10 ms·

Germans Forget Postwar History Lesson on Debt Relief in Greece Crisis

45 points by shawndumas 11y ago

jacquesm 11y ago
Greece has already had quite a bit of debt relief, it just did not seem to make much of a difference. And as long as they don't have an IRS with teeth and are willing to go after the black money parked in .ch the current situation will likely remain. It's a structural Greek problem, not a German one.
- yc1010 11y ago
  The black economy is a symptom of the problem not the cause If you were Greek (Especially a young Greek) and had no prospects for a future and no hope for job in a country with highest unemployment (especially among the youngest) in EU, the black economy might be very attractive... Also I am sure the "I did not cause this debt hence why should I pay taxes for it" attitude might be very prevailent And do you blame them? You might feel all fine and mighty sitting in your chair reading HN (probably while at work) towards those "lazy" Greeks, but all you have to do is imagine yourself in the same situation. The Greek economy already has contracted more and for longer than the US during the Great Depression (which did not have a larger debt burden then), let that fact focus your mind, here is a graph http://i.imgur.com/LKQ6Mov.jpg http://i.imgur.com/LKQ6Mov.jpg Don't forget that the Great Depression years where the golden age for criminals in the US, like I said its symptom of the problem not the root cause.
  - roel_v 11y ago
    The black economy is a symptom of the problem not the cause 8| What sort of weird alternate universe can this sort of statement come from? Are you claiming tax dodging would go away if there wasn't austerity? So, 8 years ago there was no tax evasion in Greece, or at least no more than average?
    - yc1010 11y ago
      Tax dodging will never go away, every economy has it, some companies from the likes of the US make an artform out of it especially the large majority funneling money via my country, Ireland. While I do not condone it, it is plainly obvious that the average person in Greece will have no "ethical" issues dodging taxes especially seeing that unemployment is high (hence black/gray economy might be the ONLY choice) and many people especially the younger generation did not rack up this debt and are the ones suffering the most, might rightly be asking themselves why they should be the ones suffering and paying for it via taxes.
      - roel_v 11y ago
        The very reason they're in this predicament is that they don't pay taxes. And no, it's not just the 'magnates' (whatever that means) - it's everybody. They can't collect on 15 billion dollars a year, if they had collected just half of that the last 5 years, there would now not be a problem at all! Look, it doesn't make sense to argue with you since you clearly have no idea what you're talking about (no, US companies do not 'dodge' tax through Ireland, they'd be raped by the IRS if what they did was illegal), it's just that populist blaring like yours seems to take over any discussion on this topic - which I have fully internalized after 20 years on the internet, and still sometimes it irks me.
        jacquesm 11y ago
        It's funny how a very large part of this is because Greece is still for small transactions very much a cash society and that means that it is relatively easy to keep things off the books. The irony is that the current situation will make sure that nobody in Greece will ever trust a bank again and that in turn will make it a lot harder to collect those taxes. This won't blow over easily.
        kamaal 11y ago
        As some one who comes from a country where tax evasion is common(India), I can tell you Greece's problems have just begun. And its not like introducing plastic money or online transactions will fix anything here. By now most of the Greeks would be so mentally conditioned to not paying taxes, any attempt from the government to make them pay will come across as a being handed out a very unfair deal. Most will feel cheated and being asked to make sacrifices out of their way. In fact this is the reason why its so difficult to turn around things in such countries. The issue is not technology or government policy. When you have a whole generation of people grow up in such a ecosystem, these practices seep into your culture and everyday life. You can only undo them gradually overtime, and sometimes it takes 2-3 generations to get out of it. Another defining characteristic of a society where cash transactions are common - Every day corruption is omnipresent.
- jerf 11y ago
  "It's a structural Greek problem, not a German one." If that's so... and I generally agree it is... then why do people keep lending them money? Or perhaps rather, "lending" them money? I actually find that a rich and interesting question not amenable to snap answers. But it doesn't make anybody involved look very good or ethical. Call it old fashioned of me, but neither borrowing money that you basically know you can't be paid back, nor lending money you basically know can't pay back, is very ethical. (Perhaps that's why the discussions about who's at "fault" keeps going around so viciously... the answer isn't "A XOR B", the answer is the union of everybody involved.)
  - tedunangst 11y ago
    Snap answer: solidarity.
  - lmm 11y ago
    > If that's so... and I generally agree it is... then why do people keep lending them money? Or perhaps rather, "lending" them money? Most of the money that's being lent is for repaying existing debts that come due. Like any bankruptcy (which is what this is, formally declared or not), the ECB is trying to smooth out the process and ensure creditors are treated equitably. As for "keeping lending them money", the bailout loans are tied to political reforms intended to fix the problems. How else would you do it? If you're asking why creditors lent them money in the first place, a lot of that predates the financial crisis. A lot of it was before rampant fraud in Greek governmental accounting became apparent. And perhaps people had more faith in European integration and expected Germany to pay Greece's debts if they ever get into trouble.
    - jerf 11y ago
