The Greek debt crisis....why?

[InDespair]

cant find another thread about this so.....

Before anyone accuses me of being thick or burying my head in the sand, I can';t always watch the news in full, and I dont read newspapers. (and Im sure others are wondering too).

Who exactly is in debt?

the people?

the banks?

How did they get themselves into this mess, and why and how do they expect a bailout?

what have they spent all their money on?

And what about tourism?

Laymans terms please.

Feel really sorry for the working class Greeks at the moment. The banks are shut until next week, and they're queuing up at cashpoints, I think they can only withdraw up to 60 Euros and some people are really suffering, particularly pensioners.

Whatever they've done whoever they voted for, they don't deserve that and I still think a compromise could be reached regarding debt. Im really uncomfortable with the "oh well tough, they got themselves into this mess" ideology. The suicide rate is pretty high there. & thinking about career prospects for young people, is depressing.

My DDs are in Crete with mates at the moment...seems as if in the tourist areas a lot of this hasn't impacted, just yet.But I think, it will...

Gemauve Tue 30-Jun-15 21:25:02

Probably more than that fucking Gidiot could teach us about economics

Remind me: is it the country with the qualified economist as finance minister, or the country with Gideon as finance minister, which has closed its banks, imposed capital controls and is a few hours from defaulting on an IMF loan that may see its central bank running out of money? How's that economics lecturing skill working out for Greece at the moment, would you say?

Remind me. Which economic thinker of giant proportions took over an economy that was growing and took it back into recession, and thanks to his policies is damning it to another. Oh yes, it's the gidiot! The towel folder himself is transferring public money to private hands at a faster rate than ever.

Varoufakis has only had the job as finance minister for just over a couple of years and has always said Greece cannot pay the 'debt'. At least he's honest. Your mate Giddy says he's paying down the debt whilst almost doubling it.

The only government that is doing what it's supposed to do, represent its people, is being demonised for so doing. We might as well just hand the job of government to the troika and in effect the corporations. #TTIP

Before Varoufakis was elected, Greece was the fastest growing economy in the eurozone and had a primary surplus - the policies were working. They are now back in recession and the whole country may collapse. Excellent economics.

I honestly think that the more you try and understand money and world markets the less wise and compassionate you become. When did money and profit become more important than people?

To rich lenders the huge debts they are owed are just numbers on paper.

To the poor, (not just in Greece but everywhere), small amounts of money are the difference between leading a dignified life, feeding your children and living or dying.

I don't understand why clever people who understand economics so well can't see the bigger picture.

"To rich lenders the huge debts they are owed are just numbers on paper."

This isn't true, though. The lenders are other taxpayers, primarily.

I'm not sure who the "rich lenders" currently are, probably institutions including pension funds who would have to write off those debts, or who have shares in firms who would do so. That would include Greek pension funds.
The zillionaires have long made their profit and left.

It's like when we say shops or airlines should bear the cost for something, when in fact it's not their shareholders who pay, but the cost is passed on to all the other customers.

I think it is various European taxpayers, especially German taxpayers, who would mostly provide money for any new ECB bonds, i.e. fresh loans.
And those taxpayers have made it very clear to their politicians that they don't want to pay any more for Greece.

Yes, many existing loans would be bonds funded by German and other taxpayers

To rich lenders the huge debts they are owed are just numbers on paper.

To the poor, (not just in Greece but everywhere), small amounts of money are the difference between leading a dignified life, feeding your children and living or dying.

Which is all lovely. So you're asking UK pension funds, which pay pensions to people who in many cases don't have much money, to stop paying (say) the occupational pensions for school dinner ladies, on the grounds that Greek pensioners need the money more? I mean, just to be clear? Why do you think pensions on limited incomes in this country are less important? Aren't they entitled to a dignified life too?

If that's not what you mean, could you outline just who you think it is that holds government debt that you think can afford to just write it off?

