7 ms·

So we just ignore the fact that the Greek government misrepresented their economic state, failed to implement the necessary changes and then puts up a completel

So we just ignore the fact that the Greek government misrepresented their economic state, failed to implement the necessary changes and then puts up a completely bogus referendum?

konceptz 11y ago
I think what msabalau is saying is that there are many issues at multiple levels of this system and instead of addressing them as a whole they turned on a single instance. The implication is that Greek's issues were used as a scapegoat for a systemic problem.
jeltz 11y ago
I am leaning towards yes, because it was well known a long time before the crash that Greece was messed up. The incentives were wrong and encouraged irresponsible ledning. The Greek government just happened to be the worst borrower.
DangerousPie 11y ago
Yes, pretty much. The author's argument is that everybody knew that their economic state was misrepresented, so the banks should have never lend them money in the first place. The mismanagement leading up to the financial crises was of course the fault of the Greek government. However, the reforms that the EU has proposed/enforced since then seem to have been more about punishing the Greeks than about actually building a properly functioning economy. That might feel justified (and because of that it has the support of many voters) but long-term it is not a viable solution to the problem.
- mike_hearn 11y ago
  The reforms are the only long term solution. They're reforms like, maybe Greeks should retire at the same age that other people in Europe do. Maybe hairdressing should not be considered a 'dangerous profession', thus unlocking various benefits. Maybe Greek train drivers should not be paid $130,000 a year to drive near-empty trains. Maybe Greece should be able to grow its own food instead of importing more than half of it. Greece is hosed because, as the article points out, it is an incredibly screwed up and corrupt country. The EU is desperately trying to make it a few percent less screwed up, and mostly getting nowhere. Greece absolutely isn't hosed because of those awful European creditors who deserve to be punished for their naive belief that maybe Greece would improve. I mean, just go take a look at the garbage that has been pouring out of Greece and ordinary Greek people about German in recent times. Allusions to Hitler seem to fall from their mouths every single day. The idea that maybe Germans should not be paying for Greeks is not fascism, yet they routinely act as if it is. Greece has no real alternative but to adopt severe reforms and that means severe "austerity", whereby "austerity" of course what people mean is shrinking the Greek state to a size more appropriate to the size of its economy.
  - DangerousPie 11y ago
    Sure, some of the austerity measures make sense. Tax evasion and the bloated public sector are a huge issue and need to be fixed. But it has to happen in a way that doesn't completely destroy the economy in the process.
  - Amezarak 11y ago
    > Greece has no real alternative but to adopt severe reforms and that means severe "austerity", whereby "austerity" of course what people mean is shrinking the Greek state to a size more appropriate to the size of its economy. Greece has a perfectly workable alternative in a Grexit. It would help them enormously and not require austerity but there are political reasons that won't allow it. If Greece was using the drachma, this would not be a problem. The other problem with austerity measures is that they have a tendency to inhibit growth or even shrink the economy; shrinking the government further certainly doesn't help that situation. EDIT: I forgot to add that Greece has a primary budget surplus - meaning that if it wasn't for the debt they owe, they'd be doing fantastically budgetarily.
    - Xylakant 11y ago
      As a purely economic solution, a Grexit combined with a default might work. However, who would step up and finance the ongoing deficit? Interest rates even for short term borrowing would be unsustainable. What would happen in the meantime, until such a Grexit could actually be performed? The banks don't have money any more, there's no infrastructure to print new bills, there's no plan on how to actually do that. It's the choice between austerity because the lenders want it or austerity because there's no money left. On top of that, would Greece leave the EU? There's a lot of greek living and working abroad under the EU residence/work rules. Would such a vote not be perceived as a "No" to europe, effectively pushing greece out of the EU at least on a temporary basis? I'm not convinced that the Grexit is a workable alternative in a larger context.
      - Amezarak 11y ago
