European Agreement Sets Up Third Greek Bailout 485
An anonymous reader writes: Euro zone leaders have reached a deal that will attempt to resolve Greece's financial crisis. The deal sets up negotiations for the country's third bailout, and will require the Greek government to give up significant autonomy in financial matters. Experts have estimated that Greece could require almost $100 billion to stabilize once again. While this will be a significant cost to taxpayers in other European countries, the economic repercussions of letting Greece default on its debts would be much greater. "The agreement will call for Greece to raise taxes in some cases, parepension benefits and take various other measures meant to reduce what critics see as too much bureaucracy and too many market protections that keep the Greek economy from operating efficiently. ... Despite the agreement, Greek banks are expected to remain closed this week. The banks are acutely short of cash and Greek depositors may soon find it difficult to withdraw even small sums from ATMs."
Greeks surrender: no restructuring (Score:5, Interesting)
Re:Greeks surrender: no restructuring (Score:5, Insightful)
>> I wonder how Tsirpas will sell this to his constituents who just voted a firm "NO" to a deal without restructuring.
Same way Bush (W) sold a tax increase to those he told "no new taxes"
Same way Clinton sold the Defense of Marriage act to those who voted for him to continue the progress of civil rights.
Same way Bush (GW) sold illegal immigrant-friendly policies to those who voted for him to close the border.
Same way Obama sold the renewal of the Patriot Act to those who voted for him to kill the program.
In short, he's a politician. I'm sure he'll manage.
Re: Greeks surrender: no restructuring (Score:5, Insightful)
It's Greece - they will get a new government instead and the agreements will be ignored. At worst it will be a hostile takeover. It wasn't long ago that Greece had a non-democratic government.
It's probably easier and cheaper to abandon the Euro for Greece.
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I agree, dump the Euro, default on the debt, and PROFIT! :)
Re: So... (Score:3)
Yep. The most amazing part is that the EU has been duped to think Greece will pay them back this time for sure!!
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Re:Greeks surrender: no restructuring (Score:5, Insightful)
No -- the Greek government was thinking that they (Greece) needed to implement serious reforms, and that they have already achieved primary surplus. However, given the state of their economy the would never be able to pay back most of the debt. So what they needed was (1) forgiveness ("restructuring") for a big chunk of the debt (2) a bridge loan until the reforms kick in and the economy recovers enough. Some of the loans would be eventually paid, but much shouldn't be (and the lenders should have known better).
What the EU wants instead is (1) the pipe dream of Greece paying back everything and (2) higher taxes and lower pensions now to help this repayment. In other words, for the EU the goal of any reforms is not to get Greece back on its feet but to extract money from it to pay back the loans.
So, the question was not on whether reforms were needed before any further loans (which was universally agreed upon), but rather on the goals. What Greece capitulated was not on agreeing to the reforms, but on accepting that notion that they will try to pay back loans despite knowing full well that they will never be able to afford to.
Re:Greeks surrender: no restructuring (Score:5, Informative)
There are some pretty serious questions about the honesty of Greek officials in reporting the implementation of previous reforms. This is one of the factors that has lead to the near total lack of trust in Tsipras and the Greek government.
Debt relief does not appear to be permanently off the table, but Germany, along with some other EZ members (notably Finland) want to see verifiable evidence of significant reforms, and not just Greek negotiators saying one thing to EZ officials and then going home and saying and doing quite different things.
Credibility is key (Score:5, Interesting)
Indeed, whether Syriza would implement the reforms is the most important question. Varoufakis was very vocal about the need for the reforms, but he has been forced out (by the EU !). The left-left wing of Syriza is opposed. It's not clear what the majority would do, and like you I would have preferred to see some reforms passed in February and March while the negotiations were ongoing.
However, some of the reforms Germany is asking for (higher taxes, pension cuts) cause me to doubt their bona fides here. The main problem is taxes in Greece is non-payment and the informal economy. Raising taxes is likely to exacerbate this problem by increasing the motivation to evade the higher taxes. Lowering taxes and simplifying the tax system is far more likely to raise more revenue.
Similarly, the main problem with government pensions is early retirement. The solution should therefore be to raise the retirement age for those currently working, which in the long term resolve the problems without creating short-term pain. The German solution (cut pensions now) means asking current pensioners who have no prospect of other sources of income and cannot choose to go back to the jobs they retired from to help repay the national debt.
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To my understanding, Portugal implemented a scheme whereby industries could be assessed based on average profits, rather than relying upon specific businesses to accurately report revenues. It sucks, and probably isn't fair, but where there is a culture of underreporting revenues or overstating expenses, or general evasion, then the only solution is to spread the pain between the law abiding businesses and individuals and the law breaking ones.
One way or another, Greeks are going to be paying a lot more tax
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Essentially this is about the basic concept of "actually paying the taxes you owe". In Greece, that is a massive exception and I remember a friend from my golden days of WoW lamenting that her job at military meant that she was, and I quote from memory "the only one she knows who pays tax on her salary". She thought it was really unfair. Not that others weren't paying, but that she was.
It's going to require a massive cultural change, not just a technical one.
Re:Greeks surrender: no restructuring (Score:5, Insightful)
You're applying reasoning which works for a country with its own currency. If a country has its own floating currency, then raising taxes and lowering pensions is not necessary to reform the economy. You can just leave those as-is and the value of your currency will decline relative to everyone else's, effectively giving all your citizens a pay cut and thus helping to reduce your expenses (measured via other currencies than your own - that's what matters when you owe money to creditors outside your country). That's what happened to Germany in the 1930s, Mexico in the 1970s when they lifted price controls on the Peso.