      "How else would you do it?" Me personally? Try a lot harder to not get into that problem in the first place. I don't mean that sarcastically or as a snap answer exactly. My views on debt are right now somewhat old fashioned, and they're getting older-fashioned pretty quickly, directly in response to current events. Humans have a long experience with debt, a lot of that experience has boiled down to "treat it as radioactive waste", and I'm increasingly unconvinced that all of our fancy financial tools have actually removed the underlying reasons for that millenia-old assessment, rather than pushing those reasons around with ever-more sophisticated tools into ever-more complicated cognitive blind spots, until one day it blows up even worse than it used to be able to. A sober analysis of a lot of the debt in the world right now is that it simply isn't going to be repaid, for mathematical reasons, and that's been true for quite a while now. (The crisis merely revealed what should already have been obvious, and it is obvious that many people still don't think this is true even after that.) And a lot of that debt has been moved behind things like "guaranteed pensions" and other things that are amenable to various forms of jiggery-pokery on the accounting. So, that's great and all, but what do we do now, right? Because no amount of wishing for changes in the past will cause them to manifest. To which my answer is basically sunk-cost fallacy, stop throwing good money after the bad. Political restructurings don't appear to be working, so stop that. But then, I'm an engineer, not a politician... "stop doing things that don't work" is very easy for me but might as well be a concept from the planet Vulcan for a politician, who is so full of nuance that they can talk themselves right out of reality and consider it not merely moral, but noble.
- gizmo 11y ago
  The bailout made a big difference to the banks who got the bailout money. It didn't help Greece's economy, because the bailout wasn't used as a stimulus package. The dysfunctional tax system in Greece isn't the cause of the crisis. But people keep bringing it up because once the people of Greece can be depicted as corrupt and lazy we can morally justify any amount of hardship we force on them. The problem with Greece is entirely structural. But the fundamental problem is that Greece doesn't have an economy that's strong enough to compete with northern Europe without substantial subsidies. Everything else is minor in comparison.
- kamaal 11y ago
  Its like a person is their late 40's, who was born into a very rich family and has now spent all their money to bankruptcy. Having not done any serious work all their lives and now expects friends and near family to continue to fund their life as it was, just because they think they are entitled to be rich regardless of their decisions and actions in life. You can give all the money to such people and they will only want more, it will fix nothing because they think they are 'entitled' to the free money. They will do no real work because they never have, and it will too painful to get off their high horse and realize they are subject to same standards as every one else in the world.
  - jacquesm 11y ago
    Greeks are very hard working, that's not the problem here.
    - kamaal 11y ago
      Hard work and productivity are really two different things. They are sometimes the same, not always.
mc32 11y ago
What? Did Greece just emerge from the largest military conflict on the planet utterly destroyed? Or did they more or less mismanage their eco? Not collecting taxes and generous retirements (hair dressing considered hazardous as mining thus eligible for early retirement, for example) is not comparable to emerging battered and destroyed from the bloodiest conflict in history. And it's not as if their debt hasn't been restructured.
- bildung 11y ago
  > What? Did Greece just emerge from the largest military conflict on the planet utterly destroyed? No, but neither did Germany. In fact, despite bombings etc. the industrial infrastructure post-war was bigger than 1933 (because it was heavily built out during that period). edit: Here is a source from German public television (skip to 4:20): https://www.planet-schule.de/sf/php/sendungen.php?sendung=9175 https://www.planet-schule.de/sf/php/sendungen.php?sendung=91...
  - yc1010 11y ago
    here is an interesting fact: Greece lost 11% of their population in WW2, Germany lost 8%
  - mc32 11y ago
    No, it was destroyed. We relieved their debt because we didn't want them to have to take wheelbarrows full of money to buy loaves of bread as happened after the treaty of Versailles which plunged Germany into nationalism and anti-west sentiment and gave rise to the socialist regime which brought on WWII. And beside the infrastructure destruction there were the ravages of war, disease, psychological, nutrition, etc. Not to mention the obvious generation of men who died. A whole generation of men dead from warring.
    - bildung 11y ago
      > No, it was destroyed. No, it really wasn't :) Heres a documentary from German public television. The interesting part starts at 4:20. I hope you can hear the English language, it has been dubbed in German: https://www.planet-schule.de/sf/php/sendungen.php?sendung=9175 https://www.planet-schule.de/sf/php/sendungen.php?sendung=91...
bobcostas55 11y ago
A good counter: http://ftalphaville.ft.com/2015/07/08/2133806/lets-talk-about-the-1953-london-agreement-on-german-external-debts/ http://ftalphaville.ft.com/2015/07/08/2133806/lets-talk-abou...? Also let's not forget Greece got ~160bn euros in debt relief just 3 years ago.
- bildung 11y ago
  > Also let's not forget Greece got ~160bn euros in debt relief just 3 years ago. Let's also not forget that most of that debt did not exist a few years earlier. Yes, Greece had and has a massive tax evasion problem, and debt wasn't exactly low pre-crisis either. But most of the current debt is a result of bank bailouts: https://en.wikipedia.org/wiki/Greek_government-debt_crisis#/media/File:Greek_debt_and_EU_average_since_1977.png https://en.wikipedia.org/wiki/Greek_government-debt_crisis#/...
  - bobcostas55 11y ago
    I don't think that's an accurate view of things, the causal chain goes the other way. Banks had to be recapitalized because of the PSI, because the Greek default wiped them out. The bailouts were directly caused by the default. And in any case, they had no choice: without the Evil Bank Bailouts Greece would have been left literally without a banking system, that's not really an option.
- ThrowThrow2 11y ago
  And not forget that most debt repayments are spread so far into the future that they are not real anymore.
higherpurpose 11y ago
Giving the government tens or hundreds of billions of euro more will not solve the situation and will likely make it worse. The government can't manage that kind of money in an efficient way given the current levels of tax fraud and other kinds of corruption in the country right now. The EU would be much better off if it offered loans only to private individuals and (small) businesses, if it really wanted to help Greece. Taking a more "decentralized" approach would ensure the "waste" would be minimal from such loans.
