4 ms·

If they forgive some of their debt and they don't radically restructure their economy they will need to be bailed out over and over again. We have the same thin

by mianos 11y ago

If they forgive some of their debt and they don't radically restructure their economy they will need to be bailed out over and over again. We have the same thing with employment benefits on a micro-scale here in Australia, people become so used to free money they don't know any better because they have never seen any other system. Its hard to blame them because they don't know any different so they think it's normal.

vidarh 11y ago
They have restructured substantially. Enough so that they were on track for a substantial primary surplus. There's much more to do, but the primary problem for the last year has been managing the crushing debt load, not the Greek government.
- igravious 11y ago
  Agreed, they still need debt restructuring. Also the €zone framework needs simultaneous reconstructing, to route surpluses to places not doing so well. But that would be the beginnings of a real federal EU and European countries are too nationalistic for that which is a shame because Europe is going to fade into relative obscurity economically unless we can make this transition. Though perhaps this crisis presents the opportunity to kick-start that process, but it's a long shot, I'm pessimistic even though I do not want to be.
- anabis 11y ago
  There are different opinions on restructuring being enough. Still not having a land registry after starting in 1994 gives me a pause.
mianos 11y ago
ps. replying to my own comment, I'd like to point out I should have said, 'forgive some more of their debt'. Adding it as a ps, so I don't substantially change the context of the comments. They already got a 50% cut on their bond debt in 2011. Thus, over and over.
scarmig 11y ago
Eh, it's hard to feel too empathetic toward the Greek state, but this entire situation is a tragedy for the Greek people, and the Euro-elite are just as guilty as the Greek state for the status quo. It was always known that the Greek state was not up to par for the euro. They only got in because of a lot of shady dealings and extensive help from Goldman Sachs to mask the reality of their situation. The Euro-elite knew this at the time, but were willing to overlook it because of an idealistic commitment to a pan-European ideology. Yes, a can was obviously being kicked down the road, but the seed of an incipient crisis was a pro: when things got terrible enough, it'd allow for the fiscalization of Europe, which would be difficult to do absent a crisis but was a pre-requisite for a real United States of Europe, the end goal where national governments would all be subsumed by the rule of a cosmopolitan elite centered on Brussels. So money poured into Greece, because its bonds offered a higher interest rate than other bonds, and everyone figured, there's no way the Eurozone would allow Greece to default. And, for a long time, Europe tried its hardest to prevent a default, but never could build the political will that the radical transformation a permanent solution to the Euro-periphery issue would need. Note, though, that the primary benefactors of the bailouts and transfers were the holders of the toxic debt, debt that had always obviously been bad debt, and not Greek school teachers or pensioners, who bore the real pain of the reforms. German banks ended up a lot happier from the packages than anyone in Greece, and funneling the bailout funds for them through Greece was a kind of political money laundering. Obviously Greece has a messed up political culture, and even now it still needs more reforms. But it takes two to tango, and the European elite was plenty happy to dance with the corruption and malignancy of the Greek state when it suited their interests. At this point Greece needs to do what's best for the Greek people (though what that is is the big open question, and it's clear that this is a quest for the least of a couple different evils) and screw the interests of outsiders.
- RodericDay 11y ago
  I really liked the interfluidity summary [0], but I would like someone to break down this exchange a bit more for me: OP: > With respect to Greece, the precise thing that European elites did to set the current chain of events in motion was to replace private debt with public during the 2010 first “bailout of Greece”. Prior to that event, it was obvious that blame was multipolar. Here are the banks, in France, in Germany, that foolishly lent. Not just to Greece, but to Goldman’s synthetic CDOs and every other piece of idiot paper they could carry with low risk-weights [1]. In 2010, the EU, ECB, and IMF laundered a bailout of mostly French and German banks through the Greek fisc. Cash flowed into Greece only so it could flow out to rickety banks. Now, suddenly, the banks were absolved. There were very few bad loans left on the books of European lenders, everyone was clean, no bad actors at all. Except one. There were the institutions, the “troika”, clearly the good guys, so “helpful” with their generous offer of funds. And then there was Greece. What had been a mudwrestling match, everybody dirty, was transformed into mass of powdered wigs accusing a single filthy penitent (or, when the people with their savings in just-rescued banks decide to be generous, a petulant misbehaving child). poster "dlr" from the comments: > I don’t see how this is even close to a fair representation of the 2010-2012 Greek debt restructuring. 199.2b EUR of Greek debt was exchanged for 29.7b notes and 62.4b new Greek bonds. This was a 52% write-down, only using par value, except the new bonds were not valued worth par, because the new coupon was way below market. After the exchange, the new bonds traded at ~25c of new par and 6c of original par. When the EFSF later repurchased bonds from private owners, it paid 11.3b to retire 31.9b of debt. That is, 34c of the new par value of the bonds, or 17c of original par. Including the haircut on the aforementioned notes (which were EFSF notes and worth new par), private creditors ended up with about 25c on the dollar of what they lent. This is not “cash flowing into Greece so it could flow out to rickety banks.” It is the exact opposite. A near complete sovereign wipeout borne by private lenders. Who took these writedowns? Paribas, Commerzbank, Dexia, SocGen, RBS, Unicredit, Groupama, HSBC, Metlife, Allianz, Axa, DB, ING, Generali and many more all wrote down and realized losses on between 60-80% of what they lent to Greece. It’s true that some of these banks got liquidity support during the Euro crisis, but the Greek write-downs were ultimately born by the stakeholders of these banks. In fact, the only banks that were directly bailed out with respect to the Greek debt restructuring were the Greek banks. The largest holders of Greek debt were Greek banks. They were the only institutions who were undoubtedly doomed as a result of losses in the value of Greece’s sovereign dooms, and the stakeholders in those banks, especially depositors were blatantly saved. National Bank of Greece held 13.7b. Piraeus held 9.4b. Alpha held 3.7b. The capital injections, initially 23b euros, meant that Greek depositors were protected from what would otherwise have been inevitable losses due to enormous domestic bank holdings in Greek debt. Foreign banks and private holders actually took losses. The discussion continues on as people discuss the details, but it gets a bit too jargony to follow. No matter if the Greeks were forgiven 50% or 80% of debt already, it seems clear that the remainder is going to be impossible to pay off, so it doesn't change that much in terms of reactions, but I'm curious what is the truth behind this first 2010 bailout. I also keep imagining that we're gonna see a replay, with "Greeks" being "non-STEM student loan holders in the US" in the near future, so I'm doubly curious. [0] http://www.interfluidity.com/v2/5965.html http://www.interfluidity.com/v2/5965.html [1] "They knew the Greek state was sketchy. But precisely because it was sketchy, prior to the financial crisis its debt paid slightly higher interest rates than that of safer Eurozone sovereigns. European banking regulations attached zero risk weights to all EU sovereigns, rendering it nearly costless for banks to simply manufacture deposits to purchase sovereign debt."

