Difficult not to love how he discusses everything with a very different language from traditional politans (or I would say, professional polititians). He sounds true and honest, and by no means a radical inciendary that wants to destroy the EU and the Euro. His political career has been cut short by massive pressure from all sides but he has gained sympathy for Syriza's cause worldwide in a very short time and nonetheless make progress in negotiations despite having everyone against his ideas in economic institutuions.
I'm sure we'll miss Varoufakis and I hope his style - be like a common mortal - permeates politics everywhere.
While Greece have lost this battle, he has shone a light into the murky workings of European politics that I believe will be invaluable and inspiring to future reformers, not to mention the citizens of the EU member states.
I'm just wondering what the heck Greece has done with the some half trillion Euros it's sucked in over the years and which hard-pressed taxpayers across Europe, many with standards of living below that of the average Greek, will now be helping to offset?
> Only a small fraction of the €240bn (£170bn) total bailout money Greece received in 2010 and 2012 found its way into the government’s coffers to soften the blow of the 2008 financial crash and fund reform programmes.
> Most of the money went to the banks that lent Greece funds before the crash.
They money from the bailouts went to pay debts that Greece owed on pre-2008 loans, and was not available to the Greek government to be used for social or economic restructuring.
I'm not certain at all what your basis for your comment is.
500 000 million spread over 10 million people for 20 years is only 2500 euros per person per year. Assuming a large chunk of this amount was interest then it makes a lot more sense where all the money went.
Well the ECB could just print couple of trillion euro and hang them out divided to each country. We will have a little inflation and that's it. Greece will be debt free and there will be no burdens on the taxpayers.
Actually Greece has a printing press for Euros (apparently you can tell which euro notes are printed in Greece by the serial number). I have been half expecting Greece to solve all its problems by just printing.
Me thinks even the Greeks would not have too much problem putting the German code on their new notes. Of course this would be interpreted as a declaration of war by the eu so it would not be wise.
In the early 20th century there was a high-profile case in Portugal, where a forger managed to convice Waterlow and Sons (a currency printer in the UK, since bought by De La Rue and currently one of the Euro printers) to print batches of portuguese notes.
These were, of course, indistinguishable from real notes. The scheme ultimately failed when a mistake caused the printing of duplicate serial numbers already ordered by the state.
I doubt a scheme like this would work today in the slightest. If in an un-digitized world this didn't last long, in today's world it would quickly be discovered.
This is a bit different in that Greece has control over a real printing press. While it would be unlikely to be kept hidden, it should be possible for the Greek printers to avoid overlapping serials numbers.
In practice they could only start their own “unauthorised” printing if it was kept secret since if it leaked the ECB would just issue new notes. This would likely be highly disruptive to the ECB as it was to Portugal.
Almost all of it was used for dept payments I believe.
Alas, this sort of thing (protect the interests of capital) is pretty normal. In the US, bankers got a bailout and homeowners lost their homes for example.
Of the bailout money, yes. But bear in mind that the bailout money (at least the initial tranche) was to take on debt that had already been spent. It most definitely is not that case that that money was spent on debt re-payments.
It's fair to say that a lot of subsequent additional money was primarily used to cover debt re-payments but that's because the original debt was so large (relative to the Greek economy).
Greece has lost the war. Fortunately the resistance was strong enough against his completely exagerated expectations. Such parties are not normally at the helm neither in US nor Europe. Care to elaborate murky workings?
While Greece have lost this battle, he has shone a light into the murky workings of European politics that I believe will be invaluable and inspiring to future reformers, not to mention the citizens of the EU member states.
Radical incendiaries? I wonder what epithets you'd employ to describe people who have voted against EU treaties (to be told to vote again until they get it right)?
"True and honest"? Are we reading the same article? He sounds like a bitter extremist who doesn't know how to control himself in order to reach a certain goal, but instead like either a petulant child or an autistic person (depending on the day of the week, it seems) can only repeat 'the Greeks voted for no extra cuts yet stay in the Euro so we should get it' (no shit? and I'd like a pony) and 'my economics paper says xyz, I want you to reply to each point I made'. Uh no buddy, that's not how the world works.
I find it strangely Kafkaesque the way each country has their own vested interests in destroying Greece. We know absolutely that they will not pay this money back (and as a price Europe is destroying their country and seizing assets, a coup of kinds).
I think they should go bankrupt - and the banks will be falling over themselves to lend them money again! It's amazing that 90% of the Greek bailout money went to the Banks and that they are no longer exposed to the risks that they made, instead tax payers are.
It really feels as if the banks should be made to pay for making such unstable, non repayable depts? Just a thought.
Well, if the Greeks would agree with your idea, they'd do it, don't you think? And if they'd really think they'd be better off leaving the Euro, they would, no? Instead, they are willing to accept drastic measures, and even Varoufakis has all eyes set on staying in the Euro zone, even if only in a farcical way (his 'we'll issue Euro-denominated bonds ourselves even if the ECB cuts us out' fantasy).
The way I see it, they want to stay in the Euro no matter what. Everybody saying 'leave the Euro' seems to know better for them than they do?
The problem is that while Greece is better off leaving the Euro, individual Greeks that already have savings would be worse off if their savings were converted to drachmas.
Seeing as how Syriza was elected by a populist movement, they could just as easily be deposed by the same populism, and a lot of people (especially those who are already retired or nearing retirement age) would be upset if they lost a large chunk of their savings.
But yes, economically, the drachma is better for Greece. Especially for younger Greeks who have little to no savings, and wouldn't be hurt by a devaluing currency, but would stand to gain from increased employment.
Can't decide if you're more insulting to those who are autistic, to those who believe in democracy, or to those who are in academia...
Yanis Varoufakis' problem is that he was playing a different game. He was trying to be an economist and do the right thing for Greece when the Eurogroup was playing politics and trying to punish Greece. They never were interested in economics or a prosperous Greece, only in maintaining the power structure across Europe.
Absolutely my reading of the situation too. I hear these two sides of the argument "Greece is a petulant and lazy bad state, hit them" and the one I subscribe to "let's forgive Greece, it was on the banks to lend stupid amounts of money to them".
Well I have autistic tendencies and I'm an academic; and I do believe in democracy although not so much the mob rule variety; so 'it takes one to know one' is rather apt here...
I think you're missing a tremendous amount of context in this observation. Varoufakis is speaking a close approximation of the truth in this situation. The point is that the Euro as a union is an economic disaster: Capitulating to the German electorate because they're bigger/richer is not much of a union, it's hegemony.
The USA doesn't let Alabama and Arkansas rot if Californians would prefer it that way, it has automatic transfers and laws in place to help its members out. Yes we are a tighter Union politically, but that's the aspiration of the EU and Euro, and they've just proven they really would prefer a regional hegemony than a group of political equals.
a) there is no 'capitulating to the German electorate'; b) the 'aspiration' of the EU is not to become a United States of Europe. I can't be bothered to go into the details, because this is EU law 101, but just the suggestion that European countries would somehow aspire to a federal model is laughable and shows 0 knowledge of the history and institutions of the EU.
And this is the illusion that's at the heart of The EU, that EU law can somehow contort social and economic systems to work in contradictory ways. It's a confederation - all members have given up some sovereignty. Except a badly design currency union and a hegemonic leadership out of Germany doesn't make economic sense when crises hit.
With my interested bystander hat on, I agree with you.
As someone who has a family interest in Greece being a pleasant place to live and work, it would have been nice if he had been even a tad effective along with it.
I wonder what effect the current EU "offer" to Greece will have on Britain's vote down the line, or on other states that may now have second thoughts about joining the euro. From my (American) perspective, it looks like being part of the Euro means giving Germany an awful lot of influence over your fiscal policy.
There is zero prospect of Britain joining the Euro; nobody's even talking about that. The possible upcoming referendum is about Britain leaving the EU.
But people also see this as a demonstration of the problems with the EU. As someone who would like to eventually see a federal EU, this whole situation has been exasperating because it has driven a lot of really pro-EU people I know to question whether the EU as whole ought to even survive if it doesn't reform after this.
