite some time. Greeks are prideful people and "OXI" is ingrained into their culture, good or bad.
- glesica 11y ago
  > The funny thing most Greeks would be on board with this. gasp We can't possibly allow a country to do something we don't agree with just because the people want it! That would be undemocratic!
  - drzaiusapelord 11y ago
    No one is deploying troops. Everyone is letting the Greeks do it. As a Greek landholder its bothersome as I'd rather not see my family's lands be given to nouveau riche Chinese for a pension check to 54 year old retirees spending all day at the caffenio, drinking frappes, and collecting pensions for the next 25+ years after barely working 30. Hopefully, it won't reach that level, but socialization of further industry (Greece's #1 employer is the government) is probably inevitable considering the politics and economic situation.
    - cgio 11y ago
      Typical entitled behaviour. Are you one of the migrant landowners that got their land as a present from the government? Maybe went to a Greek school in the states with teachers paid by the Greek government? I am in Australia and honestly I have not seen people as critical of the Greeks as Greek immigrants. I hope you settle your issues and learn to love a country that always loved its migrants. Good luck.
      - drzaiusapelord 11y ago
        That land has been in my family for 100+ years, please take whatever weird issues you have with Greece to someone appropriate to yell at.
- saryant 11y ago
  Those visits to Moscow were in fact so secretive that the BBC covered them! http://www.bbc.com/news/world-europe-32214140 http://www.bbc.com/news/world-europe-32214140
christoph 11y ago
It's hard to see how the combined problem of Greece and Puerto Rico nearly simultaneously will not be felt globally. A bigger worry globally is that China is starting to show serious economic cracks. It's certainly going to be an interesting time ahead.
- roymurdock 11y ago
  Greece = 2% of EU GDP Puerto Rico = 0.006% of US GDP Both of these default decisions are more ideologically driven (setting precedents) than they are borne of actual economic necessity, such as the TBTF bank bailouts of 2008. In Greece's case it's not even the private sector's problem anymore as debt restructuring transferred debt from the banks to the EFSF, an entity funded by public, gov't funds (mostly German, French, & Italian). [0] It's fantastic to see how these debt restructuring deals really work. In essence, creditors wrote down 25% of the debt in order to transfer private risk that they had taken on themselves onto the public. So the direct losers in the case of a Greek default are the taxpayers and, by the transitive property, the politicians of Germany, France and Italy. Indirectly it would be a blow to investor confidence in the EU, but many would probably see Greece leaving the EU as a positive for the overall EU economy and the Euro. [0] http://www.socialeurope.eu/2012/03/the-mystery-tour-of-restructuring-greek-sovereign-debt/ http://www.socialeurope.eu/2012/03/the-mystery-tour-of-restr...
afterburner 11y ago
"The EU was never meant to be a transfer union" And yet if nations are going to share a currency, they need to have a coordinated economic policy, and that ends up happening. Wealthy states in the US perpetually give money to the poorer states, but there isn't an uproar about it. Seems like the EU was doomed to fail if it didn't allow for this.
- notahacker 11y ago
  Which is what many relatively level-headed economic commentators were saying before the Euro even launched... Not to mention the fact that the EU was also never meant to be a debt collection agency, which means that since German and French banks insisted on buying up higher-yielding Greek debt, they richly deserve to share the consequences of it being unsustainable with the Greek taxpayer.
  - tonfa 11y ago
    I thought the German/French banks stopped having exposure to Greece debts a while ago.
    - notahacker 11y ago
      That's what the IMF loan that Greece is about to default on covered...
- yummyfajitas 11y ago
  It's unclear how much wealthy US states actually do pay poorer states. Whenever I see statistics attempting to quantify this, they tend to include a lot of questionable things. For example, a military base in Kansas which defends the entire US is treated as a transfer to Kansas, and a person who worked in NJ but retires to Florida has SS/Medicare treated as a transfer to Florida. If you know of good stats I'd love to see.
  - AnimalMuppet 11y ago
    And things like I-80 across Wyoming are treated like a transfer to Wyoming. But if you want to drive I-80 from New York to San Francisco, you need I-80 to exist across Wyoming. It's not needed for the locals; it's needed for the cross-country traffic.
selimthegrim 11y ago
This is such bullshit - Yugoslavia blew up partially because IMF external pressure (which grew stronger as a result of the country's lost strategic significance after the Wall fell) and a blowup in the current account deficit strained the existing transfer union arrangements and made proper austerity very hard to politically carry out from the center. That should have been the lesson to the EC what happens with a weak union (monetary w/o fiscal)
gonvaled 11y ago
