Greek Bailout

[gaggedLouise]

The negotiations over Greece's massive sovereign debt and its economic life support from stronger Eurozone countries (Germany, most of all) dramatically broke down over the weekend (already heard that, I figure?) and unless the Olympic Gods intervene Greece will go into state default by wednesday, pending the referendum on austerity measures called by its cabinet for next sunday. Measures and reforms that their debt creditors, the IMF and the governments up north and around the EU (aka "the Troika") want, but which Mr. Tsipras and his government deemed far too heavy and liable to strangle the Greek economy (I think they actually had some kind of point there, but I don't aspire to solve the issue of where to go´with Greece and the euro...).

Of course stock exchanges are falling like bullets all over Europe and beyond, due to uncertainty over what happens next.

Headline of the day: "The Greek Crisis spreads: Sell Europe"

Any aspiring buyers?  ::)

[consortium11]

There's something which strikes me as inherently bizarre and somewhat morally questionable about countries like Ireland and Portugal... countries that suffered through their own serious financial crisis and bailouts but got their own houses in order and leaving the bailout programs... having to hand over money to Greece.

But the simple truth is that Greece should have never been in the Eurozone to begin with.

One could argue that a crisis was always on the cards when you have a currency union between states with wildly different economic needs and conditions. But you don't even have to do that. Greece shouldn't have been allowed into the Eurozone. They didn't pass any of the economic conditions or requirements for entry. So they just made up the figures and pretended that they did... something they openly admitted not that long afterwards. Everyone knew they didn't pass muster but those who supported the Eurozone didn't care; the political will to have a big Eurozone trumped economic realities. It's a sad tale that we can see throughout this story... from the government mandated decisions by Fannie May and Freddie Mac to buy sub-prime loans in an attempt to make a higher percentage of poor Americans home owners which was one of the key forces behind the financial crisis to Greece today where SYRIZA's refusal to change their expensive policies despite not having the money to pay for them... time and time again we see politics trump economics.

And now people... notably the poor of Greece... are paying the price.

It's often forgotten that Greece was recovering not so very long ago. At the end of last year GDP was rising and unemployment was falling. Then came the election, then came SYRIZA and now comes this. That trite phrase about socialism working until you run out of other people's money is probably unlikely to ever be more true than it is right now with Greece. That's not to say things would have been easy if they had carried on as before with Greece; it would have been hard and it would have hurt. But as Portgual and Ireland show, they'd have likely got better. And certainly been better than what they have now.

Truth is, even setting aside the fact that they didn't qualify for the Eurozone, Greece should never have joined to begin with. The Eurozone was too big and included too many disparate economies with tension long being noted between the "Latin block" (specifically Portugal, Italy, Greece and Spain, sometimes known as the PIGS) and the more northern members centered on Germany. The financial crisis simply exposed that long running tension. The eurozone was paralyzed by it; the Latin block needed their currencies to be devalued so they could have some breathing room but couldn't because they had no control over their currency. Likewise an exit from the eurozone soon after the crisis hit would have helped Greece; in the very short term the shock from it would have hurt but the ability to devalue the currency would have given them some time and space while also giving a quick economic boost as Greece became an incredibly good value holiday destination. But again the political need to keep the eurozone together trumped the economic needs of the member states and so here we are. With Greek retail banks quite possibly literally running out of money.

[gaggedLouise]

With Greece teetering on the brink of state bankruptcy, its cabinet seems to have put a fresh offer to the Eurozone group and its governments: "if you offer us some new proposals that would work, then we could urge the people to vote yes on sunday" (according to some tweet by the Maltese PM). They coupled it with asking for a new two-year bailout. Hmmm...

When are they actually going to decide just what proposal text is going to be on those referendum ballots on Sunday?  :o It's not like they'll be able to print and distribute several millions of ballots just overnight on Saturday.

Gee, sometimes it's like almost everyone in this story are trying to negotiate with a gun on the table, or under the table.

