7 ms·

Greece debt crisis: Eurozone summit strikes deal

38 points by sampo 11y ago

vegancap 11y ago
It's a sticking plaster, delaying the inevitable. I don't suspect the 'new deal' will work and I think the growing discontent among the Greek people will continue to rise, especially under the measure of the latest deal. Greece will remain a protectorate and an insubordinate trouble child under the ECB's whip. Similar scenarios will likely play out in other southern European nation states in the next decade also.
- StavrosK 11y ago
  Why would the other southern European countries want to be in the EU at this point? There's not much to gain, and they're likely to also be made an example of if another financial crisis strikes.
  - icebraining 11y ago
    You mean in the Eurozone? There's plenty to gain from being in the EU.
    - deleted 11y ago
      [deleted]
    - smcl 11y ago
      True, but at this point joining the EU pretty much involves consenting to adopt the Euro. Only Denmark and the UK have an opt-out afaik, all the other EU countries are obliged to join
      - icebraining 11y ago
        I don't think anyone is interested in forcing countries to leave the EU if it's decided that they will leave the Euro.
        Tomte 11y ago
        No, Sweden does not have such an exception, they are required to join when they fulfil the requirements. They just exercise some creativity by making sure they don't meet the requirements.
        icebraining 11y ago
        Sorry, I deleted that part of my post (It read "UK, Denmark and Sweden").
        Tomte 11y ago
        No need to apologize. Especially since it's close enough to an exception to remember it as such. :-)
      - simpleigh 11y ago
        Although they don't seem to be in any rush - only 19 of 28 EU countries have joined the Euro according to https://en.wikipedia.org/wiki/Eurozone https://en.wikipedia.org/wiki/Eurozone .
      - mtrimpe 11y ago
        The Eurozone isn't necessarily that bad. The main thing is that you can't tax by printing currency anymore which is a really easy way to levy taxes. That means you have to have an efficient taxation apparatus, tax the rich and poor equitably and be very careful with borrowing. Greek's problem is that it isn't particularly strong in any of those and thus isn't really suited for being part of the Eurozone yet.
        wsc981 11y ago
        As it stands, keeping the 'poorer' countries in the Eurozone seems like a very bad idea. The main reason being that -unlike the USA- people in e.g. The Netherlands don't feel a connection with people from Spain and vice versa. People in the northern European countries don't even feel a connection with people in the countries close to them, even though the cultures are much closer aligned (in terms of sobriety, work-ethos, etc…) This I think is the main difference with the USA. The USA also has richer and poorer stats, but because of the shared language, history and culture, people in both the richer and the poorer states feel like a US citizen.
        deleted 11y ago
        [deleted]
  - johnchristopher 11y ago
    Remember: "There is no way to leave the EU once you are in." Or the Euro. Or the Eurozone. Or the EEC. Or the European Continent. Well, unless you have a really big motor engine.
    - StavrosK 11y ago
      "Unless Germany wants you out", I guess. The terms of the deal for Greece have been pretty onerous, you lose control of your currency with no equivalent upside. Sure, there are plenty of advantages to being in the EU, but the disadvantages seem bigger.
      - sasvari 11y ago
        being a member of the eurozone and being a member of the EU is still a difference. as the latter: Greece benefitted quite a bit from EU subsidies since joining. you can argue about if the same holds true for joining the eurozone.
      - mseebach 11y ago
        If Germany actually wanted Greece out, they would have been kicked out 3-5 years ago. Germany desperately wants Greece in, why do you think they keep negotiating? > The terms of the deal for Greece have been pretty onerous, you lose control of your currency with no equivalent upside. No upside? What do you call a decade of easy access to super cheap credit? Also, these terms are not unique to Greece, no other Euro-zone country has control over it's currency.
        gizmo 11y ago
        > What do you call a decade of easy access to super cheap credit? A poison pill. It's like giving free booze to an alcoholic. It's certainly not kindness.
        StavrosK 11y ago
        Exactly what gizmo said. It's the super-cheap credit that got us here...
- d-equivalence 11y ago
  Agreed. I'm Greek and I predict machetes in the streets in less than 1 year. If not that, the far right rising into power. Not sure which is worse.
  - sampo 11y ago
    > Not sure which is worse. Maybe you can have both?
  - StavrosK 11y ago
    I'd take the machetes. If Golden Dawn comes into power, it's going to be machetes for everyone, anyway.
  - pitt1980 11y ago
    what does "machetes in the streets" mean? I hope that was supposed to be marches and it auto-corrected
    - d-equivalence 11y ago
      Argentina 2001.
- alfapla 11y ago
  If the Greek don't like the deal they're free to leave the union.
  - gizmo 11y ago
