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

[mr friendly guy]

It looks like Finance Minister Yanis Varoufakis aka Doctor Doom has resigned.

[LaCroix]

Of course he did. He knows that the compromise was already the best offer he could get, and that the people who made it are currently personally pissed off with him over his questionable negotiation tactics.

He wants to leave office on a high note. After the bad negotiations, the end of the programs, and the public vote on no more austerity, all he could do now was run around and polish doorknobs, begging for donations, because no one will give Greece credit now, anymore.

tl;dr - He knews he has run the car against a wall and set it on fire. He will let other people try to save what's left, and proclaim himself "winning".

[K. A. Pital]

I've got some respect for the guy. He was walking without guards in the streets and rode a motoroller. I despise those who are putting themselves above the poor.

Too bad that we will not get a real generation of radical left-wing politicians unless this crisis drags on, plunging Europe, China and the US into another round of global recession.

But one thing is certain. Eurointegration at any and all costs is no longer feasible. Just look at the British newspapers. Even the ones that speak with derison about Tsipras and Varoufakis note that Greece should not consign itself to more misery just for the sake of remaining in the Eurozone.

We are no longer in 2002. There is no bright future. In the grim darkness of the future, there is only the poor South, rich North and cheap Eastern European construction and cleaning workers...

[Mange]

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?

Source for that? I'd say it wasn't near the suffering brought on by 45 years of illegal Soviet occupation.

[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?

Source for that? I'd say it wasn't near the suffering brought on by 45 years of illegal Soviet occupation.

Um, Thanas posted a fragment from a Guardian article, saying:

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.

I am not sure as to how true this is. I am not against Latvia being a part of the EU (in fact, the EU has done quite a bit to improve human rights in Latvia and other poor Eastern European nations), but I wonder whether the EMU ascent has been worth it. It does not seem to be doing any good to poorer nations of the European periphery. I know that almost anyone young with a knowledge of English leaves the country immediately if he or she finds a job elsewhere in Europe. Latvia is a remittance state, more or less. Not sure they had it better while the lat was still their national currency. Word of mouth suggests that they had really low wages (like, 400 Eur) and obscenely high prices (a can or bottle of beer would be way over 2 Euros).

But if the Guardian references social hardship that went together with EMU ascension, I am wondering if it was worth the cost. Maybe staying with their own currency like Poland, Czech Republic etc. would be better.

[BabelHuber]

But if the Guardian references social hardship that went together with EMU ascension, I am wondering if it was worth the cost. Maybe staying with their own currency like Poland, Czech Republic etc. would be better.

I don't know - do you remember the times before the Euro?

The de-facto European currency was the DM back then - there was a huge amount of DM in cash floating around Eastern Europe. With DM, you could buy anything. Of course you could use the local currency in supermarkets, restaurants etc., but the preferred currency was the DM.

So in the end, the European monetary policy was dictated by the German Bundesbank more often than not - I remember that when e.g. the Bundesbank changed the key interest rate, the other European countries mostly had to follow suit (sometimes doing so grumbling).

So if the Euro would fail, I don't know if this would be good for the European periphery - of course you could buy your food and pay your apartment with local currency, but if you want to import stuff the seller most probably would simply demand DM or Dollars instead of Euros. Of course you only would have DMs/Dollars if you would have the according exports.

Poland and the Czech Republic have some exporting industry, so they can get Euros easily, but I doubt this would be the same for Greece, Portugal, Spain and Italy...

[K. A. Pital]

The other Euro countries that you name used to have industry as well. They suffered deindustrialization in the Euro area, and they are no longer in control of their own monetary policy. DM was never a "de-facto" European currency, and when you go to, say, the Czech Republic, there is no Euro circulation in retail. There is no hard peg either, to my knowledge, so even if the countries have to devalue their currencies to make exports competitive, they do it when they need it, not when the ECB tells them tO.

[FTeik]

It looks like Finance Minister Yanis Varoufakis aka Doctor Doom has resigned.

And that when he threatened to resign, when the referendum went "Yes". Now the referendum went "No" and he still resigns.

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?