Don't forget that Greece received financial help (IMF etc) so that creditors (big banks, really) could get their risky loans (with high interest rates) repaid, de-facto unloading the private-held debt on the European taxpayer. This was much worse than a transfer union (where countries are supposed to help each other in times of crisis, alleviating suffering of the people): it was a direct transfer from the European taxpayer to the big banks - mainly French and German. This was neither in any way legitimated by the public, nor is a Eurozone mechanism. It was decided by the European financtial institutions because it made financial sense, so that the European financial system would not collapse. Once this has been accomplished, it seems that Greece can be disposed of - risking even the disintegration of the Eurozone. Not much good can come of this. So let's put this in perspective: Germany has benefited manifold of the european crisis: - extremely low interest rates paid on debt, as opposed to what the Greeks are experiencing. Some of this is based on fundamentals, some of this is pure speculation, which has hugely benefited Germany and hugely in detriment of the Greek. - big capital gains for the private German banks by investing in risky Greek bonds (help for the Greeks, which was good) - no loses on the investments, thanks to international help to unload investments once the situation has started to go out of control. They have enjoyed the upside of their investment, and thanks to intervention by the European authorities, no downside. And the Euro in general has been a big win for Germany thanks to its low exchange rate. Now the Germans are risking all this in the name of economic Orthodoxy, but Orthodoxy exists to be broken in exceptional times, as it has been broken in the Eurozone several times during this crisis, as the US has broken it (quantitative easing), as the UK has broken it (buying bankrupt banks), as Island (out of the crisis by now) has broken it. Germany itself has broken it several times in the past - breaking the 3% deficit comes to mind. And now we can not break it to restructure the debt of a country with a GDP lower than the 2% of the Eurozone's GDP? Give me a break!
- andrepd 11y ago
  "They have enjoyed the upside of their investment, and thanks to intervention by the European authorities, no downside." This is what gets me. Such is the cosiness between banks and government that this happens. Banks essentially win big time by buying bonds with absurdly high interest rates (that require herculean sacrifices by the citizens of the affected countries to even attempt to repay), all the while completely bypassing the risk that made the interest rates s high in the first place!
Mikeb85 11y ago
> Honestly Greece needs to default if only for their citizens to have to own up to the mess their politicians have made and continue to make. That's not the whole story. The reason Greece is where it is today is because of the cruel austerity package imposed upon them by their European creditors. Here's a chart of their GDP: http://www.tradingeconomics.com/greece/gdp http://www.tradingeconomics.com/greece/gdp Now of course there are other reasons as well - Greek manufacturing is non-existent, partly because they outsourced their manufacturing to Europe, who went to Greece en-masse for vacations, but then didn't when the global financial crisis hit. And of course, having an integrated currency but separate government structures isn't the best idea when you have multiple economies that are at disparate levels of wealth. In an ideal world, Greece would have been able to manage their currency and exchange levels (ie. print money), but of course they couldn't. As part of the EU, Greece essentially got the worst of both worlds - high import costs, lower (relative) income from tourism. And no control over their own currency. And to make matters worse, they got shit treatment from their creditors - their GDP has plunged since the onset of austerity measures, as has government income. While perhaps Greece could have done more, they did what they were expected to as part of the EU, and it backfired horribly. Now they're finally doing what needs to be done, and the EU cries foul...
- drzaiusapelord 11y ago
  >That's not the whole story. The reason Greece is where it is today is because of the cruel austerity package imposed upon them by their European creditors. History doesn't start in 2010. Greece pretty much lied to get into the EU and is a badly run country, at best, and a corrupt hell-hole at worst. Low retirement ages, low taxation due to fraud, government being the largest employer, lack of diversification, etc. Its easy to take this hip anti-EU position for upvotes here, but you're defending a shittily run country in almost every respect.
  - toothbrush 11y ago
    > Low retirement ages Please don't spread this toxic myth about Greece. http://www.newstatesman.com/blogs/world-affairs/2012/05/exploding-myth-feckless-lazy-greeks http://www.newstatesman.com/blogs/world-affairs/2012/05/expl...
sergiosgc 11y ago
> The EU was never meant to be a transfer union. The EU maybe not. The Eurozone, on the other hand, must have a compensation mechanism to allow for the inclusion of countries as different as the Netherlands and Portugal (to use examples far from the polarized Germany<->Greece spectrum). Whenever a country has a chronic balance of goods surplus, its currency will gain in value. This keeps the surplus from accumulating, by making imports cheaper and exports more expensive. However, combine chronic surplus and chronic deficit in the same monetary zone, and they cancel out. Neither the surplus nor the deficit get corrected automatically by the market. Now, you can't have a chronic surplus, not any more than you can have a chronic deficit. Either you compensate through other channels of monetary transfer (investment, differential taxation, redistribution), or you are letting the system go in freewheel mode. If you don't compensate, something is gotta give.
ExpiredLink 11y ago
But the Greek gave us so many felicitous words: hubris, chaos, idiot, ...

