The Greek government says Germany owes Greece nearly €279bn (£204bn; $303bn) in war reparations for the Nazi occupation during World War Two.
It is the first time Greece has officially calculated what Germany allegedly owes it for Nazi atrocities and looting during the 1940s.
However, the German government says the issue was resolved legally years ago.
Greece's radical left Syriza government is making the claim while struggling to meet massive debt repayment deadlines.
Reacting to the Greek claim, German Economy Minister Sigmar Gabriel said it was "dumb" to link Greece's bailout by the eurozone with the question of war reparations.
"To be honest I think it's dumb. I think that it doesn't move us forward one millimetre on the question of stabilising Greece," he said.
He said ordinary Greek citizens however deserved "huge respect" for their economic sacrifices under the bailout programme. The Greek elite had "plundered" the country, he complained.
Greek Prime Minister Alexis Tsipras raised the reparations issue when he met German Chancellor Angela Merkel in Berlin last month.
The new figure given by Greek Deputy Finance Minister Dimitris Mardas includes €10.3bn for an occupation loan that the Nazis forced the Bank of Greece to pay.
"According to our calculations, the debt linked to German reparations is 278.7bn euros," Mr Mardas told a parliamentary committee investigating responsibility for Greece's debt crisis. Mr Mardas said the reparations calculation had been made by Greece's state general accounting office.
Berlin paid 115m Deutschmarks to Athens in 1960 in compensation - a fraction of the Greek demand. Greece says it did not cover payments for damaged infrastructure, war crimes and the return of the forced loan.
Germany insists the reparations issue was settled in 1990, before Germany reunified.
The budget spokesman for Chancellor Merkel's Christian Democrats, Eckhardt Rehberg, reiterated on Tuesday that "the reparations issue is for us closed, politically and legally - the same applies to the so-called forced loan".
Syriza politicians have frequently blamed Germany for Greek citizens' hardship under the austerity imposed by international lenders.
Mr Tsipras is trying to renegotiate the €240bn EU-IMF bailout that saved Greece from bankruptcy. Greece has not received bailout funds since August last year, as the lenders are dissatisfied with the pace of Greek reforms.
A Greek repayment of €448m to the International Monetary Fund is due this Thursday.
Greek Finance Minister Yanis Varoufakis has said that Greece "intends to meet all obligations to all its creditors, ad infinitum".
Did not the British invade Greece as well? Look out guys, soon the Greeks will be demanding your money as well Germany should pay for its war crimes, however in this case I think the Greeks' timing is slightly suspicious. Maybe an independent commission could look into how much the Germans still owe Greece, if any.
Iron_Captain wrote: Did not the British invade Greece as well? Look out guys, soon the Greeks will be demanding your money as well Germany should pay for its war crimes, however in this case I think the Greeks' timing is slightly suspicious. Maybe an independent commission could look into how much the Germans still owe Greece, if any.
It's extortion is what it is. There was no accusations of war crimes reparations when Greece came crawling hat in hand to beg for money from Germany, only when it comes time to pay the bill. Pathetic
70 years ago now. Why should a generation of young Germans have to pay for something they had no part in.
Utterly moronic.
Next you'll be telling me I need to pay for the slave trade or colonialism.
Utter gak.
It was the German state who committed those crimes. It is the German state who must pay for them. People come and go, but the state remains. The Bundesrepublik Deutschland, as direct and legal successor to the Deutsches Reich, bears the responsibility for this.
And yes, colonialism must also be paid for if it includes war crimes. The Dutch state for example has already had to pay up several times for the war crimes they committed in the Dutch East Indies. Slave trade is not a war crime afaik though, so you should be safe on that.
I think all this really shows is how relevant WW2 has become to people frustrated with contemporary European politics. We saw similar Nazi-baiting rhetoric made by Russians and pro-Russians in Ukraine last year.
70 years ago now. Why should a generation of young Germans have to pay for something they had no part in.
Utterly moronic.
Next you'll be telling me I need to pay for the slave trade or colonialism.
Utter gak.
It was the German state who committed those crimes. It is the German state who must pay for them. People come and go, but the state remains. The Bundesrepublik Deutschland, as direct and legal successor to the Deutsches Reich, bears the responsibility for this.
And yes, colonialism must also be paid for if it includes war crimes. The Dutch state for example has already had to pay up several times for the war crimes they committed in the Dutch East Indies. Slave trade is not a war crime afaik though, so you should be safe on that.
Where does "The States'" money come from? Is it perhaps the taxpayers?
Medium of Death wrote: Why should a generation of young Germans have to pay for something they had no part in.
Well, tons of Greek are paying for something they likely have no more responsibility in.
they have the responsibility, because its their current, elected government, and like it or not, they benefited from the money when it was coming in, so they are responsible for the flip side to that since they enjoyed the benefits.
While its not the same level of culpability youd get with direct, personal debt like a credit card in your name that you have maxed out, the fact is the greeks as a whole benefited from the money their government borrowed in their name.
Hmm, if Podemos (like Syriza but with Spaniards, sure it will be funny) wins maybe they'll kick the king and ask reparations too, and if the basques grow some guts and secede they may even ask for reparations over Guernika, this idea may start some quite interesting things.
70 years ago now. Why should a generation of young Germans have to pay for something they had no part in.
Utterly moronic.
Next you'll be telling me I need to pay for the slave trade or colonialism.
Utter gak.
It was the German state who committed those crimes. It is the German state who must pay for them. People come and go, but the state remains. The Bundesrepublik Deutschland, as direct and legal successor to the Deutsches Reich, bears the responsibility for this.
And yes, colonialism must also be paid for if it includes war crimes. The Dutch state for example has already had to pay up several times for the war crimes they committed in the Dutch East Indies. Slave trade is not a war crime afaik though, so you should be safe on that.
So by that logic Russia should have quite a large amount of reparations to pay out
Well, tons of Greek are paying for something they likely have no more responsibility in.
Or something. One funny thing reporters encountered a few years back - when they went to Greece to have a look at the corruption behind the collapse - was, surprise surprise, corruption. Taking a cab from the airport the reporter had her first run-in with it. Seeing as she had company cards the cabbie asked if he should print the receipt on 150% or 200% of the real cost of the ride. He was greatly offended that the reporter didn't accept his help in taking some extra money from her employer. And that's just the tip of the iceberg. State employees in various bureaus and health care often take bribes to bump you to the top of the list. Tax evasion is a national sport. And when Greek reporters write about it they're the ones taken to court instead of the guys with Swiss numbered accounts.
Well in Greece the enemy is usually the state. Or the clients (in the Roman sence of the word) of the other party. I am not so sure as to what i can achieve here but here it goes.
Yes there is corruption. Every where. Yes there tax evasion. There is also something called cripling taxes... Up to 50% to what you gain. And social welfare payments that amount ot 1/3 of your salary. And no you can't say i have a private insurance and demand exception. One must pay for social wefare.
On another note besides the Problem of German Reparations (which i find quite hilarious) there is also the problem of a forced loan that was taken by the Nazis in WW2. A measly 10.3 Billion euros that the Nazis had actually started paying back...... And the German Rhetoric for not paying reparations is indeed funny. Or it would be if it weren't for you know ... war crimes.. that they ( the German State that is) consider proper persecution of the war. The video is in german but i think someone with better internet skill than i can at least find english subs.
Just another attempt to shift the blame. The Greeks put themselves into a gakky position, and cant accept that theyve got noone but themselves to blame.
Hell, I wouldnt even mind that much if they hadnt vilinised the German people. As it is, I couldnt care less if the whole country goes bankrupt. In fact, Id enjoy it. Wouldnt get back the money they were loaned, but its not like theres a chance of that happening anyway.
Medium of Death wrote: Why should a generation of young Germans have to pay for something they had no part in.
Well, tons of Greek are paying for something they likely have no more responsibility in.
Two wrongs?
Settle the score?
easysauce wrote: they have the responsibility, because its their current, elected government, and like it or not, they benefited from the money when it was coming in, so they are responsible for the flip side to that since they enjoyed the benefits.
Yeah, but Germans elected Hitler, and they benefited from the pillaging too. So, where do we draw the line?
I still think the Greeks should elect the communist party and do what the Soviets did when the West started nagging about the huge debts Russia owed after the 1st World War. "Debt? Whats that"?
There are other countries that had to pay reparations as part of the Paris Peace Treaties agreement in 1947.
Italy ($360 million)
Italy was one of the main Axis Powers alongside Germany and Japan. Under a peace treaty, it was required to pay $125 million to Yugoslavia, $105m to Greece, $100m to the Soviet Union, $25m to Ethiopia and $5m to Albania.
Finland ($300 million)
Out of all the countries that were required to pay reparations from World War II, Finland is the only one known to have paid its bill in full when it sent $300 million to the Soviet Union in 1952.
Hungary ($300 million)
Under a peace treaty, Hungary was required to pay $200 million to the Soviet Union, and $100m to Czechslovakia and Yugoslavia.
Romania ($300 million)
Under a peace treaty, Romania had to pay $300 million to the Soviet Union, for the damage it caused with its "military operations". According to the treaty, it was to be made "payable over eight years from September 12, 1944, in commodities."
Bulgaria ($70 million)
Bulgaria was asked to pay $45 million to Greece, and $25m to Yugoslavia. For the full $70 million, the treaty said it was to be made "payable in kind from the products of manufacturing and extractive industries and agriculture over eight years."
Expected
The only Allied country who won but paid compensation was the USA, to Japan. In 1988, under the Civil Liberties Act, U.S. President, Ronald Reagan, apologized to the Japanese-Americans interned in camps during World War II and agreed to pay $20,000 to each surviving former detainee.
Germany
Germany was required to pay the most for World War II, however, the original total still appears unclear – mainly because Allied countries demanded different forms of repayment at different meetings to discuss Europe after the war. It was believed that initially the Allies suggested that Germany owed up to $320 billion in filed reparation claims -- a total, which they shortly realized couldn't be fulfilled by Germany at the time, especially with the added World War I debt.
At the conference on German External Debts, in London, 1952, Germany's post-war debts were written down to just under 7 billion deutschemarks (worth about $3 billion at today's currency rates) from 16.2 billion deutschemarks, whilst its pre-war debts were reduced to 7.3 billion deutschemarks,
Additionally, Germany had to relinquish the country's power and divide itself initially into four Allied-owned zones, which were demilitarized and removed of their weaponry.
According to one of the allied meetings, the Potsdam Conference, "payment of reparations should leave enough resources to enable the German people to subsist without external assistance."
On January 14th 1946, in Paris, two forms of reparation were set up for the allies, in forms of shares: all reparations including funds, and those in the form of 'industrial and other capital equipment'. The U.K., U.S., France and Yugoslavia were the biggest shareholders.
