And with the first hard Left government in Europe since WW2, Russia looks forward to an enhanced presence in southern Europe and the Mediterranean. “Russian-Greek relations have very deep roots in history,” says Tsipras.
It's actually rather relevant geopolitical commentary. If Greece won't be getting money from the IMF they will after all need to find a new monetary partner.
There have been clear overtures in that direction already and key party officials already have long-standing relationships with one of Russia's most extreme and influential ideologues [1].
Not to mention that the article itself clearly mentions the visit to Putin on 8th of April; one day before the possible default.
Agreed. First line of the article: "Greece is drawing up drastic plans to nationalise the country's banking system and introduce a parallel currency to pay bills"
The solution is for Greece to either (1) cash out of euros into another nation's currency for the time being or (2) create their own currency and start stocking the Greek banks with it. Not sure what kind of purchasing power a new Greek currency would have outside of Greece though. I'd say the more likely option would be for them to default, sell their remaining Euros for USD (further undermining the price and credibility of the Euro). Not sure if this is possible and it would likely get really messy.
> If Greece won't be getting money from the IMF they will after all need to find a new monetary partner.
Why do they need a monetary partner? As opposed to reverting to what they had before euro, their own currency?
I can see how Greece might try to threaten other Euro countries with "if you don't give us more money, we will give military bases to Russia and prevent EU from helping Ukraine", but that's not really a monetary partnership with Russia.
In fairness to the OP there is a caption on a photo below the article that says Greek PM is due in Russia to visit his counterpart, Vladimir Putin. Greece has been making overtures towards its eastern giant, claiming it opposes economic sanctions on the country. The site itself made the implication. Because it's a pretty out in the open and does relate to the issue.
Russia and Greece's relationship spans over a thousand years. They do share the same religion (Orthodox Christianity), after all. The defining moment in slavic history was when St. Vladimir converted to Christianity. This of course also created their alliance and ties to the Greek Byzantine empire... Even the Cyrillic alphabet was based on the Greek alphabet, with extra characters for slavic language.
Not sure this will work when countries do not pay back credits or bonds. Most countries today need to raise money to finance their spending. If everyone does this, the lending market will break down.
Not sure that this helps those countries that depended on credits most (like Greece).
I'm also not sure if it is the best strategy for Greece to bite the hand (EU as the IWF is just the beginning) who transfered billions of $ to Greece over the last decades. If the Greece government has a plan to not depend on credit and EU subsidies in the future, hurray to them. Perhaps with the new Russian conflict they could trade in EU subsidies and wealth transfer to renting bases to Russia. But they will find out it's much harder to break a 100 year contract for a Russian base in Greece than a contract with the IWF.
"I'm also not sure if it is the best strategy for Greece to bite the hand (EU as the IWF is just the beginning) who transfered billions of $ to Greece over the last decades."
No one gives away any amount of mouney, let alone billions of them. I think you should inform yourself better before forming an opinion.
>Perhaps with the new Russian conflict they could trade in EU subsidies and wealth transfer to renting bases to Russia. But they will find out it's much harder to break a 100 year contract for a Russian base in Greece than a contract with the IWF.
It isn't a base currently, it is natural gas pipeline ("New Blue Stream"). Bolgaria - under pressure from US/EU - has recently refused "South Stream" and thus Russia's acute need for new way into Europe met Greece's souring relationship with EU. And yes, gas pipeline is a contract which is pretty hard to break.
If for no other reason but to tighten their grip on their own national minorities. The Basques and Catalans would have a viable case for independence if they could be EU members and most Western nations are founded on the principle of self-determination. Should Spain continue on its present course of denying self-determination to the Basque Country and Catalonia, they will reject the basic values that the EU is founded upon.
I'm not necessarily saying this as an advocate of Basque or Catalan independence. That is a question for the Basque and Catalan people. But a modern, moral, Western country would at least allow a binding referendum, as the UK has done in Scotland and as Canada did in Quebec. If Catalonia has a referendum and they choose to stay part of Spain, that is their choice. But the Spanish government refuses to grant them that choice.
I understand the independence movements but I don't understand why Scotland, or Catalan what independence only to become part of the even more un-representative EU.
I'm sure EU policy makers on the other hand love small regions becoming independent and wanting to join the EU as they're easier to push around.
Scotland and Catalonia are already in the EU (as part of the UK, and as part of Spain, respectively). They must already implement EU laws. Independence cuts out the middleman and allows them to have a voice in the discussions around EU policy rather than having to implement laws they had no say in.
The suffering of the people of Greece will be so great that no one will follow their path. In fact, it will be the basis of European fiscal union, since it will be so clear that there must be a mechanism to prevent further such tragedies.
I'd guess it's because many fiscally right wing parties support "austerity" programs that cut social services even in normal times.
Note that the article claims that the recent deal was deemed problematic because the government wanted to give more power to unions and larger pensions to poor people. Basically the IMF enforces right-wing policies via "disaster capitalism".
The discussion over the last months was not about austerity - this was an 2014 topic - but about a plan for the future. The greek government did provide a plan without much detail, one you would not get any money from your bank for a house or any money - this is HN - from a VC. Greece hopes to get billions of $ based on some napkin calculations.
Reason is Greece does not want to commit to any foreign influence because it feels nationally threatened.
The IMF enforces a way by which it hopes to a.) get the money back it puts in b.) no need to put money back in 5y in the future. You could make this about money or investment, or you can make this about right-wing/left-wing.
Well, it's created by relatively simple facts: a less productive periphery without the aid of a floating currency will require permanent subsidization by the more productive core or the end of the currency union. Now everyone has to pick.
As is clear to anyone interested in the topic and listening to French government officials, binding Germany in the Euro was the price for reunification.
Euro exit is the nuclear option that Germany wants to keep in order to maintain its hegemony within the Eurozone, but never wants to exercise. The Euro served nobody better than Germany. The day Germany starts facing competitive devaluations all across Europe, recession will be brutal.
@euccastro Yes life was miserable with the Deutsche Mark. Oops it was much better for most Germans. China is in trouble because it controls it's own export destiny through it's currency? I think not.
Economic policy is not designed for the benefit of "most Germans". I can assure you that life became much better for "some Germans" in the years since the Deutsche Mark, as cheap labor from Eastern Europe drove costs down and profits up, while less competitive countries within the EU couldn't devaluate their currency to rebalance trade flows. Actually, it became so much better that they didn't know what to do with all those euros. So they poured showers of them into said less competitive countries, fostering all kinds of bubbles.
When said bubbles exploded, those "some Germans" were bailed out, in great part by money from "most Germans", whatever little could be squeezed from "most Greeks", and "most" people from all countries rich and poor. "Most Greeks" never saw any of that bailout money.
Alas, coming back to the Deutsche Mark will not bring back the good old times for "most Germans". Even if it did, it won't happen because "some Germans" are perfectly happy with the current situation and the power it gives them.
Exactly. "For most germans". That's the truth. There is no germany, and no greece. You, a simple tax payers, me, a simple (greek) tax payer, all tax payers in europe, are paying for the german and french banks. Deutsche bank, for example, is not "most germans". Etc.
> The greek government did provide a plan without much detail, one you would not get any money from your bank for a house or any money
You've got it completely backwards: Greece is the equivalent of a person who desperately needs to declare bankruptcy, but is prevented by his creditors from doing so. Instead he is forced to borrow ever more money to pay off his old debts.
Eventually, no-one can pretend this is working anymore, so the creditor suggests he sell his house, his car, all his work implements. And if we take the analogy back a thousand years, even his children, himself.
"Debt peonage", it was called, and it has been incredibly common through human history.
Of course we abolished it in the developed world with things like bankruptcy laws, which acknowledge that no debt is absolute -- ability to pay matters, and the risk assumed by creditors has sometimes to result in losses.
But there is no equivalent international law for entire countries. Instead, the winners are the usual suspects -- the IMF, rich countries, American hedge funds. And the losers get 'structural adjustment': their infrastructure and natural resources sold off, their local industries subject to ahistorical competition, and their social safety nets shredded -- people actually die -- but of course the predatory loans are repaid.
Greece's Varoufakis proposed the only sane alternative: GDP-linked bonds, which ensure that the creditor and the debtor actually have their interests aligned, and Greece's payments can represent what they are actually humanly able to pay. That way it ends up mattering to Germany that Greece's economy has shrunk 25% -- how is that going to help them pay back?
Of course, that was totally ignored.
> Greece hopes to get billions of $ based on some napkin calculations.
No, let's keep the emphasis in the right place, so it is clear who is being unreasonable here: Greece needs short-term loans to pay back existing loans, and it needs that time so that it can put forward more detailed proposals that challenge the neoliberal austerity doctrine, which is really a convenient facade for deeper political strategems.
> Reason is Greece does not want to commit to any foreign influence because it feels nationally threatened.
Foreign influence? Is that a euphemism for when your national infrastructure is privatized and sold off to foreign companies, for when your pensioners resort to begging, for when hospitals shut down, your young people have 40% unemployment, etc? I mean, the active destruction and plunder of your country?
And the emphasis on foreign is misplaced: continued austerity will kindle yet more nationalistic, fascistic, racist, and xenophobic political movements across the continent. It stands to reason: inflict economic violence on entire nations and people within them become enraged and violent, although they direct their own violence against those even weaker and more disenfranchised.
I feel like I shouldn't have to point out that the second world war followed the debt crisis of a nation that was put under a completely unrealistic, punitive repayment regime.
> The IMF enforces a way by which it hopes to a.) get the money back it puts in b.) no need to put money back in 5y in the future. You could make this about money or investment, or you can make this about right-wing/left-wing.
There's a moral dimension, independent of politics. Should an international bank, whose shareholders are the very richest countries, profit at the expense of the ruination of a small nation that happens to be the actual seat of democracy?
In Germany many people live from going through garbage, you can see them everywhere in large cities. Kids from poor people need to be fed buy the Church. Pensions and social benefits were cut over the last decade, people need to work until 67 to get a pension, unemployment benefits do practically no longer exist in Germany. Germany has the lowest amount of house owners and private wealth.
Or to really hammer the point home: Slovaks should pay for Greece? Estonians should pay for Greece?
That Greece's voting rights in the EU haven't been suspended yet is a travesty. I hope it will happen soon (and that Macedonia finally will be allowed to call itself Macedonia!) and that confiscations of Greek property to pay for the loans will follow.
Or maybe we could sell Greece back to the Turks? ;)
The jurisdiction of the Greek government does not extend to Germany or Slovakia or Estonia. The Greek voters do not have a say in what the governments of those countries must do. The voters of Germany, Slovakia, and Estonia do. That's how democracy works.
(And your voting rights in the EU /can/ actually be suspended, quite legally. There are obligations you have to live up to -- and if you don't, you don't get to have a vote.)
