The European Union

[regwec]

- You're probably right on the first point, but that depends on how risk averse voters in Germany are feeling. The EU is run largely for their convenience, so they may well not want to endanger it, despite the short term costs.

- Your second point alludes to a changing picture. I think the Troika may be less likely to blink precisely because this would change approaches in other "debtor" nations (those which you identify as playing by the rules). Renzi and other figures in the Italian government have already adopted a slightly more conciliatory tone, and the possibility of loosening the fiscal straightjacket imposed by Brussels and Frankfurt may sway allegiances. On your last sentence: yes, but Eurocrats lie absolutely all of the time. Juncker is even on record as saying you have to lie when it is important.

- It is all a matter of bluff and double bluff at the moment, and Syriza may be being naive. Again, it depends on how risk-averse the Troika and the creditor nations are feeling. Nevertheless, if Syriza continue to attempt to negotiate the bailout conditions, they will at least be afforded the moral highground to lead Greece out of the €uro (and maybe the EU), if the Troika shut the door. The referendum has demonstrated that the bailout conditions were a political impossibility.

- I think Grexit is probably best for everyone, not least the Greeks. That is somewhat dependent on the reaction of the other debtor nations, however. If member states start peeling away from the €uro, then the EU itself, the corrosion may be irreversible. It is not unlikely that the deathblow may come from France.

 

[regwec]

He's expressing a sentiment that most Europeans are feeling.

No, it is just a matter of the mask slipping once again, and a German technocrat forgetting that the EU is not officially run purely in Franco-German interests.

Most Europeans are sick of bailing out Greece at this point only for Greece to essentially give them the middle finger. Bailouts have been politically unpopular in Germany, Finland, etc. The other PIIGS countries are frustrated because they followed the rules and did the necessary reforms to get back on track. You brought up a good point earlier that if they cave into Greece, it will lead to all sorts of political problems (the collapse of Germany's government, the other PIIGS demanding similar forgiveness, etc.).

Well, precisely: much depends on which way the Southern member states jump.

Greece really did burn some bridges here. And now they will suffer for it.

If they default, decouple, devalue and reform quickly, they will be better off in the long run. Good luck to them.

 

[hippie_hunter]

- Your second point alludes to a changing picture. I think the Troika may be less likely to blink precisely because this would change approaches in other "debtor" nations (those which you identify as playing by the rules). Renzi and other figures in the Italian government have already adopted a slightly more conciliatory tone, and the possibility of loosening the fiscal straightjacket imposed by Brussels and Frankfurt may sway allegiances. On your last sentence: yes, but Eurocrats lie absolutely all of the time. Juncker is even on record as saying you have to lie when it is important.

I think that we can all agree that the fiscal straightjacket should have been loosened from the get-go. Instead of focusing on Greece's debtload, they should have been focusing on much needed economic reforms that would have put Greece in a position to better handle its debt load. But in order to get a better deal Greece needs to be in a better negotiating position (which they aren't) and they shouldn't have pissed off the major players in the process.

- It is all a matter of bluff and double bluff at the moment, and Syriza may be being naive. Again, it depends on how risk-averse the Troika and the creditor nations are feeling. Nevertheless, if Syriza continue to attempt to negotiate the bailout conditions, they will at least be afforded the moral highground to lead Greece out of the €uro (and maybe the EU), if the Troika shut the door. The referendum has demonstrated that the bailout conditions were a political impossibility.

I don't think the Troika was bluffing at this point. Patience and trust can only go so far.

- I think Grexit is probably best for everyone, not least the Greeks. That is somewhat dependent on the reaction of the other debtor nations, however. If member states start peeling away from the €uro, then the EU itself, the corrosion may be irreversible. It is not unlikely that the deathblow may come from France.

The other Eurozone nations do not have the problems that Greece has and had. Unlike the other nations, Greece shouldn't have been allowed into the Eurozone to begin with. Keep in mind that unlike the other governments, they deliberately lied about their budgets and used Goldman Sachs to cover it up. The other Eurozone nations are also in a better economic position than Greece is as well.

If anything, I see this as strengthening the Eurozone. It'll be a demonstration that if you play ball like Spain, Italy, Ireland, and Portugal did, you're going to be alright. But if you're defiant like Greece was, you'll get economic calamity.

