Greek debt crisis [update: 3rd Bailout deal reached]

[BabelHuber]

Following seven years of historically unprecedented quantitative easing, zero interest rates and ever-increasing statistical fudges approaching USSR levels of delusion. We are now approaching the top of the credit cycle with pretty much all ammunition already fired. If that is the best 'growth' that can be mustered under bubble conditions, things are going to look very bleak once the current credit bubble pops. Meanwhile, European demographics continue to deteriorate (i.e. the dependency ratio continues to increase for most countries).

This also is worrying me, you are right.

But in my opinion the only chance for the EU countries which are struggling is to get their shit together now. This means running an balanced budget, removing market barriers and a supply-side policy.

This is harsh for some people for a few years, which is really unfortunate, but I see no other way. By overspending the bubbles just get bigger and will crash harder a few years down the line. Also, quite unfortunately, history has shown that the Keynesian approach only works for economies where the newly-created demand can be supplied mostly in-country. If you apply a Keynesian policy to a country which supplies the demand mostly by importing, you gain nothing in the long run.

[BabelHuber]

None of which particularly undermines the 'Krugman graph,' which was making a specific point about what has happened to the real GDP of these nations since the 2007 recession. Namely, that as yet they have not recovered, even if they are just now beginning to recover, seven years after the recession hit and five or six years since some of them began to institute austerity measures.

The PIIGS-states were hit hard in 2010/2011, and this time they can hardly put the blame on some banksters. This is why the Krugman-graph is deceiving - it doesn't distinguish between these two crisises, instead mixing them together.

Also, AFAIK austerity measures were applied starting at 2011, so it took them three years to start recovering. Of course it will take a while before the pre-2008 levels of wealth can be reached again in these countries, but that's life

[K. A. Pital]

What a bullshit.

Krugman's graph is very selective to underscore his 'point' - he took the period from 2007 (just before the bankLeman Brothers crisis) to 2014, ignoring the PIIGS-states were hit hard another time in 2010/2011, but this time because of their own policy.

My graph is from Eurostat and shows that these economies have been starting to recover after they had to show some monetary disciplin and to apply reforms. Of course such a recovery cannot occur immediately - years (or in case of Geece decades) of misguided economic politics simply cannot be cured within a short time.

Of course I also know that a part of their population has a tough time meanwhile, but at least this recovery is sustainable in the end, opposite to the effect of overspending.

So you take issue with the period chosen - I see no point in that. The PIIGS crisis was as much a product of European policy, with weaker states being wrecked by their ascendancy to the EMU, so it is natural that the entire trainwreck is considered the outcome of European policy. Jumping to radical austerity from overspending fuelled by low rates and common currency is not really a well-designed policy. It looks more like a man who has cold going to the beach to get a sun strike. Rosy-glasses morons like you were behind the financial raping of the European periphery and the collapse of the last vestiges if their sovereignity: currency and central bank. With no devaluation that could bring their fiscal situation in order, these states were left with options that range from "bad" to "nightmare".

Try selling me some more of Europropaganda, clown.

[Thanas]

Link

EC promises €35bn in aid funding, if Greek deal reached

The Commission is dropping some heavy hints that it will announce a new €35bn stimulus programme to help Greece soon, once an economics reforms deal is agreed.

Last night, Jean-Claude Juncker told reporters that:

“I want ordinary Greeks to know we are offering €35bn to help the economy”

And in today’s press briefing, spokeswoman Annika Breidthardt explained that this money is available to Athens from the current Europe budget from 2014-2020.

She says:

The Commission is currently preparing a package on this... the package and the €35bn are conditional to the conditions being met, and obviously an agreement being found.

More details on this package will be spelled out in the coming days, Breidthardt explains.

“So stay tuned” adds chief spokesman Margaritis Schinas, in case anyone had missed the nudge.

This aid funding would be used to improve Greece’s infrastructure, and fund projects for long-term growth. But the key issue with such projects is the issue of “absorption” -- ie, getting the money to the right projects on the ground.

