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

[FTeik]

Can Greek economic growth exceed 3%? I think you can answer that question yourself without IMF help. The answer is not the one people want to hear.

Reforms are pointless talk. No reform is going to make a mature economy with a consolidated and full market grow at above 3%, maybe a bit more than that. Even that is very generous. Average OECD growth since the crisis has been pathetic.

In 2014 the Troika was expecting a growth of 2.9% for 2015 in Greece. Of course that was before Syriza came into power and turned the clock back. One could also argue, that the "growth" prior to the crisis (debt-level, increases in salaries/wages by 40% from 2001-2008, reduction of the unemployment-rate from 11% in 2000 to 7.7% in 2008) wasn't growth at all, but the creation of a bubble fueled by cheap credits. Now the bubble has burst (at the stock-markets something like this is also called "correction").

And while reforms alone might not make a mature economy grow on their own, they make things easier. For example if everyone and every source of income is properly taxed instead of just the wages. Or if the beauraucracy has the necessary paperwork for opening a shop ready in a month and not a year. Or if you don't have to be dealing with corruption constantly, while doing business.

But no, according to you the undeserving rich should just throw money at the problem.

[salm]

Regarding the Indiegogo crowd sourcing campaign;


(but despite the above, I too have donated)

Not that it´s really important but the guy in the video states that if the campaign by some sort of magic reached it´s goal it would be useless because it would be much better to invest in the greek economy. Well, that´s pretty much what the stated goals of the campaign are. The money you give to the campaign actually buys you postcards, food and other stuff manfuctured in Greece and is not donated to the government.

[K. A. Pital]

In 2014 the Troika was expecting a growth of 2.9% for 2015 in Greece. Of course that was before Syriza came into power and turned the clock back. One could also argue, that the "growth" prior to the crisis (debt-level, increases in salaries/wages by 40% from 2001-2008, reduction of the unemployment-rate from 11% in 2000 to 7.7% in 2008) wasn't growth at all, but the creation of a bubble fueled by cheap credits. Now the bubble has burst (at the stock-markets something like this is also called "correction").

And while reforms alone might not make a mature economy grow on their own, they make things easier. For example if everyone and every source of income is properly taxed instead of just the wages. Or if the beauraucracy has the necessary paperwork for opening a shop ready in a month and not a year. Or if you don't have to be dealing with corruption constantly, while doing business.

But no, according to you the undeserving rich should just throw money at the problem.

The expectations of the Troika were basically a lie even back in 2010, when they posted an estimate of -3% annual contraction for Greece for the next three years (the actual contraction was -5, -7, -6,5).

I see no reason for you to strawman my position, which has been consistently pro-default. Greece needs to default on its unsustainable debts, plain and simple, and put an end to such deals until its industrial situation and trade balance improve. This may include dropping out of the eurozone to devalue the currency, like most of Eastern Europe did during the crisis with their currencies.

Even more funny is your view that reform is a matter of law, when it is much more a matter if enforcement. And corrupt societies do not change overnight. Some nations have sensible laws on paper, but as they are not enforced they just remain the corrupt shitholes they are.

And the most ridiculous is the desire to directly return Greek oligarchs to power. Centrist Greek establishment is the corrupt neo-aristocracy that put the country in this situation, and them in power will change jack shit. Except make them and their relatives filthy rich. Greek oligarchs store money outside Greece anyway.

[FTeik]

In 2014 the Troika was expecting a growth of 2.9% for 2015 in Greece. Of course that was before Syriza came into power and turned the clock back. One could also argue, that the "growth" prior to the crisis (debt-level, increases in salaries/wages by 40% from 2001-2008, reduction of the unemployment-rate from 11% in 2000 to 7.7% in 2008) wasn't growth at all, but the creation of a bubble fueled by cheap credits. Now the bubble has burst (at the stock-markets something like this is also called "correction").

And while reforms alone might not make a mature economy grow on their own, they make things easier. For example if everyone and every source of income is properly taxed instead of just the wages. Or if the beauraucracy has the necessary paperwork for opening a shop ready in a month and not a year. Or if you don't have to be dealing with corruption constantly, while doing business.

But no, according to you the undeserving rich should just throw money at the problem.