    They can't. Not without support. It takes at least a year to create a new currency. They don't even have a functioning central bank. All businesses would have to adopt the new currency, all ATM machines, all government institutions. It's a huge project. Besides, without trust in the new currency it won't be worth anything. That trust has to come from the backing of a foreign institution.
    - mseebach 11y ago
      > It takes at least a year to create a new currency A new full blown currency, yes. A new temporary currency can be done in days, or weeks at most - East Germany did it. Slovakia did it. The process involves your current currency and a stamp. For businesses and institutions, it's much easier, everything is electronic anyway. Your bank accounts just switch over from EUR to XGD. > it won't be worth anything That's pretty much the point. Exports and tourism will be boosted and the debt will be re-denominated in the new currency (at a fraction of its EUR value) or outright defaulted on.
      - gizmo 11y ago
        A new currency would be worth much less than the Euro. That's a good thing. But it would still need to be more or less stable. I'm skeptical that an emergency currency would hold its value, because of capital flight. My "at least a year" claim is based on this: http://www.theguardian.com/commentisfree/2015/jul/10/germany-greek-pain-debt-relief-grexit http://www.theguardian.com/commentisfree/2015/jul/10/germany...
        bboreham 11y ago
        The capital that can fly, has flown.
        11y ago
- erkkie 11y ago
  What's the alternative?
  - ExpiredLink 11y ago
    Argentina
  - aembleton 11y ago
    Adopting a free floating currency so that countries aren't tied to other, more powerful countries but can instead let their economies grow at different speeds.
    - erkkie 11y ago
      I agree that would be the best economic theoretical model, is it in any way feasible realistically though? Politically? Even if ignoring the EU side of it (which is nontrivial for various reasons not limited to defense, the vision of the EU, etc), is there a magic wand that would make the Greek government not be populist and wasteful with their own currency?
      - aembleton 11y ago
        Politically it would be very difficult. The problem with the EU is that it fantasises about being a United States of Europe. The problem with this is that Europe is not united. We have different languages, culture and histories. This is also what make Europe a beautiful, culturally rich place. The political elites are trying to impose a one size fits all model across Europe which won't work because we are not really all that united. We don't have a common European demos that means that individual countries are fighting for their own interest and their is no overall strategy for Europe because the electorate doesn't really care about Europe, just what they get from being a part of it. We really need to go back to being a trading block and to remove all of the political dictact and interference. If we really must have political unions, then they need to be between countries that share a common language so that the people can challenge their political masters collectively. This would mean Britian and Ireland, Germany and Austria, France and Belgium.
- youngtaff 11y ago
  Problem is the Greek's were screwed over in the first 'bailout'. They should have defaulted on the debt they owed to the private sector banks but instead EU/IMF etc. convinced them to borrow money from them to pay off the banks.
  - vegancap 11y ago
    Exactly, every subsequent bail-out has further ensnared them.
icebraining 11y ago
I absolutely love this phrase: "I don't think the Greek people have been humiliated, nor that the other Europeans have lost face. It is a typical European arrangement."
- tormeh 11y ago
  I think of Brussels as a kind of rage and humble pie buffet. A bit of both for everyone.
k-mcgrady 11y ago
Can anyone explain how things got this bad? I've been following this but it's gone on so long now I've no idea why Greece got hit so hard relative to other countries in Europe. edit: Thanks for the explanations.
- deleted 11y ago
  [deleted]
- tim333 11y ago
  There's a long but entertaining article on it here http://www.vanityfair.com/news/2010/10/greeks-bearing-bonds-201010 http://www.vanityfair.com/news/2010/10/greeks-bearing-bonds-... Sample quotes: >"How in the hell is it possible for a member of the euro area to say the deficit was 3 percent of G.D.P. when it was really 15 percent?” a senior I.M.F. official asks. “How could you possibly do something like that?” >In just the past decade the wage bill of the Greek public sector has doubled, in real terms—and that number doesn’t take into account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. > The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true. “We have a railroad company which is bankrupt beyond comprehension,”
  - arethuza 11y ago
    I had posted a link to that and then removed it as although the article is highly entertaining it is also very one-sided. Now actual reality might be one-sided but I've sort of come to the view that how the Greeks got into this mess is almost irrelevant at this point and the focus should be on what concrete measures can be done to save Greece as a functioning country while giving the best possible deal to their creditors. Spending too much time on digging over the mistakes both sides made just leads to name calling and extreme polarization of arguments - look at previous discussion on HN on this topic.
