Thoughts on Greek Debt Crisis?

[nausicaa]

So I've become strangely obsessed with the Greek debt crisis recently, and am interested in hearing others' thoughts. Who do you think is mostly to blame? What is the best way out of this? Do you think the European Union will last? Is Germany taking too much of a leadership role, or not enough?

[nellautumngirl]

I just realized my answer on the other thread is outdated since Greece agreed to reforms after all, on their own terms (but which are very similar to the ones that were proposed by other countries). I wasn't on top of things, I thought after they voted "No" on the referendum that would be it. I think this is a good start.

[Arete]

The Greeks are of course to blame for taking on that kind of debt without reforming the economy to be able to collect the taxes to make the payments. The Germans however, have been positively vindictive toward the Greeks, and have sown the seeds of future strife within the EURO. Since Germany(the money lenders), the European Community Bank, and the International Monetary Fund imposed austerity plans on Greece since 2010 in an effort to recover the money, the GDP of Greece has shrunk 25%, unemployment between ages 18-30 hovers at 60%, 31% of Greece's children live below the poverty line, 250,000 Greeks now depend on soup kitchens, and over 5000 doctors have left the country. Two Nobel Laureates in Economics, Krugman and Stigglitz, both agree Greece will never be able to pay off these debts at their current GDP, and require at least partial debt forgiveness as Germany itself had in 1953.

That isn't going to happen because forgiving Greece's debt opens the door to forgive Spain, Portugal's, Ireland's and Italy's. So Germany is about to give morality lessons to all those bad debtor countries. At least we have put that ridiculous lie to rest that the European Union is built on the solidarity and common ground of all countries.

[Arete]

I just realized my answer on the other thread is outdated since Greece agreed to reforms after all, on their own terms (but which are very similar to the ones that were proposed by other countries). I wasn't on top of things, I thought after they voted "No" on the referendum that would be it. I think this is a good start.

They did NOT agree to these reforms on their terms. Their terms required making partial debt forgiveness a key component. It was ignored. It also requires the Greek Parliment to pass several laws by this Wednesday, or the deal is off.

[sockinshoe]

I am living in Germany and can provide a German perspective. Many people disagree with the terms we put on the table. Germans in general were not initially in favour of austerity measures. And there is widespread recognition that our government was too ideological, especially our finance minister, who just dug us well past the point of return. However, Germans are also pretty upset at the Greek negotiating style. Germans don't, in general, appreciate brinkmanship. And this surprise referendum just killed all remaining trust and goodwill. Germans have made some sacrifices too. Retirement age is now 69 for men and 67 for women; in Greece it's 65, with early retirement for hazardous professions which, until recently, included playing the trombone professionally. Also the comparisons between Germany and the Third Reich are seen as incredibly hurtful and also damage goodwill. It's a shame that two people have allowed themselves to be turned against one another in this manner.

[morri]

They should do a debt cut. realistically Greece will never be able to pay the debt back. at the moment they are just held on the very short leash of the IWF give them a rest no economy can even start to work if they are crushed by debt and austerity measures.

[Geechee Girl]

Please forgive my ignorance if my questions are out of bounds. Were the terms of the original bailout of Greece conducive to having the loan paid back reasonably? Or were the terms set to keep Greece upside down at the mercy of predatory lenders? Is Greece allowed to seek financial aid outside of the EU? Could Greece buy itself out of the EU with financing from China or Russia, for example?

[Arete]

Everyone from the IMF yesterday to several Nobel Laureates in Economics acknowledges that Greece will never be able to pay back the entirety of these loans. It simply will never have enough economic output. It can't borrow from China or Russia for the same reason, these are close to 300 billion EURO at this point they will never reach the end of. Germany insists that a debt haircut/partial forgiveness is not on the table, their lenders must get back 100% and the profligate Greeks must be punished. They got everything they wanted from the Greeks and piled on a few extra helpings of humiliation, but outside their own newspapers, there have been op eds printed all over the continent warning they have weakened interEuropean cooperation and it is bound to bite them sooner or later.

