Let's step back a few years when Greek bonds were paying around 38% to their holders because of the high risk. The banks held many of these bonds and made the outrageous profits. Then when the crisis became full blown the governments stepped in and took over the bonds. The banks still have the profits from those interest rates but the citizens of those countries now will bear the losses. Sound familiar?
13
I think the advantage goes to Greece in these negotiations because the Greeks face a very difficult future whether they default and exit the Eurozone or they are bailed out on harsh terms and stay in the Eurozone suffering punishing austerity indefinitely. On the other hand the remaining Eurozone members face a potentially much worse scenario if they do not bail Greece out, i.e., the risk of a Lehman-like meltdown if Greece exits, compared only to having to live with a deal they feel was too generous to Greece if they do bail Greece out. Plus much of the money Europe has invested in Greece is clearly not recoverable, so writing it off is really giving up nothing, which makes the write off an easy thing to do if it avoids the risk of a financial calamity.
Plus the lead article in the NYT on this subject at the moment makes clear the geopolitical risks to Europe inherent the situation, which will force all of the Eurozone countries to be more reasonable in their approach.
If this was a litigation matter, one would say the parties are now on the courthouse steps, which is where realities must be faced.
If the Greeks are good poker players, they should come out of this in good shape.
Plus the lead article in the NYT on this subject at the moment makes clear the geopolitical risks to Europe inherent the situation, which will force all of the Eurozone countries to be more reasonable in their approach.
If this was a litigation matter, one would say the parties are now on the courthouse steps, which is where realities must be faced.
If the Greeks are good poker players, they should come out of this in good shape.
1
If Greece defaults, it will definitely be like Radio Shack. The world has seen both of these basket cases moving toward default/BK for YEARS! When something like Greece or Radio Shack comes on this slowly, it definitely isn't a surprise and all parties make preparations. Lehman Brothers was so different because it came as such a surprise. Big difference. When you're not ready for something, guess what? Total loss of control is quite possible if you are empty handed as many were back in 2008 when LB went down.
I would like to think that the greatness of cultural civilization embodied in ancient or modern Greece is neither comparable to Lehman Brothers nor Radio Shack.
It is a modern civilization built upon an ancient civilization that cannot be reduced to a financial merchant or an electronics shopkeep.
The cradle of democracy, architecture, arts, law, education, philosophy, literature, mathematics, etc. cannot be reduced to a vendor.
The Greeks have managed through thousands of years good and bad. They will get through this unfortunate situation stronger for having weathered such.
“Success is not final, failure is not fatal: it is the courage to continue that counts.”
– Winston Churchill
It is a modern civilization built upon an ancient civilization that cannot be reduced to a financial merchant or an electronics shopkeep.
The cradle of democracy, architecture, arts, law, education, philosophy, literature, mathematics, etc. cannot be reduced to a vendor.
The Greeks have managed through thousands of years good and bad. They will get through this unfortunate situation stronger for having weathered such.
“Success is not final, failure is not fatal: it is the courage to continue that counts.”
– Winston Churchill
4
Greece is a shack without radio.
3
The clue to this is that the Deutsche Bank CEO just quit after only having the job for a couple months. Deutsche Bank is about as big as Lehman. I wonder if Greece possibly going bankrupt and him quitting a job as the CEO of one of the world's largest banks is a coincidence? :)
1
Let the Greece exit EU. That will be the best solution to this crisis. Only it is over and not in EU, then Greece will really think about the current situation and realize the benefits they lost when they were in EU. It is clear in the very early stage that Greece needs to reduce its pension obligations. Otherwise, Greece will never be able to pay in the future just like many US cities such as Detroit, Stockton etc. they need to go to the bankruptcy court (EU) and re-emerge as a new country.
2
Yes, private banks might have sent all the risk to the taxpayers, which will absorb any Greek default via central banks. But, the problem at the end is political. If European economic union via the Euro is only for the benefit of the rich countries of the continent, then there is no reason for the poor countries to stay. With their own monetary policy and currency, and interest rates set appropriately these small countries would grow faster than being hobbled under a monetary policy fitting Germany and the Scandinavian countries.
Greece, unless monetary policy changes, really should exit the Euro, and so should Spain and Portugal, and probably Italy and many smaller East European countries. Though unpopular with voters in these countries, the imbalances seem unsustainable and this is actually not the end of the world. Simply of the dream of a unified Europe, which, after all, might have just been a dream.
Greece, unless monetary policy changes, really should exit the Euro, and so should Spain and Portugal, and probably Italy and many smaller East European countries. Though unpopular with voters in these countries, the imbalances seem unsustainable and this is actually not the end of the world. Simply of the dream of a unified Europe, which, after all, might have just been a dream.
4
As the article says, risky banks have eliminated their risk by selling the debt up the chain to the government banks. That and any other Greek debt will by now be thoroughly hedged. The cost of a failure has been slowly bled into the system as the prices of the hedges and assumption of risk by entities that consider it far less of a risk. If it was corporate debt, it would have been devalued to pennies on the dollar and sold off to debt collectors by now.
Rip up the defunct paper, enable the warning popup on Greece's credit report, and let's get this off the markets' backs.
Rip up the defunct paper, enable the warning popup on Greece's credit report, and let's get this off the markets' backs.
1
Interesting analogy, but you get the Lehman story wrong. Lehman was the culmination of a long malaise (see http://wp.me/p5zzQG-1k ), which makes it an apt analogy to Greece. Greece is a symptom of the dysfunctional Euro, much as Lehman was the symptom of a dysfunctional financial system.