Let's hope the money will actually get to them and not get stolen by Syriza cadres.

[Vendetta]

Let's hope the money will actually get to them and not get stolen by Syriza cadres.

It won't be intended for the Greek people. If it were then the troika wouldn't be so committed to stopping money for things like pensions (Y'know, money which will be spent and therefore stimulate economic activity).

[bobalot]

Let's hope the money will actually get to them and not get stolen by Syriza cadres.

True. They need to go to those German banks that made ridiculously risky loans and expect to be bailed out by taxpayers.

[K. A. Pital]

Yeah evil Syriza, they are bad!

In power for barely for half a year after soundly defeating the mofos who brought Greece to ruin, those neoliberal and other right-wing bastards who basically ruined the fucking country, bringing it to the current situation. Clearly what happened to Greece in 2004-2014 is the fault of Syriza...

Not of the corrupt and evil people who bargained the future of their nation in exchange for Eurocrat handouts, and I am pretty sure some bribes as well, surrendering sovereignity for a pile of Euro cash that did not do any good anyway.

[Thanas]

Let's hope the money will actually get to them and not get stolen by Syriza cadres.

True. They need to go to those German banks that made ridiculously risky loans and expect to be bailed out by taxpayers.

Total Exposure of Eurozone banks is much less than 35 bn, it hovers around 16bn in total, of which only 10bn is owned by German banks.

Can you please at least make an effort to factcheck your claims?

It won't be intended for the Greek people. If it were then the troika wouldn't be so committed to stopping money for things like pensions (Y'know, money which will be spent and therefore stimulate economic activity).

It is intended for the Greek economy. A better Greek economy will help the greek people.

How is going to directly spent it on pension going to help the Greek economy? It will just be used up, then what?

[K. A. Pital]

Pensioneers usually spend the majority of their income, unlike young people or rich people. Spending would expand. Now, a sustainable expansion of spending will not be achieved by simply transferring this money to Greece's pensioneers, but it would certainly be a better guarantee that the money ends up in the local economy as opposed to entrusting the cash to oligarchs in charge of "infrastructure" who will plunder the cash just as they did before. I would probably be wary if anyone from the former Greek political and financial establishment, especially oligarch families, would have any control over where and how European funds go.

[Thanas]

Pensioneers usually spend the majority of their income, unlike young people or rich people. Spending would expand. Now, a sustainable expansion of spending will not be achieved by simply transferring this money to Greece's pensioneers, but it would certainly be a better guarantee that the money ends up in the local economy as opposed to entrusting the cash to oligarchs in charge of "infrastructure" who will plunder the cash just as they did before. I would probably be wary if anyone from the former Greek political and financial establishment, especially oligarch families, would have any control over where and how European funds go.

Yes, I would agree to that and the EC by their statements is very concerned about that happening as well. Which is why I think the EU will directly decide who gets money for what. Or I hope so, because that seems to be the only way to ensure this not happening.

But then again, Greek might view that as another insult.


EDIT: Meanwhile, I am very worried that the new Government will simply not do anything to stimulate the economy and instead crash it. They don't touch the real moneylosers - pensions and military spending - but instead push everything on Business and the economy again. I can't see this working.

[K. A. Pital]

They don't touch the real moneylosers - pensions and military spending

A cut to military spending as opposed to a pension cut was not allowed by the IMF. That's the IMF for you. Money is not equivalent to money.

[FTeik]

Let's hope the money will actually get to them and not get stolen by Syriza cadres.

True. They need to go to those German banks that made ridiculously risky loans and expect to be bailed out by taxpayers.

Those poor Greeks. Because they were forced at gun-point to loan money.

a) either the money got invested, than the Greeks got something of value. No reason to not pay the loans back.

b) the money landed in the wrong hands. Then the distribution didn't work. Were Germany and the banks responsible for the distribution or were it the greek politicians and consequently their electorate, since democracy/freedom means also responsibility for ones choices and actions?

c) the money was spent on things (like pensions at fifty or people that have been long dead), that should have been payed for by taxes that were never collected. Well, party is over and now the hangover is here.