Question is, would they have been better off, if they had stayed out? Sure, there might have been (and still are) a lot of suffering, but people are willing and capable to deal with hardship, if they have a perspective for a better live.
Ask yourself, what is worse: Being poor and unemployed in your home-country or being poor, with access to a continent-wide job-market?

[K. A. Pital]

The currency union does not anyhow impact the freedom of movement. Workers from Czech Republic, United Kingdom etc. enjoy the full EU citizen rights with what comes to labour market access.

[Irbis]

Too bad that we will not get a real generation of radical left-wing politicians unless this crisis drags on, plunging Europe, China and the US into another round of global recession.

If we see the crisis dragging on, what will most likely come to power is not Syriza, but Golden Dawn. Fascists are strong through Europe, while democratic left wing parties in a lot of countries either wither, are institutionally marginalized (see Linke in Germany), or have whole media, church, right wing education complex against them. Frankly, what we should be seeing if Europeans had any common sense would be left wing coalitions winning all over Europe, how much of that we see?

DM was never a "de-facto" European currency, and when you go to, say, the Czech Republic, there is no Euro circulation in retail.

Uh, no? You can easily pay with Euro in every big shop in EU. Even in my backward city malls have cards 'we accept Euro as X zł', X being below official course, but still. In countries pretty much surrounded by Eurozone, like Switzerland or Czechy, from what I heard paying there with Euro is trivial.

There is no hard peg either, to my knowledge, so even if the countries have to devalue their currencies to make exports competitive, they do it when they need it, not when the ECB tells them tO.

Technically, there is a peg - ERM II mechanism. The hardships of Baltics were mostly from trying to stay within in during crisis years, to adopt Euro as soon as possible, instead of devaluing currency.

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?

Wrong. The suffering was in 99% done by Russophobic politicians trying to show middle finger to Russia. Euro was just a pretext - Poland had very much same reforms done in 90s when Euro didn't even exist yet. I still remember these days - idiot, rabidly Raeganist economist, Balcerowicz, called advisors from USA to discuss several variants of reforms. What shocked me when I read about it years later, is that out of all variants discussed, the most extreme was chosen without thinking, then doubled, causing even people responsible for Raegan's deregulation to stare in disbelief and ask "uh, guys, you sure about that?".

All in all, 90-92 and 97-00 were 7 years of stagnation and lack of growth, all when other eastern European countries were experiencing 5-8% growth. It was done in name of 'integration with West', now it would be called 'maintaning Euro standards' but the real purpose was destroying all ties with East, no matter the cost in industry, farming or human livelihood. If only anyone else considered back then was chosen...

Also, the irony is, Poland was well poised to join Euro in 2005-2008 after left wing government managed to maintain necessary indicators on good level thanks to boom period. Sadly, then Poles elected xenophobic duck government that was 100% against. We could have reaped Euro benefits last decade without need of any reforms, using it as a shield against 2008 recession, but alas, that positive example that would have exposed what Baltics were doing wasn't meant to be.

[BabelHuber]

The other Euro countries that you name used to have industry as well.

Sure, but when you are in the Euro, you can always buy everything with the money you make.

But if you have an own currency and only few exports, imported goods can become very expensive. This can apply e.g. to fuel, medicine and all other imports (smartphones, TVs, PCs, cars and whatnot).

So you have a devalued currency now, fine. You can easily pay for your apartment and for food (as long as it was produced in-country, so you better don't be a net food importer).
But when you need fuel for your car, you get sick or your smartphone breaks down, it can get very expensive.

Note that a country like Greece can easily raise their food production with an own currency, but this does not mean you'll get Greek companies producing smartphones, TVs or cars, or that you automaticyll get companies which can compete with Pfizer or Buyer in the pharma industry.

They suffered deindustrialization in the Euro area, and they are no longer in control of their own monetary policy.

In this case, joining the Euro was a mistake. Then they should leave.

DM was never a "de-facto" European currency, and when you go to, say, the Czech Republic, there is no Euro circulation in retail.

In the Czech Republic, I can easily pay in Euro in restaurants. Usually you get the exchange money in local currency, though. I didn't try this at supermarkets, though (there I simply used my credit card).

So es, in the Czech Republic Euroes are accepted.

