Greece

[silentstriker]

So I've been following this very closely - but I didn't see any threads on this. What do you guys think is going to happen?

Europe is blowing itself apart over Greece - and nobody seems able to stop it - Telegraph

I read this article years ago, and I thought it was excellent...and sets up the situation nicely: Beware of Greeks Bearing Bonds | Vanity Fair

 

[Bahnz]

Greece's latest suggestions overnight were so preliminary, it sounds like they could've been scribbled on the back of a sandwich in hot sauce.

From some of the pronouncements by the troika earlier this week, it really does sound like they're resigned to grexit which is terrifying - but from my pov has also been inevitable for years now. In the long run, Greece can't stay in the Euro without basically signing over the authority for fiscal decision making to Europe, which last week's referendum shows they're clearly not prepared to do. You can't have a monetary union between such an enormously economically and culturally diverse range of nations without a common budget, and even if you had that, forcing the Greeks to try and compete on the same playing field as the vastly more productive Germans is doomed to failure. In the long run, leaving the euro will probably be the best thing for Greece.

In the short run though...

 

[Quaggas]

#FirstWorldProblems

 

[RossTaylorsBox]

Greece's latest suggestions overnight were so preliminary, it sounds like they could've been scribbled on the back of a sandwich in hot sauce.

From some of the pronouncements by the troika earlier this week, it really does sound like they're resigned to grexit which is terrifying - but from my pov has also been inevitable for years now. In the long run, Greece can't stay in the Euro without basically signing over the authority for fiscal decision making to Europe, which last week's referendum shows they're clearly not prepared to do. You can't have a monetary union between such an enormously economically and culturally diverse range of nations without a common budget, and even if you had that, forcing the Greeks to try and compete on the same playing field as the vastly more productive Germans is doomed to failure. In the long run, leaving the euro will probably be the best thing for Greece.

In the short run though...

Agreed with most of this. Greece is hosed whatever they do, so they might as well not be hosed and be in financial servitude to the IMF and EU.

 

[Uppercut]

Agreed with most of this. Greece is hosed whatever they do, so they might as well not be hosed and be in financial servitude to the IMF and EU.

This was certainly true in 2008. Now, I'm not so sure. They've just endured a seven-year Great Depression to avoid the consequences of leaving the Euro, and now they're going to leave the Euro anyway? It's a complete mess. Worst of both worlds. Everyone comes out looking painfully incompetent, but I think we've reached the point where the Germans/ECB/IMF are marginally more to blame than the Greeks.

 

[harsh.ag]

Ideally, we would have

a) A portion of Greek debt written off
b) No short term austerity in Greece
c) A clear plan on reducing government discretionary spending when growth becomes normal-ish

But none of that is happening, because

a) Germany is an arrogant hack of a leader, who has made it about morality and moral hazard
b) No one likes Syriza
c) Syriza can't seem to be able to come up with c) from above

The austerity imposed on Greece in the last five years has been disastrous. Their debt-GDP ratio wasn't insane, and something that could have been handled. Only if Troika leadership would have allowed ECB to do the right things.

The only way an exit from the Euro would not be bad (comparatively) for Greece is if they manage to

a) Get their new currency (presumably the New Drachma), their new central bank, and circulation of money and deposits sorted out in double quick time
b) Immediately have a massive depreciation of the New Drachma by the new central bank which would help them achieve competitiveness in exports and get some much desirable inflation
c) Not have Europe impose massive rounds of various forms of economic sanctions on them because they are mad

Difficult indeed.

 

[BeeGee]

It's all Greek to me.

I enjoyed the musical. Olivia Newton John was hot.

 

[Magrat Garlick]

German public opinion on Greece is frightening, ftr. Seems like they're not allowed to have a functioning economy as punishment for 'holding Europe back' or something.

 

[harsh.ag]

German public opinion on Greece is frightening, ftr. Seems like they're not allowed to have a functioning economy as punishment for 'holding Europe back' or something.

Yup. Plus it seems hardly any Germans are aware that a Greek exit could cost their own economy around 75 billion euros. Instead, what they are being told is that a Greek exit would cost 1.5 billion euros less than "just default", which is true, but doesn't make any sense when you understand that "just default" actually costs around 76.5 billion euros to begin with!

Germany is a really ****ty leader for the EU to have wrt economics really. Sad.

 

[NZTailender]

Didn't Germany have like most of it's debt written off post-war? Like, they've not actually ever paid back their debt? Seems a bit rich, pardon the pun.

 

[harsh.ag]

Didn't Germany have like most of it's debt written off post-war? Like, they've not actually ever paid back their debt? Seems a bit rich, pardon the pun.

Haha yeah. On top of having their debt written off a few times, they have often been quite unshakable while demanding payments and reparations from other parties, case in point being from France after the Franco-Prussian War of 1870 (The Treaty of Frankfurt).