 

[regwec]

I don't think that will wash in the long-term, when Spain et al remain chained to an economic corpse, and Greece is doing much better having extricated itself. More likely, however, is that the Eurozone itself will either fragment or change direction: the mythology underlying the TEU and TFEU, at least, is that it is run according to democratic principles. Not living under the jack-boot of Brussels, you may underestimate quite how much ordinary Europeans loathe its unelected political class.

 

[DaddlerTheDalek]

All these Greece/Syriza news are so annoying...

 

[Marvolo]

I'm kind of glad Greece voted no to the bailout and more austerity. For better or worse democracy won. Banks shouldn't be able to tell a country and it's government how to run. And they definitely shouldn't be able to use monetary aid to blackmail a country.

Becoming even more indebted to the EU creditors and taking more money from their citizens probably wasn't in the best interest of the people who rely on their monthly pension checks. The Greek government needs to get their **** together, but if more cuts are made people will starve.

 

[hippie_hunter]

I'm kind of glad Greece voted no to the bailout and more austerity. For better or worse democracy won.

It was an inappropriate use of democracy. Sometimes, things should not be put up for a vote (like gay rights for example). I'm all for democracy and people having a say on the general direction their economy should go in and I'm a firm supporter of ballot initiatives like raising the minimum wage if people support them. But on a lot of complex economic issues like we're seeing with Greece, the ignorant plebeians shouldn't be off and voting. Most people, both yes and no voters, are not fully informed economists who fully understand the issue. And now, Greece is going to go through even more economic hardship because ignorance prevailed.

Like seriously, how about I just go up to Navient and say that 60% of me just voted in favor of not having to pay my student loans anymore. Can I get my debt restructured now? Let's see how well that goes.

Banks shouldn't be able to tell a country and it's government how to run.

Governments shouldn't be recklessly borrowing and covering it up illegally either. Just because the Greek's elected SYRIZA doesn't mean that the damage caused by New Democracy and PASOK just magically goes away. They asked for power and thus inherit the obligations that come with power.

And they definitely shouldn't be able to use monetary aid to blackmail a country.

So Greece should have just gotten the aid with Greece's creditors getting nothing in return?

Becoming even more indebted to the EU creditors and taking more money from their citizens probably wasn't in the best interest of the people who rely on their monthly pension checks. The Greek government needs to get their **** together, but if more cuts are made people will starve.

Now this I will agree with. The Troika clearly went in the wrong direction with Greece and while should have found a way to get their money back, but at the same time not do so at the cost of Greece's economic development and suffering of its people. They should have been a bit more lenient on debt repayments while focusing on economic reforms that could have put Greece on a viable path to sensible repayment first and foremost.

 

[hippie_hunter]

Another reason why this isn't a victory for democracy is because Tsprias won by either being naively stupid or deliberately deceiving his people. Polls are showing that the people who voted no overwhelmingly believe Tsprias's promise that Greece can get a better deal and stay in the Eurozone. It just isn't going to happen for three big reasons:

1. A more beneficial deal will shatter Angela Merkel's government and empower the radical right in Germany. It will probably drag down other stable nation's governments as well.

2. It will send a message to the people of the other PIIGS that if they elect extremist governments, they too can get a better deal. It would also send the signal that a country can borrow all it likes, walk away from those debts and make the rest of Europe pay the bill, as long as it is intransigent enough.

3. The people in power, particularly in Germany, seem more likely to want to make an example out of Greece.

 

[regwec]

Another reason why this isn't a victory for democracy is because Tsprias won by either being naively stupid or deliberately deceiving his people. Polls are showing that the people who voted no overwhelmingly believe Tsprias's promise that Greece can get a better deal and stay in the Eurozone. It just isn't going to happen for three big reasons:

1. A more beneficial deal will shatter Angela Merkel's government and empower the radical right in Germany. It will probably drag down other stable nation's governments as well.

As an ultimately pragmatic people who are accustomed to the EU being rigged in their favour, I think the Germans will support the least worst option. From their perspective, that may well be the continuance of the Eurozone, and the concept of its irreversibility, by any means.

