4 ms·

The creditors ( banks ) are part of "moral" game here too. If the Euro cannot handle Greek ( and Spanish , Italian, Portuguese , Irish ) default then members o

by 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.
Shivetya 11y ago
The EU was never to be a transfer union, this setup was required to get the large economic countries to accept the weaker countries being admitted. National pride would mean political suicide for any leaders who suggest sending money out in the form of welfare. While I am quite willing to lambast the banks in the states for the mess they got into I am not so willing to do so with regards to their lending to Greece. Someone would have stepped forward regardless because state actors are supposed to function properly with fiscal restraint when its apparent their economy cannot sustain their spending. The real fault here is the past and current Greek administrations which decided to pass the buck to the point we have a new government which is effectively trying to blackmail the EU. The IMF is pulling back because they were overly generous giving the Greek government far more support that rules generally permitted. Under normal conditions the rule is 200% of a countries quota which is based on each countries contribution to the IMF with a 600% cumulative total. In 2010 Greece got a 3208% (three thousand two hundred an eight) percent infusion. Greece has the highest military spending vs GDP of any NATO nation second to the US. What the IMF and EU lenders and such have done is force Greece to raise taxes to the point its near impossible to do business. Forcing many out of the legal economy if not out of Greece itself. This is the fault that can be assigned to IMF and others. Basically the businesses and people of Greece are paying a tax load so high that profit and therefor growth is nearly impossible.
- visarga 11y ago
  Lending money is always a transaction between two parties. Both should be responsible. The financial state of a country is easier to evaluate than that of a person, they shouldn't have faller for the tricks of Goldman Sachs. > According to investigative reports that appeared in Der Spiegel, the New York Times, BBC, and Bloomberg News from 2010 through 2012, Blankfein, now Goldman Sachs CEO, Cohn, now President and COO, and Loudiadis, a Managing Director, all played a role in structuring complex derivative deals with Greece which accomplished two things: they allowed Greece to hide the true extent of its debt and they ended up almost doubling the amount of debt Greece owed under the dubious derivative deals. source: http://wallstreetonparade.com/2015/06/goldman-sachs-doesnt-have-clean-hands-in-greece-crisis/ http://wallstreetonparade.com/2015/06/goldman-sachs-doesnt-h... So, EU and IMF didn't catch that, they lent money in a stupidly criminal way and now they want it back at any cost to Greece. They lent Greece money when Greece didn't need it, and now request it back when they are down. Of course Greece bears the brunt of blame here, but collective punishment at the level of a country is cruel. There are lots of innocents paying now for the financial dealings of the older generation. It's sad to see EU reduced to this kind of relationships between us. Maybe EU isn't ready to exist as it is. They allowed countries into the union and Eurozone that didn't need to be there. Instead of having a corruption-reducing effect, corruption was allowed to go on without scandals for years. EU should have had a civilizing effect on its poorer and more corrupt countries. As it is now, it's a money-shark.

by giggzy 11y ago

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.

Shivetya 11y ago

The EU was never to be a transfer union, this setup was required to get the large economic countries to accept the weaker countries being admitted. National pride would mean political suicide for any leaders who suggest sending money out in the form of welfare. While I am quite willing to lambast the banks in the states for the mess they got into I am not so willing to do so with regards to their lending to Greece. Someone would have stepped forward regardless because state actors are supposed to function properly with fiscal restraint when its apparent their economy cannot sustain their spending. The real fault here is the past and current Greek administrations which decided to pass the buck to the point we have a new government which is effectively trying to blackmail the EU. The IMF is pulling back because they were overly generous giving the Greek government far more support that rules generally permitted. Under normal conditions the rule is 200% of a countries quota which is based on each countries contribution to the IMF with a 600% cumulative total. In 2010 Greece got a 3208% (three thousand two hundred an eight) percent infusion. Greece has the highest military spending vs GDP of any NATO nation second to the US. What the IMF and EU lenders and such have done is force Greece to raise taxes to the point its near impossible to do business. Forcing many out of the legal economy if not out of Greece itself. This is the fault that can be assigned to IMF and others. Basically the businesses and people of Greece are paying a tax load so high that profit and therefor growth is nearly impossible.

visarga 11y ago
Lending money is always a transaction between two parties. Both should be responsible. The financial state of a country is easier to evaluate than that of a person, they shouldn't have faller for the tricks of Goldman Sachs. > According to investigative reports that appeared in Der Spiegel, the New York Times, BBC, and Bloomberg News from 2010 through 2012, Blankfein, now Goldman Sachs CEO, Cohn, now President and COO, and Loudiadis, a Managing Director, all played a role in structuring complex derivative deals with Greece which accomplished two things: they allowed Greece to hide the true extent of its debt and they ended up almost doubling the amount of debt Greece owed under the dubious derivative deals. source: http://wallstreetonparade.com/2015/06/goldman-sachs-doesnt-have-clean-hands-in-greece-crisis/ http://wallstreetonparade.com/2015/06/goldman-sachs-doesnt-h... So, EU and IMF didn't catch that, they lent money in a stupidly criminal way and now they want it back at any cost to Greece. They lent Greece money when Greece didn't need it, and now request it back when they are down. Of course Greece bears the brunt of blame here, but collective punishment at the level of a country is cruel. There are lots of innocents paying now for the financial dealings of the older generation. It's sad to see EU reduced to this kind of relationships between us. Maybe EU isn't ready to exist as it is. They allowed countries into the union and Eurozone that didn't need to be there. Instead of having a corruption-reducing effect, corruption was allowed to go on without scandals for years. EU should have had a civilizing effect on its poorer and more corrupt countries. As it is now, it's a money-shark.