It definitely plays into the hands of the anti-EU brigade. Their whole spiel is that the EU is a bullying, un-democratic bureaucracy. The last few weeks have made it kind of hard to make the argument that it's a warm and fuzzy family of equals.
Whether or not it'll have much of an effect on the vote, I'm not so sure. I doubt if many British identify with the Greek situation (in the sense that it could happen here, there's definitely a lot of empathy about). It's definitely seen as a consequence of the Euro (which we aren't part of) rather than the EU (which we are).
My guess is that it's likely to have hardened those who were already in the pro/anti camps and confused those who are undecided.
Possibly of more practical effect will be whether it makes the likes of Germany etc more inclined to negotiate the EU T&Cs with the UK prior to the referendum. The UK government want more flexibility in the arrangements. I can see political arguments both for giving a bit of slack so that the EU definitely stays together and for the Eurozone saying that it's flexibility that got them into their current mess.
There was a 2% increase in favour of leaving after the referendum in Greece. It has not been updated since but it will be interesting to see what the changes will be once the populists start trumpeting about the possibility of the UK being ruled by Germany.
That means that England winning the World Cup in 1966 will all have been in vain ;)
Of course, that's why the Greeks so desperately wanted to get out of the Euro, and why new countries have to be added to the Euro by beating them until they join.
Oh wait, no.
Despite all the 'omg the Germans are holding poor pplz hostage!', the Euro has massively lifted the economic prospects of tens if not hundreds of millions of people in a measly 10 or 15 years. Ask the Polish how bad the Euro has been for them, for example. The fact of the matter is - if you want to play, you have to abide by the rules. And I for one am glad that at least the Germans have the spine to say 'this is what we agreed on, no you're not special and we're not going to give you special treatment that we wouldn't give to many other countries that are in much worse shape' (like in Africa or Asia). Ffs, even some of those countries are less corrupt than Greece.
So, just because the Germans have gotten so much flak over the last few weeks, here's another sound: thank you, you guys do what others talk about but fail to uphold. (much like how the US is the only one with enough spine to actually go to war when it's necessary, but that's another topic...)
The projections of what "playing by the rules" will do for Greece in terms of recovery have been time and again completely wrong. "Follow by my rules and you'll only be subjected to a depression for a decade and a generation of people will be unemployed". When Europe implodes, again, we definitely know who to thank.
"the Euro has massively lifted the economic prospects of tens if not hundreds of millions of people in a measly 10 or 15 years"
Actually, no. The Euro has been mostly negative for all but a few of the eurozone countries. Portugal is a good example of this, as it has its economy has regressed to pre-Euro levels and there is a growing consensus that the Euro will keep its net-negative effect for the forseable future.
Nobody wants to get out of the Euro because of the exit shock and uncertainty, not because they see anything positive from staying inside.
The Euro was built basically as a renamed Deutshe Mark and this has never been fixed. Right now it's clear that it never will. A strong currency is always bad for weaker economies, which is pretty evident in the Greek case.
It has no real bearing, but it does provide us with a view of what is going on behind the scenes in the tunnels of power in Brussels. Remember that Britain is planning on a referendum to stay or leave the EU, not join the Euro. That is highly unlikely to ever happen, and after recent events I think it is absolutely clear that the ECB cannot be trusted not to use the Euro as a weapon of mass economic destruction.
I was a vehement believer in the concept of a united Europe. In some ways I still am, but only with regards to the base concepts of freedom of movement and freedom to work.
I am British and I have taken advantage of the freedom of movement. I have lived in several countries in the EU. I haven't returned to the UK since 2004. That freedom is incredible, and I hope it doesn't change.
The Euro though is a different matter. It is dividing the EU. It is creating the have's and have not's. It is being used as an economic nuclear weapon in order to force the will of one nations economic culture and expectations on to others.
Greece made a mistake back in 2010. At that point they should have embraced the Grexit. They should have crashed and taken all the German and French banks with them. Now the foreign banks have no risk in Greece. The ECB has bought them all out and the ECB and IMF hold the Greek nation by the balls.
If I was Greece I would implore Tsipras to follow Varoufakis' plan. It might not work, but it might just work, and I guarantee that another bail out is not going to change a damn thing, but move the current shit storm into a larger shit storm three years down the line.
> The Euro though is a different matter. It is dividing the EU. It is creating the have's and have not's. It is being used as an economic nuclear weapon in order to force the will of one nations economic culture and expectations on to others.
Maybe it is, but the Greek problems started decades ago, years before the Euro.
While I am not a big fan of austerity, one can ultimately only spend what you got. There were several months in which the Greece government had broken with the austerity agreements but in exchange did not manage to achieve anything which could be called an improvement of the country income situation. As a consequence the gap between income and spending even widened without giving positive impulses to the Greek economy.
Printing money does not create value - by the same amount the money is printed, all previously existing money of that currency is being devaluated. This is of course a convenient way of getting rid of old debts, but not possible if you are in a currency union. Furthermore, you still have to pay back foreign debts, and there is a little chance that they accept your printed money.
Printing money is like robbing those who still have cash as the currency is devalued. And it doesn't change a thing if you owe money in foreign currencies.
Otherwise, Japan et al. would have long ramped up the printing presses.
..especially the following line:
- The EMU is a single currency system just like the USA is. The reason the USA works and the EMU doesn’t is because the USA has a system of rebalancing whereby poor states get more federal funding than wealthy states.
The Euro is flawed by design. Flow capitals works against the Euroarea. For instance:
The interest rate convenient for Germany is not the interest rate convenient for Spain. What do you think are the rates chosen by the Central European Bank? (clue: the ECB is in Frankfurt)
This shouldn't be more problem that the Fed rate affecting New York and Florida for instance, but there is not a common fiscal policy like in the States.
What happens is that capital in the banks of the north search bigger returns in hot economies (south countries) and create bubbles (Florida again?).
When the crisis arrive, we lend public money to (Greece for instance) so they can return the money to the (private) banks and, in a sleight of hand the fault is all of the lazy south Europeans.
And here (a little dense maybe):
"Overall, the concern that the ECB rate aligns more with the Taylor recommended rates of the core countries than with the peripheral countries appears to be supported by the data[..]"
http://econ.berkeley.edu/sites/default/files/Srivangipuram.p...
Yes, because when California almost went bankrupt in 2012 all they had to do was call Pennsylvania, who then promptly wrote a check for 1/2 of California's GDP, and then said a few years later, when California still hadn't fixed its ridiculous retirement fund shortfalls, 'Nah you know what, you have nice beaches we visit every now and then, let's call it even.'
Oh no wait, they didn't - and the amount of federal funding even New Mexico gets is dwarfed (per GDP) by the deficit the Greeks were trying to roll over - again. How many US states fail to collect 25 to 40% (depending on what you count) of taxes? If there were any, how long do you think other states would keep that state afloat?
It isn't up to the individual states. The Feds can and do keep various states afloat through a variety of transfer institutions. Texas in the 1980s had to get a bailout of over 30% of its GDP due to the Savings and Loan crisis and resulting (ahem) debt forgiveness by the FDIC. New York certainly got a massive injection from the Central Bank during the fall of Long Term Capital Management. Mississippi and Alabama have been net benefitors from taxpayers in other states via entitlement programs for a generation now.
When California goes bankrupt the federal government spend more money in California. This is automatic. This doesn't happen in the Euro area. In fact, the opposite happens: Brussels force the country to spend less.
I think the system of rebalancing is a small factor, the major factor being a fiscal policy instated by the federal government on state spending...there needs to be a similar central entity in the Eurozone to implement not just momentary policy but also fiscal policy...but we all know this idea is unpopular
Does this mean that Democratic countries that are part of the Euro are rendered unable to listen to the wishes of their citizens and must instead act as despots on behalf of Germany?
The ones who were asked by Greece to cough up money pretty much agreed with Germany.
France and Italy didn't (at least not in public), because they would also at some point like to have access to taxpayer money from the Northern/Eastern EZ countries.
Never had this been true in history. Bankruptcy and debt forgiveness have happened regularly through history. And if those don't happen, usually revolution or war is a consequence.