The expectations of the Troika were basically a lie even back in 2010, when they posted an estimate of -3% annual contraction for Greece for the next three years (the actual contraction was -5, -7, -6,5).

Well, there was some growth towards the end of 2014, which would suggest, that at least some small progress had been made and that things might get better.

And if you read my older posts, you will notice I never argued for a growth of 3 percent. What I suggested was to put the payment of interests and repayment of debt on ice and have a default once agreed up on reforms have been implemented (in law as well as execution).

Quoting myself:

This isn't about Greeks debt in relation to its GDP. This is a) to make sure Greek isn't burdened, while they undergo the necessary reforms and b) to make sure there are reforms actually undertaken.

Otherwise Tsipras or whoever will succeed him will just sign a nice sounding agreement on reforms, the Greece will get the money and debt-cut they want, while dragging their feet implementing reforms, if doing anything at all. Even if after those five years the reforms didn't worked as hoped you can at least confirm (or not), that the Greece put in an honest effort and look on how to go on from there.

Clear now?

I see no reason for you to strawman my position, which has been consistently pro-default. Greece needs to default on its unsustainable debts, plain and simple, and put an end to such deals until its industrial situation and trade balance improve. This may include dropping out of the eurozone to devalue the currency, like most of Eastern Europe did during the crisis with their currencies.

Even more funny is your view that reform is a matter of law, when it is much more a matter if enforcement. And corrupt societies do not change overnight. Some nations have sensible laws on paper, but as they are not enforced they just remain the corrupt shitholes they are.

And your solution is to reward them for being corrupt shitholes? Because that is, what a default without a quid-pro-quo would be. Which is why I argue for a possible default as reward for reforms. And when I say reforms I mean codified into law and enforced.

And the most ridiculous is the desire to directly return Greek oligarchs to power. Centrist Greek establishment is the corrupt neo-aristocracy that put the country in this situation, and them in power will change jack shit. Except make them and their relatives filthy rich. Greek oligarchs store money outside Greece anyway.

Am I arguing with a dyslestic or what? Nowhere do I argue to put Greek oligarchs in power. I only doubt most of Syriza is better than the Centrist Greek establishment (although I used to hope otherwise). But promising higher pensions and less taxes and blowing up the state-sector again, when that wouldn't be even sustainable in a healthy economy is at best delusional and at worst criminal.
And let me remind you, that your much vaunted Syriza hasn't done much to go after the "filthy rich", who evaded taxes (Lagarde-list). They even wanted to amnest them. What good socialists they are.

[Thanas]

Varoufakis has lost the plot.

What they’re doing with Greece has a name -- terrorism. What Brussels and the troika want today is for the yes (vote) to win so they could humiliate the Greeks.

Why did they force us to close the banks? To instil fear in people. And spreading fear is called terrorism.

[Crown]

Varoufakis has lost the plot.

What they’re doing with Greece has a name -- terrorism. What Brussels and the troika want today is for the yes (vote) to win so they could humiliate the Greeks.

Why did they force us to close the banks? To instil fear in people. And spreading fear is called terrorism.

What a fucking loon. Next thing you know; he'll claim Merkel knew the Greek debt would be unsustainable even after a second debt write-down in 2011 but she pressed on ahead with a disastrous financial policy regardle- oh, wait ...

[mr friendly guy]

Come on. He was clearly being mocked for the terrorism claim.

[Simon_Jester]

Greece may be able to grow at much faster the 1% initially, since they've been knocked back so far. There's a large untapped labour force for example.

IF they have the resources to get businesses started up that can gainfully employ and supply that labor force, yes.

But at that point we're talking about the same sort of measures that are unpalatable if you're telling the Greeks to just apply more austerity and make sure to pay their interest payments on time. Stuff that costs money up front that is NOT being repaid to foreign bankers.

In 2014 the Troika was expecting a growth of 2.9% for 2015 in Greece. Of course that was before Syriza came into power and turned the clock back. One could also argue, that the "growth" prior to the crisis (debt-level, increases in salaries/wages by 40% from 2001-2008, reduction of the unemployment-rate from 11% in 2000 to 7.7% in 2008) wasn't growth at all, but the creation of a bubble fueled by cheap credits. Now the bubble has burst (at the stock-markets something like this is also called "correction").