1
"With hindsight, it is clear that European creditors bungled their response by demanding extreme fiscal austerity without any pressure release valve to lessen the economic pain for Greek citizens."
With hindsight? It was clear as day at the time, especially but not exclusively to readers of Paul Krugman's column on this newspaper's op ed page.
The austerity policies of Chancellor Merkel, the European Central Bank and the International Monetary Fund have been policies of economic madness. Worse, the policies are continuing right up to today, hindsight or not.
If the Greek fiasco proves anything, it proves that Smith College students were entirely correct in protesting the decision to honor Christine Lagarde, Managing Director of the IMF, an institution they accused of imposing ruinous conditions on poor countries to benefit Western banks and businesses.
At the time, it was asserted that Ms. Lagarde had changed those policies. Yes, it was acknowledged, the IMF's economic policies in the past were disastrous in addition to murderous, but the bad old IMF was gone, thanks to Ms. Lagarde.
Her appalling policies in Greece have shown how false that claim was.
With hindsight? It was clear as day at the time, especially but not exclusively to readers of Paul Krugman's column on this newspaper's op ed page.
The austerity policies of Chancellor Merkel, the European Central Bank and the International Monetary Fund have been policies of economic madness. Worse, the policies are continuing right up to today, hindsight or not.
If the Greek fiasco proves anything, it proves that Smith College students were entirely correct in protesting the decision to honor Christine Lagarde, Managing Director of the IMF, an institution they accused of imposing ruinous conditions on poor countries to benefit Western banks and businesses.
At the time, it was asserted that Ms. Lagarde had changed those policies. Yes, it was acknowledged, the IMF's economic policies in the past were disastrous in addition to murderous, but the bad old IMF was gone, thanks to Ms. Lagarde.
Her appalling policies in Greece have shown how false that claim was.
1
It is obvious that the Greek government wants Europe to pay for their early retirement and failed tax collection system.
The Grexit is the only reasonable solution and at the end of the day,a devalued Drachma will make the country cheap for experts and tourism. Maybe the Greek will learn not to spend what that don't have.
It should also be a lesson for ourselves, raising the social security and Medicare age to seventy.
The Grexit is the only reasonable solution and at the end of the day,a devalued Drachma will make the country cheap for experts and tourism. Maybe the Greek will learn not to spend what that don't have.
It should also be a lesson for ourselves, raising the social security and Medicare age to seventy.
3
The problem with the Greeks is that they have had ideas way above their station ever since winning independence from the Ottomans in 1832 (which probably would not have been achieved without heavy pressure from Russia, France and Britain). They continue to dine out on Aristotle, Socrates et al in spite of having been a cultural backwater for over 700 years. Their economy is based on agriculture and tourism and as such, simply not in the same league as the hi-tech countries of northwest Europe. As they themselves have admitted, their entry to the EU was based on fraudulent cooking of books. Now they posture as if the EU will fall apart in the event of Grexit. Not true....Europe will brush off the loss, finally spared of its persistently dishonest and recalcitrant member, and Greece will revert to its historical place as a poor, rather dozy but charming corner of the Balkans.
16
Well said!
But if Greece is an agricultural and tourism backwater and nothing else to Europe, wouldn't many states of the US Midwest be exactly the same to the East and West coasts of the US, minus the tourism? Even cooking the books, as Kansas and Illinois is doing could be called Greek...
1
This is a very stupid title and question.
The question should be: If Greece goes bankrupt, will it resemble Argentina in 1998 or in 2014 ?
Argentina has defaulted 10 times on its foreign debt obligations. The most memorable ended in the 1998–2002 Argentine Great Depression and the most recent was in 2014.
In any event, the most recent default in 2014 did not result in a major calamity in world bond markets but the 1998 debt crisis did. Argentina has also had its foreign debt rescheduled many times with the Paris Club (official creditors) and the London Club (private bank creditors) since its first debt rescheduling with the Paris Club in 1956.
Since the 1998 debt crisis, Argentina learned the hard lessons of global finance as it has also been a pariah in world debt markets. Argentina has had to pay exorbitant rates on whatever foreign borrowings it has since concluded.
Recall that the 1997-98 debt crisis involved not only Argentina, but also much of East Asia, particularly Indonesia, South Korea Thailand, Hong Kong, Laos, Malaysia and the Philippines during 1997 which also involved Russia in 1998.
Weather a Greek default on its obligations will spread to foreign holders (mainly Euro Zone governments) of Greek debt in the Euro Zone or other Western countries or not is still too early to tell … but it could get very ugly !!!
The question should be: If Greece goes bankrupt, will it resemble Argentina in 1998 or in 2014 ?
Argentina has defaulted 10 times on its foreign debt obligations. The most memorable ended in the 1998–2002 Argentine Great Depression and the most recent was in 2014.
In any event, the most recent default in 2014 did not result in a major calamity in world bond markets but the 1998 debt crisis did. Argentina has also had its foreign debt rescheduled many times with the Paris Club (official creditors) and the London Club (private bank creditors) since its first debt rescheduling with the Paris Club in 1956.
Since the 1998 debt crisis, Argentina learned the hard lessons of global finance as it has also been a pariah in world debt markets. Argentina has had to pay exorbitant rates on whatever foreign borrowings it has since concluded.