But we are talking about an economic union among states where the biggest state is quick to socialize banking losses among the poorer states, and makes it a morality play about "Those dirty Southerners".
That's a pattern that doesn't end well unless someone is smart enough to hit the partial reset button.
Egoistical showman. Not able to listen. Not able to compromise. Using inapropriate language (waterboarding, terrorist - insulting people who endure real waterboarding and/or are hurt by terrorist). Doesn't stop shooting at Schäuble (Germany), but in truth he was opposed by 19 European countries. External pressure is needed.
Stoneage lefties like to discuss, well, preach, all day long while spending other (EU) citizen's money. Greece will be saved when he and the anarcho-communist-syndicalist grufties start to modernize greece, e.g. do something again the blatant corruption, burocratie and tax evasion instead of hindering startups, business and innovative people. Imho.
Sure, not able to listen and not able to compromise define the Greek side in all this.
Where have you been?
The policies imposed to Greece don't make more sense this time that they did the last time, and the last, and the last.
But yes, we should all listen to the wise neoliberal policymakers, including the humble Herr Schäuble.
Schäuble, who maintained the funds of his party in the 90s and insists that he forgot about some 100k DM of unaccounted donations in an envelope (and by an arms dealer, no less).
Schäuble, who presides over the public KfW-Bank, which hosts the Greek recovery fund, where 15bn EUR in Greek assets are supposed to end up.
I wonder which transactions will be 'lost' this time.
Unfortunately it is the Eurogroup who are not willing to listen or compromise. The IMF reports (including one leaked today http://news.forexlive.com/!/imf-finally-says-what-they-think...) shows that Varoufakis was right all along and the debt is unsustainable, yet the Eurogroup does not listen and won't consider debt restructuring but wants to continue with the same failed and discredited policies.
I agree. The Eurogroup's real final target in this whole thing is France. The Germans want France to change their culture (pensions, social system, etc), but France is too big a target to go for straight off the bat.
Varoufakis stated:
"Based on months of negotiation, my conviction is that
the German finance minister wants Greece to be pushed out
of the single currency to put the fear of God into the
French and have them accept his model of a disciplinarian
eurozone."
Therefore they are playing the long game, and for that to work, Greece needs to capitulate and exit the Euro. The Eurogroup has tried to make it impossible for Greece to stay in the Euro, but Greece won't bite.
Once Greece do exit the Euro, the rest of Europe will see the incredible pain that is involved when your national banks have the rugs pulled out from underneath them.
Once France understands that they have to change or end up like Greece, they'll change. They'll have no choice.
The undelying point Schauble is subtly trying to make is that you cannot switch back to an alternative currency without help from outsiders. Iraq needed US help, as was recently noted in the Guardian:
"In occupied Iraq, the introduction of new paper money took almost a
year, 20 or so Boeing 747s, the mobilisation of the US military’s
might, three printing firms and hundreds of trucks. In the absence of
such support, Grexit would be the equivalent of announcing a large
devaluation more than 18 months in advance: a recipe for liquidating
all Greek capital stock and transferring it abroad by any means
available."
You think France could go back to the Franc without outside help? I highly doubt it. The point Schauble is trying to make is that if France wants to go the way of Greece, it would only involve lots and lots of pain. Abide by their rules, or else.
Of course they could. 6th largest economy on earth, with a functional banking system and plenty of resources at their disposal. They're not Iraq or Greece.
France has been on a decline since many years. They are slowly de-industrialising, and there is no sign that this trend is going to revert any time soon. [1]
So either they get their act together, which will be very hard due to mentality and political culture, or it will get much worse before it gets better. If France falls, it will be the end of the Euro. Germany is trying to fix these issues, in order to save the historical project of the European Union. Saying that Germany is just economically invading Greece is dishonest, there are huge amounts of German (and other country's) taxpayer money involved. Most people have written them off already.
If the german try to push the French in the futur a bit to openly they will be blood on the wall. The ghost of ww2 is still there, we (the french) will go the absolute extreme measure if it look like we are threaten by germany (nukes + French Far Right = not good).
So all of this need to be hidden to the public eye. And usually it is . But greece did not get that decency.
The hint is there in the article. The French know that Germany in gunning for them:
“Only the French minister [Michel Sapin] made noises that
were different from the German line, and those noises were
very subtle. You could sense he had to use very judicious
language, to be seen not to oppose. And in the final
analysis, when Dr Schäuble responded and effectively
determined the official line, the French minister would
always fold.”
And this response shows that you know nothing about economics or finance.
> do something again the blatant corruption, burocratie and tax evasion
Corruption and tax evasion are an economic problem, not a moral one. People decide whether or not to pay taxes based on many factors - convenience, value, habit, punishment, etc... In a 'developing' economy, like Greece, if there's a history of not paying taxes, you need to provide incentive to pay taxes. Because if you all of a sudden raise taxes and enforce it hard, you don't get tax evasion - you get capital flight, which is much, much worse for the economy. And it's all too easy to move around in the Eurozone.
> Stoneage lefties like to discuss, well, preach, all day long while spending other (EU) citizen's money.
Greece did not spend other EU citizen's money. They sold bonds at the market rate to banks and investors that BOUGHT them, and their debt spending was entirely sustainable up to the financial crisis (not sure if you've heard about it) which rocked the whole world. The troika bailed out those banks, with the vast majority of the "EU citizens' money" going to those banks and only a fraction of this money ever made its way to Greece.
> instead of hindering startups, business and innovative people
You know what hinders startups, business, and innovative people? A repressive tax regime. Like the one the troika imposed on Greece...
> Corruption and tax evasion are an economic problem, not a moral one.
Not true. The Greek state has traditionally been seen as an enemy of the citizen and something to take advantage of. This is due to the muchtar system established hundreds of years ago by the Osman empire, establishing clientilism. E.g. Estonia is much better on all these metrics, but income levels are similar or below Greece.
> Greece did not spend other EU citizen's money
They took advantage of having access to "Germany's credit card", with interest rates dropping from 25% to 5% post Drachme. Then they proceeded to consume that money. Even in 2014, the public and private consumption relative to net national income was at 114% [1], a completely unsustainable level. If Europe wasn't financing elevated standards of living for Greece before the crisis, they certainly did in the last few years.
> You know what hinders startups, business, and innovative people? A repressive tax regime.
New York and California have comparatively high tax rates, enormous housing costs and expensive wages. They seem to be doing just fine. Also see Germany, Austria, Switzerland and all of the Scandinavian countries.
Anyhow, like I said - businesses and people will pay taxes if they see value - beyond NY's tax free startup program, those are the 2 most populous US states (access to labour). That is a competitive advantage. There's also easier access to financial capital - another advantage.
People don't necessarily go to where the taxes are the cheapest - they go to where there's the best combination of access to labour, capital, customers, taxes, etc... (or they stay put if they think their current location is 'good enough')
Think of human behaviour as a maximization curve - a constant attempt to attain maximum "utility" of our time.
> E.g. Estonia is much better on all these metrics, but income levels are similar or below Greece.
Estonia, business-wise, seems to have quite a few things going for it.
Just reiterates what I'm saying - paying taxes is based on a number of factors, none of them morality (not on a large scale anyway).
Edit - if Greece wants to collect more tax money, they need to provide a good reason for people to pay tax money. Given that the world is a big place and anyone with enough money can move quite easily, it needs to be a more compelling reason than the fear of punishment.
> if Greece wants to collect more tax money, they need to provide a good reason for people to pay tax money
I agree on this one. I would not want to give a corrupt government my money. But then again, this is due to ethics - if not the taxpayer's, then the government's. You will find the topic of corruption mentioned in the "Ethics" section in this world bank report. [1, page 11]
Most people don't decide to pay or not pay taxes based on perception of corruption, but rather what they perceive they're receiving.
In Canada, we generally are content to pay taxes because we get such benefits as free health care, cheap medicine, free primary and secondary schooling, subsidized post-secondary schooling, and our cities are generally quite clean with good infrastructure, which is a good accomplishment considering our population density is very low.