        > As a purely economic solution, a Grexit combined with a default might work. However, who would step up and finance the ongoing deficit? As I added in my edit, Greece has a primary budget surplus. There would be no ongoing deficit. Existing debt would be paid off with the expedient of default and currency devaluation, just as other countries have historically done. A little rough patch and then things look up. Seems a much healthier alternative than decades of economic suffering due to more and more austerity and the consequences thereof. > there's no infrastructure to print new bills I can't imagine that is a very hard problem to solve. > On top of that, would Greece leave the EU? There's a lot of greek living and working abroad under the EU residence/work rules. Would such a vote not be perceived as a "No" to europe, effectively pushing greece out of the EU at least on a temporary basis? Does leaving the Euro mean leaving the Eurozone? That's an honest question. I don't think it does, but I've heard this said before. On your final point, I don't disagree: at least right now leaving the Eurozone is politically untenable. But I suspect that economically it might be the most sensible thing to do, and not just for Greece. Unless Europe forms a real fiscal union, this kind of madness will happen over and over.
- narrator 11y ago
  The derivatives that underwrote the debt made it all ok though. Same thing happened with the mortgage bubble. It's an easy way to turn a bunch of garbage into a bunch of AAA prime credit stuff. When the whole thing collapses, all the bankers get 100 cents on the dollar courtesy of central bank printing and sticking it to the taxpayer.
  - azernik 11y ago
    The key difference here is that the banks have already been bailed out (when international institutions like the IMF and ECB took over the loans), and now those institutions are demanding that instead of the taxpayer picking up the bill, the Greek pensioner do so. Shame.
- return0 11y ago
  The reforms were not "punishing", they just were never implemented in full due to resistance from the people. Even today, the majority prefers a clash and chaos to reforms.
- brohee 11y ago
  Implementing a land registry and getting people to pay taxes is not punishment... What part of the reform is actually punitive? The history of the Greek land registry is kinda hilarious btw...http://openeurope.org.uk/blog/reforming-greece-easier-said-done-never-ending-case-land-registry/ http://openeurope.org.uk/blog/reforming-greece-easier-said-d...
  - cgio 11y ago
    The part that led to 25% drop in GDP and three times the unemployment rate. The part that took a 50bn problem and made it 330. You can say whatever you want about the incompetence of Greek governments, but the wise foreign advisors managed to be even worse in every respect (e.g. using wrong multipliers to calculate impact of reforms and even making growth assumptions in an economy they themselves dried up from investment.)
  - miopa 11y ago
    There is an additional reason that makes the 'Cadastre' extremly difficult project for Greece. A lot of the land in northern Greece is claimed (with documents) by people who are now citizens of Republic of Macedonia. Greece will break some EU laws if it doesn't honor those documents, but that land is used for more than 60 years by other people or the Greek state.
    - dragandj 11y ago
      Ah, unwillingness to return stolen property to the righteous owners is a valid excuse?
deleted 11y ago
[deleted]
seliopou 11y ago
In either way it could have gone back in 2010, the profligacy of the Greek state would not have been ignored. Had it defaulted to the private creditors at the time, the country's borrowing costs would have shot through the roof. People hear "default" and think that it's a get out of jail free card. It's not. Money would be harder to come by for the state to fund its operations, which may have provided the backpressure needed for meaningful reforms to take place without shrinking the national income by 1/3. But since they didn't default, and instead the banks holding the bad debt were bailed out indirectly though loans to Greece (a tiny fraction of which remained in Greece, mind you), national income did shrink by 1/3 because of many of the changes that the institutions insisted take place _did_ take place. Now the likelihood of those loans getting paid back is as close to nil as non-failed state can get. So, to look to the future rather than the past, everybody should be trying to figure out how to repay the institutions as much money as possible. Shrinking national income further isn't going to do that. With respect to the "completely bogus referendum", not gonna bite.
skylan_q 11y ago
Forgiving all the debt to Greece causes a worldwide financial collapse. Greece's debt was restructured to be drawn out into longer payment terms at a lower interest rate and at a reduced principal to be fair to them and to prevent a financial collapse. It's containment. It's been 5 years of containment now, and it's working to some extent as nations within the eurozone are much less exposed to the greek situation than they were 5 years ago.
- Jare 11y ago
  It's working for everyone but the Greek. Blame them all you want, but we need a solution that works for everyone.