On top of that, Germany signed an agreement on September 10th 1952, confirming that West Germany would agree to pay 3 billion deutschemarks to Israel in instalments and 450 million deutschemarks to the World Jewish Congress, a federation which represents Jewish communities, over 12 years.
Similar to the situation with Greece, Israel's finance minister, Yuval Steinitz, announced in 2009 that he wanted Germany to pay between 450 million to 1 billion euros in reparations for Jews forced into slave labor during the Holocaust – despite the fact that Germany had paid off their allocated debt to Israel.
While it remains unclear on how much Germany originally owed and how much it has to pay back now – given interest on top of the original loan and countries claiming they haven't been paid enough – one writer has hazarded an estimate. According to Pablo De Grieff, author of "The Handbook of Reparations", by September 30th 1965, Germany had paid $4.5 billion, which rose to a total of more than $38.6 billion by 2000.
I ighly doubt that Germany going to go with what Greece wants
easysauce wrote: they have the responsibility, because its their current, elected government, and like it or not, they benefited from the money when it was coming in, so they are responsible for the flip side to that since they enjoyed the benefits.
Yeah, but Germans elected Hitler, and they benefited from the pillaging too. So, where do we draw the line?
germany and its people paid what they owed and suffered many consequences for their actions in addition to them being punished by the aftermath which left their country in ruins.
the greeks on the other hand are trying to get away scott free and have other people foot the bill for their excesses.
To be fair, pretty much the entire wold is/has/continues to live well beyond its means, with government/individual debt already past sustainable levels, so its not like they are the only ones passing the buck.
it is what it is namely a last ditch grasping at straws to let "business as usual" continue for a while longer.
Medium of Death wrote: Next you'll be telling me I need to pay for the slave trade or colonialism.
Black guy here, and, now that you mention it...
Believe that went through the Court systems already ..... wait.. Have the Chinese filed yet?
And what about the native Americans? Surely they could sue for HUGE reparations after being almost exterminated by the US.
Native Americans have/are getting reperations. I don't know in what form exactly, but my sister's boyfriend is native american and is apparently getting some free federal-funded benefits after turning 18.
Medium of Death wrote: Next you'll be telling me I need to pay for the slave trade or colonialism.
Black guy here, and, now that you mention it...
Believe that went through the Court systems already .....
wait..
Have the Chinese filed yet?
And what about the native Americans? Surely they could sue for HUGE reparations after being almost exterminated by the US.
Native Americans have/are getting reperations. I don't know in what form exactly, but my sister's boyfriend is native american and is apparently getting some free federal-funded benefits after turning 18.
fairs, through its government-to-government relationship with federally recognized tribes, carries out the Federal Government's unique and continuing relationship with and responsibility to tribes and Indian people. Indian Affairs programs support and assist federally recognized tribes in the development of tribal governments, strong economies, and quality programs. The scope of Indian Affairs programs is extensive and includes a range of services comparable to the programs of state and local government, e.g., education, social services, law enforcement, courts, real estate services, agriculture and range management, and resource protection.
Many Federal agencies other than the Indian Affairs have special programs to serve the American Indian population, i.e., the Indian Health Service (IHS), an adjunct of the Public Health Service, Department of Health and Human Services (HHS). The IHS provides health care services through a network of reservation-based hospitals and clinics. Besides standard medical care, the agency has established programs that specialize in maternal and child health, mental health, substance abuse, home health care, nutrition, etc. The Administration for Native Americans, another agency within HHS, administers programs aimed at strengthening tribal governments and supporting the social and economic development of reservation communities. Other agencies of the Federal Government that serves the special needs of Indian people include the Departments of Housing and Urban Development, Justice, Agriculture, Education, Labor, Commerce and Energy.
All American Indians & Alaska Natives, whether they live on or off reservations, are eligible (like all other citizens who meet eligibility requirements) to receive services provided by the state such as Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), the Food Stamp Program and the Low Income Heating and Energy Assistance Program (LIHEAP)
That's just off the bat. Believe it was mention before on here by someone a few months back on Dakka. Each tribal members depending on blood purity(?) receives additional funds from financial gains that the Tribe receives ex: casino's
Edit
Native Hawaiian's are not considered Native Americans it seems
I think the western nation should bill greece for the introduction of the failed system called Democracy, the introdycion of greek love , and they are the cause for the problems in the middle east, if they hadn't defeated the Persians we would have a different middle east than now.
70 years ago now. Why should a generation of young Germans have to pay for something they had no part in.
Ummm, by this logic there's no reason a generation of young Greeks should pay for a debt they had no part in. Just saying.
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Jihadin wrote: Next thing you know Greece going to sue all the Allies for not coming to their aid in time during WWII.
Nitpick, but the problem wasn't Britain failing to give aid, the problem was Britain coming to their aid. The Greeks trounced the Italians, and then Churchill started up his Balkan front nonsense... eventually convincing the Greeks to accept British divisions from Africa*. The handful of British troops were nothing compared to what the Nazis could deploy, and they were swept aside. Given Hitler was already gearing up for Barbarossa, it's possible Greece might have passed through the war with a kind of awkward neutrality. Unless Italy wanted another go, I guess.
*And the loss of those troops in Africa cost Britain the chance to rout the Italians before the Germans deployed troops. Churchill... I mean there's this idea that Hitler's interference cost Germany, but Churchill screwed way more.
70 years ago now. Why should a generation of young Germans have to pay for something they had no part in.
Ummm, by this logic there's no reason a generation of young Greeks should pay for a debt they had no part in. Just saying.
Why didn't they have no part in it? Didn't they vote for the parties that caused this whole mess?
Also, Germany doesn't owe the Greeks squat, the issues of the German debts of war to Greece were settled in 1960 when Greece accepted the payment of 115 million Marks as compensation.
Greece should have never been allowed to join the Euro, especially after it was known that they had been forging the economy numbers they were sending to Brussels for 10+ years... Its been way past the time that they are kicked out of the Euro and the EU.
Yeah, let's stop throwing good money after bad and let Greece devolve into the third world country it is rapidly becoming.
...
I'm not sure that's entirely a good idea, but Greece definitely needs a society and government rebuild from the ground up.
Sadly, cultural reforms are slow processes, and will not be aided by just continuing to give them monies.
1) Germany weaseled out of most of its reparation payments, largely with US and UK backing, as they wanted a strong Germany to oppose the USSR, and damn all the little countries that got torched to the ground. Germany essentially benefited from the largest debt write-off of the 20th century... or probably ever.
2) It is not only war reparations we're talking about, here. Germany forced occupied Greece to lend them money during WW2. This was an actual loan that was never repaid, and not a punishment for the losing side in a war.
3) You say today's Germans shouldn't be held accountable for the crimes of their grandparents... but all Greeks should be held accountable for the financial machinations of a minority?
4) German feeling of moral superiority over lazy Greeks... bull. I've been to both countries. The Germans are the lazy ones, of anything. The German economic miracle happened through their massive debt write-off, not from any talent on their part. Immigrants from southern Europe are amazed at how the 8-hour work day is adhered to in Germany. The rest of us are used to working 12 hours plus weekends for half the German wage or less.
5) Why, if I lend money to a Greek, and the Greek can't pay me back, I'm out of money... but when a German lends money to a Greek, and the Greek can't pay him back, the German will force the entire EU to cough up the money for him? That is literally what is happening here. And because lending to Greece is "risky" the interest rate is high... except that it's not risky at all, is it? The German banks will always be repaid, even if they have to force every EU citizen to pay them back - and this is called "bailing out Greece" when the Greeks really don't see a dime of that money, it goes to private German banks.
1) Germany weaseled out of most of its reparation payments, largely with US and UK backing, as they wanted a strong Germany to oppose the USSR, and damn all the little countries that got torched to the ground. Germany essentially benefited from the largest debt write-off of the 20th century... or probably ever.
That write-off consisted mostly of the war reparations that were forced onto Germany in the treaty of Versailles and part of the loans received under the Marshall plan. All the war reparations to the smaller countries were agreed and paid with their respective governments.
2) It is not only war reparations we're talking about, here. Germany forced occupied Greece to lend them money during WW2. This was an actual loan that was never repaid, and not a punishment for the losing side in a war.
And those debts where negotiated and paid in the agreement of 1960 between the German and Greek governments.
3) You say today's Germans shouldn't be held accountable for the crimes of their grandparents... but all Greeks should be held accountable for the financial machinations of a minority?
They voted for that minority and continued doing so for over 20 years. That is supposed to be how democracy works.
5) Why, if I lend money to a Greek, and the Greek can't pay me back, I'm out of money... but when a German lends money to a Greek, and the Greek can't pay him back, the German will force the entire EU to cough up the money for him? That is literally what is happening here. And because lending to Greece is "risky" the interest rate is high... except that it's not risky at all, is it? The German banks will always be repaid, even if they have to force every EU citizen to pay them back - and this is called "bailing out Greece" when the Greeks really don't see a dime of that money, it goes to private German banks.
What are you even going on about?! You do realize that if the money that the Greeks receive now goes to pay for bank loans, then that is because they have already received the money from those loans and spent it on other things?
And you do realize that all the private German banks that lent money to Greece before 2010 were forced to suffer a 53% loss on those loans (alongside every other private investor), when Greece had its first debt write off?
Concerning the debts, there are actually some good arguments that Germany might need to pay, see this SPIEGEL article The reparations, however, have been pretty much closed for good (legally speaking) with the 2+4 treaties.
Morally, as one of those Germans having been born more than 30 years after the end of WW2, I think we should do our most to repair what is still not mended. We would not even have to pay anything, we just drop billions of current or future debts.
Unfortunately, such an agreement would need years to come to an agreement and Greece has only a couple of days left. So, of course Greek politicians are pushing for repayments now - they are totally screwed and bancrupt, and would do anything to keep Greece from falling into total chaos.
Hence the boot-licking in the White house and the Kremlin these days.
One can certainly blame the Greek people for allowing/actively supporting/arranging themselves with such a flawed system for so many years, and some Germans say that the Greek should eat the soup they prepared for themselves (German expression), but the EU has a big responsibility in stabilizing that system for so long and not pushing for serious reforms earlier. (German banks and the ECB certainly earned good money on the back of it....)
What I see is old people in the streets, 60%+ unemployment rate with young people, thousands of people losing their home... That should be our first priority.
Instead of milking them dry, we should set up a new Marshall plan.
1) Germany weaseled out of most of its reparation payments, largely with US and UK backing, as they wanted a strong Germany to oppose the USSR, and damn all the little countries that got torched to the ground. Germany essentially benefited from the largest debt write-off of the 20th century... or probably ever..
That's one view of it.