My wife is from a third world country where almost no one pays taxes. Then again, what do they get? Infrastructure is non-existent (roads are all gravel or dirt, power is on about 50% of the time, no potable running water, police are non-existent, etc...). This is the conundrum of development economics - how do you go from this stage of development, to a new stage where people pay taxes so the government can provide services? With no services people will avoid taxes, with no tax money the government cannot provide services. The answer of course, is that it's difficult and takes time.
Corruption is an easier problem to solve, but difficult to implement. To get civil servants to stop accepting bribes you need to pay them enough that losing their pay is actually a punishment, or punish them enough that the threat of jail time counters the benefit of accepting bribes (or ideally, a bit of both).
Anyhow, neither problem can be solved in the amount of time that the troika has expected Greece to solve them - and they ARE economic problems, not moral ones.
> New York and California have comparatively high tax rates, enormous housing costs and expensive wages. They seem to be doing just fine. Also see Germany, Austria, Switzerland and all of the Scandinavian countries.
These places all have other things going for them, though.
Why don't you move to a small town in Nebraska and pay all the Federal and State taxes as well as a 20% income tax, 10% property tax, 20% sales tax, etc. Oh, because you want something for your tax money? Hmmmm.
I disagree vehemently. The austerity and bailouts so far have been a punitive process that has achieved either an undesired effect or the specific goal of:
1) destroying the economy. no growth. no way to achieve the surplus targets mandated. no way to exit debt.
now, it's a set up. that's the premise of his statements in this article. you disagree or character assassinate, either or, but you don't propose an alternative except the tired lines about Greeks spending other peoples money. Go. learn something. come back when you know something about international finance, the Eurogroup, the ECB, the last 5 years of austerity, the last 2 Greek governments, the German Sub deal (anecdotal, not endemic, but representative of the nature of such transactions) and the macro economics of how +-5 million people shall fare over the next 20-50 years.
You come across as a jerk, mean-spirited, and ignorant. Your comment was troll bait and more insulting than any of the articles rhetoric. You use the term "leftie" to describe folks of any political persuasion who make take umbrage at the blatant mafia structure at the core of the euro (currency) laid bare over the last weeks.
Please DO go study a bit before you show your face around here again. Thanks
Aaron
When the financial crisis hit, almost every country on this planet increased public spending and introduced stimulus package after stimulus package in order to help the economy back on its feet.
Greece is in a situation where their economy desperately needs any kind of stimulus. Instead, the rest of Europe decides to make an example of them by forcing them to implement austerity measures that target the masses (and not the tax-evading elite) because that is the fastest way to collect more taxes and cut public spending in a short timeframe (VAT increases, pension cuts). This is the total opposite of what Europe was doing when they were hit by the crisis.
Obviously, the European leadership wasn't happy when someone who understood this and was willing to speak up about it came into power in Greece. Luckily, the media was happy as ever to make this a human interest story and focused on Varoufakis' lifestyle instead of actually looking at what they were trying to achieve and how Greece was in an impossible situation. They've been in power for about 6 months now and are somehow responsible for all the tax evasion, public spending mistakes and, really, anything else Greece gets blamed for.
> Stoneage lefties like to discuss, well, preach, all day long while spending other (EU) citizen's money
What did you find particularly "stoneage" in his ideas?
It's not the first time I notice criticism (a rather empty one) of "left ideas" based on "being old". Isn't it a little non-sensical, to criticize ideas for being old?
Based on this interview, it looks like Tsipras is solely to blame for the Sunday's disastrous deal. I think his career will be finished after the deal passes.
Reading all these heated discussions on HN, I find them to be extremely polarized ("good Germany/bad Germany") and missing the essential component: Greece is not a country that can sustainably live without working hard. Why do so few people mention that almost 75 percent of Greek pensioners retire before the age of 61?
While I do think debt relief is a necessary tool, I also believe that we should hear much more about what the country will do to improve productivity and work harder.
because this is a red herring, likely not true, and besides the point: the point is that the 5 years of austerity, privatizations, and privations have ruined the Greek economy, made it impossible to achieve the surplus goals mandated, and basically ensured that there will be no way to exit the debt. further application of the same medicine is stupid, unless you are TRYING to destroy and divide-up Greece, hence the metaphors discussed.
A constructive economic policy needs to replace austerity as the Eurogroup medicine for economies like Greece, as we can see that it doesn't work.
There is also the issue that you seem to be unaware of how the actual situation has progressed over the last decade, the last 3 Greek governments, the surpluses achieved in a short period of time during attempted reforms, the negative effects of privatization, capital flight, etc.
There is also the issue of you thinking that German or other EU taxpayers are being asked to bail out Greece. The ECB run the Greek central banks. Those banks have gotten over 1/3 of all bailout assets for recapitalization goals. Interest earned on Greek money is being held by the ECB. The Greek people didn't need any of this to live. They grow more food than you do in Germany, and the entire economic game was set-up in Benelux, Germany, France, etc, anyway, and the Greek economy was never at their level in the first place, and so a common currency was filled with lots of German Submarine deals etc. Look at your auto industry. I live in Portugal. We don't make any cars here anymore, except so-called-German-ones (VW) or French ones. The profit chain always leads back up north. We are just the dummies making your olive oil.
If the Eurogroup wishes to defend their senseless actions, they will of course suggest that you, the bloc taxpayers, are on the hook. If you are smart enough to see through their attempts to divide, you will see that the bloc IS paying for all of this clowning around, all of the time, and that the problem is related to the general European banking sector's relationship with international finance, the ECB & national-bank relations not being linked to any public policy we can meaningfully democratically participate in, wolf-like behavior of groups like the IMF, and I'm sorry to say the Eurogroup, and their economic interests etc...
Greece functioned OK before the euro. They devalued the drachma every now and then to keep themselves competitive. While never the model of operational efficiency, they chugged along before they were saddled with debt in the mid 2000s - debt spent mostly on buying military equipment and other unnecessary stuff FROM GERMANY and other EU countries with Greek decision-makers decisions being "incentivized" to do so. Ordinary people did not see much of this money. And the money spent on bailouts since 2010 was just bailing out private banks and saddling euro taxpayers with the bill.
By the way, Germany is not exactly a stranger to corruption (compared to other northern states in Europe):
Greece functioned "OK" if a low standard of living, rampant inflation and pervasive lack of access to credit for businesses or individuals is "OK".
Of course is better than blowing up a giant credit bubble and then popping it when it goes wrong, but it's not very nice.
> debt spent mostly on buying military equipment and other unnecessary stuff FROM GERMANY
I hope you realise how ludicrous this sounds. Granting them victim status because they just couldn't resist those submarines and tanks despite not being able to pay... If you are looking for large unnecessary contributors for Greek debt, why don't you start at the $15bn Olympic Games (no doubt they were forced on Greeks by the German manufacturing firms, too).
> Germany is not exactly a stranger to corruption
Sometimes orders of magnitude matters. It does matter whether the rate of tax payment non-compliance is 5% or 50%, even if it does not fit the narrative of moral equivalence.
>Greece functioned "OK" if a low standard of living, rampant inflation and pervasive lack of access to credit for businesses or individuals is "OK".
They still have all of these things. Plus 25% unemployment (50% for young people), and debt equal to 180% GDP (soon to be 200%).
It takes two to tango. I was not trying to grant them victim status, I was just pointing out that German (and other EU businesses/banks) are not exactly blameless (ever heard of predatory lending?)
| Age | 55-59 | 60-64 | 65-69 | 70+ |
|-----------------+-------+-------+-------+-----|
| Germans working | 61% | 23% | 3% | 0% |
| Greeks working | 65% | 18% | 4% | 0% |
| USA working | 66% | 43% | 20% | 5% |
65% of Greeks age 55-59 are working, while only 61% of Germans are. More Germans age 60-64 are working than Greeks, but slightly more Greeks age up to 69 are working.
> I also believe that we should hear much more about what the country will do to improve productivity and work harder.
Yes, when will the Germans learn to work as hard as citizens of the USA?
While I agree with some of Varoufakis ideas (e.g. that Greece may be better of leaving the Euro, since internal devaluations are hard), he doesn't portray the other side objectively.
