Greece Vs EU

[NoLogo]

All the lent money is still a huge subsidy, because it is lent to conditions that are way under the marked-rate. They don’t need state investment to fix their economy. That is completely wrong analysis about their problems.
I have asked the same question a billion times and rarely is anyone ever willing to give an honest answer to this: Why didn’t Greece just default, drop out of the euro-zone and issue their own currency?

Because that would have cost their lenders a lot of money and the fear was there that after the financial crisis the financial insinuations would not be able to bare such a loss. The EU also tried to prevent a knock on effect with more than Greece dropping out, Protugal, Ireland and even Italy and Spain were all likely candidates to follow if that would have happened. That's the point I'm trying to make here, there is no defaulting for Greece or their own currency as long as other financial interests are bound to Greece staying in the Eurozone and not defaulting on their debts.

And yes they need state investment to fix their economy because they are in deep recession and no private investors are really willing to invest their money in a country that still might go completely to shit. They also haven't gotten much left to privatize anymore and just slimming down their overblown state doesn't help much either, you don't improve an economy by making more people unemployed.

So in short Greece wasn't allowed to do the only sensible thing because of investor interests being put before the interests of Greece and the EU being afraid of a knock-on effect.

 

[PedroMendez]

I know why the rest of the Euro-zone wanted to keep them in, but that was not my question. Why did Greece accept these conditions? Greece didn’t need to ask anyone for permission to default. Nobody could and would have stopped them.

 

[Stanley Road]

Greece isn't economically significant enough to bring down the Euro.

Are you sure about that? if i owned all their debt and they disappeared then so would my money

 

[Stanley Road]

Well that's no possible. European and American banks have too much at stake with them. Bailing out Greece is essentially bailing out the banks who would lose their money if Greece were to become unable to service the interest they have to pay all their lenders.

That's correct plus they are a nice little earner. Borrow 5 and pay back 7

 

[711]

I know why the rest of the Euro-zone wanted to keep them in, but that was not my question. Why did Greece accept these conditions? Greece didn’t need to ask anyone for permission to default. Nobody could and would have stopped them.

Because their new currency would be worthless outside Greece, so they would be unable to pay for any imported goods: oil, food, parts for their transport industries, machinery, medicines, fertiliser, the lot. And after defaulting no one would lend them anything to buy these things. A more self-sufficient country might be less affected, but for Greece it would mean abject poverty, maybe even starvation.

 

[Abizzz]

Greece isn't economically significant enough to bring down the Euro.

Are you sure about that? if i owned all their debt and they disappeared then so would my money

Yeah i'm sure about that. Greece's population is 3.2% of the entire € population and their contribution to the €-Area gdp is just above 2%.

I neither want nor support them leaving the € or EU, but it most definitely wouldn't be the end of either.

 

[Stanley Road]

I know why the rest of the Euro-zone wanted to keep them in, but that was not my question. Why did Greece accept these conditions? Greece didn’t need to ask anyone for permission to default. Nobody could and would have stopped them.

Well Tsipras stands behind "I didn't have a mandate to take Greece out of the Eurozone". That's politician speak for "I want to remain in power".

I believe, and the greeks I have spoken to also believe, that he folded his best hand when he canned Yannis. If he really was planning to run a parallel currency then that could have been the answer. Tsipras did a lot of cock waving whilst telling people what a lefty he was and how he would shake the world, when in reality he sits in the center whilst trying to enforce neoliberal politics that every country in the EU does

 

[Stanley Road]

Yeah i'm sure about that. Greece's population is 3.2% of the entire € population and their contribution to the €-Area gdp is just above 2%.

I neither want nor support them leaving the € or EU, but it most definitely wouldn't be the end of either.

It's the debt that's relevant not your figures

 

[Abizzz]

It's the debt that's relevant not your figures

Not to the currency as such. Go figure.

 

[PedroMendez]

Because their new currency would be worthless outside Greece, so they would be unable to pay for any imported goods: oil, food, parts for their transport industries, machinery, medicines, fertiliser, the lot. And after defaulting no one would lend them anything to buy these things. A more self-sufficient country might be less affected, but for Greece it would mean abject poverty, maybe even starvation.

Bingo. They still need to make new debt to fund their expanses and in a free market nobody would be crazy enough to give them a single cent. If they’d default and drop out of the Euro-zone, nobody would subsidies them until they carry out a substantial reform agenda and their politicians really don’t want to do that, because it would create additional short-term pain. They rather accept the current situation, which is horrible for the Greek people, than do the necessary step forward.

