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Greeks Reject Bailout Terms

316 points by xmpir 11y ago

dmckeon 11y ago
Here is a fairly detailed rundown of the situation: http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/05/7-key-things-to-know-about-greeces-debt-crisis/ http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/05/7...
- tosseraccount 11y ago
  The uncollected tax receipts graphic is shocking: 89%. No wonder they can't afford their spending.
  - nailer 11y ago
    Greece needs to get their house in order: the stats on tax avoidance are huge. There was a greek restauranteur on the BBC earlier complaining that due to the ATM shutdown he couldn't pay his suppliers, even though he had the money, since they preferred cash. In the UK you wouldn't dare say that about your business on TV. However that's a generational change: Greece can't and won't be fast enough to do this and will never be able to meet it's creditors. Greece shouldn't have been admitted into the Euro in the early 2000s, this is now the result of that unwise decision.
    - quonn 11y ago
      True, but let's keep in mind that they managed a primary surplus despite this huge tax avoidance. This actually should make everyone bullish on Greece: These are not insurmountable problems. I still think that ΣΥΡΙΖΑ is the first party ever that would be fully willing to implement the right reforms (e.g. collecting taxes, etc.) if - and only if - the EU gives Greece a future by restructuring debt. It makes me sad to observe that the so-called institutions let this opportunity pass for stupid reasons (As far as I can tell, the fear of the German/French parties of their electorate and the fear of the established parties in the 'periphery' of newcomers like Podemos). It was the best shot we had to make real progress in Greece, imho.
      - sigzero 11y ago
        I doubt very much anyone is going to be bullish on Greece. They lent Greece money on the condition they stop deficit spending and guess what, Greece didn't do it.
        quonn 11y ago
        They did and it has destroyed their economy. That's the whole problem.
    - joezydeco 11y ago
      From reading on about how Greeks avoid taxes pretty publicly and blatently[1], this is more than a generational issue. It seems like it's buried deep in the culture now. "A 32-year-old chef in Athens says his income taxes are automatically deducted from his monthly paychecks. But every time he buys something and is given an option to pay less if he doesn’t ask for a receipt, he says yes." [1] http://www.wsj.com/articles/greece-struggles-to-get-citizens-to-pay-their-taxes-1424867495 http://www.wsj.com/articles/greece-struggles-to-get-citizens...
      - nailer 11y ago
        In Italy they have Finance Police: when you buy something, you MUST hold onto the receipt until a few hundred meters away from the store. Some Italians may be able to shed more light, as I've only ever seen them operate in Rome and never in Florence or Venice.
  - Vaskerville 11y ago
    I have a few friends in Greece who will do anything to avoid paying taxes. Sadly, they think Greece will be the next Iceland and it's just not the right comparison.
  - dmckeon 11y ago
    It turns out that the 89% relates to the total of taxes uncollected over previous years, which most other countries would have written off as uncollectable debt. As of 2010, Greece collected annual taxes equal to about "34% of the country's total gross domestic product (GDP) - slightly below the EU average of 38.5%." from: http://www.bbc.com/news/magazine-33479946 http://www.bbc.com/news/magazine-33479946
- sgt101 11y ago
  Really interesting that this is presenting the vote as Greece taking control of its own future. In fact I think that the people voting no believe that they will be rescued as the result of the vote. I do not think that they are correct.
yc1010 11y ago
Fairplay to them, the whole point of the EU project was to make us all "Europeans" and to prevent constant disastrous fighting between states and people of the continent. Sometime in the last 10 years many people and the media in the "core" countries got all smug and uppity towards those lazy "peripherals" and so on forgetting exactly why the project was started, overnight we stopped being "Europeans" and became "undustrious Germans", "smart and holier than thou Nordics", "lying Greeks", "lazy Spanish" and in case of my own little peripheral island country "reckless Irish". Yeh :(
- jdimov9 11y ago
  This might have been the cover story, but is VERY far from the actual reason the "EU project" exists. As with all similar noble initiatives, the EU has much less to do with fairness and much more with power concentration (as is becoming exceedingly obvious).
  - nhaehnle 11y ago
    Calm the hyperbole :) GP is right that the EU is the result of a long process that started with the goal of preventing another big European war. You are also right in that a large part of what is happening is a result of power politics.
    - coldtea 11y ago
      >Calm the hyperbole :) Hyperbole? The E.U. is a project spearheaded by the same 3-4 nations that had the biggest colonies on earth, enslaving over 2 billion people in horrendous conditions (including mass executions when they misbehaved). And that was going on, not in the middle ages, but until the sixties (and in a different form today). Betweem them, the country that had the less colonies, started 2 world wars in order to expand. EU was created, among other things, to contain that country (and you can find that as an explicit goal from prominent French politicians advocating for its creation)... Powerful empire-building nations are not about fun and love...
      - 11y ago
dageshi 11y ago
Effectively a vote of confidence in the greek government. If they do decide to leave the euro then they now have the political cover for it.
- skwirl 11y ago
  Didn't the Greek government promise that voting "no" was the only way to STAY on the Euro? From what I have seen both sides were promising the same outcome, so the vote was all about who you believed more.
  - dageshi 11y ago
    My interpretation is that this referendum effectively forces the ball into the EU's court. The Greek public rejected the last deal, if they don't get a better one then it will be the EU pushing the Greeks out of the euro and not the choice of the Greek government to leave.
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- Paradigma11 11y ago
  Why dont the greek people show a vote of confidence by keeping their money in their banks. That would be somewhat more relevant.
imaginenore 11y ago
I really hope EU doesn't propose any more bailouts / help to them until they sober up and go through the withdrawal and all the grief stages.
- tomp 11y ago
  Greece doesn't actually need any more bailouts (at least, it didn't until last week). They run a primary budget surplus, so all they need from the EU & IMF is some kind of debt restructuring so they can stop all debt payments for a few years while they pass the necessary reforms and their economy recovers. They also need a guarantee that the banks are safe by the ECB to restore confidence, but that doesn't cost any money.
  - imaginenore 11y ago
    "They run a primary budget surplus" if you don't count the payments on all the loans. Sorry, but if I borrow a million dollars, build some business that generates profits which are less than the payments on the loan, it's not a surplus. It's called default.
    - quonn 11y ago
      > if you don't count the payments on all the loans. That's the definition of primary surplus. > but if I loan a million dollars, build some business that generates profits which are less than the payments on the loan, it's not a surplus Greece does not get the loans now - that money is already gone. The key insight from the "primary surplus" is that a haircut would work, because Greece could be self-sufficient once the debt burden is gone.
      - imaginenore 11y ago
        It's semantics, at the end of the day Greece owes money, and you simply cherry-picked a term that doesn't contain that debt. > The key insight from the "primary surplus" is that a haircut would work, because Greece could be self-sufficient once the debt burden is gone. And so would my hypothetical business that can't even cover the monthly payments on the loan. If we magically erase the debt, just like that, I got a profitable business I can brag about. > Greece does not get the loans now - that money is already gone Wow, just wow.
brianmcconnell 11y ago
The Greeks were getting a shitty deal, and knew they were getting a shitty deal. Good for them for decisively telling the Germans to get stuffed (who conveniently forget about their WWII related debts being forgiven). Iceland demonstrated that it's possible to say no to perpetual debt peonage and go on to do well. If Greece has to leave the Euro, so be it. The Euro made sense as the Deutschfranc, but that's about it.
- spiralpolitik 11y ago
  By leaving the Euro Greece will have the opportunity to put their country back together without 20 years of crippling austerity. They still need to fix their broken tax system and keep spending with their means but they have a much better chance of doing this on their own terms rather than under the cosh of the Troika. If only other countries could be so brave.
  - tptacek 11y ago
    What is the difference between "crippling austerity" and "keeping spending within their means"? Isn't the biggest financial problem in Greece the relative enormity of the public sector? Wouldn't fiscal reform basically amount to slashing entitlements and public sector employment?
    - tormeh 11y ago
      A public sector can be enormous without damaging the economy. In Scandinavian countries it's about 50% and used to be higher. The problem is that the Greek government is both bad and weak. The Greek public sector's purpose is not really to provide utility to the populace, but to buy votes from the unions. It's very hard to pay for because it does not enrichen the private sector nearly as much as it should. And because the Greek oligarchs own the media (and many parliamentarians) so taxing the rich is absurdly hard. Greece is not just insolvent, it's also practically a failed state.
      - peterfirefly 11y ago
hal9000xp 11y ago
Here is Bloomberg animation for european debt crisis: https://www.youtube.com/watch?v=C8xAXJx9WJ8 https://www.youtube.com/watch?v=C8xAXJx9WJ8 I kept this in my bookmarks more than a year. Euro is failed project by its core because monetary policy without fiscal polity doesn't work.
- yishanl 11y ago
  Really helpful, thanks!
- h1fra 11y ago
