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Author Topic: Greek Bailout  (Read 1416 times)

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Offline Cycle

Re: Greek Bailout
« Reply #50 on: July 12, 2015, 06:02:24 PM »
Apparently if you go about saying you can't repay your debts and 61% of your population publicly reject "austerity cuts," it does make it more difficult to convince other countries to loan you more money on promises that you'll "impose" austerity cuts...  Perhaps there is a lesson to be learned here?

Quote
Questions over the Greek government’s credibility hung over the finance ministers’ meeting, which officials said was conducted in a negative atmosphere. Several ministers doubted the Greek government’s ability to implement key reforms and asked Athens to pass several laws within the next few days as a sign of its commitment.


Also worthy of note, there has been a history of countries who have gotten themselves out of financial crisis after imposing austerity cuts:  see Spain.  And Portugal.  And Iceland.  And Ireland.

Quote
Ireland, Portugal, Spain and Cyprus have all been in the same boat. However Greece was the first and its problems have been the longest lasting. The Greek government gave misleading financial information to get into the euro in the first place and then manipulated the figures to mask the extent of its deficit right up to the time when the credit crunch exposed its deep-rooted problems.

Greece is also accused of having squandered the years since its bailout: it has failed to reform its bloated pensions system and failed to push through privatisations or reform the notoriously inefficient and complicated tax system.


Offline TaintedAndDelish

Re: Greek Bailout
« Reply #51 on: July 12, 2015, 06:18:52 PM »
So what happens if there is no significant easing of debt, and no reforms?

If people can't get the goods they need in order to survive, they are going to ignore the law and do whatever it takes to get by. This could mean rioting, theft, fleeing the country or revolting and replacing their government. Another thing to consider is that being desperate makes one vulnerable to possibilities that one might otherwise eschew. What are the chances that they form an alliance with another country (or corporation) in order to meet their needs?

http://www.bloombergview.com/articles/2015-05-11/apple-could-make-money-by-bailing-out-greece

« Last Edit: July 12, 2015, 06:28:18 PM by TaintedAndDelish »

Offline Cycle

Re: Greek Bailout
« Reply #52 on: July 12, 2015, 06:48:38 PM »
Well, to be clear, it isn't an easing of debt that is the immediate problem.  After all, Greece didn't make its last debt payment.

The problem Greece faces immediately is not having enough money on hand.  That is why they are going to the EU to ask for money.  The EU is reluctant to give them money now, given what Greece has been doing the past week/month/year/decade.  So really, the ball is in Greece's court to come up with something to convince the EU to give them more money.

What happens if the EU doesn't give Greece money?  My guess would be that Greece implodes and rebuilds itself over the next decade.  The Euro drops in value too, and then eventually recovers.


Online TheGlyphstone

Re: Greek Bailout
« Reply #53 on: July 12, 2015, 07:22:22 PM »
So what happens if there is no significant easing of debt, and no reforms?

If people can't get the goods they need in order to survive, they are going to ignore the law and do whatever it takes to get by. This could mean rioting, theft, fleeing the country or revolting and replacing their government. Another thing to consider is that being desperate makes one vulnerable to possibilities that one might otherwise eschew. What are the chances that they form an alliance with another country (or corporation) in order to meet their needs?

http://www.bloombergview.com/articles/2015-05-11/apple-could-make-money-by-bailing-out-greece

Shadowrun, here we come?

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Re: Greek Bailout
« Reply #54 on: July 12, 2015, 07:32:08 PM »
Whatever happens, America should take notes - because we may have to deal with something very similar.

Offline kylie

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Re: Greek Bailout
« Reply #55 on: July 12, 2015, 09:54:03 PM »
Quote from: Cycle
Apparently if you go about saying you can't repay your debts and 61% of your population publicly reject "austerity cuts," it does make it more difficult to convince other countries to loan you more money on promises that you'll "impose" austerity cuts...  Perhaps there is a lesson to be learned here?
      Big banking and democracy don't get along.  The ECB really dislikes brinkmanship and game theory being used against it.  Probably a few more.  Some would say, put up or shut up...  Many would say, don't ask the people they're just silly propagandized sheep and of course, they don't know what's best or what's possible.  They're not economists or bankers, right?   

Quote
Also worthy of note, there has been a history of countries who have gotten themselves out of financial crisis after imposing austerity cuts:  see Spain.  And Portugal.  And Iceland.  And Ireland.

