Yes, Paul, perhaps it is time that lenders "abandon the myth" that debts will be repaid timely and in full. What a quaint, outdated notion.
16
As Margret Thatcher said, "the trouble with Socialism is that you eventually run out of other peoples money."
That is what is happening to Greece. It will eventually happen to the United States also, if we don't wise up and elect leaders who actually lead.
That is what is happening to Greece. It will eventually happen to the United States also, if we don't wise up and elect leaders who actually lead.
9
I will define the national wealth of any nation, state, city, family, or etc.) as the total value of all of privately owned taxable wealth that is located within and/or being created within the boundaries of that nation, but only if that existing wealth is available to redeem that nation’s currency instead of gold from that nation’s gold reserves, and only if that wealth is subject to confiscation by the various governmental taxing authorities to collect money to spend for various wealth consuming/destroying government activities such as infrastructure improvements, government payrolls, government benefits, wars, government contracts, and other government activities that consume the nation’s existing national wealth rather than create any new national wealth.
In order to create new privately owned US wealth so that some of this new NATIONAL WEALTH can be confiscated to pay for common government activities, and to pay off the national debt, all nations should return to basic economic principles and realize/understand that privately held national wealth is only made, created, and/or acquired when the members of a family or the citizen businessmen of a nation, state, city, island, tribe, school district, hospital district, etc., perform one or more of the following tasks:
In order to create new privately owned US wealth so that some of this new NATIONAL WEALTH can be confiscated to pay for common government activities, and to pay off the national debt, all nations should return to basic economic principles and realize/understand that privately held national wealth is only made, created, and/or acquired when the members of a family or the citizen businessmen of a nation, state, city, island, tribe, school district, hospital district, etc., perform one or more of the following tasks:
2
Krugman once again shows what a simple mind he has, and shows why his policies don't work. He is correct on one topic; the only way out for Greece is to default on its debt. The reason the Germans won't allow that without a fight is that Portugal, Spain and Italy would demand the same thing.
No Paul, the issue here is simple: If you borrow beyond your means you will eventually go bankrupt. Please stop pushing borrowing as an cure for debt.
No Paul, the issue here is simple: If you borrow beyond your means you will eventually go bankrupt. Please stop pushing borrowing as an cure for debt.
12
There is plenty of blame to go around. Let's not forget that prior to the crisis every previous Government inlcuding those led by PASOK were content to buy votes by having > 40% of adult Greeks working in the public sector doing little of anything, producing little of anything of value but pulling down a paycheck...
13
I have heard greek friends say that Germnay never paid war repartions to Greece, but did pay to other nations. Is there any truth to this? And is it relevant now?
8
Maybe the Greek government could sell off title to some of their Greek Islands to foreigners to raise money so that the general population could continue to be paid by the government without working to create any new national wealth that could be subjected to taxation or confiscation to provide funds to pay for government activities, but there is a limit to the number of Greek islands that exist.
The Greeks might soon have mass starvation, and then they will have to re-industrialize in order to create new wealth to buy the basic necessities required for their basic life support.
The Greeks need to do everything required to re-industrialize ASAP, including repealing their EPA laws and their labor laws before their population starves to death.
President Obama’s administration has probably been buying worthless Greek treasury bonds with US tax collected dollars to prop up this Greek socialist model nation with US taxpayer funds, but I sure do hope that he has not been doing that.
The Greeks might soon have mass starvation, and then they will have to re-industrialize in order to create new wealth to buy the basic necessities required for their basic life support.
The Greeks need to do everything required to re-industrialize ASAP, including repealing their EPA laws and their labor laws before their population starves to death.
President Obama’s administration has probably been buying worthless Greek treasury bonds with US tax collected dollars to prop up this Greek socialist model nation with US taxpayer funds, but I sure do hope that he has not been doing that.
3
This is revisionist history.
Being part of a currency union, relinquishing sovereignty over one's currency, requires inordinate discipline.
Instead, Greece (its elected government), fraudulently cooked the books to join the Euro, and fraudulently cooked the books to report lower debt, thus lower risk, until 2010.
The EU, the ECB and the EU banks were conned by Greece.
In the bailout they took a $100B nominal (likely less in net present value) haircut, in exchange for the troika to keep the shell game going for another few years.
The idea was that the EU, the Eurozone and the world economy would be in better shape now, than in 2010, to then come to a more permanent resolution.
And it wall worked out great. EU banks are in better shape, and more able to withstand a Greek default and possible exit.
Greece meanwhile backed itself into a corner by electing a populist Marxist. Since we all know that socialism only works with other people's money, they are demanding that the EU pay them to support their populism.
The appropriate answer from the EU and German is: Nein.
Being part of a currency union, relinquishing sovereignty over one's currency, requires inordinate discipline.
Instead, Greece (its elected government), fraudulently cooked the books to join the Euro, and fraudulently cooked the books to report lower debt, thus lower risk, until 2010.
The EU, the ECB and the EU banks were conned by Greece.
In the bailout they took a $100B nominal (likely less in net present value) haircut, in exchange for the troika to keep the shell game going for another few years.
The idea was that the EU, the Eurozone and the world economy would be in better shape now, than in 2010, to then come to a more permanent resolution.
And it wall worked out great. EU banks are in better shape, and more able to withstand a Greek default and possible exit.
Greece meanwhile backed itself into a corner by electing a populist Marxist. Since we all know that socialism only works with other people's money, they are demanding that the EU pay them to support their populism.
The appropriate answer from the EU and German is: Nein.
13
Debt. Money borrowed and then used to pay pensions and cover operating expenses which governement revenue is insufficient to cover.
Cost of borrowing: interest. price paid for use of other people's money.
Greece because in Euro can't just print money to pay. US Federal Reserve is printing money to loan to the US government for it borrowing and spending spreee still running over 500 billion per year in the red.
So for many Greeks and folks like Krugman, just stiff arm those creditors and start over again. Savers losers. Dead beats, winners.
Cost of borrowing: interest. price paid for use of other people's money.
Greece because in Euro can't just print money to pay. US Federal Reserve is printing money to loan to the US government for it borrowing and spending spreee still running over 500 billion per year in the red.
So for many Greeks and folks like Krugman, just stiff arm those creditors and start over again. Savers losers. Dead beats, winners.
3
Austerity is not the main thing holding Greece back: it's the fundamental structural problems that they refuse to address (stool samples requirement to start a business, terrible labor laws, etc.).
Keynes expansion will be equally ineffective until they deal with these issues.
Keynes expansion will be equally ineffective until they deal with these issues.
7
Krugman touches too lightly on the one-sided nature of the moralizing of the austerophiles. Deadbeat borrowers are to be punished, 'full faith and credit', etc., while stupid, incompetent lenders are to be bailed out, along with their insurers. This has been a failing in the U.S., Europe, and throughout the world. It is essentially the key to the Great Recession and the slow or non-recovery. Sometimes the lending was outright predatory, other times the lending was simply incompetent. Often the AIG's, S&P's , and Moody's were clearly at fault for bad lending practices, yet they were bailed out while borrowers were punished or bankrupted.
Morality? Countries and home buyers alike were 'wrong' to borrow even though they were charged higher interest due to the risk of default. Yet when push came to shove, the lenders protest that they had no responsibility for grasping for those higher risks, and that it should be taxpayers and whole nations who should bail them out. Where is the morality in charging higher rates for 'risk' and then not accepting that risk after all?
The bailouts, if needed to save banking systems, should be for principle only. Governments that bail out should keep any interest collected, since they absorbed the actual risk. Morality does exist, whether you a borrower or a lender be.
Morality? Countries and home buyers alike were 'wrong' to borrow even though they were charged higher interest due to the risk of default. Yet when push came to shove, the lenders protest that they had no responsibility for grasping for those higher risks, and that it should be taxpayers and whole nations who should bail them out. Where is the morality in charging higher rates for 'risk' and then not accepting that risk after all?
The bailouts, if needed to save banking systems, should be for principle only. Governments that bail out should keep any interest collected, since they absorbed the actual risk. Morality does exist, whether you a borrower or a lender be.
13
Wow the three year bond closed at nearly 20%. Nice job Tsipras....LOL
1
But the Greek Government will not honor those freshly printed "Sovereign Issued" Greek Treasury Bond, so none of the Greek Bond buyers will get their money returned when the bonds become due!
Any person buying any Greek Bond should not expect the Greek government to honor their promise and commitment to repay those Greek Bonds when those bonds become due.
Does this mean that the Greek Government is not honorable?
Any person buying any Greek Bond should not expect the Greek government to honor their promise and commitment to repay those Greek Bonds when those bonds become due.
Does this mean that the Greek Government is not honorable?
2
Here in Canada we made a deal with the Masters of the Universe 35 years ago. We traded our democracy for membership in the New World Order when we gave up our sovereignty over our petroleum resources and allowed the Masters to take away our National Energy Program.
We had a wonderful 35 year run and Alberta is as rich as rich can be. Today, a couple of months after the Saudi's have turned on the spigot we realize how much we gave up. Our currency is in free fall, we are headed into European style unemployment and the future of our children is starting to not look as rosy. I live in Quebec and even here where we kept control of our energy our ceding control to much of our resources to the masters of the Universe is looking like a pretty expensive bargain as we prepare for austerity in a country with a small population and mind boggling resources.
Our country is preparing for an election this year and I expect we will be hearing a lot about the dire consequences of electing a Social Democratic party like the NDP. Canada is not Greece we are probably the wealthiest per capital nation the world has ever seen yet I expect between now and election day we will be inundated with propaganda telling us that if we try to reclaim our democracy we will suffer incalculable harm.
Canadians are extremely conservative and will no doubt elect a centrist liberal government to cede only half our democracy to the Masters of the Universe.
We had a wonderful 35 year run and Alberta is as rich as rich can be. Today, a couple of months after the Saudi's have turned on the spigot we realize how much we gave up. Our currency is in free fall, we are headed into European style unemployment and the future of our children is starting to not look as rosy. I live in Quebec and even here where we kept control of our energy our ceding control to much of our resources to the masters of the Universe is looking like a pretty expensive bargain as we prepare for austerity in a country with a small population and mind boggling resources.
Our country is preparing for an election this year and I expect we will be hearing a lot about the dire consequences of electing a Social Democratic party like the NDP. Canada is not Greece we are probably the wealthiest per capital nation the world has ever seen yet I expect between now and election day we will be inundated with propaganda telling us that if we try to reclaim our democracy we will suffer incalculable harm.
Canadians are extremely conservative and will no doubt elect a centrist liberal government to cede only half our democracy to the Masters of the Universe.
13
Why should the EU citizens continue to allow the Greek citizens to live off of the money that citizens in other EU nations loan to the Greek government in order to continue paying for the bloated Greek government payrolls and other activities instead of Greek citizens working in some dirty factory to create privately owned wealth that could be subject to Greek government confiscation via taxes to pay for Greek government activities?
Maybe the Greeks should go bankrupt, but then they will have to start working to support themselves, instead of living off of borrowed money (like the USA). Only total Greek government bankruptcy and withdrawal from the European Union will make the Greek citizens stop living off of their government handouts and then the Greek citizens will be forced to go back to work and then make the things that they need to sustain their lives. Better now than later.
Any new Greek government freshly printed paper money (Drachmas after Greek bankruptcy) would not be honored to purchase anything in Greece or anywhere else. If the Greeks withdraw from the EU, they probably would still have to use US dollars and/or Euros for their daily business operations, retail and wholesale.
If the Greeks really wanted to reverse their economic situation, then they would industrialize and start working at jobs that that create new national wealth, and stop borrowing money to pay for their government jobs that only consume the existing privately held Greek national wealth.
Maybe the Greeks should go bankrupt, but then they will have to start working to support themselves, instead of living off of borrowed money (like the USA). Only total Greek government bankruptcy and withdrawal from the European Union will make the Greek citizens stop living off of their government handouts and then the Greek citizens will be forced to go back to work and then make the things that they need to sustain their lives. Better now than later.
Any new Greek government freshly printed paper money (Drachmas after Greek bankruptcy) would not be honored to purchase anything in Greece or anywhere else. If the Greeks withdraw from the EU, they probably would still have to use US dollars and/or Euros for their daily business operations, retail and wholesale.
If the Greeks really wanted to reverse their economic situation, then they would industrialize and start working at jobs that that create new national wealth, and stop borrowing money to pay for their government jobs that only consume the existing privately held Greek national wealth.
3
In some ways this reminds me of our own housing bubble. Our Government subsidized the banks while allowing debtor house owners lose their homes. The poor and middle class took it on the neck while the big entities, the banks and corporations, went off scott free. It was completely unfair here and it is no better for Greece.
Perhaps for Greece the best option would to stop paying its debt now deferring it to say ten years in the future freezing its debt at where it is. If the European banks don't like this well perhaps Greece should withdraw from the Euro zone and print its own money once again. Yes, this would be difficult for everyone and may spell the death of the Euro zone, but the suffering of the Greek people will only become deeper unless something drastic is done.
Perhaps for Greece the best option would to stop paying its debt now deferring it to say ten years in the future freezing its debt at where it is. If the European banks don't like this well perhaps Greece should withdraw from the Euro zone and print its own money once again. Yes, this would be difficult for everyone and may spell the death of the Euro zone, but the suffering of the Greek people will only become deeper unless something drastic is done.
7
Robert Demko
"Yes, this would be difficult for everyone and may spell the death of the Euro zone, but the suffering of the Greek people will only become deeper unless something drastic is done."
Robert dear boy, Greek withdrawal would cause barely a ripple in the zone. However, your remedy of a reversion to Drachmas will push their borrowing costs into the 20's (their 3 year bond closed today at nearly 20% on just the fear of a default); all their imports will either go onto COD or the cost of import insurance and hence the cost of the product will rocket; all Greek assets and savings (that haven't already left the country) will probably be halved in value; all their private debt for everything from hotel towels to construction machinery is denominated in hard currencies that will have to be settled in devalued drachmas. Believe me the current suffering of the Greek people which I suspect is somewhat exaggerated will be as nothing by comparison with a default and Grexit.
"Yes, this would be difficult for everyone and may spell the death of the Euro zone, but the suffering of the Greek people will only become deeper unless something drastic is done."
Robert dear boy, Greek withdrawal would cause barely a ripple in the zone. However, your remedy of a reversion to Drachmas will push their borrowing costs into the 20's (their 3 year bond closed today at nearly 20% on just the fear of a default); all their imports will either go onto COD or the cost of import insurance and hence the cost of the product will rocket; all Greek assets and savings (that haven't already left the country) will probably be halved in value; all their private debt for everything from hotel towels to construction machinery is denominated in hard currencies that will have to be settled in devalued drachmas. Believe me the current suffering of the Greek people which I suspect is somewhat exaggerated will be as nothing by comparison with a default and Grexit.
3
What can the Greeks grow or manufacture to export product wise in order to get money from outside of their nation to be inside their nation as national wealth?
This privately held Greek wealth would then be available for confiscation by the government, instead of borrowing money, to pay for Greek government activities.
Maybe the Greeks could grow and export grapes, wine, and raisins to create privately owned national wealth that would be subject to taxation.
Why should the EU citizens continue to allow the Greek citizens to live off of the money that citizens in other EU nations loan to the Greek government in order to continue paying for the bloated Greek government payrolls and other activities instead of Greek citizens working in some dirty factory to create privately owned wealth that could be subject to Greek government confiscation via taxes to pay for Greek government activities?
This privately held Greek wealth would then be available for confiscation by the government, instead of borrowing money, to pay for Greek government activities.
Maybe the Greeks could grow and export grapes, wine, and raisins to create privately owned national wealth that would be subject to taxation.
Why should the EU citizens continue to allow the Greek citizens to live off of the money that citizens in other EU nations loan to the Greek government in order to continue paying for the bloated Greek government payrolls and other activities instead of Greek citizens working in some dirty factory to create privately owned wealth that could be subject to Greek government confiscation via taxes to pay for Greek government activities?
1
The beginning of the end for austerity in Europe is on the horizon. Sentiment is beginning to shift and the proof is in the pudding: US economy vs European economy.
No doubt the austerians will go kicking and screaming with the shift in the view. But they will have to accede to the demands of creditor nations if the union is to hold. The wisdom of Krugman, Carney and others has proved invaluable. And much thanks must go to the Greeks for finally saying "enough is enough".
Amazing how stupidity can still rule the day for so long. We see a glorious example of it in the nation's capital where the austerian party now is in control of Congress. 2016 election will change that.
No doubt the austerians will go kicking and screaming with the shift in the view. But they will have to accede to the demands of creditor nations if the union is to hold. The wisdom of Krugman, Carney and others has proved invaluable. And much thanks must go to the Greeks for finally saying "enough is enough".
Amazing how stupidity can still rule the day for so long. We see a glorious example of it in the nation's capital where the austerian party now is in control of Congress. 2016 election will change that.
7
Austerity in Europe means that EU "nanny state" nations must limit their expenses to the taxes that they collect from their working citizens, and stop paying for their government activities with "government credit cards."
5
Something which propably a lot commenters don't realize, greece is indebted to all european nations, more or less. A haircut would hit france, italy, spain alike.
I am not sure if all, if any, of these countries is willing to face a haircut.
I am not sure if all, if any, of these countries is willing to face a haircut.
1
I would be willing to bet that the average citizen of Italy, France, and Spain doesn't care a fig for the small amount of debt that their nations hold of Greece. Indeed, they are probably rooting the new government in Greece on.
3
But the primary debtholders are in Germany, yes?
Worse still, if Greece gets another bailout on top of its past bailouts, that precedent will be seized on by, say, Portugal, Spain, Italy, and so on.
And for what? The Greeks have shown they aren't serious about fumigating their economy. So it will just be more money down a rathole.
And for what? The Greeks have shown they aren't serious about fumigating their economy. So it will just be more money down a rathole.
1
Greece has been consigned to debtor's prison.
This is government of, for, and by the rich. It does no good in the grand scheme.
We need economies that work for all, not just a select few.
As PK often says, the beatings will continue until morale improves.
This is government of, for, and by the rich. It does no good in the grand scheme.
We need economies that work for all, not just a select few.
As PK often says, the beatings will continue until morale improves.
5
Grove:
It is no coincidence that as soon as Syriza's electoral victory was anticipated, tax collections -- always low -- fell even lower. Evidently the "select few" know that under Syriza it will be back to corruption as usual.
It is no coincidence that as soon as Syriza's electoral victory was anticipated, tax collections -- always low -- fell even lower. Evidently the "select few" know that under Syriza it will be back to corruption as usual.
1
"[H]ow is that consistent with the values of what is supposed to be an association of sovereign, democratic nations?"
It isn't. Just as the programs forced from outside aren't, which concern(ed) other countries like Spain as well, or the "checks" of fiscal budgets from European side, which concerns all and sundry of the Euro countries.
But it's a bit ridiculous to ask that question now: All proceducres in the context of the Euro are in stark contradiction to sovereignty and democracy, and quite often consciously so. Remember that the Euro should enforce political union. How is "enforcing" a "union" anything but an attack at democratic legitimized institutions? This motive runs like a thread through the whole Euro project: Creation of the Euro contrary to reason, forcing Germany in against popular opposition, breach and cancellation of all stability conditions first by Germany and France, keeping Greece in the Euro despite illegal entrance, breach of the no-bail-out condition and formation of the rescue fund - each of these measures is profoundly contradictory to the "core values" of democracy and rule of law.
It would be a surprise if that would stop now.
I don't think that the EC won't let get Tsirpas away with his refusal - that just would be to encouraging for other countries. But I'm seriously grateful that with Tsirpas, eventually one European leader does in fact heed what his electorate expects him to do. Who knows - perhaps one day others might copy that?
It isn't. Just as the programs forced from outside aren't, which concern(ed) other countries like Spain as well, or the "checks" of fiscal budgets from European side, which concerns all and sundry of the Euro countries.
But it's a bit ridiculous to ask that question now: All proceducres in the context of the Euro are in stark contradiction to sovereignty and democracy, and quite often consciously so. Remember that the Euro should enforce political union. How is "enforcing" a "union" anything but an attack at democratic legitimized institutions? This motive runs like a thread through the whole Euro project: Creation of the Euro contrary to reason, forcing Germany in against popular opposition, breach and cancellation of all stability conditions first by Germany and France, keeping Greece in the Euro despite illegal entrance, breach of the no-bail-out condition and formation of the rescue fund - each of these measures is profoundly contradictory to the "core values" of democracy and rule of law.
It would be a surprise if that would stop now.
I don't think that the EC won't let get Tsirpas away with his refusal - that just would be to encouraging for other countries. But I'm seriously grateful that with Tsirpas, eventually one European leader does in fact heed what his electorate expects him to do. Who knows - perhaps one day others might copy that?
2
Where is it written that democratic nations don't have to pay their debts?
1
For Morality of Usury one must consult David Brooks, our modern day sociologist, moralist, psychologist, philosopher, political scientist, and all around polymath.
I'm not much of a polymath, but in my humble opinion, usury, to the extent it now seems legit, is in and of itself turgid.
I'm not much of a polymath, but in my humble opinion, usury, to the extent it now seems legit, is in and of itself turgid.
2
True.
Usury is usury, and should be totally unacceptable in any case.
It appears that it is acceptable when those who decide to yse it benefit from it.
Never trust anyone around money ! !
It brings to mind Congress voting on their own raises.
JUST PLAIN WRONG
Usury is usury, and should be totally unacceptable in any case.
It appears that it is acceptable when those who decide to yse it benefit from it.
Never trust anyone around money ! !
It brings to mind Congress voting on their own raises.
JUST PLAIN WRONG
3
"Let Greece run smaller but still positive surpluses, which would relieve Greek suffering, and let the new government claim success, defusing the anti-democratic forces waiting in the wings." The problem with this solution is that it would allow a left wing government to claim economic success and I can't see the powers-that-be in the finance world ever letting that happen.
4
To root out corruption the EU needs an area wide tax system with a collection agency. Then, French or Spanish auditors would check the sales and/or income statements of Greek and Italian business. The income tax in the USA required a constitutional amendment. An EU wide sales tax might be possible under existing law.
The ECB should buy the Greek debt. The ECB could hold the debt on any terms it chose. The ECB could buy national debt based on a formula (debt to GDP or unemployment rate) thus, not favoring Greece, but as a EU stimulus measure.
The ECB should buy the Greek debt. The ECB could hold the debt on any terms it chose. The ECB could buy national debt based on a formula (debt to GDP or unemployment rate) thus, not favoring Greece, but as a EU stimulus measure.
1
I think that in light of what the Greeks have contributed to the world culture they should be forgiven this debt…even if they never make another contribution their impact is so historically enormously significant they should get a pass. Think about what life was like in ancient Europe compared to life in the Golden Age of Greece…..Europeans were primitive tribes while the Greeks invented an advanced society of thinkers, philosophers, artists, etc …..so they deserve a break.
9
"...Greece has actually made great progress in regaining competitiveness; wages and costs have fallen dramatically..." - a result of austerity?
2
The truth, however, is that the great bulk of the money lent to Greece has been used simply to pay interest and principal on debt.
----------------------------------------------------------------------
Well, without the 'great bulk of money' lent to Greece, the lenders would have called the loans and bankrupted the nation, and put it out of its misery. You also say that nobody believes Greece can fully repay the debts it has taken on and that loans must be reduced in value or forgiven.
How about you put off spending like drunk sailor for another day, pay off your loans, and talk about not living austerely, Greece? Ditto for your cosideration, professor Krugman.
----------------------------------------------------------------------
Well, without the 'great bulk of money' lent to Greece, the lenders would have called the loans and bankrupted the nation, and put it out of its misery. You also say that nobody believes Greece can fully repay the debts it has taken on and that loans must be reduced in value or forgiven.
How about you put off spending like drunk sailor for another day, pay off your loans, and talk about not living austerely, Greece? Ditto for your cosideration, professor Krugman.
2
Can I suggest that you read the article next time? It clearly states that Greece has, a) chopped spending, b) chopped real wages, and is using whatever it gets from the World Bank simply to service debt.
Or as Krugman pretty much puts it, the World Bank might's well just announce that they're sending aid to very large banks, write "Pay to the Order of Deutschebank," on the checks, and save the admin costs on oretending itherwise.
Or as Krugman pretty much puts it, the World Bank might's well just announce that they're sending aid to very large banks, write "Pay to the Order of Deutschebank," on the checks, and save the admin costs on oretending itherwise.
2
The 1948 Universal Declaration of Human Rights gave flesh to FDR's freedom from want in the following economic rights:
Article 23.
• (1) Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.
• (2) Everyone, without any discrimination, has the right to equal pay for equal work.
• (3) Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.
• (4) Everyone has the right to form and to join trade unions for the protection of his interests.
Article 24.
• Everyone has the right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay.
Article 25.
• (1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
In the plutocratic U.S. these economic human rights are entirely denied, but they have found embodiment in Europe.
The Syriza government was elected to immediately stop the worst of human suffering. It will and must follow its mandate disregarding the Germans.
Article 23.
• (1) Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.
• (2) Everyone, without any discrimination, has the right to equal pay for equal work.
• (3) Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.
• (4) Everyone has the right to form and to join trade unions for the protection of his interests.
Article 24.
• Everyone has the right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay.
Article 25.
• (1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
In the plutocratic U.S. these economic human rights are entirely denied, but they have found embodiment in Europe.
The Syriza government was elected to immediately stop the worst of human suffering. It will and must follow its mandate disregarding the Germans.
9
Well, if it was only about Greece...
I agree that Greeks can never pay their debts.
If Greece is relieved of their debt someone has to pay ... and not only Germany.
What about Slovakia ?
Their rents and per-capita income is less than in Greece.
They ask why they should pay for the 'rich' Greeks.
What about Ireland and Portugal who kept their promises ?
They will see it as liars rewarded for not fulfilling their promises.
So don't forget the big picture.
And be honest...
Even if they are relieved does anybody think they will
get a proper balanced budget with the new government ???
I don't think so...
I agree that Greeks can never pay their debts.
If Greece is relieved of their debt someone has to pay ... and not only Germany.
What about Slovakia ?
Their rents and per-capita income is less than in Greece.
They ask why they should pay for the 'rich' Greeks.
What about Ireland and Portugal who kept their promises ?
They will see it as liars rewarded for not fulfilling their promises.
So don't forget the big picture.
And be honest...
Even if they are relieved does anybody think they will
get a proper balanced budget with the new government ???
I don't think so...
6
Mr. Krugman,
Please, please share some thoughts about the Tans Pacific Partnership. It has a lot of progressives very concerned.
Please, please share some thoughts about the Tans Pacific Partnership. It has a lot of progressives very concerned.
6
Does Germany want to impose Treaty of Versailles terms on the rest of Europe? Well, Keynes called it a Carthaginian peace. It didn't work then, and it won't work now. Unless, of course, you actually want to revisit what happened after the reparations mess ended.
4
With this thinking, Krugman must also want to bail out Detroit.
And is it "Pay up or we'll destroy your banks" or "Pay up, or your profligate ways will lead to runs on your banks and their demise. And you'll find few who'll lend you any more for many years to come."
I agree that Greece cannot pay its debt: either Greece will exit the EU (leaving the EU holding the bag), or they will negotiate a reduction in Greece's debt, leading to other countries in the EU to do what Greece has done, and get the EU to subsidize them.
And is it "Pay up or we'll destroy your banks" or "Pay up, or your profligate ways will lead to runs on your banks and their demise. And you'll find few who'll lend you any more for many years to come."
I agree that Greece cannot pay its debt: either Greece will exit the EU (leaving the EU holding the bag), or they will negotiate a reduction in Greece's debt, leading to other countries in the EU to do what Greece has done, and get the EU to subsidize them.
1
Don't you remember? Obama did bail out the Detroit Auto Industry in 2008-9, and saved thousands of Jobs. That worked really well.
5
I was advoating bankruptcy for Greece gov and writing off all her debt in Krugman blog. I was puzzled as to why this isn't an option.
Now I know: it is the fear of a bank run.
Thank you for clearing this up for us.
Now I know: it is the fear of a bank run.
Thank you for clearing this up for us.
3
The world is over leveraged. Total debt in the US is 60 trillion or roughly 3.5 times national income (GDP). This scenario is repeated throughout the industrialized world. Krugman's answer is ALWAYS borrow more AND punish the lenders, ( i.e. savers) through zero interest rates on our bank deposits and treasury securities, central bank orchestrated inflation which drives real interest rates below zero, and now through calling for outright default.
3
Tell me: what'd that debt buy us? besides ever-expanding militaries, bigger and bigger corporations, urban sprawl, and the like?
Where'd the debt originating? banks that did things like bet against the people they lpaned money to, yes?
Where'd the debt originating? banks that did things like bet against the people they lpaned money to, yes?
2
The United States share the US dollar. Money flows from richer parts like New York to poorer parts like Mississippi via the taxation system. The UK shares the pound sterling. Money flows from richer parts like the south east to poorer parts like the north west via the taxation system. If you want the Euro, Germany subsidizing Greece goes with the territory. If you don't like it, dump the Euro.
3
Write off existing loans so that Greece can take on new loans from the ECB?
2
More borrowed money (loans or the proceeds from freshly printed paper Greek Sovereign Treasury bond sales) to the Greek or the other PIIGS governments is like giving a recovering alcoholic more booze on credit by allowing the Greek government to borrow more money to buy booze on credit by increasing his credit limit at his favorite liquor store charge account.
Why should other European Nations work hard every day to create taxable wealth and then continuously loan some of that money to the Greek government so that Greek citizens can live off of their bloated government payrolls and social safety nets without the Greek citizens working at all to create any taxable wealth in the Greek Nation???
Why should other European Nations work hard every day to create taxable wealth and then continuously loan some of that money to the Greek government so that Greek citizens can live off of their bloated government payrolls and social safety nets without the Greek citizens working at all to create any taxable wealth in the Greek Nation???
2
Prof PK "Can Europe get past the myths and moralizing, and deal with reality in a way that respects the Continents core values?"
Interesting. The question being asked in many European capitals -- particularly Berlin -- is the other way around: Can Greece's corrupt political system and anti-business economic model be reformed in order to fit eurozone requirements?
Interesting. The question being asked in many European capitals -- particularly Berlin -- is the other way around: Can Greece's corrupt political system and anti-business economic model be reformed in order to fit eurozone requirements?
7
Helllo, Uzi,
This is why Syriza won the elections, to do exactly those things.
You can lear about Syriza's proposals by going to Yanis Varoufakis' (the new finance minister) writings:
http://yanisvaroufakis.eu/euro-crisis/modest-proposal/
Best Regards,
Anna
This is why Syriza won the elections, to do exactly those things.
You can lear about Syriza's proposals by going to Yanis Varoufakis' (the new finance minister) writings:
http://yanisvaroufakis.eu/euro-crisis/modest-proposal/
Best Regards,
Anna
1
Thanks to Paul Krugman and the NYTimes for printing commentarieshas that expand a one-column soup-starter into a winter feast.
This column and commentaries in particular open new horizons by remembering that forgiving debts has been the turning point of success for the German Nation in the past. The new horizon is that by forgiving Greek debt, obviously Greece will thrive, and more, this thought opens the door to examining the intelligence of forgiving debts generally: consider forgiving the US National Debt? the private debts of the US Citizens?
Yes, we need to do the math on the potential gains of forgiving debts. And I am sure that the math will be done either by Dr. Krugman or by one of us in the Krugman Column Commentaries.
This column and commentaries in particular open new horizons by remembering that forgiving debts has been the turning point of success for the German Nation in the past. The new horizon is that by forgiving Greek debt, obviously Greece will thrive, and more, this thought opens the door to examining the intelligence of forgiving debts generally: consider forgiving the US National Debt? the private debts of the US Citizens?
Yes, we need to do the math on the potential gains of forgiving debts. And I am sure that the math will be done either by Dr. Krugman or by one of us in the Krugman Column Commentaries.
I think it is a low blow to bring up World War II into this and Germans are rightly upset about this.
Obviuosly, Germany declared bankruptcy in 1945 and wrote of its debt and faced the consequences..Greece can do the same now.
Really, do we want to go this route? Maybe Germany can bring up the Napoleonic war and the 30 year war during which 30% of the central Europeans perished.
Obviuosly, Germany declared bankruptcy in 1945 and wrote of its debt and faced the consequences..Greece can do the same now.
Really, do we want to go this route? Maybe Germany can bring up the Napoleonic war and the 30 year war during which 30% of the central Europeans perished.
4
Paul skips over why 25% of Greece is unemployed (understated, by the way, HALF of the young, able-bodied population does not have a job.) It's because for decades, the country has run a leftist structure with cushy public jobs, pensions and an economyrun on unsustainable spending. Long term unemployment is at 20%, because they're a society that does not honor hard work, and is rich with handouts from the pocketbooks of an ever decreasing productive segment of their society.
The fall in living standards Professor Krugman bemoans, is a direct result of that. The sacrifices the public are going to have to continue to make, are payment for services already rendered and provided by the creditors.
As Thatcher said, at some point, this type of society runs out of other people's money. Now Paul backhandedly demonizes the people that gave Greece a chance to change their ways? Give me a break! Austerity is the only way to retrain the Greeks on how to avoid this situation again! Get those young kids back to work, and teach them to understand that the way to assure prosperity is not via anything shared, but by taking care of yourself and family, and working hard to do so.
Personally, I think forgiveness of the debt or interest Greece agreed to pay is rewarding bad behavior. We need to stop Paul's "shared prosperity," because it's just a cute codeword for the statist larceny that seizes wealth from others, to justify our leadership's promises that can't be kept.
The fall in living standards Professor Krugman bemoans, is a direct result of that. The sacrifices the public are going to have to continue to make, are payment for services already rendered and provided by the creditors.
As Thatcher said, at some point, this type of society runs out of other people's money. Now Paul backhandedly demonizes the people that gave Greece a chance to change their ways? Give me a break! Austerity is the only way to retrain the Greeks on how to avoid this situation again! Get those young kids back to work, and teach them to understand that the way to assure prosperity is not via anything shared, but by taking care of yourself and family, and working hard to do so.
Personally, I think forgiveness of the debt or interest Greece agreed to pay is rewarding bad behavior. We need to stop Paul's "shared prosperity," because it's just a cute codeword for the statist larceny that seizes wealth from others, to justify our leadership's promises that can't be kept.
5
I guess this is what Prof. Krugman recommends to us here in the USA as well. Take credits as much as we can, at the end not pay them back. Well, it is the creditors' fault, not ours, they should have known better.
4
I went to Greece for a Gyro
paid for it with 7 Euros
Merkel frowned
while I chowed down
and said Krugman was my hero
paid for it with 7 Euros
Merkel frowned
while I chowed down
and said Krugman was my hero
5
"It’s true that Greece (or more precisely the center-right government that ruled the nation from 2004-9) "
Interesting distinction. Perhaps Obama, the members of the Senate and Congress who passed the ACA should be the ones on the hook for the increased costs of some insurance policies as well as those received medical coverage for "free".
"voluntarily borrowed vast sums. It’s also true, however, that banks in Germany and elsewhere voluntarily lent Greece all that money..."
Yes, "lent Greece all that money". The next step will be to not loan Greece anymore money.
Or will you say they are obligated to "voluntarily" loan Greece more money?
Interesting distinction. Perhaps Obama, the members of the Senate and Congress who passed the ACA should be the ones on the hook for the increased costs of some insurance policies as well as those received medical coverage for "free".
"voluntarily borrowed vast sums. It’s also true, however, that banks in Germany and elsewhere voluntarily lent Greece all that money..."
Yes, "lent Greece all that money". The next step will be to not loan Greece anymore money.
Or will you say they are obligated to "voluntarily" loan Greece more money?
2
One other thing worth mentioning: the Greeks w the help of at least one American banking company, deliberately deceived lenders for its loans that financed overspending. I.e., the Greek leaders and their American banking allies deserve to be penalized. Alas, the American banking co went under as I understand it but it is not clear to me that the bank leaders were ever personally held responsible....nor is it clear that the Greek leadership was ever tried for fraud. To me, part of what needs to happen is that Greece needs a commitment to rooting out corruption. It appears that Greece has reduced egregious thinks like early retirement at gov't expense, short work weeks, and bloated gov't payrolls. Before I would ask the creditors to take another haircut, the creditors should demand that the kinds of things that bloated the Greek gov't spending have been resolved. That should then allow a reasonable calculation of what is payable and an adjustment in how much the Greek debt can be written down.
The tough side of this is as seems all too common is that the lenders who want a piece of the heart are too brutal, heartless. The reality side is that although the Greeks have undoubtedly made progress, what is not clear is whether enough progress has been made.
Because Greek politicians of the past bought votes by gov't largess, it would be a sad thing if the new Greek gov't again deceived its people into thinking that life is an easy ride at the expense of others.
The tough side of this is as seems all too common is that the lenders who want a piece of the heart are too brutal, heartless. The reality side is that although the Greeks have undoubtedly made progress, what is not clear is whether enough progress has been made.
Because Greek politicians of the past bought votes by gov't largess, it would be a sad thing if the new Greek gov't again deceived its people into thinking that life is an easy ride at the expense of others.
2
One other point that is truly dangerous, long-term, for the U.S. and NATO: the current situation drives Greece right into Russia's welcoming embrace.
There is an alternate economy, as well as a competing currency foundation, forming outside the West. It is forming as a union among countries who see the value of their coordinated economic interests. China and Russia are at the core.
Every type of abrasion among Western nations drives more of the world towards this new core, and shrinks the economic, and therefore political and globs influence, of a stagnant and rapidly declining West.
We are at the precipice, and pushing those on the margin towards a future that is quickly leaving us behind. Bravo for them; and further woe to us.
There is an alternate economy, as well as a competing currency foundation, forming outside the West. It is forming as a union among countries who see the value of their coordinated economic interests. China and Russia are at the core.
Every type of abrasion among Western nations drives more of the world towards this new core, and shrinks the economic, and therefore political and globs influence, of a stagnant and rapidly declining West.
We are at the precipice, and pushing those on the margin towards a future that is quickly leaving us behind. Bravo for them; and further woe to us.
3
The cost of public borrowing, and therefore the ongoing cost of developing educational institutions, transportation infrastructure, and other public capital goods is a function in part of the risk premium bondholders require to invest in government bonds rather than in other assets. Realistically, that risk premium is calculated largely on the basis of loss experience, that is, in relation to the global and regional history of defaults and "haircuts".
Mr Krugman weaves and dodges and so obscures what is in this light an absolutely solid ethical concern that taxpayers and voters of a country honour their obligation to repay debts incurred by their own governments.
Future tightening in public debt markets caused by a deterioration in loss experience inflicted by sovereign deadbeats would not be conducive to the Keynesian instruments that Krugman is sure to favour for managing future economic crises down the line. Krugman needs to decide where he stands concerning the important obligations that underwrite such options.
Mr Krugman weaves and dodges and so obscures what is in this light an absolutely solid ethical concern that taxpayers and voters of a country honour their obligation to repay debts incurred by their own governments.
Future tightening in public debt markets caused by a deterioration in loss experience inflicted by sovereign deadbeats would not be conducive to the Keynesian instruments that Krugman is sure to favour for managing future economic crises down the line. Krugman needs to decide where he stands concerning the important obligations that underwrite such options.
3
Correct me if I'm wrong, but isn't one of the rules of gambling, "don't bet more than you can afford to lose". If you can't afford to lose, you can't afford to play, save and don't invest. Your three paragraphs are mere sophistry, from someone who makes money from usury.
I think PK gets at a way of thinking that should prevail as a resolution to the Greek crisis: rather than seek justice for the past, seek a way to build a better future.
Though not a perfect analogue, 20th century Europe offers some useful lessons: Germany's WWI reparations vs. post-WWII Marshall Plan.
Though not a perfect analogue, 20th century Europe offers some useful lessons: Germany's WWI reparations vs. post-WWII Marshall Plan.
58
John Farmer
Are you saying that the US taxpayer should pay for the corrupt Greek Government over borrowing and over spending?
Are you saying that the US taxpayer should pay for the corrupt Greek Government over borrowing and over spending?
1
Let's say that Greeks wanted or needed to leave the EU...could there be a better time? Almost 40% of Greek imports are oil. With the price of oil way down, financing imports of it might be relatively less of a struggle now than at sometime in the future.
And, with tourist season just a few months from full swing, it might increase its attractiveness as a tourist destination (due to lower value of its reinstated Drachma it will become relatively cheaper than other places). More tourism (one of its leading "exports") would increase Greece's domestic employment and enhance its balance of trade current account.
Sounds like sooner or later there is a debt bullet to bite....For the Greeks, there may be no time like the present....just sayin'....
And, with tourist season just a few months from full swing, it might increase its attractiveness as a tourist destination (due to lower value of its reinstated Drachma it will become relatively cheaper than other places). More tourism (one of its leading "exports") would increase Greece's domestic employment and enhance its balance of trade current account.
Sounds like sooner or later there is a debt bullet to bite....For the Greeks, there may be no time like the present....just sayin'....
1
Bravo to Professor Krugman! I really wish Andrea Merkel and the rest of the troika would read more of him and, more importantly, follow his advice. What has happened to Greece is more than a tragedy, it is immoral, and I thank Prof Krugman for pointing out that Germany's policies actually run counter to the European project. But, then again, they have for more than a century. The only winners in the current scenario are Germany and the banks...
1
Greece needs that "credit counselor" type action. Pay off the principal and forgive the interest. Make it responsible and every one goes home. Otherwise the Greeks do what they must and just says we are out of the Euro and goes it's own way. Yes it will hurt the banks, but the government can help. Who really knows what the result will be, but you can't tell Greece they will be in this for 50 years and think that's a solution.
30
Bravo to Mr. Krugman. As an ex-employee of one of the large financial institutions on Wall Street and watching the familiar banking antics across the country and the globe for the past years since 2000, I say he nails it.
5
Two comments on Mr. Krugman's analysis:
First, as I recollect, a duly elected Greek government misstated its finances in the process of initially running up its debt. The crisis developed when a new government corrected the country's financial statements and creditors panicked. Misstating your finances to obtain a loan is considered loan fraud around here, and it appears that the Greek government was guilty of that.