deciplex 11y ago

> The EU was never meant to be a transfer union, if it headed that way all the rich nations would likely bail and current politicians would face political defeat. Is that why it's so easy for the rich over there to hide all their wealth in tax havens like e.g. Luxemburg? To avoid transferring any wealth to the country where they actually made it all, via taxation?

drzaiusapelord 11y ago

My pet theory is that Tsipras is pretty much a communist-lite (Greece is very far to the left politically) and is pivoting to move to state controlled most things/everything under the guise of 'socialism' and 'fighting the evil Germans/Brits/French who steal our money.' I can't see his rhetoric making any sense outside of an extremist power grab. He could be bankrolled by Russian and Chinese interests (both autocracies he looks up to - he has made several secretive visits to Moscow), sell off Greek lands to pay for bills, and pretty much become Cuba. Perhaps even exit NATO as Russia and China pressure him. The funny thing most Greeks would be on board with this. Or maybe he's crazy like a fox and was courting Russia and China to counter the EU as gambler brinkmanship, but if that was true, there would be a deal by now, not a referendum that will, most likely, remove Greece from the EU. As a Greek-American I'm always shocked at how extremist the people are there when I visit. They're not like Germans who take something of a middle of the road approach, at least by Euro standards. They're an entirely different beast and I think other EU members are only starting to notice. The EU taking on Greece is like the US making Cuba the 51st state. The culture and governmental divides are huge. It was a bad idea from the start. I suspect Greece is lost to the EU and somewhat to the West for quite some time. Greeks are prideful people and "OXI" is ingrained into their culture, good or bad.

glesica 11y ago
> The funny thing most Greeks would be on board with this. gasp We can't possibly allow a country to do something we don't agree with just because the people want it! That would be undemocratic!
- drzaiusapelord 11y ago
  No one is deploying troops. Everyone is letting the Greeks do it. As a Greek landholder its bothersome as I'd rather not see my family's lands be given to nouveau riche Chinese for a pension check to 54 year old retirees spending all day at the caffenio, drinking frappes, and collecting pensions for the next 25+ years after barely working 30. Hopefully, it won't reach that level, but socialization of further industry (Greece's #1 employer is the government) is probably inevitable considering the politics and economic situation.
  - cgio 11y ago
    Typical entitled behaviour. Are you one of the migrant landowners that got their land as a present from the government? Maybe went to a Greek school in the states with teachers paid by the Greek government? I am in Australia and honestly I have not seen people as critical of the Greeks as Greek immigrants. I hope you settle your issues and learn to love a country that always loved its migrants. Good luck.
    - drzaiusapelord 11y ago
      That land has been in my family for 100+ years, please take whatever weird issues you have with Greece to someone appropriate to yell at.
saryant 11y ago
Those visits to Moscow were in fact so secretive that the BBC covered them! http://www.bbc.com/news/world-europe-32214140 http://www.bbc.com/news/world-europe-32214140

christoph 11y ago

It's hard to see how the combined problem of Greece and Puerto Rico nearly simultaneously will not be felt globally. A bigger worry globally is that China is starting to show serious economic cracks. It's certainly going to be an interesting time ahead.

