But the Greek government didn’t succumb to the bum’s rush, and that in itself is a kind of victory.
nice!!!!!!!
nice!!!!!!!
10
Professor Krugman,
Why do you believe that the USA should imitate Greece and continue to borrow a lot of money back from individuals in the recently industrialized wealth creating BRIC nations and then spend that money on more US wealth consuming US federal government activities.
Wealth consuming government activities include government contracts, pork barrel infrastructure contracts, more US government employees, more US infrastructure improvements, more entitlements, wars and more of other similar US government activities to gain the popularity and the votes of the citizens.
These actions will only increase the national debt.
Spending more than a nation collects in taxes adds to each nation’s National Debt and this will destroy their economies and then cause these nations to evolve into something resembling Detroit, then Greece, then Mexico, and then finally Somalia when individuals and governments in the industrialized wealth creating BRIC nations finally stop lending back the USA and other wealth consuming nations their hard earned US Dollars (by buying freshly printed paper US Treasury Bonds) to pay for US government wealth consuming activities that are in excess of our tax collections!
Why do you believe that the USA should imitate Greece and continue to borrow a lot of money back from individuals in the recently industrialized wealth creating BRIC nations and then spend that money on more US wealth consuming US federal government activities.
Wealth consuming government activities include government contracts, pork barrel infrastructure contracts, more US government employees, more US infrastructure improvements, more entitlements, wars and more of other similar US government activities to gain the popularity and the votes of the citizens.
These actions will only increase the national debt.
Spending more than a nation collects in taxes adds to each nation’s National Debt and this will destroy their economies and then cause these nations to evolve into something resembling Detroit, then Greece, then Mexico, and then finally Somalia when individuals and governments in the industrialized wealth creating BRIC nations finally stop lending back the USA and other wealth consuming nations their hard earned US Dollars (by buying freshly printed paper US Treasury Bonds) to pay for US government wealth consuming activities that are in excess of our tax collections!
7
Greece's growth rate will be FAR below the original 2.9% forecast largely because of the uncertainty created by the early elections triggered by SYRIZA and the time wasted negotiating to get zero in return. Partly as a result, but also partly because of SYRIZA's pre-election calls on taxpayers to stop paying their tax obligations, revenues are collapsing and the primary surplus has probably disappeared. So, the pain of going from a zero primary surplus this year to 1.5% next year (the likely target), will be the same as going from 1.5% to 3.0% under the previous targets.
5
I agree with Karen Garcia's post but rather than responding favorably to her, I would ask you, Paul Krugman (whom I happen to admire) why you see Ukraine as being much different?
How silly! Now, Greece is whining about moral support for their country and wishing they could garner a slightly higher credit rating, methinks. In what universe...? I think they have 4 months to talk to China and Russia about loans in return for what? Greece will never pay.
8
Quotation: "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." - Thomas Jefferson, 3rd President of the United States of America.
Hmmm...what does this remind you of? Ominous parallels. Greece must act to reclaim Her sovereignty!
Hmmm...what does this remind you of? Ominous parallels. Greece must act to reclaim Her sovereignty!
11
If Greeks had the same retirement age as their creditors there would be no problem.
If Greeks paid their taxes with the same fidelity as their creditors, there would be no problem.
Once you blow all the smoke away, the problem is still that Europe partnered with and loaned money to a nation of lazy deadbeats.
If Greeks paid their taxes with the same fidelity as their creditors, there would be no problem.
Once you blow all the smoke away, the problem is still that Europe partnered with and loaned money to a nation of lazy deadbeats.
17
Paul,
How are they going to get the primary surplus into the economy? Is it going to be more government spending? This would sound like no structural reform whatsoever.
How are they going to get the primary surplus into the economy? Is it going to be more government spending? This would sound like no structural reform whatsoever.
2
I think that Europeans have drastically failed to manage 2008 economic crisis effectively. Politicians were able to mask additional borrowing in Greece thanks to Goldman Sachs, JPMorgan Chase and a wide range of other banks, all those operations were not recorded as loans, which itself misled investors and regulators about the REAL depth of a country’s liabilities.
6
The Greeks have taken the first steps to restore democracy in the EU. The austerity measures extorted as the price of previous debt agreements is stopped in its tracks and Greece can now address the cricial needs of establishing pro-growth domestic policies and spending of the surplus within the current scheme of debt negotiations.
The EU/ECB and IMF need to constantly remember the way Greece got into the Eurozone after its inital denial of entry in 1999. Mario Draghi and Goldman Sachs cooked Greece's books so Greece could enter the Eurozone in 2001. Draghi is now head of the ECB and the one person most responsible for the current debt crisis not only in Greece but in the Southern Tier nations and Ireland as he and his cohorts at Goldman Sachs sold Greek and other sovereign debt to investors as the folks at GS sold he very same debt short, betting on default.
EU surviveal depends upon keeping the reality of chicanery and collusion in mind when dealing with all the sovereign debt issues since the EU and others failed promises to fully investigate Goldmqan Sachs after the Greece debacle.
Political grandstanding about bailouts and taxpayer subsidies should not be directed at other sovereign nations but the very banklers and banksters which stand most to profit from continued drawing of blood from the EU's struggling eonomies. It remains to be seen whether the breath of democracy Greece has restored to the EU will continue.
Will democracy or banksters rule the EU?
The EU/ECB and IMF need to constantly remember the way Greece got into the Eurozone after its inital denial of entry in 1999. Mario Draghi and Goldman Sachs cooked Greece's books so Greece could enter the Eurozone in 2001. Draghi is now head of the ECB and the one person most responsible for the current debt crisis not only in Greece but in the Southern Tier nations and Ireland as he and his cohorts at Goldman Sachs sold Greek and other sovereign debt to investors as the folks at GS sold he very same debt short, betting on default.
EU surviveal depends upon keeping the reality of chicanery and collusion in mind when dealing with all the sovereign debt issues since the EU and others failed promises to fully investigate Goldmqan Sachs after the Greece debacle.
Political grandstanding about bailouts and taxpayer subsidies should not be directed at other sovereign nations but the very banklers and banksters which stand most to profit from continued drawing of blood from the EU's struggling eonomies. It remains to be seen whether the breath of democracy Greece has restored to the EU will continue.
Will democracy or banksters rule the EU?
8
Greek for "keep calm and carry on" is democracy. Maybe be it is time for America to abandon Reaganism and get back on the road to democracy.
16
Perhaps France, which is borrowing at .002%, should lend to Greece at .005% making a tidy profit and thereby helping Greece off the hook with its onerous interest rates.
3
When you look at Greece as an object lesson in how to fix poorly managed governments it is much more interesting than the simple morality play offered by conservative alarmists. The importance of the current surplus cannot be overstated. The efforts to privatize the assets that presumably provide some of that surplus is an important aspect of the negotiation process. Clearly those assets are generating income because they are actually delivering goods and services.
Beyond the usual suspects wanting their hands on these cash generators the thing I find curious is the vilification of Greece's shadow economy. It appears both the common man and the shipping tycoons have found how to hide income from the government. That would mean only the honest Greeks are suffering from the current austerity. We can only hope the current leftist government can manage to overcome the help from bankers that facilitated the previous regime's disastrous policies.
Why is it that bankers get to have shadow banking practices without much political concern from the right? The distemper caused by lavish populist pensions seems out of proportion to the real theft of government tax revenues by well connected players drooling over the few viable assets propping up what is left of Greece's economy. Syriza seems to have managed retaining some of the surplus to plow back into the economy. Perhaps they are like Br'er Rabbit when it comes to being tossed from the Eurozone.
Beyond the usual suspects wanting their hands on these cash generators the thing I find curious is the vilification of Greece's shadow economy. It appears both the common man and the shipping tycoons have found how to hide income from the government. That would mean only the honest Greeks are suffering from the current austerity. We can only hope the current leftist government can manage to overcome the help from bankers that facilitated the previous regime's disastrous policies.
Why is it that bankers get to have shadow banking practices without much political concern from the right? The distemper caused by lavish populist pensions seems out of proportion to the real theft of government tax revenues by well connected players drooling over the few viable assets propping up what is left of Greece's economy. Syriza seems to have managed retaining some of the surplus to plow back into the economy. Perhaps they are like Br'er Rabbit when it comes to being tossed from the Eurozone.
6
What Krugman suggests is that, despite their best efforts to the contrary, there was an outbreak of dialogue between Greece and certain key powers within the European community. Dialogue with individuals, whether they are ordinary citizens sitting across from each other at a kitchen table or government officials and titans of finance around a conference room table, once positions are staked out, then over time as personal human knowledge and concern deepen on both sides, pulled out, the dynamics of the relationship naturally take on the character of humans, based on the virtues of compassion, decency, courage and perseverance, seeking to support each other rather than gladiators seeking to trap the other in a net of ideology. It's always encouraging when "officials" become human like the rest of us and begin-- better late than never-- to appreciate the power, enjoyment and value of really listening. To work in the long term-- and particularly for Greece and Europe over the next four months-- dialogue needs to be based on a daily fierce urgency to further expand and refine our capacity for listening and talking from our hearts with unvarnished honesty. When individuals determine to continuously change in this way breakthroughs, many modest yet in cumulative effect often astonishingly profound, are as inevitable as the reality that still more challenges and crises will follow. Yet this is a believable destiny we could all embrace with hope for the future if each of us so chose.
3
Just have read an article about capital flight in greece since end januar.
27 Billion Euro.
Nearly everyone in the article agreed that this is devastating for the greek economy.
I think, Merkel and Schäuble realized, that there is no need to oppose Syriza, not on european level, Tsipras and Varoufakis will get humiliated by the distrust of their own electorate.
27 Billion Euro.
Nearly everyone in the article agreed that this is devastating for the greek economy.
I think, Merkel and Schäuble realized, that there is no need to oppose Syriza, not on european level, Tsipras and Varoufakis will get humiliated by the distrust of their own electorate.
6
Mathias Weitz
Some of this preceded the election but overall you are right that it demonstrates their essential incompetence. The first thing they should have done is impose capital controls and made them retrospective; restricted bank cash withdrawals; closed the stock exchange; announced an intended capital levy; and a host of other actions to get a grip of the situation. Instead Tsipras and Varoufakis embarked on photo op tour of Europe during the course of which they insulted everyone.
Some of this preceded the election but overall you are right that it demonstrates their essential incompetence. The first thing they should have done is impose capital controls and made them retrospective; restricted bank cash withdrawals; closed the stock exchange; announced an intended capital levy; and a host of other actions to get a grip of the situation. Instead Tsipras and Varoufakis embarked on photo op tour of Europe during the course of which they insulted everyone.
6
Thank you for clarifying the issues. The privatization of public assets is a multi-generational crime. It means future generations of Greeks will be poorer so some rich banker can rake in money from national treasures. Much like a reverse mortgage, which means parents do not pass wealth down to their children but instead pass it to a rich investor. However, it should be obvious that the creditors had good reason to blink. Clearly, Greece would be doing much better under the drachma. Iceland has done quite well by thumbing its nose at EU and the euro as they are so constituted. The danger for the creditors is the high probability that when Greece abandons the euro, it will do very nicely, thank you very much. Greece did need some better internal fiscal controls. Now it has them. What the EU did to poorer nations, and what the IMF and World Bank also do is take advantage of a distressed nation, hand it credit which makes for a short term party and long term pain, and place a nation in a hole it can never climb out of. Like a pool hustler. Just as Zuckerberg can get a huge mortgage at 1% and a poor family has to pay PMI to protect creditors , our entire system is upside down. Instead of helping people and nations who need help, the US and the EU help those who don't! And so the rich get richer and the poor get poorer. Me, I am cheering for Greece!
7
What nonsense. The privatization of Greek assets means the end of massive feather-bedding and taxpayer subsidized waste. And instead of costing the people of Greece money, the privatized assets will pay taxes on their profit. There are problems with austerity, but privatization is not one of them.
5
You are wrong Mr. Pundit. In Los Angles, citizens pay half for municipally generated electricity what people in San Diego pay to the privately run SDG&E. Electricity is electricity. And electric power generated by a municipality for the benefit of it citizens, including clean power and fair pay of employees, is obviously a better deal for consumers. Publicly owned institutions may not be ideal in every situation, but they are ideal in some. Despite our deeply indoctrinated prejudices and biases which protect private capital for the benefit of the few, private wealth is not prima facie "better" than public wealth. Greek treasures are unique and belong to all the Greek people, not to be sold in a fire sale to a wealthy individual or corporation because some corrupt politicians made mistakes in the past. We have plenty of corrupt politicians here, along with loads of self serving, corrupt oligarchs who have sold off our national assets. Who has that benefited?
7
...and since when have big business been paying their 'fair' taxes ? Would please name me one ? What a joke.
6
Mr. Krugman's love of debt based economies is well know. His endless bending of facts to fit that narrative is equally known. But, borrowing and printing "wealth" isn't wealth at all its a shimmera of wealth.
Its not that all debt is bad. Debt that produces far more than its carrying cost has always been the backbone to economic expansion. A farmer that borrows money to plant crops and harvested 10 time the value of that seed money borrowed. Debt to just produce temporary economic lift, support lifestyles, and the wealthfare state becomes like a backpack full of rocks on a steep mountain climb. Already the interest on the US structural debt (formally known as stimulus) is over 430 BILLION a year. That's alot of money for infrastructure projects that will not be built.
Greeces like the US is in a debtors prison with no way out other than through devaluation and confiscation or otherwise known as inflation. Inflation is not a zero sum game. Mr. Krugman can bellow about low cost of financing but the truth is those rates are the artificial product of money printing and central bank bond buying. Does anyone really believe Italy's 10 years bond should yield less than the US? He better hope this farces is sustainable and interest rates don't start reflecting the REAL underlying economics. I'm sure Mr. Krugman's "debt is the answer" meme will have a new bend for that disastrous and inevitable outcome.
Its not that all debt is bad. Debt that produces far more than its carrying cost has always been the backbone to economic expansion. A farmer that borrows money to plant crops and harvested 10 time the value of that seed money borrowed. Debt to just produce temporary economic lift, support lifestyles, and the wealthfare state becomes like a backpack full of rocks on a steep mountain climb. Already the interest on the US structural debt (formally known as stimulus) is over 430 BILLION a year. That's alot of money for infrastructure projects that will not be built.
Greeces like the US is in a debtors prison with no way out other than through devaluation and confiscation or otherwise known as inflation. Inflation is not a zero sum game. Mr. Krugman can bellow about low cost of financing but the truth is those rates are the artificial product of money printing and central bank bond buying. Does anyone really believe Italy's 10 years bond should yield less than the US? He better hope this farces is sustainable and interest rates don't start reflecting the REAL underlying economics. I'm sure Mr. Krugman's "debt is the answer" meme will have a new bend for that disastrous and inevitable outcome.
11
Casey K.,
All bureaucratic government employee’s payroll costs (wages, medical benefits, and retirement costs) at every level of government and other government activities (contracts, grants, Social Security payments, SSI, loan guarantees) are net consumers and destroyers of that nation’s financial and economic resources, because they do not contribute to creating any new financial resources or national wealth that might be available to be taxed to collect money to spend on various government activities.
Each nation's government at every level needs greedy industrious private businessmen (and their greedy corporations) that will create new national wealth and new non-taxpayer paid for jobs because that is almost the only wealth available to be confiscated in the form of taxation by various levels of government in order to create funds to pay for wealth-consuming government activities, except for borrowing money and obligating future tax collections from future generations to repay those loans (US Treasury Bonds) with title to privately owned national taxable wealth provided as redeemable collateral.
All bureaucratic government employee’s payroll costs (wages, medical benefits, and retirement costs) at every level of government and other government activities (contracts, grants, Social Security payments, SSI, loan guarantees) are net consumers and destroyers of that nation’s financial and economic resources, because they do not contribute to creating any new financial resources or national wealth that might be available to be taxed to collect money to spend on various government activities.
Each nation's government at every level needs greedy industrious private businessmen (and their greedy corporations) that will create new national wealth and new non-taxpayer paid for jobs because that is almost the only wealth available to be confiscated in the form of taxation by various levels of government in order to create funds to pay for wealth-consuming government activities, except for borrowing money and obligating future tax collections from future generations to repay those loans (US Treasury Bonds) with title to privately owned national taxable wealth provided as redeemable collateral.
Hmmm Casey, not sure what you mean by "Already the interest on the US structural debt (formally known as stimulus) is over 430 BILLION a year" or where you get your figures; but the actual net interest paid by the federal government on its consolidated debt was $239 billion, equaling 1.3% of GDP. By way of comparison, in President's Reagan's last year it was $152 billion, which was 2.9% of that year's GDP. Doesn't seem to me the U.S. is in a "debtor's prison" (whatever that means), or that the capital markets are in any way reluctant to fund needed infrastructure. Indeed, it looks to me like the only things standing in the way of further intrastate investment are conservatives committed to preventing such investment as the only way to vindicate their mistaken beliefs that the sky is falling...
10
REad some macro economics. A personal debt is very different than a sovereign nation's debt but you don't know the difference.
4
Greece won a few more months to avoid paying its bills, and to continue to scam the responsible European nations into believing that it really intends to pay those debt obligations.
10
The Greek Government probably has no intention of honoring its contractual obligations!
2
Professor Krugman,
Private sector owned taxable national wealth including business profits, private personal income, property taxes and personal inheritance taxes are (almost) the only source of taxable national wealth available for the federal and local US governments to confiscate and/or forcibly take a portion of that taxable wealth in the form of taxes in order for the governments to raise funds in order to pay for bureaucratic government employee payrolls, government contracts, infrastructure improvements, wars and other government activities, except for funds that the government raises by borrowing money, or actually printing and selling US treasury bonds that obligate our private businesses, our children, and our future unborn generations to work harder than ourselves to repay these bonds when they become due.
Only the private sector generates and/or creates the taxable national wealth (business profits, private personal income, property taxes, and personal inheritance taxes) that is then available for a portion to be confiscated by their governments through taxation to pay for government activities.
There are only a few additional minor sources of Government revenue such as Import duties, mineral right royalties from government lands, sales taxes, etc.
Private sector owned taxable national wealth including business profits, private personal income, property taxes and personal inheritance taxes are (almost) the only source of taxable national wealth available for the federal and local US governments to confiscate and/or forcibly take a portion of that taxable wealth in the form of taxes in order for the governments to raise funds in order to pay for bureaucratic government employee payrolls, government contracts, infrastructure improvements, wars and other government activities, except for funds that the government raises by borrowing money, or actually printing and selling US treasury bonds that obligate our private businesses, our children, and our future unborn generations to work harder than ourselves to repay these bonds when they become due.
Only the private sector generates and/or creates the taxable national wealth (business profits, private personal income, property taxes, and personal inheritance taxes) that is then available for a portion to be confiscated by their governments through taxation to pay for government activities.
There are only a few additional minor sources of Government revenue such as Import duties, mineral right royalties from government lands, sales taxes, etc.
3
That's ok. Krugman intends to pay the bill in inflated dollars, and if that doesn't work, in dollars that miraculously appear off the printing presses.
He necer has to assume responsibility for his recommendations.
He necer has to assume responsibility for his recommendations.
7
Notice you are in Houston. So NASA, a government agency, does nothing for Houston's economy in terms of creating jobs and thus creating taxable national wealth? Only the private sector does that? No private contractors working for NASA there?
8
From what Krugman says, the bankers and the financial wizards are firmly in control of Greece (and Italy, France, and other Euro countries), but they've decided to let Greece live rather than squash it like a bug. In these countries, the welfare of the banking class comes first, that of the citizens is secondary. There are investors to be paid, and money to be made, off of the misery that is Greece. The Euro Zone seems to have turned much of Europe over to the bankers and investors and allowed them to call the shots. What the national governments want is overruled by their financial overlords.