Greece is on the Euro though, so this is not an option. The fundamental problem is that Greek citizens are being paid too many Euros for the productivity they are generating (compared to other citizens in the Eurozone). Any long-term fix for this must involve increasing the Greek productivity-to-wages ratio to match the Eurozone norm. This is a mathematical fact - you cannot avoid it by holding an election or making political promises or complaining about fairness. Failure to correct this ratio means Greek debt will continue to increase regardless of whatever other measures you take. Even if you forgave all of Greece's debt, if you do not address this productivity-to-wages ratio imbalance between Greece and the other EU countries, Greece would just continue to accrue new debt.
That means there are three options:
(A) Boot Greece out of the Euro, forcing it to create and pay wages in its own currency. This currency can then decline in value vs the Euro until the average Greek's productivity-to-wages ratio (in Euros) matches citizens' in the Eurozone. However, neither the Eurozone nor Greece seems to want a Grexit, so you're left with the following two options:
(B) Reduce average Greek wages. That's what higher taxes and lower pensions effectively do.
(C) Increase avreage Greek productivity. That's what the privatization requirements and other reform measures in this package aim to do.
At least one of those three things needs to happen. If none of them happen, Greece will simply continue amassing more debt no matter what else you do. Any proposal which does not include at least one of these things happening is simply not a solution.
I should also add that it's disingenuous to claim Greece's problems stem from its creditors. When you borrow money, you are actually borrowing it from your future. Yes it is the creditors who gave you the money, but you pay it back to them in the future. The net effect is then that you are taking money from your future, and spending it today. The only thing the creditor gets out of it is some interest payments (which can be small or large depending on the lending terms). So aside from the interest the creditors earned, any suffering the Greeks experience today and until their debt is paid off, is the cost of them living it up during the 2000s. They did this to themselves.
Debt forgiveness means the creditors (some banks and citizens in the other Eurozone countries) suffer for the Greeks having lived it up during the 2000s. Sometimes this is necessary if the interest on the debt is so onerous that the debt is growing faster than the country can pay it off. But it is not an action to be taken lightly, especially with Spain, Portugal, and Italy waiting in the wings hopeful that Greece will set a precedent which allows them to shed their debt without paying it back.
Re:Greeks surrender: no restructuring (Score:5, Insightful)
I agree with practically everything you say except the last bit.
First, the Greek wages-to-productivity ratio must fall, by a combination of (1) Government-sector wage cuts (already started); (2) productivity increases in the government sector by (a) insisting that government workers actually do their job (b) firing redundant government workers and (c) privatization and (3) wage reduction and productivity increases in the private sector – made possible by freeing labour laws.
However, raising taxes makes the wages-to-productivity ratio worse, because it increases the cost of hiring the worker without a corresponding cost to productivity, or equivalently increases deadweight losses. Instead, wage cuts in the private sector should be achieved by freeing the labour market (which is currently among the most restricted in Europe). In fact, workers need to be compensated for the wage cuts by tax cuts.
As an aside, tax cuts would also increase compliance, which is the key problem with the Tax system (far more important than the rates).
Regarding the source of problems, clearly they all stem from the behaviour of Greece (both the country and its people) and not of the creditors. Greece cooked its books before joining the Eurozone, and the Greek voters had ample opportunity to vote for free-market, better-government and smaller-government reforms in the years since.
That said, the original creditors (eurozone banks) who lend to Greece until 2010 knew all this full well and decided to extend the credit anyway. The earned the interest rates they demanded, and should now have to eat the losses when, following the crisis and resulting economic contraction, Greece can't pay back. These banks may have had to suffer, but lending to sovereigns carries default risk (just like lending to private entities carries bankruptcy risk).
What you are ignoring, however, is that the people of Europe were not creditors before their governments decided to take on the debt in 2010 (giving the banks a 50% haircut). Since the governments of Europe voluntarily decided to make public what previously was debt to private entities, they shouldn't now be able to turn around and claim that the taxpayers of Europe will suffer unfairly if the debt isn't paid. If the taxpayers were concerned about non-payments and didn't want to go into the debt vulture hedge-fund business they could have left the bad loans with the banks who made them originally.
I personally thing that. beyond being against the EU treaties, the bailouts of Greece, Spain and Italy were also ill-conceived and morally wrong. But having gone into the sovereign loans business the EU can't complain about facing default risk.
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What was the Greek government thinking? that the EU will just give more money without asking for more responsible measures.
Yes, because that is basically what is happening. The Greeks will get 100B euros, they will implement a few minor reforms, and the EU will kick the can down the road. Greece will almost certainly need another bailout in a few years. Meanwhile, voters in Italy, Spain, and Portugal, will be asking why they aren't getting a bailout too. And voters in Slovakia, Poland, Estonia, Latvia, etc. will be asking why they are paying higher taxes to bailout Greeks that are on average far richer than they are, and on
Re:Greeks surrender: no restructuring (Score:4, Interesting)
There will be no more can kicking. The Troika is now demanding a surrender of Greek fiscal sovereignty. All government legislation going ahead will have to be cleared with the Troika before the Greek parliament votes on it, and previous legislation will have to be amended to be brought into line with the new agreement.
Greece, for some time to come, will essentially be in "administration". The Germans and other EZ members do not trust Greece anymore, and are not willing to simply allow Greece to come back in a year or two and pry more money from ECB's hands. The long and the short of it is that the Greek government will no longer exercise critical sovereign powers.
