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The problem with Greece is that you can't just forgive its debts. Its deficit is still like 9-10% of GDP. Who's going to lend them money after a sovereign defau
by fennecfoxen 11y ago
The problem with Greece is that you can't just forgive its debts. Its deficit is still like 9-10% of GDP. Who's going to lend them money after a sovereign default? It's not lending anymore, it's donating. Heck, all they've been loaned so far is basically donations so that Europe could say to Eurozone members, "well don't anyone say we didn't try".
What Greece needs is a mix of debt forgiveness, market reform (labor market and otherwise) to unfreeze a sclerotic economy which is more about bribing the bureaucracy than actual competitiveness, and a measure of austerity (starting with a later retirement age, and going from there). They were starting to go down that road! They made real progress with economic growth during the recovery! But the reforms were unpopular and might be impossible to do with their internal politics, leading us to the current crisis.
So instead they're going to do the alternate version of hard-and-mean austerity by replacing euros with worthless drachmas and making everyone poorer (hope you don't owe money in Euros). Then they'll either rot for a while in stagnation before gradually getting their act together after all, or they'll turn to Vladimir Putin for bailouts from the great petro-state as long as they last (with all the relevant geopolitical consequences and "screw you Europe" strings attached).
- natrius 11y ago"Its deficit is still like 9-10% of GDP." This is very wrong. Greece has run primary surpluses in recent years. They will probably miss that goal this year, but not by 9-10% of GDP. Forgiving Greek debts would solve the problem. http://mainlymacro.blogspot.com/2015/02/greece-and-primary-surpluses.html http://mainlymacro.blogspot.com/2015/02/greece-and-primary-s...
- tptacek 11y agoApparently the deficit is more like 3% (depending on whether you believe Greece's own stats, or the EU's. Forgiving debt by definition doesn't change the primary surplus, right? The primary surplus is the budget before taking interest payments into account. And that's the whole premise of not bailing Greece out on Greek terms, right? That bailing them out doesn't accomplish anything if they're still on a course to rack up more debts due to unsustainable fiscal policy.
- natrius 11y agoYears of primary surpluses are clear evidence that Greece is capable of funding its own ongoing spending. This year is an aberration due to the crisis. If the debt were forgiven, I don't think Greece would need outside funds in 2016. Greece isn't asking for forgiveness though—they're asking for restructuring. Greek fiscal policy is not unsustainable. Much of it is unwise, but still affordable.
- peterfirefly 11y agoGreece most assuredly has not had years of primary surpluses! There has been a single quarter so far -- and that's assuming we can trust Greek accounting!
- tptacek 11y agoCan you cite some sources for the years of primary surplus? I'm looking for them, and the stats I'm seeing all suggest years of severe deficits.
- natrius 11y ago2013: http://www.wsj.com/articles/SB10001424052702304549504579320343987313738 http://www.wsj.com/articles/SB100014240527023045495045793203... 2014: http://www.wsj.com/articles/greece-misses-target-on-budget-surplus-1421244654 http://www.wsj.com/articles/greece-misses-target-on-budget-s... 2013 caveat: http://yanisvaroufakis.eu/2014/04/24/greek-statistics-are-back-primary-deficit-presented-as-surplus-with-eurostats-seal-of-approval/ http://yanisvaroufakis.eu/2014/04/24/greek-statistics-are-ba...
- arethuza 11y agoThe second of those articles seems to imply that aid to Greece is a key part of the income in the calculation of "primary surplus" and the third says "Alas, the Greek government’s 2013 primary surplus is a statistical mirage" - not exactly positive messages!
- 11y ago