CapitalistCartr 11y ago
Phillip Greenspun writes (accurately, I think): "Journalists keep referring to the years of “austerity” that Greece has endured. Government spending has been cut so much that it is now only 58.5 percent of GDP (heritage.org). What does a country that hasn’t suffered austerity spend? Singapore’s government clocks in at 14.4 percent (same source). How about a command-and-control centrally planned Communist dictatorship? China is at 25 percent. A socialist cradle-to-grave welfare state? Sweden is at 52 percent. Are the Heritage data wrong? If not, how is it possible that Greece continues to be cited as an example of a country where the government doesn’t spend enough?" http://blogs.law.harvard.edu/philg/2015/07/08/greek-austerity-government-spends-58-5-percent-of-gdp/ http://blogs.law.harvard.edu/philg/2015/07/08/greek-austerit...
- ojbyrne 11y ago
  As the comments mention, government spending in Greece went from 110 billion euros in 2007 to 88 billion euros in 2014. Unfortunately GDP went from 230 billion euros to 180 billion euros in the the same time period.
- daodedickinson 11y ago
  Countries with much worse pensions than Greece are being asked to bail out much more lavish Greek pensions — it is both moral hazard and injustice. Let's keep everybody fed and work on the medical aspect, too, and figure out how to make the Eurozone fair, which could be a minimum pension / benefit level of the lowest country, adjusted for local prices to other countries, and if you want something above that you can't demand that poorer nations pay for it.
  - deleted 11y ago
    [deleted]
  - icebraining 11y ago
    Countries with much worse pensions than Greece are being asked to bail out much more lavish Greek pensions Which countries are those? How much are they being asked to pay?
ThrowThrow2 11y ago
Discussion from yesterday on that NYT piece https://news.ycombinator.com/item?id=9850147 https://news.ycombinator.com/item?id=9850147
cuillevel3 11y ago
Yeah, let's split Greek into two countries and micro manage their regimes for a few decades. Seriously, if anybody got the money to do this.. it really helped Germany.
- jeremysmyth 11y ago
  To further emulate the German success, don't forget that you'd have to force severe indoctrination of the next several generations from school age up by requiring certain horrific historical retellings, and force similar thought policing by making certain forms of political support, speech, and activity, however peaceful, utterly illegal.
ikeboy 11y ago
>But the Greek economy has shrunk by a quarter. Its pensioners have been impoverished. Its banks are closed. That counts as suffering consequences. No sane government would emulate the Greek path. >Greece has done little to address its endemic economic mismanagement. But it has few incentives to do so if the fruits of economic improvements will flow to its creditors. So ........ I detect a contradiction between those two claims, that appears to go unaddressed in the article. Which is it? Does Greece have what to gain by improving things or not?
- crdoconnor 11y ago
  It does, but if it continues to follow Troika diktats nothing will ever improve. They realize that the policies foisted upon them are self destructive. That's why they're rebelling.
ThrowThrow2 11y ago
With all the US government pressure in this topic, and Syriza styled after Venezuela populists, I wonder why the US is not giving money to Venezuela but the EU should pay left populists.
ThrowThrow2 11y ago
I wonder if Greece will give 30% of it's country for the debt relief as Germany did when losing the war.
ThrowThrow2 11y ago
Greece already got a 50% debt relief which everyone seems to forget.
supernikita 11y ago
Germany had to loan money to pay the reparations the allies demanded for the losses in WW1. Despite all Debt Relief, the last payment on these loans was made in 2010. http://content.time.com/time/world/article/0,8599,2023140,00.html http://content.time.com/time/world/article/0,8599,2023140,00...
murbard2 11y ago
German debt relief came with the creditors rewriting the entire constitution. I think if Greece is willing to go for that, they can probably get themselves a deal!
PythonicAlpha 11y ago
As a German myself, I must admit that this is the case. The current attitude of Mrs. Merkel is popular in Germany and also other EU countries are mad about Greece, because they improved their finances with much effort and did not get that much care as Greece did. And yes, it is right, that Greece carries a lot of fault in this problem, since they forged their financial data. And I even think, that it was a big mistake, to take Greece into the Euro, because the country was and is not ready for it. But, I fear, that now dropping Greece, after five years of endurance -- and Greece took really a heavy load (eg. many pensions where cut 45% or more) -- will revert, what people thought, the Euro will bring: To unite Europe and prevent further wars. The financial crisis already has brought many new bad feelings between countries. When kicking out Greece now, because we insist in our own financial thinking (Greece has to privatize that, do that, do that, cut spending, cut, cut ... cut), we risk that next maybe Italy or Spain could fall and more and more bad feelings between countries. And we risk to loose the Euro in the long run. We should focus on a solution now, that last for a longer time and does not bring new problems in the future (as was done five years ago --- everybody knew, that the load was to much for Greece to carry, but nobody dared to look for a long-time solution). Of course, a new haircut (as everybody knows, will be necessary now) will cost more money -- but without a haircut, Greece will leave the Euro and all the money that was guaranteed from other EU countries will be lost. So even the short-time cost will be much higher -- the cost of bitter feelings and financial dogma. For Merkel it can also be the cost of votes (because she always looks for the voters -- but in this case, stupid looking for votes can be horrific for Europe as whole!) The long term costs can be even higher: Loose what was thought to be won by the European idea and it even can be, that we loose the Euro in the long run. I fear, by thinking, we must kick out Greece now, to limit the costs, we even have higher costs in the long run. We add another error on a long run of errors made in the Euro case.