Fortunately, in the U.S. the banks have been bailed out and the financial wizards have made out like bandits in a depressed economy, but they've been unable to turn the full wrath of austerity loose on the 99 percent --- so far.
Fortunately, in the U.S. the banks have been bailed out and the financial wizards have made out like bandits in a depressed economy, but they've been unable to turn the full wrath of austerity loose on the 99 percent --- so far.
9
Professor Krugman,
For Greece, or any city, state, or nation (or family) to sustain a Republic, Democracy, Theocracy, Capitalism, Communism, Fascism, Dictatorship, Kingdom, Principality or any other form of government that they select and/or is imposed upon them, that nation still has to have their privately owned businesses continuously create sufficient new taxable national wealth (and jobs) in their nation so that there is enough available wealth in that taxing authority for the taxing authority to confiscate a portion of that new national wealth and/or profit that was created by their private sector businesses, plus additional amounts confiscated through income taxes, sales taxes, property taxes, tariffs, etc., and other taxes by the government tax collectors to pay for their government activities.
This can only be accomplished by limiting government spending to less that the government collects in taxes!
For Greece, or any city, state, or nation (or family) to sustain a Republic, Democracy, Theocracy, Capitalism, Communism, Fascism, Dictatorship, Kingdom, Principality or any other form of government that they select and/or is imposed upon them, that nation still has to have their privately owned businesses continuously create sufficient new taxable national wealth (and jobs) in their nation so that there is enough available wealth in that taxing authority for the taxing authority to confiscate a portion of that new national wealth and/or profit that was created by their private sector businesses, plus additional amounts confiscated through income taxes, sales taxes, property taxes, tariffs, etc., and other taxes by the government tax collectors to pay for their government activities.
This can only be accomplished by limiting government spending to less that the government collects in taxes!
3
Your last sentence is not true, nor an actual reflection of the real world, and you know it.
Governments can and should run deficits at certain times - e.g.,, in economic downturns, when they replace the spending that "privately owned businesses" do not do ... because business does not act always in tune with what is the public or societal good.
In 2001, dubya inherited a $5 trillion surplus. If reducing debt were so important, he could have paid some off - SSA debt would have been an easy start. Instead, he squandered it on tax cuts for the rich, and a useless set of wars. So, spare me the conservative admonitions.
Governments can and should run deficits at certain times - e.g.,, in economic downturns, when they replace the spending that "privately owned businesses" do not do ... because business does not act always in tune with what is the public or societal good.
In 2001, dubya inherited a $5 trillion surplus. If reducing debt were so important, he could have paid some off - SSA debt would have been an easy start. Instead, he squandered it on tax cuts for the rich, and a useless set of wars. So, spare me the conservative admonitions.
9
Gerald
Houston
" for the taxing authority to confiscate a portion of that new national wealth"
Sorry to spoil your dreams Gerald. In the 63 years from 1870 to 1932 (a period on the whole of colossal economic expansion in the US...agreed?) real GDP per capita increased about 2.5 times. From 1933 (which no doubt in your febrile imagination is the year when the vast communistic FDR inspired governmental confiscations began) to the present day, real GDP per capita has risen about 11 times. Apparently, confiscation seems to have been remarkably effective at making everyone much richer.
Houston
" for the taxing authority to confiscate a portion of that new national wealth"
Sorry to spoil your dreams Gerald. In the 63 years from 1870 to 1932 (a period on the whole of colossal economic expansion in the US...agreed?) real GDP per capita increased about 2.5 times. From 1933 (which no doubt in your febrile imagination is the year when the vast communistic FDR inspired governmental confiscations began) to the present day, real GDP per capita has risen about 11 times. Apparently, confiscation seems to have been remarkably effective at making everyone much richer.
7
Or they find new revenues, like more taxes from the top. Please, stop the nonsense of equating taxes with theft or confiscation. Taxes are just the same as paying your country club dues, you don't pay you don't play.
People like you seem to have bought into the notion R.Reagan got so many to start believing, the notion of the free lunch.
People like you seem to have bought into the notion R.Reagan got so many to start believing, the notion of the free lunch.
9
Everything we have been reading about Greece, shows a perverse culture of corruption. A bureaucracy that is overloaded with people who do nothing but demand permits for just about everything. Getting a phone is a major exercise in futility.
A recent article in the NYT was about the culture of tax evasion, from the prime minister on down. Greeks believe taxes are stealing form them, and a significant amount of private wealth is sent to other countries. Greece has to clean up its economic system, allow businesses to start without oppressive demands for documents, and see that the wealthy pay their fair share of taxes to support the country.
If not, they will default on the current loans, and that will be a disaster, for them. The EU will survive, but Greece will become a third world country.
A recent article in the NYT was about the culture of tax evasion, from the prime minister on down. Greeks believe taxes are stealing form them, and a significant amount of private wealth is sent to other countries. Greece has to clean up its economic system, allow businesses to start without oppressive demands for documents, and see that the wealthy pay their fair share of taxes to support the country.
If not, they will default on the current loans, and that will be a disaster, for them. The EU will survive, but Greece will become a third world country.
8
The real story here is that there were two choices:
1) Those stupid enough to lend Greece money smash the Greek economy and don't get their money back.
2) Those stupid enough to lend Greece money just don't get it back.
Effectively what has happened but not been announced is that the Eurozone countries have written off the hundreds of billions they poured into Greece. Which is fair enough because it should have been categorized as humanitarian aid rather than a 'fiscally sound loan'.
The sad thing is that the money ultimately comes from the pockets of EU taxpayers, many of whom still believe that they are not part of a transfer union.
1) Those stupid enough to lend Greece money smash the Greek economy and don't get their money back.
2) Those stupid enough to lend Greece money just don't get it back.
Effectively what has happened but not been announced is that the Eurozone countries have written off the hundreds of billions they poured into Greece. Which is fair enough because it should have been categorized as humanitarian aid rather than a 'fiscally sound loan'.
The sad thing is that the money ultimately comes from the pockets of EU taxpayers, many of whom still believe that they are not part of a transfer union.
4
One problem for your analysis:
The economy of Greece is already shattered. It's a fourth-world economy bent on becoming a fifth-world one.
The economy of Greece is already shattered. It's a fourth-world economy bent on becoming a fifth-world one.
From 2008 through 2011 Iceland suffered perhaps the worst of the western nations subject to the Great Recession. And Iceland's problem, like Greece's, was primarily rooted in Germany.
But Iceland, Paul Krugman described it, "did an Iceland."
Maybe no nation in history had so great a debt per capita, and then shed it in such a short period of time. Iceland has a population of only over 300,000 and has had what appears to be the fastest recovery on record.
Since 2011 GDP has only gone up and salaries are rising as national debt falls and government pays off billions in loans from the IMF.
Germany is Iceland's largest creditor; as of 2010 German banks had over €20 billion owed them by Iceland But Iceland did exactly as Paul Krugman has recommended other nations do in that crisis:they let the banks collapse; devalued the currency (which Greece can't do); introduced capital controls; and avoided as much as possible paying debt as dictated.
In nearby Ireland the public took on the financial institutions' debt; Iceland didn't. And as much as possible, Greece should follow Iceland's example, not Ireland's. And they are. We taxpayers of the world should applaud them. Bank and corporate debt should be their problem, not that of the public.
.
But Iceland, Paul Krugman described it, "did an Iceland."
Maybe no nation in history had so great a debt per capita, and then shed it in such a short period of time. Iceland has a population of only over 300,000 and has had what appears to be the fastest recovery on record.
Since 2011 GDP has only gone up and salaries are rising as national debt falls and government pays off billions in loans from the IMF.
Germany is Iceland's largest creditor; as of 2010 German banks had over €20 billion owed them by Iceland But Iceland did exactly as Paul Krugman has recommended other nations do in that crisis:they let the banks collapse; devalued the currency (which Greece can't do); introduced capital controls; and avoided as much as possible paying debt as dictated.
In nearby Ireland the public took on the financial institutions' debt; Iceland didn't. And as much as possible, Greece should follow Iceland's example, not Ireland's. And they are. We taxpayers of the world should applaud them. Bank and corporate debt should be their problem, not that of the public.
.
38
Pain now; pain later.
Krugman has been arguing to kick the can down the road for years/ That's the Keynesian way of doing business.
And each time the can gets kicked, a little of it scuffs off on the pavement. There soon will be no can left for Greece to move on down the pike.
Krugman has been arguing to kick the can down the road for years/ That's the Keynesian way of doing business.
And each time the can gets kicked, a little of it scuffs off on the pavement. There soon will be no can left for Greece to move on down the pike.
5
Krugman thinks he has the story just right. Neither pro business nor leftist. The creditors are villainized along with the left and their unreal expectations of socialist spending. The Greeks have arranged to continue to pay off the debt but with less punishing austerity placed on them. The problem with Krugman's analysis is that it only fits his configuration. No Procustean Bed here. Krugman has repeatedly stated he hated the Euro and the austerity that Greece's creditors have placed upon them. But Greece's breakout under the weight of austerity that wrecks the creditors plans for their type of recovery which Krugman has constantly railed against is unrealistic in this column.
4
..yet another who missed this truth: http://www.spiegel.de/international/europe/greek-debt-crisis-how-goldman...
In ancient Mesopotamia a lender had a similar problem but more flexibility to work with. If the farmer you lent grain or stock to was unable to repay it would do little good to take what little was left, the debtor would starve and die. Nor would it do to take the land and put the debtor out as is today's foreclosure process.
But 45 centuries ago you could take the person of the debtor, put them under the lash and on short rations and force them to work not only their land but yours.
There seems to be a great deal of similarity between debt peonage and modern day austerity. The Greeks have been chained to the wheel of their debt and forced on short rations so that the debtors can feel sated in their righteous anger.
I'm wondering why it is that Hammurabi showed far more humanity with far greater grace then we see today in these supposedly enlightened leaders?
But 45 centuries ago you could take the person of the debtor, put them under the lash and on short rations and force them to work not only their land but yours.
There seems to be a great deal of similarity between debt peonage and modern day austerity. The Greeks have been chained to the wheel of their debt and forced on short rations so that the debtors can feel sated in their righteous anger.
I'm wondering why it is that Hammurabi showed far more humanity with far greater grace then we see today in these supposedly enlightened leaders?
19
Greece has begun to break the chains of the failed conservative economic policies that were imposed on them and they are beginning the long walk towards prosperity.
5
When most of the Greek citizens are supported by Greek government payrolls or Greek Government contracts, then that is a liberal or a socialist/communist form of Government!
2
Ah, indeed the Greeks may be breaking the chains...
But they should be well aware that the life without chains places it upon their own shoulders for the solution and the chains that THAT solution may place on them with no real chance of their ever being removed.
But they should be well aware that the life without chains places it upon their own shoulders for the solution and the chains that THAT solution may place on them with no real chance of their ever being removed.
My impression is that there is enormous opportunity for structural reform in Greece, beginning with addressing the rampant tax evasion, but extending to eliminating bureaucracy, red tape, and regulation that lock in success for some and lock it out for others. Its those inefficiencies that keep Greece the poor step-child of Europe. One can hope that Syriza, outsiders less beholden to special interests and the rich and powerful than previous governments, can actually make progress on these structural reforms. The would be a long-term upside to the pain. We'll see if it happens.
3
Syriza is beholden to its own set of masters, and I doubt seriously that they will be any more forgiving than the previous ones.
2
Yes. I do think that the left (including me) does miss a point or two sometimes: Greece has a culture of tax evasion that has damaged the country terribly. I think Germany is right that that cultural trait needs to be brutally broken. Supervision probably is required.
I suspect that Syriza agrees under it all, but at this point they just had to say not to get attention.
I suspect that Syriza agrees under it all, but at this point they just had to say not to get attention.
2
Comments on this column are fewer than usual, reflecting fatigue with the issue of the Greek debt. Some commentators miss the point of Paul Krugman's interest in the Greek story, which for him is an object-lesson in the wrongheadedness of austerity. The situation of Europe is a mirror held up to U.S. legislators showing what would happen if we went down the belt-tightening road that the Tea Party, and fiscal conservatives generally, would like us to take, and the Greeks are heroic for finally standing up to the threats of their creditors. In his eyes they are models for Americans who should resist the austerians at home.
I expect that the present "temporary" arrangement in Europe will be followed by another and another after that, as a politically expedient way of getting the respective voting publics of Greece and Germany to gradually accept the fact that neither the debtors nor the creditors are going to get everything they want. The Greeks will have to mend some of their spendthrift ways, and their creditors will have to accept less than 100% of what they are owed - probably FAR less. When you make foolish loans, you deserve to get burned.
I expect that the present "temporary" arrangement in Europe will be followed by another and another after that, as a politically expedient way of getting the respective voting publics of Greece and Germany to gradually accept the fact that neither the debtors nor the creditors are going to get everything they want. The Greeks will have to mend some of their spendthrift ways, and their creditors will have to accept less than 100% of what they are owed - probably FAR less. When you make foolish loans, you deserve to get burned.
8
Robert Crosman,
Do you believe that there is no limit to the amount of taxable wealth that the public sector can confiscate from the wealth-producing private sector and also borrow from industrious individuals in the BRIC nations in order to pay for unlimited wealth-consuming Greek and US federal government activities?
Federal government economic capability and resources to pay for their government activities are only created by confiscating wealth from the wealth-producing individuals in the USA via taxation, while government spending does not create any new taxable national wealth in the USA.
Do you believe that there is no limit to the amount of taxable wealth that the public sector can confiscate from the wealth-producing private sector and also borrow from industrious individuals in the BRIC nations in order to pay for unlimited wealth-consuming Greek and US federal government activities?
Federal government economic capability and resources to pay for their government activities are only created by confiscating wealth from the wealth-producing individuals in the USA via taxation, while government spending does not create any new taxable national wealth in the USA.
3
Even if Krugman saw value in austerity, he would be opposed.
The idea was not his. And such is one of the major failings that comes from Krugman's arrogance.
The idea was not his. And such is one of the major failings that comes from Krugman's arrogance.
I completely understand and agree with the austerity argument but Krugman keeps missing the other side of the equation. Greece is a profoundly corrupt country. People do not pay their taxes, unions featherbed (particularly in government jobs) beyond anything we've seen in the USA for 50 years and pensions are out of synch with wages and taxes. Allowing them another reprieve, not from austerity but from re-structuring their finances, dooms them to either perpetual 25 percent unemployment or endless inflation and devaluations inconsistent with being in the Eurozone. It's really that simple. The new Greek government is just conning the rest of Europe into yet another extension of support (read subsidy). If everyone were serious here, we'd be seeing debt collection targets, productivity targets, cutting future pensions and on and on. If you freed up the Greek labor market, changed the pension scheme to be reality based and collected the taxes that are due the whole mess would be permanently solved. Sooner or later the sclerotic labor markets in France and Italy will end them in the same trap. State sponsored unproductive use of labor and capital will kill growth every single time.
7
Krugman approves the former, but fails to open his eyes to the inevitability of the latter.
3
"Notably, the European Commission has decided not to fine France and Italy for exceeding their deficit targets."
That's nice. But how about fining Germany: for undercutting the agreed-upon deficit target of 2.0% by increasing productivity & wages both by 1.5%, resulting in a net deficit of 0%? and for undercutting the agreed-upon inflation target by carrying a surpus of 7.5%?
That's nice. But how about fining Germany: for undercutting the agreed-upon deficit target of 2.0% by increasing productivity & wages both by 1.5%, resulting in a net deficit of 0%? and for undercutting the agreed-upon inflation target by carrying a surpus of 7.5%?
6
Ah...The successful should not be so successful argument ! !
I knew it would surface sometime.
And, it is from this sort of argument that mediocrity and/or incompetence are allowed to thrive.
I knew it would surface sometime.
And, it is from this sort of argument that mediocrity and/or incompetence are allowed to thrive.
3
On the left we have a big problem. We are reality-based and that's a tremendous asset, but it is also our achilles heel.
Why did a supposedly leftist regime set a 1.5% primary *surplus* as the starting point, the first ask, in the negotiation? There's an old saying that in a negotiation, the first party to state their price loses -- and that is the case here. Didn't the left learn that, as in the U.S., dealing with a depression with half-measures may avert the depression but leaves a persistent recession in place, THAT YOU NOW OWN in the minds of the electorate?!
The best the new government had to offer is the status quo, with respect to the primary surplus? Won't that result in Greece continuing to muddle along with disastrously high unemployment and economic distress that will take years if not decades to overcome? How long will the Greek electorate go along with that, before deciding the poor economy is now owned by Syriza?
Syriza needed to exit the Euro, nationalize its banks, tax its rich, and form a new and competitive Emerging Eurozone that becomes more and more tempting for Spain and Portugal to join. Meanwhile tell the creditors that the opening bid in terms of debt repayment is ZERO, and we can negotiate trade agreements from there in exchange for partial repayment of the debt in new Drachmas, with a substantial haircut. Or get nothing at all from us, except the spectre of our future success.
THAT, and only that, would have gotten Merkel's attention.
Why did a supposedly leftist regime set a 1.5% primary *surplus* as the starting point, the first ask, in the negotiation? There's an old saying that in a negotiation, the first party to state their price loses -- and that is the case here. Didn't the left learn that, as in the U.S., dealing with a depression with half-measures may avert the depression but leaves a persistent recession in place, THAT YOU NOW OWN in the minds of the electorate?!
The best the new government had to offer is the status quo, with respect to the primary surplus? Won't that result in Greece continuing to muddle along with disastrously high unemployment and economic distress that will take years if not decades to overcome? How long will the Greek electorate go along with that, before deciding the poor economy is now owned by Syriza?
Syriza needed to exit the Euro, nationalize its banks, tax its rich, and form a new and competitive Emerging Eurozone that becomes more and more tempting for Spain and Portugal to join. Meanwhile tell the creditors that the opening bid in terms of debt repayment is ZERO, and we can negotiate trade agreements from there in exchange for partial repayment of the debt in new Drachmas, with a substantial haircut. Or get nothing at all from us, except the spectre of our future success.
THAT, and only that, would have gotten Merkel's attention.
3
The possibility of exiting the Euro WAS on the minds of the ECB and the leaders of the Euro nations. The continuation of the European Union dream is under question here. The major problem in the exit of Greece is probably the ensuing questioning among the other large-Euro debt nations. Should any emulate the huge reduction of Greek debt by exiting the Euro union and essentially canceling its debt through a hugely devalued national currency? How simple to do an Argentina, paying what, 20% back on its debt. Those nations, the whole EU, and even the US does not want the breakup of the Euro group. The EU nations have already ceded Federal Reserve type controls over member nation banks. reducing future Greek type problems, making Greece's problems an anomaly.
1
The idea is to solve Greece's problems, not to get Angela Merkel's attention.
No wonder the leftist argument has serious problems. They have no idea what the problem really is ! ! !
No wonder the leftist argument has serious problems. They have no idea what the problem really is ! ! !
3
In the bad old days before the Euro, governments would inflate their way out debt. Now with the Euro, that option is no longer available. Countries have to pay their debts with a currency that retains its value.
If Greece wants to leave the Euro or default on its debt, that should be of no concern to the rest of Europe. However three to four years ago, Greek sovereign debt held at European debt threatened to make these banks insolvent. Four years later these banks can afford to write off what has not been already written off of Greek's sovereign debt.
The new Syriza government, not realizing the banking system can be no longer threatened by insolvencies, over played the Greek hand. In addition, no other European government thinks their tax payers should bail out the Greeks. That is the story that is not discussed by Mr. Krugman.