roymurdock 11y ago
Greece = 2% of EU GDP Puerto Rico = 0.006% of US GDP Both of these default decisions are more ideologically driven (setting precedents) than they are borne of actual economic necessity, such as the TBTF bank bailouts of 2008. In Greece's case it's not even the private sector's problem anymore as debt restructuring transferred debt from the banks to the EFSF, an entity funded by public, gov't funds (mostly German, French, & Italian). [0] It's fantastic to see how these debt restructuring deals really work. In essence, creditors wrote down 25% of the debt in order to transfer private risk that they had taken on themselves onto the public. So the direct losers in the case of a Greek default are the taxpayers and, by the transitive property, the politicians of Germany, France and Italy. Indirectly it would be a blow to investor confidence in the EU, but many would probably see Greece leaving the EU as a positive for the overall EU economy and the Euro. [0] http://www.socialeurope.eu/2012/03/the-mystery-tour-of-restructuring-greek-sovereign-debt/ http://www.socialeurope.eu/2012/03/the-mystery-tour-of-restr...

afterburner 11y ago

"The EU was never meant to be a transfer union" And yet if nations are going to share a currency, they need to have a coordinated economic policy, and that ends up happening. Wealthy states in the US perpetually give money to the poorer states, but there isn't an uproar about it. Seems like the EU was doomed to fail if it didn't allow for this.

notahacker 11y ago
Which is what many relatively level-headed economic commentators were saying before the Euro even launched... Not to mention the fact that the EU was also never meant to be a debt collection agency, which means that since German and French banks insisted on buying up higher-yielding Greek debt, they richly deserve to share the consequences of it being unsustainable with the Greek taxpayer.
- tonfa 11y ago
  I thought the German/French banks stopped having exposure to Greece debts a while ago.
  - notahacker 11y ago
    That's what the IMF loan that Greece is about to default on covered...
yummyfajitas 11y ago
It's unclear how much wealthy US states actually do pay poorer states. Whenever I see statistics attempting to quantify this, they tend to include a lot of questionable things. For example, a military base in Kansas which defends the entire US is treated as a transfer to Kansas, and a person who worked in NJ but retires to Florida has SS/Medicare treated as a transfer to Florida. If you know of good stats I'd love to see.
- AnimalMuppet 11y ago
  And things like I-80 across Wyoming are treated like a transfer to Wyoming. But if you want to drive I-80 from New York to San Francisco, you need I-80 to exist across Wyoming. It's not needed for the locals; it's needed for the cross-country traffic.

selimthegrim 11y ago

This is such bullshit - Yugoslavia blew up partially because IMF external pressure (which grew stronger as a result of the country's lost strategic significance after the Wall fell) and a blowup in the current account deficit strained the existing transfer union arrangements and made proper austerity very hard to politically carry out from the center. That should have been the lesson to the EC what happens with a weak union (monetary w/o fiscal)

