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The Greek debt crisis....why?

999 replies

InDespair · 27/06/2015 17:24

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.

OP posts:
Hullygully · 29/06/2015 13:47

that's a bit rude cote. I don't think ad hominem attacks will get us any further.

Greece is in a terrible position, we all know that, we all know it went mad when it joined the euro and got all the free money it could (the Greece then). Just look at its history.

But this is now. Grinding it further into the dust will profit no one, least of all its creditors, never mind the actual live people.

herethereandeverywhere · 29/06/2015 13:50

Greek 'austerity' over the last 5 years....I read yesterday that the UK based company Dixons Carphone has a greek chain (i forget the name) which has done very well over the last few years; in no small part due to a government-backed scheme to issue free laptops and tablets to the 'underprivileged' Shock

And therein lies the problem. The IMF and the Eurozone are lending billions so the Greeks can retire early and play on their free laptops. I am actually a leftie but that type of feckless money management in the face of massive debt issues makes it difficult to offer sympathy. Greece simply cannot have a utopian left wing society when it's being paid for by endless debt.

juliascurr · 29/06/2015 13:51

there were similar pro-austerity arguments after WW2 - great resistance to founding te NHS, nationalising industry etc
the Attlee govt prioritised the welfare of the general population over those preaching the vital importance of 'living within our means' - usually popular with those with substantial means
the British remembered the 30's as an example of austerity in practice
post-war public borrowing and spending were followed by the 'never had it so good' 50's

Earlybird · 29/06/2015 13:51

A party elected as a reaction to austerity measures, with no clear plans for the future of the economy.....

Completely agree. The current government was elected based mostly on the promise to stand against austerity measures demanded by the EU. Their strategy for dealing with the debt issue seems to be consist of asking for more money and more time - with no clear/effective strategy for repaying the money owed. Instead, they are getting deeper in debt with repayments looming but also due to the fact they stubbornly insist on outdated retirement/pension policies that exist nowhere else.

At some point, you can't keep 'kicking the can down the road'. At some point, you have to deal with reality. That time appears to be now.

CoteDAzur · 29/06/2015 13:54

I'm sorry you feel it was rude to point out that your views on Greece's situation appear to be based on emotions rather than an objective understanding and analysis of their economy. I got that impression from the absent economic content in your posts and your use of emotional appeals such as "Why not just get every Greek to sell a kidney?".

You've been asked this before but didn't answer: How exactly do you believe Syriza plans to "do things differently"?

Isitmebut · 29/06/2015 13:59

Hullygully ..... What Greece did to get into its mess is history.

But the EU is a big honking bureaucratic game, and Greece no longer wanted to play the game.

The debt WAS unserviceable, but Greece had to play the game of being a good 'member' and trying its best to dig itself out, to then look for debt forgiveness - but it would have took more effort, not bluster.

Gobby open necked Syriza calling important German's names, when it could be said if NOT for Germany financially standing behind the Eurozone during the Financial Crash, there would have been a lot more damage.

You can't dictate to EU Germany what YOU want, you have to play the fecking game. I HATE the fecking 28-State games.

Greece never, so tah dah they and everyone else they needed on their side, appear not to want to play games any more with Greece, and taking away their Euro beach ball.

IndridCold · 29/06/2015 14:03

The saddest thing is that a year ago the Greek economy was doing pretty well (fastest growing economy in the eurozone). The Syriza coalition government has done an awful lot of harm to their own country.

claig · 29/06/2015 14:04

"due to a government-backed scheme to issue free laptops and tablets to the 'underprivileged'

Reminds me of the socialist economics and use of taxpayer money of one Gordon Bennett

"Gordon Brown promises free laptops and broadband for poor families

Prime minister unveils plan to give 270,000 low income families the technology to help them follow their children's progress at school"

www.theguardian.com/politics/2010/jan/11/gordon-brown-free-laptops-broadband

Isitmebut · 29/06/2015 14:10

Hi Claig .... its taken free laptops to get you off the fence, even the bureaucratic EU didn't get your goat up, are you well? lol

RandomFriend · 29/06/2015 14:13

Greece has lost 25% of its GDP in the last five years, so that banks in Germany and France didn't have to suffer losses.

Some economists argue that the Greek debt situation has been handled really badly by the ECB since 2010.

www.voxeu.org/article/grexit-staggering-cost-central-bank-dependence

It is because the ECB handled the situation so badly that the austerity measures were introduced. Thus the current crisis is not completely the fault of Greece, as this thread seems to be suggesting.

