They're in worse shape than the US was at the same time into the Great Depression. Six years after the GFC, and Greece's GDP is still 25% lower than it was pre-crisis.
This is really unprecedented stuff. Hard to blame them for taking extreme positions to end the suffering.
A common way to measure the length of a recession is to start counting as soon as the GDP drops for two quarters in a row, and stop counting when the GDP recovers past that 'zero point'. A slight slowing in the rate of decline after years of recession isn't quite a recovery so you wouldn't start the clock from there. You can see a similar local max. in the Great Depression line when the government stopped the stimulus programs and passed a law to balance the budget.
It's still a recession until it hits 'zero' again, even if there is solid growth?
E.g. if a country started with a GDP of 100, dropped to 10 in a single year, and then over the next 90 years grew its GDP by 1 each year, it would be 90 years of economic growth but still a recession?
Technically the recession is only when GDP drops for at least two consecutive quarters, what follows is the recovery phase. It's just common phrasing to call the whole period the recession or depression. In your example, there'd be a 1-year recession with a 90-year recovery.
Could be what was brought up on BBC during a interview with Steve Keen, where Keen talks about Greek prices falling faster than GDP for a period of time.
The Greek economy was and is primarily based on an oversized public sector, which was only made possible by a) devaluing the Drachma at every point possible and b), after joining the Euro, falsifying statistics to facilitate being lent more.
As such, it seems more reasonable to compare the current GDP with a reference in, say, 1990. Back then, Greece’s GDP was at 98,251,934,651, whereas for 2014 you have 299,615,364,238 (USD), or roughly a 305%-growth. In comparison, France stood at 1,275,300,566,196 and is now at 2,829,192,039,171, i.e. 221%.
In other words, Greece borrowed too much and now people are upset that they can’t continue their just-achieved standard of living because people don’t give them any more money. But even now, their cumulative GDP growth over 24 years is still larger than that of France, one of the primary lenders in the ongoing debacle (comparison to Germany is difficult, due to reunification complicating everything).
I find it striking that there was a recovery in 2010, after which the austerity measures were implemented, which were then followed by a downward slide. I have never understood why any sane economist is in favor of austerity measures while it has been shown that every time they plunge the economy into recession making it harder to pay back debts.
>I have never understood why any sane economist is in favor of austerity measures
That can be attributed to the influence of wealthy business lobbies. Austerity puts downward pressure on wages, which in turn creates upward pressure on profits.
Economists, like everybody else, respond to incentives.
That makes no sense. All businesses suffer along with the rest of the economy when flow of money dries up. It's not just lower wages, it's lower sales, profits and for those business kept afloat by financial leverage, such crisis often mean complete death.
B) Businesses in the rest of the Eurozone can reap the benefits of suppressed Greek wages (in the form of a more cut-throat labor market), without facing the consequences of lower demand themselves.
Perhaps they should get less tanks and use the better their money? Greek has more tanks than Germany and France together. A huge army for a little country.
What would you have done? They have tons of problems. I mean, who will give them money now given that they're telling their creditors, "And I shall wear the creditors’ loathing with pride"? There was that kickstarter to donate to them but...
Several Eastern European countries took a similar dive after they got rid of their socialist governments in the 90s. Then their economy started to grow a bit later.
AFAIR, most of those countries defaulted on their socialist era debt too.
(Except hungary, which was already known as the "happiest barrack in the communist camp")
This is a good example, Bulgaria grew like crazy -- after 35% of their debt was completely forgiven and the remainder was heavily subsidized via very low interest rates.
> For Greece, an equivalent amount of debt relief (a reduction of 46% on an NPV basis) would equate to something like $150 billion in forgiven loans.
If I understand Wikipedia correctly, Greece was indeed given a 106.5 + 48.2 = 154.7 billion haircut in 2012:
"The haircut alone lowered the government debt pile by €106.5bn (equal to a debt-to-GDP ratio decline of 55.0 percentage points), but as Greek banks at the same time were holding almost one third of the restructured debt, this also created the need for the Troika and Greek government to pay for a €48.2bn bank recapitalisation in 2012"
Kind of, but not exactly.. They exchanged many of the short term loans with longer term ones, with conditions that demanded heavy austerity. The private banks took a big haircut after years of negotiation but the private loans were a small total portion compared to the public ones. The IMF readily admits how flawed their troika bailout was;
And the funny thing is? It wasn't austerity that got the US out of that depression. It was FDR's New Deal, probably still the most left-wing plan ever enacted by a US government.
Rather than 'tightening belts,' FDR responded with Social Security, the TVA, banking reform, relief funds, the housing administration, new tax policies, the list goes on.
Amusingly, even then, those on the right charged him with attacking business and even communism, but unlike the left-wing policies of the last couple of decades, he actually stuck to his guns and rode the goodwill of the people into the first and only third term in the history of the presidency.
About the only case I know of for austerity ever actually leading to anything half-good is Finland, the only country in WWII ever to pay off the full extent of its war debt. But while the eventual result was to turn the country into a proper industrial power, the intervening decades are still remembered as one of significant poverty, of literally making bread flour from tree bark because wheat was too expensive. One even wonders if this was the start of Finland's lingering reputation for depression and alcoholism, from which it is only now starting to recover.
The ugly truth about austerity politics is that it is very much about making a handful of very rich people even richer, and little else. Look at Britain, where the party of some of the richest people in the country are blabbering about tightening belts. You think David Cameron's cutting back at home?
Or hell, look at Germany. The biggest bully for austerity politics in the whole EU is also literally it's richest country. And you can damn sure bet they aren't playing the same game at home.
And oh look, just as last time Europe tried to squeeze a country into bankruptcy for its debts, there's suddenly all these new fascist parties gaining popular support, and an iron-fisted tyrant consolidating power in Russia. It's almost like we've all forgotten the 30s ever happened already ...
Weak currency even with strong export due to sharing it with Portugal, Greece, Spain etc. This is what worked for Germany. If the Euro breaks up Germany is the one in trouble.
The first decade or so after reunification was in all respects unusual so I'd rather not try to draw any conclusions from that. They /did/ have trouble around 2000 or so and Schröder was brave/dumb enough to make drastic reforms in order to improve things.
(And it turns out that I don't know how to spell Hartz. Rather embarrasing.)
The way I as an outsider understand the economic history of Germany, Hartz IV was the one that really mattered.
Whether or not you agree that Hartz IV helped or that it was necessary, I think you can at least agree that it hurt :/ -- in which case one can't complain that Germany wants drastic measures to be undertaken in Greece without being willing to taste the same medicine itself.
> Or hell, look at Germany. The biggest bully for austerity politics in the whole EU is also literally it's richest country. And you can damn sure bet they aren't playing the same game at home.
Inform yourself which reforms where enacted in Germany in 2004/2005 which lead to a nearly uninterrupted decade of economic growth and a very practically balanced-out federal budget. Maybe cutting spending and increases taxes actually leads to a sensible economic state and a more-or-less working public sector. Unless, of course, austerity always fails!
Finding efficiencies and austerity are not the same thing. Germany has free university tuition, Greece has a failing healthcare system that keeps running out of medicine.
Germany has not implemented austerity, yet it feels the need to lecture other countries on the need to do so.
Greece is part of the single market, that means that people can leave. All the smart, qualified people left Greece a long time ago.
> Finding efficiencies and austerity are not the same thing. Germany has free university tuition, Greece has a failing healthcare system that keeps running out of medicine.
Germany failed to collect 2.3% of its tax receipts, Greece failed to collect 89.5% [1]. If Greek people want to continue not paying taxes, they’ll have to make cuts elsewhere, yes.
> Germany has not implemented austerity, yet it feels the need to lecture other countries on the need to do so.
Greece has not contributed financially to the bailout programmes, yet it feels the need to lecture other countries on the need to do so.
> Greece is part of the single market, that means that people can leave. All the smart, qualified people left Greece a long time ago.
So? I don’t mind Greeks moving to Germany for jobs, they’re welcome here just as any other person from the EU. What exactly are you trying to say?