gonvaled 11y ago

Don't forget that Greece received financial help (IMF etc) so that creditors (big banks, really) could get their risky loans (with high interest rates) repaid, de-facto unloading the private-held debt on the European taxpayer. This was much worse than a transfer union (where countries are supposed to help each other in times of crisis, alleviating suffering of the people): it was a direct transfer from the European taxpayer to the big banks - mainly French and German. This was neither in any way legitimated by the public, nor is a Eurozone mechanism. It was decided by the European financtial institutions because it made financial sense, so that the European financial system would not collapse. Once this has been accomplished, it seems that Greece can be disposed of - risking even the disintegration of the Eurozone. Not much good can come of this. So let's put this in perspective: Germany has benefited manifold of the european crisis: - extremely low interest rates paid on debt, as opposed to what the Greeks are experiencing. Some of this is based on fundamentals, some of this is pure speculation, which has hugely benefited Germany and hugely in detriment of the Greek. - big capital gains for the private German banks by investing in risky Greek bonds (help for the Greeks, which was good) - no loses on the investments, thanks to international help to unload investments once the situation has started to go out of control. They have enjoyed the upside of their investment, and thanks to intervention by the European authorities, no downside. And the Euro in general has been a big win for Germany thanks to its low exchange rate. Now the Germans are risking all this in the name of economic Orthodoxy, but Orthodoxy exists to be broken in exceptional times, as it has been broken in the Eurozone several times during this crisis, as the US has broken it (quantitative easing), as the UK has broken it (buying bankrupt banks), as Island (out of the crisis by now) has broken it. Germany itself has broken it several times in the past - breaking the 3% deficit comes to mind. And now we can not break it to restructure the debt of a country with a GDP lower than the 2% of the Eurozone's GDP? Give me a break!

andrepd 11y ago
"They have enjoyed the upside of their investment, and thanks to intervention by the European authorities, no downside." This is what gets me. Such is the cosiness between banks and government that this happens. Banks essentially win big time by buying bonds with absurdly high interest rates (that require herculean sacrifices by the citizens of the affected countries to even attempt to repay), all the while completely bypassing the risk that made the interest rates s high in the first place!

Mikeb85 11y ago

> Honestly Greece needs to default if only for their citizens to have to own up to the mess their politicians have made and continue to make. That's not the whole story. The reason Greece is where it is today is because of the cruel austerity package imposed upon them by their European creditors. Here's a chart of their GDP: http://www.tradingeconomics.com/greece/gdp http://www.tradingeconomics.com/greece/gdp Now of course there are other reasons as well - Greek manufacturing is non-existent, partly because they outsourced their manufacturing to Europe, who went to Greece en-masse for vacations, but then didn't when the global financial crisis hit. And of course, having an integrated currency but separate government structures isn't the best idea when you have multiple economies that are at disparate levels of wealth. In an ideal world, Greece would have been able to manage their currency and exchange levels (ie. print money), but of course they couldn't. As part of the EU, Greece essentially got the worst of both worlds - high import costs, lower (relative) income from tourism. And no control over their own currency. And to make matters worse, they got shit treatment from their creditors - their GDP has plunged since the onset of austerity measures, as has government income. While perhaps Greece could have done more, they did what they were expected to as part of the EU, and it backfired horribly. Now they're finally doing what needs to be done, and the EU cries foul...

drzaiusapelord 11y ago
>That's not the whole story. The reason Greece is where it is today is because of the cruel austerity package imposed upon them by their European creditors. History doesn't start in 2010. Greece pretty much lied to get into the EU and is a badly run country, at best, and a corrupt hell-hole at worst. Low retirement ages, low taxation due to fraud, government being the largest employer, lack of diversification, etc. Its easy to take this hip anti-EU position for upvotes here, but you're defending a shittily run country in almost every respect.
- toothbrush 11y ago
  > Low retirement ages Please don't spread this toxic myth about Greece. http://www.newstatesman.com/blogs/world-affairs/2012/05/exploding-myth-feckless-lazy-greeks http://www.newstatesman.com/blogs/world-affairs/2012/05/expl...

sergiosgc 11y ago

> The EU was never meant to be a transfer union. The EU maybe not. The Eurozone, on the other hand, must have a compensation mechanism to allow for the inclusion of countries as different as the Netherlands and Portugal (to use examples far from the polarized Germany<->Greece spectrum). Whenever a country has a chronic balance of goods surplus, its currency will gain in value. This keeps the surplus from accumulating, by making imports cheaper and exports more expensive. However, combine chronic surplus and chronic deficit in the same monetary zone, and they cancel out. Neither the surplus nor the deficit get corrected automatically by the market. Now, you can't have a chronic surplus, not any more than you can have a chronic deficit. Either you compensate through other channels of monetary transfer (investment, differential taxation, redistribution), or you are letting the system go in freewheel mode. If you don't compensate, something is gotta give.

ExpiredLink 11y ago

But the Greek gave us so many felicitous words: hubris, chaos, idiot, ...