Greek Financial Crisis Thread

[Geilinor]

The last two images link to Tsipras' draft.
Part one: http://www.zougla.gr/file.ashx?fid=1711585
Part two: http://www.zougla.gr/file.ashx?fid=1711587

Alright, reading it now. It's already clear that "raising the VAT" is a complete and utter fabrication, though.

It mentions lowering the first two rates of VAT.

[Camelza]

Well, yes, but I don't think anyone in here is actually suggesting that ..I want to think.
The problem is that Greece's productivity has to increase in order to get out of recession(along with a large number of other measures), this can happen by lowering taxation and bureucracy, as well as increasing the buying power of Greeks - or at least set a course towards exporting products.
Eliminating part-time and illegal employment would be quite beneficial as well.

If Greece wants to remain in the Eurozone and wants to increase GDP, it should focus on Consumption.

Unfortunately we can't increase consumption with these unemployment and poverty rates. So, we either have to increase the buying power of the populace, or cheapen production to make competitive enough products for exportation.

Greece should have never entered the eurozone..

Tell me about it.
We (as in "we the people")never even voted regarding the matter.
:/

[Novus America]

As has been pointed out it is still lower than the U.S. and many EU countries.

Greece isn't the US. Greece isn't western Europe. Greece is poorer.

Russia is definitely NOT a country you want to emulate, and South Korea has very long hours,

Greece also has very, very long hours. Greeks work longer than Germans, French, Italians, Spaniards, Swiss, Danes etc.

Boosting productivity is the only way other than a larger workforce or longer hours to make your economy grow. GDP is the total product per year (instead of per hour) for your country. So your only choices for growth are more people working, more hours worked each year, and/or more productivity.

Investments ↑ → Productivity ↑.

Greece does not have to be poorer. Japan used to be poor, it no longer is. Or look at how much richer China is now as opposed to 40 years ago.

And I am aware Greece already has long hours, which again due to diminishing returns is a often bad thing. (Plus it is bad for workers living conditions) It is obviously much better to produce $100 in one worker hour than $100 in 10. Lowering working hours can actually quite often increase productivity per hour.

Investments do not guarantee or always equal increased productivity, they can improve productivity though, you are correct, IF they are good investments. Bad investments can actually decrease productivity. Greece also needs to make an investment friendly climate. And if Greece wants to actually increase investments the need to raise and spend money better, all the corruption and excess bureaucracy leads to deadweight loss.

[Camelza]

Define said scare-tactics,

The mantra of the Tsipras-Varoufakis duo has been "if Greece fails Italy and Spain will follow suit because they are fucked up just as we are, that's why you have to give us money at the conditions we want", which is blatantly false.

Well, truth is if Greece defaults the nations that will have the greatest problem from it would be these countries. Tsipras's merely claiming that it would be destructive for all if Greece defaults and given they have not many other options it is quite possible. I don't entirely agree with that notion, but it wasn't directed towards the people of said countries as a kind of terrorism, just a reminder that things could go very wrong without this being Tsipras' own will.

the Greek government isn't against nations but the governing political elite of Europe.

The Greek government has been quite evidently taking public stances that are detrimental to other fellow EU members and hence their citizens.
So, really, no love from me to the ruling EPP majority in the EU, but I can't really find the Tsipras cabinet to be exactly spotless.

And many European governments are taking public stances that are detrimental to Greece's citizens. Shall we sacrifice one country to save the rest?
We could avoid all that. But it's late, so whatever happens is unknown from now on.

[Novus America]

Well, yes, but I don't think anyone in here is actually suggesting that ..I want to think.
The problem is that Greece's productivity has to increase in order to get out of recession(along with a large number of other measures), this can happen by lowering taxation and bureucracy, as well as increasing the buying power of Greeks - or at least set a course towards exporting products.
Eliminating part-time and illegal employment would be quite beneficial as well.

If Greece wants to remain in the Eurozone and wants to increase GDP, it should focus on Consumption. Greece should have never entered the eurozone..

Obviously Greece should not have entered, but the Eurozone is a roach motel, once you check in there is no easy way out.

Consumption not helpful if you are consuming foreign products, imports are subtracted from GDP.