First, let's explode the idea of parity: German median income is almost twice that of Greece. Greeks work longer and have fewer holidays. The average age of Greek retirement is actually higher than Germany's. http://www.newstatesman.com/blogs/world-affairs/2012/05/expl... for more of the same.
So already the popular notion that hard-working Germans tax-payers are actually paying for those lazy, feckless Greeks is wrong. It also has nasty racist and fascist undertones, but let's put that aside.
Furthermore, it gets the causality backwards: the labor rollbacks and public cuts inflicted on German workers created the surplus that German banks speculatively invested in dubious Greek enterprises and Spanish construction projects in the 2000s.
Broadly, through the 2000s, Germany embraced neoliberalism, labour got squeezed, profits shot up, and a surplus accumulated. That surplus then needed a place to invest.
Those investments went to, among other dubious places, the (famously) fiscally irresponsible Greek government and corrupt Greek enterprises.
But investment isn't aid, of course. There's no gift. German banks were betting on a return when they loaded Greece and other countries up with debt. Of course a creditor nation also enjoys many political privileges over its debtors, so German politicians were happy, too.
Better yet, that same capital flow was being recycled back into German manufacturing by inflating demand for German exports from those countries! Living beyond their means often meant buying German goods! A giant circulation machine had formed that helped the Germany economy nearly double in 10 years.
In 2008, the slow slide of Italy, Spain, Greece, etc. into the status of 'debtor nations' was brought to a halt by the liquidity crisis. Everyone stopped fantasizing about endless debt-fueled growth. Germany banks and the ECB became more cautious. The circulation halted, and the Greek, Spanish, Italian economies, which distorted by malinvestment and terrible bubbles, collapsed.
Now we see the vulturism of austerity. You know, at one point in 2012 Germany actually proposed replacing the Greek budget and tax functions wholesale -- what else of a country's polity is left? That's economic occupation.
So, to sum up, we have the perverse situation where the banks which caused the crisis are being bailed out by the citizens of a country whose economy was wrecked by the same capital flows the banks mishandled! The Germans citizens aren't bailing out the Greeks citizens. The Greek citizens are bailing out the German banks that lent money to corrupt Greek politicians, by endlessly renewing all that toxic debt that rightly should be written off.
Of course, this should sound familiar, because it happened first in the US in 2008. Again, banks won, ordinary people paid dearly.
Beware the narrative about Germans paying for Greek mistakes. It's wrong, quite disgustingly wrong, and the truth is almost the exact opposite.
There is no "germany" and no "greece". A german person, is not the deutsche bank. Likewise, a greek person, is not the greek national bank. "Germany vs greece", is just a simple "we vs them" plot, to hide the banks between the mass of the people.
What is happening is that ALL european tax payers, are essentially paying for the german and french banks.
There is also an economic dimension: (a) and (b) are just impossible. There's no way Greece's debt can ever be repaid in full. All along, this farce has been about bailing out the foolish investments of private creditors (mainly German and French banks) at the expense of the taxpayers of all countries, mainly the "creditor" ones (because they are the ones that could foot the bill after all). The squeeze on the population of the "debtor" countries is mostly about ideology; from the perspective of the (new) creditors, it doesn't even make economic sense to push your debtors further into recession.
The US will also not pay back it's debt. This is not how it works. You do not pay off debt. You refinance debt with other debt. So this "There's no way Greece's debt can ever be repaid in full." is beside the point.
OK. It's just as clear that Greece will not be able to indefinitely refinance its debt. As in, debt will perpetually grow beyond GDP. I don't think this is even controversial.
The US is an anomaly in that it has had the printing press for the world's reserve currency for more than forty years. Whether it'll be able to do so indefinitely is a different question.
You forget that greece does not have to pay back any debt or interrest till 2020.
We are talking about additional money/debt here that greece wants.
I am pretty sure that it would be possible to negotiate a debt cut if greece can prove that they can get their shit together. They do seem to have other priorities at the moment, tough.
That's nonsense. It owes $500 million in a few weeks to IMF, and the obligations keep coming after that. They require continual renewal.
Without debt forgiveness or some kind of GDP-linked scheme, they will slide even further into debt over the next 5 years.
An analogous thing happened multiple times in Africa, too: kleptocrats took out wopping IMF loans for impractical infrastructure projects, stole most of the money, the infrastructure rots, and then over the next few decades the country would end up paying 3 or 4 times the original principal back to the rich Western creditors, having gained nothing, and often having to engage in those euphemistic "structural reforms" that actually end up killing people (you know, if your mosquito net budget goes to loan repayments instead, children die of malaria).
The situation with Greece is very close. The contrast between debtor and creditor is not as stark, but the dynamics are the same.
'“We are a Left-wing government. If we have to choose between a default to the IMF or a default to our own people, it is a no-brainer,” said a senior official.'
Wow, what an incredibly entitled attitude to hold.
What's so entitled about it? The IMF is a creditor just like any other, and assumes risks when it makes loans. The duty of the Greek government is—without question—to its people. While you can certainly argue that default is not in the people's best interest, if the leaders honestly think that's the best option then that's what they should do.
They don't honestly think that. They know very well what they promised is stupid. It's just that left-wing people are a lot better at making promises than at living by them.
No, the IMF isn't a creditor just like any other. Its wikipedia page reads,
>The International Monetary Fund (IMF) is an international organization headquartered in Washington, D.C., in the United States, of 188 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
I realize that you might consider it simply marketing text, so that you may likewise read the same thing about Goldman Sachs. I can imagine reading this text in an advertisement:
>Goldman Sachs is an American multinational investment banking firm working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
But I wouldn't take it at face value. Do you really think there is no difference between the first sentence and my version with Goldman Sachs in it?
This is an open question. Personally, I read the first versoin (with IMF, taken from its WP page) at face value, whereas I would roll my eyes if I saw the version with Goldman Sachs in it and would consider it to be content-free marketing written by an ad agency with no relationship with Goldman Sachs, nor is there any chance the second version would be accepted by Wikipedia as a neutral point of view.
Basically, I am saying that in my personal opinion and Wikipedia's, the IMF is not "a creditor like any other."
If you read up on IMF's track record, esp. in Latin America, you could be excused to roll your eyes approximately as hard with both versions. I understand that Wikipedia accepts the first definition because it's an official mission statement of the IMF. That doesn't make it any more true in practice.
The only reason the IMF (et al) had to step in was because no normal creditor was willing to assume the risks that came with lending money to Greece anymore. If the IMF was a normal creditor they would have never given any loans to Greece, and definitely not at this scale.
So disregarding the IMF now with a claim of "they are just a creditor and knew the risks" seems a bit unfair. They lent this money to support Greece, not because anybody thought it was a good investment.
Yeah, it's not so much a left-wing government as it is an anti-EU governments. I can completely understand why and how it came to be, given the hard measures that were expected of Greece, but boy it is not going to be pretty to watch this unfold.
It is essentially a nightmare scenario, since Greece is doing what the rest of the EU was trying to avoid by borrowing money to Greece, which is having Greece having to default. So now we both get Greece to default and lose a lot of money on top of that.
I wonder what the long-term effects will be for Greece.
> Yeah, it's not so much a left-wing government as it is an anti-EU government
Syriza is pro-EU, but the EU officials and the Troika have been acting anti-EU towards Greece for years. If the EU had acted earlier instead of watching for years as Greece paid up to 38% or so in interests (to french and german banks, so it was very profitable to "watch"), this would never have escalated.
>It is essentially a nightmare scenario, since Greece is doing what the rest of the EU was trying to avoid by borrowing money to Greece, which is having Greece having to default. So now we both get Greece to default and lose a lot of money on top of that.
logical end to a typical "payday loan trap". The only difference is that borrower is a sovereign state with its own army, so some typical ways of debt collecting just can't be applied here.
This isn't a payday loan trap. Greece has a structural government AND trade deficit, not a payday liquidity problem. Even if the loans were forgiven today, they would have to loan again tomorrow.
So cheating others who lent you money out of their money is democracy. Indeed this is radical. But breaking contracts is not something to base your future on if you're not self-sufficient.
Defaulting on a loan is not "cheating" -- it's one of the core reasons (if not the core reason) why there's interest. Loaning money is a risky business, and defaulting is relatively common and certainly not criminal.
> So cheating others who lent you money out of their money is democracy.
well lending money doesn't guarantee you're going to get that money back. It's business and business is risky. I'm sure you believe in free market right? so that's free market in action for you, creditors didn't do their due diligence, nobody's going to cry for them.
What is happening in Greece is the depraved child of democracy. Politicians, playing on people's insecurities and feelings with tub-thumping and misleading rhetorics, in order to clasp their fingers to executive power.
Despite entering Government under the most difficult circumstances, to my mind Syriza haven't put a foot wrong. Say whatever you like about them, but if I was a Greek citizen, I would certainly have voted for Syriza.
But of course, right know the rest of the EU are probably cursing the ancient Athenians for inventing democracy...
I probably would also have voted for Syriza. But expected them to soften their ideologie and start reforming the burocratie for real. Just go on overspending using borrowed money cannot go on forever.
Really? There are no superfluous public servants that could be fired? No corrupt ones to be put in jail? No one who received unearned pensions? No ill-gotten land in the hands of the Church to tax or confiscate?
How about repealing or at least amending §103.4 in the overly long Constitution?
The moment has passed for these cowering reforms designed to show Germany and others that Greece is going to behave now. The well being of the next generation of Greeks and the stability of the eurozone is at stake.
It's your only hope for the future. If you go bankrupt you still won't have any money so you /will/ have to reduce the size of the state, anyway.
Besides, there is nothing "cowering" about firing corrupt public servants or no longer sending pensions to people who are long dead.
The stability of the Eurozone is actually not at stake. Not any more. Playing chicken with the rest of Europe won't work -- you'll just drive yourselves off a cliff.
Well this is Greece. The locals are not to be ignored if history tells us anything. I think that's where the no-brainer comes from. These are elected officials doing the will of the electorate as far as I can see. The country doesn't want to pay back the money because they don't believe in the system backing the funds in the first place. They don't have faith in the Eurozone or the Western central banks.
it's similar; getting off the gold standard allows you to print money, and insofar as they don't have the right to print Euros and therefore it is like Gold (can't be created by fiat, by them at least, they have to get it from somewhere), introducing their own floating money is very similar.
A better solution would be to integrate the Greek economy into a paneuropean federal country, that simply eats the losses of Greece. I am certain some states in America are net beneficiaries of federal spending (more government dollars flow into it than are retrieved through taxes.)
This is likely a lot better solution than local currencies: I would back a (metaphorical) 'civil war' (being on the side of the North of course) in Europe in which countries are really kind of shoehorned back into a federal European country under centralized rule, a central constitution, and with limitations on 'state rights'. (Note that all the while, as in the analogy, this central federal paneuropean country would remain democratic.) I've never heard anyone else express this opinion though.