Concerning the IWF forbidding spending cuts for the military. This is obviously done in the best interest of the Greek, so they can defend themselves, should the evil Germans decide to size Greek assets by force.
More seriously, why does Greece need the permission of the IWF, if it wants to cut spending on its own. And if that really is the case, I would totally agree, if those responsible get ferrocrete-shoes and dropped into the mediterran. Might also give the fish a change from fugative.

[K. A. Pital]

Are you being sarcastic here? I see nothing to laugh about, really. Greece has a huge and oversized military burden; the cuts to the military spending were okayed by both Greece, EC and European leaders. The only party that said no was the IMF, because, well, the pensions are not being cut by 400 million EUR - which is what it wants, and a military cut of the same size is not enough. In the light of this, I think Greece should really try to drive a wedge between the "troika" and tell the IMF to go to hell.

[Starglider]

Those poor Greeks. Because they were forced at gun-point to loan money.

Awful decisions were made in the 2000s and yes the Greek population bears some responsibility for electing crooks, but consider the options and information available. If the supposedly professional EU beurecrats and bankers believed the fake promises and statistics coming out of the Greek government immediately prior to and after joining the euro, how do you expect the electorate to do better? In terms of blame, the Greek electorate has been punnished more than enough for electing those politicians. Of course the politicians, bankers and beurecrats themselves have got away scot free, indeed usually with massive bonuses, bribes, promotions and pensions. And of course any Greeks under 30 had no say in that turn-of-the-millenium politicing.

At this point a majority of Greek population has experienced significant hardship, and a sizable minority has experienced severe hardship, for over half a decade. This is going to continue for the foreseeable future regardless of what option is chosen, the main question being how many decades it will continue and how much worse it's going to get before the turnaround.

There are several practical reasons why (electronically) printing up a half-trillion euros and paying off all the periphery debts might be a bad idea, but at this point there is no ethical case for 'revenge' against the Greek populace, if indeed there ever was. Honestly I would just say print to the moon at this point, northern Europe deserves to take some inflation more than southern Europe deserves to live with odious debt indefinitely. Or rather I would say that if I thought that preserving the eurozone was a good thing.

[BabelHuber]

So you take issue with the period chosen - I see no point in that.

This graph basically shows that countries which were hit in the 2008 crisis and then again in 2010/2011 do worse than countries which were only hit in 2008.

This is a fucking tremendous insight -without Krugman's graph I wouldn't have known this, really!

The PIIGS crisis was as much a product of European policy, with weaker states being wrecked by their ascendancy to the EMU, so it is natural that the entire trainwreck is considered the outcome of European policy.

Can you please tell me which "European policy" forced countries to overspend just because the loans were easy to get back then? You can stick your left-wing conspiracy theories where the sun doesn't shine.

Jumping to radical austerity from overspending fuelled by low rates and common currency is not really a well-designed policy. It looks more like a man who has cold going to the beach to get a sun strike.

Overspending until everything breaks down and then expecting the taxpayers of other countries to pay for you in the name of "solidarity" is downright moronic, end of story.

Rosy-glasses morons like you were behind the financial raping of the European periphery and the collapse of the last vestiges if their sovereignity: currency and central bank. With no devaluation that could bring their fiscal situation in order, these states were left with options that range from "bad" to "nightmare".

Try selling me some more of Europropaganda, clown.

These countries were eager to join the Euro, nobody forced them to. Also, it was clear from the start that these economies had to adjust to the new currency. Failing to do so has to cause troubles, everyone had to know this.

And still even countries like Greece want to keep the Euro. Why do they simply leave if the Euro is so bad?

You cannot take a bath without getting wet, this should be clear to anyone, except of left-wing nutjobs of course.