Re:Greeks surrender: no restructuring (Score:4, Insightful)
It is in no small part because the other PIIGS states have gone some distance to implementing austerity measures that the Troika had no choice but to put the harshest conditions upon any agreement that allowed Greece to remain part of the Eurozone. If they had simply handed Greece more bailout money, or even gone the distance towards some debt relief, the other troubled EZ states would have had every right to demand the same considerations.
Beyond that, so controversial is any bailout, that any agreement that did not amount to an unconditional surrender would have lead to political crises in some EZ states. Finland's government, in particular, is facing a non-confidence vote if a deal with Greece doesn't contain strong elements of control. That's a big reason for the huge asset sale the deal requires.
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So what's wrong with a massive debt restructuring?
Because then the other PIIGS will want a restructuring as well. The EU could afford to forgive the Greek debt. They cannot afford to forgive Italy's debt. The other debtor nations have made hard choices, and found the political will to make reforms. That will all collapse if Greece is allowed to walk away from its debt.
Another problem with debt forgiveness, is that many of the nations that will pay higher taxes to fund it are a lot poorer than Greece. Many of them are already voting for extremist parti
Re: Greeks surrender: no restructuring (Score:2, Insightful)
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What was the Greek government thinking? that the EU will just give more money without asking for more responsible measures.
Why not? They've done exactly that twice already. Three times, if you count Euro adoption in Greece, which actually was the first Greek bailout. Yes, the agreements came with some "austerity," but the Greeks back-pedaled, slow-walked and lied about much of that, the predicted economic recovery in Greece never materialized and the rest of Europe looked the other way while all this went on.
If this deal goes down the same things will happen and we'll be right back here in three odd years with Greece anoth
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Of course they did. That's the result of deflation policies like the ones imposed in Greece. Unemployment and a drop in GDP. See Brünning in 1930 Weimar Germany as an example. If the Germans didn't know themselves this they were stupid in the extreme. But the thing is they probably know this its just an asset stripping move.
Re:Greeks surrender: no restructuring (Score:4, Interesting)
Basically, the "NO" was a bluff in the hopes that the other side will yet again get soft. The problem is that the Greeks have vastly overplayed their hand. That a big crash was coming to them was visible for a very long time to anybody willing to look at facts. I know several Greeks that left the country 10 years or more ago because they saw no future for that country.
As it is now, there is almost no sympathy left for what Greece is doing at the moment in the Euro-Zone. Newer eastern members rightfully point out that _they_ had to implement drastic reforms to even be allowed in. Citizens all over the EU are unwilling to pay anymore without vast concessions by Greece. Anybody being friendly or soft on Greece runs a serious risk of losing the next election just because of that.
In other words, the gloves are coming off now. The main reason is that Greece is completely out of touch with reality.
Re:Greeks surrender: no restructuring (Score:5, Insightful)
Re:Greeks surrender: no restructuring (Score:4, Insightful)
They don't expect the austerity measures to grow the economy. They expect the austerity measures to provide a hard landing rather than an outright crash. The idea is to loan them money until they are roughly self sustaining and no one expected that to be anything other than painful but still less painful than having the budget cut overnight when they can't get anymore loans.
Re:Greeks surrender: no restructuring (Score:5, Insightful)
The most notable point is the European countries would not face such horrific economic crisis without a unified currency. Greece would be in crisis; the Kronor and Franc and DM and dollar and Pound and Piece would be strong; tourists would show up with pocket change, scraps to throw the Greeks, staying in lavish hotels and buying expensive trinkets and high-dollar food for cheap; the influx of money toward Greek tourism and Greek exports would help support and rebuild the Greek economy; the sudden access to cheap Greek imports would improve the wealth of neighbors (instead of weakening their economy) by the principle of comparative advantage (and its genesis principle, the unifying economic theory which I developed to explain how wealth works); and everyone--Greece and the other Euro neighbors--would experience much less pain (Greece by more rapid recovery thanks to the more dramatic shift in trade advantage; everyone else by sudden access to more import goods for the same outlay of money--a local increase in wealth).
Instead, Greece falters; its currency (Euro) becomes no weaker than any other currency (Euro); exports don't increase because the neighboring countries's currencies (Euro) don't have a higher value than the Greek currency (Euro); the Greek currency (Euro) becomes weaker; neighboring currencies (Euro) also become weaker, thanks to Greece's shitty economy; neighboring countries must raise taxes and outlay expenses to bail out Greece, with associated strain on their economy and no return on their investment (wealth destruction); and everyone's economy stumbles and struggles to get back up.
Re:Greeks surrender: no restructuring (Score:5, Insightful)
What this all demonstrates is that the Eurozone needs to become a full fiscal union. What is happening in Greece, with the effective seizure, or at least oversight, of the Greek government's fiscal powers, is what needs to happen.
Currencies like the US dollar work because, while there may be fifty states that use the USD, there is a single issuing central bank and a federal government that holds core constitutional fiscal powers. That's why you can have economies as diverse, small and large, as Rhode Island, Tennessee, California and New York in one federal state, because there is no "sharing" of fiscal sovereignty. The states are free to borrow money, but they have no control over central fiscal policy.
In other words, as so many have been saying since Maastricht was signed, for the Euro to actually work, the Eurozone needs to effectively become a single state, and EZ members need to surrender their fiscal powers to a central fiscal authority.