  - zzleeper 11y ago
    Why? They should have never been in the Euro. Any econ major knows that you can't have monetary union without either fiscal union or prudent governments. Check this prescient article from 18 years ago by one of the best macro minds of recent years (Rudi Dornbusch): https://www.foreignaffairs.com/articles/europe/1996-09-01/euro-fantasies-common-currency-panacea https://www.foreignaffairs.com/articles/europe/1996-09-01/eu... He talks about excluding Italy, Portugal, Greece, Spain, etc. So what happened? Standards got relaxed and they accepted e.g. Spain. And then other countries completely falsified their numbers and also got in due to that (Greece). I don't even know why are they still thinking about keeping Greece in the Euro. They don't even have the internal political capital to make the deep reforms they need (labor mkt reforms, an IRS with bite, retirement at a much older age, etc). It would have been better for everyone on the first place to assume Greece will devalue, and to start planning for that. They default, have maybe half a year of real pain, and then they get back on their feet albeit with financial autarky.
    - aliem 11y ago
      I always ask myself: "who accepted them?" and then I simply respond to myself the EU accepted them along with all the other PIGS. Like they did with the EMS. https://en.wikipedia.org/wiki/European_Monetary_System https://en.wikipedia.org/wiki/European_Monetary_System It didn't work at the time, they now wanted to make it forcibly work (again). Something is not right.
fungi 11y ago
there are three pre-crisis article in the first paragraph that are cited as evidence that it was no secret. creditors were (apparently) not blind to the fact.
giggzy 11y ago
The creditors ( banks ) are part of "moral" game here too. If the Euro cannot handle Greek ( and Spanish , Italian, Portuguese , Irish ) default then members of the Euro must share the imbalance. As an american tax payer it hurt to watch bank bailouts here. In europe I keep hearing countries names, but this is a bank bailout fundamentally. Sticking the debt on national governments while also forcing austerity ( defacto shrinking of GDP ) leads to a lose:lose.
- WalterBright 11y ago
  I would expect that austerity would shrink the GDP. After all, if a business is only viable if it receives constant infusions of cash, then shutting off that cash would shut down the company, and its output would no longer contribute to the GDP. But it was not a productive business, anyway.
  - deleted 11y ago
    [deleted]
  - Amezarak 11y ago
    > After all, if a business is only viable if it receives constant infusions of cash, The Greek government runs a primary budget surplus. http://www.wsj.com/articles/greece-misses-target-on-budget-surplus-1421244654 http://www.wsj.com/articles/greece-misses-target-on-budget-s... Just not one large enough to satisfy creditors. That means, without the debt payments, Greece would be free and clear and wouldn't have any budget issues. The only reason Greece needs 'constant infusions of cash' is to pay off these debts, which becomes more difficult as more austerity is demanded.
    - visarga 11y ago
      Maybe there can be done restructuring instead of too much austerity.
    - peterfirefly 11y ago
      No, they probably /don't/ have a primary surplus. They briefly did, but that was before Syriza. Most of the recent infusions of cash were part of the ELA -- so /not/ to pay off debts but to compensate for illiquid (or insolvent...) banks and the stave off bank runs. The debt payments are /not/ in any way big or difficult -- the EU took over most of the debt and in the process forced through a large haircut on the debt + Greece got artificially low (very low!) interest rates + enormous maturity extensions. Greece also got (much) deferred payments for that debt, especially for the interest.
westiseast 11y ago
I guess a lot of the analysis being offered recently is showing that the Greeks, if not being encouraged to lie, we're certainly being given a wink and a nod. At least, the current crisis should be seen as two separate issues - poor Greek governance, and poor bank governance.
rosser 11y ago
If Greece's creditors lent money to the country while knowing of its government's misrepresentations, then whose fault is that again?
- telepheron 11y ago
  Who says the creditors were fully aware of the government's misrepresentations? Those misrepresentations were discovered when the Troika started to investigate Greece's financial state.
  - rosser 11y ago
    When you're lending out billions of dollars, you don't take the debtor's statements at face value. You do very thorough due diligence, and employ very capable people to do it for you. There is no excuse for Deutsche Bank, et al, not to have known exactly how tenuous the strength and solvency of the Greek economy were. The notion that no-one knew the Greek government was lying about the state of their economy until it was too late is ludicrous on its face.