  Thanks for the sharing, very intersting and well explained
- haberman 11y ago
  This is awesome, thanks! There is one big part I really don't get though. Why would Greece's creditors assume that Germany was going to cover a Greek default, just because they are both in the EuroZone? That would be like my bank assuming that the US Government would cover my mortgage if I default, just because it's denominated in dollars. That line of reasoning makes no sense to me. Related to this, the video says: "The problem is, somebody has to pick up the tab, or else every country in the Euro area will suffer." I don't get this either. That would be like saying that me defaulting on my mortgage will make all my neighbors suffer, just because our mortgages are in the same currency. It doesn't seem like a Greek default should hurt anybody but Greece and their creditors.
  - fredkbloggs 11y ago
    Yeah, this. I've never yet seen an explanation for this, in either the MSM or the financial press. There is an assumption everywhere that no one in the eurozone can default. My thinking is that this must have something to do with the ECB's rules on collateral; if the Greek banks have nothing but defaulted securities to offer, then they cannot meet their reserve requirements and therefore cannot obtain euros from the ECB or other banks within the system. That would result in all Greek banks going bust and being unable to operate, unless the Bank of Greece stepped in (by implication, issuing loans to banks in drachma in exchange for defaulted or new public debt securities). But this is speculation on my part; I have never seen the mechanism explained in any detail. Kind of amazing that in 7 years of "crisis" everyone has been happy to parrot the same default == grexit mantra without once explaining the mechanics, but here we are.
chx 11y ago
I have been collecting links for days now, here are a few. The picture is really not pretty and while you can place some blame on the Greeks, for the last five years at least it would seem they are not the one to blame. if you want a very simplified slightly hilarious explanation, https://www.reddit.com/r/OutOfTheLoop/comments/3bhwij/what_is_going_on_in_greece/csmlkp1 https://www.reddit.com/r/OutOfTheLoop/comments/3bhwij/what_i... this will do. https://twitter.com/cstross/status/617775611642257408 https://twitter.com/cstross/status/617775611642257408 http://faculty.chicagobooth.edu/anil.kashyap/research/papers/A-Primer-on-the-Greek-Crisis_june29.pdf http://faculty.chicagobooth.edu/anil.kashyap/research/papers... http://www.truth-out.org/news/item/26112-an-economic-hit-man-speaks-out-john-perkins-on-how-greece-has-fallen-victim-to-economic-hit-men http://www.truth-out.org/news/item/26112-an-economic-hit-man... http://www.interfluidity.com/v2/5965.html http://www.interfluidity.com/v2/5965.html https://twitter.com/AP/status/616622654234169344 https://twitter.com/AP/status/616622654234169344 http://www.irishtimes.com/opinion/who-will-dare-say-out-loud-emperor-has-no-clothes-1.2267032 http://www.irishtimes.com/opinion/who-will-dare-say-out-loud... http://www.forbes.com/sites/niallmccarthy/2015/03/13/contrary-to-what-most-people-think-greeks-work-the-longest-hours-in-europe-infographic/ http://www.forbes.com/sites/niallmccarthy/2015/03/13/contrar... http://www.theguardian.com/business/2015/jun/30/greek-debt-troika-analysis-says-significant-concessions-still-needed http://www.theguardian.com/business/2015/jun/30/greek-debt-t... https://fsaraceno.wordpress.com/2015/06/27/its-the-politics-stupid/ https://fsaraceno.wordpress.com/2015/06/27/its-the-politics-...
paskster 11y ago
I am astouned by all the comments, who say that "Greeks were getting a shitty deal" or that the bailout terms were somewhat "unfair". Facts are: Greece had a spending deficit for several decades now. This spending deficit accumulated to such a big dept, that no investors were willing to lend greece any more money. 18 european countries transferred billions of euros in the last couple of years to greece, to help the country and the people. In return they had an agreement that greece would cut their spending. Greece never lived up to the agreements it made. In the last weeks 18 european countries offered greece another bailout, where greece would receive several bilions again. In return they asked greece to finally cut spendings. Now greece voted against this bailout. There are a lot of people in europe (myself included, I am from Germany by the way) who are not willing to transfer further billions of euroes to greece, just so that a socialist party can fullfil its "promises" and increase their deficit.
- dkopi 11y ago
  One thing's for sure, without countries to bail them out, without banks to lend them more money - the greeks will have no other choice but to increase their tax income and decrease their spending. Austerity as some might call it.
  - atmosx 11y ago
    If the ECB keeps the current regime for another 2 to 3 weeks, then Greece might be "forced" to go back to the Drachma and devalue. At that point you don't need to increase tax incomes but you might have a series of other problems (control devaluations, impose capital control for an undetermined period, etc.) - but in the long run, might be positive (According, to Krugman, Stiglitz, S. Keen, etc.)
    - dkopi 11y ago
      Inflating away debt is another form of increasing tax revenues. Also known as Seigniorage. It's just a more sophisticated way of collecting taxes, and it will harm the poorest greeks and middle class first.
  - 11y ago
sktrdie 11y ago
I know I will be treated as an extreme futurist, but we live in this little tiny spec called Earth and we're all in this together. The idea that there are laws about environmental protection in one country and none in others, calls to the idea that we should just have a single unifying country called "world" and keep the current separation only for cultural reasons. The EU was a step in this direction but it seems that yet again centralization of power ended up making things worst. So from one end I'm happy that Greece gets to go its own way and escape centralization that forced it into a shitty situation. On the other hand though, this breaks the dream I had of building a system which would allow better collaboration between nations, and most of all, better understanding of the real issues that we're facing as a species (overpopulation, climate change, food scarcity, etc..).
- orbifold 11y ago
  Personally I prefer the current situation, where a few countries provide a very good standard of living compared to most of the rest of the world, compared to what some parts of the population have to endure even in countries like the US. Globalization does only benefit the very rich in the short term, whereas strong nation states at least to some degree are able to stand up against large multinational coorporations.
- jqm 11y ago
  I've sometimes thought there should be exactly two levels of government... International (non-optional and all countries participate) and County (~2500 km2 and several thousand to maybe 10 million max people). The world has gotten smaller and the effects nations have on each other larger. It's dangerous and it's not efficient. At the same time people have their local customs and laws (and spending habits). So let that be. But enforce bans on slavery, genocide, trade route monopolization, nuclear weapons, pollution etc. At an international level. As it is, it seems national governments are in general problematic... both to local communities and to the global community. I think eventually they can be done without.
saool 11y ago
Good for the Greeks to stand up against bullying and remaining somewhat dignified (as much as they could be after years of destroying their society at the whim of the "austericides"). That said, the vote means lots of pain coming their way, and Euro or not, their economy will take the hit now and the North will pretty much be able to buy half of the country at garage sale prices. Talk about some value investing for "deserving" German and French banks: you lend recklessly, get bailed out by your debtors, then you buy the damn farm.
davidf18 11y ago
The real problem is that banks lent to Greece without doing their due diligence evaluating risk. Instead the bankers collected their fat fees for making the loans. Usually when banks make bad loans they have to write them off but when in 2010 the Troika (Euro Community, IMF, ECB) took over the Greek debt they paid 100% instead of insisting on the banks taking a "haircut" of say 50%. In truth some of the smaller members of the IMF did ask that they banks take a hit but the larger members turned that down. The problems with the Greek economy that lenders are complaining about now, about the lowest tax collection rate in Europe, the "overly generous" retirement plans all existed before banks made the loans and fixing these problems should have been made a condition of making the loans in the first place. It will be impossible for Greece to pay off the debt and now instead of the bank management (and the shareholders who appointed them) taking the hit for their incompetence in making the loans the taxpayers will take the hit. The German and other taxpayers should not have a problem with Greece, but rather that Merkel and other governments decided to pay off the banks 100% instead of insisting that they take a large "haircut." Ideally, the banks should have been made to take a "haircut" on the loans and the shareholders should have fired the management. Instead Merkel and other leaders let the banks off the hook putting the burden on the taxpayers. Now the taxpayers should fire Merkel and the leadership of other countries that OK'd the 100% payout to the banks in the next elections.
- fredkbloggs 11y ago
  This is so common that it already has a name: extend and pretend. That's exactly what was done with Greece; the interest rate was lowered to a scandalously generous level, maturities extended to practically forever (Merkel and co. will be long dead by the time most of it is due), and everyone got to pretend things were fine. As usual with this approach, things weren't fine, and when it was time to extend and pretend again, someone decided they weren't going along with it. Japan has been extending and pretending for about 25 years now. They are far more indebted than Greece but their interest rates are even lower. There is no conceivable way that Japan is ever going to repay that debt, and it's still growing at a pretty rapid pace. The circumstances are different (very few JGBs are held by foreigners, and Japan issues its own currency), but it's pretty clear from experience that extend and pretend leads to lengthy periods of anemic economic activity. The question is whether default and workout will be any better; the record there is mixed at best.