And the DM was the de-facto currency:

https://www.ecb.europa.eu/pub/pdf/other ... 28da0e0671

In 2000, for example,
the demand for DM 1,000 banknotes (equivalent
to €511) was 15 times higher than in 1975 and
represented 34% of the total value of Deutsche
Mark banknotes in circulation. Moreover, in
countries outside the European Union with
relatively unstable monetary regimes, where
inflation is high and/or there is little trust in the
banking system, people often hold the cash of lowinflation
currencies as a store of value. Before the
introduction of euro banknotes, high-value notes
such as the DM 1,000 were held.

There is no hard peg either, to my knowledge, so even if the countries have to devalue their currencies to make exports competitive, they do it when they need it, not when the ECB tells them tO.

Don't forget you also need imports to produce somnething: German cars usually are made of steel which was imported. But of course the value added to the steel is worth much more than the steel itself.

So depending on the imports you need for production and the value you can add during manufacturing, a weak currency can also be a curse for production (of course this is not valid if you can produce the raw materials domestically).

So if you have a weak currency and don't add much value to a product you need to import, you can also get problems...

[K. A. Pital]

Paying with Euro is not trivial. Finding a shop that would accept is not trivial. When national currency exists, it is rarely that one can "pay with Euros", and if it is possible, the exchange rate is absolutely killing (in Switzerland during the Euro peg times, when the CHF was pegged at 1.2, the CHF prices were asked in Euros, meaning a huge premium had to be paid every time you make use of "foreign currency").

Maybe Poland is more Euro-infused than other nations, but I have not been able to "easily" pay with Euros when travelling outside the common currency zone.

As far as I know, only Denmark participates in ERM II with a hard peg as of now. Neither Poland nor the Czech Republic take part in ERM II, and though obliged to join, this is very unlikely as the population is largely against the Euro: only 16% want the Euro in the Czech Republic and only 32% in Poland, unless these numbers seriously changed...

Moreover, "with Euros you can always buy goods" is nonsense. Buying goods in exchange for cheap credit is exactly what led Southern Europe to its doom. Having a common currency does not mean you magically get an endless well of money. The EU found it out the hard way.

Smartphones are not easily accessible regardless of whether you are paid 400-500 Eur per month in Euros or some other currency, you are just too fucking poor to buy and currency has nothing to do with it. Mistaking common currency for equal incomes is stupid.

[LaCroix]

Paying with Euro is not trivial. Finding a shop that would accept is not trivial. When national currency exists, it is rarely that one can "pay with Euros", and if it is possible, the exchange rate is absolutely killing

Here in Hungary (countryside, not even a big city), I can even pay the hay delivery from my local farmer in Euro, and get about the same rate I get at the exchange offices (you get 300-310 everywhere). Restaurants usually give you the exact daily rate. Some shops do even have extra debit card readers to charge you in Euro, apart from the normal Forint ones. They even have parking clocks that accept both currencies in some cities.

You would need to drive far into rural countryside to find somebody not eagerly accepting Euro, as far as my experience goes.

[K. A. Pital]

In Budapest I saw some shops and restaurants accepting Euro, but far from all around me (unless paying with credit card, in which case currency is exchanged by the respective payment system). Public transport, attractions etc. accept only HUF, as far as I understood. But yeah, Hungary had more Euro-shops than Czech Republic, where paying in Euros was a rare possibility. Maybe I did not try to give people Euros, if there was no sign informing that they are accepted, but I did not see that many Euro-accepted signs either.

[Fingolfin_Noldor]

All in all, 90-92 and 97-00 were 7 years of stagnation and lack of growth, all when other eastern European countries were experiencing 5-8% growth. It was done in name of 'integration with West', now it would be called 'maintaning Euro standards' but the real purpose was destroying all ties with East, no matter the cost in industry, farming or human livelihood. If only anyone else considered back then was chosen...

Honestly, those guys there simply chose one political master for another. Hopefully, they didn't choose wrong....

(Not like anything will change anything. Some countries simply don't understand how to survive when sandwiched between Great Powers.)

[BabelHuber]

Smartphones are not easily accessible regardless of whether you are paid 400-500 Eur per month in Euros or some other currency, you are just too fucking poor to buy and currency has nothing to do with it. Mistaking common currency for equal incomes is stupid.