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Also, in the US money does flow between the states, primarily from well-off states to poorer states. These aren't considered loans or bail-outs. If the EU considered subsidizing the worse economies as a cost of keeping the Eurozone, things would work a lot better.
Re:Greeks surrender: no restructuring (Score:4, Informative)
"Failed state" California sends more money to the federal government both in total and as a percentage of what it gets back than "flourishing Texas", although neither of them are net takers. http://wallethub.com/edu/state... [wallethub.com]
Rhode Island is not a net taker either. That isn't exactly what you were trying to measure but if Cali didn't have to subsidize a bunch of other states then its finances would look better, which by the way is in surplus for 2015.
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That's a different issue. As I understand it, the EU is not dictating things like minimum wage to Greece. PR isn't the only territory or nation using the USD: lots of other territories use it too, such as Palau, Micronesia, US Virgin Islands, etc. And a bunch of nations too: Belize's currency is pegged to it 2:1, and Zimbabwe now uses the USD as its official currency because theirs was worthless. Obviously, foreign nations like Zimbabwe are not going to implement things like US Federal minimum wage stan
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l2718 asks:
Shhhh...
The All New Slashdot IMF Editorial Policy is to leave questions like that answered in the subtext of the original post: The People Don't Matter and If You Think They Do You're a 'Populist' which is just shy of being an 'Extremist'.
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The most notable point is the that there is no firm agreement to restructure (cut) the debt. I wonder how Tsirpas will sell this to his constituents who just voted a firm "NO" to a deal without restructuring.
Why would he have to sell it to his constituents? Doesn't he know that when you owe a bank 1,000,000,000 the bank owns you - but if you owe the bank 380,534,382,133.32 you own the bank?
Maybe the leadership of Greece just doesn't know how to negotiate. Should we send in Donald Trump to work it out?
Sunk cost fallacy (Score:5, Insightful)
European leaders keep pretending that they are giving Greece new money, when they are merely shuffling old debts around.
The money that was loaned to Greece has been lost. The whole crisis is about everyone involved being unwilling to accept this reality and thinking that the money will somehow magically come back once the Greeks have been punished sufficiently.
It is the same theory behind debtor's prison. It should be abolished for the same reasons.
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Yes, there is no point in sending a debtor to prison. And there is no point in lending him any more money, now that he has proven to be a deadbeat.
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Technically that is not true. To repay the debts, the Greeks would have to divert something like 20% of government spending towards repayment. So if they cut half the spending from budget then they could be solvent even accounting for the resulting shrinking in the economy and the debt payments.
Technically, the Greeks can repay the debt, it just requires a good chunk of the country to starve to death in the process. And I mean literally because government spending is about half of their economy (a bit more
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The village is 500 EUR poorer and nobody understands why.
At least 100EUR of that was because the room was dirty. Were they not listening to the story?
dog in the manger (Score:2)
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Inkeeper is +100; inkeeper is then -100 (0), butcher is +100; butcher is then -100 (0), banker is +100; eventually, the Innkeper has to borrow money from the Banker, everyone is 100 euros richer (cleared their debt to 0), and the economy is somehow $300 euros richer and nobody understands why.
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Even if you loaned money to Greece at 1% I don't see how they'd pay it back.
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Even if you loaned money to Greece at 1% I don't see how they'd pay it back.
Nobody expects them to pay it back. The conditions and restucturing and austerity and everything is there to make sure the Greeks will not need another €100 billion in a couple of years. Nobody thinks the Greeks won't need €100 billion in a couple of years time. But then we'll have saved enough to pay them again. And we'll keep doing this until the cows come home. It's like the story of the cricket and the ants. Some people work hard, others make music and dance.
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It's like the story of the cricket and the ants. Some people work hard, others make music and dance.
So we should ban "Zorba The Greek?" [wikipedia.org] Is that what you're saying? I knew it.
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European leaders keep pretending that they are giving Greece new money, when they are merely shuffling old debts around.
The money that was loaned to Greece has been lost. The whole crisis is about everyone involved being unwilling to accept this reality and thinking that the money will somehow magically come back once the Greeks have been punished sufficiently.
It is the same theory behind debtor's prison. It should be abolished for the same reasons.
There will be no "haircut" for treaty reasons but it has been suggested that the start of repayments will be postponed even more and the repayments will be made over an even longer period which allows inflation to gnaw away at the loans which in principle is the same thing as a haircut. IIRC they call that debt restructuring. That having been said while I acknowledge that Greece needs yet another haircut or something that boils down to a haircut, I have very little sympathy with Greece anymore. They have a
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Not the same at all. Debtor's prison threw debtors in jail where they couldn't work off their debts. Greece is not being thrown in jail. If they have the political will to radically overhaul their pension system and general government debt spending then they could pay it off. The only restructing needed is drastically renegotiated interest rates because compounding interest makes paying the principle amount nearly impossible. To insist the principle be repaid is not "punishment" by itself. Compounding inte
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Not the same at all. Debtor's prison threw debtors in jail where they couldn't work off their debts. Greece is not being thrown in jail.
No, it has been thrown into jail. The further cuts will depress the economy even further, increasing the debt load. Also they'll lead to real starvation and homelessness for a large amount of population.
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Take a look at Greek GDP. Per-capita GDP went down by nearly a third between 2008 and 2014, and a lot of that is due to austerity measures. Asking for more is counterproductive and vindictive. Moreover, there has to be a certain amount of money in the country to keep the economy limping along, and
Moreover, simply being in the Eurozone deprives countries of some effective means of managing their economies. Germany doesn't need these, but Greece does. Keeping the Eurozone functioning is going to requi
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The money that was loaned to Greece has been lost.