    - tormeh 11y ago
      Just a heads-up that the concept that the creditors must accept risk is a very anglo-saxon perspective. The German view is that debts are to be paid back, period. If you don't pay them back you're a morally deficient scoundrel. If you're ever bankrupt then the legal system will permanently brand you. German economics is a mix of Austrian school economics and strict morals. It doesn't excuse the largely international banks a la Deutsche, but it does explain the Germanic outrage.
      - throwaway2048 11y ago
        just like germany paid off its debts post ww1 and ww2?
        oldmanjay 11y ago
tacone 11y ago
Well, Greece implemented a lot of changes, and it's one of the few Eurozone countries that successfully implemented internal devaluation (salaries halved). What you call "necessary changes" actually turned out to be "bad changes", and everybody with a grain of salt would say there was no way they could get Greece up again on its feet. Greece, like many other countries, messed up or not, began sinking after joining the Eurozone. One may wonder a bit before blaming them.
- crdoconnor 11y ago
  "Well, Greece implemented a lot of changes, and it's one of the few Eurozone countries that successfully implemented internal devaluation (salaries halved)." I wish more pro-Eurozone people would consider this one. The creditors were very plainly less concerned with getting paid back than they were with waging a brutal class war. This is a classic principal/agent problem. The Troika negotiators are not playing with their money, they are playing with taxpayer money. Hence the debt is more of an excuse to push for the reforms that their friends want, irrespective of the very real negative effect it has on Greek solvency. This, if for no other reason, is why the debt should never be paid back.
elorant 11y ago
failed to implement the necessary changes Greek here. This is an understatement. While I’ve mentioned in other posts that our economy is faulty, arguing that we didn’t do anything to fix it is awfully wrong. We did a lot. We managed to move from a 14% deficit to a 1% surplus in just four years. Four. Fucking. Years. No other country in the developed world has done such a feat in such a short time. The effect of that was tremendous for the population, 50% of young people are unemployed. So while we admit our wrongdoings (well at least some of us do) we’d also appreciate if EU could cut us some slack. The reason radicals like Tsipras came into power is the lack of flexibility from EU leaders. The tip of the iceberg is the report that was published last week from IMF that pretty much described the Greek dept as unsustainable. The report was known to various EU leaders for months but they chose to suppress it. I don’t need to tell you how this looks from our side. It’s preposterous to say the least. They say they don’t trust our government, and I don’t blame them for it, but how could anyone trust them. They’re all cunts.
- telepheron 11y ago
  That same report says that failure of the economy to recover is caused by the failure of the government to implement the necessary changes, worsened by the current government during the past 5 months.
  - elorant 11y ago
    That’s one way to put it. The other is that besides the government IMF fucked up too by setting unrealistic goals, like a 4% surplus by 2016 which led Tsipras denying continuation of the program to avoid further damage to the economy (those goals were eventually reduced but it now seems too little too late). Everyone is looking for a scapegoat. The government is blaming ECB and the Germans, EU is blaming the government, and IMF is blaming everyone including Lagarde who can’t seem to get her head out of her ass. Then there is US who see what a clustefuck this whole situation is but can’t do anything but nagging the Germans to become a bit more flexible and in order to put some pressure on them decided to make the report public just when Tsipras abandoned negotiations. There is a Greek proverb saying that when too many roosters sign the dawn comes late.
  - 11y ago
ubernostrum 11y ago
"Hey, these austerity measures are tanking the Greek economy even harder, making it actually impossible for them to survive without more loans... you know what, I think we should force them to do even more of it in order to fix things!" As the wise man says: doing the same thing over and over, and expecting a different result, is insanity.
Spooky23 11y ago
I remember Jim Cramer (not exactly an economic luminary) was able to identify on air that Greece was a joke a decade ago. Funny that the German and French bankers couldn't figure it out. The responsible states in Europe all benefited from the excesses of countries like Greece, so they let the good times roll.
crdoconnor 11y ago
>So we just ignore the fact that the Greek government misrepresented their economic state Not until the Goldman Sachs executives who helped misrepresent their finances are doing the perp walk, no.