I should think after WWI, Germans of all people would see the danger in driving a European country to ruin with onerous debts, but maybe everyone there just forgot about that after the little dictator just decided he didn't want to pay them anymore?
I'm having trouble reading between the lines here. Was he given a push by being excluded from the recent meetings? Is the suggestion that he was actually a hindrance to Greece progressing? Is he saying he supports the move or that he 'has to'?
He's content with leaving his position, that Greece now had some leverage to negotiate better terms.
He understands that the last restructuring agreement terms is not acceptable. I would assume that he was probably being very vocal in meetings, thus certain parties would think that his presence might make future negotiations more difficult.
> He's content with leaving his position, that Greece now had some leverage to negotiate better terms.
Leverage better terms? I don't think you have any idea how much Tsipras has alienated France and Germany's public opinions. Now that supporting Greece has become synonym of political suicide, I believe that Greece has effectively very little leverage.
After Tsipras' call to vote No, I would be surprised to see any negotiation happen in the near future.
France and Germany has no option but to negotiate.
If Greece defaults, most likely they will exit the Eurozone and this will be disastrous for Europe (Italy and Spain will be exposed in particular).
Financially, it will send a ripple effect and the Euro will devalue as those debts can't be collected, i.e. written off. Politically, it will be the beginning of the end of the Eurozone.
I'm not disagreeing with you on the public opinion of either France or Germany on Greece. But it is in their leader's (France and Germany's) best interest to `help` Greece despite the public's opinion, as public opinion does not always align to the needed course of action.
In Greece's situation, the public opinion (by form of referendum) is used to cement their bargaining position, i.e. the people are ready to accept the repercussions of debt default if they don't get a better deal.
Which is why the negotiation is continuing / will continue, otherwise it will be a terrible lose-lose situation for all.
Maybe German and French politicians really are sufficiently pissed off not to want to negotiate. The referendum did have one important effect though: it smashed any illusions that Syriza is the problem. Heck, the No vote in the referendum was significantly larger than the vote for Syriza in the elections this year!
The problem is that the creditors insist on "squeezing blood from a stone", unwilling to reach an agreement that actually works, and the people of Greece insist that they won't accept that. Now, it's often said and true that in a democracy, the people of one country cannot be allowed to force their will onto the people of 18 other countries. But the facts are on the table; the Greeks have demonstrated that they won't budge. If the creditors won't budge either, it probably means total default and Grexit, something that ostensibly nobody wanted, but that is inevitable given how nobody was willing to make the necessary concessions to avoid it.
In the medium to long term, the Greeks will probably be better off outside a dysfunctional currency union, and the Euro will either get fixed or dissolved after the next few crises.
The problem is the German and French public have never been told or refuse to understand that the original bailout of Greece was a bail out of German, French and other banks.
Greece was sacrificed to save the wider euro, and the German and French public should be grateful.
Why they did that? Poor countries should not buy brand new German subs. Where are the subs now? As far as I now they are deployed in Greek Navy and like any sub are quite expensive to operate. Did Greece spend all borrowed money on German weapons?
When a bank makes a loan there's always a risk of losing money and that's priced into the load (or should be).
'moral hazard' should limit the amount of money banks are willing to lose and so willing to lend to people / companies / countries etc.
The banks and european politicians seem to have forgotten about the hazard and instead bailed out those who lent money to Greece and left the public to pick up the cost.
My theory is that this was his endgame: the eurogroup is now forced to make a move, unless Merkel and her entourage want to go down in history as those that broke up the Euro by moralizing demands of having to pay back debts but could have prevented it. And Greece will use exactly this smugness as leverage for further negotiations.
Maybe that wasn't his plan, but he can now see the very situation you depicted. I believe he was too proactive for a government that bases a lot on pretense (read - paperwork). Old world vs. New World.
The demands are not moralizing, but consistent. If other countries went through austerity, why should Greece be exempt? Imagine what will happen if everybody suddenly thought, that if they act aggressively and recklessly enough, everybody else would pay?
Because, in history, other countries were forgiven their debts, as well, especially so Germany. If Germany gets their debts forgiven after waging war over Europe, then why not Greece after living beyond their means? That would be consistent, as well. And helpful if it means it keeps the Euro zone together and relatively stable.
And let's not forget how much of the help for Greece wasn't actual help, it was a bailout by proxy for German and French banks. How would the political climate in Europe be if these banks had needed an explicit bailout?
You are talking about historical consistency. What the European establishment needs is political consistency. The Baltic states, as well as Spain, Portugal, and Ireland did go through varying degrees of austerity. If you start treating one member differently, right after other members went through difficult reforms, why should other members then play ball? And that is false reasoning: does this mean that any country can wage war and racial extermination and then be forgiven, because Germany already was?
Regarding the bailout thing. A bailout is, per definition, paying off the creditors (banks in this case). The reason people do it at all is to keep the confidence of the money market. Greece wouldn't need a bailout if they were planning to stop taking on any debt at all. But they aren't.
To answer your question, if the banks would take the hit, then it would hurt private households. People think of banks as some super dodgy prop hedge funds, that use their own money to reap super profits. They don't. Banks invest the money of their clients and bag any difference between the interest rate they've offered and the interest rate they've earned. So again, the hit would go to pension funds and possibly depositors. Now, what kind of political climate would be in Europe, if say a German pensioner suddenly got less, because the Greeks couldn't pay back?
> If you start treating one member differently, right after other members went through difficult reforms, why should other members then play ball?
Yep.
We are talking iterated games and rational expectations here. Something you'd expect an expert in game theory to understand -- which he of course does, leading to the conclusion that he has been very dishonest the whole way through.
Maybe austerity is a really bad idea. It has its place in the general monetary toolbox [1], but history shows that it is really not worth to use only that (Mark Blyth: Austerity - The History of a Dangerous Idea [2]). Also, even the IMF has studies where the positive effects of austerity are questioned [3].
He refused to negotiate technical details of Austerity in Bargaining sessions, and continually lectured the Troika on the need to provide debt relief. When he says he wears the creditors loathing with pride, he really means it.
As the most competent economist in the room in any negotiating meeting, he clearly made the mostly-incompetent politicians insecure. I mean, Schauble studied law and was an average accountant, Djesslbloem studied agricultural policies, Lagarde is a lawyer. When he suggested advanced financial instruments of policies, most of them could not understand what he was saying, hence the accusations of gambling and so on.
In that sense, yes, he's better gone: he leaves while on top, having been vindicated by both economists (IMF report) and the public. I fear this might mean Greece will still have to swallow a bitter pill though.
I think you are leaving out that he wasn't exactly a decent diplomat or politician, calling the creditors "terrorists" and publicly offended the German finance minister. In fact, I'd consider this the biggest reason he has come in disfavour with the other ministers.
I will concede that. However, I doubt he was speaking about the creditors in a nice manner. And regardless, it certainly wasn't his first diplomatic gaffe in his tenure as finance minister.
However, if his words are commonly misrepresented, then he should be more careful when speaking publicly. Part of being a politician, and particularly a minister, means your every word will be scrutinised in every way.
While he definitely had the ability as an economist, he did not when it came to being a politician nor a diplomat. But his resignation seems to confirm that he himself realises this.
If one considers their creditors imbeciles (as one might fairly do in this case), it becomes an open question where they plan to get money from in order to continue? Even if they go bankrupt, they have to keep getting money from somewhere.
You're right, they have to get goods from somewhere. The currency situation is due to the imbalance between what Greece produces on the world market vs. what it consumes.
Their government can certainly print money endlessly, but it's like issuing more stock: it doesn't just make the value of that country go up, it makes the value of its stock (money) go down proportionately.
So the fact remains that Greece won't be able to buy all the things it wants without outside cash. And who is going to give it any now? If you just print money without limit, you'll soon find that there's nothing to buy with that money due to inflation.
Maybe they can copy Argentina, but when their finance minister's exit speech is basically "haha, later suckers!" I don't have high hopes.