[Anny Nym]

My thoughts on the great greek tragedy? It´s a complete monkey theatre from from back to forth!

It is a given that Greece will never be able to pay back this ridiculous high debt. Everyone knows that, first and formemost the current EU plutocrats in Brussels.

But nobody of them cares for Greece, where a whole generation is going to be burned up right now, as a journalist put it on-spot. This is not about Greece, this is solely about that monstrosity which is the Euro and the current system of EU: They are desperately trying to hold it together.

Normally, if a country is in the same situation as Greece is now, there would be a currency devaluation, a debt cut and a fresh start. But of course this is not possible, as they don´t have a own currency they have the Euro, and on it, there is a whole rat´s tail attached to which makes it impossible for Greece to make any free decisions.

That said, national bankrupcy for Greece will come anyway. Not now, but in 3-5 years. But until then, the EU plutocrats are digging their claws deeper and deeper into this country and hundreds of thousands of greek people will unnecessarily suffer.

[nausicaa]

That isn't going to happen because forgiving Greece's debt opens the door to forgive Spain, Portugal's, Ireland's and Italy's. So Germany is about to give morality lessons to all those bad debtor countries. At least we have put that ridiculous lie to rest that the European Union is built on the solidarity and common ground of all countries.

I agree that there's really no way that Greece can pay back the debt at this point, but I also see the concern that forgiving Greece's debt will open the way for Spain, Portugal, Ireland, and Italy to all default on their debt. Do you think the concept of the EU is just unsustainable? That's the question I'm grappling with right now.

For the Europeans on this board--would you prefer your countries go back to independent currencies? What are the general feelings about the EU and the euro amongst people you know?

[Anny Nym]

For the Europeans on this board--would you prefer your countries go back to independent currencies? What are the general feelings about the EU and the euro amongst people you know?

Yes!

Very bad ones and deteriorating the younger the people get. (I am in my late 20s, people in their early 20s have a worse impression than my peers have. Not that I want to hinder them...)

[Arete]

Nausica, I am a dual citizen, and vote in Greek elections when I am there during election season. Yes, I vastly prefer we went back to the drachma, for reasons Anny Nym outlined. However, I hold a minority view among Greeks. To them being in the EURO represented success and acceptance, we were no longer just another Southern European basket case the North always felt free to look down on.

The problem with the EU is they think they can have a successful monetary union without a successful political union. In the US, richer states transfer money every year to poorer states, and that is the only was the dollar works for 50 disparate economies. There is a sense of shared history. The EU has many different histories, about 20 official languages, 3 very distinct types of Christianity that influenced each country. No country wants to give even a fraction of its sovereignty over to invest in an overarching European Parliament. The one they currently have is considered toothless by most Europeans. The EU seems to work best as a free trade zone. As a United States of Europe, not so much.

[Arete]

If you are between 18-30 in Greece there is a 60% chance you are unemployed and you blame EU imposed austerity.

[Anny Nym]

Also, Europe was sepereated by the Iron Curtain for decades.

The USA is not Europe, what works for the USA will never work for Europe, so a "United States of Europe" sounds more like a complete nightmare and rather Orwellian to most people.

I don´t know if "toothless" is a word I would use, more like "estranged"? Here when we say "the EU is doing this and that..." the feeling we have is that of a complete alienated cluster, a political and social Moloch, who really likes fill its own pockets and to hold us down.

One thing btw: The EU is NOT Europe!

I am a european, but I am NOT a "EU-citizen" (well, I am in legal matters of course, but never with heart and mind!)

If you are between 18-30 in Greece there is a 60% chance you are unemployed and you blame EU imposed austerity.

And they are right to do so.

[Sundaymorning]

The problem with the EURO (and the EU for that matter) is that is was a nice political idea. Unfortunately, like most nice political visions, it doesn't correspond with the (economical) reality at all.

They might have been able to cover up the problems for a while, and they are still trying their hardest to do that now, but reality will catch up with them eventually.

Throw in some major corporatism like financial institutes being able to tranfer their rotten government loans to the taxpayers of the other EU countries and the corrupt government elite and their henchmen profiting from ripping off the Greek taxpayers for decades up to the point where no one who is in their right mind wants to pay any taxes anymore since they get peculated anyways, and you have a desaster like there is now in Greece.