If Greece wants to leave the Euro or default on its debt, that should be of no concern to the rest of Europe. However three to four years ago, Greek sovereign debt held at European debt threatened to make these banks insolvent. Four years later these banks can afford to write off what has not been already written off of Greek's sovereign debt.
The new Syriza government, not realizing the banking system can be no longer threatened by insolvencies, over played the Greek hand. In addition, no other European government thinks their tax payers should bail out the Greeks. That is the story that is not discussed by Mr. Krugman.
2
What has actually happened is that about 80% of the debt has been taken over by Eurogroup governments, the ECB and IMF. Thus the regular banking system has been isolated from contagion. The danger of contagion was over stated three years ago but it's non existent now. The Greek have already received considerable debt relief (they're paying about 0.5% interest on most of it and many maturities have been extended to 30 plus years) so they're not going any more. It comes down to the Greeks delivering on their various promises. Personally I don't think they will but I could be wrong since they are desperate to avoid losing the Euro (I don't blame them although Krugman thinks it desirable). Has Tsipras got the stones to grab his moment and force through the structural reforms necessary to get Greece out of this mess. The omens don't look good.
4
"Now with the Euro, that option is no longer available. Countries have to pay their debts with a currency that retains its value."
Of course they could inflate the Euro but Germany (and others) will probably refuse to go on that ride.
Of course they could inflate the Euro but Germany (and others) will probably refuse to go on that ride.
1
Jp
Michigan
The Euro and thus Greece, Germany and all the rest have already experienced a 25% devaluation against the dollar in the last three years (more if you want to extend the timeframe a year or two). So why hasn't the devaluation magic already worked for Greece? In another column the other day Krugman was suggesting a 30% devaluation (using his patented Iceland unit of measurement ha ha) was the magic wand and it would work quickly.
Michigan
The Euro and thus Greece, Germany and all the rest have already experienced a 25% devaluation against the dollar in the last three years (more if you want to extend the timeframe a year or two). So why hasn't the devaluation magic already worked for Greece? In another column the other day Krugman was suggesting a 30% devaluation (using his patented Iceland unit of measurement ha ha) was the magic wand and it would work quickly.
2
It takes an economist, who is well within the mainstream of Modern Economic Thought, like Krugman, to point out the obvious fact that Greece, and in fact Europe, won in this stand off by the bankers with the so called leftist government of Greece.
The status of the Primary Surplus from Greek Bond Sales was exactly the point at stake in the dispute, and it was settled to the advantage of those who recognize that, unless Greece can use these funds to facilitate wage increases in order to increase demand and stimulate growth, Greece is doomed to a condition of permanent depression.
However; what must occur is that the debtor nations of Europe, which are almost everyone, not just the Mediterranean Periphery, must be able to rebalance current accounts in order to preserve the EU from eventual disintegration. Under the present system of currency union without political union this cannot happen, and what we have in Europe is a convergence to zero as a result.
As far as I am concerned, I have been waiting to capitalize upon the intransigence of the Germans in order to capitalize upon a European disaster, and the ensuing flight into US treasuries which would undoubtedly ensue. The dollar would soar, and interest rates would plunge. A great scheme for me, if only it weren't for those darned Greek Lefties, who seem to understand Economics.
The status of the Primary Surplus from Greek Bond Sales was exactly the point at stake in the dispute, and it was settled to the advantage of those who recognize that, unless Greece can use these funds to facilitate wage increases in order to increase demand and stimulate growth, Greece is doomed to a condition of permanent depression.
However; what must occur is that the debtor nations of Europe, which are almost everyone, not just the Mediterranean Periphery, must be able to rebalance current accounts in order to preserve the EU from eventual disintegration. Under the present system of currency union without political union this cannot happen, and what we have in Europe is a convergence to zero as a result.
As far as I am concerned, I have been waiting to capitalize upon the intransigence of the Germans in order to capitalize upon a European disaster, and the ensuing flight into US treasuries which would undoubtedly ensue. The dollar would soar, and interest rates would plunge. A great scheme for me, if only it weren't for those darned Greek Lefties, who seem to understand Economics.
13
Excellently stated ... particularly, the last paragraph, where I would add that the US dollar would then be practically locked-in as the world's reserve currency for the next century.
1
Too much economic news is treated as if on the sports page, and this and the commentary discussed is a good example. I would tend to agree that Greece shouild get some relief on its budget short of a deficit permit deficit, the prerrequisite for this is that Greece effectively keeps going on the basic reforms which will change the economy (and society) so it will get out of the hole into which it has dug itself. We can talk about "democracy" in Greece, but the other Eurozone countries are demoracies too, and their electorates are simply not prepared to lend more money to Greece. Theoretically Greece could get money from Moscow, Beijing or elsewhere but this is no solution to the Greek structural problems which, unless resolved, will simply recur once the Rusiain funding runs out. Mr. Krugman should be encouraging Greece to get on with the hard work it needs to do and not try to use this extreme special case to push his more general agenda, which btw is not unreasonable, for the better organized and managed Eurozone countries to loosen up, which of course will probably help Greece too if it gets is act in order, which is by no means assured.
Philip D. Sherman,
If your family (or your nation) makes widgets, then your family must make and then sell enough widgets to others outside of your family so that your family can accumulate enough profit and wealth to enable them to buy other things that your family needs from others that produce those other things.
Then hopefully you will then have enough left over to accumulate more wealth for any future emergencies.
Or you can live on credit cards until the lenders of real wealth stop increasing your credit limit.
Or a nation can print and sell "Sovereign Treasury Bonds" and spend the proceeds on wealth consuming government activities that do not create any new taxable wealth.
Nations like Greece can obligate their future unborn generations to repay their national debts (Sovereign Treasury Bonds) after current citizens have their federal government spend all of that "borrowed money" on the current citizens.
If your family (or your nation) makes widgets, then your family must make and then sell enough widgets to others outside of your family so that your family can accumulate enough profit and wealth to enable them to buy other things that your family needs from others that produce those other things.
Then hopefully you will then have enough left over to accumulate more wealth for any future emergencies.
Or you can live on credit cards until the lenders of real wealth stop increasing your credit limit.
Or a nation can print and sell "Sovereign Treasury Bonds" and spend the proceeds on wealth consuming government activities that do not create any new taxable wealth.
Nations like Greece can obligate their future unborn generations to repay their national debts (Sovereign Treasury Bonds) after current citizens have their federal government spend all of that "borrowed money" on the current citizens.
1
I suppose the Greek situation is important if Krugman thinks it is. I'm just tired of hearing about it. A more important national problem is the intransigence and economic ignorance of the Republicans and their embarrassment of an ally, the Tea Party. They try to cut the national treasury to the point where it is running on fumes. Many of them are more than willing to forfeit payment of the national debt in defiance of the constitutional mandate that the debt not be questioned. They happily bring the government to the point of closure or beyond. We have other more important issues to worry about than the problems confronting Greece.
2
Austerity IS Synonymous With Plutocracy
When he ran for the presidency, Hollande, the present French president declared: "My enemy is High finance". However, he initially behaved just the opposite, finally choosing a hyper wealthy 30 something investment banker as finance minister.
Under pressure from polls, France finally declared that it would run a deficit fifty percent higher than the limit imposed by the law instituting the Euro, and this for two years in a row. Solving the Greek problem was then easy, but the plutophiles insisted to make a show.
(The greater demand imposed by France, qualitatively evaluated, considering the relative sizes of economies and deficits: it is as if France was going to run (15)x(1.5) above the limit, when Greece was looking only for 2x(1.5) relief. So the French violation is much greater… and was agreed to).
Plutocrats are those who use power, generally through the money they command, to achieve satanic aims. Generally self–aggrandizement by commanding more is a primary obsession.
Central to this strategy is the tactic of making money ever more expensive, and reserved to the hyper wealthy. The less money We The People have, the richer plutocrats have.
Instead, to operate an economy effectively, one needs enough money to conduct all and any transaction that benefits the society at large.
So surrendering to the austerity is not just a madness, it is a system to submit societies to the plutocratic madness, a much worse prospect.
When he ran for the presidency, Hollande, the present French president declared: "My enemy is High finance". However, he initially behaved just the opposite, finally choosing a hyper wealthy 30 something investment banker as finance minister.
Under pressure from polls, France finally declared that it would run a deficit fifty percent higher than the limit imposed by the law instituting the Euro, and this for two years in a row. Solving the Greek problem was then easy, but the plutophiles insisted to make a show.
(The greater demand imposed by France, qualitatively evaluated, considering the relative sizes of economies and deficits: it is as if France was going to run (15)x(1.5) above the limit, when Greece was looking only for 2x(1.5) relief. So the French violation is much greater… and was agreed to).
Plutocrats are those who use power, generally through the money they command, to achieve satanic aims. Generally self–aggrandizement by commanding more is a primary obsession.
Central to this strategy is the tactic of making money ever more expensive, and reserved to the hyper wealthy. The less money We The People have, the richer plutocrats have.
Instead, to operate an economy effectively, one needs enough money to conduct all and any transaction that benefits the society at large.
So surrendering to the austerity is not just a madness, it is a system to submit societies to the plutocratic madness, a much worse prospect.
1
Austerity is not spending more than your income!
Every federal government economic capability and resources are (only) created by confiscating taxable wealth from the greedy wealth-producing individuals in their their nation via taxation, while government spending does not create any new taxable national wealth in their nation.
Greece is a perfect example of the results of Deficit Government spending!
Every federal government economic capability and resources are (only) created by confiscating taxable wealth from the greedy wealth-producing individuals in their their nation via taxation, while government spending does not create any new taxable national wealth in their nation.
Greece is a perfect example of the results of Deficit Government spending!
3
Greece has two sources of 'tax evasion' that relate to its two biggest economic sectors, tourism and shipping. First are the small households that rent rooms in their homes in the tourist locations (islands and the mainland). It is very hard for the central tax agency to keep track of such small businesses, many of whom under-report income. Second are the large shipping magnates who keep funds in international accounts. Depending on which source one reads, Greece has the largest or second largest shipping fleet in the world and these companies have financial transactions everywhere. Much of the lost tax revenue comes from the shipping industry.
This is part of a much larger problem of corporations and businesses that are international shifting funds to places where the taxes are lower or even non-existent. The Eurozone countries need to face up to the fact that many of their companies avoid paying taxes to their home countries. Rather than pick on Greece or Spain or Portugal or even Italy, the EU would do better working out mechanisms to ensure that companies pay their fair share of taxes and not play off one country against another. Better yet, maybe this could lead to GATT-like agreement that standardized tax rates for all international trade, something like a value-added tax collected at source? Then, it would be impossible for companies to run continual tax avoidance schemes and countries like Greece would have adequate income to cover their services.
This is part of a much larger problem of corporations and businesses that are international shifting funds to places where the taxes are lower or even non-existent. The Eurozone countries need to face up to the fact that many of their companies avoid paying taxes to their home countries. Rather than pick on Greece or Spain or Portugal or even Italy, the EU would do better working out mechanisms to ensure that companies pay their fair share of taxes and not play off one country against another. Better yet, maybe this could lead to GATT-like agreement that standardized tax rates for all international trade, something like a value-added tax collected at source? Then, it would be impossible for companies to run continual tax avoidance schemes and countries like Greece would have adequate income to cover their services.
1
best known greek shipper = aristotle onassis
1
It seems the only long term way for the EU to survive with Greece, Spain, etc. as member States would be for the EU to somehow change to the US system.
The US has supported States, mainly in the old Confederate South, that haven't even tried to maintain a primary surplus for decades. We do the reverse of the EU. Rather than banks Lending money to them, we effectively take primary surplus from States who are the economic equivalent of Germany (generally the Northeast and Pacific States) through excess Federal taxes and Give it to them.
Not only do they not have to give it back, they fairly constantly complain their tax share is too high.
Whether it is better to have a US system, with essentially permanent dependent States, or one without them is the real question. As one who has had to suffer the outrageous political/ideological rhetoric that they sometimes spew out, I am often conflicted myself.
The US has supported States, mainly in the old Confederate South, that haven't even tried to maintain a primary surplus for decades. We do the reverse of the EU. Rather than banks Lending money to them, we effectively take primary surplus from States who are the economic equivalent of Germany (generally the Northeast and Pacific States) through excess Federal taxes and Give it to them.
Not only do they not have to give it back, they fairly constantly complain their tax share is too high.
Whether it is better to have a US system, with essentially permanent dependent States, or one without them is the real question. As one who has had to suffer the outrageous political/ideological rhetoric that they sometimes spew out, I am often conflicted myself.
7
Excellent comment!
I'd vote "without them"
I'd vote "without them"
1
The French agree with Krugman. The French paper Le Monde had news articles with French economics and finance ministers and they feel having the breathing room to run the 3-5 percent deficits that they are running through 2017 will give them at least 1 percent plus growth. Brussels and Berlin are too strict on the deficit orthodoxy is the clear message. On the other hand, the French government appears to be "trading" structural reform, much of it probably needed, for "forebearance" from Brussels. Very interesting politics.
Fundamentally, any economic area needs to have the flexibility the U.S. had in the wake of the immediate financial crisis to run 10 percent or so deficits. Big crises require big numbers to be moved. So the European 3 percent limit is a roof too low for the real world.
Fundamentally, any economic area needs to have the flexibility the U.S. had in the wake of the immediate financial crisis to run 10 percent or so deficits. Big crises require big numbers to be moved. So the European 3 percent limit is a roof too low for the real world.
4
Having a left-leaning publication printing interviews with Socialist Party government ministers does not mean that "The French" agree with Krugman.
It's good to see that Greece is doing better. It seems that everyone is making Greece the goat. The rich don't pay taxes and the working class doesn't work enough is the mantra. Does that sound familiar here in the US?
As usual, Goldman Sachs; the folks that engineered the costly developments for not only the Greeks - but the whole world. They started the practice of bundling bad loans which devastated the planet.
They also helped Greece hide their debt, Enron style when Greece's investment in revitalizing the tourist industry and other projects became overwhelmingly expensive. After showing Greece how to borrow more through this accounting trick, Goldman Sachs started betting against Greece's ability to pay back their bonds.
Can you imagine what that did to the interest rates?
As usual, Goldman Sachs; the folks that engineered the costly developments for not only the Greeks - but the whole world. They started the practice of bundling bad loans which devastated the planet.
They also helped Greece hide their debt, Enron style when Greece's investment in revitalizing the tourist industry and other projects became overwhelmingly expensive. After showing Greece how to borrow more through this accounting trick, Goldman Sachs started betting against Greece's ability to pay back their bonds.
Can you imagine what that did to the interest rates?
4
Correction:
"As usual, Goldman Sachs; the folks that engineered the costly developments for not only the Greeks - but the whole world.
should read:
As usual, Goldman Sachs; the folks that engineered the costly developments for not only the Greeks - but the whole world; was not mentioned or blamed for their role in this devastating bubble burst.
"As usual, Goldman Sachs; the folks that engineered the costly developments for not only the Greeks - but the whole world.
should read:
As usual, Goldman Sachs; the folks that engineered the costly developments for not only the Greeks - but the whole world; was not mentioned or blamed for their role in this devastating bubble burst.
4
"It seems that everyone is making Greece the goat. The rich don't pay taxes and the working class doesn't work enough is the mantra. Does that sound familiar here in the US?"
So the rich are unfairly targeted?
So the rich are unfairly targeted?
Amazing how many Americans commenting here use the first person plural in prescribing for Greece.
1
Actually what matters most about government spending and revenues is what is the government investing in by spending money, who is benefiting and who is footing the bill. A major part of the Greek debt is military spending with Greece being #7 in military spending per capita in the world. Syriza can easily cut some of that spending including, ironically on arms bought from Germany which are useless for Greece. Syriza can also continue to do things like they did the first week when they rehired 600 cleaning ladies and paid for it by cutting payments to high-priced consultants. No doubt there are plenty of those as part of the corruption of Crony capitalism for the interests of Goldman Sachs and the other banksters.
On the revenue side a tally of Greek plutocrats holdings of non-paid taxes in Swiss Banks is $50 Billion! Ie enough to pay off all Greek debts!
If even 10% of that money is clawed back for the public out of private plutocrat's hands it will go a long way towards Greek government revenues.
An interesting development just across the water from Greece is the recent deal of Cyprus with Russia. The other option neglected by the Corporate pundits is a Greek alliance with the BRICS who are busily shoring up an alternative financing/World Bank system to the US Corporate system.
They are even developing their own SWIFT large scale money moving software system used now for international banking using the dollar.
The US financial empire will crumble of its own corruption
On the revenue side a tally of Greek plutocrats holdings of non-paid taxes in Swiss Banks is $50 Billion! Ie enough to pay off all Greek debts!
If even 10% of that money is clawed back for the public out of private plutocrat's hands it will go a long way towards Greek government revenues.
An interesting development just across the water from Greece is the recent deal of Cyprus with Russia. The other option neglected by the Corporate pundits is a Greek alliance with the BRICS who are busily shoring up an alternative financing/World Bank system to the US Corporate system.
They are even developing their own SWIFT large scale money moving software system used now for international banking using the dollar.
The US financial empire will crumble of its own corruption
3
Austerity is a nom de plume for "Bank Bailout" to be continued!
1
It's only about granting a bit mire time, not money!!!
1
I've read much about this agreement, but only Krugman appraises this as a Greek victory. While it puts off any reckoning until later, the Syriza party will have to back off most of the promises it made to get elected. For the government it's a definite retreat.
4
The Financial Times has not portrayed this as a defeat for Greece, and agrees that mostly the parties have kicked the can down the road.
Actually, it would take some amazingly bad negotiating to lose once you've established a primary surplus. That means you don't need your creditors. Greece might have had to do some fast institutional footwork if it was forced out of the Eurozone, but countries have left monetary unions before and will do so again.
The Eurozone, however, has been revealed as little more than a graceless heap of ineffective institutions. The list of the institutional reforms it requires -- starting with arrangements for the orderly settlement of debts by too heavily indebted sovereigns -- is so long that one has to wonder whether liquidation for the Eurozone itself might be the easier path.
The Eurozone, however, has been revealed as little more than a graceless heap of ineffective institutions. The list of the institutional reforms it requires -- starting with arrangements for the orderly settlement of debts by too heavily indebted sovereigns -- is so long that one has to wonder whether liquidation for the Eurozone itself might be the easier path.
Dear Mr. Krugman,
So, like our "government", Greece and the E.U. have NO problem that can't be, like the proverbial can, "kicked down the road"?
Maybe the whole world should just "sequester".
What's Greek for "Is this any way to run a country"?
See you in a few months as the debtors and creditors are not going away soon.
So, like our "government", Greece and the E.U. have NO problem that can't be, like the proverbial can, "kicked down the road"?
Maybe the whole world should just "sequester".
What's Greek for "Is this any way to run a country"?
See you in a few months as the debtors and creditors are not going away soon.
3
You have to love this guy. I'm now calculating my "notational debt", expecting to have a bonanza of extra cash. Oh, wait a minute, I'm expected to pay all my debt.........
Why is it that when a government borrows money, all the rules that apply to individuals suddenly go out the window. Debt is bad for individuals and it's bad for governments. That's just the way it is. Always has been, always will be.
Why is it that when a government borrows money, all the rules that apply to individuals suddenly go out the window. Debt is bad for individuals and it's bad for governments. That's just the way it is. Always has been, always will be.
3
I am growing weary of the childish whining and hypocrisy of the "debt Nazis", who cynically act like debt is a one-sided contract and call for pain to be inflicted only on debtors, with no requirement for creditors to accept any responsibility. I say cynically because this bit of sophistry completely ignores the reality of RISK, that all these critics happily acknowledge when it comes to defending tax preferences for investors (creditors) who supposedly take RISK.