It's not like they put it all in a big pile and set fire to it. (Or did they?) Where is all that money now, anyway?
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The money that was loaned to Greece has been lost.
It's not like they put it all in a big pile and set fire to it. (Or did they?) Where is all that money now, anyway?
according to a chief economist at the imf, about two thirds went directly to foreign banks. the remaining third went to greek banks.
http://blog-imfdirect.imf.org/... [imf.org]
Re:Sunk cost fallacy (Score:5, Insightful)
Even we forgave all of Greece's debts. They would still be in the negative. The reason they haven't gone bankrupt is because they CAN NOT AFFORD IT. They are that fucked up!!
And no, to solve this they wouldn't need to starve. Greece as done all the stupid things to fix the budget, but the still haven't done a single thing that wouldn't have a negative effect on their economy or a positive one:
1. They haven't raised pension age: Would be positive for the economy.
2. They haven't address government corruption and tax dodging: Would be positive.
3. They haven't sold off or reduced investment in their ridiculously oversize military which role is to fight a theoretical war with their 10x larger neighbour and fellow NATO ally Turkey. Would have no major net impact on the overall economy. (not that you can blame them for wanting such a military considering their history, but they can't afford it, and needs forget the past).
Instead they have:
1. Reduced benifits: Has a stong negative effect on the economy.
2. Introduced silly ineffective laws. Has negative effect on the economy.
3. Blamed the reduction and silly laws on everybody else. Has a net negative effect.
4. Loaned money to pay interest even at 10+% interest. Has STONG negative effects on economy.
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1. retirement age properly in line with demographics
2. transparent and mostly non-corrupt government
3. mostly fair and enforced tax system
4. reasonable spending on military
Re:Sunk cost fallacy (Score:5, Informative)
Totally agree. However, back in the day when Greece was allowed in the EURO (not EU), their obvious unsuitability was waived by France and Germany (under loud protest from the Netherlands and the Finns). It's appalling to see the German politicians ride the moral high-ground after:
1. Allowing the Greeks in the euro in 2001 in the first place when it was obviously a bad fit (same holds for Italy)
2. Breaking the stability pact in 2003 when it was convenient for them, opening the floodgates
3. Profiting immensely from the increased export that was fueled by ill-advised loans to a corrupt elite in the Southern nations
4. Bailing out the banks wrt Greece and offloading the Greek debt on the European population at large
5. Pointing the German anger at a foreign nation to hide their shenanigans
From my point of view it's a very sinister game that's being played here and the European project has failed. The Germans in particular seem to be incapable of taking responsibility for their actions and have stooped to a very dangerous form of demagogy. Let's stop this farce.
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Even we forgave all of Greece's debts. They would still be in the negative.
Factually incorrect. Greece has a primary surplus.
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If that was true, then why are they not only refusing to pay what they owe, but they are demanding even more money?
You have a $100/mo surplus, but $150/mo in loans. You take an additional loan structured to cost you $25/mo, but to bankroll enough money that you can pay $175/mo. You use some of that money to invest in other things (analogy: dishwasher uses 1/7 of the water that handwashing uses, but costs $1000; could save you $50/mo, if you could actually save up any money...), reducing your costs, increasing your surpluses. You divert the additional surplus to paying off high-dollar loans.
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1. They haven't raised pension age: Would be positive for the economy.
[...]
1. Reduced benifits: Has a stong negative effect on the economy.
Raising pension age *is* a reduction in benefits.
Re:Sunk cost fallacy (Score:4, Interesting)
The money that was loaned to Greece has been lost. The whole crisis is about everyone involved being unwilling to accept this reality and thinking that the money will somehow magically come back once the Greeks have been punished sufficiently.
Remarkable the extent to which economists agree with you and to which politicians disagree. Gee, I wonder who's right?
Most notably, in the last bailout plan, the IMF called for growth in the Greek GDP to top 4% within a few years, and that's what would allow them to pay back the debt. So, in a very short time, while constrained by harsh austerity measures and with no ability to use govt funds to stimulate any job growth, Greece was supposed to leap from the bottom of the EU to the top in terms of growth. Yeah, right, pure fantasy--devised to soothe the lenders that somehow, some way, their investments in Greek loans are not a lost cause and that they will soon profit from them, if only Greece will get its act together and mumble mumble mumble something.
The underpants gnomes had a better business plan ;-)
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Debtor's prison isn't what you think it is. You're thinking of usury, which is where someone is in essence kept as a slave by increasing their debt at a faster rate than the payments are made. Debtor's prison was intended (remember, intended, in actuality it didn't work out) to provide debtors with either skills so they could exit and fix their debt issue, or it was intended to protect the debtor from creditors permanently in return for the debtor providing the necessary basic labour for his upkeep (eg: Running enough of a farm to feed himself).
No.
Debtor's prison worked by putting the indebted person into jail to squeeze friends, family, and business associates to come up with money to get them out.
Very important link left out: the agreement text (Score:5, Informative)
Read it, it is only 7 pages long and, although it mentions other documents, the gist of it is there.
Commenting on the agreement without reading it is engaging in mindless speculation colored by your own misconceptions and ideological leaning
Oh, who am I kidding, this is slashdot, nobody RTFA.
Re:Very important link left out: the agreement tex (Score:5, Informative)
Re:Very important link left out: the agreement tex (Score:5, Informative)
1st paragraph: asks Greece to keep their promise this time.