[Arete]

If anyone ripped off Greek taxpayers, it was the Greek government itself. The Greek government, both social and Christian democrats, took out those loans in the name of the Greek state with no thought how to pay them back. What is killing us now is the austerity imposed by European institutions and the IMF that has shrunk the GDP and is now causing a full on brain drain in the country. Old people are dumpster diving every day so German banks can get 100% of their money back.

[Sundaymorning]

If anyone ripped off Greek taxpayers, it was the Greek government itself. The Greek government, both social and Christian democrats, took out those loans in the name of the Greek state with no thought how to pay them back. What is killing us now is the austerity imposed by European institutions and the IMF that has shrunk the GDP and is now causing a full on brain drain in the country. Old people are dumpster diving every day so German banks can get 100% of their money back.

Yeah, that is what I meant.

And also, basically everyone (except from some financial institutes maybe) would have been much better off if Greece would just have gone bankrupt years ago. That would have been a fresh start. But of course, those financial institutes are way too involved with politicians that that would have ever happend. Corporatism at its finest.

And what about the "normal" citizens who would have been affected by those banks in crisis? Well, instead of printing money like crazy and handing it out to the banks like the ECB does now, they should have just guaranteed a certain amount of money to each citizen which they would have handed over if the citizens saving were lost because of a bank collaps. That wouldn't have been a perfect solution, but still much better than the desaster that we have now.

ETA: the banks already got most of their money back. It's basically the taxpayers from other countries now which hold most of the risks, not the banks.

[Arete]

Oh yeah, the 1st and 2nd bailouts were about saving German and French banks that had made predatory loans. It was never about helping Greece. But Madame Merkel knew she could not go to her public and ask them to bail out the banks. It would not have been popular. So they slowly transferred the bank loans by paying them off and shifting the risk to their taxpayers. That is why they were so worried Greece would bring down the EURO in 2010 but no longer worried now. The banks are mostly paid, it's the taxpayers now owed the money. Got to love EU priorities. Save the banks, but pretend you are actually saving countries. Then put out the word in the papers your party controls that Greeks are lazy profligates and a cancer on Europe (that was tweeted by a German parliamentarian). But hey, solidarity!

[Anny Nym]

Then put out the word in the papers your party controls that Greeks are lazy profligates and a cancer on Europe (that was tweeted by a German parliamentarian). But hey, solidarity!

Yes this is true, they did that, but this is not what the people think imho. Neither in Germany nor in another middle/norther european country.

the austerity politics are seen as the cancer, not Greece.

It is a perfect example, however, for hor deep the divide between the EU and Europe is.

The case, no basket case, with some german newspapers is a whole other topic.

A few of the leading newspapers have a really terrible culture of "restricted output only". The Zeit, for example, just did a month long row of articles about how the commoners are just so big mean meanies to the poor journalists and politicans!

No, I am not kidding you, not even about that pouting-like-a-toddler subtone all of the articles had.

There is a big problem with loss of trust in Germany.

[Sundaymorning]

Oh yeah, the 1st and 2nd bailouts were about saving German and French banks that had made predatory loans. It was never about helping Greece. But Madame Merkel knew she could not go to her public and ask them to bail out the banks. It would not have been popular. So they slowly transferred the bank loans by paying them off and shifting the risk to their taxpayers. That is why they were so worried Greece would bring down the EURO in 2010 but no longer worried now. The banks are mostly paid, it's the taxpayers now owed the money. Got to love EU priorities. Save the banks, but pretend you are actually saving countries. Then put out the word in the papers your party controls that Greeks are lazy profligates and a cancer on Europe (that was tweeted by a German parliamentarian). But hey, solidarity!

The inconvenient truth is that the banks and other financial institutes have the governments in captivity.

Most countries in the EU are heavily in debt, way more than what is sustainable, and the only reason many of them aren't bankrupt by now is that they can sell their government bonds to financial institutions for interest rates which are way under the fair market price. In return, when things get bad, governments bail out the financial institutes and launch the printing press at the ECB.