I do not hold government debt in my pension; I do, however, hold instruments of major banks who probably have lent money to Greece - a Grexit doesn't just impact "numbers on a screen"

"And I still don't understand why, if nearly all the countries in the world owe money to other countries, why can't we just write them all off and stop lending stupid amounts that end up with people suffering, people who were not to blame. I blame the money lenders mostly and anyone that profits from the misery of others"

Among the reasons others have outlined, because the debt is at different interest rates, matures at different times and is of a different size between countries.

If you owe your friend £100 and he owes you £100, sure, cancel it.

If you owe friend A £100,000 and are paying interest at 10% and A is using that interest to pay her personal care assistant, and A borrowed £50,000 from friend B at a 2% interest rate to adapt her house, friend A doesn't want both debt cancelled as she loses out on both capital and income.

Which economic thinker of giant proportions took over an economy that was growing and took it back into recession

Don't know. I thought you were having a go at Osborne but this must be aimed at someone else. The recession ended in 2009. It is true the opposition repeatedly predicted that the coalition's policies would lead to a double dip recession but it didn't happen. Perhaps you are referring to France or Germany, both of which have had recessions during the last 5 years.

We got it wrong on austerity say the IMF. Steve Keen was right, taking money away will not cause an economy to grow.

I find this thread hard to follow. I haven't been in an economics class in over 15 years, so forgive me.

My general impression was that the Greeks were irresponsible to borrow so much. But the banks were irresponsible to lend so much. They too knew better, but didn't care because they could depend on tax payers to smooth things out.

The Greeks have been paying dearly. The banks don't seem to have taken much of a "hair cut."

Some people want to see this as some sort of morality play. Which is one way to look at it. But, that being the case, justice has not been done. It would appear we have two scoundrels and only one punished.

The banks don't seem to have taken much of a "hair cut."

It depends on if you think 53.5% isn't much: if I lent you £100 and you were only able to pay back (and, indeed, pay interest on) £46.50 I think I'd be quite a soft lender.

And of course, the main holder of Greek government debt was Greek banks and financial institutions, so they immediately needed re-capitalising as the alternative would be the complete collapse of the Greek economy.

There seems to be some sort of idea abroad that bonds are held by James Bond style villains in underground lairs, and that writing them off harms only them. One of the main holder of government bonds in a given country will be long-term savers, such as pension funds, who need to meet long-term obligations with decent security. If you were a pension fund with large liabilities to pay pensions in sterling for the, say, thirty year lifetime of a pensioner, could you suggest what instrument you would rather the pension hold than UK government 30 year sterling bonds? One of the things pension funds were, absolutely rightly, criticised for post-Maxwell and against post-2007 was holding risky, speculative stocks and property. So they moved into bonds. Do you have a better idea?

And another "there should be a haircut" point.

A lot of UK pensioners hold "granny bonds": index-linked savings certificates issued by NS&I. The classic zero-risk savings instrument for children (indeed, the proverbial widows and orphans) is savings certificates: you buy them from the post office, they carry a modest coupon, you don't (in general) have to pay tax on them. If someone lost money on shares, the chorus would go up: if you don't want to risk your money, buy some savings certificates. War bonds. That sort of thing.

Savings certificates are retail versions of bonds. They perform the same job (mopping up excess liquidity now while providing long-term income, plus funding the PSBR) because you're trading access to capital for income and the government gets the capital for the duration. Should pensioners who bought "granny bonds" take a haircut for their greed and foolishness if the UK were to find itself in the same position as Greece? If not, why not?

I find it hard to follow Gemauve because when I try to Google who Greece owes and how much has been written off thus far, I can pick any facts I like! Everyone seems to have their own set of "facts." (Perhaps it has to do with the original debt, vs. additional debt taken on to service the original debt which is compounding?)

Surely this is part of the problem. All this obfuscation, makes it hard for regular people like myself to get a grip.

