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A lot of people are comparing this to the German writedown, which in someways is both apt and not apt. Its also important to note that there are no easy paths

A lot of people are comparing this to the German writedown, which in someways is both apt and not apt. Its also important to note that there are no easy paths out of this - money is not invented from nowhere. The Germans took a horrific beating at the end of World War II - whole cities (Dresden et al) were literally burned completely to the ground at the hand's of the creditor's planes. While it was the German people's fault to some extent, they were also realistically under a dictatorship when it happened and that had to be taken into account (not everyone or even a majority of people were in favor of the war). This is the same logic that applied during the first two Greek bailouts (and the 60% haircut the debt has already taken in the private sector) - the Greek people were mislead as to the fiscal state of their country and deserved some faith and leniency. However, after that, they have done very little to improve the fiscal structure in their company. EVEN WITHOUT ANY DEBT PAYMENTS, the country still is running a deficit because they are way over generous on their pensions, have way too many people working in government, and have a continuing rampant tax collection problem. This has gone on for 5 years since the start of the crisis and they haven't fixed it (or even close), and by not fixing it, have made the problem way worse. This needs to change now. They have proven they are not able to do it themselves, it threatens the whole currency, and therefore, like receivership for a bankrupt company, they need to have an external actor come in and do it for them. Or default and leave the currency. (Which is in my opinion what they should do.) This is not pretty - but that's reality - and the Greek people have earned it at this point by not electing leaders that have put them on a path to a sustainable fiscal budget. There is a lesson in there for all of us. EDIT: And there comes the predictable vote downs. I am honestly not anti-Greek, just trying to summarize the situation as someone with an economics background. EDIT2: This is also not "just the Germans" - there is also substantial baltic opposition to bailing out Greece without reforms happening first: http://www.ekathimerini.com/199040/article/ekathimerini/news/eurozones-poorer-nations-take-hard-line-on-greece http://www.ekathimerini.com/199040/article/ekathimerini/news...

timr 11y ago
"However, after that, they have done very little to improve the fiscal structure in their company. EVEN WITHOUT ANY DEBT PAYMENTS, the country still is running a deficit because they are way over generous on their pensions, have way too many people working in government, and have a continuing rampant tax collection problem." You know that the greek government was running a surplus as recently as 2013, right? Most of the "bailout" money never went to Greece -- it went straight to their creditors. Greece definitely borrowed too much, but it's just factually incorrect to say that they haven't improved their fiscal structure.
- outside1234 11y ago
  This is one of the key issues with just issuing more debt to "solve the issue" - paying the right hand with the left hand doesn't solve anything. The reason the money went back to the creditor country is that the interest payments were due and they did this to "kick the can" down the road on how sustainable those payments were. The can is down the road now and just throwing more money to Greece isn't going to solve anything. Honestly, I think Greece should just flip the bird to Europe and walk away from the debt. They should reintroduce their currency. They won't be able to get more than humanitarian assistance but this will give them the internal political will to balance their budget. Re: Surplus: Here is the data I am working off of: http://www.tutor2u.net/economics/revision-notes/a2macro-eu-greece3.png http://www.tutor2u.net/economics/revision-notes/a2macro-eu-g... No surpluses or even close - send a reference if you have different data - genuinely curious.
  - timr 11y ago
    Gross Government Debt is not the same thing as a budgetary deficit. The greeks had, through massive tax increases and spending cuts, achieved an annual surplus. They still had a huge amount of debt from prior deficits: http://www.reuters.com/article/2014/04/23/greece-primary-idUSB5N0N100B20140423 http://www.reuters.com/article/2014/04/23/greece-primary-idU... You'll see lots of whinging (mostly from Fortune, but also a few others) that this isn't a "real" surplus, but they're splitting hairs. The point is that the Greeks made a real positive change to their economy. They're just buried under a mountain of debt, and if Germany gave a flying fuck about keeping Greece in the EU, they'd be trying to find a way to restructure it -- as they did for Ireland.
    - jsnell 11y ago
      First, the graph you complained about is specifically showing large budget deficits for the last 14 years or so. It's the blue bars. You might think the data in that graph is somehow false, but at least it's very relevant data for this conversation. Second, there indeed all kinds of sources claiming there's been a primary surplus for years. It's also clear that Greece is paying very little interest (2.6-4.0% of GDP in 2014 depending on the source -- it's quite amazing that you can't get reliable facts on something like this!). Their debt is also continuing to increase rapidly, and now they're going to need another 80 billion bailout. This combination of supposed facts just doesn't add up. If there's a primary surplus and the interest payments are tiny, there should be either a fiscal surplus or at most a tiny fiscal deficit. And in that case there's no reason for the debt to grow. The easiest conclusion to see is that this is just the books being cooked once again. For example in 2013 that was a total of 9.5% of GDP in spending being ignored due to being supposedly non-recurring. (Not blaming Greece for this btw, it's been in the interest of the EU to pretend that the situation is somehow getting better and the plan is working). This rather suggests that forgiving the debt (not just, some but even all the debt) would do little to get them out of the whole. They'd still be running a deficit, and would just have to start going to debt once again.