EDIT:
I don't mean civil war literally of course, and have edited to clarify. I was just drawing an analogy with the South seceding from the union. Obviously there is 0 chance of any actual war, nor would anyone want one for a minute. The difference between past wars is that there actually are democratic European institituions - i.e. the EU - just as America remained democratic through and after its civil war.
The goal of sharing wealth to encourage social betterment is a laudable and positive goal. The idea of closer political union to avoid another war is also a good one.
However they are not necessarily going to go hand in hand - but I cannot think of a case where they did not. Mostly cos political conquest in empires lead to wealth "sharing" - the common idea was transaction costs dropped under one empire increasing the wealth beyond taxation costs.
This is something Eurozone has done well without actual war - but it seems to have reached the point where we are either all in for the Euro (total fair wealth sharing) or just give up.
However selling "total state level socialism" (from States that have to states that do not) is a hard sell - even if right here and now, that's how Greece looks the best solution.
However every country thinks it needs to keep it's own wealth and not give up it's sovereignty - but this is like tribes who used to live in the countries themselves - they have up Independance for security and prosperity.
Different languages and cultures across Europe will prevent formation of a Federal Paneuropian country. US benefitted from English being primarily the common language across different states.
Dissolution of EU and abandonment of common currency is the only long-term solution for situations like Greece.
Long-term, would people really mind if their politicians speak English when participating at the 'federal' level? I can't imagine there would be such a large objection, and as a rule in my experience with Germans (the largest EU economy by a large margin, followed by the UK), they are proud English speakers, and English is a requirement for serious business or political participation. Germany and the UK would almost certainly be all right with federal English, and together account for 39% of the EU economy. The French (third-largest) have different feelings but I doubt that they would object to the simple fact of their leaders speaking English at the federal level. Just Germany, France, and UK, together account for 55% of the EU economy. Smaller countries would have more trouble adapting, but, really, how many leaders need to be involved at the 'federal' level? Local government can, of course, remain in its own language. I don't see why this isn't the correct solution long-term.
Greece would be fortunate to have Mississippi's economy about right now, they have a 26% unemployment rate; Mississippi is 7.x%.
Greece has 100 times as much government debt as Mississippi.
Greece has a ~$200b economy, $20k per capita GDP, and 11 million people. Mississippi has a $110b economy, with just 3 million people, and a per capita GDP of about $37k or soon to be twice that of Greece.
If Greece does everything right for 30 years, they might catch back up to Mississippi.
Their actions so far are rapidly leading them toward being a second tier European economy, in the category with Slovakia, Czech, Slovenia, Russia, Poland etc. instead of being with eg France, Italy and Germany. In fact they're already there, the question now is how much further are they going to fall - the likely answer is they'll lose at least another 1/3 of their real economy.
Greece has an amazing history. That history won't feed or employ people, or keep Greece economically competitive such that their children have a good future.
When you talk to people from Bulgaria, Ukraine, Moldova, Macedonia, etc. they tend to be very focused on economy and money, and there's a good reason for that - they're trying to survive.
IMO one of the main reasons why US democracy is so dysfunctional is because they've centralized so much power in a single location, Congress. Because the people making the laws are so far removed from the people that the laws affect, transparency and accountability go out the window, the door is wide open to corruption, and even when they do try to fix problems, the one-size-fits-all approach makes for crappy solutions that don't take into account the nuances of different regions. I sure as hell don't want this for Europe.
To give a couple other examples - why is 'separation of concern' better than a 'god object' in programming? Why is democracy better than monarchy? Why is an ecosystem of smaller companies better than a monopoly? Because centralization is unmanageable (too many dependencies in one place), brittle (single point of failure), inefficient (lack of locality means solutions are sub-optimal) and (when humans are involved) creates perverse incentives.
>A better solution would be to integrate the Greek economy into a paneuropean federal country, that simply eats the losses of Greece. I am certain some states in America are net beneficiaries of federal spending (more government dollars flow into it than are retrieved through taxes.)
Better -- for whom?
You will already find that debtor states (at the national level) find it much harder to generate sympathy within the nation if they consistently, repeatedly and unchangeably show that they cannot manage their finances.
So please, explain it to me like I'm five:
How do you think those with money would be willingly convinced to part with it, if they don't even give it up for their own kin?
The "Nixon shock" was suspending dollar convertibility to gold that lead to the dissolution of the Bretton Woods system of fixed exchange rates. The Bretton Woods institutions that were put in place to support the system - the IMF and the World Bank, survived, albeit with new interpretations of their missions.
Many consider breaking promises to be wrong and contracts to be promises, and so consider breaching contracts to be immoral.
Many others also consider the long-term negative consequences of breaching contracts to be worse than short-term positive consequences. If they consider short-term thinking at the cost of the long-term to be immoral, they would consider breaching contracts to be immoral.
To you, breaching a contract might just be another IF-THEN which is implicitly or explicitly coded into the contract, but others consider it to have moral weight.
I agree. Back when the financial crash happened and people were walking away from their mortgages, there was a lot of bloviating about those people's moral duty to pay their mortgages. There is no moral component to it at all. Only a financial one.
If morality is determined by "do unto others as you would have them do unto you", then I think this probably is immoral. It's fairly low on the range of immoral behavior, but it shouldn't be a purely economic calculation, in my opinion.
The creditor failed that by not offering the credit at zero interest, as they would have liked to have done unto them. Why should the golden rule only be applied one way?
You are a lender of money. Someone asks you for money. What's the interest rate you should charge if you apply the golden rule? Zero, because that's what you would want to be charged. Therefore, the creditors in this case broke themselves the golden rule, and shouldn't complain that the debtors did also.
Future contracts depend more on the position of a country than on its payment history. Consider Ecuador. It has better ratings and access to credit after it pursued aggressive debt haircuts.
The difference is that the only reason Greece is able to loan money at all is because they are lending from the ECB/IMF at below market rates, an option which they will no longer have when they leave the EU and default on IMF loans.
A non-difference is that most of those loans went to service old loans anyway. And the main reason Greece can't get loans on the markets is because its current debt is obviously unsustainable and its position as a deficit country in a badly designed monetary union is hopeless.
You hit the nail on the head with the position as a deficit country: Greece will have to solve that whether it stays in the EU or not. The question is which way to achieve that is harsher: the political force of the EU, or the market force Greece will have to endure when it goes back to its own currency. I think the latter will be harsher, since nobody has any incentive to keep Greece afloat other than if it generates a personal gain, whereas if Greece stays in the EU then countries like Germany have a greater interest in keeping Greece afloat to prevent destabilization of the EU. Therefore they will funnel money into Greece at rates that have negative return on investment if you look purely at Greece, but which will have positive return on investment if you factor in that it keeps the EU stable. The market however, has no such incentive.
The government is a coalition of right wing nationalists and left wing - nationalistic - marxists. Not sure why this should be called a left wing government. Calling the government left-wing is marketing to get sympathies with leftist people in Europe.
So I'd rather call the government nationalistic populist.
And now, with "finance ministry officials are categorically denying any suggestion that Greek representatives said the country would run out of cash" I think could be confirmed that Greece is running out of cash.
http://www.theguardian.com/business/live/2015/apr/02/greece-...
I agree with Ștefan (and with the lessons that history provides), but I have to disagree with the context in which this is put. We were talking about Europe here (well, the Eurozone part of it, which is nothing but a level of integration), where we talk about "us" on a broad (unional) level, about solving problems that we all have in our court. The next thing you know is a shift in prospective, where "us" got restricted on a national level (guess why and on who's interest), and now the rest of what was formerly "(the non-Greek part of European) us" you count as "enemies". Maybe we are more different than we wanted to admit, and we may have to work harder for what makes us "us (in an acceptable formula)", but we are not enemies.
There is some degree of hostility towards Greece in this thread (albeit mostly from 2 people, one of whom joined HN 30 minutes ago).
It seems appropriate to point out that it is public knowledge that the EU was/is irrationally hostile towards Greece during the Eurozone crisis.[0]
Now they have to play high stakes fiscal politics with a very clever bunch of largely unrestrained leftists. Frankly, they can't blame anyone else for this problem.
When you let anger and resentment dictate your policy, yes you're being irrational, by definition.
It was like 7 years ago. Now there's a difficult situation (a debt realistically impossible to pay) and different people in charge (not thieves and Goldman Sachs anymore [1]). Let's focus on viable solutions.
Don't get me wrong, the EU had every right to be angry, it's just preferable that the people in charge of billions of euros and the well being of millions don't pursue tacit vendettas in lieu of good fiscal policy, which is the point made in the referenced article.
The quoted article is one point of view. As with all current events, only history will tell who is wrong or right.
Another viewpoint is: It is "public knowledge" that the same "bitter EU medicine" worked well for Ireland, Portugal and Spain. So from the "Pigs" countries - only the "g" refuses to take it. That is their right. But then don't blame/insult the doctor.
In 2013, Spain's tax revenue was 32.6 % of GDP. Compare that to Germany 36.7 %, Netherlands 36.3 % and Finland 44.0 %. Also consider that these as proportion of tax revenue to official GDP, and it's pretty safe to assume that Spain has more in grey economy (not in official statistics) than northern Euro countries.
Spains unemployment rate was 24% in 1994. It was 21% in 1985. Or 18% in 1998. Unemployment in Spain is traditionally 10% above northern countries or the US. So yes unemployment is high (we had a crisis and had a recession!) but not as high as you make it look without context.
Or maybe Greece condition is worse and the side-effects of that pill would kill it anyway, and Greek government suspects it and tries to try other alternatives first.
Of course it worked: nowadays Portugal can borrow money in the free market with interest rates that are historically low, much cheaper than with the IMF. This means: the world trusts again in Portugal.
What you speak about is a completely different thing, Portugal has very old and deep structural problems but they were not caused by this particular crisis, they just got more exposed. Solving them is another story, I don't even think that our democracy (as we know it) is able to do it.
The world trusts that they will receive the money that they lend to us. The lender doesn't care from where that money comes.
In the end we arrive to the same conclusion, EU/IMF/whatever trust Portugal enough to bail us out again.
But I understand where you want to get: "we are behaving like good boys" and making everything that "Germany" says. Would you prefer an atitude like the Greek one, "acting like a spoiled kid"? As Greece, we are a small and periferical country without any power to negotiate by ourselves - we need to associate with others - and sincerely I prefer Portugal to associate with Germany than Greece. Our best way to get through this is by being "the good boys" and man up.
That's not where I want to get; I don't care about such petty considerations, nor do I agree with any of those characterizations. If it's better for us to strictly comply with the guidelines set by the lenders, I'm fine with that.
I'm simply skeptical that any of those parties (private lenders or EC/IMF/ECB) lend us money because they trust us to pay it back, and so I have to wonder why else would they lend us money.
Borrowing rates are historically low most other places as well.
Regarding 'trust' in Portugal: Draghi's 'whatever it takes' statement and actions are mainly what fixed this.
You need to be careful about definitively attributing an outcome to a particular action - hey, maybe you fixed borrowing costs by eating weetabix for breakfast one day in 2010, and now Portugal has low borrowing rates.