One might suggest that one of the reasons "we" didn't pile on loads of reparation repayments was that they we did this after WW I and, all things considered, that didn't really work out too well.
Even if only occasionally we do/can learn from the mistakes of the past.
1) Germany weaseled out of most of its reparation payments, largely with US and UK backing, as they wanted a strong Germany to oppose the USSR, and damn all the little countries that got torched to the ground. Germany essentially benefited from the largest debt write-off of the 20th century... or probably ever.
2) It is not only war reparations we're talking about, here. Germany forced occupied Greece to lend them money during WW2. This was an actual loan that was never repaid, and not a punishment for the losing side in a war.
3) You say today's Germans shouldn't be held accountable for the crimes of their grandparents... but all Greeks should be held accountable for the financial machinations of a minority?
4) German feeling of moral superiority over lazy Greeks... bull. I've been to both countries. The Germans are the lazy ones, of anything. The German economic miracle happened through their massive debt write-off, not from any talent on their part. Immigrants from southern Europe are amazed at how the 8-hour work day is adhered to in Germany. The rest of us are used to working 12 hours plus weekends for half the German wage or less.
I more or less a gree with everything you wrote. Except that eastern europeans working 12h a day /weekend does not make them more efficient or laboursome - it just shows that they need/ want more money than they would get if they'd stick with an 8h job. Mostly to pay for the family back home and to build a house. Romanian friends of mine did exactly that.
Someone who says "I want to have at least 50% of my day for myself, my friends and family", and makes enough money while having that, is not lazy, he is sane.
Istill know a lot of lazy Germans, however, and I would call myself one, too.
In my time in an international bank in Belgium, I was always "Ze German", because I would easily do the job of a Greek, a Portuguese and a Congolese together (and yes, that might be a slight hyperbole to make a point ). That is not a judgement on their character, they were all very nice people (well, except for the Greek guy). But you could see that I came from a background where giving your best, being self-motivated and getting gak done meant more than for those guys. In exchange they were all better at socialising and did not come across as the arrogant bastard that I sometimes seemed to be.
5) Why, if I lend money to a Greek, and the Greek can't pay me back, I'm out of money... but when a German lends money to a Greek, and the Greek can't pay him back, the German will force the entire EU to cough up the money for him? That is literally what is happening here. And because lending to Greece is "risky" the interest rate is high... except that it's not risky at all, is it? The German banks will always be repaid, even if they have to force every EU citizen to pay them back - and this is called "bailing out Greece" when the Greeks really don't see a dime of that money, it goes to private German banks.
I read this all the time but it does not get truer with repetition. The EU has not spend nearly as much on Greece, as everyone thinks. We have actually made a lot of money on Greece's back, since apart from some EU structural funds (which they did not care to pick, apparently) everything they get nowadays is LOANS.
That is money they need to pay back.
They get loans to pay back loans.
And the interest on those loans.
Which grow everytime they take a new loan, of course.
And Greece could very well say that they do not pay back loans. It is actually what they are threatening to do. It would just mean that they would default, they would leave the Euro and become a third world country right away. Socially a nightmare, of course. But if the more we force them to reform and cut down social achievements, the more "just as unattractive" and hence feasible does a Grexit become.
And yes, more than 60% of the new loans go into the repayment of old ones. But no, German banks are not the major creditors of the Greek state, nor have they ever been.
You can find a list from 2011 (after the first big cut) HERE (German language but the names should be easy enough) Since then, basically all the new funds came from the ECB, the new EU funds and the IMF, and, since interest in other countries is waning, recently again more and more the National bank of Greece. Privat bank loans have dropped from 218 billion in the end of 2009 to 47 billion september 2014 (13,5 billion of that being from German banks).
That is not at all to say that German banks did not profit a lot from this whole situation and that it is totally disgusting.
Nor that I do not like some German-bashing less than my fellow dakkanite. But you should get your facts/opinions straight, nevertheless.
And I am sorry that you (or your dad or mum) had to work so much. I hope the future will be different for you!
Reparations is a separate argument than the loan payment. Are the loans not made from the EU to Greece correct? Despite Deutsche Uber Alles, its just one country in the EU.
You cannot suspend payments to EU debt because you claim Germany owes you money.
Frazzled wrote: Reparations is a separate argument than the loan payment. Are the loans not made from the EU to Greece correct? Despite Deutsche Uber Alles, its just one country in the EU.
You cannot suspend payments to EU debt because you claim Germany owes you money.
Am I missing something?
Maybe the EU needs to be governed from Texas after all...
Frazzled wrote: Reparations is a separate argument than the loan payment. Are the loans not made from the EU to Greece correct? Despite Deutsche Uber Alles, its just one country in the EU.
You cannot suspend payments to EU debt because you claim Germany owes you money.
Am I missing something?
A lack of good faith? This comes up so often it's just being used to whip up national sentiment in Greece, and to blame an outside force for their woes.
Is there a mechanism for ejecting countries from the EU?
Article 50 of the of the Treaty of the European Union allows for a country to voluntary leave the union, but AFAIK there is no legal mechanism in place for forcefully ejecting a country from the EU.
You can't leave, but we're just going to put all these police and tanks and walls on your border. There might be delays in crossing, due to all the construction...
Do reparations really "mend fences"? Is there any evidence to support that they do? There is clearly evidence to the contrary. The role of reparations in interwar European instability has already been mentioned. So what is the actual point of reparations? Put simply, they are levied by victors in war to punish the vanquished. The punishment can be both material (e.g., to cripple the enemy) and formal (e.g., to force the enemy to assume moral responsibility for the war).
"Mend Fences" would depend on the individuals (citizens) who live in those countries. Which might take up to three more generations to remove or lessen to a degree
Manchu wrote: Do reparations really "mend fences"? Is there any evidence to support that they do? There is clearly evidence to the contrary. The role of reparations in interwar European instability has already been mentioned. So what is the actual point of reparations? Put simply, they are levied by victors in war to punish the vanquished. The punishment can be both material (e.g., to cripple the enemy) and formal (e.g., to force the enemy to assume moral responsibility for the war).
Have there been any documented instances of reparations lessening tensions?
Plus - is current German/Greek diplomatic tension actually a matter of war crimes committed 70+ years ago ... or maybe a matter of unrelated debt owed today?
Manchu wrote: Plus - is current German/Greek diplomatic tension actually a matter of war crimes committed 70+ years ago ... or maybe a matter of unrelated debt owed today?
My own personal opinion, based on nothing but the timing of these claims every time Greece needs more money, is that this is playing to the home crowd that the Greek problems are caused by external actors who are holding Greece back, while simultaneously trying to guilt more money from Germany.
PhantomViper wrote: Why didn't they have no part in it? Didn't they vote for the parties that caused this whole mess?
Some of them, yes. But it happened 7 years ago, and so there are now 25 year olds who weren't didn't vote for them.
Also, Germany doesn't owe the Greeks squat, the issues of the German debts of war to Greece were settled in 1960 when Greece accepted the payment of 115 million Marks as compensation.
I think you've missed my point - if we're going to draw a line and say that with enough time we just stop worrying about a liability... exactly how much time has to pass? Medium of Death claimed that events 70 old were done and dusted... why not events from 5 years ago?
If 5 years is too short a time... what happens five years from now, when the Greek debt is still sitting there? Because the debt will still be sitting there in 10 years, and another 10 years after that. The current primary surplus Greece is running is basically just repaying interest, the debt itself is forever, until it is outgrown (unlikely given growth forecasts for Greece) or eventually forgiven.
So when do we wipe the debt? At what point do we decide that the current Greek population shouldn't have to continue paying for the failures of the past generations?
How long do we insist Greece suffers under the payment plans?
Sining wrote: Probably when most of the Generation is dead. It's kinda stupid to insist that debts of 5 years ago be forgiven.
First up, it's less stupid and more hyperbole, in order to get people to think about their own arguments.
Second up, a very large part of the Greek debt has already been forgiven, and the rest will be sooner or later, it's just a question of how long Europe insists on primarily surpluses before letting Greece off the rest of the debt.
Third, forgiveness or reduction of debt to organisations in distress is basic business practice. The idea that an organisation should battle on failing to make payments it is now clearly incapable of making is a moral position that's about 200 years past dead.
Once you start to understand those points, and add to it the realisation that this debt was accrued almost entirely by a corrupt oligarchy within Greece, while the debt burden is now suffered by the average Greek citizen, then the moralistic position taken by many in this thread becomes obviously meaningless.
Get rid of that nonsense and we can start to move to useful, practical questions, like how long and harsh should the Greek repayment schedule be before we forgive the debt. Basically how much do we have to punish Greece in order to avoid a moral hazard?
First, there's probably where you and I differ cause I find most hyperbole stupid. If you can't make your argument without making use of hyperbole, then you probably don't have a very good argument either.
Second, what is your point? Let's say I lend money to someone, and I end up forgiving 70% of the debt, I should just forgive the remaining 30% because I've already forgiven 70%? I mean, how does that make sense?
Third, wow, good thing none of the entities involved are businesses then. And while I can understand what you mean but honestly, organisations will let go of bad debt but they will almost never ever deal with the other organisation again. I'm not sure greece wants to be in that position.
A corrupt oligarchy that was still democratically elected by most of the average Greek citizens that are still alive at this point.
It's interesting that you think of it as punishing Greece. Because let's be honest here, Greece borrowed the money. Greece got part of its loan forgiven. Greece STILL can't repay the loan. And somehow this is 'punishing' Greece.
Sining wrote: First, there's probably where you and I differ cause I find most hyperbole stupid. If you can't make your argument without making use of hyperbole, then you probably don't have a very good argument either.
You should judge an argument as strong or weak by reading the argument and considering it’s merits. Whether it uses a technique that you haven’t liked elsewhere should be irrelevant.
In this case the hyperbole is there simply because of the two things being compared, one is 70 years old and the other 7 years old (arguably older, as it was 7 years ago that it turned to crap, but the underlying processes that grew the debt started long before then). And so I suggested that both things were in the past, in order to get people to think about exactly when something went from being current, to being so old that we can just forget about it and move on.
Note, by the way, that I’ve never gotten an answer.
Second, what is your point? Let's say I lend money to someone, and I end up forgiving 70% of the debt, I should just forgive the remaining 30% because I've already forgiven 70%? I mean, how does that make sense?
Please read my posts, I have already explained this. To repeat my final point so you read it this time;
How long and harsh should the Greek repayment schedule be before we forgive the debt? Basically how much do we have to punish Greece in order to avoid a moral hazard?
Third, wow, good thing none of the entities involved are businesses then. And while I can understand what you mean but honestly, organisations will let go of bad debt but they will almost never ever deal with the other organisation again. I'm not sure greece wants to be in that position.