[FTeik]

Are you being sarcastic here? I see nothing to laugh about, really. Greece has a huge and oversized military burden; the cuts to the military spending were okayed by both Greece, EC and European leaders. The only party that said no was the IMF, because, well, the pensions are not being cut by 400 million EUR - which is what it wants, and a military cut of the same size is not enough. In the light of this, I think Greece should really try to drive a wedge between the "troika" and tell the IMF to go to hell.

Concerning the IWF forbidding spending cuts for the military. This is obviously done in the best interest of the Greek, so they can defend themselves, should the evil Germans decide to size Greek assets by force.
More seriously, why does Greece need the permission of the IWF, if it wants to cut spending on its own. And if that really is the case, I would totally agree, if those responsible get ferrocrete-shoes and dropped into the mediterran. Might also give the fish a change from fugative.

Awful decisions were made in the 2000s and yes the Greek population bears some responsibility for electing crooks, but consider the options and information available. If the supposedly professional EU beurecrats and bankers believed the fake promises and statistics coming out of the Greek government immediately prior to and after joining the euro, how do you expect the electorate to do better? In terms of blame, the Greek electorate has been punnished more than enough for electing those politicians. Of course the politicians, bankers and beurecrats themselves have got away scot free, indeed usually with massive bonuses, bribes, promotions and pensions. And of course any Greeks under 30 had no say in that turn-of-the-millenium politicing.

At this point a majority of Greek population has experienced significant hardship, and a sizable minority has experienced severe hardship, for over half a decade. This is going to continue for the foreseeable future regardless of what option is chosen, the main question being how many decades it will continue and how much worse it's going to get before the turnaround.

There are several practical reasons why (electronically) printing up a half-trillion euros and paying off all the periphery debts might be a bad idea, but at this point there is no ethical case for 'revenge' against the Greek populace, if indeed there ever was. Honestly I would just say print to the moon at this point, northern Europe deserves to take some inflation more than southern Europe deserves to live with odious debt indefinitely. Or rather I would say that if I thought that preserving the eurozone was a good thing.

This isn't about "revenge".
As much as I want to sympathize with the common greek,
when I hear, that five years after the Lagarde-List out of 2,000 suspected tax evaders less than twenty have been investigated,
when I hear, that Germany and France offered to help to establish an efficient revenue-service and were refused,
when I hear, that states like Slovakia, which are still poorer than Greece have to contribute to the bailout,
and so on,
then it is hard to feel sympathy.

[Thanas]

Greece is trying the old "promise one thing in Brussels, do another" thing again:

Link

Officials from the bailout monitors said a submission on Tuesday by Athens of a list of “prior actions” — essentially a calendar of specific measures that will be legislated and implemented — retreated from earlier Greek commitments.

How the hell is this going to help in getting a deal passed?

[Thanas]

Even more chilling, the proposals do not have any reform or culling of the Greek bureaucracy or instituting a decent revenue service. So it is quite clear the solution for Syriza is to rehire state servants and continue as before, putting the cuts on the few profitable business that are around.

[Eternal_Freedom]

Ok, question time, why is the EU being so patent and generous with Greece? I can't recall them being this generous to Spain or Portugal or Ireland a few years back. I may be wrong of course, but it would be nice to know why we're being so, well, nice to the Greeks when everything I've read here an elsewhere says we really shouldn't be.

[K. A. Pital]

Further culling?

[Thanas]

Ok, question time, why is the EU being so patent and generous with Greece? I can't recall them being this generous to Spain or Portugal or Ireland a few years back. I may be wrong of course, but it would be nice to know why we're being so, well, nice to the Greeks when everything I've read here an elsewhere says we really shouldn't be.

Because the EU are not monsters and realize that the ordinary Greek population are the ones who will suffer.

Further culling?

It doesn't help to just fire people, one needs to reform the laws. By all accounts, opening a business is still as cumbersome.

[Thanas]

Some comments from Grecians (from the Guardian page):

Living in Greece has become a struggle.

