Greek Exit form the Euro

[metis]

More than the issue of "spend-spend-spend" that's caused the problem is one of "don't increase my taxes-don't increase my taxes-don't increase my taxes". Polls have shown that a clear majority of Americans want more benefits from their government but lower taxes on themselves. Politicians do listen to their constituents, and they want to get elected and re-elected, so we're getting the problems we deserve.

 

[philbo]

Those political leaders lied to the Greek people as much as the EU when they doctored the books and made their financial situation look better than what it actually was.

What muddies the waters even more is that the rest of Europe knew damn well that the Greek economic miracle, to turn their economy round in a few years so that the Euro criteria appeared to be met just at the point of joining, that "miracle" was sleight of hand and a mirage.

..so IMO there's a strong argument for saying that the Eurozone does have a responsibility for some of that debt: they knowingly took on the financial cesspit that was Greece, because it was politically expedient. The austerity measures the EU+IMF put in place were another bit of political fudge, forcing Greece to honour contracts e.g. with German defence companies for hardware they really didn't need while hitting the poorest hardest. This is pretty much what got Syriza elected.

It is very likely that the Eurozone is going to lose more money (a *lot* more money) in the event of a Greek exit than it would cost to not just bail them out, but wipe out the entirety of Greek debt as it stands, but they're not going to because it'll only happen again in another few years. If Greece were able to show they were capable of collecting taxes from the people who should be paying them, it probably wouldn't be a problem: Greece isn't a poor country, judged by the wealth of its people; however not paying tax is kind of the national sport so the government simply doesn't have anything like enough to pay some of the ridiculously high benefits they do, though again it's a bit more complex... at the moment Greek youngsters are largely unemployed and being supported by their grandparents' over-generous pensions. Simply cutting pensions may work for the well-off, dependent-free oldies, but would leave a significant proportion of their youth with nothing.

I don't know if it'd work, but what I'd like to see is a bailout deal that sends in the Eurocrats not to implement an even more rigid austerity programme, but to overhaul their tax collection, from the ground up, and actually gets people to pay - of course, that means that the top 25-50% are going to take a major hit, and they're the ones with the loudest voices; but they should realize they'll still fare better that way than under the chaos that will ensue if Greece does leave the Euro. Unless they think they'll just leave..

 

[esmith]

More than the issue of "spend-spend-spend" that's caused the problem is one of "don't increase my taxes-don't increase my taxes-don't increase my taxes". Polls have shown that a clear majority of Americans want more benefits from their government but lower taxes on themselves. Politicians do listen to their constituents, and they want to get elected and re-elected, so we're getting the problems we deserve.

So how do you educate the US voter to the idea that more benefits from the government does not necessarily benefit oneself in the long rung. Will the Greek population vote for austerity or the continuation of the socialist programs instituted by their government? It will be interesting to see what happens in either case. Do not want to get into a discussion of US politics on this thread but would be open to one in the North American section.

 

[Wirey]

So how do you educate the US voter to the idea that more benefits from the government does not necessarily benefit oneself in the long rung. Will the Greek population vote for austerity or the continuation of the socialist programs instituted by their government? It will be interesting to see what happens in either case. Do not want to get into a discussion of US politics on this thread but would be open to one in the North American section.

I think it's more of an allocation issue. The Yanks have a ton of money. They just have to use it more wisely.

 

[metis]

So how do you educate the US voter to the idea that more benefits from the government does not necessarily benefit oneself in the long rung. Will the Greek population vote for austerity or the continuation of the socialist programs instituted by their government? It will be interesting to see what happens in either case. Do not want to get into a discussion of US politics on this thread but would be open to one in the North American section.

I think each of us would likely agree that some benefits are good, some bad, and some we can debate until the cows come home. My point is that, in a responsible society, we should pay for our benefits sooner or later, and I prefer the "sooner" except in cases of absolute emergency-- then I'll settle for a bit later.

