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.

While there are, of course, many views in Greece, on the whole Greeks have been very pro-European up until now and didn't have the anti-Europe factions the UK has. Even now the negative sentiments are primarily focused towards the Germans not the EU, while a lot of people want to vote No to austerity but remain in the EU.

Booboostoo .... in other words, "a lot" of people want (as we say in the UK) their European cake and eat it - which is not an option and this Referendum if a 'NO', will probably mean they leave the EU.

EU Lenders do not have to be German to realise that if 'NO', it will not only harden Syriza and similar parties unwillingness to accept EU terms, but if ever they DID come to a restructuring plan, it will give those in Greece the basis for challenging the restructuring plan.

The EU 'cannot do business' with Greece on that basis.

Syriza's strategy 'machine gun' spraying new anti austerity bullets at this bureaucratic monolith called the EU, can only harden the EU's resolve, not open their wallets further and/or forgive debt - as they have to answer to their own voters, who'd rather THEY had that money to boost their national growth/employment.

If new Greek loans/forgivness doesn't work and confirm that it WAS 'good money after bad', EU Member States answering their own electorate, can hardly turn around and say 'we thought that they were good for it' - when they clearly DO NOT.

It's like having no money. Refusing to make cut backs and demanding to borrow more. If it's no austerity for Greece then it should be no austerity for anyone else in Europe. I expect that's what the left want anyway.

How can they keep borrowing when they can't even pay back what they already owe

The UK keeps borrowing and we can't pay back what we owe, and yet the world continues to turn. The same's true, on a grand scale, for the USA.

The difference is that we can service our debts; ie, we can continue to pay the coupon on bonds, and we can continue to make repayments as they fall due, even if only by borrowing a balancing sum of new money. We're credit-worthy enough that at the end of a bunch of 10 year 3% bonds, we can borrow the same amount for another 10 years for 3% (plus or minus: people get very rich from the pluses and minuses).

The Greek problem isn't that they can't pay it back. It's that they can't even manage it at its current level. They can't pay the interest and they can't roll over debt as it expires, because no-one really wants to lend them money.

If you want to see it from the Greek person's point of view, the debt is the state's creation and the state's problem. The Greeks do not identify with their state or feel responsibility for its actions. Greeks identify with their country, which is made up of wonderful individuals such as themselves, but the state is something to avoid most of the time and benefit from in pre-election times.

I also have German relatives and getting to explain each nation's point of view to the other is proving impossible. The Germans are very contentious, they can't imagine having a debt and not paying it, and very socially conscious.

At another level the EU is experiencing the cultural clashes and 'lost in translation' issues that affect any federation.

'Conscientious' not contentious!

I agree with that. Most people can't afford to pay off their mortgages or other debts. But they usually pay the interest or get them paid of within their terms of borrowing. But Greece isn't doing this. But I still expect there will be some sort of way out. I thought they'd be out of the Euro over this but it seems not.

vivienne - I think under any sane system they'd be out of the euro . The only reason they aren't is that the euro is more a political creation (and ideological conviction) than an economic one with any kind of rational basis.

"the reality that staying in the eurozone means that Greece gives up on democratic self-rule, at least where fiscal policy is concerned."

I'm not sure what you mean. Other democratic countries manage to self-rule while in the Eurozone. The fiscal policy imposed upon Greece at the moment comes from not its Eurozone membership but its need to abide by creditors' rules if it wants more credit.

"Personally I think the best solution is probably a managed Grexit"

I agree. Best for EU and best for Greece too, since it will then be able to set its own monetary policy according to its own needs and circumstances/

"Most people can't afford to pay off their mortgages or other debts. But they usually pay the interest or get them paid of within their terms of borrowing."

Greece has already had a large chunk of its debt already off. People with mortgages they can't afford would worship at the altar of their banks if they got this kind of leniency. Greece's ungratefulness and its supporters' apparent ignorance of this fact is actually quite galling.

I agree booboo, I have Greek friends and German friends. They speak completely different languages even when they speak the same one.

I agree with you too, OThe Huge. What is a shame is that it wasn't possible to create an EU that allowed for differences, instead of gradual convergence under German hegemony. (And no, I don't blame the Germans, I admire them, they just seem to have order and efficiency in their DNA).

Looked at now, one can see how insane the whole thing was. But it came from good intentions, and one of them was peace. It would show yet again how crap humans are if something can't be sorted. Something based on the reality of what IS rather than what should have been.

I think the Greeks are ungrateful and the PM's speech was really cheeky IMHO. If I was in charge they wouldn't get another penny never mind what the referendum said. Good job I'm not.

Hully - The reason why this discussion isn't going anywhere is that you don't understand the significance of the figures I am posting. You have reached a judgement in your head, read an article that confirmed it, and now have to tell those of us who have studied economics at university and worked in financial markets that we are wrong in our analysis.

I posted two sets of economic data to you from Bank of Greece which prove that the austerity measures have worked to bring Greece's economy in the right direction. Did you understand them? Would you like to try your hand arguing why you feel those numbers don't show an improvement?

It's galling because you have a punitive nature, Cote. Or you certainly express yourself thus.

Lots of countries (including let us remind ourselves, Germany) have had debt write-offs. The Greeks find that particularly galling.

Everyone has their own gall, ultimately it doesn't change anythign or help, does it?

Would that be the economics that students are in revolt about because it denies reality Cote?