Yes, the governments of Greece made bad economic policy, law enforcement, and other choices. But the banks that offered and priced the debt - knowingly or unknowingly - failed to add enough of a premium to the rate to cover the actual risk of default, and the investors failed to heed the ancient "caveat of emptor" when evaluating their decision to purchase that debt.
In our "free market" capitalist system, "you pays your money and takes your chances". When debts go bad, certainly the defaulters are accountable and must properly be made to make restitution WITHIN THE BOUNDS OF REASON, but the investors must also pay a price for having failed in their responsibility to properly evaluate and understand the risks they are taking. If this is no longer true, the very first step that should be taken is the complete elimination of reduced tax rates on capital gains. I know that all you debt scolds all agree.
Yes, the governments of Greece made bad economic policy, law enforcement, and other choices. But the banks that offered and priced the debt - knowingly or unknowingly - failed to add enough of a premium to the rate to cover the actual risk of default, and the investors failed to heed the ancient "caveat of emptor" when evaluating their decision to purchase that debt.
In our "free market" capitalist system, "you pays your money and takes your chances". When debts go bad, certainly the defaulters are accountable and must properly be made to make restitution WITHIN THE BOUNDS OF REASON, but the investors must also pay a price for having failed in their responsibility to properly evaluate and understand the risks they are taking. If this is no longer true, the very first step that should be taken is the complete elimination of reduced tax rates on capital gains. I know that all you debt scolds all agree.
11
In a few short paragraphs, M. Anders has summarized the moral/ethical dimensions of the European creditor/debtor crisis in language that does not require a degree in economics to understand. And his solution, reasonable restitution, is well, positively Krugian.
1
I don't believe that Greece can run a primary surplus until I see it. Given the Syriza-induced collapse of tax revenue, my money is on yet another primary deficit.
Greece needs other nations' tax money to pay its bills (never mind its debts), and such a transfer union is only sustainable if Greek politicians are willing to play by the rules of their creditors and benefactors.
Insulting the Germans as Nazis and blaming all of Greece's current problems on them, has poisoned the political climate in Europe, and may scuttle the new bailout will need this summer. Germany is a democracy too, and lawmakers no longer have a mandate for more bailouts.
You can't win "battles" and "wars" against partners, only against enemies. And enemies will no longer send money your way.
Greece needs other nations' tax money to pay its bills (never mind its debts), and such a transfer union is only sustainable if Greek politicians are willing to play by the rules of their creditors and benefactors.
Insulting the Germans as Nazis and blaming all of Greece's current problems on them, has poisoned the political climate in Europe, and may scuttle the new bailout will need this summer. Germany is a democracy too, and lawmakers no longer have a mandate for more bailouts.
You can't win "battles" and "wars" against partners, only against enemies. And enemies will no longer send money your way.
4
"Syriza also agreed to crack down on tax evasion, although why collecting taxes is supposed to be a defeat for a leftist government is a mystery to me."
Because it's something the creditors would like to see, it becomes a bargaining chip. Maybe the new government would like to get in another negotiated debt reduction, before going through with this. That's too bad though, because if they would actually crack down on tax evasion and corruption, everybody's mood would brighten up. And Greece would get the benefit of the doubt in other matters.
Because it's something the creditors would like to see, it becomes a bargaining chip. Maybe the new government would like to get in another negotiated debt reduction, before going through with this. That's too bad though, because if they would actually crack down on tax evasion and corruption, everybody's mood would brighten up. And Greece would get the benefit of the doubt in other matters.
2
Why would foreign interests want to see tax evasion and corruption disappear from Greece, when they hold most of the big companies and investments there? It's not like Siemens would be happy to lose procurements because they cannot bribe anyone any more.
2
If Mr. Krugman do to himself what he praise the greeks, he will be in jail for crook.
1
The debtors, and governments they put in place, are just trying to diminish their lost. They just don't care about what Greek people will have to suffer.
Dear Mr Krugman,
your analysis is perfect and it is much more than an opinion.
I would like to intervene anyway on an open question you raise on your article.
You ask yourself why Greece accepted before those harsh conditions, and you suppose that it was for fear of the worst.
On that I would disagree, because the rules were agreed by the Troika in 2012 with the corrupted and clientilist right wing government of Mr Samaras, who didn't touched the corruption system, because he was part of it, he didn't touch the macroscopic tax evasion, because the tax evaders were part of his clientilist system.
If he would have frighted those two pilasters, that would have meant his political suicide, so he catted pensions, wages, public officers and sold the Greek best properties to the same debtors banks, with great joy of the Troika, which so they were kept quite giving them something else in exchange.
The great wonder is therefore the connivance of the Troika, driven with the rigid rules defined by Ms Merkel and Mr Schäuble, which applied an additional rule: the connivance to silence.
That's why the German Government shouted so much as soon the new Government changed the order of the cards on the table: they feared that their connivance with the Samara's system was discovered, as it partially was, now also Mr Tsipras has no convenience to discover all.
your analysis is perfect and it is much more than an opinion.
I would like to intervene anyway on an open question you raise on your article.
You ask yourself why Greece accepted before those harsh conditions, and you suppose that it was for fear of the worst.
On that I would disagree, because the rules were agreed by the Troika in 2012 with the corrupted and clientilist right wing government of Mr Samaras, who didn't touched the corruption system, because he was part of it, he didn't touch the macroscopic tax evasion, because the tax evaders were part of his clientilist system.
If he would have frighted those two pilasters, that would have meant his political suicide, so he catted pensions, wages, public officers and sold the Greek best properties to the same debtors banks, with great joy of the Troika, which so they were kept quite giving them something else in exchange.
The great wonder is therefore the connivance of the Troika, driven with the rigid rules defined by Ms Merkel and Mr Schäuble, which applied an additional rule: the connivance to silence.
That's why the German Government shouted so much as soon the new Government changed the order of the cards on the table: they feared that their connivance with the Samara's system was discovered, as it partially was, now also Mr Tsipras has no convenience to discover all.
5
At last, some reasonable analysis of what has just happened. If this respite from the savagery of austerity allows Greece to reverse some of the harsher cuts, and people's misery begins to abate, the new govt.'s credit with the public will improve. If Merkel forces her govt. to stop the campaign to destroy the Greeks -- she certainly managed to tone down the anti-Greek rhetoric coming from her finance minister -- then Greece has a little time to work out a deal that allows it to stay in the eurozone. All the talk recently how the eurozone could withstand an exit by the Greeks is nonsense. It would be a massive failure of the European experiment with repercussions throughout Europe. Despite the flaws in an incomplete political system married to a common currency, it must be made to work. To her credit, I believe that Merkel sees it this way, even if some in her govt. don't.
5
Let's hope this is alright and grease does well. Bear in mind that the Greeks could easily default and then issue there own currency.y In the current circumstances it's no means clear that they would be better off doing stuff . Sweden I believe Denmark England all have their own currencies and their own central banks. Greece would be better off to do so. the euro zone is largely German colonialism
Why cannot each and every Greek citizen get their income from some government agency payroll or government contract, at maybe double the minimum wage scale to create income equality?
Where does all of that "Free Government Money" come from?
Only private businesses wealth creation activity creates new taxable wealth, and that new and existing privately owned taxable wealth is the primary source of funds to be confiscated by governments through taxes to pay for any and all government activities.
Government expenditures only consume a nation's wealth and do not create any new taxable wealth.
Government Contracts to private businesses to create infrastructure, weapons, social programs are also paid for by the taxpayers and do not create national wealth, but those activities just consume national wealth that was created by other citizens who created new national wealth that was confiscated by the government to pay for those government activities!
Yes, labor creates taxable wealth as long as that labor is not paid for by the taxpayers!
Labor receives paychecks and that create taxable wealth when that employee works for a privately owned business to create taxable wealth for the business where he works, but not if that business is a government contractor.
Where does all of that "Free Government Money" come from?
Only private businesses wealth creation activity creates new taxable wealth, and that new and existing privately owned taxable wealth is the primary source of funds to be confiscated by governments through taxes to pay for any and all government activities.
Government expenditures only consume a nation's wealth and do not create any new taxable wealth.
Government Contracts to private businesses to create infrastructure, weapons, social programs are also paid for by the taxpayers and do not create national wealth, but those activities just consume national wealth that was created by other citizens who created new national wealth that was confiscated by the government to pay for those government activities!
Yes, labor creates taxable wealth as long as that labor is not paid for by the taxpayers!
Labor receives paychecks and that create taxable wealth when that employee works for a privately owned business to create taxable wealth for the business where he works, but not if that business is a government contractor.
4
Greece came out well, Professor? That must be why the German parliament so ecstatically approved the plan. This kind of spin does not help readers understand what is at stake. Many people have died in Greece as a result of the economic crisis. German bankers want to crush small businesses and decimate pension plans, and privatize energy and everything they can get their greedy little hands on in Greece. This negotiation did not come out well for the Greek people and continued submissive capitulation by cowardly elected officials will not come out well for the Greek people.
1
The numbers deceive. Yes, the German parliament approved the commitment of another huge sum of German tax dollars to help the Greeks because of party discipline, but there was so much grumbling underneath that it's doubtful a measure like this will pass again in 4 months, and the chances get lower and lower with each day the Greeks dawdle w.r.to tax collection--so much for "ecstasy"! And all of this plays into the hands of the growing popularity of the anti-Europe party in Germany, which is the largest net contributor to the union. And your remarks about German bankers are pure fabrication. Many Greeks suffer not because of Germany's insistence that it will not throw good money after bad, but because the Greeks cannot be made to pay taxes EVEN WHEN THEY SEE that the money is urgently needed.
Collectimg Taxes!? What a novel idea? OK, everyone knew that it would come down to that. Right? The obvious answer has been in plain sight since day one. You can forget about "Austerity, belt tightening, or conversely stimulus spending, et al" (quotation marks for emphasis). That's the whole problem in a nutshell. However any nation decides what type of economy is in their best interest nothing can be achieved if the Tax revenues, based on the underlying nature of any economic plan vanish before collection time.
This is not a sole problem just for Greece. While the extensive nature of Tax avoidance may be systemic to this nation, all nations struggle with Tax cheats and more importantly in these times, off shore hiding of cash. Again, none of this is new, but the amount of money has never been larger as is the number of criminal Tax Avoiders. According to the periodic reports from various agencies and venues, the amount of collectable "Tax Revenues" is in the billions and billions. Since none of that money does anything but sit, hidden away, it has a worthless value of not being in circulation for use of any kind. OK, it can be bundled for outside loans to others for spending, but essentially it remains off book and can't be counted.
Greece's finest hour may be in developing improved methods in recapturing this stolen money and lead to better international cooperation in doing so. The Oligarchs should worry about hungry Greeks.
This is not a sole problem just for Greece. While the extensive nature of Tax avoidance may be systemic to this nation, all nations struggle with Tax cheats and more importantly in these times, off shore hiding of cash. Again, none of this is new, but the amount of money has never been larger as is the number of criminal Tax Avoiders. According to the periodic reports from various agencies and venues, the amount of collectable "Tax Revenues" is in the billions and billions. Since none of that money does anything but sit, hidden away, it has a worthless value of not being in circulation for use of any kind. OK, it can be bundled for outside loans to others for spending, but essentially it remains off book and can't be counted.
Greece's finest hour may be in developing improved methods in recapturing this stolen money and lead to better international cooperation in doing so. The Oligarchs should worry about hungry Greeks.
4
Professor Krugman,
When various nations, states, and cities such as the USA, Greece and Detroit cause their businesses with their jobs and their high business costs to relocate outside of that taxing jurisdiction due to high taxes caused by expensive government employee labor contracts, expensive labor featherbed work rules, expensive EPA rules, expensive labor protection laws, and other expensive regulations, those businesses then no longer have as much newly created wealth available to be confiscated by that government to pay government expenses!
Those governments then go bankrupt and then cannot afford to pay for public bureaucratic services such as water and sewer, police, fire protection, roads, bridges, etc. or social safety net welfare programs.
Where would Detroit be today if Secretary of Labor Robert Reich and President Clinton had not created NAFTA that relocated so many of the Detroit Auto Manufacturing jobs to Mexico?
Where would Detroit be today if President Clinton had not granted Permanent Most Favored Nation (MFN of PNTR) trade status to Communist China that relocated even more of the remaining Detroit Auto Manufacturing jobs to China?
Where would Detroit be today if the Obama administration had not elected to relocate some of the GM engine plants and those associated GM jobs to Tiajuana, Mexico and hire Mexican Labor to save labor and environmental manufacturing costs.
When various nations, states, and cities such as the USA, Greece and Detroit cause their businesses with their jobs and their high business costs to relocate outside of that taxing jurisdiction due to high taxes caused by expensive government employee labor contracts, expensive labor featherbed work rules, expensive EPA rules, expensive labor protection laws, and other expensive regulations, those businesses then no longer have as much newly created wealth available to be confiscated by that government to pay government expenses!
Those governments then go bankrupt and then cannot afford to pay for public bureaucratic services such as water and sewer, police, fire protection, roads, bridges, etc. or social safety net welfare programs.
Where would Detroit be today if Secretary of Labor Robert Reich and President Clinton had not created NAFTA that relocated so many of the Detroit Auto Manufacturing jobs to Mexico?
Where would Detroit be today if President Clinton had not granted Permanent Most Favored Nation (MFN of PNTR) trade status to Communist China that relocated even more of the remaining Detroit Auto Manufacturing jobs to China?
Where would Detroit be today if the Obama administration had not elected to relocate some of the GM engine plants and those associated GM jobs to Tiajuana, Mexico and hire Mexican Labor to save labor and environmental manufacturing costs.
3
Can we dream of a coalition of the world's wealthiest humans doing their best to settle world financial problems without profiting: is such a thing possible?
After all, the wealthy are the real owners of political systems and many if not most countries.
After all, the wealthy are the real owners of political systems and many if not most countries.
4
Dream on, but beware the awakening.
Why would any rich or a poor person work for free?
5
For decades I, the Greek taxpayer, have carried the burden of many thousands of female civil servants who are entitled to retire from age 50 if they have underage (<18 yrs old) children. Obviously, nobody has an infant or toddler at home at this age; the idea is that the poor things are exhausted and so their fellow citizens have to support them for the next 35 years.
Another example. We have a few special public high schools for gifted children (ala Bronx Science etc) which accepted students after exams. The new government decreed this to be elitist. and hence students will be accepted at random by lottery.
“Perpetual students” expelled after many years from universities maintained by public funds, will now be “mercifully” readmitted
Thank God for lender demands, or we would still have lifelong pensions for unmarried and never employed daughters of deceased civil servants, and salaries/pensions for trade union officials in the public sector who officially conducted union business in lieu of working.
Adult supervision is needed for Greek governments, to protect me, the taxpayer, whose pension has been slashed in half .
Another example. We have a few special public high schools for gifted children (ala Bronx Science etc) which accepted students after exams. The new government decreed this to be elitist. and hence students will be accepted at random by lottery.
“Perpetual students” expelled after many years from universities maintained by public funds, will now be “mercifully” readmitted
Thank God for lender demands, or we would still have lifelong pensions for unmarried and never employed daughters of deceased civil servants, and salaries/pensions for trade union officials in the public sector who officially conducted union business in lieu of working.
Adult supervision is needed for Greek governments, to protect me, the taxpayer, whose pension has been slashed in half .
7
I don't pretend to understand all of this. There's only thing that I do understand: no one wants to see a country fail or become a real basket case in terms of its economy. In today's world what happens in the Eurozone affects what happens in Asia, the Americas, and every other country. The only difference between today and the middle of the 20th century is that today things can happen in a nanosecond.
6
Finally a NYT reader who admits that they don't understand all of this. Neither do I, sir.
Still people have their opinions (hey, maybe Krugman doesn't understand it all either, could be, right?), and mine is that Greece is a rounding error in the world economy and really doesn't matter in and of itself. What matters, perhaps, is the fear of contagion - that a Greek failure would spread and throw other Med countries (at least) into problematic default potential and worse would throw the EuroElite into a big spasm about whether their "experiment" will actually work or not.
It may be that it will, over time. But if it does, it will be costly, will make some countries do what they never wanted to do (and actually, closely tied union), and the growth will be low and slow.
The experiment, in my view, was at least partly created, maybe largely created, to fight American economic power as a world-wide phenomenon. Then they all got swept up in our Lehman moment anyway. What have learned here? Not much.
Still people have their opinions (hey, maybe Krugman doesn't understand it all either, could be, right?), and mine is that Greece is a rounding error in the world economy and really doesn't matter in and of itself. What matters, perhaps, is the fear of contagion - that a Greek failure would spread and throw other Med countries (at least) into problematic default potential and worse would throw the EuroElite into a big spasm about whether their "experiment" will actually work or not.
It may be that it will, over time. But if it does, it will be costly, will make some countries do what they never wanted to do (and actually, closely tied union), and the growth will be low and slow.
The experiment, in my view, was at least partly created, maybe largely created, to fight American economic power as a world-wide phenomenon. Then they all got swept up in our Lehman moment anyway. What have learned here? Not much.
1
In his blog Krugman took an extreme pessimistic view, ultimately deciding that the richer members of the Union were determined to kick Greece out. Of course the actual result is a "win" from that point of view, but it was actually fairly predictable and amounts to kicking the can down the road again. Greece does not want to leave and the Union really does not want it to, but there is little likelihood of some grand bargain that will allow Greece to do what it wants to do while continuing to get assistance from the other members. The brinkmanship will continue.
6
Too much austerity will reduce spending but it will make the situation worse if it causes the economy to contract into deflation. Nobody ever paid off their debts by reducing their income to subsistence levels, which is what this over reliance upon austerity can cause. The bankers and the lenders involved do not care about macro economic issues, they care about their money, which is why they have pressured for extreme austerity measures. The focus upon the economy for every polity is meeting material needs and sustaining it, so austerity which impedes achieving those needs are never going to work for long except under the pressure of extreme force. Greece does not have the wealth creating capabilities of Germany or of France, so when it goes into great debt it cannot produce the surpluses needed to get out of it as quickly as Germany or France.
3
Krugman seems to have convinced himself that the deal negotiated was not a fairly massive Greek climb down despite the mountain of evidence to the contrary and the almost universal opinion (not least amongst sections of Tsipras's own party back in Greece) that it was. He then proceeds to construct a bizarre theory that this perception is the consequence of some unspoken conspiracy between the business press and disappointed leftist commentators. The mind boggles. The reality is that the Greeks conducted a massive retreat on just about every issue of substance; a temporary patch has been applied; the Greeks have had to come up with a list of commitments on structural reform (which is what this is all about anyway); and will remain under close supervision by their Troika (sorry Institution) parole officer. Whether the Greeks can deliver on their commitments or try to wriggle out of them is an open question (a key minister has already gone off the reservation) and if they don't we'll be here again in four months if not sooner. Essentially nothing has changed in the Greek situation whatever Krugman may believe.
6
A Greek view.
What Greece Needs By ARISTOS DOXIADISFEB. 25, 2015
What Greece needs is bigger businesses, more foreign investment, more experiments with new business models, and more innovation coming out of its universities. Syriza appears to be against all of that.
If so, it matters little what they manage to negotiate on debt and fiscal deficits. Unless Greece can export more, the country will fail to grow in the anti-austerity phase of this crisis, just as it failed under austerity.
What Greece Needs By ARISTOS DOXIADISFEB. 25, 2015
What Greece needs is bigger businesses, more foreign investment, more experiments with new business models, and more innovation coming out of its universities. Syriza appears to be against all of that.
If so, it matters little what they manage to negotiate on debt and fiscal deficits. Unless Greece can export more, the country will fail to grow in the anti-austerity phase of this crisis, just as it failed under austerity.
6
That article was a much more complex exposition of the issues in Greece than *anything* that I had read before. (especially way beyond the 2 dimensional way it has been drawn in PK's columns).