I found David Graeber's (sociologist) radio 4 series on debt, illuminating. He is very clear, cogent and entertaining. The series is still available on iPlayer for those with time/interest.

www.bbc.co.uk/programmes/b05447pc

If you are just interested vis a vis the current crisis, skip to the last episode, it's just 15 min:

www.bbc.co.uk/programmes/b054tl77

The thinking this morning is the ECB might effectively force some weaker Greek banks to fail and then Greek depositors will be 'bailed in' so losing their deposits just like Cyprus.

I found this to be interesting in terms of the part played by the IMF:

www.independent.co.uk/news/business/comment/greece-crisis-imf-was-pushed-around-by-angela-merkel-and-nicholas-sarkozy--and-now-it-is-being-humiliated-10356247.html

Don't read the comments though. The comments below Indie articles are as bad as those below Telegraph articles with both being certainly more unpleasant than those below Mail articles.

It looks like, unsurprisingly, the Greek government have in fact folded and accepted the whole deal unconditionally, with trivial amendments to save face.

So much for "game theory". Wouldn't it have been easier to have just done this a few weeks ago? They're now in the difficult position that they may not be able to fold, having started the referendum hare running, and at this late stage the other finance ministers may be a lot less willing to accept (or able to unanimously agree on) even the slightest face-saving changes anyway.

www.theguardian.com/business/live/2015/jul/01/greek-debt-crisis-creditors-consider-next-moves-after-imf-default-live#block-5593ae2ee4b075e173d532f9

News hitting the wires now is Tsipras has given concessions - but his Ministers will not accept.

I don't think anything can be conceded or decided until the Referendum.

but his Ministers will not accept.

Nor, apparently, will the Germans.

Whoops.

Why are you so pleased Gemauve?

Glee, again.

I'm not understanding glee at failure, it is so like the smirking Tories on the front bench.

I heard on the news last night that the Greek government don't really want to go ahead with the referendum. To my simple mind it's quite obviously that the Greek goverment thought that Europe would come to the rescue at the 11th hour and now they haven't they don't know what to do next. How can Greece stay in the Euro. They can't. IMHO.

*I honestly think that the more you try and understand money and world markets the less wise and compassionate you become. When did money and profit become more important than people?

To rich lenders the huge debts they are owed are just numbers on paper. *

I think it's more a case of simple mathematics rather than compassion. I think we're all sympathetic to the Greek people but the reality is they're no longer a safe country to lend money to. They're refusing to make any more cutbacks and yet want to borrow more money.

So let's put this another way. Someone comes to you and wants to borrow more money. You've lent them a lot already and they're up to their eyeballs in debt already to many other people.

You say you will only lend them more money if they make some big cutbacks. They refuse and offer some token cuts that you don't think is enough.

Do you

a) be compassionate and lend them money anyway knowing that chances are you will never get paid back and next month they'll be back asking for more?

b) Say no.

That's pretty much what's happened here. Greece have been borrowing off the markets for decades. Now they can't, they've turned to the Eurozone/IMF and now they've spent all that cash too and want more. Yet crucially haven't done enough yet to convince lenders that they are serious on repayment.

I don't understand why clever people who understand economics so well can't see the bigger picture.

The bigger picture is having even countries live within their means. The mistake was in the past lending countries vast sums without any thoughts as to if they could ever repay it. So you can either accept the past was a mistake and go forwards with better lending criteria or keep throwing good money after bad so you can be 'compassionate'

We have some Spanish people staying with us an I asked them what they thought of Spain leaving the Euro. They were horrified and said they never want to see the Peseta back again.

The thing is though they have job for life public sector jobs - they are not young unemployed. The same thing in Greece. Its is only when pensioners lose their savings and their pensions that the politics will change At the moment most people in Southern Europe want to stay in the EU, keep the Euro and live in a pretend world where there is money for everything.

Only absolute poverty and a return to the 1960s/70s will make these countries change - sadly I think we may also see civil wars and dictatorships back again though.