So we just ignore the fact that the Greek government misrepresented their economic state, failed to implement the necessary changes and then puts up a completely bogus referendum?

konceptz 11y ago

I think what msabalau is saying is that there are many issues at multiple levels of this system and instead of addressing them as a whole they turned on a single instance. The implication is that Greek's issues were used as a scapegoat for a systemic problem.

jeltz 11y ago

I am leaning towards yes, because it was well known a long time before the crash that Greece was messed up. The incentives were wrong and encouraged irresponsible ledning. The Greek government just happened to be the worst borrower.

DangerousPie 11y ago

Yes, pretty much. The author's argument is that everybody knew that their economic state was misrepresented, so the banks should have never lend them money in the first place. The mismanagement leading up to the financial crises was of course the fault of the Greek government. However, the reforms that the EU has proposed/enforced since then seem to have been more about punishing the Greeks than about actually building a properly functioning economy. That might feel justified (and because of that it has the support of many voters) but long-term it is not a viable solution to the problem.

mike_hearn 11y ago
The reforms are the only long term solution. They're reforms like, maybe Greeks should retire at the same age that other people in Europe do. Maybe hairdressing should not be considered a 'dangerous profession', thus unlocking various benefits. Maybe Greek train drivers should not be paid $130,000 a year to drive near-empty trains. Maybe Greece should be able to grow its own food instead of importing more than half of it. Greece is hosed because, as the article points out, it is an incredibly screwed up and corrupt country. The EU is desperately trying to make it a few percent less screwed up, and mostly getting nowhere. Greece absolutely isn't hosed because of those awful European creditors who deserve to be punished for their naive belief that maybe Greece would improve. I mean, just go take a look at the garbage that has been pouring out of Greece and ordinary Greek people about German in recent times. Allusions to Hitler seem to fall from their mouths every single day. The idea that maybe Germans should not be paying for Greeks is not fascism, yet they routinely act as if it is. Greece has no real alternative but to adopt severe reforms and that means severe "austerity", whereby "austerity" of course what people mean is shrinking the Greek state to a size more appropriate to the size of its economy.
- DangerousPie 11y ago
  Sure, some of the austerity measures make sense. Tax evasion and the bloated public sector are a huge issue and need to be fixed. But it has to happen in a way that doesn't completely destroy the economy in the process.
- Amezarak 11y ago
  > Greece has no real alternative but to adopt severe reforms and that means severe "austerity", whereby "austerity" of course what people mean is shrinking the Greek state to a size more appropriate to the size of its economy. Greece has a perfectly workable alternative in a Grexit. It would help them enormously and not require austerity but there are political reasons that won't allow it. If Greece was using the drachma, this would not be a problem. The other problem with austerity measures is that they have a tendency to inhibit growth or even shrink the economy; shrinking the government further certainly doesn't help that situation. EDIT: I forgot to add that Greece has a primary budget surplus - meaning that if it wasn't for the debt they owe, they'd be doing fantastically budgetarily.
  - Xylakant 11y ago
    As a purely economic solution, a Grexit combined with a default might work. However, who would step up and finance the ongoing deficit? Interest rates even for short term borrowing would be unsustainable. What would happen in the meantime, until such a Grexit could actually be performed? The banks don't have money any more, there's no infrastructure to print new bills, there's no plan on how to actually do that. It's the choice between austerity because the lenders want it or austerity because there's no money left. On top of that, would Greece leave the EU? There's a lot of greek living and working abroad under the EU residence/work rules. Would such a vote not be perceived as a "No" to europe, effectively pushing greece out of the EU at least on a temporary basis? I'm not convinced that the Grexit is a workable alternative in a larger context.
    - Amezarak 11y ago
      > As a purely economic solution, a Grexit combined with a default might work. However, who would step up and finance the ongoing deficit? As I added in my edit, Greece has a primary budget surplus. There would be no ongoing deficit. Existing debt would be paid off with the expedient of default and currency devaluation, just as other countries have historically done. A little rough patch and then things look up. Seems a much healthier alternative than decades of economic suffering due to more and more austerity and the consequences thereof. > there's no infrastructure to print new bills I can't imagine that is a very hard problem to solve. > On top of that, would Greece leave the EU? There's a lot of greek living and working abroad under the EU residence/work rules. Would such a vote not be perceived as a "No" to europe, effectively pushing greece out of the EU at least on a temporary basis? Does leaving the Euro mean leaving the Eurozone? That's an honest question. I don't think it does, but I've heard this said before. On your final point, I don't disagree: at least right now leaving the Eurozone is politically untenable. But I suspect that economically it might be the most sensible thing to do, and not just for Greece. Unless Europe forms a real fiscal union, this kind of madness will happen over and over.
narrator 11y ago
The derivatives that underwrote the debt made it all ok though. Same thing happened with the mortgage bubble. It's an easy way to turn a bunch of garbage into a bunch of AAA prime credit stuff. When the whole thing collapses, all the bankers get 100 cents on the dollar courtesy of central bank printing and sticking it to the taxpayer.
- azernik 11y ago
  The key difference here is that the banks have already been bailed out (when international institutions like the IMF and ECB took over the loans), and now those institutions are demanding that instead of the taxpayer picking up the bill, the Greek pensioner do so. Shame.
return0 11y ago
The reforms were not "punishing", they just were never implemented in full due to resistance from the people. Even today, the majority prefers a clash and chaos to reforms.
brohee 11y ago
Implementing a land registry and getting people to pay taxes is not punishment... What part of the reform is actually punitive? The history of the Greek land registry is kinda hilarious btw...http://openeurope.org.uk/blog/reforming-greece-easier-said-done-never-ending-case-land-registry/ http://openeurope.org.uk/blog/reforming-greece-easier-said-d...
- cgio 11y ago
  The part that led to 25% drop in GDP and three times the unemployment rate. The part that took a 50bn problem and made it 330. You can say whatever you want about the incompetence of Greek governments, but the wise foreign advisors managed to be even worse in every respect (e.g. using wrong multipliers to calculate impact of reforms and even making growth assumptions in an economy they themselves dried up from investment.)
- miopa 11y ago
  There is an additional reason that makes the 'Cadastre' extremly difficult project for Greece. A lot of the land in northern Greece is claimed (with documents) by people who are now citizens of Republic of Macedonia. Greece will break some EU laws if it doesn't honor those documents, but that land is used for more than 60 years by other people or the Greek state.
  - dragandj 11y ago
    Ah, unwillingness to return stolen property to the righteous owners is a valid excuse?