Umm, no, you actually really have no idea how it works. We’re not talking about simple delinquency and bad debt write-offs like you describe above. We’re talking about companies going to creditors and telling them that a given venture is actually going to be a lot less profitable than thought, so much less profitable that expected profits can’t service the full debt. This is called debt restructuring, and creditors accept this because reduced payments are preferable to potentially greater losses in the event of bankruptcy.
A corrupt oligarchy that was still democratically elected by most of the average Greek citizens that are still alive at this point.
Actually most of the beneficiaries had government contacts but weren’t in government themselves.
It's interesting that you think of it as punishing Greece. Because let's be honest here, Greece borrowed the money. Greece got part of its loan forgiven. Greece STILL can't repay the loan. And somehow this is 'punishing' Greece.
Because the idea that Greece is servicing the debt is a complete nonsense, let alone the idea that they’ll ever pay even this reduced amount back. That is simply something that isn’t happening, and won’t happen.
So instead it becomes a question of how long Germany and Europe insist on the current arrangement, where Greece sends ~4% of GDP back in to Europe as repayment.
It’s like, for instance, if an 8 year old kid stole his Dad’s Porsche and trashed it. So the Dad cancelled the son’s $10 pocket money indefinitely. Everyone, probably even the 8 year old, knows that this cancelled allowance is never going to add up to enough to repay the Porsche. Instead it’s a punishment that will continue until the Dad thinks the son has learned his lesson.
So I’ll repeat my question, how long should Greece continue to have to make these payments before we reset the balance and let their economy begin to recover?
I mean ignoring the fact that Greece and Germany are in this case, neither kid nor adult, and if anything are both mature countries that really should know better than to let anything of this sort happen to them, the thing isn't about punishing Greece. I'm sorry if you feel it is, but basically Greece could have chosen not to borrow the money. It came with a lot of strings attached, which they knew but they could just as easily have chosen to go into bankruptcy even if it was the much more horrible choice. You can try to inject morality into this but frankly, that's stretching it.
And I think you're the one with no idea about debt restructuring. If a company lent another company 2 billion and expected to get back 2 billion + interest, and the other company said 'well, too bad, you can only get 1 billion back', that's really less debt restructuring than it is debt forgiveness.
As it is, nobody is going to start forgiving Greece's debt anytime soon because it would set a horrible precedent for all the other EU countries that are in a bind.
I agree with Sining that the parent/child metaphor is misplaced.
If the question is, why hasn't Germany engineered some kind of Marshall Plan for Greece then perhaps we ought to consider what incentive Germany has to do so, considering the expense.
Thinking back to what the USA stood to gain at the beginning of the Cold War, it is difficult to imagine Germany finding the same potential benefits in Greece today.
Manchu wrote: I agree with Sining that the parent/child metaphor is misplaced.
If the question is, why hasn't Germany engineered some kind of Marshall Plan for Greece then perhaps we ought to consider what incentive Germany has to do so, considering the expense.
Thinking back to what the USA stood to gain at the beginning of the Cold War, it is difficult to imagine Germany finding the same potential benefits in Greece today.
That is a very good point. Which incentive does the German government (or the French, and surely the British) see to avoid a total desaster?
One has to ask if they have a plan at all, or if secretly they have already decided to accept a Grexit, with all the negative consequences it would have for the Greek people. (re-introducing and devalueing the Drahme would not help for European bonds and make it much more difficult to get new cash credits.)
One note on wording:
It is not "Germany", it is "the EU".
While I am aware that, right now, Germany effectively is a hegemonial power in the EU (which is not a nice thought to me, having a very low opinion of our governement) it is also true that Germany's foreign policy, and especially the European policy (and politics) have always been very much coordinated through the EC/EU institutions (and/or in silent cooperation with the USA). Plus, they would never want to pay the bill alone.
It is. But states work very different from companies or individuals. They can usually get away with having huge debts unless things really go wrong like with Greece. Also, the UK's debt is nothing compared to what is probably the largest debt in human history: http://www.usdebtclock.org/
It is not "Germany", it is "the EU". While I am aware that, right now, Germany effectively is a hegemonial power in the EU (which is not a nice thought to me, having a very low opinion of our governement) it is also true that Germany's foreign policy, and especially the European policy (and politics) have always been very much coordinated through the EC/EU institutions (and/or in silent cooperation with the USA). Plus, they would never want to pay the bill alone.
And who controls the EU? Sure, Britain, the other states and especially France have some say in it, but it is Germany that is the decisive factor. Nothing will be done without German approval or political power behind it. So yeah, while the EU ≠ Germany, the two are very closely related.
Greeks are doomed, they owe way too much to ever repay, the country is a dump right now, tourisam the old standby is not what it was.
They are best leaving, it will hurt hard but they will never repay the debts they owe and at this rate will never recover.
As to giving them more money to help, they have already had billion uopon billion given to them. More aint going to help.
s to leaving it can be done on paper, things exist but no ones ever used them or even thought about how to put them into practice.
Automatically Appended Next Post: Greeks are doomed, they owe way too much to ever repay, the country is a dump right now, tourisam the old standby is not what it was.
They are best leaving, it will hurt hard but they will never repay the debts they owe and at this rate will never recover.
As to giving them more money to help, they have already had billion uopon billion given to them. More aint going to help.
s to leaving it can be done on paper, things exist but no ones ever used them or even thought about how to put them into practice.
Greece is nowhere near total disaster at this point, trust me.
If they leave the EU then their whole financial system will collapse, they will suffer hyper-inflation when they are forced to devalue whatever currency they adopt to lower their international debt, their internal production, including of basic foodstuffs and necessities won't be able to meet the internal demand and with their democratic parties completely devoid of any legitimacy it will probably mean a return to a military dictatorship like they had in the past... They will basically become the Venezuela of Europe but without the oil.
PhantomViper wrote: Greece is nowhere near total disaster at this point, trust me.
If they leave the EU then their whole financial system will collapse, they will suffer hyper-inflation when they are forced to devalue whatever currency they adopt to lower their international debt, their internal production, including of basic foodstuffs and necessities won't be able to meet the internal demand and with their democratic parties completely devoid of any legitimacy it will probably mean a return to a military dictatorship like they had in the past... They will basically become the Venezuela of Europe but without the oil.
THAT will be total disaster.
It may not be a disaster, but the patient is on life support, hemorrhaging badly, with little ability to clot, and showing little signs of recovery.
treslibras wrote: Which incentive does the German government (or the French, and surely the British) see to avoid a total desaster?
What exactly is the total disaster? Greek re-alignment toward Moscow?
That is to say, the question is about what Germany can, should, or might want to do. Germany cannot make Greece leave. If the Greeks say Germany has made it too tough for them to stay, no one should take that seriously ... if you are correct that leaving would only make things worse. Therefore, the question of Greece leaving the EU is effectively moot inasmuch as it boils down to an attempt to extort Germany by threatening the Greek people. If some Greek government puts the gun against their people's heads, they cannot claim it is Germany's finger on the trigger.
treslibras wrote: Which incentive does the German government (or the French, and surely the British) see to avoid a total desaster?
What exactly is the total disaster? Greek re-alignment toward Moscow?
That is to say, the question is about what Germany can, should, or might want to do. Germany cannot make Greece leave. If the Greeks say Germany has made it too tough for them to stay, no one should take that seriously ... if you are correct that leaving would only make things worse. Therefore, the question of Greece leaving the EU is effectively moot inasmuch as it boils down to an attempt to extort Germany by threatening the Greek people. If some Greek government puts the gun against their people's heads, they cannot claim it is Germany's finger on the trigger.
I'm a bit confused about that whole "can Greece be forced to leave the EU/Euro" thing atm...
On one hand, the only thing that I find about it on legal documents is the Article 50 of the EUT that I mentioned earlier, on the other hand I keep seeing several Ministers from different countries, newspaper articles and even EU representatives saying that it can be a real option so I'm not really sure if the EU can force Greece to leave or not.
Also, there is one thing that you might not be aware of: Syriza WANT'S Greece to leave the Euro / EU. They were founded as an anti-EU party and only changed their tune so that they could win the elections (more than 80% of Greeks state that they should stay in the EU at all costs). And so is their coalition partner.
There are several political views that state that all of this: going against all other countries on the EU-Russian relations, threatening Germany with War Reparation claims, threatening to open European borders to Jihadists and illegal immigrants, constantly refusing to deliver the technical documents that the European Commission is asking and bragging about it in the media, etc, are all just political ploys so that when they are finally "forced" to leave the EU they can still point the blame for it to the EU itself to their own countrymen.
treslibras wrote: Which incentive does the German government (or the French, and surely the British) see to avoid a total desaster?
What exactly is the total disaster? Greek re-alignment toward Moscow?
I think he meant total disaster for the Greeks.
This.
PhantomViper wrote:Greece is nowhere near total disaster at this point, trust me.
If they leave the EU then their whole financial system will collapse, they will suffer hyper-inflation when they are forced to devalue whatever currency they adopt to lower their international debt, their internal production, including of basic foodstuffs and necessities won't be able to meet the internal demand and with their democratic parties completely devoid of any legitimacy it will probably mean a return to a military dictatorship like they had in the past... They will basically become the Venezuela of Europe but without the oil.
THAT will be total disaster.
And this.
And I think it is important to make a distinction between the Greek people and the Greek state and government. I do not care much about the latter but I do for the former.
But how can you divide them? If you say "No more money for Greece" you condemn the Greek to huge suffering. You might think that is OK. I do not.
I agree that Syriza was totally blue-eyed on what they could do or demand. But I am also sure that by now Tsipras has very much understood that he is trapped between the devil and Belzebub.
Manchu wrote: Like I said, Greece has a gun to its head and keeps saying "don't make me do it!" This is not impressive.
Yes and I agree with you and I really can't fathom what they are hopping to accomplish with these attitudes.
Polls in the rest of the European countries, especially those in northern Europe, show that the people of those countries are against "lending" (giving away, actually) any more money to Greece.
Is the Greek government really expecting the leaders of those countries to go against the wishes of the majority of their constituents? When all of them are also being forced to implement very unpopular austerity measures in their own countries?
And even if they do and Greece gets another pardon on their foreign debt, and yet another bundle of cash. What then? They still suffer from a massive corruption, tax evasion and general public finance deficit problems that no Greek government so far has shown the will or the competence to tackle so we would all be in this exact same position in another 2-3 years...
Furthermore the current Greek government is anti austerity and wants to spend, because the people elected them to do so.
Let it fail, allow hard reality to sink in, and then permit Greece to default.
The Greek people elected a series of governments that promised continued good times on borrowed money. All the consequences become tomorrows problems. Tomorrow came and now the piper must be paid.
international economics is bullgak anyway, paper monety that deosnt exist, the bubble needs to not only be burst but prevented from reinflating. Greece is a good start.
