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.

"Greece" didn't exist then charley.

The worst thing for the entire world is the uncertainty. If Greece is going to "fail", it would be best for everyone (Greece & the Greek people especially) if it were to happen sooner, rather than later.

Which makes me wonder cui bono from all the current FUD ? I think we need to look more closely at some of the investing of recent weeks.

On a related note, chatting with friends last night, I'd be curious as to what peoples memories are of why the UK didn't join the Euro ? I thought at the time it was the right decision (which hindsight confirms). But for all the wrong reasons.

I think it was a lot to do with losing control and letting Germany Europe pull the strings as to how the country is to be governed. And I think Gordon Brown recognised that the UK could end up propping up weak economies. Exactly what's happening now. I'm voting out of Europe. It's a disaster zone.

I think it was a lot to do with losing control

One of the chickens that was forecast to come home to roost, and has in Greece, is that a lot of mainland Europe has very generous salary-related state pension provision. And because it's the state, there's no pension fund, they just assume that they can pay it out of future taxes.

Giving people a salary-linked entitlement with no funds behind it, paid irrespective of later economic conditions, is a hostage to fortune.

The UK system is state pensions at a low but sustainable level paid out of future revenue, plus private and employer pensions that (post-Maxwell) have a large fund behind them. You can argue about how secure those pensions are, but I bet Greek pensioners aren't feeling too confident their pensions will be paid in the long term either. They're already likely to take a haircut, and if there's one group that has no ability to respond to a drop in their income by working harder/longer/elsewhere, it's pensioners.

So Greece (and most of the rest of southern Europe) has made massive promises to boomers, which it's not at all clear can be paid without external help. And Germans, working to 67 for pensions they pay handsomely for, simply won't support transfers so that Greek hairdressers can claim large pensions at fifty because of the "dangerous chemicals" they work with. This problem is not going to get better. Good luck to the Eurozone in dealing with it.

I remember debate about the inequality between powerful economies such as Germany's and the smaller, less stable ones of some of the Mediterranean countries, and predictions that in the long term the inequalities would make the whole thing unsustainable. Which seemed like a logical argument to me.

Thank you to everyone who has contributed to this thread, by the way. I can't say I've understood all the detail, but it has been very informative.

You see my memory (although I do read a lot) was that irrespective of what we were told, the real reason was that Gordon Brown detested Tony Blair (who would have signed up to the Euro in a heartbeat), and decided that as Chancellor he would keep the UK out.

Either way, it seems a wise move now ...

One of the chickens that was forecast to come home to roost, and has in Greece, is that a lot of mainland Europe has very generous salary-related state pension provision

When the Euro was being mooted, quite a few UK analysts pointed out that the UKs private pension funds (which were well-funded) were very attractive to the putative Eurozone countries.

Luckily Gordon Brown nipped that in the bud by allowing companies to run down pension funds so now UK pensions are as dodgy as anywhere else.

In other news, when Gordon Brown goes on holiday, he burns his house down, to avoid being burgled.

It's all a stack of dominoes, too.

Already the IMF is starting to look a little ... fractious. If Greece fails to repay the IMF, then the non-European members (which include China, and India) will have some support for their view that the IMF is too Euro-centric. And if Greece defaults, what of non-European countries who owe the IMF.

Maybe with the fascination for previous fashion revivals, military coups will make a comeback ?

We were also forced out of the ERM by the markets in 1992. Speculators were selling Sterling and Germany and France refused to support the currency at ERM levels. We subsequently came out of recession and did well with a weaker currency. This proved the Euro project was a joke.

lurkinghusband you're last sentence is what scares me most, living in Greece as I do. Greece is basically a village, and you can always find someone who knows someone, whose sister/uncle/ nieghbour knows someone and the word is the army are on high alert. It will take just one police officer, probably with huge financial worries and stress themselves, to fire at an unruly pensioner for the country to descend into chaos. Nothing would probably please Merkel more.