Second, tax collection in Greece by all accounts is conducted poorly. Creditors certainly have a right to request improvements in tax collection as a condition to any relief. The one sided picture painted by Mr. Krugman in his column of rapacious creditors exploiting poor, innocent Greeks is misleading.
First, as I recollect, a duly elected Greek government misstated its finances in the process of initially running up its debt. The crisis developed when a new government corrected the country's financial statements and creditors panicked. Misstating your finances to obtain a loan is considered loan fraud around here, and it appears that the Greek government was guilty of that.
Second, tax collection in Greece by all accounts is conducted poorly. Creditors certainly have a right to request improvements in tax collection as a condition to any relief. The one sided picture painted by Mr. Krugman in his column of rapacious creditors exploiting poor, innocent Greeks is misleading.
5
Banks were bailed out and had their debts restructured. And so why does Greece not get the same treatment as big banks?
Germany was provided no debt relief in the 20s and 30s. Look what happened there. Debt relief and restructuring is done all the time. So please stop with all the non-sensical "moralizing".
Germany was provided no debt relief in the 20s and 30s. Look what happened there. Debt relief and restructuring is done all the time. So please stop with all the non-sensical "moralizing".
4
Why should the Greeks work when they can live off of borrowed government payroll money without doing any work to create the things that are required to sustain their lives.
If people stop buying Greek Bonds, then maybe the Greeks will have to re-industrialize and create national wealth that would be subject to government confiscation instead of living off of borrowed money!
If people stop buying Greek Bonds, then maybe the Greeks will have to re-industrialize and create national wealth that would be subject to government confiscation instead of living off of borrowed money!
3
Professor Krugman is correct. As a young lawyer, I was involved in a few big Chapter 11 bankruptcies. While bankruptcy regimes everywhere are solicitous of the creditors being paid in full if possible, bankruptcy courts everywhere know that a successful reorganization requires reducing creditors' claims to an amount of payment that leaves a viable entity; if that can't be done liquidation is the only option.
But we're talking about a nation, Greece, with real people, who must have all that makes a decent life: food, shelter, jobs, healthcare, a functioning economy, at least hope for a prosperous future, etc., so liquidation isn't an option, which means that we must have a plan for a viable Greece, one that provides the foregoing benefits for its people. That means that Greece's debts must be equitably discharged until reduced to an amount that a viable Greece can pay, which means that some or all of Greece's creditors must, according to principles of equity and priority, see their debts discharged and suffer losses. Either that or Greece in slavery and misery for years.
Reducing Greece's debts to what leaves a viable Greece is equitable, because lending is always a risk. The creditor banks took that risk and lost are now entitled to no more than what a viable Greece can pay; they are not entitled to recover all of their debt after making bad and improvident and imprudent loans to Greece, at the expense of turning Greeks into miserable slaves so as to make them whole.
But we're talking about a nation, Greece, with real people, who must have all that makes a decent life: food, shelter, jobs, healthcare, a functioning economy, at least hope for a prosperous future, etc., so liquidation isn't an option, which means that we must have a plan for a viable Greece, one that provides the foregoing benefits for its people. That means that Greece's debts must be equitably discharged until reduced to an amount that a viable Greece can pay, which means that some or all of Greece's creditors must, according to principles of equity and priority, see their debts discharged and suffer losses. Either that or Greece in slavery and misery for years.
Reducing Greece's debts to what leaves a viable Greece is equitable, because lending is always a risk. The creditor banks took that risk and lost are now entitled to no more than what a viable Greece can pay; they are not entitled to recover all of their debt after making bad and improvident and imprudent loans to Greece, at the expense of turning Greeks into miserable slaves so as to make them whole.
7
Any other plan for dealing with Greece's debts would not only place the European project in the greatest jeopardy; it would also enshrine a regime that will guarantee future imprudent and improvident lending and thus ensure future economic crisis, because, if creditors know that now and in the future they can make whatever imprudent loans they wish and that some government's people will be forced to make them whole, they can lend with no fear of risk, and that will lead to what economists and lawyers call moral hazard, that is, they will be able to lend protected from any significant loss and thus ensured of their profits.
No sound legal system can permit such a thing without inviting economic disaster which its people will have to pay for. Governments and their people are obliged to pay no more in a economic crisis than what is necessary to maintain a sound banking system; no debtor nation and its people are obliged to repay more debts than what they can pay while maintaining a decent standard of living and making the investments in their people and capital which are necessary for a prosperous future; all losses beyond that equitably belong to and must be paid by the creditors to prevent moral hazard's imprudent lending and to gives debtors a decent life and hope for the future.
So another of the Eurozone's fatal flaws is that its regime protects creditors from their equitable share of losses from their bad loans, causing moral hazard and inequitable suffering.
No sound legal system can permit such a thing without inviting economic disaster which its people will have to pay for. Governments and their people are obliged to pay no more in a economic crisis than what is necessary to maintain a sound banking system; no debtor nation and its people are obliged to repay more debts than what they can pay while maintaining a decent standard of living and making the investments in their people and capital which are necessary for a prosperous future; all losses beyond that equitably belong to and must be paid by the creditors to prevent moral hazard's imprudent lending and to gives debtors a decent life and hope for the future.
So another of the Eurozone's fatal flaws is that its regime protects creditors from their equitable share of losses from their bad loans, causing moral hazard and inequitable suffering.
2
German creditors are not going to let Greece go that easily. The only way that the New Leftist Government elected by the Greeks with a mandate is to think about Greeks, and Greeks only. If they are going to be ostracized from the EU, so be it. Just like the new Italian Prime Minister who has decided to go against the grain, just like the Germans when it suits them, so should the Greeks. Austerity has almost killed Greece. With unemployment rates at 25-27% it is on the verge of losing out a generation or two of Greeks. Time for the New Government to make some selfish, hard decisions.
4
Mr Krugman, have you ever proposed a solution to any economic problem that did not include more government spending and/or a "hair cut" for some creditor?
3
Sadly Dr. Krugman continues to miss the point about Greece. This is not about debt, it's about continued efforts by the current Greek government to increase deficits, to freeze privatizations, increase the size of the public sector and continue the ways that actually brought Greece to this point. If they were to continue with the other parts of the program and simply negotiated a reduction in debt, Europe would probably agree to it. But they tie the reduction in debt which is a good goal with all the other things that come from the bad old days of state socialism, and I am not talking about mere redistribution here but having the state run large swaths of the economy. Even I, as a Greek do not want to see us go there. Better for the banks to go belly up and the economy to crater in one shot than to see it sink into a morass of the bad old way of doing things over a longer period of time.
4
Channeling Keynes, speaking after World War I, about the German reparations, with a bit of a paraphrase:
"Europe can whistle for the money they sent to Greece to rescue their banks back home."
Mythology serves to explain the way a puzzling world works, and also grows to reinforce one's perspective of that explanation. It is interesting that the two countries most celebrated for, and influenced by, their respective mythologies - Greece and Germany - are deadlocked over their myth-based explanations of the financial crisis.
"Europe can whistle for the money they sent to Greece to rescue their banks back home."
Mythology serves to explain the way a puzzling world works, and also grows to reinforce one's perspective of that explanation. It is interesting that the two countries most celebrated for, and influenced by, their respective mythologies - Greece and Germany - are deadlocked over their myth-based explanations of the financial crisis.
6
Some critics use the term "mafia capitalism," which, I think, is a fair description. If allowed to work in the shadows I have little doubt Germany et. al. would threaten to make Greece an example, the high-brow version of breaking kneecaps. Thank you, Paul Krugman, for adding your voice and attention to the matter and calling for humane policies.
7
Are you saying that Greece should not honor their debt repayment promises?
Would that make Gre3ce a dishonorable nation?
Would that make Gre3ce a dishonorable nation?
1
I have wondered about what forced Greek exit from the Euro would mean in terms of "disastrous economic and political consequences for consequences for Europe as a whole." I myself can only come up with nightmare scenarios for Europe and the Global economy, but I keep questioning my own expertise. What I would very much appreciate is for Prof. Krugman and his simialary qualified colleagues to at least provide best and worst case scenarios.
This seems especially important since the Rube-Goldberg Euro system was destined for collapse since its inception, and the system's inability to control fiscal policy has finally developed into a nearly terminal condition. The time has come when the EU must either 1. Come up with a mechanism for accommodating the fiscal problems of Greece; 2. Expel Greece; or 3. Face up to Greece leaving on its own terms. Given such grim alternatives, we really should have a specific understanding of whats at stake if the parties choose 1. or 2. above.
Recently, Prof, Krugman mentions the possibility of Grexit causing a run on Greek banks. Recently, a run on the banks of Cyprus caused considerable upset in the world's financial sector, but responsible action put out the fire. The Greek economy is however over ten times the size of Cyprus ($22 billion versus $267 billion). To me this means a far graver danger while the Germans are now more intransigent than ever. "We'll soon see," seems inadequate since the outcome will affect the US.
This seems especially important since the Rube-Goldberg Euro system was destined for collapse since its inception, and the system's inability to control fiscal policy has finally developed into a nearly terminal condition. The time has come when the EU must either 1. Come up with a mechanism for accommodating the fiscal problems of Greece; 2. Expel Greece; or 3. Face up to Greece leaving on its own terms. Given such grim alternatives, we really should have a specific understanding of whats at stake if the parties choose 1. or 2. above.
Recently, Prof, Krugman mentions the possibility of Grexit causing a run on Greek banks. Recently, a run on the banks of Cyprus caused considerable upset in the world's financial sector, but responsible action put out the fire. The Greek economy is however over ten times the size of Cyprus ($22 billion versus $267 billion). To me this means a far graver danger while the Germans are now more intransigent than ever. "We'll soon see," seems inadequate since the outcome will affect the US.
5
"It’s true that Greece (or more precisely the center-right government that ruled the nation from 2004-9) voluntarily borrowed vast sums. It’s also true, however, that banks in Germany and elsewhere voluntarily lent Greece all that money. We would ordinarily expect both sides of that misjudgment to pay a price."
When one 'voluntarily' borrows money, it is to be hoped that one does so with the expectation of repaying it. Otherwise, one is not borrowing but stealing. When one loans money, it is with the expectation that it will be repaid. Otherwise, it is not a loan but a gift.
If one cannot repay, one goes into bankruptcy and assets are divided among creditors to repay part of the debt. That is the price both sides pay for their misjudgment. If one chooses, however, not to repay that is fraud and legal actions are taken to force repayment.
There is nothing mythical about debt repayment, and analysis should take into account the moral hazard issue, whereby allowing Greece to duck out on debts it took on will only encourage the same behavior in the future.
When one 'voluntarily' borrows money, it is to be hoped that one does so with the expectation of repaying it. Otherwise, one is not borrowing but stealing. When one loans money, it is with the expectation that it will be repaid. Otherwise, it is not a loan but a gift.
If one cannot repay, one goes into bankruptcy and assets are divided among creditors to repay part of the debt. That is the price both sides pay for their misjudgment. If one chooses, however, not to repay that is fraud and legal actions are taken to force repayment.
There is nothing mythical about debt repayment, and analysis should take into account the moral hazard issue, whereby allowing Greece to duck out on debts it took on will only encourage the same behavior in the future.
7
In bankruptcy, in the US at least, there are also limits on which assets can be liquidated and the debtor goes on with some of his property. Alternately, the debtor reorganizes in order to pay off debts over a set amount of time and the creditors are usually forced to accept repayment of principal with reduced or no interest.
My current understanding of the situation is that Greece cannot afford to continue on its current course and withdrawal from the EU would be almost as bad for Greece and terrible for Europe. Krugman indicates Greece needs lower payments which probably means a cut in interest as well. This is a reasonable accommodation–good for all sides and fully in keeping with what happens in bankruptcies.
My current understanding of the situation is that Greece cannot afford to continue on its current course and withdrawal from the EU would be almost as bad for Greece and terrible for Europe. Krugman indicates Greece needs lower payments which probably means a cut in interest as well. This is a reasonable accommodation–good for all sides and fully in keeping with what happens in bankruptcies.
4
The point is that when you lend (1) you assume the risk in your interest, and (2) you are always free to not lend. Krugman is not advocating that borrowers get free of their obligations, but he is (correctly) pointing out that a transaction is a contract involving two parties and both assume risk.
4
two things about Greece: 1. Someone has said that their whole economy is about the same size as Dallas. Reducing sovereign debt, providing stimulus, or just changing some Greek and EU regulations to provide incentives for growth in the Greek private sector, where they would have a competitive advantage, is not that big a deal in terms of the overall EU economy. Call what we've seen a modern Trojan horse trick on the part of the Greeks, which the Germans resent; or resentment of German demands, remembering WWII, on the part of the Greeks. They should both get over this, embrace each other as partners in the E.U., and do the macro economics and incentives for private investment that work, if for no other reason, than to show that the EU stands for the strongest economy helping the smallest economy when necessary, and with any luck, to the mutual benefit of both.
Part of this is that the banks loaded up on Greek debt through a combination of a questionable trading scheme by GS and a failure to do due diligence. A 50% haircut on the most egregious loans would be in order, as well as credits from GS--say the $13 billion they still owe our Treasury from money laundered in the AIG bailout.
2. Greece started off with direct democracy (we now have representative democracy). I would suggest they try to bring it back by adding the ballot initiative process to their government, as well as embracing the "difference principle" of John Rawls, i.e. progressive taxation.
Part of this is that the banks loaded up on Greek debt through a combination of a questionable trading scheme by GS and a failure to do due diligence. A 50% haircut on the most egregious loans would be in order, as well as credits from GS--say the $13 billion they still owe our Treasury from money laundered in the AIG bailout.
2. Greece started off with direct democracy (we now have representative democracy). I would suggest they try to bring it back by adding the ballot initiative process to their government, as well as embracing the "difference principle" of John Rawls, i.e. progressive taxation.
2
I wish I could remember the name of the guest on CNBC this week who pointed out that those in Germany and elsewhere who say the Greeks don't deserve to be bailed out fail to remember that Germany did not deserve to be bailed out after WWII, but we did it anyway for their sake and ours.
11
Krugman's point about banks loaning money as in our own recession, viz. Countrywide and Fannie and Freddie in cahoots, and therefore being responsible in part for the unwise spending that resulted in the current ongoing "crisis" in Greece has merit. Another reader has pointed out that Germany was loaned money it did not repay post WWII. Is the decisive point then give Greece a break, Germany, or the Euro will not last. Should it?
2
The demolition of Greece by the EU, led by the Germans, is beyond bizarre. One has to suspect some sort of malicious motive at work. Iceland managed very nicely to come out from under by defaulting, so can Greece. As long as the euro remains their currency, and they remain in the EU, the euro banks will have to come round, and will probably be eager to jump in with both feet, both to prevent a contagion of bank distress, and because they will inevitably believe there is money to be made.
6
Krugman's one conclusion in this essay is very important the nature and immorality of problem.
Consider that a pathologic gambler ( such as Greece center right wing party , always right wing do these things in western world( republicans in White house ) ) and loaning money from the loan shark ( mafia). everybody knows that this trade is immoral because both side of the trade is felons.
Loan shark doesn't give money , if they cannot twist the arm or blackmail, In the same way pathetic gambler doesn't go and loan from normal sources.
As a conclusion: We have been all along aware of how Center right in Greece was corrupt and fraudulent.
we also learn during the 2008 as a last drop in the glass, World financial system is the worst loan shark in the world.
Yes Greece should honor the debt, but lets don't forget Banks who loan the money is also immoral and felons.
Entire scheme is immoral.
Consider that a pathologic gambler ( such as Greece center right wing party , always right wing do these things in western world( republicans in White house ) ) and loaning money from the loan shark ( mafia). everybody knows that this trade is immoral because both side of the trade is felons.
Loan shark doesn't give money , if they cannot twist the arm or blackmail, In the same way pathetic gambler doesn't go and loan from normal sources.
As a conclusion: We have been all along aware of how Center right in Greece was corrupt and fraudulent.
we also learn during the 2008 as a last drop in the glass, World financial system is the worst loan shark in the world.
Yes Greece should honor the debt, but lets don't forget Banks who loan the money is also immoral and felons.
Entire scheme is immoral.
6
The Troika 'lending' Greece the money to pay interest on the current debt is prestidigitation of the first order.
What is really sad is the people being fooled includes the holders of the Greek debt. Greece is producing and exporting less now then they could be if at full employment, so the real wealth involved in these transactions is wholly imaginary. Sure the debt holders are being paid but that is just numbers in a ledger. As we all know the underlying debt will never be paid back, including the new debt being generated to pay the interest, it is all just vapor-cash.
Where does the 'wealth' that the debt holders now have on their account balance come from? Why from the German man-in-the-street. It can come from nowhere else.
What is really sad is the people being fooled includes the holders of the Greek debt. Greece is producing and exporting less now then they could be if at full employment, so the real wealth involved in these transactions is wholly imaginary. Sure the debt holders are being paid but that is just numbers in a ledger. As we all know the underlying debt will never be paid back, including the new debt being generated to pay the interest, it is all just vapor-cash.
Where does the 'wealth' that the debt holders now have on their account balance come from? Why from the German man-in-the-street. It can come from nowhere else.
5
Krugman's column occasions me to reflect on a vision of markets, one that 95% of us take as a given, where winners and losers are created by the workings of some natural law of economics. The truth we know is different and more complicated. Markets are not the offspring of the gods, foreordained to reign with the rectitude and justice of a wise sovereign, but instead very much the creation of humans. How we design them determines how they will work, which should seem obvious enough. Not recognizing this though distorts reality profoundly and leads us to imagine markets are a game
which people buy into at birth, knowing and accepting the rules at infancy. Games by their very design create winners and losers, whereas if we give pause to reflect on how families and communities view the function of market forces its always to maximize personal wins and minimize personal loses. Markets according to this outlook are not meant to impartially sort, like some pin-striped referee, aggregate winners and losers. Rather they exist as tools to maximize the well being of individual human beings, one after another. The leaders of the Euro Zone and the ECB would do well to seriously ruminate on these points to help guide them in their negotiations with Greece and other debtor nations in the future.
which people buy into at birth, knowing and accepting the rules at infancy. Games by their very design create winners and losers, whereas if we give pause to reflect on how families and communities view the function of market forces its always to maximize personal wins and minimize personal loses. Markets according to this outlook are not meant to impartially sort, like some pin-striped referee, aggregate winners and losers. Rather they exist as tools to maximize the well being of individual human beings, one after another. The leaders of the Euro Zone and the ECB would do well to seriously ruminate on these points to help guide them in their negotiations with Greece and other debtor nations in the future.
9
i would go further. greece is a european vacation spot. it is the greek government that pays to keep all the ancient sites open and affordable for all those german and english tourists.
3
Why is the goal only "to make Greece an example to other borrowers?" Why isn't the goal also "to make Greece an example to other lenders?" Angela Merkel keeps saying she doesn't want German taxpayers' dollars going to bail out Greece, but isn't her real fear that German taxpayers' dollars would have to go to bail out the big German banks for their profligate lending if Greece isn't crucified on a cross of debt repayment? It's always the same story: the poor pay for their mistakes, but the 1% get bailed out for theirs. And the dividends keep flowing.
16
A review of the economic studies that justified the bailout might be in order, just to see if the assumptions made to justify the lending were reasonable at the time, and what level of risk was associated with the lending at the time. The lenders and the borrowers entered into a covenant agreement, the terms of which have proven onerous to the Greek economy, and need to be reconsidered in that light. Relegating Greece to a captive state status can't be good for future cooperation and prosperity of the people. Banks acting badly should be brought to account and take responsibility for their actions, otherwise the handling of risky ventures across the Eurozone will impose undo hardship on the general populations.
2
Today, most of Greek debt is held by European national banks, governments and the IMF, so the question now boils down to who is to take the hit for Greece's dud bonds: the taxpayers in Greece or those in the other EU-member states? Presently Greece is even paying a lower interest rate on its debt than Germany, which has a AAA rating, thanks to the help of the troika. That's more help than a state in the US can expect to receive from the other states in the Union. Oh, and by the way, Germany has exactly 2 votes in the 21-member board of the ECB that decides on policy. Something tells me that the other Euro-member countries are no more generous than Germany
5
"And I think the case we're making for that lending becomes a lot easier because the Greeks were actually irresponsible. The Greeks actually did behave badly, and so the political case for unlimited exposure to Greece is very hard to make. A much easier case to make is for Spain and then Portugal and Italy, all of which did nothing wrong on the official side. So you could argue that the bad actor has been ejected, but we need to save the good actors."Paul Krugman on Euro Rescue Efforts.SPIEGEL interview 06/05/2012.
"Doing the right thing would, however, require that other Europeans, Germans in particular, abandon self-serving myths and stop substituting moralizing for analysis."P.Krugman on saving Greece,N.Y.Times.01/30/2015.
Where was your moralizing Professor in 2012 when the Greeks were the bad boys according to your assessment and needed to be kicked out ?
Respectfully,J.C.
"Doing the right thing would, however, require that other Europeans, Germans in particular, abandon self-serving myths and stop substituting moralizing for analysis."P.Krugman on saving Greece,N.Y.Times.01/30/2015.
Where was your moralizing Professor in 2012 when the Greeks were the bad boys according to your assessment and needed to be kicked out ?
Respectfully,J.C.
2
I wonder if Prof. Krugman would be so nonchalant about writing off Greek debt if he were one of it's creditors? Even money from stronger European banks and governments ultimately belongs to the people of those countries. Just a consideration. It's easy to lecture on moral rectitude when you personally have nothing to lose whichever way things go.
4
Private parties who lend take on risk- the risk of non-repayment. They are supposed to price that risk accordingly, and they take loses when they fail to make good loans. To pretend that there is morality here is incorrect. Private banks made a bad loan, now they are trying to use government muscle to collect. Turning the EU into a loan shark is not the purpose of democratic government, and it will have dire consequences for the democratic project that is the EU.
9
Shoson,
Except that a good portion of lending to Greece was based on promises made by a duly elected Greek government - promises which were delayed or simply not kept. You may dispute the economic basis for those promises, but that's hardly the point. Agreements are agreements. The net effect of what's likely to happen now is political pressure within nations like Germany to hold back on emergency funding the next time it's needed - in Greece or in countries with similar views on the efficacy of arranging an economy on the basis of the free-lunch principle. You might ask yourself - why did Greece need emergency help in the first place? And why does Germany never need such help?
Except that a good portion of lending to Greece was based on promises made by a duly elected Greek government - promises which were delayed or simply not kept. You may dispute the economic basis for those promises, but that's hardly the point. Agreements are agreements. The net effect of what's likely to happen now is political pressure within nations like Germany to hold back on emergency funding the next time it's needed - in Greece or in countries with similar views on the efficacy of arranging an economy on the basis of the free-lunch principle. You might ask yourself - why did Greece need emergency help in the first place? And why does Germany never need such help?
1
Greek wealthy don't pay taxes, and the burden for debt falls not on those who in fact incurred the debt but those left without shelters or Cypriot or Swiss connections. As in the US, this malfeasance is rewarded by European banks allowing back-shifted deposits, and efforts to balance budgets or pay off debts usually results in the funds being siphoned off into one of these banking schema or another. Ordinary Greeks work extraordinarily hard, though often at multiple short term cash jobs, these days. Follow the money, these folks didn't borrow it, don't owe it and like the gimmicks now at work on Wall Street, they wind up as the only folks still standing for the debt when the big boys slide back under their wet financial rocks.
14
The U.S. had this problem in the 1850's.
It was resolved by armies marching South, with the resulting death of over 600,000 people using 19th-century weapons and military tactics.
Debt forgiveness is the only non-violent solution. After WW2, in 1953, Germany was forgiven 16 billion Deutschemarks to jump-start their economy.
Turn-about's fair play. Unless we should reconsider that 1953 deal.... how much is that in 2015 terms, with interest for the interim, again? :)
It was resolved by armies marching South, with the resulting death of over 600,000 people using 19th-century weapons and military tactics.
Debt forgiveness is the only non-violent solution. After WW2, in 1953, Germany was forgiven 16 billion Deutschemarks to jump-start their economy.
Turn-about's fair play. Unless we should reconsider that 1953 deal.... how much is that in 2015 terms, with interest for the interim, again? :)
6
THE LESSONS OF HISTORY
The Germans, whose Chancellor Merkel has steered the Euro zone policy on so-called austerity measures, should know better than to humiliate a country financially, as happened to Germany after WW I. That gave rise to Hitler, Nazism and WW II. Not until the Marshall plan did Germany return to prosperity. Humane treatment was extended to the Germans after their defeat in WW II. So what is it that Greece did so that was so terribly wrong that they deserve to be put in a position that is in some ways parallel to that of Germany after WW I? Engage in nepotism? Overpay bureaucrats? Yes, those decisions were bad, if not criminal. But compared with the slaughter of the millions who died as a result of WW II, they're small potatoes. Yet what's happening in Europe where austerity has been imposed? We see the rise of the extreme right. Neo Nazis are gaining recognition, power and, most fearsome of all, respectability. Is that truly what the Germans wish to generate as a result of demanding punitive austerity? They need to learn the lessons of history and show offer some more humane treatment to those countries that require a (you should excuse the expression) a kinder and gentler austerity.
The Germans, whose Chancellor Merkel has steered the Euro zone policy on so-called austerity measures, should know better than to humiliate a country financially, as happened to Germany after WW I. That gave rise to Hitler, Nazism and WW II. Not until the Marshall plan did Germany return to prosperity. Humane treatment was extended to the Germans after their defeat in WW II. So what is it that Greece did so that was so terribly wrong that they deserve to be put in a position that is in some ways parallel to that of Germany after WW I? Engage in nepotism? Overpay bureaucrats? Yes, those decisions were bad, if not criminal. But compared with the slaughter of the millions who died as a result of WW II, they're small potatoes. Yet what's happening in Europe where austerity has been imposed? We see the rise of the extreme right. Neo Nazis are gaining recognition, power and, most fearsome of all, respectability. Is that truly what the Germans wish to generate as a result of demanding punitive austerity? They need to learn the lessons of history and show offer some more humane treatment to those countries that require a (you should excuse the expression) a kinder and gentler austerity.
23
As usual Paul is right on the money. Forcing Greece to pay one hundred percent of theses loans would more than likely lead to the end of democracy in the cradle of democracy. The Greek people would turn to a fascist regime to end the nightmare. Like the Germans turned to the Nazis to end the Versailles Dictat!
7
Dr. Krugman's article obviously shows his political tendencies, what North-Americans call "Liberal" (by the standards of other countries that would be Center-Left). However, there are several points he has made in the last five years, regarding the Eurozone economy, that need to be considered as well. So, with that in mind I present my position:
- Did the Greeks lie their way into the Eurozone? YES However, it's public knowledge that Goldman Sachs helped them hide a lot of "peccadilloes" AND it's also true that a lot of the powers that be in the EU looked the other way, in the cases it those "peccadilloes" were impossible to hide. For all I know, the Germans were against it from the start and now is "I told you so" time.
- Did the Greek Government live beyond its means and also lied about it? Yes they did, just like we did in my country, we're now paying the price too.
Now, Dr. Krugman also argues Germany's position is not only detrimental to Southern Europe, it's detrimental (from the economic point of view) to the entire Eurozone, his point is that the tightening of Fiscal and Monetary policy has brought the Eurozone to the brink of deflation (core inflation wise), according to the info available today even Germany itself has fallen into headline deflation). So, while Eurozone is arguably in a better position to tolerate a disorderly Greek exit, the underlying situation is serious enough to still trigger a "Domino Effect".
- Did the Greeks lie their way into the Eurozone? YES However, it's public knowledge that Goldman Sachs helped them hide a lot of "peccadilloes" AND it's also true that a lot of the powers that be in the EU looked the other way, in the cases it those "peccadilloes" were impossible to hide. For all I know, the Germans were against it from the start and now is "I told you so" time.
- Did the Greek Government live beyond its means and also lied about it? Yes they did, just like we did in my country, we're now paying the price too.
Now, Dr. Krugman also argues Germany's position is not only detrimental to Southern Europe, it's detrimental (from the economic point of view) to the entire Eurozone, his point is that the tightening of Fiscal and Monetary policy has brought the Eurozone to the brink of deflation (core inflation wise), according to the info available today even Germany itself has fallen into headline deflation). So, while Eurozone is arguably in a better position to tolerate a disorderly Greek exit, the underlying situation is serious enough to still trigger a "Domino Effect".
5
Continuation of the above post.
It's important to remember, that the Spanish General elections is on December 2015 and "PODEMOS" (a political movement that uncomfortably reminds me of the nutjobs we have down here) is got a slight advantage over the traditional parties. Now: Spain is the fourth largest economy in the Eurozone, from what I know, they did everything by the book to enter the Monerary Union AND they got in trouble because they bailed out private banks. So: the "Moral Hazard" argument (to give it a name) doesn't seem to apply to Spain. If the Eurozone gives the Greeks no option but to leave AND they somehow manage to at least muddle through on their own. I'd say there's a pretty good chance for the Spaniards to follow suit. So, if the Germans expected their warnings to keep the other debtor nations in line, it might just work the opposite way. That could start the "domino effect" they feared so much in 2010. In other words: If they don't give the Greeks some sort of alternative, This situation might present itself again next year with Spain. I don't think the Eurozone (or the Germans for that matter) would want to deal with that, for the all their work done to keep the Eurozone in place might just fall apart.
It's important to remember, that the Spanish General elections is on December 2015 and "PODEMOS" (a political movement that uncomfortably reminds me of the nutjobs we have down here) is got a slight advantage over the traditional parties. Now: Spain is the fourth largest economy in the Eurozone, from what I know, they did everything by the book to enter the Monerary Union AND they got in trouble because they bailed out private banks. So: the "Moral Hazard" argument (to give it a name) doesn't seem to apply to Spain. If the Eurozone gives the Greeks no option but to leave AND they somehow manage to at least muddle through on their own. I'd say there's a pretty good chance for the Spaniards to follow suit. So, if the Germans expected their warnings to keep the other debtor nations in line, it might just work the opposite way. That could start the "domino effect" they feared so much in 2010. In other words: If they don't give the Greeks some sort of alternative, This situation might present itself again next year with Spain. I don't think the Eurozone (or the Germans for that matter) would want to deal with that, for the all their work done to keep the Eurozone in place might just fall apart.
1
Final part of my argument.
Finally, there's the promise of "growth" made by the Eurozone Leaders to the entire region. It has DEFINITELY not materialized. So "the average joe"' patience in debtor countries (exclude Greece all you want, nobody else is being blamed for cheating) is probably non-existent. Dr. Krugman places the blame squarely on the current opposition of the Germans' economic bosses to anything that smacks of loosening Fiscal or Monetary policy policies. Is he right? Whatever political bias Dr. Krugman has against "Supply Side" Economics, it's important to remember that the claims that QE was going to bring disaster to the US economy HAS been proven wrong. Now, the Eurozone is attempting to do a watered down version of the US QE. It's important to remember that Dr. Krugman said several times that Fiscal Policy alone was not enough to get out of the recession in the US but that it was nowhere as disastrous as what the US right wing claimed. Seems like in the case of the Eurozone, their "watered down" version of QE (set up under strong German objections) is too little, too late. I guess we'll find out if he's right during this year. And for the record: I hope he's wrong. A messy breakup of the Eurozone would not be good news to anyone.
Finally, there's the promise of "growth" made by the Eurozone Leaders to the entire region. It has DEFINITELY not materialized. So "the average joe"' patience in debtor countries (exclude Greece all you want, nobody else is being blamed for cheating) is probably non-existent. Dr. Krugman places the blame squarely on the current opposition of the Germans' economic bosses to anything that smacks of loosening Fiscal or Monetary policy policies. Is he right? Whatever political bias Dr. Krugman has against "Supply Side" Economics, it's important to remember that the claims that QE was going to bring disaster to the US economy HAS been proven wrong. Now, the Eurozone is attempting to do a watered down version of the US QE. It's important to remember that Dr. Krugman said several times that Fiscal Policy alone was not enough to get out of the recession in the US but that it was nowhere as disastrous as what the US right wing claimed. Seems like in the case of the Eurozone, their "watered down" version of QE (set up under strong German objections) is too little, too late. I guess we'll find out if he's right during this year. And for the record: I hope he's wrong. A messy breakup of the Eurozone would not be good news to anyone.
1
I don't understand how Krugman can say the loans haven't subsidized Greek spending on the grounds they're mostly going to pay back Greece's debt. Their debt *is* spending. It would be like Mitt Romney saying he doesn't subsidize his children's lives, he just pays their bills for them.
1
We have been told, many times, how irresponsible the Greek people have been, justifying the harsh positions of the creditor nations. Question? Why is it that the Swiss government's recent devaluing of the Swiss Franc has been allowed to arbitrarily cause mayhem throughout the Eurozone. This single move seems to have had a more negative affect than any recalcitrant response by the Greek citizenry. Is this just further proof that the 1% get to call the shots while the poor nations bear the brunt of austerity?
2
There was no "Swiss government's recent devaluing of the Swiss Franc.
What happened was a reset in exchange rates that raised the value of the Swiss Franc relative to the Euro. Fwiw, the exchange markets have done the same thing with the dollar gaining over the Euro.
Things are an economic mess in Europe-after after the mess they've made to deal with the fiscal collapse of 2008 - resulting in deflation which has some perverse and reverse effects.
It's what happens when you substitute right wing financial ideology for solid economic theory - not to mention all the half-baked economic ideology of Austrian Austerian implemented in both Europe and the United States.
Fortunately we had the Obama Stimulus before the nutwings took over and the FED did what it could within its strictures. Things would be a lot better if the Far Right did not hold so much power through so much of the downturn. So we've had solid economic growth while. Europe and the UK have choked on iausterity programs.
So what does the new GOP Congress set as first order of business - pick Keystone pipeline as a WINNER instead of the loser it is. Government makes so much more sense to them when the GOP government picks winners and losers.
What happened was a reset in exchange rates that raised the value of the Swiss Franc relative to the Euro. Fwiw, the exchange markets have done the same thing with the dollar gaining over the Euro.
Things are an economic mess in Europe-after after the mess they've made to deal with the fiscal collapse of 2008 - resulting in deflation which has some perverse and reverse effects.
It's what happens when you substitute right wing financial ideology for solid economic theory - not to mention all the half-baked economic ideology of Austrian Austerian implemented in both Europe and the United States.
Fortunately we had the Obama Stimulus before the nutwings took over and the FED did what it could within its strictures. Things would be a lot better if the Far Right did not hold so much power through so much of the downturn. So we've had solid economic growth while. Europe and the UK have choked on iausterity programs.
So what does the new GOP Congress set as first order of business - pick Keystone pipeline as a WINNER instead of the loser it is. Government makes so much more sense to them when the GOP government picks winners and losers.
1
Switzerland did not recently "devalue" the franc. The Swiss removed the cap of the franc vs. the euro, after which the franc *appreciated* sharply.
Dear Professor Krugman: You wrote:
“Recent events in Greece pose a fundamental challenge for Europe: Can it get past the myths and the moralizing, and deal with reality in a way that respects the Continent’s core values?”
What the Euros have been telling Greece certainly does have a Kantian moral base: it’s morally wrong to lend money to those who you know will not pay back (the universality criterion). But should the Euros decide to write off some or all the loans and lend more money to Greece, it would find it has a moral basis as well, in Confucianism: you always help your brother even he has never paid back past loans: do NOT do to others what you do not want others do to you when you are in their plight. It is a morality only humans are capable of cognizing and practicing. The nature’s basis for this morality is: no two of us are ever equal.
Besides, who knows what will Greece turn out to be in ten years, a century? That brother of ours, who gave us Socrates, Plato, Aristotle (and Kant), deserves our help when he is in need.
“Recent events in Greece pose a fundamental challenge for Europe: Can it get past the myths and the moralizing, and deal with reality in a way that respects the Continent’s core values?”
What the Euros have been telling Greece certainly does have a Kantian moral base: it’s morally wrong to lend money to those who you know will not pay back (the universality criterion). But should the Euros decide to write off some or all the loans and lend more money to Greece, it would find it has a moral basis as well, in Confucianism: you always help your brother even he has never paid back past loans: do NOT do to others what you do not want others do to you when you are in their plight. It is a morality only humans are capable of cognizing and practicing. The nature’s basis for this morality is: no two of us are ever equal.
Besides, who knows what will Greece turn out to be in ten years, a century? That brother of ours, who gave us Socrates, Plato, Aristotle (and Kant), deserves our help when he is in need.
2
The root problem there and here, thousands of years past or today, is usury. It is considered sin. In the past, levels believed as excessive, (even by those who were not strict practitioners of a code sent by their deity), were classified in many places as crime. Much of the world's suffering can be attributed to this regressive behavior that amounts to a tax by the rich (individual, bank, or government) on those least able to fend for themselves. There is no moral justification for what is done in the name of greed. None.
5
Most of us only learn through suffering, as Sophocles showed. Why would Greeks give up deeply ingrained habits of corruption, featherbedding, etc., unless they experienced the prolonged consequences of their actions. They must change these habits. If bailed out too soon, most Greeks will go right back to their old ways.
1
According to a Greek friend, Tsipras is already aiming to bring back the old days, promising to re-hire all the people from Greece's public TV station ( a notoriously overstaffed organization, where, as my friend said, "even the secretaries had secretaries") who were laid off by the previous government.
By moralizing in this way and imposing harsh austerity on Greece, while citing Greek corruption and profligacy - the Banks, as usual deflect attention from their own corruption, which is rife … and ongoing.
While the bankers continue to collect bonuses and new Porsches, destitute and sometimes demented elderly Greeks, scrabble for morsels in the garbage.
While the bankers continue to collect bonuses and new Porsches, destitute and sometimes demented elderly Greeks, scrabble for morsels in the garbage.
4
As is always the case, the ordinary Joe (or Andreas, in this case) gets caught in the catastrophic space between poor governance and a huge banking system willing to finance such. Sooner or later the devil gets his due, and populist parties like Syriza rise in response to the madness of perpetual suffering for the guy on the street.... I wish Greece the best in its showdown with its moralizing EU creditors.
3
Is it facile to compare what Germany is doing to Greece to what was done to Germany after WWI? The imposition of harsh penalties that starve a desperate and humiliated population into extreme behavior?
2
If a dumb banker makes a loan to a dumb borrower, a bad debt will usually follow. Thus, there will be loan forgiveness. The problem for Greece is the bankers have wised up. Greece has not. It is doubtful they will find someone else's money to spend. Good luck. You will need it.
3
It's amazingly hypocritical to constantly use WWI and WWII as a reason to blame Germany here and accuse them of forgetting history, and somehow use this as a way to justify bending over for Greece's current financial woes. This goes for all Americans, and really any country that's been involved in war within the last two 200 years. Germany is one of the few countries to actually confront their dark history full on. The average person here would be lucky to have half the knowledge about WWII than the average school kid in Germany.
How can we possibly speak from a moral high ground when we have yet to account for our own historical atrocities. Have we paid back every Native American, every African-American, every Filipino (anybody remember that war?), every Iraqi, and SO ON. They're all in fantastic shape, aren't they?
So before pulling out the war guilt card, just look in the mirror and ask yourself if your own country has paid in full.
How can we possibly speak from a moral high ground when we have yet to account for our own historical atrocities. Have we paid back every Native American, every African-American, every Filipino (anybody remember that war?), every Iraqi, and SO ON. They're all in fantastic shape, aren't they?
So before pulling out the war guilt card, just look in the mirror and ask yourself if your own country has paid in full.
2
Policies that keep a country from having jobs, especially for young people entering the job market, are policies that feed the unrest and disillusionment we see in too many parts of our world today. The mentality of "I work hard and have to pay taxes" and "you are a lazy bum and might benefit from my taxes" is a really skewed way of viewing what has been happening over the past 35 years.
1
"Greece has actually made great progress in regaining competitiveness..."
Everything that I have read indicates that the country still has no system to document the ownership of real property; favored industries owned by cronies of the ruling classes are still protected from competition; government corruption is still rampant; bureaucratic red tape is still daunting (you have to pay off the bureaucrat to get around the red tape); the courts are still dysfunctional; the oligarchs pay no taxes so the tax rates for everyone else are the highest in Europe; 10,000 Greek Orthodox Church employees are still on the public payroll; etc.
Mr. Krugman leaves out the factual basis for this strange assertion -- I would be curious if he could follow-up on why he believes this.
Everything that I have read indicates that the country still has no system to document the ownership of real property; favored industries owned by cronies of the ruling classes are still protected from competition; government corruption is still rampant; bureaucratic red tape is still daunting (you have to pay off the bureaucrat to get around the red tape); the courts are still dysfunctional; the oligarchs pay no taxes so the tax rates for everyone else are the highest in Europe; 10,000 Greek Orthodox Church employees are still on the public payroll; etc.
Mr. Krugman leaves out the factual basis for this strange assertion -- I would be curious if he could follow-up on why he believes this.
4
Germany may have lost the last war, but with our past help it's winning now. If things were really fair, Berlin would still be picking up the pieces..
2
Not surprisingly, when Greek voters went to the polls Sunday, they elected a new government that is demanding a renegotiation of its debt. German and European Union officials have responded with adamant opposition to any such changes.
Fortunately for Germany, its own creditors took quite a different stance after World War II. In the London Debt Agreement of 1953, the 20 nations — including Greece — that had loaned money to Germany during the pre-Nazi Weimar Republic and in the years since 1945 agreed to reduce West Germany’s debts by half. Moreover, they agreed that its repayments could not come out of the government’s spending but only and explicitly from export income. They further agreed to undervalue the German mark, so that German export income could grow. By the consent of all parties, the London Agreement, and subsequent modifications, were crafted in proceedings that made West Germany an equal party to its creditors: It could, and sometimes did, reject the creditors’ terms and insist on new negotiations.
Fortunately for Germany, its own creditors took quite a different stance after World War II. In the London Debt Agreement of 1953, the 20 nations — including Greece — that had loaned money to Germany during the pre-Nazi Weimar Republic and in the years since 1945 agreed to reduce West Germany’s debts by half. Moreover, they agreed that its repayments could not come out of the government’s spending but only and explicitly from export income. They further agreed to undervalue the German mark, so that German export income could grow. By the consent of all parties, the London Agreement, and subsequent modifications, were crafted in proceedings that made West Germany an equal party to its creditors: It could, and sometimes did, reject the creditors’ terms and insist on new negotiations.