- jacquesm 11y ago
  This is exactly the dilemma the politicians are wrestling with, that + re-election.
npalli 11y ago
If you look at the Greek situation from an American lens you will mistakenly consider debt forgiveness to be a solution to the Greek problem. There are two big issues with the Greek situation that go beyond the debt forgiveness issue 1. Even if substantial portion of the debt is forgiven, the Greek state runs a deficit with a corrupt clientalistic system built since 1980 that provides Denmark type social benefits with baltic-area economy. Unless this social structure is completely reworked in line with the fundamentals of the Greek economy, there will always be a mismatch and Greek will continue to need bailouts. BTW, this is Europe wide problem where old people voted massive benefits for themselves in the past thirty years and adjustment is needed. Greece happens to be the most extreme case of mismatch. As Angela Merkel says, Europe has 7% of the world population, 25% of the economy and 55% of the social programs. In contrast, the US is only 20% of social spending (if you don't include military). So the US lens is always towards more social spending. 2. Moral Hazard across the Eurozone, debt forgiveness for Syriza will embolden other left wing parties in Spain (Podemos) and Italy to make noise and 'democratically' choose to default on substantial portion of their debts. Spain and Italy are much larger economies with much larger debts, if they decide to default it will lead to massive problems in the Euro area. The German solution is to make the Greek situation so utterly painful (via Grexit if needed) that much bigger problems with Spain and Italy don't come down the line.
- TheOtherHobbes 11y ago
  Please explain why public spending for public benefit counts as "moral hazard", while public spending on bank bailouts, corporate welfare, and the opportunity costs of chimerical QE lending is a moral necessity? Or why the IMF is perfectly happy to lend money it will never recover to the bankrupt Ukraine, but considers Greece to be beyond the pale? Or why Germany - which has actually had more debt forgiven than any other country in Europe - has somehow managed to persuade everyone that it's a unique model of fiscal probity?
  - npalli 11y ago
    Public benefits such as this -- http://www.dailymail.co.uk/news/article-3148451/A-island-pretending-blind-benefits-8-500-pensioners-faked-aged-100-lawyers-claim-earn-just-12-000-New-book-reveals-Greeks-cheated-ruin.html http://www.dailymail.co.uk/news/article-3148451/A-island-pre... Plus greeks cannot collect taxes. Tax collectors are threatened ("break their legs") http://www.businessinsider.com/greeces-former-tax-collection-chief-harry-theoharis-explains-tax-evasion-problem-2015-7 http://www.businessinsider.com/greeces-former-tax-collection... Ukraine doesn't have a social system that approximates Northern Europe level percentage and they collect taxes. The debt that Germany owed was imposed by the Victors of WWI and WWII, it wasn't that Germany bankrupted itself into ruin by spending more and not collecting taxes. Pretty hilarious to see people compare Greek situation to Germany after world wars.
jackgavigan 11y ago
The roots of Greece's current problems lie in the failure of the EU to enforce its own rules. They overlooked the fact that the Greek government of the day cooked its books to meet the Maastricht criteria for joining the Euro, then failed to enforce the Stability and Growth Pact rules when France and Germany broke them. Eurozone interest rates were set at a low level to stimulate the post-reunification German economy, ignoring the risk of over-stimulating (and inflating asset bubbles) in the faster-growing Portugese, Irish, Greek and Spanish (PIGS) economies. The end result is that the German economy benefited, at the expense of the PIGS economies, which wound up tatters. Even today, the rule-breaking continues; Germany's current account surplus is in breach of the 6% limit defined in the EU's Macroeconomic Imbalance Procedure but the EU turns a blind eye. The first Greek bail-out deal "was about protecting German banks, but especially the French banks, from debt write offs", according to a former head of the German central bank: http://www.spiegel.de/international/germany/former-central-bank-head-karl-otto-poehl-bailout-plan-is-all-about-rescuing-banks-and-rich-greeks-a-695245.html http://www.spiegel.de/international/germany/former-central-b... But even if you decide to ignore how the current situation arose and whose fault it is, the simple fact is that Greece cannot repay the amount of debt it is now lumbered with. Even the IMF has sais that it's "unsustainable". The Greek economy has suffered far worse than any other country in Europe: https://pbs.twimg.com/media/CJYl1rTXAAAQvju.png https://pbs.twimg.com/media/CJYl1rTXAAAQvju.png The EU is partly responsible for that, and it is morally wrong, in my opinion, for them to refuse to face up to the fact that the only acceptable solution is to reduce the amount of debt that Greece has to repay (and/or extend its maturity to achieve the same result). EDIT: By the way, it's not like the Greeks have done nothing. They were on course to generate a primary budget surplus this year (i.e. before you take interest payments into account).
dang 11y ago
Those of you in this and related threads who have been abusing each other and each other's countries are behaving shamefully. There is no place for that on Hacker News. If you can't comment respectfully—which means sincerely taking extra care to be respectful, given how sensitive this topic is—then please don't comment here at all. Would everyone else please do the community a favor and flag such comments? You can do that (if your account has 30 or more karma) by clicking on a comment's timestamp to go to its page, then clicking 'flag' at the top. If that proves insufficient, and HN really is incapable of discussing this without devolving into nastiness and slurs, then we're simply going to start killing these stories when they come up, despite the importance and intellectual interest of the topic.
- yarper 11y ago
  I agree with this, I'd also like to add that discussions to the extent that Germany was or was not "destroyed" in WW2 and therefore did or did not "deserve" debt relief are horrifying. These threads seem to be a hotbed for people articulating their already formed opinions and cannot be read by anyone trying to establish what the facts actually are, which renders them useless to hn.

