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 elite would create an artificial crisis using their own appointed actors and they would inflate debt figures in order to create a crisis for which their preferred solution is austerity'

But do you really think that it's possible to orchestrate things quite that precisely?

'you have been relentlessly good humored, and never seem to get pissy with anyone'

Thank you suzannecanthecan, it's easy keeping one's head when others [no names mentioned, but everyone knows who they are] are losing theirs around you if you know you are speaking the truth

Greece can't pay its debts now. You can put whatever you want in the accounts, but a bit of creative accounting can't change that.

You can't go to your mortgage company and say "no, I can't make next month's payment, or any payment this year, but really are you evaluating my total debt correctly?"

' do you really think that it's possible to orchestrate things quite that precisely?'

Absolutely. I think Germany has been played and outmanoeuvred. I think the objective is to harm the Eurozone and weaken Germany and the EU. It has taken years to materialise.

The whole Greek debacle goes in part back to the days when Goldman Sachs helped advise the Greek politicians when they entered the Euro in the first place, when the figures were not as accurate as they could have been. Were IPSAS accounting standards used?

No IPSAS wasn't used, because it didn't even exist when the Maastricht criteria were established. The Eurozone might move towards a change in public sector accounting standards, but they do everything very slowly. Anyway, as Merrymouse says, Greece cannot make their payments at the moment. That's a problem, however you calculate your debt.

People comparing this to a bank loan, or a credit card debt, or a mortgage: this is a simplistic analogy. A national economy is not like a household. We are talking about a nation of 11 million people. The analogy is invalid because there are political consequences to debt and austerity on this scale.

Money is a technology which facilitates the exchange of goods for labour. When it causes mass suffering something is wrong and it is a political problem which must be addressed.

The real danger is political extremism which we have seen in Greece and is what the EU was set up to prevent. The moral position of "you borrowed the money and now you must pay it back" is irrelevant because what really matters is the future security and prosperity of the whole EU.

Before Greece entered the Euro, when it was soverign country with its own currency, the Drachma, it never experienced a 25% drop in GDP , as great as the US experienced in the Great Depression. Greece was even more corrupt than it is now then, with more clientelism, tax evasion etc, and yet their economy still did well enough and grew and they issued bonds and they were bought by investors and Greece had to pay higher interest on those bonds.

But after their political class engineered them into the Euro on falsified figures, partially advised by bankers (who had studied hard at university), the ordinary Greek people have now suffered a catastrophe and the neoliberal system is imposing draconian austerity on pensions etc

But the Greek people and Greece are just bit players in the geostrategic game of the elites. The real damage is being done to the Eurozone and the EU project and the European powerhouse economy - Germany. Greece is just the catalyst for that. And after Greece, there will probably be another catalyst. I don't think Germany has enough fingers to stick in all the dykes that are yet to spring leaks.

We need Jon Ronson.

Sorry to come back in late.

Claig, please tell me how living in Donetsk means that I can't possibly understand what's going on there now? What is it about living in gorgeous Donetsk (really - it is/was a beautiful city...in the centre at least) leaves me incapable of understanding the events as well as someone who, I presume, has never actually set foot in glorious ????????

As to the rest of your points....

No, I am pro West and pro capitalism. But I am against metropolitan elites who stitch the people up. I am for democracy and referenda and the people's choice. I am against war and suffering and want people to be allowed to prosper and develop without being stitched up by unaccountable and unelected bureaucrats and elites who impose austerity that destroys GDP and economic prosperity of ordinary people.

Really? Because you don't seem to be against the war instigated by Russian in Ukraine. You don't seem to approve of the democratic mandate handed to Angela Merkel by her electorate to negotiate with Greece, and despite your protestations to the contrary, you stand squarely for a party that wants to dismantle the UK's welfare state, one that would destroy prosperity for everyday working Brits.

The reason I (and others...) think you might be a Kremlinbot is because all your contrary views are easy enough to understand through the lens of Russian interest. Russia wants a weak and divided EU, so it can continue to go on holiday in Paris and stash cash in the London super prime market. Russia wants the UK to be governed by UKIP, so it no longer influenced in EU affairs and hands out even more tax goodies to non domiciled Russians. Russia wants to sow division and discord in Europe so it can drag the Baltics back into its corrupt & undemocratic sphere.

Russia is the best example we have of an undemocratic oligopoly which is genuinely run in the elite's interests...

russia and the middle east are two very good reasons why the eu should be pulling together as much as possible. united we stand ..

The analogies to household budgets/credit cards are closer to the truth than you'd care to admit. Of course it's not exact. No analogies ever are. I'm sure I can lead a horse to water and make it drink.

People just like to pretend economics is this complex beast too complicated for you to understand...It's bullshit really. The bottom line is that even sovereign nations have to balance their books (eventually) just like any household. The old thinking that a western nation cannot go bankrupt is now clearly wrong. Greece is bankrupt.