They wouldn’t starve but it would be a scary reality check for Greece. They have almost no competitive industry (except tourism) and their standard of living has to adjust to this reality. They would end up with the GDP/cap that they had in the late 1960s. It takes balls for a politician to tell his countrymen: “hey…the last decades of economic development were one big failure, because most of the investment was bad….we really dropped the ball and now we have to restart from a much lower level….”

Even Syriza was too scared to do that. At least their leadership. The only guy who had the balls to make this necessary step (Varoufakis) was sacked. He would have blamed the wrong actors, but he would have done the right thing: default on the debt and get on with it.
With economic reforms it is a bit like with a phobias. The period of anxiety before doing it is what really cripples you, not the act itself. The second you actually start a credible reform process, the economic takes one more hit, but starts to recover shortly after.

 

[Will Absolute]

Bingo. They still need to make new debt to fund their expanses and in a free market nobody would be crazy enough to give them a single cent. If they’d default and drop out of the Euro-zone, nobody would subsidies them until they carry out a substantial reform agenda and their politicians really don’t want to do that, because it would create additional short-term pain. They rather accept the current situation, which is horrible for the Greek people, than do the necessary step forward.

They wouldn’t starve but it would be a scary reality check for Greece. They have almost no competitive industry (except tourism) and their standard of living has to adjust to this reality. They would end up with the GDP/cap that they had in the late 1960s. It takes balls for a politician to tell his countrymen: “hey…the last decades of economic development were one big failure, because most of the investment was bad….we really dropped the ball and now we have to restart from a much lower level….”

Even Syriza was too scared to do that. At least their leadership. The only guy who had the balls to make this necessary step (Varoufakis) was sacked. He would have blamed the wrong actors, but he would have done the right thing: default on the debt and get on with it.
With economic reforms it is a bit like with a phobias. The period of anxiety before doing it is what really cripples you, not the act itself. The second you actually start a credible reform process, the economic takes one more hit, but starts to recover shortly after.

I've forgotten the details of Greece's financial circumstances, but I thought their current account balance was okay when debt payments were factored out. If they were to default, wouldn't they be able to pay their way on some kind of cash basis? Or is that naive?

 

[Stanley Road]

I've forgotten the details of Greece's financial circumstances, but I thought their current account balance was okay when debt payments were factored out. If they were to default, wouldn't they be able to pay their way on some kind of cash basis? Or is that naive?

What would they pay with?

Other countries have defaulted and done much better afterwards but the initial carnage is immense, it seems to last a short time though, unlike the 8 years or so that Greece have been under the cosh. I'm not even sure what Greece or the EU hope to achieve with this merry go round

 

[Will Absolute]

What would they pay with?

Other countries have defaulted and done much better afterwards but the initial carnage is immense, it seems to last a short time though, unlike the 8 years or so that Greece have been under the cosh. I'm not even sure what Greece or the EU hope to achieve with this merry go round

The EU's approach to many issues reminds me of the joke about a guy who falls from the top of a skyscraper. All the way down, as he passes each successive floor, people standing at the windows hear him say: "All right so far, all right so far!"

 

[Stanley Road]

The EU's approach to many issues reminds me of the joke about a guy who falls from the top of a skyscraper. All the way down, as he passes each successive floor, people standing at the windows hear him say: "All right so far, all right so far!"

lol

Pretty much

Or my bosses approach, ignore it till it goes away.

 

[PedroMendez]

I've forgotten the details of Greece's financial circumstances, but I thought their current account balance was okay when debt payments were factored out. If they were to default, wouldn't they be able to pay their way on some kind of cash basis? Or is that naive?

They don't eve achieve a primary surplus on paper and I don't trust their calculations for a second. So the reality is that they probably still run a ~2% deficit. If they leave the Euro, their currency would plummet into oblivion and importing anything would become difficult. Except tourism, there is little industry that would bring foreign currency into the country. Their current economy is just not productive enough to allow a standard of living similar to western Europe. All the investment based on debt created the illusion of wealth without actually doing anything productive.
Defaulting alone isn't the solution. Defaulting + creating efficient and transparent institutions would help - like it did in many countries -, but they don't want to do that.