To be read with German accent as it was most likely added by Germany. It echoes the statement by Merkel [businessinsider.com] this weekend that says "The most important currency has been lost and that is trust".
2nd paragraph: tell Greece it is either both ESF and IMF or nothing.
Meaning Greece will most likely have to agree to another set of measures imposed by IMF.
3rd paragraph, pages 2 and 3, first item on page 4: sets the first measures to be taken and its deadlines.
Some must be voted into law by 15 July (72 hours after the meeting) and some by 22 July, next week. They are more or less the same measures that triggered the referendum last week but with a notable absence: cuts in the military
pages 4 and 5, aditional measures:
- model for privatization.
Instead of going to the public coffers it will go to a fund (managed by Greece, supervised by Europe). The assets (estimated 50B) will be split: 50/25/25. 50% to recapitalize the banks, 25B to repay loans, 25B for investiments.
- model for the supervision: all draft legislation will be subject of their (EU and IMF) consult and agreement. Greece has until 20 July to ask to be helped.
- reversal of anti austerity legislation: all of them, except the humanitarian crisis bill, must be reexamined and either reversed or replaced by an equivalent measure.
SOP for "troika" (as in group of three, EU, ECB and IMF) technicians to become the fourth power in the country during the program duration. Happened in Portugal and Ireland
end of page 5: states that Greece will need between 82 and 86B, unless it can collect more taxes or privatize better. 7 of those billion euros are needed before 20 July and 5 more before mid August. Also states that greece needs to "clear its arrears" to IMF and Bank of Greece
Sibling post has it right, this part is "Greece, pay denbts"
page 6: states that Greece either accepts the deal or banks won't reopen. Also, that it is syriza's )and whoever was its predecessor) fault by easing the policies during the last 12 months and that Eurozone can reconsider "longer grace and payment periods" but that will be "no haircuts"
Again, "Greece, stop screwing up, pay denbts, all of it"
page 7: states that if Greece accepts the deal the deal will go forward. Also, that in the next 3-5 years 35B will be mobilized to fund investment and economic activity (including SME) via EU programmes
This must be the concession Tsipras is talking about, 35B for investment including small and medium-sized entrerprises not counting towards the loan but via EU investment.
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Well, my reply to you was meant as a joke - building on your accurate observation that slashdotters rarely read anything beyond the summary.
It's amazing isn't it? We've got so much information available at the touch of our fingers, yet we can't be bothered to spend the *seconds* it would take to find a source document regarding the matter at hand. It's a sad commentary on the status of critical thinking skills among our ranks.
Anywho, it's inspiring to find another of the few here willing to fight the go
Re:Very important link left out: the agreement tex (Score:4, Informative)
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Also listen to Varoufakis's interview. It gives you quite a lot of insight into how Greece got to this point:
http://mpegmedia.abc.net.au/rn... [abc.net.au]
Basically looks like Varoufakis was pulling the strings, but in the end Tsipras blinked first. What else could he do though, I think Varoufakis didn't grasp until late in the piece that powerful parts of the EU were quite happy to call his bluff on a Grexit. Seems like his ego is now in repair mode after making that rather fatal miscalculation.
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A number of Eurozone states, lead by Germany, were at a place where their governments would have been in very serious trouble had they simply repeated the process as it has rolled out to date. There were reports that if there had been another bailout like the last ones, the Finnish government would have collapsed, and Merkel certainly has been feeling intense pressure not to give in to Greek demands. The referendum seems to have been the final straw, however. The attempt to shame the Eurozone into handing G
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He probably still doesn't understand why game theory does not work in real life.
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We were more or less forced to adopt Euro. This was the price for France allowing reunification. Switzerland does just fine with their own currency, Germany would be able to do so just as well.
Greece is like your brother-in-law (Score:3, Interesting)
That brother-in-law that keeps borrowing money, then borrows some more; never paying it back. Why? because they can't generate enough revenue to cover their spending. Finally when they can't seem to manage their finances at all and throw a big party, they still want more. Fiat currency arguments aside, it's probably better to let Greece figure this out on their own, with their own currency because the rest of the EU would be throwing good money after bad. Unfortunately the rest of the EU won't let that happen just yet because Italy and Spain would probably be next; it would give the UK further argument to pull out and that would mean serious trouble for the Eurozone.
Not quite (Score:3, Insightful)
Some important caveats:
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It doesn't matter if the current government contracted for it. It exists.
Imagine you're a corporation (which in a lot of ways governments are kind of like). Now, imagine you get a new CEO who wants to get out of existing contracts because he didn't contract for them and doesn't want to pay them.
Too damned bad. You don't get to go "waaah, we can't af
Think of bankruptcy (Score:2)
In fact, corporations get exactly that when the file for bankruptcy. a procedure designed exactly to restructure their debt. It's true that sometimes this means the company is liquidated entirely, wi
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If Germany starts forgiving debts for everybody, then the Germans are paying for someone else's prosperity
the debts europeans (not only germans) are paying were originally from private european banks who made big money investing in greece. europeans (and germans) should some day ask their respective governments why they made them responsible for those private debts.
people are right, it's not a loan. it's a scam.
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The difference between your example of a corporation and a nation is that the corporation has limited liability. The janitor of that corporation will lose his job, but he will not be held financially accountable for the bad decisions the CEO made. Not so for the Greeks. Their governments and elites had a ball, and the population is now forced to foot the bill.