       Okay, so bring on the evidence these are really comparable situations?

       Here's one column that argues Greece is not Ireland...

Quote
... the Irish crisis was a banking crisis: its banks were bust, the state bailed them out and took on debts it could not sustain. Austerity was harsh – but the economy was globalised. Even as Irish banks went bust, the Irish banking sector – an unofficial conduit of money from London to the tax havens, and full of US investment banks – was still recruiting.

Then there’s agribusiness. Irish agriculture, from a country of 3 million people, produces enough to feed 50m worldwide and growing. If you look at the the profile of imports and exports from Ireland to Britain, it’s much the same via mix and per-capita GDP as the trade between the north and south of Britain. In other words – hugely controversial to say politically – Britain and Ireland are close to being a single economy with two currencies.

Ireland, in short, had the English language, an established role to play with the City of London and Frankfurt, and a modern, high-scale agriculture business.

Unmodernised capitalism
That is not to say austerity was popular: even now the water protests are boosting the same kind of radical left party we see ruling Greece, and boosting Sinn Fein, which has aligned itself internationally with Syriza.

But in Ireland the kind of austerity enacted did not tank production by 25 per cent and family incomes by 40 per cent. It did not cause ordinary middle class people to vote for a party whose flags are red and methodology Marxist. And there was no mass fascist movement in Ireland.

The difference is: Greece is an unmodernised capitalism where you can’t impose austerity at this level and hope to modernise at the same time.

I’ve become an unwilling expert, for example, on its pharmacy regulations. Sure, the law saying pharmacies can’t open within a certain short distance of each other has been repealed, but there is still a rule that says one pharmacy per 1,000 people, one owner for each pharmacy, one pharmacy for each pharmacist.

Walgreens, Superdrug and Boots, in other words, are locked out of this sector, whose opening hours are not generous. There is even a massive fight over whether newsagents are allowed to sell aspirin in Greece.

To somebody who needs aspirin during pharmacy closing hours this can appear a no brainer: liberalise everything. It is exactly what the IMF has been arguing for in the Brussels Group talks, even this month: liberalise the pharmacies and bakeries or we withhold 7bn of aid and your country goes bankrupt.

Deep structures
The problem is, the deep structures of Greek capitalism mean you can only modernise by unpicking things carefully and with consent. A population used to being seen personally by a pharmacist, to getting their drugs on informal credit when they can’t pay, just will not transform itself overnight into a midwest American consumer group.

It’s the same with taxes. Hiking VAT sounds like a no-brainer in a country that needs to raise taxes. When finance minister Yanis Varoufakis proposed instead to set a low – 16 per cent – top rate of VAT, on the grounds that it would undermine the culture of evasion, the IMF’s economists reportedly said yes. Somewhere along the line it got hiked to 23 per cent.

If the IMF’s negotiators wanted to give the impression their aim is to destroy most of the small businesses that keep Greek capitalism alive, and with it, consent for democracy, they are doing a brilliant job.

And that’s what has begun to undermine the faith of those identified as moderate and western-educated in the Syriza leadership.

The IMF now seems to be not only acting as if ignorant of its own economics department, but as if Greek society did not exist.

The IMF, in a leaked document from its own negotiators in Greece, admitted last month that there is “an inverse relationship” between the reforms being imposed on greece and the “sustainability” of its debt.

Having pressured the Europeans for less austerity and more debt write offs, the IMF seems now prepared to walk away from the problem. Its rationale is most probably the pressure it is under from its non-European members.

And such pressure may increase if, later this month, the Greek parliament’s own inquiry alleges the IMF lent tens of billions to Greece unlawfully.

« Last Edit: July 12, 2015, 09:56:43 PM by kylie »

Offline gaggedLouiseTopic starter

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Re: Greek Bailout
« Reply #56 on: July 13, 2015, 02:51:02 AM »
Well, apparently they have a third bailout deal drawn up now, designed to pour 50 bn euro into the Greek financial system over the space of an undisclosed time, likely perhaps two or three years, to be able to reset loans (there will be no outright debt reduction, no "haircut") and some more to revive the Greek banking system and general liquidity. I'm just watching Angela Merkel at a morning press briefing on the tv. It seems there will be more austerity than anyone (in Greece anyway, or in most of the media) had expected last week though. The deal will have to be cleared by the Greek and German parliaments over the next two or three days. In fact, all 18 Eurozone parliaments will have to vote on it, but it will go through even if one or two states fail to clear it.