Comrade Stas is the one you were replying to, but I think he was in part expounding on a point I made a few posts earlier, so I'm going to reply a bit...

Basically, even if we concede that the pre-crisis 'growth' of the Greek economy was an irrelevant bubble, that doesn't help the Greeks repay their debts. It just means that the Greek debts were even more unsustainable in 2010 than we already believed. That even if the Greek economy really had been as strong as the bubble made it appear, the debt would still be unsustainable. Since it would take many years of steady, real growth just to get the Greek economy to be as prosperous and successful as the apparent level during the bubble... and since even then the Greek debts would be unsustainable...

That still leads to the conclusion that it's not realistically possible for the Greeks to repay the debts. If no one's willing to shovel money into the impoverished pit that is the Greek economy, no one should expect money to come magically flying out of the pit, either. You can't get blood from a stone.

[Irbis]

Greece may be able to grow at much faster the 1% initially, since they've been knocked back so far. There's a large untapped labour force for example.

So what? In new 12 EU members, you have reserves dwarfing them by two orders of magnitude, willing to work for far less. In fact, they work for so little EU studies warned the whole region is under critical threat of permanent stagnation, brain drain and becoming purely cheap manual labour source. Why would anyone move jobs to Greece when Slovakia or Slovenia are closer?

Some of the most resolute opponents of cutting Prime Minister Alexis Tsipras and his Syriza Party any slack, however, have been Europe’s most deprived nations, places like Bulgaria, the European Union’s poorest member, and Baltic States blighted by decades of Soviet-imposed penury.

“We are much poorer than the Greeks, but we have performed reforms,” Rosen Plevneliev, the president of Bulgaria, a northern neighbor of Greece, said in an interview. “When you have a problem, you have to address it and not shift it to Brussels or onto somebody else,” he said, deriding Syriza’s complaints that Europe had let Greece down.

What, Merkel didn't bothered to learn yet what giving time and spotlight to radical right wing xenophobes does to politics in eastern Europe? Maybe someone should tell her results of Polish election?

Anyway, nice lie, but here's real reason these countries didn't explode like Greece:



Notice the dip around 2008? To give one example, Lithuania's population went from 3.25 million in 2008 to 2.85 million in 2015. That's loss of 400.000 people - over 12% of population exiled to look for money to Eurozone. Giving the same "therapy" to Greece means 1.2 million people that have to move to richer parts of Europe. Do tell me, would Germans accept 750.000 Greeks moving there? Because I don't see any other place in Europe ready to absorb that amount. And, given how Merkel kisses with Cameron recently on inner EU migration blocks, something tells me it would be a big 'NO'.

That is, of course, ignoring the fact Baltics are accustomed to hardships from 90s that would make your typical West European suicide, making them much more resilient to hard reforms. They also have much lower level of development, making falls much smaller. But hey, we can bash Greece by comparing this apple to their orange, why would we spare ourself that fun, eh?

Frankly, if German leadership would be good for something these days, it would be to tell these nationalists to shut up and show the same solidarity that was given them decade before, both in the case of Greece and immigrant quotas for refugees fleeing to Europe. By enabling them and going along with their rabid close-mindedness, all they are doing is spreading red carpet before a dozen of Putin-lite dear leaders that play the same cards he did in 1998. Adenauer would turn in his grave if he heard penny-pinching trampling of his ideals and ingratitude shown for all the opportunities Germany has been given.

[K. A. Pital]

Do tell me, would Germans accept 750.000 Greeks moving there?

They would not have a choice, actually, if Greece remains in Europe, and most likely that is what will happen.

P.S. I am sure FTeik knows that I am, well, me... and I will get to a reply once I have some free time.

[Crown]

Come on. He was clearly being mocked for the terrorism claim.

I get it, but in context what Varoufakis is saying is not that far fetched at all. There has been a concerted effort from Greece's commercial media to spread panic and terror about this referendum (the graphic I posted on a previous page gives an example) and the language from certain people in the Eurogroup could only be described as 'regime change'.