univalent 11y ago
No matter which way this went this whole referendum seemed like a political stunt. It was a huge distraction, frayed nerves and made everyone more entrenched in their negotiation positions. A good deal and compromise is generally negotiated behind closed doors without making loud speeches that you can't walk away from. I feel sorry for the Greek people. They deserve better from their own leaders.
stagas 11y ago
An entire nation, rejected being oppressed into austerity. This is all that matters. Goodbye, capitalism.
littletimmy 11y ago
What's most interesting to me in this entire crisis is the moral discourse surrounding debt. More often than not, you'll hear stuff like: "Of course Greece must pay its debt", "You mean to say you can just take money and not pay?", "Why should taxpayers bail Greece out?"... All the while, there is absolute ZERO condemnation for banking entities making risky loans. There is not even a tacit nod towards acknowledging that if banks make loans that fail, it is their loss to eat. Not a whisper about how taxpayers have been surreptitiously bailing out banks, and not Greece. Somehow, a creditor is deemed morally superior to the debtor. What repulsive rhetoric!
- themartorana 11y ago
  Well, not exactly. The people are rather loud about it (at least here in the U.S. where we lock up petty drug offenders for life, but there's nary a single banker in jail for the 2008 worldwide economic collapse), but it doesn't matter if we make noise about it. As long as no one in government does, and the media mostly ignores it, the result is the same.
- Natsu 11y ago
  I guess that depends on whether you see making a promise you have no reason to believe you can keep is better or worse than being dumb enough to believe it.
  - sooheon 11y ago
    Don't discount the third option, that creditors are neither dumb or gullible, but predatory.
    - CamperBob2 11y ago
      Well, they've "preyed" themselves into substantial losses. Even if the EU makes good on the principal on Greece's behalf, it was still a dumb idea to lend money to them.
    - Natsu 11y ago
      Usually predatory lenders have more recourse over you: they'll take your car from the car title loan, etc. What do they gain from this situation, exactly? It seems to me like everybody loses here... and I'm not entirely certain they won't find some bailout and have it happen again. Right now, I feel sorry for the people in Greece, it seems like they work long hours for nothing and their government is completely underwater.
rdl 11y ago
What does this mean for startups/tech industry? I assume not very much as long as it is limited to Greece, but more so if it spreads to Portugal, Spain, Italy, right?
vmorgulis 11y ago
"Europe exemplifies a situation unfavourable to a common currency. It is composed of separate nations, speaking different languages, with different customs, and having citizens feeling far greater loyalty and attachment to their own country than to a common market or to the idea of Europe." Milton Friedman, The Times, November 19, 1997 https://en.wikipedia.org/wiki/Optimum_currency_area https://en.wikipedia.org/wiki/Optimum_currency_area
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PythonicAlpha 11y ago
After 5 years of "rescuing" that did lead the country into ruins, no wonder! It is a widespread knowledge (at least the US has it), that forceful saving in a crisis, will deepen the crisis. As a German, I know that Germany got a dept-cut after the second World war, that the German nation could rise from misery. We should have allowed the Greek the same luxury. Instead, the governments cared only for the banks.
- peterfirefly 11y ago
  Greece already got a haircut. In fact, it was one of the biggest haircuts ever in history.
  - PythonicAlpha 11y ago
    I am not aware, that it was the "biggest ever in history" -- I even doubt that since, the Greek economy is not so big. I would like to compare that with the haircut Germany got after the war ... but in inflation-adjusted numbers (many haircuts can be the biggest, when you don't care about inflation).
- Lazare 11y ago
  That...couldn't be more wrong. Back in 2012 it was determined that Greek debt was unsustainable, and a large haircut was needed. But because the EU governments were unable/unwilling to accept any haircut on their holdings of Greek debt, that write down was borne entirely by private sector lenders. > Instead, the governments cared only for the banks. The banks lost 75%+ of their loans. The governments lost 0%. There's no way you can realistically spin that as a bail out of the banks.
  - PythonicAlpha 11y ago
    The question is, when the banks "lost 75% of their loans". To my knowledge, this happened much later, when the banks that initially where in danger already got rid of the most toxic loans. Those loans either went to the EU "Rescue Umbrella" or where sold (with discounts). When those sold loans later where haircut, than the lost value of 75% was on papers, but the value that those holders really lost very likely much smaller (if any), because they bought the loans with huge discounts.
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beloch 11y ago
A Greek friend once told me that, in Greece, "only idiots pay 100% of the taxes they owe". His perception of his fellow Greeks' attitude towards taxes wasn't wrong. In Greece, tax evasion is endemic. https://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_Greece https://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_... It's hard to be surprised by the financial troubles of a government that is so utterly feckless when it comes to collecting taxes that members of it's own finance ministry are suspected of hiding their funds abroad. It is also hard to have sympathy for Greeks, most of whom apparently view tax evasion as a virtue. Now that they've burned Germany and the EU, where is Greece going to get the money it can't collect from it's own citizens?
- vacri 11y ago
  I have also had a Greek friend tell me, well before this crisis started, that tax avoidance was almost a national sport in Greece, and there was a social stigma to paying all your taxes. He said it with a mixture of pride and sadness.
lifeisstillgood 11y ago
An analogy I used with my wife trying to explain / argue Greece. It struck a chord. Fiscal Union: Would you lend me 10 million dollars? No If I was Warren Buffets adopted son (!) would you lend it to me? Maybe. Well that's how the rest of the world's investors saw Greece. Despite all the protests that it was separate debt no one believed them. And Greece is about to prove them right. Debt restructuring (ie fiscal Union "just this once") If I am having to spend five months negotiating with the Bank Manager to get an overdraft that will let me pay him the next months mortgage payments with that overdraft, then we should stop talking about the cuts I need to afford the overdraft and look at how to deal with the mortgage. I don't like the situation Europe is in - but it was clear in the 1970s where this was all going - just because it is not politically palatable right now, Euro zone countries are going to have to become responsible for each other's debts, and that means negotiating on fiscal policies across Europe. Stuff TIPP - that's a serious agreement to hammer out. And don't do it in secret.
christkv 11y ago
I think one of the core problems in the whole euro zone disaster was the ability of previous governments with low credit ratings suddenly going from paying 8-10% on their bonds to 2-3%. Basically the lenders completely ignored historic risk, counting on the richer euro countries to bail out any country that abused the cheap credit. I think we are seeing the effect of that policy. For the people who are demonizing the Greeks I would like to remind them that it takes two to party. The drunk sailor who wastes all his money, and the fool who lends him more money, expecting to be repaid. Either there is a full currency union with the transfers (meaning more and more federal like rule) or we will get some sort of collapse of the euro zone at some point in the future.
endymi0n 11y ago
I'm astounded at the fight here between pro and contra austerity. It's not about to save or not to save - it's about where to save. Greece could (have) bailed out itself with just a semi-decent stab against rampant corruption, without endangering the common people at all. Switzerland offered to collect billions of Euros of Greek tax offenders on Swiss accounts on their own. The List with the names "disappeared", and some years and dozens of questions later, reappeared with half the names removed. Switzerland's still waiting for Greece to make a move. While the last weeks were all about the 1.5 bil EUR rate, Greeks moved 3 bil EUR out of the country every fricking day. Greece infamously doesn't even have a register who owns which property and real estate. Greece is still in the top 5 state: of military spending per capita, and the list goes on. No matter how much money you pour into this banana republic, it's just going to evaporate on the way there. Still, their best option is probably where they are going already: a proper default and return to a weaker currency, just as it helped iceland. http://netrightdaily.com/2015/06/icelandic-default-could-save-greece/ http://netrightdaily.com/2015/06/icelandic-default-could-sav... Still won't help, if they don't tackle corruption as well.
pinaceae 11y ago
all those useless emotions. simple facts can't be avoided. nobody is willing to lend greece money besides the ECB. tsipras tried putin and china, both turned him down. the greek-style of socialism (coalition with the extreme right notwithstanding) relies on foreign capital. once that runs out, it is over. greece has never built up any robust, modern facets of statehood. there is no central database of landownership. parties act like clans, hand out positions based on loyalty, not merit. it's a second world country that thinks of itself as the leader of the first world, as witnessed in endless, tiresome discussions with various greek representatives. they're all so smart, yet their economy doesn't produce shit. spain, portugal, the eastern europeans all got their act together and worked out plans to move along. greece decided to call the people they're borrowing money from nazis and terrorists. greece never qualified as a member to the EU, it was a historic mistake to accept them. grexit, now. let the rest of europe govern and prosper in peace.
ryandrake 11y ago