3
What I've never seen explained is why the Greek government borrowed all that money in the first place. Presumably debt was incurred in order to build infrastructure, to boost the Greek economy, which was expected to increase government revenues to pay off the debt. Well, what happened to the sums borrowed? Were they used to support welfare, pensions, and other forms of subsidies to domestic interests? Were they syphoned off in corruption of all sorts? Arms purchases are mentioned - these are expensive and non-productive. I remember that Goldman-Sachs was implicated in cooking the books, so that the Greek government appeared in better fiscal shape than was actually the case. It was assumed that the economic boom wd continue indefinitely, and that the Greek economy wd grow its way out of debt. This was the same assumption that U.S. banks made when they made bad loans that helped cause our collapse. Rather than let the whole economy be ruined, our government bailed out the banks. Clearly, the same approach has to be taken with Greece, since letting a whole nation's economy fail is not an option. We all contributed to the present situation, and we all must bear some of the pain.
4
That's the whole problem none of us voted for any leaders in Greece
Thank you Dr. Krugman for pointing out that the elaborate morality play surrounding the Greek debt is just a smoke screen for a huge bailout of European banks by European taxpayers. The bankers knew that Greece was a bad risk, but banked (yes, bad pun) on the belief that the European governments would bail them out rather than risk another great depression brought on by their collapse. A case study in moral hazard, and the need for proper bank regulation. Banks have to be required to have adequate reserves, and only lend to entities which are likely to pay them back.
5
Many comments compare the situation of Europe to that of the US, without considering that Europe, at a quarter century of its foundation, is at a state comparable to that of the US around 1815, a quarter century after its founding.
The various US States agreed on little, except to increase the territory of the US. Massachusetts refused to take part in the war of 1812 well, because it perceived it to be it against its economic interests.
It would be unthinkable, that an individual US State would refuse to take part in a foreign war but back then it was accepted.
As to bail outs, as late as 1843 the Federal government refused to rescue eight States and the territory of Florida, that having borrowed unwisely (and mostly from British Banks) went bankrupt. Congress, after debating the issue for 2 years refused to bail them out, in order not to set a precedent for other States. It was not an easy decision, as it was feared that Great Britain might collect the debt by force.
The States continued to disagree on the political and economic differences until the Civil War settled their differences.
Compared to this, the politics of the EU are most definitively benign.
The various US States agreed on little, except to increase the territory of the US. Massachusetts refused to take part in the war of 1812 well, because it perceived it to be it against its economic interests.
It would be unthinkable, that an individual US State would refuse to take part in a foreign war but back then it was accepted.
As to bail outs, as late as 1843 the Federal government refused to rescue eight States and the territory of Florida, that having borrowed unwisely (and mostly from British Banks) went bankrupt. Congress, after debating the issue for 2 years refused to bail them out, in order not to set a precedent for other States. It was not an easy decision, as it was feared that Great Britain might collect the debt by force.
The States continued to disagree on the political and economic differences until the Civil War settled their differences.
Compared to this, the politics of the EU are most definitively benign.
2
Not really a reply to Krugman's current article, but I was doing a bit of research comparing Greece's debt crisis with Detroit's bankruptcy, and I came across this article from 2013 http://www.nytimes.com/2013/07/22/opinion/krugman-detroit-the-new-greece...
Krugman talked about how Detroit could learn from Greece. Well here we are 16 months later, and Detroit seems to have the worst of it's crisis behind it, while Greece's still drags on with no end in sight.
.
Perhaps Krugman could revisit the Detroit / Greece comparison?
Krugman talked about how Detroit could learn from Greece. Well here we are 16 months later, and Detroit seems to have the worst of it's crisis behind it, while Greece's still drags on with no end in sight.
.
Perhaps Krugman could revisit the Detroit / Greece comparison?
3
Please read TFA. The only thing that Dr. Krugman suggested that Detroit learn from Greece is to keep the discussion on the actual economic issues rather than letting it get derailed into moralizing about the failures of Detroit's politics.
3
Um, it's a good idea to actually read articles you link to before claiming they say the opposite of what's there in black and white.
4
The Marshall Plan was enacted to help all of Europe, not just Germany, but also those countries ( under pressure by the USSR,), to rebuild to prevent USSR and communism from gaining control. Also, a secondary reason was to build up Europe to be able to buy our goods, becoming a major trading partner. Unfortunately in the Greek case, Greece has been a small trading partner and a small part of Europe and the EU. There is, also in Europe a kind of a feeling that the Greeks are lazy, corrupt, etc. and not worthy of any more aid.
Also, in the past, Mr. Krugman wrote how a Greek withdrawal from the EU was probably a good idea for Greece to be able to control their own future and it's withdrawal could be easily be handled by the EU.
Also, in the past, Mr. Krugman wrote how a Greek withdrawal from the EU was probably a good idea for Greece to be able to control their own future and it's withdrawal could be easily be handled by the EU.
1
"...diffusing the anti-democratic forces..."
Mr. Krugman, I admire your tenacity in sticking to your beliefs, which by and large are on the money, but in this instance, I believe the clear and present danger to democracy, worldwide, has been the unbridled growth and now almost complete takeover of governments everywhere, by the Plutocratic Oligarchy,
The Greeks get it, and hopefully others soon will.
Pickety, and your Alma Mater are nearly unanimous in their agreement with this state of affairs, see excerpt from Wikipedia -
"French economist Thomas Piketty states in his 2013 book, Capital in the Twenty-First Century, that "the risk of a drift towards oligarchy is real and gives little reason for optimism about where the United States is headed.
A study conducted by political scientists Martin Gilens of Princeton University, and Benjamin Page of Northwestern University, was released in April 2014,[21] which stated that their "analyses suggest that majorities of the American public actually have little influence over the policies our government adopts."
http://en.m.wikipedia.org/wiki/Oligarchy
Mr. Krugman, I admire your tenacity in sticking to your beliefs, which by and large are on the money, but in this instance, I believe the clear and present danger to democracy, worldwide, has been the unbridled growth and now almost complete takeover of governments everywhere, by the Plutocratic Oligarchy,
The Greeks get it, and hopefully others soon will.
Pickety, and your Alma Mater are nearly unanimous in their agreement with this state of affairs, see excerpt from Wikipedia -
"French economist Thomas Piketty states in his 2013 book, Capital in the Twenty-First Century, that "the risk of a drift towards oligarchy is real and gives little reason for optimism about where the United States is headed.
A study conducted by political scientists Martin Gilens of Princeton University, and Benjamin Page of Northwestern University, was released in April 2014,[21] which stated that their "analyses suggest that majorities of the American public actually have little influence over the policies our government adopts."
http://en.m.wikipedia.org/wiki/Oligarchy
7
Great point. Just read the Piketty book. So has Paul and I am sure he would agree with everything you said and that we need to put an additional tax on wealth. Another great book is "This Changes Every Thing" by Naomi Klein which addresses climate change.
1
Exactly how did the evil lenders force Greece to take questionable loans? Where were all the wise pundits asking the tough questions about questionable loans? Why didn't Greece merely find a more accommodating lender and escape the clutches of the evil lenders? Why don't the Greeks find such lenders now and pay off their existing debt? Why would it be devastating for Greece to flee the EU and on whom would the disaster fall? Why is it so easy to tell other people that they should lose money to make nice? When is a deal not a deal and a commitment not a commitment? Will Paul Krugman explain to your bank that it should forgive the interest on your mortgage less you be forced to work to make a living? Will you quit your neighborhood association if he doesn't? Will Krugman respond or will he just keep sending you his money to defray your debt?
Watch for checks in the mail.
Watch for checks in the mail.
5
"When is a deal not a deal and a commitment not a commitment? "
One such time is when banks stop overnight lending to each other and send the economy into a tailspin while being saved by US taxpayers. We thought the deal was that banks vied in a free market that would punish them for misbehavior.
One such time is when banks stop overnight lending to each other and send the economy into a tailspin while being saved by US taxpayers. We thought the deal was that banks vied in a free market that would punish them for misbehavior.
4
All good questions and I am sure they were asked when we all forgave Germany's debt after they were responsible for tens of millions of deaths in WWII. Let's face it Greece cannot repay its loans ... period. A little common sense about maintaining the strength of the EU, a realization that the lenders made bad loans, and a little humanity on the part of the banksters who are all too familiar with the process of getting bailed out!!
6
Let me turn that question around and put it to you this way: exactly how did the evil Greeks force the lenders to give them questionable loans? If you are unable to assess the risks of loaning to borrowers, you shouldn't be in the business of lending to begin with.
4
The problem of Europe is not Greece or Spain or Italy or even Germany, the problem is that they live in an alternative reality. Philosophically imposed this reality assumes perfectly coordinated budgets and optimum fiscal conditions that prevent inflation and allow investments to freely flow throughout the continent without risk. If only they had taken the time out to read Alice in Wonderland, they would see that unpredictability has a habit of appearing and requires that flexibil responses need to be a part of the repertoire for handling the unforeseen.
Europe now has a basket of unforeseen situations including Ukraine, Russia, the fall of the price of oil, a recession and a deflation. Dogma will not get them through, nor will wishful thinking. The fear of inflation is an old fear , the fear of a collapsing economy has yet to resonate with them. They seem to think if one pill made them smaller then another pill must make them bigger, they have yet to discover mutual support in difficult times. They have yet to go outside the concept of Europe as an economic union run by bankers…and do not see themselves as belonging to one Europe.
It is not reasonable to continue to believe in independence and unity of Europe, it is to be one or the other, If they are to have more than a currency they will have to reconsider the responsibilities they have to bare to each other… and they do not have time to waste as the rabbit said !
Europe now has a basket of unforeseen situations including Ukraine, Russia, the fall of the price of oil, a recession and a deflation. Dogma will not get them through, nor will wishful thinking. The fear of inflation is an old fear , the fear of a collapsing economy has yet to resonate with them. They seem to think if one pill made them smaller then another pill must make them bigger, they have yet to discover mutual support in difficult times. They have yet to go outside the concept of Europe as an economic union run by bankers…and do not see themselves as belonging to one Europe.
It is not reasonable to continue to believe in independence and unity of Europe, it is to be one or the other, If they are to have more than a currency they will have to reconsider the responsibilities they have to bare to each other… and they do not have time to waste as the rabbit said !
1
I wonder at Europe imposing the kinds of conditions on Greece that lead to the rise of despots. It's particularly sad that this is lead by Germany.
Obviously Europe doesn't fear the rise of fascism or bolshevism or something akin in Greece. That's the real factor here -- Greece isn't Germany.
Obviously Europe doesn't fear the rise of fascism or bolshevism or something akin in Greece. That's the real factor here -- Greece isn't Germany.
1
It was back in 1980 when Canada gave up much of its sovereignty to the Masters of the Universe. Canada's Nation Energy Program had as part of its policy a small be world standards vertically integrated petroleum company. Even Canada's small oil company was viewed as a threat to he control over the world economy and PetroCanada became just another private oil company.
Greece has a population of 11 million. it is not an industrial or financial behemoth but somehow threatens the financial security of the entire universe. When small nations like Greece can be bullied and coerced into compliance with international commerce what does it say about the vitality of democracy.
Maybe it is time to examine what we mean when we use the word democracy. If democracy means the submission to military, financial, and industrial power maybe we should go back to the original words used to describe colonial and hegemonic dominance.
Our allies in the middle east have with our help suppressed any nascent democratic movements and the Masters of the Universe have been equally successful in thwarting democracy even in countries like Greece whose economies are far removed from today's technological revolution.
Greece has a population of 11 million. it is not an industrial or financial behemoth but somehow threatens the financial security of the entire universe. When small nations like Greece can be bullied and coerced into compliance with international commerce what does it say about the vitality of democracy.
Maybe it is time to examine what we mean when we use the word democracy. If democracy means the submission to military, financial, and industrial power maybe we should go back to the original words used to describe colonial and hegemonic dominance.
Our allies in the middle east have with our help suppressed any nascent democratic movements and the Masters of the Universe have been equally successful in thwarting democracy even in countries like Greece whose economies are far removed from today's technological revolution.
7
Greece's original fiscal problem was that it didn't collect enough tax revenues to pay for all the services that a modern European society expects - in short, Bushonomics on steroids. That ship crashed at the end of 2009, and Greek tax rates are now, if anything, too high
If Syriza is going to be taken seriously as a progressive-left force, it should continue to fight to close loopholes, and also to shift more of the nation's total tax burden onto the top 10% and especially the top 1%. The more top-heavy the tax regime is, the less of a fiscal drag effect it will have on consumer spending and demand. They also need to raise the minimum wage in order to get more money into the pockets of workers, even if wage levels in the middle of the spectrum have to still be restrained.
After taking care of the more immediate business, I would also love to see Syriza openly confront the "Golden Dawn Problem," and do it in a way that won't provoke violence or acts of terrorism from the neofascists.
If Syriza is going to be taken seriously as a progressive-left force, it should continue to fight to close loopholes, and also to shift more of the nation's total tax burden onto the top 10% and especially the top 1%. The more top-heavy the tax regime is, the less of a fiscal drag effect it will have on consumer spending and demand. They also need to raise the minimum wage in order to get more money into the pockets of workers, even if wage levels in the middle of the spectrum have to still be restrained.
After taking care of the more immediate business, I would also love to see Syriza openly confront the "Golden Dawn Problem," and do it in a way that won't provoke violence or acts of terrorism from the neofascists.
4
Tax evasion by all classes on an industrial scale was only one of the problems. Others included a vastly bloated public sector; widespread corruption; government procurement as a graft system; dysfunctional politics; state owned enterprises as a source of payola; unregulated borrowing; lies about the economic condition of the country; crony capitalism; the list is endless.
4
Gosh, John. That sounds an awful lot like the Bush 43 years!
6
"Although nobody knows it, Greece has actually made great progress in regaining competitiveness; wages and costs have fallen dramatically, so that, at this point, austerity is the main thing holding the economy back."
I wonder if Prof. Krugman could pause his self-righteous moralizing long enough to think about the implication of that statement. Would Greece, without the pressure put on it by the rest of the Euro zone, have implemented the structural changes necessary to improve its competitiveness to the point it has - what was the term - a structural budget surplus? Of course not.
The real underlying problem is that the moneyed elite in Greece (just as in the US) has been plundering the country at the expense of the 90% for decades. It is unfortunately true that this has been happening with the tacit collusion of other countries, which were happy to close their eyes to the problems as long as their own elite (front and center, the financial industries) were making a handsome profit at the expense of European tax payers.
If the new, nominally "socialist", government of Greece is true to social principals, it will refocus the "structural changes" still needed away from cutting jobs and social services for the 90% and towards curtailing the power of the moneyed elites, who, like in the US, pay little or no taxes and receive huge amounts of government transfers. These economic eletes receive support from the insane "economic theory" of free markets evangelized by Krugman
I wonder if Prof. Krugman could pause his self-righteous moralizing long enough to think about the implication of that statement. Would Greece, without the pressure put on it by the rest of the Euro zone, have implemented the structural changes necessary to improve its competitiveness to the point it has - what was the term - a structural budget surplus? Of course not.
The real underlying problem is that the moneyed elite in Greece (just as in the US) has been plundering the country at the expense of the 90% for decades. It is unfortunately true that this has been happening with the tacit collusion of other countries, which were happy to close their eyes to the problems as long as their own elite (front and center, the financial industries) were making a handsome profit at the expense of European tax payers.
If the new, nominally "socialist", government of Greece is true to social principals, it will refocus the "structural changes" still needed away from cutting jobs and social services for the 90% and towards curtailing the power of the moneyed elites, who, like in the US, pay little or no taxes and receive huge amounts of government transfers. These economic eletes receive support from the insane "economic theory" of free markets evangelized by Krugman
2
"Free markets evangelized by Krugman"? I've been reading Paul Krugman's column for years, and I don't think he preaches "free markets." I think he'd agree that restoring jobs and social services and curtailing the power of the moneyed elites is exactly what needs to be done, in Greece and in the USA. And I agree with him!
4
I completely agree with Professor Krugman that both sides of the misjudgment are responsible. Reminds us of the lending scheme where the banks willingly lent money to sub-prime borrowers with full knowledge of their credit unworthiness but, are unwilling to reduce the borrowers' burden after things went bust. If the intention is to only make the borrowers suffer while exonerating themselves then, the German banks seem to be succeeding where their panzers failed.
5
Banks never have to get a haircut. The same thing is happening in this country with personal debt. Private financial firms buy up old debt that people have already settled and paid off; only to finding someone repeatedly calling, harassing, threatening them unless they paid them the debt they already paid off. It’s tantamount to legalized extortion. The whole world would benefit from getting the European economy growing again and that includes Greece.
5
In 2012, Greek Bond Holders suffered "a nominal loss of 53.5 percent on their holdings, which equates to a real loss of 73 to 74 percent." (from link provided)
The amount, $ 147 billion, amounted to $ 13 400 for every man, woman, and child in Greece.
How can one state that private lenders have largely bailed out ?
The amount, $ 147 billion, amounted to $ 13 400 for every man, woman, and child in Greece.
How can one state that private lenders have largely bailed out ?
4
This is not a comment but a question that arises from my inexpereince in finance and from the article. If Greece were on the drachma and it declared bankrupcy the gain would be that it would stop paying its degts and cash flow wd improve, as K writes. But since it is on the euro , the Central European bank wd cut off credit to Greek Banks if Greece declared bankrupcy. I assume that this means that if Greece were on the Drachma and declared bankrupcy, the Eurobanks wd not cut off credit to the greek banks but merely cut off credit to the Greek Government. Why would this difference occur? Why wouldnt the Central European bank or any foreign bank consdider the whole country a risk when its government declares bankrupcy regardless of whether Greece's currency is the euro or the drachma?
Because the government would have to borrow in Euros. Also there is a risk that Greek banks would lend to the government and thus wouldn't be able to get their principal back, thus creating default risk for Greece.
1
On the drachma, the Greek government could control the money supply, i.e. it could keep the banks solvent. Not so on the euro.
1
I've been interested in recent NYTs articles about the Swiss Franc which has wildly increased in value. Especially since the EU decided to try Quantitative Easing which in turn caused interest rates on loans taken in Swiss Francs to sky rocket. People in Austria and Poland were sold on the idea that they could get lower interest on loans on Swiss Francs than they could get in their own countries currency. This has caused distress and the affected countries are stating they will take over the loans in their own currency. As the Euro and the Ruble among other currencies go down the Swiss Franc has become ever more powerful in relation to other currencies thus hurting Switzerland's economy. This certainly has had much to do with the crash in the price of Oil. But also the financial mismanagement of the Euro. The Germans and the Bankers in Brussels won't even allow trickle down policies. Now with the new Quantitative Easing they join the US in at least allowing some money to make its way into the economy for jobs and some growth.
1
One of the first things that responsible parents teach their children is the necessity of keeping your word. It's not complicated. You make a promise, you keep it. If you don't then your word becomes worthless and with that so goes the ability of anyone to trust you again.
Simple enough for a 3 year-old to understand, right?
Except to a Keynesian.
In Krugman's world if the kid down the street agrees to mow my lawn for 20 bucks and reneges on the deal, it's somehow our 'shared' fault that my grass sits unmown. Bull. The fault is the kid's, especially if he's already gotten my 20. It's HIS obligation to know that he can fulfill his end of the deal before he takes the money. If he knows he can't, or even suspects so, then it's incumbent upon HIM not to enter into the arrangement with me.
Not so for Greece, apparently, at least according to the bleeding hearts of America's Keynesian Left. It's Germany's (and the Greeks' other creditors') fault for loaning to Greece in the first place. The wonder of it all.
I eagerly await the day that we start hearing from the Krugmans of the world that all debts, certainly at least those owed by individuals experiencing personal hardship of one sort or another, should start being forgiven too. If Greece's debts can be dismissed (or the ever-popular and insidious euphemism 'haircutted'), then why not mine?
Responsibility is simply not a tenet of the economic left. It is precisely for this reason that their ideas cannot be taken seriously.
Simple enough for a 3 year-old to understand, right?
Except to a Keynesian.
In Krugman's world if the kid down the street agrees to mow my lawn for 20 bucks and reneges on the deal, it's somehow our 'shared' fault that my grass sits unmown. Bull. The fault is the kid's, especially if he's already gotten my 20. It's HIS obligation to know that he can fulfill his end of the deal before he takes the money. If he knows he can't, or even suspects so, then it's incumbent upon HIM not to enter into the arrangement with me.
Not so for Greece, apparently, at least according to the bleeding hearts of America's Keynesian Left. It's Germany's (and the Greeks' other creditors') fault for loaning to Greece in the first place. The wonder of it all.
I eagerly await the day that we start hearing from the Krugmans of the world that all debts, certainly at least those owed by individuals experiencing personal hardship of one sort or another, should start being forgiven too. If Greece's debts can be dismissed (or the ever-popular and insidious euphemism 'haircutted'), then why not mine?
Responsibility is simply not a tenet of the economic left. It is precisely for this reason that their ideas cannot be taken seriously.
2
I suggest that you read Krugman's column more carefully. The Greek public debts and the inefficient tax system are mainly the fault of "center-right" (i.e. conservative) governments in Greece during the past decade or more. However, your moralistic "solution" is precisely the kind of simplistic thinking that helped deepen the Great Depression and world crisis of the 1930s and has prolonged the Great Recession of our own time.
11
MinnRick, your analogies are disingenuous and do not acknowledge the legal and moral responsibilities of lenders as well as borrowers, as well as practical considerations. Lenders are in the catbird seat and have much more power to dictate onerous terms. Borrowers only borrow because they don't have other options. I don't hear Krugman arguing for debt forgiveness, but for altering the terms of repayment so that the borrower can right their ship.
IF the creditors insist on maintaining the contract with the cost of making the borrower destitute, who wins? The borrower is still unable to repay and the nation sinks and becomes impoverished. If lenders kill their customers, who will borrow from them?
IF the creditors insist on maintaining the contract with the cost of making the borrower destitute, who wins? The borrower is still unable to repay and the nation sinks and becomes impoverished. If lenders kill their customers, who will borrow from them?
8
I couldn't care less whether the governments which delivered Greece into its current morass have been conservative or liberal. At the end of the day their problem has been profligacy, which has created in the Greek population the illusion (and that's EXACTLY what it is) that their publicly-funded rides on the economic gravy train were somehow sustainable. They weren't. The medicine for this disease, unfortunately for Greece, is the pain of withdrawal. That means less public spending, less benefits, later and less-comfortable retirement (like the rest of the world) and actually having to pay their taxes.
Do you prescribe the continuation of meth or heroin for addicts suffering in withdrawal who are trying to kick? Of course not. Their pain is necessary. So is Greece's, and if their society cannot adapt to the realities of living within their means (and honoring their debt obligations, as the rest of the world does) then perhaps a horrible, painful reboot for Greek society is what has to happen.
What absolutely doesn't (and shouldn't) have to happen is for the rest of the EU to continue to subsidize economic irresponsibility indefinitely in the interest of sparing the junkie his pain.
Do you prescribe the continuation of meth or heroin for addicts suffering in withdrawal who are trying to kick? Of course not. Their pain is necessary. So is Greece's, and if their society cannot adapt to the realities of living within their means (and honoring their debt obligations, as the rest of the world does) then perhaps a horrible, painful reboot for Greek society is what has to happen.
What absolutely doesn't (and shouldn't) have to happen is for the rest of the EU to continue to subsidize economic irresponsibility indefinitely in the interest of sparing the junkie his pain.
1
We Are Greece
Greece has rearranged the income tax rate brackets. It hasn't helped. Of course it still refuses to tax its shipping industry. The slow sinking of Greece relates to the myriad of benefits funded by young workers to pay for retirement lifestyles.
An iceberg, particularly at a distance, looks small and harmless because its massive size is concealed underwater. Almost a hundred years ago a benign system of Social Security was devised to care for the elderly with a 3 percent tax on wages that promised to benefit us all. In Europe socialists were more generous but the basic structure of taxing jobs to fund the system was maintained.
Expecting the young to support the old may have been a natural way of life before legal abortion and increased life expectations began to strain the actuary tables. The combined payroll taxes in the U.S. have grown to 15.3% and in Greece they have reached 44%. Like a cancer Social Security taxes destroy good jobs and high rates of unemployment reduce wages and strain the system further. The larger harm in recent decades has gone unnoticed as family wealth of the poorer half of the population (low wage workers) has decreased by 75 percent. This has led to a crisis in family formation and child development.
The solution can take many forms but all require a shift from taxing jobs to taxing wealth to support the laborers that created it decades ago.
Greece has rearranged the income tax rate brackets. It hasn't helped. Of course it still refuses to tax its shipping industry. The slow sinking of Greece relates to the myriad of benefits funded by young workers to pay for retirement lifestyles.
An iceberg, particularly at a distance, looks small and harmless because its massive size is concealed underwater. Almost a hundred years ago a benign system of Social Security was devised to care for the elderly with a 3 percent tax on wages that promised to benefit us all. In Europe socialists were more generous but the basic structure of taxing jobs to fund the system was maintained.
Expecting the young to support the old may have been a natural way of life before legal abortion and increased life expectations began to strain the actuary tables. The combined payroll taxes in the U.S. have grown to 15.3% and in Greece they have reached 44%. Like a cancer Social Security taxes destroy good jobs and high rates of unemployment reduce wages and strain the system further. The larger harm in recent decades has gone unnoticed as family wealth of the poorer half of the population (low wage workers) has decreased by 75 percent. This has led to a crisis in family formation and child development.
The solution can take many forms but all require a shift from taxing jobs to taxing wealth to support the laborers that created it decades ago.
4
I agree with taxing wealth, especially at times of extreme wealth inequality. Perhaps some sort of "trigger" based on degrees of inequality?
2
"It’s true that Greece (or more precisely the center-right government that ruled the nation from 2004-9) voluntarily borrowed vast sums."
I agree with the overall argument (i.e., it's not right for Germany and other creditors to expect and demand that Greece keeps using 20 percent of its GDP to repay principal and interest on old loans, at the expense of the Greek people's welfare). But I disagree with the above statement.
When Costas Karamanlis and New Democracy swept into power in 2004, Greece had been under 11 consecutive years of PASOK governance (with 19 out of the 23 previous years under PASOK). Virtually all the scandals in Greece occurred during the PASOK years, although PASOK supporters would have us believe otherwise.
Mr. Karamanlis was much maligned by the PASOK-leaning vast majority of the Greek media throughout his time in office - much like President Obama has been relentlessly maligned by FOX and the hard right since he was first elected in 2008 - but when Mr. Karamanlis lost the 2009 election, Greece had a debt of $30-35 billion.
Since then, the Greek debt exploded to $300 billion. This happened under George Papandreou and Antonis Samaras. It had little or nothing to do with Mr. Karamanlis.
An important part of the reason people are misinformed about Greece is because of the distorted parody that is the Greek media, which do not function the way media do in this country. But that is another discussion altogether.
I agree with the overall argument (i.e., it's not right for Germany and other creditors to expect and demand that Greece keeps using 20 percent of its GDP to repay principal and interest on old loans, at the expense of the Greek people's welfare). But I disagree with the above statement.
When Costas Karamanlis and New Democracy swept into power in 2004, Greece had been under 11 consecutive years of PASOK governance (with 19 out of the 23 previous years under PASOK). Virtually all the scandals in Greece occurred during the PASOK years, although PASOK supporters would have us believe otherwise.
Mr. Karamanlis was much maligned by the PASOK-leaning vast majority of the Greek media throughout his time in office - much like President Obama has been relentlessly maligned by FOX and the hard right since he was first elected in 2008 - but when Mr. Karamanlis lost the 2009 election, Greece had a debt of $30-35 billion.
Since then, the Greek debt exploded to $300 billion. This happened under George Papandreou and Antonis Samaras. It had little or nothing to do with Mr. Karamanlis.
An important part of the reason people are misinformed about Greece is because of the distorted parody that is the Greek media, which do not function the way media do in this country. But that is another discussion altogether.
4
it is a matter of cash flows. Debt coming due in the near term, be it interest or principal, cannot be paid fully out of Greek government intake, hence the periodic cash injections from the Troika.
But, current rates are so amazingly low, Spain can borrow at 2.45% for 30 years for example, that even without any haircuts, it would be straightforward to replace existing, short-maturity Greek debt with longer maturity ones, thereby making the near-term cash needs for debt repayment much less. Greece poses a greater credit risk than Spain, perhaps, but with the Troika working as a collection agency effectively in control of government spending, the extra yield required by lenders in this special situation would have to be small.
Reduce the primary budget surplus mandate from its current 4.5% to somewhere around 2% of GDP, and the problem disappears overnight. I wouldn't be surprised at all that if that were to happen, Greek economy responded with 10-11% nominal GDP growth per year for 2015 and 2016. Then the overall debt situation would look much rosier in 2017.
But, current rates are so amazingly low, Spain can borrow at 2.45% for 30 years for example, that even without any haircuts, it would be straightforward to replace existing, short-maturity Greek debt with longer maturity ones, thereby making the near-term cash needs for debt repayment much less. Greece poses a greater credit risk than Spain, perhaps, but with the Troika working as a collection agency effectively in control of government spending, the extra yield required by lenders in this special situation would have to be small.
Reduce the primary budget surplus mandate from its current 4.5% to somewhere around 2% of GDP, and the problem disappears overnight. I wouldn't be surprised at all that if that were to happen, Greek economy responded with 10-11% nominal GDP growth per year for 2015 and 2016. Then the overall debt situation would look much rosier in 2017.
4
Considering how the Greek economy is at last growing, the austerity measures seem to have worked. The debt will never be paid in full no matter what happens. But lot of other countries have huge national debts, but nobody is worried, as long as the economy is rolling and producing benefits to everybody. If Greece manages to get her wheels spinning and people working, the EU is going to prosper. And that's what we are aiming at, isn't it?
5
One again, Professor Krugman largely whitewashes the underlying problem: Greece's economy is broken; Greece's regulatory system is broken, and Greece has a largely non functional tax system. For decades Greeks--middle class, upper class--it matters not--essentially did not pay taxes. Graft and protectionism is widespread--and most importantly, Greece produces almost nothing that the rest of the world wants--except for tourism. Krugman glosses over this systemic dysfunction by saying "Although nobody knows it, Greece has actually made great progress in regaining competitiveness; wages and costs have fallen dramatically." Of course wages have fallen, because vast numbers of employees in do nothing jobs have been laid off--more labor = less wages. There has been no fundamental improvement in the Greek system--and the new government wants to roll back many of the few positive changes (ie restore pensions, raising costs, and rehire pointless government employees). The bottom line is this is a problem of primarily the doing of the Greek people--students who want to go to school for 10 years on the government, citizens and businesses that don't pay taxes, an endless bureaucracy that stifles innovation, and a robber baron ruling class that endless pads its own nest. The only way this will ever change (as evidenced by many decades of broken promises to EU) is if Greece is forced to rehab. Left to their own devices the Greek public will return to status quo ante.
13
Well said.
But Krugman will continue to argue for more spending--more stimulus--more pump priming, because that's his answer for everything. He seems to ignore the obvious--that the Greek economy isn't much worth priming--with all of the structural deficiencies it carries.
But Krugman will continue to argue for more spending--more stimulus--more pump priming, because that's his answer for everything. He seems to ignore the obvious--that the Greek economy isn't much worth priming--with all of the structural deficiencies it carries.
7
1) Greece cannot possibly repay 318B Euro debt. 2) Much of the private bank share of Greek debt (say the big French banks) was offloaded onto the ECB, which is not subject to the haircut. 3) The obvious answer is a moratorium on interest payments for 3-5 years, during which time the government could spend its surplus on short-term projects focused on stimulating growth. [25% of Greece's 2015 budget is earmarked for interest and principal on these debts; one-third of it goes to the ECB] 4) To hit the Euro zone target of 60% of debt:GDP ratio, Greece would need a GNP of over 500B Euros. At its 2007 peak, the GDP was about $307B [at that time, about 230B Euros]. Just to get back to the 2007 level, Greece needs growth of 5% a year for 5 or 6 years. Its great "success" of 2014 was growth of about 0.7%, and forecasts look for 2-3% growth in the best-case scenarios, up to 2020. At that rate, GDP would reach 2007 levels in the mid-2020s. How can that be a realistic alternative, when it would still be less than half of the GDP level needed to reduce the ratio to 60%? Instead, use the gov't surplus to try to increase short-term growth by stimulating demand [in a balanced budget, interest on the debt excluded], and strengthen structural reforms of tax policy, compliance [24% of economic activity was undeclared, and thus untaxed, in 2013], labor markets, and accountability.
6
The fact of the matter is that any country that has even a reasonable amount of debt owed in a currency that it does not create is vulnerable to a debt explosion in the wake a a recession and the follow on interest rate hikes. Past a certain point, it is impossible for a country in this situation to grow, save and tax their way out of the trap. This is not news. It has long been used by the US in conjunction with the IMF & World Bank to bring small countries to heel and open up their resources for exploitation. The textbook cases of this are found in the mid-late 20th century history of South America.
Many seem to also forget the gazillions of dollars of German debt that were forgiven after WWII, and their resulting economic resurgence. They would be a third world pit right now if they had been forced into austerity and made to pay off that debt with interest. What's good for the Greece was good for the Burgher.
Many seem to also forget the gazillions of dollars of German debt that were forgiven after WWII, and their resulting economic resurgence. They would be a third world pit right now if they had been forced into austerity and made to pay off that debt with interest. What's good for the Greece was good for the Burgher.
9
Funny how the banksters are never made to take a hair cut. Bad mortgage paper, no problem the government (any of the developed nations) will just take the bad paper in exchange for good money from the public. What is happening in Greece, the banksters get theirs the Greeks get the shaft. Notice a pattern here. The banksters have corrupted the governments of all the major developed nations.
16
Prof. Krugman accurately points out that "...banks in Germany and elsewhere voluntarily lent Greece all that money. We would ordinarily expect both sides of that misjudgment to pay a price." However, the oligarchs have set up a vulture capitalism that primarily assigns responsibility to the "profligate" borrower not to the foolish lender. Actually these vulture lenders are not really foolish. They understand that the laws are skewed in their favor to allow taxpayers to create value for the economic system which foolish politicians and bankers squander and oligarchs pluck the properties and wealth from the inevitable collapse at bargain basement prices. Clearly an inclusive capitalist system--one that would encourage a balance of market activity on BOTH sides of this equation--needs to be adopted globally to efficiently grow a new world economy supportive of democratic societies. What better place to start this evolution than in the young, aspiring Eurozone?
10
It is easy to understand creditors concerns. In 2012, the "haircut" was 75% of $142 billion. The question of saving the Green economy and government is directly related asking how far to the bottom of this mess? Will the new government act to improve an economy - an economy that has little in the way of exportable commodities, goods or services. Greece, at this point in time, appears to be little more than a tourist dependent economy. It may be that there is no amount of financial forgiveness that resolves this saga.
2
Germany went to war over excessive debt, and in the wake of that tragedy, the US forgave their war debts from World War 2. How about a little understanding, mein herrs?
17
Punishing Greece to to the point of destitution benefits no one....unless there is a hidden agenda of who is going to take over running the country.
My dad taught me the importance of having a planned outcome in mind when making long term decisions. Doesn't seem to me there is a planned outcome here. At least not one we can readily see...which, in turn, makes me wonder about the hidden agenda.
Is there a nefarious plan to turn Greece into some satellite state used to, oh, I don't know....nuclear waste storage or a penal colony? What happens when the country collapses? How does that benefit the Euro-zone, the global economy, or the people who have to live there?
What exactly does Madam Merkel and her collective _want_ to see happen in Greece? It sure as heck isn't a stable nation/economy.
Maybe it's time to ask that question.
http://wifelyperson.blogspot.com/
My dad taught me the importance of having a planned outcome in mind when making long term decisions. Doesn't seem to me there is a planned outcome here. At least not one we can readily see...which, in turn, makes me wonder about the hidden agenda.
Is there a nefarious plan to turn Greece into some satellite state used to, oh, I don't know....nuclear waste storage or a penal colony? What happens when the country collapses? How does that benefit the Euro-zone, the global economy, or the people who have to live there?
What exactly does Madam Merkel and her collective _want_ to see happen in Greece? It sure as heck isn't a stable nation/economy.
Maybe it's time to ask that question.
http://wifelyperson.blogspot.com/
9
Wifely,
You are right on the money. We in Canada gave up much of our sovereignty in 1980 when we abrogated our Canada Energy Program. Democracy is now just another word. Merkel is no more a representative of the German people than the American congress is representative of the people of America. We are living in Enron's world . Enron made only one mistake it was in too much of a hurry.
The New World Order envisioned by William F. Buckley Sr. in the early 20th century took almost 100 years till his son James Lane Buckley could get Citizens United through a Buckley apostate Supreme Court.
You are right on the money. We in Canada gave up much of our sovereignty in 1980 when we abrogated our Canada Energy Program. Democracy is now just another word. Merkel is no more a representative of the German people than the American congress is representative of the people of America. We are living in Enron's world . Enron made only one mistake it was in too much of a hurry.
The New World Order envisioned by William F. Buckley Sr. in the early 20th century took almost 100 years till his son James Lane Buckley could get Citizens United through a Buckley apostate Supreme Court.
8
One major flaw in your argument: Greece did not have a planned outcome in mind--when it lived beyond it's mean, spent itself into oblivion, and borrowed money it couldn't pay back.
If you so admire the philosophy of having a long-term plan--why do you want to reward (or forgive) a country that obviously had NO plan at all--other than to live the good life until the music stopped?
If you so admire the philosophy of having a long-term plan--why do you want to reward (or forgive) a country that obviously had NO plan at all--other than to live the good life until the music stopped?
There are three ways of reducing the burden of a debt. One is lowering interest rates. However, with real rates close to zero, that is not a viable option for Greece. A second way is to lower the debt burden, essentially have creditor banks take a 'haircut'. However, those banks and the European Central Bank don't appear to want to do that. Therefore, the third way is to extend the loan timeline much further into the future, say 50 or 100 years from now.
I'm not kidding about 50 or 100 years. Germany finally paid off its World War I debts in 2010 after they had been halved in 1953. The German government needs to be reminded about that. And Britain owes debts on virtually every war it ever fought. For example, it still owes debt on the South Sea Bubble from 1720 after the war with Spain from 1701-13.
So, the most realistic situation for the Greeks (and for the European banks which hold the debt) is to extend the debt for a very long time, allowing Greece to use its revenues to expand its economy instead of paying interest. As Krugman points out, the banks aren't going to be paid back soon in any case. So, they might as well agree to a very long-term solution to this crisis. It's in everyone's interest.
I'm not kidding about 50 or 100 years. Germany finally paid off its World War I debts in 2010 after they had been halved in 1953. The German government needs to be reminded about that. And Britain owes debts on virtually every war it ever fought. For example, it still owes debt on the South Sea Bubble from 1720 after the war with Spain from 1701-13.
So, the most realistic situation for the Greeks (and for the European banks which hold the debt) is to extend the debt for a very long time, allowing Greece to use its revenues to expand its economy instead of paying interest. As Krugman points out, the banks aren't going to be paid back soon in any case. So, they might as well agree to a very long-term solution to this crisis. It's in everyone's interest.
4
One of the problems with trying to come to a fair opinion on situations like the Greek government's is that the "creditors" are never named. The nation-state players -- Greece, Germany, etc. -- are dutifully reported on, but the real forces behind the dilemma -- the banking combines -- lurk in the dark. This is a very useful article in that respect, except that Krugman should go on and actually name the creditors, and keep naming them. As he points out, why should German (and presumably American, British, and Swiss, and Scottish) banks not pay a price too? Why should they be assured that, after making their risky loans to Greece, they will be bailed out by the IMF, or the Greek government and the suffering Greek people? It is absolutely reminiscent of the 1920s in the post-Versailles world, and we know what that led to.
13
There are virtually no private holders of Greek debt any more. Greek debt was heavily held by European banks and insurance companies pre-crisis, but by now the only holder is the ECB itself -- The ECB bought up all the Greek debt in the open market from the private holders, who were panic-sellers. As Krugman points out, the bailout was structured to prevent private debt holders from taking a large loss. It was politically much easier to bail out Greece than to bail out the European banks, who would have had their capital wiped out if the Greek government had defaulted.
2
The moral of the story is the banks run everything and really know nothing. I love the myth that education will solve all the problems. This one ties in with the media giving us propaganda and not news. Pray to God and he will solve the problem. The criminal justice system will cure all the problems by criminalizing what? Psychiatry is not a science but knows that these things are all caused by chemicals in the brain that rationalize everything. Osama Bin Laden could have been taken out by a single sniper but would that have solved "the problem''?
6
Great column today from Krugman. Pulitzer quality.
The issues are so hard to understand yet he makes it as clear as balancing a checkbook and then some.
The issues are so hard to understand yet he makes it as clear as balancing a checkbook and then some.
15
Like the gold standard in the run up to the great depression, the euro has imprisoned Greece and other countries in a system of fixed exchange rates at unrealistically high values. The euro can fluctuate relative to USD & CHF, but within the euro-zone low-productivity economies like Greece are stuck with the same currency as high-productivity economies like Germany. Exiting the euro would actually benefit Greece in the long term, though granted there would be disruption in the short run. Exiting the euro would force a default on Greek debt, accomplishing the objective of debt reduction. Greece would then be shut out of credit markets, forcing the Greek government to operate on a cash basis, which would in turn force improved tax collection and a balanced budget. The replacement currency, let's call it "New Drachma", would have a much lower exchange rate than the euro, which would put all those lovely beaches "on sale" by at least 20%. Low prices for USD or euro-based vacationers would bring in lots of hard currency to finance imports. Who would lose from Greece exiting the euro? Greek banks would be wiped out for sure, but their balance sheets are entirely fictional anyway, so they survive today purely because of the "extend and pretend" policies of the ECB. The Greek banks need to re-capitalize, better to do so now than later. The ECB would lose all those loans, but everyone knows the loans are un-payable, so again it's better to face reality than hide from it.