I figure Tsipras and some others, in several countries, will face a lot of questions when they return home...
« Last Edit: July 13, 2015, 02:54:54 AM by gaggedLouise »

Offline TaintedAndDelish

Re: Greek Bailout
« Reply #57 on: July 13, 2015, 03:00:44 AM »
I figure Tsipras and some others, in several countries, will face a lot of questions when they return home...

Yeah, that referendum is gonna backfire.

Offline consortium11

Re: Greek Bailout
« Reply #58 on: July 13, 2015, 06:38:06 AM »
Sorry about that--moved old posts from the News to your thread so we could have this all in one spot, and the forum displays posts in chronological order, so ack, Louise has the 1st post now. >_>

No worries; from my own time moderating a forum years ago I know how blunt a tool moving posts around can be.



Couple of general thoughts on some of the things that have been posted here:

The problem is simple.  Greece makes $2 a day and spends $4 a day.  It doesn't matter how much Greece had in its account at the start, simple math will draw that number down to $0.  You can keep adding money in via loans or gifts or bailouts or magic fairies.  It won't do a thing to solve the problem because the number will still go down to $0.

In some of your posts you mention how the issue is Greece spends more than it makes and thus runs up debts. But, as I mentioned in a previous post, Greece is hardly unique in doing that; you'll find almost all countries in the world rely on deficit spending and its hard to think of any countries that don't have considerable debts. Even within ivory tower economic theory there are very few positions that argue countries shouldn't spend more than they make... frankly the Austrian School (which argue for very little government spending to begin with) is basically the only major one with even Keynesian's putting forward that there will have to be extended periods where a government relies on deficit spending to get by.

That's not to say that you have to agree that deficit spending is a good idea or that there isn't an issue with the degree of deficit spending by Greece but saying that deficit spending alone is the issue means that virtually every other country in the world would also be in the same position.

     I do think the Greeks have some point, at least in principle, that Germany was gifted a whole lot of money (far more than Greece is asking for, I believe) when it faced historical crises.

Germany's historic crises came after it had been involved in World Wars, lost a generation of young men, in the first case lost a significant amount of its productive land and in the second be an occupied country divided between other nations with its infrastructure utterly destroyed. It's hardly a relevant comparison to draw with a Greece which hamstrung its own currency and had severe structural weaknesses. It's also worth noting that Germany itself managed to stabilize its hyperinflation in 1923 after foreign efforts failed; the Dawes and Young plans came much later. And the Dawes plan wasn't much different to the current options for Greece: a large sum was loaned directly to Greece, existing debts were lowered and restructured (as Greek debt already has been) and Germany had to make serious changes to its economy and spending.

Granted on paper, what the euro does is brings fixed interest rates for everyone with predictably turbulent results...  But it was sold as, 'This is supposed to allow the whole to adjust and prop up weaker areas when shit like this happens.'  Or some such, now dubious balance.

But the euro was never sold on that idea; in fact one of the key points about it (later formally ratified in the Lisbon Treaty; Article 125) was that there would be no bailouts. There was never any suggestion that weaker members would be directly propped up by stronger ones; that would have taken the Eurozone into the realm of fiscal rather than merely monetary union. In fact the way the Euro was sold was that there would never be any need to prop up weaker areas to begin with; the strict financial requirements of first Maastricht, then the membership critera were meant to keep all the countries stable. Of course, those requirements ended up not being strict at all and in Greece's case they simply lied about their economic situation up until 2009/10 but in regards to what the Eurozone was sold to people as that doesn't change anything.

Should the average people, the moment this original situation beyond their control forces them into debt, always (and therefore probably, repeatedly,  cyclically as business tends to work it) quit everything they might be doing at the moment -- job training for more specialized careers that might take years, taking care of families, living in stable situations so they can move wherever the jobs might be, etc. etc. -- so that they just might have a slightly, piddly better chance of working overtime for months in low-paying jobs in the hopes of paying off debts fast?  What if the debt is something like cancer treatment and no amount of short-term overtime is gonna cover it?

You seem to be mixing apples and oranges kylie. Consumer debt (which you appear to be talking about here) in Greece isn't a particularly massive issue; its consumer debt levels are less than they are in the UK, the US, Sweden, Canada, Finland, Switzerland, the Netherlands or Denmark. And that's the official figures; if the professional classes which overstate their debts and debt payments to evade taxes were accounted for the number would be even lower. Greece's consumer economy is primarily cash based which means things like credit card debts are a relatively minor matter.