We are also of course only considering one very limited measure of 'success' - you did not mention unemployment or GDP, for some reason ...
> Regarding 'trust' in Portugal: Draghi's 'whatever it takes' statement and actions are mainly what fixed this.
> maybe you fixed borrowing costs by eating weetabix for breakfast one day in 2010, and now Portugal has low borrowing rates.
Portugal has low borrowing rates because it didn't break promises and contracts. This allowed Portugal to be trusted again, not Draghi's statements. If so they would have worked with Greece also..
'Trust, not money, is the currency of business and life.' - David Horsager
The ECB buying government debt, and pledging to buy as much as was needed, wasn't the main cause then?
Global interest rates being historically low isn't a cause now?
No, you say, it is because of something that was the same before, during, and after the main crisis point - that promises and contracts were not broken. (Not that promises or contracts need necessarily have been broken had other courses of action been taken).
Meanwhile e.g. Germany, who broke the rules on borrowing early in the life of the Euro, has of course suffered economic collapse, and cannot borrow money at any interest rate. And Iceland, they are back in the stone age now.
We can never compare Portugal with Iceland. As an objective example:
Portugal needs energy from the exterior to survive. Would anybody trust us enough to sell energy (at a reasonable price), not knowing if we would pay it [1]? By the other hand, Iceland doesnt't need the exterior as much as we, they can afford to not be trusted [2].
[1] Or we could associate to Russia, like Syriza tried..
[2] 'By harnessing the abundant hydroelectric and geothermal power sources, Iceland's renewable energy industry provides close to 85% of all the nation's primary energy - proportionally more than any other country - with 99.9% of Iceland's electricity being generated from renewables.'
Agreed, the Iceland comparison is a red herring that is repeated often but which completely bypasses how different the Iceland economic crisis was.
Iceland never had much deficit. It has a healthy public economy. Iceland had a boom of financial industry which then went bust, but it wasn't a significant part of the country's real economy.
When the banks went bust, foreign customers who lost money in the crash insisted that Iceland, the country, should compensate. The government felt they didn't, because it was not the Icelandic government that was in bankruptcy. And that was fine.
The public deficit in Greece (and, to lesser extent, Portugal, Ireland, France, Italy and now Finland) is a very different problem.
I must add that I disagree about Iceland not needing the exterior. Iceland is a very, very small country on a remote, barren island with few natural resources, and is hugely dependent on imports to make it livable in the modern sense. Iceland definitely needs trade with the exterior to survive. I would say Greece is more self-sufficient for many important things (like food) though not for geothermal energy.
Global interest rates are low, and they are approximately the level at which Portugal can borrow, because there is some trust that it behaves normally.
If Portugal behaved like Greece, it couldn't borrow at those rates from the market. Greece can't, without others underwriting the debts.
In this sub-thread, we were debating whether austerity in Portugal was a success.
The best comparison would be to Portugal had it and the EU/ECB adopted different policies. Admittedly this is hard since we do not see that.
You are choosing to compare Portugal to Greece. Greece alas is a complete basket-case. Starting in a much better situation than Greece, and claiming success for policies that leave you less worse off than Greece, is a very low bar.
At the same time, you argue that we can never compare Portugal to Iceland - not even as a counterexample to 'a country must not break promises or contracts, otherwise the economy goes down the drain'.
Iceland is not a very useful counterexample for "a country must not break promises" - or more precisely, "is it not wise for a country to break trust in its policies" - because I can't see what promises Iceland would have broken.
Why the Iceland case is different - and Iceland has not lost serious trust in eyes of lenders - is that Iceland did not run a serious public deficit and it did not fill such a deficit by borrowing.
Still, the economic crisis brought a shock to Icelandic economy in form of huge devaluation. If Portugal would have gone from EUR to its own currency, how much would it have devalued?
History often does not tell who is right or who is wrong, particularly when it comes to economics - 'though no one will believe it - economics is a technical and difficult subject' - when you mix in politics and ideology as well, the truth is often obscured.
There are people who argue that the New Deal did not help end the Great Depression: 'it was ending anyway' or 'the second world war ended it'.
The Obama stimulus was (a) useless (b) helpful but insufficient (c) just right.
Do you think history will reach a consensus on this?
Regarding your 'another viewpoint': Greece has implemented eye-wateringly bitter medicine.
Like medieval doctors, when bleeding fails to cure the patient, they call for more bleeding, blame the patient for not being devout enough, and say that the suffering is a punishment for past crimes.
The fact that bleeding did not manage to kill their other patients clearly demonstrates it was a success, and that Greece is the one at fault, not the doctors.
Odd. I don't see the same kinds of news - making it look like a Greek exit is imminent - elsewhere, like ft.com or wsj.com, who certainly cover this kind of thing.
Sure, I've been following it pretty closely, as 1) it's interesting, and 2) I live in Italy, where we could potentially see some repercussions.
However, this article - and especially the headline - make things sound quite imminent.
It wouldn't be the first to mention capital controls or something else happening the weekend following this one, but they make it sound much more probable than others have.
We are already printing a trillion Euros in the current round of QE / stimulation. Why not make that 500 Bn more and use that imaginary money to release the economies of Greece Spain and Portugal. With the carrot of debt freedom, almost all economic and structural reforms become possible.
That would be only delaying the issue, as QE is a program of buying bonds with imaginary money, not giving out the imaginary money for free. Bonds have maturity dates.
I'm not sure about that. Buying bonds is merely one of many mechanisms to stimulate demand in the assumption we are in a demand poor crisis. Demand in Greece is sooo depressed because of the enormous debt that relieving it at all will have a positive demand experience.
Add to which Keynes original idea is to bury the money in bottles and any form of monetary supply increase is good.
I think I agree with downthread - finances as a form of control - it's a banker mentality.
It's going to be really interesting to see how far creditors are willing to go in order to get the money that Greece either (A) doesn't have or (B) is unwilling to pay.
I think (A) is more applicable in Greece's case. The Euro has favored export economies, such as Germany's, for the past decade. Greece needs a currency that will support its economy, which is much different than Germany's. The Euro's benefits of easier inter-Europe trade and increased European power in the global currency markets have been far outweighed by its inability to cater to the very different economies of the various EU nations.
It's important to look at who owns Greece's debt to see who is really pushing for repayment. [0] The EFSF owns 45% of the government's 315bn Euro debt. Amazingly, according to the EFSF's last financial statement in 2013: "As at [sic] 31 December 2013, the EFSF as an issuer has been assigned an AA rating by Standard & Poor's, an Aa1 rating by Moody's and an AA+ by Fitch Ratings and the highest possible short-term rating from all three major credit rating agencies — Standard and Poor's (A-1+); Moody's (P-1) and Fitch Ratings (F1+)." Germany, Italy, and France own the largest number of shares of the EFSF with Germany at 771k, France at 579k, and Italy at 509k. Most of the other countries own anywhere from 5k-100k shares. [1]
I just wonder if people are going to get greedy/desperate enough to pull a vulture bank maneuver and start seizing real assets - see the seizure of an Argentinian Naval Vessel by hedge fund Elliot Capital. [2] Now that would be a very messy affair.
> I just wonder if people are going to get greedy/desperate enough to pull a vulture bank maneuver and start seizing real assets - see the seizure of an Argentinian Naval Vessel by hedge fund Elliot Capital. [2] Now that would be a very messy affair.
That would be basically be war, but fought with economic weapons. I like to think that Europe is not at that stage yet (and hopefully never will be).
"The EFSF owns 45% of the government's 315bn Euro debt."
You should go back in time, and read the "details". The debt was owned by german and french banks. What essentially happened is that those banks were bailed out with the money of all the european tax payers. (Greek, german, french, etc.)
Any sources on this? I would be very interested in a detailed account of how the EFSF was used to nationalize private bank debt and spread it across the 17 member states of the EU. This would seem almost criminal in nature to me, but I wouldn't be surprised if it were true.
I'm full of ambivalent feelings towards Syriza, on one hand they are (were) a nice breath of fresh air, a promise of some positive change, on the other: they turned out to be kinda arrogant, kinda short-sighted and pretty bad at diplomacy. Politics isn't about being right 100% of time (not that they were), it's about being effective, and in that they are lacking badly. Seems they entered this whole thing with this cocky approach of "now we'll show 'em, them dumb fucks!". They've got their wrists slapped for that and now complain again on how bad EU is treating them. Hard to get sympathy for that.
"Yanis Varoufakis, the Greek Finance Minister, for one, singled out Italy for having debt that was “unsustainable,” which served only to infuriate Italian Finance Minister Pier Carlo Padoan"
"Within a day of winning the Greek election, he (Tsipras) called the Russian ambassador and protested the EU’s statement condemning Russian-backed Ukrainian separatists for an attack on civilians in a Mariupol market"
"But even then, Greece could have survived its mistakes were it not for one other fatal decision: to move forward with its electoral platform before renegotiating its debt, increasing government spending without the requisite funds and reversing or stalling key reforms (...) All these factors positioned Greece to buckle in its negotiations. It was simply hemorrhaging far too much money far too fast to hold its position."
It's a really bad strategy in that it doesn't prepare the Greek people for anything bad happening. The short term consequences of Greece crashing out of the Euro is going to be very painful for Greece.
> The short term consequences of Greece crashing out of the Euro is going to be very painful for Greece.
For Greece? Greece will recover, and it's hard to do worse than it is currently doing. And as others say, a floating currency will help correct the imbalance of an exporter like Germany dominating the EU.
And bizarrely, I suspect investment will be quick to return if Greece is seen as being out from under its cloud. Investors seem to care less about previous behavior than about future prospects.
> It's a really bad strategy in that it doesn't prepare the Greek people for anything bad happening.
No... Germany stands to lose the most, because the likely eventual outcome is the collapse of the entire monetary union, and the wide markets that Germany has enjoyed.
Oh it will be a problem for other countries. But there are short term consequences to a Grexit for Greece, the long term consequences may be good but immediately you'll be looking at; capital controls so people can't move their money around, Euros being forcibly converted to drachma, Greek banks going bust (combined with capital controls that isn't fun), a temporary inflation spike.
So short term Greece's social problems will be exacerbated - and that is the problem, arrogance suggests that there won't be a problem. The government may be looked back on a different light in 5-10 years time, but when there is renewed rioting in the streets in a month that isn't so good.
Germany successfully refinanced several German banks during the crisis and the current debt of Greece will not be payed fully back before 50 years. German EU contribution will be cut back. The impact to Germany will be minimal.
Democracy is a system of government, populism is a strategy for maximizing popularity by appealing to emotions with rhetoric and unrealistic proposals, and pitting a group of people against another group. Since I can see where you are going with this, yes, the notion of populism does require the politically incorrect idea that not everyone is perfectly rational, intelligent and well informed. One can be in favour of democracy without necessarily agreeing with the voting decisions of general public, and without agreeing with political strategies that exploit this.