5
This is wise counsel as far as it goes, but it does not go far enough. The situation Greece faces is equivalent to the Great Depression in the US, maybe worse. Professor Krugman knows that, and despite the good FDR New Deal employment programs like the WPA and the CCC, it took re-armament and WWII to bring back full employment. What the Professor has put on the table will not come close to doing the job. It is a start at part of the problem, though.
So the public should be aware that Yanis Varoufarkis, James Galbraith and Stuart Holland have been working for several years now on a program, and you can find it here: http://yanisvaroufakis.eu/euro-crisis/modest-proposal/
It proposes a New Deal for Greece, and it will be accompanied by a dramatic reform of the sieve like tax collections. Who knows, it might even shame the great economic oligarchs into putting Greece first.
Just thought the public should know that the new Greek finance minister has been working for years on his modest proposals, because you're going to see a lot of demagoguery about him over the next few weeks. Americans should appreciate the inspiration for the proposals in the New Deal. The danger is that for the German "ideology," the New Deal may be same whipping boy it was for people like Amity Shlaes and the Republican Right.
Greece has lots of sunshine, wind and water power potential, and that can be a base for the job creation.
So the public should be aware that Yanis Varoufarkis, James Galbraith and Stuart Holland have been working for several years now on a program, and you can find it here: http://yanisvaroufakis.eu/euro-crisis/modest-proposal/
It proposes a New Deal for Greece, and it will be accompanied by a dramatic reform of the sieve like tax collections. Who knows, it might even shame the great economic oligarchs into putting Greece first.
Just thought the public should know that the new Greek finance minister has been working for years on his modest proposals, because you're going to see a lot of demagoguery about him over the next few weeks. Americans should appreciate the inspiration for the proposals in the New Deal. The danger is that for the German "ideology," the New Deal may be same whipping boy it was for people like Amity Shlaes and the Republican Right.
Greece has lots of sunshine, wind and water power potential, and that can be a base for the job creation.
9
" ... The truth, however, is that the great bulk of the money lent to Greece has been used simply to pay interest and principal on debt ..."
Yes and that is the point in which Mr. Krugman again deviates miles from any path close to reality.
Greece has funded its consumer spending via cheap credits way longer than since the crisis broke out.
Greece has funded its consumer spending since it entered the Eurozone by using cheap credit based on false, not to say criminally falsified, statistics that got Greece into the Eurozone and then got Greece cheap money based on credibility that never was based on Greece's economy but on the Eurozone's economy.
Greece was a criminal case right from the start.
And there is no way that Greece, which already has received the benefits from two haircuts totalling about 60% of its debt, will pa back unless it will be forced to so under the existing rules.
All the whining that Mr. Krugman and his band of Communists are now writing their fingers off will not make Greece even considering paying it's debt.
it will only deliver the ideological and argumentative basis for more fraud by the Greece government.
And that is no basis for a state that is out to get more money from international lenders.
Greece has to pay back or go bankrupt like any other debtor.
Communists or no Communists and Fascists or no Fascists in it's government, there is only one way and that is to pay back by any means and according to existing contracts.
Yes and that is the point in which Mr. Krugman again deviates miles from any path close to reality.
Greece has funded its consumer spending via cheap credits way longer than since the crisis broke out.
Greece has funded its consumer spending since it entered the Eurozone by using cheap credit based on false, not to say criminally falsified, statistics that got Greece into the Eurozone and then got Greece cheap money based on credibility that never was based on Greece's economy but on the Eurozone's economy.
Greece was a criminal case right from the start.
And there is no way that Greece, which already has received the benefits from two haircuts totalling about 60% of its debt, will pa back unless it will be forced to so under the existing rules.
All the whining that Mr. Krugman and his band of Communists are now writing their fingers off will not make Greece even considering paying it's debt.
it will only deliver the ideological and argumentative basis for more fraud by the Greece government.
And that is no basis for a state that is out to get more money from international lenders.
Greece has to pay back or go bankrupt like any other debtor.
Communists or no Communists and Fascists or no Fascists in it's government, there is only one way and that is to pay back by any means and according to existing contracts.
5
It'll be interesting to see if the full weight of an important European country can bring some sanity to the dismal corruption of the banking system. Where can the bankers hide when an entire economy calls their bluff and says "No More!'?
Every average person in the western world should be cheering this story on.
Every average person in the western world should be cheering this story on.
3
It is absolutely true that Greece will never be able to pay back its debt. It is also true that creditors will have to suffer for their irresponsible lending, which was actually supported by the central banks that rated Greek debt as AAA.
However, why not look at the consequneces of debt relief? This can happen with a haircut on the outstandign debt: it is clear that Portugal, Ireland, Italy and Spain will also want to see debt relief. That is something Germany and the other Northern creditors cannot bear.
The other path would be monetary financing of the debt by inflating it away: that will cause also the German middle class' savings to evaporate. Is it likely that the German middle clas would accept that, after years of austerity to support reunification? Rather it is likely that we would be looking at the second burning of the Reichstag!
However, why not look at the consequneces of debt relief? This can happen with a haircut on the outstandign debt: it is clear that Portugal, Ireland, Italy and Spain will also want to see debt relief. That is something Germany and the other Northern creditors cannot bear.
The other path would be monetary financing of the debt by inflating it away: that will cause also the German middle class' savings to evaporate. Is it likely that the German middle clas would accept that, after years of austerity to support reunification? Rather it is likely that we would be looking at the second burning of the Reichstag!
2
Relying on Germany to do the "right thing"-how has that worked out in the past?
I have followed the Greek economic minister Yanis Varoufakis and his plan is to confront Germany into acting (hopefully) on a mutually beneficial reduction of debt to stay IN the Euro.
Germany's Spiegel claims Merkel is a PURE pragmatist with absolutely NO vision.
Going to be interesting how those 2 forces "negotiate".
P.S. is Greece's footsie with Russia a way to buy off German businessmen by providing backdoor access to trade between the two?
I have followed the Greek economic minister Yanis Varoufakis and his plan is to confront Germany into acting (hopefully) on a mutually beneficial reduction of debt to stay IN the Euro.
Germany's Spiegel claims Merkel is a PURE pragmatist with absolutely NO vision.
Going to be interesting how those 2 forces "negotiate".
P.S. is Greece's footsie with Russia a way to buy off German businessmen by providing backdoor access to trade between the two?
2
The trouble (a poor choice of word) with left winning election victories have yet to prove that they can sustain the tough positions that brought them to power.
France (with Hollande) hasn't done so. My early read on Greece is the same.
Something seems to "take the fizz out". Perhaps its weariness, perhaps its the realization of the practical difficulties of the situation, perhaps its the comfort of the victory and the trappings of power. We'll just have to wait and see how this victory plays out.
France (with Hollande) hasn't done so. My early read on Greece is the same.
Something seems to "take the fizz out". Perhaps its weariness, perhaps its the realization of the practical difficulties of the situation, perhaps its the comfort of the victory and the trappings of power. We'll just have to wait and see how this victory plays out.
1
Pretty cute article. Not real smart, but cute. Trying to save Greece from itself. Not going to happen. Greece is toast and on its way to the scrap heap. But if Krugman wants to send his money to Greece I am very sure they will spend it. The people of Greece have spoken: kill us off. Okay, have it your way. But the real winner of the last election will then become apparent. Golden Dawn. Took 3rd. Center did not work. The left is not going to work. So the far right grows and grows.
4
The real problem seems to be that central bankers care only about the wealth of their fellow bankers. Their moralizing about austerity is merely a pious cover for their actual belief that bankers (and their shareholders) are a privileged class whose entitlement should not be affected by recessions. If it's necessary for ordinary mortals to suffer so that bankers can maintain their entitlement, then suffer they shall! Of course, the central bankers will couch that belief in pious pseudo-Calvinistic terms, but it reflects the same aristocratic beliefs as Mitt Romney dismissing half the country as "takers."
Austerity is merely a euphemism for protecting the entitled privilege of bankers to exempt themselves from the harsh conditions suffered by commoners and peasants. It doesn't matter that the misery the central bankers inflict is not producing the promised results for the non-banker population. What matters is that, as Dr Krugman notes, money is flowing into bankers' coffers. And that means Austerity is working just as it should.
Austerity is merely a euphemism for protecting the entitled privilege of bankers to exempt themselves from the harsh conditions suffered by commoners and peasants. It doesn't matter that the misery the central bankers inflict is not producing the promised results for the non-banker population. What matters is that, as Dr Krugman notes, money is flowing into bankers' coffers. And that means Austerity is working just as it should.
11
So as Dr. Krugman explains it, Greece is apparently caught in a payday lender kind of debt spiral from which it can never recover? If Germany continues to dominate economic policy in Europe, will the new Prime Minister Alexis Tsipras preside over a messy version of “my big fat Greek divorce” from the Euro? Will we then see a modern-day, right-wing “General’s Coup” topple a democratically elected Greek government to placate the Germans?
This might all sound like hyperbole but “with potentially disastrous economic and political consequences for Europe as a whole,” as a distinct possibility, revival of the drachma might not be what anyone, including Greek nationalists, wants? It would be a tragedy if the country that gave us the word, would sacrifice democracy for political stability, even as its economic stability remains in doubt. So the EU and the ECB should respect the wishes of the Greek electorate and accommodate the new PM’s mandate to ease up on austerity – the alternative is chaos.
This might all sound like hyperbole but “with potentially disastrous economic and political consequences for Europe as a whole,” as a distinct possibility, revival of the drachma might not be what anyone, including Greek nationalists, wants? It would be a tragedy if the country that gave us the word, would sacrifice democracy for political stability, even as its economic stability remains in doubt. So the EU and the ECB should respect the wishes of the Greek electorate and accommodate the new PM’s mandate to ease up on austerity – the alternative is chaos.
7
For the Greeks, who would again be the authors of their own misfortunes. Not for anyone else or not much anyway. Alas the events of three millennia ago don't have much traction in 2015.
I still don't understand why a German tax payer would ever want to forgive Greek debt? Why would you ever trust the Greek people to be fiscally responsible? For that matter, I feel very badly for Germany, Norway, and the other fiscally responsible nations. So much so that I wonder, why do they stay in the Euro Zone?
5
"I still don't understand why a German tax payer would ever want to forgive Greek debt?"
Well in the first place, the Greeks aren't asking for forgiveness. They are negotiating a REFI. It is true that they have raised the idea that the banks writing-off parts of the loan as bad debt (something banks do everyday) - leaving Greece to take a hit to their future credit worthiness.
Why would German taxpayers want that?
1. The is very real possibility of default either in the near term or the future. Generally creditors prefer to work with debtors to make sure that they get some of their money (or all of it with a bit less interest then stipulated) rather then none. I'm pretty sure German taxpayers would prefer 110%, say, of their investment rather then zero.
2. Relief now will make Greece stronger economically sooner, allowing German companies (which are overwhelmingly export and finance based) to make more money from them as a trading partner. Presumably, the health and profits of the German economy is of interest to German taxpayers.
3. No relief might lead to a breakdown of Greek civil society and democracy that will create a number of major security challenges that will be very expensive for the German taxpayer. It is cheaper overtime to have a stable, friendly democracy as a near neighbor then either a failed state or strong-arm dictatorship.
It is a no-brainer as a business decision.
Well in the first place, the Greeks aren't asking for forgiveness. They are negotiating a REFI. It is true that they have raised the idea that the banks writing-off parts of the loan as bad debt (something banks do everyday) - leaving Greece to take a hit to their future credit worthiness.
Why would German taxpayers want that?
1. The is very real possibility of default either in the near term or the future. Generally creditors prefer to work with debtors to make sure that they get some of their money (or all of it with a bit less interest then stipulated) rather then none. I'm pretty sure German taxpayers would prefer 110%, say, of their investment rather then zero.
2. Relief now will make Greece stronger economically sooner, allowing German companies (which are overwhelmingly export and finance based) to make more money from them as a trading partner. Presumably, the health and profits of the German economy is of interest to German taxpayers.
3. No relief might lead to a breakdown of Greek civil society and democracy that will create a number of major security challenges that will be very expensive for the German taxpayer. It is cheaper overtime to have a stable, friendly democracy as a near neighbor then either a failed state or strong-arm dictatorship.
It is a no-brainer as a business decision.
6
After reading a few comments it occurred to me that it might be a good idea for all of us to read Portia's speech from the Merchant of Venice Act 4 Scene 1 with particular emphasis on the part I've included below:
Though justice be thy plea, consider this,
That, in the course of justice, none of us
Should see salvation: we do pray for mercy;
And that same prayer doth teach us all to render
The deeds of mercy.
Though justice be thy plea, consider this,
That, in the course of justice, none of us
Should see salvation: we do pray for mercy;
And that same prayer doth teach us all to render
The deeds of mercy.
9
Greece's exit from the Union would not be a disaster for the Union, it would probably be better off in short order. It would be catastrophic for Greece though.
2
Exactly the opposite. Greece would be better off, at least in the short run, leaving the Union and defaulting on its debt. It's government fiscal system could return to furnishing public goods instead of acting as an loan enforcer for German banks. If that were to happen, however, the Eurozone would be thrown into chaos as short-sellers stalk the next potential leaver.
3
"If that were to happen, however, the Eurozone would be thrown into chaos as short-sellers stalk the next potential leaver."
Exactly. The new Greek Finance Minister said just said something to the effect of: It was a mistake to join the Euro in the first place, but leaving now would be a disaster. The same goes for the other side: It was a mistake to let (Let? More like lobby and scheme) Greece into the Euro, but having them leave now would be a disaster.
It is a waste of time trying to rewind the past. Learn from it, but go forward from where you are.
Exactly. The new Greek Finance Minister said just said something to the effect of: It was a mistake to join the Euro in the first place, but leaving now would be a disaster. The same goes for the other side: It was a mistake to let (Let? More like lobby and scheme) Greece into the Euro, but having them leave now would be a disaster.
It is a waste of time trying to rewind the past. Learn from it, but go forward from where you are.
1
It would be something of a disaster for both, but probably in different ways. For Greece, there's the obvious problems of replacing the currency and making sure their banking system doesn't complete disintegrate. For the EU, however, there is the not insignificant issue of sovereignty. If Greece leaves, it sets the precedent that countries outside of France and Germany might be expendable. And, if push comes to shove, the French and Germans will save themselves rather than the other members. It makes the union more fragile and less likely to be successful.
1
The banks in America faced a similar challenge to that of Europe in regard to excessive debt. The answer, from 2009 forward, was pretty simple: foreclose and move the people out of their houses. While America's mega-banks and mega-corporations got bailed out by the worst of their mistakes, America's population, for the most part, was left holding a bag of dirt.
This is no joke. There are economists and experts who believe it will take two generations or more to recover the massive loss of personal wealth in places like Memphis and other cities. The Washington Post just ran a series on the impact in Prince Georges County, Maryland, a suburb of DC that, in prosperous times, became the wealthiest majority black county in America.
The uneven quality of the bailouts was one of the forces behind the anger of those who joined the so called tea party movement. While that effort was mid-wifed by scads of Republican money, it was, at times, a genuine expression of populist outrage.
President Obama and team managed to save America from economic collapse, but his Wall Street born and bred advisors never figured out how to give much more than symbolic relief to mortgage holders. Recently, the banks have paid billions in virtual confessions lying, cheating and stealing, but they walk away having not admitted to their actual crimes. Money buys almost everything, including the patina of innocence.
We had our own Greek experience here, we just don't fully realize it.
Doug Terry
This is no joke. There are economists and experts who believe it will take two generations or more to recover the massive loss of personal wealth in places like Memphis and other cities. The Washington Post just ran a series on the impact in Prince Georges County, Maryland, a suburb of DC that, in prosperous times, became the wealthiest majority black county in America.
The uneven quality of the bailouts was one of the forces behind the anger of those who joined the so called tea party movement. While that effort was mid-wifed by scads of Republican money, it was, at times, a genuine expression of populist outrage.
President Obama and team managed to save America from economic collapse, but his Wall Street born and bred advisors never figured out how to give much more than symbolic relief to mortgage holders. Recently, the banks have paid billions in virtual confessions lying, cheating and stealing, but they walk away having not admitted to their actual crimes. Money buys almost everything, including the patina of innocence.
We had our own Greek experience here, we just don't fully realize it.
Doug Terry
39
Amen. An American Syriza party would be nice. The Occupy movement had its chance to make an impact a few years ago but it blew its chance by deliberately not putting a leadership in place and by avoiding or rebuffing relationships with sympathetic politicians. Meanwhile the tea party, with its fictitious populist grass roots but bankrolled by the plutocracy, took over the GOP.
6
Absolutely correct. Obama's listening to the Wall St. contingent in his advisory group has led him to the biggest errors when it came to policy regarding ordinary citizens. It was awful to watch as these banker types made the same errors that intensified the pain for ordinary people in the Great Depression and as the banks, who had just been bailed out (!) intentionally went back to preventing ordinary folks from getting the justice they were entitled to from the system. The latest dumb thing was the 529 savings account recommendation. Fortunately, Obama turned on a dime and eliminated that unnecessary and worthless idea.
Sadly, there are hundreds of onerous (to middle class people) Republican ideas that will now be attached to must pass bills and the voters who put these dodos into office and the many more voters who were too uninvolved and too uninterested to vote will discover just how destructive of their economic comfort the LACK of regulation and good government can be.
Sadly, there are hundreds of onerous (to middle class people) Republican ideas that will now be attached to must pass bills and the voters who put these dodos into office and the many more voters who were too uninvolved and too uninterested to vote will discover just how destructive of their economic comfort the LACK of regulation and good government can be.
1
Sort of like the so called instigator of the tea party movement Rick Santelli of CNBC railing against a government program to help people who were behind on their mortgages, but remaining silent on the big wall street bailouts.
1
I keep reading the articles and op-ed pieces to see if Greece is making any progress on their internal/cultural problems, such as the habitual tax evasion and petty corruption. I'm not seeing any reason to believe any progress is being make. So I'm wondering whether it makes any real difference whether Germany does this, or that banks do that.
4
Don't the election results count as evidence? A big part of Syriza's platform and appeal was the idea of a new broom sweeping out the corrupt establishment and their frank talk about taxes, corruption, and related problems. They won a historic landslide on that. Also, another party whose platform was all about that, To Potami, was just edged out of third place despite being less then a year old and containing no "old face."
The irony of all the sudden quibbling about corruption and taxes is that the establishment that both fostered the culture in the first place and sabotaged efforts to change it is the one that Germany and the EU favored in the recent election - and the Greeks threw out. (Coincidentally, they were also the ones who ran-up all these loans back before the crash.)
The election was between an establishment that said "We need austerity" and showed by their actions that reform on taxes and corruption was not important and a coalition of reformers who said "Austerity is a failure and reform on taxes and corruption an urgent priority."
The irony of all the sudden quibbling about corruption and taxes is that the establishment that both fostered the culture in the first place and sabotaged efforts to change it is the one that Germany and the EU favored in the recent election - and the Greeks threw out. (Coincidentally, they were also the ones who ran-up all these loans back before the crash.)
The election was between an establishment that said "We need austerity" and showed by their actions that reform on taxes and corruption was not important and a coalition of reformers who said "Austerity is a failure and reform on taxes and corruption an urgent priority."
1
The problem is the way EU was constructed. It started out as a trading and commercial union. Eventually it adopted new currency and new rules which made the EU a closer union. Yet the member countries still had their own banks, and drew up their own budgets. It was kind of separate but equal philosophy. There was talk of "closer union" and "more Europe" but that never happened.
So when disaster struck, and banks had to shut down or recapitalized the only country that could afford to assist financially was Germany and Angela Merkel insisted that all loans had to be repaid. There was talk of mutualizing the debt, but Angela Merkel said NO. So while some creditors did take haircuts, the debt from borrowing primarily from Germany had to be paid back. As past of Germany and IMF loans, austerity was required which forced the restructuring of the economy. That was painful for many countries and caused high unemployment.
Currently Greece's debt is so high that it will never be paid back - the economy can never grow enough to pay it back. Thus austerity continue and in the last election Syriza won on an anti-austerity program.
The solution would be to mutualize the debt but Germany is blocking that. Also the EU is tarnished and many countries now have growing anti-EU parties as a result of the high debt burden.
It the EU itself is not restructured along with the debt I am not sure how much longer the EU can last.
So when disaster struck, and banks had to shut down or recapitalized the only country that could afford to assist financially was Germany and Angela Merkel insisted that all loans had to be repaid. There was talk of mutualizing the debt, but Angela Merkel said NO. So while some creditors did take haircuts, the debt from borrowing primarily from Germany had to be paid back. As past of Germany and IMF loans, austerity was required which forced the restructuring of the economy. That was painful for many countries and caused high unemployment.
Currently Greece's debt is so high that it will never be paid back - the economy can never grow enough to pay it back. Thus austerity continue and in the last election Syriza won on an anti-austerity program.
The solution would be to mutualize the debt but Germany is blocking that. Also the EU is tarnished and many countries now have growing anti-EU parties as a result of the high debt burden.
It the EU itself is not restructured along with the debt I am not sure how much longer the EU can last.
4
What was intended to be the saving grace of the folly of a monetary union without common monetary policy was the set of rules and regulations Greece fudged, or cheated on. Make no mistake - the Greeks cheated and now they want the rest of Europe to pay for it.
2
Much of Europe, and most notably Germany, see Greece as irresponsible in their borrowing, spending, and in failing to be rigorous in collecting revenue. The Greek government has for decades failed to enforce tax laws, both for individuals and for corporations. The corruption has been breathtaking. Neither Germany nor any other member of the E.U. see Greece taking any material steps to correct that failure. And the new government is talking a good populist game without addressing the core issue.
7
"And the new government is talking a good populist game without addressing the core issue."
How can you be sure when they've been in office for just a few days? Ending tax evasion and corruption was a central element of their populist "talk." It is one thing to be reserve judgment until you see evidence that they are following through and another thing to dismiss them before they ever get a chance.
It is certainly a fact that the outgoing establishment government - led by the same party that ran up the debt before the crisis - didn't address these core issues (and even subverted attempts to do so). The great irony is that the Germans and the EU were remarkably aggressive in favoring that party - which created the mess and refused to address what you consider "the core issue" - and in showing hostility to the new reform government.
Apparently, Europe's banks and politicians, most notably Germany's, don't care about "the core issue" of taxes and corruption as much you say its citizens do.
How can you be sure when they've been in office for just a few days? Ending tax evasion and corruption was a central element of their populist "talk." It is one thing to be reserve judgment until you see evidence that they are following through and another thing to dismiss them before they ever get a chance.
It is certainly a fact that the outgoing establishment government - led by the same party that ran up the debt before the crisis - didn't address these core issues (and even subverted attempts to do so). The great irony is that the Germans and the EU were remarkably aggressive in favoring that party - which created the mess and refused to address what you consider "the core issue" - and in showing hostility to the new reform government.
Apparently, Europe's banks and politicians, most notably Germany's, don't care about "the core issue" of taxes and corruption as much you say its citizens do.
1
This essay by Krugman is so slanted against Germany and against creditors in general that I hardly know where to begin.
First, where we agree: Krugman says,
"It’s true that Greece (or more precisely the center-right government that ruled the nation from 2004-9) voluntarily borrowed vast sums."
What Krugman doesn't say is that there was considerable fraud involved. According to the Wikpedia article on the Greek financial crisis,
"To keep within the monetary union guidelines, the government of Greece had … for many years misreported the country's official economic statistics. At the beginning of 2010, it was discovered that Greece had paid Goldman Sachs and other banks hundreds of millions of dollars in fees since 2001, for arranging transactions that hid the actual level of borrowing."
It amazes me that Greece, like the US, avoids criminal prosecution of bankers who apparently engaged in wide scale fraud during the banking crisis of 2008 and AFTER. Could there be any clearer evidence that FAILING TO HOLD LARGE BANKS ACCOUNTABLE is not a winning strategy for either Americans or Greeks?
And of course there has been wide scale tax evasion within Greece itself.
Krugman asks the rhetorical question:
"But doesn’t Greece have an obligation to pay the debts its own government chose to run up? That’s where the moralizing comes in."
But why not be outraged at the actions of American and Greek banks?
And don't conflate those with ALL of the creditors.
First, where we agree: Krugman says,
"It’s true that Greece (or more precisely the center-right government that ruled the nation from 2004-9) voluntarily borrowed vast sums."
What Krugman doesn't say is that there was considerable fraud involved. According to the Wikpedia article on the Greek financial crisis,
"To keep within the monetary union guidelines, the government of Greece had … for many years misreported the country's official economic statistics. At the beginning of 2010, it was discovered that Greece had paid Goldman Sachs and other banks hundreds of millions of dollars in fees since 2001, for arranging transactions that hid the actual level of borrowing."
It amazes me that Greece, like the US, avoids criminal prosecution of bankers who apparently engaged in wide scale fraud during the banking crisis of 2008 and AFTER. Could there be any clearer evidence that FAILING TO HOLD LARGE BANKS ACCOUNTABLE is not a winning strategy for either Americans or Greeks?
And of course there has been wide scale tax evasion within Greece itself.
Krugman asks the rhetorical question:
"But doesn’t Greece have an obligation to pay the debts its own government chose to run up? That’s where the moralizing comes in."
But why not be outraged at the actions of American and Greek banks?
And don't conflate those with ALL of the creditors.
4
"What Krugman doesn't say is that there was considerable fraud involved."
And what YOU don't say is:
1. German banks and EU political leaders connived in these frauds, which were as much perpetrated on the citizens of Greece as on the citizens of the rest of the EU.
2. That the 2004-09 government which ran up the debt was led by the same party that was just kicked out - and that EU leaders, particularly Germany, favored over the winning reform coalition.
3. That the new government is made up of people who have been locked out of power for decades and were persistent and shrill critics of what they saw as the financial fraud and manipulation of the ruling elite.
Everything that has transpired has vindicated the criticism that the leaders of the new government have made from the wilderness for years. But the EU prefers to work with the people who lied, manipulated, and fostered a culture of corruption then the people who want to end it - because the people trying to end it are upfront about EU complicity.
And what YOU don't say is:
1. German banks and EU political leaders connived in these frauds, which were as much perpetrated on the citizens of Greece as on the citizens of the rest of the EU.
2. That the 2004-09 government which ran up the debt was led by the same party that was just kicked out - and that EU leaders, particularly Germany, favored over the winning reform coalition.
3. That the new government is made up of people who have been locked out of power for decades and were persistent and shrill critics of what they saw as the financial fraud and manipulation of the ruling elite.
Everything that has transpired has vindicated the criticism that the leaders of the new government have made from the wilderness for years. But the EU prefers to work with the people who lied, manipulated, and fostered a culture of corruption then the people who want to end it - because the people trying to end it are upfront about EU complicity.
3
This is just a lovely piece of work. The appeals to reason and emotion are perfectly balanced and the writing is simple and clear.
8
I fail to see how Mr. Krugman can go anywhere near his story. Greece did everything Mr. Krugman would have them do--up until the point it became ridiculous to keep doing it. It didn't work.
According to Keynesians like Krugman, the solution for Greece's weak economy is spending. It doesn't matter where you get the money--just spend, spend, spend your way to prosperity. Greece did exactly that--in spades. Problem is, it didn't work. Greece, with it's meagre olive oil and tourism economy, couldn't afford the lifestyle it had bought for itself--and couldn't pay back the money borrowed to finance it.
The question for Mr. Krugman is this: "when are you going to admit that his brand of Neo-Keynesian economic theory is bunk? In a nutshell, here is Krugman's formula for ailing economies:
A. Downturn begins--borrow money and spend to stimulate the economy.
B. Recovery begins--keep borrowing, keep spending, less we derail the recovery.
C. We have recovered--keep borrowing and spending--because now we can afford it.
The problem with Krugman's formula is that there is never a time to pay anything back--as Keynes' theories dictated Krugman's world involves endless deficit spending--no matter how the economy is faring.
The logical result? Greece went past the point of no return. Their skimpy economy couldn't support paying back the money. Krugman's solution? Blame the folks who lent it to them--and keep spending to stimulate the economy. Such folly.
According to Keynesians like Krugman, the solution for Greece's weak economy is spending. It doesn't matter where you get the money--just spend, spend, spend your way to prosperity. Greece did exactly that--in spades. Problem is, it didn't work. Greece, with it's meagre olive oil and tourism economy, couldn't afford the lifestyle it had bought for itself--and couldn't pay back the money borrowed to finance it.
The question for Mr. Krugman is this: "when are you going to admit that his brand of Neo-Keynesian economic theory is bunk? In a nutshell, here is Krugman's formula for ailing economies:
A. Downturn begins--borrow money and spend to stimulate the economy.
B. Recovery begins--keep borrowing, keep spending, less we derail the recovery.
C. We have recovered--keep borrowing and spending--because now we can afford it.
The problem with Krugman's formula is that there is never a time to pay anything back--as Keynes' theories dictated Krugman's world involves endless deficit spending--no matter how the economy is faring.
The logical result? Greece went past the point of no return. Their skimpy economy couldn't support paying back the money. Krugman's solution? Blame the folks who lent it to them--and keep spending to stimulate the economy. Such folly.
9
I used to think the way you do. But the reality is that Keynesian economics CAN work if it's not about spending just for the purpose of stimulating the economy, but rather about timing needed government expenditures so that they coincide with economic downturns. For example, a City desperately needs a new sewage treatment plant. It's going to float bonds and build the plant regardless. Why not wait for the local economy to cool off before building it?
.
It also works if you don't overextend yourself. The problem in Greece (and many cities here in the US) isn't that they spent money in a down economy. It's that they overextended themselves by taking on too much debt. The problem wasn't that they spent in a down economy, it was that they took on too much debt.
.
It also works if you don't overextend yourself. The problem in Greece (and many cities here in the US) isn't that they spent money in a down economy. It's that they overextended themselves by taking on too much debt. The problem wasn't that they spent in a down economy, it was that they took on too much debt.
4
Greece is running a surplus not a deficit That is, I would imagine, is contractionary. Also, since the money Greece has borrowed has been used to pay the interest to foreign banks it has not done very much to increase demand in Greece. Why is endless deficit spending really a problem as long as the interest growth does not grow faster than GNP? Part of Greece's problem is the rich don't pay their taxes. Not very different from what Republicans would like to accomplish in the United States.
5
Anybody who ever read Keynes would know that your ABCs are wrong. Please do some homework. For one thing, Greece borrowed during good years, not bad.
3
Germany depends a lot on exports, hence, nice to have a somewhat 'captive' audience within and without the European Union. And having Greece stay in, vastly exceeds any empty satisfaction to see a member country go by the wayside. The moralizing, if pushed too hard, may boomerang into hypocrisy, and the discomfort of looking at ourselves on reflection. If ordinary citizens take a cut, Banks should by 'happy' to comply. Austerity plus high unemployment seems an awful combination, a death trap of sorts.
4
Aye...there be the rub... and what may crack the wall and bring the EU down.
EU taxpayers have been shipping moolah for five years, ostensibly to Greece, to pay off their own Oligarchs', hidden behind their favored "financial institutions" capitalist fronts, sub prime loans. How long will that last? The Greek example, if democracy is real in the EU, bespeaks another coming, hair cut, maybe to the shoulders a la 1789...
(...and isn't Ukraine, in a more extreme example, just the same game...'oh, poor Kiev can't pay because of the dirty Ogre and the "little green" gremlins of the Kremlin"...when the fact was it couldn't anyway...and maybe West Oligarchs turned to post CIA types, private corp "security" like Xe, or XYZ, or whatever, to make sure a friendly- paying (non defaulting)- Gov was in place?
once it comes to be seen that way, how long will recession suffering EU taxpayers foot the bail out?)
EU taxpayers have been shipping moolah for five years, ostensibly to Greece, to pay off their own Oligarchs', hidden behind their favored "financial institutions" capitalist fronts, sub prime loans. How long will that last? The Greek example, if democracy is real in the EU, bespeaks another coming, hair cut, maybe to the shoulders a la 1789...
(...and isn't Ukraine, in a more extreme example, just the same game...'oh, poor Kiev can't pay because of the dirty Ogre and the "little green" gremlins of the Kremlin"...when the fact was it couldn't anyway...and maybe West Oligarchs turned to post CIA types, private corp "security" like Xe, or XYZ, or whatever, to make sure a friendly- paying (non defaulting)- Gov was in place?
once it comes to be seen that way, how long will recession suffering EU taxpayers foot the bail out?)
1
Economists should read Mancur Olson's The Logic of Collective Action on the nature of collective action problems. (Only political scientists read it.) As Robin Grier and I argue in our new book, The Long Process of Development, these problems explain why it took so many, many centuries to develop a state and market in England and Spain., even in the good case of England. The same problem exists in Europe, which has only been developing a state for 65 years, and the process faces even more severe collective action problems.
Without an effective democratic European state, the EU cannot determine the budgets of democratic European states. If it yields to Greece, other democratic governments also have an incentive to be a free rider. If only a radical government will stand up and be free rider, people will elect radicals.
The time has come to face up to the fact that the Euro cannot survive a crisis Friedman and Krugman recognized this in the 90s and Krugman five years now. He was right the first time.
The Europeans, I think, have played this right. Austerity is the only alternative to independent currencies. Governments would abandon the Euro without suffering. The rest of Europe needed to strengthen its banking system, and the Swiss and Draghi needed to take the steps to lessen the impact.
The stock market seems finally to have recognized what will happen. it is time for Krugman and others to recognize the logic of collective action problems.
Without an effective democratic European state, the EU cannot determine the budgets of democratic European states. If it yields to Greece, other democratic governments also have an incentive to be a free rider. If only a radical government will stand up and be free rider, people will elect radicals.
The time has come to face up to the fact that the Euro cannot survive a crisis Friedman and Krugman recognized this in the 90s and Krugman five years now. He was right the first time.
The Europeans, I think, have played this right. Austerity is the only alternative to independent currencies. Governments would abandon the Euro without suffering. The rest of Europe needed to strengthen its banking system, and the Swiss and Draghi needed to take the steps to lessen the impact.
The stock market seems finally to have recognized what will happen. it is time for Krugman and others to recognize the logic of collective action problems.
1
Evidently we will be locked into low interest rate policy by high government debt indefinitely. Policy will over-ride everyone's theories of what people do naturally.
2
When President Obama met with European leaders in 2009 to coordinate the response to the financial crisis, they all agreed to a robust fiscal stimulus package. Neither the American nor the European fiscal stimulus was adequate in practice, but the European variant was particularly short-lived. Under the guidance of Chancellor Merkel, for years now Europe has pursued a mistaken policy of fiscal austerity, to the point that they now appear to be in the midst of a double-dip recession characterized by deflation. With Greek voters finally saying no to this inane policy, an initiative from President Obama might be welcome to renew the Europeans' commitment to run larger fiscal deficits once again.
2
Mr. Krugman's argument while appealing on a humanitarian level, presents only one side of the coin and is, therefore, somewhat misleading. In a nutshell and somewhat simplified, it argues that Greece's people and it's economy would be OK or, at least, on the road to mend if it did not have to fulfill it's debt obligations and could continue to remain in good financial standing with the ECB.
That on an individual level, sounds to me like arguing that a person can take out a mortgage of any size and argue that without the mortgage obligation she/he could feed and clothe the family. What would happen to a country's or the world's economy if people would start borrowing and banks would lend on that basis? Or what would happen if a very large country such as the US would follow Krugman's proposed solution to over-borrowing?
I don't know what would be the "least bad" solution to Greece's debt problem from all points of view including the future of the EU and, especially, of the Euro as well as the European and, ultimately, the world economy. But one must factor in the likely knock on effect of a solution of the Greek debt problems on how the EU and, ultimately, the world will have to solve similar government (and possibly corporate and individual) debt problems in the future. And, Mr. Krugman is certainly not doing this with his proposal.
That on an individual level, sounds to me like arguing that a person can take out a mortgage of any size and argue that without the mortgage obligation she/he could feed and clothe the family. What would happen to a country's or the world's economy if people would start borrowing and banks would lend on that basis? Or what would happen if a very large country such as the US would follow Krugman's proposed solution to over-borrowing?
I don't know what would be the "least bad" solution to Greece's debt problem from all points of view including the future of the EU and, especially, of the Euro as well as the European and, ultimately, the world economy. But one must factor in the likely knock on effect of a solution of the Greek debt problems on how the EU and, ultimately, the world will have to solve similar government (and possibly corporate and individual) debt problems in the future. And, Mr. Krugman is certainly not doing this with his proposal.
2
It's important to remember that national debt is not a personal mortgage. Average Greeks didn't make the conscious decision to take on massive debt. Their elected officials did that. But average Greeks are suffering from that debt repayment. They're paying with tremendously high unemployment and an economic depression that should have ended years ago.
13
Also, as Krugman said, the lenders have to take some responsibility
as well. That's why they get interest on their loans. The banks have to
be willing to get back a fraction on the Euro for their bad decision to lend to a (corrupt) right-of-center government.
as well. That's why they get interest on their loans. The banks have to
be willing to get back a fraction on the Euro for their bad decision to lend to a (corrupt) right-of-center government.
3
What would happen if everybody did this? is a moral and philosophical argument that is essentially useless as a practical rule, like the slippery slope argument. If everybody did this, then we would have to stop them. In the meantime, we will all be better off if we bail out Greece in the current state of the facts.
3
If I thought for a minute that Prof. Krugman was actually sincere about his concern for the European project ... Let him answer then this question: suppose that treating Greece as he suggests were actually to hurt the European project, even cause it to collapse. (He doesn't think so, but surely he can consider the possibility he is wrong about the consequences.) Would he then retract his suggestions? Or would it still be full steam ahead, darn the torpodeoes. Everything he has written these past five years has demonstrated pretty conclusively that he invokes the European project only to justify a position on Greece which he has already determined. So I don't believe his sincerity.
1
All you people decrying the Greek spending are ignoring the human tragedy that this austerity program has wrought. Babies were being left in churches because mothers could not feed them. It is like the Great Depression and worse over there. Debt spending is often rung up when the income/revenue coming in to an individual, a company, or a government is enough to keep up the payments on it. When a severe collapse like 2008 happens and the income suddenly drops, then the debt rises beyond ability to pay as the debtor becomes farther behind and the interest compounds. I am sure many people bought houses pre 2008 that they could afford just fine until they lost their jobs, and the replacement jobs were at seriously reduced salaries. Greek debt is not that large in the scheme of things, and some debt forgiveness or reduction would help them (and any other debtor in the same situation) get back on their feet with the ability to keep up repayments.
2
The moralizing analysis is completely wrong: the average Greek has been punished for a crime she and he did not commit. Meanwhile, the culprit bankers are not giving back their mansions.
So Germany is going to become reasonable about Greece. Why? Because it is co-responsible: the Drachma was converted into Euro at twice its real value. Germany agreed to this. That instant wealth for Greece was going to bring a lot of purchase of German luxury cars by wealthy Greeks, and it did. So the average Greek was set-up by influential Germans.
Another point: Germany saw its debt cut down four times during the Twentieth Century, and the last time was in 1953. So basically Germany did not have to pay for Nazism and reconstruction.
In particular Germany did not pay in any commensurate fashion for the Greeks it killed in World War Two. How many Greeks did Germany kill? So many, one does not know how many. Up to more than eleven percent of the population. Scaled up to the present population of the USA, that would be around 33 million dead.
The sort of governments which has been in power throughout the West, has been serving the wealthy capital class, from the USA to Greece. It’s not just the Eurozone.
The British Royal Mail was evaluated by some financiers at 12 billion Euros. But the government sold it 4 billion. In a few hours of trading, the privatized company gained 60%, making a lots of instant wealth for investors.
https://patriceayme.wordpress.com/2015/01/29/great-bitter-lake/
So Germany is going to become reasonable about Greece. Why? Because it is co-responsible: the Drachma was converted into Euro at twice its real value. Germany agreed to this. That instant wealth for Greece was going to bring a lot of purchase of German luxury cars by wealthy Greeks, and it did. So the average Greek was set-up by influential Germans.
Another point: Germany saw its debt cut down four times during the Twentieth Century, and the last time was in 1953. So basically Germany did not have to pay for Nazism and reconstruction.
In particular Germany did not pay in any commensurate fashion for the Greeks it killed in World War Two. How many Greeks did Germany kill? So many, one does not know how many. Up to more than eleven percent of the population. Scaled up to the present population of the USA, that would be around 33 million dead.
The sort of governments which has been in power throughout the West, has been serving the wealthy capital class, from the USA to Greece. It’s not just the Eurozone.
The British Royal Mail was evaluated by some financiers at 12 billion Euros. But the government sold it 4 billion. In a few hours of trading, the privatized company gained 60%, making a lots of instant wealth for investors.
https://patriceayme.wordpress.com/2015/01/29/great-bitter-lake/
11
In essence, Krugman is saying Germany's choice is between Treaty of Versailles and the Marshall Plan. That should be a choice it is capable of grasping.
21
Again Mr. Kruger, like the new Greek government, conflates austerity and the changes necessary for Greece to go forward,. Austerity is wrong in times of crisis and we have enough data at this point regardless of time or place. Greece's problem is that it is a failed state. Michael Lewis has written the best article about what happened in Vanity Fair http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds... (the gist: total breakdown of civic life) Tax evasion is the national sport, has been for decades. And Greece has a huge, unproductive, corrupt public sector that has to borrow to support it. It employs anyone with political connections to positions with little to no work with high salaries and retirement in your 50s. The private sector is mostly relying to the government through a crony capitalist system. All that was financed on the cheap by getting fraudulently in the euro zone (cooking the books, see the euphemistic term "Greek statistics"). The only solution for Greece is to totally restructure its economy. Two governments up to now have tried to just tinker at the edges fearing the political cost. They couldn't convince the taxpayers of many Europeans countries why they should work till their late 60s so the Greek public employees can retire in their 50s. The new government is the latest that will try the same thing. The question is regardless of what happens with austerity whether Greece is willing and able to overhaul its economy.