The issue of austerity sounds so simple on the outside but can be terribly complicated when inside. The idea of just cutting back spending has repercussions, and some of them can be catastrophic. OTOH, a country like Greece can't just keep doing what they've been doing and not expect even more major problems.

So, who's going to take the hit(s)? Is it going to be those on pensions that have to live off them? Is it going to be the investors, whom if hurt probably will not be willing to invest for maybe decades? Is it going to be the military? All of the above? Some of the above?

Should they let "capitalism" reign? Well, what does one do when people fall off the economic cart, banks collapse as people pull their money out, and all economic hell breaks loose?

It is not "socialism" that caused this problem-- it was not paying for what they "bought". Sweden is more "socialistic" than Greece, but they don't have this same problem.

 

[Ultimatum]

Default. Drachma. Nationalize.

Greece have lost the game.

 

[esmith]

Say goodnight Greece.....

 

[Yerda]

Does anyone know if the Greek population realizes how much pain they're about to bring down on themselves?

They've been living through a lot of pain this past few years. Perhaps they no longer see the threats as worth worrying about.

 

[Terrywoodenpic]

Proportionally the Greek national debt is only a small fraction of that of the USA.
though neither may ever be paid.

 

[LuisDantas]

I read that Greek social spending outstripped their income, but the politicians can't get re-elected without doing it. The Greeks are bribing themselves with borrowed money.

They are hardly alone in that, either. Nor are the alternatives all that safe.

 

[oldbadger]

Why doesn't the EU just cancel the debt placed upon Greece? It would make things go a whole lot more smoothly.

Brilliant idea!
If a country has borrowed more than it can pay back, just cancel the debt....... problem over!
I like it. In fact, if anybody has borrowed more than they can afford to pay back, we could insist that banks, building societies, loan companies etc just cancel the debt!

On the side, Scotsman, I was hoping that you would not be too disgruntled today, because I was just wondering whether you might be able to drop us a wedge or two...,... a couple of big-ones would do it for me. I'll pay you back within a month, I swear. You can count on me. You know that you can trust a badger, even an old 'un.

 

[LuisDantas]

To the best of my understanding, from Greece's perspective the situation is a bit similar to Brazil back in the 1980s.

We had dealings with the IMF back then. It was the oddest of situations. For the best part of ten years (perhaps more than ten years) the news and public opinion just kept harping on and on about how important it was that the IMF did as our government wanted. At the same time, one of the most frequent Brazilian attitudes was complaining about the outrage that the "loss of sovereignity" was.

Yes, we complained all the time about how unfair it was that the IMF expected to have some say on our economic policies just because we were asking it for money.

Brazilians are funny like that ... but I don't know that in this respect we are all that unusual. The USA has supply side economics, climate change denial and insistence on keep growing a "defense" budget that is already ludicrous, for instance.

It seems that any community thinks of itself as deserving of privilege as a matter of fact.

But Greece looks like a more direct comparison to Brazil in the 1980s to me. High inefficiency, chronic insolvency, poor job market, contradictory expectations about foreign nations and institutions.

Basically, it is a sorry mess, but people just don't know how to accept that kind of responsibility, and take refuge in xenophoby and nationalism. It is always the nationalism.

Personally, I don't think there is any course of action worth bothering about at the purely financial level. Forgiving the payments ad eternum is of course out of question. On the other hand, allowing a whole community - one with a troubled history with its neighbors no less, as Greece has had fairly recent conflicts with the Ottoman Empire and had a hand in complex roles in various Balkanic conflicts and was invaded by Germany and Italy in WW2 - can only lead to disaster.

Any true solution will have to earn the confidence of the Greek people and involve motivating them into better solvency. But by far the most likely consequences now will be a split between Greece and the EU, followed by growing radicalism and economic hardships in Greece. Sooner or later it will lead to armed conflict or a comparable tragedy. National pride will forbid less traumatic solutions and lack of foreign interest will make those few and far between anyway.