deleted 11y ago

[deleted]

seliopou 11y ago

In either way it could have gone back in 2010, the profligacy of the Greek state would not have been ignored. Had it defaulted to the private creditors at the time, the country's borrowing costs would have shot through the roof. People hear "default" and think that it's a get out of jail free card. It's not. Money would be harder to come by for the state to fund its operations, which may have provided the backpressure needed for meaningful reforms to take place without shrinking the national income by 1/3. But since they didn't default, and instead the banks holding the bad debt were bailed out indirectly though loans to Greece (a tiny fraction of which remained in Greece, mind you), national income did shrink by 1/3 because of many of the changes that the institutions insisted take place _did_ take place. Now the likelihood of those loans getting paid back is as close to nil as non-failed state can get. So, to look to the future rather than the past, everybody should be trying to figure out how to repay the institutions as much money as possible. Shrinking national income further isn't going to do that. With respect to the "completely bogus referendum", not gonna bite.

skylan_q 11y ago

Forgiving all the debt to Greece causes a worldwide financial collapse. Greece's debt was restructured to be drawn out into longer payment terms at a lower interest rate and at a reduced principal to be fair to them and to prevent a financial collapse. It's containment. It's been 5 years of containment now, and it's working to some extent as nations within the eurozone are much less exposed to the greek situation than they were 5 years ago.