Many of the suggested improvements are objectively sound, e.g. property taxes, tax collection in general, normalized VAT, reducing government corruption and red-tape, removing various monopolies, etc.
Greece is the most corrupt country in the EU[1] and also one of the worst for doing business in general[2]. It also has one of the lowest levels of productivity.
It's been ~5 years since the first bailout, yet Greece haven't made much progress. Many of the suggested improvements require a simple pen stroke by the parliament. No wonder Germans get tired bankrolling all of Greece.
To be fair, the vast majority of the bailouts have gone to paying back debts. Those debts were held with corporate German and foreign banks.
And here is the kicker; Those debts are now held by the ECB, which, is not supposed to be a lender of last resort, but now has become one by default. The corporate banks are now safe and have extricated themselves from the risky position they found themselves in 5 years ago.
The ECB doesn't care either way. Schauble secretly welcomes a Grexit, because without external support Greece can't move to a new Drachma. The logistics are just impossible by themselves. Schauble wants the rest of the Eurozone to witness what will happen when you exit the Euro without support (it won't be pretty).
Hi there France btw. You still like you early retirement, large civil service employment, string unions and social state? Well, you're number one on their hit list.
Yes, Varoufakis mentioned: "Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone." (http://yanisvaroufakis.eu/2015/07/11/behind-germanys-refusal...)
A bit like nuking Japan was the first shot in US's Cold War against USSR. (But fortunately not as immediately violent.)
The analogy with actual war is I think far less unreasonable that it at first sounds. I-don't-know-who said "The First World War was fought with guns, the Second World War was fought with tanks, the Third World War will be fought with banks."
I don't mean to say that this is any kind of tinderbox situation. But it is crystal clear to me that it's at the very least a first-world country being forced by a hegemon into neo-colonial vassal-hood/debt bondage, something that is quite shocking to see, especially when there are no standing armies in sight.
And the violence is real, in that Greece is suffering a humanitarian crisis that will only deepen. Actual people will die prematurely, and others' lives will be wrecked, for Schaeuble's example to pay off, as much as newspapers like to abstract this fact behind phrases like "deep pension cuts".
> To be fair, the vast majority of the bailouts have gone to paying back debts. Those debts were held with corporate German and foreign banks.
Let me cite from another economist, Hans-Werner Sinn:
"At that time (late March 2010), French banks had a 53 billion euro exposure to private and public instances in Greece, the German ones a 33-billion euro exposure, the US
10 billion, and the UK 9 billion.
[....]
At the end of March 2015, the sum of current account deficits accumulated since early 2008 was 108 billion euros, equivalent to one-third of the multilateral and intergovernmental loans provided to Greece, which amounted to 325 billion euros. Two-thirds of the public credit was thus apparently used to finance capital flight and one-third to finance the current account deficit – ultimately the living standard that could no longer be financed with the income of the Greek citizenry. Thus, over the entire crisis period it can hardly be argued that barely 10 percent of the public credit benefited the Greek people, as Finance Minister Varoufakis does. Apart from the above, Greek debtors benefited from the fact that the international community helped them meet their obligations towards foreign creditors, and also made it possible for them to bring their
wealth out of the country."
> Hi there France btw. You still like you early retirement, large civil service employment, string unions and social state? Well, you're number one on their hit list.
Hi there, I'm from France and I would love to see all of the above gone. Any idea when this will happen?
> As a non educated (in that matter), it's impossible to understand anything without the feeling you end up as a fanboy for some party.
Well, if you care what the outcome is and you decide you want to see one party prevail, that doesn't turn you into a fanboy.
Because maybe there really are good guys and bad guys, or at least massively powerful overdogs who will crush entire underdog nations for realpolitikal advantage.
Look, Greece is fucked. Tsipras failed. Varoufakis failed. I like them, but they couldn't outwit Germany. The screwed up. They'll be remembered for that, just as Merkel will be remembered for destroying the founding principles of the EU.
Actually I want to avoid having to think of it as bad guys vs good guys. And information are mostly (unless you're an insider) <greek|german> guy revealing the truth about the other.
I'd love to have a real map of the economic relationships between banks, investors, governments.
> Many of the suggested improvements are objectively sound, e.g. property taxes, tax collection in general, normalized VAT, reducing government corruption and red-tape, removing various monopolies, etc.
Those have been proposed by Syriza itself, but that hardly matters because the disagreement is not actually about economic policy, at all.
The salient features of the Eurogroup deal are things like: "give us $50 billion of your airports, bridges, government land, tourist attractions, etc, but at today's Depression-era prices". Shock doctrine stuff.
And: "take far more severe austerity, for the chance to negotiate another bailout you need to pay us back for the previous bailout, without debt relief being on the table, despite your population rejecting this option in the very recent past, despite the IMF concluding the current debt load is clearly massively unsustainable". Make that sound reasonable, please.
> It's been ~5 years since the first bailout, yet Greece haven't made much progress.
Could it be that the collapse of 25% of Greek GDP under the last 5 years of austerity demonstrates that more austerity isn't the answer? Some economist wise cracked that prescribing austerity for a country in a depression† is like trying to cure a sick patient with regular beatings.
† the worst depression of a modern state since the 1930s, incidentally.
> No wonder Germans get tired bankrolling all of Greece.
Hah, those generous German tax-payers. But wait, aren't they really bailing out German and French banks, at least indirectly, after the ECB gobbled up all that toxic peripheral debt that is was the predictable outcome of wild trade imbalances in an ill-thought-out monetary union? What fraction of Greek bailout money was just recycled into paying back the IMF and ECB? Do you know?
Do you know how loan sharks operate?
Here's an alternate perspective to jar you out of your slumber:
Deutschland deutschland uber alles, but with banks instead of tanks.
"The European Union as we have known it ended over the weekend. That EU project was all about the gradual convergence of equal nations into an “ever closer union”. That’s finished now."
Disclaimer: my parents are Portuguese and I visit Portugal regularly.
I understand his feelings, I don't understand his reasoning.
I understand his feelings because there is a lot of unfairness going on: big economies (e.g.: France, Italy) are treated with more leniency and tolerance than small economies (e.g.: Portugal, Spain), simply because they're far more important to EU. It is humiliating and Greece should feel it even worse.
I don't understand his reasoning because for the indebted countries there are only 2 objective choices: it is the EU way or the highway. The EU simply can't accept that Greek voters just decide to quit the treatment but remain in the Eurozone because the voters of Portugal, Spain, Italy and other countries would do just the same. It would have been the end of Eurozone.
Varoufakis and Syriza should have started a Grexit strategy from the early beginning. They didn't, so Germany saw they were bluffing and won the game.
Greece lost because Varoufakis didn't understand what was at stake.
124 comments
[ 3.4 ms ] story [ 193 ms ] threadI'm sure we'll miss Varoufakis and I hope his style - be like a common mortal - permeates politics everywhere.
While Greece have lost this battle, he has shone a light into the murky workings of European politics that I believe will be invaluable and inspiring to future reformers, not to mention the citizens of the EU member states.
http://www.theguardian.com/world/2015/jun/29/where-did-the-g...
Another case of profits being privatized and losses being socialized.
> Most of the money went to the banks that lent Greece funds before the crash.
They money from the bailouts went to pay debts that Greece owed on pre-2008 loans, and was not available to the Greek government to be used for social or economic restructuring.
I'm not certain at all what your basis for your comment is.
https://www.theguardian.com/world/2015/jul/06/return-drachma...
http://www.eurotracer.net/information/notes.php
These were, of course, indistinguishable from real notes. The scheme ultimately failed when a mistake caused the printing of duplicate serial numbers already ordered by the state.
I doubt a scheme like this would work today in the slightest. If in an un-digitized world this didn't last long, in today's world it would quickly be discovered.
https://en.wikipedia.org/wiki/Alves_dos_Reis
In practice they could only start their own “unauthorised” printing if it was kept secret since if it leaked the ECB would just issue new notes. This would likely be highly disruptive to the ECB as it was to Portugal.
