Greece, what the fuck?

[Loren Pechtel]

The Greeks most certainly have not done everything asked. They aren't fixing the fundamental flaws to their system at all.

They had some weaknesses that were exposed when the bankers threw the world into a huge recession, not fundamental flaws.

They're doing nothing about the rampant tax evasion.

They're doing nothing about the unsustainable retirement age. (This won't help in the short run but down the road it will make things work better.)

They're doing basically nothing about the rampant corruption.

 

[Loren Pechtel]

They've played it the Troika's way for five years, and they're worse off for it. The consequences may well turn out to be more severe than they realize, but they're done with the Troika's game. So if the EU doesn't like it, they can kick Greece out, and, judging from the news, thats where things are headed. And yes, failed state status or a military or RW coup are among the ugly possibilities. I don't know why you seem to think you're the only one who realizes this.

Of course they are. That was inevitable--they were running their economy on borrowed money. That couldn't be sustained, the attempt was to wean them off it gently rather than make them go cold turkey.

 

[Loren Pechtel]

Comparing government to a household is not very helpful.

It's accurate in this case, although it doesn't really represent what was happening.

It's more like:

You make $25k/yr. You have been borrowing $25k/yr and living at the $50k/yr level.

Your banker says this can't be sustained.

You keep right on spending at $50k/yr until the day the loan officer says "no more" and you find yourself unable to meet your obligations.

 

[ksen]

Comparing government to a household is not very helpful.

It's accurate in this case, although it doesn't really represent what was happening.

It's more like:

You make $25k/yr. You have been borrowing $25k/yr and living at the $50k/yr level.

Your banker says this can't be sustained.

You keep right on spending at $50k/yr until the day the loan officer says "no more" and you find yourself unable to meet your obligations.

Actually, it's nothing like that ... at all.

 

[Horatio Parker]

They've played it the Troika's way for five years, and they're worse off for it. The consequences may well turn out to be more severe than they realize, but they're done with the Troika's game. So if the EU doesn't like it, they can kick Greece out, and, judging from the news, thats where things are headed. And yes, failed state status or a military or RW coup are among the ugly possibilities. I don't know why you seem to think you're the only one who realizes this.

Of course they are. That was inevitable--they were running their economy on borrowed money. That couldn't be sustained, the attempt was to wean them off it gently rather than make them go cold turkey.

Weaning? What weaning?

They're either going to restructure the debt or exit and default. Even the IMF says the debt can't be paid back.

NPR's story today was a piece of work. Essentially, it said:

1. Greeks refuse to compromise
2. An Irish official stated that the debt must be restructured.
3. The Germans likely won't agree to that.

Wtf?

 

[untermensche]

They had some weaknesses that were exposed when the bankers threw the world into a huge recession, not fundamental flaws.

They're doing nothing about the rampant tax evasion.

Not true.

Greece struggles to address its tax evasion problem

http://www.theguardian.com/world/2015/feb/24/greece-collecting-revenue-tax-evasion

And the US has a massive corporate tax evasion problem which the people who most want to see the Greeks suffer don't care about at all.

They're doing nothing about the unsustainable retirement age. (This won't help in the short run but down the road it will make things work better.)

Greece agrees to raise retirement age, discusses further cuts

http://rt.com/business/greece-retirement-troika-cuts-620/

This was in 2012. You are really keeping up.

They're doing basically nothing about the rampant corruption.

What corruption are you talking about?

They can't possibly be as corrupt as the US where big business basically owns the government.

You are talking out of your behind.

 

[thentian]

From http://www.business-anti-corruption.com/country-profiles/europe-central-asia/greece/snapshot.aspx.

"Corruption severely affects Greece's business environment and has completely distorted market competitiveness"

Add to this a large and inefficient bureaucracy, making it difficult to get necessary licences and permits.

Then add frequent talk of nationalization.

What do you get?

A country that is tempting to invest in?

 

[Togo]

The policy being rejected was a series of specific austerity measures designed to increase the net tax take of the Greek government, so more money would be available for repaying foreign creditors. In the event of a Greek default, those payments are no longer made (that's what a default means), which means Greece is left with the fiscal surplus they've been running for several years now, and can get their economy back on track.

Basically it's the same pattern as any other debt default - as the creditors are unable to make arrangements to delay or haircut their payments, the borrower does that for them.

First Greece does not have surpluses now

They're running a budget surplus for this year, just as they have for the previous few years.

Second, defaulting on the debt does not make it go away.

No, but it does stop the interest payments, which is all that is required for Greece to be running a surplus and rebuilding their economy.