Production is the what you need. Consumption of course is very good if your economy is already productive as it creates a larger domestic market. But an economy that consumes more than it produces is not what you want.

[The Qeiiam Star Cluster]

The EZ won't extend the bailout.

http://www.bbc.com/news/world-europe-33325886

[Calimera II]

If Greece wants to remain in the Eurozone and wants to increase GDP, it should focus on Consumption. Greece should have never entered the eurozone..

Consumption not helpful if you are consuming foreign products, imports are subtracted from GDP.

Consumer confidence and consumption should go up --> Greek companies will invest and expand production capacity: more employment, more consumer confidence, more consumption, more production.

[Novus America]

Consumption not helpful if you are consuming foreign products, imports are subtracted from GDP.

Consumer confidence and consumption should go up --> Greek companies will invest and expand production capacity: more employment, more consumer confidence, more consumption, more production.

Again not necessarily. The investments, employement, increased production capacity will probably just go to factories in China. Unless Greece can produce competive domestic industries increased consumption will not produce any gains, and could actually detract from GDP.

[Pino Grand Fenwick]

34 miuntes until bankruptcy....

[Natapoc]

34 miuntes until bankruptcy....

It's not actually bankruptcy. It's something that would occur before bankruptcy. Not paying the IMF on time is not the same as being bankrupt.

[Calimera II]

Consumer confidence and consumption should go up --> Greek companies will invest and expand production capacity: more employment, more consumer confidence, more consumption, more production.

Again not necessarily. The investments, employement, increased production capacity will probably just go to factories in China. Unless Greece can produce competive domestic industries increased consumption will not produce any gains, and could actually detract from GDP.

You are acting like Greece isn't competitive at all, and that's false.

[Novus America]

Again not necessarily. The investments, employement, increased production capacity will probably just go to factories in China. Unless Greece can produce competive domestic industries increased consumption will not produce any gains, and could actually detract from GDP.

You are acting like Greece isn't competitive at all, and that's false.

They are mostly competitive in industries that are not based on domestic consumption, hence neccesitating serious investment and structural reforms before consumption can be a viable growth mechanism.

[Geilinor]

Consumption not helpful if you are consuming foreign products, imports are subtracted from GDP.

Consumer confidence and consumption should go up --> Greek companies will invest and expand production capacity: more employment, more consumer confidence, more consumption, more production.

The production is one of the biggest issues, it isn't competitive to produce in Greece and austerity dries up consumption.

[Arkolon]

34 miuntes until bankruptcy....

It's not actually bankruptcy. It's something that would occur before bankruptcy. Not paying the IMF on time is not the same as being bankrupt.

Being in arrears to the IMF is almost just as serious. Some speculate it spells Grexit from the Eurozone.

Whatever happened, it was two minutes ago.

[Risottia]

Alright, reading it now. It's already clear that "raising the VAT" is a complete and utter fabrication, though.

It mentions lowering the first two rates of VAT.

Mind you, actually lowering the top rate of VAT isn't a bad idea per se - after all, high VAT is used to control inflation during periods of quick growth, hence lowering the VAT can reduce the risk of deflation.

But really, lowering the first two rates of VAT while NOT pushing luxury items such as restaurant meals into the top rate and not eliminating areas with VAT exemption? Seems purely inflative while draining further the public coffers.

[Risottia]

34 miuntes until bankruptcy....

It's not actually bankruptcy. It's something that would occur before bankruptcy. Not paying the IMF on time is not the same as being bankrupt.

I think the exact term for the current state of the Greek finances is "technical default".

[Pollona]

"The International Monetary Fund on Tuesday confirmed Greece had not made its 1.5 billion euro loan repayment to the Fund, making it the first advanced economy to ever be in arrears to the Fund.

The missed payment, the largest in the Fund’s history, is equivalent to a default, in that both imply a breach of Athens’ obligations."

IMF spokesman Gerry Rice said Greece can now only receive further IMF funding once the arrears are cleared.

Rice confirmed that Greece had asked for a last-minute repayment extension earlier on Tuesday, which the Fund’s board will consider “in due course.”

So in the eyes of the IMF, Greece has officially defaulted. According to their rules they can not provide any further funding to Greece once they are paid.

Wonder if Tsipras still thinks this is worth it.