The failure and shame should be shared by the lenders. If you really want a risk-free investment, you should be willing to accept a risk-free return. You receive a return on a loan commensurate with the risk of default. Sovereign debt should not be special.
chuckcode 11y ago
Pretty amazing lack of leadership on all sides to let this degenerate into a game of political chicken with no good endings for anyone. Clearly the Greeks were going to have an exceptionally hard time paying back their debt and certainly the Germans who were in a similar situation after WWI should have realized the depth of the problem [1]. Anyone who honestly thought that the situation would get better under the austerity program despite all economic history to the contrary should have realized a couple years in that it wasn't going to work. After a few years the debts would be even more difficult to pay after Greek GDP shrunk by 25%[2]. From my personal it seems like if Europe had really wanted to help Greece tackle their debt they should have used the crisis to change Greek laws to make it easier to start and run a business there. Currently Greece is by far the hardest country in the Euro currency to run a business as it ranks just before Russia (61 vs 62) in the World Bank's "Ease of Doing Business Index"[3]. The other economies that are held up as examples of recoveries like Iceland and Ireland rank 12 and 13 respectively. Having a monetary union without a political union is a questionable undertaking in general [4]. Given that the leaders of Europe know that they should either be working to get closer to a political union with similar laws and workings or looking for a way to gracefully exit economies that aren't working out. The current approach of bashing Greece with no real alternative to grinding economic suffering seems like the worst sort of denial about the reality on the ground. [1] https://en.wikipedia.org/wiki/Treaty_of_Versailles https://en.wikipedia.org/wiki/Treaty_of_Versailles [2] http://www.slate.com/blogs/moneybox/2015/02/18/how_bad_is_greece_s_economy_these_charts_will_tell_you.html http://www.slate.com/blogs/moneybox/2015/02/18/how_bad_is_gr... [3] http://data.worldbank.org/indicator/IC.BUS.EASE.XQ http://data.worldbank.org/indicator/IC.BUS.EASE.XQ [4] http://www.euro-know.org/europages/articles/rmu.html http://www.euro-know.org/europages/articles/rmu.html [5] http://www.theatlantic.com/business/archive/2014/05/which-states-are-givers-and-which-are-takers/361668/ http://www.theatlantic.com/business/archive/2014/05/which-st...
parley 11y ago
I'm not a financial expert and can't speak to what's true or not, but here's [1] a short interview with Swedens former Tax Agency chief who was apparently part of a small task force to evaluate Greece's tax collection and aid in its improvement. He claims that removing corruption is not the only problem, and that the rest of the EU are underestimating the lack of tax collection competence with regards to modern methods and processes, as well as the powerlessness and political isolation of the Greek tax chief, making his/her job impossible - e.g. by not even being allowed to pick his/her own employees. Again, I don't know what's true or not, just providing the opinion of a former Tax Agency chief of a country that collects a lot of taxes and who apparently had the opportunity to take a closer look at Greece's tax collection. Google Translate does a decent job with the article translation. [1] https://translate.google.com/translate?sl=sv&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.dn.se%2Fnyheter%2Fforre-skattechefen-domer-ut-grekiska-skatteverket%2F&edit-text= https://translate.google.com/translate?sl=sv&tl=en&js=y&prev... EDIT: Grammar.
NumberCruncher 11y ago
You folks are deep in the Group Trap. You should read more Harry Browne and think less about politics... Not because I say so but because it makes your life happier.
elorant 11y ago
OK let me say this as clear as I can after reading most of the comments. Yes we have a dysfunctional economy. We have a lot of red tape and corruption going on in the public sector. We spend a lot of money in pensions and salaries, more than any EU country. We have an inefficient to say the least tax collecting mechanism. And many other problems. But. You expect us to change all that in just five years. This is fucking impossible guys. Please, get a grip of reality. Countries don’t just change in five years. And then you get disappointed and become nihilists arguing that we haven’t implemented any reforms. All the effort Greece has done in the last five years, moving from a 14% deficit to 1% surplus doesn’t get enough credit. All we get is been constantly hammered for our failures. No wonder the NO vote took 60%. People here are so fucking tired. Six years of recession and we have the Troika constantly down on our throats without cutting us any slack. If EU leaders had shown some flexibility things would have turned up a lot better for everyone. We could extend the maturity of some loans, achieve a sustainable surplus and start repaying. Instead we’re facing the nuclear option of defaulting on most of our debt. How does that help anyone? And if you think Tsipras is radical wait until Le Pen wins the French presidency. She has an open agenda of exiting the euro. Then we can talk what compromises Germans are willing to do.
- peterfirefly 11y ago
  > You expect us to change all that in just five years. This is fucking impossible guys. Please, get a grip of reality. Countries don’t just change in five years. October 7, 1989, DDR celebrating its 40th anniversary: https://www.youtube.com/watch?v=CeePo6BGmHc https://www.youtube.com/watch?v=CeePo6BGmHc October 3, 1990, reunification of Germany: https://www.youtube.com/watch?v=e4kpqKBbdic https://www.youtube.com/watch?v=e4kpqKBbdic Who are The People in Greece? Mad Communists or people who want freedom and prosperity and liberation from the old political class?
woodpanel 11y ago
Ahh, the nytimes. If there are two biases the NYT is guilty of, then its being stubbornly progressive and subconsciously anti-German. Take this for example: "... financial carpet bombing. The European Central Bank severely limited financial assistance to Greek banks, ... making it hard for retirees ..." Calling it "financial assistance" helps in framing it as an assault on a guaranteed right the Greek Banks have. Especially if it's something that was "severly limited" by that evil Frankfurters. I know perspectives fluctuate quite heavily from country to country. It is actually the reason why I read as broad as possible (including NYT) to get to know a possible different viewpoint on pending issues. But the american progressive view on the Greek-Bailout-topic is so much flawed that I might call it derailed. It is not simply flawed by ideology but that ideology also decides what details are to be amplified over the distance-caused resistance. And more importantly, that ideology decides what details are not to be amplified. The ECB is still lending money, it is just not legally allowed to issue new credits (credits are what those "financial assistances" really were) to a benkrupt country. And the whole american-progressive story of Germany/Rich-Europe enslaving the poor Greeks is just as stupid as the european-progressive story of America enslaving the third world. The world is not that simple to just blame everything on the fat cats. And actually those uninformed progressive world-views (wether it be european progressives judging american foreign policies toward third parties or vice-versa) bear something deeply anti-progressive in them: framing a whole nation evil, accepting illiberal leaderships as long as they are anti-<evilnation> and often calling for harsh intervention. Or in the case of the Greferendum: Making it a progressive virtue, that nation A's tax €s utilization ought to be decided by nation B's voters.
deleted 11y ago
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HSO 11y ago
At the risk of being a moralizing bore, may I remind everybody that "Germany", "Greece" etc. are not people, and that people are not countries? I am surprised by the national coloring, however faint, of some comments here and there https://news.ycombinator.com/item?id=9835433 https://news.ycombinator.com/item?id=9835433. "I am a German" or "Greek here" should have no relevance to the ideas put forth. "Your money" and "your banks" are not really "my money" and "my banks" once I have paid the tax and don't own the bank! The theory of complex systems reminds us that aggregates can have properties that are not traceable to any individuals themselves. Game theory tells us that incentives and constraints can get so messed up that developments take on an eigendynamic which was nobody's intent nor interest. Please, be civilized and don't let yourselves be infected by nationalistic passions. Your moralizing nanny... (No seriously, I am starting to get concerned.)
- abandonliberty 11y ago
  Yes, we are interpreting the nations of individuals, rather than nations composed of many individuals. If I buy a home and am forced to eat ramen to pay for it, that's entirely separate from my estranged uncle's mafia loan shark forcing me to eat ramen. Modern day slavery - debt bondage - also passes from generation to generation. You don't choose where you are born. This is a very complex and ambiguous situation.
williesleg 11y ago
Who cares? The USA overspends by how much Greece owes every WEEK. Never gonna pay it back, ever.
jotm 11y ago
Ready your breakfast and eat hearty... For tomorrow, we dine in hell!
vamur 11y ago
Good for Greece. What they now need asap is digital drachma with automatic tax on incoming transfers, capital controls on imports, default on debts to ECB, haircut on deposits above 100k, exit Schengen/Russia sanctions and currency swaps with Russia and China/India. Next they need to improve balance of trade by devaluing drachma, removing expensive imports, replacing EU imports with imports from China, encouraging local food and energy production, exporting fish/fruits/vegetables to Russia and China. Also cut defense expenses with defense pact with Russia vs attack by Turkey and sell old military equipment to Iraq. Once all of this is done, they can start fighting corruption and waste, which can be done by cutting max pensions, reducing the public sector and centralizing government services.
totalcookie 11y ago
"Off-Topic: Most stories about politics, or crime, or sports, unless they're evidence of some interesting new phenomenon. Videos of pratfalls or disasters, or cute animal pictures. If they'd cover it on TV news, it's probably off-topic." HN Guidelines