[Blythe]

It looks like Greece has defaulted on their IMF payment. I had a feeling that was going to happen after watching the news about the various deals Greece didn't take when asking for a bailout/financial aid.

[Beorning]

Please explain it to me: so, Greece didn't pay the IMF money. Does it automatically mean that Greece is bankrupt? I'm not sure how these things work...

Also, who do you think is right here: the IMF / EU or Greece?

[Cassandra LeMay]

Please explain it to me: so, Greece didn't pay the IMF money. Does it automatically mean that Greece is bankrupt? I'm not sure how these things work...

Here's how I understand the bankruptcy situation: No, Greece isn't bankrupt - yet. There isn't any "insolvency law" that governs states, which makes it difficult to say when exactly a state enters bankruptcy, but, that said, the big rating agencies will (as I understand it) only declare Greece's financial status to be bankrupt when it can't pay back its private creditors, which hasn't happened yet. Right now we are talking about not paying back sates and institutional creditors. When it comes to the IMF, Greece is currently in arrears, but (IIRC) the IMF will now start to ask their money back, level some penalties against Greece, for a month, before they declare Greece insolvent. Not sure what the consequences will be if the IMF makes that declaration.

Aside from the Greek state there are also the Greek banks, which are running out of money and depend on the ECB. How long the ECB will pump money from the European Stability Fond into the Greek banks remains to be seen and may change according to the outcome of the Greek referendum (if it is held).

Also, who do you think is right here: the IMF / EU or Greece?

I think everyone has some portion of the blame for the current situation to shoulder.

Previous Greek governments should have done some things differently, both before and after the crisis began, and the current government hasn't really helped a lot either. Syriza was elected on promises that might never have been very realistic to begin with, and how they have conducted themselves in the negotiations with the Troika hasn't helped. If their negotiation strategy was (and is) a matter of trying to appear strong for their home audience, inexperience, or an attempt to achieve some concessions based on the premise that Europe wouldn't drop Greece, no matter what the Greeks asked for and how they asked for it ... I don't know, maybe a bit of all that.

As for the Troika, the unflexible insistence on strict austerity was (IMO) the wrong move. I blame it on two factors: One, conservative ideology where austerity is often not just motivated by economic policies, but also driven by ideology of a "small state". Two, the fact that the usual "game plan" for states in financial trouble just couldn't work, yet was followed in those aspects where it appeared feasible, i.e. austerity measures. Either the members of the troika didn't realize what consequences that would have, or saw the problems but couldn't (or wouldn't) come up with a Plan B.

(To explain my point #2: The game plan the IMF usually follows when dealing with a state in financial trouble consists of three meassures: Devaluation of the currency, writing off at least some debt, and some austerity / money-saving policies to help bring down debt further. Devaluing the Greek currency was impossible because of their Euro membership. A debt write-off was not wanted because around the time the IMF entered the picture (ca. 2010, iirc) Italy, Spain, and Portugal were in financial troubles too. No one wanted to send the signal that creditors of European countries could expect to lose some of their money in a  debt write-off, as that might have hurt the ability of countries besides Greece to borrow money on the markets. That left austerity as the only standard tool available, but without the other meassures that are often used that alone couldn't work to solve Greece's problems. )

That's all rather simplified, and perhaps not 100% accurate, but it's how I understand it, not having followed all the developments closely.

[consortium11]

(To explain my point #2: The game plan the IMF usually follows when dealing with a state in financial trouble consists of three meassures: Devaluation of the currency, writing off at least some debt, and some austerity / money-saving policies to help bring down debt further. Devaluing the Greek currency was impossible because of their Euro membership. A debt write-off was not wanted because around the time the IMF entered the picture (ca. 2010, iirc) Italy, Spain, and Portugal were in financial troubles too. No one wanted to send the signal that creditors of European countries could expect to lose some of their money in a  debt write-off, as that might have hurt the ability of countries besides Greece to borrow money on the markets. That left austerity as the only standard tool available, but without the other meassures that are often used that alone couldn't work to solve Greece's problems. )

That's all rather simplified, and perhaps not 100% accurate, but it's how I understand it, not having followed all the developments closely.