(just like one can be in favour of the freedom of speech to say X without agreeing with X)
"Populism is a political doctrine that appeals to the interests and conceptions (such as hopes and fears) of the general people, especially contrasting those interests with the interests of the elite."
Democracy: Low taxes on essential products
Populism: High taxes on essential products, then "stamps", "aids", or low taxes/subsidies on a very specific range of said essential product
Also similar to the Roman Strategy of Bread and Circuses
> But even then, Greece could have survived its mistakes were it not for one other fatal decision: to move forward with its electoral platform before renegotiating its debt, increasing government spending without the requisite funds and reversing or stalling key reforms
This only seems like a bad thing because it is viewed in terms of money and debts, rather than human cost. The reality is that Syriza must do some spending if only to hold Greece over and stem the rise of the far-right. Greece has had 7 years of "reforms". They need to also spend some money sometimes.
I am greek. In the real estate business. I have no debt or loans, always living well within my means. For last year, I payed 90% of my true income in taxes. I am, basically, being murdered. 'Nough said.
When you hear about, or say, "greeks don't pay their taxes", you should also get informed about how much that taxation really is. That's extremely difficult, even for someone living here. To give the slightest of many examples, you may read that income from real estate is taxed with 33%. That's true, but it glosses over ~30 more "small" taxes on real estate, and many other general laws that affect it. ..You read "I don't pay my taxes of 33%", my what-really-happened, extremely simple, just did a division, calculation, is 90%. ..Have a good day. Cause I'm having bad years.
I applaud the Greek Government. They show how important a nationalistic point of view is (as in "Greece first").
For 70 years no German Government could win on a nationalistic ticket. The vast majority of German elites were pro-Europe. The majority of people saw the billions of $ wealth transfer to the southern and eastern countries as moral compensation for the war.
With comparing the elected German chancellor to Hitler, comparing the finance minister to a concentration camp manager and the talk of reparations, Germans felt insulted and black mailed and Greece created cracks in the above narrative.
The Greek government achieved that the next German government and generation of conservatives will win on a nationalistic ticket to fend of right wing anti European parties like the AfD (Alternative For Germany). Which is good, as the best for Germany is not a political union like the EU but TTIP and something like NAFTA combined with a China style currency policy. The EU helps small countries gain disproportional power and poor countries gain money transfers while it binds and hinders Germany and France. The US does what's best for the US for the last 200 years. A proud symbol to learn from.
Next step could be the UK EU exit, FN in France will help, TTIP and with Polish NAFTA love this could be the first stepping stones for an unpolitical economic union.
Greece got in European Union too easy and this is the consequence. If Greece gets out, it would shake the faith in the E.U., true, but on the other hand that may be a good move for everyone. For E.U. in the way of not having more problems that it can handle and finally spending attention on things that are rather "not so important" right now. For Greece, it would be a much-needed "time alone", to get to truly understand the price and meaning of a few things. They seem to haven't had enough time for that.
Greece has a relatively small industrial sector and relies very heavily on imports, which will be completely unaffordable with a new currency. Their huge tourism sector will suffer when they go out of the EU. Their productivity per hour worked is very low. They still have a huge corruption and nepotism problem, an a people who will have to scale back their standard of living. Comparable to the trouble a country like Germany will be in when Greece leaves the Euro? I don't think so.
I'm not disagreeing categorically, but I don't think it's that one-sided.
I was (i) considering the cascading effect of a Greek exit from the Euro, and (ii) thinking in relative terms: I'm not arguing that Germany will be worse off, but perhaps it has more to lose at this point.
I'm aware that this article describes the dynamics of countries going to the receiving side of EFSF, not of countries leaving the Euro altogether, but I think the perverse dynamics described apply to the latter too.
Relying heavily on exports, as Germany does, may mean you have more to lose in a crisis like this. Consider what happens after a few more European countries stop generating demand for German goods, at the same time that demand from the US is weak too. Demand from the rest of EU and from the US was a big part of what made Germany 'a country like Germany'.
Yes, imports would be unaffordable for Greece with the new currency and that will generate a lot of pain (not that devoting a big share of the national budget to servicing debt is helping a lot), but that will also force the country to correct that imbalance, making what's left of local industry more competitive. That pain would be a price to pay for adapting to a more self-reliant setup, while the one currently being endured (mostly on ideological grounds, I claim) seems more pointless.
Re: tourism, having their own currency to devaluate might help with that.
Re: standard of living, it's not like Greece's current situation, and their prospects within the demands of the memorandum are rosy either.
Corruption and nepotism won't help, but they aren't helping within the Euro either. If anything, those problems are made worse in colonial economies, which the deficit countries in Europe have been, for good and ill, to a large extent.
All in all, a Greek exit from the eurozone is a big lose-big lose proposition for anyone. I don't think it matters a whole lot who stands to lose more. But to the extent that it matters, I think it must be considered in relative terms. Overall, Germany has a better deal in the Eurozone than Greece, and it has more to lose.
Well, Greece has a trade deficit of more than 20 billion on a 200 billion economy. Of that trade deficit, only 1.5 billion or so is to Germany, which is nothing in a 4 trillion economy. I am not sure whether there will be such a cascading effect from leaving the EU. Sure, if Greece defaults on its debts to other EU states, then those states may need to default on their debt themselves, but the market already knows that there is a big chance that Greece will default on its debts or that they need to be forgiven, and Greece is a small country. Even in the worst case when many of the insolvent states exit the EU, the vast majority of German export will still remain. For sure Germany has more to lose if the EU turns into total chaos scenario, but even if there is a big cascading effect it's hard to imagine that, so most of Germany's export will remain even in the face of several states leaving the EU. That's why I think that the life of the average German will not be impacted nearly as much as the life of the average Greek.
You're right though that this discussion of who will hurt more is irrelevant. What has become clear is that a monetary and political union does not result in a more stable Europe. Perhaps the goals should be scaled back to the original goal of increasing trade by reducing transaction costs, rather than trying to have Europe follow the US model.
Greece would not necessarily have to exit the EU when it exits the Euro, and I don't know what would happen. If Greece exits the Euro unilaterally but wants to stay in the EU I don't know whether expulsion would be likely. There is actually a paper on this topic which argues that it would be possible for a country to leave the eurozone without leaving the EU: http://www.tilj.org/content/journal/48/num2/Dammann125.pdf
Lots of Europeans do travel to Turkey. Funnily enough I am currently on a trip from the EU to Turkey. Here's a few facts to consider:
- I have to exchange Euros to Turkish Liras, and for tourists the exchange rates are not good.
- A flight to Turkey cost me about €200 while a flight to Greece is far cheaper even thought he distance is similar.
- It's very expensive to call my family from Turkey. Calling from Greece is cheap due to the EU.
- My bank card is not accepted everywhere, whereas in Greece I believe it would be.
- I have to get a visum for Turkey.
- Travel insurance for Turkey is more expensive.
- An european car trouble emergency service membership works in Greece but not in Turkey.
- The prices in Turkey are far cheaper than in Greece. Greece could adjust their prices to Turkish levels (and likely would have to) after leaving the euro and EU, but then they earn far less of course.
Subjectively I do feel safer in Greece because they are in the EU. Also perhaps some Europeans would not travel to Greece because of perceived anger from Greeks to the rest of the EU, or they wouldn't travel to Greece out of spite if they default on European debt.
That's what I thought too, too: exit from euro does not have to mean exit from EU.
BTW at least in Istanbul - not necessarily elsewhere in Turkey - you'll shop in many places with cash euros. But yes, there are some places where you actually do need liras. For exchanging cash, I've for a long time depended on withdrawing cash from an ATM; the rate is better than in kiosks in almost any country (particularly better than the rip-offs at my home airport which is close to a scam).
Higher flight prices are possibly due to airport taxes and such things, or just random air ticket pricing quirkiness, probably not EU. From where I live, flights to Istanbul that I sampled are slightly cheaper than flights to Athens (distance is practically the same).
It is interesting that Turkey requires a visa from a number of EU countries. A visa seems really simple to get, though (on arrival at airport).
The recent Greek hyperbolic anger against Germans is one thing that discourages me from going there as tourist (I'm not German, but I might be mistaken for one). In that, Tsipras and his crowd are not doing a great service on their country. But maybe it was what they needed to do in order to win elections and then explain why things don't start improving overnight.
Yes, it may be irrational, but I do think that's what many people fear. Even if you don't expect any real problems, the feeling that you are not appreciated in another country can easily make people decide to visit another country instead.
BTW, Turkey recently changed the rules regarding visas; now you cannot get a visum at the airport any more, you need to apply and pay online and print out the application form, which you exchange for a visum at the border. It's still easy, but these small hurdles do add up.
195 comments
[ 3.0 ms ] story [ 231 ms ] threadThere have been clear overtures in that direction already and key party officials already have long-standing relationships with one of Russia's most extreme and influential ideologues [1].
Not to mention that the article itself clearly mentions the visit to Putin on 8th of April; one day before the possible default.
[1] http://www.rferl.org/content/greek-syriza-deep-ties-russian-...
The solution is for Greece to either (1) cash out of euros into another nation's currency for the time being or (2) create their own currency and start stocking the Greek banks with it. Not sure what kind of purchasing power a new Greek currency would have outside of Greece though. I'd say the more likely option would be for them to default, sell their remaining Euros for USD (further undermining the price and credibility of the Euro). Not sure if this is possible and it would likely get really messy.
Why do they need a monetary partner? As opposed to reverting to what they had before euro, their own currency?
I can see how Greece might try to threaten other Euro countries with "if you don't give us more money, we will give military bases to Russia and prevent EU from helping Ukraine", but that's not really a monetary partnership with Russia.
Not sure that this helps those countries that depended on credits most (like Greece).
I'm also not sure if it is the best strategy for Greece to bite the hand (EU as the IWF is just the beginning) who transfered billions of $ to Greece over the last decades. If the Greece government has a plan to not depend on credit and EU subsidies in the future, hurray to them. Perhaps with the new Russian conflict they could trade in EU subsidies and wealth transfer to renting bases to Russia. But they will find out it's much harder to break a 100 year contract for a Russian base in Greece than a contract with the IWF.
If not, this looks like a bad move.
No one gives away any amount of mouney, let alone billions of them. I think you should inform yourself better before forming an opinion.
Much of modern government is about giving away other people's money.
It isn't a base currently, it is natural gas pipeline ("New Blue Stream"). Bolgaria - under pressure from US/EU - has recently refused "South Stream" and thus Russia's acute need for new way into Europe met Greece's souring relationship with EU. And yes, gas pipeline is a contract which is pretty hard to break.
The EU sacrificed Greece to save their own skins
https://www.opendemocracy.net/can-europe-make-it/thomas-fazi...