The fact of the matter was that Greece has lost 25% of their GDP in the last 6 years, largely due to austerity measures, but were able to create a
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Already happens.
http://news.bbc.co.uk/2/hi/eur... [bbc.co.uk]
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To mangle a phrase, "who's the less responsible, the brother-in-law or the lender who keeps giving him 'loans' after he hasn't fully paid back the first ones?"
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but... but.. he's my brother-in-law, my wife will cut me off if I don't keep lending to him. Yeah he's a deadbeat, partying all night but he's still "family."
Maybe it's just cheaper to divorce my wife and not deal with him anymore? :-P
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my wife will cut me off if I don't keep lending to him.
Ok, I see the problem now -- you loaned him the money out of the hooker fund. Thanks the clarification.
Good news for the UK (Score:2, Troll)
The British Museum is going to get a chance to buy at auction the Greek cultural artifacts they didn't manage to loot.
Not set in stone yet (Score:2)
The bailout still has to go through a number of European national parliaments. There have been rumors about the Finnish parliament not ready to go ahead with this.
Charles Dickens said it best (Score:4, Insightful)
"Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
-- Charles Dickens, David Copperfield
Seriously, people, don't borrow money from scary international lenders who are just waiting for you to default so they can take control of your country. Don't borrow money from them! And if you do: pay it back! I can't stress that last point enough. It's really the key to the whole Greece problem.
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No, it was at other EU members' request, not Greece's.
My solution (Score:2)
Start renting out the Parthenon for parties. If that doesn't work, start charging $0.50 each for Thermopylae selfies.
Re:My solution (Score:5, Insightful)
This is clearly a bad deal and frankly it seems like most of the people at the table know it is a joke. Did you see the deadlines in the article? They're giving themselves basically until the end of the week to completely turn their economy around, for the mere promise that the rest of the EU will consider extending the repayment period of the debts. They aren't even considering debt forgiveness.
IMHO, the correct solution for Greece, painful as it would definitely be, is an exit from the Eurozone and a return to a national currency. The Eurozone has fundamental structural problems that are going to put Greece back in the hotseat in a few years even with this deal. Combined monetary policy with independent fiscal policy is not a sustainable model. It's like giving your irresponsible uncle your credit card on his promise that he will pay you back for everything he charges, even though he has defaulted on every loan he has ever had and is currently tens of thousands of euros in the hole and doesn't have a job.
It also doesn't allow your currency to fluctuate with your economy, which puts a stranglehold on your economy when you have a recession.
Sadly, a unified fiscal policy is politically impossible in the current EU. It would give up way too much sovereignty and be political suicide in most countries. You're talking about the EU itself collecting taxes and spending them on infrastructure. Foreign governments gaining oversight over national governments, an especially worrisome situation when the national government is breathtakingly corrupt. There is no chance you would get even a simple majority of countries to agree, much less the supermajority that would no doubt be required.
Most Important (Score:5, Insightful)
First things first: We have to make sure that no banker ever loses so much as a Euro, no matter how bad the investment. That's primary in this deal.
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First things first: We have to make sure that no banker ever loses so much as a Euro, no matter how bad the investment. That's primary in this deal.
That's what really bothers me about this whole thing -- it's a reminder that Big Finance no longer needs to evaluate the risk of their investments because they'll never again be held accountable for them. Listening to the coverage of the Greece problems gave me flashbacks to the subprime mortgage crisis, among others. Letting bad investments bite these mega-corporations in the ass isn't even on the table.
I try to empathize with the Greek people, since the majority of them are probably being dragged throug
Bailout money doesn't really end up in Greece .. (Score:2)
Not a Greek bailout (Score:5, Insightful)
True, Greece borrowed irresponsibly and spent it in wasteful ways. But the banks can not shirk their responsibility.
Fool me once, ... Fool me thrice... time, blame me (Score:2)
The first bailout may have been Greece's fault. Maybe even the second one. But the fact that they need a third means that Germany et. al. CAUSED the third one by giving crappy demands after the second bail out.
Clearly Greece's problems are no longer just caused by Greece, but a direct result of Germany's idiocy.
Re:Well so much for Democracy (Score:5, Insightful)
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They voted against austerity measures and got worse ones. Their finance minister got shitcanned because he wasn't an idiot and wouldn't send the Greek people into debt servitude.
I understand the need to personalize this as a morality play, but really it just boils to down to a ruling class that never had a concern for the welfare or will of the people.
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Well, many people vote themselves bread and games until there is no bread or games left. Greece has reached that point, even if the population there does not seem to understand this. Some level of humility is required to realize shortcomings of that type and to be able to overcome them. The Greek Government seems to have finally found that humility, the population has not yet done so.
Re:Well so much for Democracy (Score:4, Insightful)
What do you mean? Of course it mattered. The Greeks were offered a deal and told it was the best deal they were going to get. They turned it down. Now they have accepted a worse deal. Democracy is politics, not magic, it doesn't magically fill accounts with funds and ATMs with Euros. It doesn't magically erase consequences of bad decisions and unpaid bills.
Re:Well so much for Democracy (Score:4, Insightful)
Well, do you think Greece was going to successfully vote for other countries to give them money? Because that was never gonna work.
The problem is Greece's current government came in on the claims they could renegotiate terms with little leverage because they said so. They they had a referendum to say how much they all agreed that other people should give them more money. Then they got told that their vote didn't really change anything.
What's happening now is those other people are pointing out that the vote by the Greeks was pretty much symbolic at best, delusional at worst. Because voting to have someone else give you money is pretty meaningless to that someone else.