316 points by xmpir 11y ago

Here is a fairly detailed rundown of the situation: http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/05/7-key-things-to-know-about-greeces-debt-crisis/ http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/05/7...

tosseraccount 11y ago
The uncollected tax receipts graphic is shocking: 89%. No wonder they can't afford their spending.
- nailer 11y ago
  Greece needs to get their house in order: the stats on tax avoidance are huge. There was a greek restauranteur on the BBC earlier complaining that due to the ATM shutdown he couldn't pay his suppliers, even though he had the money, since they preferred cash. In the UK you wouldn't dare say that about your business on TV. However that's a generational change: Greece can't and won't be fast enough to do this and will never be able to meet it's creditors. Greece shouldn't have been admitted into the Euro in the early 2000s, this is now the result of that unwise decision.
  - quonn 11y ago
    True, but let's keep in mind that they managed a primary surplus despite this huge tax avoidance. This actually should make everyone bullish on Greece: These are not insurmountable problems. I still think that ΣΥΡΙΖΑ is the first party ever that would be fully willing to implement the right reforms (e.g. collecting taxes, etc.) if - and only if - the EU gives Greece a future by restructuring debt. It makes me sad to observe that the so-called institutions let this opportunity pass for stupid reasons (As far as I can tell, the fear of the German/French parties of their electorate and the fear of the established parties in the 'periphery' of newcomers like Podemos). It was the best shot we had to make real progress in Greece, imho.
    - sigzero 11y ago
      I doubt very much anyone is going to be bullish on Greece. They lent Greece money on the condition they stop deficit spending and guess what, Greece didn't do it.
      - quonn 11y ago
        They did and it has destroyed their economy. That's the whole problem.
  - joezydeco 11y ago
    From reading on about how Greeks avoid taxes pretty publicly and blatently[1], this is more than a generational issue. It seems like it's buried deep in the culture now. "A 32-year-old chef in Athens says his income taxes are automatically deducted from his monthly paychecks. But every time he buys something and is given an option to pay less if he doesn’t ask for a receipt, he says yes." [1] http://www.wsj.com/articles/greece-struggles-to-get-citizens-to-pay-their-taxes-1424867495 http://www.wsj.com/articles/greece-struggles-to-get-citizens...
    - nailer 11y ago
      In Italy they have Finance Police: when you buy something, you MUST hold onto the receipt until a few hundred meters away from the store. Some Italians may be able to shed more light, as I've only ever seen them operate in Rome and never in Florence or Venice.
- Vaskerville 11y ago
  I have a few friends in Greece who will do anything to avoid paying taxes. Sadly, they think Greece will be the next Iceland and it's just not the right comparison.
- dmckeon 11y ago
  It turns out that the 89% relates to the total of taxes uncollected over previous years, which most other countries would have written off as uncollectable debt. As of 2010, Greece collected annual taxes equal to about "34% of the country's total gross domestic product (GDP) - slightly below the EU average of 38.5%." from: http://www.bbc.com/news/magazine-33479946 http://www.bbc.com/news/magazine-33479946
sgt101 11y ago
Really interesting that this is presenting the vote as Greece taking control of its own future. In fact I think that the people voting no believe that they will be rescued as the result of the vote. I do not think that they are correct.

yc1010 11y ago

Fairplay to them, the whole point of the EU project was to make us all "Europeans" and to prevent constant disastrous fighting between states and people of the continent. Sometime in the last 10 years many people and the media in the "core" countries got all smug and uppity towards those lazy "peripherals" and so on forgetting exactly why the project was started, overnight we stopped being "Europeans" and became "undustrious Germans", "smart and holier than thou Nordics", "lying Greeks", "lazy Spanish" and in case of my own little peripheral island country "reckless Irish". Yeh :(

jdimov9 11y ago
This might have been the cover story, but is VERY far from the actual reason the "EU project" exists. As with all similar noble initiatives, the EU has much less to do with fairness and much more with power concentration (as is becoming exceedingly obvious).
- nhaehnle 11y ago
  Calm the hyperbole :) GP is right that the EU is the result of a long process that started with the goal of preventing another big European war. You are also right in that a large part of what is happening is a result of power politics.
  - coldtea 11y ago
    >Calm the hyperbole :) Hyperbole? The E.U. is a project spearheaded by the same 3-4 nations that had the biggest colonies on earth, enslaving over 2 billion people in horrendous conditions (including mass executions when they misbehaved). And that was going on, not in the middle ages, but until the sixties (and in a different form today). Betweem them, the country that had the less colonies, started 2 world wars in order to expand. EU was created, among other things, to contain that country (and you can find that as an explicit goal from prominent French politicians advocating for its creation)... Powerful empire-building nations are not about fun and love...
    - 11y ago

dageshi 11y ago

Effectively a vote of confidence in the greek government. If they do decide to leave the euro then they now have the political cover for it.

skwirl 11y ago
Didn't the Greek government promise that voting "no" was the only way to STAY on the Euro? From what I have seen both sides were promising the same outcome, so the vote was all about who you believed more.
- dageshi 11y ago
  My interpretation is that this referendum effectively forces the ball into the EU's court. The Greek public rejected the last deal, if they don't get a better one then it will be the EU pushing the Greeks out of the euro and not the choice of the Greek government to leave.
  - deleted 11y ago
    [deleted]
Paradigma11 11y ago
Why dont the greek people show a vote of confidence by keeping their money in their banks. That would be somewhat more relevant.

imaginenore 11y ago

I really hope EU doesn't propose any more bailouts / help to them until they sober up and go through the withdrawal and all the grief stages.

tomp 11y ago
Greece doesn't actually need any more bailouts (at least, it didn't until last week). They run a primary budget surplus, so all they need from the EU & IMF is some kind of debt restructuring so they can stop all debt payments for a few years while they pass the necessary reforms and their economy recovers. They also need a guarantee that the banks are safe by the ECB to restore confidence, but that doesn't cost any money.
- imaginenore 11y ago
  "They run a primary budget surplus" if you don't count the payments on all the loans. Sorry, but if I borrow a million dollars, build some business that generates profits which are less than the payments on the loan, it's not a surplus. It's called default.
  - quonn 11y ago
    > if you don't count the payments on all the loans. That's the definition of primary surplus. > but if I loan a million dollars, build some business that generates profits which are less than the payments on the loan, it's not a surplus Greece does not get the loans now - that money is already gone. The key insight from the "primary surplus" is that a haircut would work, because Greece could be self-sufficient once the debt burden is gone.
    - imaginenore 11y ago
      It's semantics, at the end of the day Greece owes money, and you simply cherry-picked a term that doesn't contain that debt. > The key insight from the "primary surplus" is that a haircut would work, because Greece could be self-sufficient once the debt burden is gone. And so would my hypothetical business that can't even cover the monthly payments on the loan. If we magically erase the debt, just like that, I got a profitable business I can brag about. > Greece does not get the loans now - that money is already gone Wow, just wow.

brianmcconnell 11y ago

The Greeks were getting a shitty deal, and knew they were getting a shitty deal. Good for them for decisively telling the Germans to get stuffed (who conveniently forget about their WWII related debts being forgiven). Iceland demonstrated that it's possible to say no to perpetual debt peonage and go on to do well. If Greece has to leave the Euro, so be it. The Euro made sense as the Deutschfranc, but that's about it.

spiralpolitik 11y ago
By leaving the Euro Greece will have the opportunity to put their country back together without 20 years of crippling austerity. They still need to fix their broken tax system and keep spending with their means but they have a much better chance of doing this on their own terms rather than under the cosh of the Troika. If only other countries could be so brave.
- tptacek 11y ago
  What is the difference between "crippling austerity" and "keeping spending within their means"? Isn't the biggest financial problem in Greece the relative enormity of the public sector? Wouldn't fiscal reform basically amount to slashing entitlements and public sector employment?
  - tormeh 11y ago
    A public sector can be enormous without damaging the economy. In Scandinavian countries it's about 50% and used to be higher. The problem is that the Greek government is both bad and weak. The Greek public sector's purpose is not really to provide utility to the populace, but to buy votes from the unions. It's very hard to pay for because it does not enrichen the private sector nearly as much as it should. And because the Greek oligarchs own the media (and many parliamentarians) so taxing the rich is absurdly hard. Greece is not just insolvent, it's also practically a failed state.
    - peterfirefly 11y ago

hal9000xp 11y ago

Here is Bloomberg animation for european debt crisis: https://www.youtube.com/watch?v=C8xAXJx9WJ8 https://www.youtube.com/watch?v=C8xAXJx9WJ8 I kept this in my bookmarks more than a year. Euro is failed project by its core because monetary policy without fiscal polity doesn't work.