Their room for manoeuvre is ultimately determined by their voters, most of whom have realized by now what little regard Syriza (and most of Greece) have for them.
> He didn't call them terrorists, that was a translation error that inflammatory media outlets didn't bother to correct.
Where do you think the mistranslation happened? Here's the text (in Spanish) from the El Mundo interview. My Spanish isn't great, but it seems quite clear:
(El Mundo) Aunque no haya encuestas, en las calles de Atenas lo que se siente es que la gente cada día que pasa tiene más miedo.
(Varoufakis) Sí, así es. Lo que están haciendo con Grecia tiene un nombre: terrorismo
(El Mundo) ¿De verdad piensa que lo que están haciendo con Grecia es terrorismo?
(Varoufakis) Por supuesto que lo pienso: es terrorismo. ¿Por qué nos han forzado a cerrar los bancos? Para insuflar el miedo en la gente. Y cuando se trata de extender el terror, a ese fenómeno se le llama terrorismo. Pero confío en que el miedo no gane.
(El Mundo) Even though there are no polls, what you feel in Athen's streets is that people is more scared every day.
(Varoufakis) Yes, that's it. What they are doing to Greece has a name: terrorism.
(El Mundo) Do you really think that what they are doing to Greece is terrorism?
(Varoufakis) Of course I think so: it is terrorism. Why did they force us to close our banks? (They did so) To instill fear into people. And when the objective is to spread terror, that phenomenon is called terrorism. But I have faith in that fear won't win.
---
My personal stance is that he did indeed call their counterparties terrorists. However, he carefully distinguished them from "violent terriorists" such as ISIS et al. Which kind of terrorists are actually more harmful in the long run... that's a matter for personal opinion.
A couple of other terms that could have been used was "spreading FUD" and racketeering (nice nation you have there, would be sad to see anything bad happen to it...).
But the guy have a penchant for not mincing words...
Actually he has been insulted for five months by German politicians but stayed polite despite this. The real problem was the perception as being arrogant, which was also fueled by the media.
A nice way of saying the Greek govt was mostly Idiocracy (2006) incarnate. Sounds like there might be a leadership vacuum and hard, effective work ethic may not be appreciated (or it was a personality conflict).
One positive note: most organizations are culturally self-selecting. So if it didn't work out, that means he's freed up to land a better gig even if he could have made an larger impact if allowed, it's clear the leadership either blames him, feels they have irreconcilable differences or doesn't want him to succeed. It appears he gave it a good go, but perhaps insiders think otherwise. Reiterating the maxim of never burn bridges and always take the high road when leaving employment (and never gossiping/speak ill of anyone in an exit interview.)
Hmm, it seems to me that "advanced financial instruments" that helped mask persistent corruption and tax evasion are a big reason why Greece is currently in a no-win financial deadlock.
And it's a bit rich to talk about the "competent" Greek economist vs. his "incompetent" EU counterparts when they're the ones with the money and he isn't.
When it comes to the Greek debt fiasco, Shakespeare said it best 400 years ago: "Neither a borrower nor a lender be, For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry."
Sure, they're the ones with money and he isn't, but that's hardly his fault, and it's a bit rich to suggest that this implies competence, when part of the reason Greece doesn't have any money is thanks to the policies of these EU counterparts (and their predecessors).
> And it's a bit rich to talk about the "competent" Greek economist vs. his "incompetent" EU counterparts when they're the ones with the money and he isn't.
So you mean that all competent economists are in rich countries, and all incompetent in poor ones?
Does the same apply to other disciplines? Like all good mathematicians are in the US and India? All good painters are in the Netherlands? etc
How sad! I now realize that coming from a country with less than average literary achievements, no matter how I try I won't be ever able to write! I thank you for saving me the effort to try!
The idea that any of those leaders would have been intimidated by or felt insecure around Varoufakis is laughable. He was a mildly amusing technocrat given a specific mission by his delusional government, a mission he failed miserably at while mostly working to maintain his own brand. National leaders keep trained monkeys of their own in the room to explain or even negotiate the details, the key issues are in making sure that major points are accepted by both sides. I would not say that is is leaving "while on top", he is just leaving.
This is no longer a negotiation regarding greek debt, it is a determination of the process for greek exit from the Euro.
>This is no longer a negotiation regarding greek debt, it is a determination of the process for greek exit from the Euro.
Which was the only possible solution for Greece (outside of 50% debt relief which would have been optimal, but politically impossible due to conservative culture). So in a way he delivered.
Given that Syriza came to power claiming the could both eliminate austerity conditions and keep Greece in the Euro, I have a hard time believing that this is delivering in any way, shape, or form. Greece is now going to have an unpleasant austerity imposed on it by collapse of their banking system and exit from the Euro. In the long-run this is possibly better, but it is going to be very unpleasant for quite a while.
Having permanent depression is always unpleasant. Anyway Euro is not a big deal. Membership in EU is. They have access to Schengen, EU markets and borders.
You might think that, but it's a fact that he managed to move the debate from "more austerity to repay all" to "the unsustainable debt has to be renounced". Both the IMF and the public agreed with him. The fact that he didn't need "trained monkeys", unlike his counterparts, is exactly why they clearly felt threatened and spent six months name-calling him.
> It is a determination of the process for greek exit from the Euro.
It might well be the determination of the process for Euro dismemberment. It's now clear that a country not useful to the current "enlarged deutschmark" will be just thrown to the wolves, so the clock is ticking for Italy and Spain.
From my reading of the IMF report abstract, it seems that they believe the debt is unsustainable given that Greece didn't follow the plan laid out in the 2012 framework. Hardly a change of message, I'd say.
Relevant passage:
> By late summer 2014, with interest rates having declined further, it appeared that no further debt relief would have been needed under the November 2012 framework, if the program were to have been implemented as agreed. But significant changes in policies since then—not least, lower primary surpluses and a weak reform effort that will weigh on growth and privatization—are leading to substantial new financing needs.
They stopped following austerity because things were getting intolerable for the average person. By the time the medicine could have 'worked', the patient would have been long dead. So the change in policy was inevitable, as it was debt relief. If Merkel and Schauble had agreed to debt relief 6 months ago, accepting that it was a price worth paying for the stability and long term wealth of the eurozone, things today would be looking rosy. Unfortunately, they could not get themselves to reveal to their electorate that the 2012 bailout was for European banks and arms dealers rather than the Greek people (which is now long overdue), and here we are.
What is wrong or subjective? Well we still don't actually know what's going to happen. Maybe all their debts will be forgiven tomorrow. Seems unlikely, but right now we don't know what's going to happen we just have a range of good and bad guesses. Until we know for sure they have failed we can't call them delusional; indeed lots of people think they are right to fight against austerity, not delusional. And working to maintain his own brand... even if their isn't an argument to be made that getting people to like him is beneficial for his party and his job objectives (which surely there is), how many politicians do you know who don't attempt to maintain their own brand? It's the game they're in.
All in all... we get it, you dislike the Greek government, disagree with them entirely, and are confident you know what is going to happen. Your views are subjective.
> Maybe all their debts will be forgiven tomorrow.
Greece is not the only democracy in Europe and Merkel likes her job too much for that to happen. Sure, if the US/IMF think that the debt should be forgiven, they’re welcome to purchase it and hand it over to Greece, but that’s even more unlikely.
Good for you. I am sure that made you feel a lot better.
For starters, delusional may imply mental illness but its primary definition is to hold false or unrealistic beliefs or opinions. That clearly describes the Syriza government.
Trained monkeys is a figure of speech to imply that economists have little place at the negotiation table until they are called upon to produce a fact or table that is required, often to create such a fact or table even if it is not supported by the data. Whether or not they have the capacity for reasoning is completely superfluous to their role in the discussion, they are window-dressing and nothing more.