 

[Shadow Wolf]

There actually is historic precedence for debt forgiveness.
Debt Cancellation in Mesopotamia and Egypt from 3000 to 1000 BC | Global Research - Centre for Research on Globalization
Debt relief - Wikipedia, the free encyclopedia
Even Germany was pardoned of war debts to help them rebuild. In Greece, it should be the Greek citizens that are number one priority, and that they aren't suffering-rather, in this case, their suffering ameliorated-because of a few politicians.
It's unfortunate that economic systems are supported that make it possible for just a few to inflict massive suffering upon the masses.

 

[Willamena]

Does anyone know if the Greek population realizes how much pain they're about to bring down on themselves?

Really, you don't think they'd be better off, like the Quebec Separatists?

 

[Bunyip]

A couple of years ago the Greek gov decided that people who had pools were thus rich enough to pay taxes - camo pool covers subsequently sold like hot cakes.

 

[philbo]

To the best of my understanding, from Greece's perspective the situation is a bit similar to Brazil back in the 1980s.

Purely financially, yes - though Greece has the added confounding factor of being part of the Euro, so it is unable to devalue its currency, print more money and generally do the sorts of things that countries which have their own currency do when they've got a massive hole in their finances.

Greece has spent the last few years destroying their economy because of the sorts of economic controls the IMF & ECB have insisted on; the prognosis would be kind of obvious were it not for the Euro, and the damage to everyone else that would be caused by a Greek exit: it's going to cause more damage to the Eurozone & world's markets than the cost of simply giving Greece the money (as a comparison, the amount of money "liberated" by the ECB in its last couple of rounds of quantitative easing exceeds the total Greek debt.. the Eurozone could, if it wanted, write off Greek debts without making a dent. But they're worried about the sort of message that sends)

..but then the Greeks really haven't helped themselves, and I don't think Syriza have done a very good job at all. I reckon, if they'd actually tried to change the culture of tax evasion, both the IMF and the ECB would be behind them. But despite the noises made before they got in, they haven't made any significant strides in that direction, and Greece will continue to be a financial basket case until that chagnes.

 

[Flankerl]

There actually is historic precedence for debt forgiveness.
Debt Cancellation in Mesopotamia and Egypt from 3000 to 1000 BC | Global Research - Centre for Research on Globalization
Debt relief - Wikipedia, the free encyclopedia
Even Germany was pardoned of war debts to help them rebuild. In Greece, it should be the Greek citizens that are number one priority, and that they aren't suffering-rather, in this case, their suffering ameliorated-because of a few politicians.
It's unfortunate that economic systems are supported that make it possible for just a few to inflict massive suffering upon the masses.

You uhm realise that Greece had (i think) 100 Billion/Milliard € of their debt forgiven, right? It didn't help because Greece is simply incredibly overspending.

And after WW2 Greece got money for the debt forgiveness of Germany. Though this money wasn't really used for the betterment of Greece. And the civil war didn't help.


Greece wants to overspend and receive money from the IMF/EU/Eurozone. And I really hope that they are cut loose.

 

[Yerda]

Yes, we complained all the time about how unfair it was that the IMF expected to have some say on our economic policies just because we were asking it for money.

Have you read Joseph Stigitz's book about the IMF (and World Bank) in the 80s and 90s?

 

[Twilight Hue]

Because investors would lose big time, and that would not only affect Greece but also the EU.

Isn't investing typically regarded as being a risk venture anyways? Why keep pouring money into a hopeless situation and risk making things even more worse in the long term?

 

[metis]

Isn't investing typically regarded as being a risk venture anyways? Why keep pouring money into a hopeless situation and risk making things even more worse in the long term?

There's no doubt changes must be made, but there's a far greater danger in overreacting. To move too quickly into austerity, for example, would have the effect of shrinking an already ailing Greek economy.