 

[fredfertang]

I blame Margaret Thatcher

 

[Magrat Garlick]

Didn't Germany have like most of it's debt written off post-war? Like, they've not actually ever paid back their debt? Seems a bit rich, pardon the pun.

while true (well, story-true), this kind of 'sins-of-the-fathers' logic is

a) the same as the Germans are using to squeeze Greece
b) kinda ignores that the post-WWII debt was also something to keep behind the door against the Federal Republic of Germany in the event that the Germans decided to back out of the whole liberal democracy thing

 

[Furball]

It's hardly surprising public opinion against Greece is hardening when they seem to expect the rest of Europe to continue to cough up so that they can continue to avoid tax and retire at 55.

 

[Magrat Garlick]

It's hardly surprising public opinion against Greece is hardening when they seem to expect the rest of Europe to continue to cough up so that they can continue to avoid tax and retire at 55.

Sigh.

 

[harsh.ag]

It's hardly surprising public opinion against Greece is hardening when they seem to expect the rest of Europe to continue to cough up so that they can continue to avoid tax and retire at 55.

Dude....

 

[Bahnz]

Dude....

What? Greece does still have enormous problems with tax evasion, and the effective retirement age of Government workers is still 56. It's horrendously unsustainable.

 

[harsh.ag]

What? Greece does still have enormous problems with tax evasion, and the effective retirement age of Government workers is still 56. It's horrendously unsustainable.

Yeah, and they need to make those changes, yes.

But the economics of this situation goes this way:

a) Greece doesn't have its own currency and its own central bank
b) The entire continent just went through a massive recession, which the countries haven't recovered from (especially when it comes to the unemployment rate)
c) This is much more a demand side recession than a supply sided one
d) In such recessions, the key is to get demand back up
e) For the first few years, ECB sucked balls on this. They refused to even have the required monetary stimulus. In fact, they raised rates at one point! Fathom this. Greece, being part of the Euro, had to go through this. US and UK didn't.
f) Greece did start with a higher debt burden than the other EU members, yes. But a 100% debt-GDP ratio isn't insane. It can be reined in without too much hardship
g) One of the worst times to cut government spending is during a demand deficient recession
h) Even if you do cut govt spending, normal countries will have central banks who will offset that austerity by expanding money supply, conducting QE etc. This is very important. Greece does not have a central banl, again.
h) The Greece rescue plan should have included no short term austerity measures, but firm austerity measures when growth and normalcy returned
i) Their GDP has tanked since the austerity program

j) You would assume that the only (one and only) benefit of the austerity program would be to reduce the debt/GDP ratio. But because the GDP has tanked so much (because of austerity itself!), the debt-GDP ratio is actually higher now!

And all of this was very predictable economics. Basically Irving Fisher from the 1930s. Everyone knows this. Not having your own central bank, but one which listens to the Troika is deeply damaging sometimes, and the Troika takes no responsibility for that. They think they are doing a swell job!

More on this in a while. Have to go.

 

[Bahnz]

Yeah, and they need to make those changes, yes.

But the economics of this situation goes this way:

a) Greece doesn't have its own currency and its own central bank
b) The entire continent just went through a massive recession, which the countries haven't recovered from (especially when it comes to the unemployment rate)
c) This is much more a demand side recession than a supply sided one
d) In such recessions, the key is to get demand back up
e) For the first few years, ECB sucked balls on this. They refused to even have the required monetary stimulus. In fact, they raised rates at one point! Fathom this. Greece, being part of the Euro, had to go through this. US and UK didn't.
f) Greece did start with a higher debt burden than the other EU members, yes. But a 100% debt-GDP ratio isn't insane. It can be reined in without too much hardship
g) One of the worst times to cut government spending is during a demand deficient recession
h) Even if you do cut govt spending, normal countries will have central banks who will offset that austerity by expanding money supply, conducting QE etc. This is very important. Greece does not have a central banl, again.
h) The Greece rescue plan should have included no short term austerity measures, but firm austerity measures when growth and normalcy returned
i) Their GDP has tanked since the austerity program

j) You would assume that the only (one and only) benefit of the austerity program would be to reduce the debt/GDP ratio. But because the GDP has tanked so much (because of austerity itself!), the debt-GDP ratio is actually higher now!

And all of this was very predictable economics. Basically Irving Fisher from the 1930s. Everyone knows this. Not having your own central bank, but one which listens to the Troika is deeply damaging sometimes, and the Troika takes no responsibility for that. They think they are doing a swell job!

More on this in a while. Have to go.

I don't disagree with a lot of this (although I would say that public debt of 100% is very unhealthy). But at the end of the day, I can't help but feel that a lot of your points only further support the fact that Greece really shouldn't be in the Euro. It should be able to devalue its currency and inflate its way out of some of its debt. And Europe isn't the states. I don't think you can really blame the German people for not wanting to fund a Greek stimulus package (even if it might be partially in their own interest to do so), given the enormous structural problems that remain in their economy.

 

[fredfertang]

Given what they now appear ready to agree to I do wonder wtf the point in that referundum was, given that Tsipras looks like he's going to cave in pretty much completely

It's so ****ing obvious what's going to happen now - the Greeks will agree to more austerity just to get the economy to struggle on and then Tsipras' government will go and we'll have all this **** again in a few weeks time and meanwhile the Greeks will have spent more of what little cash they have on another election in which some new party led by that Varoufakis bloke gets in - its all going to turn to crap eventually so it might as well happen now and the Germans tell them to foxtrot oscar