Recall that the 1997-98 debt crisis involved not only Argentina, but also much of East Asia, particularly Indonesia, South Korea Thailand, Hong Kong, Laos, Malaysia and the Philippines during 1997 which also involved Russia in 1998.
Weather a Greek default on its obligations will spread to foreign holders (mainly Euro Zone governments) of Greek debt in the Euro Zone or other Western countries or not is still too early to tell … but it could get very ugly !!!
2
Sufficient numbers of experts have now weighed in, to give critical mass to Elliott's Rule: "If sufficient numbers of experts predict disaster, nothing will happen. NOTHING"
9
We must address the causal issue. Greece, with the help of American banks, hid their level of debt from the people and the Greek people hid their wealth from the their own tax man. Everyone wanted more for me and the politicians did what the people wanted so they could keep their fat incomes. The Greeks are now blaming anyone else and will not admit they lied to each other and financially ruined their country and must never, never do that again. With great regrets it is time for them to go, time for them to create their own currency, stop lying to each other and build a new Greece on their own.
12
Well, the Greeks had wonderful teachers (Jedi Masters) namely American banks who were the masters in hiding bad debt (hundreds of billions in bad mortgages) and many wealthy and corporations who are masterful in offshoring assets and avoiding income tax (particularly as a marginal rate) on earnings.
6
Greek politicians lied. But your comment is disingenuous since they were not alone in hiding the situation nor was the "lie" ever credible,especially to bond rating agencies andatheir banking clients which have never been seriously held to account either. So socializing risk and privatizing profit is as true today as ever
2
Seems clear that the strictly economic fallout of Greek default would be more akin to Radio Shack - although it might be very tough for Greece. What some European leaders rightly worry about is the political fallout - that could, who knows, be even worse than Lehman Brothers - fracturing of Europe, greater Russian influence, etc. I don't think anyone can really see the future; Grexit will be akin to wandering down a dark alley - not a place you want to go if you can help it.
The more austerity is imposed on Greece, the deeper it dives into recession, and the more difficult it becomes to repay its debts. Europe is going to have to cut Greece some slack if it doesn't want to head down that dark alley.
The more austerity is imposed on Greece, the deeper it dives into recession, and the more difficult it becomes to repay its debts. Europe is going to have to cut Greece some slack if it doesn't want to head down that dark alley.
2
If the German government is the big debt holder, Merkel should just do the write down. Everyone is blaming Tsipras, but, guess what, the kid is right.
13
With respect, you miss the point. The debt will most likely be written off anyway, but will Greece stop spending what it does not have?
Does anyone even remember the "sick man of Europe"?"Economic Reform" was only part of the story. A virtuous story to tell, but far from being even the most important component of Germany 's spectacular revival.
Germany built the currency union to benefit itself. One of the intended consequences was easy credit to questionable states, fueling export growth. The other was a lower euro, from which Germany has handsomely benefited in comparison to the DM. Look to Switzerland if you have any doubts.
A fiscal transfer union is its domestic political bugbear, to be avoided at all costs. Hence the ad hominem attacks on "lazy southerners".
Germany built the currency union to benefit itself. One of the intended consequences was easy credit to questionable states, fueling export growth. The other was a lower euro, from which Germany has handsomely benefited in comparison to the DM. Look to Switzerland if you have any doubts.
A fiscal transfer union is its domestic political bugbear, to be avoided at all costs. Hence the ad hominem attacks on "lazy southerners".
17
ALL unions involve fiscal transfers, because it is impossible for all regions of a country (or even a state or a city) to be exactly equal in wealth. Mississippi and New Mexico get about $2.50 in federal spending for every $1 they pay in federal taxes. Delaware and Minnesota get about $ 0.50. So what?
The benefits of a united Europe, particularly not having had a war in 70 years, something which had not happened in the previous 1000 years, outweigh the costs of supporting Greece and some of the other southern states.
The benefits of a united Europe, particularly not having had a war in 70 years, something which had not happened in the previous 1000 years, outweigh the costs of supporting Greece and some of the other southern states.
12
Try to explain the concept to the mercantilist germGerman public opinion
3
All i see is, that the swiss purchasing power is 5500 Euro,
while for a german it is 2000 Euro.
I don't care about export excess, if it's just because my wages are depressed. A strong currency may make us not to be the top exporter of the world (actually in absolute number twice as much as the second - china). But it surely helps the german citizen.
We had been a top exporter for decades before the euro, with a strong currency, but we were also much wealthier than the rest of europe. I want my own currency back, i don't want to share this purchasing power just for some trade surplus.
while for a german it is 2000 Euro.
I don't care about export excess, if it's just because my wages are depressed. A strong currency may make us not to be the top exporter of the world (actually in absolute number twice as much as the second - china). But it surely helps the german citizen.
We had been a top exporter for decades before the euro, with a strong currency, but we were also much wealthier than the rest of europe. I want my own currency back, i don't want to share this purchasing power just for some trade surplus.
3
Germans like to ask why they should support Greece. But in any Union, some parts will inevitably be poorer than others. Lake Woebegone, where all the children are above average, does not exist in real life. There are US states that consistently, every year, for decades, receive more than they pay into the Federal Treasury, and other that consistently receive less than they pay in. The same is true for Canadian provinces. Within European countries there are regional differences (northern vs southern Italy; Catalonia vs Andalucia).