yishanl 11y ago
Really helpful, thanks!
h1fra 11y ago
Thanks for the sharing, very intersting and well explained
haberman 11y ago
This is awesome, thanks! There is one big part I really don't get though. Why would Greece's creditors assume that Germany was going to cover a Greek default, just because they are both in the EuroZone? That would be like my bank assuming that the US Government would cover my mortgage if I default, just because it's denominated in dollars. That line of reasoning makes no sense to me. Related to this, the video says: "The problem is, somebody has to pick up the tab, or else every country in the Euro area will suffer." I don't get this either. That would be like saying that me defaulting on my mortgage will make all my neighbors suffer, just because our mortgages are in the same currency. It doesn't seem like a Greek default should hurt anybody but Greece and their creditors.
- fredkbloggs 11y ago
  Yeah, this. I've never yet seen an explanation for this, in either the MSM or the financial press. There is an assumption everywhere that no one in the eurozone can default. My thinking is that this must have something to do with the ECB's rules on collateral; if the Greek banks have nothing but defaulted securities to offer, then they cannot meet their reserve requirements and therefore cannot obtain euros from the ECB or other banks within the system. That would result in all Greek banks going bust and being unable to operate, unless the Bank of Greece stepped in (by implication, issuing loans to banks in drachma in exchange for defaulted or new public debt securities). But this is speculation on my part; I have never seen the mechanism explained in any detail. Kind of amazing that in 7 years of "crisis" everyone has been happy to parrot the same default == grexit mantra without once explaining the mechanics, but here we are.

chx 11y ago

I have been collecting links for days now, here are a few. The picture is really not pretty and while you can place some blame on the Greeks, for the last five years at least it would seem they are not the one to blame. if you want a very simplified slightly hilarious explanation, https://www.reddit.com/r/OutOfTheLoop/comments/3bhwij/what_is_going_on_in_greece/csmlkp1 https://www.reddit.com/r/OutOfTheLoop/comments/3bhwij/what_i... this will do. https://twitter.com/cstross/status/617775611642257408 https://twitter.com/cstross/status/617775611642257408 http://faculty.chicagobooth.edu/anil.kashyap/research/papers/A-Primer-on-the-Greek-Crisis_june29.pdf http://faculty.chicagobooth.edu/anil.kashyap/research/papers... http://www.truth-out.org/news/item/26112-an-economic-hit-man-speaks-out-john-perkins-on-how-greece-has-fallen-victim-to-economic-hit-men http://www.truth-out.org/news/item/26112-an-economic-hit-man... http://www.interfluidity.com/v2/5965.html http://www.interfluidity.com/v2/5965.html https://twitter.com/AP/status/616622654234169344 https://twitter.com/AP/status/616622654234169344 http://www.irishtimes.com/opinion/who-will-dare-say-out-loud-emperor-has-no-clothes-1.2267032 http://www.irishtimes.com/opinion/who-will-dare-say-out-loud... http://www.forbes.com/sites/niallmccarthy/2015/03/13/contrary-to-what-most-people-think-greeks-work-the-longest-hours-in-europe-infographic/ http://www.forbes.com/sites/niallmccarthy/2015/03/13/contrar... http://www.theguardian.com/business/2015/jun/30/greek-debt-troika-analysis-says-significant-concessions-still-needed http://www.theguardian.com/business/2015/jun/30/greek-debt-t... https://fsaraceno.wordpress.com/2015/06/27/its-the-politics-stupid/ https://fsaraceno.wordpress.com/2015/06/27/its-the-politics-...

paskster 11y ago

I am astouned by all the comments, who say that "Greeks were getting a shitty deal" or that the bailout terms were somewhat "unfair". Facts are: Greece had a spending deficit for several decades now. This spending deficit accumulated to such a big dept, that no investors were willing to lend greece any more money. 18 european countries transferred billions of euros in the last couple of years to greece, to help the country and the people. In return they had an agreement that greece would cut their spending. Greece never lived up to the agreements it made. In the last weeks 18 european countries offered greece another bailout, where greece would receive several bilions again. In return they asked greece to finally cut spendings. Now greece voted against this bailout. There are a lot of people in europe (myself included, I am from Germany by the way) who are not willing to transfer further billions of euroes to greece, just so that a socialist party can fullfil its "promises" and increase their deficit.

dkopi 11y ago
One thing's for sure, without countries to bail them out, without banks to lend them more money - the greeks will have no other choice but to increase their tax income and decrease their spending. Austerity as some might call it.
- atmosx 11y ago
  If the ECB keeps the current regime for another 2 to 3 weeks, then Greece might be "forced" to go back to the Drachma and devalue. At that point you don't need to increase tax incomes but you might have a series of other problems (control devaluations, impose capital control for an undetermined period, etc.) - but in the long run, might be positive (According, to Krugman, Stiglitz, S. Keen, etc.)
  - dkopi 11y ago
    Inflating away debt is another form of increasing tax revenues. Also known as Seigniorage. It's just a more sophisticated way of collecting taxes, and it will harm the poorest greeks and middle class first.
- 11y ago

sktrdie 11y ago

I know I will be treated as an extreme futurist, but we live in this little tiny spec called Earth and we're all in this together. The idea that there are laws about environmental protection in one country and none in others, calls to the idea that we should just have a single unifying country called "world" and keep the current separation only for cultural reasons. The EU was a step in this direction but it seems that yet again centralization of power ended up making things worst. So from one end I'm happy that Greece gets to go its own way and escape centralization that forced it into a shitty situation. On the other hand though, this breaks the dream I had of building a system which would allow better collaboration between nations, and most of all, better understanding of the real issues that we're facing as a species (overpopulation, climate change, food scarcity, etc..).

orbifold 11y ago
Personally I prefer the current situation, where a few countries provide a very good standard of living compared to most of the rest of the world, compared to what some parts of the population have to endure even in countries like the US. Globalization does only benefit the very rich in the short term, whereas strong nation states at least to some degree are able to stand up against large multinational coorporations.
jqm 11y ago
I've sometimes thought there should be exactly two levels of government... International (non-optional and all countries participate) and County (~2500 km2 and several thousand to maybe 10 million max people). The world has gotten smaller and the effects nations have on each other larger. It's dangerous and it's not efficient. At the same time people have their local customs and laws (and spending habits). So let that be. But enforce bans on slavery, genocide, trade route monopolization, nuclear weapons, pollution etc. At an international level. As it is, it seems national governments are in general problematic... both to local communities and to the global community. I think eventually they can be done without.

saool 11y ago

Good for the Greeks to stand up against bullying and remaining somewhat dignified (as much as they could be after years of destroying their society at the whim of the "austericides"). That said, the vote means lots of pain coming their way, and Euro or not, their economy will take the hit now and the North will pretty much be able to buy half of the country at garage sale prices. Talk about some value investing for "deserving" German and French banks: you lend recklessly, get bailed out by your debtors, then you buy the damn farm.

davidf18 11y ago

The real problem is that banks lent to Greece without doing their due diligence evaluating risk. Instead the bankers collected their fat fees for making the loans. Usually when banks make bad loans they have to write them off but when in 2010 the Troika (Euro Community, IMF, ECB) took over the Greek debt they paid 100% instead of insisting on the banks taking a "haircut" of say 50%. In truth some of the smaller members of the IMF did ask that they banks take a hit but the larger members turned that down. The problems with the Greek economy that lenders are complaining about now, about the lowest tax collection rate in Europe, the "overly generous" retirement plans all existed before banks made the loans and fixing these problems should have been made a condition of making the loans in the first place. It will be impossible for Greece to pay off the debt and now instead of the bank management (and the shareholders who appointed them) taking the hit for their incompetence in making the loans the taxpayers will take the hit. The German and other taxpayers should not have a problem with Greece, but rather that Merkel and other governments decided to pay off the banks 100% instead of insisting that they take a large "haircut." Ideally, the banks should have been made to take a "haircut" on the loans and the shareholders should have fired the management. Instead Merkel and other leaders let the banks off the hook putting the burden on the taxpayers. Now the taxpayers should fire Merkel and the leadership of other countries that OK'd the 100% payout to the banks in the next elections.

fredkbloggs 11y ago
This is so common that it already has a name: extend and pretend. That's exactly what was done with Greece; the interest rate was lowered to a scandalously generous level, maturities extended to practically forever (Merkel and co. will be long dead by the time most of it is due), and everyone got to pretend things were fine. As usual with this approach, things weren't fine, and when it was time to extend and pretend again, someone decided they weren't going along with it. Japan has been extending and pretending for about 25 years now. They are far more indebted than Greece but their interest rates are even lower. There is no conceivable way that Japan is ever going to repay that debt, and it's still growing at a pretty rapid pace. The circumstances are different (very few JGBs are held by foreigners, and Japan issues its own currency), but it's pretty clear from experience that extend and pretend leads to lengthy periods of anemic economic activity. The question is whether default and workout will be any better; the record there is mixed at best.

