He's better educated than most politicians in Europe - including most finance ministers.
I wasn't expecting a deal, and lo - it seems a deal will not happen.
Greece could offer to sell its people into slavery, and it seems that still wouldn't be enough for certain elements in the European nomenklatura.
So Grexit it is.
If anyone is crazy, mad, and delusional, it's the German establishment. Schauble would rather rob his banks of any timetable for repayment than deal with financial reality like a rational adult.
It was tired and strenuous, when it was published, but now it literally makes no sense. Sure he did Game Theory research, but LIFE != GAME. He said it so himself.
I haven't read a single unified explanation using game theory, that accounts for everything Greece government did during negotiations.
It's the Epileptic Trees[1] of the Politics.
[1] Epileptic Trees was one of explanations to why trees in Lost were shaking violently.
I don't think you're right that game theory did not work out for them.
Your assumption appears to be that what they could hope for was a reasonable deal. But the way Schäuble has acted, it is by now clear that a reasonable deal is unlikely to be possible. For Germany this is all about ideology, not about economic rationality (amusing they accuse Tsipiras of being too ideological).
In that instance, what could they hope for? Their winning scenario is to demonstrate to their own constituency that they've tried everything. They've stretched extremely far. They've demonstrated to their home audience how Germany wants to humiliate them rather than get a fair deal.
They've further managed to create substantial cracks in the Euro group facade, with France in particular now openly having taken their side.
If they exit, then it is clear the Euro must be reformed if it is to survive.
They may in the end have permanently tarnished Merkel's and Schäuble's political legacies. Justifiably so.
Would any of this have happened if they had played ball and agreed to a toxic, unsustainable deal? The previous Greek government played ball, and what they got was a death sentence for the Greek economy. Playing ball with these opponents is a bad idea, since they seem intent of kicking in your knees first.
> It is a little bit if your wife threatens you with divorce and you say: OK, let's do it.
If you're told that to stay you will need to subject to daily beatings, then divorce is the right choice.
The banks counted on other countries to bail out any other in the eurozone, so they provided as much risky debt as they could. Maybe I'm cynical, but however this ends, it will probably end up being a wealth transfer from the european taxpayers to the banks. We've seen this time and time again recently: socialize private risk. The only way this ends is by letting the banks go down eventually, otherwise they will continue risky behavior, counting on the public to save them when things go wrong. Unfortunately the system is such that this is not in the interest of the politicians. Politicians with "good behavior" get cosy high paying jobs in the financial sector after their political career. Just look up any ex politicians and I bet you he or she is now working in the financial sector.
The solution for this is to extend a politician's salary for say 10 years after, and forbid them from accepting any money from any company for those 10 years. They can work for those companies for free if they want. They cannot get a cosy job after they've shown "good behavior" in their political career. The cost of this is a drop in the ocean compared to the perverse incentives this will remove. Say what you want about Dijsselbloem, but this is one thing that he gets right. https://translate.google.com/translate?sl=auto&tl=en&js=y&pr...
"End up"? It has already happened. (From Wikipedia, but well sourced):
Initially, European banks had the largest holdings of Greek debt. However, this has shifted as the "troika" (i.e., European Central Bank or ECB, International Monetary Fund or IMF, and a European government-sponsored fund) have purchased Greek bonds. (...) Excluding Greek banks, European banks had €45.8bn exposure to Greece in June 2011, with €9.4bn held by French and €7.9bn by German banks. However, by early 2015 their holdings were minimal, roughly €2.4B.
It is amusing and sad that Merkel apparently described Tsipiras as "hard and ideological" when the German position is so clearly ideologically driven.
Merkel is risking her legacy over this, and Schäuble's legacy in Europe is basically sealed - barring something truly crazy happening, he'll be remembered for this, and just this, outside of Germany.
And in the end the outcome - no matter what they do - is that Greece will not pay all its debts. Everyone knows this. The IMF have gone historically far in expressing public dissatisfaction with the Euro group and the ECB over their unwillingness to accept this.
Yet they appear to insist on sticking with the alternative that will cause the most pain and uncertainty for everyone involved just because further debt relief doesn't fit their ideology, knowing that the end result either way is that the money won't - can't - be paid back on the current schedule or in full.
I don't understand why you rail against the 'German establishment'. Aren't they just implanting the wishes of the German people? Same for the Finns, Latvians, etc.
Nope, they play on them and manipulate them to save German banks.
It's the "too big too fail" scenario, this time with the Eurozone playing the part of the federal government. Greece plays the role of the people getting mortgages that couldn't afford to repay post bubble.
The punishment of Greece (and other countries in turn, including France) will be used to clamp down on the German population in the end and keep them accepting of austerity and neo-liberal measures of their own.
Sure, they are maybe implementing the wishes of the people ... or shaping public opinion. I bet that framing this crisis as a humanitarian issue and a people vs banks issue, instead of as a lazy greek vs industrious germans, would have fostered solidarity between european nations instead of increasing nationalistic tensions.
We are far away from the climate pre WWI/WWII, but that is the direction we have chosen. Let's hope the next round of politicians are able to take a broader view, and that the current situation is reversible.
Many people in EU think about the situation as "give Greeks more money" vs "give Greeks 0 money", whereas in reality the situation is "get some Greek debt repaid" vs "get 0 Greek debt repaid". Obviously, in the first case, the latter is the better option, while in the second case, the former is. It's mainly the politicians' fault of presenting the issue in terms of the first two options to their people.
Small point: the 'better educated' comment is at base an appeal-to-authority argument. In other words, irrelevant. Is there an argument or isn't there? And anyway, how is 'better educated' defined? Does the standard 'university degrees ladder' always trump other considerations? Often enough, it probably does not.
He's probably right. Italy and France are the next overextended countries bound to fall once their ratings go down and their government bond interests go up. And compared to these economies, Greece's is negligible.
Maybe the spectacular punishment of Greece will teach them a lesson and convince them to reduce their public debt. Or maybe nothing can convince politicians to worry about the medium-long term.
There's a major problem unravelling. A large amount of the population live a lot longer than were expected ~90 years ago when the current welfare state system became widespread across Europe.
How do you pay pensions in the current economic climate to people that have been retired for 25+ years, who were expected to largely die 25 years ago?
In the Greece situation, how do you do this when a large amount of the populace actively avoid paying their fair share of tax? How do you do it when nearly 30%[1] of GDP is exports based around imports and your accounts are frozen and you can't pay suppliers?
It's an economic situation that hasn't be witnessed before. All this is before you throw Germany into the mix, who have a _lot_ riding on how this all plays out.
The world economic situation is in a very interesting place at the moment - Greece is only the tip of the iceberg. Look at Puerto Rico, look at China, hell look at the UK and how it's economy is currently stacked. Suddenly, overnight, the government won't support "free" TV licences for people aged 75+! The global economic situation at the moment is very interesting.
Maybe it was too close geographically to the big players and that's how it avoided being made the first example :-)
BTW, besides people in developed countries living longer we also have the problem of fewer children in each new generation. Not even immigration can balance the low birth rate in Italy, for example.
Right now we have only one third of the population working and supporting the other two thirds and the percentage of active people keeps on shrinking. When will it become unsustainable? What will the Italian government do then?
> The global economic situation at the moment is very interesting.
Way too interesting for my taste. And the sea level rise will make it even more so. I'd rather read about stuff like this in dystopian novels instead of living it...
> There's a major problem unravelling. A large amount of the population live a lot longer than were expected ~90 years ago when the current welfare state system became widespread across Europe.