45 points by shawndumas 11y ago

Greece has already had quite a bit of debt relief, it just did not seem to make much of a difference. And as long as they don't have an IRS with teeth and are willing to go after the black money parked in .ch the current situation will likely remain. It's a structural Greek problem, not a German one.

yc1010 11y ago
The black economy is a symptom of the problem not the cause If you were Greek (Especially a young Greek) and had no prospects for a future and no hope for job in a country with highest unemployment (especially among the youngest) in EU, the black economy might be very attractive... Also I am sure the "I did not cause this debt hence why should I pay taxes for it" attitude might be very prevailent And do you blame them? You might feel all fine and mighty sitting in your chair reading HN (probably while at work) towards those "lazy" Greeks, but all you have to do is imagine yourself in the same situation. The Greek economy already has contracted more and for longer than the US during the Great Depression (which did not have a larger debt burden then), let that fact focus your mind, here is a graph http://i.imgur.com/LKQ6Mov.jpg http://i.imgur.com/LKQ6Mov.jpg Don't forget that the Great Depression years where the golden age for criminals in the US, like I said its symptom of the problem not the root cause.
- roel_v 11y ago
  The black economy is a symptom of the problem not the cause 8| What sort of weird alternate universe can this sort of statement come from? Are you claiming tax dodging would go away if there wasn't austerity? So, 8 years ago there was no tax evasion in Greece, or at least no more than average?
  - yc1010 11y ago
    Tax dodging will never go away, every economy has it, some companies from the likes of the US make an artform out of it especially the large majority funneling money via my country, Ireland. While I do not condone it, it is plainly obvious that the average person in Greece will have no "ethical" issues dodging taxes especially seeing that unemployment is high (hence black/gray economy might be the ONLY choice) and many people especially the younger generation did not rack up this debt and are the ones suffering the most, might rightly be asking themselves why they should be the ones suffering and paying for it via taxes.
    - roel_v 11y ago
      The very reason they're in this predicament is that they don't pay taxes. And no, it's not just the 'magnates' (whatever that means) - it's everybody. They can't collect on 15 billion dollars a year, if they had collected just half of that the last 5 years, there would now not be a problem at all! Look, it doesn't make sense to argue with you since you clearly have no idea what you're talking about (no, US companies do not 'dodge' tax through Ireland, they'd be raped by the IRS if what they did was illegal), it's just that populist blaring like yours seems to take over any discussion on this topic - which I have fully internalized after 20 years on the internet, and still sometimes it irks me.
      - jacquesm 11y ago
        It's funny how a very large part of this is because Greece is still for small transactions very much a cash society and that means that it is relatively easy to keep things off the books. The irony is that the current situation will make sure that nobody in Greece will ever trust a bank again and that in turn will make it a lot harder to collect those taxes. This won't blow over easily.
        kamaal 11y ago
        As some one who comes from a country where tax evasion is common(India), I can tell you Greece's problems have just begun. And its not like introducing plastic money or online transactions will fix anything here. By now most of the Greeks would be so mentally conditioned to not paying taxes, any attempt from the government to make them pay will come across as a being handed out a very unfair deal. Most will feel cheated and being asked to make sacrifices out of their way. In fact this is the reason why its so difficult to turn around things in such countries. The issue is not technology or government policy. When you have a whole generation of people grow up in such a ecosystem, these practices seep into your culture and everyday life. You can only undo them gradually overtime, and sometimes it takes 2-3 generations to get out of it. Another defining characteristic of a society where cash transactions are common - Every day corruption is omnipresent.
jerf 11y ago
"It's a structural Greek problem, not a German one." If that's so... and I generally agree it is... then why do people keep lending them money? Or perhaps rather, "lending" them money? I actually find that a rich and interesting question not amenable to snap answers. But it doesn't make anybody involved look very good or ethical. Call it old fashioned of me, but neither borrowing money that you basically know you can't be paid back, nor lending money you basically know can't pay back, is very ethical. (Perhaps that's why the discussions about who's at "fault" keeps going around so viciously... the answer isn't "A XOR B", the answer is the union of everybody involved.)
- tedunangst 11y ago
  Snap answer: solidarity.
- lmm 11y ago
  > If that's so... and I generally agree it is... then why do people keep lending them money? Or perhaps rather, "lending" them money? Most of the money that's being lent is for repaying existing debts that come due. Like any bankruptcy (which is what this is, formally declared or not), the ECB is trying to smooth out the process and ensure creditors are treated equitably. As for "keeping lending them money", the bailout loans are tied to political reforms intended to fix the problems. How else would you do it? If you're asking why creditors lent them money in the first place, a lot of that predates the financial crisis. A lot of it was before rampant fraud in Greek governmental accounting became apparent. And perhaps people had more faith in European integration and expected Germany to pay Greece's debts if they ever get into trouble.
  - jerf 11y ago
    "How else would you do it?" Me personally? Try a lot harder to not get into that problem in the first place. I don't mean that sarcastically or as a snap answer exactly. My views on debt are right now somewhat old fashioned, and they're getting older-fashioned pretty quickly, directly in response to current events. Humans have a long experience with debt, a lot of that experience has boiled down to "treat it as radioactive waste", and I'm increasingly unconvinced that all of our fancy financial tools have actually removed the underlying reasons for that millenia-old assessment, rather than pushing those reasons around with ever-more sophisticated tools into ever-more complicated cognitive blind spots, until one day it blows up even worse than it used to be able to. A sober analysis of a lot of the debt in the world right now is that it simply isn't going to be repaid, for mathematical reasons, and that's been true for quite a while now. (The crisis merely revealed what should already have been obvious, and it is obvious that many people still don't think this is true even after that.) And a lot of that debt has been moved behind things like "guaranteed pensions" and other things that are amenable to various forms of jiggery-pokery on the accounting. So, that's great and all, but what do we do now, right? Because no amount of wishing for changes in the past will cause them to manifest. To which my answer is basically sunk-cost fallacy, stop throwing good money after the bad. Political restructurings don't appear to be working, so stop that. But then, I'm an engineer, not a politician... "stop doing things that don't work" is very easy for me but might as well be a concept from the planet Vulcan for a politician, who is so full of nuance that they can talk themselves right out of reality and consider it not merely moral, but noble.
gizmo 11y ago
The bailout made a big difference to the banks who got the bailout money. It didn't help Greece's economy, because the bailout wasn't used as a stimulus package. The dysfunctional tax system in Greece isn't the cause of the crisis. But people keep bringing it up because once the people of Greece can be depicted as corrupt and lazy we can morally justify any amount of hardship we force on them. The problem with Greece is entirely structural. But the fundamental problem is that Greece doesn't have an economy that's strong enough to compete with northern Europe without substantial subsidies. Everything else is minor in comparison.
kamaal 11y ago
Its like a person is their late 40's, who was born into a very rich family and has now spent all their money to bankruptcy. Having not done any serious work all their lives and now expects friends and near family to continue to fund their life as it was, just because they think they are entitled to be rich regardless of their decisions and actions in life. You can give all the money to such people and they will only want more, it will fix nothing because they think they are 'entitled' to the free money. They will do no real work because they never have, and it will too painful to get off their high horse and realize they are subject to same standards as every one else in the world.
- jacquesm 11y ago
  Greeks are very hard working, that's not the problem here.
  - kamaal 11y ago
    Hard work and productivity are really two different things. They are sometimes the same, not always.

