18 ms·

Greek Debt Crisis Deal Is Reached, but Long Road Remains

• kazinator 11y ago
  Can the homeland of Archimedes return to buoyancy? Edit: I am satisfied with zero points (a circle!) for this comment, which seems fair. I therefore implore you good people, "noli turbare circulus meus!"
• discardorama 11y ago
  Ignorance alert: I'm no economist nor an European. Since Greece's economy has been in the doldrums for a while, I'm wondering why don't European powerhouses (like Germany) move some manufacturing there? Greece is a popular tourist destination; so how come I'm not hearing of lots of outside money moving in to buy hotels, resorts, etc.?
  • hartator 11y ago
    Corruption. It's not a coincidence that money had vanished. German manufactures will face extortion that will draw away any perks provided by low cost of living.
  • zaf 11y ago
    > so how come I'm not hearing of lots of outside money moving in to buy hotels, resorts, etc.? In the leisure industry that'e been happening big time on the Premium level for the last 10 years and now slowly at the Luxury level. As for European/Global industrial powerhouses it's always been the red tape and government agency middle men that has been the main friction for moving in. Whats happening is that these hassles are being removed as Greece gets more in line with European regulations.
    • deleted 11y ago
      [deleted]
  • derriz 11y ago
    Greece is quite corrupt by western standards. Their previous minister for defense is serving jail time for bribery. Politics and society are based on clientism and patronage rather than rules and an independent legal system. This is why tax compliance is so low. Even the ownership of land is murky (they've spent 20 years and 100m of EU grant money attempting to build a basic land registry with little to show for the money). So without connections it's quite a hostile environment to operate a business. Edit: seems I'm getting downvoted for some reason. So here are some links: http://openeurope.org.uk/blog/reforming-greece-easier-said-done-never-ending-case-land-registry/ http://openeurope.org.uk/blog/reforming-greece-easier-said-d... http://www.nytimes.com/2013/03/05/world/europe/former-greek-defense-minister-convicted-in-corruption-case.html http://www.nytimes.com/2013/03/05/world/europe/former-greek-... http://www.transparency.org/cpi2014/results http://www.transparency.org/cpi2014/results
    • grey-area 11y ago
      The current minister of finance in Germany had to resign after accepting 100,000 DM from an arms dealer, and is director of The Institution for Growth which he suggested 50B in Greek assets be transferred to. More blatant corruption would be hard to find. Yet somehow he has the chutzpah to lecture Greece on financial probity. https://www.kfw.de/KfW-Group/About-KfW/Vorstand-und-Gremien/Verwaltungsrat-und-seine-Ausschüsse/ https://www.kfw.de/KfW-Group/About-KfW/Vorstand-und-Gremien/...
      • east2west 11y ago
        I know you are being rhetorical but even New York Times would agree the Greek government is more corrupt than the German government. Some level of corruption is inevitable in every ruling class; an old Chinese saying is that pure water has no fish: no one will work in a graft-free institution. Your rhetorics is not helpful at the current critical juncture; cooler heads must prevail. It is far more important to consider whether the existing economic, financial, and political arrangement is sustainable and whether Greeks may be better off with a clean slate. A massive European aid program is necessary in any case and the current level of Greek debt is unrealistic. Why not acknowledge the facts and spend money on people to help them get back on their feet and at least reap political good-will, which is sorely lacking right now. Muddling through has not worked so far. If a fourth bailout becomes necessary, it will be a political earthquake with strategic implication for the rest of the world. God, I hope it does not come to pass.
  • return0 11y ago
    1) It's expensive. Greek industry itself has moved to the balkans, and china. Many greek businesses run through cyprus to survive (low tax). 2) laws not being enforced in places where they should. 3) lets just say, the greeks have been spoiled by a decade of easy lending and dont have the greatest work ethic. 4) Many hotel chains have been sold in the past decade. Tourism doesn't make as much as you think.
• nugget 11y ago
  All they did was kick the can down the road for the 32nd time. This is the most boring sovereign default in history.
  • hartator 11y ago
    Yes, I feel it will never end. Detroit is almost the size of the greek economy (~ 200 billions USD vs ~ 242 billions USD) and had gone bankrupt without any major waves.
    • dotnetchris 11y ago
      other than it is now a complete and utter wasteland in comparison to the rest of the US?
      • foobarian 11y ago
        Yeah but which is the cause and which is the effect?