Actually, it's nothing more than a gigantic fraud where the taxpayers pay for the losses while the financial institutes get most of the profits. However, stopping the system would also mean that the politicians would have to come clean about the fact that the funding of most governments simply isn't sustainable in the long run.

[Arete]

Coming clean on government financing is something no politician on either side of the Atlantic Pond is about to volunteer.

I wish the Greek government had the stones to say fuck it, we are out of this currency union and we are going back to controlling our own money. But the Euro is still wildly popular in Greece, and we seem to be willing to sacrifice our children and our own self respect for the priviledge of using the "cool" currency. We may still get lucky and get kicked out.

[guitar_villain]

If anyone ripped off Greek taxpayers, it was the Greek government itself. The Greek government, both social and Christian democrats, took out those loans in the name of the Greek state with no thought how to pay them back. What is killing us now is the austerity imposed by European institutions and the IMF that has shrunk the GDP and is now causing a full on brain drain in the country. Old people are dumpster diving every day so German banks can get 100% of their money back.

One of the really big problems with the Greek taxpayers is that they don't actually pay their taxes. There have been numerous stories about this for years- large parts of the economy are underground, businesses pay workers minimum wages and make it up on cash bonuses, people avoid paying property taxes on pools by claiming they don't have them, etc.

I'm what Americans would call a tax and spend liberal (and the rest of the world moderate right) and I don't like paying taxes either, but if you want all the nice government stuff like roads and healthcare, you have to fork out the cash. To paraphrase a great comment, I pay taxes because they buy me civilization

Sadly, I don't see a good end for this. The EU were idiots for letting Greece in, the Greeks were idiots for accepting and now we're stuck with a country that couldn't pay its bills even without the crippling austerity measures. Every side is going to take it in the shorts here even with all the temporary bailout measures- the bankers need to accept that the money is gone, the Greek people are going to have their savings wiped out when they go back to some inflated script, the Greek economy is going to drastically shrink leading to large scale unemployment, etc. Just terrible all around.

[Arete]

The Greek economy has already drastically shrunk and there is massive unemployment. Greece suffered through 400 years of Turkish occupation. Taxes, which included Christian sons for the Sultan's army, were collected at bayonet point. They were used to beautify the Sultsn's palaces and capital, not to provide roads and schools. Cheating the Sultan of his tax was considered a noble act of resistance, no kidding. They would mutilate their more handsome children to keep them from being rounded up to become a Janissaries. After liberation in 1821, Greeks thought their taxes would go for roads, schools, etc. but even its elected governments would pocket tax money and distribute to clients. It did not have a tradition of we pay taxes, and can see the roads, schools, etc. The country was not even fully electrified until the early 1980s. Greeks don't trust their government to do right with their taxes, and they have a lot of evidence to back them up. It's not that they are too stupid to make the connection between taxes and infrastructure, it's that they have suffered decades of clientelism and cronyism and watched their tax money go up in smoke. It is a hard fix that starts with the government building trust, not lecturing about taxes.

[latraviata]

Coming clean on government financing is something no politician on either side of the Atlantic Pond is about to volunteer.

I wish the Greek government had the stones to say fuck it, we are out of this currency union and we are going back to controlling our own money. But the Euro is still wildly popular in Greece, and we seem to be willing to sacrifice our children and our own self respect for the priviledge of using the "cool" currency. We may still get lucky and get kicked out.

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[nausicaa]

Here's another pickle I see that the EU has: I understand it worries about forgiving Greece's loans because it would set a precedent for other countries to default as well. But at the same time, if Greece drops out of the EU and goes back to the drachma, wouldn't that also set a bad precedent for the EU? It would really impress on other countries that the euro is something temporary and malleable, rather than permanent.

And AreteJo, that is interesting that so many Greeks still strongly favor staying on the euro. Is it also because of inflation fears if they go back to the drachma?

Do you all think the EU will last in its present form, or will it close up shop sooner rather than later? Or will it be left with only a handful of "good student" member countries in it?