mc32 11y ago

What? Did Greece just emerge from the largest military conflict on the planet utterly destroyed? Or did they more or less mismanage their eco? Not collecting taxes and generous retirements (hair dressing considered hazardous as mining thus eligible for early retirement, for example) is not comparable to emerging battered and destroyed from the bloodiest conflict in history. And it's not as if their debt hasn't been restructured.

bildung 11y ago
> What? Did Greece just emerge from the largest military conflict on the planet utterly destroyed? No, but neither did Germany. In fact, despite bombings etc. the industrial infrastructure post-war was bigger than 1933 (because it was heavily built out during that period). edit: Here is a source from German public television (skip to 4:20): https://www.planet-schule.de/sf/php/sendungen.php?sendung=9175 https://www.planet-schule.de/sf/php/sendungen.php?sendung=91...
- yc1010 11y ago
  here is an interesting fact: Greece lost 11% of their population in WW2, Germany lost 8%
- mc32 11y ago
  No, it was destroyed. We relieved their debt because we didn't want them to have to take wheelbarrows full of money to buy loaves of bread as happened after the treaty of Versailles which plunged Germany into nationalism and anti-west sentiment and gave rise to the socialist regime which brought on WWII. And beside the infrastructure destruction there were the ravages of war, disease, psychological, nutrition, etc. Not to mention the obvious generation of men who died. A whole generation of men dead from warring.
  - bildung 11y ago
    > No, it was destroyed. No, it really wasn't :) Heres a documentary from German public television. The interesting part starts at 4:20. I hope you can hear the English language, it has been dubbed in German: https://www.planet-schule.de/sf/php/sendungen.php?sendung=9175 https://www.planet-schule.de/sf/php/sendungen.php?sendung=91...

bobcostas55 11y ago

A good counter: http://ftalphaville.ft.com/2015/07/08/2133806/lets-talk-about-the-1953-london-agreement-on-german-external-debts/ http://ftalphaville.ft.com/2015/07/08/2133806/lets-talk-abou...? Also let's not forget Greece got ~160bn euros in debt relief just 3 years ago.

bildung 11y ago
> Also let's not forget Greece got ~160bn euros in debt relief just 3 years ago. Let's also not forget that most of that debt did not exist a few years earlier. Yes, Greece had and has a massive tax evasion problem, and debt wasn't exactly low pre-crisis either. But most of the current debt is a result of bank bailouts: https://en.wikipedia.org/wiki/Greek_government-debt_crisis#/media/File:Greek_debt_and_EU_average_since_1977.png https://en.wikipedia.org/wiki/Greek_government-debt_crisis#/...
- bobcostas55 11y ago
  I don't think that's an accurate view of things, the causal chain goes the other way. Banks had to be recapitalized because of the PSI, because the Greek default wiped them out. The bailouts were directly caused by the default. And in any case, they had no choice: without the Evil Bank Bailouts Greece would have been left literally without a banking system, that's not really an option.
ThrowThrow2 11y ago
And not forget that most debt repayments are spread so far into the future that they are not real anymore.

higherpurpose 11y ago

Giving the government tens or hundreds of billions of euro more will not solve the situation and will likely make it worse. The government can't manage that kind of money in an efficient way given the current levels of tax fraud and other kinds of corruption in the country right now. The EU would be much better off if it offered loans only to private individuals and (small) businesses, if it really wanted to help Greece. Taking a more "decentralized" approach would ensure the "waste" would be minimal from such loans.