Once that is done nations with margianlly better economies but following the same economic principle as Greece, and for that I mean Spain, France, the UK and ultimately the US might change tracks a little.
The trouble with democracy is that the people offering cake today paid for tomorrow get elected, those who propose monetary caution cant offer the electorate cake today and thus don't get elected. Most nations cant afford cake everyday. In fact I dont think any can. But everyday cake is served and the debts mount up.
Grimstonefire wrote: Sorry for not reading all 4 pages here (lazy me), but I'm confused. This is a simple matter to resolve isn't it?
It's not like a cheque for billions can go missing in the post, there would be lots of paperwork for simple government transactions???
If the Greeks messed up their calculations at the time by a few hundred billions and it was a legally binding agreement then tough.
It's not like this would be a sympathy payment, it all would have been ratified by a legal body at some point.
You'r assuming the Greek government has it's side of the paperwork. That's a big assumption, and Germany could just forage it's side of the paperwork, y'know?
Greece will default and be declared bankrupt by the IMF. Any refunding is just noise before the inevitable.
Why sent good money after bad? The current Greek government has no intention of changing Greek spending or trying to balance, and were elected for abandoning austerity.
Greece made its choice at the ballot box and the rest of the EU should not have to pay for it.
Sining wrote: I mean ignoring the fact that Greece and Germany are in this case, neither kid nor adult, and if anything are both mature countries that really should know better than to let anything of this sort happen to them,
You missed the point of the analogy entirely. The parent/child element is irrelevant. The point is that the payments being made are no way near the face value of the debt, and everyone involved knows this.
the thing isn't about punishing Greece. I'm sorry if you feel it is, but basically Greece could have chosen not to borrow the money.
Nonsense positioning. What you are sorry for, and what I feel is irrelevant. And. But what should have done is even more irrelevant (what Greece should have done is borrow the money and put it all in Apple stocks).
All that matters is what was done, and what is to be done to resolve it. And the basic facts of that reality is that Greece has a debt that they won’t ever repay in full, and the rest of Europe is lumped with a bad that’s actually quite immaterial relative to the scale of the Eurozone.
So the basic workable solution, which is more or less being reached slowly over a muddled process of negotiations and renegotiations, is to steadily write off the Greek debt, while insisting they may considerable sacrifices as a show of repaying the debt. That is done both as a punishment to avoid the moral hazard, and as an offering to people who really hate the idea that organisations often walk away from debt.
[And I think you're the one with no idea about debt restructuring. If a company lent another company 2 billion and expected to get back 2 billion + interest, and the other company said 'well, too bad, you can only get 1 billion back', that's really less debt restructuring than it is debt forgiveness.
Please, just go and read about this. Learn. There’s a million websites out there offering simple, plain English explanations of concepts like debt restructuring. Don't just sit in a forum denying basic financial concepts to protect your ego. That's wasting everyone's time.
As it is, nobody is going to start forgiving Greece's debt anytime soon because it would set a horrible precedent for all the other EU countries that are in a bind.
Holy gak. I've already said this "Basically how much do we have to punish Greece in order to avoid a moral hazard?"
Sining wrote: I mean ignoring the fact that Greece and Germany are in this case, neither kid nor adult, and if anything are both mature countries that really should know better than to let anything of this sort happen to them,
You missed the point of the analogy entirely. The parent/child element is irrelevant. The point is that the payments being made are no way near the face value of the debt, and everyone involved knows this.
It kind of is the point. The whole parent/child is important because as you said, the child will NEVER be able to repay the parent back for the cost of the car. Another adult however should be able to pay back another adult for wrecking a car.
the thing isn't about punishing Greece. I'm sorry if you feel it is, but basically Greece could have chosen not to borrow the money.
Nonsense positioning. What you are sorry for, and what I feel is irrelevant. And. But what should have done is even more irrelevant (what Greece should have done is borrow the money and put it all in Apple stocks).
All that matters is what was done, and what is to be done to resolve it. And the basic facts of that reality is that Greece has a debt that they won’t ever repay in full, and the rest of Europe is lumped with a bad that’s actually quite immaterial relative to the scale of the Eurozone.
So the basic workable solution, which is more or less being reached slowly over a muddled process of negotiations and renegotiations, is to steadily write off the Greek debt, while insisting they may considerable sacrifices as a show of repaying the debt. That is done both as a punishment to avoid the moral hazard, and as an offering to people who really hate the idea that organisations often walk away from debt.
Again, you seem to think it's a punishment to be asked to repay your loans. I think that's really the crux of your argument. Don't repay debts. It's punishing.
[And I think you're the one with no idea about debt restructuring. If a company lent another company 2 billion and expected to get back 2 billion + interest, and the other company said 'well, too bad, you can only get 1 billion back', that's really less debt restructuring than it is debt forgiveness.
Please, just go and read about this. Learn. There’s a million websites out there offering simple, plain English explanations of concepts like debt restructuring. Don't just sit in a forum denying basic financial concepts to protect your ego. That's wasting everyone's time.
My ego is fine. I think your ego however needs to go read about this.
As it is, nobody is going to start forgiving Greece's debt anytime soon because it would set a horrible precedent for all the other EU countries that are in a bind.
Holy gak. I've already said this "Basically how much do we have to punish Greece in order to avoid a moral hazard?"
Incredible.
Except I don't think it's a punishment. The greeks do have a debt to pay. It's that simple.
The Greeks claim Germany also has a debt to pay -- not just in terms of reparations but the gunpoint-loan extracted from Greece during the war, which the Third Reich did begin to repay.
Manchu wrote: I agree with Sining that the parent/child metaphor is misplaced.
The point of the analogy wasn’t to place them as parent and child, but just to set up a situation where a payment was significant to the debtor, but meaningless compared to the scale of the debt. Seeing that situation it should be obvious to everyone that the payment had little to do with ever repaying the full debt, but about making the debtor face at least some consequences for the situation he put himself in.
If the question is, why hasn't Germany engineered some kind of Marshall Plan for Greece then perhaps we ought to consider what incentive Germany has to do so, considering the expense.
Thinking back to what the USA stood to gain at the beginning of the Cold War, it is difficult to imagine Germany finding the same potential benefits in Greece today.
One interesting thing to note about the Marshall Plan is that it was the end result, and for a long before the idea was much closer to the old fashioned notion of punishing and crippling the loser. We very nearly got instead the Morgenthau plan, which dominant well in to 1945, and in this plan Germany was to be essentially disarmed – a new Germany was envisioned to be like Belgium or the Netherlands, with high standards of living but essentially no heavy industry and therefore no capacity for war. What’s interesting to note is that the Morgenthau plan was finally rejected because it was too kind to Germany. How things changed in a few short years, so that not just the old axis powers, but also the new rivals in the Soviet Union, were offered vast sums of money to build their economies is kind of incredible.
I guess this links to Greece’s in that eventually the debt will be largely written off. Give it another five years and the wisdom of insisting Greece hand over ~4% of GDP every year for the mess of another time will seem less and less wise. But like the Marshall plan, it takes a lot of negotiations and the clarity of time to reach that understanding.
It depends what you mean by serious. If you mean it is a large sum of money that will require extensive effort to repay over a long period of time, then yeah, it is serious debt. If you mean 'oh my God that's so much money any minute now it's going to come crashing down' then no, you're nowhere near a serious level of debt, and this can be observed through the fact that you've owed vastly more in the past without ever coming close to collapse.
In fact, there's a pretty solid argument that if a country borrows in a currency it controls entirely, it can't ever collapse through debt.
sebster wrote: The point of the analogy wasn’t to place them as parent and child
But perhaps you can see how it was unfortunate nonethless, especially with regard to characterizing Germany as punishing Greece. It certainly has the ring of accusing Germany of unfounded paternalism (again, keep in mind the current state of Russian propaganda).
Iron_Captain wrote: It is. But states work very different from companies or individuals. They can usually get away with having huge debts unless things really go wrong like with Greece.
The big difference with Greece is that the debt is in a currency it doesn't control entirely.
That's actually a serious flaw with the Euro that I don't believe was fully realised before the experiment began, that we're only now beginning to understand properly.
sebster wrote: But like the Marshall plan, it takes a lot of negotiations and the clarity of time to reach that understanding.
I expect Germany would have handed Greece a Marshall Plan sometime in the last three years if it had any confidence that (a) Greece was as essential to its foreign policy aims as West Germany was to the USA's post-WW2 and/or (b) Greece could be a responsible and reliable partner in Germany's foreign policy aims as West Germany was for the USA post-WW2. As things stand, Greek politics took a flaky turn toward Russia in the context of Russian aggression in the Ukraine as part of a transparent extortion bid ...
sebster wrote: But like the Marshall plan, it takes a lot of negotiations and the clarity of time to reach that understanding.
I expect Germany would have handed Greece a Marshall Plan sometime in the last three years if it had any confidence that (a) Greece was as essential to its foreign policy aims as West Germany was to the USA's post-WW2 and/or (b) Greece could be a responsible and reliable partner in Germany's foreign policy aims as West Germany was for the USA post-WW2. As things stand, Greek politics took a flaky turn toward Russia in the context of Russian aggression in the Ukraine as part of a transparent extortion bid ...
The Marshall Plan has been re-interpreted in history as a means of building strong states to resist communism, but it actually wasn't the plan. The plan actually offered the USSR and the other Eastern bloc countries funds in order to modernise and adopt US style industry. The idea being that if US money could help everyone else become prosperous like the US then everyone would be rich and happy and there'd be lots of trade and no need for any more fighting. The Soviets rejected the funds, and told the rest of the Eastern Bloc countries to do the same.
Point being, I guess, that Marshall plan type support to Greece wouldn't just be about drawing Greece towards Germany, it'd be more about a belief that making Greece in to a stable, prosperous nation is good not just for the Greeks but for everyone in Europe.
To clarify, I'm not in any way suggesting money gets handed over to Greece. The corruption is still there, and the money would be pissed away sure as anything. But a program that steadily writes off debt, in conjunction with anti-corruption reforms in Greece with experts paid for out of Euro coffers, that might be a workable medium term plan.
They will suffer hyper-inflation when they are forced to devalue whatever currency they adopt to lower their international debt, their internal production, including of basic foodstuffs and necessities won't be able to meet the internal demand and with their democratic parties completely devoid of any legitimacy it will probably mean a return to a military dictatorship like they had in the past... They will basically become the Venezuela of Europe but without the oil.
Interesting article on sueddeutsche.de, albeit a bit off-topic.
