The economist Thomas Picketty is interviewed by Die Zeit about Greek debt: a translation is available at Medium. After due consideration the good professor concludes, and I paraphrase: Fuck those Germans. Key quote: [INDENT]Piketty: When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.
…After the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece. Instead, both of our states employed the second method with the three components that I mentioned, including debt relief. Think about the London Debt Agreement of 1953, where 60% of German foreign debt was cancelled and its internal debts were restructured. [/INDENT] Greece’s debt is currently 177% of GDP: it was 107% in 2008. Recall that government spending in Greece is about 80% of what it was in the beginning of the financial crisis.
Anyone come across any informative podcasts/radio shows/tv programs talking about the latest from Greece and the fallout? I’m kind of fascinated by this potential breakup, and long term I think it will be good for Greece. And btw, of course Thatcher was right about the Euro:
Why do you keep wanting to fuck Germans? Germans are not that attractive, and Germany is not the one being most strict in their condemnations of Greece. Finland was extremely upset about the previous deal which they considered too lenient, and has already said there will be no new deal with better terms. Lithuania has an, if possible, even tougher stance – same goes for Estonia & Latvia. I have also still to see any good arguments that poorer East European & Baltic countries should be forced to pay for the much richer Greece, and all in all I’d much rather that we focused on aiding Ukraine & Moldova. But fuck them right.
Anyway, my solution to the Greek problem is debt write down to around 50% GDP, couped with taking away their ability to run deficit the next twenty years. A new start is required, but lets not end up in the same hole five years down the line.
I think popular German recalcitrance to lend any more money is predicated on the sentiment that there is widespread tax fraud and corruption in Greece. That’s driving the determination to enforce “austerity.”
In short, Germans do not think the Greek system behaves responsibly with the money they are given.
So, I guess right now everything is in a holding pattern until Greece presents it counter offer to the EZ tomorrow (basically, the counter offer seems to be a 30-50% ‘haircut’, which Germany would take the biggest hit on). Greek Finance Minister Yanis Varoufakis resigned is the only other notable thing I’ve seen in the news (everything else is pretty much the same as after the ‘no’ vote was confirmed). Banks are still not open fully and I can’t see that changing unless the Greeks persuade the EZ to go along with their proposal AND give them a bailout to carry them over in the mean time. So, I guess it’s going to hinge on that as to whether there is a Grexit or not (or, of course, if their banks collapse in the mean time I suppose).
I have a question though. I know there are severe limits on Greeks to withdraw money from the Greek banks. Theoretically, could a Greek citizen go to another country and withdraw money from an ATM there? This came up in a discussion I was having this weekend and my thought were that the accounts themselves would be frozen since even though it’s all in Euros it still has to check back with those accounts. Another guy thought that they should be able to go to another country where the ATMs aren’t frozen and get out their money just like any other EU citizen. Anyone know for sure? Just curious.
Well, since the folks at the ECB basically hated his ridiculous rhetoric (and it seems the feelings were mutual) I’d say it’s what they are hoping for, and it might work. But the Greek government has kind of painted themselves into a corner with their referendum at this point…they can only concede so much and they absolutely are going to need the EZ and ECB to write down a good part of their debt AND give them access to the bailout funds. And the clock is definitely ticking…a Greek collapse could be days or at most a week or so away without an injection of cash real soon and some sort of deal.
I guess the French and Germans aren’t seeing eye to eye on what to do next, so I suppose there is a chance that Greece might get enough concessions to make a deal and stick to the referendum. But they are playing chicken with their country and if the Germans have their way they are screwed.
ISTM that the Greeks are being as clear as possible - they are not going to pay back anything. They aren’t going to pay back what they have already borrowed, and if they get more loans, they aren’t going to pay those back either. They didn’t do the things they said they would earlier, and they aren’t going to do them now.
I disagree. From what I heard, the Greek proposal will be a ‘haircut’ or write down of their debt…something between 30-50%. Probably an extension on the rest for a decade or so. Plus, of course, access again to the bailout fund which they desperately need right now to inject liquidity into their system. But I don’t think they are saying they won’t pay back anything at all. Even if they go their own way and create their own currency (and then play inflation games to leverage their debt) they will have to pay something.
Yes, it is an exaggeration to say they won’t pay back anything. But the proposal, if it is as you say, will absolutely go nowhere. I really don’t see how the creditors will be convinced to moderate their terms by the fact that Greek population doesn’t like them.
Exactly. Greece won’t be paying back anything and everybody knows this. The elephant in the room will get a 100 % haircut (I don’t know if elephants actually have hair but it makes for a nice metaphor).
Well, at this point most of the ‘creditors’ are the major national banks and the ECB. Like I said, there seems to be some dissension between France and Germany (the biggest players in the EZ/EU of course). The actual Greek proposal hasn’t been shown yet, so it’s all speculation as to what specifics they are asking for, but they have said all along they want that write down ‘haircut’ of their debt, so that’s a pretty good bet. After this referendum, though, the ability of the Greek government to broadly negotiate might be somewhat stifled, since they are going to have to abide by that…and there just might not be enough room on both sides to come to an agreement. Seems to me Germany is already at that point and are merely going through the motions, but maybe there is enough for both sides to be able to come to an agreement. It’s going to be ugly, regardless.
Elephants do have hair. But I don’t think a 100% haircut is possible in any way, so that would not even be worth them going for. I’m not even sure they will get the 30% (probably not the 50% for sure), as that might not be politically possible with the various ‘creditors’ voters (especially the German voters who will be taking a large part of this).
I’m probably missing something but why should a Greece outside of the Eurozone but still within the EU be such a big deal? After all, 9 EU members, including my own, the UK, have been doing just fine managing their own financial affairs. The Eurozone is certainly not essential to fiscal well-being.
But I don’t think a 100% haircut is possible in any way, so that would not even be worth them going for. I’m not even sure they will get the 30% (probably not the 50% for sure), as that might not be politically possible with the various ‘creditors’ voters (especially the German voters who will be taking a large part of this).