Either Europe must become a true Union, in which such differences are accepted as the price for unity or the common currency is ultimately doomed,
Either Europe must become a true Union, in which such differences are accepted as the price for unity or the common currency is ultimately doomed,
19
Does anyone even remember the "sick man of Europe"?"Economic Reform" was only part of the story. A virtuous story to tell, but far from being even the most important component of Germany 's spectacular revival.
Germany built the currency union to benefit itself. One of the intended consequences was easy credit to questionable states, fueling export growth. The other was a lower euro, from which Germany has handsomely benefited in comparison to the DM. Look to Switzerland if you have any doubts.
A fiscal transfer union is its domestic political bugbear, to be avoided at all costs. Hence the ad hominem attacks on "lazy southerners".
Germany built the currency union to benefit itself. One of the intended consequences was easy credit to questionable states, fueling export growth. The other was a lower euro, from which Germany has handsomely benefited in comparison to the DM. Look to Switzerland if you have any doubts.
A fiscal transfer union is its domestic political bugbear, to be avoided at all costs. Hence the ad hominem attacks on "lazy southerners".
2
Imagine that the people of Iowa or Alaska or New Brunswick or Alberta vote to provide themselves generous pensions and plentiful civil service jobs with outstanding benefits, while declining to mandate or pay anywhere near enough in taxes to fund these. "Help!" they cry to their neighbors after their financial collapse. "We will help you" say the citizens of Connecticut or Nebraska or British Columbia or Ontario, "provided that you at least cut your pension promises and civil service to the levels that we provide, and collect the taxes that we ourselves pay." "No!" comes the response, "why you're trying to impose Austerity upon us, and as NYT columnists have shown, Austerity is an Evil, like genocide. Just give us the funds so that we can continue to do as we have done!"
10
Precisely this. It continues to amaze me how short sighted the "makers" can be. The benefits of union FAR outweigh the costs of helping out the "takers."
2
The other similarity between this scenario and that of our own 2008 debacle is that Germany lent euros to Greece like there was no tomorrow, and had to have some idea that the Greek economy was not in a position of strength. Those loans fueled imports into Greece from the German export economy, such that Germany was basically recycling its own money back through domestic jobs. Germany would never have been able to do this in drachmas, which is a big reason why Germany pushed so hard for the euro. So, like Lehman and the other big banks that bundled junk home mortgages to get higher returns, Germany's financial voodoo has come back to haunt it. What's shameful is that Germany is behaving as though the Greeks are...well, what they've always been: a bit feckless, lazy and improvident. Just like those homeowners-with-a-pulse who were vilified as our big banks were getting bailed out.
30
You have a great point. All the finger-pointing at Greece by the haughty Germans is too much to believe. After all, Greece would never have gotten into this mess if Germans (and other nations) were not willing to extend loan terms to Greece that were clearly unsustainable.
If you're going to blame the victim, fine. But, you also have to blame the pushers and profiteers outside of Greece who sold the Greeks a dream of unlimited prosperity that was--as is always the case--ultimately a mirage.
If you're going to blame the victim, fine. But, you also have to blame the pushers and profiteers outside of Greece who sold the Greeks a dream of unlimited prosperity that was--as is always the case--ultimately a mirage.
23
Believe me, never again.
We don't care anymore boosting our exporting to greece, or about this recycling job legend.
Now we know that the americans helped forging the books, and the greeks lied about their economic standing. All this shiny opportunities were a fraud.
Never again we will hand out money to fuel an artificial consum, from now on we will help the greeks to live beyond their own revenue.
We will never again handing out any credits, just to take the blame if these credits turn out to be a bad investment. Therefore i strongly oppose any further credits. Make a clean final cut, it will happen anyway. And after that greece is in the merry of the free market, and everyone should know, that there never will be a bailout for the bankers again.
We don't care anymore boosting our exporting to greece, or about this recycling job legend.
Now we know that the americans helped forging the books, and the greeks lied about their economic standing. All this shiny opportunities were a fraud.
Never again we will hand out money to fuel an artificial consum, from now on we will help the greeks to live beyond their own revenue.
We will never again handing out any credits, just to take the blame if these credits turn out to be a bad investment. Therefore i strongly oppose any further credits. Make a clean final cut, it will happen anyway. And after that greece is in the merry of the free market, and everyone should know, that there never will be a bailout for the bankers again.
1
The first bailout, as is now widely acknowledged, was a bailout of German and French banks. It did absolutely nothing to help Greece.
The Germans are very good at remembering the effects of hyper-inflation. They are less good at remembering the causes and consequences. Schauble does not seem to remember that unpayable debt will always lead to catastrophe. In the case of Germany, the catastrophe was the free and fair election of the National Socialist party, with Adolf Hitler as Chancellor. Much as Germany dislikes Syriza, would they really prefer to see Golden Dawn take power in Greece?
Lastly, a Grexit will be the end of the Euro. Period. It will take some years, maybe a decade or more, but the dominos will fall... Portugal probably next, then Ireland, then the bigger ones: Italy, Spain, France. A rump Euro might remain... Germany, Austria, Finland. But it is now abundantly clear that monetary union without harmonization is unsustainable.
Dan Kravitz
The Germans are very good at remembering the effects of hyper-inflation. They are less good at remembering the causes and consequences. Schauble does not seem to remember that unpayable debt will always lead to catastrophe. In the case of Germany, the catastrophe was the free and fair election of the National Socialist party, with Adolf Hitler as Chancellor. Much as Germany dislikes Syriza, would they really prefer to see Golden Dawn take power in Greece?