2. It will send a message to the people of the other PIIGS that if they elect extremist governments, they too can get a better deal. It would also send the signal that a country can borrow all it likes, walk away from those debts and make the rest of Europe pay the bill, as long as it is intransigent enough.

Are you saying that the Troika have a mandate to contrive monetary policy in order to affect the outcome of democratic elections in member states?

In any case, the myth of a democratic underpinning to the treaties is crucial to the EU project. I don't think Germany could avoid a rapprochement with belligerent debtor countries, if they represent a sizeable proportion of EU citizens.

3. The people in power, particularly in Germany, seem more likely to want to make an example out of Greece.

If they are seen to do so, however, the EU project is dead. The founding principles of the EU are set out in Article 2 of the TEU:

"The Union is founded on the values of respect for human dignity, liberty, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities."

And at Article 3:

"It shall promote economic, social and territorial cohesion, and solidarity among member states".

These are the principles agreed by the representatives of the sovereign governments of the member states. They are supposed to be the democratic basis for the whole EU project, and the guarantor that the sovereignty surrendered by those states would not be abused by the unelected institutions.

Well, I don't think any of those sentiments provide for Germany, acting behind the slipping mask of the institutions, to hand a diktat of enforced poverty down to a member state, nor does it allow for Germany to "punish" or "make an example of" a state who resists.

Plenty of Europeans already believe that Merkel is doing with bank loans what Hitler and the Kaiser before him failed to do with tanks. The fate of Greece may prove or refute those suspicions.

It was an inappropriate use of democracy.

You should move to Belgium: they would make you an EU commissioner within weeks.

Edit-

It is hard to argue with John Redwood on the knavish politicking of the ECB:

"It is unacceptable for one of the leading Central banks of the world to fail to tell people on what basis it will support Greek banks and get them open for business again.

It is the job of the ECB to supply Euros to Greek banks when people want to withdraw their money. It is their duty to allow external settlement of accounts from Greece to the rest of the zone and beyond. Greek business with money needs to pay foreign suppliers. If Greek banks are solvent as the ECB has always said they are, they must supply the cash. If a bank in the zone becomes insolvent, then the ECB must trigger its recapitalisation. Playing politics with the livelihoods of Greeks and undermining Greek businesses by failing to allow transactions is doing damage to the Eurozone as a whole as well as to Greece itself."

 

[DJ_KiDDvIcIOUs]

All Debt Is Negotiable

Now that Greece’s citizens have overwhelmingly rejected the idea of continued financial austerity, the rest of Europe—particularly Germany—must decide whether to continue to hound the broke-ass Greeks to repay their debts. And Germany’s own moral superiority is far murkier than Germans might think.

With all of the political and economic machinations surrounding the Greek debt crisis, it is easy to lose sight of the basic situation, which is this: Greece’s leaders unwisely borrowed money that was freely loaned to them, and they blew it unwisely, and now they can’t pay it back. (More precisely, they can’t pay it back the way that creditors want without imposing a severe level of suffering on Greek citizens.) Wishing that Greece could pay it back, or harshly scolding Greece for being unwise with its spending habits, will not make the country any more able to pay the money back. The question that Europe’s bankers (and German leaders, who tend to provide most of Europe’s money via their strict German sense of propriety) now face is whether to keep pumping money into Greece in order to try to right the nation’s economy so that they might be able to, one day, repay some of their debt; or whether to just say “**** you, Greece,” and demand their money, and chase Greece away from a united Europe for good.

There is a moral element to all of this. Most people believe that if you borrow money, you should pay it back. And because most people believe this on a personal level, they believe it for entire nations as well. But nations do not operate like individuals. It’s counterproductive to throw a poor person in debtor’s prison, and even more counterproductive to push a nation to the point of war because it can’t pay off its creditors. Any moral discussion of Greece’s debt must contend with the question of how much average citizens—who will do the real suffering under austerity—are responsible for the economic mistakes of their leaders.

In an interview with the German paper Die Zeit (translated into English by Gavin Schalliol, though his translation has since been taken down for copyright reasons), Thomas Piketty tells Germany rather stringently that they are full of ****—after all, Germany spent many years rampaging through Europe and destroying neighboring countries and accumulated tons of debt during WWII, and they were never required to pay all of that debt back.