This referendum could have been held with a 'grace period' of liquidity and finance from the Eurogroup, they've decided to not do so. Yes, many arguments could be had about why they should accommodate SYRIZA at all, etc. But that doesn't change any of the previous sentence. Or as some observers have noted; where were the crocodile tears being shed about Greeks lining up at ATMs when food banks were struggling to feed desperate people?

It should be noted; given some of the violent protests that have rocked Greece in the 5 years leading up to SYRIZA, doesn't it strike you as bizarre that so far this referendum has been so civil despite what I've written above?

Now, to a moment of levity. By now I assume we all know that 'OXI' (pronounced Oh-he) means 'NO' and 'NAI' means 'YES', so only other thing to say is that he's being asked 'Are you a communist?, Are you a member of the left?, Was your father? etc, etc.

[FTeik]

Greece may be able to grow at much faster the 1% initially, since they've been knocked back so far. There's a large untapped labour force for example.

IF they have the resources to get businesses started up that can gainfully employ and supply that labor force, yes.

But at that point we're talking about the same sort of measures that are unpalatable if you're telling the Greeks to just apply more austerity and make sure to pay their interest payments on time. Stuff that costs money up front that is NOT being repaid to foreign bankers.

In 2014 the Troika was expecting a growth of 2.9% for 2015 in Greece. Of course that was before Syriza came into power and turned the clock back. One could also argue, that the "growth" prior to the crisis (debt-level, increases in salaries/wages by 40% from 2001-2008, reduction of the unemployment-rate from 11% in 2000 to 7.7% in 2008) wasn't growth at all, but the creation of a bubble fueled by cheap credits. Now the bubble has burst (at the stock-markets something like this is also called "correction").

Comrade Stas is the one you were replying to, but I think he was in part expounding on a point I made a few posts earlier, so I'm going to reply a bit...

Basically, even if we concede that the pre-crisis 'growth' of the Greek economy was an irrelevant bubble, that doesn't help the Greeks repay their debts. It just means that the Greek debts were even more unsustainable in 2010 than we already believed. That even if the Greek economy really had been as strong as the bubble made it appear, the debt would still be unsustainable. Since it would take many years of steady, real growth just to get the Greek economy to be as prosperous and successful as the apparent level during the bubble... and since even then the Greek debts would be unsustainable...

That still leads to the conclusion that it's not realistically possible for the Greeks to repay the debts. If no one's willing to shovel money into the impoverished pit that is the Greek economy, no one should expect money to come magically flying out of the pit, either. You can't get blood from a stone.

Which is why I suggested, that repayments are put on hold, while the Greeks got their house in order.

Varoufakis has lost the plot.

Quote:
What they’re doing with Greece has a name -- terrorism. What Brussels and the troika want today is for the yes (vote) to win so they could humiliate the Greeks.

Why did they force us to close the banks? To instil fear in people. And spreading fear is called terrorism.

And what the Greeks did is what? Embezzlement? Bilking?

[Vendetta]

Which is why I suggested, that repayments are put on hold, while the Greeks got their house in order.

Right, but as the IMF predicts, "getting their house in order" (allowing enough economic recovery for any money to be payable at all) will take four times longer than your dartboard figure.

[K. A. Pital]

Well, there was some growth towards the end of 2014, which would suggest, that at least some small progress had been made and that things might get better.

There was growth below 2%. Greece spends over 4% of their GDP on debt interest.

And if you read my older posts, you will notice I never argued for a growth of 3 percent. What I suggested was to put the payment of interests and repayment of debt on ice and have a default once agreed up on reforms have been implemented (in law as well as execution).

Very well - that is a good solution if the period is long enough to allow them to restore their economy. But with confidence in Greece so low, how can you be sure that the investors won't simply hope that Greece gets another bailout? That's why I wonder if a non-default option would work - at least, one that will not include a massive haircut + capital infusions...

And your solution is to reward them for being corrupt shitholes? Because that is, what a default without a quid-pro-quo would be. Which is why I argue for a possible default as reward for reforms. And when I say reforms I mean codified into law and enforced.