I consider it an infinitely smaller problem than people dying. The new old are healthier to boot!
If you have the time, I highly recommend Mark Blyth's explanation of the EU situation. The article is mostly right. Blyth goes into a lot more detail in the history (pre-euro), showing how the various banks of europe bet against their own sovereigns by exploiting how the bond yields were converging with the introduction of the Euro - often by getting all the Greek and other "risky", high-yield debt that they could.
If you thought "too big to fail" was bad enough in the US, at least our Fed could do something other than let the economy fail and now were starting to slowly recover. In Europe, they are "too big to bail", and I expect a few more countries to quickly follow Greece's lead fairly soon.
It's going to be a default on the boomer savings which are far beyond reality. I agree it is coming, hence the desperate rear-guard action against Greece to maintain the line that pretending to be solvent is your best option.
I totally believe this is about bailing out French and German banks. It's also about making life really bad for Greece to encourage Ireland/Spain/Italy/Portugal they must keep paying back German/French banks.
The French and German banks were already bailed out. At this point the issue is that the governments that bailed them out don't want to be the ones left with the bill for the bailout they basically dictated.
surely bailing out Greece when primary exposure is French/German/UK banks is sharing the bailout costs amongst the whole EU in particular poorer countries subsidising richer ones.
I agree part of this bailout has already taken place. The second phase is ensuring life in Greece is so bad that other larger countries don't want to default.
I'm really sick of the people who come onto this forum (not talking about you, look elsewhere in these threads) and castigate the Greeks for being deadbeats. If they keep repeating this narrative when people have pointed out again and again that the €zone has structural flaws then there is no point in reasoning any more with them and you have to ignore them because they only hear the little voices in their heads.
You can't lay it out much clearer than Yanis Varoufakis does here -- "The euro is a hybrid of a fixed exchange-rate regime, like the 1980s ERM, or the 1930s gold standard, and a state currency. The former relies on the fear of expulsion to hold together, while state money involves mechanisms for recycling surpluses between member states (for instance, a federal budget, common bonds). The eurozone falls between these stools – it is more than an exchange-rate regime and less than a state."
When you get an unequal club, guess what! someone is going to be the weakest link. It is _inevitable_. If it wasn't Greece, it would have been someone else. Ok, you could make the argument that Greece was particularly lax in how it handled its own finances as part of the club but that (1) does not mean they should be punished with nearly a decade of unremitting poverty (2) not all the Greeks did this so it is _collective_ punishment (3) the €zone needs structural[§] adjustment and (4) we shouldn't keep socialising private debt, there _should_ be some risk to merit the interest charged.
We really need to start listening to what the Greeks are telling us. If the €zone starts unravelling things could get very nasty very quickly. I'm not joking.
---
[§] Yanis Varoufakis even touches on this, again explicitly -- "Europe did not know how to respond to the financial crisis. Should it prepare for an expulsion (Grexit) or a federation?"
>We really need to start listening to what the Greeks are telling us. If the €zone starts unravelling things could get very nasty very quickly. I'm not joking.
These were all concerns brought up well before the Euro was even instituted, much less expanded to semi-broke nations like Greece. The EU doesn't seem particularly interested in admitting that there are massive differences culturally and fiscally between the countries and that these differences mean that a unified currency with no monetary flexibility is doomed to fail.
EUR crushing USD early in its lifecycle after naysayers shouted down EUR didn't help things.
When these concerns were brought up initially I didn't heed them. I was blinded by the warm-fuzzies and the spirit of solidarity, I'll admit it! This is an issue I've had to totally change my thinking about. The UK were really smart on this one, as were the Danes and the Swedes. It's not too late to make things better but it's a huge ship to turn around and these things have a way of systemically operating according to their own logic eventually and resisting control. The only saving grace of the EUR is that other places in the world have their own special problems but that's no consolation and only a pig (sorry pigs!) would think like that.
My opinions is that since Greece chased out the auditors, its Greece that rejected the federation. If you are asking for money, but refuse oversight, why would anyone go along?
Second, they have been extremely compliant for 5 years with dire consequences in a failed "recipe" that even the IMF and German economists agree has been punitive and ill designed.
Nope, RTFA. That concerned the previous program which was ending -- and everyone, from most US and EU economists to the IMF had declared ill concived and bad for Greece AND the EU.
What they asked for was a new program -- the one which has been the focus of negotiations for months, and that would entail new auditors and checks.
It's hard to say who someone is, but https://www.youtube.com/watch?v=A3uNIgDmqwI (Yanis Varoufakis: Confessions of an Erratic Marxist /// 14th May 2013) shows a little bit of his persona. I believe his trustworthy, but this whole catastrophe is so large it's hard to be sure of anything.
tl;dr The Eurozone needs means to cope with differences in productivity and fiscal policies - either needs free floating exchange rates (ie no Euro) or it needs federal budgets and bonds (ie fiscal Union)
Either option scares the shit out of everyone so no one has brought it up.
The ex Greek finance minister thinks the current German finance minister is forcing Greece to exit the Euro so they can force the fiscal Union closer - but (implicitly) without having to messily deal with democracy or referendums.
supposedly greece exiting is more expensive than keeping them but at what point do you kick out someone who is mooching off you and suddenly demanding all sorts of things. It's like the beggar that becomes very choosy and feel a huge entitlement. I don't know why this is the case, someone receiving so much should feel humble and grateful but instead arrogance and a need for more.
having said that do they seriously expect greece to ever pay back the debt or even let alone feed their citizens? When was the last time you heard something made in Greece that wasn't in ancient history textbook and encyclopedia of Gods? I also feel irked by the lack of rationalism from EU.
Mooching? They're not actually receiving much at all - 90% of the bailout money they have received has gone straight back to their creditors - Deutsche Bank, ECB and IMF. Only a tiny fraction of the bailout actually enters the Greek economy.
It's like throwing a money boomerang at someone, and each time it comes back claiming that they owe you another 50 billion
and that's somehow EU and Germany's fault? That they are not handing over truckload of cash to a country which just wants more and more without ever paying any of it back? That they have 50% unemployment rate, and an economy incapable of producing anything worth of value that would pull them out of debt?
When South Korea defaulted, the entire country came together to pay off the debt. People even brought their herilooms and personal jewlery to melt to gold bars to help the country pay back the money to IMF. Businesses and large conglomerates were not bailed out but allowed to fail so that they pick up their shit. Now we get smartphones, tv, components, kpop, cars, ships, all sorts of wonderful stuff. And greece? What the hell have they produced in the past 100 years? South Korea has only been around half that.
Why should Germany put up with this kind of attitude? Where does this sense of entitlement come from in Greece? Do they seriously believe that the rest of Europe owes them something? If they are this arrogant then let them fail and see just how quickly Greece will downspiral into a failed state.
I think your argument is predicated on the notion that banks lending money is somehow a benevolent, charitable act. It isn't. In a fractional reserve banking system, making loans is precisely how banks make their money.
Unless of course they get greedy and start making ill-advised, unsecured bad loans. Then their greed is going to come back and bite them in the ass when the debtor can't pay.
Lets not forget the Goldman Sachs helped Greece to cook the books to get into the Eurozone in the first place.
So if banks don't give Greece money to prevent it from turning into Mogadishu, then who do they expect to keep the country afloat? I mean they haven't been able to do that for 90 years. They need to keep taking out loans, and now suddenly the hand that was feeding them are the bad guys?
There's no good guys and bad guys in this. You must understand that unless a loan is issued with a zero or negative interest rate, it will always have a net negative impact on your balance. Where else does the money to repay the interest come from?