10
Professor Krugman ignores one critical aspect - the endemic corruption and overweening bureaucracy in the Greek government. When you have to pay bribes to multiple agencies just to do business, it's no wonder that jobs are scarce.
75
The point is, making millions of innocent Greeks suffer is simply a non sequitur with respect to all this corruption. It does absolutely nothing to stop it. So what's the point of these comments deploring the corruption?
2
Identifying part of the problem does not solve the problem, however. Greece is not a victim ONLY of internal corruption. It is also under enormous pressure from its creditors to use 20 percent of its GDP to repay old loans. This is unsustainable, and the Greek people - most of whom are good and decent, law-abiding citizens - deserve a break. It is morally incumbent on Germany and others in the European Union to ease up on their austerity demands.
3
Yes, Greece is corrupt. But your comment suggests that corruption causes unemployment. Given the vertiginous rise in Greek unemployment since 2008, your argument requires that there was a similar huge increase in corruption since 2008. I find this very dubious.
2
FYI, the Washington Post's Harold Meyerson this week has explained Germany's history of having its debt forgiven. The West forgave half of Germany's debt in 1953. But what was good for Germany is not good for Greece, at least according to Germany.
See http://www.washingtonpost.com/opinions/harold-meyerson-in-greek-crisis-g....
See http://www.washingtonpost.com/opinions/harold-meyerson-in-greek-crisis-g....
12
Might such creditor patience cause other countries to renegotiate, too?
Mr. Krugman, Europe is undergoing this test overdue in lieu of following up the ill - conceived and even worse performed economic dictation of the troika. I strongly applaud the wisdom of the Greek people for stopping that bogus. Some folks in Brussels might be mad now but so what!
What Europe is in need of, is close collaboration of our middle classes in the spirit of camaraderie. Just disregard what the bureaucrats are telling us to do.
What Europe is in need of, is close collaboration of our middle classes in the spirit of camaraderie. Just disregard what the bureaucrats are telling us to do.
1
Think of it like a game of Monopoly. When your opponent lands on Boardwalk and you own it with a hotel on it, you have a choice: If you want to keep playing, you need to make a deal. If you want to end the game, you collect every dime that is owed. Same thing here. Does the EU want to keep playing or does it want to end the game?
124
5 years!
What has Greece done with the five years of debt relief given it by its European neighbors to get back on its feet?
Hear Professor Hatzis in these pages two days ago: "Greece’s economy is not free and competitive. Powerful cartels are shielded with barriers to entry by newcomers and foreign investors. There are still numerous closed shops and professions. Public sector unions are overprotected in comparison with private sector employees....
The administrative and the bureaucratic costs for investing, starting a business or transfer real estate are still unreasonably high. Overregulation is stifling economic activity. The tax system is inefficient and grossly complex. The justice system is extremely slow in enforcing contracts or resolving bankruptcies. Corruption is widespread and socially tolerated....
The welfare system is the European Union's most inefficient in eradicating poverty and now it is also insolvent. The result is low-quality services and rising inequality.,,,"
Greece's economy is what ours would look like if Paul Krugman designed it!
Not surprisingly, when Syriza's election victory was anticipated, income tax collections in a nation of tax cheats plummeted even further.
Why should a German hausfrau get down on her knees to mop the floor to pay more taxes so that Greece's corrupt economy can be propped up for another year or two?
If this represents "the continent's core values," then the European project is doomed anyway.
What has Greece done with the five years of debt relief given it by its European neighbors to get back on its feet?
Hear Professor Hatzis in these pages two days ago: "Greece’s economy is not free and competitive. Powerful cartels are shielded with barriers to entry by newcomers and foreign investors. There are still numerous closed shops and professions. Public sector unions are overprotected in comparison with private sector employees....
The administrative and the bureaucratic costs for investing, starting a business or transfer real estate are still unreasonably high. Overregulation is stifling economic activity. The tax system is inefficient and grossly complex. The justice system is extremely slow in enforcing contracts or resolving bankruptcies. Corruption is widespread and socially tolerated....
The welfare system is the European Union's most inefficient in eradicating poverty and now it is also insolvent. The result is low-quality services and rising inequality.,,,"
Greece's economy is what ours would look like if Paul Krugman designed it!
Not surprisingly, when Syriza's election victory was anticipated, income tax collections in a nation of tax cheats plummeted even further.
Why should a German hausfrau get down on her knees to mop the floor to pay more taxes so that Greece's corrupt economy can be propped up for another year or two?
If this represents "the continent's core values," then the European project is doomed anyway.
7
What has Greece done with those five years? Well, look at the numbers. 25% reduction in GDP. 25% unemployment. 33% in subsistence poverty. These are WORSE than Great Depression levels. Enough with the moralizing. It doesn't work. For 5 years it has only made things worse.
3
@ porto
You describe symptoms of the corruption that infects the Greek economy from top to bottom. What has Greece done to address that corruption in the five years that Europe's bailouts have bought it?
Greece's problems are not macroeconomic. Krugman's problem is that he can't see anything except through his prism of austerity v. stimulus. But all you can hope to get from stimulating the Greek economy is what the street calls a "dead cat bounce."
You describe symptoms of the corruption that infects the Greek economy from top to bottom. What has Greece done to address that corruption in the five years that Europe's bailouts have bought it?
Greece's problems are not macroeconomic. Krugman's problem is that he can't see anything except through his prism of austerity v. stimulus. But all you can hope to get from stimulating the Greek economy is what the street calls a "dead cat bounce."
1
Poverty and chronic unemployment destroys peoples lives. They lead to an increase in violence, increases in disease and increases in early death. Greece is a perfect example of this unexamined fact. Despite a relatively stable total population, the death rate in Greece increased by almost 10% from 2010 to 2012, after remaining stable for the previous decade. It is highly likely that statistics will show a continuation of the increase during the past two years, and no direct lines can be drawn, but even if we assume the death rate has not risen since 2012, that means at least 60,000 more Greeks have died during the past 5 years of economic crisis in that country.
Greece has suffered not just a potentially terrible and perhaps mortal blow, but an actual one.
Greece has suffered not just a potentially terrible and perhaps mortal blow, but an actual one.
4
Paul should save all the articles he has written about Greece.
He can recycle them for Italy, Portugal, Spain, Iceland and Ireland with some minor tweaking.
He can recycle them for Italy, Portugal, Spain, Iceland and Ireland with some minor tweaking.
2
And if we don't get our own house in order by getting geezer giveaways under control, the US too.
btw, AARP told me I was a geezer almost a decade ago.
btw, AARP told me I was a geezer almost a decade ago.
Men Or Markets?
"Let me issue and control a nation's money and I care not who writes the laws." Mayer Amschel Rothschild (1744-1812)
Trust in men ... or women such as Greenspan, Bernanke, and Yellen ... or trust in free markets to set rates? Since its inception, the Federal Reserve Board virtually has destroyed the currency of the USA. In the EU, Mr. Draghi talked a similar game; now he is playing it. Meanwhile, beware of Greeks bearing debts.
Yes, Greeks have elected a left-wing government threatening to default on Greek debt. Spain is following suit. Ireland, Italy, and Portugal are waiting in the wings. Such are the consequences of trusting in men.
Do the few ideological bureaucrats in central banks have more wisdom that the combined wisdom of all investors in free markets? We’ve given them power as if they do. They’ve failed. Now, nations are burning (www.nationonfire.com).
"Let me issue and control a nation's money and I care not who writes the laws." Mayer Amschel Rothschild (1744-1812)
Trust in men ... or women such as Greenspan, Bernanke, and Yellen ... or trust in free markets to set rates? Since its inception, the Federal Reserve Board virtually has destroyed the currency of the USA. In the EU, Mr. Draghi talked a similar game; now he is playing it. Meanwhile, beware of Greeks bearing debts.
Yes, Greeks have elected a left-wing government threatening to default on Greek debt. Spain is following suit. Ireland, Italy, and Portugal are waiting in the wings. Such are the consequences of trusting in men.
Do the few ideological bureaucrats in central banks have more wisdom that the combined wisdom of all investors in free markets? We’ve given them power as if they do. They’ve failed. Now, nations are burning (www.nationonfire.com).
1
Of course, markets. How could anybody be so stupid as to say anything else?
Because we know that markets -- a simple idea and a simple creation of men, -- are all-knowing, omniscient, perfect vehicles to solve all problems. That's right. The selfish, private goal of seeking short-term profits solves all problems, short-term, private, long-term, public. Whatever problem you have, a market with human greed behind it will solve that problem. Got a problem with a time horizon of 100 years where decisions made in the next 10 years determine how it will go? Then there's only one thing to do; get government out of the way and trust in markets where the people making the decisions won't even be alive in 100 years.
Because we know that markets -- a simple idea and a simple creation of men, -- are all-knowing, omniscient, perfect vehicles to solve all problems. That's right. The selfish, private goal of seeking short-term profits solves all problems, short-term, private, long-term, public. Whatever problem you have, a market with human greed behind it will solve that problem. Got a problem with a time horizon of 100 years where decisions made in the next 10 years determine how it will go? Then there's only one thing to do; get government out of the way and trust in markets where the people making the decisions won't even be alive in 100 years.
9
Did anyone read the IMF report referenced by PK? It really doesn't support his arguments.
if you read it, you will note some interesting sections like:
Pg 4: "Greece has continued to make significant progress in rebalancing the economy." (the current plan is working)
Pg 4: "But Greece has lagged on productivity-enhancing reforms." (the primary danger to the plan is "vested interests" who don't want to reform)
Pg 5: "The external current account registered a surplus in 2013, for the first time in decades, but non-tourism exports continue to perform poorly" (excitement that Greece is able to function without new debt should be tempered by the fact that this surplus is a statistical anomaly that seems to be driven by tourism which in turn is driven by a weak Euro)
Pg 6: "Investor interest has increased, and the government re-accessed markets for the first time in four years." (The plan has resulted in new capital investment"
Pg 25: "Greece’s capacity to repay the Fund remains adequate" (the current path is sustainable)
pg 25: "The adjustment has been largely expenditure led." (the plan is sustainable large through decreases in spending)
Pg 26 "Overall, the fiscal adjustment in Greece has been progressive." (this is no right-wing plan)
The fact that PK would link to a document that discredits his own arguments demonstrates that he does not believe that his fans would actually do their own analysis, and instead just regurgitate his propaganda falsely couched as analysis
if you read it, you will note some interesting sections like:
Pg 4: "Greece has continued to make significant progress in rebalancing the economy." (the current plan is working)
Pg 4: "But Greece has lagged on productivity-enhancing reforms." (the primary danger to the plan is "vested interests" who don't want to reform)
Pg 5: "The external current account registered a surplus in 2013, for the first time in decades, but non-tourism exports continue to perform poorly" (excitement that Greece is able to function without new debt should be tempered by the fact that this surplus is a statistical anomaly that seems to be driven by tourism which in turn is driven by a weak Euro)
Pg 6: "Investor interest has increased, and the government re-accessed markets for the first time in four years." (The plan has resulted in new capital investment"
Pg 25: "Greece’s capacity to repay the Fund remains adequate" (the current path is sustainable)
pg 25: "The adjustment has been largely expenditure led." (the plan is sustainable large through decreases in spending)
Pg 26 "Overall, the fiscal adjustment in Greece has been progressive." (this is no right-wing plan)
The fact that PK would link to a document that discredits his own arguments demonstrates that he does not believe that his fans would actually do their own analysis, and instead just regurgitate his propaganda falsely couched as analysis
4
Seriously? You should try quoting from the rest of the report. It's not as one-sided as you make it out.
For example, on page 4, your quote ("Greece has continued to make significant progress in rebalancing the economy.") is followed by a general description of fiscal cuts (i.e. government services - why this qualifies as "the economy", I'm not actually sure...but hey...). It concludes with "To have reached a surplus so swiftly is an extraordinary adjustment by any international comparison." In other words, PK's point - that the Greeks have really taken it on the chin - is accurate.
Or, maybe your quote from page 26 using "progressive" as some sort of rebuttle to "right-wing". The usage in that passage is more of an economic, rather than political, usage of the word - i.e. measured by the gini coefficient. Essentially, the kinds of cuts have been "progressive" in that they have made the country less unequal (and everyone poorer). But, PK was talking about the Greek government that ruled during the excess and implemented the plan; those are not quite the same thing.
The others are similar to greater and lesser degrees. Sure (pg. 25) "the current path is sustainable" unless of course (pg. 4) "Political support for the EFF-supported program [becomes] fragile". And, yes, basing a recovery on tourism and oil isn't sustainable, but calling it a statistical anomaly "driven by a weak Euro" assumes that the Euro will strengthen in the near future.
For example, on page 4, your quote ("Greece has continued to make significant progress in rebalancing the economy.") is followed by a general description of fiscal cuts (i.e. government services - why this qualifies as "the economy", I'm not actually sure...but hey...). It concludes with "To have reached a surplus so swiftly is an extraordinary adjustment by any international comparison." In other words, PK's point - that the Greeks have really taken it on the chin - is accurate.
Or, maybe your quote from page 26 using "progressive" as some sort of rebuttle to "right-wing". The usage in that passage is more of an economic, rather than political, usage of the word - i.e. measured by the gini coefficient. Essentially, the kinds of cuts have been "progressive" in that they have made the country less unequal (and everyone poorer). But, PK was talking about the Greek government that ruled during the excess and implemented the plan; those are not quite the same thing.
The others are similar to greater and lesser degrees. Sure (pg. 25) "the current path is sustainable" unless of course (pg. 4) "Political support for the EFF-supported program [becomes] fragile". And, yes, basing a recovery on tourism and oil isn't sustainable, but calling it a statistical anomaly "driven by a weak Euro" assumes that the Euro will strengthen in the near future.
1
Jason, I am not claiming that it is one-sided at all. It is clear that the current plan has significant downside, as do all plans that involve paying down massive debt. There are valid arguments on why changes should be made to the current plan and there are valid arguments that the plan is functioning fine as-is. On the other hand, many of the specific arguments posited by PK, both in this article and his previous writings, are not supported by the document he cites. That is my point.
Clearly, it is PK who views all matters as one-sided. Everyone who disagrees with him is demonized as dumb, evil or dumb and evil. I do not question his intelligence or morality. On the other hand, I do question many of his argument, as well as his candor and intolerance for any views contrary to his own.
Clearly, it is PK who views all matters as one-sided. Everyone who disagrees with him is demonized as dumb, evil or dumb and evil. I do not question his intelligence or morality. On the other hand, I do question many of his argument, as well as his candor and intolerance for any views contrary to his own.
Any good academic would do this. You're just confused because you are used to and seemingly embrace political discourse in the U.S. And regarding your reading of the IMF report, the IMF is a Trojan horse for international bankers and capitalists, and has been all about promoting the interests of foreign capitalists and local economic elites, e.g., liberalizing trade laws and cutting domestic taxes and expenditures, while turning a cold shoulder to important interests of working people, such as promoting health care and jobs. Of course it is going to favor the status quo, they're its authors!
I wonder how Paul would feel about people who don't pay back the money he has lent them.
As for the whole European project - it deserves to go the way of the Holy Roman Empire.
As for the whole European project - it deserves to go the way of the Holy Roman Empire.
2
Yes indeed, World Wars I and II were a big improvement on that nasty old Holy Roman Empire.
1
People & countries have to accept responsibility for their decisions & actions.
Greece is just like Detroit....and Chicago, Illinois, California & NY are all following the standard path of "Big Liberal Governments" promising entitlements to get elected.
They then raise taxes which causes people who create jobs & work & pay taxes to leave, resulting in bankrupt nations, states & cities.
This is the simple facts.
Krugman avoids the facts.
Greece is just like Detroit....and Chicago, Illinois, California & NY are all following the standard path of "Big Liberal Governments" promising entitlements to get elected.
They then raise taxes which causes people who create jobs & work & pay taxes to leave, resulting in bankrupt nations, states & cities.
This is the simple facts.
Krugman avoids the facts.
2
You'll have to remind me when the last time any of Chicago, Illinois, California or NY went bankrupt.
And the integrity of the banking/financial system? Isn't that important for an economist to consider, too?
1
Maybe a reminder to Merkel of what happened in Germany after the Treaty of Versailles would help.
5
"The CBO cautioned that America’s unaffordable public programs and crushing debt will condemn us to anemic economic growth. Total federal debt will reach $22.3 trillion by 2020. Unsustainable, says the CBO — especially when now-low interest rates return to normal."
I'm just curious if Prof. Krogman knows the definition of the word "unsustainable?"
I'm just curious if Prof. Krogman knows the definition of the word "unsustainable?"
2
An interesting quote Constance. Where's it from?
NO! The Germans cannot and will not. My only question is what is the fallout for our markets. What is the impact of the dissolution of the Eurozone on the world economy?
I don't expect the moneyed to let go with the money they expect to make in lending money to Greek's government. These people indirectly rule the European politics through put in power loyal friends.
1
The issue is not really how much of its debt (regardless of interest rates) Greece does, or doesn't, retire, its how. Creditors will decide, either through the market place or polling booth, how much, if anything, Greece will be loaned in the future. Good luck with that. Greece's better be ready to "run ... positive surpluses" on its own.
It actually might be Greece's 'Europe Test.'
Because it's difficult to hate and love the other Europeans and especially Germany at the same time that much?
And then the additional complication that there are so many Germans for complete debt forgiveness.
And does everybody know here that Tsipras really can't stand Americans?.
And I don't say that to imply that y'alls enemy should make y'all look at Germany with more admiration and respect.
But allow me to assess, that it is kind of hilarious - that some 'liberal readers' or commenters of the NYT, who often like to talk about the 'corruption' in their own government - suddenly ignore it if some other confusing motives are involved.
Is this like the 'Llibertarian Spirit' which hates itself for what it loves?
Because it's difficult to hate and love the other Europeans and especially Germany at the same time that much?
And then the additional complication that there are so many Germans for complete debt forgiveness.
And does everybody know here that Tsipras really can't stand Americans?.
And I don't say that to imply that y'alls enemy should make y'all look at Germany with more admiration and respect.
But allow me to assess, that it is kind of hilarious - that some 'liberal readers' or commenters of the NYT, who often like to talk about the 'corruption' in their own government - suddenly ignore it if some other confusing motives are involved.
Is this like the 'Llibertarian Spirit' which hates itself for what it loves?
1
I don't know...that sounds like an internet rumor.
Professor Krugman alludes to the "haircut" of the bankers (which, as I recall, came only after Merkel's party lost some six regional elections and her reelection was in danger). What is needed today is a scalping ... speaking metaphorically, of course :).
2
Dear Mr. Krugman,
Whew! Just read Mr. Biden's column about helping Central America and now your column on helping Greece. So much help, so little money seemingly available.
I guess this happens when you "bank roll" countries for profit; "haircuts" might soon become the norm. I do not for one moment believe banks in London, Zurich, etc. are REALLY interested in "helping" the people; they want to make a buck.
And much like "bundling toxic mortgages" in this country helping lead to the "worst financial disaster" since the Great Depression, the folks "helping" Greece are finding their money was, perhaps, not well spent. The problem seems to be that one can handle "Banks Too Big To Fail" (The suckers known as "taxpayers" will be there to bail them out) but what about "Countries Too Big To Fail"? Is Greece really one of those? Sometimes even "bankers" choose poorly.
And though the world is, seemingly, interconnected, I am very happy that this problem seems to concern, primarily, those of the European Union instead of good, old Uncle Sam.
Not to worry; I think the EU will have bigger fish to fry once Mr. Putin starts rolling again.
Whew! Just read Mr. Biden's column about helping Central America and now your column on helping Greece. So much help, so little money seemingly available.
I guess this happens when you "bank roll" countries for profit; "haircuts" might soon become the norm. I do not for one moment believe banks in London, Zurich, etc. are REALLY interested in "helping" the people; they want to make a buck.
And much like "bundling toxic mortgages" in this country helping lead to the "worst financial disaster" since the Great Depression, the folks "helping" Greece are finding their money was, perhaps, not well spent. The problem seems to be that one can handle "Banks Too Big To Fail" (The suckers known as "taxpayers" will be there to bail them out) but what about "Countries Too Big To Fail"? Is Greece really one of those? Sometimes even "bankers" choose poorly.
And though the world is, seemingly, interconnected, I am very happy that this problem seems to concern, primarily, those of the European Union instead of good, old Uncle Sam.
Not to worry; I think the EU will have bigger fish to fry once Mr. Putin starts rolling again.
Sounds like Greece has stopped drinking booze but still has a bar bill to pay off. Cut out the accumulated interest charges, and split bill up among the rest of the EU party. Obviously, Germany's ran a trade surplus for years with Greece, mooching drinks off them
1
The interest charges are already tiny as a consequence of debt relief deals already concluded. In fact the debt payments in total are currently only consuming about 3% of Greek GDP.
1
3% of US GDP equals between 75% and 80% of our defense budget. Or, it equals about 60% of our Social Security budget. Somewhere around 50% of our Education budget. Around 100% of our transportation budget.
3% of GDP is a lot.
3% of GDP is a lot.
I guess this is all going to boil down to whether the Germans see the EU as an historical opportunity to end the tribalism and civil wars of Europe or as a vehicle to protect Germany's current account surplus. Hopefully the first view prevails but given the geopolitical acumen Germany typically displays during Europe's crises the latter seems more likely.
4
The conservatives are never remiss to remind anybody of paying for making bad decisions. It's just what has to be done for things to work out as they should. Well, what about the bad decisions of those pumping credit into Greece hoping to make a profit. It seems the conservatives would have to agree those were pretty bad business decisions, right? But not just bad business decisions, they were bad political and macroeconomic decisions that, should they go wrong, could initiate serious political and international repercussions as we see before us now.
But I don't see conservatives saying those creditors need to pay for those bad decisions and help solve the problem they're part of creating. Why is that?
But I don't see conservatives saying those creditors need to pay for those bad decisions and help solve the problem they're part of creating. Why is that?
14
It is worse than that - the babies who made the bad decision have been protected and in some cases even promoted. Not to mention the politicians who did not exercise wise oversight of the nation's banks.
To be fair, the EU establishment also forgave PASOK, the center-right leaders who made the poor borrowing decisions - they were the darlings as the implemented austerity the last couple of years. Such nurturing tolerance for poor lending and borrowing decisions contrasts vividly with the draconian punishment the Greek electorate is made to face for poor election decisions.
To be fair, the EU establishment also forgave PASOK, the center-right leaders who made the poor borrowing decisions - they were the darlings as the implemented austerity the last couple of years. Such nurturing tolerance for poor lending and borrowing decisions contrasts vividly with the draconian punishment the Greek electorate is made to face for poor election decisions.
1
Yes, yes, I know. Sadly. All our brain-washed conservatives are doing is cheering on the corporate feudalism their mind-masters are working so fervently to give future generations.
Another hyperbole laden missive from Krugman I'm afraid. A fatal blow to peace and democracy? Please. For someone who often points out that economics is not a morality play Krugman spends a lot of time moralizing. There's some truth in his claims that part of the bailout monies they have received has been used to make payments on their debts but so what. Those debts represent part of the Greek balance sheet and if they weren't being funded by loans they'd have to be paid out of tax revenues. What Krugman's argument amounts to is that the debts should be written off while the entire edifice of Greek life which created this problem in the first place (rampant tax evasion, corruption, inefficient government owned enterprises, crony capitalism, a grotesquely bloated public sector, etc. etc.) should all be allowed to remain in place so the so everyone can get back to business as usual. Namely, public and private sector borrowing at the low rates that Euro membership makes possible and spreading the largess around internally to all social classes until the next crisis occurs in about ten years time. It aint going to happen Paul.
13
I think it is important to understand that this is an opinion column where Krugman explores the moral and political ramifications of the science of economics. When Krugman says that economics is not a morality play, I think he means that economics offers practical data-driven guidance on the very real moral choices that we all have to make. Unfortunately, some people use incorrect or discredited economic theories to advocate harming large numbers of other people, and this column is an excellent place for Dr. Krugman to explain what the science is and what the data shows.
2
I never saw where Krugman said in any of his articles about Greece that, "rampant tax evasion, corruption, inefficient government owned enterprises, crony capitalism, a grotesquely bloated public sector, etc. etc.) should all be allowed to remain in place?"
Charles
Tallahassee
It is implicit in his remedy.
Tallahassee
It is implicit in his remedy.
We often think of the EU as the United States of Europe. But the nature of their political union is very different from ours. We have three states, Alabama, Mississippi and Louisiana, which have received more in federal expenditures than they have paid in federal taxes each year for over a century. Nobody in the USA really cares. We view this as a cost of doing business as a Union, and life goes on. Not so in the EU. Germany gets headaches thinking that she is subsidizing debtor states in the EU. It is inevitable in the long run that some EU members will subsidize others. Until this is recognized, the EU experiment will never work.
35
The funny thing about those three states is the political attitude that the federal government is too big, and should get out of their "hair". Akin to those who are seemingly unaware that their Medicare or Social Security are government programs.
3
PK - What happened to your thinking of three years ago when you said:
"Greece Must and Will leave the Euro"
http://news.bbc.co.uk/2/hi/programmes/hardtalk/9725121.stm
"Greece Must and Will leave the Euro"
http://news.bbc.co.uk/2/hi/programmes/hardtalk/9725121.stm
3
That interview took place before Draghi said he would do whatever it took to preserve the Euro. You should know that Bruce, and you probably do, but have chosen to forget so that you can continue your ad hominen posture against Professor Krugman.
With Draghi backstopping Greek banks, Greece does not have to leave the Euro. Capiche?
With Draghi backstopping Greek banks, Greece does not have to leave the Euro. Capiche?
I'm a scientist and have spoken to German and Swiss fellow scientists about this topic. They give the same moralizing nonsense about irresponsibility that Prof Krugman speaks of. If scientists, who are supposedly objective and consider data first and ideology last say such things, there is little hope that the Germans will change their policy.
The Greeks need to exit - and demonstrate to the other countries also caught in Germany's power grab that European peoples will not submit to forced domination, economic or military.
The Greeks need to exit - and demonstrate to the other countries also caught in Germany's power grab that European peoples will not submit to forced domination, economic or military.
5
You're probably right. Krugman's proposal is the first workable solution I've seen in a long time, so I'd like to see it work. But if it doesn't, maybe Greece should leave the Euro. After all, Greece is going to suffer either way. Either they suffer indefinitely (or at least until some miracle happens and they can get out of their cycle of debt), or they can pull off the bandaid, suffer more in the short term, but have a light at the end of the tunnel.
.
Of course Germany will fight to keep Greece in the Euro, because they aren't suffering now, but will if Greece leaves. Tsipras knows this, I think.
.
Of course Germany will fight to keep Greece in the Euro, because they aren't suffering now, but will if Greece leaves. Tsipras knows this, I think.
4
Yes, you are right. The Greeks are free to leave the EU and the Euro and default. The Germans, never mind the Swiss (who are not in the EU), couldn't stop them. But as long as the Greeks want to be kept afloat by tax-payer money from other EU countries like France, Germany, and Italy they must stick by the settlements that earlier Greek governments negotiated.
The European (including Swiss and German banks) which recklessly bought Greek bonds were punished by a 70% haircut on their holdings. The money that Greece owns now is held by her European partners at very low and well below market rate interest. And writing off hundreds of billions of taxpayer Euros is politically impossible if Greece remains as corrupt and unproductive as reported by the NYT.
The European (including Swiss and German banks) which recklessly bought Greek bonds were punished by a 70% haircut on their holdings. The money that Greece owns now is held by her European partners at very low and well below market rate interest. And writing off hundreds of billions of taxpayer Euros is politically impossible if Greece remains as corrupt and unproductive as reported by the NYT.
1
You may be right that Greece will need to exit. But first, the really interesting question: can poor little Greece, with its vibrant, clear-headed new government, force the mighty Germans et al. to back away from their absurdly rigid and self-serving ideology? We'll see where things stand after that fascinating drama plays out ...
1
Global banking appears to operate as a US 'Pay Day Loan" service - extremely little risk and vast profits.
5
The Eurozone countries, the European Central Bank and International Monetary Fund (IMF) - the Troika - imposed 'austerity' on Greece, but they all followed the IMF's sadistic bankster recipe that has a record of killing the patient while soothing big banks.
The IMF has a rich record of economic failure around the globe.
The IMF's overreach was described by former vice-president of the World Bank, Joseph Stiglitz:
"When the IMF arrives in a country, they are interested in only one thing. How do we make sure the banks and financial institutions are paid? It is the IMF that keeps the (financial) speculators in business. They're not interested in development, or what helps a country to get out of poverty."
http://alturl.com/zuxte
IMF policies throughout the 1990s nearly killed Argentina with excess privatization, rapid economic 'liberalization' and the lowering of corporation taxes and tightening public spending.
Argentina suffered a catastrophic economic collapse in 2001.
"In the case of Argentina, we seem to have got the balance wrong," said the IMF.
No kidding.
Stiglitz says globalization can be either a success or a failure, depending on its management. "There is success when it is managed by national government by embracing the characteristics of each individual country, but there is failure when it is managed by international institutions such as IMF."
The IMF-led economic strangulation serves only bankers - while millions are tortured.
The Troika is wrong.
The IMF has a rich record of economic failure around the globe.
The IMF's overreach was described by former vice-president of the World Bank, Joseph Stiglitz:
"When the IMF arrives in a country, they are interested in only one thing. How do we make sure the banks and financial institutions are paid? It is the IMF that keeps the (financial) speculators in business. They're not interested in development, or what helps a country to get out of poverty."
http://alturl.com/zuxte
IMF policies throughout the 1990s nearly killed Argentina with excess privatization, rapid economic 'liberalization' and the lowering of corporation taxes and tightening public spending.
Argentina suffered a catastrophic economic collapse in 2001.
"In the case of Argentina, we seem to have got the balance wrong," said the IMF.
No kidding.
Stiglitz says globalization can be either a success or a failure, depending on its management. "There is success when it is managed by national government by embracing the characteristics of each individual country, but there is failure when it is managed by international institutions such as IMF."
The IMF-led economic strangulation serves only bankers - while millions are tortured.
The Troika is wrong.
132
Thanks for the link, very interesting. Stuff like that's why I read the comments section.
3
"Many people seem to believe that the loans Athens has received since the crisis broke have been subsidizing Greek spending. The truth, however, is that the great bulk of the money lent to Greece has been used simply to pay interest and principal on debt."
Which frees up money for spending on the Greek welfare state. Money is fungible, professor.
"It’s also true, however, that banks in Germany and elsewhere voluntarily lent Greece all that money. We would ordinarily expect both sides of that misjudgment to pay a price."
Let's make a deal. You lend me your income from writing this nonsense, I will give you back half and we can call it even.
"If it were just a matter of government finance, Greece could simply declare bankruptcy; it would be cut off from new loans, but it would also stop paying off existing debts, and its cash flow would actually improve."
The Greeks are spending more on their welfare state than they pay in taxes. Also, when the government stiffs its creditors, those creditors also stop lending to the private economy and a depression follows, reducing tax revenues and spending further.
There is no escape. Progressivism/socialism is unsustainable.
Take a hard look at Greece. They are America's ghost of Christmas future.
Which frees up money for spending on the Greek welfare state. Money is fungible, professor.
"It’s also true, however, that banks in Germany and elsewhere voluntarily lent Greece all that money. We would ordinarily expect both sides of that misjudgment to pay a price."
Let's make a deal. You lend me your income from writing this nonsense, I will give you back half and we can call it even.
"If it were just a matter of government finance, Greece could simply declare bankruptcy; it would be cut off from new loans, but it would also stop paying off existing debts, and its cash flow would actually improve."
The Greeks are spending more on their welfare state than they pay in taxes. Also, when the government stiffs its creditors, those creditors also stop lending to the private economy and a depression follows, reducing tax revenues and spending further.
There is no escape. Progressivism/socialism is unsustainable.
Take a hard look at Greece. They are America's ghost of Christmas future.
3
@Bart DePalma: If Dr. Krugman, or I, were foolish enough to lend you a large amount without sober investigation of your revenue, expenses, and ability to sustain repayment in hard times, we would surely deserve to lose some or even all of our loan. Why should Goldman Sachs and big European banks be exempt from the manifest consequences of their own irresponsibility?
So, no, I suspect Dr. Krugman won't be lending you much.
So, no, I suspect Dr. Krugman won't be lending you much.
3
What is also unsustainable is the form of capitalism we seem to be under with the wealthy take all, and the rest of us get only the scraps they allow us. A world where 80 people have more wealth than half the population of the planet put together. This kind of imbalance has led to every revolution from France, to Russian to Cuba with mostly negative results for all.
3
Not very convincing - social democracy is obviously more sustainable than unfetterrd capitalism.
1
I don't understand why Greece leaving the Euro would be such a hard thing to do, or have difficult consequences. By itself it doesn't erase the debt, but as long as the ECB is committed to ultra-low inflation rates, the adjustment problem for the peripheral countries (which Krugman has often lamented) remains.
Could somebody please explain how, in practice, would the Grexit happen? If, for example, I had 100 euros in a Greek bank, would they magically turn in to drachmas over night, like the prince of the fairy tale into a frog?
If so, could I save my euros by transferring them into a German bank instead?
And how, technically, would the Grexit work out? The euro conversion project took a lot of planning and several years. Many IT-systems were modified, and in many ways, it was more demanding than the 2000-conversion two years earlier.
It is not so hard to mix orange juice (drachmas) and apple juice (euros), but how do you part them again once mixed?
Would the banks and Greece just close down for 6 months while all the systems are changed back? Could that be done in secret? Inquiring minds would like to know...
If so, could I save my euros by transferring them into a German bank instead?
And how, technically, would the Grexit work out? The euro conversion project took a lot of planning and several years. Many IT-systems were modified, and in many ways, it was more demanding than the 2000-conversion two years earlier.
It is not so hard to mix orange juice (drachmas) and apple juice (euros), but how do you part them again once mixed?
Would the banks and Greece just close down for 6 months while all the systems are changed back? Could that be done in secret? Inquiring minds would like to know...
It appears that the Europeans did the same as the Americansand . They bail out the banks , financial, markets etc,and used Greece as the AIG to fhelp funnel money to te too big to fail. Your article really implies two big differences between the American and European plans. The first is of courcs that gGeece is a country not a corporation so that millions of people are suffering. The other is the USA brought in ithe QEs bigger, faster and beeter than the Europeans.
2
>
Well the first thing the Greeks must do is pay their taxes.
“When there is an income tax, the just man will pay more and the unjust less on the same amount of income."
Plato
Well the first thing the Greeks must do is pay their taxes.
“When there is an income tax, the just man will pay more and the unjust less on the same amount of income."
Plato
2
Lending money entails risk. Sometimes those who borrow can not pay back all or a portion of what they borrowed. Greece is now in that position. It's time for those who lent Greece money to take a haircut, or if you prefer, "tighten their belt" or "austerity".
5
Another column short on rel facts. If one goes to th link handily provided by the Times but apparently not read by Dr K one finds that being "largely bailed out" actually means having a reduction of 73% in principle and interest shoved down your throat if one is a private lender to Greece!
Seventy Three Percent!!! In what world is taking a "haircut" of 73% being "largely bailed out"???
Krugman fails once again to provide any useful information.
Seventy Three Percent!!! In what world is taking a "haircut" of 73% being "largely bailed out"???
Krugman fails once again to provide any useful information.
2
During a trip to Germany in the 1990s, my friend's bank started rejecting his credit card purchases. Dependent on that credit card, he called the bank from a phone in a train station, the only phone available at the time. A sign over the phone said that calls were limited to three minutes. Of course, my friend was on hold for longer than that. A line of Germans started to form at the phone, and they started complaining that my friend had exceeded the time limit. I quickly looked around and spotted several unoccupied phones. I speak German and pointed out to the people in line that several other phones were available if they wanted to make a call. Not one of them left the line. They insisted that my friend should get off the phone. They preferred to sacrifice their own time and convenience in order to assign guilt and demonstrate self-righteousness.
The German word for "debt," Schuld, is the same word that means "guilt." With a culture of self-righteousness, Germans would rather suffer economic hardship in Germany than admit that they were wrong and forgive Greek debt. They want Greeks to suffer for their "guilt," even it means that Germans will suffer too.
The German word for "debt," Schuld, is the same word that means "guilt." With a culture of self-righteousness, Germans would rather suffer economic hardship in Germany than admit that they were wrong and forgive Greek debt. They want Greeks to suffer for their "guilt," even it means that Germans will suffer too.
9
Greece standard of living has gone down and also the United States. So we have something in common. Money is going to banks in Greece and also United States. We have saved the banks but not the people and so there is suffering in Greece and some in United States. One black man found employment by holding up the local store in my area which has little crime. Do we call that progress in the recovery? Maybe next will be the local bank?
2
Dr. Krugman writes that the EU Greek bailout plan is not really a plan to bailout Greece. It is a plan to bail out creditor-country banks with the Greeks being required to also contribute at great cost to themselves.
This is not really too different from what the Federal government did in the wake of the collapse of the house bubble. The bailout plan was designed primarily to benefit the banks whose "financial engineering" made possible the bubble in the first place. And, the plan was executed at great expense to the home owners, who like the Greeks, were clearly complicit.
In both cases, the creditors made possible the irresponsible behavior that ended in disaster. The creditors did this to profit. And, in both cases, the creditors have been quite deft at convincing people that the borrowers are the only ones at fault.
This is not really too different from what the Federal government did in the wake of the collapse of the house bubble. The bailout plan was designed primarily to benefit the banks whose "financial engineering" made possible the bubble in the first place. And, the plan was executed at great expense to the home owners, who like the Greeks, were clearly complicit.
In both cases, the creditors made possible the irresponsible behavior that ended in disaster. The creditors did this to profit. And, in both cases, the creditors have been quite deft at convincing people that the borrowers are the only ones at fault.
7
Same old problem: the hypocritical need to treat a debtor nation or debtor city like it was a profligate family. If we don't hold Greece's feet to the fire, then other nations will think it's ok to walk away from their debts too.
Absurdly reductionist and short-sighted. The Germans need to recognize that they bear their share of the blame for making this mess, and they need to put their outrage aside and begin thinking about consequences and ripple effects.
Absurdly reductionist and short-sighted. The Germans need to recognize that they bear their share of the blame for making this mess, and they need to put their outrage aside and begin thinking about consequences and ripple effects.
9
My impression is that the loans made to the underdeveloped EU countries were EU sanctioned as a means to spur development. Perhaps not all of this money was used wisely or even legally, but Spain, Ireland, and Greece have dramatically improved infrastructure compared to the pre-Euro period. This is akin to a European version of US development efforts in the 30s like the Tennessee Valley Authority. As long as economies expand, paying the loans is not a problem, but the toxic assets meltdown has temporarily stopped expansion. In Germany at about the time of the collapse the press was reporting that the average standard of living in Greece and Spain exceeded that in Germany. This has not given the German populace much sympathy for their southern neighbors, and is much like US middle class reaction to reports of "welfare queens" during the Reagan years. No one in power in Germany now had anything to do with WWII, so it would probably be useful to quite flogging the war guilt horse. (If I were German, I know would find it tedious). Germany has undergone greater self-reflection for their war responsibilities than any other nation. I think a more relevant question to ask is what use will hurting the economy of a Euro zone country do for the rest of the EU? Which leads us back to Professor Krugman's assertion that austerity is the wrong course of action to restore prosperity. History suggests that nations spend their way out of recession, rather than save their way out of it.
8
The Greek crisis arose from entirely different reasons for those in Spain, Portugal or Ireland.
1
Forgive a good part of Greece's external debt. Forgive virtually all of our claims on Cuba for its expropriation of the property of thousands of Cubans now living here and scores of American companies that operated there. Forgive the illegal entry and settlement of millions of immigrants. None are tidy solutions. All are necessary.
9
@Stubbycat. Forgiveness never seems 'tidy' to moralists and prigs, and certainly not to bankers. Perhaps they should look at the guidance of religion. After all, even the Old Testament demands a forgiveness of loans after seven years. The Greeks have been suffering nearly that long, so call their share of forgiveness (and who among us doesn't need a little forgiveness?) a jubilee and be done with it.
1
Why?
Greece spent. Cuba stole. Illegals broke the law.
Yeah, it may feel good to guilty liberals but why?
Why should the failures of other nations be our responsibility?
Greece spent. Cuba stole. Illegals broke the law.
Yeah, it may feel good to guilty liberals but why?
Why should the failures of other nations be our responsibility?
1
Do that, and it will happen again. And again. And again.
Once you make it clear there is no downside to doing a great wrong, people revise their morality and decide it is "OK" to steal into a country and take jobs from the local citizens -- it's "OK" to borrow and not repay debts -- and it's "OK" to seize property or companies, because in the long run you will get away with it.
That's the problem with situational ethics.
Once you make it clear there is no downside to doing a great wrong, people revise their morality and decide it is "OK" to steal into a country and take jobs from the local citizens -- it's "OK" to borrow and not repay debts -- and it's "OK" to seize property or companies, because in the long run you will get away with it.
That's the problem with situational ethics.
The events in Greece represent the first major modern challenge to the laissez-faire, state-enabled capitalism for a generation. Many can be relied upon to ask the 'right' questions, such as, why should other EU states pay for Greek debt?
Of course, few have asked why did it come to pass that sovereign EU states should have said 'Yes' when billionaire hedge fund investors and sovereign wealth funds asked: "Can you please socialise our investment losses?" Or, perhaps more accurately, the mainstream media never derived a satisfactory answer to that question.
It is worth remembering the words of US Senator Hiram Warren Johnson, when he said that the first casualty of war is truth, ironically delivered when discussing a very different kind of war on Germany (in 1917), than that seemingly in the mind of the new Greek Prime Minister Alexis Tsipras.
Only when we begin to shift the focus from the truth-numbing language of mindless capitalism, to a recognition that even unfettered capitalism needs rescuing from the current crisis, will we begin a fight back.
The drama about to play out in Greece should not be seen as putting a nation of feckless foreigners in their 'place', but the beginning of a magnificent civil rights adventure.