My solution is enough punishment already: being in default is very hard, and Greece had 6 years of recession. Finally, dropping out of the Euro area means a 40-50% devaluation of their currency. Their economy contracted by 25% and they're on the way to becoming depopulated, just as Eastern Europe. Greek early retirement, for example, has not been a huge problem prior to the crisis, with average retirement at 61 years, but when the creditors kept pressing on raising retirement age officially, it just made every Greek jump on the leaving train, creating a massive problem for their budget due to a spike in early retirements. That is why sometimes I think even the best-intentioned reform plans submitted from Europe are having the opposite consequences.

Nowhere do I argue to put Greek oligarchs in power. I only doubt most of Syriza is better than the Centrist Greek establishment (although I used to hope otherwise).

My hopes for SYRIZA were not high to begin with, but it seems like they are at least doing what they promised to do, going into a head-on confrontation to end austerity.

But promising higher pensions and less taxes and blowing up the state-sector again, when that wouldn't be even sustainable in a healthy economy is at best delusional and at worst criminal.

The problem they face, regarding pensions, is that the threat of abolishing early retirement created a massive stream of early retirees, who are now essentially impoverished. You cannot make them go back to work. Progressive taxation is not "less taxes", it is taxes for those who can pay. At least, that is the main idea. Or would you rather see people earning less than 12000 Eur carry the burden of the Greek recovery? Especially as the entire thing is completely the fault of rich bureaucrats, and the Greek elites who likewise don't belong to the poor and hardly ever care what happens to them.

And let me remind you, that your much vaunted Syriza hasn't done much to go after the "filthy rich", who evaded taxes (Lagarde-list). They even wanted to amnest them. What good socialists they are.

http://www.bild.de/politik/ausland/steu ... .bild.html
Not sure where you got the amnesty from. SYRIZA has done more to investigate tax evasion than the previous governments, who went as far as arresting whistleblowers over this Lagarde List!

Greece is already basically overexploiting its workers with over 2000 hours worked per year (Greece in the top three nations in the OECD statistical database, along with such paragons of wage slavery like Russia and Mexico).

[Irbis]

Another issue Germans seem to ignore, if we initiate Grexit, what stops financial markets that are currently sitting on trillion idling dollars from all that quantitative easing free capital from mounting attack on Spain or Italy? These two countries are sort of stable now and can borrow at low rates because people still have trust in Euro. What happens if that trust is damaged and markets mount attack on both?

Soros managed to single-handedly kill pound's entrance to Eurozone in 1992 using a tiny fraction of the above money in much more regulated world. I wonder if Merkel and her advisors have any sort of plan in place when all so called PIIGS are threatened with forced ejection from Euro? Because as of now, she looks like Nero arguing Rome's firefighting services need to be cut, what's the worst that could happen?

[Elfdart]

The more I read about this, the more the banks in Europe come across as the love child of the bartender who keeps serving drinks to someone who is already falling down drunk and too broke to pay the tab, and one of those sleazy bill collection agencies that buys bad debts and harasses/threatens someone who again, can't pay -on the off chance that hooligan tactics will magically create cash in the debtors' pockets. Jared Bernstein wrote that the banks (not just the German ones) are in a pickle* because:

One reason Greek government debt grew so quickly was that Germany, the Eurozone’s powerhouse economy that’s been imposing austerity on the Greeks, used the money from its trade surpluses not to buy imports from weaker peripheral economies, like Greece, thereby helping to foster more balanced growth and less debt in the region. Instead, they bought Greek debt, financing the run-up we’re dealing with today.

If this is true then my only beef with Tsipras is that he didn't pull the pin and default immediately upon taking office. If they agreed to the Eurozone's terms, Syriza would be consigning Greece to perpetual depression anyway, so why not take their chances with outright default?

*No that's not a typo: the banks are in deep shit.

[Crown]

20% of the vote counted so far according to the Guardian, so far OXI leading with 60% of the vote.

The Guardian Live Stream

EDIT :: Although doesn't look like voting from Athens has come in yet.

[Purple]

Just what are the actual options on this referendum? Every source I can find just keeps saying "yes" and "no" without any explanation. Is it "default? y/n" or "accept foreign extortion y/n?"

[Crown]

Just what are the actual options on this referendum? Every source I can find just keeps saying "yes" and "no" without any explanation. Is it "default? y/n" or "accept foreign extortion y/n?"