(I am pretty impressed by google translation, I basically just did some formatting for ease of reading):
"Why Portugal, Spain and Ireland managed the turn and Greece did not"
The real problem in Greece is the weakness of state institutions, says an insider who is familiar with the work of the Troika. This meant that the government has saved that the reforms that the re-emergence of the country should take, but was omitted. The renovators in Brussels, Frankfurt and New York had set out that SYRIZA would take back some austerity measures after a change of power, but that this would be evened out by the fact that the new government would act forcefully against corruption and nepotism. "That was a bitter disappointment" says the insider.
1. This is demonstrated by the controversy over an anti-corruption officer of the government. The troika had urged former conservative Prime Minister Antonis Samaras to provide for an independent authority to build a firewall against potential offenders, in order to fight corruption in the public service. The new head of government Tsipras installed that authority within the Treasury. The firewall is gone.
2. Take another example - the property tax, the government Samaras introduced the tax at the insistence of the Troika to make wealthy Greeks finance the state budget. The tax was was unpopular, partly because many property values were only fictitious after five years of crisis. During the election campaign SYRIZA promised an easing, without, however, providing for a replacement. As a result, the revenue from the tax collapsed already before the election - the Greek took the victory of SYRIZA for granted. Because of this the primary surplus turned into a deficit again. Exact figures are not currently not obtainable.
3. 7000 Greeks with a tax liability of more than one million euros. Another example is the dispute over tax payment extensions. Even the Samaras government had refused to collect tax arrears consistently. A law allowed, much to the displeasure of the creditors of Greece, to pay off tax debts in 100 monthly installments. SYRIZA further eased the conditions for the debtor. In the opinion of the Troika that further undermined tax morale. Currently, there are up to 7,000 Greeks with tax debts of more than one million euros. This can hardly be poor.
4. Finally, the law against foreclosures: Ostensibly to protect poor people from being thrown out of their houses, it is now forbidden to banks to secure the property assets of outstanding defaults. The Government of Alexis Tsipras has not limited protection to those most in need, but on the contrary, included higher real estate assets of up to EUR 500 000 involved. From the banks' perspective, this means that collateral for loans are worth nothing now, and they are not even protected against fraud. So they did the obvious and stopped lending money - which prevents the construction of new houses and the recovery of the Greek construction industry.
One banker says: "I know few governments which have done so much harm to their own country in such a short time, such as SYRIZA has done here."
-- Well, I would not take bankers as the most objective commentators in these questions , but it was interesting to read which measurements were discussed - and blocked or pervertred by Syriza.
From its inception, Marshall conceived of the ERP as a means of furthering US foreign policy aims. The benign summary would be, fostering economic prosperity to obviate international tension. A more skeptical version goes, laying the foundations of American economic and political hegemony in Europe. The Soviet Union correctly perceived this latter reality, not least of all because even the vague pitch Marshall gave at Harvard in 1947 was already weakening the Eastern Bloc.
So the lesson is -- making a country "more stable" through economic foreign policy is not really separate from political influence. The Greeks seem to want the money/debt relief but not the European (read German) political influence. This is very, very different from the Western Allies' and West Germany's attitudes toward the US in the 1940s.
Manchu wrote: How much of this punishment do you chalk up to moral hazard and how much do you chalk up to satisfying frustrated German voters?
I think that the current requirements put on Greece are about preventing moral hazard, but the failure to form a final, coherent end game to all of this is about not wanting to tell the German voters that ultimately Greece isn’t going to pay the principle back.
Sining wrote: It kind of is the point. The whole parent/child is important because as you said, the child will NEVER be able to repay the parent back for the cost of the car. Another adult however should be able to pay back another adult for wrecking a car.
Who ‘should’ be able to pay for something is irrelevant. Greece can’t repay the debt they’ve built up.
Again, you seem to think it's a punishment to be asked to repay your loans. I think that's really the crux of your argument. Don't repay debts. It's punishing.
The point really isn’t that hard to understand, and I’m really going to have to conclude that your constant failure to understand it can only be deliberate. So I’m going to try one more time, and if you don’t get it, then that’s it, you can continue not understanding it.
Greece will never repay the debt. The current levels of repayment are about as harsh as you can get without risking meltdown, but at the current level they’re barely covering interest (and when interest rates rise again they won’t be covering that). So arguing that the current repayments are about repaying the debt is total nonsense.
And so, once we accept Greece can’t repay the whole debt, it just becomes a question of how of the debt it should repay. A basic understanding of the scale of the European financial sector relative to Greece will tell you that a total debt write off will have minimal impact on Europe, and be a tremendous relief to Greece.
However, total debt write off will set a precedent that would likely make other countries in Europe build up massive debt in the expectation that it would be written off when it became unmanageable. This would be known as a moral hazard.
And so the question becomes one of how much Greece has to suffer under the debt to make it clear to other countries that building up unmanageable debt is a very bad thing, and not to be repeated.
My ego is fine. I think your ego however needs to go read about this.
So I take you’ve got no interest in going and learning about restructuring. On the one hand that’s fair enough, its something that most people won’t ever need to know about. But on the other hand, when you’ve got a very limited knowledge of finance and no interest in learning more, what in the hell are you doing throwing opinions about on international finance?
Here are the things I agree with you about. Greece will likely never pay back the debt in full. Germany is not going to just let the debt go because German voters won't like it.
However, the crux of the matter which you don't understand is that I don't consider it a punishment to force Greece to repay the debt. At the end of the day, Greece did borrow the money. They do have a debt. The fact that it'll likely be written off in the future doesn't mean that it should be written off sooner or that it's a punishment.
treslibras wrote: Interesting article on sueddeutsche.de , albeit a bit off-topic.
(I am pretty impressed by google translation, I basically just did some formatting for ease of reading):
It’s a good article, thanks for posting it. While I agree with the facts presented and think they are important issues, there’s two basic points that frame the overall article’s point that I think are quite dubious.
"Why Portugal, Spain and Ireland managed the turn and Greece did not"
Greece didn’t manage the turn for the simple fact that it’s debt, even after the write-offs, is still far greater than the others. Greece’s debt to GDP is as high as 175% by some estimates, while the rest aren’t much more than 100% - and Spain is about 75%. Fairly basically, Greece is in a deeper hole, and deeper holes are harder to get out of.
The real problem in Greece is the weakness of state institutions, says an insider who is familiar with the work of the Troika. This meant that the government has saved that the reforms that the re-emergence of the country should take, but was omitted. The renovators in Brussels, Frankfurt and New York had set out that SYRIZA would take back some austerity measures after a change of power, but that this would be evened out by the fact that the new government would act forcefully against corruption and nepotism. "That was a bitter disappointment" says the insider.
This is true, and important, but also very misleading. Greece has terrible institutions, and reform is important. But the exact same line was trotted out against every single nation of Europe, and of the US, during the GFC, as an argument against stimulus. It’s basically an extension of argument of the freshwater/saltwater split in economics.
The point, ultimately, is that institutional reform alone won’t solve the problem. Even if the finance and government sectors of Greece become a hyper-efficient tomorrow, the debt would still be crushing for a country with such a low economic base. But also, if the debt was written off entirely tomorrow, then Greece would still struggle and be likely to do the same all over again, because the institutions are so bad.
What’s needed, basically, is a combination of debt relief and institutional reform. Ideally the two things could be married, so debt relief is conditional on institutional reform. Which is pretty much the IMF’s reason for being, so…
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Manchu wrote: From its inception, Marshall conceived of the ERP as a means of furthering US foreign policy aims. The benign summary would be, fostering economic prosperity to obviate international tension. A more skeptical version goes, laying the foundations of American economic and political hegemony in Europe. The Soviet Union correctly perceived this latter reality, not least of all because even the vague pitch Marshall gave at Harvard in 1947 was already weakening the Eastern Bloc.
So the lesson is -- making a country "more stable" through economic foreign policy is not really separate from political influence. The Greeks seem to want the money/debt relief but not the European (read German) political influence. This is very, very different from the Western Allies' and West Germany's attitudes toward the US in the 1940s.
I agree entirely. I actually went back to my previous post on the Marshall Plan to copy and paste my bit about the Soviet's rejecting funds to prevent political and economic interference... only to realise I'd cut it from my previous answer for brevity
But yes, money brings with it political influence. Even when the political influence is about as benevolent as can be, like the Marshall Plan's commitment to peace through prosperity, it still comes loaded with assumptions about how a country ought to operate to be prosperous.
This might describe the Greek/German situation quite well, overall.
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Sining wrote: Here are the things I agree with you about. Greece will likely never pay back the debt in full. Germany is not going to just let the debt go because German voters won't like it.
However, the crux of the matter which you don't understand is that I don't consider it a punishment to force Greece to repay the debt. At the end of the day, Greece did borrow the money. They do have a debt. The fact that it'll likely be written off in the future doesn't mean that it should be written off sooner or that it's a punishment.
You are really, really fixated on the word punishment. In this context, it merely means ‘the amount that Greece must repay to avoid the moral hazard’.
You can use another term if you want, or you can type out ‘the amount Greece has to repay to avoid the moral hazard’ every single time, if you want, the basic facts of the situation don’t change.
Yeah i wouldn't call it a punishment, but it is a serious situation with potentially dire consequences. Greece reminds me of the 5 stages of grief - they seem to have move past denial and are somewhere between anger and bargaining. The thing is, even if germany agreed (which i don't think they should) and paid them the reparations, it still wouldn't fix the problems it would just push them back a little bit further (again).
Sining wrote: That's because you keep using the word punishment, which I don't feel fits the situation.
I know you don’t like it because you like the morality of repaying what you owe, and ‘punishment’ sounds negative, as if it was outside of what's normally expected. I get that, and from a personal moral point of view I actually agree.
But the issue here is that what Greece is repaying really has nothing to do with what they owe. That repayment is never going to happen, and what is being repaid, while an incredibly difficult burden on Greece, is pretty much a rounding error to the European financial sector. The only reason to require those payments, instead of cancelling them and letting Greece back in to some kind of stability, is to set an example, to reduce the chance of this happening in Greece or anywhere else ever again.
That’s a punishment. What other word should be used to describe that?
Sining wrote: That's because you keep using the word punishment, which I don't feel fits the situation.
I know you don’t like it because you like the morality of repaying what you owe, and ‘punishment’ sounds negative, as if it was outside of what's normally expected. I get that, and from a personal moral point of view I actually agree.
But the issue here is that what Greece is repaying really has nothing to do with what they owe. That repayment is never going to happen, and what is being repaid, while an incredibly difficult burden on Greece, is pretty much a rounding error to the European financial sector. The only reason to require those payments, instead of cancelling them and letting Greece back in to some kind of stability, is to set an example, to reduce the chance of this happening in Greece or anywhere else ever again.
That’s a punishment. What other word should be used to describe that?
A loan? If i took out a personal loan and didn't repay it, it would be a rounding error to the australian financial sector. Nevertheless, there would be repercussions (for me) for not paying it. The expectation that i should repay or try to repay the loan, however, would not be considered a punishment.