Third, without the ECB supplying liquidity to Greece its banks run out of cash in days.

That is a serious problem. It's also a straightforward violation of the Eurozone treaty, which may make others more reluctant to join. The ability to print money in these situations is vital, and the fact that many Eurozone members don't control their own currency is subject to a great deal of regulation.

None of the above seems to add up to less "austerity" that I can see.

If the economy is running a surplus, which it is, and the debt repayments have stopped, which it looks like they will, then there is no need for austerity.

Austerity is not a measure to reform government or improve growth. It's a promise to extract more money from the economy to give to creditors. The austerity package the EU was proposing was to triple the existing surplus. That's not going to happen now.

It's possible you're confusing 'austerity' with 'reducing spending'. The austerity package proposed was principally composed of tax rises over to increase the existing surplus in the economy.

 

[dismal]

WTF?

Are you saying that Greece after the financial crisis is able to sustain the same level of debt that they were able to before the crisis?

I am saying that they have lower revenues after the crisis and therefore their ability to sustain a debt is similarly lowered. That means that what constituted a sustainable debt level in the past isn't relevant to what constitutes a sustainable debt level today. Why do you feel that's wrong?

When it comes to borrowing, governments and households are very different things. Nation states do not have to plan for eventual retirement or death; they are immortal entities whose long term income prospects (even for poor nations) are excellent - even poor countries tend to get wealthier over the long term.

The Greek situation has more in common with a bank run than it does with a household debt default. The banks don't have enough money to give all their depositors their money today. This is not a problem, as long as the depositors don't all simultaneously lose confidence in the bank's ability to ever give them their money.

In the event of a bank run, the solution is for the central bank, or other entities set up for the purpose, to lend lots of money (often on very generous terms) to prop up the bank until confidence returns.

The troika are the central bank in this analogy (and in the case of the ECB, quite literally). They can lend on generous terms (by which I mean long term loans at reasonable rates of interest, rather than the more usual - for nation states - short term loans at lower rates), and keep Greece afloat; or they can refuse to do so, and allow Greece to collapse, causing massive and needless hardship - which is basically what they have done.

This stupid and short sighted policy from the troika is basically the 'writ large' result of the cognitive error that sees national economies as sufficiently similar to household budgets as to be treated in the same way. It is a very, very stupid and harmful analogy - but it is very popular, because most people are morons, and have no understanding of economics beyond budgeting for their own households.

"I would understand this, if only it were far more simple than it really is", they cry. "So I shall pretend it's simple, and clamour for simple solutions, based on simple mindedness!"

If you can't see how that would lead to disaster, you are not alone.

A gripping narrative but not one that is particularly consistent with reality.

Even if one were to take as a given that the path to prosperity is for the central bank to whip up liquidity to support massive sustained government borrowing, you are still missing the key point I have made a dozen plus times:

The ECB is a central bank, but it is not the central bank of Greece. Its job is not whip up liquidity so the Euro's most irresponsible members can party on irresponsibly. It has a duty to maintain a strong Euro and to preserve the currency union on behalf of all its members.

It makes roughly 2% more sense to say it's the job of the ECB to print Euros to bail out Greece as it does to say it's the job of the US Federal Reserve to print dollars to bail out Greece or it's the job of the Polish central bank to print zlotys to bail out Greece.

There is a cost to the Europeans, the Americans, or the Poles to print money to bail out the Greeks and in the case of the Europeans they are not willing to bear that cost without reassurances the debt party at their expense is going to stop.

 

[dismal]

If the economy is running a surplus, which it is

It's not.

Does this change your narrative at all?

 

[Togo]

If the economy is running a surplus, which it is

It's not.

Does this change your narrative at all?

It is. This economy was in surplus this year, and has been for several years. The immediate crisis has caused a great deal of emergency spending, which is why Greece isn't technically in surplus as of the last two months, but that's a product of immediate events, not the long term deficit in the economy on which your narrative depends.

Of course, you're more than welcome to explain how the difficulties of the last few years have been caused by a deficit that only started weeks ago.

 

[Togo]

The ECB is a central bank, but it is not the central bank of Greece. Its job is not whip up liquidity so the Euro's most irresponsible members can party on irresponsibly.

Operating a fiscal surplus is hardly partying. You've not shown any evidence of any partying.

Here is a document about the ECB's responsibilities in 'whipping up' liquidity on behalf of individual member states, as published by the ECB.
https://www.ecb.europa.eu/pub/pdf/other/pp41-53_mb200205en.pdf

 

[SimpleDon]

It's not.

Does this change your narrative at all?