This thread is fascinating, I live in the country and fail to understand even the basics, just like most people here. Everyone is exhausted, mentally and physically and they are the lucky ones who have a job still, more often than not supporting an extended family on 500 euros a month. I don't think anyone who lives here has slept properly since last week. There's no benefits system like in other EU countries, and if you don't work there's no health insurance. But not to worry, you can just drop dead, that's one less Greek to worry about. It's a humanitarian crisis in the very root of democracy.

The poster up thread who is Greek described the Greek attitude to the state perfectly. Look after yourself because the government won't, too busy spending their seven thousand euro a month salary.

Rant over.

I remember when Greece, Spain, Portugal were all military dictatorships for many years.
A major reason these countries wanted to join the EU, once they became democracies, was to reduce the chance of reversion to that state.

Greek has a very large military for its size and GDP - one of the areas where it spends far too much and panders to national pride. Also for historical reasons, Greece wants to be able to match Turkey, possibly to defend Cyprus.
However, military might is a luxury when they are so broke - and is actually potentially dangerous for them.

I'm sure the EU would fund basic food and medical aid if any member country got into such a dreadful situation as to need it: otherwise desperate people might indeed vote for a military strongman and maybe also look for minority scapegoats.

Professor Steve Keen in BBC interview saying he hopes the Greeks vote no. I doubt he'll be invited back...

"Greek has a very large military for its size and GDP - one of the areas where it spends far too much and panders to national pride. Also for historical reasons, Greece wants to be able to match Turkey, possibly to defend Cyprus."

LOL. Turkey has the second largest army in NATO after the US. There is no chance in this world or next that a bankrupt country like Greece with population of only 11 million and no money will match that.

Besides, Greece is part of EU. Do you really believe that Turkey might declare war on EU anytime soon?

Also re "possibly defend Cyprus" - sorry but LOL, again. Do you actually know what happened in Cyprus? Military junta came to power in Greece & thought it was a great plan to annex Cyprus to mainland Greece (look up "ENOSIS"). They instigated a coup in Cyprus for this end. Ethnic cleansing of Turks started. Turkey stepped in and created a safe zone. Greeks wouldn't accept a federal state solution, so the island remained divided. More recently, Annan Plan for reunification of Cyprus was put to referendum - 65% of Turkish Cypriots voted "Yes" to reunification, but it didn't happen because only 24% of Greeks agreed. (Thankfully, otherwise Turkish Cypriots would also be dragged down into this armageddon.)

So, pray tell. Why exactly do you feel Greece needs to "defend Cyprus" against Turkey (assuming for a second that it could)? I'm really interested in what singular insight you might have on this subject.

In other news, when Gordon Brown goes on holiday, he burns his house down, to avoid being burgled.

hahahaha you're killing me!

I was explaining why Greeks want to keep armed forces that are too large for their needs or purse. I don't agree with them in the slightest.

My point was their armed forces are too large and expensive for their defense, but are plenty for a military takeover of Greece itself.
I remember when Greece had a military dictatorship, so I think it's another aspect to worry about.

The Greeks I know still have bitter hatred and suspicion of Turkey.
We might be sure Turkey would never invade, but the Greeks don't trust them, hence their refusal to cut the military.
Yes, it's irrational, but so is voting themselves pensions at age 50, but not the tax to pay for it.

And no, I don't have to look up Enosis or the Cyprus invasion - I remember it all happening.

"We might be sure Turkey would never invade, but the Greeks don't trust them"

Again, Turkey didn't "invade" because it felt like it, or because it enjoys military confrontation. Turkish army flexed its muscle because ethnic cleansing of Turks started in Cyprus, with the military junta of Greece announcing its intentions to take over the island ("ENOSIS").

If Greece wants to further ruin itself throwing money at military expenses they can't afford in a futile attempt to measure dicks with an army they can't hope to match, it is its prerogative of course. It's silly, though. And completely unnecessary, unless they are planning to take over some other land and cleanse it of its Turkish minority.