Greece's crisis is due to its sovereign debt and deficit; the amount of money the Greek state as a whole owes to its lenders and how much money it needs to borrow each year to keep up its spending.



So, it appears a debt deal has just been struck. Greece will get its third bailout in return for reforms to its pensions, improving its tax revenue systems and a general liberalizing of the economy. There will be no haircut (i.e. debt writeoff) and only minor restructuring. In the short term that should keep Greece in the Eurzone and give it a touch of breathing room... but my suspicion is that unless something fundamental changes it will just lead to Greece staggering along till another crisis hits in six months or so.

It's worth noting that this deal is less favourable to Greece than the one offered prior to the "referendum" and frankly is less favorable than the one offered back in February. For all of Tsipras' and ex-finance minister Varoufakis' posturing what they've done is put the Greek people through six months of pain to get a worse deal then they were offered because of their ego and hubris.

It also should be noted that this isn't a done thing it. It needs to be ratified by the various governments of the Eurozone. After Tsipras (who, lets remember, was elected as a eurosceptic left wing firebrand) purged most of the more hardline left from his party recently its expected he'll get the measure through (although I think a lot of Greek people will feel betrayed by him) and likewise Merkel should be able to force it through in Germany... but there are other places that may prove problematic. The other bailed out countries may resent Greece getting terms better then they were ever offered while the likes of Slovakia and Slovenia may sit back and wonder why they're being asked to provide vast amounts of money so Greece, even with the proposed changes, can keep offering benefits far more generous then a Slovakian or Slovenian can expect.

Offline Dashenka

Re: Greek Bailout
« Reply #59 on: July 13, 2015, 07:01:23 AM »
I wonder if the rumour that Finland was against any more money to Greece is true.

Offline Silk

Re: Greek Bailout
« Reply #60 on: July 13, 2015, 07:32:25 AM »
In a few ways I can't help but see similarities to the old tale of the King and bread.

The people are starving,(Greece) so the King (Germany) creates a writ that all families will get sceduled bread to all of the people, so when the free bread is taken away, the people get angry because their bread is being taken away.

Offline Dashenka

Re: Greek Bailout
« Reply #61 on: July 13, 2015, 07:43:41 AM »
The EU is now playing the innocent hypocrite and the victim.

They knew when they bailed Greece for the first time what they got themselves into. They knew the situation in Greece when the country joined the Euro and the EU. They knew there would be immense pressure from the people because they now see their lives all coming apart.

They knew EVERYTHING that has happened, years and years ago. No fucks were given back then and now suddenly it's all to blame on Greece. No.

When a bank gives out a mortgage to unemployed people, the bank is just as much at fault as the people taking the mortgage. Same thing with Greece and the EU, ECB, IMF and the rest of the alphabet.

They knew it but nobody had the guts to change it back then, because if they did it to Greece, they had to tell every other country to reform their pension system as well and the EU wouldn't be popular anymore.

Everybody lost now. The Greek people the most, as they have to work longer, get paid less, pay more taxes, etc, etc. The EU lost a massive amount of money and popularity has dropped to almost 0. Governments broke promises by sending more money to Greece anyway, making them impopular and the people of Europe have basically bailed out Greece again with our tax money.

I say well done EU, for eventually doing the right thing and save the Greek people but the outcome was set weeks ago.



Never in political history have so many people showed such levels of sheer and utter incompetence than the EU in the last few weeks, with the possible exception of the Bush government claiming there were WOMD's in Iraq.

Offline Zillah

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Re: Greek Bailout
« Reply #62 on: July 13, 2015, 07:50:28 AM »
Also, take a look at Goldman Sachs' involvement in all of this.

The EU sort of knew what they were getting into, but Goldman Sachs helped Greece present its 'finances' on its loan application, for lack of more technical terms. They also made some loans to Greece that didn't appear on their books as loans, so they looked more cash fluid than they really were. Essentially, they presented Greece as a risk, but not nearly as bad or as scary a risk as they should've looked.

Then, following this, Goldman Sachs made large numbers of investments that would be extremely profitable if Greece defaulted on its loans. Unsurprisingly, those investments paid off handsomely.