It is my _opinion_ that Varoufakis has been primarily interested in making sure that he emerges from this sorid affair as he went in, a 'rebellious rock-star' who can assure himself of at least a decade of speaking gigs and punditry while the rest of his country crumbles. Nice work for a mid-grade academic. I am sure the book describing how none of this is his fault and if only they had listened to him everything would have worked out just fine (and the 'elites' would have gotten what they deserve, etc.) is due to be published any day now.
Is the suggestion that he was actually a hindrance to Greece progressing?
Yes. The Troika wanted to negotiate, but Varoufakis didn't have the power to negotiate anything because the Greek prime minister reserved the right to veto anything which came out of the negotiations.
First rule of negotitations: If you're serious about negotiating, you send someone who has the power to negotiate.
And yet, it is one of the most common and powerful negotiation strategies, and hence frequently suggested also on this site, to be able to say "sounds interesting, but I need to check that with my spouse/family/boss/prime minister".
It's not like Greece just had to get this one deal and then they would have lived happily ever after. For Greece it's not enough to get _a_ deal. They have been getting those deals for 5 years, and a new one is negotiated every few months. The issue is to get a deal that actually works.
Unfortunately those are the traits many people look for in a politician, although to be charitable they're usually confusing them with more noble traits like honesty or integrity. :( Flippancy, tribalism, and reductivism all too often look like bravery and insight from a great distance, at least among people who see politics as a war rather than as an unfortunate side effect of democracy.
Bullshit. People need to sit down and be told they're being stupid. Being able to take it is another thing. Call him harsh, but the more I'm reading the more valid his points seem to be.
If everyone else can't handle the truth then they're being fools. Is that true?
He has some good economic arguments at best and only if you subscribe to the school of economic thought he adheres to. What I've seen of him, he is what the Germans would call a "Fachidiot" (something like "subject idiot" in English), someone who cannot see further than their own subject matter.
As a native Dane with a decentish working knowledge of German, I'd say the Danish word "distanceblænder" ("distance blinder", "distance dazzler") is more fitting:
Someone who (or something which) superficially dazzles with apparent qualities but on closer inspection disappoints utterly.
[terrorism]'s original meaning, given in the Oxford English Dictionary as "government by intimidation".[1]
On Thursday, Schulz told German daily Handelsblatt that the elected Syriza government should be replaced by “technocrat” government until stability is restored.
“We should appoint governments of technocrats,” Martin Schulz told Handelsblatt. [2]
I think it's brilliant that so many people here take an interest in news beyond the mundane, read what they can and trade opinions in a predominantly reasonable fashion. As someone really late to the party, I appreciate being able to gain snippets of info from my peers plus a few distilled links for when I have time to delve further.
He gave 2 talks a few years ago that are well worth a watch - he talks briefly about the abuse of mathematics in certain parts of academic economy, cites a Star Trek Voyager episode and other interesting things:
When i was a teenager, i frequently felt shocked how politicians managed to justify even obvious crimes, like: Soviets had a theory explaining why Berlin blockade of 1948-49 was good and justified. Now as i am getting old, i am less and less surprised by anything, and yet these Greek guys stand out.
I hope i will live enough to see sovereign debt being given only with a physical collateral: a piece of national territory. Otherwise, no way currency union, or any other supranational union except those backed by force (like USA) can survive. If EU leaders had balls, they will prevent what's happening with Greece now, but nobody wants it to do in their electoral cycle.
Debt must come with strict, enforceable and unavoidable means to collect it, otherwise both sides - lender and recipient - if they are sovereign nations - are making troubles for themselves and others.
This is a bit melodramatic. Debt is a business agreement, if it's not secured then the interest rate will be higher. There are numerous ways for lenders to protect themselves against default, but default is always an option.
There's no moral failing, it's purely an economic decision from here forward. Greece will technically default, they'll renegotiate terms, they might leave the EZ, but in the end, life will go on and banks will gladly lend to them again.
The problem isn't that Greece cannot repay the debt. The real problem is that the people of Greece were indebted by the politicians whom most of them didn't even vote for. And those who did vote for them, were not fully aware of the implications and consequences they and everyone else in Greece were going to face.
Basically, what happened is that one small group of people sold everyone else into debt bondage. They had no moral right whatsoever to do so. Now these people lost their savings and face a daunting prospect of shortages and hardships. Call it democracy, but really it's just a crime. Perhaps it's time to rethink what role should governments play in our lives, if any.
This is exactly the reason why strict and enforceable means to collect debt is required: countries are democratic and people can vote against paying the debt, thus relieving politicians who took those decisions of any responsibility. This is why there must be a legitimate force beyond the government control to collect back the money. Or modern economy becomes an illusion.
As another HN thread notes: Piketty mentions that Germany got a lot of their own debt written off after WW2. Germany itself has shirked paying reparations to Greece for all the looting they did (See https://www.youtube.com/watch?v=jOKuNAdMIEI for example). Also "pieces of national territory as collateral" has not worked out very well during say WW1 reparations -- it just encourages far right politics.
Again, I am not saying Greece should not be more fiscally prudent. The Greek government needs to be more fiscally transparent, collect more tax and generally run itself better. However clearly the austerity medication has not worked and (as the IMF itself recognizes). At some point the EU has to decide if punishing Greece's youth (who will not get decent pensions or social benefits anyway) is an appropriate response to overspending by their parents and grandparents.
Greek youth will be punished much more heavily if the country leaves the EU than if part of their territory or other assets are taken to pay the debt. Greece is a basket case: it has never paid for itself in its sovereign history and will probably never do. But being EU citizens, young Greeks can leave the country to work elsewhere. Being forced out of EU, they will find themselves in a poor country which is bound to remain poor, and with no easy way out, like say Albanians.
All lending to a sovereign is inherently unsecured. When you lend money to someone you demand to be paid interest because there is a risk you won't get repaid. Based on the risk of not being repaid, you charge an appropriate interest rate. What you propose only ends in war.
This is why i think a country should not lend the money to a country a war with which it can't reasonably expect to win so easily that no war is possible: it will yield to demands.
Demanding interest: it worked when Greece was selling their debt on the free market. I have no problem with that, whoever buys their bonds accepts the risks, and the rate is market driven, caveat emptor rule applies. But right now we are speaking of money given essentially for free, on conditions much more favorable than any market rate Greece can expect to get (this is why they are asking for money, otherwise they will just offer more bonds). So you are not right here: money given on below-market conditions may, and should, require ways to collect it back.
Land is private property in most countries, so IMHO your suggestion doesn't really make sense. Or are you trying to say the voters should personally take financial responsibility for the country?
I find it really interesting how people immediately start making moral judgements (it would only be fair if they repay it, they stole someone's money and ran off with it etc.) of the side that borrowed the money when it's on country level.
But when it's a company borrowing money and not being able to repay it - hey, that's just business for ya. The lender should have known better.
I am speaking about national sovereignty over land, not ownership rights. Of course, private owners of parcels of land will retain them, except paying property taxes to a different state and being bound by different laws (probably getting residence permits in a new country, too, to enable access to their property). This is annexation, not foreclosure-like sale.
Well, but if a company refuses to repay its debt, this is called a bankruptcy isn't it? In U.S. it is either chapter 7 or 11 and means anything from takeover/sell of its assets or outright liquidation. At least in any more or less democratic countries, a company cannot just fail to pay its debt with no consequences.
In case of a bankruptcy, only stakeholders of the company suffer: management team simply gets fired, employees either get another job or work for the new owner if assets are sold. Same here: i am not suggesting making private citizens responsible for the national debt directly, just the government, which should either cede some part of its territory, or gets dissolved outright.
Debt comes with risk and reward: you give some money, get some interest, and maybe the principal back. The amount of interest depends on the risk. Usually nothing happens, and you get everything back, but sometimes you don't. That's business.
If you want some "strict, enforceable and unavoidable means to collect it", you are not talking about debt as we know it.