I even saw one mainstream newspaper use the phrase "economic aid" when referring to the loans given to Greece to service their existing debt!
much the same perversion as the 2008 bailouts going to predatory lenders instead of bankrupt US homeowners
I'm not necessarily saying this as an advocate of Basque or Catalan independence. That is a question for the Basque and Catalan people. But a modern, moral, Western country would at least allow a binding referendum, as the UK has done in Scotland and as Canada did in Quebec. If Catalonia has a referendum and they choose to stay part of Spain, that is their choice. But the Spanish government refuses to grant them that choice.
I'm sure EU policy makers on the other hand love small regions becoming independent and wanting to join the EU as they're easier to push around.
Note that the article claims that the recent deal was deemed problematic because the government wanted to give more power to unions and larger pensions to poor people. Basically the IMF enforces right-wing policies via "disaster capitalism".
Reason is Greece does not want to commit to any foreign influence because it feels nationally threatened.
The IMF enforces a way by which it hopes to a.) get the money back it puts in b.) no need to put money back in 5y in the future. You could make this about money or investment, or you can make this about right-wing/left-wing.
As is clear to anyone interested in the topic and listening to French government officials, binding Germany in the Euro was the price for reunification.
http://blog.mpettis.com/2015/02/syriza-and-the-french-indemn...
When said bubbles exploded, those "some Germans" were bailed out, in great part by money from "most Germans", whatever little could be squeezed from "most Greeks", and "most" people from all countries rich and poor. "Most Greeks" never saw any of that bailout money.
Alas, coming back to the Deutsche Mark will not bring back the good old times for "most Germans". Even if it did, it won't happen because "some Germans" are perfectly happy with the current situation and the power it gives them.
http://yanisvaroufakis.eu/2014/12/26/6265/
You've got it completely backwards: Greece is the equivalent of a person who desperately needs to declare bankruptcy, but is prevented by his creditors from doing so. Instead he is forced to borrow ever more money to pay off his old debts.
Eventually, no-one can pretend this is working anymore, so the creditor suggests he sell his house, his car, all his work implements. And if we take the analogy back a thousand years, even his children, himself.
"Debt peonage", it was called, and it has been incredibly common through human history.
Of course we abolished it in the developed world with things like bankruptcy laws, which acknowledge that no debt is absolute -- ability to pay matters, and the risk assumed by creditors has sometimes to result in losses.
But there is no equivalent international law for entire countries. Instead, the winners are the usual suspects -- the IMF, rich countries, American hedge funds. And the losers get 'structural adjustment': their infrastructure and natural resources sold off, their local industries subject to ahistorical competition, and their social safety nets shredded -- people actually die -- but of course the predatory loans are repaid.
Greece's Varoufakis proposed the only sane alternative: GDP-linked bonds, which ensure that the creditor and the debtor actually have their interests aligned, and Greece's payments can represent what they are actually humanly able to pay. That way it ends up mattering to Germany that Greece's economy has shrunk 25% -- how is that going to help them pay back?
Of course, that was totally ignored.
> Greece hopes to get billions of $ based on some napkin calculations.
No, let's keep the emphasis in the right place, so it is clear who is being unreasonable here: Greece needs short-term loans to pay back existing loans, and it needs that time so that it can put forward more detailed proposals that challenge the neoliberal austerity doctrine, which is really a convenient facade for deeper political strategems.
> Reason is Greece does not want to commit to any foreign influence because it feels nationally threatened.
Foreign influence? Is that a euphemism for when your national infrastructure is privatized and sold off to foreign companies, for when your pensioners resort to begging, for when hospitals shut down, your young people have 40% unemployment, etc? I mean, the active destruction and plunder of your country?
And the emphasis on foreign is misplaced: continued austerity will kindle yet more nationalistic, fascistic, racist, and xenophobic political movements across the continent. It stands to reason: inflict economic violence on entire nations and people within them become enraged and violent, although they direct their own violence against those even weaker and more disenfranchised.
I feel like I shouldn't have to point out that the second world war followed the debt crisis of a nation that was put under a completely unrealistic, punitive repayment regime.
> The IMF enforces a way by which it hopes to a.) get the money back it puts in b.) no need to put money back in 5y in the future. You could make this about money or investment, or you can make this about right-wing/left-wing.
There's a moral dimension, independent of politics. Should an international bank, whose shareholders are the very richest countries, profit at the expense of the ruination of a small nation that happens to be the actual seat of democracy?
But Germans should pay for Greece?
That Greece's voting rights in the EU haven't been suspended yet is a travesty. I hope it will happen soon (and that Macedonia finally will be allowed to call itself Macedonia!) and that confiscations of Greek property to pay for the loans will follow.
Or maybe we could sell Greece back to the Turks? ;)
(And your voting rights in the EU /can/ actually be suspended, quite legally. There are obligations you have to live up to -- and if you don't, you don't get to have a vote.)
So already the popular notion that hard-working Germans tax-payers are actually paying for those lazy, feckless Greeks is wrong. It also has nasty racist and fascist undertones, but let's put that aside.
Furthermore, it gets the causality backwards: the labor rollbacks and public cuts inflicted on German workers created the surplus that German banks speculatively invested in dubious Greek enterprises and Spanish construction projects in the 2000s.
Broadly, through the 2000s, Germany embraced neoliberalism, labour got squeezed, profits shot up, and a surplus accumulated. That surplus then needed a place to invest.
Those investments went to, among other dubious places, the (famously) fiscally irresponsible Greek government and corrupt Greek enterprises.
But investment isn't aid, of course. There's no gift. German banks were betting on a return when they loaded Greece and other countries up with debt. Of course a creditor nation also enjoys many political privileges over its debtors, so German politicians were happy, too.
Better yet, that same capital flow was being recycled back into German manufacturing by inflating demand for German exports from those countries! Living beyond their means often meant buying German goods! A giant circulation machine had formed that helped the Germany economy nearly double in 10 years.
In 2008, the slow slide of Italy, Spain, Greece, etc. into the status of 'debtor nations' was brought to a halt by the liquidity crisis. Everyone stopped fantasizing about endless debt-fueled growth. Germany banks and the ECB became more cautious. The circulation halted, and the Greek, Spanish, Italian economies, which distorted by malinvestment and terrible bubbles, collapsed.
Now we see the vulturism of austerity. You know, at one point in 2012 Germany actually proposed replacing the Greek budget and tax functions wholesale -- what else of a country's polity is left? That's economic occupation.
So, to sum up, we have the perverse situation where the banks which caused the crisis are being bailed out by the citizens of a country whose economy was wrecked by the same capital flows the banks mishandled! The Germans citizens aren't bailing out the Greeks citizens. The Greek citizens are bailing out the German banks that lent money to corrupt Greek politicians, by endlessly renewing all that toxic debt that rightly should be written off.
Of course, this should sound familiar, because it happened first in the US in 2008. Again, banks won, ordinary people paid dearly.
Beware the narrative about Germans paying for Greek mistakes. It's wrong, quite disgustingly wrong, and the truth is almost the exact opposite.
There is no "germany" and no "greece". A german person, is not the deutsche bank. Likewise, a greek person, is not the greek national bank. "Germany vs greece", is just a simple "we vs them" plot, to hide the banks between the mass of the people.
What is happening is that ALL european tax payers, are essentially paying for the german and french banks.
The US is an anomaly in that it has had the printing press for the world's reserve currency for more than forty years. Whether it'll be able to do so indefinitely is a different question.
Apropos this:
http://yanisvaroufakis.eu/books/the-global-minotaur/
We are talking about additional money/debt here that greece wants.
I am pretty sure that it would be possible to negotiate a debt cut if greece can prove that they can get their shit together. They do seem to have other priorities at the moment, tough.
Without debt forgiveness or some kind of GDP-linked scheme, they will slide even further into debt over the next 5 years.
An analogous thing happened multiple times in Africa, too: kleptocrats took out wopping IMF loans for impractical infrastructure projects, stole most of the money, the infrastructure rots, and then over the next few decades the country would end up paying 3 or 4 times the original principal back to the rich Western creditors, having gained nothing, and often having to engage in those euphemistic "structural reforms" that actually end up killing people (you know, if your mosquito net budget goes to loan repayments instead, children die of malaria).
The situation with Greece is very close. The contrast between debtor and creditor is not as stark, but the dynamics are the same.
Wow, what an incredibly entitled attitude to hold.
Exactly this
All that Greece and the institutions that lent money to them did was to push the problem forward and make it worse
Greece has basically two options: deflate their prices in Euro (what austerity ends up doing) or have a currency that can float. It's that simple
(Or having a stronger fiscal union in the Eurozone, but that's hard as well)
Because prices embed wage costs and ability of people to pay.
>The International Monetary Fund (IMF) is an international organization headquartered in Washington, D.C., in the United States, of 188 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
I realize that you might consider it simply marketing text, so that you may likewise read the same thing about Goldman Sachs. I can imagine reading this text in an advertisement:
>Goldman Sachs is an American multinational investment banking firm working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
But I wouldn't take it at face value. Do you really think there is no difference between the first sentence and my version with Goldman Sachs in it?
This is an open question. Personally, I read the first versoin (with IMF, taken from its WP page) at face value, whereas I would roll my eyes if I saw the version with Goldman Sachs in it and would consider it to be content-free marketing written by an ad agency with no relationship with Goldman Sachs, nor is there any chance the second version would be accepted by Wikipedia as a neutral point of view.
Basically, I am saying that in my personal opinion and Wikipedia's, the IMF is not "a creditor like any other."
So disregarding the IMF now with a claim of "they are just a creditor and knew the risks" seems a bit unfair. They lent this money to support Greece, not because anybody thought it was a good investment.
It is essentially a nightmare scenario, since Greece is doing what the rest of the EU was trying to avoid by borrowing money to Greece, which is having Greece having to default. So now we both get Greece to default and lose a lot of money on top of that.
I wonder what the long-term effects will be for Greece.
Syriza is pro-EU, but the EU officials and the Troika have been acting anti-EU towards Greece for years. If the EU had acted earlier instead of watching for years as Greece paid up to 38% or so in interests (to french and german banks, so it was very profitable to "watch"), this would never have escalated.
logical end to a typical "payday loan trap". The only difference is that borrower is a sovereign state with its own army, so some typical ways of debt collecting just can't be applied here.
http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=121.GST.Q.G...
The surplus was apparently achieved with some helpful interpretation by the "troika", in order to support Greece: http://blogs.wsj.com/brussels/2014/04/23/greek-primary-surpl...
Democracy is still a radical concept.
well lending money doesn't guarantee you're going to get that money back. It's business and business is risky. I'm sure you believe in free market right? so that's free market in action for you, creditors didn't do their due diligence, nobody's going to cry for them.
But of course, right know the rest of the EU are probably cursing the ancient Athenians for inventing democracy...
How about repealing or at least amending §103.4 in the overly long Constitution?
http://www.hri.org/docs/syntagma/artcl120.html#A103
Besides, there is nothing "cowering" about firing corrupt public servants or no longer sending pensions to people who are long dead.