Greece has actually had a debt write-off... 50% of it was taken as a haircut by its creditors. In addition the overall repayment date was set far further in the future then in any of the other states in similar circumstances and the interest rate has been utterly slashed in comparison. In essence Greece got the sweetest of all possible bailout deals when it came to debt reduction.

Likewise I'm not sure we can say that the austerity (and it's hardly austerity to tell someone they can't spend someone else's money with complete freedom) wasn't working. Greece's GDP was rising and unemployment falling as recently as the end of last year. The issue was that SYRIZA swept into power on the back of populist but useless rhetoric (as they are now unfortunately discovering) about how they'd essentially refuse to pay the money back and instead keep spending more. That spooked the markets and lenders who didn't really see the attraction of lending yet more money to a country when the predicted (at the time) government is saying they won't pay it back. Thus, the chaos we have now.

If we're looking for who's at fault then in the immediate circumstances it's SYRIZA... they broke a recovery that had been painfully slow but was recovering (much as it did in both Portugal and Ireland). But that misses the bigger picture. The real people at fault are the heavily pro-Europe as a political entity thinkers who created the Eurozone as it is in the first place and especially those who took Greece into it. A crisis like this was always going to be on the cards... before any of the recent financial turmoil that kicked this whole thing into motion there was already tension between the Latin block/PIGS and the Northern block with the Latin block suffering due to the strength of the Euro. And that's to say nothing of the fact that Greece shouldn't have even been part of the Eurozone to begin with; it failed all the economic tests that a country was meant to pass to become a member but simply invented figures and pretended it did.

The people most at fault are those who put the political/ideological importance of having a widely used Euro above the economic realities of having it actually work and be stable. It's another sad example of thinking that politics can overrule economics and people putting political ideology above economic reality. Now the Greeks are paying for that hubris.

[gaggedLouise]

Just heard some Syriza politician saying on the tv: "the ECB wants to kill the Greek people". Things are really heading into a peak of uncertainty and high rethoric. ^_ ^

[Beorning]

I don't approve either. But it is his right to think what he wants, and seems hardly the sort of thing meriting a boycott.

I'm not fan of boycotting in general, but I'd like to point out that the whole "governments are fascist for making vaccines mandatory" attitude is potentially as harmful as outright claiming that vaccines are harmful.

Just heard some Syriza politician saying on the tv: "the ECB wants to kill the Greek people". Things are really heading into a peak of uncertainty and high rethoric. ^_ ^

Well, I must say that I've heard that some Noble-prize winners in economics are saying the same thing... So, maybe there's a point to it?

[Beorning]

Meanwhile, the exit polls from Greece suggest that the "No" option won the vote...

[gaggedLouise]

Well, the Greeks did deliver an overwhelming NO vote - about 60 vs 40% - defying any  simple "more of the same medicine" solution, and triggering a fever of activity among politicians and bankers in the coming weeks.

Best two comments so far to the referendum: a board with the text "UNFUCK GREECE" held up by a band of young voters in the central square of Athens, and on the opposite side, an op-ed article with the laughable headline "They voted No to reality" by Swedish MEP and senior conservative party bigwig Gunnar Hökmark, published in a big Stockholm daily.  ::) Hökmark theorizes that there will either be a new kind of bank run, when foreign investors try to buy up the Greek banks and force money off their owners (??) or there's going to be an alliance between hardline communists and the ultra-right wing folks of the Golden Dawn party.  ??? Only by bending to even more and harder austerity by the benevolent Brussels and IMF, and by reducing their country to a de facto colony, could the Greeks hope to get up on their feet again.