The 'moral position' you speak of mustermark goes beyond Greece & in fact probably even the EU. You can't simply let even a country borrow, borrow, borrow then when they cannot pay it back simply say "Ok mate, never mind. We'll wipe it clean and here.....borrow some more"

As I said much earlier. Greece creditors will at some point need another haircut on it's debts. Even the German's accept that.

The issue right now is the Greek PM is asking to borrow more money, not taking the steps the creditors think is necessary to sort their finances out AND demanding to have 30% of their debts forgiven.

Now. You try that with your bank manager. Yes mr bank manager, I know I'm £100k in debt but I really need to borrow another £10k to pay my bills and in order to borrow the money I also demand you wipe out £30k of my debts.

Let's see how long he/she laughs for.

'please tell me how living in Donetsk means that I can't possibly understand what's going on there now?'

Because of your analysis of what is happening now. I think you have a wrong analysis of it, so living there has not helped.

'Because you don't seem to be against the war instigated by Russian in Ukraine.'

I disagree with you, I don't think Russia has instigated a war. There is a Minsk treaty and the ukrainian coup government, which toppled an elected President when an election was due within a year, have refused to negotuate with the separatists who want a federation. they don't want to secede, they want a federation. There are a million refugees from Donetsk and Lugansk and most of them have gone to stay in camps in Russia, not Ukraine.

'You don't seem to approve of the democratic mandate handed to Angela Merkel by her electorate to negotiate with Greece'

I am all for democratic mandates. What I don't approve of is her intransigent policy. i agree with the IMF that she should write down some of Greece's debt and provide more debt relief. In a democracy, citizens are allowed to disagree with politicians such as Tony Blair on the Iraq War or Cameron on rooftop wind turbine policy and the need to hug a hoodie. That's democracy.

'you stand squarely for a party that wants to dismantle the UK's welfare state, one that would destroy prosperity for everyday working Brits.'

UKIP is against TTIP unlike Labour and I support UKIP because I believe in independent nation states and democrac, referenda and national sovereignty. We can all see how the EU elite has reacted to the democratic referendum called by the Greek government The EU is run by unelected bankers and their servants and they impose economic orthodoy on all European countries. As the Syriza MP said last night, if governments are not allowed to make their own economic decisions on taxation, pensions etc then what is te point in holding elections. Under UKIP, there will be a point in holding elections, because the people will have direct democracy, referendums and national sovereignty.

'Russia wants a weak and divided EU'

Yes, but I think the same is true of the US.

I support UKIP because I want an independent Britain run on common sense principles and no longer taking orders on rooftop wind turbines from unlelected bureaucrats in Brussels.

I have nothing against Russia or Russians or Chinese and I do not believe the media generated spin about them. i want trade and peace and I think we are being prepared for war which is why there is the vilification of Russia.

People comparing this to a bank loan, or a credit card debt, or a mortgage

My point is that Greece's fundamental problem is that they can't make repayments. With any debt this is when the shit hits the fan. You can't change this by using another set of accounting standards.

As with other debts, creditors may take a pragmatic approach and come to an agreement with their debtor.

I agree with most of what you say claig, except for the reservation that most of the actual members of said democracies are kept in wilful ignorance and simply don't have the information necessary to make a reasoned choice/vote.

I'm sure I can lead a horse to water and make it drink

Maybe you can Niceguy, but that's an idiom, not an analogy

Of course economics is complex, an economy is an example of a non linear system and as such inherently complex?

The analogies to household budgets/credit cards are closer to the truth than you'd care to admit. Of course it's not exact. No analogies ever are. I'm sure I can lead a horse to water and make it drink.

Niceguy2

You only have to Google, "family budget analogy," to find it debunked and lambasted by reams of reputable newspapers, think-tanks and academics. It's a famous trap, so easy to fall into, so favoured by politicians who want to belt tighten for political reasons.

It's a flawed analogy because the household vs the state is the difference micro and macro economics.

And why do you think your analysis, informed by hours of watching RT, is better than someone equally as informed and who has, you know, actually lived in the country? I know, for a fact, that the majority of people in Donetsk are not blindly pro-Russia. Nor are they blindly pro-EU. Most of them hold nuanced, sometime contradictory views.

Most of the younger generation are pro-EU, and feel that they are Western. They are annoyed that their children can't be taught in Russian, but at the same time (and similar to many parents on MN!) feel that being bilingual in Ukrainian is a good thing. They take holidays to Poland & the Czech republic, and feel embarrassed that countries previously lagging them in terms of HDI have now surged ahead. They see that being in the EU has sorted out/been the catalyst to reduce corruption (to some extent) in these countries. They want the freedom to travel & work in the EU and Germany/UK/etc. freely. The EU represents freedom and a chance to escape their underdeveloped and corrupt - yet beautiful country, but also to reform that country.