Jare 11y ago
It's working for everyone but the Greek. Blame them all you want, but we need a solution that works for everyone.
- zzleeper 11y ago
  Why? They should have never been in the Euro. Any econ major knows that you can't have monetary union without either fiscal union or prudent governments. Check this prescient article from 18 years ago by one of the best macro minds of recent years (Rudi Dornbusch): https://www.foreignaffairs.com/articles/europe/1996-09-01/euro-fantasies-common-currency-panacea https://www.foreignaffairs.com/articles/europe/1996-09-01/eu... He talks about excluding Italy, Portugal, Greece, Spain, etc. So what happened? Standards got relaxed and they accepted e.g. Spain. And then other countries completely falsified their numbers and also got in due to that (Greece). I don't even know why are they still thinking about keeping Greece in the Euro. They don't even have the internal political capital to make the deep reforms they need (labor mkt reforms, an IRS with bite, retirement at a much older age, etc). It would have been better for everyone on the first place to assume Greece will devalue, and to start planning for that. They default, have maybe half a year of real pain, and then they get back on their feet albeit with financial autarky.
  - aliem 11y ago
    I always ask myself: "who accepted them?" and then I simply respond to myself the EU accepted them along with all the other PIGS. Like they did with the EMS. https://en.wikipedia.org/wiki/European_Monetary_System https://en.wikipedia.org/wiki/European_Monetary_System It didn't work at the time, they now wanted to make it forcibly work (again). Something is not right.

fungi 11y ago

there are three pre-crisis article in the first paragraph that are cited as evidence that it was no secret. creditors were (apparently) not blind to the fact.

giggzy 11y ago

The creditors ( banks ) are part of "moral" game here too. If the Euro cannot handle Greek ( and Spanish , Italian, Portuguese , Irish ) default then members of the Euro must share the imbalance. As an american tax payer it hurt to watch bank bailouts here. In europe I keep hearing countries names, but this is a bank bailout fundamentally. Sticking the debt on national governments while also forcing austerity ( defacto shrinking of GDP ) leads to a lose:lose.

WalterBright 11y ago
I would expect that austerity would shrink the GDP. After all, if a business is only viable if it receives constant infusions of cash, then shutting off that cash would shut down the company, and its output would no longer contribute to the GDP. But it was not a productive business, anyway.
- deleted 11y ago
  [deleted]
- Amezarak 11y ago
  > After all, if a business is only viable if it receives constant infusions of cash, The Greek government runs a primary budget surplus. http://www.wsj.com/articles/greece-misses-target-on-budget-surplus-1421244654 http://www.wsj.com/articles/greece-misses-target-on-budget-s... Just not one large enough to satisfy creditors. That means, without the debt payments, Greece would be free and clear and wouldn't have any budget issues. The only reason Greece needs 'constant infusions of cash' is to pay off these debts, which becomes more difficult as more austerity is demanded.
  - visarga 11y ago
    Maybe there can be done restructuring instead of too much austerity.
  - peterfirefly 11y ago
    No, they probably /don't/ have a primary surplus. They briefly did, but that was before Syriza. Most of the recent infusions of cash were part of the ELA -- so /not/ to pay off debts but to compensate for illiquid (or insolvent...) banks and the stave off bank runs. The debt payments are /not/ in any way big or difficult -- the EU took over most of the debt and in the process forced through a large haircut on the debt + Greece got artificially low (very low!) interest rates + enormous maturity extensions. Greece also got (much) deferred payments for that debt, especially for the interest.

westiseast 11y ago

I guess a lot of the analysis being offered recently is showing that the Greeks, if not being encouraged to lie, we're certainly being given a wink and a nod. At least, the current crisis should be seen as two separate issues - poor Greek governance, and poor bank governance.

rosser 11y ago

If Greece's creditors lent money to the country while knowing of its government's misrepresentations, then whose fault is that again?

