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.

The uncomfortable truth is that at some point, Greece will need to have some of their debts forgiven (again).

There was another article recently about crowdfunding to pay off Greece's debts. Unfortunately it was going to need about €450 from every citizen in the EU to do it. That gives you an idea of the scale of their debts.

There's simply no way they can pay all their debts back. If Greece was a person they'd be declared bankrupt ages ago.

However.....as much as I support the idea that they need debt relief. I don't believe that moment is now. Why? Because I'm yet to be convinced that Greece won't simply carry on regardless. Their latest government was naive beyond all doubt. They wanted (and still want) to borrow money and have debt relief. In other words it's like asking your parents to lend you another £500. You'll pay them back honestly but at the same time can they ignore part of the huge loans you've already borrowed. As parents should you lend them more money? Have they learned their lesson yet?

And I have a great degree of sympathy for the Germans who are dutifully working hard, saving hard, living within their means, retiring at 67 AND paying a tidy sum towards those who didn't bother. Understandably they're pretty pissed off at handing over more & more money to the Greeks who are retiring at 50 with bigger pensions and continually asking for more.

Bullshit Cote, Greek GDP is down 25% and is dropping every year, wages are dropping year on year, one wage is often all that's sustaining whole families, people cannot afford to eat, buy medicine or house themselves and there is an outflow of young people similar to what happened to Ireland in the 1840s.

TwosDoctor … thems fightin’ words, but as usual, factually you have sod all to a jam tart to back them up.

Up to when did Greece lose 25% of national output (GDP), as I thought I saw they came out of the recession in 2014 with around 0.7% growth and until pee balled around this year, were forecast to grow around 2% this year.

The UK in 2008-9 lost close to 7% of national output (GDP), which was worse than the Great Depression if memory serves (not that I was around lol) - but you can’t sit and cry about it, a government has to DO something to stimulate the Private Sector to growth, something socialist/Marxist governments are rubbish at realising it, never mind doing it.

And the alternative;

July 2nd 2015; ”Greece’s GDP to shrink (another) 20% in case of ‘Grexit’ – S&P”
rt.com/business/271273-grexit-eurozone-consequences-gdp/

”A possible ‘Grexit’ will cause ‘severe’ consequences to the Greek economic system, warns the Standard and Poor’s (S&P) rating agency. It has increased the chances of Greece exiting the eurozone to 50 percent.”

”Greece’s banks and payment system will be unable to operate and will consequently shut down without the euro support system, estimated at 70 percent of Greek GDP, S&P reported on Thursday. Greece will then permanently lose access to financing from the European Central Bank, which would create a serious foreign currency shortage for the private and public sectors.”

”In the case of a ‘Grexit’ the country’s real GDP will immediately plunge 25 percent and still be 20 percent below the baseline after four years, according to the report. Unemployment will surge above 29 percent and will only gradually come down.”

For Greece’s PM Tsipras to just come out and tell the Greek people that in the event of a Referendum ‘NO’ vote, he will have an EU deal within 48-hours, is disingenuous politics beyond belief, as if the Russians invaded the EU it would take those bureaucrats longer that to come up with a response.

"Bullshit Cote, Greek GDP is down 25% and is dropping every year"

In your learned opinion, was there any chance for wages and GDP to increase from levels artificially inflated by enormous amounts of debt?

It's like you are saying "I used to live really well while maxing out my ten credit cards. Now banks won't give me any more credit so I'm forced to live like a poor man. This shows their policy of making me limit my expenses hasn't worked."

In such cases, austerity programs aim to limit state expenditure and bring the economy to reasonable ratios. As I've said downthread, in the last 5 years, Greece's exports increased 19% in EUR terms while imports decreased by 12%, leading to a 34% lower deficit. Capital Account Balance improved by 24%. External debt is in much better shape now, with much of short term debt restructured to very long-term obligations. Even their Reserve Assets are 10% higher now than they were 5 years ago.

All of the figures above are taken from the official figures of Bank of Greece (the country's Central Bank).

"wages are dropping year on year"

Yes, that is what happens when economies contract, from a previously debt-fuelled craze for example, as is Greece's case. Look at average annual wages of OECD countries by year - Greece's was EUR 18.5K in 2005, then their average wages increased 73% EUR 32K in 4 years. When their debt situation blew up at that point (2009), of course economy started contracting and wages started decreasing.