“After the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround,” Piketty says. “We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece. Instead, both of our states employed [inflation, a special tax on private wealth, and debt relief].”

Now that Germany’s economy is strong and the debt shoe is on the other, Greecier, foot, though, Germany would like to see Greece exercise the sort of “fiscal discipline” and austerity that could prove ruinous for the Greek people. Piketty does not deny that the Greek government was crooked, but he asks Germans to look at the big picture: “Europe was founded on debt forgiveness and investment in the future. Not on the idea of endless penance. We need to remember this.” He calls for the same sort of European conference on debt that took place after WWII—one that benefited broke-ass Germany then, and which would ask the Germans to now, in essence, pay that historic debt forward to broke-ass Greece, so that the indebted nation of the moment can move forward without being ruined.

All of this is a wonderful primer on the point at which debt stops being a math issue, and starts becoming a moral issue. No people on earth want to be made to do penance for a debt that they don’t feel responsible for incurring. When debt reaches the point that paying back would severely damage the economy of the nation being asked to pay it back—or when the payback might extend longer than a single generation, with the debt burden of past fools being shifted on present strivers—it is probably time to get more flexible about payback terms. Otherwise, people tend to start breaking things.

Remember that those who extend too much easy credit are just as foolish as those who accept it.

http://gawker.com/all-debt-is-negotiable-1715996006

I'm definitely not all that versed in what is going on in Greece but this Gawker article brings up some very valid points.

 

[regwec]

Added to that, the Troika was responsible for Greece being given an unsustainable loan with unachievable conditions in 2010, when it would have been far better for it to have defaulted and decoupled. They feared contagion: Greece was, in effect, bailing out the Troika.

 

[Mechanix]

Would Greece learn their lesson if the debt was forgiven or reduced?

It seems like they have a history of repeating mistakes.

 

[regwec]

Who do you suppose is learning whose lesson? It's terrorism against US citizens justified because Bush Jr's government invaded Iraq?

 

[Mechanix]

Eh? I don't see the comparison. Greece clearly has a spending problem. The more suitable comparison would be the predatory lending strategies that the mortgage companies in the States utilized to essentially con people into taking out large or second mortgages on their homes, knowing they wouldn't be able to pay them back.

Although, I would hope that a government made up of numerous checks and balances would be smarter when it comes to taking out loans than an average individual.

 

[regwec]

The point is that ordinary people (and their children) should not be punished for the blunders of their leaders.

An interesting piece on the hypocrisy of Germany's position on Greek debt.

 

[regwec]

And another on the death of democracy in the EU.

 

[chamber-music]

Greece shouldn't of been allowed to join the Euro right away in the first place. The Greek government was cooking the books on the numbers and the EU was so happy to have Greece join the Euro they didn't bother to press the Greek Government on its financial figures.

It wasn't until 2009 that it was revealed that the gap between what Greece earns and what it spends was 4 times as much as the EU allows.

 

[regwec]

On the contrary, though EU politicians seem to have conveniently short memories, the Greek government admitted to the fraud in 2004, and it was certainly known about by Brussels before Greece joined in 2001. As usual, truth, openness and the rule of law were set aside by the EU technocrats, in favour of their "political imperative".

Here.

Brussels and Frankfurt had every opportunity to prevent this crisis occurring. Instead, they ensured it would come to pass, and now they seek to put all the blame on Greece, and force all the suffering on the Greek people.

 

[regwec]

Prior to the Greek referendum, Commission President Jean-Claude Juncker gave a stern warning that a "No" vote would be a vote against keeping the €uro.

As predicted, he was lying. Again.

 

[DaddlerTheDalek]

So regwec. What do you think should the EU and Germany do to end this crisis?

 

[regwec]

The ECB should extend liquidity to the Greek banks, in order to prevent widespread social unrest. That is the ECB's job, as a central bank and lender of last resort, so long as the Greek banks are solvent (we are told that they are). If the Greek banks are insolvent, then the ECB is obliged to recapitalise them under the European Stability Mechanism. None of these institutions has the right to deprive ordinary Greeks of access to their own money.