Hannahouse · 29/06/2015 14:13

This reply has been deleted

Message withdrawn at poster's request.

claig · 29/06/2015 14:17

I'm fine. This is not one of my many strong subjects. I know the Greeks were tricked by an elite class of progressive fat cat politicians and that they were advised by Goldman Sachs in part etc and that figures were quoted to get into the Euro which probably most of the Brussels bureaucracy knew were baloney, but what happens now, I don't know.

My strong subject is conspiracy theory and I am sure that there are several behind all this.

Earlybird · 29/06/2015 14:22

We've spent the last however many days/weeks/months pretending that the Greeks were negotiating in good faith they never were and that the Germans had an intention of massive debt forgiveness (there was never a chance of that).

It has been clear for a long time that the Greeks don't want to compromise. Who can blame them? Compromise, as defined by "they take the money in agreement for austerity" has been a disaster. It hasn't worked. If it hasn't worked by now, it isn't going to work.

It has been clear for the last month that the Tsipras government was calling for a total repudiation of the debt owed. The only question was the terms:
do the creditors want to take a 70% reduction on the debt in euros, or
do they want a 70% debt reduction to be paid back in drachmas, over a longer period where Russia and China help the Greeks through the process?

The Greek position has been to offer nothing at all to Europe, other than a different way to cram down the debt.

The most important point at this moment:
the euro is stronger without Greece.
Greece is stronger without the Euro -- not immediately, but in a year or so, depending upon China and Russia.

Short term view - things look dreadful.

Intermediate term view: things look better, for everyone.

merrymouse · 29/06/2015 14:22

What "historically" is that, merry?

I can't think of an exact comparison involving debt, but for instance the American Revolution wasn't won because America won a logical or legal argument about tax, it was won because Britain couldn't win a war across the Atlantic at the time and France found it expedient to help the colonies.

Many creditors will write off a debt if a business is in trouble because they need it to remain a going concern.

The banks received support after the 2008 crash not because everybody believed they had done their best, but because people needed the banks, whether or not they had behaved irresponsibly.

Historically, when push comes to shove, decisions are made taking into account who has most power and what is expedient, not what has been agreed previously.

The downside of not paying a debt is a poor credit rating. However, you just have to look at the Europe my grandparents grew up in (World War I), the Europe my parents grew up in (World War II), the Europe I grew up in (Cold War) and the Europe my children are living in to see that countries and situations change.

claig · 29/06/2015 14:23

I think this serves a number of objectives. I think Greece is being made an example of, after having been tricked by its corrupt political class in cahoots with bankers to enter the Euro on false figures. It is a warning to other countries in Europe and will probably be used as a reason to drive through centralised financial control within the Eurozone among all other Eurozone countries whether they like it or not. I think the elite also want to bankrupt Greece in order to pick off its assests and privatise its industries and because of the huge oil and gas reserves off its coast which may become exploitable over the coming decades.

Gemauve · 29/06/2015 14:33

there were similar pro-austerity arguments after WW2 - great resistance to founding te NHS, nationalising industry etc the Attlee govt prioritised the welfare of the general population over those preaching the vital importance of 'living within our means' - usually popular with those with substantial means the British remembered the 30's as an example of austerity in practice post-war public borrowing and spending were followed by the 'never had it so good' 50's

Nationalising industry was the cheapest course in 1945, and was done on the never never. To take the example of the railways and transport industries, although the share swap is now argued to have been over-generous, it cost essentially nothing at the time. Shares in the Big Four, already hugely depressed in value by the need for post war reconstruction, were swapped for (effectively) government bonds: nationalisation was done by forcing owners of shares to swap those shares for interest bearing government paper. We've been paying for it since. The nationalisation included complete basketcase industries, like the canals, which had been in terminal decline since the 19th century. Buying those was a really smart move. Not.

The same applied, mutatis mutandis, to steel, energy and telecoms: the choice was allowing them to go bust (with hideous consequences given the UK had to export to survive), lending them money under something like the Loans Guarantee Act of the 1930s which would cost cash right now or issuing government debt (dressed up as bonds) to pay for them later.

I'm not sure where you get the idea of 1930s "austerity" from either: the Loans Guarantee Acts pumped huge amounts of money into railways, canals, shipbuilding, particularly the underground in pure Keynesian mode, and then from 1935 the huge increase in defence spending had a similar effect.

What are you claiming was cut in the 1930s? It was an interventionist government that borrowed heavily, came off the gold standard (in 1931) to devalue sterling to improve the economy, formed a national government for most of the period to avoid political infighting, threw vast amounts of cash at industry (not all of it wisely) and generally did everything it could to keep Britain out of the global depression. It didn't entirely succeed: what more would you have had it do? What policy would, say, Syrzia implement that the National Government wouldn't? The Holidays With Pay Act? Raising the School Leaving Age? Slum Clearance? Devaluation? All National Government policies.