"there is an outflow of young people similar to what happened to Ireland in the 1840s"

The outflow I see most of is rich Greek people who have taken out their funds out of Greece an are now living in France or London. There are entire classes in London schools made up of Greek children, I hear. I met one such man currently living in London who was complaining that his child didn't learn much English at all because all his classmates are Greek and so are some of the teachers.

In the South of France, real estate agencies are flooded by Greeks looking to buy houses. They have apparently surpassed Russians as the geese that lay the golden eggs around these parts.

Meanwhile, check out the actual referendum question (picture).

Is there any hope whatsoever that voters will make an informed decision?

I like how the BBC has put it:

For those who can't read Greekdebtspeak, well, you're on your own.

The two appendix documents - "Reforms for the completion of the current programme and beyond" and "Preliminary debt sustainability analysis" - don't sound much more easily digestible than the ballot.

There is still a question over when and how voters will be presented with those documents, and whether world-class economists will be on hand at polling stations to explain them.

"You know the very powerful and the very stupid have one thing in common. They don't alter their views to fit the facts. They alter the facts to fit the views. Which can be uncomfortable if you happen to be one of the facts that needs altering."

Doctor Who (4th series, episode 4)

Are you talking about yourself? I'm the one providing the facts and numbers here, and you are the one refusing to change your point of view.

If austerity's working in Greece, I'd hate to see it failing.

I'm impressed that both Cote and isitme know better than the IMF.

Are you listening, Christine?

We don't claim to know better than IMF, just better than you and DoctorTwo.

IMF is the one who insists on the austerity measures that are currently on the table. I'm surprised that you seem to think they are of a different viewpoint than mine or Isitme's.

"If austerity's working in Greece, I'd hate to see it failing."

It was working for the purpose it was designed, which was to eliminate the imbalances of the economy and bring its various measures to healthier levels.

It was never meant to keep growing Greek economy and wages. That was not possible. Do you not understand that their economy, wages, employment etc was all based on the zillions they were getting in debt?

No different than living it up on your credit cards, then crying when bank refuses to give you more money. Well, you have to start living according to your means at that point. And think about how you are going to pay back that debt.

It was never meant to keep growing Greek economy and wages.

Actually, a lot of people think that is exactly the purpose of government and international organisations. To allow people to live.

That was not possible.

That is disputed among economists.

Have you not read the IMF's latest? I posted it upthread.

Still, fingers in ears ignore ignore

Hullygully .... NO ONE disagrees with the IMF the Greeks need (ever more) help, I have said on this link that need debt write offs - but the EU cavalry have THEIR views on what the Greeks need to do - and just like ANYONE up to their ying-yangs in debt needing to borrow more, the LENDER has the upper hand, so an incompetent and gobby borrower needs to realise that.

It will clearly take longer than 2-days after a 'YES' vote, never mind a 'NO', which is hardly the basis for additional help, never mind additional help PLUS.

Even without the debt, presumably Greece needs to borrow more money - are there any likely lenders outside the EU/IMF?

Greece: The options, an Op-ed piece for RT online.

From that article:-

" And what of the eurozone?

The EU has egg on its face and a sickly currency whose sanctity is being undermined. Economically, Greek GDP is barely 1.8 percent of the 335 million citizen eurozone. However contagion risks will be a huge worry. Europe has delayed vital structural reforms and will pay a greater price than the ‘mere’ high unemployment relative stagnation of recent years where Asia rose and Europe froze. Investors will be spooked to realize the euro is not merely perishable, it is in mortal danger. Greece is a small but debt-laden Mediterranean nation, behind the narcissistic political hubris, the EU remains an, albeit fading, giant of global influence."

All those who think the IMF and the troika are right need to consider that both are staffed by bankers and headed by lawyers, Mr Varoufakis is a highly regarded economist and is backed by 2 Nobel laureates in Stiglitz and Krugman who would both vote OXI to austerity, Steve Keen, professor of economics at Kingston University who said the same when interviewed on the BBC, and won't be invited back as they're headed by a banker.

The IMF and ECB exist purely to ensure the banks get their money whatever the cost to ordinary people. Hungary realised this and kicked them out. Link here. There are loads of links about this, just none from MSM. I wonder why...

DoctorTwo.... Russia's Putin has his Russia Today (RT) news channel to spread his anti EU propaganda, we know where to find it, we don't need you regurgitating it. Guffaw

With the Russia-Ukraine-EU 'stuff', a Russian dig at the EU when he hopes to pick up the Greek pieces. Go figure.