[TaintedAndDelish]

It looks like Greece is boned when it comes to importing from other countries, but I wonder if their newly devalued currency might be instrumental in exporting goods. If i understand this correctly, they can now produce goods at a relatively low price.

As for keeping other countries from buying out their banks ( in a hostile attempt to control their currency ), I would think that could be dealt with by passing a law or something to prevent ownership of banks and real estate by outsiders?

[Cycle]

I don't understand the Greece "No" vote.  What do they think will happen now?

[Darkleather]

I don't understand the Greece "No" vote.  What do they think will happen now?

I'm not sure either.

It seems to be the political equivalent of closing your eyes, putting your fingers in your ears and saying "LA LA LA" and hoping the tiger behind you goes away

[Oniya]

I follow Robert Reich (former Secretary of Labor) on Facebook.  The Greek situation is scarily like what's happening in the US, with most of the money being concentrated in the ultra-upper class, and the lower class being expected to foot the bill.  The Eurozone 'solution' called for things like pensions to be cut - when more than a fifth of the population is pensioners, and unemployment among young people is at almost 50%.  The Greek banks are closed, and only allowing people to withdraw 60 euros a day via ATMs - but many pensioners don't have ATM cards.  The banks opened on Wednesday to allow these people a one-off withdrawal of 120 euros.

The 'solution' seems to have come down to:  Raise/implement many taxes across the board (affecting all citizens), raise the retirement age (gotta get everything you can out of them), end the grant that provides a 'top-up' to the poorest of the pensioners, and have pensioners pay more for their health care. 

The possible outcomes of this are - 1) The Eurozone comes up with a better plan, or 2) Greece leaves the Eurozone.  As it is, with the banks basically issuing IOUs, they may already be developing a 'de facto' currency replacing the euro.

[consortium11]

You can't really compare the US to the Eurozone (and thus Greece) because while the US is both a monetary and fiscal union the Eurozone is merely monetary. While individual states in the US obviously have some level of fiscal autonomy the federal government still has a large amount of control over both taxes and spending. That's not the case in the Eurozone; the member countries are free to set their own tax and spending rates.

The issue with Greece (and Portual... and Spain... and Ireland... and to an extent Italy...) is one that was unfortunately inevitable as soon as the Eurozone was created. Those countries (generally known as the Latin/Southern Block or occasionally the PIGS) needed to have a weak currency to keep their economies flourishing. The so called Northern Block of the Eurozone, largely headed by Germany, needed a strong one. The Euro largely remained strong and, even before the series of financial issues that rocked the world, there was real tension there. As soon as the sovereign debt crisis hit? It came apart at the seams. Countries outside the Eurozone (the UK being a good example) could devalue their currency and put more of it into circulation to buy themselves time and soften the blow... Eurozone countries couldn't. Monetary but not fiscal union will never work. Different countries have different monetary needs... often wildly different. A crisis was inevitable. Sadly those who pointed this out were accused of being xenophobic, behind-the-times or (in the UK at least) "Little Englanders" and the voices on the left who had always opposed the European project were drowned out.

Here's the basic issue with Greece.

They have no money. They've spent it all.

Greece not only can't afford to support itself as-is, it also needs to pay back the groups it has already borrowed huge amounts from. Before anyone starts talking about vulture capitalists it's worth noting that those creditors have already agreed to write off 50% of the debt, accepted an interest rate far below what the open market would demand (open market Greek gilts are at around 15-25% depending on maturity, the rate Greece currently pays is 2.5%) and restructed the debt to give Greece longer to pay it off multiple times. For the record those are far, far, far more generous terms then Ireland, Spain or Portugal got during their own bailouts.