univalent 11y ago

No matter which way this went this whole referendum seemed like a political stunt. It was a huge distraction, frayed nerves and made everyone more entrenched in their negotiation positions. A good deal and compromise is generally negotiated behind closed doors without making loud speeches that you can't walk away from. I feel sorry for the Greek people. They deserve better from their own leaders.

stagas 11y ago

An entire nation, rejected being oppressed into austerity. This is all that matters. Goodbye, capitalism.

littletimmy 11y ago

What's most interesting to me in this entire crisis is the moral discourse surrounding debt. More often than not, you'll hear stuff like: "Of course Greece must pay its debt", "You mean to say you can just take money and not pay?", "Why should taxpayers bail Greece out?"... All the while, there is absolute ZERO condemnation for banking entities making risky loans. There is not even a tacit nod towards acknowledging that if banks make loans that fail, it is their loss to eat. Not a whisper about how taxpayers have been surreptitiously bailing out banks, and not Greece. Somehow, a creditor is deemed morally superior to the debtor. What repulsive rhetoric!

themartorana 11y ago
Well, not exactly. The people are rather loud about it (at least here in the U.S. where we lock up petty drug offenders for life, but there's nary a single banker in jail for the 2008 worldwide economic collapse), but it doesn't matter if we make noise about it. As long as no one in government does, and the media mostly ignores it, the result is the same.
Natsu 11y ago
I guess that depends on whether you see making a promise you have no reason to believe you can keep is better or worse than being dumb enough to believe it.
- sooheon 11y ago
  Don't discount the third option, that creditors are neither dumb or gullible, but predatory.
  - CamperBob2 11y ago
    Well, they've "preyed" themselves into substantial losses. Even if the EU makes good on the principal on Greece's behalf, it was still a dumb idea to lend money to them.
  - Natsu 11y ago
    Usually predatory lenders have more recourse over you: they'll take your car from the car title loan, etc. What do they gain from this situation, exactly? It seems to me like everybody loses here... and I'm not entirely certain they won't find some bailout and have it happen again. Right now, I feel sorry for the people in Greece, it seems like they work long hours for nothing and their government is completely underwater.

rdl 11y ago

What does this mean for startups/tech industry? I assume not very much as long as it is limited to Greece, but more so if it spreads to Portugal, Spain, Italy, right?

vmorgulis 11y ago

"Europe exemplifies a situation unfavourable to a common currency. It is composed of separate nations, speaking different languages, with different customs, and having citizens feeling far greater loyalty and attachment to their own country than to a common market or to the idea of Europe." Milton Friedman, The Times, November 19, 1997 https://en.wikipedia.org/wiki/Optimum_currency_area https://en.wikipedia.org/wiki/Optimum_currency_area

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PythonicAlpha 11y ago

After 5 years of "rescuing" that did lead the country into ruins, no wonder! It is a widespread knowledge (at least the US has it), that forceful saving in a crisis, will deepen the crisis. As a German, I know that Germany got a dept-cut after the second World war, that the German nation could rise from misery. We should have allowed the Greek the same luxury. Instead, the governments cared only for the banks.

peterfirefly 11y ago
Greece already got a haircut. In fact, it was one of the biggest haircuts ever in history.
- PythonicAlpha 11y ago
  I am not aware, that it was the "biggest ever in history" -- I even doubt that since, the Greek economy is not so big. I would like to compare that with the haircut Germany got after the war ... but in inflation-adjusted numbers (many haircuts can be the biggest, when you don't care about inflation).
Lazare 11y ago
That...couldn't be more wrong. Back in 2012 it was determined that Greek debt was unsustainable, and a large haircut was needed. But because the EU governments were unable/unwilling to accept any haircut on their holdings of Greek debt, that write down was borne entirely by private sector lenders. > Instead, the governments cared only for the banks. The banks lost 75%+ of their loans. The governments lost 0%. There's no way you can realistically spin that as a bail out of the banks.
- PythonicAlpha 11y ago
  The question is, when the banks "lost 75% of their loans". To my knowledge, this happened much later, when the banks that initially where in danger already got rid of the most toxic loans. Those loans either went to the EU "Rescue Umbrella" or where sold (with discounts). When those sold loans later where haircut, than the lost value of 75% was on papers, but the value that those holders really lost very likely much smaller (if any), because they bought the loans with huge discounts.

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beloch 11y ago

A Greek friend once told me that, in Greece, "only idiots pay 100% of the taxes they owe". His perception of his fellow Greeks' attitude towards taxes wasn't wrong. In Greece, tax evasion is endemic. https://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_Greece https://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_... It's hard to be surprised by the financial troubles of a government that is so utterly feckless when it comes to collecting taxes that members of it's own finance ministry are suspected of hiding their funds abroad. It is also hard to have sympathy for Greeks, most of whom apparently view tax evasion as a virtue. Now that they've burned Germany and the EU, where is Greece going to get the money it can't collect from it's own citizens?

vacri 11y ago
I have also had a Greek friend tell me, well before this crisis started, that tax avoidance was almost a national sport in Greece, and there was a social stigma to paying all your taxes. He said it with a mixture of pride and sadness.

lifeisstillgood 11y ago

An analogy I used with my wife trying to explain / argue Greece. It struck a chord. Fiscal Union: Would you lend me 10 million dollars? No If I was Warren Buffets adopted son (!) would you lend it to me? Maybe. Well that's how the rest of the world's investors saw Greece. Despite all the protests that it was separate debt no one believed them. And Greece is about to prove them right. Debt restructuring (ie fiscal Union "just this once") If I am having to spend five months negotiating with the Bank Manager to get an overdraft that will let me pay him the next months mortgage payments with that overdraft, then we should stop talking about the cuts I need to afford the overdraft and look at how to deal with the mortgage. I don't like the situation Europe is in - but it was clear in the 1970s where this was all going - just because it is not politically palatable right now, Euro zone countries are going to have to become responsible for each other's debts, and that means negotiating on fiscal policies across Europe. Stuff TIPP - that's a serious agreement to hammer out. And don't do it in secret.

christkv 11y ago

I think one of the core problems in the whole euro zone disaster was the ability of previous governments with low credit ratings suddenly going from paying 8-10% on their bonds to 2-3%. Basically the lenders completely ignored historic risk, counting on the richer euro countries to bail out any country that abused the cheap credit. I think we are seeing the effect of that policy. For the people who are demonizing the Greeks I would like to remind them that it takes two to party. The drunk sailor who wastes all his money, and the fool who lends him more money, expecting to be repaid. Either there is a full currency union with the transfers (meaning more and more federal like rule) or we will get some sort of collapse of the euro zone at some point in the future.

endymi0n 11y ago

I'm astounded at the fight here between pro and contra austerity. It's not about to save or not to save - it's about where to save. Greece could (have) bailed out itself with just a semi-decent stab against rampant corruption, without endangering the common people at all. Switzerland offered to collect billions of Euros of Greek tax offenders on Swiss accounts on their own. The List with the names "disappeared", and some years and dozens of questions later, reappeared with half the names removed. Switzerland's still waiting for Greece to make a move. While the last weeks were all about the 1.5 bil EUR rate, Greeks moved 3 bil EUR out of the country every fricking day. Greece infamously doesn't even have a register who owns which property and real estate. Greece is still in the top 5 state: of military spending per capita, and the list goes on. No matter how much money you pour into this banana republic, it's just going to evaporate on the way there. Still, their best option is probably where they are going already: a proper default and return to a weaker currency, just as it helped iceland. http://netrightdaily.com/2015/06/icelandic-default-could-save-greece/ http://netrightdaily.com/2015/06/icelandic-default-could-sav... Still won't help, if they don't tackle corruption as well.

pinaceae 11y ago

all those useless emotions. simple facts can't be avoided. nobody is willing to lend greece money besides the ECB. tsipras tried putin and china, both turned him down. the greek-style of socialism (coalition with the extreme right notwithstanding) relies on foreign capital. once that runs out, it is over. greece has never built up any robust, modern facets of statehood. there is no central database of landownership. parties act like clans, hand out positions based on loyalty, not merit. it's a second world country that thinks of itself as the leader of the first world, as witnessed in endless, tiresome discussions with various greek representatives. they're all so smart, yet their economy doesn't produce shit. spain, portugal, the eastern europeans all got their act together and worked out plans to move along. greece decided to call the people they're borrowing money from nazis and terrorists. greece never qualified as a member to the EU, it was a historic mistake to accept them. grexit, now. let the rest of europe govern and prosper in peace.

ryandrake 11y ago

The failure and shame should be shared by the lenders. If you really want a risk-free investment, you should be willing to accept a risk-free return. You receive a return on a loan commensurate with the risk of default. Sovereign debt should not be special.