Me, I think this is a problem with the whole concept of globalization and open markets in the first place ... you can't pretend that wages, skills, and goods are interchangeable on a global scale without accounting for the relative differences between countries. Which is why they had separate currencies with separate values in the first place.
You can't just slap a common currency on that many countries, leave them to manage their own money completely separately, and then somehow magically assume the price of goods will be uniform across those countries.
When this was happening a lot of people said it would never work.
Honestly, this is like "voting" that the bank, instead of foreclosing on your mortgage should reduce the mortgage, give you lower payments, and give you money to pay your bills.
This has nothing to do with democracy, and everything to do with the fact that once you're bankrupt, you can't pretend like voting it away changes anything. You're still bankrupt, and if your creditors don't want to give you more money, your temper tantrum doesn't mean a damned thing.
Pretending like Greece had the leverage to change the terms to suit them is the failure here.
This is like loaning money to someone who says they can't afford their bills, having them run out and buy a new TV, and then they want to borrow some more money because they can't pay their bills.
In this case, Germany has said it's not getting stuck holding the bag. And I don't really blame them, otherwise the EU becomes a way to move money from wealthy nations to poorer ones.
Re:Well so much for Democracy (Score:5, Insightful)
Silly Greeks you thought your vote mattered.
What? They got exactly what they voted for. The EU offered them a deal, and said that if they didn't take it, the eventual deal they would have to take would be a worse one. And they voted not to take the deal. They got exactly what they voted for, as promised: they still had to take a deal of some sort, and now they've got a worse one, just like they asked for.
And as if that weren't enough evidence that Democracy works in Greece, keep in mind that they are in the position they're in because the position they're in is exactly the one they've been voting for all these years to obtain: they wanted more stuff than they could be bothered to pay for, and wanted to continue to elect socialist politicians who would promise them it would all be OK, and they'd always be able to get other Europeans to go to work each day in order to buy them the lifestyle they wanted. Democracy in Greece has worked perfectly. The problem is that the voters in Greece are fools.
Re:title is wrong (Score:5, Insightful)
banks were mostly saved in 2010 already. the debt is since then public and will be repayed with european tax money, one way or the other.
plus a bit of greek blood, i guess, since they have no money left. this show right now isn't about banks anymore, it's just political. it's about destroying syriza, sending a strong message throughout europe and, well, try to make this failed system last a little longer. doesn't look good.
Re:Privatize the profits, socialize the loses... (Score:5, Informative)
The only way for Greece to recover is to leave the monetary union. They can remain a member of the EU without using the euro as their currency, the UK is an example of that; but every story you read in the mainstream media implies otherwise, which simply isn't true.
It isn't just the UK; only 19 of the 28 member states of the EU use the Euro currency. Ones that don't include Denmark, Czech Republic, Romania, and Sweden. According to Wikipedia, however, it does seem that most of these are obliged to switch to the Euro when certain conditions are met; the only countries which have specifically opted out are UK and Denmark. But I do think it's interesting that very few eastern European EU nations have adopted the Euro so far (and instead, a couple of non-EU eastern European nations like Montenegro have unilaterally adopted it). If you look at the map [wikipedia.org], Greece kinda stands alone as a Euro user in that region, with only Cyprus (EU), Montenegro (non-EU) and Kosovo (non-EU) also using it.
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"But I do think it's interesting that very few eastern European EU nations have adopted the Euro so far (and instead, a couple of non-EU eastern European nations like Montenegro have unilaterally adopted it)."
It's because entrance into the EU is staged. It goes something like this:
1) A country expresses interest to join
2) That country must make political changes to meet EU standards- this means matching EU standards on things like product quality/safety, human rights, law enforcement and so on and so forth
3
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Greeks are OK, apparently. This is what Wikipedia entry on Greece kinda leads with :
Greece is a democratic and developed country with an advanced high-income economy, a high quality of life and a very high standard of living. ...
Greece, which is one of the world's largest shipping powers, has the largest economy in the Balkans, where it is an important regional investor.
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Euro isn't by any means a failure, what's a failure is the half-hearten attempt to trim the dead weight.
It's like having a leg cut and repeatedly smearing urine all over it because that takes away the pain momentarily, instead of going to the hospital and pay to have it treated.
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The Euro is not a failure (much as the US wishes it was), Greece is a failure. Greece is also not very large with 11 Million citizens, while the Eurozone has 468 Million citizens. That is about 2.3%. And keep in mind the worse the current Greek efforts to not pay their debts backfires on them, the less inclined will other Eurozone members be to try that as well.
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Why does the US wish for the Euro to be a failure ?
Because a successful Euro would supplant the dollar as the primary world currency, with an associated loss of control, prestige and commercial benefits to the US.
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And even a brief look at the numbers shows that you are full of shit.
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2. Forcing the country to either default or accept further austerity is causing a humanitarian crisis in the country
They should have thinked twice before borrowing in the first place.
5. A lot of the money that was 'loaned' to Greece, exited the country immediately in the form of purchases of German/French goods even military equipment
Which Greece wasn't forced to buy. Let's face it. 99% of today's Greece debt comes from loans taken by a democratically elected government since the 80's.
2. Forcing the country to either default or accept further austerity is causing a humanitarian crisis in the country.
Last time I checked Greece was still richer than many northern neighbors from Eastern Europe. A lot richer than southern neighbors from Africa. Why would there be a humanitarian crisis in Greece but not in poorer countries?