Let's also remember what the consequences would be of simply not paying back their debt and reneging on it. Who is going to lend to a country that refuses to honour its debts? Because of politics and the warped version of Keynesian economics (sometimes called the "new neoclassical synthesis") that currently dominates economic policies there are few if any countries that can actually support themselves without borrowing. But again, who'd lend to Greece if they have a history of not paying their debts? And even if they did agree to lend how high an interest rate would they demand to make up for that risk (which is the reason gilts are used to measure how strong a countries economy is; the less risk the lower the interest rate and vice-versa).

The truly tragic thing is even eight months ago this was all avoidable. Yes, the conditions of the bailout had been tough. Yes, they would be tough still. But GDP was up and employment was down as 2014 came to an end. A corner had been turned and while things were still going to be tough and still going to suck for a while the end of the bailout was in sight... just as it was with Ireland and Portugal. Then came the news of the snap election, then came the electoral upswing of Syriza who were talking about increasing spending (remembering that Greece already didn't have any money to spend) and refusing to pay debts. Understandably both the markets and other governments balked at this... especially countries like Ireland and Portgual that had suffered through the hard times, kept their word and paid back the money they owed and were now being asked to fund Greece refusing to do so. Thus the sad situation we face now.

So what happens next?

Frankly, it's hard to tell because the referendum didn't really mean anything. The Greek people were asked to vote on a deal that had already been taken off the table. It was symbolic at best. And the problem with symbolic gestures is that they mean nothing compared to the cold, hard, economic truth of life... much like how the symbolic gesture of a closer Europe was allowed to trump realities and thus cause the Eurozone in the first place.

We'll know more tomorrow when the Greek PM Alexis Tsipras addresses the leaders of the Eurozone. But both sides appear backed into a corner. Tsipras' rhetoric and the result of the referendum, symbolic or not, means he can hardly back down now. But neither can the powers that be in the Eurozone. A weakening of their position against Greece will bring the other countries who went through bailouts screaming that they deserve reperations for not getting as sweet a deal (and as above the Greeks already have the sweetest deal of them all). And in Spain's case with an election coming up their leader, under pressure from a Syriza type party back home, isn't going to want to give them anything.

Personally I think Greece has to leave the Eurozone... and the quicker the better. It should never have been there to begin with... both in technical terms (it failed all the entry tests) and in judgement (it was always going to suck for them). Then it can devalue and while things will still be awful there's a way out. The current zombie-state existence where Greece is only kept alive by other people throwing them money can't go on. It hurts everyone. The question is having already sacrificed so much to the vanity of the Eurozone whether politicians are willing to finally let it tumble or whether they'll drag this out.

And Greece has to get itself in order... even before the crisis it had a real tax and spending problem. Tax evasion is a huge issue... and for once it's not the super rich doing so but the professional middle-classes. There's a very interesting paper on it here but the headline example is this; professional Greeks self-reporting their taxes claimed that they spent more money servicing consumer debt then they made in a year. For comparison even in countries considered to have huge consumer debt the figure is around 30%... and that's the very upper bracket. That 100%+ figure doesn't come about because Greek doctors or lawyers were bouncing from pay day loan to pay day loan... it's because they were massively under-reporting their income so they could avoid taxes.

On the spending side of things there was what was assumed to be an apocryphal story about the Greek train system being so under-used and over-subsidized that it would be cheaper to make everyone who uses it get a taxi instead. Turns out it's pretty much true as long as three people share each taxi. Now in reality it's not quite as simple as just cancelling all trains and paying for taxis instead... much of the cost of the rail network comes from the generous pensions and the like which were funded with debt spending... but it's a simple example of what went wrong with Greece. They spent far too much money, got far too little back in tax and without control over their monetary policy simply couldn't do anything to sort it out when the good times ended and the bad times rolled in.

I think Greek people are scared... and who can blame them. And they're proud... and again, who can blame them for that? That's why they said no at the referendum. I'm not sure anyone ever won the hearts and minds of a people by saying that they'd have to pay more taxes and have their services and benefits cut. The hope Syriza offers that all debts will be cancelled and that spending can be increased may be completely illusory... but it's hope none the less. And with banks literally running out of money, food being horded, pensions quite possibly soon not being paid and medicine not be available hope is a tempting answer.