    - tim333 11y ago
dbcooper 11y ago
Well, I guess this is what happens when you elect a bunch of clowns from the political fringe - no expertise, no negotiating ability, no realistic goals, no reasonable promises. This seems to be the worst deal offered to any Greek government yet, including the deal previously offered to Tsipras.
Zenst 11y ago
What I find worrying is that Greece like a few other countries are in the same situation, just that the other countries did all the things the loaners wanted and with that maintained credibility and credit lines so they could get them directly without having to be so public to get respectable rates. Those countries did not want Greece to leave as would then place them on the front line and focus and attention upon them in much the same way that the press will interview and talk with those at the front of any queue, be that Apple or any other reason. This is a queue that nobody wants to be at the front. But the sad part is, this whole process is self-fulfilling and talent leaves Greece and with all the uncertainty and worry put upon them, jobs kinda suffer and only snowballs the situation. Yet all the focus is upon churning that debt mountain and little or no focus upon rebuilding and aiding the country beyond the standard - sell this and that off without any regard for it is is right for Greece. In short this whole drama focuses upon mopping up a leaking water main and no focus at all upon resolving that water main and making sure it does not break. Yes the loaners made suggestions and some come about, many have not and all the diverging just only hurts the people more. FOr the Eurozone and the Euro currency if Greece leaves then the knock on effect could be very detrimental, but that is only because currently Greece is on the front line and those ripples and impact upon the Euro currency not negligible and I do wonder if the amount lost on the Euro and the volume of Euro's in circulation that that amount is greater than all the money Greece has ever owed. That nobody has worked out I can see and certainly a larger consideration that is being mooted. The Euro has lost around 18% against the American Dollar (USD) in the past year and 10% against the British Pound(GBP). Still not all atributable to Greece but when the UK/Britain is part the Euroland though not the currency then the impact and amount involved make it clear that the sooner the Greek problem is made a non-problem then the better. Though had they just written of the debt, the actual cost to the Euro-zone countries would perhaps been far less than it has been. Certainly would have had better news in that period and focus upon more productive things.
DangerousPie 11y ago
Does anybody have a good source that explains the reasoning behind all of the measures required from Greece? Many of them make sense to me in terms of removing clientelist structures (e.g. removing "protected" jobs, early retirement incentives, bringing collective bargaining laws in line with the rest of the EU). However, I don't really understand how increasing VAT or requiring advance payments on corporation tax is going to help in an already suffering economy. I presume this is all about increasing revenue by curbing tax avoidance and closing loopholes, but I can't really find a good source on this.
- tow21 11y ago
  VAT increases: AIUI it's more about tax simplification & transparency. At the moment there are so many exemptions and reductions to various VAT rates depending on type of goods/service/location etc that it becomes close to impossible to accurately determine tax liability and monitor tax avoidance, especially when you've got a generally underfunded tax collection agency. Not to mention as a business it's really hard to actually work out what you owe, even if you are trying to play by the rules. Effectively there's not much point in the existing VAT regime because it is so opaque, so if you're going to keep it at all you need to simplify somehow. Not denying it's likely to have a negative impact on consumption.
- mnglkhn2 11y ago
  The main problem is the small taxable base, meaning tax evasion in Greece is a serious problem. By increasing VAT you make sure that you actually increase tax revenue quick and in a uniform way across the entire population. It makes your budgeting and forecasting more predictable and reliable. Yes, it affects the poor the hardest, but at least you can actually budget an increase in aid programs. If it were to hope on plans to increase tax collection efforts it would then become a very unpredictable and lengthy setup. Plus, there are already Eastern European countries (see Romania, a country in the proximity of Greece) that applied the VAT increase measure starting with 2010 when it went up to 25% VAT. At the time, Romanian State workers had to also accept a pay cut of 30% of their salary. What I mean to say is that the austerity plan Greece is embarking on right now has been tried already and it will work. The problem is the political will of the Greek elite to give up their privileges.