by mianos 11y ago

vidarh 11y ago

They have restructured substantially. Enough so that they were on track for a substantial primary surplus. There's much more to do, but the primary problem for the last year has been managing the crushing debt load, not the Greek government.

igravious 11y ago
Agreed, they still need debt restructuring. Also the €zone framework needs simultaneous reconstructing, to route surpluses to places not doing so well. But that would be the beginnings of a real federal EU and European countries are too nationalistic for that which is a shame because Europe is going to fade into relative obscurity economically unless we can make this transition. Though perhaps this crisis presents the opportunity to kick-start that process, but it's a long shot, I'm pessimistic even though I do not want to be.
anabis 11y ago
There are different opinions on restructuring being enough. Still not having a land registry after starting in 1994 gives me a pause.

mianos 11y ago

ps. replying to my own comment, I'd like to point out I should have said, 'forgive some more of their debt'. Adding it as a ps, so I don't substantially change the context of the comments. They already got a 50% cut on their bond debt in 2011. Thus, over and over.

scarmig 11y ago

Eh, it's hard to feel too empathetic toward the Greek state, but this entire situation is a tragedy for the Greek people, and the Euro-elite are just as guilty as the Greek state for the status quo. It was always known that the Greek state was not up to par for the euro. They only got in because of a lot of shady dealings and extensive help from Goldman Sachs to mask the reality of their situation. The Euro-elite knew this at the time, but were willing to overlook it because of an idealistic commitment to a pan-European ideology. Yes, a can was obviously being kicked down the road, but the seed of an incipient crisis was a pro: when things got terrible enough, it'd allow for the fiscalization of Europe, which would be difficult to do absent a crisis but was a pre-requisite for a real United States of Europe, the end goal where national governments would all be subsumed by the rule of a cosmopolitan elite centered on Brussels. So money poured into Greece, because its bonds offered a higher interest rate than other bonds, and everyone figured, there's no way the Eurozone would allow Greece to default. And, for a long time, Europe tried its hardest to prevent a default, but never could build the political will that the radical transformation a permanent solution to the Euro-periphery issue would need. Note, though, that the primary benefactors of the bailouts and transfers were the holders of the toxic debt, debt that had always obviously been bad debt, and not Greek school teachers or pensioners, who bore the real pain of the reforms. German banks ended up a lot happier from the packages than anyone in Greece, and funneling the bailout funds for them through Greece was a kind of political money laundering. Obviously Greece has a messed up political culture, and even now it still needs more reforms. But it takes two to tango, and the European elite was plenty happy to dance with the corruption and malignancy of the Greek state when it suited their interests. At this point Greece needs to do what's best for the Greek people (though what that is is the big open question, and it's clear that this is a quest for the least of a couple different evils) and screw the interests of outsiders.