[Cassandra LeMay]

I don't understand the Greece "No" vote.  What do they think will happen now?

One problem with the vote was that the question really didn't fit any of the possible outcomes of the vote. People were pretty much left wondering what the "yes" or "no" would really mean. Some voted No because they want Greece out of the EU and/or the Euro. Others might have voted No to express support for the current government. Others might have vote No to send a message to the EU about the bailout conditions in general or express some lingering frustration with previous greek governments who agreed to the bailout conditions. Yet others might have taken the vote to be largely a referendum on how much tax increase and benefit reduction Greece should agree to. A majority of Greeks want to keep the Euro, but ask anyone if they want higher taxes and they are bound to say no. That wasn't the question as written on the ballot papers, but for many people it was the question implied in the referendum. The Independent has an article today that sums it up fairly nicely: Click here

The Eurozone 'solution' called for things like pensions to be cut - when more than a fifth of the population is pensioners, and unemployment among young people is at almost 50%.

One problem that makes the pension cuts even worse is that Greece has (to the best of my knowledge) very little in the way of unemployment insurance/benefits or social security you might find in Germany, France, or the UK. For many Greek families the pensions of the oldest family members might be almost the only income they have. Cutting down pensions wouldn't be so bad if the younger members of a family had some income, but for many people that might not be the case.

The truly tragic thing is even eight months ago this was all avoidable. Yes, the conditions of the bailout had been tough. Yes, they would be tough still. But GDP was up and employment was down as 2014 came to an end. A corner had been turned and while things were still going to be tough and still going to suck for a while the end of the bailout was in sight...

While I agree with you on many things, I can not agree that the date from the end of 2014 conclusively demonstrates that a corner had been turned and things were beginning to take a turn for the better. I don't think we have enough data to conclusively call this an upward trend - or, if there had been such a trend, to state with any confidence what the reasons for it were.

Also, unemployment figures are notoriously difficult to read because many countries have quite different standards who does - or doesn't - count as unemployed. As far as I know, Greece counts those who are actively looking for a job. That that number drops the longer a recession lasts is to be expected, as some people just give up. The total unemployment figure also does say nothing about the number of long-term unemployed. As far as I know the number of long-term unemployed actually rose in Greece from 2013 to 2014, which I wouldn't exactly read as an indicator of an economic turn for the better.

[Cycle]

So, wait.  Did Greece just offer to accept even harsher austerity concessions than the ones they jubilantly rejected a week ago?

[kylie]

     It wouldn't be the first time a government has doubled down on its people regardless of what many seem to believe the vote was about.  In the US, we have the whole Trade Promotion business with its secret contents, history of union resistance to prior international deals that ended up hitting workers, and by now apparent shrugging off environmental rules and online privacy. 

     Maybe the Greek government was more concerned about short-term stability than any long-term change.  Or maybe they just bought the conservative line that it must be their own people that were too corrupt and lazy/guilty, so better to bill the majority (and raise retirement ages) to pay for the sins of the rich (who I presume would be the worst of the tax evasion, the ones with large stashes in foreign banks).  All while limiting taxes on corporations to what the creditors wanted.  Curious, that -- can't ever touch those big corporations, can ya (or would that be big, largely foreign corps?).  Or maybe they really do mainly represent the rich.  I dunno. 

[kylie]

     Then there's the brighter PR angle, where at least the Greek leadership may be able to say they are getting some kind of debt relief in return.

Austerity measures and deeper structural reforms seem to be the price the Greeks will have to pay in return for having a portion of their debt burden alleviated.

The concession would allow Mr Tsipras to sell the deal as a face-saving measure after the Greek people delivered a 'No' to the previous bail-out terms, which provided no explicit promise to debt relief.