Trombone12 11y ago
This was a surprisingly happy article about the deal, other venues have had a different tone (here represented by their headline): Bloomberg: "Greece Capitulates to Creditors’ Demands to Cling to Euro" euobserver: "Greece capitulates at EU summit"
adamc 11y ago
How sure is it that Tsipras will be able to get the Greek end passed? Seems rather different than what he campaigned on, so I'm wondering if his party will revolt.
- ExpiredLink 11y ago
  The deal is much better for them than bankruptcy.
somberi 11y ago
I got this from one of the many forwards but I think it explains bad-debt painted as good-debt cycle well, even though it is a tad superficial. This is not applicable only to the Greek tragedy, but also to Sub-prime and startups burning VC-money. MARY is the proprietor of a bar in Dublin. She realises that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar – she will go broke. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around about Mary's 'drink now, pay later' marketing strategy and, as a result, increasing numbers of customers flood into Mary's bar. Soon she has the largest sales volume for any bar in Dublin — all is starting to look rosy. By providing her customers freedom from immediate payment demands Mary gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Mary's gross sales volume increases massively. A young and dynamic vice-president at the local bank recognises that these customer debts constitute valuable future assets and increases Mary's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral. At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into Drinkbonds and Alkibonds. These securities are then bundled and traded on international security markets. The new investors don't really understand that the securities being sold to them as 'AAA' secured bonds are really the debts of unemployed alcoholics. They have had a 'rating house' certify they are of good quality. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses. One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Mary's bar. He so informs Mary. Mary then demands payment from her alcoholic patrons, but, being unemployed alcoholics, they cannot pay back their drinking debts. Since Mary cannot fulfil her loan obligations she is forced into bankruptcy. So she now is broke. The bar closes and the 11 employees lose their jobs. Overnight, Drinkbonds and Alkibonds drop in price by 90%. The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community. The suppliers of Mary's bar had granted her generous payment extensions and had invested their firms' pension funds in the various Bond securities. They find they are now faced with having to write-off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations. Her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers. Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion euro, no-stringsattached cash infusion from their cronies in government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Mary's bar.
dataker 11y ago
Using the problem to extend the problem. Pragmatism is a scarce resource in our time.
- ExpiredLink 11y ago
  The EU found a very pragmatic solution which spares Greece to become a second Argentina.
  - dataker 11y ago
    The situation is different with IMF, South American political culture and Mercosul. Still, assuming it was the case, Greece would just take more time to 'become a second Argentina'.
  - tormeh 11y ago
    Isn't the Argentinean case lauded as an example of successful default?
    - wsc981 11y ago
      I would argue it'll be prove more succesful eventually as well. It's better to start over from a clean slate (even if potential investors might become scared to invest in a defaulted country) compared to becoming perpetual financial slaves, which I think will be the future of Greece if they choose to stay in the Eurozone.
    - ExpiredLink 11y ago
      quite the contrary: http://dealbook.nytimes.com/2014/07/30/in-hedge-fund-argentina-finds-relentless-foe/ http://dealbook.nytimes.com/2014/07/30/in-hedge-fund-argenti...
  - cplanas 11y ago
    At this point, I think that many Greeks would happily accept being a second Argentina. I guess that this is what they wanted when they voted Syriza and when they voted NO in the referendum. Moreover, the outcome of the Argentinian crisis, after the "corralito", was not so extremely bad for Argentinian economy. This is the annual GDP growth of Argentina in the year of the crisis (2001) and the 6 years after: -4.4, -10.9, +8.8, +9.0, +9.2, +8.4, +8.0. Average: +4.01. This is the equivalent data for Greece starting in 2008: -0.4, -4.4, -5.4, -8.9, -6.6, -3.9, +0.8. Average: -4.1. I guess I don't need to comment further. Source: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
ExpiredLink 11y ago
This is the agreement document: http://t.co/4OeNBKtyqv http://t.co/4OeNBKtyqv
- _rpd 11y ago
  The transfer of $50bn in state assets to an "an independent fund that will monetize the assets through privatisations and other means" is a fairly significant feature of the deal that doesn't seem to be receiving a lot of attention.
  - ExpiredLink 11y ago
    $50bn is an overly optimistic assumption. $7bn is realistic.