This is especially true with central banks, where every € you receive comes with debt attached. How do you repay the interest on those debts? You have to borrow more €'s from the central bank, which also come with more debt attached. And so your debt burden increases exponentially until you're crippled by interest repayments. It is mathematically impossible to repay debt in these circumstances.
It takes two parties to get into a mess like this. As the old saying goes, "if you owe the bank $50 thousand, you're in trouble. If you owe the bank $50 billion, you're in it together".
> There's no good guys and bad guys in this. You must understand that unless a loan is issued with a zero or negative interest rate, it will always have a net negative impact on your balance. Where else does the money to repay the interest come from?
Why the hell would anyone give out loans in first place if they are going to get zero to negative interest rates? Even Islamic banking takes equity or other ways of making sure that they are rewarded for lending money.
I'm just trying to see it from your view but you simply demonize EU and Banks because it gives the borrower a hard time without considering that it's also the lender's money and opportunity cost at stake here. It's not very convincing.
There is no "hand that was feeding them". If it was such a bad deal then you would imagine creditors would stop lending at some point.
The most likely thing that would have happened is that at some point Greece would have entered a financial crisis, devalued its currency, and gone off as usual. As it's happened countless times in other places.
The banks are going to run out of money within days without emergency funds from EU. Who would they have to beg next to secure those funds if not EU? I'm genuinely curious. Print more money to pay for all the debt? How is that going to work out?
>Lets not forget the Goldman Sachs helped Greece to cook the books to get into the Eurozone in the first place.
Two possibilities exist: The EU knew what they were getting into and they deserve this mess, or they didn't know what they were getting into and they aren't qualified to run a multinational currency with zero flexibility.
> That they have 50% unemployment rate, and an economy incapable of producing anything worth of value that would pull them out of debt?
They have the unemployment rate they have thanks to the unsustainable - something even the IMF admits - austerity measures.
> When South Korea defaulted, the entire country came together to pay off the debt.
South Korea was never subject to the kind of ludicrous austerity demands that Greece got, had their own currency and so were able to improve their export competitiveness much more easily, as well as was able to - and aggressively did - restructure many of the banks and businesses that dragged their economy down because they were not detail-controlled to nearly the extend Greece has been.
> Businesses and large conglomerates were not bailed out but allowed to fail so that they pick up their shit.
Greece is not allowed by the Troika to choose how to reform their economy, so this option is not on the table for Greece unless it exits the Euro.
> Why should Germany put up with this kind of attitude?
Because the alternative is they get nothing? Debt always comes with risk. The interest rate is meant to price that in. If you can't deal with the risk of a restructuring, don't lend money. Except the lenders in this case learned a different lesson: your risks get socialised by the tax payers, and your government will then act like mobsters to try to recover the money, instead of letting the banks that took the risk also take the losses.
Why should Greece put up with the kind of attitude Germany has shown? Why should Europe?
> They have the unemployment rate they have thanks to the unsustainable - something even the IMF admits - austerity measures.
It also doesn't help that there has been no innovation or large industries creating jobs in the first place. Blame austerity all they want but EU is not responsible for job creation or the livelihood of individual countries, I think that's up to the leaders of each country, and being competent helps.
> South Korea was never subject to the kind of ludicrous austerity demands that Greece got, had their own currency and so were able to improve their export competitiveness much more easily, as well as was able to - and aggressively did - restructure many of the banks and businesses that dragged their economy down because they were not detail-controlled to nearly the extend Greece has been.
You are downplaying the fact that there are other countries that were in South Korea's position never really recovered. It's not something that can be done easily, of course in hindsight it's always obvious. However, the fundamental problem is that there simply is no major global player industry in Greece to start, of course it's going to have a harder time getting back up. By no means was South Korea given an easier time, the debt payments were just as harsh if not worse. Jobs were destroyed, society changed but in the end they were able to pull themselves out by actually focusing on getting back on their feet.
> Greece is not allowed by the Troika to choose how to reform their economy, so this option is not on the table for Greece unless it exits the Euro.
So you are telling me Greece is not allowed to save itself? This is ludicrous. This is akin to saying I'm homeless because I'm not suppose to help myself. I don't blame the Greek people however, they just don't know of any other option other than the one that has been prescribed to them for close to a century.
>
Because the alternative is they get nothing? Debt always comes with risk. The interest rate is meant to price that in. If you can't deal with the risk of a restructuring, don't lend money. Except the lenders in this case learned a different lesson: your risks get socialised by the tax payers, and your government will then act like mobsters to try to recover the money, instead of letting the banks that took the risk also take the losses.
Why should Greece put up with the kind of attitude Germany has shown? Why should Europe?
Why shouldn't Germany feel bitter about having to keep Greece on lifeline out of their own pockets? I mean you make it sound like Germany has had it easier but from the rubbles of Allied bombing, as it emerged as an economic powerhouse and leaders of EU. When a tenant continues to be delinquent on rent, they get kicked out. Of course they blame the land lords but does it improve their situation? Does it win them a ticket back in? Here, we'll let you keep living on our dime while everyone else makes regular payments.
Where are you getting all these from? What Greece is saying is "we want to pay back the debt without starving the lower-income citizens to death". That's entitlement?
>without starving the lower-income citizens to death
do you seriously believe Greece is capable of that if they are to go on their own path? What industry is there to speak of in Greece? What goods or resources are they willing to trade or offer to the rest of the world?
And why do you feel the need to make this into a political argument and not of economics? Of course you can pay back the debt without starving it's own people if they could, but they can't. There's nothing that I can see or EU believes that Greece could pull itself out of debt and they are in for some deep amount of money. Did you really expect EU to give them another get out of jail card like they have all this time?
>do you seriously believe Greece is capable of that if they are to go on their own path? What industry is there to speak of in Greece? What goods or resources are they willing to trade or offer to the rest of the world?
Racist much? Greece has a import/export deficit (excluding oil) of around -1%. They have a large tourism industry, a strong (worldwide competitive) shipping industry, and they export food products, minerals (ores?) and lots of other things besides.
>And why do you feel the need to make this into a political argument and not of economics?
Because Economics 101 already says the plan imposed and followed for 5 years is illogical and doomed to failure. Check any leading economist on the issue (except those serving in political positions in involved countries). Heck, there's even an IMF report saying exactly that.
>Did you really expect EU to give them another get out of jail card like they have all this time?
"Get out of jail" card? Perhaps you should read some more into the history of all this. The "card" Greece was shown for the last 5 years lead to a 25% GPD fall, 30% unemployment (50% youth unemployment), huge pay cuts (over 40%), and several other measures besides.
The only one who ever took a "get out of jail free card" in Europe was Germany, who's national debt and war reccuperation payments were slashed over 60% (including war reccuperations to Greece, for destroying infrastructure and leading to the death of 700.000 people, on top of getting a forced loan from the Greek state while it was occupied they never repaid).
If they forgive some of their debt and they don't radically restructure their economy they will need to be bailed out over and over again. We have the same thing with employment benefits on a micro-scale here in Australia, people become so used to free money they don't know any better because they have never seen any other system. Its hard to blame them because they don't know any different so they think it's normal.
They have restructured substantially. Enough so that they were on track for a substantial primary surplus. There's much more to do, but the primary problem for the last year has been managing the crushing debt load, not the Greek government.
Agreed, they still need debt restructuring. Also the €zone framework needs simultaneous reconstructing, to route surpluses to places not doing so well. But that would be the beginnings of a real federal EU and European countries are too nationalistic for that which is a shame because Europe is going to fade into relative obscurity economically unless we can make this transition. Though perhaps this crisis presents the opportunity to kick-start that process, but it's a long shot, I'm pessimistic even though I do not want to be.
ps. replying to my own comment, I'd like to point out I should have said, 'forgive some more of their debt'.