Alas, this sort of thing (protect the interests of capital) is pretty normal. In the US, bankers got a bailout and homeowners lost their homes for example.
It's fair to say that a lot of subsequent additional money was primarily used to cover debt re-payments but that's because the original debt was so large (relative to the Greek economy).
While Greece have lost this battle, he has shone a light into the murky workings of European politics that I believe will be invaluable and inspiring to future reformers, not to mention the citizens of the EU member states.
I find it strangely Kafkaesque the way each country has their own vested interests in destroying Greece. We know absolutely that they will not pay this money back (and as a price Europe is destroying their country and seizing assets, a coup of kinds).
I think they should go bankrupt - and the banks will be falling over themselves to lend them money again! It's amazing that 90% of the Greek bailout money went to the Banks and that they are no longer exposed to the risks that they made, instead tax payers are.
It really feels as if the banks should be made to pay for making such unstable, non repayable depts? Just a thought.
The way I see it, they want to stay in the Euro no matter what. Everybody saying 'leave the Euro' seems to know better for them than they do?
Seeing as how Syriza was elected by a populist movement, they could just as easily be deposed by the same populism, and a lot of people (especially those who are already retired or nearing retirement age) would be upset if they lost a large chunk of their savings.
But yes, economically, the drachma is better for Greece. Especially for younger Greeks who have little to no savings, and wouldn't be hurt by a devaluing currency, but would stand to gain from increased employment.
Yanis Varoufakis' problem is that he was playing a different game. He was trying to be an economist and do the right thing for Greece when the Eurogroup was playing politics and trying to punish Greece. They never were interested in economics or a prosperous Greece, only in maintaining the power structure across Europe.
The USA doesn't let Alabama and Arkansas rot if Californians would prefer it that way, it has automatic transfers and laws in place to help its members out. Yes we are a tighter Union politically, but that's the aspiration of the EU and Euro, and they've just proven they really would prefer a regional hegemony than a group of political equals.
As someone who has a family interest in Greece being a pleasant place to live and work, it would have been nice if he had been even a tad effective along with it.
I'm deeply opposed to the idea on many fronts but am genuinely interested in the opposite view.
Whether or not it'll have much of an effect on the vote, I'm not so sure. I doubt if many British identify with the Greek situation (in the sense that it could happen here, there's definitely a lot of empathy about). It's definitely seen as a consequence of the Euro (which we aren't part of) rather than the EU (which we are).
My guess is that it's likely to have hardened those who were already in the pro/anti camps and confused those who are undecided.
Possibly of more practical effect will be whether it makes the likes of Germany etc more inclined to negotiate the EU T&Cs with the UK prior to the referendum. The UK government want more flexibility in the arrangements. I can see political arguments both for giving a bit of slack so that the EU definitely stays together and for the Eurozone saying that it's flexibility that got them into their current mess.
There was a 2% increase in favour of leaving after the referendum in Greece. It has not been updated since but it will be interesting to see what the changes will be once the populists start trumpeting about the possibility of the UK being ruled by Germany.
That means that England winning the World Cup in 1966 will all have been in vain ;)
Oh wait, no.
Despite all the 'omg the Germans are holding poor pplz hostage!', the Euro has massively lifted the economic prospects of tens if not hundreds of millions of people in a measly 10 or 15 years. Ask the Polish how bad the Euro has been for them, for example. The fact of the matter is - if you want to play, you have to abide by the rules. And I for one am glad that at least the Germans have the spine to say 'this is what we agreed on, no you're not special and we're not going to give you special treatment that we wouldn't give to many other countries that are in much worse shape' (like in Africa or Asia). Ffs, even some of those countries are less corrupt than Greece.
So, just because the Germans have gotten so much flak over the last few weeks, here's another sound: thank you, you guys do what others talk about but fail to uphold. (much like how the US is the only one with enough spine to actually go to war when it's necessary, but that's another topic...)
Actually, no. The Euro has been mostly negative for all but a few of the eurozone countries. Portugal is a good example of this, as it has its economy has regressed to pre-Euro levels and there is a growing consensus that the Euro will keep its net-negative effect for the forseable future.
Nobody wants to get out of the Euro because of the exit shock and uncertainty, not because they see anything positive from staying inside.
The Euro was built basically as a renamed Deutshe Mark and this has never been fixed. Right now it's clear that it never will. A strong currency is always bad for weaker economies, which is pretty evident in the Greek case.
I was a vehement believer in the concept of a united Europe. In some ways I still am, but only with regards to the base concepts of freedom of movement and freedom to work.
I am British and I have taken advantage of the freedom of movement. I have lived in several countries in the EU. I haven't returned to the UK since 2004. That freedom is incredible, and I hope it doesn't change.
The Euro though is a different matter. It is dividing the EU. It is creating the have's and have not's. It is being used as an economic nuclear weapon in order to force the will of one nations economic culture and expectations on to others.
Greece made a mistake back in 2010. At that point they should have embraced the Grexit. They should have crashed and taken all the German and French banks with them. Now the foreign banks have no risk in Greece. The ECB has bought them all out and the ECB and IMF hold the Greek nation by the balls.
If I was Greece I would implore Tsipras to follow Varoufakis' plan. It might not work, but it might just work, and I guarantee that another bail out is not going to change a damn thing, but move the current shit storm into a larger shit storm three years down the line.
Maybe it is, but the Greek problems started decades ago, years before the Euro.
Wrong. You can always print money if you are the sovereign.
Otherwise, Japan et al. would have long ramped up the printing presses.
"The Greek budget showed a primary surplus of 1.506 billion euros in the January-May period this year"
http://greece.greekreporter.com/2015/06/25/greek-budget-prim...
("Oh no! Evil Germans! Austerity!")
http://www.pragcap.com/greece
..especially the following line: - The EMU is a single currency system just like the USA is. The reason the USA works and the EMU doesn’t is because the USA has a system of rebalancing whereby poor states get more federal funding than wealthy states.
The Euro is flawed by design. Flow capitals works against the Euroarea. For instance:
The interest rate convenient for Germany is not the interest rate convenient for Spain. What do you think are the rates chosen by the Central European Bank? (clue: the ECB is in Frankfurt)
This shouldn't be more problem that the Fed rate affecting New York and Florida for instance, but there is not a common fiscal policy like in the States.
What happens is that capital in the banks of the north search bigger returns in hot economies (south countries) and create bubbles (Florida again?).
When the crisis arrive, we lend public money to (Greece for instance) so they can return the money to the (private) banks and, in a sleight of hand the fault is all of the lazy south Europeans.
Sure, physical location is paramount...
Let's count the members of the main decision-making group of the ECB, the Governing Council.
Two Germans. Twenty-three non-Germans.
"Let's count the members of the main decision-making group of the ECB, the Governing Council. Two Germans. Twenty-three non-Germans."
No, let's count hard data better.
Here, from a nobel prize: http://krugman.blogs.nytimes.com/2011/06/15/one-size-fits-on...
And here (a little dense maybe): "Overall, the concern that the ECB rate aligns more with the Taylor recommended rates of the core countries than with the peripheral countries appears to be supported by the data[..]" http://econ.berkeley.edu/sites/default/files/Srivangipuram.p...
Oh no wait, they didn't - and the amount of federal funding even New Mexico gets is dwarfed (per GDP) by the deficit the Greeks were trying to roll over - again. How many US states fail to collect 25 to 40% (depending on what you count) of taxes? If there were any, how long do you think other states would keep that state afloat?
If so, I don't see this ending well.
France and Italy didn't (at least not in public), because they would also at some point like to have access to taxpayer money from the Northern/Eastern EZ countries.
If you want the tap to keep running, you have to be able to compromise with the guys at the source and at least pretend to care about repaying it.
But we are talking about an economic union among states where the biggest state is quick to socialize banking losses among the poorer states, and makes it a morality play about "Those dirty Southerners".
That's a pattern that doesn't end well unless someone is smart enough to hit the partial reset button.
Stoneage lefties like to discuss, well, preach, all day long while spending other (EU) citizen's money. Greece will be saved when he and the anarcho-communist-syndicalist grufties start to modernize greece, e.g. do something again the blatant corruption, burocratie and tax evasion instead of hindering startups, business and innovative people. Imho.