It helps to see the nuanced and complicated broad based problems there. To depict it as merely a battle against a completely destructive "austerity" imposed by the Troika is not only completely uninformative, but detrimental to finding solutions to Greece's problems.
It helps to see the nuanced and complicated broad based problems there. To depict it as merely a battle against a completely destructive "austerity" imposed by the Troika is not only completely uninformative, but detrimental to finding solutions to Greece's problems.
2
True Greece does need more investment. But in order for more investment, investors have to see that you are commited to work. Greece needs stronger work ethics. People have to be willing to put in 40+ hours a week without billing for over time as we do in the USA. You cannot shut down the country between 2-4 pm every day as is the practice in many european countries. Retirement ages have to be raised to near 65 rather than 55. Bottom line is for invesments there needs to be a strong commitment to suceess.
5
The financial problems of Greece took a long time to reach a crisis point, and those problems are not going to be solved quickly. The key – as Paul Krugman writes – is getting started on the road back. That has now occurred.
The world needs to take a hard look at the conduct of the creditors of sovereign debt for countries like Greece. Those creditors always receive a large premium over what other creditors receive, which is an appropriate reflection of risk. If they need to get a haircut from time to time, so be it.
The world needs to take a hard look at the conduct of the creditors of sovereign debt for countries like Greece. Those creditors always receive a large premium over what other creditors receive, which is an appropriate reflection of risk. If they need to get a haircut from time to time, so be it.
14
The best thing for Greece would be to leave the EU. They could then default on all their external debt, devalue the drachma, and get back to living their lives. Sure there would be some short-term pain, but the current status quo just ensures long-term misery for the common people. And let's be clear, the bailouts are for the wealthier EU nations' banks, not the Greeks.
10
If they do so, Greece will never get any foreign investment, except maybe from Russia
3
What the "liberal" press seems to not realize is that you have to choose your battles wisely, and that Syriza played an effective hand utilizing the limited cards it had at its disposal. With Golden Dawn waiting in the wings to take over should Syriza fail, this is a remarkable victory not just for Greece, but for liberal democracy.
14
To go straight to the punch line, now that we have established what the creditors are, it is only a matter of setting the price.
There is hope for the future.
There is hope for the future.
3
Why this insistence on using "primary surplus" as the key metric?
Since when does paying interest to your creditors not matter?
Since when does paying interest to your creditors not matter?
3
When interest rates are, as Dr. K. pointed out, 0.0002% for the next five years, what difference does the interest rate make?
It is the principal of the thing that counts! Pun intended.
It is the principal of the thing that counts! Pun intended.
4
Tim-- primary surplus matter when talking about sovereign debt. Sovereign debt is different from private debt, given that you can't force a country into receivership. A sovereign nation always has the ability to choose not to pay its debt, and the only remediation creditors have is to block the access of said nation to further credit. Or to convince other nations to go to war.
1
Byron - The rate at which Greece can borrow is not 0.0002%. Check the bond markets.
GR - agree, but does Greece not plan or need to borrow externally in the future?
GR - agree, but does Greece not plan or need to borrow externally in the future?
'Meanwhile, the first real debtor revolt against austerity is off to a decent start, even if nobody believes it.'
Let's stay with the facts - and call it 'the second debtor revolt of Greece'.
At the first debtor revolt in 2011 the debt of Greece was cut -(in half?) but the real issue of Greece's economical problem hardly was adressed.
And it all changed with the election of Syriza - and as a knowledgable Greek
opinionator in the NYT wrote. The Greek people want justice perhaps even more than debt forgiveness.
And only if the Greek people will get the justice they deserve - there is a chance for them to get to sustainable economics!
Let's stay with the facts - and call it 'the second debtor revolt of Greece'.
At the first debtor revolt in 2011 the debt of Greece was cut -(in half?) but the real issue of Greece's economical problem hardly was adressed.
And it all changed with the election of Syriza - and as a knowledgable Greek
opinionator in the NYT wrote. The Greek people want justice perhaps even more than debt forgiveness.
And only if the Greek people will get the justice they deserve - there is a chance for them to get to sustainable economics!
7
I lived in Greece in 1999. Not paying taxes for Greeks is so embedded in their culture that to begin paying taxes for Greeks would be like if they gave up speaking Greek and started speaking German. What Paul Krugman doesn't acknowledge in any of his "Greek Columns" (pun intended) is that Greeks do not pay taxes. Greeks have tried in the past lowered tax rates and raising tax rates to no avail on tax compliance. You know who pays all their taxes even though they have high tax rates? Germans.
11
Greeks don't pay their debts. They never have and the never will. Every Euro the Germans send them is a Euro the Germans will never see again. Why would the Germans be so foolish as to keep doing this? Greece needs to leave the Eurozone. Ultimately it will have to. There really is no other way to resolve the issue.
6
"France can borrow for five years at an interest rate of 0.002 percent. Sounds like no one in authority in or out of government there knows a wise way to invest 0% interest funds to create jobs and strengthen the economy. Maybe the political and economic elites should admit their failure and start listening to all the voices they've been ignoring.
3
These Nanny State nations spend the borrowed money on handouts to their citizens.
This way the voters vote for the incumbents!
This way the voters vote for the incumbents!
1
Greece should be kicked out of the EU. Greece is financially irresponsible and has proven time and again that it will never be financially responsible, not to itself, not to its citizens, and certainly not to the European Union. Granting a reprieve to Greece is a huge mistake and it will ultimately cvause deeper damage to the EU.
8
There is no way to "kick" a country out of the EU. The only way Greece can leave the EU is by agreement.
The most sensible course of action is probably for Greece to leave the Eurozone, but stay in the EU.
The most sensible course of action is probably for Greece to leave the Eurozone, but stay in the EU.
2
Certainly Greek governments bear half the responsibility for the mess. But what about the banks, including a large number of German and French banks, who irresponsibly loaned money to it? And what about the EU governments who bailed out those irresponsible banks to hoisted their loans upon the citizens? Should they be kicked out too?
6
Tough talk. Financially irresponsible entities should always be punished. I assume you would also argue that no bank should ever be bailed out for even a penny of a loss on a bad investment or the reckless activity of a counterpart that the bank did not maintain sufficient capital reserves to protect itself against or properly hedge against. If a bank become insolvent, they should go belly up and the executives, traders, risk management employees and regulators in charge of oversight should be barred from ever working in finance again...
Of course, if we had done that, most of the bankers now holding Greek workers feet to the fire would no longer have jobs.
Of course, if we had done that, most of the bankers now holding Greek workers feet to the fire would no longer have jobs.
7
I know its popular to root for the underdog although in Greece's case they definitely need a financial overseer. They are big time tax dodgers expecting the rest of Europe to pick up the tab as well as the IMF. 100% of the self-reported income of Greece's professional classes is going toward paying off consumer debts. This is because they are massively under reporting their income as the new norm.
One third of Greeks are self-employed, nearly twice the European average which is the highest rate in the EU. The oligarchs as well as this particular chunk of the population is seriously rinsing Greece out of their ability to run the country. The statistics on the white-collar, high-income professional classes reveals that in at least five sectors, including doctors and accountants, self-employed people are supposedly paying more than they earn on debt repayments every month. It doesn't take a genius to figure out that they are hiding their undisclosed money in off shore accounts. What must irk responsible countries like Germany, Netherlands and England, is that these same tax dodgers expect their Northern sugar daddies and mommies to pay for their free ride.
One third of Greeks are self-employed, nearly twice the European average which is the highest rate in the EU. The oligarchs as well as this particular chunk of the population is seriously rinsing Greece out of their ability to run the country. The statistics on the white-collar, high-income professional classes reveals that in at least five sectors, including doctors and accountants, self-employed people are supposedly paying more than they earn on debt repayments every month. It doesn't take a genius to figure out that they are hiding their undisclosed money in off shore accounts. What must irk responsible countries like Germany, Netherlands and England, is that these same tax dodgers expect their Northern sugar daddies and mommies to pay for their free ride.
9
Greece got a four month reprieve - nothing more, nothing less.
Any claim to the contrary (whether that Greece won some big victory or had to step back meaningfully on its demands) is based on ideological bias.
Any claim to the contrary (whether that Greece won some big victory or had to step back meaningfully on its demands) is based on ideological bias.
6
I ask the same thing and the only answer is we have been brain washed into believing the rich guy down the street worked hard for his money.
Take the time to read about the life of John Warne Gates known in the 19th and 20th as Bet a Million Gates.
Take the time to read about the life of John Warne Gates known in the 19th and 20th as Bet a Million Gates.
3
And it is admirable that now also some US news reports and opinion pieces focus on fighting corruption as it is the first item on the list of Syriza.
And that even the NYT put it on the front page of its International edition I read this morning in Paris!
And that even the NYT put it on the front page of its International edition I read this morning in Paris!
4
Greece was asking for a write down of about one-third of its debt and threatening to leave the Eurozone, but instead it got debt relief and in return they promise to do:
#1 Tax reform; Like um, collect taxes owed to the Greek state.
#2 Government Bureaucracy reform.
#3 Entitlement reform.
I don't know who won, but in my view if you have to be forced to do something as basic as collecting taxes on your citizenry, your fight has only begun.
#1 Tax reform; Like um, collect taxes owed to the Greek state.
#2 Government Bureaucracy reform.
#3 Entitlement reform.
I don't know who won, but in my view if you have to be forced to do something as basic as collecting taxes on your citizenry, your fight has only begun.
36
Only in this, a time of anti-intellectualism/anti-rationalism not seen in the western world since middle earth, could a halting of FURTHER austerity measures on an already austerity devastated population be considered a win. It's a statement akin to calling the Affordable Care Act a victory for liberalism. Policy thought has been hijacked and pulled so far to the right that actual liberal legislative ideas are not even debatable in the mainstream sphere. In a very real way, we are all Greeks now; to the detriment of democracy and free thought.
24
The Greeks caused their own problems, and they should be cut loose to wallow in their own mud.
2
I disagree; a handful of country-less oligarchs and corporations connived to lavish their corrupting wealth on a very weak handful of politicians for the purpose of pillaging a vulnerable country. "Greeks" were not privy to the knowledge of the scheming that led to their plunder. Should they have been? Were they willfully ignorant of at least some aspects of the raiding? Did they benefit from some of the scraps of the spoils that fell off the banker's plates? I would suspect the answer is yes to these questions. But that in no way, in my mind at least, justifies this puritanical belief in the righteousness of suffering as atonement. We'll have to agree to disagree on this though.
"Let them eat Baklava"!
"Let them eat Baklava"!
1
Greece is basically a third world country at this point and their per capita government spending is still about US $14,000 (PPP) per year. How can anyone take seriously the claim that they are facing crushing austerity? They may not be spending what the Krugians would like but they do spend more than 136 other countries. They are in the same spending league as Australia, Israel, Kuwait, New Zealand and Switzerland. Would someone please explain how this could be called "crushing austerity?"
7
How about: they have a surplus that they can't spend along with an unemployment rate of 25%. If you are still confused, try this: take the US government's budget position in 2000 (surplus!) and put it in 2008-2009 but then have the government decide to not spend it.
1
You say "austerity madness" but I disagree. The decision to use austerity and to sell it on false notions of "living within your means" and other propagandist slogans was DELIBERATE. It is clear what is happening in Europe under the diktats of the new German Empire (once known as a "community" what a sick joke that is now) - keep the depression going, unemployment high, pressure for wages to go lower, reduce living standards, and transfer all that wealth to the top. Keep the depression going - and call it recovery - create the expectation that this is the way it must be and move on to the next "crisis" which will do more of the same until European and US wages are on par with those in Bangladesh. That is the Neoliberal dream - and it's coming true.
5
Greece is like a diseased limb in the body of Europe. The decision has been made to try one more time to save the limb rather than amputate. We will just have to wait four months to see if the treatment works or if amputation is still required.
2
The problem with the coverage I've seen (e.g. BBC) is that even relatively sophisticated outlets seem pretty clueless about the details. I can just imagine the level of stupidity on CNN with its love of sensationalism, et a lone Fox or the financial channels, which is why I haven't bothered with any of them.
The media focus seems mostly on the payments with little recognition of the underlying surplus issue. The tax collection piece seems major as it is clearly one of the structural problems that got Greece into trouble and should have been addressed long ago. Clearly Germany and company were too busy punishing the Greek public to to consider simple ways to increase the revenue side.
The media focus seems mostly on the payments with little recognition of the underlying surplus issue. The tax collection piece seems major as it is clearly one of the structural problems that got Greece into trouble and should have been addressed long ago. Clearly Germany and company were too busy punishing the Greek public to to consider simple ways to increase the revenue side.
4
Wrong! Germany has offered Greece the help of 500 experienced tax collectors to help them set up a modern, computer-based system, an offer that has not been taken up--and that is no accident!
The real tragedy is Greece's continued membership in the Euro. No amount of fiscal wiggle room, even assuming Greece is allowed to run primary deficits will make up for the 25%-50% devaluation required to restore competitiveness and growth.
4
Yes, the "single currency" has been a disaster since it was introduced - and not only for Greece.
But to scrap the Euro, thereby restoring control of each country's currency to that country, would make the politicians who brought about the disaster look stupid. Therefore it won't happen, at least not until the economies of Europe have been even more thoroughly destroyed than they have been so far.
But to scrap the Euro, thereby restoring control of each country's currency to that country, would make the politicians who brought about the disaster look stupid. Therefore it won't happen, at least not until the economies of Europe have been even more thoroughly destroyed than they have been so far.
3
Like the Greeks, Krugman, you are low on specifics.
The decision on how the fiscal targets would be achieved was always up to the Greeks. The fiscal targets themselves are non-negotiable. And that did not change despite the high drama put on by the Greeks and the ruinous threats they made. What the Greeks got was basically a change in tone but nothing of substance was amended. So please stop trying to pretend that they won.
The decision on how the fiscal targets would be achieved was always up to the Greeks. The fiscal targets themselves are non-negotiable. And that did not change despite the high drama put on by the Greeks and the ruinous threats they made. What the Greeks got was basically a change in tone but nothing of substance was amended. So please stop trying to pretend that they won.
2
I find quite interesting the consistent theme from commenters that the banks are at fault for Greece's problems.
How dare the banks loan money to a poor little country they should have known couldn't pay them back?
Yet, it is expected that banks loan even more money to Greece because, well, they need It to bring back the halcyon days of their fake prosperity, which they couldn't actually afford.
Then there is Krugman over in the corner encouraging ever more debt to be frivolously wasted by inefficient governments because interest rates are low.
This party will not end well.
How dare the banks loan money to a poor little country they should have known couldn't pay them back?
Yet, it is expected that banks loan even more money to Greece because, well, they need It to bring back the halcyon days of their fake prosperity, which they couldn't actually afford.
Then there is Krugman over in the corner encouraging ever more debt to be frivolously wasted by inefficient governments because interest rates are low.
This party will not end well.
6
the morality of a loan depends on the point in time,
if you refuse a loan you are responsible for suffering and the absence of stimulus,
if you want the loan back your are a loanshark and did irresponsible lending.
So it is just fair, that european taxpayers have to give the greeks another loan, of which the greeks already pronounced, they want a complete haircut of - because it was always just about saving the sadistic bankers.
if you refuse a loan you are responsible for suffering and the absence of stimulus,
if you want the loan back your are a loanshark and did irresponsible lending.
So it is just fair, that european taxpayers have to give the greeks another loan, of which the greeks already pronounced, they want a complete haircut of - because it was always just about saving the sadistic bankers.
7
you are making a moral argument for an economic problem
3
How dare the banks create artful dodges to enable Greece to take on more debt and hide how that was happening from the rest of the EU? These loans were not transparent by any means. The bankers knew exactly what they were doing. They have things tied up so that it is always heads-I-win, tails-you-loose.
Banks having to take a loss on their own lack of due diligence? Horrors!
Banks having to take a loss on their own lack of due diligence? Horrors!
3
Greece's economy is fraudulent and corrupt beyond belief. Greece entered the Eurozone by fraud, tax collection is rampant, and government employment is generally welfare.
What Greece has won is, by dint of threats to Eurozone, is some acceptance of funny money policies.
Just what Krugman loves!
What Greece has won is, by dint of threats to Eurozone, is some acceptance of funny money policies.
Just what Krugman loves!
7
You would prefer, perhaps, that Greece go the way of Cyprus and have the Russians take over their banks? Yeah, that ought to fix things.
3
I tried to think about what points you were making relative to the column piece but couldn't. What exactly are you saying?
3
Um . . . if tax collection were rampant, wouldn't the Greek government have more money?
3
Mr Krugmann is barking up the wrong tree. Greece has already had a haircut of > 50% in NPV terms. Greece has had fiscal stimulus like few others countries between 2000-08 (with deficits >10% per year). What good did it do? Why should "more of the same" help? Mr Krugman perfectly fits the cliche of the ignorant, remote American clueless about conditions on the ground.
Greece is trouble because:
1. It never had an industrial revolution and produces hardly anything anybody wants. 2. It has one of the worst legal systems in Europe that fails to protect citizens and businessmen 3. It has a degree of red tape in business, politics and bureaucracy unimaginable to an American mind 4. It has a well-educated but deeply corrupt and nepotistic eilte and equally corrupt public sector unions 5. It has overspend on military for decades because of its silly, nationalistic stance agains Turkey 6. It has one of the worst media systems in Europe - that is not much different from what you see in former communist countries - where oligarchs have their own TV stations to blackmail politics or each other - and to place their mistresses as anchorwomen. 7. It has a culture of mistrust - where the default assumption is "he will rip me off - so it is ok for me to rip him off". 8. It has a weak civil society with a culture of blame and lack of self responsibility (blame the Germans, the Turks, the Romans, the Ottomans, the British) - after all Greece was more or less occupied for close to 2000 years.
Greece is trouble because:
1. It never had an industrial revolution and produces hardly anything anybody wants. 2. It has one of the worst legal systems in Europe that fails to protect citizens and businessmen 3. It has a degree of red tape in business, politics and bureaucracy unimaginable to an American mind 4. It has a well-educated but deeply corrupt and nepotistic eilte and equally corrupt public sector unions 5. It has overspend on military for decades because of its silly, nationalistic stance agains Turkey 6. It has one of the worst media systems in Europe - that is not much different from what you see in former communist countries - where oligarchs have their own TV stations to blackmail politics or each other - and to place their mistresses as anchorwomen. 7. It has a culture of mistrust - where the default assumption is "he will rip me off - so it is ok for me to rip him off". 8. It has a weak civil society with a culture of blame and lack of self responsibility (blame the Germans, the Turks, the Romans, the Ottomans, the British) - after all Greece was more or less occupied for close to 2000 years.
13
Fiscal stimulus in a depressed economy wherein government spending doesn't crowd out private spending is a whole lot different than fiscal spending in a booming economy. I believe everyone can agree that 2000 to 2008 where boom times. Stimulus spending in the US during 2009-2010 has employed a technique learnt from the Great Depression era. In fact I worked on many infrastructure projects that simply would not have gone ahead w/o it. Those projects created employment and economic demand for goods and services in a time when nobody wanted to spend a dime on anything.
Your points regarding how Greece got into this mess may or may not be valid. I'm not an expert but it doesn't change the fact that they are in a mess and need to get themselves out of it. Too many people are making this economic problem a moral issue in that the Greeks must be punished for their past behaviors. I don't see that line of thinking presenting any growth opportunities to any economy. Any opportunities means jobs, stability and growth.
Your points regarding how Greece got into this mess may or may not be valid. I'm not an expert but it doesn't change the fact that they are in a mess and need to get themselves out of it. Too many people are making this economic problem a moral issue in that the Greeks must be punished for their past behaviors. I don't see that line of thinking presenting any growth opportunities to any economy. Any opportunities means jobs, stability and growth.