Adding it as a ps, so I don't substantially change the context of the comments.
They already got a 50% cut on their bond debt in 2011.
Thus, over and over.
Eh, it's hard to feel too empathetic toward the Greek state, but this entire situation is a tragedy for the Greek people, and the Euro-elite are just as guilty as the Greek state for the status quo.
It was always known that the Greek state was not up to par for the euro. They only got in because of a lot of shady dealings and extensive help from Goldman Sachs to mask the reality of their situation. The Euro-elite knew this at the time, but were willing to overlook it because of an idealistic commitment to a pan-European ideology.
Yes, a can was obviously being kicked down the road, but the seed of an incipient crisis was a pro: when things got terrible enough, it'd allow for the fiscalization of Europe, which would be difficult to do absent a crisis but was a pre-requisite for a real United States of Europe, the end goal where national governments would all be subsumed by the rule of a cosmopolitan elite centered on Brussels.
So money poured into Greece, because its bonds offered a higher interest rate than other bonds, and everyone figured, there's no way the Eurozone would allow Greece to default. And, for a long time, Europe tried its hardest to prevent a default, but never could build the political will that the radical transformation a permanent solution to the Euro-periphery issue would need. Note, though, that the primary benefactors of the bailouts and transfers were the holders of the toxic debt, debt that had always obviously been bad debt, and not Greek school teachers or pensioners, who bore the real pain of the reforms. German banks ended up a lot happier from the packages than anyone in Greece, and funneling the bailout funds for them through Greece was a kind of political money laundering.
Obviously Greece has a messed up political culture, and even now it still needs more reforms. But it takes two to tango, and the European elite was plenty happy to dance with the corruption and malignancy of the Greek state when it suited their interests. At this point Greece needs to do what's best for the Greek people (though what that is is the big open question, and it's clear that this is a quest for the least of a couple different evils) and screw the interests of outsiders.
I really liked the interfluidity summary [0], but I would like someone to break down this exchange a bit more for me:
OP:
> With respect to Greece, the precise thing that European elites did to set the current chain of events in motion was to replace private debt with public during the 2010 first “bailout of Greece”. Prior to that event, it was obvious that blame was multipolar. Here are the banks, in France, in Germany, that foolishly lent. Not just to Greece, but to Goldman’s synthetic CDOs and every other piece of idiot paper they could carry with low risk-weights [1]. In 2010, the EU, ECB, and IMF laundered a bailout of mostly French and German banks through the Greek fisc. Cash flowed into Greece only so it could flow out to rickety banks. Now, suddenly, the banks were absolved. There were very few bad loans left on the books of European lenders, everyone was clean, no bad actors at all. Except one. There were the institutions, the “troika”, clearly the good guys, so “helpful” with their generous offer of funds. And then there was Greece. What had been a mudwrestling match, everybody dirty, was transformed into mass of powdered wigs accusing a single filthy penitent (or, when the people with their savings in just-rescued banks decide to be generous, a petulant misbehaving child).
poster "dlr" from the comments:
> I don’t see how this is even close to a fair representation of the 2010-2012 Greek debt restructuring. 199.2b EUR of Greek debt was exchanged for 29.7b notes and 62.4b new Greek bonds. This was a 52% write-down, only using par value, except the new bonds were not valued worth par, because the new coupon was way below market. After the exchange, the new bonds traded at ~25c of new par and 6c of original par. When the EFSF later repurchased bonds from private owners, it paid 11.3b to retire 31.9b of debt. That is, 34c of the new par value of the bonds, or 17c of original par. Including the haircut on the aforementioned notes (which were EFSF notes and worth new par), private creditors ended up with about 25c on the dollar of what they lent. This is not “cash flowing into Greece so it could flow out to rickety banks.” It is the exact opposite. A near complete sovereign wipeout borne by private lenders.
Who took these writedowns?
Paribas, Commerzbank, Dexia, SocGen, RBS, Unicredit, Groupama, HSBC, Metlife, Allianz, Axa, DB, ING, Generali and many more all wrote down and realized losses on between 60-80% of what they lent to Greece. It’s true that some of these banks got liquidity support during the Euro crisis, but the Greek write-downs were ultimately born by the stakeholders of these banks.
In fact, the only banks that were directly bailed out with respect to the Greek debt restructuring were the Greek banks. The largest holders of Greek debt were Greek banks. They were the only institutions who were undoubtedly doomed as a result of losses in the value of Greece’s sovereign dooms, and the stakeholders in those banks, especially depositors were blatantly saved. National Bank of Greece held 13.7b. Piraeus held 9.4b. Alpha held 3.7b. The capital injections, initially 23b euros, meant that Greek depositors were protected from what would otherwise have been inevitable losses due to enormous domestic bank holdings in Greek debt. Foreign banks and private holders actually took losses.
The discussion continues on as people discuss the details, but it gets a bit too jargony to follow. No matter if the Greeks were forgiven 50% or 80% of debt already, it seems clear that the remainder is going to be impossible to pay off, so it doesn't change that much in terms of reactions, but I'm curious what is the truth behind this first 2010 bailout.
I also keep imagining that we're gonna see a replay, with "Greeks" being "non-STEM student loan holders in the US" in the near future, so I'm doubly curious.
It's not just insulting. It's dangerous. If Germany continues this line, not only will the Euro disintegrate, but we can "look forward" to a much higher likelihood the UK will decide to outright leave the EU as well. I know more than one hardline pro-EU people here in the UK that have softened their EU support substantially after seeing the treatment Greece has gotten.
I'm pro-EU as well, but this is getting ridiculous. There's no way the country will grow like this, all that's happening is that businesses are closing, and obviously nobody wants to start new ones in this uncertainty.
The EU seems bent on wringing every last penny from the lower income tiers, which hasn't worked for the past six years, and is unlikely to start working now. The average Greek is, at this point, desperate enough to just want to leave the EU and deal with the consequences rather than watch the country die and/or get sold off over decades.
As a German I find your complete misrepresentation of reality insulting. The German political class is the reason why Greece still has the Euro.
The Eastern Europeans never wanted to bail-out the Greeks to begin with, and have zero sympathy for their cries about inhumane austerity because the "austere" Greeks are still better off than the Eastern Europeans. Thus any transfer of money from e.g. Lithuania to Greece is perceived as a crying injustice.
But even in Western Europe Germany is close to being Greece's best friend. The first bail-out was almost sabotaged by the Finns when they demanded collateral for their money. Which caused the Dutch to ask for that too. Meanwhile Evil Evil Schäuble knew that the Greeks would never be able to pay back that money - and lied to the German people about that "your money is safe, we will get everything back", he said.. shortly before agreeing to the first haircut. Billions of Euros of German tax payer money evaporated.
Without the German government Finnish and Dutch ships would have transported away the Greek statues, gold, and whatever other valuable thing they could find. And if "European solidarity" depended on the Eastern Europeans the Greeks would have never gotten a cent.
The Greeks who are so fond of the Euro should be endlessly thankful to the German political class (not the people - they never supported this bail-out).
I think this is also the primary reason why Schäuble does not want another haircut. His original lie would become even more severe and the German electorate would become even angrier.
See, I'm Italian and the thing that is insulting is how Schäuble and Merkel sometimes make decisions in this situation without even consulting the rest of the creditors (France, Italy and others).