38 points by sampo 11y ago

It's a sticking plaster, delaying the inevitable. I don't suspect the 'new deal' will work and I think the growing discontent among the Greek people will continue to rise, especially under the measure of the latest deal. Greece will remain a protectorate and an insubordinate trouble child under the ECB's whip. Similar scenarios will likely play out in other southern European nation states in the next decade also.

StavrosK 11y ago
Why would the other southern European countries want to be in the EU at this point? There's not much to gain, and they're likely to also be made an example of if another financial crisis strikes.
- icebraining 11y ago
  You mean in the Eurozone? There's plenty to gain from being in the EU.
  - deleted 11y ago
    [deleted]
  - smcl 11y ago
    True, but at this point joining the EU pretty much involves consenting to adopt the Euro. Only Denmark and the UK have an opt-out afaik, all the other EU countries are obliged to join
    - icebraining 11y ago
      I don't think anyone is interested in forcing countries to leave the EU if it's decided that they will leave the Euro.
      - Tomte 11y ago
        No, Sweden does not have such an exception, they are required to join when they fulfil the requirements. They just exercise some creativity by making sure they don't meet the requirements.
        icebraining 11y ago
        Sorry, I deleted that part of my post (It read "UK, Denmark and Sweden").
        Tomte 11y ago
        No need to apologize. Especially since it's close enough to an exception to remember it as such. :-)
    - simpleigh 11y ago
      Although they don't seem to be in any rush - only 19 of 28 EU countries have joined the Euro according to https://en.wikipedia.org/wiki/Eurozone https://en.wikipedia.org/wiki/Eurozone .
    - mtrimpe 11y ago
      The Eurozone isn't necessarily that bad. The main thing is that you can't tax by printing currency anymore which is a really easy way to levy taxes. That means you have to have an efficient taxation apparatus, tax the rich and poor equitably and be very careful with borrowing. Greek's problem is that it isn't particularly strong in any of those and thus isn't really suited for being part of the Eurozone yet.
      - wsc981 11y ago
        As it stands, keeping the 'poorer' countries in the Eurozone seems like a very bad idea. The main reason being that -unlike the USA- people in e.g. The Netherlands don't feel a connection with people from Spain and vice versa. People in the northern European countries don't even feel a connection with people in the countries close to them, even though the cultures are much closer aligned (in terms of sobriety, work-ethos, etc…) This I think is the main difference with the USA. The USA also has richer and poorer stats, but because of the shared language, history and culture, people in both the richer and the poorer states feel like a US citizen.
      - deleted 11y ago
        [deleted]
- johnchristopher 11y ago
  Remember: "There is no way to leave the EU once you are in." Or the Euro. Or the Eurozone. Or the EEC. Or the European Continent. Well, unless you have a really big motor engine.
  - StavrosK 11y ago
    "Unless Germany wants you out", I guess. The terms of the deal for Greece have been pretty onerous, you lose control of your currency with no equivalent upside. Sure, there are plenty of advantages to being in the EU, but the disadvantages seem bigger.
    - sasvari 11y ago
      being a member of the eurozone and being a member of the EU is still a difference. as the latter: Greece benefitted quite a bit from EU subsidies since joining. you can argue about if the same holds true for joining the eurozone.
    - mseebach 11y ago
      If Germany actually wanted Greece out, they would have been kicked out 3-5 years ago. Germany desperately wants Greece in, why do you think they keep negotiating? > The terms of the deal for Greece have been pretty onerous, you lose control of your currency with no equivalent upside. No upside? What do you call a decade of easy access to super cheap credit? Also, these terms are not unique to Greece, no other Euro-zone country has control over it's currency.
      - gizmo 11y ago
        > What do you call a decade of easy access to super cheap credit? A poison pill. It's like giving free booze to an alcoholic. It's certainly not kindness.