CapitalistCartr 11y ago

Phillip Greenspun writes (accurately, I think): "Journalists keep referring to the years of “austerity” that Greece has endured. Government spending has been cut so much that it is now only 58.5 percent of GDP (heritage.org). What does a country that hasn’t suffered austerity spend? Singapore’s government clocks in at 14.4 percent (same source). How about a command-and-control centrally planned Communist dictatorship? China is at 25 percent. A socialist cradle-to-grave welfare state? Sweden is at 52 percent. Are the Heritage data wrong? If not, how is it possible that Greece continues to be cited as an example of a country where the government doesn’t spend enough?" http://blogs.law.harvard.edu/philg/2015/07/08/greek-austerity-government-spends-58-5-percent-of-gdp/ http://blogs.law.harvard.edu/philg/2015/07/08/greek-austerit...

ojbyrne 11y ago
As the comments mention, government spending in Greece went from 110 billion euros in 2007 to 88 billion euros in 2014. Unfortunately GDP went from 230 billion euros to 180 billion euros in the the same time period.
daodedickinson 11y ago
Countries with much worse pensions than Greece are being asked to bail out much more lavish Greek pensions — it is both moral hazard and injustice. Let's keep everybody fed and work on the medical aspect, too, and figure out how to make the Eurozone fair, which could be a minimum pension / benefit level of the lowest country, adjusted for local prices to other countries, and if you want something above that you can't demand that poorer nations pay for it.
- deleted 11y ago
  [deleted]
- icebraining 11y ago
  Countries with much worse pensions than Greece are being asked to bail out much more lavish Greek pensions Which countries are those? How much are they being asked to pay?

ThrowThrow2 11y ago

Discussion from yesterday on that NYT piece https://news.ycombinator.com/item?id=9850147 https://news.ycombinator.com/item?id=9850147

cuillevel3 11y ago

Yeah, let's split Greek into two countries and micro manage their regimes for a few decades. Seriously, if anybody got the money to do this.. it really helped Germany.

jeremysmyth 11y ago
To further emulate the German success, don't forget that you'd have to force severe indoctrination of the next several generations from school age up by requiring certain horrific historical retellings, and force similar thought policing by making certain forms of political support, speech, and activity, however peaceful, utterly illegal.

ikeboy 11y ago

>But the Greek economy has shrunk by a quarter. Its pensioners have been impoverished. Its banks are closed. That counts as suffering consequences. No sane government would emulate the Greek path. >Greece has done little to address its endemic economic mismanagement. But it has few incentives to do so if the fruits of economic improvements will flow to its creditors. So ........ I detect a contradiction between those two claims, that appears to go unaddressed in the article. Which is it? Does Greece have what to gain by improving things or not?

crdoconnor 11y ago
It does, but if it continues to follow Troika diktats nothing will ever improve. They realize that the policies foisted upon them are self destructive. That's why they're rebelling.

ThrowThrow2 11y ago

With all the US government pressure in this topic, and Syriza styled after Venezuela populists, I wonder why the US is not giving money to Venezuela but the EU should pay left populists.

ThrowThrow2 11y ago

I wonder if Greece will give 30% of it's country for the debt relief as Germany did when losing the war.

ThrowThrow2 11y ago

Greece already got a 50% debt relief which everyone seems to forget.

supernikita 11y ago

Germany had to loan money to pay the reparations the allies demanded for the losses in WW1. Despite all Debt Relief, the last payment on these loans was made in 2010. http://content.time.com/time/world/article/0,8599,2023140,00.html http://content.time.com/time/world/article/0,8599,2023140,00...

murbard2 11y ago

German debt relief came with the creditors rewriting the entire constitution. I think if Greece is willing to go for that, they can probably get themselves a deal!

PythonicAlpha 11y ago

As a German myself, I must admit that this is the case. The current attitude of Mrs. Merkel is popular in Germany and also other EU countries are mad about Greece, because they improved their finances with much effort and did not get that much care as Greece did. And yes, it is right, that Greece carries a lot of fault in this problem, since they forged their financial data. And I even think, that it was a big mistake, to take Greece into the Euro, because the country was and is not ready for it. But, I fear, that now dropping Greece, after five years of endurance -- and Greece took really a heavy load (eg. many pensions where cut 45% or more) -- will revert, what people thought, the Euro will bring: To unite Europe and prevent further wars. The financial crisis already has brought many new bad feelings between countries. When kicking out Greece now, because we insist in our own financial thinking (Greece has to privatize that, do that, do that, cut spending, cut, cut ... cut), we risk that next maybe Italy or Spain could fall and more and more bad feelings between countries. And we risk to loose the Euro in the long run. We should focus on a solution now, that last for a longer time and does not bring new problems in the future (as was done five years ago --- everybody knew, that the load was to much for Greece to carry, but nobody dared to look for a long-time solution). Of course, a new haircut (as everybody knows, will be necessary now) will cost more money -- but without a haircut, Greece will leave the Euro and all the money that was guaranteed from other EU countries will be lost. So even the short-time cost will be much higher -- the cost of bitter feelings and financial dogma. For Merkel it can also be the cost of votes (because she always looks for the voters -- but in this case, stupid looking for votes can be horrific for Europe as whole!) The long term costs can be even higher: Loose what was thought to be won by the European idea and it even can be, that we loose the Euro in the long run. I fear, by thinking, we must kick out Greece now, to limit the costs, we even have higher costs in the long run. We add another error on a long run of errors made in the Euro case.

jacquesm 11y ago
This is exactly the dilemma the politicians are wrestling with, that + re-election.