No, you got this one wrong:

Let's say you earn €500/month. You can have a cheap smartphone for €100, which is 20% of your salary.

Now your country leaves the Euro, you get 500 NewCurrency now.

This currency now is de-valued, let's say 50%.

This means you earn 500 NewCurrency, but your smartphone now costs 200 NewCurrency, which is 40% of your salary.

As a sidenote, this is exactly why lots of Germans wants the DM back - the DM was stronger, so imports were cheaper.

[K. A. Pital]

If you keep buying foreign goods but not producing anything of value in return, the balance is negative, and the situation is unsustainable anyway. You will just accumulate debt until either private indebted cannot pay (banks implode) or government can no longer support your high Euro-denominated wage and pension, and goes bankrupt.

In a nutshell. Once again, having a common currency does not automatically mean you earn higher wages. It means you can, theoretically, for a short time earn wages which are unsustainably high, as they are denominated in a currency, the exchange rate of which hinges on the stronger economies and not on your own economy.

In the end the reckoning will come. Your currency appreciated all of a sudden not because you had a strong economy and something to offer, but simply because some other nation in the common currency has a strong economy and is highly rated as far as debt goes.

Contrast this with, say, Asian nations, their currencies appreciate as they rely on their own industrial output. If they cannot maintain the output, or output falls and industrial capital is underutilized, the currency will depreciate and exports can resume. Not just exports, though, a depreciation will lead to internal production for the domestic market becoming competitive again.

[Elfdart]

It looks like Finance Minister Yanis Varoufakis aka Doctor Doom has resigned.

And that when he threatened to resign, when the referendum went "Yes". Now the referendum went "No" and he still resigns.

I doubt it was his decision.

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?

Question is, would they have been better off, if they had stayed out? Sure, there might have been (and still are) a lot of suffering, but people are willing and capable to deal with hardship, if they have a perspective for a better live.
Ask yourself, what is worse: Being poor and unemployed in your home-country or being poor, with access to a continent-wide job-market?

Not everyone wants to be an economic nomad.

[BabelHuber]

If you keep buying foreign goods but not producing anything of value in return, the balance is negative, and the situation is unsustainable anyway. You will just accumulate debt until either private indebted cannot pay (banks implode) or government can no longer support your high Euro-denominated wage and pension, and goes bankrupt.

In a nutshell. Once again, having a common currency does not automatically mean you earn higher wages. It means you can, theoretically, for a short time earn wages which are unsustainably high, as they are denominated in a currency, the exchange rate of which hinges on the stronger economies and not on your own economy.

In the end the reckoning will come. Your currency appreciated all of a sudden not because you had a strong economy and something to offer, but simply because some other nation in the common currency has a strong economy and is highly rated as far as debt goes.

Contrast this with, say, Asian nations, their currencies appreciate as they rely on their own industrial output. If they cannot maintain the output, or output falls and industrial capital is underutilized, the currency will depreciate and exports can resume. Not just exports, though, a depreciation will lead to internal production for the domestic market becoming competitive again.

From the perspective of the national economy, you are right.

However, from the point of view of a single employee, you are wrong:

When the currency is devalued, lots of stuff which was cheap back then is expensive now. People tend to not like this...

[K. A. Pital]

From the perspective of a drug addict, the addiction is not necessarily harming him, but in the end, and outside observer can tell that the situation is destroying the addict's physical and mental health. If the Eurozone is harmful for the countries of the South (and it is, after decades of convergence they experienced shock divergence with the North), who am I to tell them to stay in the name of a common currency, which is just money?

People, especially young ones, tend not to like 50% unemployment and tiny wages either. This is why the youth is even more radically against the European project as it is now, far more than the elderly, check the age groups in the Greek referendum.

[BabelHuber]

From the perspective of a drug addict, the addiction is not necessarily harming him, but in the end, and outside observer can tell that the situation is destroying the addict's physical and mental health. If the Eurozone is harmful for the countries of the South (and it is, after decades of convergence they experienced shock divergence with the North), who am I to tell them to stay in the name of a common currency, which is just money?