Countries are not people. Analogies comparing personal debt to the debts of nations are usually way too simple and therefore result in overly simple conclusions.
The concepts remain the same though. The idea of loans is that they're to be repaid, and that repayment isn't considered a form of punishment. Otherwise it wouldn't be a loan, it would be a gift.
Torga_DW wrote: A loan? If i took out a personal loan and didn't repay it, it would be a rounding error to the australian financial sector. Nevertheless, there would be repercussions (for me) for not paying it. The expectation that i should repay or try to repay the loan, however, would not be considered a punishment.
You don’t like the word ‘punishment’ and you appear to be not alone in that regard. Personally I couldn’t give a feth what word is used, so long as it effectively differentiates the reality of how the Greek situation is being resolved and why. Simply calling it debt repayment completely ignores the situation of both Greece and Europe.
If anyone has a better term, by all means suggest it.
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Torga_DW wrote: The concepts remain the same though. The idea of loans is that they're to be repaid, and that repayment isn't considered a form of punishment. Otherwise it wouldn't be a loan, it would be a gift.
Sure, in ordinary circumstances that’s exactly how it works. But these aren’t ordinary circumstances. These are circumstances where the payment regime doesn’t just inconvenience Greece, the instability and economic hardship those payments create in Greece actually make things more awkward in the rest of Europe.
In and of itself, wiping this debt would allow everyone to move forward. But that can’t be done because it would set a precedent where Greece or other countries in Europe might think it was okay to let this happen again, in the belief that they’d be released from the debt.
Given those circumstances, it becomes clear the reason to require Greece to continue payments isn’t to get the money, but because Greece can’t just be allowed to walk away from their mess. The reason to require the payments that are causing economic disfunction and political instability is not because Europe really needs the money repaid, but as a punishment on Greece to decrease the chance of this happening again.
That's a fair point, there's a good deal of this that's largely being done to set an example. And, to be perfectly honest, that's not an entirely incorrect approach, the Greek state allowed too much corruption to flourish, some would argue lied its way into the Euro, and basically didn't spend its money wisely. It *should* be punished for that to ensure other nations do not fall into the same trap and prevent possible future entrants from acting in a similar manner.
Accountability is important.
The unfortunate part is that this means a lot of suffering on the part of the Greek people, many who absolutely do not deserve it, and political instability.
Vaktathi wrote: That's a fair point, there's a good deal of this that's largely being done to set an example. And, to be perfectly honest, that's not an entirely incorrect approach, the Greek state allowed too much corruption to flourish, some would argue lied its way into the Euro, and basically didn't spend its money wisely. It *should* be punished for that to ensure other nations do not fall into the same trap and prevent possible future entrants from acting in a similar manner.
Accountability is important.
The unfortunate part is that this means a lot of suffering on the part of the Greek people, many who absolutely do not deserve it, and political instability.
Which are also important factors to keep in mind.
Why do you think that the Greeks are being made an example of?
- They have already been given a pardon for about 50% of their debt 3 years ago.
- They pay less interest in the debt that they do have than other countries that were in comparable situations, namely Spain, Portugal and Ireland.
Despite all of this, not only do they need another debt write off (that they will ultimately get, because they can't pay what they've borrowed anyway), they will also require even more "borrowed" money! And in all of these years, they have yet to implement the fiscal and anti-corruption policies that they desperately need to achieve any type of balanced public finances!
Europe isn't trying to punish Greece in any way, they are only trying to make sure that any more money that they sink into it isn't just burned away like the previous one was.
Personally, I think that they won't accomplish anything, especially with a government like this in place, and Greece will have to leave the EU / Euro.
Of course nobodies forgetting, that Greece's troubles are helping keep the value of the Euro down. And helping the German economy keep it's head above water.
Heaven forbid that the euro should rise and make European industry less competitive.
Greece denies default accusations http://www.bbc.co.uk/news/business-32297781 Greece has denied reports it is preparing to default on its loans if it cannot reach agreement on its bailout terms with international creditors.
A government spokesman said negotiations were proceeding swiftly towards a solution.
Greece negotiated a three-month extension to its €240bn (£176bn; $272bn) bailout at the end of February.
The Greek government is due to pay the International Monetary Fund (IMF) €203m on 1 May and €770m on 12 May.
But reports suggest the government is rapidly running out of money. It needs to find €2.4bn to pay civil service salaries and pensions this month.
he Greek government has also dismissed media reports that it was considering calling early elections if it failed to negotiate a settlement with its international creditors.
Last week, eurozone officials said Greece only had six working days left to come up with a revised list of reforms to seal a deal on its next rescue bailout.
Eurozone deputy finance ministers want an agreement on the €7.2bn loan in time for a Eurogroup meeting on 24 April.
Greek prime minister Alexis Tsipras has said that Athens will not be able to service its debt without financial help from the European Union
Greek government to withhold IMF payments according to the FT Prime Minister Tsipras denies preparing for default according to Reuters
Government funds to run out by end of month
Default would likely lead to "Grexit" and return to drachma
EU may not withstand uncertainty surrounding break-up of monetary union
Concern could trigger derivatives crisis and ‘Lehman moment’
Like frogs in a pot of water that is very slowly coming to the boil
The Financial Times, citing unsourced "people briefed on the radical leftist government's thinking" has made the claim that the Tsipras government in Athens has "has decided to withhold E2.5 billion of payments due to the International Monetary Fund in May and June if no agreement is struck".
The Greek government was quick to deny the claim. "Greece ... is not preparing for any debt default and the same goes for its lenders. Negotiations are proceeding swiftly towards a mutually beneficial solution," read a statement from the Prime Minister’s office.
The Greek government is rapidly exhausting its funding to pay salaries and pensions with no funding from its lenders having been released since July. Another "end of the road" deadline looms - this time the Eurogroup meeting on April 24th.
This meeting may truly be the "end of the road" because it is expected that the Greek government will have finally depleted its reserves and will be wholly dependent on its creditors by the end of this month.
Negotiations have been going around in circles since the election of the anti-austerity Syriza government in January and appear no closer to resolution. It became apparent in late February that neither side was prepared to compromise - each having too much to lose from deviating from their central positions. There has been adequate time, since then, for preparations to be made for an orderly "Grexit".
Indeed, it may be that the two sides have agreed to disagree and are waiting for a politically expedient time for Greece to leave the euro. Media coverage of the crisis in both Germany and Greece is catalysing public opinion towards this end.
Yet, both sides have a lot to lose from a "Grexit" so it is no surprise that the brinkmanship will go down to the wire.
Despite protestations and denials, borrowing from the BRICS bank is still an option for Greece - opening the way for further influence from the East into Europe.
Indeed the ties between Greece and Russia have been strengthening in recent months.
While Europe may be preparing for a "Grexit" it is hard to imagine that it could withstand the uncertainty caused by such an event. Many banks are exposed to Greek debt and a default could trigger credit default swaps (CDS) and a derivatives crisis.
Derivatives have been described by Warren Buffet as ‘financial weapons of mass destruction’. A crisis in the derivatives market would badly impact the entire western financial system and could cause contagion.
In March we wrote with regards to the fact that Deutsche Bank had not passed the Fed's stress test, "Equally troubling, is the fact that Deutsche Bank, who have derivatives exposure of over a whopping €54 trillion – almost nine times the GDP of the entire Eurozone – has serious issues with risk management."
Were Deutsche Bank - with its "issues with risk management" - or any highly leveraged financial institutions to be caught in the middle of a default crisis it would cause a level of financial dislocation unseen in Europe in modern times.
While a ‘Grexit’ will likely be financially and monetarily positive for Greece itself in the long term, it would be devastating in the short term.
Torga_DW wrote: The concepts remain the same though. The idea of loans is that they're to be repaid, and that repayment isn't considered a form of punishment. Otherwise it wouldn't be a loan, it would be a gift.
Sure, in ordinary circumstances that’s exactly how it works. But these aren’t ordinary circumstances. These are circumstances where the payment regime doesn’t just inconvenience Greece, the instability and economic hardship those payments create in Greece actually make things more awkward in the rest of Europe.
In and of itself, wiping this debt would allow everyone to move forward. But that can’t be done because it would set a precedent where Greece or other countries in Europe might think it was okay to let this happen again, in the belief that they’d be released from the debt.
Given those circumstances, it becomes clear the reason to require Greece to continue payments isn’t to get the money, but because Greece can’t just be allowed to walk away from their mess. The reason to require the payments that are causing economic disfunction and political instability is not because Europe really needs the money repaid, but as a punishment on Greece to decrease the chance of this happening again.
I don't necessarily disagree with that, but there's a reason for the extraordinary circumstances. Germany and others have been trying to 'push' their values on greece for a reason - greece is economically unsustainable and shows no sign or interest in fixing the problem. Wiping the debt won't do anything - greece is still spending like a bpd in a casino, and wanting other countries (like germany) to continue bailing them out (although its less of a bailout and more of a very short-term continuance). Some good faith has to come into play from greece's side at some point - being in the EU doesn't mandate charity from the other countries. What happens if germany reads the writing on the wall, gets fed up with the situation and then decides they'll be the ones to leave the EU? The perspective seems to me that people are assuming greece deserves the benefit of the doubt, and deserves international charity, when all signs point to the problem being intentionally home brewed.
Out of curiousity, what's really stopping the average greek citizen to just move out of the country to just seek more jobs elsewhere? Other than the usual that is.
Greece is going to default and we will have a crisis. We've already seen commercial banks stop lending and before too long we should start seeing them de-leverage into an illiquid market.
By October this mess should be over and attention can turn towards the US and it's giant derivatives bomb. Then the real fun can begin. The next 4-5 years should be when the crisis finally comes to the states and it should be just as bad as what hit Europe.
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Sining wrote: Out of curiousity, what's really stopping the average greek citizen to just move out of the country to just seek more jobs elsewhere? Other than the usual that is.
The average Greek is broke so there is that hurdle.
You are correct in assuming that people will flee a country when there is an outflow of capital. In Greece, that has certainly been the case since the crisis hit. Capital flows should reverse once there has been a default and real political change. Simply defaulting wont attract capital back into the country.
Vaktathi wrote: That's a fair point, there's a good deal of this that's largely being done to set an example. And, to be perfectly honest, that's not an entirely incorrect approach, the Greek state allowed too much corruption to flourish, some would argue lied its way into the Euro, and basically didn't spend its money wisely. It *should* be punished for that to ensure other nations do not fall into the same trap and prevent possible future entrants from acting in a similar manner.
Accountability is important.
The unfortunate part is that this means a lot of suffering on the part of the Greek people, many who absolutely do not deserve it, and political instability.