RodericDay 11y ago
I really liked the interfluidity summary [0], but I would like someone to break down this exchange a bit more for me: OP: > With respect to Greece, the precise thing that European elites did to set the current chain of events in motion was to replace private debt with public during the 2010 first “bailout of Greece”. Prior to that event, it was obvious that blame was multipolar. Here are the banks, in France, in Germany, that foolishly lent. Not just to Greece, but to Goldman’s synthetic CDOs and every other piece of idiot paper they could carry with low risk-weights [1]. In 2010, the EU, ECB, and IMF laundered a bailout of mostly French and German banks through the Greek fisc. Cash flowed into Greece only so it could flow out to rickety banks. Now, suddenly, the banks were absolved. There were very few bad loans left on the books of European lenders, everyone was clean, no bad actors at all. Except one. There were the institutions, the “troika”, clearly the good guys, so “helpful” with their generous offer of funds. And then there was Greece. What had been a mudwrestling match, everybody dirty, was transformed into mass of powdered wigs accusing a single filthy penitent (or, when the people with their savings in just-rescued banks decide to be generous, a petulant misbehaving child). poster "dlr" from the comments: > I don’t see how this is even close to a fair representation of the 2010-2012 Greek debt restructuring. 199.2b EUR of Greek debt was exchanged for 29.7b notes and 62.4b new Greek bonds. This was a 52% write-down, only using par value, except the new bonds were not valued worth par, because the new coupon was way below market. After the exchange, the new bonds traded at ~25c of new par and 6c of original par. When the EFSF later repurchased bonds from private owners, it paid 11.3b to retire 31.9b of debt. That is, 34c of the new par value of the bonds, or 17c of original par. Including the haircut on the aforementioned notes (which were EFSF notes and worth new par), private creditors ended up with about 25c on the dollar of what they lent. This is not “cash flowing into Greece so it could flow out to rickety banks.” It is the exact opposite. A near complete sovereign wipeout borne by private lenders. Who took these writedowns? Paribas, Commerzbank, Dexia, SocGen, RBS, Unicredit, Groupama, HSBC, Metlife, Allianz, Axa, DB, ING, Generali and many more all wrote down and realized losses on between 60-80% of what they lent to Greece. It’s true that some of these banks got liquidity support during the Euro crisis, but the Greek write-downs were ultimately born by the stakeholders of these banks. In fact, the only banks that were directly bailed out with respect to the Greek debt restructuring were the Greek banks. The largest holders of Greek debt were Greek banks. They were the only institutions who were undoubtedly doomed as a result of losses in the value of Greece’s sovereign dooms, and the stakeholders in those banks, especially depositors were blatantly saved. National Bank of Greece held 13.7b. Piraeus held 9.4b. Alpha held 3.7b. The capital injections, initially 23b euros, meant that Greek depositors were protected from what would otherwise have been inevitable losses due to enormous domestic bank holdings in Greek debt. Foreign banks and private holders actually took losses. The discussion continues on as people discuss the details, but it gets a bit too jargony to follow. No matter if the Greeks were forgiven 50% or 80% of debt already, it seems clear that the remainder is going to be impossible to pay off, so it doesn't change that much in terms of reactions, but I'm curious what is the truth behind this first 2010 bailout. I also keep imagining that we're gonna see a replay, with "Greeks" being "non-STEM student loan holders in the US" in the near future, so I'm doubly curious. [0] http://www.interfluidity.com/v2/5965.html http://www.interfluidity.com/v2/5965.html [1] "They knew the Greek state was sketchy. But precisely because it was sketchy, prior to the financial crisis its debt paid slightly higher interest rates than that of safer Eurozone sovereigns. European banking regulations attached zero risk weights to all EU sovereigns, rendering it nearly costless for banks to simply manufacture deposits to purchase sovereign debt."