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When Greece borrowed money, it was sustainable. Their GDP was growing, in large part because the European economy was growing before the crisis. When the Euro
by Mikeb85 11y ago
When Greece borrowed money, it was sustainable. Their GDP was growing, in large part because the European economy was growing before the crisis.
When the European and world economy went down, it dragged Greece with them. The debt became unsustainable. Instead of the creditors losing out (much as an investor or normal creditor would when they invest in something that loses), the Europeans decided to bail out the initial creditors, and convinced the then-current Greek government to take a bad deal, all the while basically 'socializing' the risk. Their shitty economics led to a 25% contraction in the Greek economy.
If you follow the chain of events, this crisis is as much Germany's fault as Greece's.
Another thing to keep in mind, is that it doesn't matter whose fault it is. If Greece stops paying its creditors and stops taking loans, Germans will lose out. It's actually in Germany's best interest to forgive some of the debt, and have Greece pay the rest. Greece's economist/finance minister knows this, that's why they can play this game.
- melling 11y agoI haven't followed Greece that closely but this story about Greece hiding its debt to gain entry into the Euro has been mentioned more than once: http://www.nytimes.com/2010/02/14/business/global/14debt.html?pagewanted=all http://www.nytimes.com/2010/02/14/business/global/14debt.htm...
- tptacek 11y agoThe stats I can find suggest Greece ran a primary deficit pretty consistently starting in 2002 --- long before the crisis --- in fact, they appear to have run a primary deficit during the boom years that preceded the crisis.
- Mikeb85 11y agoA deficit isn't necessarily unsustainable over a period of economic growth. If growth and inflation outpace the cost of borrowing, it's worthwhile to borrow. Kind of like the US is doing right now.
- tptacek 11y agoThat's a good point, but the obvious next Google search suggests that Greece's economic growth was unspectacular during the early 00s, and began lagging in '06.
- Mikeb85 11y agohttp://www.tradingeconomics.com/greece/gdp http://www.tradingeconomics.com/greece/gdp Greece's GDP nearly tripled from 2000 to 2008. Their debt to GDP was comparable to other European nations until 2008 (105% of GDP).
- coob 11y agoAnd we're treating those figures as trustworthy are we? Eurostar consistently failed to validate numbers provided by the Greek government in that period.
- netcan 11y agoThis is a super important point. One that needs to come into the debate in Germany more. Greece may have been run by a ridiculously irresponsible government (and electorate), but it was the troika (Germany, mostly) put the fallout on the German (and EU) public's tab. That was and is a debt guaranteed to go bad.
- allendoerfer 11y agoHow can a group of the ECB, the IMF and the EU be "mostly German"? Seems pretty international to me. In fact Germany is under-represented in the ECB and the commission, because it has only one seat, as do countries that have a tenth of the German population.
- netcan 11y agoWell… I don't really know the ins and outs but Angela Merkel seems to be the primary spokesperson and negotiator for the Troika. I'm not sure how/who provides the funds for the ECB & IMF. I think it's ultimately Germany too. At least the German public seem to believe they are on the hook for and troika loans that aren not repaid. The reason Germany have a particular interest/power here (apart from being a large eurozone member) is that it is/was their banks that are owed money by the Greek government. This is vagueness kind of part of the problem, these oblique and vague institutions representing oblique and vague interests. What is the ECB exactly? How is it funded? What does it want? In any case, it doesn't really matter if this is germany or if Angela and the electorate are just playing the role. The Troika made a (unrealistic) loan to Greece so that Greece could pay back "creditors" (who I'm assuming are largely German banks, but am possibly mistaken).
- allendoerfer 11y agoGermany does pay the most in absolute terms. This does nothing to the fact that the Troika is not mostly German. I do not think that HN is a place for these kinds of polemic arguments. Lets leave them to the right wing eu-critics that try to built up enemy stereotypes. Angela Merkel is not part of the Troika. Angela Merkel plays a prominent role in the debate because she is the unofficial leader of the northern states, while François Hollande unofficially represents the southern states. Both can only influence one vote of the EU commission and have very limited influence on the ECB or the IMF.
- sgnelson 11y agoYes. I should have added, it's not that I don't have sympathy for Greece and how their debt has been structured. I also don't think Europe should let them fall. It's also not that I don't think Piketty is correct in some of his solutions (though I have differences of opinion with some of them), I just found his reasoning to be wrongheaded and somehow "dumb." At least for someone who is supposed to be a great world economist. (My own take away should be "Don't believe the hype.")
- hackuser 11y ago> it doesn't matter whose fault it is. If Greece stops paying its creditors and stops taking loans, Germans will lose out. It's actually in Germany's best interest to forgive some of the debt, and have Greece pay the rest. Absolutely. It's bizarre that in a country with bankruptcy laws (which Germany must have), they argue that it's 'immoral' for Greece to have some debt relief. > When the European and world economy went down, it dragged Greece with them. Remember who started the Great Recession (the U.S.). The Greeks probably had less to do with it than most nations.