The stability of the Eurozone is actually not at stake. Not any more. Playing chicken with the rest of Europe won't work -- you'll just drive yourselves off a cliff.
How is this different to the https://en.wikipedia.org/wiki/Nixon_Shock?
A better solution would be to integrate the Greek economy into a paneuropean federal country, that simply eats the losses of Greece. I am certain some states in America are net beneficiaries of federal spending (more government dollars flow into it than are retrieved through taxes.)
This is likely a lot better solution than local currencies: I would back a (metaphorical) 'civil war' (being on the side of the North of course) in Europe in which countries are really kind of shoehorned back into a federal European country under centralized rule, a central constitution, and with limitations on 'state rights'. (Note that all the while, as in the analogy, this central federal paneuropean country would remain democratic.) I've never heard anyone else express this opinion though.
EDIT: I don't mean civil war literally of course, and have edited to clarify. I was just drawing an analogy with the South seceding from the union. Obviously there is 0 chance of any actual war, nor would anyone want one for a minute. The difference between past wars is that there actually are democratic European institituions - i.e. the EU - just as America remained democratic through and after its civil war.
What you're suggesting is a United States of Europe, which many of use in Europe don't want and certainly not by force.
However they are not necessarily going to go hand in hand - but I cannot think of a case where they did not. Mostly cos political conquest in empires lead to wealth "sharing" - the common idea was transaction costs dropped under one empire increasing the wealth beyond taxation costs.
This is something Eurozone has done well without actual war - but it seems to have reached the point where we are either all in for the Euro (total fair wealth sharing) or just give up.
However selling "total state level socialism" (from States that have to states that do not) is a hard sell - even if right here and now, that's how Greece looks the best solution.
However every country thinks it needs to keep it's own wealth and not give up it's sovereignty - but this is like tribes who used to live in the countries themselves - they have up Independance for security and prosperity.
It's a hard sell.
Dissolution of EU and abandonment of common currency is the only long-term solution for situations like Greece.
Greece would be fortunate to have Mississippi's economy about right now, they have a 26% unemployment rate; Mississippi is 7.x%.
Greece has 100 times as much government debt as Mississippi.
Greece has a ~$200b economy, $20k per capita GDP, and 11 million people. Mississippi has a $110b economy, with just 3 million people, and a per capita GDP of about $37k or soon to be twice that of Greece.
If Greece does everything right for 30 years, they might catch back up to Mississippi.
Their actions so far are rapidly leading them toward being a second tier European economy, in the category with Slovakia, Czech, Slovenia, Russia, Poland etc. instead of being with eg France, Italy and Germany. In fact they're already there, the question now is how much further are they going to fall - the likely answer is they'll lose at least another 1/3 of their real economy.
Greece has an amazing history. That history won't feed or employ people, or keep Greece economically competitive such that their children have a good future.
When you talk to people from Bulgaria, Ukraine, Moldova, Macedonia, etc. they tend to be very focused on economy and money, and there's a good reason for that - they're trying to survive.
To give a couple other examples - why is 'separation of concern' better than a 'god object' in programming? Why is democracy better than monarchy? Why is an ecosystem of smaller companies better than a monopoly? Because centralization is unmanageable (too many dependencies in one place), brittle (single point of failure), inefficient (lack of locality means solutions are sub-optimal) and (when humans are involved) creates perverse incentives.
Better -- for whom?
You will already find that debtor states (at the national level) find it much harder to generate sympathy within the nation if they consistently, repeatedly and unchangeably show that they cannot manage their finances.
So please, explain it to me like I'm five:
How do you think those with money would be willingly convinced to part with it, if they don't even give it up for their own kin?
It does make getting contracts in the future much more difficult though.
Many others also consider the long-term negative consequences of breaching contracts to be worse than short-term positive consequences. If they consider short-term thinking at the cost of the long-term to be immoral, they would consider breaching contracts to be immoral.
To you, breaching a contract might just be another IF-THEN which is implicitly or explicitly coded into the contract, but others consider it to have moral weight.
I want a rate that is reasonable to the risk, because if I insist on a lower rate, I won't be able to borrow at all.
I don't think anybody who would use the golden rule as a moral tool would really interpret it that way.
The government is a coalition of right wing nationalists and left wing - nationalistic - marxists. Not sure why this should be called a left wing government. Calling the government left-wing is marketing to get sympathies with leftist people in Europe.
So I'd rather call the government nationalistic populist.
However, what's written seems not far from truth. Other sources have been reporting how Greece is running out of cash.
Feb 6: http://www.wsj.com/articles/greece-could-run-out-of-cash-in-...
Mar 23: http://business.financialpost.com/business-insider/greeces-g...
Apr 2: http://www.reuters.com/article/2015/04/02/us-eurozone-greece...
And now, with "finance ministry officials are categorically denying any suggestion that Greek representatives said the country would run out of cash" I think could be confirmed that Greece is running out of cash. http://www.theguardian.com/business/live/2015/apr/02/greece-...
It seems appropriate to point out that it is public knowledge that the EU was/is irrationally hostile towards Greece during the Eurozone crisis.[0]
Now they have to play high stakes fiscal politics with a very clever bunch of largely unrestrained leftists. Frankly, they can't blame anyone else for this problem.
[0] http://www.telegraph.co.uk/finance/economics/11226828/Tim-Ge...
Yes, very "irrational", after discovering that Greece had blatantly lied about pretty much everything relevant to the Eurozone.
Wars have been fought over a lot less.
Let's not forget the Germany and France were the first to break the Euro's rules and the rule were changed so they weren't fined.
http://www.bbc.co.uk/news/world-europe-16761087
It was like 7 years ago. Now there's a difficult situation (a debt realistically impossible to pay) and different people in charge (not thieves and Goldman Sachs anymore [1]). Let's focus on viable solutions.
[1] http://www.spiegel.de/international/europe/greek-debt-crisis...
Another viewpoint is: It is "public knowledge" that the same "bitter EU medicine" worked well for Ireland, Portugal and Spain. So from the "Pigs" countries - only the "g" refuses to take it. That is their right. But then don't blame/insult the doctor.
Spain has an unemployment rate of 23% for starters.
We should also take a look at Iceland, where going a different route to the EU medicine worked well for them.
http://stats.oecd.org/index.aspx?DataSetCode=REV
In 2013, Spain's tax revenue was 32.6 % of GDP. Compare that to Germany 36.7 %, Netherlands 36.3 % and Finland 44.0 %. Also consider that these as proportion of tax revenue to official GDP, and it's pretty safe to assume that Spain has more in grey economy (not in official statistics) than northern Euro countries.
What you speak about is a completely different thing, Portugal has very old and deep structural problems but they were not caused by this particular crisis, they just got more exposed. Solving them is another story, I don't even think that our democracy (as we know it) is able to do it.
In the end we arrive to the same conclusion, EU/IMF/whatever trust Portugal enough to bail us out again.
But I understand where you want to get: "we are behaving like good boys" and making everything that "Germany" says. Would you prefer an atitude like the Greek one, "acting like a spoiled kid"? As Greece, we are a small and periferical country without any power to negotiate by ourselves - we need to associate with others - and sincerely I prefer Portugal to associate with Germany than Greece. Our best way to get through this is by being "the good boys" and man up.
I'm simply skeptical that any of those parties (private lenders or EC/IMF/ECB) lend us money because they trust us to pay it back, and so I have to wonder why else would they lend us money.
Regarding 'trust' in Portugal: Draghi's 'whatever it takes' statement and actions are mainly what fixed this.
You need to be careful about definitively attributing an outcome to a particular action - hey, maybe you fixed borrowing costs by eating weetabix for breakfast one day in 2010, and now Portugal has low borrowing rates.
We are also of course only considering one very limited measure of 'success' - you did not mention unemployment or GDP, for some reason ...
> maybe you fixed borrowing costs by eating weetabix for breakfast one day in 2010, and now Portugal has low borrowing rates.
Portugal has low borrowing rates because it didn't break promises and contracts. This allowed Portugal to be trusted again, not Draghi's statements. If so they would have worked with Greece also..
'Trust, not money, is the currency of business and life.' - David Horsager
Global interest rates being historically low isn't a cause now?
No, you say, it is because of something that was the same before, during, and after the main crisis point - that promises and contracts were not broken. (Not that promises or contracts need necessarily have been broken had other courses of action been taken).
Meanwhile e.g. Germany, who broke the rules on borrowing early in the life of the Euro, has of course suffered economic collapse, and cannot borrow money at any interest rate. And Iceland, they are back in the stone age now.
Portugal needs energy from the exterior to survive. Would anybody trust us enough to sell energy (at a reasonable price), not knowing if we would pay it [1]? By the other hand, Iceland doesnt't need the exterior as much as we, they can afford to not be trusted [2].
[1] Or we could associate to Russia, like Syriza tried..
[2] 'By harnessing the abundant hydroelectric and geothermal power sources, Iceland's renewable energy industry provides close to 85% of all the nation's primary energy - proportionally more than any other country - with 99.9% of Iceland's electricity being generated from renewables.'
http://en.wikipedia.org/wiki/Economy_of_Iceland
Iceland never had much deficit. It has a healthy public economy. Iceland had a boom of financial industry which then went bust, but it wasn't a significant part of the country's real economy.
When the banks went bust, foreign customers who lost money in the crash insisted that Iceland, the country, should compensate. The government felt they didn't, because it was not the Icelandic government that was in bankruptcy. And that was fine.
The public deficit in Greece (and, to lesser extent, Portugal, Ireland, France, Italy and now Finland) is a very different problem.
If Portugal behaved like Greece, it couldn't borrow at those rates from the market. Greece can't, without others underwriting the debts.
Compare Greece: http://www.tradingeconomics.com/greece/government-bond-yield
to Portugal:http://www.tradingeconomics.com/portugal/government-bond-yie...
Notice how the figures have same form, but quite different scales.
The best comparison would be to Portugal had it and the EU/ECB adopted different policies. Admittedly this is hard since we do not see that.
You are choosing to compare Portugal to Greece. Greece alas is a complete basket-case. Starting in a much better situation than Greece, and claiming success for policies that leave you less worse off than Greece, is a very low bar.
At the same time, you argue that we can never compare Portugal to Iceland - not even as a counterexample to 'a country must not break promises or contracts, otherwise the economy goes down the drain'.
Why the Iceland case is different - and Iceland has not lost serious trust in eyes of lenders - is that Iceland did not run a serious public deficit and it did not fill such a deficit by borrowing.
Still, the economic crisis brought a shock to Icelandic economy in form of huge devaluation. If Portugal would have gone from EUR to its own currency, how much would it have devalued?
ISK halved its value practically overnight: http://www.tradingeconomics.com/embed/?s=usdisk&d1=20050101&...
There are people who argue that the New Deal did not help end the Great Depression: 'it was ending anyway' or 'the second world war ended it'.