Restructuring would also prove a significant political victory against the eurozone's hawkish creditor bloc - led by Germany - who have refused to countenance any measures that will hit their taxpayers...

...  Reprofiling is likely to take the form of further maturity extensions on Greece's loan repayments. These already stretch out as far as 2057. The Greeks may also be given some form of "debt swap" where expensive bonds could be paid off by cheaper loans from the ESM.

      I still have to wonder if the price isn't just coming round to another crisis in a few years, though.  So much of the West has its youth chronically unemployed and its oldest and poorest being told to give more and more.  When you already have 40+ years of repayment scheduled, really, how many shocks and crises is it going to take before we're back to the same impasse and more demands for more punishment?  "Debt sustainability" indeed.  What language is this. 

     Meanwhile Britain is slamming its own youth, I dunno who else...  Wherever is the EU thinking Greek tourism revenue is going to come from when the rest of the world is struggling too?  To pick another case where the economy is so reliant on tourism and everything's been in a downturn there:  It's a bit as if the US federal government had told Hawaii, develop more industries to pay off massive debts, while we demand everyone work longer just to keep recycling the same debts back into our banks in the first place...  And most of Hawaii is already working two jobs and one month's pay away from eviction as things are.

     Oh, but it's sooo important to punish Greece for trying to guarantee pensions for the poor.  Too crucial that when a region has few resources to begin with, their people become jobless and displaced so they can work cheap in other areas of the world.  And big business goes on and on -- while the ECB caps how much Greece can tax corporations!
 

[gaggedLouise]

Yep, it does sound like the Greek cabinet have had to pack more austerity and tax rises into their proposed package effort (to be thrashed out over the weekend by fellow EU leaders) but the No vote in the referendum did make the point that they won't simply be dictated to - and nor will the German government (like, "you gotta help the Greeks and others indefinitely or the system will break down").


By the way, I heard there may be a China crisis coming soon, or mounting already on the markets and stocks front - which could make the Greek crisis seem small in comparison...

https://www.youtube.com/watch?v=5EYLrws2_s0

[consortium11]

...so better to bill the majority (and raise retirement ages) to pay for the sins of the rich (who I presume would be the worst of the tax evasion, the ones with large stashes in foreign banks).

As far as I'm aware studies indicate that isn't the case; demographically the most impact from both tax evasion (the illegal kind) and tax avoidance (the legal kind) in Greece are the middle classes; the small business owners, the lawyers, the doctors, the teachers, the academics, the scientists etc etc. They're the ones who massively under report their income and do most things for cash (frequently in hand) while using every tax trick in the book so they pay little to no tax.

"Debt sustainability" indeed.  What language is this.

It's the language of modern government.

As mentioned above the new neoclassical synthesis has become the leading economic theory amongst governments across the world these days. And that theory requires debt spending. I can think of basically a handful of governments in the world and only a couple amongst the developed countries that live within their means in a colloquial sense (i.e. their expenditures are the same or less than the money they bring in). To make up that shortfall they thus need to take on debt and a key part of the economic health of a country is to keep that level of debt sustainable and to make sure that the deficit (the difference between the amount spent... including debt repayments... and the amount brought it) is manageable. Switzerland is generally regarded as one of the strongest economies in the world (frequently topping the World Economic Forum's list); its debt is currently around $128,5000,000,000 but because it is one of the few countries in the world that doesn't regularly run a deficit (2014 was the first time it had in almost a decade) the debt is considered sustainable. Likewise Norway; while it has a huge amount of government debt (especially in comparison to GDP) because it doesn't run at a deficit year-on-year (and actually tends to run a large surplus) that debt is likewise considered sustainable. Even countries that don't run at a surplus like Germany or UK are considered to have sustainable debt levels because their deficits are manageable.