18
How fortunate we ignorant Americans are to have knowledgeable Europeans like you to straighten us out. Much of what you say about Greece's weak social capital is undoubtedly valid (by contrast, the fact that Greece is not predominantly an industrial economy is a bit of a red herring -- one can potentially live quite well on services like tourism and shipping as well as agriculture: we cannot all of us spend all our time building high-end motor cars).
The question that really counts, though, is where we go from here. Granted Greece's wretched and corrupt historical inheritance, do we look for the country to just sink beneath the waves like Atlanta? If not, what is to be done? Unlike their predecessors, the leaders of the new government openly recognize the perverse power of the oligarchy and are committed to attacking it. Shouldn't we encourage and support them in this endeavor?
The question that really counts, though, is where we go from here. Granted Greece's wretched and corrupt historical inheritance, do we look for the country to just sink beneath the waves like Atlanta? If not, what is to be done? Unlike their predecessors, the leaders of the new government openly recognize the perverse power of the oligarchy and are committed to attacking it. Shouldn't we encourage and support them in this endeavor?
15
So Lothar, assuming what you say is true and not a gross exaggeration and libel, please answer two questions --
First, why did your banks make all of those loans to this corrupt, inefficient, lazy, worthless and irresponsible nation; was this not fraudulent on their part?
Second, why should such loans made fraudulently be repaid? In the U.S., a loan shark isn't legally entitled to repayment of his loan -- that's the price he pays and the risk he bears for being in the business he's in.
On the other hand, if you're telling me your banks knew all along that the Greeks would be unable to carry that debt absent the muscle of your gov't forcing them into penury, and that's just the price they pay for having accepted the money, then I as a native New Yorker better understand what's going on. As the Godfather said, "It makes no difference to me how a man makes his living." Just please, don't try and take the high road and pretend you're not what you are -- a bunch of loan sharks...
First, why did your banks make all of those loans to this corrupt, inefficient, lazy, worthless and irresponsible nation; was this not fraudulent on their part?
Second, why should such loans made fraudulently be repaid? In the U.S., a loan shark isn't legally entitled to repayment of his loan -- that's the price he pays and the risk he bears for being in the business he's in.
On the other hand, if you're telling me your banks knew all along that the Greeks would be unable to carry that debt absent the muscle of your gov't forcing them into penury, and that's just the price they pay for having accepted the money, then I as a native New Yorker better understand what's going on. As the Godfather said, "It makes no difference to me how a man makes his living." Just please, don't try and take the high road and pretend you're not what you are -- a bunch of loan sharks...
5
What I would like very much to see is the economic argument for staying in the EZ. All of this is supposed to be about the future will being of the Greek people, is it not? What is the economic advantage to staying in the EU or the EZ is it really worth tolerating the German Imperial diktats? Does staying in really mean the Greek people will be better off eventually? I seriously doubt it but I would love to see the analysis which proves me wrong.
4
There is no economic argument for any country staying in the Eurozone; there never was. It was recognized even before it was introduced that the economic effect would be harmful (though the degree of harm was underestimated). The reasons for introducing the Euro were purely political.
On the other hand, there may be some advantage to staying in the EU. That is a more complex question.
On the other hand, there may be some advantage to staying in the EU. That is a more complex question.
1
An economic union does not exist without a strong political union, something Europe lacks. That is the underlying "can" that always gets kicked down the road. Unless or until that is rectified, the Euro will remain suspect.
5
Greece was hot topic when it was about to collapse, tank the Eurozone, and destroy the world economy. But, back from the brink and on to ISIS and the next hot thing.
I guess it depends how much Greece adheres to the new requirements for this 4-month "trial period." If it shows good faith, there can be further restructurings. If it implodes, again watch out. But this, for me, was a victory over Merkel and those would rather torch the whole place than give it a chance to escape the fire. Good for Greece, and I hope good for the Continent that governments can heed the cries of its citizenry forced to deal with an economic crisis most had nothing to do with.
Maybe there's hope for populism yet.
I guess it depends how much Greece adheres to the new requirements for this 4-month "trial period." If it shows good faith, there can be further restructurings. If it implodes, again watch out. But this, for me, was a victory over Merkel and those would rather torch the whole place than give it a chance to escape the fire. Good for Greece, and I hope good for the Continent that governments can heed the cries of its citizenry forced to deal with an economic crisis most had nothing to do with.
Maybe there's hope for populism yet.
101
I love the line (and imagery--and sound--succinctly put!):" Merkel and those would rather torch the whole place than give it a chance to escape the fire."
Thanks! For such a powerful action metaphor!
Thanks! For such a powerful action metaphor!
4
If you borrow money to invest in production, there's a decent chance that you'll get back both the money you borrowed and the cost of that money (interest). If you borrow money to go gambling in Vegas, there's a decent chance that you'll have nothing but debt to pay when you get back down to earth. These are the two extremes.
What did Greece do with the money it borrowed? Given the obvious fact that they've been threatening to default, it's clear that whatever choice they made was closer to "Vegas gambling" than it was to "productive investing". So now the question is: What can lenders expect from the latest Greek government?
I wonder what the Vegas odds are that Greece will return to "Vegas gambling"?
What did Greece do with the money it borrowed? Given the obvious fact that they've been threatening to default, it's clear that whatever choice they made was closer to "Vegas gambling" than it was to "productive investing". So now the question is: What can lenders expect from the latest Greek government?
I wonder what the Vegas odds are that Greece will return to "Vegas gambling"?
4
Will you please stop using the word "austerity" to describe the situation in Greece. A more correct phrase would be "learning to live within one's own means."
8
That's nonsense.
The average Greek on the street didn't tank the economy but they're the ones being hit with punitive austerity.
The average Greek on the street didn't tank the economy but they're the ones being hit with punitive austerity.
3
There's "learning" the Dickensian way and learning the Montessori way, Dickensian is austerity,
5
Governments are not run like your household checkbook. Imposing this simplistic equivalency has proven time and again to be disastrous. Time to entertain some new, and even uncomfortable economic ideas.
5
Prof. Krugman, you mention that Syriza intends to keep running modest primary surpluses, but with fiscal revenue plunged into the abyss due to Syriza's irresponsible promises, before and after the election, this will turn out to be a huge endeavor. Modest surpluses may then translate into even worse austerity that will perpetuate the madness of the last years. Has it ever occured to you that Syriza's self-conflicting policies might be pro-austerity after all?
Judging from my experience with other, non-economic contexts, I can see how a next step in resolving a problem might be small; it needs to fit with what exists now and at the same time noodge in a new direction. Too little fit with the old and things can fall apart, too much new and things can fall apart in a different way. So maybe a small noodge is healthy and will prove to be a more lasting and robust approach in the long run.
3
Greek saga is the battle between economic logic and financing logic. In our history of the economic growth, the financing logic has been the winning side. That is the reason why Japan paid interests to the creditor nations through the third country even during the WW II.
In the age of the declining economic growth, the battle between economic logic and the financing logic can bee seen in our country too between Republican's "austerity or balanced budget" and Democrat's "stimulus budget". In Japan, the same battle has been on over 20 years in spite of their economic environment of secular stagnation and then deflation.
This is the never-ending battle. In our country, the most important thing is to realize the fact that our economy is in the stage of low growth in spite of the recovery of unemployment rate. Housing market is not recovering rapidly as Allan Greenspan laments. M2 velocity has been declining since late 1990's in parallel with the declining employment of our working age population. Productivity growth rate also shows long term decline in spite of the technology boom that we hear. Our population growth is slowing even though we are better in number than Japan and Germany.
So, What is our economic problems? We need to debate and discuss this.
In the age of the declining economic growth, the battle between economic logic and the financing logic can bee seen in our country too between Republican's "austerity or balanced budget" and Democrat's "stimulus budget". In Japan, the same battle has been on over 20 years in spite of their economic environment of secular stagnation and then deflation.
This is the never-ending battle. In our country, the most important thing is to realize the fact that our economy is in the stage of low growth in spite of the recovery of unemployment rate. Housing market is not recovering rapidly as Allan Greenspan laments. M2 velocity has been declining since late 1990's in parallel with the declining employment of our working age population. Productivity growth rate also shows long term decline in spite of the technology boom that we hear. Our population growth is slowing even though we are better in number than Japan and Germany.
So, What is our economic problems? We need to debate and discuss this.
3
What does the country need?
Well paying jobs.
If people are working, producing, and spending, we get a virtuous circle where the money they spend provides more decent jobs for other people. What do we need to provide these well paying jobs?
Well, gee, we need money, money in the private sector, money to pay for these jobs,
We must keep the change in the balance sheet of the private sector positive. More money must come into it than goes out. Where does money flow from and to?
There are two places. First, the federal government. When it spend, it adds money to the private sector. When it taxes, it takes money out. The deficit measures how much it puts in net. When we have a surplus, we take money out net. THE FEDERAL DEFICIT IS INCOME FOR PEOPLE, BUSINESSES, AND STATE AND LOCAL GOVERNMENTS.
The other place is our trade balance. When it is positive, money is put in the private sector; when it is negative, money is taken out.
The net effect of these two sectors must be positive. If we have a large trade balance, we only need a small deficit or can even support a surplus like Australia.
Today we have a large negative trade balance. We need a large deficit.
This is a simplification. There are matters I left out like once we have full employment or if we have shortages, we must cut back on spending or raise taxes to avoid inflation. Also federal spending must get the money to those who need it and will spend it, not those who do not need it and will speculate with it.
Well paying jobs.
If people are working, producing, and spending, we get a virtuous circle where the money they spend provides more decent jobs for other people. What do we need to provide these well paying jobs?
Well, gee, we need money, money in the private sector, money to pay for these jobs,
We must keep the change in the balance sheet of the private sector positive. More money must come into it than goes out. Where does money flow from and to?
There are two places. First, the federal government. When it spend, it adds money to the private sector. When it taxes, it takes money out. The deficit measures how much it puts in net. When we have a surplus, we take money out net. THE FEDERAL DEFICIT IS INCOME FOR PEOPLE, BUSINESSES, AND STATE AND LOCAL GOVERNMENTS.
The other place is our trade balance. When it is positive, money is put in the private sector; when it is negative, money is taken out.
The net effect of these two sectors must be positive. If we have a large trade balance, we only need a small deficit or can even support a surplus like Australia.
Today we have a large negative trade balance. We need a large deficit.
This is a simplification. There are matters I left out like once we have full employment or if we have shortages, we must cut back on spending or raise taxes to avoid inflation. Also federal spending must get the money to those who need it and will spend it, not those who do not need it and will speculate with it.
5
Dr. Krugman writes today: "And the creditors did not pull the plug. Instead, they made financing available to carry Greece through the next few months."
So Greece can continue to overspend and be such an example of financial mismanagement! This gives more excuse for the U.S. to continue with financial profligacy?!
Meanwhile we need to thank any fiscal hawks here in the U.S. for our creditors not yet overtly threatening to 'pull the plug' on us. Nothing was said about fact the yearly shortfall of hundreds of $Billions, isn't actually $1 Trillion or more per year ... is only thanks to some people in Congress who are against enormous expansion in government spending. It's continued for decades.
Meanwhile, both low interest rates, and continued decline in living standards, continue. When interest rates were higher, and for over 25 years after WW2, the U.S. was actually paying a fair amount to its creditors
while having also for many years been building up huge National Debt.
And now close to 50% of that is owed to foreign countries, like China and Japan. Less than 25% of it was, only a few years ago.
And how is it that Japan is having problems with its economy while it has a huge amount invested, like in T-Bills, in the U.S.?
Japan is not being bought out like the U.S., by creditors.
If the U.S. were to tolerate some deflation, that could help stop the process of being bought out,
and could be able to invest overseas in ways not detrimental to its economy.
So Greece can continue to overspend and be such an example of financial mismanagement! This gives more excuse for the U.S. to continue with financial profligacy?!
Meanwhile we need to thank any fiscal hawks here in the U.S. for our creditors not yet overtly threatening to 'pull the plug' on us. Nothing was said about fact the yearly shortfall of hundreds of $Billions, isn't actually $1 Trillion or more per year ... is only thanks to some people in Congress who are against enormous expansion in government spending. It's continued for decades.
Meanwhile, both low interest rates, and continued decline in living standards, continue. When interest rates were higher, and for over 25 years after WW2, the U.S. was actually paying a fair amount to its creditors
while having also for many years been building up huge National Debt.
And now close to 50% of that is owed to foreign countries, like China and Japan. Less than 25% of it was, only a few years ago.
And how is it that Japan is having problems with its economy while it has a huge amount invested, like in T-Bills, in the U.S.?
Japan is not being bought out like the U.S., by creditors.
If the U.S. were to tolerate some deflation, that could help stop the process of being bought out,
and could be able to invest overseas in ways not detrimental to its economy.
2
There are two simple facts that Mr Karch cannot seem to grasp. One is:
The federal government can print money.
The U.S. can never go bankrupt unless we want to. It will run out of money the day after the NFL runs out of points. Now we cannot print arbitrarily large sums ad infinitum. When the economy has achieved its full potential or we have shortages, printing too much money will cause severe inflation. That is certainly not the case today.
The other fact is:
ONLY the federal government can print money.
No one else has a printing press. The population increases. The dollar loses value. The economy grows. As all this happens, the private sector needs more and more money. Money created by banks is balanced out by private debt. Only the federal government can provide the new money net. The preferred way to do this is for the government to finance via gross deficits worthwhile projects such as infrastructure repair, education, research, etc. If we do this wisely, we will reap long term benefits and get money in the hands of the people who need it and will spend it, and out of the hands of the people who do not need it and will speculate with it.
What has happened if this fact is ignored? All 6 times we have eliminated deficits long enough to substantially pay down the debt, we have suffered a depression.
The definition of insanity is doing the same thing over and over while expecting different results.
The federal government can print money.
The U.S. can never go bankrupt unless we want to. It will run out of money the day after the NFL runs out of points. Now we cannot print arbitrarily large sums ad infinitum. When the economy has achieved its full potential or we have shortages, printing too much money will cause severe inflation. That is certainly not the case today.
The other fact is:
ONLY the federal government can print money.
No one else has a printing press. The population increases. The dollar loses value. The economy grows. As all this happens, the private sector needs more and more money. Money created by banks is balanced out by private debt. Only the federal government can provide the new money net. The preferred way to do this is for the government to finance via gross deficits worthwhile projects such as infrastructure repair, education, research, etc. If we do this wisely, we will reap long term benefits and get money in the hands of the people who need it and will spend it, and out of the hands of the people who do not need it and will speculate with it.
What has happened if this fact is ignored? All 6 times we have eliminated deficits long enough to substantially pay down the debt, we have suffered a depression.
The definition of insanity is doing the same thing over and over while expecting different results.
14
Len Charlap says the U.S. can't go bankrupt. Seems fine so far. It can print money, to be sure. And everyone in the U.S., every family, is going bankrupt today, because of these policies: printing money, refusing to tolerate any deflation, continuing with the low interest rates! At this rate, and sooner than anyone suspects, there will be nothing left here except what is owned, lock, stock, and barrel, by foreign interests and banks overseas!
2
Much of our "debt" is money we owe ourselves, and much is due to the criminal warring of Bush-Cheney. As for people going bankrupt, it's not the fault of the Fed. It's the fault of our full-blown capitalist system whose beneficiaries wallow in wealth while the system's acolytes rain down austerity on the poor and middle classes. Even some inveterate Republicans count 1971 as a turning point, the end of the golden quarter century of middle class prosperity built on post-war production.
9
This may be just Act II (after the debacle of the failed Greek experiment with austerity in Act I). It seems by today's vote in the Bundestag that Germany finally blinked when the reality of keeping Greece on life support (aka getting some more austerity and some more debt repayment) versus pulling the plug and losing everything (aka a Greek default) including perhaps the dissolution of the European Union. Whether Act III will be a German-induced Gotterdammerung or another heroic Greek victory revealing austerity for the Trojan horse it is remains to be seen. We've had enough of German tragedies in the 20th century; I'm rooting for the Greeks. They've been on the right side of history since the Battle of Marathon.
8
Modern reporting often leaves readers with angst and frustration! Details, analysis, and context are cast aside for screams of defeat and victory; process is ignored. For Greece, the details of process are the story!
The austerity-conservative-German lead team is using Greece's recession and internal collapse (much of it self-caused!) to leverage a classic squeeze play: Greece is forced to accept loans and internal economic measures on terms which continue its recession, with its only option to go broke! In whose interests is such a diabolical idea? The hidden players, the private banks!
Greece, now broke (mainly from its own doing!) put bank loans to Greece at risk of mass default. So the agreement originally signed subtly shifted the risks and repayment of those loans to the Greece population. That shift specified balance sheet targets which deepened the humanitarian crisis.
But aren't the government and the people the same? No, the government has its own resources and authority and normally acts as a social buffer. Through the original agreement, Greece's government became a wedge and siphon. Its coffers and credit empty, the Greek government was forced to dig deeper into the population to extract the value of its safety nets--which were easy scapegoats because of past corruption.
Greece was squeezed--suspended between being broke and going broke. Meanwhile the bankers got their bailout by targeting through the national balance sheet through the EU.
The austerity-conservative-German lead team is using Greece's recession and internal collapse (much of it self-caused!) to leverage a classic squeeze play: Greece is forced to accept loans and internal economic measures on terms which continue its recession, with its only option to go broke! In whose interests is such a diabolical idea? The hidden players, the private banks!
Greece, now broke (mainly from its own doing!) put bank loans to Greece at risk of mass default. So the agreement originally signed subtly shifted the risks and repayment of those loans to the Greece population. That shift specified balance sheet targets which deepened the humanitarian crisis.
But aren't the government and the people the same? No, the government has its own resources and authority and normally acts as a social buffer. Through the original agreement, Greece's government became a wedge and siphon. Its coffers and credit empty, the Greek government was forced to dig deeper into the population to extract the value of its safety nets--which were easy scapegoats because of past corruption.
Greece was squeezed--suspended between being broke and going broke. Meanwhile the bankers got their bailout by targeting through the national balance sheet through the EU.
51
Sadly not true (that the private banks stand to do well).
Most of the money Greece owes is to the IMF and the other Eurozone governments. The private banks have already lost most of what they lent in the first haircut. This caused the collapse of neighboring Cyprus and put the Greek banks (who hold most of the debt) on life-support. There isn't actually much debt out there not covered by the above (there are some German Landsbanks who will be in trouble too).
The one exception is that a few Hedge funds bought distressed debt and are (still) hoping for a big payoff. They will probably get their fingers burnt.
Most of the money Greece owes is to the IMF and the other Eurozone governments. The private banks have already lost most of what they lent in the first haircut. This caused the collapse of neighboring Cyprus and put the Greek banks (who hold most of the debt) on life-support. There isn't actually much debt out there not covered by the above (there are some German Landsbanks who will be in trouble too).
The one exception is that a few Hedge funds bought distressed debt and are (still) hoping for a big payoff. They will probably get their fingers burnt.
1
Everybody is a winner here - as the first item on the list of Syriza is to fight corruption and collecting taxes - which always was the first item on the list of the other European States which tried to help Greece.
And as it was nearly impossible before by dealing with a bunch of Oligarchs - there is a realistic chance that Greece can become a 'modern European democracy'!
And as it was nearly impossible before by dealing with a bunch of Oligarchs - there is a realistic chance that Greece can become a 'modern European democracy'!
19
Why are NYT posters living in the US piously complaining about Greece being a country "run by oligarchs" and plagued by inefficient tax collection? Doesn't the US have exactly the same problems? In fact, the Republican party strategically underfunds the IRS so taxes can't be collected from scofflaws.