There is no business with a profit margin and 0 risk. Well, there is actually: the ones the private lenders made with Greece, before unloading their financial instruments onto the European governments
This whole Greek economic (and now social) crisis is one muddy thing. At first, until Syriza came to power, I have understood what's been happening between the key players. The "story behind", while never completely told by the media, was clear. With Syriza, that's no longer the case. For example: The way they have negotiated with the creditors, their whole communication with the media, who financed them. Totally contradictory. And now, the man in the duo Varoufakis resigns... What a show! But, what's behind it?
I think this move serves to weaken the political cover for the Eurogroup refusing to continue negotiations with Greece (they can't say "we refuse to negotiate because of Yanis"). I'm starting to think that this was his plan all along, and that he and Tsipras are outplaying the Eurogroup right now.
His post evokes FDR's speech some days before the 1936 election, in which Roosevelt says: "We had to struggle with the old enemies of peace--business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. [...] Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me--and I welcome their hatred."
Varoufakis, and Greece in general, are in a somewhat different position right now than America was immediately after the First New Deal. On the other hand, if Varoufakis is right, the differences may not be as great as I imagine...
The contract that Greece signed with the EU didn't change after they signed it. If they agreed to it then, they have to agree to it now. If you disagree then does that mean I don't have to pay off my college loans, house mortgage and car loan either?
It's unfortunate, because his understanding of economics eclipses that of his European peers. I'm sure he'll still be advising Tsipras in some capacity though. And his resignation will take away one more of the troika's excuses...
I realize that you probably imitated GP's short style on purpose, but to elaborate a little bit: It's an accounting tautology that every (monetary) savings must be offset by a debt somewhere. Since private households tend to save (and we should consider that a good thing, given how available savings is an essential part of freedom within a capitalist system), the debts have to be somewhere else. They could be debts of firms (for investment), but the private sector is exposed to (sometimes severe) economic fluctuations. So a buffer is needed somewhere, and the logical place for this buffer is government debt.
I suppose the simplest answer is: to increase your spending (ability) right now, with the expectation that after the debt has been paid off you will be achieve a net positive value.
A small business might borrow to buy expensive equipment which will enable them to offer additional service, or to access other market segment.
Along a similar line, a country might borrow to accelerate their growth (e.g. investing in infrastructure projects).
Ignoring everything else, watching this whole saga unfold has been absolutely incredible. In a global environment mainly involving conservative powers, seeing a left-wing party take left-wing views to the negotiation table is utterly fascinating.
The next few days are going to be incredible. I really do hope Yanis stays on with the Greek government - his knowledge is clearly beneficial even if his ability to negotiate is lacking (for reasons I'm partially sympathetic to given the qualifications of his counterparts). He definitely has a position to play in the Greek government adivsing their plays in the coming future.
e: I'd absolutely love to see him and Wayne Swan (AU centre-left-wing treasurer during the GFC) sit down and discuss both the AU and Greek history between GFC and now. Swan and co. implemented a massive stimulation package that's widely credited as saving AU from feeling the bulk of the pain of the GFC and was relatively unique in its existance amongst the approaches of various nations. I think both of them could have quite the discussion about how both AU and Greece approached this and the resultant effects then to now.
Australia had the massive advantage of its own currency and a low government debt. Australia had room to manoeuvre through the GFC where as Greece went into it with a currency it does not control and very high debt levels resulting from reckless (and fraudulent) lending. While Wayne Swan did OK, I doubt he could have done much if he had been the Greek finance minister in 2008.
Australia had the massive advantage of its own currency and a low government debt.
Not to mention a relatively natural resource-based economy, and significant trade with China... one of the other least GFC effected parts of the world.
I wasn't trying to say the situations are similar. What I was suggesting is that the two examples give fascinating case studies into how differing approaches cause braoder social and financial effects. Both men strike me as realtively knowledgeable in financial matters and both come from the left side of politics in constrast to the usual 'economically strong' parties, so I'd be interested in listening to them discuss these topics.
I've no doubt that the Greek government was trammeled in ways that the AU government was not. We were in a comparitively very healthy position with a significants surplus to draw upon and an ongoing (at the time) resources export boom, among other things.
Yes Australia got much luckier than we really deserved. Having a relatively small population sitting on top of a huge amount of natural resources allows us a lot of slack. I only wish we did more with our lucky situation.
He did our country a great service. Even now after his personal victory he does what is in the country's best interest. The creditors demanded his removal. True he is a poor diplomat and politics need diplomacy but if more politicians were a bit like him the world would be better off. At least he is honest.
As for the situation, as we often say in Greece the truth is somewhere in the middle, we must repay they must let us do so with dignity and hope.
> He's been caught lying on multiple occasions.
Has he? Why should we believe that those deals were not offered as he said seeing the change in the attitude of the Eurogroup (which is a loose group of friends as it's president claimed when he decided to kick out one of it's members last Sunday)or even the IMF (which recognized with a report what he always said about debt sustainability) last week after the announcement of the referendum.
Anyway by honest I was referring mostly to his political and ideological position and not to his negotiation tactics.
What happens when you use game theory in a rough political situation? We will see it soon. We are entering in an uncharted territory, the risk has increased. This kind of negotiation is going to settle a new battle field in politics and as in any battle there can be huge losses.
It is not the critic who counts; not the man who points
out how the strong man stumbles, or where the doer of
deeds could have done them better. The credit belongs to
the man who is actually in the arena, whose face is
marred by dust and sweat and blood; who strives valiantly;
who errs, who comes short again and again, because there
is no effort without error and shortcoming; but who does
actually strive to do the deeds; who knows great
enthusiasms, the great devotions; who spends himself in
a worthy cause; who at the best knows in the end the
triumph of high achievement, and who at the worst, if he
fails, at least fails while daring greatly, so that his
place shall never be with those cold and timid souls who
neither know victory nor defeat.
-- Teddy Roosevelt
Sorry for sidetracking but this is a really big annoyance of mine on hn/reddit. A quote without any context is just an invitation to a pissing contest between who can google the most appropriate random piece of text some famous dead guy said. It's not exactly constructive. All you're saying here is "to hell with the critics" and making it seem like TR agrees with that viewpoint wrt greek economics 100 years after his death.
Frankly, I thought this would be perfectly obvious, so did not need to be explicitly stated: My intention was to underscore that criticism of the ex-FM from the sidelines should be tempered with the knowledge that there are intractable problems here which he was genuinely attempting to solve.
That this might be taken to imply that the long-dead author of the quote which I used for its poetry somehow endorses a position in contemporary political debate is so obviously absurd that I cannot imagine a HN reader doing so.
Interesting, I found this quote very appropiate here, specially because its meaning is quite ambiguous to me. And so are the times we are living in the EU.
For instance, given Varoufakis's resignation, we could interpret the man in different ways:
1) As a person who chose not to be in the arena(in TR's words).
2) A man who was already in the arena but already failed while daring greatly.
3) A man who was already in the arena and arrived at triumph of high achievement, by allowing the Greek people to challenge the Troika with a referendum. And his resignation is just another triumphal move.
I do agree tho that filling comment threads with open-to-interpretation quotes is not very constructuve. Still one here one there can make the issue less black and white - which is good IMHO.
With your risk profile, the interest rate will be 99%, payable as soon as the credit is given, before you leave the room. You will come alone, unarmed, and barefooted.
I believe his exit was planned before the referendum, regardless of the outcome. He had already openly stated that he would step down if the result of the vote was YES, but the media never asked him what would happen in the event of a NO victory.
His exit, especially in the early AM before EU markets open, will give some confidence to the bankers and most likely prevent the markets from sinking. Furthermore, it will signal to the creditors that SYRIZA is serious about reaching a deal.
I've been following the evolution of Mr. Varoufakis's thinking for the last 5 years, through his many appearances on Doug Henwood's Behind the News podcast. Listening to him speak on the Euro-crisis, it's clear that there's no one in the media who has a better grasp of how we got into this mess and how we ought to get out of it.
Yes I would say this is right. There needs to be an ability for all sides to save face here so someone had to go. I suspect that he has been extra obnoxious of late so that he could be removed at the appropriate time. Classic ploy.