Of course, few have asked why did it come to pass that sovereign EU states should have said 'Yes' when billionaire hedge fund investors and sovereign wealth funds asked: "Can you please socialise our investment losses?" Or, perhaps more accurately, the mainstream media never derived a satisfactory answer to that question.
It is worth remembering the words of US Senator Hiram Warren Johnson, when he said that the first casualty of war is truth, ironically delivered when discussing a very different kind of war on Germany (in 1917), than that seemingly in the mind of the new Greek Prime Minister Alexis Tsipras.
Only when we begin to shift the focus from the truth-numbing language of mindless capitalism, to a recognition that even unfettered capitalism needs rescuing from the current crisis, will we begin a fight back.
The drama about to play out in Greece should not be seen as putting a nation of feckless foreigners in their 'place', but the beginning of a magnificent civil rights adventure.
7
But isn't governmental corruption and stifling red tape on business start ups part of Greece's problem? Isn't the wide-spread refusal of the Greek population to pay taxes also part of the problem? The inefficiency of the Greek economy seems to be a core challenge that must be addressed before their problems can be resolved.
10
Typical Krugman: blame the greedy bankers and right wing government. No mention of the stifling power of unions, incredible red tape and corruption needed to start or operate a small business, and in general the difficulties that must be overcome to earn a living (by actually working) in Greece.
2
I agree Paul, but why hasn't Goldman Sachs been sued/fined for providing Greece a means to get into the European Union in the first place? Greece lacked the financial standing to qualify, so some smart kids at Goldman Sachs invented a money-debt swapping scheme to make it look like Greece qualified, and so they were approved. This distinction is important because it allowed Greece to borrow tens of billions of dollars at much lower rates. The wrong guys gained power in Greece, prodigious borrowing ensued and Goldman Sachs walked away with an enormous fee.
You say there's no point in moralizing now, and I agree, what's done is done in Greece, but should that logic also provide impunity to the Machiavellian bankers who hatched this rotten egg?
You say there's no point in moralizing now, and I agree, what's done is done in Greece, but should that logic also provide impunity to the Machiavellian bankers who hatched this rotten egg?
36
Many people who analyze these sorts of things have said over and over that the debts incurred by Greece are so large, relative to their economy, that they will never be paid off. The only way to relieve the situation is to write down most of the debt to a manageable level. Then D. K says, "a forced exit of Greece from the euro, with potentially disastrous economic and political consequences for Europe as a whole." That's some pretty serious stuff.
If leaving the Euro is disastrous, paying of the debt is disastrous, and maintaining the current situation is disastrous, this path cannot lead to any kind of resolvable solution.
So what then is it? It's punishment. I am reminded of the horrible economic reparations that Europe imposed upon Germany after WWI. That didn't work out too well.
Greece messed up big time, but they didn't kill anyone. The punishment should fit the crime, not be unending. No it's not fair to let them get away with it, but we let Wall Street get away with stealing trillions from the public. In fact, the evil doers made even more money after the collapse.
The Greek people should not face perpetual suffering for their government's mistakes. No nation punished America for invading Iraq and no Wall Street Barons went to jail.
If leaving the Euro is disastrous, paying of the debt is disastrous, and maintaining the current situation is disastrous, this path cannot lead to any kind of resolvable solution.
So what then is it? It's punishment. I am reminded of the horrible economic reparations that Europe imposed upon Germany after WWI. That didn't work out too well.
Greece messed up big time, but they didn't kill anyone. The punishment should fit the crime, not be unending. No it's not fair to let them get away with it, but we let Wall Street get away with stealing trillions from the public. In fact, the evil doers made even more money after the collapse.
The Greek people should not face perpetual suffering for their government's mistakes. No nation punished America for invading Iraq and no Wall Street Barons went to jail.
30
Let's be clear WHO let Wall Street get away with stealing trillions.
It was the Democrats under Barack Obama. He waa President. He had the power. He clearly knows his way around an "executive order".
He had all the power and ability to put the banksters in jail -- to order repayment -- to give "haircuts" -- to ensure that Goldman Sachs, which engineered the Greek fiasco as well, was destroyed and never rose again. The vampire squid.
Did he do any of this? did he even CONSIDER any of it? NO.
He let them walk free. Even more so, he gave Goldman Sachs alums the highest positions possible in his administration and took their advice. After all, they were "experts" with "degrees", who knew how "the system worked".
It was the Democrats under Barack Obama. He waa President. He had the power. He clearly knows his way around an "executive order".
He had all the power and ability to put the banksters in jail -- to order repayment -- to give "haircuts" -- to ensure that Goldman Sachs, which engineered the Greek fiasco as well, was destroyed and never rose again. The vampire squid.
Did he do any of this? did he even CONSIDER any of it? NO.
He let them walk free. Even more so, he gave Goldman Sachs alums the highest positions possible in his administration and took their advice. After all, they were "experts" with "degrees", who knew how "the system worked".
It seems to me the issue at the core of this is that the arrangements Greece is struggling with have as their primary purpose the goal of making sure the people who made the bad decisions to loan Greece money in the first place feel as little pain as possible.
It's somewhat akin to what happened in the U.S. in that the first task of dealing with the Great Recession seemed to be ensuring that the people responsible for it, were the first ones made whole. Further, they are the ones who have mainly been soaking up all the gains from the 'recovery' to date.
You could observe this and speculate that the system which is supposed to ensure financial stability for everyone in practice is rigged to benefit only the few who control the money; the rest are to be written off as collateral damage, whether they be Greek pensioners, people with underwater mortgages, etc.
As a side note, an explanation for the obsession with inflation in some quarters is that the .1% - who have soaked up most of the gains in the U.S. - are seeing vast inflation in the assets they focus on, like high-end real estate. They are sloshing in so much money, they're driving up prices in their part of the marketplace.
So, to understand the Euro system's response, look at how much pain will fall on those who have to make the critical decisions if they do what needs to be done. Wealth means never having to sacrifice - not while you can sacrifice others.
It's somewhat akin to what happened in the U.S. in that the first task of dealing with the Great Recession seemed to be ensuring that the people responsible for it, were the first ones made whole. Further, they are the ones who have mainly been soaking up all the gains from the 'recovery' to date.
You could observe this and speculate that the system which is supposed to ensure financial stability for everyone in practice is rigged to benefit only the few who control the money; the rest are to be written off as collateral damage, whether they be Greek pensioners, people with underwater mortgages, etc.
As a side note, an explanation for the obsession with inflation in some quarters is that the .1% - who have soaked up most of the gains in the U.S. - are seeing vast inflation in the assets they focus on, like high-end real estate. They are sloshing in so much money, they're driving up prices in their part of the marketplace.
So, to understand the Euro system's response, look at how much pain will fall on those who have to make the critical decisions if they do what needs to be done. Wealth means never having to sacrifice - not while you can sacrifice others.
7
They are "either at your throat or at your feet" - Churchill talking about some group of people.
3
The European project exists through the mutual support of its member nations. However, Greece (and the other member nations) has a higher duty to its people. If the price of supporting the European project is endless suffering for Greece, the Greece should exit the euro.
As for the lender nations, there is a thing called risk for which they charge a premium. If they get a haircut, then they need to factor that into their future risk premiums. The people of Greece should not have to suffer indefinitely because the so-called masters of finance got their risk calculations wrong.
As for the lender nations, there is a thing called risk for which they charge a premium. If they get a haircut, then they need to factor that into their future risk premiums. The people of Greece should not have to suffer indefinitely because the so-called masters of finance got their risk calculations wrong.
8
Stupid monetary policy keeps interest rates too low to cover default risks. That's why money stays in mattresses.
I think we are seeing the argument Prof. K will make when one of our states falls too deeply into debt to borrow any more, in calling for a federal bailout. Not that I had any doubt before this column. And, he will blame it on governments not spending enough. He does not seem to ever recognize moral hazard or long term consequences. He recognizes that Greece is being lent money primarily to pay back its debts but writes as if that were a bad thing. There is a reason when people go bankrupt the trustee, and not the borrower, is in charge. It should not be a negotiation between equals. I love Greece for too many reasons to state in a comment, but, as some Greeks have said to me - they did this to themselves and they have to pay the consequences. We may be saying the same thing some day as we know we violate every rule of common sense.
At the end of the day, someone has to pay for Greece's party. Prof. K wants it to be Germany. I think it should be Greece. I'm sure the prof knows a hundred times more economic minutiae and formulas than the rest of us, but, didn't we learn in the last major crisis we are still coming out of that the only experts worth listening to are those who admit they don't know a whole lot either.
At the end of the day, someone has to pay for Greece's party. Prof. K wants it to be Germany. I think it should be Greece. I'm sure the prof knows a hundred times more economic minutiae and formulas than the rest of us, but, didn't we learn in the last major crisis we are still coming out of that the only experts worth listening to are those who admit they don't know a whole lot either.
8
Greece is in trouble because it followed Krugman's principles and now the bill has come due. One day interest rates in the US will rise and will consume a huge portion of the annual budget just like Greece and Krugman's answer will always be the same. He will push devaluation of the dollar in order to make the debt look smaller completing the wealth confiscation he so dearly loves.
7
Expecting people to pay debts after losing their jobs sure won't go anywhere useful.
1
In Wingnut World, you get to make things up and believe them. Takes James for example.
"...because it followed Krugman's principles..."
What Krugman principles? James doesn't tell you, but they are clearly the reason "...now the bill has come due." Does James have any bad words for the creditors who were lending to those awful, spendthrift Greeks (following "Krugman's principles," of coure) who wouldn't pay their loans? No, James doesn't. Why don't those creditors have to suffer for their bad lending decisions? Well, James has not even thought about that, have you James?
"...because it followed Krugman's principles..."
What Krugman principles? James doesn't tell you, but they are clearly the reason "...now the bill has come due." Does James have any bad words for the creditors who were lending to those awful, spendthrift Greeks (following "Krugman's principles," of coure) who wouldn't pay their loans? No, James doesn't. Why don't those creditors have to suffer for their bad lending decisions? Well, James has not even thought about that, have you James?
1
How is it that loans to pay principle and debt do NOT subsidize Greek spending? They allow Greece to continue to borrow in order to over-spend to shore up a subsidization framework unsustainable at their size and level of productivity; and a public sector too large and unproductive, a workforce too protected from competitive realities and a destructive culture of corruption and stifling bureaucracy that is endemic.
Apparently, the "European project" must be kept alive only by means that challenge the physical laws of the universe: you borrow money at no cost because to pay interest to capital is to render your scheme impractical.
Guess what? Greece doesn't get to violate laws that ALLOW civilization to be sustainably financed without expropriating capital. And neither the Professor nor Euros so inclined have the votes or the guns to expropriate capital to keep UNsustainable regimes afloat.
What the Professor suggests is that Greece simply says: "set us back to zero as regards principle and debt, so we can begin piling it on again, unsustainably". To suggest that they wouldn't go back to spending more than they take in is a joke.
The Professor also suggests that Euro states subsidize their members, really without limit, in leveling all of Europe to some universal (high) standard of living that is divorced from what each member produces. Frankly, I don't believe for a moment that Europe is going to buy that.
To each his own socialism, but be sure you can afford it.
Apparently, the "European project" must be kept alive only by means that challenge the physical laws of the universe: you borrow money at no cost because to pay interest to capital is to render your scheme impractical.
Guess what? Greece doesn't get to violate laws that ALLOW civilization to be sustainably financed without expropriating capital. And neither the Professor nor Euros so inclined have the votes or the guns to expropriate capital to keep UNsustainable regimes afloat.
What the Professor suggests is that Greece simply says: "set us back to zero as regards principle and debt, so we can begin piling it on again, unsustainably". To suggest that they wouldn't go back to spending more than they take in is a joke.
The Professor also suggests that Euro states subsidize their members, really without limit, in leveling all of Europe to some universal (high) standard of living that is divorced from what each member produces. Frankly, I don't believe for a moment that Europe is going to buy that.
To each his own socialism, but be sure you can afford it.
8
"Guess what? Greece doesn't get to violate laws that ALLOW civilization to be sustainably financed without expropriating capital. And neither the Professor nor Euros so inclined have the votes or the guns to expropriate capital to keep UNsustainable regimes afloat."
Says who? The Greeks already have the votes, and who's going to say what they "get to" do, you?
Says who? The Greeks already have the votes, and who's going to say what they "get to" do, you?
Greece (and by extension the Professor here) simply want to get back to the high-living days of the past -- a huge unwieldy government. Nobody paying any taxes. Big social services, modeled on Germany and France and Sweden. Early retirement at 50, with a fat public pension. Expensive foreign goods.
Most people don't care where the money comes from, until it runs out and the party is over.
Lefty liberals like Krugman only care about spending on social services -- bread and circuses to appease the poor and dependent. OF COURSE it is popular. Everybody likes getting stuff for free. I'm sure if you offered me a bunch of stuff for "free", I'd jump on it. But it wouldn't be good for me.
And it won't be good when the party ends, for Greece or anyone else. And the party always ends. (When it does, you can be sure Krugman will slink off and come up with 1000 excuses why "it wasn't his ideas" and "they must have misinterpreted what he was REALLY saying".)
Most people don't care where the money comes from, until it runs out and the party is over.
Lefty liberals like Krugman only care about spending on social services -- bread and circuses to appease the poor and dependent. OF COURSE it is popular. Everybody likes getting stuff for free. I'm sure if you offered me a bunch of stuff for "free", I'd jump on it. But it wouldn't be good for me.
And it won't be good when the party ends, for Greece or anyone else. And the party always ends. (When it does, you can be sure Krugman will slink off and come up with 1000 excuses why "it wasn't his ideas" and "they must have misinterpreted what he was REALLY saying".)
1
It is a time for us to re-learn how our federal system works in comparison with European Union. To do this, we need to examine how our distressed states like Florida after the financial crisis mainly due to the collapse of housing boom were rescued by the federal system, indirectly by the higher tax paying states mostly Democrats majority states like New York, without facing difficulty like Greece.
This is important because sooner or later our oil producing states, mostly Republican majority states, like North Dakota will encounter revenue shortage similar to Florida after the collapse of oil boom. As you are well aware, Republicans demand small government without recognizing financial help from the federal government mostly in the area such as disaster damages, social security, unemployment insurance and numerous other programs because the distressed states like Florida could not earn enough tax revenue from the citizens and corporations of the state. Without this federal mechanism, Florida and other financially distressed states would have encountered severer and slower economic recovery for a long time. But how many voters in Florida and other distressed states know this simple fact?
This is important because sooner or later our oil producing states, mostly Republican majority states, like North Dakota will encounter revenue shortage similar to Florida after the collapse of oil boom. As you are well aware, Republicans demand small government without recognizing financial help from the federal government mostly in the area such as disaster damages, social security, unemployment insurance and numerous other programs because the distressed states like Florida could not earn enough tax revenue from the citizens and corporations of the state. Without this federal mechanism, Florida and other financially distressed states would have encountered severer and slower economic recovery for a long time. But how many voters in Florida and other distressed states know this simple fact?
31
And what do those wealthier blue states make their money off of? everyone else. The financial industry. They are not making their money off agriculture or manufacturing. They don't MAKE anything anymore. They don't build it or mine it or farm it. They make money by manipulating the stock market and selling people investments.
In Florida, they made it by lending people money to buy hyper-inflated homes in a bubble market. And it was hardly just Florida. They did it all over the place.
BTW: where do you think the Bluesters go when they retire? Florida. So they have a vested interest in Florida real estate, investments and prosperity.
In Florida, they made it by lending people money to buy hyper-inflated homes in a bubble market. And it was hardly just Florida. They did it all over the place.
BTW: where do you think the Bluesters go when they retire? Florida. So they have a vested interest in Florida real estate, investments and prosperity.
Professor Krugman is very forgiving. And in the macroeconomic sense, he may be right. But I can see the Germans' point of view. They work hard and save while Greeks cheat on their taxes, live on welfare, retire early and milk the system. We have some people in the U.S. who do the same thing and ruin it for those who really do need help.
5
Do you have any idea how much German debt was forgiven after WWII to allow Germany to get back on its feet? And that was after starting a World War, killing scores of millions, and not just mismanaging funds. Get my drift?
2
cheat ( underpay) on their taxes, live on (corporate) welfare, retire early and milk(lobby) the system.
We have some people in the U.S. who do the same thing and ruin it for those who really do need help.(Like after the financial crisis - their called Wall Street, the 1%, the oligarchy)
So the glass house logic being: let families suffer and fail now to save Mammon for the future.
(Doesn't Germany have free education/healthcare/paid leave/ child care etc?)
This is how America Exceptionalism really shines
We have some people in the U.S. who do the same thing and ruin it for those who really do need help.(Like after the financial crisis - their called Wall Street, the 1%, the oligarchy)
So the glass house logic being: let families suffer and fail now to save Mammon for the future.
(Doesn't Germany have free education/healthcare/paid leave/ child care etc?)
This is how America Exceptionalism really shines
I don't like to see anyone suffer, but the Greeks are primarily responsible for the mess they are in, regardless of what Krugman says. Fine, reduce their debt, their interest payments and so forth. On a practical level it's either that or they leave the EU.
But any notion that giving the Greeks a little breathing room will end or significantly reduce political and trade union corruption, end crony capitalism, result in real reform of the welfare state and of their tax codes so no more tax evasion, all so they will be more productive and start living within their means ... is not credible.
But any notion that giving the Greeks a little breathing room will end or significantly reduce political and trade union corruption, end crony capitalism, result in real reform of the welfare state and of their tax codes so no more tax evasion, all so they will be more productive and start living within their means ... is not credible.
7
As usual flawed logic from former Enron adviser Paul Krugman. Say I buy a house and take out a $1 million mortgage (as I can't pay all cash like Paul since I don't have a cushy taxpayer funded CUNY stint on researching inequality). It would be nonsensical for me to say I could meet all my living expenses if only I didn't have to pay back the principal on my mortgage. Any since those banks were stupid enough to lend to me they should just forgive my mortgage. That would be nice in liberal fantasy land - except for the next guy that needs a mortgage and can't get one.
12
Did the Greeks act any more irresponsibly than our financial sector preceding 2008? No. But we bailed them out, didn't we? Just as we protect the lenders so does the EU. It's all about who takes the loss. It's never the banks.
1
"If not, the whole European project—the attempt to build peace and democracy through shared prosperity—will suffer a terrible, perhaps mortal blow." Ah yes, prosperity that is shared; that is the tough part
It is sad to see Europe--the seat of the Enlightenment and social contract and from which our founding fathers drew inspiration--struggle against two basic flaws of capitalism and human nature—selfishness and greed. Many of the core values of the Enlightenment were intended to serve as a check on the selfishness and greed of the elites and to expand consideration of the rights of individuals and democracy.
While the social contract was all about spelling out individual and government rights and responsibilities, it seems we in the West are having a lot of trouble these days with the responsibility part.
We do have a lot of finger wagging and moralizing by the rich and powerful about the irresponsibility of the casualties of capitalism--be they Greece, the millions of subprime mortgage victims, or those Takers in need of government assistance). As Krugman suggests: what was the responsibility of the European banks that "voluntarily lent Greece all that money"?
What is being intentionally omitted is the responsibility and accountability of wealthy elites. Look how hard our elites have worked to absolve themselves of accountability by changing our laws and demanding deregulation.
The big question: What obligations do the wealthy & powerful have to their society?
It is sad to see Europe--the seat of the Enlightenment and social contract and from which our founding fathers drew inspiration--struggle against two basic flaws of capitalism and human nature—selfishness and greed. Many of the core values of the Enlightenment were intended to serve as a check on the selfishness and greed of the elites and to expand consideration of the rights of individuals and democracy.
While the social contract was all about spelling out individual and government rights and responsibilities, it seems we in the West are having a lot of trouble these days with the responsibility part.
We do have a lot of finger wagging and moralizing by the rich and powerful about the irresponsibility of the casualties of capitalism--be they Greece, the millions of subprime mortgage victims, or those Takers in need of government assistance). As Krugman suggests: what was the responsibility of the European banks that "voluntarily lent Greece all that money"?
What is being intentionally omitted is the responsibility and accountability of wealthy elites. Look how hard our elites have worked to absolve themselves of accountability by changing our laws and demanding deregulation.
The big question: What obligations do the wealthy & powerful have to their society?
10
It seems to be conceded that some kind of waiver or consent from creditors should be obtained, if only to avoid the consequences of default. The question then devolves to the terms of such consent. Does Prof Krugman hold with Mr Wolf of the FT should be conditional on domestic reform or that it should not? If the former, who should judge what reform merits debt relief? If the latter, what effect does he think unconditional relief is likely to have on the relations between EU states and the market for sovereign in general?
If the wealthy, both here and abroad, paid their taxes instead of hiding them in offshore accounts; if the people were able to see their government as their protector rather than the protector of the wealthy alone; if reasonably smart people can see through the sadistic and ultra-conservative lens of the mainstream media, and would notice and empathize with the suffering of people everywhere under capitalism and cronyism... well, then, we'd not have these problems. But there are so many sycophants engendered by the endless pro-capitalist propaganda, and by the mythical vanishing lottery possibilities of Western corporatism, that we hear nothing but cries of class warfare every time anyone suggests that the current parasitic relationship, wherein the wealthy live off exploiting the work of those who have less, should be ended. The rich seem to have become nothing so much as whiny little children, ones who have essentially lost their humanity already. Bravo for trying, Professor Krugman; it's a lot more honesty than the effete rich will ever manage. Thus, we must soak 'em!
16
The US has the highest level of tax compliance of all industrialized nations despite all of the talk of Cayman Island accounts. That is mostly because the criminal penalties for tax evasion are pretty harsh. I realize that doesn't jibe the with left's storyline anymore than the fact that the top 10% pay 70% of federal taxes. By comparison Greece has the lowest level of tax compliance in europe.
2
Total mischaracterization about who is receiving the interest payments on Greek debt. The debt held by private banks and private investors was repudiated in the first round of the Greek bailout, with most receiving only 10 cents on a dollar of debt for repayment. That was about one half of all Greek debt outstanding at that time. The remaining half is held by other governments or their government central banks, and thus held by the taxpayers of other European countries. That debt had its duration greatly extended and its interest rate cut more than in half in the first bailout. Thus citizens of Europe lost over half their value on these Greek bonds held by their government. Further debt reduction is just a further direct transfer of wealth from citizens of Europe to the Greek government and its people. Get the facts and story straight. Maybe such reparations are justified given how Greece started civilization, but that should be the focus of the article.
19
Carrying on what exactly happened in the previous five years is truly irrelevant for today.
The criitcal point is that with the present austerity regime the only prospect for Greece is to continue shrinking its economy and keep paying all its surplus revenue to service the debt for all eternity since there is no way it can repay even a significant fraction of its principal without economic growth. If the creditor nations refuse to acknowledge that the present course can only lead to Greece exiting the Euro in a chaotic fashion they will be shooting themselves in the foot. Blaming Greece for the chaos is not going to make it go away.
The criitcal point is that with the present austerity regime the only prospect for Greece is to continue shrinking its economy and keep paying all its surplus revenue to service the debt for all eternity since there is no way it can repay even a significant fraction of its principal without economic growth. If the creditor nations refuse to acknowledge that the present course can only lead to Greece exiting the Euro in a chaotic fashion they will be shooting themselves in the foot. Blaming Greece for the chaos is not going to make it go away.
3
I think you are wrong to this degree - he knows exactly what will happen if Greece keeps getting bailed out. It is what he believes should happen.
There's evidence that billions of dollars lent to Greece before the crisis was vendor financing from Germany and others for the purchase of advanced weaponry like submarines, tanks and jets... supposedly to arm Greece against the Turks. (The same weapons were sold to the Turks.) That money went from German bank to German manufacturer, or maybe most of it never left the bank at all. The weapons may have provided some Greeks with jobs and revenue for a brief period, but just enough to keep the deals moving. But arms sales are a no-fly zone when it comes to public debate. Has anyone read, "Confessions of an Economic Hit Man"? Or seen the Ferris Wheel scene from "The Third Man"?
7
Nowhere in the article is mentioned that systemic problems in Greece which still have not been dealt with. The lowest level of income tax compliance in the EU, low retirement ages in general and very low ones for many jobs, including radio broadcasters and hairdressers. Until these difficult political issues are dealt with the Greek economy even with debt relief will never truly recover.
18
Greece has created its own financial problems. Where else in the world do people retire at age 50 with full salaries and substantial increases each succesive year? Now Greece can wallow in its own mud. Remember, Greece is one of the PIGS - Portugal, Italy, Greece, and Spain. However, Greece was the most hoggish.
12
So let me get this right. Even assuming it is correct to claim that Greece's "people [which people? how many of them?] retire at age 50 with full salaries and substantial increases each successive year," shouldn't the solution to that be to reform the pension system so that it is in line with other European countries, rather than inflict perennial, horrific unemployment on the entire country, especially young generations who were never even able to benefit from the arrangements you describe? And if average Greek citizens should be punished indefinitely for their "greed," what about the banks who made irresponsible loans to what they knew was a poorly run government, and yet continue to profit from them?
6
Madrazo, the banks should be punished as well, especially Goldman Sachs. But what Greeks want is to continue their system of early retirement and big pensions, and what they NEED is to have those things "clawed back" and reformed.
That's why they are so unhappy. They were perfectly happy running up giant debts, and enjoying their early retirement and big pensions. People always are. Look at our public union sector in the US! It's always party time, until the beer runs out.
That's why they are so unhappy. They were perfectly happy running up giant debts, and enjoying their early retirement and big pensions. People always are. Look at our public union sector in the US! It's always party time, until the beer runs out.
Fortunately, the new Greek government has remembered that each EU country has a veto power over joint actions - like Russian sanctions.
3
"If not, the whole European project — the attempt to build peace and democracy through shared prosperity — will suffer a terrible, perhaps mortal blow."
Despite such claims, the "attempt" has always been (not just now) to give greater profits to the few, and if a side effect was to have others prosper, it would help create illusions of upward mobility that would keep the rest of us quiet. Now this ugly system is working so badly that the 1% feels they have to be even more greedy for the profit system just to survive. What is going on in Greece is causing a panic among creditors. They will be pushing very hard to stop Greece from reducing their huge cut of government spending, regardless of how much pain they cause
We all need to be more against, and vocal about our objections, to the profit system and be in favor of democratic economics - or we are just putting band-aids on broken legs. Among many things this means taking public funds now being diverted to private interests and channeling them back into public i.e. government work, such as rebuilding infrastructure done by government workers (like e.g. with a Civilian Conservation Corps.) and, where need be, by honest competitive bidding.
Despite such claims, the "attempt" has always been (not just now) to give greater profits to the few, and if a side effect was to have others prosper, it would help create illusions of upward mobility that would keep the rest of us quiet. Now this ugly system is working so badly that the 1% feels they have to be even more greedy for the profit system just to survive. What is going on in Greece is causing a panic among creditors. They will be pushing very hard to stop Greece from reducing their huge cut of government spending, regardless of how much pain they cause
We all need to be more against, and vocal about our objections, to the profit system and be in favor of democratic economics - or we are just putting band-aids on broken legs. Among many things this means taking public funds now being diverted to private interests and channeling them back into public i.e. government work, such as rebuilding infrastructure done by government workers (like e.g. with a Civilian Conservation Corps.) and, where need be, by honest competitive bidding.
5
Krugman believes that lending money and then requesting that it be repaid as promised,"moralizing"and uses the term with contempt.
"The truth is that " the great bulk of the money lent to Greece has been used simply to pay interest and principal on the debt" that was incurred by "Greek spending".
"The truth is that " the great bulk of the money lent to Greece has been used simply to pay interest and principal on the debt" that was incurred by "Greek spending".
11
I was taught that it's usually the belief system -- here, one that sees life and economics through a prism of moralizing -- that is the last thing a person is willing to change. Even destroying another's banking system, or undermining a union of which one is a part, might seem more appealing, according to this teaching. I think it's about trying to make the self feel better -- feel better about the self and about life on life's terms.
5
Greece is feeling a pain similar to what went on in this country during the meltdown in 2008. Most of their 11 Million citizens have little hope for a life remotely resembling what they had before, and their young people less than that. Not unlike those here whose only choice was foreclosure.
But there has to be some realism applied to a situation where the level of fiscal irresponsibility ran rampant nationwide, fueled by their own leadership. Greece probably thought it was getting a sweet deal with the EU, but it made a grave mistake - its economy will never be able to be on a par with the northern European countries - as has been said, it's olives and tourism. So the way out is for Greece to default, return to its own currency and accept the consequences of their own leadership's irresponsible behavior. Europe should then help as it can to ease the pain within the "new normal" that is created, functioning similar to USAID in efforts to help Greece build an economy. This is better than massive infusions of cash that haven't changed much. Greece, unlike our banks, is not too big to fail.
It's hard to put the genie back in the bottle, but Greece limping along, pining for what was, will just prolong the agony, and create a bitterness that will last a long time.
But there has to be some realism applied to a situation where the level of fiscal irresponsibility ran rampant nationwide, fueled by their own leadership. Greece probably thought it was getting a sweet deal with the EU, but it made a grave mistake - its economy will never be able to be on a par with the northern European countries - as has been said, it's olives and tourism. So the way out is for Greece to default, return to its own currency and accept the consequences of their own leadership's irresponsible behavior. Europe should then help as it can to ease the pain within the "new normal" that is created, functioning similar to USAID in efforts to help Greece build an economy. This is better than massive infusions of cash that haven't changed much. Greece, unlike our banks, is not too big to fail.
It's hard to put the genie back in the bottle, but Greece limping along, pining for what was, will just prolong the agony, and create a bitterness that will last a long time.
1
Before I met my Greek wife in the mid 70s, I knew little about Greece. Most North Americans know nothing of Europeans, other than Greeks are cute, and Germans bad. She was studying in London. Because of currency controls, she was subsisting in England on potatoes. She walked the 4km each way to her school.
Greece was poor. My brother in law said, poor, but with dignity. There wasn’t a divided highway in the country. The pollution was terrible. You had to watch out for donkey droppings in the villages. A Datsun pickup was a luxury vehicle. Garbage collection was spotty, and things were pretty dirty. Crossing the frontier into Greece was terrible. If by bus, customs officials would take the bus apart looking for smuggled toasters. If by car, you had to elbow your way past dozens of returning guest Arbeiters to register your car on your passport. Between the time I met my wife and the implementation of the euro, the drachma had been devalued 90%. It’s no wonder you would have to pry Euros from the Greeks’ cold dead hands.
After joining the EU, there was a miraculous transformation. Motorways were built. Garbage was collected, and the streets cleaned. It became possible to actually see the famous hills of Athens. The current Greek subway system makes Toronto’s look bad. BMWs and Mercedes replaced the Sarkakis Mitsbishis. Subsidies to Greece from the EU are the about same as the net positive contribution to the EU by Germany, some 100B euros.
The Greeks have a lot to lose.
Greece was poor. My brother in law said, poor, but with dignity. There wasn’t a divided highway in the country. The pollution was terrible. You had to watch out for donkey droppings in the villages. A Datsun pickup was a luxury vehicle. Garbage collection was spotty, and things were pretty dirty. Crossing the frontier into Greece was terrible. If by bus, customs officials would take the bus apart looking for smuggled toasters. If by car, you had to elbow your way past dozens of returning guest Arbeiters to register your car on your passport. Between the time I met my wife and the implementation of the euro, the drachma had been devalued 90%. It’s no wonder you would have to pry Euros from the Greeks’ cold dead hands.
After joining the EU, there was a miraculous transformation. Motorways were built. Garbage was collected, and the streets cleaned. It became possible to actually see the famous hills of Athens. The current Greek subway system makes Toronto’s look bad. BMWs and Mercedes replaced the Sarkakis Mitsbishis. Subsidies to Greece from the EU are the about same as the net positive contribution to the EU by Germany, some 100B euros.
The Greeks have a lot to lose.
14
All good and well, but they did not invest in a decent government system and kept corruption away from the day to day operations. The northern European did, they formed a well run government apparatus, collecting taxes, etc.
4
Germany loans money to Greece. Greeks buy Mercedes and BMWs. Money returns to Germany. The cars and the debt remain in Greece. Eventually the cars rust, but the debt could go on forever.
3
Sovereign debt never matters until it does, e.g., during an economic crisis or if global monetary conditions push up interest rates or weaken the currency or whatever. It is never prudent for governments to borrow to fund current operations. That is like using a credit card to buy food and pay rent. Eventually, sometimes after years of profligacy, the bills come due. In the case of sovereign debt, those bills are often handed to the young, who enjoyed none of the benefits of the spending.
Of course, the theory behind the borrowing is that the money is used to build infrastructure and that everyone, including the young, will benefit. In practice, corrupt politicians line their own pockets and make sweet deals with their crony capitalist backers.
Meanwhile, the banksters play both sides of the political game and make money no matter who wins. If there's a crisis, the banks are always first in line for the free money and the people, as always, are forced to cover it.
Of course, the theory behind the borrowing is that the money is used to build infrastructure and that everyone, including the young, will benefit. In practice, corrupt politicians line their own pockets and make sweet deals with their crony capitalist backers.
Meanwhile, the banksters play both sides of the political game and make money no matter who wins. If there's a crisis, the banks are always first in line for the free money and the people, as always, are forced to cover it.
6
It is interesting the good doctor spends little time on the propensity of Greeks to not pay taxes, government officials who need bribes to get things done, and the difficulty of starting a business. He appears to be correct that there will be a haircut, but then what? More of the same is my guess, but perhaps I will be wrong.
13
"Germany and elsewhere voluntarily lent Greece all that money. We would ordinarily expect both sides of that misjudgment to pay a price."
Exactly. So if someone with a credit score of 400 successfully applies for a loan from a bank, doesn't the bank bear some(lots of?) responsibility for that misjudgment? Why should every citizen in Greece pay for the misjudgments of the German banks handing out the loans?
And if the WW2 Allies had been bent on moralizing, 60% of Germany's debt would not have been forgiven and all of Europe would suffered the consequences of a failed country.
Greece does not have a stellar economic history but take off the moral certitude goggles and solve some problems already.
Exactly. So if someone with a credit score of 400 successfully applies for a loan from a bank, doesn't the bank bear some(lots of?) responsibility for that misjudgment? Why should every citizen in Greece pay for the misjudgments of the German banks handing out the loans?
And if the WW2 Allies had been bent on moralizing, 60% of Germany's debt would not have been forgiven and all of Europe would suffered the consequences of a failed country.
Greece does not have a stellar economic history but take off the moral certitude goggles and solve some problems already.
16
I would add to this analysis that the right wing government from 2004-09 had the help of the vampire squid, Goldman Sachs, in cooking the books to hide their economic incompetence. Goldman then shorted the Greek debt and made out handsomely by their accounting games (like many other major banks). As everywhere the average taxpayer pays for the crimes of the rich, while the oligarchs continue to hide their money (as has happened in the US as well). The point that the Germans needed help after WWII to get their economy going is a sad piece of irony given their current stance to the Green austerity disaster
25
Greece is the poster child for the problems that happen when a bunch of disparate nations adopt the same currency. There are bound to be winners and losers with so many diverse economies--and insulting nations for problems that may go beyond their borders, then putting the squeeze on their economies is bound to backfire.
To my mind Greece is a test for the entire Eurozone. The very fact the Eurozone got created from a group of nations with a history of fighting for centuries, frankly amazes me. Toss in the fact that Greek islands and banks were havens for international oligarchs to shield their income from the tax man, and you have a big mess.
In a shared currency, all Euro countries have to absorb some of the Greek problems. To place it only on Greece will result in a blow up of the entire Euro concord.
To my mind Greece is a test for the entire Eurozone. The very fact the Eurozone got created from a group of nations with a history of fighting for centuries, frankly amazes me. Toss in the fact that Greek islands and banks were havens for international oligarchs to shield their income from the tax man, and you have a big mess.
In a shared currency, all Euro countries have to absorb some of the Greek problems. To place it only on Greece will result in a blow up of the entire Euro concord.
9
Greece lived large with other people's money, was not truthful in joining the EU and the Euro, then went on a spending using the good credit of the rest of the EU. A bloated government, retire at a very young age and all kinds of services they could not afford. Now they want the rest of Europe to subsidize, specifically the German tax payer, their bad behavior. The new government has already started loading more people onto its payroll, sticking it to the EU immediately. Cut the bad apple out of the EU, Greece goes its own way and prints lots paper money which is useless for trade. Those who believe otherwise, like Paul Krugman, need the pony up and buy Greek Bonds and get a great interest rate. Of course you will eventually be asked to accept to pennies on your investment.
15
To the contrary, Greeks don't ask the German taxpayer for a subsidy. They ask the German banks to own their bad loans. If the German taxpayers want to subsidize the German banks, and so reward them for bad behavior, that's between Germans.
3
Bravo, Prof. Krugman! Two additional points need to be made to your trenchant analysis of the Greek situation: (1) new Greek Prime Minister Alexis Tsipras has promised to continue important reforms like ending crony capitalism there and forcing the rich elite to pay their taxes (sound familiar); and (2) most nation's like the U.S. that have their own currency are allowed to carry a sizable debt, but it seems that the German-led E.U. is not willing to do that for Greece. The fundamental question facing the E.U. is: Will stubborn adherence to the failed austerity policy, as shown in the area's current economic malaise and the failure of the Greek experiment, lead to a new economic approach or some significant moderation? As European history has shown over and over again fanatical adherence to ideology has inevitably led to calamity. In this case, as Prof. Krugman indicates, it is the future of the E.U. currently the world's largest economic trading block that is at stake.
10
Greece was not forced to sign up these loans. The cleanest way to solve the problem would have been to declare bankruptcy. But since Greece decided to loan money from other EURO countries (money that was payed out by EU banks to Greece banks because theses EU countries or, better, their tax payers guaranteed for these loans) it is time they face the real world. Why should tax payers in the other EURO countries suffer in their pension payments, infra structure (like road, school) repairs and other issues? Why does Greece not re-structure their corrupt system, find the money that the 2.000 richest families have parked abroad and collect all taxes like it is done in other Euro countries? And re-hiring all these fired government employees back in the overfilled public Greece administrative sector makes no sense, if the money needs to be borrowed form other countries again.
5
collect all taxes like it is done in other Euro countries
Like taxes are collected from Russian Oligarchs in London?
Like taxes are collected from Russian Oligarchs in London?
2
Why don't all the World War II allies take back the loan foregiveness given to Germany in 1953 and say "we were just kidding guys, please pay up" or "game on" and just ask them to deposit what they owe in the Greek treasury.
Oh, and please hurry with those payments.
Oh, and please hurry with those payments.
81
'Why don't all the World War II allies take back the loan foregiveness given to Germany in 1953'?
Perhaps because the Germans confessed their sins and - since then beat themselves up - even much more than a dude from Mesa probably ever can.
Look at me - I feel so bad about what Germany did decades before I even was born - that I' not only for total debt forgiveness for Greece - I also always excuse myself that I#m german if I meet the ex-enemy American.
Perhaps because the Germans confessed their sins and - since then beat themselves up - even much more than a dude from Mesa probably ever can.
Look at me - I feel so bad about what Germany did decades before I even was born - that I' not only for total debt forgiveness for Greece - I also always excuse myself that I#m german if I meet the ex-enemy American.
4
We are all so civil. What is happening in Europe is war. Oh not the bullets and bombs type, well not yet, but economic war. It is the same war we are fighting in the US. We have a whole party fighting a war with the takers , the 47%, while allowing those that took advantage of the less financially sophisticated to get away with their fraudulent practices and in fact made better than whole with the dollars of the people they defrauded.
There was a Star Trek episode where two warring cultures which did not want it's stuff/culture destroyed. So they converted to a computer war. The computer would simulate an attack and then people would be told to report to a death chamber. Both civilization's computers would count the dead to make sure all the "casualties" reported and died. It was a study on how stuff becomes more important than human life.
Today with our bail out of our banks we have put money and stuff above human suffering. Bailout the banks, leave the humans to suffer.
When enough of the population has to walk into the "death chamber" perhaps we will end this economic war or perhaps we will have a real one. The answer may lie in Greece.
There was a Star Trek episode where two warring cultures which did not want it's stuff/culture destroyed. So they converted to a computer war. The computer would simulate an attack and then people would be told to report to a death chamber. Both civilization's computers would count the dead to make sure all the "casualties" reported and died. It was a study on how stuff becomes more important than human life.
Today with our bail out of our banks we have put money and stuff above human suffering. Bailout the banks, leave the humans to suffer.
When enough of the population has to walk into the "death chamber" perhaps we will end this economic war or perhaps we will have a real one. The answer may lie in Greece.
16
Dear Mr. Krugman, I am an avid follower of yours and and subscribe to your theories. However, I am Greek and I know Greece well. The problem with Syriza is that they have been against every single one of those reforms which have made Greece a more competitive country with surpluses. They have been such a destructive force in society aligning themselves with corrupt trade unions that plundered public funds.. They encouraged the burning and trashing of Athens. They fought recapitalisation of the banks, reforming the public sector, slashing wasteful spending in the most violent and brutal manner. And now I am supposed to believe that they will defy their base and push through reforms necessary to modernise the Greek state and make it competitive. I can assure you, Syriza is far more opposed to cracking down on tax evasion than New Democracy. There attitude is that the oi poloi are just trying to make a living and one should turn a blind eye. That leaves the so called oligarchs. Well, good luck with that. To be honest most of them have good tax lawyers and don't have to rely on cheating the system unlawfully. I as a Greek am afraid to trust them. What should the Germans say, who hear all the stories. So please forgive me if I feel that in giving in to Syriza's demands, Europe would be rewarding the wrong political ethos with no guarantees that this government will develop the political will to push through any of the necessary reforms. I hope I am wrong.
100
You certainly know more about Greece than I do, and for purposes of argument let's accept that it's hugely corrupt. The issue is, how does the austerity program help to end corruption? In fact, it seems to me it is more likely to encourage it, because more and more people will find it impossible to find a legitimate job or earn an honest living and will turn to ancient and traditional types of cronyism, patronage, etc.