Where have you been?
The policies imposed to Greece don't make more sense this time that they did the last time, and the last, and the last. But yes, we should all listen to the wise neoliberal policymakers, including the humble Herr Schäuble.
Schäuble, who presides over the public KfW-Bank, which hosts the Greek recovery fund, where 15bn EUR in Greek assets are supposed to end up.
I wonder which transactions will be 'lost' this time.
Varoufakis stated:
Therefore they are playing the long game, and for that to work, Greece needs to capitulate and exit the Euro. The Eurogroup has tried to make it impossible for Greece to stay in the Euro, but Greece won't bite.Once Greece do exit the Euro, the rest of Europe will see the incredible pain that is involved when your national banks have the rugs pulled out from underneath them.
Once France understands that they have to change or end up like Greece, they'll change. They'll have no choice.
It is an economic invasion at state level.
France will leave the Eurozone before that happens. There's already discontent with the EU and Euro in France, nationalists rising, etc...
And they're a strong enough economy that leaving the Euro wouldn't leave them with worthless francs...
So either they get their act together, which will be very hard due to mentality and political culture, or it will get much worse before it gets better. If France falls, it will be the end of the Euro. Germany is trying to fix these issues, in order to save the historical project of the European Union. Saying that Germany is just economically invading Greece is dishonest, there are huge amounts of German (and other country's) taxpayer money involved. Most people have written them off already.
[1] http://www.acting-man.com/?p=32993
> do something again the blatant corruption, burocratie and tax evasion
Corruption and tax evasion are an economic problem, not a moral one. People decide whether or not to pay taxes based on many factors - convenience, value, habit, punishment, etc... In a 'developing' economy, like Greece, if there's a history of not paying taxes, you need to provide incentive to pay taxes. Because if you all of a sudden raise taxes and enforce it hard, you don't get tax evasion - you get capital flight, which is much, much worse for the economy. And it's all too easy to move around in the Eurozone.
> Stoneage lefties like to discuss, well, preach, all day long while spending other (EU) citizen's money.
Greece did not spend other EU citizen's money. They sold bonds at the market rate to banks and investors that BOUGHT them, and their debt spending was entirely sustainable up to the financial crisis (not sure if you've heard about it) which rocked the whole world. The troika bailed out those banks, with the vast majority of the "EU citizens' money" going to those banks and only a fraction of this money ever made its way to Greece.
> instead of hindering startups, business and innovative people
You know what hinders startups, business, and innovative people? A repressive tax regime. Like the one the troika imposed on Greece...
Not true. The Greek state has traditionally been seen as an enemy of the citizen and something to take advantage of. This is due to the muchtar system established hundreds of years ago by the Osman empire, establishing clientilism. E.g. Estonia is much better on all these metrics, but income levels are similar or below Greece.
> Greece did not spend other EU citizen's money
They took advantage of having access to "Germany's credit card", with interest rates dropping from 25% to 5% post Drachme. Then they proceeded to consume that money. Even in 2014, the public and private consumption relative to net national income was at 114% [1], a completely unsustainable level. If Europe wasn't financing elevated standards of living for Greece before the crisis, they certainly did in the last few years.
[1] http://www.cesifo-group.de/ifoHome/publications/docbase/deta...
> You know what hinders startups, business, and innovative people? A repressive tax regime.
New York and California have comparatively high tax rates, enormous housing costs and expensive wages. They seem to be doing just fine. Also see Germany, Austria, Switzerland and all of the Scandinavian countries.
That's why I'm bombarded with ads that brag about NY's startup program that allows you to operate for 10 years with NO taxes?
http://startup.ny.gov/ http://esd.ny.gov/BusinessPrograms/Taxes_Incentives.html
Anyhow, like I said - businesses and people will pay taxes if they see value - beyond NY's tax free startup program, those are the 2 most populous US states (access to labour). That is a competitive advantage. There's also easier access to financial capital - another advantage.
People don't necessarily go to where the taxes are the cheapest - they go to where there's the best combination of access to labour, capital, customers, taxes, etc... (or they stay put if they think their current location is 'good enough')
Think of human behaviour as a maximization curve - a constant attempt to attain maximum "utility" of our time.
> E.g. Estonia is much better on all these metrics, but income levels are similar or below Greece.
Estonia, business-wise, seems to have quite a few things going for it.
http://www.lowtax.net/features/Estonias-Advantages-571583.ht...
Just reiterates what I'm saying - paying taxes is based on a number of factors, none of them morality (not on a large scale anyway).
Edit - if Greece wants to collect more tax money, they need to provide a good reason for people to pay tax money. Given that the world is a big place and anyone with enough money can move quite easily, it needs to be a more compelling reason than the fear of punishment.
I agree on this one. I would not want to give a corrupt government my money. But then again, this is due to ethics - if not the taxpayer's, then the government's. You will find the topic of corruption mentioned in the "Ethics" section in this world bank report. [1, page 11]
[1] http://www1.worldbank.org/publicsector/civilservice/rsGerman...
Most people don't decide to pay or not pay taxes based on perception of corruption, but rather what they perceive they're receiving.
In Canada, we generally are content to pay taxes because we get such benefits as free health care, cheap medicine, free primary and secondary schooling, subsidized post-secondary schooling, and our cities are generally quite clean with good infrastructure, which is a good accomplishment considering our population density is very low.
My wife is from a third world country where almost no one pays taxes. Then again, what do they get? Infrastructure is non-existent (roads are all gravel or dirt, power is on about 50% of the time, no potable running water, police are non-existent, etc...). This is the conundrum of development economics - how do you go from this stage of development, to a new stage where people pay taxes so the government can provide services? With no services people will avoid taxes, with no tax money the government cannot provide services. The answer of course, is that it's difficult and takes time.
Corruption is an easier problem to solve, but difficult to implement. To get civil servants to stop accepting bribes you need to pay them enough that losing their pay is actually a punishment, or punish them enough that the threat of jail time counters the benefit of accepting bribes (or ideally, a bit of both).
Anyhow, neither problem can be solved in the amount of time that the troika has expected Greece to solve them - and they ARE economic problems, not moral ones.
These places all have other things going for them, though.
Why don't you move to a small town in Nebraska and pay all the Federal and State taxes as well as a 20% income tax, 10% property tax, 20% sales tax, etc. Oh, because you want something for your tax money? Hmmmm.
Please don't do that—it only makes the thread worse, and adds nothing of substance to your comment.
now, it's a set up. that's the premise of his statements in this article. you disagree or character assassinate, either or, but you don't propose an alternative except the tired lines about Greeks spending other peoples money. Go. learn something. come back when you know something about international finance, the Eurogroup, the ECB, the last 5 years of austerity, the last 2 Greek governments, the German Sub deal (anecdotal, not endemic, but representative of the nature of such transactions) and the macro economics of how +-5 million people shall fare over the next 20-50 years. You come across as a jerk, mean-spirited, and ignorant. Your comment was troll bait and more insulting than any of the articles rhetoric. You use the term "leftie" to describe folks of any political persuasion who make take umbrage at the blatant mafia structure at the core of the euro (currency) laid bare over the last weeks. Please DO go study a bit before you show your face around here again. Thanks Aaron
Greece is in a situation where their economy desperately needs any kind of stimulus. Instead, the rest of Europe decides to make an example of them by forcing them to implement austerity measures that target the masses (and not the tax-evading elite) because that is the fastest way to collect more taxes and cut public spending in a short timeframe (VAT increases, pension cuts). This is the total opposite of what Europe was doing when they were hit by the crisis.
Obviously, the European leadership wasn't happy when someone who understood this and was willing to speak up about it came into power in Greece. Luckily, the media was happy as ever to make this a human interest story and focused on Varoufakis' lifestyle instead of actually looking at what they were trying to achieve and how Greece was in an impossible situation. They've been in power for about 6 months now and are somehow responsible for all the tax evasion, public spending mistakes and, really, anything else Greece gets blamed for.