Lastly, a Grexit will be the end of the Euro. Period. It will take some years, maybe a decade or more, but the dominos will fall... Portugal probably next, then Ireland, then the bigger ones: Italy, Spain, France. A rump Euro might remain... Germany, Austria, Finland. But it is now abundantly clear that monetary union without harmonization is unsustainable.
Dan Kravitz
8
The key paragraph is the one that begins "Greek debt is now overwhelmingly held by European governments . . ."
Of approximately $231 billion in debt previously held by banks, $205 billion has been transferred to central governments. What's left is a hiccup to the private banking system. No wonder it's like Radio Shack and not Lehman Brothers.
The biggest danger now, to the Eurozone, is that Greece leaves and sees its economy do much better, more like it was doing in its pre-euro dollar days. If Portuguese, Spainish and Italian voters see that, they'll pressure their politicians to leave or elect new ones who will threaten to.
This all stems from the original euro compromise that set up a central bank particularly suited to the German economy. The Germans fixed the game so they were destined to win, but after you win all the marbles, who do you play with?
Of approximately $231 billion in debt previously held by banks, $205 billion has been transferred to central governments. What's left is a hiccup to the private banking system. No wonder it's like Radio Shack and not Lehman Brothers.
The biggest danger now, to the Eurozone, is that Greece leaves and sees its economy do much better, more like it was doing in its pre-euro dollar days. If Portuguese, Spainish and Italian voters see that, they'll pressure their politicians to leave or elect new ones who will threaten to.
This all stems from the original euro compromise that set up a central bank particularly suited to the German economy. The Germans fixed the game so they were destined to win, but after you win all the marbles, who do you play with?
37
I appreciate this comment the most of the several very good ones in response to this "The Upshot," because it points to the fundamental conflict between the geopolitical disaster that would result from Greece leaving the EU and the lack of economic importance of Greece to Germany. However, I think that, should it leave the Eurozone, Greece will only see "its economy do much better" through a long-term deal with Russia and its friends. According to myth the goddess, Athena, gave the olive tree to the ancestors of the Greeks. Why didn't she give some of her wisdom too?
1
Good idea. Pressure on the governments of the individual nations to provide a better life for their citizens is something that every nation should deal with. Leaving all decisions to those Left or Right extremists mantras instead of thinking of what will help the people is our curse.
4
The regulations of the European Central Bank may have been "particularly suited to the German economy," but it gave the Euro the credibility of the German Deutchmark. A less strict central bank would have given the Euro a credibility closer to the Greek Drachma. Such would not have been a feasible alternative. Who would have joined?
So this comment may be true, but it is somehow scapegoating Germany for something that had no real alternative. And if that could be viewed as a negative feature, why were so many countries so eager to join the Euro?
So this comment may be true, but it is somehow scapegoating Germany for something that had no real alternative. And if that could be viewed as a negative feature, why were so many countries so eager to join the Euro?
1
Greece is already a failed country,
we are just dressing up this fact with the money of taxpayers of other countries.
How many billions did the US-taxpayers sink in the iraq (i thing it had been 3000 = 3 Trillion), and iraq has oil, people are more self sustaining. Greece can also drain huge amounts of money without improving their economic basics.
Even if it would be another Lehman, the real reason for the economic downturn was not just the credit freeze, but that the monkey business of the wallstreet masters collapsed, and with it the brave new neoliberal economy. Lehman was a fast and sudden death to an already zombie.
It's the same with greece, their nemesis is not a default, their problems is a corrupt and dysfunctional elite. We should go through the motions. The chances that greece will manage a turnaround, even, or especially when we keep funding it, are minimal.
I am just sorry for the ordinary greeks, they deserved something better.
we are just dressing up this fact with the money of taxpayers of other countries.
How many billions did the US-taxpayers sink in the iraq (i thing it had been 3000 = 3 Trillion), and iraq has oil, people are more self sustaining. Greece can also drain huge amounts of money without improving their economic basics.
Even if it would be another Lehman, the real reason for the economic downturn was not just the credit freeze, but that the monkey business of the wallstreet masters collapsed, and with it the brave new neoliberal economy. Lehman was a fast and sudden death to an already zombie.
It's the same with greece, their nemesis is not a default, their problems is a corrupt and dysfunctional elite. We should go through the motions. The chances that greece will manage a turnaround, even, or especially when we keep funding it, are minimal.
I am just sorry for the ordinary greeks, they deserved something better.
11
I'm burned out commenting on the "Greek debt crisis". In particular attempting to rebutt ignorant remarks on the Greek economy, and supposed lack of Greek "common sense", not to mention more crude ethnic epithets.
Greece has a primary surplus. Instead of demonstrating the capacity to implement pragmatic solutions each of the creditors to this day seeks to cover its own narrow interests, to everyone's financial and political detriment but most of all to Greeks. How does a shrinking GDP get debt paid?
The crisis was built with the collusion of the most powerful EU states and various private interests and suited them all while the easy credit gravy train was running full steam. The "bailout" was anything but in any meaningful sense, since it has failed Greece and placed avoidable and undue hardship on its people. The IMF has publicly admitted as much.
The "bailout" was a firewall to protect these same interests. Now that private interests have been protected nobody seems to care about the fate ordinary Greeks, nor the European taxpayers who will assume the costs of what literally amounts to a neo colonial enterprise.