I get that your government has to work with internal politics, but, on the other hand, our government find increasingly difficult to justify this idea of a German-centric Europe to our public opinion (no matter if the German government is actually a mediator between the 'north' and the 'south' Europe or not), because that's how it's perceived here.
But Greece didn't need bailing out in the first place, they could have defaulted and let the banks carry the can (after all loans are a risk), but German banks would have gone bust and Merkel et al couldn't stomach that so they transferred the banks debt onto the EU public.
German consistently runs a trade-surplus that's in excess of EU treaties but remains unwilling to raise demand at home, this creates a huge imbalance at the heart of the Euro.|
When the Euro came into being it was obvious to many people (and stated widely) that the interest rates were set to suit Germany and were far to low for many of the other countries.
Germany is at the heart of the problem of the Euro and they can't or won't see it
The bailout was; Greece was lent money it could not have gotten on the open market. Mostly to pay off debts from bank the Eurozone feels too big too fail ( my speculation ).
Since I'm from that part of the world (visiting Greece, Balkans and Germany regularly), I will give some feedback here...
We have saying here "owns money as Greece" - and that sayings was coined in 19th century. In 1822 Greece declared independece from Ottoman Empire and by 1880 Greece owned 5.243.428 marks to... guess? Germany.
From point of Greece, it is much better for them that Greece leaves Eurozone. They already occurred 80% of pain so there is not so much to lose. With Drachmas they will have some inflation and inflation will fix entitlement problem. And tourism will become very very competitive. And they can fix tax evasion problem on their own.
From point of France - that will be disaster: the euro an ECB is designed for economies and societies similar to Germany and German's influence in Europe will raise.
This crisis is pure politics now.
Macedonians have joke that Greece should be renamed: "the former European country Greece".
> They already occurred 80% of pain so there is not so much to lose.
I think this was the logic for people voting OXI in the referendum, but there is still banking and public infrastructure and host of other things that they could lose.
To readers who don't get the joke: lots of ill-will exists between Greece and Macedonia over a naming dispute, which has led Macedonia to be known as FYROM (the Former Yugoslav Republic of Macedonia) on Google Maps.
Leaving the euro zone is in Greece's own interest anyway. Greece is in the position it is today because it cannot execute on its structural reforms. It still cannot raise taxes and has an overweight public sector. Leaving the euro zone will at least improve competitivity and give them a fighting chance to produce again.
And this is beside the moral position of demanding that the german tax payers cover the expenses of the Greek state that the Greek tax payers can't be bothered to pay.
Disruption is often necessary. European countries have a nasty habbit of preferring a permanent mild pain to a greater upfront pain and then drawing a line and starting on a right foot.
Given how insane past decisions of Schäuble have been* Yanis' assessment of him makes a lot of sense. His politics have always swayed between hilarious ignorance, impotent aggression and seemingly crippling senility. Treating the "teaching" of other EU members in a war-like fashion would fit the scheme.
* For one he wanted to use a hypthetical threat german harbors by terrorists who would drive ships with bombs into them to force the german government into creating legislation to let the german army operate with live weapons inside german borders; as well as let them shoot down passenger planes within german borders.
* Secondly he wanted to create a "federal trojan", a virus he insisted would be capable of infiltrating EVERY computer. Ever. And he wanted its use to be fully legal.
I wouldn't really call his past decisions insane, although I agree with you that he's our (German) version of a political hardliner.
Personally, I would describe his reasoning and actions as in line with the aim of always putting the German state (not necessarily its people) first. Maybe his idol is Bismarck, maybe there's some other reason for his actions. Who knows; I surely don't. It is possible, of course, that his views and behaviour have become quite disconnected from the "real" world. After all, he's been a MP for 43 years now - making him the most senior MP in the history of the FRG. But then, he's seen quite a few global disasters happening from a political perspective.
In the end, right now, he's doing a fairly good job of maintaining a stable German economic position in the EU/the world and is able to even strengthen Germany's global political position as well. This rather aggressive damage control certainly doesn't support the ideals that the EU is built upon, but then who knows whether he subscribed to it in the first place? I honestly believe that, should the EU fail in the coming decade, he'll be remembered quite positively.
I can kind of see how the first two could maybe, possibly, be seen as not insane. However, how do you defend the Bundestrojaner thing, in light of the fact that what he intended was literally impossible?
I would call that a profound lack of knowledge (or concious ignorance thereof?) in combination with the fact that it's always better to claim the impossible (because you can polarise the masses more easily and scale down your claim later on once the main challenge - getting things things passed - is done with).
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[ 3.4 ms ] story [ 179 ms ] threadThis theory would indeed explain many things.
I wasn't expecting a deal, and lo - it seems a deal will not happen.
Greece could offer to sell its people into slavery, and it seems that still wouldn't be enough for certain elements in the European nomenklatura.
So Grexit it is.
If anyone is crazy, mad, and delusional, it's the German establishment. Schauble would rather rob his banks of any timetable for repayment than deal with financial reality like a rational adult.
It is a little bit if your wife threatens you with divorce and you say: OK, let's do it.
It was tired and strenuous, when it was published, but now it literally makes no sense. Sure he did Game Theory research, but LIFE != GAME. He said it so himself.
I haven't read a single unified explanation using game theory, that accounts for everything Greece government did during negotiations.
It's the Epileptic Trees[1] of the Politics.
[1] Epileptic Trees was one of explanations to why trees in Lost were shaking violently.
Your assumption appears to be that what they could hope for was a reasonable deal. But the way Schäuble has acted, it is by now clear that a reasonable deal is unlikely to be possible. For Germany this is all about ideology, not about economic rationality (amusing they accuse Tsipiras of being too ideological).
In that instance, what could they hope for? Their winning scenario is to demonstrate to their own constituency that they've tried everything. They've stretched extremely far. They've demonstrated to their home audience how Germany wants to humiliate them rather than get a fair deal.
They've further managed to create substantial cracks in the Euro group facade, with France in particular now openly having taken their side.
If they exit, then it is clear the Euro must be reformed if it is to survive.
They may in the end have permanently tarnished Merkel's and Schäuble's political legacies. Justifiably so.
Would any of this have happened if they had played ball and agreed to a toxic, unsustainable deal? The previous Greek government played ball, and what they got was a death sentence for the Greek economy. Playing ball with these opponents is a bad idea, since they seem intent of kicking in your knees first.
> It is a little bit if your wife threatens you with divorce and you say: OK, let's do it.
If you're told that to stay you will need to subject to daily beatings, then divorce is the right choice.
The solution for this is to extend a politician's salary for say 10 years after, and forbid them from accepting any money from any company for those 10 years. They can work for those companies for free if they want. They cannot get a cosy job after they've shown "good behavior" in their political career. The cost of this is a drop in the ocean compared to the perverse incentives this will remove. Say what you want about Dijsselbloem, but this is one thing that he gets right. https://translate.google.com/translate?sl=auto&tl=en&js=y&pr...
Initially, European banks had the largest holdings of Greek debt. However, this has shifted as the "troika" (i.e., European Central Bank or ECB, International Monetary Fund or IMF, and a European government-sponsored fund) have purchased Greek bonds. (...) Excluding Greek banks, European banks had €45.8bn exposure to Greece in June 2011, with €9.4bn held by French and €7.9bn by German banks. However, by early 2015 their holdings were minimal, roughly €2.4B.
https://en.wikipedia.org/wiki/Greek_government-debt_crisis#C...
330,000,000 (2015 numbers)
Fiscal transfer: €45.8B-€2.4B = €43.4B (your numbers :)
43.4B / 330M = €131.5 from each man, woman, child in the €zone.