timr 11y ago

"However, after that, they have done very little to improve the fiscal structure in their company. EVEN WITHOUT ANY DEBT PAYMENTS, the country still is running a deficit because they are way over generous on their pensions, have way too many people working in government, and have a continuing rampant tax collection problem." You know that the greek government was running a surplus as recently as 2013, right? Most of the "bailout" money never went to Greece -- it went straight to their creditors. Greece definitely borrowed too much, but it's just factually incorrect to say that they haven't improved their fiscal structure.

outside1234 11y ago
This is one of the key issues with just issuing more debt to "solve the issue" - paying the right hand with the left hand doesn't solve anything. The reason the money went back to the creditor country is that the interest payments were due and they did this to "kick the can" down the road on how sustainable those payments were. The can is down the road now and just throwing more money to Greece isn't going to solve anything. Honestly, I think Greece should just flip the bird to Europe and walk away from the debt. They should reintroduce their currency. They won't be able to get more than humanitarian assistance but this will give them the internal political will to balance their budget. Re: Surplus: Here is the data I am working off of: http://www.tutor2u.net/economics/revision-notes/a2macro-eu-greece3.png http://www.tutor2u.net/economics/revision-notes/a2macro-eu-g... No surpluses or even close - send a reference if you have different data - genuinely curious.
- timr 11y ago
  Gross Government Debt is not the same thing as a budgetary deficit. The greeks had, through massive tax increases and spending cuts, achieved an annual surplus. They still had a huge amount of debt from prior deficits: http://www.reuters.com/article/2014/04/23/greece-primary-idUSB5N0N100B20140423 http://www.reuters.com/article/2014/04/23/greece-primary-idU... You'll see lots of whinging (mostly from Fortune, but also a few others) that this isn't a "real" surplus, but they're splitting hairs. The point is that the Greeks made a real positive change to their economy. They're just buried under a mountain of debt, and if Germany gave a flying fuck about keeping Greece in the EU, they'd be trying to find a way to restructure it -- as they did for Ireland.
  - jsnell 11y ago
    First, the graph you complained about is specifically showing large budget deficits for the last 14 years or so. It's the blue bars. You might think the data in that graph is somehow false, but at least it's very relevant data for this conversation. Second, there indeed all kinds of sources claiming there's been a primary surplus for years. It's also clear that Greece is paying very little interest (2.6-4.0% of GDP in 2014 depending on the source -- it's quite amazing that you can't get reliable facts on something like this!). Their debt is also continuing to increase rapidly, and now they're going to need another 80 billion bailout. This combination of supposed facts just doesn't add up. If there's a primary surplus and the interest payments are tiny, there should be either a fiscal surplus or at most a tiny fiscal deficit. And in that case there's no reason for the debt to grow. The easiest conclusion to see is that this is just the books being cooked once again. For example in 2013 that was a total of 9.5% of GDP in spending being ignored due to being supposedly non-recurring. (Not blaming Greece for this btw, it's been in the interest of the EU to pretend that the situation is somehow getting better and the plan is working). This rather suggests that forgiving the debt (not just, some but even all the debt) would do little to get them out of the whole. They'd still be running a deficit, and would just have to start going to debt once again.