Which are also important factors to keep in mind.
Yep. And while Greece got themselves in to this mess, even if they hadn’t there would still be a need to enforce a tough payment scheme on them, just to set an example.
It sucks for the Greek people, and it isn’t great for the rest of Europe as one of its member nations struggles along as an economic mess, but it really does have to be that way.
Vaktathi wrote: That's a fair point, there's a good deal of this that's largely being done to set an example. And, to be perfectly honest, that's not an entirely incorrect approach, the Greek state allowed too much corruption to flourish, some would argue lied its way into the Euro, and basically didn't spend its money wisely. It *should* be punished for that to ensure other nations do not fall into the same trap and prevent possible future entrants from acting in a similar manner.
Accountability is important.
The unfortunate part is that this means a lot of suffering on the part of the Greek people, many who absolutely do not deserve it, and political instability.
Which are also important factors to keep in mind.
Yep. And while Greece got themselves in to this mess, even if they hadn’t there would still be a need to enforce a tough payment scheme on them, just to set an example.
It sucks for the Greek people, and it isn’t great for the rest of Europe as one of its member nations struggles along as an economic mess, but it really does have to be that way.
What "tough payment scheme"?
Greece pays much less interest on its Troika loans than Portugal, Ireland, Spain or Italy did. How is a payment scheme though when its much more lenient than those of the other countries that were in similar circumstances?
Greece pays much less interest on its Troika loans than Portugal, Ireland, Spain or Italy did. How is a payment scheme though when its much more lenient than those of the other countries that were in similar circumstances?
The harshness isn't in the interest repayment, but the primary surplus requirement (one of the conditions needed to lower the Greek interest repayments to the 2.6% shown in the figure). It's that primary surplus requirement that's causing the hardship in Greece.
I'd be okay with Greece not paying interest on their loans but I doubt they would manage even that.
It'd be interesting to see just how much the average european suffers as a result of the current situation in Greece though. The euro's at one of the lowest I've ever seen it, which can't help their imports but then again, most of my European customers are mostly turning to easten europe for their stuff.
Greece pays much less interest on its Troika loans than Portugal, Ireland, Spain or Italy did. How is a payment scheme though when its much more lenient than those of the other countries that were in similar circumstances?
The harshness isn't in the interest repayment, but the primary surplus requirement (one of the conditions needed to lower the Greek interest repayments to the 2.6% shown in the figure). It's that primary surplus requirement that's causing the hardship in Greece.
But lowering that primary surplus requirement means an even bigger growth of their debt and is nothing more than a band aid.
If there is one thing that this crisis has more than proved is that those types of Keynesian economic measures only cause even more hardship in the future. Throwing more money at the problem without any type of structural reforms won't solve anything and the Greeks have shown little or no interest in implementing those reforms.
If there is one thing that this crisis has more than proved is that those types of Keynesian economic measures only cause even more hardship in the future. Throwing more money at the problem without any type of structural reforms won't solve anything and the Greeks have shown little or no interest in implementing those reforms.
You are assuming the "reforms" would have done anything to improve the situation. Greece was already past the point of no return once they hit the 70% Debt:GDP ratio and that was well before this crisis flared up. Most of the developed world is already beyond that point and that's why they are trying fudge their gdp and debt calculations to make the situation look more manageable and/or improving.
Any more insights on why this whole thing was caused by the failed banana plantations in Patagonia?
Not sure where you are getting banana plantations from. I was talking about contagion in the Eurozone crushing your currency and it's gone straight down since then.
How is the Euro doing?
Maybe you should actually go back and look what I said and look at how your currency has performed.
Edit.. this is even more hilarious because you are living in Portugal and are directly paying for the bail out of one of your largest banks that had exposure to Cyrpus during the bail-in. The concept of counter party risk and contagion shouldn't be a foreign concept since you are directly feeling the pain. Oh well.. you will see what real contagion looks like soon enough.
PhantomViper wrote: But lowering that primary surplus requirement means an even bigger growth of their debt and is nothing more than a band aid.
Nah, the opposite. The primary surplus has been established as having a massive negative impact on Greek GDP, relaxing it would allow GDP to recover by as much as 2% per 1% reduction in requirement, meaning the debt to gdp measure through rising GDP.
The story of Greece, of course, has been that despite the primary surplus requirement debt to gdp has grown considerably, because the efforts to repay debt have collapsed gdp faster than its reduced GDP.
If there is one thing that this crisis has more than proved is that those types of Keynesian economic measures only cause even more hardship in the future. Throwing more money at the problem without any type of structural reforms won't solve anything and the Greeks have shown little or no interest in implementing those reforms.
That’s the exact opposite of true. The GFC has been an extraordinary vindication of basic ISLM modelling, while in contrast the austerity movement has utterly collapsed. Austerity predicted that debt repayment would lead to private sector confidence and growth, and none of it happened anywhere. Nor was there the predicted spike in interest rates for government bonds where austerity was not practiced, as austerity had predicted.
And the two key papers that austerity was built around were both shown to be utterly vacuous. The first claimed a link between surpluses and growth but it was nothing more than a crude correlation. More sophisticated work found the causation was in reverse – countries with strong growth tended to surpluses, not the other way around. The second paper was even worse, claiming that 90% debt to GDP was the tipping point where growth collapsed, a review of the paper found the relationship only existed because of excel formula mistakes in the analysis – when corrected there was no relationship.
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dereksatkinson wrote: You are assuming the "reforms" would have done anything to improve the situation. Greece was already past the point of no return once they hit the 70% Debt:GDP ratio and that was well before this crisis flared up. Most of the developed world is already beyond that point and that's why they are trying fudge their gdp and debt calculations to make the situation look more manageable and/or improving.
That’s junk economics that’s been utterly discredited (the original work only found the relationship due to basic excel mistakes, seriously). And you even got the number wrong, the claimed tipping point was 90%. Nor was it a point of no return, it was just a point where there was a claimed drop in future gdp growth. I mean, as a point of no return off the top of my head we’ve seen the UK, USA, Australia and New Zealand all went well past 100% debt to gdp after WWII, and then returned.
There is something a bit too deja-vu-ish about this election campaign, especially the tragic Greek economic backdrop.
Just like five years ago, Greece is on the brink of default. But 2015 is very different from 2010 in one important respect: other eurozone countries and the IMF are signalling they won't be panicked into rushing through another bailout.
If hints from the German finance minister, Wolfgang Schaeuble, and more explicit remarks from EU officials are any guide, Greece will be left to flounder, which means that there is a high probability that - at some point between May and July - the Greek government will fail to make repayments on the billions that fall due for repayment to the IMF, and/or the European Central Bank and/or private-sector providers of short term debts.
For what it's worth, the IMF is owed €200m (£144m) on 1 May and €760m on 12 May, while the ECB is due €6.7bn in June and July.
Greek exit?
Now this does not necessarily mean Greece would leave the euro at the point that it misses a debt payment.
The government could follow the example of Cyprus and impose restrictions on the export of capital from the country, to conserve as much cash as possible in a banking system too close to collapse for comfort.
And it could create its own IOUs, a sort of parallel domestic currency interchangeable with euros, to pay its employees and trade creditors.
In these dire circumstances, it would not really be part of a proper monetary union, it wouldn't be a full member of the eurozone. But it would still have the euro as legal tender.
This would be a pretty ghastly scenario for the Greek people - who would struggle for a period to obtain the things they need from abroad. And it the economy is limping along now, it would contract sharply for a period, as businesses and banks went kaput.
But strikingly the German government is putting it about that financial contagion to the rest of the eurozone would be limited.
Which may be hopeful, wishful thinking or naive.
Stark signal
It is certainly true that the eurozone and IMF can afford the likely losses on Greece's debts.
But that is not really the point. A Greek default would signal in the starkest way that European Monetary Union is about national convenience, not a political project to integrate the governance and balance sheets of members.
As such a Greek departure risks creating an economic schism between the rich north of Germany, the Netherlands, Austria and Finland, and the poorer south and east - with France in an uneasy no-man's land.
Capital would gravitate to the north. Funding costs for businesses and households would be permanently lower there. And the rich north would get richer and richer relative to the stagnating south and volatile east.
If that were to foster resentment on either side of the Alpine divide, it would not be a benign outcome.
As for us, the Greek drama represents unwelcome instability as we choose our next leaders.
But for the avoidance of doubt, the short-term risks to our prosperity are much lower than they were five years ago - whereas the long term risks, of a Europe permanently failing to pull together to create the conditions for sustainable growth and prosperity, may be greater.
Here’s a couple of charts that show how much work Greece has done to repair its situation from the farcical place it had put itself in 6 years ago;
The Greek government has made massive cuts to government spending and raised taxes so that what was a deficit of 15% each year is now a surplus of 5%. At the same time (through both government action and natural economic factors) the average Greek income has been cut by about 30%, meaning Greek labour costs about 75% of the Euro average, greatly improving competitiveness.
The point of all this is that the hard work to return the Greek economy to a viable place has already happened. That doesn’t mean I’m saying everything is rosy, but basically if a reasonable deal can be struck on future debt repayments, then Greece can pretty much be left to slowly, eventually recover.
I’m not saying that will happen, of course. Basically I think that so far everyone the situation has muddled towards a towards a solution not so much out of a spirit of compromise, but because the alternative is to hit the ‘make Greece explode button’. When you aren’t willing to press that button, the only alternative is to make a good enough deal that means the other side won’t hit the ‘make Greece explode button’ either. I have no idea how long both sides will remain like that. There’s certainly enough media opinions out there that are almost cheering for a Greek collapse.
Does that labour cost chart use unit labour costs? That's the one you need to look at. It's not clear. I'd also be curious about consumer and producer prices relative to eu19, which is another measure of competitiveness.
Another thing to look at is effective exchange rate of Greece deflated by those cost and price indexes. If that has gone down significantly then I'd be inclined to agree with you.
Still, with those crackpots in governing I have a feeling Greece is still I'm big trouble.
Soladrin wrote: Seriously though, there really isn't a good outcome here is there?
From whose perspective? For the average Greek, you want to default and move on.
From the perspective of the German (or European pensioner in general) a default is a threat to your retirement and the solvency of your banking system. The system is so fragile that even non-performing cross currency mortgages are starting to cause problems for their banks. The other shoe should drop this fall/winter.
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Jihadin wrote: Its Monday and Greece is still a country. Sig Other was offer a position as a GS14 slot in Athens. Prompt "NO" was the reply
Greece will likely still be a country after they exit too. That really isn't what people are worried about. The concern is how it will impact the rest of Europe (specifically the banking sector) when they finally decide to leave. A lot of institutions use CDS to hedge exposure but now they can't even reliably use those because the derivatives don't pay out when the institutions backing them are insolvent.