Merkel is risking her legacy over this, and Schäuble's legacy in Europe is basically sealed - barring something truly crazy happening, he'll be remembered for this, and just this, outside of Germany.
And in the end the outcome - no matter what they do - is that Greece will not pay all its debts. Everyone knows this. The IMF have gone historically far in expressing public dissatisfaction with the Euro group and the ECB over their unwillingness to accept this.
Yet they appear to insist on sticking with the alternative that will cause the most pain and uncertainty for everyone involved just because further debt relief doesn't fit their ideology, knowing that the end result either way is that the money won't - can't - be paid back on the current schedule or in full.
It's the "too big too fail" scenario, this time with the Eurozone playing the part of the federal government. Greece plays the role of the people getting mortgages that couldn't afford to repay post bubble.
The punishment of Greece (and other countries in turn, including France) will be used to clamp down on the German population in the end and keep them accepting of austerity and neo-liberal measures of their own.
We are far away from the climate pre WWI/WWII, but that is the direction we have chosen. Let's hope the next round of politicians are able to take a broader view, and that the current situation is reversible.
Maybe the spectacular punishment of Greece will teach them a lesson and convince them to reduce their public debt. Or maybe nothing can convince politicians to worry about the medium-long term.
There's a major problem unravelling. A large amount of the population live a lot longer than were expected ~90 years ago when the current welfare state system became widespread across Europe.
How do you pay pensions in the current economic climate to people that have been retired for 25+ years, who were expected to largely die 25 years ago?
In the Greece situation, how do you do this when a large amount of the populace actively avoid paying their fair share of tax? How do you do it when nearly 30%[1] of GDP is exports based around imports and your accounts are frozen and you can't pay suppliers?
It's an economic situation that hasn't be witnessed before. All this is before you throw Germany into the mix, who have a _lot_ riding on how this all plays out.
The world economic situation is in a very interesting place at the moment - Greece is only the tip of the iceberg. Look at Puerto Rico, look at China, hell look at the UK and how it's economy is currently stacked. Suddenly, overnight, the government won't support "free" TV licences for people aged 75+! The global economic situation at the moment is very interesting.
[1] - https://atlas.media.mit.edu/en/profile/country/grc/
Maybe it was too close geographically to the big players and that's how it avoided being made the first example :-)
BTW, besides people in developed countries living longer we also have the problem of fewer children in each new generation. Not even immigration can balance the low birth rate in Italy, for example.
Right now we have only one third of the population working and supporting the other two thirds and the percentage of active people keeps on shrinking. When will it become unsustainable? What will the Italian government do then?
> The global economic situation at the moment is very interesting.
Way too interesting for my taste. And the sea level rise will make it even more so. I'd rather read about stuff like this in dystopian novels instead of living it...
I consider it an infinitely smaller problem than people dying. The new old are healthier to boot!
Many of them can work if needed.
If you have the time, I highly recommend Mark Blyth's explanation of the EU situation. The article is mostly right. Blyth goes into a lot more detail in the history (pre-euro), showing how the various banks of europe bet against their own sovereigns by exploiting how the bond yields were converging with the introduction of the Euro - often by getting all the Greek and other "risky", high-yield debt that they could.
If you thought "too big to fail" was bad enough in the US, at least our Fed could do something other than let the economy fail and now were starting to slowly recover. In Europe, they are "too big to bail", and I expect a few more countries to quickly follow Greece's lead fairly soon.
I agree part of this bailout has already taken place. The second phase is ensuring life in Greece is so bad that other larger countries don't want to default.
I'm really sick of the people who come onto this forum (not talking about you, look elsewhere in these threads) and castigate the Greeks for being deadbeats. If they keep repeating this narrative when people have pointed out again and again that the €zone has structural flaws then there is no point in reasoning any more with them and you have to ignore them because they only hear the little voices in their heads.
You can't lay it out much clearer than Yanis Varoufakis does here -- "The euro is a hybrid of a fixed exchange-rate regime, like the 1980s ERM, or the 1930s gold standard, and a state currency. The former relies on the fear of expulsion to hold together, while state money involves mechanisms for recycling surpluses between member states (for instance, a federal budget, common bonds). The eurozone falls between these stools – it is more than an exchange-rate regime and less than a state."
When you get an unequal club, guess what! someone is going to be the weakest link. It is _inevitable_. If it wasn't Greece, it would have been someone else. Ok, you could make the argument that Greece was particularly lax in how it handled its own finances as part of the club but that (1) does not mean they should be punished with nearly a decade of unremitting poverty (2) not all the Greeks did this so it is _collective_ punishment (3) the €zone needs structural[§] adjustment and (4) we shouldn't keep socialising private debt, there _should_ be some risk to merit the interest charged.
We really need to start listening to what the Greeks are telling us. If the €zone starts unravelling things could get very nasty very quickly. I'm not joking.
---
[§] Yanis Varoufakis even touches on this, again explicitly -- "Europe did not know how to respond to the financial crisis. Should it prepare for an expulsion (Grexit) or a federation?"
These were all concerns brought up well before the Euro was even instituted, much less expanded to semi-broke nations like Greece. The EU doesn't seem particularly interested in admitting that there are massive differences culturally and fiscally between the countries and that these differences mean that a unified currency with no monetary flexibility is doomed to fail.
EUR crushing USD early in its lifecycle after naysayers shouted down EUR didn't help things.
Second, they have been extremely compliant for 5 years with dire consequences in a failed "recipe" that even the IMF and German economists agree has been punitive and ill designed.
It was their campaign promise and they kept it.
http://www.nytimes.com/2015/01/31/business/international/gre...
What they asked for was a new program -- the one which has been the focus of negotiations for months, and that would entail new auditors and checks.
Either option scares the shit out of everyone so no one has brought it up.
The ex Greek finance minister thinks the current German finance minister is forcing Greece to exit the Euro so they can force the fiscal Union closer - but (implicitly) without having to messily deal with democracy or referendums.
having said that do they seriously expect greece to ever pay back the debt or even let alone feed their citizens? When was the last time you heard something made in Greece that wasn't in ancient history textbook and encyclopedia of Gods? I also feel irked by the lack of rationalism from EU.
It's like throwing a money boomerang at someone, and each time it comes back claiming that they owe you another 50 billion
When South Korea defaulted, the entire country came together to pay off the debt. People even brought their herilooms and personal jewlery to melt to gold bars to help the country pay back the money to IMF. Businesses and large conglomerates were not bailed out but allowed to fail so that they pick up their shit. Now we get smartphones, tv, components, kpop, cars, ships, all sorts of wonderful stuff. And greece? What the hell have they produced in the past 100 years? South Korea has only been around half that.
Why should Germany put up with this kind of attitude? Where does this sense of entitlement come from in Greece? Do they seriously believe that the rest of Europe owes them something? If they are this arrogant then let them fail and see just how quickly Greece will downspiral into a failed state.
Unless of course they get greedy and start making ill-advised, unsecured bad loans. Then their greed is going to come back and bite them in the ass when the debtor can't pay.
Lets not forget the Goldman Sachs helped Greece to cook the books to get into the Eurozone in the first place.
What kind of logic is that?
This is especially true with central banks, where every € you receive comes with debt attached. How do you repay the interest on those debts? You have to borrow more €'s from the central bank, which also come with more debt attached. And so your debt burden increases exponentially until you're crippled by interest repayments. It is mathematically impossible to repay debt in these circumstances.