[Natapoc]

"The International Monetary Fund on Tuesday confirmed Greece had not made its 1.5 billion euro loan repayment to the Fund, making it the first advanced economy to ever be in arrears to the Fund.

The missed payment, the largest in the Fund’s history, is equivalent to a default, in that both imply a breach of Athens’ obligations."

IMF spokesman Gerry Rice said Greece can now only receive further IMF funding once the arrears are cleared.

Rice confirmed that Greece had asked for a last-minute repayment extension earlier on Tuesday, which the Fund’s board will consider “in due course.”

So in the eyes of the IMF, Greece has officially defaulted. According to their rules they can not provide any further funding to Greece once they are paid.

Wonder if Tsipras still thinks this is worth it.

What other choices are there? At some point it becomes clear that repayment is not an option. Greece passed that point long ago.

[Arkolon]

"The International Monetary Fund on Tuesday confirmed Greece had not made its 1.5 billion euro loan repayment to the Fund, making it the first advanced economy to ever be in arrears to the Fund.

The missed payment, the largest in the Fund’s history, is equivalent to a default, in that both imply a breach of Athens’ obligations."

IMF spokesman Gerry Rice said Greece can now only receive further IMF funding once the arrears are cleared.

Rice confirmed that Greece had asked for a last-minute repayment extension earlier on Tuesday, which the Fund’s board will consider “in due course.”

So in the eyes of the IMF, Greece has officially defaulted. According to their rules they can not provide any further funding to Greece once they are paid.

Wonder if Tsipras still thinks this is worth it.

It has to be said now, in all fairness, that it is Syriza's amateurish ineptitude and cluelessness as a working government that the Greek debt crisis has been exacerbated to the point at which we find ourselves today. Any reasonable government would have taken the bailout, accepted the amended reforms, and that was that. Now Grexit looms and Greece joins Liberia, Somalia, Sudan, and Zimbabwe in countries that have been in arrears to the IMF. I can only offer a slow, sarcastic clap.

[Risottia]

Well, truth is if Greece defaults the nations that will have the greatest problem from it would be these countries.

Not quite. Yes, blowing 40 billion € would be a blow for Italy, but Greece wasn't going to repay them anyway, and the fundamentals of the Italian and Spanish economies are much better than 3-4 years ago.

Tsipras's merely claiming that it would be destructive for all if Greece defaults and given they have not many other options it is quite possible.

The point is that
a) it's actually not THAT destructive, given the size of the Greek population and of the Greek economy
b) it pisses off the citizens of those countries who have had to go through a lot of cuts to their rights (not just benefits, rights, as certified by the judiciary in various cases), thus eroding further international sympathy for the plight of Greece

I don't entirely agree with that notion, but it wasn't directed towards the people of said countries as a kind of terrorism

That is exactly how it was perceived, though.

And many European governments are taking public stances that are detrimental to Greece's citizens.

It's the same shit other countries have had to go through, only that those other countries actually went through painful cuts.

Shall we sacrifice one country to save the rest? We could avoid all that. But it's late, so whatever happens is unknown from now on.

It's not about sacrificing Greece to save the rest of Europe. The rest of Europe isn't as fucked up as the Greek coffers. It's about having a plan to save Greece and its citizens, and Tsipras so far has failed to present an effective solution.

[Chestaan]

Even worse, it's impossible to make use of monetary policy to combat recessions. The US can get over this by having a unified fiscal policy, meaning if one state gets into economic trouble, the other's can subsidise it.

I would say the lack of dispute resolution mechanisms is worse, monetary policy is only effective in certain cases, the effectiveness of monetary policy has been grossly exaggerated in Europe. In the U.S. we do have a united monetary policy that helps, but we never view it is a sole, or usually even a primary source of action.

Take Texas as an example. If Texas was in recession but say, New York wasn't you guys would probably give some money to Texas to sort their shit out, perhaps raised through extra revenue from New York. There's no similar method in Europe yet there needs to be if the euro is to be anyway viable.

[Natapoc]

I would say the lack of dispute resolution mechanisms is worse, monetary policy is only effective in certain cases, the effectiveness of monetary policy has been grossly exaggerated in Europe. In the U.S. we do have a united monetary policy that helps, but we never view it is a sole, or usually even a primary source of action.