2
What Greece needs is less greedy international banksters.
When Greece, the poorest country in the European Union, joined the Euro by in 2001 (after being properly rejected in 1998), Greece's economic output per head was 30% lower than the rest of the Eurozone.
So the banksters adopted a knowingly weak economic child, Greece, an economy comprised mostly of small and medium-size businesses whose main 'export' is tourism and proceeded to lend it billions.
Just after Greece's admission to 'the Euro', Goldman Sachs helped the government quietly borrow billions with a deal hidden from public view because it was treated as a 'currency trade' rather than a loan.
This helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.
'Instruments' developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece.
In dozens of deals, banksters provided cash upfront in return for Greece payments in the future...with those liabilities left off the books.
Greece traded away its future rights to airport fees and lottery proceeds to banksters in one of these deals, which were not recorded as loans, which misled investors and regulators about the depth of a country’s liabilities.
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance."
-James Madison
When Greece, the poorest country in the European Union, joined the Euro by in 2001 (after being properly rejected in 1998), Greece's economic output per head was 30% lower than the rest of the Eurozone.
So the banksters adopted a knowingly weak economic child, Greece, an economy comprised mostly of small and medium-size businesses whose main 'export' is tourism and proceeded to lend it billions.
Just after Greece's admission to 'the Euro', Goldman Sachs helped the government quietly borrow billions with a deal hidden from public view because it was treated as a 'currency trade' rather than a loan.
This helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.
'Instruments' developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece.
In dozens of deals, banksters provided cash upfront in return for Greece payments in the future...with those liabilities left off the books.
Greece traded away its future rights to airport fees and lottery proceeds to banksters in one of these deals, which were not recorded as loans, which misled investors and regulators about the depth of a country’s liabilities.
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance."
-James Madison
277
'What Greece needs is less greedy international banksters.'
and what Greece needs too - is less greedy international Oligarchs who even took some internationaöl banksters to the cleaner.
and what Greece needs too - is less greedy international Oligarchs who even took some internationaöl banksters to the cleaner.
1
Well said, Socrates. When Greece joined the EU the banks believed they had a backstop against default.. Banks made a bad credit decision in lending to Greece and should pay the price --- a big write off. Angela, since most of Germany's exports are to Europe, wouldn't it make sense to get Greece back on a sound footing so they can buy your products and services?
7
What makes you think the banks can just give their customers money away to someone who has a really poor record of not paying it bills?
Where do you think the banks get the money from. When you talk about greedy banksters what about people like me that may own a few shares in my retirement account, and have savings with them? All this talk about banksters assumes they banks just have money from somewhere to risk, and they just don't want to spend it.
Greece borrowed but did not make the reforms necessary to pay it back. Several articles lately have pointed to just how much corruption there is. The Greeks think of taxes as stealing from them. Just clening up the tax evasion would be at least 50% of the problem. Then there is the regulation of business, it takes years to start one, and includes payoff to government bureaucrats.
So don't blame the banks, they are not responsible for Greece's economic problems, they have investors, savers and others to answer to.
All this talk about banksters shows a lack of knowledge about banking. Banks also finance businesses. If they have to forgive loans to Greece, that is money they do not have to help other businesses. The money does not just come out of thin air.
Where do you think the banks get the money from. When you talk about greedy banksters what about people like me that may own a few shares in my retirement account, and have savings with them? All this talk about banksters assumes they banks just have money from somewhere to risk, and they just don't want to spend it.
Greece borrowed but did not make the reforms necessary to pay it back. Several articles lately have pointed to just how much corruption there is. The Greeks think of taxes as stealing from them. Just clening up the tax evasion would be at least 50% of the problem. Then there is the regulation of business, it takes years to start one, and includes payoff to government bureaucrats.
So don't blame the banks, they are not responsible for Greece's economic problems, they have investors, savers and others to answer to.
All this talk about banksters shows a lack of knowledge about banking. Banks also finance businesses. If they have to forgive loans to Greece, that is money they do not have to help other businesses. The money does not just come out of thin air.
1
Little solace for the 50% of youth unemployed or the strait jacket on a functioning economy. Greece should default, exit the Euro and start over. Extend and pretend does them no good.
13
'Greece should default, exit the Euro and start over. Extend and pretend does them no good.'
Only economists -(or commenters) who want to push back Greece to the hardest times when it was one of the poorest countries in Europe - suggest such economical suicide.
Only economists -(or commenters) who want to push back Greece to the hardest times when it was one of the poorest countries in Europe - suggest such economical suicide.
4
Greece is one of the world's oldest civilizations. They will reverse the doom that Germany helped heap upon them in due course. "Poor" defines nothing. Arbitrary measures ( by economists) of GDP, etc. are not appropriate at this juncture. The talents and intellect of the Greeks need to be unlocked. Debt slavery only works for the creditors, who already drew all the blood from the turnip.
7
Agreed. Tourism is the lifeblood of Greece and ditching the Euro would fill every plane, boat, restaurant and tour. I agree with Mark & Socrates' comments; there are too many international banks with their grubby hands all over Greece. Supply and demand has been subverted and gamed out a percentage. Enough.
1
The strangest thing is that austerity proponents claim that governments should curb their expenses and investments (i.e. projects with future returns such as education and infrastructure) exactly when interest rates are historically low. If someone needs to borrow money, this would be the best time to do that. Not only that; by borrowing money and investment it stimulates the economy.
29
The point is that you need to have someone willing to loan you the money with which to undertake all the "investments". Not sure how much future return there really is on bonus payments to pensioners so they can take a holiday and more do nothing government jobs - the types of "investments" Greece has previously made.
1
It is premature to talk about debt relief and primary surplus targets when Greece still has to achieve a primary surplus.
Last year, Greece ran a 16 billion Euro primary deficit. But the Troika claimed that Greece had achieved a primary surplus, because they decided to take 19 billion Euros out of the equation, which had been spent on recapitalizing Greek banks
This year, the Troika expects a primary surplus, but the numbers are not in yet, and it is entirely possible that Greece won't be able to pay its bills, even before interest payments.
But all of this is ultimately beside the point. The real issue is that Greek wages and Greek productivity are mismatched, and that either wages have to go down through internal devaluation if Greece stays in the EU and the Euro or through external devalution by leaving the Euro-Zone.
The best solution at this point would be to offer Greece a debt restructuring in exchange for a voluntary exit from both the EU and the Euro. This way, the Greeks would become masters of their own destiny, and Europe could still insist that the Euro and the EU are inextricably linked. In the end, both sides would be better off...
Last year, Greece ran a 16 billion Euro primary deficit. But the Troika claimed that Greece had achieved a primary surplus, because they decided to take 19 billion Euros out of the equation, which had been spent on recapitalizing Greek banks
This year, the Troika expects a primary surplus, but the numbers are not in yet, and it is entirely possible that Greece won't be able to pay its bills, even before interest payments.
But all of this is ultimately beside the point. The real issue is that Greek wages and Greek productivity are mismatched, and that either wages have to go down through internal devaluation if Greece stays in the EU and the Euro or through external devalution by leaving the Euro-Zone.
The best solution at this point would be to offer Greece a debt restructuring in exchange for a voluntary exit from both the EU and the Euro. This way, the Greeks would become masters of their own destiny, and Europe could still insist that the Euro and the EU are inextricably linked. In the end, both sides would be better off...
2
I suspect that a significant factor in the rest of the Eurozone's willingness to push this problem down the road is the rush of the Russians to engage with the new Greek government. Putin might have quickly stepped in to help the Greeks if the rest of the Eurozone had pulled the rug on them.
5
My feeling is that if Angela Merkel can sell to the German public that victory has been won by the Greeks collecting taxes from the wealthy and cracking down on corruption, while quietly allowing the size of Greece's primary surplus to decline to something reasonable, more power to her. Maybe at this point, it's more about face saving for Merkel, et al. than substance.
7
Greece should be kicked out of the Eurozone and forced to live on their drachma or whatever they conjure.
They will do themselves and all of us a huge favor.
And Krugman faithfully keeps up his drumbeat that somehow cheating on taxes, living beyond means, borrowing recklessly, lying about numbers is a great thing, and all of those can be blamed on credits with the phrase irresponsible lending. May be that gets him a play with the extreme liberal commenters here, but out in the real world people are certain he has lost his mind.
They will do themselves and all of us a huge favor.
And Krugman faithfully keeps up his drumbeat that somehow cheating on taxes, living beyond means, borrowing recklessly, lying about numbers is a great thing, and all of those can be blamed on credits with the phrase irresponsible lending. May be that gets him a play with the extreme liberal commenters here, but out in the real world people are certain he has lost his mind.
8
Now who's got a drumbeat going here, MidtownDesi? As the post declares Greece has a primary surplus (and in this they are not lying about numbers), have been collecting more taxes and are going after tax cheats (not cutting funding to the IRS as we have done here in the USA), is are borrowing only to maintain cash flow and pay interest (consider that primarily European aid to Greece's creditors). The story story has changed because of dramatic sacrifices by the Greek people, but you trumpet old news as if it reflected current events. Kicking Greece out of the Eurozone for your atavistic pleasure isn't in the cards - further accommodation for Greece is the future.
13
So let's flip this around, a private sector bank concocts a deal to hide the true fiscal position of Greece ( a fraud) and goes unpunished (Goldie and the boys in NY City). Reckless lenders push money out the door to borrowers who clearly could not pay the money back because they can package them and sell to other stupid banks grubbing for yield and now expect to be paid. Citizens are punished because their feckless leaders seeking status put them in the position. The only thing sensible you said was for Greece to leave the Euro, set up a new currency, jake on the debts to the Euro state(what ever it is) and move on. They are better off without the blood sucking banks in Germany.
3
Think about this Desi:
Balanced Budgets and Depressions in the US
Thayer, Frederick C.
"... since 1791, there have been six significant economic depressions among the innumerable "business cycles." Each sustained period of budget-balancing was immediately followed by a significant depression. There are as yet no exceptions to this historical pattern.
This is the record of six depressions:
1. 1817-21: in five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819.
2. 1823-36: in 14 years, the debt was reduced by 99.7 percent, to $38,000. A depression began in 1837.
3. 1852-57: in six years, the debt was reduced by 59 percent, to $28.7 million. A depression began in 1857.
4. 1867-73: in seven years, the debt was reduced by 27 percent, to $2.2 billion. A depression began in 1873.
5. 1880-93: in 14 years, the debt was reduced by 57 percent, to $1 billion. A depression began in 1893.
6. 1920-30: in 11 years, the debt was reduced by 36 percent, to $16.2 billion. A depression began in 1929.
...
The question is whether this consistent pattern of balance the budget-reduce the national debt-have a big depression is anything other than a set of coincidences. According to economic myths, none of these sequences should have occurred at all. How on earth, for example, could we virtually wipe out the national debt in the mid-1830s, then fall immediately into one of the six recognized collapses in our history? ..."
Balanced Budgets and Depressions in the US
Thayer, Frederick C.
"... since 1791, there have been six significant economic depressions among the innumerable "business cycles." Each sustained period of budget-balancing was immediately followed by a significant depression. There are as yet no exceptions to this historical pattern.
This is the record of six depressions:
1. 1817-21: in five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819.
2. 1823-36: in 14 years, the debt was reduced by 99.7 percent, to $38,000. A depression began in 1837.
3. 1852-57: in six years, the debt was reduced by 59 percent, to $28.7 million. A depression began in 1857.
4. 1867-73: in seven years, the debt was reduced by 27 percent, to $2.2 billion. A depression began in 1873.
5. 1880-93: in 14 years, the debt was reduced by 57 percent, to $1 billion. A depression began in 1893.
6. 1920-30: in 11 years, the debt was reduced by 36 percent, to $16.2 billion. A depression began in 1929.
...
The question is whether this consistent pattern of balance the budget-reduce the national debt-have a big depression is anything other than a set of coincidences. According to economic myths, none of these sequences should have occurred at all. How on earth, for example, could we virtually wipe out the national debt in the mid-1830s, then fall immediately into one of the six recognized collapses in our history? ..."
6
Whenever one may kick a can down the road rather than pick it up, one should -- or so goes conventional socialist wisdom when a debt is owed. Syriza may be new to power, but clearly they've absorbed THIS lesson. And despite all the tough talk by creditors, their willingness to cave on this to Greece augurs well for future demands to keep the bailout going without further demands that a society be restructured to be more self-sustaining.
Wow. The amount of Greece's debt is a "notional" number, that's "a more or less arbitrary number at this point, with little bearing on the amount anyone expects Greece to pay". Apparently, that's because what a country borrows to live better than it could otherwise is unimportant because debt-service is a matter to be forgiven into perpetuity as a right with a bailout. By whatever means eliminate the effects of needing to pay that debt-service, and I can see how the quantity of debt becomes meaningless ... or "notional".
The point that has been successfully masked is that Greece refuses to change its uncompetitive labor laws, reform its pervasive corruption, further reduce an unproductive public sector, slim down a still-generous social safety net and actually collect the taxes owed by its people. And Europe bought into it. The cost of that buy-in may be a Europe essentially paying itself for the debt it foolishly allowed Greece to accumulate.
The Professor's real point is that there IS such a thing as a free lunch! And it features gyros!
Wow. The amount of Greece's debt is a "notional" number, that's "a more or less arbitrary number at this point, with little bearing on the amount anyone expects Greece to pay". Apparently, that's because what a country borrows to live better than it could otherwise is unimportant because debt-service is a matter to be forgiven into perpetuity as a right with a bailout. By whatever means eliminate the effects of needing to pay that debt-service, and I can see how the quantity of debt becomes meaningless ... or "notional".
The point that has been successfully masked is that Greece refuses to change its uncompetitive labor laws, reform its pervasive corruption, further reduce an unproductive public sector, slim down a still-generous social safety net and actually collect the taxes owed by its people. And Europe bought into it. The cost of that buy-in may be a Europe essentially paying itself for the debt it foolishly allowed Greece to accumulate.
The Professor's real point is that there IS such a thing as a free lunch! And it features gyros!
10
Okay, but why shouldn't that apply equally to corporations or governments that walk away from pension obligations? Or file for bankruptcy? Why should some be able to walk away from part or all of the "debts" but not others?
Double standards by chance?
Double standards by chance?
8
Richard -- hold the blarney and answer a simple question: how is this debt ever going to get paid? Explain how you would collect this debt.
Read
http://en.wikipedia.org/wiki/Venezuelan_crisis_of_1902–03
Read
http://en.wikipedia.org/wiki/Venezuelan_crisis_of_1902–03
1
"...socialist wisdom...", really? So-called conservatives like Reagan and George W. Bush had no problem exploding the debt.
"Deficits don't matter" - Dick Cheney. I think Republicans are the soccer league stars of kicking the can - no solutions for health care, immigration or even tax reform. They can't even figure out how to fund one agency without teeing up the proverbial can.
"Deficits don't matter" - Dick Cheney. I think Republicans are the soccer league stars of kicking the can - no solutions for health care, immigration or even tax reform. They can't even figure out how to fund one agency without teeing up the proverbial can.
2
as they say if you owe the bank a thousand bucks, you have a problem.
if you owe the bank 20 Billion, the bank has the problem.
The creditors blinked here. A dose of reality crept into the discussions.
Why? It's Greek to me.
if you owe the bank 20 Billion, the bank has the problem.
The creditors blinked here. A dose of reality crept into the discussions.
Why? It's Greek to me.
99
The main goal of austerity from what I can tell, is to privatize national assets and to force Greece in particular to keep buying weapons from France and Germany they don't need.
48
The austerity was widespread--remember the P.I.I.G.S.? Ireland is partly out of the hole, but only because one eighth of its population emigrated, many of them with higher degrees.
2
According to a "Spiegel" article, debtor countries have already signalled to Mr. Varoufakis that the 4.5 percent primary surplus are not realistic, and therefore the Friday agreement contained vague language instead of the 4.5%. I wonder which news reports and opinion pieces Mr Krugman has read that claim Syriza had surrendered. Certainly not the German press.
Just for the record: it's fine with me that Greece has got some wiggle room.
Just for the record: it's fine with me that Greece has got some wiggle room.
7
Paul Krugman correctly assesses the outcome from the last round of events in the Greek Crisis: reducing targeted primary surplus has been legitimized as an overriding goal. Going forward, Greece’s euro-zone partners would benefit from adhering to a core economic principle championed by Immanuel Kant. He contended that using reason without applying it to experience only leads to theoretical illusions. Have Greece’s euro-zone partners listened to Kant? Since 2010, they have been committed firmly to a program of austerity based on their version of reason. They have been steadfastly refusing to abandon this program to start negotiating, instead, for a new program in which debt repayment would be tied to the growth of Greece’s economy, as Paul Krugman’s conception does. In contrast, Yanis Varoufakis has responded constructively to the (catastrophic) experience of the Greek people. He is proposing a sensible, growth-driven repayment of debt but Angela Merkel (and her euro-zone colleagues) has been saying no. So, ironically, Kant’s Greek student practices his teachings whereas his German student seems to be possessed by theoretical illusions. But extrapolating from Dr. Merkel’s stellar economic and social record, I am confident that, before the closing-of-the-ring, she would make sure that reason and experience come together.
72
And Kant, after all, was German.
Another complex issue brought to a readable narrative. Sort of a cautionary tale for those who want to self impose someone elses currency upon themselves. As Greece found out, no way out, you are at the mercy of blood sucking parasites like the German banks, who were stupid enough to loan you the money in the first place knowing you couldn't pay it back even when the good times rolled. Of course, you could not have gotten in the club without some legerdemain by a noted Wall Street Money Changing Outfit, but hey that gets left out of the story of the bad, bad borrower. So, I hope this helps. Maybe it will buy Greece enough time to set up a new currency and leave the Euro system, hopefully followed by the rest of Southern Europe.
6
A good start. Now all we need to do is retire the euro and let countries have their own currencies back.
2
Why? Are you a forex trader? What would 27 new currencies do for the global economy, let alone Europe?
2
Boston dweller? And you say "we" in relation to the euro? Can you not see what's wrong with that?
2
Surprise! Greece had mercy on the Euro zone and gave them a few more months to get their heads on straight. No. Greece did not succumb to the banksters, it gave them a temporary reprieve and permission to portray the negotiation as a win for creditors. These creditors will have to decide how to write off the ridiculous bad debts without all creditors realize that they can have their debt burdens lightened or forgiven.
The primary lesson: Creditors have the primary responsibility of ascertaining the capacity to pay, before they loan money. If debtors cannot pay, creditors have failed to do their jobs and like all capitalists, take the loss that their miscalculations earned. All people must recognize that risking money for profit entails the potential of loss. So far nations and citizens have been made subject to the hubris of banks. It is time for debtor nations to assert sovereignty and for people to demand loan forgiveness in all democracies.
The primary lesson: Creditors have the primary responsibility of ascertaining the capacity to pay, before they loan money. If debtors cannot pay, creditors have failed to do their jobs and like all capitalists, take the loss that their miscalculations earned. All people must recognize that risking money for profit entails the potential of loss. So far nations and citizens have been made subject to the hubris of banks. It is time for debtor nations to assert sovereignty and for people to demand loan forgiveness in all democracies.
67
For too long a time, it was not at all clear that sanity would prevail in northern YURP - that bankers would look at their interest schedule and see that Greece was actually meeting its repayment dates.
Finally common sense reined, and bankers realized that you don't pinch too hard on a debtor who's paying you back !
Hoocooddanode ?
Finally common sense reined, and bankers realized that you don't pinch too hard on a debtor who's paying you back !
Hoocooddanode ?