What did you find particularly "stoneage" in his ideas?
It's not the first time I notice criticism (a rather empty one) of "left ideas" based on "being old". Isn't it a little non-sensical, to criticize ideas for being old?
But I sure can appreciate him speaking English rather than some bureaucratic newspeak that is the norm among elected (and non-elected) officials.
And I can appreciate that he deeply cares for his people over holding on to his government job.
I will take occasional hyperboles over content-free mambo-jumbo any time.
"When disagreeing, please reply to the argument instead of calling names."
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/item?id=9879815
While I do think debt relief is a necessary tool, I also believe that we should hear much more about what the country will do to improve productivity and work harder.
By the way, Germany is not exactly a stranger to corruption (compared to other northern states in Europe):
https://en.wikipedia.org/wiki/Corruption_in_Germany
Of course is better than blowing up a giant credit bubble and then popping it when it goes wrong, but it's not very nice.
> debt spent mostly on buying military equipment and other unnecessary stuff FROM GERMANY
I hope you realise how ludicrous this sounds. Granting them victim status because they just couldn't resist those submarines and tanks despite not being able to pay... If you are looking for large unnecessary contributors for Greek debt, why don't you start at the $15bn Olympic Games (no doubt they were forced on Greeks by the German manufacturing firms, too).
> Germany is not exactly a stranger to corruption
Sometimes orders of magnitude matters. It does matter whether the rate of tax payment non-compliance is 5% or 50%, even if it does not fit the narrative of moral equivalence.
They still have all of these things. Plus 25% unemployment (50% for young people), and debt equal to 180% GDP (soon to be 200%).
It takes two to tango. I was not trying to grant them victim status, I was just pointing out that German (and other EU businesses/banks) are not exactly blameless (ever heard of predatory lending?)
According to Wikipedia: https://en.wikipedia.org/wiki/Retirement
65% of Greeks age 55-59 are working, while only 61% of Germans are. More Germans age 60-64 are working than Greeks, but slightly more Greeks age up to 69 are working.> I also believe that we should hear much more about what the country will do to improve productivity and work harder.
Yes, when will the Germans learn to work as hard as citizens of the USA?
Many of the suggested improvements are objectively sound, e.g. property taxes, tax collection in general, normalized VAT, reducing government corruption and red-tape, removing various monopolies, etc.
Greece is the most corrupt country in the EU[1] and also one of the worst for doing business in general[2]. It also has one of the lowest levels of productivity.
It's been ~5 years since the first bailout, yet Greece haven't made much progress. Many of the suggested improvements require a simple pen stroke by the parliament. No wonder Germans get tired bankrolling all of Greece.
[1] http://www.ekathimerini.com/155963/article/ekathimerini/news...
[2] http://www.doingbusiness.org/data/exploreeconomies/greece#st...
And here is the kicker; Those debts are now held by the ECB, which, is not supposed to be a lender of last resort, but now has become one by default. The corporate banks are now safe and have extricated themselves from the risky position they found themselves in 5 years ago.
The ECB doesn't care either way. Schauble secretly welcomes a Grexit, because without external support Greece can't move to a new Drachma. The logistics are just impossible by themselves. Schauble wants the rest of the Eurozone to witness what will happen when you exit the Euro without support (it won't be pretty).
Hi there France btw. You still like you early retirement, large civil service employment, string unions and social state? Well, you're number one on their hit list.
A bit like nuking Japan was the first shot in US's Cold War against USSR. (But fortunately not as immediately violent.)
I don't mean to say that this is any kind of tinderbox situation. But it is crystal clear to me that it's at the very least a first-world country being forced by a hegemon into neo-colonial vassal-hood/debt bondage, something that is quite shocking to see, especially when there are no standing armies in sight.
And the violence is real, in that Greece is suffering a humanitarian crisis that will only deepen. Actual people will die prematurely, and others' lives will be wrecked, for Schaeuble's example to pay off, as much as newspapers like to abstract this fact behind phrases like "deep pension cuts".
Let me cite from another economist, Hans-Werner Sinn:
"At that time (late March 2010), French banks had a 53 billion euro exposure to private and public instances in Greece, the German ones a 33-billion euro exposure, the US 10 billion, and the UK 9 billion. [....] At the end of March 2015, the sum of current account deficits accumulated since early 2008 was 108 billion euros, equivalent to one-third of the multilateral and intergovernmental loans provided to Greece, which amounted to 325 billion euros. Two-thirds of the public credit was thus apparently used to finance capital flight and one-third to finance the current account deficit – ultimately the living standard that could no longer be financed with the income of the Greek citizenry. Thus, over the entire crisis period it can hardly be argued that barely 10 percent of the public credit benefited the Greek people, as Finance Minister Varoufakis does. Apart from the above, Greek debtors benefited from the fact that the international community helped them meet their obligations towards foreign creditors, and also made it possible for them to bring their wealth out of the country."
Hi there, I'm from France and I would love to see all of the above gone. Any idea when this will happen?
That's the hardest part of this whole issue, everyone say something different. Greeks are ..., Germans are ..., Banks are ...
As a non educated (in that matter), it's impossible to understand anything without the feeling you end up as a fanboy for some party.
Well, if you care what the outcome is and you decide you want to see one party prevail, that doesn't turn you into a fanboy.
Because maybe there really are good guys and bad guys, or at least massively powerful overdogs who will crush entire underdog nations for realpolitikal advantage.
Look, Greece is fucked. Tsipras failed. Varoufakis failed. I like them, but they couldn't outwit Germany. The screwed up. They'll be remembered for that, just as Merkel will be remembered for destroying the founding principles of the EU.
I'd love to have a real map of the economic relationships between banks, investors, governments.
Those have been proposed by Syriza itself, but that hardly matters because the disagreement is not actually about economic policy, at all.
The salient features of the Eurogroup deal are things like: "give us $50 billion of your airports, bridges, government land, tourist attractions, etc, but at today's Depression-era prices". Shock doctrine stuff.
And: "take far more severe austerity, for the chance to negotiate another bailout you need to pay us back for the previous bailout, without debt relief being on the table, despite your population rejecting this option in the very recent past, despite the IMF concluding the current debt load is clearly massively unsustainable". Make that sound reasonable, please.
> It's been ~5 years since the first bailout, yet Greece haven't made much progress.
Could it be that the collapse of 25% of Greek GDP under the last 5 years of austerity demonstrates that more austerity isn't the answer? Some economist wise cracked that prescribing austerity for a country in a depression† is like trying to cure a sick patient with regular beatings.
† the worst depression of a modern state since the 1930s, incidentally.
> No wonder Germans get tired bankrolling all of Greece.
Hah, those generous German tax-payers. But wait, aren't they really bailing out German and French banks, at least indirectly, after the ECB gobbled up all that toxic peripheral debt that is was the predictable outcome of wild trade imbalances in an ill-thought-out monetary union? What fraction of Greek bailout money was just recycled into paying back the IMF and ECB? Do you know?
Do you know how loan sharks operate?
Here's an alternate perspective to jar you out of your slumber:
https://foreignpolicy.com/2015/02/20/its-time-to-kick-german...
"The European Union as we have known it ended over the weekend. That EU project was all about the gradual convergence of equal nations into an “ever closer union”. That’s finished now."
http://www.irishtimes.com/opinion/tormenting-greece-is-about...
I understand his feelings, I don't understand his reasoning.
I understand his feelings because there is a lot of unfairness going on: big economies (e.g.: France, Italy) are treated with more leniency and tolerance than small economies (e.g.: Portugal, Spain), simply because they're far more important to EU. It is humiliating and Greece should feel it even worse.
I don't understand his reasoning because for the indebted countries there are only 2 objective choices: it is the EU way or the highway. The EU simply can't accept that Greek voters just decide to quit the treatment but remain in the Eurozone because the voters of Portugal, Spain, Italy and other countries would do just the same. It would have been the end of Eurozone.
Varoufakis and Syriza should have started a Grexit strategy from the early beginning. They didn't, so Germany saw they were bluffing and won the game.
Greece lost because Varoufakis didn't understand what was at stake.