4 ms·

It is not mainly about pumping money now: it is about writing off (bad) debt, and punishing investors for doing bad investments, thereby making sure that invest

It is not mainly about pumping money now: it is about writing off (bad) debt, and punishing investors for doing bad investments, thereby making sure that investors understand that they need to be more alert, and not jump into high yielding investments assuming that governments will bail them out whenever things go south. No yield without risk. It comes a bit late now, because most banks have already recovered their investments, and only the governments will be affected (and the IMF, ...) Regarding pumping money: the now defenestrated Varoufakis has argued that Greece was not requesting money from the EU, but that the EU should have an investment program (much bigger than the ones currently in place), financed basically with Eurobonds, and implement by funneling those funds into both the private and public economy via banks. The program was intended to invest in poor European regions. The involvement of banks will use the profit motive to make sure that the investments are sound, and the fact that the funds will be nearly free (for the banks) will incentive the banks to really invest the money. Not only Greece would benefit, but Lithuania too. And not all regions on those countries, only the ones in need.

fauigerzigerk 11y ago
>It comes a bit late now, because most banks have already recovered their investments How do you mean recovered? Banks have already taken a 50% haircut on their Greek debt. The 2011 round of Greek debt relief, in which only private creditors were participating, was worth 100bn. That doesn't sound like risk free yield to me.
- gonvaled 11y ago
  Link please? Anyhow, having lost a part of their investment, and taking the deserved loss without being unnecessarily shielded by the institutions are different things: it does not matter if they lost 50bn, if the European institutions saved them from losing another 50bn by piling up the risk on the European taxpayer. There were probably sound reasons why we helped the banks back then (contagion risk, instability of financial markets, ...). What is being argued now is that there are equally (even more valid, since they involve human suffering) reasons to help the Greek now.
  - fauigerzigerk 11y ago
    >Link please? Eurozone crisis: banks agree 50% reduction on Greece's debt http://www.theguardian.com/world/2011/oct/27/eurozone-crisis-banks-50-greece http://www.theguardian.com/world/2011/oct/27/eurozone-crisis... >What is being argued now is that there are equally (even more valid, since they involve human suffering) reasons to help the Greek now. Absolutely! The question is not whether help is necessary, the question is what kind of structural reforms should be demanded in exchange for debt relief so they don't simply run up new debt.
    - gonvaled 11y ago
      So I guess we are in the same camp here: the Greeks need to implement some reforms, and the financial markets need to take a hit. The exact details need to be worked out. As far as I know, the Troika has been refusing to accept a haircut on the Greek debt as a part of the negotiations, which is one of the factors that has escalated the problem.

fauigerzigerk 11y ago

>It comes a bit late now, because most banks have already recovered their investments How do you mean recovered? Banks have already taken a 50% haircut on their Greek debt. The 2011 round of Greek debt relief, in which only private creditors were participating, was worth 100bn. That doesn't sound like risk free yield to me.

gonvaled 11y ago
Link please? Anyhow, having lost a part of their investment, and taking the deserved loss without being unnecessarily shielded by the institutions are different things: it does not matter if they lost 50bn, if the European institutions saved them from losing another 50bn by piling up the risk on the European taxpayer. There were probably sound reasons why we helped the banks back then (contagion risk, instability of financial markets, ...). What is being argued now is that there are equally (even more valid, since they involve human suffering) reasons to help the Greek now.
- fauigerzigerk 11y ago
  >Link please? Eurozone crisis: banks agree 50% reduction on Greece's debt http://www.theguardian.com/world/2011/oct/27/eurozone-crisis-banks-50-greece http://www.theguardian.com/world/2011/oct/27/eurozone-crisis... >What is being argued now is that there are equally (even more valid, since they involve human suffering) reasons to help the Greek now. Absolutely! The question is not whether help is necessary, the question is what kind of structural reforms should be demanded in exchange for debt relief so they don't simply run up new debt.
  - gonvaled 11y ago
    So I guess we are in the same camp here: the Greeks need to implement some reforms, and the financial markets need to take a hit. The exact details need to be worked out. As far as I know, the Troika has been refusing to accept a haircut on the Greek debt as a part of the negotiations, which is one of the factors that has escalated the problem.