      - StavrosK 11y ago
        Exactly what gizmo said. It's the super-cheap credit that got us here...
d-equivalence 11y ago
Agreed. I'm Greek and I predict machetes in the streets in less than 1 year. If not that, the far right rising into power. Not sure which is worse.
- sampo 11y ago
  > Not sure which is worse. Maybe you can have both?
- StavrosK 11y ago
  I'd take the machetes. If Golden Dawn comes into power, it's going to be machetes for everyone, anyway.
- pitt1980 11y ago
  what does "machetes in the streets" mean? I hope that was supposed to be marches and it auto-corrected
  - d-equivalence 11y ago
    Argentina 2001.
alfapla 11y ago
If the Greek don't like the deal they're free to leave the union.
- gizmo 11y ago
  They can't. Not without support. It takes at least a year to create a new currency. They don't even have a functioning central bank. All businesses would have to adopt the new currency, all ATM machines, all government institutions. It's a huge project. Besides, without trust in the new currency it won't be worth anything. That trust has to come from the backing of a foreign institution.
  - mseebach 11y ago
    > It takes at least a year to create a new currency A new full blown currency, yes. A new temporary currency can be done in days, or weeks at most - East Germany did it. Slovakia did it. The process involves your current currency and a stamp. For businesses and institutions, it's much easier, everything is electronic anyway. Your bank accounts just switch over from EUR to XGD. > it won't be worth anything That's pretty much the point. Exports and tourism will be boosted and the debt will be re-denominated in the new currency (at a fraction of its EUR value) or outright defaulted on.
    - gizmo 11y ago
      A new currency would be worth much less than the Euro. That's a good thing. But it would still need to be more or less stable. I'm skeptical that an emergency currency would hold its value, because of capital flight. My "at least a year" claim is based on this: http://www.theguardian.com/commentisfree/2015/jul/10/germany-greek-pain-debt-relief-grexit http://www.theguardian.com/commentisfree/2015/jul/10/germany...
      - bboreham 11y ago
        The capital that can fly, has flown.
      - 11y ago
erkkie 11y ago
What's the alternative?
- ExpiredLink 11y ago
  Argentina
- aembleton 11y ago
  Adopting a free floating currency so that countries aren't tied to other, more powerful countries but can instead let their economies grow at different speeds.
  - erkkie 11y ago
    I agree that would be the best economic theoretical model, is it in any way feasible realistically though? Politically? Even if ignoring the EU side of it (which is nontrivial for various reasons not limited to defense, the vision of the EU, etc), is there a magic wand that would make the Greek government not be populist and wasteful with their own currency?
    - aembleton 11y ago
      Politically it would be very difficult. The problem with the EU is that it fantasises about being a United States of Europe. The problem with this is that Europe is not united. We have different languages, culture and histories. This is also what make Europe a beautiful, culturally rich place. The political elites are trying to impose a one size fits all model across Europe which won't work because we are not really all that united. We don't have a common European demos that means that individual countries are fighting for their own interest and their is no overall strategy for Europe because the electorate doesn't really care about Europe, just what they get from being a part of it. We really need to go back to being a trading block and to remove all of the political dictact and interference. If we really must have political unions, then they need to be between countries that share a common language so that the people can challenge their political masters collectively. This would mean Britian and Ireland, Germany and Austria, France and Belgium.
youngtaff 11y ago
Problem is the Greek's were screwed over in the first 'bailout'. They should have defaulted on the debt they owed to the private sector banks but instead EU/IMF etc. convinced them to borrow money from them to pay off the banks.
- vegancap 11y ago
  Exactly, every subsequent bail-out has further ensnared them.