8
Apparently, they were too far down the road to turn back. Leaving the Eurozone seems not to have been an option. They had some bargaining power, but today German bonds went on sale for a zero interest rate and sold quite well. And to me that tells you that Germany has imposed its will on the rest of Europe and Europe and accepted it. Also, Keynesian or not, there may have been widespread waste and corruption in Greece, more than the norm, and it needed to be addressed with austerity. One way of looking at it is that some people in Greece took advantage of other people in Greece. Printing money may only have fed a monster. It's a problem, but can-kicking is the order of the day, and seems to be working.
3
Greek leaders bought themselves some time, but the people are still suffering. There won't be any immediate relief for them under this "deal."
The only sighs of relief are coming from the stock market, which rose joyously and greedily at the news that the sadistic banks will continue to destroy democracies. That is considered good news in a world where the plutonomy rules. It swells to cancerous proportions, while the working and middle classes shrink.
If there is anything positive coming out of this Greek tragedy, it's that a harsh light is being aimed at the truth: that the banks own most of the global political system and have the power to destroy sovereign governments. I hope that, unlike our own corrupt leaders, Syriza's leaders do go after the oligarchs who robbed their country blind and hid their cash in offshore accounts. I hope that the Greeks will at least be treated to a perp walk or two. I hope that the story of how Greece entered the Eurozone in the first place -- through some shady Goldman Sachs-initiated debt and "financial instruments" -- with the banksters cynically betting on default and winning -- gets told again and again and again.
There needs to be more outrage. And it must spread beyond the birthplace of democracy to all of Europe and the US. Without outrage, wealth inequality will continue to grow and the oligarchs will continue to rule, buying up politicians and courts and legislatures and plundering whole countries in a global fire sale.
The only sighs of relief are coming from the stock market, which rose joyously and greedily at the news that the sadistic banks will continue to destroy democracies. That is considered good news in a world where the plutonomy rules. It swells to cancerous proportions, while the working and middle classes shrink.
If there is anything positive coming out of this Greek tragedy, it's that a harsh light is being aimed at the truth: that the banks own most of the global political system and have the power to destroy sovereign governments. I hope that, unlike our own corrupt leaders, Syriza's leaders do go after the oligarchs who robbed their country blind and hid their cash in offshore accounts. I hope that the Greeks will at least be treated to a perp walk or two. I hope that the story of how Greece entered the Eurozone in the first place -- through some shady Goldman Sachs-initiated debt and "financial instruments" -- with the banksters cynically betting on default and winning -- gets told again and again and again.
There needs to be more outrage. And it must spread beyond the birthplace of democracy to all of Europe and the US. Without outrage, wealth inequality will continue to grow and the oligarchs will continue to rule, buying up politicians and courts and legislatures and plundering whole countries in a global fire sale.
225
First, let me preface what I'm about to type with the fact that I'm a Greek-American that has spent much time in Greece over the past 51 years.
First, beware of Greeks baring gifts. The Greek government and its business environment are the most corrupt in the Organization for Economic Co‑operation and Development (OECD.) The Greek governmental bureaucracy is atrocious. It is the cause of Greece's extraordinary decline compared to other EU countries that also suffered from the 08 collapse.
Greece must export its way out of its depression; but, the Greek government is so dysfunctional, with way too may people doing nothing but stymieing economic growth, that the country is being strangled by its own corruption.
For Greece to truly become part of the Euro Zone, it was fraudulently brought in by corrupt Greek politicians and, who else but, Goldman Sachs. Oh...why haven't Goldman Sachs executives been prosecuted for this particular fraud??? Oh...money talks, honesty and integrity walks.
Greece will never become a real democracy until its corrupt government is reformed, the "prime directive" of the so called "troika."
First, beware of Greeks baring gifts. The Greek government and its business environment are the most corrupt in the Organization for Economic Co‑operation and Development (OECD.) The Greek governmental bureaucracy is atrocious. It is the cause of Greece's extraordinary decline compared to other EU countries that also suffered from the 08 collapse.
Greece must export its way out of its depression; but, the Greek government is so dysfunctional, with way too may people doing nothing but stymieing economic growth, that the country is being strangled by its own corruption.
For Greece to truly become part of the Euro Zone, it was fraudulently brought in by corrupt Greek politicians and, who else but, Goldman Sachs. Oh...why haven't Goldman Sachs executives been prosecuted for this particular fraud??? Oh...money talks, honesty and integrity walks.
Greece will never become a real democracy until its corrupt government is reformed, the "prime directive" of the so called "troika."
8
Krugman is so enamoured of expansionary policies that he wants to give Greece a free pass for the most corrupt irresponsible economic regime in recent European history. And endorse the antics of a bunch of loopy academic Marxists playing government. i guess that's pretty consistent with his general approach to economic policy.
5
Greece does NOT run a budget surpluses. It still runs enormous budget deficits of at least 8% GDP. The reason that Greece runs primary surplus is due to creative accounting on behalf of Eurostat, as outlined in this blog:
http://blogs.wsj.com/brussels/2014/04/23/greek-primary-surplus-statistic...
This post is about the fiscal year of 2013, but the numbers for FY 2014 won't be that different.
At the moment Greece is not in trouble because of its debts to other Eurogroup members. As part of the bailout agreement, Greece won't have to serve this debt until 2020 or so. Greece is in dire need of money, because over 20% of its national budget is financed through short-term loans from Greek banks (so-called T-bills) and that Greece can't borrow beyond the 15 billion Euro limit imposed by the ECB.
So the Greek primary surplus is a mirage. Every fifth Euro spent by the Greek government is financed through NEW debt, and Greece needs Euro Zone tax payer money to pay its bills.
In a nutshell: Greece has more of a revenue than a debt problem. The current crisis is NOT about Greece's old debts. It's about whether other Eurogroup governments are willing to finance Greek budget deficits with their taxpayer money.
http://blogs.wsj.com/brussels/2014/04/23/greek-primary-surplus-statistic...
This post is about the fiscal year of 2013, but the numbers for FY 2014 won't be that different.
At the moment Greece is not in trouble because of its debts to other Eurogroup members. As part of the bailout agreement, Greece won't have to serve this debt until 2020 or so. Greece is in dire need of money, because over 20% of its national budget is financed through short-term loans from Greek banks (so-called T-bills) and that Greece can't borrow beyond the 15 billion Euro limit imposed by the ECB.
So the Greek primary surplus is a mirage. Every fifth Euro spent by the Greek government is financed through NEW debt, and Greece needs Euro Zone tax payer money to pay its bills.
In a nutshell: Greece has more of a revenue than a debt problem. The current crisis is NOT about Greece's old debts. It's about whether other Eurogroup governments are willing to finance Greek budget deficits with their taxpayer money.
5
from your linked WSJ blog:
"Second, we exclude several specific items, mainly to better reflect the underlying structural fiscal position.
In 2013, these adjustments amounted to 9.5% of GDP, mainly reflecting the one-off cost of the support to the banking sector, which amounted to 10.8% of GDP according to the programme definition, and the transfers from Member States to Greece corresponding to profits on Greek Bonds held by the Eurosystem Central Banks, which amounted to 1.5% of GDP.
This brings us to a primary surplus of 0.8% of GDP."
You didn't seem to have read it yourself. These were one-offs in 2013. Greece is running a primary surplus now.
"Second, we exclude several specific items, mainly to better reflect the underlying structural fiscal position.
In 2013, these adjustments amounted to 9.5% of GDP, mainly reflecting the one-off cost of the support to the banking sector, which amounted to 10.8% of GDP according to the programme definition, and the transfers from Member States to Greece corresponding to profits on Greek Bonds held by the Eurosystem Central Banks, which amounted to 1.5% of GDP.
This brings us to a primary surplus of 0.8% of GDP."
You didn't seem to have read it yourself. These were one-offs in 2013. Greece is running a primary surplus now.
32
Greece, with 2% of Eurozone GDP, was always overemphasized in terms of impact on Europe, or the rest of the global economy. Its importance lay in a narrative created by its creditors , essentially that a nation's fiscal policies are a morality play. Government expenditures and debt "bad"", externally imposed austerity " good,". All completely independent of other considerations such as the effects on the long-suffering population, or the macro-economic effects of further strangling an economy in a deflationary spiral. It's probably inevitable in a world run by, and for, bankers. Just don't hold them responsible for the the greatest financial crisis since the Great Depression. After all, they are the good guys, right?
23
The people do not count in all of this austerity idiocy.
44
Paul Krugman does such a great job of making sense of what often seems to be nonsensical.
14
British bromides aside, Greece has indicated that there is economic viability possible outside the Germanic paradigm of the euro. And it's just a matter of time before the rest of the European Community concedes that one currency is just not where it's at for their countries.
15
The big fight is yet to come, but Syriza, very new to the international game, has done well thus far. How some in Berlin thought the new Greek government could support a renewed austerity drive is mind-boggling to many of us. Syriza stood up for its people, hoping its creditors would blink, and that seems like precisely what happened. Here's hoping that in the future Chancellor Merkel saves her at times grating moralism for Moscow instead of Athens.
25
The surplus under discussion can be facilitated by effective tax collection.The issue in Greece is that tax evasion is rampant in a private sector made up largely of professional individuals and small businesses.The challenge is to change the culture,which is hard and takes a long time.The impact of culture getting in the way of the right thing to do can be seen in the US ,where we still believe in the luxury of "following your dream and never giving up",the ex Soviet Republics,where dictatorships morphed into kleptocracies,the Middle East where a Spring has been followed by fragmentation and infighting along sectarian and tribal infighting and in Greece where under reporting of income is a way of life.
2
Austerity is no macroeconomic measure, it is a straightjacket, a framework for domestic policies. Now to say, Greece has defeated austerity is not correct, because they still have to follow the rules of austerity.
But within these rules they can do whatever they want. And it is also not correct to imply the former economic policies are the derivation of austerity, these politics were deeply flawed. Every directive would have failed within these domestic junk, austerity was the outside policy to limit the fallout.
I think most european grew tired with greece lawmakers constantly procrastinating and delivering deeply flawed reforms. Like most greeks they were wishing for anything but clinging to this deadbeats. Syriza may be rattling the cages, they may scare the other europeans, who huddled around germany, and may scare their own citizen, who are doing a banking march, but they are something different.
And for greece being something different is already an improvement, as long as the limits set by austerity are not breached. Syriza didn't changed austerity, they just changed what the former governement made out of it.
But within these rules they can do whatever they want. And it is also not correct to imply the former economic policies are the derivation of austerity, these politics were deeply flawed. Every directive would have failed within these domestic junk, austerity was the outside policy to limit the fallout.
I think most european grew tired with greece lawmakers constantly procrastinating and delivering deeply flawed reforms. Like most greeks they were wishing for anything but clinging to this deadbeats. Syriza may be rattling the cages, they may scare the other europeans, who huddled around germany, and may scare their own citizen, who are doing a banking march, but they are something different.
And for greece being something different is already an improvement, as long as the limits set by austerity are not breached. Syriza didn't changed austerity, they just changed what the former governement made out of it.
1
For years, the right wing in America has been screaming on thousands of radio stations across the land that the U.S. was endanger of "becoming another Greece". They seemed to want it to happen. And, in fact, their allies on Capitol Hill have labored in that direction, criticizing stimulus spending as piling up reckless debt on top of irresponsible debt (the G.W. Bush wars and tax cuts for the wealthy, in sharp contrast, were apparently responsible debt obligations). Had they won the White House in either of the last two elections, there can be little doubt we would have been dumped into a decade or longer recession or even depression.
Greece is a very special case. Its economy is mired in rules and regulations that, in some ways, mimic medieval times. It seems to be the exact antipode of a modern, competitive society with strictures limiting competition and encouraging lassitude among the established. It is also representative of the southern tier of states that traditionally favor quality of life over competitive instincts.
The comparison between Greece and the United States was never valid, but, if you are driving across America's heartland in states like Texas or Louisiana later today, you can most likely tune into a local or national talk show still denouncing the possibility of our eminent demise from the national debt. When Republicans win the White House once again, as they surely will one day, such talk will cease.
http://terryreport.com
Greece is a very special case. Its economy is mired in rules and regulations that, in some ways, mimic medieval times. It seems to be the exact antipode of a modern, competitive society with strictures limiting competition and encouraging lassitude among the established. It is also representative of the southern tier of states that traditionally favor quality of life over competitive instincts.
The comparison between Greece and the United States was never valid, but, if you are driving across America's heartland in states like Texas or Louisiana later today, you can most likely tune into a local or national talk show still denouncing the possibility of our eminent demise from the national debt. When Republicans win the White House once again, as they surely will one day, such talk will cease.
http://terryreport.com
36
France can borrow at that rate only because the ECB and the other creditor Euro member states agree to support their bonds. Without that suppoort the bonds would be downgraded. And as a taxpayer in Europe, I find it very hard to feel sorry for Greece. Historically they've always played the same game, like the son, who after killing his parents, cries for mercy because he's now an orphan. Take their actions under the Latin Monetary Union as an example. It's, as Yogi Berra said, deja-vu all over again. Someone is going to have to pay for the decade-long fiscal excesses of Greece, and I don't see why it should be the taxpayers of the Euro member countries who through government institutions in effect are holding 80% of Greek bonds as a result of having bailed Greece out. The Germans are holding 60 billion Euro in Greek debt. And they should raises their taxes and forget about it? Krugman is living proof that it's always easier to spend other perople's money. I would pull the plug on Greece. Then they could really see what austerity is like.
13
And you are living in CH... and you vouch for Europeans in the EU?
You visibly forget that our German neighbours have used the Eurozone the sell their wares (of excellent quality) mostly to the EU neighbours and made their economy the best in Europe. Greece as no economy that can stand against the bullying of the Germans, and I live in a neighbouring country of Germany.
You visibly forget that our German neighbours have used the Eurozone the sell their wares (of excellent quality) mostly to the EU neighbours and made their economy the best in Europe. Greece as no economy that can stand against the bullying of the Germans, and I live in a neighbouring country of Germany.
8
"I would pull the plug on Greece. Then they could really see what austerity is like."
And so would Switzerland. Economics is not a morality play.
And so would Switzerland. Economics is not a morality play.
13
Cursing the Greeks may improve your mood, but it doesn't help the situation.
With all the constant haggling over money, Europe is going into "every man for himself" mode. And that's too bad. Because unlike in America, where "socialist" goes with "Europe" as "dark" goes with "night", Europe was becoming a model in the world for how states should cooperate. But no more. "Europe" has been pathetically donwsized to "Angela Merkel".
With all the constant haggling over money, Europe is going into "every man for himself" mode. And that's too bad. Because unlike in America, where "socialist" goes with "Europe" as "dark" goes with "night", Europe was becoming a model in the world for how states should cooperate. But no more. "Europe" has been pathetically donwsized to "Angela Merkel".
5
I’m tired of continual columns about the Greece/EU financial crisis. It’s important, but why such a preoccupation? Krugman I thought was the Conscience of a Liberal applying his insights to our Great American Inequality .
The gop rw extremists parading on our media daily are ever more threatening to our security and well being. We could use some factual contrast to the politics and economic policies of some of the more successful advanced countries.Those with better living standards for their populations, and more democratic elections. How do they do it? Some specifics please, to compare to our worsening US backwardness.
Not as exciting as the Greece saga?
The gop rw extremists parading on our media daily are ever more threatening to our security and well being. We could use some factual contrast to the politics and economic policies of some of the more successful advanced countries.Those with better living standards for their populations, and more democratic elections. How do they do it? Some specifics please, to compare to our worsening US backwardness.
Not as exciting as the Greece saga?
49
The point is our European brothers have horribly failed to manage the 2008 crash by imposing austerity and interest rate hikes. Foe example, Sweden raising interest rates and pushing their economy into depression was a real time example for our Fed and our Republican clowns that raising interest rates now would be equally disasterous. Now if we could just build a few bridges, or tunnels, fix the potholes and pay for community college for a generation we have abandoned, maybe, just maybe, we will grow past this self imposed suffering... Without Krugman would we understand these relationships?
305
If you don't understand at least some of the connection between what's happening in Greece and America's own economic situation, you haven't been paying attention.
29
I disagree. The Greek crisis, and how it is resolved, or not), is one of the defining stories of our time. Syriza is challenging the neoliberal orthodoxy in ways that are unimaginable in the States. In the US, both the Republicans and Democrats are solidly in bed with the banks and big money and it is only a matter of degree. Syriza is really outside the corporate mold. If they succeed, and Podemos follows in Spain, we could be seeing a generational and important (not radical) ideological change in politics and economics.
168
Varoufakis has called the wording of the agreement "constructive ambiguity".
It had to be done that way, because the measures had to be approved by the German Bundestag, as well as other European parliaments. The agreement had to be spun as a loss for Greece in order to win approval.
In fact, it's a big win for Greece.
1. the surplus will not be increased.
2. There will be no new Government layoffs, privatizations, and sell-offs of assets. 'Austerity' will instead consist of the reasonable measures of improving tax collection and Government efficiency.
3. Varoufakis says that Greece will now work out its budget plans with the professionals at the IMF - "which holds views that I personally agree with" - rather than submitting to the creditor powers.
4. Interim financing will be provided, and the can will be kicked down the road for four months.
In four months Greece's negotiating position will be better, not worse, because it's now clear that it was the Eurogroup that blinked and lost the game of chicken, whatever the spin may be.
It had to be done that way, because the measures had to be approved by the German Bundestag, as well as other European parliaments. The agreement had to be spun as a loss for Greece in order to win approval.
In fact, it's a big win for Greece.
1. the surplus will not be increased.
2. There will be no new Government layoffs, privatizations, and sell-offs of assets. 'Austerity' will instead consist of the reasonable measures of improving tax collection and Government efficiency.
3. Varoufakis says that Greece will now work out its budget plans with the professionals at the IMF - "which holds views that I personally agree with" - rather than submitting to the creditor powers.
4. Interim financing will be provided, and the can will be kicked down the road for four months.
In four months Greece's negotiating position will be better, not worse, because it's now clear that it was the Eurogroup that blinked and lost the game of chicken, whatever the spin may be.
144
First off Syrizas measure will help the economy by helping ordinary people and the working class so their economy will improve from these measures. But secondly and most importantly the longer Syriza succeeds in holding off moreAusterity imposed by the banksters, the more time for their allies like Podemos in Spain, Sinn Fein in Ireland, the Five-Star movement in Italy to win their own victories against the banksters.
Syriza realizes that it has to be part of a European movement against austerity - it is too small to battle the power of International capital all by itself. So from the beginning Tsipras and Varifoukis have been talking not only to the banksters but over the heads via interviews to the people all over Europe.
Syriza realizes that it has to be part of a European movement against austerity - it is too small to battle the power of International capital all by itself. So from the beginning Tsipras and Varifoukis have been talking not only to the banksters but over the heads via interviews to the people all over Europe.
5
Thanks Mark for the clarity.
1
I have a theory about tax collection, or the lack of it, which has been an problem in Greece for far longer than the recent crisis. Syriza leaders seem to realize that any national government simply doesn't have the power to make oligarchs pay up without the full force of European insistence behind it. The coming months will be a good test of whether they can increase tax payments and reduce corruption. The odds are against them, but it's an exciting prospect to imagine.
Thanks Mr Krugman, for a clear headed analysis of the Greece agreement, as opposed to too many articles that never seem to mention primary surplus nor other key issues really at stake.
Thanks Mr Krugman, for a clear headed analysis of the Greece agreement, as opposed to too many articles that never seem to mention primary surplus nor other key issues really at stake.
207
Maybe we can learn something about squeezing taxes out of the avoidant class. Greece is not the only country whose wealthy use every available ruse to keep from paying their allotted share.
10
http://www.forbes.com/sites/timworstall/2015/02/26/the-reason-austerity-...