"Off-Topic: Most stories about politics, or crime, or sports, unless they're evidence of some interesting new phenomenon. Videos of pratfalls or disasters, or cute animal pictures. If they'd cover it on TV news, it's probably off-topic." HN Guidelines
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They're in worse shape than the US was at the same time into the Great Depression. Six years after the GFC, and Greece's GDP is still 25% lower than it was pre-crisis.
This is really unprecedented stuff. Hard to blame them for taking extreme positions to end the suffering.
So I'd say looking at that graph they're in exactly the same place the USA was ~4 years after the 'start', depending on where you measure it from.
E.g. if a country started with a GDP of 100, dropped to 10 in a single year, and then over the next 90 years grew its GDP by 1 each year, it would be 90 years of economic growth but still a recession?
http://www.debtdeflation.com/blogs/2015/07/06/discussing-syr...
Somewhere round the 1:00 mark.
As such, it seems more reasonable to compare the current GDP with a reference in, say, 1990. Back then, Greece’s GDP was at 98,251,934,651, whereas for 2014 you have 299,615,364,238 (USD), or roughly a 305%-growth. In comparison, France stood at 1,275,300,566,196 and is now at 2,829,192,039,171, i.e. 221%.
In other words, Greece borrowed too much and now people are upset that they can’t continue their just-achieved standard of living because people don’t give them any more money. But even now, their cumulative GDP growth over 24 years is still larger than that of France, one of the primary lenders in the ongoing debacle (comparison to Germany is difficult, due to reunification complicating everything).
(Source for all numbers: http://data.worldbank.org/indicator/NY.GDP.MKTP.CD )
http://www.bruegel.org/nc/blog/detail/article/1647-is-greece...
That can be attributed to the influence of wealthy business lobbies. Austerity puts downward pressure on wages, which in turn creates upward pressure on profits.
Economists, like everybody else, respond to incentives.
A) The relative position of the owners still improves.
http://isites.harvard.edu/fs/docs/icb.topic620591.files/Indi...
B) Businesses in the rest of the Eurozone can reap the benefits of suppressed Greek wages (in the form of a more cut-throat labor market), without facing the consequences of lower demand themselves.
Several Eastern European countries took a similar dive after they got rid of their socialist governments in the 90s. Then their economy started to grow a bit later.
http://i.imgur.com/7zPvyKo.png
For Greece, an equivalent amount of debt relief (a reduction of 46% on an NPV basis) would equate to something like $150 billion in forgiven loans.
I think they'd be much more competitive, don't you?
If I understand Wikipedia correctly, Greece was indeed given a 106.5 + 48.2 = 154.7 billion haircut in 2012:
"The haircut alone lowered the government debt pile by €106.5bn (equal to a debt-to-GDP ratio decline of 55.0 percentage points), but as Greek banks at the same time were holding almost one third of the restructured debt, this also created the need for the Troika and Greek government to pay for a €48.2bn bank recapitalisation in 2012"
https://en.wikipedia.org/wiki/Greek_government-debt_crisis
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/06/05/i...
Rather than 'tightening belts,' FDR responded with Social Security, the TVA, banking reform, relief funds, the housing administration, new tax policies, the list goes on.
Amusingly, even then, those on the right charged him with attacking business and even communism, but unlike the left-wing policies of the last couple of decades, he actually stuck to his guns and rode the goodwill of the people into the first and only third term in the history of the presidency.
About the only case I know of for austerity ever actually leading to anything half-good is Finland, the only country in WWII ever to pay off the full extent of its war debt. But while the eventual result was to turn the country into a proper industrial power, the intervening decades are still remembered as one of significant poverty, of literally making bread flour from tree bark because wheat was too expensive. One even wonders if this was the start of Finland's lingering reputation for depression and alcoholism, from which it is only now starting to recover.
The ugly truth about austerity politics is that it is very much about making a handful of very rich people even richer, and little else. Look at Britain, where the party of some of the richest people in the country are blabbering about tightening belts. You think David Cameron's cutting back at home?
Or hell, look at Germany. The biggest bully for austerity politics in the whole EU is also literally it's richest country. And you can damn sure bet they aren't playing the same game at home.
And oh look, just as last time Europe tried to squeeze a country into bankruptcy for its debts, there's suddenly all these new fascist parties gaining popular support, and an iron-fisted tyrant consolidating power in Russia. It's almost like we've all forgotten the 30s ever happened already ...
Harz IV. Kurzarbeit. Eurojobs. Stable currency for decades/no devaluations.
Lo and behold, it actually worked for them (although it was quite unpleasant for many Germans).
The first decade or so after reunification was in all respects unusual so I'd rather not try to draw any conclusions from that. They /did/ have trouble around 2000 or so and Schröder was brave/dumb enough to make drastic reforms in order to improve things.
https://en.wikipedia.org/wiki/Hartz_concept
(And it turns out that I don't know how to spell Hartz. Rather embarrasing.)
The way I as an outsider understand the economic history of Germany, Hartz IV was the one that really mattered.
Whether or not you agree that Hartz IV helped or that it was necessary, I think you can at least agree that it hurt :/ -- in which case one can't complain that Germany wants drastic measures to be undertaken in Greece without being willing to taste the same medicine itself.
Inform yourself which reforms where enacted in Germany in 2004/2005 which lead to a nearly uninterrupted decade of economic growth and a very practically balanced-out federal budget. Maybe cutting spending and increases taxes actually leads to a sensible economic state and a more-or-less working public sector. Unless, of course, austerity always fails!
Germany has not implemented austerity, yet it feels the need to lecture other countries on the need to do so.
Greece is part of the single market, that means that people can leave. All the smart, qualified people left Greece a long time ago.
Germany failed to collect 2.3% of its tax receipts, Greece failed to collect 89.5% [1]. If Greek people want to continue not paying taxes, they’ll have to make cuts elsewhere, yes.
> Germany has not implemented austerity, yet it feels the need to lecture other countries on the need to do so.
Greece has not contributed financially to the bailout programmes, yet it feels the need to lecture other countries on the need to do so.
> Greece is part of the single market, that means that people can leave. All the smart, qualified people left Greece a long time ago.
So? I don’t mind Greeks moving to Germany for jobs, they’re welcome here just as any other person from the EU. What exactly are you trying to say?
[1] https://img.washingtonpost.com/wp-apps/imrs.php?src=https://... fromhttp://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/03/w...
I should think after WWI, Germans of all people would see the danger in driving a European country to ruin with onerous debts, but maybe everyone there just forgot about that after the little dictator just decided he didn't want to pay them anymore?
He understands that the last restructuring agreement terms is not acceptable. I would assume that he was probably being very vocal in meetings, thus certain parties would think that his presence might make future negotiations more difficult.
Leverage better terms? I don't think you have any idea how much Tsipras has alienated France and Germany's public opinions. Now that supporting Greece has become synonym of political suicide, I believe that Greece has effectively very little leverage.
After Tsipras' call to vote No, I would be surprised to see any negotiation happen in the near future.
If Greece defaults, most likely they will exit the Eurozone and this will be disastrous for Europe (Italy and Spain will be exposed in particular).
Financially, it will send a ripple effect and the Euro will devalue as those debts can't be collected, i.e. written off. Politically, it will be the beginning of the end of the Eurozone.
Again, basic knowledge of the current public opinions of either countries on the subject strongly indicates the contrary.
I do not have the background required to have an informed opinion about the economical consequences of such situation.
Just stating the obvious from a pure political standpoint IMHO.
In Greece's situation, the public opinion (by form of referendum) is used to cement their bargaining position, i.e. the people are ready to accept the repercussions of debt default if they don't get a better deal.
Which is why the negotiation is continuing / will continue, otherwise it will be a terrible lose-lose situation for all.
The problem is that the creditors insist on "squeezing blood from a stone", unwilling to reach an agreement that actually works, and the people of Greece insist that they won't accept that. Now, it's often said and true that in a democracy, the people of one country cannot be allowed to force their will onto the people of 18 other countries. But the facts are on the table; the Greeks have demonstrated that they won't budge. If the creditors won't budge either, it probably means total default and Grexit, something that ostensibly nobody wanted, but that is inevitable given how nobody was willing to make the necessary concessions to avoid it.