icebraining 11y ago

I absolutely love this phrase: "I don't think the Greek people have been humiliated, nor that the other Europeans have lost face. It is a typical European arrangement."

tormeh 11y ago
I think of Brussels as a kind of rage and humble pie buffet. A bit of both for everyone.

k-mcgrady 11y ago

Can anyone explain how things got this bad? I've been following this but it's gone on so long now I've no idea why Greece got hit so hard relative to other countries in Europe. edit: Thanks for the explanations.

deleted 11y ago
[deleted]
tim333 11y ago
There's a long but entertaining article on it here http://www.vanityfair.com/news/2010/10/greeks-bearing-bonds-201010 http://www.vanityfair.com/news/2010/10/greeks-bearing-bonds-... Sample quotes: >"How in the hell is it possible for a member of the euro area to say the deficit was 3 percent of G.D.P. when it was really 15 percent?” a senior I.M.F. official asks. “How could you possibly do something like that?” >In just the past decade the wage bill of the Greek public sector has doubled, in real terms—and that number doesn’t take into account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. > The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true. “We have a railroad company which is bankrupt beyond comprehension,”
- arethuza 11y ago
  I had posted a link to that and then removed it as although the article is highly entertaining it is also very one-sided. Now actual reality might be one-sided but I've sort of come to the view that how the Greeks got into this mess is almost irrelevant at this point and the focus should be on what concrete measures can be done to save Greece as a functioning country while giving the best possible deal to their creditors. Spending too much time on digging over the mistakes both sides made just leads to name calling and extreme polarization of arguments - look at previous discussion on HN on this topic.
  - tim333 11y ago

dbcooper 11y ago

Well, I guess this is what happens when you elect a bunch of clowns from the political fringe - no expertise, no negotiating ability, no realistic goals, no reasonable promises. This seems to be the worst deal offered to any Greek government yet, including the deal previously offered to Tsipras.

Zenst 11y ago

What I find worrying is that Greece like a few other countries are in the same situation, just that the other countries did all the things the loaners wanted and with that maintained credibility and credit lines so they could get them directly without having to be so public to get respectable rates. Those countries did not want Greece to leave as would then place them on the front line and focus and attention upon them in much the same way that the press will interview and talk with those at the front of any queue, be that Apple or any other reason. This is a queue that nobody wants to be at the front. But the sad part is, this whole process is self-fulfilling and talent leaves Greece and with all the uncertainty and worry put upon them, jobs kinda suffer and only snowballs the situation. Yet all the focus is upon churning that debt mountain and little or no focus upon rebuilding and aiding the country beyond the standard - sell this and that off without any regard for it is is right for Greece. In short this whole drama focuses upon mopping up a leaking water main and no focus at all upon resolving that water main and making sure it does not break. Yes the loaners made suggestions and some come about, many have not and all the diverging just only hurts the people more. FOr the Eurozone and the Euro currency if Greece leaves then the knock on effect could be very detrimental, but that is only because currently Greece is on the front line and those ripples and impact upon the Euro currency not negligible and I do wonder if the amount lost on the Euro and the volume of Euro's in circulation that that amount is greater than all the money Greece has ever owed. That nobody has worked out I can see and certainly a larger consideration that is being mooted. The Euro has lost around 18% against the American Dollar (USD) in the past year and 10% against the British Pound(GBP). Still not all atributable to Greece but when the UK/Britain is part the Euroland though not the currency then the impact and amount involved make it clear that the sooner the Greek problem is made a non-problem then the better. Though had they just written of the debt, the actual cost to the Euro-zone countries would perhaps been far less than it has been. Certainly would have had better news in that period and focus upon more productive things.

DangerousPie 11y ago

Does anybody have a good source that explains the reasoning behind all of the measures required from Greece? Many of them make sense to me in terms of removing clientelist structures (e.g. removing "protected" jobs, early retirement incentives, bringing collective bargaining laws in line with the rest of the EU). However, I don't really understand how increasing VAT or requiring advance payments on corporation tax is going to help in an already suffering economy. I presume this is all about increasing revenue by curbing tax avoidance and closing loopholes, but I can't really find a good source on this.

tow21 11y ago
VAT increases: AIUI it's more about tax simplification & transparency. At the moment there are so many exemptions and reductions to various VAT rates depending on type of goods/service/location etc that it becomes close to impossible to accurately determine tax liability and monitor tax avoidance, especially when you've got a generally underfunded tax collection agency. Not to mention as a business it's really hard to actually work out what you owe, even if you are trying to play by the rules. Effectively there's not much point in the existing VAT regime because it is so opaque, so if you're going to keep it at all you need to simplify somehow. Not denying it's likely to have a negative impact on consumption.
mnglkhn2 11y ago
The main problem is the small taxable base, meaning tax evasion in Greece is a serious problem. By increasing VAT you make sure that you actually increase tax revenue quick and in a uniform way across the entire population. It makes your budgeting and forecasting more predictable and reliable. Yes, it affects the poor the hardest, but at least you can actually budget an increase in aid programs. If it were to hope on plans to increase tax collection efforts it would then become a very unpredictable and lengthy setup. Plus, there are already Eastern European countries (see Romania, a country in the proximity of Greece) that applied the VAT increase measure starting with 2010 when it went up to 25% VAT. At the time, Romanian State workers had to also accept a pay cut of 30% of their salary. What I mean to say is that the austerity plan Greece is embarking on right now has been tried already and it will work. The problem is the political will of the Greek elite to give up their privileges.