3
I agree with you entirely that austerity harmed the governments efforts to pass structural reforms. But Europe was adamant and the alternative in 2012 was Grexit. Like it or not, we had to deal with the German electorate. So the previous government passed structural reforms and slashed spending in the hope that Greece could return to the capital markets as soon as possible. It managed to borrow in 2014 as did the Greek banks. This was a major success. Growth was forecast at 2.6% for 2015. Unemployment was beginning to drop. Marginally but it was heading in the right direction. A surplus in 2013 and 2014 had already allowed the government to start rolling back on austerity in 2014. Property taxes were being brought down, health care was made available to uninsured Greeks in the second half of 2014, as was limited housing for homeless people. Further tax cuts were scheduled for 2015 as the economy improved. Major investments were scheduled from privatisations (now cancelled by Syriza) Had we continued Greece - like Ireland today - would soon be borrowing from markets at interest rates lower than those under the Bailout Agreement. There was no reason for a head on clash with the German electorate by a party with no track record for reforms. Sadly, Greece needed austerity to reform. Can Syriza defy its trade union & public sector base and reform without the pressure of austerity? For jobs more than anything we need an efficiently state and political stability....
1
May I suggest that Nobel Laureate Krugman might stop "substituting moralizing for analysis"? Not one word on the failures of past Greek government, which is the last few years have bled the middle class dry while giving the oligarchs break after break. How on earth is it the duty of, say, the Baltic states (with their standard of living way below Greece's) to switch their loans to a gift? Krugman's fixation on Germany is almost comical. There are more countries in the European Union, and many of them are financially engaged in Greece, including quite a number of poor countries.
The exit of Greece from the Euro zone and from the EU *will* be disastrous - for Greece, and for nobody else. Krugman doesn't seem to agree with this, but the new prime minister in Athens apparently does.
As long as Greece doesn't do its part (and there are indications that the new government might be much better than its corrupt predecessors), there is very little incentive for the rest of the EU to spend more and more and more money.
The exit of Greece from the Euro zone and from the EU *will* be disastrous - for Greece, and for nobody else. Krugman doesn't seem to agree with this, but the new prime minister in Athens apparently does.
As long as Greece doesn't do its part (and there are indications that the new government might be much better than its corrupt predecessors), there is very little incentive for the rest of the EU to spend more and more and more money.
15
Gee it sounds a bit like the Fed bailing out banks for the benefit of the purchasers of "junk" and paid for by the tax payers. Even bailed out foreign bsnks and investment companies.
Do I detect a."moral" pattern of the wealthy and powerful? I guess I need new glasses. But the are so costly.
Do I detect a."moral" pattern of the wealthy and powerful? I guess I need new glasses. But the are so costly.
12
I understand that Greek has been a corrupt country governed by crony capitalism. OK, got that. The question is what do you do to turn that around. Just suppose that the EU was to invade Greece so as to set up a non-corrupt government. It seems unlikely to me that there would be an attempt to make the average Greek citizen pay back the money ripped off by the crony capitalists and corrupt politicians. Instead that debt would likely be wiped clean and institutions building would be attempted. Money stolen by the bad guys would be tracked down and confiscated.
Perhaps it would be a good idea for the EU to just 'pretend' they've invaded Greece and help build a non-corrupt system there. It seems more likely to be a good thing for everyone in the long run.
Perhaps it would be a good idea for the EU to just 'pretend' they've invaded Greece and help build a non-corrupt system there. It seems more likely to be a good thing for everyone in the long run.
9
'Perhaps it would be a good idea for the EU to just 'pretend' they've invaded Greece and help build a non-corrupt system there.'
No need for that - Each summer a lot of Europe invades Greece - the funny thing it never stopped corruption?!
No need for that - Each summer a lot of Europe invades Greece - the funny thing it never stopped corruption?!
I still do not understand how forcing the Greeks to run surpluses of any kind can help the Greek people. Surpluses leech money out of the private sector, reducing what people get and thus can spend.
I don't know about Greece, but ALL 6 times we have had surpluses for more than 3 years, we have immediately fallen into a depression.
I don't know about Greece, but ALL 6 times we have had surpluses for more than 3 years, we have immediately fallen into a depression.
29
Well that's the point. It's not about helping the Greek people at all, it's about ensuring the profits of German investors. The sad fact is that big bankers don't believe that they should ever be at risk of losing money, and they own enough politicians to make sure they get their way. Just look at who is making money off the Greeks and the other southern Euro nations that are suffering through the collapse of bubbles. That money came from the North… instead of investing in Germany, or paying the German workers more, the big bankers sent money south and insist on never losing money regardless of what happens to the local economies.
14
Capitalism is like a fine wine. In moderation a glass of wine rewards our day's labor; but it can be addictive, in excess it is destructive to the drinker, his family, his employer and society.
Capitalism enables us to fulfill our human desire to create, to provide, to achieve. People benefit from regulated capitalism: I work for you; your business makes a product society wants; you pay me a fair wage for my labor and we all benefit.
But unregulated capitalism is the equivalent of alcoholism. In excess, it destroys our humanity. When you are addicted, you over drink; you no longer pay me a fair wage because you want more profit; you don't care that I and my family suffer; you only care about growing bigger, making more money. You make predatory loans because money makes money; you don't care how the loan will be repaid; you don't care about the suffering the repayment may cause; you have lost your humanity, you just want your money.
What regulations were in place in the EU, America when loans/mortgages were readily handed out to people/countries that did not have the financial stability/capacity to repay? The borrowers were irresponsible (some intended to defraud--capitalism too) and the lenders were predatory (drunk with capitalism and blinded by $$). Why were there no regulations requiring lenders examine/factor-in repayment risk?
I'm all for capitalism, but it can be destructive. Are the Greek people required to suffer? Is the EU to dissolve? All for money??
Capitalism enables us to fulfill our human desire to create, to provide, to achieve. People benefit from regulated capitalism: I work for you; your business makes a product society wants; you pay me a fair wage for my labor and we all benefit.
But unregulated capitalism is the equivalent of alcoholism. In excess, it destroys our humanity. When you are addicted, you over drink; you no longer pay me a fair wage because you want more profit; you don't care that I and my family suffer; you only care about growing bigger, making more money. You make predatory loans because money makes money; you don't care how the loan will be repaid; you don't care about the suffering the repayment may cause; you have lost your humanity, you just want your money.
What regulations were in place in the EU, America when loans/mortgages were readily handed out to people/countries that did not have the financial stability/capacity to repay? The borrowers were irresponsible (some intended to defraud--capitalism too) and the lenders were predatory (drunk with capitalism and blinded by $$). Why were there no regulations requiring lenders examine/factor-in repayment risk?
I'm all for capitalism, but it can be destructive. Are the Greek people required to suffer? Is the EU to dissolve? All for money??
192
An excellent analogy.
Thank you.
Thank you.
3
True.
This is predatory crony Capitalism.
The dismantling of regulations has created this monster.
This is predatory crony Capitalism.
The dismantling of regulations has created this monster.
1
Like with many other financial issues it is always easier to blame the victim. Blaming the victim has gone so far in the U.S. that we now see people who are bankrupted by medical expenses blamed for getting sick.
88
If you have been profligate before, the way out is to spend even more recklessly
If you lent a lot of money to a group or a country, and they squander it all and can't pay back even interest, you can be called a villain if you refuse to lend them even more
If you are born in the western countries, you are entitled a good living. Regardless of your skill set. In this day and age, when most jobs can be done at a quarter or less cost in a different country, the people in the west, simply due to where they were born, are still entitled to a good living
Long held values like living within ones means and living modestly are passé. People who advocate such values can be called evil rich or other names.
If you lent a lot of money to a group or a country, and they squander it all and can't pay back even interest, you can be called a villain if you refuse to lend them even more
If you are born in the western countries, you are entitled a good living. Regardless of your skill set. In this day and age, when most jobs can be done at a quarter or less cost in a different country, the people in the west, simply due to where they were born, are still entitled to a good living
Long held values like living within ones means and living modestly are passé. People who advocate such values can be called evil rich or other names.
7
"a forced exit of Greece from the euro, with potentially disastrous economic and political consequences for Europe as a whole." That's an incredibly rash statement for which Krugman provides not a whit of evidence. Perhaps because it's a gross exaggeration?
An honest appraisal would allow for a Greek departure from the European union, and the euro. Sure, there would be reverberations, but where is the proof of impending doom Krugman forecasts? Reality check - Greece should never have joined the Union and its euro. Left to its own currency the market place - Yes - the Marketplace - would have led (forced) Greek politicians and policies to a better order. Instead with the euro - undisciplined chaos.
Abandon the euro and allow the chips to fall as they may. Greek's would be better off in the long run.
An honest appraisal would allow for a Greek departure from the European union, and the euro. Sure, there would be reverberations, but where is the proof of impending doom Krugman forecasts? Reality check - Greece should never have joined the Union and its euro. Left to its own currency the market place - Yes - the Marketplace - would have led (forced) Greek politicians and policies to a better order. Instead with the euro - undisciplined chaos.
Abandon the euro and allow the chips to fall as they may. Greek's would be better off in the long run.
9
Of course anyone can say the same thing about you: i.e., that "Greeks would be better off in the long run" is a "rash statement" and "gross exaggeration" without "a whit of evidence."
1
If you cannot pay back what you borrow, Krugman believes you should pay back less, and that will make things good again.
What about the investors and depositors in the banks that loaned Greece the money? Why should they suffer a loss because Krugman doesn't like Greeks suffering austerity pain? These are people whom Krugman thinks nothing of.
I bought a house and I live with the obligation to pay off the money I borrowed to buy it. I bought a car and lived with the obligation to pay off the loan to buy it. But apparently Greece is special - it can borrow money, spend it to obey Krugman's Ideals, and then get a free pass to avoid its obligations. The contracts I signed for my loans were made to suit me and the lenders, and we both lived up to our bargains. Apparently Progressive governments shouldn't be required to live up to their contracts. Politicians - especially Progressive ones - aren't held to a higher standard.
Maybe it's time they should be.
What about the investors and depositors in the banks that loaned Greece the money? Why should they suffer a loss because Krugman doesn't like Greeks suffering austerity pain? These are people whom Krugman thinks nothing of.
I bought a house and I live with the obligation to pay off the money I borrowed to buy it. I bought a car and lived with the obligation to pay off the loan to buy it. But apparently Greece is special - it can borrow money, spend it to obey Krugman's Ideals, and then get a free pass to avoid its obligations. The contracts I signed for my loans were made to suit me and the lenders, and we both lived up to our bargains. Apparently Progressive governments shouldn't be required to live up to their contracts. Politicians - especially Progressive ones - aren't held to a higher standard.
Maybe it's time they should be.
13
When any honor-based system fails, this happens. Greeks failed. Or are they Grecians. They failed too. Their credit scores suffer the blow. Time for a public feud between the guilty parties with a legacy of playing dumb and dumping on innocents and those crediting the creditors. Identify these factions, report on it. Then the mule is out of the barn. Anyway, too much corruption and too little guidance lead to unnatural economic extremes. It'd be undignified to just slip like that on the banana peel from all the monkey business. Next is the EU unravelling because the individual states are all at each other's throats. It'd be too late to pretend they've got a happy marriage. They're a cold bed full of historical enmity and a liability to surviving industries. Hardly the stuff of harmony. Too bad it's not that easy to reverse the curses on the book.
Except--if you couldn't pay back the money you borrowed, you could declare bankruptcy and get out from under those debts--a possibility you have conveniently overlooked.
Yes, there are consequences to that declaration. But it would involve the forgiveness of a certain part of the debt and a restructuring of other parts of it to make it easier to pay down. I would argue that is not much different from what Mr. Krugman is discussing here.
Left out of your argument--the possibility that the lenders do share culpability, both in your case and in the larger national case. Borrowers should not take on more debt than they can afford--but lenders should not throw business prudence to the winds in the name of greed and offer unmitigated loans to iffy borrowers. Both sides are at fault for gambling unrealistically in these situations, and both sides have to suffer some consequences of losing the gamble. But, since lenders generally have more political and economic power than borrowers, the borrowers generally suffer the bigger penalty.
Yes, there are consequences to that declaration. But it would involve the forgiveness of a certain part of the debt and a restructuring of other parts of it to make it easier to pay down. I would argue that is not much different from what Mr. Krugman is discussing here.
Left out of your argument--the possibility that the lenders do share culpability, both in your case and in the larger national case. Borrowers should not take on more debt than they can afford--but lenders should not throw business prudence to the winds in the name of greed and offer unmitigated loans to iffy borrowers. Both sides are at fault for gambling unrealistically in these situations, and both sides have to suffer some consequences of losing the gamble. But, since lenders generally have more political and economic power than borrowers, the borrowers generally suffer the bigger penalty.
20
Personal finance is a convenient but poor and misleading model for many of the anti-intuitive concepts of macro-economics. You don't print money, nations do. You don't make the laws, nations do. You don't charter and protect the banking system, nations do. You are not responsible for thousands to millions of people who, through no fault of their own, might be starving, nations are. Default on your mortgage and car loan will not put banking systems and national or trans-national currencies at risk. Forcing your family into austerity or even starvation to pay those loans will not risk war or the dissolution of a continent's economic system.
Regarding the notion that "progressive governments shouldn't be required to live up to their contracts", Germany holds much of the Greek debt. Germany is the strongest force enforcing payment of that debt under faulty macro-economic understanding. Yet, Germany was forgiven half of it's WWII and pre-WWII debt in August of 1953 (See Wikipedia: Agreement on German External Debts) It was the right thing to do then, Germany recovered from the devastation of WWII. It is the right thing to do now, people are starving in Greece and Greece needs to recover from its economic devastation.
I hope you and your family never starve to pay off bank debts to which you agreed but if it ever comes to that, I hope people with larger hearts will allow you to declare bankruptcy, thereby legally defaulting on much of that debt, and be able to eat again.
Regarding the notion that "progressive governments shouldn't be required to live up to their contracts", Germany holds much of the Greek debt. Germany is the strongest force enforcing payment of that debt under faulty macro-economic understanding. Yet, Germany was forgiven half of it's WWII and pre-WWII debt in August of 1953 (See Wikipedia: Agreement on German External Debts) It was the right thing to do then, Germany recovered from the devastation of WWII. It is the right thing to do now, people are starving in Greece and Greece needs to recover from its economic devastation.
I hope you and your family never starve to pay off bank debts to which you agreed but if it ever comes to that, I hope people with larger hearts will allow you to declare bankruptcy, thereby legally defaulting on much of that debt, and be able to eat again.
9
I borrowed money from my credit card, I took student loans, I took loan to buy my home, and I still have student loans. I want to go on an expensive European vacation and splurge. I will probably borrow even more from my credit card. I recently lost my job because it was too hard to get up in the mornings, and my boss got upset with me. The credit card guys don't know this and still lending to me. When I come back from my vacation, I will refuse to pay all the people who lent me money. I will not vacate my home either even if I can't pay mortgage. I think it is pure evil that all these people think I should pay back. Why not take a hair cut? As Kramer said in Seinfeld, they all write these things off, do one more time. The evil rich are are already rich, plenty evil, do they need to become even more rich and even more evil? I think they should forgive all my loans, and give me some extra loan because I need some cash for my future living expenses.
15
People who cannot tell the difference between their finances and the finances of a huge long lived country that can print as much money as it needs and whose debts are in that currency should stay out of the argument. Greece's problem is that it cannot print its own money.
When did the US pay off (or even down) the huge (121% of GDP) debt from WWII?
Do you have a money printing press?
When did the US pay off (or even down) the huge (121% of GDP) debt from WWII?
Do you have a money printing press?
21
And there in lies the problem, you failed to see the message. You were irresponsible. The people of Greece, like those in Latin American in the 70's and 80's, were stuck with debts agreed upon by a bunch of vacuous, vain leaders. Bottom, why must the debtor be the one who has to suffer?
@Paul: the Greeks went on a huge spending spree, just as Desi described. They gave themselves luxuries. They gave themselves huge pensions, big salaries for do-nothing government jobs. They increased government spending, especially jobs. They lowered the retirement age to FIFTY and with a huge pension for life.
So it is exactly like the example, where the person goes on vacation and quit his job, and just runs his credit card bills up -- KNOWING he will never pay, and KNOWING he will declare bankruptcy and dump the debt on others. He does not honorably stop spending and inform the credit bureau that he's broke. He just keeps spending. Because spending is FUN.
Also: I agree with Len here that Greece needs to return to the drachma, and then devalue it. But of course, that has repercussions too and will likely lead to the destruction of the EU.
So it is exactly like the example, where the person goes on vacation and quit his job, and just runs his credit card bills up -- KNOWING he will never pay, and KNOWING he will declare bankruptcy and dump the debt on others. He does not honorably stop spending and inform the credit bureau that he's broke. He just keeps spending. Because spending is FUN.
Also: I agree with Len here that Greece needs to return to the drachma, and then devalue it. But of course, that has repercussions too and will likely lead to the destruction of the EU.
1
Mr. Krugman, Thnaks for the overview. Most peopole really do not understad that this is not about sovergn dept but about banking risk. The biggegst lender to Greece is Goldmann. They knowingly make high risk, or bad loans, to Greece but do not wish to share the financial responsibility. If the banks has no accountability for their risks, then the whole system is rigged. Let see if the future discussions/negotiations/actions will focus on the real issue or not. Cheers, Nick
100
Krugman's doing the gentlemanly thing and practically begging for more analysis. Especially if Greece is going to be exitted from the Euro! Granted, Greece's record has hardly been spotless and yes, it's been quite the taint to the continent, but when bills are due tensions run high and ECB may tip over to unfair action. Go on a wild ride and do the fun thing. Be chic and reckless.
But o, those o so western values set in stone on the books getting in the way of kicking an entire population in the face. That can't and mustn't happen. That'd be rude. Greece is a nation of assets. Real worth? None of our business. If you have to ask, go away. If you're in the know, chances are you're corrupting the system for a kickback. What to do now! A brilliant professor could fix the system, but a country emblematic of suffering would also be a worthwhile little thing to explore. What happened in Greece is hardly our problem across the Atlantic Ocean. Krugman's concern is a sign of his great heart full of cares for the voiceless Greek citizenry.
But o, those o so western values set in stone on the books getting in the way of kicking an entire population in the face. That can't and mustn't happen. That'd be rude. Greece is a nation of assets. Real worth? None of our business. If you have to ask, go away. If you're in the know, chances are you're corrupting the system for a kickback. What to do now! A brilliant professor could fix the system, but a country emblematic of suffering would also be a worthwhile little thing to explore. What happened in Greece is hardly our problem across the Atlantic Ocean. Krugman's concern is a sign of his great heart full of cares for the voiceless Greek citizenry.
Or could it be - that all these comments of essentially -(or accidently?) taking the side of Rich Greek Criminals by condemning the European who try to help Greece - are another tragic misunderstanding?
Of people who never where in Greece?
Because if anybody ever was in Greece - the condemnation of the old and corrupt system comes quite natural - and thus the very easy choice which side to take.
And in this case it is not the side of people, who are so confused, that they don't realize that they actually are against 'cleaning up' Greece.
Of people who never where in Greece?
Because if anybody ever was in Greece - the condemnation of the old and corrupt system comes quite natural - and thus the very easy choice which side to take.
And in this case it is not the side of people, who are so confused, that they don't realize that they actually are against 'cleaning up' Greece.
1
This would be an interesting comment if I could somehow put aside the feeling that Greece's creditors are rather more interested in getting back as close to 100 centimes on every euro they lent, than in whether or not a viable, democratic Greece will survive at all. Let the truth be told: When one profligate morgagee loses their home in foreclosure, it can be a disaster for one family, but when 20 million morgagee's lose their homes, it can be a disaster for an entire nation.
And, let us please lose the infantile notion that the finances of nation states are - or should be - analogous to the finances of a private household.
And, let us please lose the infantile notion that the finances of nation states are - or should be - analogous to the finances of a private household.
10
How does the suffering of the Greek people via austerity help change "the old and corrupt system"?
4
Good article, but Greece is a sideshow. Western civilization does not depend on whether Greece pays or the (now official) creditors get paid on time or at all. Greece has adjusted and will continue to adjust. Vulnerable creditors have been paid. The only issue now is how official creditors see their public duty.
1
So far the new greek government has not proposed even one idea intended to better greek economy through sound measures, investment or whatever.
All proposals on the contrary suppose increased spendings by the state, higher salaries and so on.
If this position is maintained the best option will be the separation of Greece from the eurozone, better loose all the previously lended money than keep such a member with no perspective.
All proposals on the contrary suppose increased spendings by the state, higher salaries and so on.
If this position is maintained the best option will be the separation of Greece from the eurozone, better loose all the previously lended money than keep such a member with no perspective.
9
The euro is holding Greece hostage, and vice-versa. Calling (yet again) for enlightened self-interest on the part of European governments and financial institutions in granting Greece the breathing space it needs to begin to prosper again flies in the face of five years of cultural and economic biases. Ain't gonna happen. Greece needs a reboot. Period.
3
It's a little more complicated than that, although Krugman has, basically, the right idea. I've seen people here forced to sell property to pay taxes, and a lot of foreclosures have taken place. There is a smoldering resentment here, especially of Germany, and of the economic colonization of Greece that has taken place via the so-called "troika-" the ECB, the Franco-German (and, increasingly, German) led EU, and the IMF.
In 1953, Germany was forgiven her WWII reparations debt, which allowed the country to thrive. Greeks ask, why can't we be granted a similar favor, especially since we weren't responsible for the death of 50 million human beings, many of them Greeks, as the Germans are? This is why the first act of the new PM of Greece was to lay a wreath on a monument to executed Greek Resistance fighters of WWII. A finger in the eye of Merkel, who is deeply resented here. Greeks have had enough. Now things will get interesting.
In 1953, Germany was forgiven her WWII reparations debt, which allowed the country to thrive. Greeks ask, why can't we be granted a similar favor, especially since we weren't responsible for the death of 50 million human beings, many of them Greeks, as the Germans are? This is why the first act of the new PM of Greece was to lay a wreath on a monument to executed Greek Resistance fighters of WWII. A finger in the eye of Merkel, who is deeply resented here. Greeks have had enough. Now things will get interesting.
496
'It's a little more complicated than that,'
I couldn't agree more and was in two demonstrations in Athens where even a picture of Angela was burned and I understand it's always helpful if the people have some 'foreigners' to blame for their misery and a few eeks later I was in Spain and followed a march in Valencia and strangely there - the people mainly accused their own politicians and bankers of being corrupt.
And afterwards I often wondered about these difference between Athens and Valencia?
I couldn't agree more and was in two demonstrations in Athens where even a picture of Angela was burned and I understand it's always helpful if the people have some 'foreigners' to blame for their misery and a few eeks later I was in Spain and followed a march in Valencia and strangely there - the people mainly accused their own politicians and bankers of being corrupt.
And afterwards I often wondered about these difference between Athens and Valencia?
3
Much is made of the Marshall plan. Look at the numbers. Germany got a lot less than France and England that were not leveled. What the allies did, however, as part of the plan, was to stop dismantling the country, and let the Germans get on with rebuilding. Since the war, the Germans have paid huge amounts to just about everyone you can think of.
Greece is not Germany. The Germans were assembling fighter planes in the forest.
You claim to live in Greece. You must know then how uncompetitive the place is. Nothing has change there in the past 5 years other than they are extracting more taxes from those who have no loopholes.
Greece is not Germany. The Germans were assembling fighter planes in the forest.
You claim to live in Greece. You must know then how uncompetitive the place is. Nothing has change there in the past 5 years other than they are extracting more taxes from those who have no loopholes.
4
Greek debt will be forgiven and Greece thrown out of the eurozone.
This contry in history never ever paid back debt.
Good luck to the next happy lenders.
This contry in history never ever paid back debt.
Good luck to the next happy lenders.
When was the first time Germany did something for another country? Usually, they are so busy being superior, they hardly notice the existence of other countries, except of course, when the advantage to the Germans is to exploit them. I would be pleasantly shocked if the Germans did the humane thing and helped Greece attempt to recover from a banking system which the Germans have exploited to their own benefit.
8
2011, when germany negotiated a bailout of greece's looming bankruptcy with the unvoluntrary backing of european taxpayer, germans taking the biggest part.
A bankruptcy that came due because banks trusted the account books that the americans forged.
A bankruptcy that came due because banks trusted the account books that the americans forged.
2
My case rests! To the Germans it is always some one else's fault. The bailout, as you put it, was to insure German bankers that they would get some return on their misplaced loans, much like the bailout of American banks. Had the Greeks still had their own currency, things would have been far easier for Greece. and don't tell me that Greece had any control of the Euro banks.
3
#1 the banks are entities on their own, they serve no national interests. You americans should know this better than anyone else. Banks can be the legal enemy within. Also i do not consider the banks as smart, not smart enough to see how unsustainable those credits were.
What german banks did, like other banks is not liability of the german citizen. You americans also don't want to be held liable for all the toxic crab your banker sold us, or d'you ?
#2 weren't access to credits not the whole idea of the EMU ? We wanted investment, we want viable loans by private banks. We wanted these loans in countries like greece, that had been the shiny prodigy of all the european policies. Weren't the greeks so eager to get these loans that they forged their books just to get an access ?
We would have mocked the banks who would have given the greeks a bad rating, this was political just not wanted.
The bankers could have declared bancruptcy on greece, like they did in argentina. It was within their legal power. And it had been banks from everywhere, not only germany.
The situation was desperate for greece back than.
And somehow now i deeply regret, that we have tried to help on behalf of our ordinary citizen account.
What german banks did, like other banks is not liability of the german citizen. You americans also don't want to be held liable for all the toxic crab your banker sold us, or d'you ?
#2 weren't access to credits not the whole idea of the EMU ? We wanted investment, we want viable loans by private banks. We wanted these loans in countries like greece, that had been the shiny prodigy of all the european policies. Weren't the greeks so eager to get these loans that they forged their books just to get an access ?
We would have mocked the banks who would have given the greeks a bad rating, this was political just not wanted.
The bankers could have declared bancruptcy on greece, like they did in argentina. It was within their legal power. And it had been banks from everywhere, not only germany.
The situation was desperate for greece back than.
And somehow now i deeply regret, that we have tried to help on behalf of our ordinary citizen account.
1
I suspect that Krugman's claim that Greece runs a surplus not counting interest on their debt is specious.
If Greece's debts were eliminated, it would likely not be very long at all before they would demanding loans from the countries/banks they just stiffed in order to carry out more "stimulation".
Krugman's tired tune of limitlss government spending, without regard for ability to pay, in order to achieve growth is old. Eventually debts need to be paid, it is just a question of who really pays.
If Greece's debts were eliminated, it would likely not be very long at all before they would demanding loans from the countries/banks they just stiffed in order to carry out more "stimulation".
Krugman's tired tune of limitlss government spending, without regard for ability to pay, in order to achieve growth is old. Eventually debts need to be paid, it is just a question of who really pays.
7
Ken our debt in 1946 was 121% of GDP. When was that debt paid? In point of fact in the next 27 years we increased the debt by 75% and enjoyed great prosperity.
You have to understand that the finances of a huge long lived country that can print as much of it currency as it needs and whose debt is in its own currency is farm far different from your finances. Countries do not always need to pay debt.
Greece's problem is that it cannot print its own currency.
You have to understand that the finances of a huge long lived country that can print as much of it currency as it needs and whose debt is in its own currency is farm far different from your finances. Countries do not always need to pay debt.
Greece's problem is that it cannot print its own currency.
16
Those bankers are the pillars of society, hey!
2
I don't understand how increasing aid to the unemployed and spending more on health care reduces unemployment? Unless Greeks are to be either unemployed or working in healthcare?
2
Both are direct fiscal stimulus, put directly into the places where it does the most good by picking up the highest velocity.
It als reduces suffering. That is a nice side effect.
It als reduces suffering. That is a nice side effect.
8
When people who had no money get some, they don't squirrel it away unlike people with a lot of money who when they get some more might. The rich who get a new windfall might also choose, say, to take that ski trip to Switzerland and spend the money there. But give a dollar to a poor person and it immediately enters the local market producing a multiplier effect.
9
Expat, unemployment is caused by too little demand. Businesses will not hire people to make stuff if they so not have customers to buy it. People can't buy stuff, become customers, because they do not have enough money. Unemployment and health benefits get more money to people to spend and thus become customers.
Get it?
Get it?
5
Wasn't Goldman Sachs involved in several of the worst loans?
24
Actually my memory is that Goldman helped the Greek colonels who were running the government at the time hide Greece's debts via complicated financial chicanery so that Greece could enter the eurozone which it could not have done otherwise.
21
Yes, that's what I was thinking of. Thanks.
1
The Greece electing a government of a newly created Syriza Party on the promise to end poisonous austerity imposed by the Troika(IMF,ECB,EU) is a most important moment in European political and economic history.It is the moment for make or break. All dépends on German genius how the Greeks mandate through ballot is respected.
Before commenting on the 'bailout' wrangling,I am tempted to put a few words on the crisis that Greeks inherited in the first place and people aspiration in electing Syriza.
The financial crisis is a result of political corruption mired in Greece successive governments and oligarchs freedom not to pay taxes coupled with anarchy in executiopn of the tax codes.
From Syriza and its leader Alexis Tsipras ,Greeks demand a thorough rooting out ofpolitical corruption and good governance and gagging oligarchs to pay taxes as per stringent rules.
The way forward in ongoing impasse between Mr Tsipras and EU is that EU let Tsipras ease out austerity,privatise national assets like shipping industry,create jobs for some of 60 percent unemployed youth and regain competitiveness in the market.This can only be achieved by not giving moral sermons on adhering to the time table set for repayment of the bail out.The period for repayment need be enlarged and a part (not in full) of the bail out be exempted.It is justified.First, creditors knew that they were not going to get full value of the debt.Second,there are précédents of debt exemption in Germany,Russia and Irak.
Before commenting on the 'bailout' wrangling,I am tempted to put a few words on the crisis that Greeks inherited in the first place and people aspiration in electing Syriza.
The financial crisis is a result of political corruption mired in Greece successive governments and oligarchs freedom not to pay taxes coupled with anarchy in executiopn of the tax codes.
From Syriza and its leader Alexis Tsipras ,Greeks demand a thorough rooting out ofpolitical corruption and good governance and gagging oligarchs to pay taxes as per stringent rules.
The way forward in ongoing impasse between Mr Tsipras and EU is that EU let Tsipras ease out austerity,privatise national assets like shipping industry,create jobs for some of 60 percent unemployed youth and regain competitiveness in the market.This can only be achieved by not giving moral sermons on adhering to the time table set for repayment of the bail out.The period for repayment need be enlarged and a part (not in full) of the bail out be exempted.It is justified.First, creditors knew that they were not going to get full value of the debt.Second,there are précédents of debt exemption in Germany,Russia and Irak.
5
My solution? Encourage uptight Germans to take a nice holiday in sunny, alive (at one time anyway) Greece, and spend like crazy. Who knows, they might actually enjoy themselves in the process - get a tan, eat some great food, dance a little, and get to know their neighbors a bit better. Especially Merkel looks of late like she could use a bit of a break.
50
'Encourage uptight Germans to take a nice holiday in sunny, alive (at one time anyway) Greece'
No need for that - Greece is besides Spain, Italy and Southern France Germanys favorite 'southern' vacation spot.
That's why we really like each other - the Germans and the Greeks!
No need for that - Greece is besides Spain, Italy and Southern France Germanys favorite 'southern' vacation spot.
That's why we really like each other - the Germans and the Greeks!
3
This quote caught my eye:
"It's true that banks in Germany and elsewhere voluntarily lent Greece all that money. We would ordinarily expect both sides of that misjudgment to pay a price. But the private lenders have been largely bailed out (despite a “haircut” on their claims in 2012). Meanwhile, Greece is expected to keep on paying."
It's also true that banks in our country "voluntarily lent" homeowners a lot of money in the lead up to the meltdown in 2008--- no make that "aggressively marketed" loans to homeowners. Have they taken a "haircut" on their claims? Have they accepted the regulations that some in our government want to impose? Have they paid a price for their "misjudgment"?
"It's true that banks in Germany and elsewhere voluntarily lent Greece all that money. We would ordinarily expect both sides of that misjudgment to pay a price. But the private lenders have been largely bailed out (despite a “haircut” on their claims in 2012). Meanwhile, Greece is expected to keep on paying."
It's also true that banks in our country "voluntarily lent" homeowners a lot of money in the lead up to the meltdown in 2008--- no make that "aggressively marketed" loans to homeowners. Have they taken a "haircut" on their claims? Have they accepted the regulations that some in our government want to impose? Have they paid a price for their "misjudgment"?
185
Profligate spending is unacceptable. Profligate protection of private banks, well that's OK. Greece is apparently small enough to fail.
284
'Profligate spending is unacceptable. Profligate protection of private banks, well that's OK.'
Not really - but the ironius thing right now - in Greece's case everybody who is on the other side of 'profligate spending' -(by the rich Greeks Oligarchs) - might finds himself ultimately opposite of the head of the new gree government Tsipras.
As Tsipras wants to fight the criminals, who destroyed Greece there are still some commenters here who want to fight other Europeans, who try to help Greece.
When will they notice on what side they actually are?
Not really - but the ironius thing right now - in Greece's case everybody who is on the other side of 'profligate spending' -(by the rich Greeks Oligarchs) - might finds himself ultimately opposite of the head of the new gree government Tsipras.
As Tsipras wants to fight the criminals, who destroyed Greece there are still some commenters here who want to fight other Europeans, who try to help Greece.
When will they notice on what side they actually are?
2
You've written a lot about how the Euro doesn't fit the situation and the needs of many European nations. If that's so then it would be logical to spend a few columns on how to dismantle it, how to convert back to sovereign currencies and the risks and benefits.
7
"shared prosperity" Get a load of that "myth."
3
Would it be an idea to have the Greeks pass a law that taxes assets (with some high hurdle) of Greek nationals abroad. A bit what the US does to its own nationals living abroad. The resulting claim could then be pledged to Germany, The Netherlands and the UK (wheremost of these olicharchs have property) enabling the respective tax authorities to start collecting. And they are very good at it. This would hopefully help the moral argument and to have the Greek economy to start using its primary surplus a bit more to boosts it's national economy.
3
Greece does it the other way. They have Greek language schools in other countries, like Canada, Germany and Tanzania that I personally know of, where they pay the salaries and the pensions.
Am I not correct in remembering that onerous economic demands for repayment from Germany after the First War led to enough civil discontent in that country to allow the election of a government none of us will forget?
We learned, and did things differently after the Second War, investing in the rebuilding that led to the recovery of a powerhouse country - wait for it! - the same country now firmly behind placing onerous terms on the Greeks.
What part did they forget?
We learned, and did things differently after the Second War, investing in the rebuilding that led to the recovery of a powerhouse country - wait for it! - the same country now firmly behind placing onerous terms on the Greeks.
What part did they forget?
221
The European arrangement based on good intentions looks more like a market guaranty for Germany.If starving a population is moral to protect bank liquidity what is going on with our civilization?
62
"What part did they forget?"
Answer: All of it!
Those who don't study history are condemned to repeat it.
Answer: All of it!
Those who don't study history are condemned to repeat it.
4
Why is it that in today's world only the big banks are worth bailing out and saving? This is worldwide, not just in Europe. The banks make risky investments, violate long standing rules and then get bailed out by the government and have laws enacted to protect consumers essentially rewritten by them to ensure they continue to be able to exploit the general public and reap enormous profits with little or no risk. Yet , the US Supreme Court in its infinite wisdom believes money does not influence politics !
144
Germany, under Angela Merkel, continues to assert its draconian position on the Greek debt. And the many Greek people who had nothing to do with the debt crisis continue to suffer. Youth unemployment is close to 60%. That's unconscionable.
Germany's lack of memory and empathy is really quite astounding. Has it entirely forgot the debt forgiveness it received from the world in 1953, for both World War I and World War I? This, after a horrific war that it perpetuated, which included more than 11-million non-German deaths? The debt forgiveness that contributed mightily to the economic hegemony it now once again enjoys in Europe?
Does history count for nothing?
Germany's lack of memory and empathy is really quite astounding. Has it entirely forgot the debt forgiveness it received from the world in 1953, for both World War I and World War I? This, after a horrific war that it perpetuated, which included more than 11-million non-German deaths? The debt forgiveness that contributed mightily to the economic hegemony it now once again enjoys in Europe?
Does history count for nothing?
477
'Does history count for nothing?'
I'm really glad that Germany has learned that much from history that after a lot of introspection and absolutely hating themselves - it takes a stand if other nations in Europe are led by criminals.
I'm really glad that Germany has learned that much from history that after a lot of introspection and absolutely hating themselves - it takes a stand if other nations in Europe are led by criminals.
2
We are living in a world of well-ordered continuity. There are no million peoples murdered, not whole countries depleted. We can not 'restart' a whole system just for some country overspended. If this becomes a habit it will freeze all mutual relations and festers a moral hazard.
1
They are "always either at your throat or at your feet" - Churchill.
This is all fine and sensible. However, your portrayal of the new Syrizia government's plans is unduly flattering. Yes they want to be allowed to spend more to stimulate demand. Yes their request to run lower primary (non-interest) budget surpluses seems sensible. However, they campaigned on a program of spending this on rehiring public sector workers let go, and raising the minimum wage and pensions. This is effectively undoing the reforms of the previous government and returning Greece to an economy where half the labour force works for the government in a corruption laden patronage machine financed ultimately by the EU. The only change is a new patron, Syrizia instead of PASOC or New Democracy. Maybe if Syrizia was proposing to spend any re-negotiated savings on an infrastructure spending program or anything else consistent with supporting productivity, their European partners and maybe their tax payers would be more sympathetic.
30
For the Germans, Pyrrhic victory,
Making the Greeks quite unhappy,
But Syriza's rise
Should be no surprise,
They've had it with austerity.
It's time that Merkel see the light,
A bullet the Germans must bite
Will they be realistic
Stop being sadistic?
Relieve this austerity plight?
Making the Greeks quite unhappy,
But Syriza's rise
Should be no surprise,
They've had it with austerity.
It's time that Merkel see the light,
A bullet the Germans must bite
Will they be realistic
Stop being sadistic?
Relieve this austerity plight?
50
I was recently in Greece, as it remains one of my favorite places in the world, and to see the destruction wrought on the people from the last time I was there - 2010 - was heartbreaking yet uplifting at the same time. The people remain, despite their hardships, incredibly warm, generous, thoughtful and engaged regardless of where in the country I was: Athens, Crete, Thessalonica. Sitting atop the Acropolis and gazing out over all of Athens, with 2,000 + years of history speaking tangibly to me, I was overcome with both awe and hope. As I watched the sun set, painting the ocean and the landscape in colors that only Monet could dream up, the realization, one that I have understood logically but, I as learned, not emotionally, precipitated into a glorious crystal constructed of optimism, joy and relief that shone out of me like the last rays of the dying sun. There will be a sunrise in Greece again. A glorious one that illuminates all that the Greeks have given to our world; one that will now also include new hues, hues of struggle, resilience and triumph that makes the people and the land shine all the brighter!
39
Turnabout is fair play for Greece to return the ridiculous demands on its debt. No where have I read who exactly are the creditors forcing the depression on the Greek people? All we get is the Germans demands but not players involved. This might help to clarify the points made by Professor Krugman. Buts let's just assume that the ECB is the only creditor and these Austerity measures are the main problem. So then what? It sounds that the Greeks will never be able to achieve stability under these terms. What would the end game become should this situation remained locked into the the German's way or the highway? Again and again it looks to be the same issue. Greece will never succeed.
But this then forces the Greek government to leave the Euro and the EuroZone. Apparently this will cause a further disaster, with the inference that this last option is even worse for the creditor(s) while the debts just get written off by paying in the old Dracma currency. Talk about stupid. It's time for Greece to pull this option by reopening their treasury and reprinting this paper money. Or at least going through the motions with the firm idea of actually doing it. One has to wonder how far the Germans are willing to go while Greece calls the bluff. They can't be in any worse position than they currently seem to be.
But this then forces the Greek government to leave the Euro and the EuroZone. Apparently this will cause a further disaster, with the inference that this last option is even worse for the creditor(s) while the debts just get written off by paying in the old Dracma currency. Talk about stupid. It's time for Greece to pull this option by reopening their treasury and reprinting this paper money. Or at least going through the motions with the firm idea of actually doing it. One has to wonder how far the Germans are willing to go while Greece calls the bluff. They can't be in any worse position than they currently seem to be.
6
Paul, as usual you are confused. The Greek problem has nothing to do with 'austerity', it is, and as it should be about debt, and paying what you owe. Yes, Greece finds itself in 'debtors prison', as it should be, especially after cooking the books for years. In America you go to jail for that. I am sure you would like there to be an international bankruptcy court, like in America, you could get a fresh start. If only there would be, everything would work itself out? Nonsense. Best Greece leave the Euro zone. Think of it as being foreclosed on. Let Greece go off to live in their socialistic world where only they will experience all its consequences, good and bad. Finally, the good news. Real estate prices will be falling, making it easy for you to buy an island to retire to and you can experience the Greek folly.
66
If Greece leaves the Euro zone, as you suggest, and in effect declares bankruptcy, as Iceland in effect did several years ago, then who is going to pay off its creditors, which are mostly German banks?
Or will the German banks have off loaded the debt to, oh, gosh, you don't suppose American banks took it on?
Nah, right, OUR bankers are too smart for that.
Heh.
Or will the German banks have off loaded the debt to, oh, gosh, you don't suppose American banks took it on?
Nah, right, OUR bankers are too smart for that.
Heh.
11
Except the lenders had reason to know the books were cooked. On top of that, our banks helped them cook the books.
"Let me tell you about the very rich. They are different from you and me..."
Ordinary people are practical and exercise common sense forgiveness.
The rich are altogether different. They will drag a billion people through discomfort to avoid one iota of their discomfort. That's the point of the Great Gatsby.
Same with those rich and powerful banks. It's a form of insanity. In ancient Rome they killed the Grachi brothers and even Julius Caesar when they attempted to provide relief to the masses at the expense of their pocket book. In later times they employed children in coal mines and factories for better returns on their margins. Its an insanity, a kin to addiction. Like junkies they have a justification for their next hit. And if you are not paying attention you'll fall for it. But in real life, ordinary people aren't like that - only junkies and addicts and other forms of insanity.