Do you accept the offer made on 25th of June (i.e. more austerity); Yes or No.

[Purple]

Just what are the actual options on this referendum? Every source I can find just keeps saying "yes" and "no" without any explanation. Is it "default? y/n" or "accept foreign extortion y/n?"

Do you accept the offer made on 25th of June (i.e. more austerity); Yes or No.

Thanks. Now I know what to cheer for.

[Enigma]

Looks like the No side has won. Interesting times ahead.

[K. A. Pital]

The NO definetely won, and it looks like a landslide win, not just barely won in a tie. Tomorrow's econ news will be full of fear, uncertainty, doubt.

[Crown]

Official statement from the Eurogroup; "I take note of the outcome of the Greek referendum. This result is very regrettable for the future of Greece.

For recovery of the Greek economy, difficult measures and reforms are inevitable. We will now wait for the initiatives of the Greek authorities. The Eurogroup will discuss the state of play on Tuesday 7 July."

The Greeks must be punished lest others get ideas.

[Thanas]

Come on. He was clearly being mocked for the terrorism claim.

I get it, but in context what Varoufakis is saying is not that far fetched at all. There has been a concerted effort from Greece's commercial media to spread panic and terror about this referendum (the graphic I posted on a previous page gives an example) and the language from certain people in the Eurogroup could only be described as 'regime change'.

This referendum could have been held with a 'grace period' of liquidity and finance from the Eurogroup, they've decided to not do so. Yes, many arguments could be had about why they should accommodate SYRIZA at all, etc.

If they had chosen to hold a referendum way before the bailout expired or even in the last month nobody would have minded and the ECB would have funded it. Once the program expired there was no legal basis to do so. This was explained at length. The fact that nobody on the Greek side thinks contracts should be kept did not change that.

I don't know why this is terrorism. It was clear from the start when the bailout expired. To continue it would be a dictatorial action.

Official statement from the Eurogroup; "I take note of the outcome of the Greek referendum. This result is very regrettable for the future of Greece.

For recovery of the Greek economy, difficult measures and reforms are inevitable. We will now wait for the initiatives of the Greek authorities. The Eurogroup will discuss the state of play on Tuesday 7 July."

Indeed it is very regrettable. After all, do you think this referendum creates a legal claim for the creditors to make a better offer? At best Tsipras will get minimal concessions. Any other deal will not pass national parliaments in Europe.

As the Guardian writes:

It is underlining the obvious, but this was a Greek vote on an issue that is European. Tsipras was already negotiating from the position of having won a general election. He may have hoped that a specific mandate for extracting a better deal from the EU would bolster his claim. But that would suggest a big misreading of the balance of power.

Before Greece voted, officials in Brussels were arguing that the referendum question was invalid, because the offer – as made at 11th-hour talks the previous weekend – had expired when those talks broke down. It is hard to believe that the same offer will not now be revived in some form, but Tsipras may be made to work hard to achieve that. Whether it can be improved (from the Greek point of view) could be another matter.

And the real difficulty for Tsipras may not be the Germans so much as the other countries, who have made no secret of their reluctance to soften the terms on offer. There is a feeling that Greece – thanks to a flamboyant prime minister and a stubborn attitude, plus the determination of Germany and others to “save” the euro at almost any price – has been treated as a special case. Among those who will resist further concessions are not just those, such as Ireland, emerging successfully from their own painful bailouts, but “new” Europeans – such as Slovakia and the Baltic states – who made enormous sacrifices, especially in the case of Latvia, to meet the conditions for joining the euro and resent any watering down of the terms.

Only one question was really settled today: the Greek government has survived, and Brussels must deal with Athens as it is, rather than as it would like it to be. The bigger questions – can Greece remain in the euro, or even in the European Union – remain unanswered. As does the most pressing for most Greeks: when will the banks reopen, and how many euros can we withdraw?

If Europe wants Greece to cave or exit, they don't have to do anything. They can just sit back and fiddle while Greece burns after the ATMs will stay closed indefinitely come Wednesday.

[K. A. Pital]

It is implied that Latvia and other nations made their own population suffer badly to join the Euro. I sort of wonder, is this currency even worth the human suffering?