Sucker.

are there any likely lenders outside the EU/IMF?

In a word ... no. And there aren't likely to be.

Would you invest your pension fund in a loan to Greece ?

Neither would the rest of the world.

I was also just coming here to say that the last thing this thread needs is Russia Today propaganda and misinformation.

You do realise Putin is rubbing his hands together in anticipation of being able to drive a wedge between Greece and the rest of Europe don't you? And if he succeeds that this probably won't be to the benefit of the normal people of Greece?

Of course Russia is an expert on 'austerity' with all their people still in poverty and their oil revenues going on an increased military.

Anyone got any Russian 'white goods' in their kitchens?

If it weren't for oil, their economic reality would be still using carts to travel - so who gives a flying fart what Russia thinks???

WhattodowithMum ..... re your last post about the "possibility of a perpetually growing Greek economy and wages" - according to some economists.

Do those economists ever look at the balance of the economy, or measurements of Productivity re the sustainability of that economy, ESPECIALLY after such a large increase due to low interest rates, spending and debt?

Neither would the rest of the world.

I was thinking about countries who might lend for political rather than economic reasons.

Great thread - I've been riveted to the news following the crisis of the last few weeks and wondered why there'd been no MN discussion. Turns out you were all here

It seems clear that if austerity continues in Greece the country will continue to have a fairly unpleasant time of it. Conversely, my sense is that no-one really knows what would happen if Greece either left the eurozone, or left the EU altogether. To me, the elephant in the room is the political dimension to the whole sorry mess: the ideological commitment of many within the EU's governing institutions to irreversible political, fiscal and economic convergence of EU nations. Were this commitment not so deep, Grexit could surely have been considered some time ago, and managed perhaps with less pain than Greece has already been through. But leaving aside the economics (which I have seen argued convincingly both in favour of and against austerity within the existing political situation) the ideological commitment to the EU and to the eurozone makes this impossible.

There is good evidence that the eurozone was always intended as a political mechanism, to force greater fiscal integration between eurozone countries in the service of 'ever closer union' and - eventually - a United States of Europe. That's why they seriously considered creating a currency union without fiscal union in the first place: because the belief was that over time the necessity of fiscal union would become obvious, prompted most likely by crises like the one we are currently witnessing. So, then, the choice is between relaxing the ideology (eg by allowing countries to exit the eurozone, by easing up on 'ever closer union', by being in any way politically flexible) or forcing an entire country to its knees and leaving pensioners weeping on the streets outside shuttered banks, in the service of proving the need for greater centralised EU fiscal control. Guess which way the EU has jumped.

Ultimately this isn't about an economic 'right' or 'wrong' decision. It's about whether at the last count it's the elected governments of EU members that are in charge of their nations, or whether in fact it's the EU supranational government that calls the shots. To my eye if they are to have a united currency, the answer has to be 'It's the EU, silly'. Otherwise you end up with situations - like the Greek one - where governments are democratically elected on fiscal promises they can't deliver, because in order to maintain overall stability in the currency union the fiscal levers are controlled by umbrella institutions that don't answer to the Greek people, at least not enough to make them care about any Greek 'democratic mandate'. It follows from this that something has to give: either national sovereignty (ie democracy) or currency union.

I think Tsipras has grasped at least one end of this, which is why he keeps going on about democratic mandates. However (unless he is playing a very crafty and mendacious game indeed) his insistence that Greece will still stay in the eurozone means he hasn't grasped the entirety - ie the reality that staying in the eurozone means that Greece gives up on democratic self-rule, at least where fiscal policy is concerned. Either that, or he's lying and is trying to force the eurozone to dump him, so as to ensure the best possible terms of an exit.

Personally I think the best solution is probably a managed Grexit. I think where fuckups have become this entrenched, the best solution is to let the chickens come home to roost, deal with the pain and rebuild. But I fear this won't happen, and what will emerge from the wreckage will be a eurozone as ideologically single-minded as before, with the peoples of its various nations more restless, more frustrated and (in the case of Greece) more impoverished than ever.

Will what is happening in Greece affect the value of sterling against the euro?

I just heard on Sky News that there is a challenge to the referendum in the courts saying it is unconstitutional. It's a fiasco. How can they keep borrowing when they can't even pay back what they already owe. They'll bring the Euro down at this rate and then the whole continent will suffer.