Other Europeans are taking notice of the disconnect in the ad hominem slurs of major governments' officials heaped on Greeks. This hypocritical, nay duplicitous, behaviour is the true risk to the European project. It certainly is not the relative inconsequence of knock on effects of any default of a country which represents 2% of Europe's population (even less GDP)
Greece has a primary surplus. Instead of demonstrating the capacity to implement pragmatic solutions each of the creditors to this day seeks to cover its own narrow interests, to everyone's financial and political detriment but most of all to Greeks. How does a shrinking GDP get debt paid?
The crisis was built with the collusion of the most powerful EU states and various private interests and suited them all while the easy credit gravy train was running full steam. The "bailout" was anything but in any meaningful sense, since it has failed Greece and placed avoidable and undue hardship on its people. The IMF has publicly admitted as much.
The "bailout" was a firewall to protect these same interests. Now that private interests have been protected nobody seems to care about the fate ordinary Greeks, nor the European taxpayers who will assume the costs of what literally amounts to a neo colonial enterprise.
Other Europeans are taking notice of the disconnect in the ad hominem slurs of major governments' officials heaped on Greeks. This hypocritical, nay duplicitous, behaviour is the true risk to the European project. It certainly is not the relative inconsequence of knock on effects of any default of a country which represents 2% of Europe's population (even less GDP)
11
Greece may currently produce a primary surplus, temporarily, but it is unlikely to last without implementation of the main reforms demanded by the creditors, especially given the dogma promulgated by this government.
These reforms are probably the only chance Greece has of righting its finances in the long-term, to prevent a swift relapse into financial dysfunction. That is the only reason I support continued discussions, for Greece's sake. Otherwise, I would be happy to see them leave the Eurozone...
These reforms are probably the only chance Greece has of righting its finances in the long-term, to prevent a swift relapse into financial dysfunction. That is the only reason I support continued discussions, for Greece's sake. Otherwise, I would be happy to see them leave the Eurozone...
3
Far to easy to blame "lazy southerners" for your own country 's lazy and careless oversight of lending. I would say Germany shares equal blame in this crisis, except that it engineered the euro to its own benefit , creating the easy credit trap Greece was lured into, demonstrating adept neo colonial predation.
8
I'm burned out commenting on the "Greek debt crisis". In particular attempting to rebutt ignorant remarks on the Greek economy, and supposed lack of Greek "common sense", not to mention more crude ethnic epithets.
The crisis was built with the collusion of the most powerful EU states and various private interests and perfectly suited them all while the gravy train was running full steam. The "bailout" was anything but in any meaningful sense, since it has failed Greece and placed avoidable and undue hardship on its people. The IMF has publicly admitted as much.
The "bailout" was a firewall to protect these same interests. Now that private interests have been protected nobody seems to care about the fate ordinary Greeks, nor the European taxpayers who will assume the costs of what literally amounts to a neo colonial enterprise.
Other Europeans are taking notice of the disconnect between the ad hominem slurs of officials and heads of major governments heaped on Greeks. This hypocritical, nay duplicitous, behaviour is the true risk to the European project. It certainly not the relative inconsequence of knock on effects of any default of a country which represents 2% of Europe's population and even less of its economy.
The crisis was built with the collusion of the most powerful EU states and various private interests and perfectly suited them all while the gravy train was running full steam. The "bailout" was anything but in any meaningful sense, since it has failed Greece and placed avoidable and undue hardship on its people. The IMF has publicly admitted as much.
The "bailout" was a firewall to protect these same interests. Now that private interests have been protected nobody seems to care about the fate ordinary Greeks, nor the European taxpayers who will assume the costs of what literally amounts to a neo colonial enterprise.
Other Europeans are taking notice of the disconnect between the ad hominem slurs of officials and heads of major governments heaped on Greeks. This hypocritical, nay duplicitous, behaviour is the true risk to the European project. It certainly not the relative inconsequence of knock on effects of any default of a country which represents 2% of Europe's population and even less of its economy.
36
Greece has a primary surplus. Instead of demonstrating the capacity to implement pragmatic solutions each of the creditors to this day seeks to cover its own narrow interests, to everyone 's financial and political detriment but most of all to long suffering Greeks. How does a shrinking GDP help anyone get debts paid, and more importantly allow Greeks to simply put food on the table?it'ssthe absurdity of the "solutions " which boggle the mind...
14
Largely true. HOWEVER, one cannot deny the massive systemic issue's in Greece's socio-economic situation, especially when it comes to tax-avoidance.
9
Yoyo your comment is simple diversion. Greece, like Italy, has had a fiscal primary surplus for years. Which other oecd countries can make the same claim in the last 30 years?
1
Other countries are now considering exiting the Euro. Who can blame them? Tying your nation's economy to the economies of others that can easily fail would not be my first choice. In 15 years the Euro has been a problem, particularly for average citizens. Too big to fail is true of nations, not just banks. Let them fail. If enough of them do, the rest will mend their ways.
3
But for a while there, the euro was a gravy train for the lending nations of N. Europe. Countries that could never have borrowed in their own currencies were suddenly able to take on euro-denominated debt and, with it, buy the nifty products made by...guess who? The same countries who lent them all that money. Not too different from the ridiculously unqualified home buyers whose mortgages fueled the big boom before our bust here in the US.
12
Really? I'm not aware of any, so To what countries do you refer?
4
I thought that I had read that England is thinking of leaving the Euro.