It is. This economy was in surplus this year, and has been for several years. The immediate crisis has caused a great deal of emergency spending, which is why Greece isn't technically in surplus as of the last two months, but that's a product of immediate events, not the long term deficit in the economy on which your narrative depends.

Of course, you're more than welcome to explain how the difficulties of the last few years have been caused by a deficit that only started weeks ago.

It's my understanding that the Greeks are running a primary surplus. They are running government operations at a surplus, ie not including any payments on their debts, principal or interest.

 

[SimpleDon]

The problems are many.

The small surpluses being run by the Greeks depress the economy. Who here believes that an economy with 27% rate of unemployment needs further depression?

The question of whether austerity is the best way for the Greeks to recover from the 2008 recession is settled beyond any question. It is most definitely not.

The Greeks will never be able to pay off this debt with their current situation under austerity.

The only reason to continue austerity is to further punish them or to cover up the boneheaded decision to impose austerity in the first place. I go with the second.

Not to mention covering for the right wing parties that have accepted austerity in Spain and other countries.

A good rule of thumb in any of these cases is to assume that conservatives are always wrong.

 

[Loren Pechtel]

If the economy is running a surplus, which it is, and the debt repayments have stopped, which it looks like they will, then there is no need for austerity.

Austerity is not a measure to reform government or improve growth. It's a promise to extract more money from the economy to give to creditors. The austerity package the EU was proposing was to triple the existing surplus. That's not going to happen now.

It's possible you're confusing 'austerity' with 'reducing spending'. The austerity package proposed was principally composed of tax rises over to increase the existing surplus in the economy.

If they were running a surplus net of debt repayment their banking system wouldn't be in meltdown now.

 

[laughing dog]

If the economy is running a surplus, which it is, and the debt repayments have stopped, which it looks like they will, then there is no need for austerity.

Austerity is not a measure to reform government or improve growth. It's a promise to extract more money from the economy to give to creditors. The austerity package the EU was proposing was to triple the existing surplus. That's not going to happen now.

It's possible you're confusing 'austerity' with 'reducing spending'. The austerity package proposed was principally composed of tax rises over to increase the existing surplus in the economy.

If they were running a surplus net of debt repayment their banking system wouldn't be in meltdown now.

Bullshit - the meltdown is occurring because of the expectations of a future economic Greek disaster.

 

[fromderinside]

hey Joe. Somebody told me the bank was running out of money. Heck. I better get my money out before they do.


What does one logically conclude will happen?

The bank will ........

 

[Togo]

If they were running a surplus net of debt repayment their banking system wouldn't be in meltdown now.

The unsupported claim was that Greece was being irresponsible and making the debt worse. That isn't the case. It is the debt, not the behaviour, that is the problem. Why are you netting the surplus with the debt?

 

[dismal]

It's not.

Does this change your narrative at all?

It is. This economy was in surplus this year, and has been for several years.

Not true. Links were provide earlier in the thread.

- - - Updated - - -

It is. This economy was in surplus this year, and has been for several years. The immediate crisis has caused a great deal of emergency spending, which is why Greece isn't technically in surplus as of the last two months, but that's a product of immediate events, not the long term deficit in the economy on which your narrative depends.

Of course, you're more than welcome to explain how the difficulties of the last few years have been caused by a deficit that only started weeks ago.

It's my understanding that the Greeks are running a primary surplus. They are running government operations at a surplus, ie not including any payments on their debts, principal or interest.

Not true. Links were provide earlier in thread.

- - - Updated - - -

If the economy is running a surplus, which it is, and the debt repayments have stopped, which it looks like they will, then there is no need for austerity.

Austerity is not a measure to reform government or improve growth. It's a promise to extract more money from the economy to give to creditors. The austerity package the EU was proposing was to triple the existing surplus. That's not going to happen now.

It's possible you're confusing 'austerity' with 'reducing spending'. The austerity package proposed was principally composed of tax rises over to increase the existing surplus in the economy.

If they were running a surplus net of debt repayment their banking system wouldn't be in meltdown now.

Or, more to the point, if they were already running a surplus and intended to continue running one in the future why the hell would they have their panties so wadded up about a bailout that requires them to run a surplus?

 

[Togo]

Not true. Links were provide earlier in the thread.

We're on page 44. You'll need to give me at least a clue where to look.

Or, more to the point, if they were already running a surplus and intended to continue running one in the future why the hell would they have their panties so wadded up about a bailout that requires them to run a surplus?

They're not. They're upset about a bailout repayment that requires them to increase the size of the surplus to 3 times it's present level, and dictates exactly what policies will be implemented to achieve this.