Take Texas as an example. If Texas was in recession but say, New York wasn't you guys would probably give some money to Texas to sort their shit out, perhaps raised through extra revenue from New York. There's no similar method in Europe yet there needs to be if the euro is to be anyway viable.

Exactly. Many states in the US would be in a worse situation than Greece if they were treated the same way.

[Pollona]

It has to be said now, in all fairness, that it is Syriza's amateurish ineptitude and cluelessness as a working government that the Greek debt crisis has been exacerbated to the point at which we find ourselves today. Any reasonable government would have taken the bailout, accepted the amended reforms, and that was that. Now Grexit looms and Greece joins Liberia, Somalia, Sudan, and Zimbabwe in countries that have been in arrears to the IMF. I can only offer a slow, sarcastic clap.

The renegotiation process was clearly doomed once the Syriza government railed against the creditors, took several photo-op tours in Russia, and refused to acknowledge the gross inefficiencies in state owned companies up for privatization. They threw away an opportunity to renegotiate on reasonable terms; maybe ask for a few extensions on the loans rather than write-offs, and published sensible spending plans while tackling tax evasion. All of this without blaming the Eurozone leaders (the very people who were trying to rescue them). After Syriza started talking about WW2 reparations from Germany, I could tell they were no longer serious. They struck themselves out as populists standing against a bulwark of further austerity, and have completely flopped in international diplomacy. Now they will be directly responsible for a crisis arguably worse than the previous 5 years.

The sad thing is, they might have actually had a chance.

I would happily join you in a slow, sarcastic clap parade.

[Pollona]

Take Texas as an example. If Texas was in recession but say, New York wasn't you guys would probably give some money to Texas to sort their shit out, perhaps raised through extra revenue from New York. There's no similar method in Europe yet there needs to be if the euro is to be anyway viable.

Exactly. Many states in the US would be in a worse situation than Greece if they were treated the same way.

That's not exactly how it works in the United States. What the US has is a system of organized fiscal transfers. Everyone in the 50 states pays taxes to the federal government. Through various federal programs (Welfare, Grants, etc.) the money is then dispersed to the states. Someone in Utah might be paying for roads in Massachussets, while someone from Massachussets might pay for Welfare in Kansas, etc. So in short, the US has something like a full fiscal union, while the EU does not.

Despite our federation, each state still has to issue its own bonds and is individually responsible for the way it spends its money. They are supposed to make sure they are fiscally solvent regardless.

And speaking as a Texas taxpayer, the idea of bailing out another state is reprehensible. If our state is run into the ground, it's up to our leaders to fix it, not the taxpayers of New York. US states bailing out each other, however logical it might seem, is not popular on all fronts.

[Chestaan]

Take Texas as an example. If Texas was in recession but say, New York wasn't you guys would probably give some money to Texas to sort their shit out, perhaps raised through extra revenue from New York. There's no similar method in Europe yet there needs to be if the euro is to be anyway viable.

Exactly. Many states in the US would be in a worse situation than Greece if they were treated the same way.

That's not exactly how it works in the United States. What the US has is a system of organized fiscal transfers. Everyone in the 50 states pays taxes to the federal government. Through various federal programs (Welfare, Grants, etc.) the money is then dispersed to the states. Someone in Utah might be paying for roads in Massachussets, while someone from Massachussets might pay for Welfare in Kansas, etc. So in short, the US has something like a full fiscal union, while the EU does not.

Despite our federation, each state still has to issue its own bonds and is individually responsible for the way it spends its money. They are supposed to make sure they are fiscally solvent regardless.

And speaking as a Texas taxpayer, the idea of bailing out another state is reprehensible. If our state is run into the ground, it's up to our leaders to fix it, not the taxpayers of New York. US states bailing out each other, however logical it might seem, is not popular on all fronts.

That is exactly what I just described, just in a more simplified manner. When one state is booming, they federal government will direct less money towards it and direct extra funds to a state that may have a more sluggish economy. This helps to smooth out the business cycles of states and counters the effect of each state not having access to monetary policy.

If the euro is to work, it will require a similar system of fiscal transfers, otherwise you will have issues that we have now, two countries having two different business cycles and not being able to fix it through monetary policy due to the common currency.