Is that not correct?
Is that not correct?
1
What the Eurozone needs to recognize is that every economy has a Greece.
From the micro economics of the family budget where the beer bought is "premium" or the car, or the shoes, or the baby stroller. There is always an unjustifiable expense when compared against the norm.
In state governments there is always the town and county that are the basket cases of the state and the rest of the state has to make up for the red ink that is generated there.
In every nation there are states that just never are going to pay for themselves on a monetary basis. If the USA threw out every state that was costing us money, we'd be down to a couple handfuls of stars on the flag.
The Euro was sort of a bad idea for Greece from the get go. Currency fluctuations are the life blood of tourist destinations. When everybody goes to Greece, the value of their currency goes up, which attracts tourism to someplace else with a more favorable exchange rate. This drop in demand drops the price of the currency and presto, Greece it is this year!
With a stable currency (one that is depressed by Greece and therefore benefits Germany by being immune to higher currency from supply/ demand for it's goods) Greece doesn't get the benefit of being a low cost option.
If Germany were to do a cost benefit analysis of having Greece in the Eurozone, they would see that the lower Euro has added immensely to their manufacturing and export economy. Enough so that Germany could cover the interest for Greece. IMHO.
From the micro economics of the family budget where the beer bought is "premium" or the car, or the shoes, or the baby stroller. There is always an unjustifiable expense when compared against the norm.
In state governments there is always the town and county that are the basket cases of the state and the rest of the state has to make up for the red ink that is generated there.
In every nation there are states that just never are going to pay for themselves on a monetary basis. If the USA threw out every state that was costing us money, we'd be down to a couple handfuls of stars on the flag.
The Euro was sort of a bad idea for Greece from the get go. Currency fluctuations are the life blood of tourist destinations. When everybody goes to Greece, the value of their currency goes up, which attracts tourism to someplace else with a more favorable exchange rate. This drop in demand drops the price of the currency and presto, Greece it is this year!
With a stable currency (one that is depressed by Greece and therefore benefits Germany by being immune to higher currency from supply/ demand for it's goods) Greece doesn't get the benefit of being a low cost option.
If Germany were to do a cost benefit analysis of having Greece in the Eurozone, they would see that the lower Euro has added immensely to their manufacturing and export economy. Enough so that Germany could cover the interest for Greece. IMHO.
22
It is always so easy to lose sight of the fact that the Greek people are in pain and that those tasked with caring for the community of European people are only concerned with imaginary things, like ancient debt, instead of current hopeless despair.
26
The other taxpayers in the Eurozone are fed up with subsidizing a government that seems primarily interested in dragging its feet and playing political games, instead of implementing reforms that all other Euro nations have adopted and thus take to be self-evident (such as collecting income and property taxes, for a start).
11
But the other European Nations aren't subsidizing Greece. They are net takers in the Greek economy, and want more, just as any self respecting colonial enterprise....
3
I think Mr. Irwin misses the point.
I agree with his analysis of the situation, the reasoning of the various actors, five years ago. But today I don't think that the economic/financial results are the main point. Rather, I think it's the political dimension.
The whole European Union was imho basically a political project. Even though since its beginning in the coal and steel agreement the economics were front and center, basically it was the 20th century's Peace of Westphalia -- a project to end war in western Europe. While other dimensions have been added, e.g. expansion eastward, and new tensions with Russia (which are not independent of each other), the political drive remains basic. The adoption of a single currency was fraught with risk, as any economist could tell you and many did; a monetary union without a fiscal union or something very close to it was and is unlikely to work. The fathers of the euro, I'm sure, knew this but made a political bet. It's now clear that that was a bad bet; the near-inevitable happened and led to more divisive forces than unifying ones.
If this is correct, as many observers explicitly or implicitly think, then the Greek crisis will continue to be kicked down the road -- i.e. the "creditors" will cave -- until it is somehow solved, or disappears; who knows? Greece will never be forced to leave the euro. And its people will continue to suffer, long term, from the lack of a real resolution to their untenable economic situation.
I agree with his analysis of the situation, the reasoning of the various actors, five years ago. But today I don't think that the economic/financial results are the main point. Rather, I think it's the political dimension.
The whole European Union was imho basically a political project. Even though since its beginning in the coal and steel agreement the economics were front and center, basically it was the 20th century's Peace of Westphalia -- a project to end war in western Europe. While other dimensions have been added, e.g. expansion eastward, and new tensions with Russia (which are not independent of each other), the political drive remains basic. The adoption of a single currency was fraught with risk, as any economist could tell you and many did; a monetary union without a fiscal union or something very close to it was and is unlikely to work. The fathers of the euro, I'm sure, knew this but made a political bet. It's now clear that that was a bad bet; the near-inevitable happened and led to more divisive forces than unifying ones.
If this is correct, as many observers explicitly or implicitly think, then the Greek crisis will continue to be kicked down the road -- i.e. the "creditors" will cave -- until it is somehow solved, or disappears; who knows? Greece will never be forced to leave the euro. And its people will continue to suffer, long term, from the lack of a real resolution to their untenable economic situation.
7
But people will only suffer so far and for so long before they revolt. I'm only barely familiar with Greek politics since WW2, but they do seem to have a capacity for nasty civil war, some lingering attachments to Slavic nationalism with more than passing affection for Russia, and disputed territory in Cyprus that the Turks might love to take a chance on owning themselves. And then there's it legendary lack of scrutiny of world travelers from the Middle East and other noted basket case terrorist incubation points. Seems to me there are some really dark corners well beyond the merely economic.