The Troika has to meet Syrzia for new negotiations- they are doing this, anyway. As I see it, there are two options on the table: debt restructuring as part of new bailout conditions built around achievable austerity and fiscal stimulus, or managed exit from the Eurozone. I think the latter is in everybody's interests, except for the Eurocrats who are devoted to the concept of "ever closer" and irreversible union.

The €uro itself is an insolvency machine, so we will all be here again in a few months or years with Spain or Italy or even France, so the EU institutions have an interest in being serious and trying to resolve the crisis cleanly, rather than opting for the usual combination of preening and threats.

 

[herakles]

Would Greece learn their lesson if the debt was forgiven or reduced?

It seems like they have a history of repeating mistakes.

I don't think this is about "learning their lesson"

Look I am Greek (Zeus Greek not Frat Greek). I have family that lives in the villages. Until the Eurozone Greeks NEVER had debt or credit or mortgages! Greeks always paid with cash. While they didn't have much they were happy. Greeks are not lazy. France, Germany and the Dutch gave Greece the Euro and open lines of credit, the Greek government essentially forced Greeks to take on credit something that is essentially alien to them.

I equate Greece vs EU to a guy who makes 40k lives in a 1br apt drives a 15 years old car and pays cash for everything. He doesn't have much but everything he has is his. Now this guy is offered free credit not just a credit card but a open line of credit. He is also encouraged to use it!!!

He buys a 4 br 3b house a Mercedes, starts shopping at Niemen Marcus and eats at steakhouses now. The bank now steps in and says "you over spent your money now pay back your debts" The guy was never taught how to use credit so he is now screwed!

That is Greece in a nutshell.

 

[herakles]

The ECB should extend liquidity to the Greek banks, in order to prevent widespread social unrest. That is the ECB's job, as a central bank and lender of last resort, so long as the Greek banks are solvent (we are told that they are). If the Greek banks are insolvent, then the ECB is obliged to recapitalise them under the European Stability Mechanism. None of these institutions has the right to deprive ordinary Greeks of access to their own money.

The Troika has to meet Syrzia for new negotiations- they are doing this, anyway. As I see it, there are two options on the table: debt restructuring as part of new bailout conditions built around achievable austerity and fiscal stimulus, or managed exit from the Eurozone. I think the latter is in everybody's interests, except for the Eurocrats who are devoted to the concept of "ever closer" and irreversible union.

The €uro itself is an insolvency machine, so we will all be here again in a few months or years with Spain or Italy or even France, so the EU institutions have an interest in being serious and trying to resolve the crisis cleanly, rather than opting for the usual combination of preening and threats.

Honestly I hope for the sake of my people it is a controlled "Grexit" back to the Drachma. Greece's financial and political elite made it out like bandits while the people have been screwed over.

 

[Mechanix]

I don't think this is about "learning their lesson"

Look I am Greek (Zeus Greek not Frat Greek). I have family that lives in the villages. Until the Eurozone Greeks NEVER had debt or credit or mortgages! Greeks always paid with cash. While they didn't have much they were happy. Greeks are not lazy. France, Germany and the Dutch gave Greece the Euro and open lines of credit, the Greek government essentially forced Greeks to take on credit something that is essentially alien to them.

I equate Greece vs EU to a guy who makes 40k lives in a 1br apt drives a 15 years old car and pays cash for everything. He doesn't have much but everything he has is his. Now this guy is offered free credit not just a credit card but a open line of credit. He is also encouraged to use it!!!

He buys a 4 br 3b house a Mercedes, starts shopping at Niemen Marcus and eats at steakhouses now. The bank now steps in and says "you over spent your money now pay back your debts" The guy was never taught how to use credit so he is now screwed!

That is Greece in a nutshell.

The Greeks lied about their debt to get into the EU in the first place. So they weren't exactly on the up and up before the lines of credit were extended to them.

Also, the government is not the same as an individual. I don't think it's right to baby the Greek government for not knowing how credit works.

That being said, the EU is definitely the main contributor to this whole crisis. But, I don't think its right to absolve Greece of blame.

I think this sums it up well:

http://www.vox.com/2015/6/30/8867939/greece-economic-crisis

 

[regwec]

No-one is trying to absolve Greece from blame, but it should be recognized that they have been driven into an impossible situation.

And, again, the Eurocrats were highly complicit in the fraud that led to Greece adopting the €.