Your joke is sadly quite accurate. There is no long term plan. Or any plan. Or any understanding. I can just talk about European and German politicians. Many people in the economic/finance ministries (up to the PUS) know fairly well, that all this stuff is complete and utter bullshit, but once you start to talk to elected officials, you enter a different realm, where logic doesn't exist. Compared to them, RAWK is the beacon of reason.

 

[Stanley Road]

Budget deficit was 7.2 % last year

 

[PedroMendez]

Budget deficit was 7.2 % last year

But that must be the number after servicing debt, right?

 

[Adisa]

I don't agree that the EU must keep Greece in the Eurozone at all cost, to prevent a domino effect. Greece is a basket case. The idea that the Euro will be stronger with Greece in it is fanciful.
I think markets are a lot more mature to recognise that Greece leaving is the best solution.

 

[Stanley Road]

But that must be the number after servicing debt, right?

Dunno but how does one want to polish a turd to make it look better

 

[Stanley Road]

I don't agree that the EU must keep Greece in the Eurozone at all cost, to prevent a domino effect. Greece is a basket case. The idea that the Euro will be stronger with Greece in it is fanciful.
I think markets are a lot more mature to recognise that Greece leaving is the best solution.

Pretty much but they will keep them in at all costs ad they cant kick them out

 

[Don't Kill Bill]

It is going to get very complicated bailing Greece out further without writing off debt. The IMF can't lend money unless it believes that the country it bails out can pay the money back after the initial restructuring. Its report about what happened last time was damning about the EU stance.

In short the IMF should never have lent Greece any money given the EU's decision on debt forgiveness. That is why Greece remains in severe economic difficulty. The IMF does not believe that it can service the debt it has and I think politically the EU can't lend Greece more money without the IMF being a party to the deal.

So there will either be another fudge where we all pretend the Greeks can make further reforms which will lead to them being able to service their existing debt plus the next bail out, IE a great big fat and useless lie to be repeated again later with even bigger numbers.

Or the EU will have to write off vast amounts of Greek debt to a level that it becomes serviceable again.

Or it leaves the Euro and the whole thing moves on to one of the others PIGS because that is why this whole thing went the way it did a fear of contagion in the EU banks.

So are the EU banks stronger now than the last time, are the share values strong enough that a run on them is unthinkable because if you know what happens when there is even a hint of a bank going down? Are the countries inside the Euro in less need of raising debt now than they were?

 

[GloryHunter07]

I know why the rest of the Euro-zone wanted to keep them in, but that was not my question. Why did Greece accept these conditions? Greece didn’t need to ask anyone for permission to default. Nobody could and would have stopped them.

Default isn't necessarily a great solution for the borrower. Not that the current situation is particularly rosy either..

 

[Stanley Road]

Default isn't necessarily a great solution for the borrower. Not that the current situation is particularly rosy either..

Its the only solution in this case

 

[Stanley Road]

It is going to get very complicated bailing Greece out further without writing off debt. The IMF can't lend money unless it believes that the country it bails out can pay the money back after the initial restructuring. Its report about what happened last time was damning about the EU stance.

In short the IMF should never have lent Greece any money given the EU's decision on debt forgiveness. That is why Greece remains in severe economic difficulty. The IMF does not believe that it can service the debt it has and I think politically the EU can't lend Greece more money without the IMF being a party to the deal.

So there will either be another fudge where we all pretend the Greeks can make further reforms which will lead to them being able to service their existing debt plus the next bail out, IE a great big fat and useless lie to be repeated again later with even bigger numbers.

Or the EU will have to write off vast amounts of Greek debt to a level that it becomes serviceable again.

Or it leaves the Euro and the whole thing moves on to one of the others PIGS because that is why this whole thing went the way it did a fear of contagion in the EU banks.

So are the EU banks stronger now than the last time, are the share values strong enough that a run on them is unthinkable because if you know what happens when there is even a hint of a bank going down? Are the countries inside the Euro in less need of raising debt now than they were?

Sure there will be another fudge but whats the point? Every plan or project has a start / action / end result, except this one. Problem is the EU has no idea when faced with testing issues.

Without the option to devalue and no chance of achieving internal devalue, there seems little option but default. I feel the greeks should be told their debt will be forgiven so long as they leave the euro on a voluntary basis.

What happens after that depends on how it goes with a new currency in a few years.