      • vonmoltke 11y ago
        It was such before the bankruptcy. In fact, the flight of people and businesses out of the city, and resulting collapse in tax base, is part of what caused the bankruptcy.
      • msandford 11y ago
        It was headed that way before the bankruptcy, though. People moving out caused the default, not the default causing people to move out. The point is that Detroit going broke didn't bring all the capital markets in the US to their knees. It's definitely not good that Detroit went broke. But it didn't break the US economy.
      • mikeash 11y ago
        That happened well before. The bankruptcy was the result, not the cause, of Detroit's decline. Note that "wasteland" is exaggerated. Certainly there are a lot of abandoned buildings and neighborhoods, but many places are still thriving. It's not what it once was, but there's still a lot going on. Seems that there are a lot of stakeholders who are care a lot more about not having Greece default than was the case for Detroit, while at the same time nobody has enough power to really make anybody do anything. So Greece is coming down to a very long and drawn-out series of negotiations where nobody can put their foot down and say, look, here are the lines you can't cross, and here's where you're allowed some flexibility. Figure it out. With Detroit, it all happened in an environment with a strong legal system that could keep the various parties under control. The fact that federal (and even state) benefits aren't affected by Detroit's finances no doubt helps a lot too. No matter what happened with Detroit, 70-year-old retired autoworkers living there would continue to receive Social Security. That simplifies things a lot since there's a backstop for how bad things can get in the worst case.
• civilian 11y ago
  Greece really needs to get rid of their occupational licenses. It's great for the people who are already licensed, but it's just a drag on the economy: http://www.nytimes.com/2010/10/15/world/europe/15greece.html http://www.nytimes.com/2010/10/15/world/europe/15greece.html
  • guelo 11y ago
    25% of German workers require an occupational license.
    • civilian 11y ago
      To compare, roughly 30% of the US require an occupational license. Germany's more free-market than the US in this regard. Weird, right? I couldn't find good numbers on what % of jobs in Greece require a professional license.
    • peterfirefly 11y ago
      And Germany would be much better off without that.
    • radu_floricica 11y ago
      As a matter of principle, there is a difference between: - you need expertise in order to be able to safely do X: take these exams and you're certified - the state sells a limited number of licenses in order to create artificial shortage, usually combined with guaranteed profits, like the 35% profit in the link. The certification is just a piece of paper and only loosely related to a set of exams.
• ZenoArrow 11y ago
  This is really reckless, I hope the Greek government rejects this deal. The debt is already beyond what Greece can pay, unemployment is very high, and yet the plan is to combine more debt and more austerity. This is nothing less than a power grab, there's no interest in a strong Greek economy before its public infrastructure has been sold off. I hope the Greek government has the guts to go bankrupt. It'd be a short term loss with a long term gain. It's not like the creditors have to lose out, Argentina showed that by paying off its debts after their currency issues. Similarly, savings could be protected by freezing their value and offering to pay the equivalent in the new currency (assuming Greece would be required to leave the Euro).
  • rsync 11y ago
    "I hope the Greek government has the guts to go bankrupt. It'd be a short term loss with a long term gain. It's not like the creditors have to lose out, Argentina showed that by paying off its debts after their currency issues." The confusing part is that there is a very recent, very relevant precedent that was set by Iceland and for some reason that course of action is completely off the table. I don't know why. It appears to have worked very well for Iceland.
    • tptacek 11y ago
      Iceland isn't part of the Eurozone, is it?
      • kawera 11y ago
        No, it isn't.
        • tptacek 11y ago
          Then how are the situations comparable? Iceland had a bank crisis triggered by a speculative bubble produced by poorly managed deregulation. It imposed capital controls, was bailed out by the IMF, and took on a crapload of debt in the process, which it is paying off. All this was managed by Iceland's central bank, which controls Iceland's own currency. Greece has multiple structural flaws and an economy that does not appear compatible with the Eurozone, while being locked into the monetary policy of Germany and France, who effectively control the ECB. The only thing these events seem to have in common is that they were economic crises. Iceland's problems were acute; Greece's chronic. Iceland's had a single cause, Greece many. Iceland controls its monetary policy, Greece signed that over to the Eurozone. Iceland got assistance from the IMF, Greece requires ongoing assistance from the ECB. Iceland is paying off its debts, Greece is (it seems apparent) never going to do that.
• drjesusphd 11y ago
  Can someone answer this simple question: why do Greek banks have no money? They are private companies and are not the ones that defaulted.