The Obama stimulus was (a) useless (b) helpful but insufficient (c) just right. Do you think history will reach a consensus on this?
Regarding your 'another viewpoint': Greece has implemented eye-wateringly bitter medicine.
Like medieval doctors, when bleeding fails to cure the patient, they call for more bleeding, blame the patient for not being devout enough, and say that the suffering is a punishment for past crimes.
The fact that bleeding did not manage to kill their other patients clearly demonstrates it was a success, and that Greece is the one at fault, not the doctors.
http://www.wsj.com/articles/banks-ready-contingency-plans-in...
http://www.nytimes.com/2015/03/19/business/international/war...
http://www.ft.com/cms/s/0/47aa4dce-d2f7-11e4-b7a8-00144feab7...
However, this article - and especially the headline - make things sound quite imminent.
It wouldn't be the first to mention capital controls or something else happening the weekend following this one, but they make it sound much more probable than others have.
http://www.forbes.com/sites/robertlenzner/2013/11/25/the-fed...
Add to which Keynes original idea is to bury the money in bottles and any form of monetary supply increase is good.
I think I agree with downthread - finances as a form of control - it's a banker mentality.
I think (A) is more applicable in Greece's case. The Euro has favored export economies, such as Germany's, for the past decade. Greece needs a currency that will support its economy, which is much different than Germany's. The Euro's benefits of easier inter-Europe trade and increased European power in the global currency markets have been far outweighed by its inability to cater to the very different economies of the various EU nations.
It's important to look at who owns Greece's debt to see who is really pushing for repayment. [0] The EFSF owns 45% of the government's 315bn Euro debt. Amazingly, according to the EFSF's last financial statement in 2013: "As at [sic] 31 December 2013, the EFSF as an issuer has been assigned an AA rating by Standard & Poor's, an Aa1 rating by Moody's and an AA+ by Fitch Ratings and the highest possible short-term rating from all three major credit rating agencies — Standard and Poor's (A-1+); Moody's (P-1) and Fitch Ratings (F1+)." Germany, Italy, and France own the largest number of shares of the EFSF with Germany at 771k, France at 579k, and Italy at 509k. Most of the other countries own anywhere from 5k-100k shares. [1]
I just wonder if people are going to get greedy/desperate enough to pull a vulture bank maneuver and start seizing real assets - see the seizure of an Argentinian Naval Vessel by hedge fund Elliot Capital. [2] Now that would be a very messy affair.
[0] http://www.bloomberg.com/news/articles/2015-02-02/greece-see...
[1] http://www.efsf.europa.eu/attachments/EFSF%20Financial%20Sta...
[2] http://www.nytimes.com/2012/10/19/world/americas/seizure-of-...
That would be basically be war, but fought with economic weapons. I like to think that Europe is not at that stage yet (and hopefully never will be).
You should go back in time, and read the "details". The debt was owned by german and french banks. What essentially happened is that those banks were bailed out with the money of all the european tax payers. (Greek, german, french, etc.)
Good article on this from Foreign Affairs: http://www.foreignaffairs.com/articles/143294/david-gordon-a...
Some quotes:
"Yanis Varoufakis, the Greek Finance Minister, for one, singled out Italy for having debt that was “unsustainable,” which served only to infuriate Italian Finance Minister Pier Carlo Padoan"
"Within a day of winning the Greek election, he (Tsipras) called the Russian ambassador and protested the EU’s statement condemning Russian-backed Ukrainian separatists for an attack on civilians in a Mariupol market"
"But even then, Greece could have survived its mistakes were it not for one other fatal decision: to move forward with its electoral platform before renegotiating its debt, increasing government spending without the requisite funds and reversing or stalling key reforms (...) All these factors positioned Greece to buckle in its negotiations. It was simply hemorrhaging far too much money far too fast to hold its position."
For Greece? Greece will recover, and it's hard to do worse than it is currently doing. And as others say, a floating currency will help correct the imbalance of an exporter like Germany dominating the EU.
And bizarrely, I suspect investment will be quick to return if Greece is seen as being out from under its cloud. Investors seem to care less about previous behavior than about future prospects.
> It's a really bad strategy in that it doesn't prepare the Greek people for anything bad happening.
No... Germany stands to lose the most, because the likely eventual outcome is the collapse of the entire monetary union, and the wide markets that Germany has enjoyed.
So short term Greece's social problems will be exacerbated - and that is the problem, arrogance suggests that there won't be a problem. The government may be looked back on a different light in 5-10 years time, but when there is renewed rioting in the streets in a month that isn't so good.
For Greece? Take a look at Argentina.
(just like one can be in favour of the freedom of speech to say X without agreeing with X)
From Wikipedia
"Populism is a political doctrine that appeals to the interests and conceptions (such as hopes and fears) of the general people, especially contrasting those interests with the interests of the elite."
Democracy: Cheap Education Populism: Easy-to-get student loans
Democracy: Low taxes on essential products Populism: High taxes on essential products, then "stamps", "aids", or low taxes/subsidies on a very specific range of said essential product
Also similar to the Roman Strategy of Bread and Circuses
This only seems like a bad thing because it is viewed in terms of money and debts, rather than human cost. The reality is that Syriza must do some spending if only to hold Greece over and stem the rise of the far-right. Greece has had 7 years of "reforms". They need to also spend some money sometimes.
When you hear about, or say, "greeks don't pay their taxes", you should also get informed about how much that taxation really is. That's extremely difficult, even for someone living here. To give the slightest of many examples, you may read that income from real estate is taxed with 33%. That's true, but it glosses over ~30 more "small" taxes on real estate, and many other general laws that affect it. ..You read "I don't pay my taxes of 33%", my what-really-happened, extremely simple, just did a division, calculation, is 90%. ..Have a good day. Cause I'm having bad years.
For 70 years no German Government could win on a nationalistic ticket. The vast majority of German elites were pro-Europe. The majority of people saw the billions of $ wealth transfer to the southern and eastern countries as moral compensation for the war.
With comparing the elected German chancellor to Hitler, comparing the finance minister to a concentration camp manager and the talk of reparations, Germans felt insulted and black mailed and Greece created cracks in the above narrative.
The Greek government achieved that the next German government and generation of conservatives will win on a nationalistic ticket to fend of right wing anti European parties like the AfD (Alternative For Germany). Which is good, as the best for Germany is not a political union like the EU but TTIP and something like NAFTA combined with a China style currency policy. The EU helps small countries gain disproportional power and poor countries gain money transfers while it binds and hinders Germany and France. The US does what's best for the US for the last 200 years. A proud symbol to learn from.
Next step could be the UK EU exit, FN in France will help, TTIP and with Polish NAFTA love this could be the first stepping stones for an unpolitical economic union.
I was (i) considering the cascading effect of a Greek exit from the Euro, and (ii) thinking in relative terms: I'm not arguing that Germany will be worse off, but perhaps it has more to lose at this point.
Re: the cascading effect:
http://yanisvaroufakis.eu/2011/08/04/why-italy-why-spain-and...
I'm aware that this article describes the dynamics of countries going to the receiving side of EFSF, not of countries leaving the Euro altogether, but I think the perverse dynamics described apply to the latter too.
Relying heavily on exports, as Germany does, may mean you have more to lose in a crisis like this. Consider what happens after a few more European countries stop generating demand for German goods, at the same time that demand from the US is weak too. Demand from the rest of EU and from the US was a big part of what made Germany 'a country like Germany'.
https://www.destatis.de/EN/FactsFigures/NationalEconomyEnvir...
Yes, imports would be unaffordable for Greece with the new currency and that will generate a lot of pain (not that devoting a big share of the national budget to servicing debt is helping a lot), but that will also force the country to correct that imbalance, making what's left of local industry more competitive. That pain would be a price to pay for adapting to a more self-reliant setup, while the one currently being endured (mostly on ideological grounds, I claim) seems more pointless.
Re: tourism, having their own currency to devaluate might help with that.
Re: standard of living, it's not like Greece's current situation, and their prospects within the demands of the memorandum are rosy either.
Corruption and nepotism won't help, but they aren't helping within the Euro either. If anything, those problems are made worse in colonial economies, which the deficit countries in Europe have been, for good and ill, to a large extent.
All in all, a Greek exit from the eurozone is a big lose-big lose proposition for anyone. I don't think it matters a whole lot who stands to lose more. But to the extent that it matters, I think it must be considered in relative terms. Overall, Germany has a better deal in the Eurozone than Greece, and it has more to lose.
You're right though that this discussion of who will hurt more is irrelevant. What has become clear is that a monetary and political union does not result in a more stable Europe. Perhaps the goals should be scaled back to the original goal of increasing trade by reducing transaction costs, rather than trying to have Europe follow the US model.
Would Greece have to exit from EU when it exits euro?
BTW lots of Europeans do tourist trips to Turkey, even though it is not in EU.
Lots of Europeans do travel to Turkey. Funnily enough I am currently on a trip from the EU to Turkey. Here's a few facts to consider:
- I have to exchange Euros to Turkish Liras, and for tourists the exchange rates are not good. - A flight to Turkey cost me about €200 while a flight to Greece is far cheaper even thought he distance is similar. - It's very expensive to call my family from Turkey. Calling from Greece is cheap due to the EU. - My bank card is not accepted everywhere, whereas in Greece I believe it would be. - I have to get a visum for Turkey. - Travel insurance for Turkey is more expensive. - An european car trouble emergency service membership works in Greece but not in Turkey. - The prices in Turkey are far cheaper than in Greece. Greece could adjust their prices to Turkish levels (and likely would have to) after leaving the euro and EU, but then they earn far less of course.
Subjectively I do feel safer in Greece because they are in the EU. Also perhaps some Europeans would not travel to Greece because of perceived anger from Greeks to the rest of the EU, or they wouldn't travel to Greece out of spite if they default on European debt.
BTW at least in Istanbul - not necessarily elsewhere in Turkey - you'll shop in many places with cash euros. But yes, there are some places where you actually do need liras. For exchanging cash, I've for a long time depended on withdrawing cash from an ATM; the rate is better than in kiosks in almost any country (particularly better than the rip-offs at my home airport which is close to a scam).
Higher flight prices are possibly due to airport taxes and such things, or just random air ticket pricing quirkiness, probably not EU. From where I live, flights to Istanbul that I sampled are slightly cheaper than flights to Athens (distance is practically the same).
It is interesting that Turkey requires a visa from a number of EU countries. A visa seems really simple to get, though (on arrival at airport).
The recent Greek hyperbolic anger against Germans is one thing that discourages me from going there as tourist (I'm not German, but I might be mistaken for one). In that, Tsipras and his crowd are not doing a great service on their country. But maybe it was what they needed to do in order to win elections and then explain why things don't start improving overnight.
BTW, Turkey recently changed the rules regarding visas; now you cannot get a visum at the airport any more, you need to apply and pay online and print out the application form, which you exchange for a visum at the border. It's still easy, but these small hurdles do add up.