 

[Santi_Mesut_Alexis_87]

Sickening. Do we need more proofs to say austerity is killing Europe?


https://www.theguardian.com/world/2017/jan/01/patients-dying-greece-public-health-meltdown

 

[Regulus Arcturus Black]

Sickening. Do we need more proofs to say austerity is killing Europe?


https://www.theguardian.com/world/2017/jan/01/patients-dying-greece-public-health-meltdown

Greece is sadly what is killing Greece, not austerity.

They don't pay taxes and have no inclination to ever start doing so.

No taxes = fecked public services.

 

[devilish]

I don't agree that the EU must keep Greece in the Eurozone at all cost, to prevent a domino effect. Greece is a basket case. The idea that the Euro will be stronger with Greece in it is fanciful.
I think markets are a lot more mature to recognise that Greece leaving is the best solution.

If you ask me Greece should be out of the eurozone and the eu. Their irresponsible spending risk crippling an entire continent

 

[devilish]

Greece is sadly what is killing Greece, not austerity.

They don't pay taxes and have no inclination to ever start doing so.

No taxes = fecked public services.

Exactly

 

[UweBein]

Greece is sadly what is killing Greece, not austerity.

They don't pay taxes and have no inclination to ever start doing so.

No taxes = fecked public services.

Unfortunately, that's probably correct.

 

[Santi_Mesut_Alexis_87]

Greece is sadly what is killing Greece, not austerity.

They don't pay taxes and have no inclination to ever start doing so.

No taxes = fecked public services.

This is one thing that must be fixed. Another thing is the lack of medical personnel due to austerity cuts, as the article says.

 

[sun_tzu]

This is one thing that must be fixed. Another thing is the lack of medical personnel due to austerity cuts, as the article says.

How do you fix it though?
https://en.m.wikipedia.org/wiki/Tax_evasion_and_corruption_in_Greece
It's endemic... seems culturally ingrained
I honestly don't know how that's going to change and certainly not anytime soon

 

[Sweet Square]

Greece is sadly what is killing Greece, not austerity.

They don't pay taxes and have no inclination to ever start doing so.

No taxes = fecked public services.

Former Greence finance minster on Tax evasion.

(At the 40 minute mark)

 

[Mozza]

Not paying your taxes is forgiven for the rich (it's just tax planning) but punished for the poor

 

[devilish]

Former Greence finance minster on Tax evasion.

(At the 40 minute mark)

Do you come from a Southern European country?

I come from one and I assure you that he's speaking bollocks. If VAT is reduced to 2% most would still not pay it. They simply hate paying taxes

 

[sun_tzu]

Not paying your taxes is forgiven for the rich (it's just tax planning) but punished for the poor

Avoidence / evasion

 

[Stanley Road]

I imagine the average greek pays more tax than google and the like pay. Its not just tax avoidance that has go them in the shit, just look at their ill fated railway that had more staff than passengers. I doubt collecting every penny in tax would make any difference to the debt

 

[Pogue Mahone]

Not paying your taxes is forgiven for the rich (it's just tax planning) but punished for the poor

Yet the vast majority of tax monies in any exchequer come from "the rich". In Ireland you have 80% of the income from tax coming from 20% of the population. I imagine the stats are similar in Greece. Seems harsh that people who have given their country so much money over the years should be demonised for attempting to try and keep a little more of the money they've earned, providing they adhere to whatever rules/regs the government have in place.

 

[Stanley Road]

Sickening. Do we need more proofs to say austerity is killing Europe?


https://www.theguardian.com/world/2017/jan/01/patients-dying-greece-public-health-meltdown

Austerity is the only tool the eurzone has as they have no currency to devalue then they must devalue from within, drive out costs and reduce wages to make products competitive, its the way of the neoliberalist disease. Then they can offer those products to other eu members that also have no money.

 

[sun_tzu]

Yet the vast majority of tax monies in any exchequer come from "the rich". In Ireland you have 80% of the income from tax coming from 20% of the population. I imagine the stats are similar in Greece. Seems harsh that people who have given their country so much money over the years should be demonised for attempting to try and keep a little more of the money they've earned, providing they adhere to whatever rules/regs the government have in place.

 

[devilish]

I imagine the average greek pays more tax than google and the like pay. Its not just tax avoidance that has go them in the shit, just look at their ill fated railway that had more staff than passengers. I doubt collecting every penny in tax would make any difference to the debt

That's strange considering that Brexit Britain's main plan is to turn the country into a tax haven and make a success out of it