It takes two parties to get into a mess like this. As the old saying goes, "if you owe the bank $50 thousand, you're in trouble. If you owe the bank $50 billion, you're in it together".
Why the hell would anyone give out loans in first place if they are going to get zero to negative interest rates? Even Islamic banking takes equity or other ways of making sure that they are rewarded for lending money.
I'm just trying to see it from your view but you simply demonize EU and Banks because it gives the borrower a hard time without considering that it's also the lender's money and opportunity cost at stake here. It's not very convincing.
Good question, ask the ECB - http://www.telegraph.co.uk/finance/comment/jeremy-warner/115...
> "you simply demonize EU and Banks"
Wow, after all your Greece trash talk you accuse ME of demonizing? This is no longer a rational conversation.
The most likely thing that would have happened is that at some point Greece would have entered a financial crisis, devalued its currency, and gone off as usual. As it's happened countless times in other places.
Two possibilities exist: The EU knew what they were getting into and they deserve this mess, or they didn't know what they were getting into and they aren't qualified to run a multinational currency with zero flexibility.
Or a third option, they were manipulated into getting to this mess by a 3rd party who stands to make an awful, awful lot of money from it.
They have the unemployment rate they have thanks to the unsustainable - something even the IMF admits - austerity measures.
> When South Korea defaulted, the entire country came together to pay off the debt.
South Korea was never subject to the kind of ludicrous austerity demands that Greece got, had their own currency and so were able to improve their export competitiveness much more easily, as well as was able to - and aggressively did - restructure many of the banks and businesses that dragged their economy down because they were not detail-controlled to nearly the extend Greece has been.
> Businesses and large conglomerates were not bailed out but allowed to fail so that they pick up their shit.
Greece is not allowed by the Troika to choose how to reform their economy, so this option is not on the table for Greece unless it exits the Euro.
> Why should Germany put up with this kind of attitude?
Because the alternative is they get nothing? Debt always comes with risk. The interest rate is meant to price that in. If you can't deal with the risk of a restructuring, don't lend money. Except the lenders in this case learned a different lesson: your risks get socialised by the tax payers, and your government will then act like mobsters to try to recover the money, instead of letting the banks that took the risk also take the losses.
Why should Greece put up with the kind of attitude Germany has shown? Why should Europe?
It also doesn't help that there has been no innovation or large industries creating jobs in the first place. Blame austerity all they want but EU is not responsible for job creation or the livelihood of individual countries, I think that's up to the leaders of each country, and being competent helps.
> South Korea was never subject to the kind of ludicrous austerity demands that Greece got, had their own currency and so were able to improve their export competitiveness much more easily, as well as was able to - and aggressively did - restructure many of the banks and businesses that dragged their economy down because they were not detail-controlled to nearly the extend Greece has been.
You are downplaying the fact that there are other countries that were in South Korea's position never really recovered. It's not something that can be done easily, of course in hindsight it's always obvious. However, the fundamental problem is that there simply is no major global player industry in Greece to start, of course it's going to have a harder time getting back up. By no means was South Korea given an easier time, the debt payments were just as harsh if not worse. Jobs were destroyed, society changed but in the end they were able to pull themselves out by actually focusing on getting back on their feet.
> Greece is not allowed by the Troika to choose how to reform their economy, so this option is not on the table for Greece unless it exits the Euro.
So you are telling me Greece is not allowed to save itself? This is ludicrous. This is akin to saying I'm homeless because I'm not suppose to help myself. I don't blame the Greek people however, they just don't know of any other option other than the one that has been prescribed to them for close to a century.
> Because the alternative is they get nothing? Debt always comes with risk. The interest rate is meant to price that in. If you can't deal with the risk of a restructuring, don't lend money. Except the lenders in this case learned a different lesson: your risks get socialised by the tax payers, and your government will then act like mobsters to try to recover the money, instead of letting the banks that took the risk also take the losses. Why should Greece put up with the kind of attitude Germany has shown? Why should Europe?
Why shouldn't Germany feel bitter about having to keep Greece on lifeline out of their own pockets? I mean you make it sound like Germany has had it easier but from the rubbles of Allied bombing, as it emerged as an economic powerhouse and leaders of EU. When a tenant continues to be delinquent on rent, they get kicked out. Of course they blame the land lords but does it improve their situation? Does it win them a ticket back in? Here, we'll let you keep living on our dime while everyone else makes regular payments.
do you seriously believe Greece is capable of that if they are to go on their own path? What industry is there to speak of in Greece? What goods or resources are they willing to trade or offer to the rest of the world?
And why do you feel the need to make this into a political argument and not of economics? Of course you can pay back the debt without starving it's own people if they could, but they can't. There's nothing that I can see or EU believes that Greece could pull itself out of debt and they are in for some deep amount of money. Did you really expect EU to give them another get out of jail card like they have all this time?
I'm just an observer, I don't work for EU.
Racist much? Greece has a import/export deficit (excluding oil) of around -1%. They have a large tourism industry, a strong (worldwide competitive) shipping industry, and they export food products, minerals (ores?) and lots of other things besides.
>And why do you feel the need to make this into a political argument and not of economics?
Because Economics 101 already says the plan imposed and followed for 5 years is illogical and doomed to failure. Check any leading economist on the issue (except those serving in political positions in involved countries). Heck, there's even an IMF report saying exactly that.
>Did you really expect EU to give them another get out of jail card like they have all this time?
"Get out of jail" card? Perhaps you should read some more into the history of all this. The "card" Greece was shown for the last 5 years lead to a 25% GPD fall, 30% unemployment (50% youth unemployment), huge pay cuts (over 40%), and several other measures besides.
The only one who ever took a "get out of jail free card" in Europe was Germany, who's national debt and war reccuperation payments were slashed over 60% (including war reccuperations to Greece, for destroying infrastructure and leading to the death of 700.000 people, on top of getting a forced loan from the Greek state while it was occupied they never repaid).
Still not having a land registry after starting in 1994 gives me a pause.
It was always known that the Greek state was not up to par for the euro. They only got in because of a lot of shady dealings and extensive help from Goldman Sachs to mask the reality of their situation. The Euro-elite knew this at the time, but were willing to overlook it because of an idealistic commitment to a pan-European ideology.
Yes, a can was obviously being kicked down the road, but the seed of an incipient crisis was a pro: when things got terrible enough, it'd allow for the fiscalization of Europe, which would be difficult to do absent a crisis but was a pre-requisite for a real United States of Europe, the end goal where national governments would all be subsumed by the rule of a cosmopolitan elite centered on Brussels.
So money poured into Greece, because its bonds offered a higher interest rate than other bonds, and everyone figured, there's no way the Eurozone would allow Greece to default. And, for a long time, Europe tried its hardest to prevent a default, but never could build the political will that the radical transformation a permanent solution to the Euro-periphery issue would need. Note, though, that the primary benefactors of the bailouts and transfers were the holders of the toxic debt, debt that had always obviously been bad debt, and not Greek school teachers or pensioners, who bore the real pain of the reforms. German banks ended up a lot happier from the packages than anyone in Greece, and funneling the bailout funds for them through Greece was a kind of political money laundering.
Obviously Greece has a messed up political culture, and even now it still needs more reforms. But it takes two to tango, and the European elite was plenty happy to dance with the corruption and malignancy of the Greek state when it suited their interests. At this point Greece needs to do what's best for the Greek people (though what that is is the big open question, and it's clear that this is a quest for the least of a couple different evils) and screw the interests of outsiders.