People, especially young ones, tend not to like 50% unemployment and tiny wages either. This is why the youth is even more radically against the European project as it is now, far more than the elderly, check the age groups in the Greek referendum.

Don't you get it?

If you had a job which was payed in Euro, you cannot afford as much after leaving the Euro.

Of course, if you didn't have a job and got one because your country left the Euro, you do better now. One size does not fit all here.

[Purple]

a) If you had a job which was payed in Euro, you cannot afford as much after leaving the Euro.

b) Of course, if you didn't have a job and got one because your country left the Euro, you do better now.

If you will allow me to add annotations to your text, what he is saying is that as it stands now a) has empirically been proven to be far less likely than b). And I agree. Furthermore it is morally heinous to presume that the plight of a) is greater than that of anyone who would have benefited from b). For one looses part of his purchasing power whilst the other gains access to such unnecessary luxuries such as having food to eat.

[BabelHuber]

If you will allow me to add annotations to your text, what he is saying is that as it stands now a) has empirically been proven to be far less likely than b).

Even if you have 25% unemployment, you have more people employed than unemployed. Those who are already employed can be a majority, you know?

And I agree. Furthermore it is morally heinous to presume that the plight of a) is greater than that of anyone who would have benefited from b). For one looses part of his purchasing power whilst the other gains access to such unnecessary luxuries such as having food to eat.

And you create this strawman for which reason?

I have never stated that a.) is better than b.)! I just pointed out that leaving the Euro does not make everything better, because actually imports will become more expensive. And this does have a negative impact on the standard of living, because people can afford less.

And this does not hit the rich, mind you. The workers are actually those who e.g. cannot have their car repaired because the spare parts got so expensive.

Of course this has also effects on other areas, e.g. public transports. If your country buys Mercedes busses or Siemens trains, you have to pay the spare parts as well as new busses/ trains in Euro.

Now if you want to keep these vehicles driving, it costs suddenly more! So you can:

a.) Raise prices or
b.) Hand out (more) subsidies - where to get them from? printing more money? raising taxes?

Again, the rich won't give a shit, the regular, working people will be affected.

These effects are not invalidated even when your unemployment rate sinks - those who had a job before are still poorer, and usually people don't like such things.

[K. A. Pital]

Leaving the Euro does not make things better automatically. But show me a nation with a devalued currency that'd be also struggling with massive unemployment like Greece, or Spain for that matter?

Having 25% unemployment is actually terrible: youth unemployment stays at 60%, meaning if you're in the 18-24 cohort, no job for you, and total employement includes only people who got their jobs earlier. New jobs either appear very slowly or not at all; the economy has shed a huge part of the workforce, and given the situation, it is very likely that the youngest generation - the have-nothings - got shafted, while old people who may also have other sources of income, still keep their jobs.

Of course this has also effects on other areas, e.g. public transports. If your country buys Mercedes busses or Siemens trains, you have to pay the spare parts as well as new busses/ trains in Euro.

Maybe your country should look for alternative suppliers then, who will make the same thing cheaper, or even in-source production. I know some E. European countries make decent buses, and I've seen quite a few Chinese buses rolling around with the same facilities as European ones.

These effects are not invalidated even when your unemployment rate sinks - those who had a job before are still poorer

At some point these effects will be invalidated (if your economy starts producing things and actually accumulating capital, its currency will appreciate in the markets). Besides, those who have no job are a greater problem: they are the generation that is productive, that is supposed to have a job, pay taxes and maintain the pension system. And it's them who are out of jobs.

[Me2005]

If you will allow me to add annotations to your text, what he is saying is that as it stands now a) has empirically been proven to be far less likely than b).

Even if you have 25% unemployment, you have more people employed than unemployed. Those who are already employed can be a majority, you know?

25% unemployment does not equal 75% of the population being employed. It equals 75% of the workforce being employed, which can be some arbitrary percentage of the total population, usually excluding the elderly, disabled, and young children. In the US, it means "anyone working or collecting unemployment," which isn't really a good measure as people can loose unemployment but still be eligible workers. Even by using a good measure and excluding people who really can't work, you could have a situation where you have 100% employment and still have a minority of workers in a country.

I find this whole situation both fascinating and incomprehensible.