I've no investment in either side, but Turkey ethnically cleansed the Greek Cypriots from the Northern part of Cyprus, which became the Turkish Republic of Northern Cyprus (Turkey is the only country that recognises it, viewed as illegal occupation under international law)
For some reason, I remember the Ghurkas (stationed there) and the Turkish army having a bloodless standoff. British forces just guarded our bases.

The Greek junta' collapsed after that disastrous Cyprus cockup, but Greece civilian governments since then have never looked impressive.

Anyway, just me remembering the days of the junta and hoping we don't see another.
I don't know if the troika specifically have said to cut military spending, or if that's too humiliating a demand.

Gemauve, I think your account is slightly one sided to say the least.

The Greeks did join the Euro with 'cooked books' and all countries were completely complicit, and they were able to join effortlessly. This is a perfect illustration of the corruption that rampages through the EU as a whole.
I don't think you mentioned that in 2008 when the financial crisis hit the global economy, and Greece and other countries like Greece were completely powerless to devalue, print money or do anything to save themselves from the recession. As their debts grew, unemployment spiked and the recession savaged their economy they were completely unable to defend themselves in the normal way that the UK and other independent countries were able to. As the debts ballooned, and the cost of living rose, they found themselves in serious trouble pretty quickly.
I find it incredible that you talk of luxury yachts and London houses, when in fact that is a strong and vastly untrue statement to make. The wealthy greeks becoming fearful of what was happening in their country, and decided to relocate their wealth to somewhere safer in the world and who can blame them looking at the greek banks now.

In a nutshell the euro does not work for small european economies, they will never be able to pay off the huge and vast debts that have built up over the recession, somebody somewhere needs to grow a set of balls, write off some of the debt, come up with a policy that will not crucify the life line that tourism provides (adding too much tax to tourism will drive it away) or punishing pensioners (the age should rise of course, but this is a small point) and come up a 'realistic' plan ~ or Greece will leave, and the whole of the EU project will have failed. Miserably. We will then watch other southern european countries follow suit.....

Rosie I feel for you I really do, what a horrible thing to witness. It is the ordinary greek citizens that are really suffering and have been for years, and most people in the UK feel very sad for our friends there, whom actually have already suffered years and years of serious poverty.
If I were a greek voter I would be voting no, what have they got to lose now, independence will bring a renewed sense of dignity and ignite the country's ability to CHOOSE and DIRECT their own future, and not been held to ransom by Germany. It is quite an unspoken feeling here that we are rooting for Greece and hope they come out fighting. At least with independence they will be the masters of their own destiny for good or bad, and they have a new beginning ~ it feels inevitable that Greece will leave at some point if not now then in a few months time, because the currency simply does not work for them, and it never will. The debt is unsustainable, the level of austerity for that length of time is unsustainable to already quite a poor nation. It is time Greece took control. It is a failure of the EU not of the greek people in my view.

Heart, I think you are whitewashing the important part.

Greece was heavily in debt before the financial crisis. They were spending money like a teenager given access to their dad's gold card.

They completely lied about the state of their finances when joining the Euro. Tax evasion is a national 'right'. Buildings are left purposely incomplete to avoid paying taxes. Visiting a doctor/dentist? Take cash with you.....

Now they are deep in the shit frankly because everyone turned a blind eye before.

The problem right now is that Tsipras was elected because like many left wing socialists, he promised a rosy message that he couldn't possibly deliver.

And his bluff has been called. You cannot demand to borrow money and set the terms. Firstly the german voters are tired of pouring good money after bad. They'd stomach it if the Greeks were moving heaven & earth to fix their problems but the general feeling is they're not. They're just kicking the can down the road and in 6 months time will be back for more.

Secondly and much more importantly. If you let Greece off it's obligations to pay it's debts then you invite the other countries like Portugal, Spain etc to think "Well....if Greece can do it....maybe we should". Countries who DID take the painful medicine at the time.