In the medium to long term, the Greeks will probably be better off outside a dysfunctional currency union, and the Euro will either get fixed or dissolved after the next few crises.
Greece was sacrificed to save the wider euro, and the German and French public should be grateful.
When a bank makes a loan there's always a risk of losing money and that's priced into the load (or should be).
'moral hazard' should limit the amount of money banks are willing to lose and so willing to lend to people / companies / countries etc.
The banks and european politicians seem to have forgotten about the hazard and instead bailed out those who lent money to Greece and left the public to pick up the cost.
It's a race to the bottom.
And let's not forget how much of the help for Greece wasn't actual help, it was a bailout by proxy for German and French banks. How would the political climate in Europe be if these banks had needed an explicit bailout?
Regarding the bailout thing. A bailout is, per definition, paying off the creditors (banks in this case). The reason people do it at all is to keep the confidence of the money market. Greece wouldn't need a bailout if they were planning to stop taking on any debt at all. But they aren't.
To answer your question, if the banks would take the hit, then it would hurt private households. People think of banks as some super dodgy prop hedge funds, that use their own money to reap super profits. They don't. Banks invest the money of their clients and bag any difference between the interest rate they've offered and the interest rate they've earned. So again, the hit would go to pension funds and possibly depositors. Now, what kind of political climate would be in Europe, if say a German pensioner suddenly got less, because the Greeks couldn't pay back?
Yep.
We are talking iterated games and rational expectations here. Something you'd expect an expert in game theory to understand -- which he of course does, leading to the conclusion that he has been very dishonest the whole way through.
(I agree with the rest as well.)
In that sense, yes, he's better gone: he leaves while on top, having been vindicated by both economists (IMF report) and the public. I fear this might mean Greece will still have to swallow a bitter pill though.
However, if his words are commonly misrepresented, then he should be more careful when speaking publicly. Part of being a politician, and particularly a minister, means your every word will be scrutinised in every way.
While he definitely had the ability as an economist, he did not when it came to being a politician nor a diplomat. But his resignation seems to confirm that he himself realises this.
Their government can certainly print money endlessly, but it's like issuing more stock: it doesn't just make the value of that country go up, it makes the value of its stock (money) go down proportionately.
So the fact remains that Greece won't be able to buy all the things it wants without outside cash. And who is going to give it any now? If you just print money without limit, you'll soon find that there's nothing to buy with that money due to inflation.
Maybe they can copy Argentina, but when their finance minister's exit speech is basically "haha, later suckers!" I don't have high hopes.
If their currency were to lose value, their exports would become cheaper in relation to others.
This in turn would drive up exports.
Right now the euro is trading pretty much on par with USD.
Not likely that this is beneficial for the Greek economy, as it seems very dependent on farming and raw material extraction.
Where do you think the mistranslation happened? Here's the text (in Spanish) from the El Mundo interview. My Spanish isn't great, but it seems quite clear:
(El Mundo) Aunque no haya encuestas, en las calles de Atenas lo que se siente es que la gente cada día que pasa tiene más miedo.
(Varoufakis) Sí, así es. Lo que están haciendo con Grecia tiene un nombre: terrorismo
(El Mundo) ¿De verdad piensa que lo que están haciendo con Grecia es terrorismo?
(Varoufakis) Por supuesto que lo pienso: es terrorismo. ¿Por qué nos han forzado a cerrar los bancos? Para insuflar el miedo en la gente. Y cuando se trata de extender el terror, a ese fenómeno se le llama terrorismo. Pero confío en que el miedo no gane.
(El Mundo) Even though there are no polls, what you feel in Athen's streets is that people is more scared every day.
(Varoufakis) Yes, that's it. What they are doing to Greece has a name: terrorism.
(El Mundo) Do you really think that what they are doing to Greece is terrorism?
(Varoufakis) Of course I think so: it is terrorism. Why did they force us to close our banks? (They did so) To instill fear into people. And when the objective is to spread terror, that phenomenon is called terrorism. But I have faith in that fear won't win.
---
My personal stance is that he did indeed call their counterparties terrorists. However, he carefully distinguished them from "violent terriorists" such as ISIS et al. Which kind of terrorists are actually more harmful in the long run... that's a matter for personal opinion.
But the guy have a penchant for not mincing words...
Googling the actual Greek word he used brings up page after page of arguments that it meant exactly that: terrorism.
One positive note: most organizations are culturally self-selecting. So if it didn't work out, that means he's freed up to land a better gig even if he could have made an larger impact if allowed, it's clear the leadership either blames him, feels they have irreconcilable differences or doesn't want him to succeed. It appears he gave it a good go, but perhaps insiders think otherwise. Reiterating the maxim of never burn bridges and always take the high road when leaving employment (and never gossiping/speak ill of anyone in an exit interview.)
And it's a bit rich to talk about the "competent" Greek economist vs. his "incompetent" EU counterparts when they're the ones with the money and he isn't.
When it comes to the Greek debt fiasco, Shakespeare said it best 400 years ago: "Neither a borrower nor a lender be, For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry."
So you mean that all competent economists are in rich countries, and all incompetent in poor ones?
Does the same apply to other disciplines? Like all good mathematicians are in the US and India? All good painters are in the Netherlands? etc
How sad! I now realize that coming from a country with less than average literary achievements, no matter how I try I won't be ever able to write! I thank you for saving me the effort to try!
What a funny world!
Right? :-)
This is no longer a negotiation regarding greek debt, it is a determination of the process for greek exit from the Euro.
Which was the only possible solution for Greece (outside of 50% debt relief which would have been optimal, but politically impossible due to conservative culture). So in a way he delivered.
> It is a determination of the process for greek exit from the Euro.
It might well be the determination of the process for Euro dismemberment. It's now clear that a country not useful to the current "enlarged deutschmark" will be just thrown to the wolves, so the clock is ticking for Italy and Spain.
From my reading of the IMF report abstract, it seems that they believe the debt is unsustainable given that Greece didn't follow the plan laid out in the 2012 framework. Hardly a change of message, I'd say.
Relevant passage:
> By late summer 2014, with interest rates having declined further, it appeared that no further debt relief would have been needed under the November 2012 framework, if the program were to have been implemented as agreed. But significant changes in policies since then—not least, lower primary surpluses and a weak reform effort that will weigh on growth and privatization—are leading to substantial new financing needs.
http://www.imf.org/external/pubs/cat/longres.aspx?sk=43044.0
Here's a wonderful anecdote about their glacial and incompetent privatization:
http://www.forbes.com/sites/timworstall/2015/07/03/the-airbu...
Note the marvelous bit about the hundreds of clients the non-selling of 4 Airbus planes provided jobs for.
What is wrong or subjective in "delusional government", "failed", "working to maintain his own brand"?
Is it the "trained monkeys" you object to?
Edit: and I think you are just trying to use appeals to decorum to suppress dissent.
Note: "childish", "defamatory", "bad-faith", "stooping", "vacuous", "insults". Hoisted by your own petard? Projection?
All in all... we get it, you dislike the Greek government, disagree with them entirely, and are confident you know what is going to happen. Your views are subjective.
Greece is not the only democracy in Europe and Merkel likes her job too much for that to happen. Sure, if the US/IMF think that the debt should be forgiven, they’re welcome to purchase it and hand it over to Greece, but that’s even more unlikely.
For starters, delusional may imply mental illness but its primary definition is to hold false or unrealistic beliefs or opinions. That clearly describes the Syriza government.
Trained monkeys is a figure of speech to imply that economists have little place at the negotiation table until they are called upon to produce a fact or table that is required, often to create such a fact or table even if it is not supported by the data. Whether or not they have the capacity for reasoning is completely superfluous to their role in the discussion, they are window-dressing and nothing more.