npalli 11y ago

If you look at the Greek situation from an American lens you will mistakenly consider debt forgiveness to be a solution to the Greek problem. There are two big issues with the Greek situation that go beyond the debt forgiveness issue 1. Even if substantial portion of the debt is forgiven, the Greek state runs a deficit with a corrupt clientalistic system built since 1980 that provides Denmark type social benefits with baltic-area economy. Unless this social structure is completely reworked in line with the fundamentals of the Greek economy, there will always be a mismatch and Greek will continue to need bailouts. BTW, this is Europe wide problem where old people voted massive benefits for themselves in the past thirty years and adjustment is needed. Greece happens to be the most extreme case of mismatch. As Angela Merkel says, Europe has 7% of the world population, 25% of the economy and 55% of the social programs. In contrast, the US is only 20% of social spending (if you don't include military). So the US lens is always towards more social spending. 2. Moral Hazard across the Eurozone, debt forgiveness for Syriza will embolden other left wing parties in Spain (Podemos) and Italy to make noise and 'democratically' choose to default on substantial portion of their debts. Spain and Italy are much larger economies with much larger debts, if they decide to default it will lead to massive problems in the Euro area. The German solution is to make the Greek situation so utterly painful (via Grexit if needed) that much bigger problems with Spain and Italy don't come down the line.

TheOtherHobbes 11y ago
Please explain why public spending for public benefit counts as "moral hazard", while public spending on bank bailouts, corporate welfare, and the opportunity costs of chimerical QE lending is a moral necessity? Or why the IMF is perfectly happy to lend money it will never recover to the bankrupt Ukraine, but considers Greece to be beyond the pale? Or why Germany - which has actually had more debt forgiven than any other country in Europe - has somehow managed to persuade everyone that it's a unique model of fiscal probity?
- npalli 11y ago
  Public benefits such as this -- http://www.dailymail.co.uk/news/article-3148451/A-island-pretending-blind-benefits-8-500-pensioners-faked-aged-100-lawyers-claim-earn-just-12-000-New-book-reveals-Greeks-cheated-ruin.html http://www.dailymail.co.uk/news/article-3148451/A-island-pre... Plus greeks cannot collect taxes. Tax collectors are threatened ("break their legs") http://www.businessinsider.com/greeces-former-tax-collection-chief-harry-theoharis-explains-tax-evasion-problem-2015-7 http://www.businessinsider.com/greeces-former-tax-collection... Ukraine doesn't have a social system that approximates Northern Europe level percentage and they collect taxes. The debt that Germany owed was imposed by the Victors of WWI and WWII, it wasn't that Germany bankrupted itself into ruin by spending more and not collecting taxes. Pretty hilarious to see people compare Greek situation to Germany after world wars.

jackgavigan 11y ago

The roots of Greece's current problems lie in the failure of the EU to enforce its own rules. They overlooked the fact that the Greek government of the day cooked its books to meet the Maastricht criteria for joining the Euro, then failed to enforce the Stability and Growth Pact rules when France and Germany broke them. Eurozone interest rates were set at a low level to stimulate the post-reunification German economy, ignoring the risk of over-stimulating (and inflating asset bubbles) in the faster-growing Portugese, Irish, Greek and Spanish (PIGS) economies. The end result is that the German economy benefited, at the expense of the PIGS economies, which wound up tatters. Even today, the rule-breaking continues; Germany's current account surplus is in breach of the 6% limit defined in the EU's Macroeconomic Imbalance Procedure but the EU turns a blind eye. The first Greek bail-out deal "was about protecting German banks, but especially the French banks, from debt write offs", according to a former head of the German central bank: http://www.spiegel.de/international/germany/former-central-bank-head-karl-otto-poehl-bailout-plan-is-all-about-rescuing-banks-and-rich-greeks-a-695245.html http://www.spiegel.de/international/germany/former-central-b... But even if you decide to ignore how the current situation arose and whose fault it is, the simple fact is that Greece cannot repay the amount of debt it is now lumbered with. Even the IMF has sais that it's "unsustainable". The Greek economy has suffered far worse than any other country in Europe: https://pbs.twimg.com/media/CJYl1rTXAAAQvju.png https://pbs.twimg.com/media/CJYl1rTXAAAQvju.png The EU is partly responsible for that, and it is morally wrong, in my opinion, for them to refuse to face up to the fact that the only acceptable solution is to reduce the amount of debt that Greece has to repay (and/or extend its maturity to achieve the same result). EDIT: By the way, it's not like the Greeks have done nothing. They were on course to generate a primary budget surplus this year (i.e. before you take interest payments into account).

dang 11y ago

Those of you in this and related threads who have been abusing each other and each other's countries are behaving shamefully. There is no place for that on Hacker News. If you can't comment respectfully—which means sincerely taking extra care to be respectful, given how sensitive this topic is—then please don't comment here at all. Would everyone else please do the community a favor and flag such comments? You can do that (if your account has 30 or more karma) by clicking on a comment's timestamp to go to its page, then clicking 'flag' at the top. If that proves insufficient, and HN really is incapable of discussing this without devolving into nastiness and slurs, then we're simply going to start killing these stories when they come up, despite the importance and intellectual interest of the topic.

yarper 11y ago
I agree with this, I'd also like to add that discussions to the extent that Germany was or was not "destroyed" in WW2 and therefore did or did not "deserve" debt relief are horrifying. These threads seem to be a hotbed for people articulating their already formed opinions and cannot be read by anyone trying to establish what the facts actually are, which renders them useless to hn.