If you have a degree and you wish to work you will move to another Country. Popular choices these days are UK, Germany, Switzerland. The reasons for this move are simple.You spent 4-6 years studying, probably got a postgraduate degree as well and when you wish to work you have the choice to work from approximately 5538.37 British Pounds yearly and a big portion of that mount will go to "health" insurance which is useless since you pay everything already. For example: i wish to do a general blood check up for free since that right is given to me by my health insurance. All is well up to the point that they (hospital) tell you they have an opening after 8 months!

Now if i wish to found my own business i will have to wait about 6 months for the papers to be finalized (bureaucracy) and then i will try to get a business loan from a bank to start working. Talking about "Mission Impossible" here. Now if you are lucky and know someone from the "inside" you will get the loan at very "logical" interest rate of 15-20+%. Combine the interest rate with the taxes and voila!!! You are bankrupt already.

By now i believe most of what i stated above is know to most. So lets forget about the economy and let us take a look at the psychological effects the economic crisis has to most Greeks. Constant fear and uncertainty is two words that can describe the state of mind of most people and even those are not enough.

If and when you get paid from your work you run straight to the bank to take all your money out of your account/s to make sure that the banks don't default or the government doesn't take the money out of your account (Cyprus style bailout).

If you are just finishing school you wonder what to study in uni that it is close to your home so you can live there and if you are lucky the subject you will study will help you get a decent job. If you just finished uni you either prepare yourself psychologically to leave Greece or prepare yourself to work for at least 5 years uninsured to a bar or a cafe.

If you are one of the lucky ones and you have a job, you simply live in constant fear how much money they going to cut of your salary next time someone thinks of a new bailout plan or if you are going to have a pension after working for 30 years.

And at the end if you are a pensioner you try to make due with approximately 248.52 - 568.04 British pounds per month ( i admit that there are pensioners who get up to 2130.14 pounds a month).

What i believe is that most Greeks are tired being in state that the everything about the future is unknown. I mean after 5 years of bailout plans and promises from the Hellenic government and foreign ones we haven't seen any good results. I personally wouldn't mind the hardships of the economic crisis that much if i knew that something good would come at the end.

Ok, we all know most Europeans think Greeks do not pay taxes. Right?

Wrong! The privileged cronies of the political elite don't pay taxes. The politicians cream money from the state, the civil servants live on bribes, state police and municipal workers do alright. The rest of the population pay far more than their fair share of taxes. Self employed are even forced to pay 55% of next years estimated taxes in advance!

But this new, left wing government are trying at least to negotiate an agreement which will help the country. Things here are dire; we are suffocating and it's getting worse. The EU are only concerned at stopping contagion - no one seems to consider the plight of the average citizen here.

Push us just a little bit mor and things will get ugly - as people Re becoming desperate.

[Thanas]

I've changed the title to reflect the shifted discussion.


Oh, and Slovakia seems fed up - so fed up that their finance minister even brought a book to the recent meeting to read if it gets boring (read: If Varoufakis drones on again).

"Three eurogroup meetings and two summits should be enough to reach a solution for Greece"
and:
"It's Wed evening so I'm pretty curious what the eurozone will look like when we finish"

[Thanas]

Finnish finance minister:

I would be very positively surprised if there was a deal tonight.

There has been a lot of back of forth between the technical level and the political level, and we haven’t seen a concrete proposal yet, and we have to deal with it very carefully based on our parliamentary mandates....

[K. A. Pital]

Eastern European countries make their people work for less than 5000 British pounds a year. The EU is a colonial empire of massive inequality, with Elysium-like places in Luxembourg, parts of Belgium, Germany, Netherlands and Austria etc. on one side and rather grim places like Greece, Hungary, Romania etc. on the other side. Portugal, Spain are somewhere inbetween.

Thanas, you said further culling. Your backtracking is evident. Now you seem to have realized this.

Greece is fucked. But Europe is also fucked. The EU is not the paradise people thought it would be. Central powers drain the impoverished periphery of talent, because it is logical to make money abroad. Periphery can no longer support the handouts meant to placate the passive remainder of their citizens, and so will have to accept lower life standards for a long period, forget about "convergence".