Trombone12 11y ago

This was a surprisingly happy article about the deal, other venues have had a different tone (here represented by their headline): Bloomberg: "Greece Capitulates to Creditors’ Demands to Cling to Euro" euobserver: "Greece capitulates at EU summit"

adamc 11y ago

How sure is it that Tsipras will be able to get the Greek end passed? Seems rather different than what he campaigned on, so I'm wondering if his party will revolt.

ExpiredLink 11y ago
The deal is much better for them than bankruptcy.

somberi 11y ago

I got this from one of the many forwards but I think it explains bad-debt painted as good-debt cycle well, even though it is a tad superficial. This is not applicable only to the Greek tragedy, but also to Sub-prime and startups burning VC-money. MARY is the proprietor of a bar in Dublin. She realises that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar – she will go broke. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around about Mary's 'drink now, pay later' marketing strategy and, as a result, increasing numbers of customers flood into Mary's bar. Soon she has the largest sales volume for any bar in Dublin — all is starting to look rosy. By providing her customers freedom from immediate payment demands Mary gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Mary's gross sales volume increases massively. A young and dynamic vice-president at the local bank recognises that these customer debts constitute valuable future assets and increases Mary's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral. At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into Drinkbonds and Alkibonds. These securities are then bundled and traded on international security markets. The new investors don't really understand that the securities being sold to them as 'AAA' secured bonds are really the debts of unemployed alcoholics. They have had a 'rating house' certify they are of good quality. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses. One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Mary's bar. He so informs Mary. Mary then demands payment from her alcoholic patrons, but, being unemployed alcoholics, they cannot pay back their drinking debts. Since Mary cannot fulfil her loan obligations she is forced into bankruptcy. So she now is broke. The bar closes and the 11 employees lose their jobs. Overnight, Drinkbonds and Alkibonds drop in price by 90%. The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community. The suppliers of Mary's bar had granted her generous payment extensions and had invested their firms' pension funds in the various Bond securities. They find they are now faced with having to write-off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations. Her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers. Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion euro, no-stringsattached cash infusion from their cronies in government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Mary's bar.

dataker 11y ago

Using the problem to extend the problem. Pragmatism is a scarce resource in our time.

ExpiredLink 11y ago
The EU found a very pragmatic solution which spares Greece to become a second Argentina.
- dataker 11y ago
  The situation is different with IMF, South American political culture and Mercosul. Still, assuming it was the case, Greece would just take more time to 'become a second Argentina'.
- tormeh 11y ago
  Isn't the Argentinean case lauded as an example of successful default?
  - wsc981 11y ago
    I would argue it'll be prove more succesful eventually as well. It's better to start over from a clean slate (even if potential investors might become scared to invest in a defaulted country) compared to becoming perpetual financial slaves, which I think will be the future of Greece if they choose to stay in the Eurozone.
  - ExpiredLink 11y ago
    quite the contrary: http://dealbook.nytimes.com/2014/07/30/in-hedge-fund-argentina-finds-relentless-foe/ http://dealbook.nytimes.com/2014/07/30/in-hedge-fund-argenti...
- cplanas 11y ago
  At this point, I think that many Greeks would happily accept being a second Argentina. I guess that this is what they wanted when they voted Syriza and when they voted NO in the referendum. Moreover, the outcome of the Argentinian crisis, after the "corralito", was not so extremely bad for Argentinian economy. This is the annual GDP growth of Argentina in the year of the crisis (2001) and the 6 years after: -4.4, -10.9, +8.8, +9.0, +9.2, +8.4, +8.0. Average: +4.01. This is the equivalent data for Greece starting in 2008: -0.4, -4.4, -5.4, -8.9, -6.6, -3.9, +0.8. Average: -4.1. I guess I don't need to comment further. Source: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG

ExpiredLink 11y ago

This is the agreement document: http://t.co/4OeNBKtyqv http://t.co/4OeNBKtyqv

_rpd 11y ago
The transfer of $50bn in state assets to an "an independent fund that will monetize the assets through privatisations and other means" is a fairly significant feature of the deal that doesn't seem to be receiving a lot of attention.
- ExpiredLink 11y ago
  $50bn is an overly optimistic assumption. $7bn is realistic.