"Let me tell you about the very rich. They are different from you and me..."
Ordinary people are practical and exercise common sense forgiveness.
The rich are altogether different. They will drag a billion people through discomfort to avoid one iota of their discomfort. That's the point of the Great Gatsby.
Same with those rich and powerful banks. It's a form of insanity. In ancient Rome they killed the Grachi brothers and even Julius Caesar when they attempted to provide relief to the masses at the expense of their pocket book. In later times they employed children in coal mines and factories for better returns on their margins. Its an insanity, a kin to addiction. Like junkies they have a justification for their next hit. And if you are not paying attention you'll fall for it. But in real life, ordinary people aren't like that - only junkies and addicts and other forms of insanity.
29
So all Greeks should pay up for the follies of its government and the fact that its wealthiest citizens avoid paying their share of taxes. This reminds of the argument that the people who could not afford floating interest mortgages are responsible for the financial crisis of 2008, and thus banks are entitled to get help but anyone facing foreclosure on their home deserve it, and small businesses looking for loans to stay afloat should not get them while the banks are trying to recover the losses from risky investments. This type of moralizing may feel good for those sitting pretty but it ignores that many people lives are impacted for no fault of their own. It is not even sensible economics.
7
Mr. Krugman is ignoring the elephant that suddenly appeared in the room. The new Greek government is not-so-subtly attempting to break up a unified front on EU sanctions against Russia, some think with the goal of forcing additional concessions on their debts. While Krugman seems to read Syriza as “liberal”, they have acted so far more like old-school “leftists”. Putin is their friend, literally. Leaving debts aside for a moment, playing with fire at this critical time doesn’t inspire confidence. Add to this a plan to restore Greek bureaucracy to its previous bloated level, which no reforms to prevent a repeated collapse, one has to wonder if lack of maturity and experience will weigh heavier in the long run than the promise of new ideas.
6
Um, Greece is hardly alone in voicing the desire to lift sanctions against Russia: prominent voices in the administrations of France and Germany, among others, have also called for lifting sanctions in recent weeks. They're all doing it out of economic self-interest—there are huge revenue losses to the EU in continued sanctions—but let's not pretend Greece is breaking a unified front here. They're wrong to suggest it, but they have plenty of company.
3
Check your calendar. Note the century. The Soviet Union and the International are long gone. Putin is not a "leftist." Whatever the new Greek government's posture with respect to Russia comes to be -- they've hardly had time to develop one -- it will not be rooted in some lurking communist ideological affinity.
It might also be a good idea to stop harping on Alexis Tsipras as somehow "immature." Forty is not pimply. In high tech, where the premium is on innovative problem solving, which is what Greece desperately needs, forty is over the hill. The only reason there are few 40 year old heads of state is that it typically takes at least another decade of flattery, wheedling, cajoling, maneuvering and general soul-selling to break through to the top of ossified political parties and institutions.
It might also be a good idea to stop harping on Alexis Tsipras as somehow "immature." Forty is not pimply. In high tech, where the premium is on innovative problem solving, which is what Greece desperately needs, forty is over the hill. The only reason there are few 40 year old heads of state is that it typically takes at least another decade of flattery, wheedling, cajoling, maneuvering and general soul-selling to break through to the top of ossified political parties and institutions.
6
WWII is now a distant memory. Most of our veterans are gone. Germany seems to have forgotten its history and how it was rebuilt by the Allied nations who simply could have crushed them after the war.
It took an agonizing amount of sheer logic to overcome the awful things that came out of that war. Pragmatism and a sheer desire to prevent such a catastrophe from happening again lead the victors to do something rather unique. They not only forgave the losing countries, they helped them rebuild their crumbled nations.
Germany has created an extremely high-functioning economy. They should be proud of their achievements. They should also look back and ask themselves this question: Where would we be if the Allies treated us like we are treating the southern Euro zone countries.
Germany, look back at the unlikely historical event that let you rebuild and become a very successful nation and ask yourself why you feel like it is a moral victory to not offer the same to your southern neighbors.
It took an agonizing amount of sheer logic to overcome the awful things that came out of that war. Pragmatism and a sheer desire to prevent such a catastrophe from happening again lead the victors to do something rather unique. They not only forgave the losing countries, they helped them rebuild their crumbled nations.
Germany has created an extremely high-functioning economy. They should be proud of their achievements. They should also look back and ask themselves this question: Where would we be if the Allies treated us like we are treating the southern Euro zone countries.
Germany, look back at the unlikely historical event that let you rebuild and become a very successful nation and ask yourself why you feel like it is a moral victory to not offer the same to your southern neighbors.
268
You are missing the point Sir. Germany was rebuilt as quickly as possible to counteract Soviet aggression after WW2. The Soviets occupied the entire Eastern Europe and then left it in tatters 45 years later without having rebuilt any country what so ever. We are living with that legacy today with Russia now trying to steal parts of other countries again.
2
It is a myth that allies have triggered the german postwar industry.
In fact a lot of the remaining german industry was dismantled and transferred to france and britain. It took personal engagement like Major Ivan Hirst (Volkswagen) that some production plants remained operational after 1949 at all with the stuff they had.
In fact a lot of the remaining german industry was dismantled and transferred to france and britain. It took personal engagement like Major Ivan Hirst (Volkswagen) that some production plants remained operational after 1949 at all with the stuff they had.
2
Dear Scott, I don't know where you got your history from, but the Marshall plan was not plan from the Allies instituted out of the goodness of their hearts. It was a US plan to keep the recipient countries on the "right", meaning anti-communist, side of the fence. Recipients included Germany but also allied victors such as France and wholesome countries such as fascist Franko's Spain.
Greece is not a country recently destroyed by war but has received vast amounts of EU subsidies for decades to improve its economic backbone without much to show for. This is not the German's (or Dutch, Finish, Austrians or other creditors') fault.
Greece is not a country recently destroyed by war but has received vast amounts of EU subsidies for decades to improve its economic backbone without much to show for. This is not the German's (or Dutch, Finish, Austrians or other creditors') fault.
2
You amaze me Paul, with how you never discuss a specific scenario - which might not work. I guess Economics is "Never Having to Say You're quantitative".
The closest you get is to look at the mountain of money some country prints and go: "meh".
The bottom line: in a situation like this, creditors have meaningful access to only two things:
1. Middle-class savings and assets (the rich have moved theirs out of the country and out of reach - the poor don't have any)
For only the most recent example, look at all the folks who get paid with Zlotys and buy houses with Swiss Francs. Same said banks probably advising these folks to put their pensions in bitcoins.
2. Future Middle-class wages (through taxes)
The metaphorical Faustian agreement each new government strikes with the old banking system is:
> They make a show of not letting their citizens' bodily organs be taken from them
> They look the other way, as their citizens are continually bled
> When things get tough, they look the other way, as organs are taken, too
The closest you get is to look at the mountain of money some country prints and go: "meh".
The bottom line: in a situation like this, creditors have meaningful access to only two things:
1. Middle-class savings and assets (the rich have moved theirs out of the country and out of reach - the poor don't have any)
For only the most recent example, look at all the folks who get paid with Zlotys and buy houses with Swiss Francs. Same said banks probably advising these folks to put their pensions in bitcoins.
2. Future Middle-class wages (through taxes)
The metaphorical Faustian agreement each new government strikes with the old banking system is:
> They make a show of not letting their citizens' bodily organs be taken from them
> They look the other way, as their citizens are continually bled
> When things get tough, they look the other way, as organs are taken, too
2
Do not believe for one instant that economic fascists like Schauble and Merkel will not pull the plug on Greece; they have already proven truly heartless, seemingly salivating over beautiful sunny isles. Maybe Dr. Krugman would consider laying bare Germany's history on repayment of loans to other countries, like the US? US taxpayers, as always, took it on the chin to pay for Germany's war atrocities because Germans refused to shoulder the burden or repay any loans from their full-out fascist joyrides across the globe, twice in one century. So we paid not only with our fathers' and grandfathers' lives to save the innocent from Nazis, but also economically, just after our own banking depression of the 1930s. We also saved Germany after the fall of The Berlin Wall. So for the naked emperors in Germany to be constantly crowing about their fastidious natures leading to ultimate economic power sickens those of us old enough to remember their atrocities and their refusal to even pay for them. We also of course have Germans to thank for the armageddon in the ME, as it was Germany who murdered and drove out huge numbers of Jews from their native countries, forcing the creation of Israel. So the haughty, lecturing Germans could at least take the time to glance across the pond and give us a small nod of thanks for not leaving them in their very deserved misery after both of their World Wars, as they grab the mother of all democracy, by the throat.
19
They are "always either at your throat or at your feet" - Churchill
Hatred of Germany can distort one's view of history! The responsibility for the "armageddon" in the Middle East lies soley with the founding of Israel on stolen Arab land. I've never seen Germany blamed for that before! And the two world wars were "their" - Germany's - World Wars. Recent analysis certainly assigns more blame for both wars to Britain, and, for World War II, the United States.
2
While common sense would dictate a middle ground approach to the Greek dilemma, there is no reason to believe those now in power are capable of moderation. Perhaps surviving radical leftists have appeal to Krugman but those in Greece appear to be simply another variety of thugs. They have already turned to support of Russia and its aggression in Ukraine as a tool in their efforts to evade the debt problem. It may also be germane that Greece has in the recent past created a culture of graft and tax evasion that rivals those of South Asia. The chances are greater that the EU will cast Greece out than that a sensible compromise will be found.
3
Not so very long ago Germany similarly suffered from a crushing burden of debt, and that debt was forgiven. How soon they seem to forget.
13
They haven't forgotten at all as Daniel Davis have pointed out - that the massive debt relief in the twentieth century, Germany got it in the context of an equally massive national admission that the entire political system was rotten and needed to be totally restructured with foreign help.
And that's why I am as a German are for 100 percent debt relief - and I even wouldn't ask for a 'equally massive national admission that the entire political system of Greece was rotten too - and needed to be totally restructured with foreign help.
I think Tsipras mentioned that already often enough - without carefully avoiding the words 'foreign help'.
And that's why I am as a German are for 100 percent debt relief - and I even wouldn't ask for a 'equally massive national admission that the entire political system of Greece was rotten too - and needed to be totally restructured with foreign help.
I think Tsipras mentioned that already often enough - without carefully avoiding the words 'foreign help'.
8
I understand that lenders should pay their part too because they were suppose to assess their customers in an adequate way, however, I don’t back draconian measures defended by the recently formed Greek government which is suggesting cutting the debt in half and extending the life of their debt.
1
To be clear, you yourself Dr. Krugman advised Greece in your interview with Der Spiegel in 2012 to leave the Eurozone. In your last column you pointed out again, that Greece has no room to maneuver, unless it abandons the Euro. Many in the northern EU would agree. The Greeks don't want to do this, probably because they don't relish the consequences of bank runs, capital controls and extreme inflation, that such a step would entail. Something which you are very much silent about.
It is worth noting, that Germany is in no way reluctant to finance other EU nations. As a net contributor to the EU budget and its economic development programs it does so all the time - within the agreed-upon framework. Germans are however very reluctant to additionally finance institutions that are - by the Greeks themselves - perceived and described as fundamentally mismanaged, corrupt and above all inefficient.
The German public would be a great deal more sympathetic towards Greece had there been rather more enthusiasm shown within the last five years in reforming said institutions. Germans are very much aware, that the bad governance in Greece is not the fault of the individual Greek "on the street" but neither is it the fault of the individual German taxpayer.
It is unclear why Germans, and Dutch and Fins and so on, for that matter, should be made to pay for, and continue to pay for, the ineptitude of the Greek politicians, be they past, present or future.
It is worth noting, that Germany is in no way reluctant to finance other EU nations. As a net contributor to the EU budget and its economic development programs it does so all the time - within the agreed-upon framework. Germans are however very reluctant to additionally finance institutions that are - by the Greeks themselves - perceived and described as fundamentally mismanaged, corrupt and above all inefficient.
The German public would be a great deal more sympathetic towards Greece had there been rather more enthusiasm shown within the last five years in reforming said institutions. Germans are very much aware, that the bad governance in Greece is not the fault of the individual Greek "on the street" but neither is it the fault of the individual German taxpayer.
It is unclear why Germans, and Dutch and Fins and so on, for that matter, should be made to pay for, and continue to pay for, the ineptitude of the Greek politicians, be they past, present or future.
38
"It is unclear why Germans, and Dutch and Fins ... should be made to pay for, and continue to pay for, the ineptitude of the Greek politicians ... "
For the same reason people from New York, Massachusetts and Connecticut pay for the ineptitude of Florida politicians; because it strengthens the nation as a whole and protects the most vulnerable of Florida's citizens from the whims of her inept politicians. But Europe is obviously not a nation, and maybe her peoples still hate each other enough to tear apart the European Union.
For the same reason people from New York, Massachusetts and Connecticut pay for the ineptitude of Florida politicians; because it strengthens the nation as a whole and protects the most vulnerable of Florida's citizens from the whims of her inept politicians. But Europe is obviously not a nation, and maybe her peoples still hate each other enough to tear apart the European Union.
358
and the rest of American are willing to pay for the ineptitude of New York wall streeet, its bankers and insurers by bailing them out.
11
Okay, then howabout the German tax payer pay back all the loans that they were forgiven for in 1953, with back interest.
What's good for the goose, is good for the gander.
In all fairness, I fully expect Germans to hold themselves to the same terms they hold the Greeks.
So, all that debt and reparations from World War I, and add to that, the loans after World War I, and then everything they borrowed during WWII.
What's good for the goose, is good for the gander.
In all fairness, I fully expect Germans to hold themselves to the same terms they hold the Greeks.
So, all that debt and reparations from World War I, and add to that, the loans after World War I, and then everything they borrowed during WWII.
37
Your first point is very interesting and is being more widely reported. Rather than allow banks to deal with their own problems, we have drawn into backstopping the activities of banks. Because they hold deposits, deposits are made by rank and file citizens, and a bank collapse would touch every household, we justifiably see banks as institutions that must be prevented from failure. With the increasing combination of deposits with risk-taking activities, made more so in the US as commercial banks have become investment banks, we are basically attaching an investment bank's risk portfolio to the taxpayers.
Some of the banks get into trouble that clearly warrants governments to step in or else risk massive economic collapse. But we also now see handfuls of large banks which control markets as oligopolies. They take the same copycat risks, and they concentrate the same potential outcomes.
Would that we had smaller banks, less risk-taking proximate to depositors, and an attendant indifference to their collapse, putting the risk in the hands of shareholders rather than entire economies.
But, increasingly, we separate shareholders from risk and co-opt the responsibility by encouraging outsized growth and responsibility to the economy. Some is facilitated by international competition and the need to keep up. But some is simply the increasing influence that a handful of financial institutions exert on the markets where they operate.
Some of the banks get into trouble that clearly warrants governments to step in or else risk massive economic collapse. But we also now see handfuls of large banks which control markets as oligopolies. They take the same copycat risks, and they concentrate the same potential outcomes.
Would that we had smaller banks, less risk-taking proximate to depositors, and an attendant indifference to their collapse, putting the risk in the hands of shareholders rather than entire economies.
But, increasingly, we separate shareholders from risk and co-opt the responsibility by encouraging outsized growth and responsibility to the economy. Some is facilitated by international competition and the need to keep up. But some is simply the increasing influence that a handful of financial institutions exert on the markets where they operate.
8
The Greek state railway has more employees than passengers, and it would be cheaper to send all its passengers by taxi. Greek small businesses are hard-working, but there is immense featherbedding in state companies and the welfare rolls. And the featherbedding began under Andreas Papandreou senior, the ideological precursor to the Syriza party that rules today.
For a macroeconomist, this may all be irrelevant. An unending flow of cash from Slovakia, Germany, Britain, and Finland can make the equation balance. But it is not good for the future of Europe, and economists must not make excuses for it or try to put the blame elsewhere.
For a macroeconomist, this may all be irrelevant. An unending flow of cash from Slovakia, Germany, Britain, and Finland can make the equation balance. But it is not good for the future of Europe, and economists must not make excuses for it or try to put the blame elsewhere.
15
Amanda conveniently lacks any figure or references to back up her statements. It should be noted, however, that in the recent past, both Greece and Germany had about the same government spending of about 50% of GDP.
http://www.tradingeconomics.com/
http://www.tradingeconomics.com/
16
After the Great Depression, bankers were put on notice: make sure your borrowers can pay before you lend.
Banks take risks when they lend. Banks have a responsibility to their stockholders. Making risky loans are the fault of lenders, not borrowers. Punishing borrowers who cannot pay is deceit. Punish bankers who took excessive risks and leant money that cannot be repaid. Stockholders are NOT entitled to a return on their investments, or profits, or bailouts by governments.
What is going on in Greece is overdue everywhere. Lenders who have made bad loans are in control of governments. Governments that made bad loans are equally culpable. Lending to Greece to keep them within the club and then punishing the Greek people is tyranny. The wealthy Greeks who do not pay taxes, who have left the country, who are the only Greeks with the means to pay are like the wealthy everywhere. They socialize risk and privatize profit.
Germany made a lot of risky loans and they lost. Germans should stop acting like mafia loan sharks and recognize those incompetent officials who sanctioned bad loans and remove them from positions of responsibility, maybe charge them with crimes like securities fraud, or dereliction of duty. Maybe we should do that here in America to banks that made bad loans and other investors who were "rescued" instead of borrowers. At a minimum, taxpayers deserve to be compensated for tax dollars that criminals and incompetents were paid.
Banks take risks when they lend. Banks have a responsibility to their stockholders. Making risky loans are the fault of lenders, not borrowers. Punishing borrowers who cannot pay is deceit. Punish bankers who took excessive risks and leant money that cannot be repaid. Stockholders are NOT entitled to a return on their investments, or profits, or bailouts by governments.
What is going on in Greece is overdue everywhere. Lenders who have made bad loans are in control of governments. Governments that made bad loans are equally culpable. Lending to Greece to keep them within the club and then punishing the Greek people is tyranny. The wealthy Greeks who do not pay taxes, who have left the country, who are the only Greeks with the means to pay are like the wealthy everywhere. They socialize risk and privatize profit.
Germany made a lot of risky loans and they lost. Germans should stop acting like mafia loan sharks and recognize those incompetent officials who sanctioned bad loans and remove them from positions of responsibility, maybe charge them with crimes like securities fraud, or dereliction of duty. Maybe we should do that here in America to banks that made bad loans and other investors who were "rescued" instead of borrowers. At a minimum, taxpayers deserve to be compensated for tax dollars that criminals and incompetents were paid.
15
The irony is that in the early 1950s Germany desperately needed to refinance the terms of its debt to the "victor" nations, who agreed, thereby launching the famous German miracle... Germany forgets its past and seeks to reassert itself as the dominant European power "conquering" teh continent by cloaking itself in the moral high ground of fiscal responsibility... It's current wealth was thanks to the generosity of its benefactors in the 50s and 60s; a charity Germany is unwilling to show to Greece today.
16
worth repeating in this context -
Daniel Davis at Crooked Timber:
'There’s more than a couple of Germans I’ve spoken to over the last few years who have pointed out that although Germany got massive debt relief in the twentieth century, it got it in the context of an equally massive national admission that the entire political system was rotten and needed to be totally restructured with foreign help; this was also the basis on which the integration of Eastern Germany was managed in the 1990s. Seeing the peripheral Eurozone debt in isolation from the politics of European'integration is a sure way to lead yourself up blind alleys.
Daniel Davis at Crooked Timber:
'There’s more than a couple of Germans I’ve spoken to over the last few years who have pointed out that although Germany got massive debt relief in the twentieth century, it got it in the context of an equally massive national admission that the entire political system was rotten and needed to be totally restructured with foreign help; this was also the basis on which the integration of Eastern Germany was managed in the 1990s. Seeing the peripheral Eurozone debt in isolation from the politics of European'integration is a sure way to lead yourself up blind alleys.
6
Debt renogiations aside, the german miracle in the 60s is contributed to the germans alone, who rebuild their industry on their own. Mashall plan was for providing survival for the first years, but not much more. The only real stimulus had been, that everything was destroyed and there had been a need of plenty. The only outside contribution had been the trust in us coming up with an own liberal economy.
The victor nations had shown a lot of charity, but this was by freedom, by acceptance, and not by money. After 1953 (the london conference, and maybe even earlier) there had been no contribution i know off.
The victor nations had shown a lot of charity, but this was by freedom, by acceptance, and not by money. After 1953 (the london conference, and maybe even earlier) there had been no contribution i know off.
1
Uh, just out of curiosity; weren't those debts incurred because we (and our allies) bombed Russia back to the stone age at the end of WWII? If so, would you agree that we be allowed to do the same to Greece before we forgive their debt? If so, I'm all for it, if not, it seems Greece has two choices - pay their debts, or exit the Euro. I'm fine with either outcome.
1
Greece spent itself into bankruptcy. It allowed too many citizens to escape paying their share of expenses. Tax evasion is the national pastime.
We saw that when they government did aerial surveys it showed a great many homes with hidden amenities, where the residents had claimed far less value.
There were and are, a great many rich
Greeks who have stashed their money in other countries to avoid paying taxes. The government operates many enterprise such as the phone and electrical systems, and it takes baksheesh to get any service.
So yes, the interest rates on Greek bonds are high, it is a risk to loan to them. There is a good possibility of default. What happens then if that should occur? The creditors will have to take "hair cuts" and hope to break even, the Greek economy will sink even further, and the government will have to hold a fire sale. The creditor banks are just waiting for that, just as they did with the American Financial Crisis.
The Greek economy will become hostage to the private equity industry, and the citizens will be bled dry. They will have to work for peon wages.
You can look at Argentina as an example to see just what happens in these cases.
We saw that when they government did aerial surveys it showed a great many homes with hidden amenities, where the residents had claimed far less value.
There were and are, a great many rich
Greeks who have stashed their money in other countries to avoid paying taxes. The government operates many enterprise such as the phone and electrical systems, and it takes baksheesh to get any service.
So yes, the interest rates on Greek bonds are high, it is a risk to loan to them. There is a good possibility of default. What happens then if that should occur? The creditors will have to take "hair cuts" and hope to break even, the Greek economy will sink even further, and the government will have to hold a fire sale. The creditor banks are just waiting for that, just as they did with the American Financial Crisis.
The Greek economy will become hostage to the private equity industry, and the citizens will be bled dry. They will have to work for peon wages.
You can look at Argentina as an example to see just what happens in these cases.
8
If I remember correctly, early in the crisis France and Germany while pushing Greece to rein in its expenses were insistent on Greece continue to buy expensive military hardware from both countries. The other point to consider is that Europe forgave a huge amount of Germany's WW I debt (50%) to allow the country to
emerge from the disaster of WW II. I should think that Merkel and others would reflect on the beneficial results of that decision for Germany and, by extension, for Europe. But memory seems to be in short supply when self interests are in play.
emerge from the disaster of WW II. I should think that Merkel and others would reflect on the beneficial results of that decision for Germany and, by extension, for Europe. But memory seems to be in short supply when self interests are in play.
558
It had been 16 Million $ reparations vom Versailles, and 16 Million from the Marshall Plan (by the way, it was a loan until 53).
Reparations hardly classify as Austerity, nor as loans.
It's right, germans had lended heavily from american banks, and above all, it is just marginal compared to the damage they did in WW2. But the war aside, the germans were waived half of the debts of WW1 and half of the Mashall plan.
How does 32 Million in 53 in a completly depleted country compare to roughly 210 Billion (240 in Euro) in 2015 in a country that just overspended ?
Reparations hardly classify as Austerity, nor as loans.
It's right, germans had lended heavily from american banks, and above all, it is just marginal compared to the damage they did in WW2. But the war aside, the germans were waived half of the debts of WW1 and half of the Mashall plan.
How does 32 Million in 53 in a completly depleted country compare to roughly 210 Billion (240 in Euro) in 2015 in a country that just overspended ?
I don't think Greece is any longer "a country that just overspent." It's pretty depleted, with more than 25% unemployed, about half of youth unemployed, per capita health care spending down by 25%, wages, pensions, and benefits cut drastically, depression and suicides way up, people searching through the garbage in middle-class communities, businesses closed, etc., etc. It's been compared to the American Great Depression, which needs its own New Deal. Yes, it's time to forgive some debt once again.
13
The point is that continuing to put a burden on a country with consequential social arrest doesn't do any good to anyone. On the other hand, giving Greece some breathing room may, in the end, be more generally profitable than squeezing the last drop of blood from them. That their economy was mishandled badly no one questions. The question remains, what is the best solution given the circumstances.
19
The shortsightedness of the Germans and the ECB are hard to comprehend but then again these folks brought us World War I and World War II, so rationality is not their highest quality.
Now the Russians see an opening and yesterday apparently made some overtures to Greece about providing it financing to retire the European debt. So Europe sits on its hands and moralizes causing Putin to come to Greece's rescue. Good move Germany and ECB, and it is almost as good as your austerity policies which have driven southern Europe to a miserable state with deflation as their future.
Now the Russians see an opening and yesterday apparently made some overtures to Greece about providing it financing to retire the European debt. So Europe sits on its hands and moralizes causing Putin to come to Greece's rescue. Good move Germany and ECB, and it is almost as good as your austerity policies which have driven southern Europe to a miserable state with deflation as their future.
85
Why in retrospective all we did is just evil ?
The greeks were in 2011 in an financial hostage situation, they brought upon themself. The bailout was to avoid bankruptcy. Didn't you americans not do the same for your bankers ? We could have avoided the middleman and could have bailed out the banks directly, but this would have been a formal default of greece.
And you can be reassured, this was absolutly not a pleasure. The 58 Billion Euro for german taxpayer, 10% of their revenue for that year, had been a reason for outstanding wrath.
We had the choice to let the greeks face an disorderly bankruptcy, or hand out a loan to fake solvency. Of course what we are up to now is rotten compromise, but back than i didn't anyone hear coming up with a better solution. And just saying save the greeks from their own folly isn't really an idea.
Of course we could forfeit all the outstanding loans now, but among the lenders, only germany is strong enough to face such a loss. In total this had been 240 Billion Euro, and it will be passed through to germany. This will be 7% of our GDP. Just for comparison, the marshall plan for whole europe was 1% of the US GDP back than.
What's the quote you hate so much ? 'keep on beating until the moral improves' ?Would it be more appropriate if it would be 'keep on beating the germans until moral improves' ?
The greeks were in 2011 in an financial hostage situation, they brought upon themself. The bailout was to avoid bankruptcy. Didn't you americans not do the same for your bankers ? We could have avoided the middleman and could have bailed out the banks directly, but this would have been a formal default of greece.
And you can be reassured, this was absolutly not a pleasure. The 58 Billion Euro for german taxpayer, 10% of their revenue for that year, had been a reason for outstanding wrath.
We had the choice to let the greeks face an disorderly bankruptcy, or hand out a loan to fake solvency. Of course what we are up to now is rotten compromise, but back than i didn't anyone hear coming up with a better solution. And just saying save the greeks from their own folly isn't really an idea.
Of course we could forfeit all the outstanding loans now, but among the lenders, only germany is strong enough to face such a loss. In total this had been 240 Billion Euro, and it will be passed through to germany. This will be 7% of our GDP. Just for comparison, the marshall plan for whole europe was 1% of the US GDP back than.
What's the quote you hate so much ? 'keep on beating until the moral improves' ?Would it be more appropriate if it would be 'keep on beating the germans until moral improves' ?
12
No one grudges Germans their conservative and good business and social practices.
But no one has a good and just solution for the problems either.
Let's not kid ourselves that no one has / had a better solution. The better solutions are never taken because who will NOT benefit from them.
But no one has a good and just solution for the problems either.
Let's not kid ourselves that no one has / had a better solution. The better solutions are never taken because who will NOT benefit from them.
2
"Of course we could forfeit all the outstanding loans now, ..." I doubt you are a German banker. Of course German workers (rather than taxpayers) produce an immense amount of wealth due to their productivity. However, neither German or Greek workers benefit from this swindle perpetrated by the German or European (in collusion with the Greek) elites.
5
What you conveniently forget is that the Allies chose not to force Germany into decades of reparations payments. We forgave not only your debts but your debts to the countries that you destroyed in your attempt to take over the world.
I understand that neither of us were alive when the war took place but the fact that Germany ignores the sheer luck that the victors of WWII took pity on the losers of that war and chose to help them rebuild should serve as a moral lesson about forgiveness.
I fear that Germany has forgotten the fact that its success, in large measure, relies on the generosity of many years ago.
Do the right thing for the EU. Forgive the debts of Portugal, Italy, Greece and Spain.
I understand that neither of us were alive when the war took place but the fact that Germany ignores the sheer luck that the victors of WWII took pity on the losers of that war and chose to help them rebuild should serve as a moral lesson about forgiveness.
I fear that Germany has forgotten the fact that its success, in large measure, relies on the generosity of many years ago.
Do the right thing for the EU. Forgive the debts of Portugal, Italy, Greece and Spain.
16
Greece has no sovereignty as long as it's part of the Euro system. The debt, most of it toxic gambling debt via the too big to fail banks can never be paid off and has turned the Greek people into debt slaves. They have been force fed a destructive and murderous policy of austerity, attacks on labor, and massive amounts of virtual money printing, which isn't directed into the real economy, but instead goes to prop up the too big to fail mega banks, in effect another bailout.
This is not just a Greek problem, but an ongoing problem of the whole European and American (trans-Atlantic) banking system. The casino banks are sitting on around 1.5 QUADRILLION worth of toxic derivatives. These derivatives were a major cause of the crisis back in 2008 and are still a major threat today.
All this toxic debt needs to be written off, and a Glass-Steagall style bankruptcy re-organization needs to be implemented along with the creation of national development banks to inject federal credit into the economies for infrastructure, water and power projects, high technology, and nuclear energy, to get a real economic recovery going.
An FDR style recovery for Greece and for the rest of the trans-Atlantic countries is urgently needed.
This is not just a Greek problem, but an ongoing problem of the whole European and American (trans-Atlantic) banking system. The casino banks are sitting on around 1.5 QUADRILLION worth of toxic derivatives. These derivatives were a major cause of the crisis back in 2008 and are still a major threat today.
All this toxic debt needs to be written off, and a Glass-Steagall style bankruptcy re-organization needs to be implemented along with the creation of national development banks to inject federal credit into the economies for infrastructure, water and power projects, high technology, and nuclear energy, to get a real economic recovery going.
An FDR style recovery for Greece and for the rest of the trans-Atlantic countries is urgently needed.
448
"All this toxic debt needs to be written off..."
Does this simplistic plan include ending the new loans that keep Greece functioning. Or instead do the banks "write off this toxic debt" while providing new debt? Is this "write off" to be paid for by the citizens of other countries?
This idea that bank are a magical place where lead is spun into gold is absurd. Almost as absurd as the idea that those "evil" banks can just eats these massive losses without severe consequences to the citizenry of the loaning countries.
The only "FDR style recovery" that worked was entry into WW2. I don't think we need another world war to ensure that a country where folks retire in their 50s do not have to pay the bills that they accrued.
Does this simplistic plan include ending the new loans that keep Greece functioning. Or instead do the banks "write off this toxic debt" while providing new debt? Is this "write off" to be paid for by the citizens of other countries?
This idea that bank are a magical place where lead is spun into gold is absurd. Almost as absurd as the idea that those "evil" banks can just eats these massive losses without severe consequences to the citizenry of the loaning countries.
The only "FDR style recovery" that worked was entry into WW2. I don't think we need another world war to ensure that a country where folks retire in their 50s do not have to pay the bills that they accrued.
2
"Does this simplistic plan include ending the new loans that keep Greece functioning."
Krugman clearly explains that is not true. New loans are not used to keep Greece functioning. They only roll over old debt. The money never gets to Greece. It is refinance of old debt, done for the lenders only.
Much of that old debt went back to Germany to buy useless things like German submarines and missile boats and planes and used German Army tanks. Now all that stuff sits and rusts, never-needed right wing foolishness that benefited only Germany.
Krugman clearly explains that is not true. New loans are not used to keep Greece functioning. They only roll over old debt. The money never gets to Greece. It is refinance of old debt, done for the lenders only.
Much of that old debt went back to Germany to buy useless things like German submarines and missile boats and planes and used German Army tanks. Now all that stuff sits and rusts, never-needed right wing foolishness that benefited only Germany.
12
Oh please, Mr. Thomason. This is semantics. Servicing the national debt is part of keeping a national government functioning. That is certainly the case when our own Congress plays Russian roulette with the full faith and credit of the United States. It is a requirement for functioning in today's global society and a duty of any responsible government. This is not "moralizing". It is a cold reality of the world that folks don't lend money to folks who don't pay them back. Morals have nothing to do with that fact.
As yesterday has proved there will be again a compromise - like the compromise Greece reached with the EU about the Russian sanctions.
And it is one of the worst self serving myth, that the German moralizing is/was about 'Pay up' - or even worst 'Pay up or we destroy your banking system'.
Yesterday the German President of the EU Martin Schulz - a fellow 'social' politician of Alexis Tsipras met with Tsipras.
Supposedly Tsipras told him - he will do everything to fight the corruption of the oligarchs in his country and make sure that the rich pay their taxes.
Great 'moralizing' from Tsipras - or what did Madame Lagarde say - in French and not in German?
'This is not about austerity it is about reforms'!
And it always was - and not so much about 'the debt' as the debt forgiveness of 2011 had proven where the Greek oligarchs promised that they would change their ways.
And they didn't - and that's why they are gone now - and perhaps it would help not to answer 'moralizing' with 'moralizing' and to mention - just in passing' - that there was a lot more monetary help from the EU for Greece than just these loans.
And it is one of the worst self serving myth, that the German moralizing is/was about 'Pay up' - or even worst 'Pay up or we destroy your banking system'.
Yesterday the German President of the EU Martin Schulz - a fellow 'social' politician of Alexis Tsipras met with Tsipras.
Supposedly Tsipras told him - he will do everything to fight the corruption of the oligarchs in his country and make sure that the rich pay their taxes.
Great 'moralizing' from Tsipras - or what did Madame Lagarde say - in French and not in German?
'This is not about austerity it is about reforms'!
And it always was - and not so much about 'the debt' as the debt forgiveness of 2011 had proven where the Greek oligarchs promised that they would change their ways.
And they didn't - and that's why they are gone now - and perhaps it would help not to answer 'moralizing' with 'moralizing' and to mention - just in passing' - that there was a lot more monetary help from the EU for Greece than just these loans.
7
To return to an old theme that applies equally in New York and London and Paris, not anyone who rated a junk bond as investment grade has yet been successfully sent to jail.
32
How about Germany just rescue its own banks, like US taxpayers had to do for our criminal syndicates?
8
'How about Germany just rescue its own banks, like US taxpayers had to do for our criminal syndicates?#
As much I might have the same kind words for 'Banks' as you - There is no need to 'rescue' German Banks - as they now hold less than 10 percent of the Greek debt - and they easily can 'eat' that!
As much I might have the same kind words for 'Banks' as you - There is no need to 'rescue' German Banks - as they now hold less than 10 percent of the Greek debt - and they easily can 'eat' that!
2
If the German and French banks insist on their bullying, the Greeks won't have an alternative to defaulting on their debt (extortion). That means Grexit, which according to the Breugel Institute would cost at least 80 billion Euros. I doubt they are willing to risk that. Syria cannot renege on their anti-austerity pledge (they would be out of power pretty soon).
So there two likely scenarios: there is a compromise to avoid further disturbances (the biggest being the collapse of the Union project) or Grexit (with the implied fragmentation of EU) and the nationalization of Greek banks after a a run. Whatever happens, Syriza should be loyal to the citizens who elected them.
So there two likely scenarios: there is a compromise to avoid further disturbances (the biggest being the collapse of the Union project) or Grexit (with the implied fragmentation of EU) and the nationalization of Greek banks after a a run. Whatever happens, Syriza should be loyal to the citizens who elected them.
7
The banks have already taken their loss .The Greek alrady defaulted on most of their bank credits .What is left is owed to the IMF,the ECB and for the most part to the European taxpayers .
1
Dominique, why can't the ECB just print euros to save the taxpayers any costs? If it causes a bit of inflation, that;s what Europe needs, isn't it?
8
Missing in this analysis is a consideration of what the other debtor nations in Europe (Portugal, Spain, Italy) would do if the European Central Bank reduced the Greeks' payments. The consequences for the creditor-nation taxpayers would not be "minimal" if this were a collective rush to change the terms of the loans.
23
Agreed.
That is, if they were "fair" in the first place. Now that the weather has turned for the worse, European "austerians" may be less fulsome in the praise of the terms of the loans.
I wonder, will the perpetrators pay the price ? Where is the talk of socialized losses and privatized profits ?
That is, if they were "fair" in the first place. Now that the weather has turned for the worse, European "austerians" may be less fulsome in the praise of the terms of the loans.
I wonder, will the perpetrators pay the price ? Where is the talk of socialized losses and privatized profits ?
7
In the long term, not considering a debt relief program for those countries where productivity lags would be catastrophic for the whole European program of unification. Greece may be the weakest link of the European chain, but if it breaks ....
7
Did someone not just say something about the risks of myths and moralising...? Unfortunately German VSPs are busy talking about taking no prisoners. Expectatios of the hoi polloi are pretty much refelected by many of the German comments on this thread: KIll the hostages! If Merkel does not say something to cool things down soon, she will find it politically increasingly difficult to hold back the ordoliberal hoards.
4
Only one thing comes to mind based on your description of the scenario Prof. Krugman : This is the extortion of a state by another state.
If the circumstances were so dire, the least Greece's "friends" could do is lend money at the lowest rate feasible, notwithstanding your description of bailing out the creditor banks.
In my opinion, this is a scandal. It needs a fairer negotiation by the ECB / European Union with their Greek member state.
It seems to me that, based on your description, Greece has a lot less to lose than I thought. They have much more power and should exercise it to prevent their extortion.
Thank you for calling this out ! I hope you will take some more time on this subject in the very near future.
If the circumstances were so dire, the least Greece's "friends" could do is lend money at the lowest rate feasible, notwithstanding your description of bailing out the creditor banks.
In my opinion, this is a scandal. It needs a fairer negotiation by the ECB / European Union with their Greek member state.
It seems to me that, based on your description, Greece has a lot less to lose than I thought. They have much more power and should exercise it to prevent their extortion.
Thank you for calling this out ! I hope you will take some more time on this subject in the very near future.
44
I think the old saying is something like, if you owe the bank a little, they have the balance of power - so they call the tune, if you owe the bank a lot, you have the balance of power - so you CAN call the tune.
7
Extortion ?
Well, after Greece cooked the books, spent borrowed money for God knows what but certainly not a single sound investement it could benefit from, now when the money disapeared the lenders are called " extorters "
Do you really imagine yourself helping greece people with that kind of arguments ?
Well, after Greece cooked the books, spent borrowed money for God knows what but certainly not a single sound investement it could benefit from, now when the money disapeared the lenders are called " extorters "
Do you really imagine yourself helping greece people with that kind of arguments ?
3
they are lending at very low rates.
2
what happened with all that money the Greek Gvt borrowed and as you say German and other banks not least American provided? The money was given as loans in different forms to Greek dishonest corporations who made bad investments maybe on purpose. The owners diverted the money abroad and the original Greek companies defaulted. This is where the Greek taxpayers come in: they did not benefit but now they were asked to cover the payback. Anybody wonder why they are protesting? Now the Germans figure out that Greeks have generous pension schemes and other benefits, and blame the people a lazy. What Is hard to understand is why the small Greek economy can shake the EURO-zone and the whole EU? Or is it a self inflicted problem resulting from the general austerity policy which ECB is now distancing itself from by starting its own QE.
9
"what happened with all that money the Greek Gvt borrowed and as you say German and other banks not least American provided?"
It went back to the hands of the Geman and Frenck bankers.
It went back to the hands of the Geman and Frenck bankers.
70
Does it matter what happenend with the money inside greece ?
Of course the greek plutocrats are to blame, i think we all can agree on that. But who is closer to them, the greek citizen or anyone from the outside.
And just for the information, it had not been german or french banks, that whitewashed the money, most money went to cyprus, quite a lot into swiss and also the US. German banks had been just a top lender.
If you want other nations liable for what happenend in greece, you imply that other nations may rush in and take the greek plutocrats into custody. I really would like that, we have this infamous lagarde list too, we know the names. And we, like syriza, have no mercy for the etablishment.
We could make a deal, for every million we reclaim from greek tax dodger, we forfeit another 10 million from the loans.
Of course the greek plutocrats are to blame, i think we all can agree on that. But who is closer to them, the greek citizen or anyone from the outside.
And just for the information, it had not been german or french banks, that whitewashed the money, most money went to cyprus, quite a lot into swiss and also the US. German banks had been just a top lender.
If you want other nations liable for what happenend in greece, you imply that other nations may rush in and take the greek plutocrats into custody. I really would like that, we have this infamous lagarde list too, we know the names. And we, like syriza, have no mercy for the etablishment.
We could make a deal, for every million we reclaim from greek tax dodger, we forfeit another 10 million from the loans.
2
'It went back to the hands of the Geman and Frenck bankers.'
No it didn't and that's another unacceptable self serving myth -
After 2011 when a first debt forgiveness was more or less forced by Angela Merkel on banks and private investors alike - the debt was 'restructered' in a way that now the EZB holds most of it and YES - in very strange winded and complicated way also by Greek Banks. And banking has become so absurd that supposedly a lot of the provided money goes back to the hand of the Greek bankers.
No it didn't and that's another unacceptable self serving myth -
After 2011 when a first debt forgiveness was more or less forced by Angela Merkel on banks and private investors alike - the debt was 'restructered' in a way that now the EZB holds most of it and YES - in very strange winded and complicated way also by Greek Banks. And banking has become so absurd that supposedly a lot of the provided money goes back to the hand of the Greek bankers.
1
Thank you for putting this statement into print, since many commenters on stories regarding Greece seem to see this whole crisis as a case of European socialism leading to catastrophe. More of the right's seeming entitlement to not only have its own opinions, but its own facts as well ...