The opposition to the NHS was nothing to do with "austerity" either. The BMA and other objected to government involvement in health care which it variously saw as Stalinism or National Socialism. As Beveridge said, he shut the consultants up by stuffing their mouths with gold.

BubaMarra · 29/06/2015 14:37

I personally have no understanding for investors who beleived that greek fiscal position was the same as of other european countries. There was absolutly NO reasons for such a belief, EVER. And it's never good to make a financial decision based on a beleif, let alone such a stupid one. Looking at pre crisis greek yield curve relative to other countries you see madness, absolute madness. But global economy was in a boom cycle, money was literally floating around, so noone asked questions. Risk apetite was enormous. And than shit has hit the fan and now we all suddenly realise that Greece cannot repay its debt because its huge. No shit.

I also have no understanding for government corruption and tax evasion which is a HUGE problem for Greece, number one problem they need to address.

There is a lesson to be learnt for all the parties involved.

Fingeronthebutton · 29/06/2015 14:43

Do the Greeks still have a system where a single woman inherits her dead Fathers state pension. Or the 200+ Listed jobs where you retired at 50. I know that hair dressing was one of them.

claig · 29/06/2015 14:48

I think this lies behind a lot of what is happening.

"In August Digital Journal reported "Analysts gauge that Greece is in fact the richest country in Europe due to its wealth of, yet unexploited, oil and gas deposits."

...

According to Prison Planet earlier surveys estimated that the value of natural gas resources available for Greece to exploit could exceed $9 trillion. Those surveys did not take into account the Cretan Sea or the Southern Aegean.

John Ward, author of the Slog, has long maintained that the EU and U.S. have been aware of the potential of oil and gas reserves in Greek waters, noting that both sides are fully cognizant of the geopolitical importance of Greece.

www.digitaljournal.com/article/334152#ixzz3eSUpG4Qs

Someone wants to get their hands on it. Syriza are probably an obstacle and Golden Dawn will probably be an obstacle too, so someone wants to topple Syriza first and continue the decimation of the Greek economy in order to escalate the level of debt owed by Greece so that the oil can eventually be handed over to the bankers in payment.

Isitmebut · 29/06/2015 15:00

Hannahouse ....

re your "Isitmebut: "The international capital markets, investment banks, to normal fund managers, down to ‘Vulture’ Funds, are experts at pricing ‘risk’ ..."

"Global financial crisis?"

Should I really have qualified my point "except in a financial crisis"^? lol

You are correct in that every government bond price went up, every other non government bond's price went DOWN, so historic price/yield relationships went out of the window - especially as all the fund management buyers, put all their money in government bonds and then sat on their hands (no matter what the yields), until they felt safe to invest away from government bonds again.

Investment banks who thought they were 'hedged' against unnecessary risk (if 'long' credits and 'short' government bonds) coming into the crash, only found the opposite was true - but those that started buying early in 2009 did well - those who tried to 'average in' during the 2008 crisis i.e. Lehman and Bear Stearns with Mortgage Bonds etc, paid the ultimate price.

Your 'point' on any scoreboard.

Isitmebut · 29/06/2015 15:13

BubbaMarra .... Re your "I personally have no understanding for investors who beleived that greek fiscal position was the same as of other european countries. There was absolutly NO reasons for such a belief, EVER."

If investors only criterion was a countries fiscal position, would they be buying ANY European government bonds NOW?

Investors in the time you are looking at, if wanted to be in the Euro, were looking for YIELD, as many pensions funds (especially Final Salary) counted on say 7% annual returns from their portfolios - saw AAA and AA bond yields go to 2-3% ish levels, when including inflation back then, gave them a NEGATIVE 'real' return.

That is also why collateralized securities and derivatives etc became investor popular, as they were looking for 'extra'.

But when investors buy government bonds, there are no bleedin' contracts signed, you are searching, but the problem is GREECE, not the investors.

Hullygully · 29/06/2015 15:38

Cote, hyperbole is a recognised and acceptable language device to highlight the ludicrous nature of others' supposedly "rational" arguments.

And what Claig said.

squidzin · 29/06/2015 15:51

Ooh claig. Interesting!

One day it might be... Those mad conspiracy theorists were right all along! (just not about climate change)

claig · 29/06/2015 15:52

Absolutely, squidzin! And they are right about climate change too!