chuckcode 11y ago

Pretty amazing lack of leadership on all sides to let this degenerate into a game of political chicken with no good endings for anyone. Clearly the Greeks were going to have an exceptionally hard time paying back their debt and certainly the Germans who were in a similar situation after WWI should have realized the depth of the problem [1]. Anyone who honestly thought that the situation would get better under the austerity program despite all economic history to the contrary should have realized a couple years in that it wasn't going to work. After a few years the debts would be even more difficult to pay after Greek GDP shrunk by 25%[2]. From my personal it seems like if Europe had really wanted to help Greece tackle their debt they should have used the crisis to change Greek laws to make it easier to start and run a business there. Currently Greece is by far the hardest country in the Euro currency to run a business as it ranks just before Russia (61 vs 62) in the World Bank's "Ease of Doing Business Index"[3]. The other economies that are held up as examples of recoveries like Iceland and Ireland rank 12 and 13 respectively. Having a monetary union without a political union is a questionable undertaking in general [4]. Given that the leaders of Europe know that they should either be working to get closer to a political union with similar laws and workings or looking for a way to gracefully exit economies that aren't working out. The current approach of bashing Greece with no real alternative to grinding economic suffering seems like the worst sort of denial about the reality on the ground. [1] https://en.wikipedia.org/wiki/Treaty_of_Versailles https://en.wikipedia.org/wiki/Treaty_of_Versailles [2] http://www.slate.com/blogs/moneybox/2015/02/18/how_bad_is_greece_s_economy_these_charts_will_tell_you.html http://www.slate.com/blogs/moneybox/2015/02/18/how_bad_is_gr... [3] http://data.worldbank.org/indicator/IC.BUS.EASE.XQ http://data.worldbank.org/indicator/IC.BUS.EASE.XQ [4] http://www.euro-know.org/europages/articles/rmu.html http://www.euro-know.org/europages/articles/rmu.html [5] http://www.theatlantic.com/business/archive/2014/05/which-states-are-givers-and-which-are-takers/361668/ http://www.theatlantic.com/business/archive/2014/05/which-st...

parley 11y ago

I'm not a financial expert and can't speak to what's true or not, but here's [1] a short interview with Swedens former Tax Agency chief who was apparently part of a small task force to evaluate Greece's tax collection and aid in its improvement. He claims that removing corruption is not the only problem, and that the rest of the EU are underestimating the lack of tax collection competence with regards to modern methods and processes, as well as the powerlessness and political isolation of the Greek tax chief, making his/her job impossible - e.g. by not even being allowed to pick his/her own employees. Again, I don't know what's true or not, just providing the opinion of a former Tax Agency chief of a country that collects a lot of taxes and who apparently had the opportunity to take a closer look at Greece's tax collection. Google Translate does a decent job with the article translation. [1] https://translate.google.com/translate?sl=sv&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.dn.se%2Fnyheter%2Fforre-skattechefen-domer-ut-grekiska-skatteverket%2F&edit-text= https://translate.google.com/translate?sl=sv&tl=en&js=y&prev... EDIT: Grammar.

NumberCruncher 11y ago

You folks are deep in the Group Trap. You should read more Harry Browne and think less about politics... Not because I say so but because it makes your life happier.

elorant 11y ago

OK let me say this as clear as I can after reading most of the comments. Yes we have a dysfunctional economy. We have a lot of red tape and corruption going on in the public sector. We spend a lot of money in pensions and salaries, more than any EU country. We have an inefficient to say the least tax collecting mechanism. And many other problems. But. You expect us to change all that in just five years. This is fucking impossible guys. Please, get a grip of reality. Countries don’t just change in five years. And then you get disappointed and become nihilists arguing that we haven’t implemented any reforms. All the effort Greece has done in the last five years, moving from a 14% deficit to 1% surplus doesn’t get enough credit. All we get is been constantly hammered for our failures. No wonder the NO vote took 60%. People here are so fucking tired. Six years of recession and we have the Troika constantly down on our throats without cutting us any slack. If EU leaders had shown some flexibility things would have turned up a lot better for everyone. We could extend the maturity of some loans, achieve a sustainable surplus and start repaying. Instead we’re facing the nuclear option of defaulting on most of our debt. How does that help anyone? And if you think Tsipras is radical wait until Le Pen wins the French presidency. She has an open agenda of exiting the euro. Then we can talk what compromises Germans are willing to do.

peterfirefly 11y ago
> You expect us to change all that in just five years. This is fucking impossible guys. Please, get a grip of reality. Countries don’t just change in five years. October 7, 1989, DDR celebrating its 40th anniversary: https://www.youtube.com/watch?v=CeePo6BGmHc https://www.youtube.com/watch?v=CeePo6BGmHc October 3, 1990, reunification of Germany: https://www.youtube.com/watch?v=e4kpqKBbdic https://www.youtube.com/watch?v=e4kpqKBbdic Who are The People in Greece? Mad Communists or people who want freedom and prosperity and liberation from the old political class?

woodpanel 11y ago

Ahh, the nytimes. If there are two biases the NYT is guilty of, then its being stubbornly progressive and subconsciously anti-German. Take this for example: "... financial carpet bombing. The European Central Bank severely limited financial assistance to Greek banks, ... making it hard for retirees ..." Calling it "financial assistance" helps in framing it as an assault on a guaranteed right the Greek Banks have. Especially if it's something that was "severly limited" by that evil Frankfurters. I know perspectives fluctuate quite heavily from country to country. It is actually the reason why I read as broad as possible (including NYT) to get to know a possible different viewpoint on pending issues. But the american progressive view on the Greek-Bailout-topic is so much flawed that I might call it derailed. It is not simply flawed by ideology but that ideology also decides what details are to be amplified over the distance-caused resistance. And more importantly, that ideology decides what details are not to be amplified. The ECB is still lending money, it is just not legally allowed to issue new credits (credits are what those "financial assistances" really were) to a benkrupt country. And the whole american-progressive story of Germany/Rich-Europe enslaving the poor Greeks is just as stupid as the european-progressive story of America enslaving the third world. The world is not that simple to just blame everything on the fat cats. And actually those uninformed progressive world-views (wether it be european progressives judging american foreign policies toward third parties or vice-versa) bear something deeply anti-progressive in them: framing a whole nation evil, accepting illiberal leaderships as long as they are anti-<evilnation> and often calling for harsh intervention. Or in the case of the Greferendum: Making it a progressive virtue, that nation A's tax €s utilization ought to be decided by nation B's voters.

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HSO 11y ago

At the risk of being a moralizing bore, may I remind everybody that "Germany", "Greece" etc. are not people, and that people are not countries? I am surprised by the national coloring, however faint, of some comments here and there https://news.ycombinator.com/item?id=9835433 https://news.ycombinator.com/item?id=9835433. "I am a German" or "Greek here" should have no relevance to the ideas put forth. "Your money" and "your banks" are not really "my money" and "my banks" once I have paid the tax and don't own the bank! The theory of complex systems reminds us that aggregates can have properties that are not traceable to any individuals themselves. Game theory tells us that incentives and constraints can get so messed up that developments take on an eigendynamic which was nobody's intent nor interest. Please, be civilized and don't let yourselves be infected by nationalistic passions. Your moralizing nanny... (No seriously, I am starting to get concerned.)

abandonliberty 11y ago
Yes, we are interpreting the nations of individuals, rather than nations composed of many individuals. If I buy a home and am forced to eat ramen to pay for it, that's entirely separate from my estranged uncle's mafia loan shark forcing me to eat ramen. Modern day slavery - debt bondage - also passes from generation to generation. You don't choose where you are born. This is a very complex and ambiguous situation.

williesleg 11y ago

Who cares? The USA overspends by how much Greece owes every WEEK. Never gonna pay it back, ever.

jotm 11y ago

Ready your breakfast and eat hearty... For tomorrow, we dine in hell!

vamur 11y ago

Good for Greece. What they now need asap is digital drachma with automatic tax on incoming transfers, capital controls on imports, default on debts to ECB, haircut on deposits above 100k, exit Schengen/Russia sanctions and currency swaps with Russia and China/India. Next they need to improve balance of trade by devaluing drachma, removing expensive imports, replacing EU imports with imports from China, encouraging local food and energy production, exporting fish/fruits/vegetables to Russia and China. Also cut defense expenses with defense pact with Russia vs attack by Turkey and sell old military equipment to Iraq. Once all of this is done, they can start fighting corruption and waste, which can be done by cutting max pensions, reducing the public sector and centralizing government services.

totalcookie 11y ago

"Off-Topic: Most stories about politics, or crime, or sports, unless they're evidence of some interesting new phenomenon. Videos of pratfalls or disasters, or cute animal pictures. If they'd cover it on TV news, it's probably off-topic." HN Guidelines