  • revelation 11y ago
    The ECB has been keeping Greek banks alive for many months now. If you missed the news, there are long lines at ATMs and plenty of Greeks moving money anywhere but Greece - no bank can survive a bank run.
  • cmurf 11y ago
    Read fractional-reserve banking. They only have a small fraction of deposits in the form of cash. Since the bulk of the Greek economy depends on imports, it means they are constantly importing stuff and exporting cash. And their dependency on actual physical paper money in the day to day economy has really hurt their economy more in the last two weeks than anything that's happened since the 2nd bailout; it may turn out this current period injures the Greek economy worse than any of the austerity measures.
  • bradleyjg 11y ago
    The big danger inherent in a bank is a liquidity crisis-- their loans can't be called in all at once and their assets generally can't be sold all at once without losing a lot of value, but their liabilities in the form of demand deposits can be withdrawn at any time. So in the modern era central banks generally stand as a lender of last resort, if all the depositors want their money out at the same time then the central bank will lend individual banks cash against their assets to give to depositors. This promise, if made credibly, has the effect of preventing bank runs. The Greek banks have a different problem, a solvency crisis. They have made investments and loans that have not done well, in part because the economy as a whole has not done well. That includes lending money to the Greek government in the form of bond purchases. So it is simply the case that their liabilities (including money owned to depositors) are greater than their assets (including the risk discounted value of outstanding loans).
    • peterfirefly 11y ago
• guelo 11y ago
  When Greece finally leaves the Euro I hope they deny travel visas to Germans.
  • neokya 11y ago
    LOL - that would be funny cause tourism is only proven way Greece makes money.
    • peterfirefly 11y ago
      That and EU subsidies.
• chappi42 11y ago
  I hope and wish that they are able to reform their country. And limit the influence of the extreme right/left wishful thinkings.
• vessenes 11y ago
  I'm a Greek immigrant kid, so I have some emotional attachment, and lots of family in Greece, but little actual knowledge of life on the streets in Greece since they joined the Eurozone. That said, it has seemed to me for some time that exiting the Eurozone would be far preferable to this sort of solution, e.g. one that leaves the debt high and lets Germany force austerity measures down into the local economy. Isn't precisely what is required right now massive currency inflation, leading to far cheapened Greek exports (tourism and olive oil?). I would love to buy a villa in Greece, if I had the cash. And, if the new drachma is issued, and inflates heavily, it will become much less expensive to do so. It seems like the Eurozone has locked in these smaller countries with an import friendly lifestyle; they get Germany-quality goods in without tariffs, and it's emotionally very hard to think about going back.
  • _rpd 11y ago
    Currency devaluation is usually preferred to inflation - that's why exiting the Euro is under consideration, so that there is a local currency to devalue. High inflation erodes savings and discourages investment - it can be socially destabilizing.
    • vessenes 11y ago
      Yes, you said it better. I was imagining devaluation. The interviews with Varoufakis are interesting this week; they indicate he had a "don't leave eurozone, but get leverage" plan which involved nationalizing banks and issuing their own 'ious', presumably senior in some ways to their existing debt. Seems like the administration didn't have the stomach for it. I don't think this ends well for Greece, frankly. This kind of authoritarian punishment is what drove Germany into WWII at some level; crushing debt and 'punishing' as a thing you do to countries just isn't a great plan.
      • _rpd 11y ago
        I think the plan is to sacrifice Greece to keep Portugal, Spain and Italy in line. If Spain or Italy starts demanding debt forgiveness, the Euro really will collapse.
• vamur 11y ago
  Syriza government is laughably incompetent. They had 6 months to introduce a cryptocurrency and remove reliance on ECB for running internal economy and exports. They also had 6 months to start reforms to reduce bloated government spending and invest to reduce food imports. Instead, they let ECB take Greek deposits as hostage, wasted 6 months on negotiations before imposing capital controls, did not get anything in return for not vetoing the Russian sanctions and signed a deal that is worse than any worst case scenario from the default. After the deal, they will give ECB direct control of Greek economic sovereignity. And 50 billion of state assets as a repayment for interest on the debt that is essentially permanent! With only vague promises of haircuts sometime in the future. In 3 years after this new deal, Greece will likely lose 20% of its GDP and 10% of its population, as anyone with a brain will try to emigrate. That is if Greek people do not object to this deal, which seems highly unlikely.