1
Greece is neither Lehman Brothers nor RadioShack because it is not a corporation, it is a country with a very rich culture. By the way corporations are neither people nor countries.
Greece is a bad place for billionaires to make money but no one lost their house in Greece as a result of getting sick as it happened in the US until recently. Hopefully Obamacare but an end to this inhumanity.
Greece has gone through much worse, this bad economy is by comparison close to the best of times. Only 75 years ago Greece lost 10% of its population mostly due to starvation but also German massacres reprisals for fighting against the occupation. A truck would clean the streets of Athens from corpses of those who had died the night before.
Greece is a bad place for billionaires to make money but no one lost their house in Greece as a result of getting sick as it happened in the US until recently. Hopefully Obamacare but an end to this inhumanity.
Greece has gone through much worse, this bad economy is by comparison close to the best of times. Only 75 years ago Greece lost 10% of its population mostly due to starvation but also German massacres reprisals for fighting against the occupation. A truck would clean the streets of Athens from corpses of those who had died the night before.
13
Your distinction is such an important one and is always overlooked. Finance ministers have been handling Greece like a bankrupt company, where the interests of secured and general creditors are met first and the shareholders get whatever is left over.
However, Greece is not a company. The interests of its citizens (shareholders) have been pushed below the interests of the creditors. But Greece is not beholden to bankruptcy laws as companies are. Greece is beholden to the citizens who vote in elections. It will be interesting to see where this all shakes out.
However, Greece is not a company. The interests of its citizens (shareholders) have been pushed below the interests of the creditors. But Greece is not beholden to bankruptcy laws as companies are. Greece is beholden to the citizens who vote in elections. It will be interesting to see where this all shakes out.
11
Well said.
While it would be great if a leopard can change its spots, those in favor of continued bailouts don't understand that this is like telling a teenage kid to get out of bed earlier through the force of logical argument.
Greek is more than an economic disaster; it is a cultural disaster.
Greek is more than an economic disaster; it is a cultural disaster.
17
You do not know how the IMF works. When the IMF is involved in a bailout, debt is typically not written off; especially if the money is owed by the distressed country to American or European institutions. For this reason, the write-off that Greece obtained in 2012 is exceptional.
The thrust of your argument is that no one knows how a Greek default might play out and therefore we should not go there. It is a play on the ignorance of your readers who probably know little about the history of sovereign debt default. Perhaps the biggest sovereign debt crisis in recent years was the Russian default in the late 1990s which did set off a mini crisis in the immediate interim but failed to make much of a dent in the subsequent NASDAQ bubble or derail the launch of the Euro. In other words, the impact was limited.
For a small, peripheral country like Greece where some expectation of possible default is widely held and where extensive preparations have been made, the fallout from any payment crisis will be even smaller. So much so that it is likely to be a nonevent. Thus, even though we do not know how the default will play out, we can say with a great deal of confidence that it is a problem which can be dealt with.
The thrust of your argument is that no one knows how a Greek default might play out and therefore we should not go there. It is a play on the ignorance of your readers who probably know little about the history of sovereign debt default. Perhaps the biggest sovereign debt crisis in recent years was the Russian default in the late 1990s which did set off a mini crisis in the immediate interim but failed to make much of a dent in the subsequent NASDAQ bubble or derail the launch of the Euro. In other words, the impact was limited.
For a small, peripheral country like Greece where some expectation of possible default is widely held and where extensive preparations have been made, the fallout from any payment crisis will be even smaller. So much so that it is likely to be a nonevent. Thus, even though we do not know how the default will play out, we can say with a great deal of confidence that it is a problem which can be dealt with.
9
You're missing a fairly obvious point: Greece is part of a monetary union and thus not an independent state in the mold of Russia in the late 90's. It's more akin to California or Texas defaulting on its municipal bonds, all of which are of course $US denominated. If you don't think that would have an outsized impact on the $, other States and int'l trading partners, you're nuts.
And yes this would be true even for a small US State, say Vermont.
And yes this would be true even for a small US State, say Vermont.
2
Considering market behavior can be as much psychological as it is mathematical, the shock value of a Greek default/bankruptcy just won't be there the way it was for Lehman.
It's like watching that house in Texas fall into the lake. Doom comes, but is kind of boring to wait for.
It's like watching that house in Texas fall into the lake. Doom comes, but is kind of boring to wait for.
5
Because everyone was surprised that Lehman could default,
but for greece this has been looming around long enough.
but for greece this has been looming around long enough.
6
With some very satisfying results for confident and dedicated Europeans.
Like - there is no realistic way anymore to question the common European currency - as not only the Greek demonstrations for the Euro have shown.
So the Euro might have been a mistake in the first place - or not?
Who cares anymore - if most Europeans are now aware - even if somebody would 'exit' - the Euro in such a country STILL would be THE currency used.
And that renders all the speculation about 'exits' ad absurdum and makes it abundantly clear that in the case of this crisis Europe AGAIN has NO other chance then to come together as so many times before.
With some 'drama' for sure - like always - but the dramatic question is not Lehman or Radio Shack - because that is a typical Angl-American question.
The question is: Will sanity and the typical European spirit of solidarity and empathy prevail - AND will it be possible to turn the few European countries which had a corrupt and Oligarchic stucture - around?
And I say that as an American.