telepheron 11y ago
Who says the creditors were fully aware of the government's misrepresentations? Those misrepresentations were discovered when the Troika started to investigate Greece's financial state.
- rosser 11y ago
  When you're lending out billions of dollars, you don't take the debtor's statements at face value. You do very thorough due diligence, and employ very capable people to do it for you. There is no excuse for Deutsche Bank, et al, not to have known exactly how tenuous the strength and solvency of the Greek economy were. The notion that no-one knew the Greek government was lying about the state of their economy until it was too late is ludicrous on its face.
  - tormeh 11y ago
    Just a heads-up that the concept that the creditors must accept risk is a very anglo-saxon perspective. The German view is that debts are to be paid back, period. If you don't pay them back you're a morally deficient scoundrel. If you're ever bankrupt then the legal system will permanently brand you. German economics is a mix of Austrian school economics and strict morals. It doesn't excuse the largely international banks a la Deutsche, but it does explain the Germanic outrage.
    - throwaway2048 11y ago
      just like germany paid off its debts post ww1 and ww2?
      - oldmanjay 11y ago

tacone 11y ago

Well, Greece implemented a lot of changes, and it's one of the few Eurozone countries that successfully implemented internal devaluation (salaries halved). What you call "necessary changes" actually turned out to be "bad changes", and everybody with a grain of salt would say there was no way they could get Greece up again on its feet. Greece, like many other countries, messed up or not, began sinking after joining the Eurozone. One may wonder a bit before blaming them.

crdoconnor 11y ago
"Well, Greece implemented a lot of changes, and it's one of the few Eurozone countries that successfully implemented internal devaluation (salaries halved)." I wish more pro-Eurozone people would consider this one. The creditors were very plainly less concerned with getting paid back than they were with waging a brutal class war. This is a classic principal/agent problem. The Troika negotiators are not playing with their money, they are playing with taxpayer money. Hence the debt is more of an excuse to push for the reforms that their friends want, irrespective of the very real negative effect it has on Greek solvency. This, if for no other reason, is why the debt should never be paid back.

elorant 11y ago

failed to implement the necessary changes Greek here. This is an understatement. While I’ve mentioned in other posts that our economy is faulty, arguing that we didn’t do anything to fix it is awfully wrong. We did a lot. We managed to move from a 14% deficit to a 1% surplus in just four years. Four. Fucking. Years. No other country in the developed world has done such a feat in such a short time. The effect of that was tremendous for the population, 50% of young people are unemployed. So while we admit our wrongdoings (well at least some of us do) we’d also appreciate if EU could cut us some slack. The reason radicals like Tsipras came into power is the lack of flexibility from EU leaders. The tip of the iceberg is the report that was published last week from IMF that pretty much described the Greek dept as unsustainable. The report was known to various EU leaders for months but they chose to suppress it. I don’t need to tell you how this looks from our side. It’s preposterous to say the least. They say they don’t trust our government, and I don’t blame them for it, but how could anyone trust them. They’re all cunts.

telepheron 11y ago
That same report says that failure of the economy to recover is caused by the failure of the government to implement the necessary changes, worsened by the current government during the past 5 months.
- elorant 11y ago
  That’s one way to put it. The other is that besides the government IMF fucked up too by setting unrealistic goals, like a 4% surplus by 2016 which led Tsipras denying continuation of the program to avoid further damage to the economy (those goals were eventually reduced but it now seems too little too late). Everyone is looking for a scapegoat. The government is blaming ECB and the Germans, EU is blaming the government, and IMF is blaming everyone including Lagarde who can’t seem to get her head out of her ass. Then there is US who see what a clustefuck this whole situation is but can’t do anything but nagging the Germans to become a bit more flexible and in order to put some pressure on them decided to make the report public just when Tsipras abandoned negotiations. There is a Greek proverb saying that when too many roosters sign the dawn comes late.
- 11y ago

ubernostrum 11y ago

"Hey, these austerity measures are tanking the Greek economy even harder, making it actually impossible for them to survive without more loans... you know what, I think we should force them to do even more of it in order to fix things!" As the wise man says: doing the same thing over and over, and expecting a different result, is insanity.

Spooky23 11y ago

I remember Jim Cramer (not exactly an economic luminary) was able to identify on air that Greece was a joke a decade ago. Funny that the German and French bankers couldn't figure it out. The responsible states in Europe all benefited from the excesses of countries like Greece, so they let the good times roll.

crdoconnor 11y ago

>So we just ignore the fact that the Greek government misrepresented their economic state Not until the Goldman Sachs executives who helped misrepresent their finances are doing the perp walk, no.