Offline Dice

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Re: Greek Bailout
« Reply #63 on: July 13, 2015, 08:05:38 AM »
Yea, the EU knew what they where doing in 2010,but the whole system looked to be falling at the time. It was a necessary evil. These days the Euro zone can take the hit and Greece ain't going anywhere fast.

The only way out of this for Greece is to leave the Euro zone and go back to its own currency. Let the ass drop out of the value and start looking like a great market for making and exporting shit cheaply. Germany really should not be able to have the market share of exports it does in the financial situations of the separate Euro nations. That currency works great for them, not so great for others. To be honest, I doubt the Euro will hold forever.

Offline JackWhite

Re: Greek Bailout
« Reply #64 on: July 13, 2015, 08:12:25 AM »
Yea, the EU knew what they where doing in 2010,but the whole system looked to be falling at the time. It was a necessary evil. These days the Euro zone can take the hit and Greece ain't going anywhere fast.

The only way out of this for Greece is to leave the Euro zone and go back to its own currency. Let the ass drop out of the value and start looking like a great market for making and exporting shit cheaply. Germany really should not be able to have the market share of exports it does in the financial situations of the separate Euro nations. That currency works great for them, not so great for others. To be honest, I doubt the Euro will hold forever.

The problem is that Greece doesn't have an export economy. It would take a huge amount of time, way too long to turn that around. The people would certainly take the same or an even worse hit than what they do now while staying in the Euro. I never saw an exit as a good option for the Greek people.

Online Oniya

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Re: Greek Bailout
« Reply #65 on: July 13, 2015, 08:20:15 AM »
Also, take a look at Goldman Sachs' involvement in all of this.

The EU sort of knew what they were getting into, but Goldman Sachs helped Greece present its 'finances' on its loan application, for lack of more technical terms. They also made some loans to Greece that didn't appear on their books as loans, so they looked more cash fluid than they really were. Essentially, they presented Greece as a risk, but not nearly as bad or as scary a risk as they should've looked.

Then, following this, Goldman Sachs made large numbers of investments that would be extremely profitable if Greece defaulted on its loans. Unsurprisingly, those investments paid off handsomely.

Bingo - this!  And a lot of the 'bailout' money is making its way right on back to G-S (who, by the way, were among the banks that were bailed out by the US in 2008.)  This (on a much greater scale) is the same sort of tactic that the banks were using back when the 'housing bubble' was forming:  Take a higher risk individual, make it look like they were less of a risk than they really are, and get them into the loan you want them in.  Then, when they can't make the payments - oh well!

Offline Dashenka

Re: Greek Bailout
« Reply #66 on: July 13, 2015, 08:23:58 AM »
No news that banks (the American and British at the front) are the scum of the earth. That shouldn't come as a surprise to anybody anymore :)

Offline Zillah

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Re: Greek Bailout
« Reply #67 on: July 13, 2015, 08:49:49 AM »
No news that banks (the American and British at the front) are the scum of the earth. That shouldn't come as a surprise to anybody anymore :)

Hey! Not everyone who works in investments and banking is scum.

A few of us working on Wall Street are nice, I hope. ::)

Offline Dashenka

Re: Greek Bailout
« Reply #68 on: July 13, 2015, 09:15:23 AM »
Hey! Not everyone who works in investments and banking is scum.

A few of us working on Wall Street are nice, I hope. ::)

Haha well there is only one I know of that is nice :P Bit slow on the posts but hey... can't be perfect :P

Offline gaggedLouiseTopic starter

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Re: Greek Bailout
« Reply #69 on: July 13, 2015, 11:02:42 AM »
It would be useful if banks - some major banks - could drop their tendency to operate and think only on a stratospheric level, where hundreds of millions can become almost coffee money in the long run and ordinary customers are on the bottom rung.

Anyway, many finance ministers and their top staff and advisors have a background in the banking and capital management sector, so we can't really expect them to punish the banks with a hard drubbing.  ::)

Offline Dashenka

Re: Greek Bailout
« Reply #70 on: July 13, 2015, 11:08:55 AM »
It would be useful if banks - some major banks - could drop their tendency to operate and think only on a stratospheric level, where hundreds of millions can become almost coffee money in the long run and ordinary customers are on the bottom rung.

Anyway, many finance ministers and their top staff and advisors have a background in the banking and capital management sector, so we can't really expect them to punish the banks with a hard drubbing.  ::)

But do you know how much a good cup of coffee costs you nowadays? Ever been to Soho for lunch? You need millions for a coffee.