OP:
> With respect to Greece, the precise thing that European elites did to set the current chain of events in motion was to replace private debt with public during the 2010 first “bailout of Greece”. Prior to that event, it was obvious that blame was multipolar. Here are the banks, in France, in Germany, that foolishly lent. Not just to Greece, but to Goldman’s synthetic CDOs and every other piece of idiot paper they could carry with low risk-weights [1]. In 2010, the EU, ECB, and IMF laundered a bailout of mostly French and German banks through the Greek fisc. Cash flowed into Greece only so it could flow out to rickety banks. Now, suddenly, the banks were absolved. There were very few bad loans left on the books of European lenders, everyone was clean, no bad actors at all. Except one. There were the institutions, the “troika”, clearly the good guys, so “helpful” with their generous offer of funds. And then there was Greece. What had been a mudwrestling match, everybody dirty, was transformed into mass of powdered wigs accusing a single filthy penitent (or, when the people with their savings in just-rescued banks decide to be generous, a petulant misbehaving child).
poster "dlr" from the comments:
> I don’t see how this is even close to a fair representation of the 2010-2012 Greek debt restructuring. 199.2b EUR of Greek debt was exchanged for 29.7b notes and 62.4b new Greek bonds. This was a 52% write-down, only using par value, except the new bonds were not valued worth par, because the new coupon was way below market. After the exchange, the new bonds traded at ~25c of new par and 6c of original par. When the EFSF later repurchased bonds from private owners, it paid 11.3b to retire 31.9b of debt. That is, 34c of the new par value of the bonds, or 17c of original par. Including the haircut on the aforementioned notes (which were EFSF notes and worth new par), private creditors ended up with about 25c on the dollar of what they lent. This is not “cash flowing into Greece so it could flow out to rickety banks.” It is the exact opposite. A near complete sovereign wipeout borne by private lenders.
Who took these writedowns? Paribas, Commerzbank, Dexia, SocGen, RBS, Unicredit, Groupama, HSBC, Metlife, Allianz, Axa, DB, ING, Generali and many more all wrote down and realized losses on between 60-80% of what they lent to Greece. It’s true that some of these banks got liquidity support during the Euro crisis, but the Greek write-downs were ultimately born by the stakeholders of these banks.
In fact, the only banks that were directly bailed out with respect to the Greek debt restructuring were the Greek banks. The largest holders of Greek debt were Greek banks. They were the only institutions who were undoubtedly doomed as a result of losses in the value of Greece’s sovereign dooms, and the stakeholders in those banks, especially depositors were blatantly saved. National Bank of Greece held 13.7b. Piraeus held 9.4b. Alpha held 3.7b. The capital injections, initially 23b euros, meant that Greek depositors were protected from what would otherwise have been inevitable losses due to enormous domestic bank holdings in Greek debt. Foreign banks and private holders actually took losses.
The discussion continues on as people discuss the details, but it gets a bit too jargony to follow. No matter if the Greeks were forgiven 50% or 80% of debt already, it seems clear that the remainder is going to be impossible to pay off, so it doesn't change that much in terms of reactions, but I'm curious what is the truth behind this first 2010 bailout.
I also keep imagining that we're gonna see a replay, with "Greeks" being "non-STEM student loan holders in the US" in the near future, so I'm doubly curious.
[0] http://www.i...
The EU seems bent on wringing every last penny from the lower income tiers, which hasn't worked for the past six years, and is unlikely to start working now. The average Greek is, at this point, desperate enough to just want to leave the EU and deal with the consequences rather than watch the country die and/or get sold off over decades.
The Eastern Europeans never wanted to bail-out the Greeks to begin with, and have zero sympathy for their cries about inhumane austerity because the "austere" Greeks are still better off than the Eastern Europeans. Thus any transfer of money from e.g. Lithuania to Greece is perceived as a crying injustice.
But even in Western Europe Germany is close to being Greece's best friend. The first bail-out was almost sabotaged by the Finns when they demanded collateral for their money. Which caused the Dutch to ask for that too. Meanwhile Evil Evil Schäuble knew that the Greeks would never be able to pay back that money - and lied to the German people about that "your money is safe, we will get everything back", he said.. shortly before agreeing to the first haircut. Billions of Euros of German tax payer money evaporated.
Without the German government Finnish and Dutch ships would have transported away the Greek statues, gold, and whatever other valuable thing they could find. And if "European solidarity" depended on the Eastern Europeans the Greeks would have never gotten a cent.
The Greeks who are so fond of the Euro should be endlessly thankful to the German political class (not the people - they never supported this bail-out).
I think this is also the primary reason why Schäuble does not want another haircut. His original lie would become even more severe and the German electorate would become even angrier.
I get that your government has to work with internal politics, but, on the other hand, our government find increasingly difficult to justify this idea of a German-centric Europe to our public opinion (no matter if the German government is actually a mediator between the 'north' and the 'south' Europe or not), because that's how it's perceived here.
German consistently runs a trade-surplus that's in excess of EU treaties but remains unwilling to raise demand at home, this creates a huge imbalance at the heart of the Euro.|
When the Euro came into being it was obvious to many people (and stated widely) that the interest rates were set to suit Germany and were far to low for many of the other countries.
Germany is at the heart of the problem of the Euro and they can't or won't see it
What would make it different this time around?
There was a write-off, but it wasn't enough.
The bailout was; Greece was lent money it could not have gotten on the open market. Mostly to pay off debts from bank the Eurozone feels too big too fail ( my speculation ).
We have saying here "owns money as Greece" - and that sayings was coined in 19th century. In 1822 Greece declared independece from Ottoman Empire and by 1880 Greece owned 5.243.428 marks to... guess? Germany.
From point of Greece, it is much better for them that Greece leaves Eurozone. They already occurred 80% of pain so there is not so much to lose. With Drachmas they will have some inflation and inflation will fix entitlement problem. And tourism will become very very competitive. And they can fix tax evasion problem on their own.
From point of France - that will be disaster: the euro an ECB is designed for economies and societies similar to Germany and German's influence in Europe will raise.
This crisis is pure politics now.
Macedonians have joke that Greece should be renamed: "the former European country Greece".
I think this was the logic for people voting OXI in the referendum, but there is still banking and public infrastructure and host of other things that they could lose.
And this is beside the moral position of demanding that the german tax payers cover the expenses of the Greek state that the Greek tax payers can't be bothered to pay.
Disruption is often necessary. European countries have a nasty habbit of preferring a permanent mild pain to a greater upfront pain and then drawing a line and starting on a right foot.
* For one he wanted to use a hypthetical threat german harbors by terrorists who would drive ships with bombs into them to force the german government into creating legislation to let the german army operate with live weapons inside german borders; as well as let them shoot down passenger planes within german borders.
* Secondly he wanted to create a "federal trojan", a virus he insisted would be capable of infiltrating EVERY computer. Ever. And he wanted its use to be fully legal.
Personally, I would describe his reasoning and actions as in line with the aim of always putting the German state (not necessarily its people) first. Maybe his idol is Bismarck, maybe there's some other reason for his actions. Who knows; I surely don't. It is possible, of course, that his views and behaviour have become quite disconnected from the "real" world. After all, he's been a MP for 43 years now - making him the most senior MP in the history of the FRG. But then, he's seen quite a few global disasters happening from a political perspective.
In the end, right now, he's doing a fairly good job of maintaining a stable German economic position in the EU/the world and is able to even strengthen Germany's global political position as well. This rather aggressive damage control certainly doesn't support the ideals that the EU is built upon, but then who knows whether he subscribed to it in the first place? I honestly believe that, should the EU fail in the coming decade, he'll be remembered quite positively.