No economy, including our own, is moving in the right direction when people are starving and unemployment is increasing - but that is inconvenient life rather than sums again.

Tspiras will come out of it all right. Likely the vote will be a yes ( in effect a vote to stay in the euro) so he and his cronies will regretfully resign on principle and for the sake of stability will support the new gvt just long enough to get them money - then will manufacture a reason not to support them as soon as the money is got, and will then force another election - which they might well win.
The EU can't very well say 'you can have the terms as long as you promise not to elect Tspiras again...
Tough one for everyone except Tspiras who will be fine whatever happens, craft bugger...

Spot on MrsU! Tsipras, like all Greek politicians, is primarily concerned with his personal political success. As a secondary issue he will protect his party, but not to excess as Greek parties come and go. His aim is to become the new PASOK.

An EU top knob has stated that there are NO plans being discussed with Greek P.M.Tsipras, or any basis for a 'guaranteed' 48-hour deal after a 'No' on Sunday he mentioned this morning.

Tsipras is BACK on his 'No' soap box this evening within another 'NO' rally; I wonder what lies will come out of his mouth tonight???

Hullygully .... you don't like the qualified opinions of Cote, so take it personal with "punitive nature."

And there is the GREEK PROBLEM, they are taking the problems THEIR governments built up, personally.

In Greece there has been no RECENT loss of a World War, having been bombed out, invaded by Communists and needing a wheelbarrow of money to buy a loaf of bread state of the State, as happened in Germany when needing loans/forgiveness.

Cheap and plentiful EU money was Greece's downfall, and Greece was not alone in taking advantage of it i.e. home building in Spain and the Irish republic, but the Greek economy was not on solid ground once a severe recession hit - which was similar to the UK.

So Greece was not alone in making mistakes, but yours were bigger, thats all - now play the fecking EU game and stop bleating, they have your shesh-gonads in a debt vice.

"the economics that students are in revolt about because it denies reality Cote?"

I don't what you are talking about there, Hully. Worse, you don't know what I'm talking about. You don't understand the terms used, why the figures are relevant and what they indicate. You don't know the theory and have no practical experience of financial markets, either.

We have been trying to explain what is going on and why these austerity measures are implemented in such situations. You either don't get any of it or just don't want to.

I'm not saying this to put you down, but it is what it is. I probably wouldn't be able to talk to you about whatever you specialise in, but certainly hope wouldn't try to challenge you on a subject I know nothing about, armed only with borrowed paragraphs from some online articles.

"you have a punitive nature, Cote"

I'm sorry you are feeling punished, Hully. That wasn't my intention. The subject matter can be quite taxing at times, but I've been trying to explain it in simple terms and with layman's examples.

"Tspiras will come out of it all right."

I agree, as he is hanging on as once out of the EU, IMO he is best politically equipped to smooze up to Russia or China for money.

"No economy, including our own, is moving in the right direction when people are starving and unemployment is increasing "

Is that your professional opinion?

Unemployment increases when the economy slows down. There are multiple reasons when increasing unemployment would be a move in the right direction - e.g. during periods of high inflation.

Increased poverty is of course never pretty but the solution is not to give everyone a paycheck from the state and retire them at 50, which is what they were doing. Their economy will pick up and this time in the right direction - less state involvement, increased tax collection, proper business incentives, etc.

Apparently the banks will have run out of cash by the end of Sunday

Cote - I'm not sure what you mean. Other democratic countries manage to self-rule while in the Eurozone. The fiscal policy imposed upon Greece at the moment comes from not its Eurozone membership but its need to abide by creditors' rules if it wants more credit.

This is both true and not true. Perhaps it would be more accurate to say signing up for a common currency means, for those countries that do it, accepting significant limits on what an elected government is able to do without incurring problems that might have been avoided were it not for the common currency.

That is to say, a currency shared between different nations limits the sovereignty of those nations' elected governments, including the sovereign right to make stupid decisions on the electorate's behalf, and then live with the consequences. If you're on your own, with your own currency, that's your problem, you devalue and hopefully bounce back. If you can't devalue, as has been exhaustively discussed upthread, you're a bit more stuck and basically just shouldn't have got into the pickle in the first place. But because no-one wants people to start questioning the single currency, instead you get bailed out with endless loans, in exchange for accepting that other people are going to tell you how to run your tax and welfare systems.

I think what is complicating this crisis most is the fact that it is not just about economics: under the surface there are fundamental conflicts about the proper mode of government in a globalised society. Should we be aiming away from nation states towards an international technocratic, social-democratic supra-government based on universal human rights and consumer capitalism underpinned by taxation and a welfare state? After all that is what most of northern Europe has, with relatively minor variations. Or do nations still correspond to blocs of cultural and political identity such as to be a better vehicle for different peoples' management of their own interests?

The eurozone (and the EU generally) has muddled this question, because in order to function properly it requires a social-democratic supra-government etc, but has been implemented on top of multiple, divergent nations most of which still seem to believe that their elected governments are in charge. I would argue, though, that they are probably mistaken, and inasmuch as different countries still seem to self-rule, that this is mostly because their electorates haven't yet voted for anything that sets the democratic mandate of their national government fundamentally at odds with the interests of the supra-government.

I've been riveted to the Greek crisis because to my eye it's only superficially about economics: fundamentally it's about how and from where the nations of Europe are ruled.