Greece is a tragic example of the downward spiral a country can enter if its debt stops being sustainable. Because of the risk of non-payment commercial lenders will demand huge interest rates for any money they lend to Greece (if they are even open to lending at all) which is why Greece is dependent on the good will of the other Eurozone countries. But is it really fair for other countries... some of whom went through their own bailouts not so long ago... to indefinitely prop up Greek spending? How long must the tax payers of Spain, Portugal and Ireland watch their own money be sent to Greece while the Greeks demand that they no longer be expected to pay it back? There's already been a 50% haircut, slashing of interest rates and one huge restructure; Greece has been given far more favorable terms than any other Eurozone country.

As for the Greek volt face as I mentioned before the referendum was largely symbolic rather than meaningful. Right now Greece needs the Troika more than the Troika need Greece. If Greece were to push the big red button and refuse to pay all debts and immediately leave the Eurozone then it would be both an economic blow to those countries and a political blow to the Eurozone but neither would be a mortal wound even if taken together. In contrast Greece needs money and it needs it now. It is a state pretty much literally on life support; without regular injections of money from outsiders it will collapse and figuratively die. Currency deflation isn't the bogeyman that the more strict Austrian theorists like to suggest it is but without outside money being brought in the vast amount of drachmas (or whatever the never currency would be) Greece would need to create to simply function would likely immediately cause the sort of vast deflation that does cause issues.

While obviously not as dramatic there are similarities with the situation Hollande found himself in when first elected to President of France. He'd been elected on a largely left wing platform including higher taxes for companies and high earners, lowering the retirement age and creating government subsidized jobs. But almost as soon as he began implementing those policies the response of the French economy was to fall apart. His opponent at the election's, the former president Nicolas Sarkozy, prediction that his policies would bring an economic crisis within two days may have been hyperbolic... but only in regards to the time frame. To stop the economy imploding Hollande had to either indefinitely postpone or cancel altogether much of the platform he'd been elected on and instead put in a series of economic reforms that were largely borrowed from the opponent he'd just beaten. Perhaps most notably he actually brought in laws which made it easier for companies to fire workers or reduce their pay/hours and gave workers less support when challenging those decisions; basically the antithesis of policies he'd been elected on.

Economic realities don't care about your political position, statements of intent or symbolic referendums. For all that Tsipras has been hailed as "outmaneuvering" the Troika on a political front (and I'd argue that's not exactly clear) he's still confronted by that economic reality; Greece needs other people's money to keep functioning. He can fight for the best terms he can but with the Eurozone (or at least Germany which dominates it) remaining resolute at the end of the day he basically has to give them what they ask for.

[Dashenka]

This was the only outcome from the start. Everybody lost by being macho and stubborn and arogant but this was the only outcome and everybody knew that. They just played their political games making everybody hate everybody even more.


Incompetence galore.

[kylie]

     I just kinda myeh at how it's so often made out to be a nationalist issue, which country is better rhetoric, when it's so obviously a class issue.  Sure some countries happen to be sitting on more resources, but beyond that there's a lot of pushing about what sort of world people want to live in.  Apparently it's another banks too big to fail.  Until they have to try to do it all again down the road.  People are just hoping for some "cyclical" boom to appear and temporarily help everyone forget? 

      And that goes double for Germany, who keep insisting they're the only "big people" in the room cause hey, they don't have to rely much on tourism.  And for the record, they were propped up pretty nicely after the Second World War and again in the 50's, never mind whatever else the Greeks may or may not have done. 

[Cycle]

This was the only outcome from the start. Everybody lost by being macho and stubborn and arogant but this was the only outcome and everybody knew that. They just played their political games making everybody hate everybody even more.


Incompetence galore.

Couldn't have said it better myself.

And I think it is hilarious that anyone thinks the EU should be loaning even more money to Greece--given that the same people are also saying Greece's existing debt load is already unsustainable.  XD


"I can't pay you back."

"Well cut your spending and go earn more money."

"No, you're an evil lender and I won't be told what to do.  ...  Now, loan me more money."