Many of them will have close relatives - cousins, aunts, uncles - living in Russia. They feel an affinity and fondness to Russia, a shared cultural sense. But they explicitly feel that they are still different - they are Ukrainian, maybe different from the Western Ukrainian sense of being Ukrainian, but by god they are not Russian.

The older generation has fond memories of the Soviet Union, and feels disorientated by this new world where they have to speak Ukrainian in their everyday jobs. They feel natural resentment at this, and that they are being ignored in their own country. But they also enjoy the idea that they aren't Russian either, they are a distinct (and obvs. better!) version of Russians. Less drunk, less corrupt, more Western etc. Many of them long for EU standard healthcare & retirement benefits. Many of this population will have supported the idea of Russian integration, but not the practice. The wealthier of these people have either left for Russia or Western Ukraine - in practice denuding Donetsk of those that might have supported a soft Russian takeover. The only people left now are the very poor. It's a desperate, horrendous situation. I feel like my happy memories of Donetsk are being shat on by Russia.

Sorry that was so long...

'Russia wants a weak and divided EU'

So do you Claig - you want us to leave the EU!

Russia is being rightfully vilified. It is a corrupt, undemocratic country, run in the interests of the rich, unelected oligarchs.

So what if UKIP is against TTIP? It's also all for dismantling our welfare state and turning us into some kind of US - Russia hybrid, with the poor thankful for shitty jobs and the rich never having to hand over a penny in taxes. God knows why you think that's a better, more democratic future for this country.

Niceguy2
It's a bit like saying higher mathematics is simple because 2 plus 2 equals 4 and that is easy to understand.

that was^ an analogy btw?

Parliament president Martin Schulz is asked by a journalist: "Aren't you afraid that by accepting the Greek narrative of the referendum, it means that more and more populist politicians will use referendums as a political weapon in budgetary issues."
Schulz replies that other MEPs have "raised exactly that problem".
"What will happen if there is a referendum in another country, putting in doubt a possible compromise with Greece? What will then happen? Therefore I think we are in a difficult situation."
Pesky voters, eh?

Well Hully, the problem is we all want contradictory things. I want to pay less taxes but have better public services. If you held two referendums, one asking if people wanted more doctors, the other asking if people wanted lower taxes, you would probably get good majorities for both.

But they are contradictory desires.

That's why we don't have a direct democracy - we elect governments to make difficult decisions for us, based on their ideological convictions.

Niceguy2.

No, government finances really aren't similar to household ones at all.

For one, my spending is your income and so my saving makes you poorer. Put it this way: if I'm broke and cut back spending my household finances recover. If we're all broke and cut back spending shops go under, businesses fold and we're all worse off.

For another, nations don't have life cycles. Sensible and lucky,individuals usually load up on debt when they are young (mortgage, student debt, etc..) pay it off and build up assets during working life and then live off savings and pension in old age. Countries don't age or die and so there really really isn't a point where 'balancing the books' is necessarily a good idea.

Look at the charts here:

www.ukpublicspending.co.uk/uk_debt

The UK's been in debt since 1700 - probably earlier too, but I can't find a chart that goes back that far - The highest debt peaks as a % of GDP (which is the number that really matters) were after the Napoleonic wars and after the second world war.

There's nothing wrong with debt as long as your creditors give you good interest rates.

The moment things look a bit dicey, and you are perceived not to be able to pay - well your interest rates on debt rise and you're in a pickle because you can't afford the repayments.

Greece's fundamentally weak economy with a bloated public sector full of people not actually doing all that much combined with a culture of tax evasion means people take one look at it and think the risk is too high.

If you borrow as a country, you must make the repayments to keep borrowing. Greece can't make the repayments without serious reform. This reform is painful.

Aloysha, I don't want to turn it into a Ukraine thread, suffice to say what ordinary people think has no effect on the geopolitical game in Ukraine, just as what ordinary people in Greece think, or ordinary people in the UK thought about the Iraq War that Tony Blair took us into, has/had no effect on the geostrategic game except when the Greek government decided to call a democratic referendum, which put the elite's noses out of joint.

As for UKIP, I think democracy, common sense, independnece and national sovereignty are the most important things a people can have, which is why I think UKIP are better than the other parties. But there is disagreement over that, because that is politics.

"So do you Claig - you want us to leave the EU!"

Absolutely because I believe in democracy and national sovereignty and the way the Greek government has been treated by the EU elite has made clear to the world what they think about democracy and the popular will. I don't want that for Britain one day in the future when we might get into economic difficulty. I want our elected politicians to be able to determine their own eceonomic policies and targets rather than being puppets of the bankers.

niceguy2: A sovereign nation with its own currency can never go bankrupt, and this is the fundamental problem with the Euro in general and with Greece in particular.

I'm interested to know which nation has "balanced its books" in modern times, or is this speculation on your part?