It is my _opinion_ that Varoufakis has been primarily interested in making sure that he emerges from this sorid affair as he went in, a 'rebellious rock-star' who can assure himself of at least a decade of speaking gigs and punditry while the rest of his country crumbles. Nice work for a mid-grade academic. I am sure the book describing how none of this is his fault and if only they had listened to him everything would have worked out just fine (and the 'elites' would have gotten what they deserve, etc.) is due to be published any day now.
Yes. The Troika wanted to negotiate, but Varoufakis didn't have the power to negotiate anything because the Greek prime minister reserved the right to veto anything which came out of the negotiations.
First rule of negotitations: If you're serious about negotiating, you send someone who has the power to negotiate.
As far as I can see it is much harder to reach a deal now that there is a precedence to have the negotiated deal rectified at a referendum.
If everyone else can't handle the truth then they're being fools. Is that true?
> If everyone else can't handle the truth then they're being fools.
Take a step back, the idiocy of the past is history. There is the idiocy of the now to deal with.
Someone who (or something which) superficially dazzles with apparent qualities but on closer inspection disappoints utterly.
http://ordnet.dk/ods/ordbog?query=distancebl%C3%A6nder
(I agree completely with your description: some good arguments at best and then only if...)
On Thursday, Schulz told German daily Handelsblatt that the elected Syriza government should be replaced by “technocrat” government until stability is restored.
“We should appoint governments of technocrats,” Martin Schulz told Handelsblatt. [2]
[1] http://www.theguardian.com/world/2001/may/07/terrorism
[2] http://www.telegraph.co.uk/finance/economics/11718296/EU-war...
https://www.youtube.com/watch?v=A3uNIgDmqwI
https://www.youtube.com/watch?v=MEUWxNifJJ8
I hope i will live enough to see sovereign debt being given only with a physical collateral: a piece of national territory. Otherwise, no way currency union, or any other supranational union except those backed by force (like USA) can survive. If EU leaders had balls, they will prevent what's happening with Greece now, but nobody wants it to do in their electoral cycle.
Debt must come with strict, enforceable and unavoidable means to collect it, otherwise both sides - lender and recipient - if they are sovereign nations - are making troubles for themselves and others.
There's no moral failing, it's purely an economic decision from here forward. Greece will technically default, they'll renegotiate terms, they might leave the EZ, but in the end, life will go on and banks will gladly lend to them again.
Basically, what happened is that one small group of people sold everyone else into debt bondage. They had no moral right whatsoever to do so. Now these people lost their savings and face a daunting prospect of shortages and hardships. Call it democracy, but really it's just a crime. Perhaps it's time to rethink what role should governments play in our lives, if any.
Again, I am not saying Greece should not be more fiscally prudent. The Greek government needs to be more fiscally transparent, collect more tax and generally run itself better. However clearly the austerity medication has not worked and (as the IMF itself recognizes). At some point the EU has to decide if punishing Greece's youth (who will not get decent pensions or social benefits anyway) is an appropriate response to overspending by their parents and grandparents.
Demanding interest: it worked when Greece was selling their debt on the free market. I have no problem with that, whoever buys their bonds accepts the risks, and the rate is market driven, caveat emptor rule applies. But right now we are speaking of money given essentially for free, on conditions much more favorable than any market rate Greece can expect to get (this is why they are asking for money, otherwise they will just offer more bonds). So you are not right here: money given on below-market conditions may, and should, require ways to collect it back.
I find it really interesting how people immediately start making moral judgements (it would only be fair if they repay it, they stole someone's money and ran off with it etc.) of the side that borrowed the money when it's on country level.
But when it's a company borrowing money and not being able to repay it - hey, that's just business for ya. The lender should have known better.
And yet, in most countries the biggest land owner is... the state.
In case of a bankruptcy, only stakeholders of the company suffer: management team simply gets fired, employees either get another job or work for the new owner if assets are sold. Same here: i am not suggesting making private citizens responsible for the national debt directly, just the government, which should either cede some part of its territory, or gets dissolved outright.
If you want some "strict, enforceable and unavoidable means to collect it", you are not talking about debt as we know it.
There is no business with a profit margin and 0 risk. Well, there is actually: the ones the private lenders made with Greece, before unloading their financial instruments onto the European governments
Varoufakis, and Greece in general, are in a somewhat different position right now than America was immediately after the First New Deal. On the other hand, if Varoufakis is right, the differences may not be as great as I imagine...
Isn't a country better off after debt restructuring?
But yes, a country can be better off after debt restructure and should remain that way if certain reforms are put in place.
I realize that you probably imitated GP's short style on purpose, but to elaborate a little bit: It's an accounting tautology that every (monetary) savings must be offset by a debt somewhere. Since private households tend to save (and we should consider that a good thing, given how available savings is an essential part of freedom within a capitalist system), the debts have to be somewhere else. They could be debts of firms (for investment), but the private sector is exposed to (sometimes severe) economic fluctuations. So a buffer is needed somewhere, and the logical place for this buffer is government debt.
I suppose the simplest answer is: to increase your spending (ability) right now, with the expectation that after the debt has been paid off you will be achieve a net positive value.
A small business might borrow to buy expensive equipment which will enable them to offer additional service, or to access other market segment.
Along a similar line, a country might borrow to accelerate their growth (e.g. investing in infrastructure projects).
Was this the plan all along?
Is this the highest stake of good cop, bad cop ever played?
Whatever the outcome, I have full respect for Yanis and would be taking full note of everything he has to say.
The next few days are going to be incredible. I really do hope Yanis stays on with the Greek government - his knowledge is clearly beneficial even if his ability to negotiate is lacking (for reasons I'm partially sympathetic to given the qualifications of his counterparts). He definitely has a position to play in the Greek government adivsing their plays in the coming future.
e: I'd absolutely love to see him and Wayne Swan (AU centre-left-wing treasurer during the GFC) sit down and discuss both the AU and Greek history between GFC and now. Swan and co. implemented a massive stimulation package that's widely credited as saving AU from feeling the bulk of the pain of the GFC and was relatively unique in its existance amongst the approaches of various nations. I think both of them could have quite the discussion about how both AU and Greece approached this and the resultant effects then to now.
Not to mention a relatively natural resource-based economy, and significant trade with China... one of the other least GFC effected parts of the world.
I've no doubt that the Greek government was trammeled in ways that the AU government was not. We were in a comparitively very healthy position with a significants surplus to draw upon and an ongoing (at the time) resources export boom, among other things.
He's been caught lying on multiple occasions, most recently only two days ago about already having new proposals from the eurogroup.
And it's still remains to be seen how truthful the arguments with which he sold the Greek public on a "no" vote are.
That this might be taken to imply that the long-dead author of the quote which I used for its poetry somehow endorses a position in contemporary political debate is so obviously absurd that I cannot imagine a HN reader doing so.
For instance, given Varoufakis's resignation, we could interpret the man in different ways:
1) As a person who chose not to be in the arena(in TR's words).
2) A man who was already in the arena but already failed while daring greatly.
3) A man who was already in the arena and arrived at triumph of high achievement, by allowing the Greek people to challenge the Troika with a referendum. And his resignation is just another triumphal move.
I do agree tho that filling comment threads with open-to-interpretation quotes is not very constructuve. Still one here one there can make the issue less black and white - which is good IMHO.
I believe his exit was planned before the referendum, regardless of the outcome. He had already openly stated that he would step down if the result of the vote was YES, but the media never asked him what would happen in the event of a NO victory.
His exit, especially in the early AM before EU markets open, will give some confidence to the bankers and most likely prevent the markets from sinking. Furthermore, it will signal to the creditors that SYRIZA is serious about reaching a deal.
I've been following the evolution of Mr. Varoufakis's thinking for the last 5 years, through his many appearances on Doug Henwood's Behind the News podcast. Listening to him speak on the Euro-crisis, it's clear that there's no one in the media who has a better grasp of how we got into this mess and how we ought to get out of it.
http://lbo-news.com/2015/01/28/yanis-varoufakis-on-btn-16-ti...