So should I buy Wonkabars or short them? I’m confused.
Wow, it is becoming more and more of a mess:
Pavlos Deas, owner of an olive processing factory in Chalkidiki, told The Telegraph that he may have to shut down a plant employing 250 people within days.
“We can’t send any money abroad to our suppliers. Three of our containers have been stopped at customs control because the banks can’t give a bill of landing. One is full of Spanish almonds, the others full of Chinese garlic,” he said.
“We don’t know how we are going to execute and export an order of 60 containers for the US. We don’t even have enough gas. We asked for 10,000 litres but they are only letting us have 2,000. It’s being rationed by the day. Factories are closing around us in a domino effect and we’re all going to lose everything if this goes on,” he said.
… another businessman:
“I can’t import anything. Restaurants are starting to close down because they can’t obtain food and we are going straight into the peak tourist season. It is going to be utterly horrendous if this goes on,” he said.
Syriza’s allies are abandoning the ship
Four members of the nationalist Independent Greeks party (Anel) - the junior partners - said they would break ranks and vote “Yes” to creditor demands - though no offer is now on the table - admitting that they were aghast by the closure of the banking system and the drastic events of recent days.
… the head of Syriza has climbed to the very top of the tree and there is no going back:
Mr Varoufakis vowed to resign if the Greek people voted yes. “I prefer to cut off my own arm rather than sign an agreement without debt restructuring,” he told Bloomberg TV.
… and the ranks are losing confidence in their leaders
One MP appeared to have lost confidence in the party leadership. “We have had months of childish tactics. They thought they could blackmail Europe into making concessions instead of going to the root of the problem facing this country and accepting that we have to break free altogether. They don’t know what they are doing,”
As I see it, there are no good outcomes. Things have gotten way too far.
If Greeks vote “Yes” (even though the proposal they are voting for does not exist), the government falls, new elections are called, which will take at least a few weeks, during which the country will continue falling apart. Hopefully after the elections Syriza is punished for its utter incompetence and relegated to the dust bin of history, new government accepts the EU terms, and harsh austerity measures are instituted. That’s the best case scenario.
If Greeks vote “No”, they will be forced, not by any external forces, but by pure necessity, to abandon Euro (which will cause big damage to the Euro in world markets), new currency is instituted, there is a long and agonizing period of pure economic chaos that is extremely damaging to the Greek economy, and when Greece somehow stabilizes it is relegated to be the “poor man” of Europe (or as the guy in that article put it “part of North Africa”) for the foreseeable future.
Correction to the previous post: it was not the head of Syriza that vowed to resign. It is the Finance Minister. Tsipras actually said he’ll respect the people’s will and fly to Brussels the day after to sign a deal. Except there will be no deal for him to sign since it is off the table, so it will have to be renegotiated, if he does renegotiate, it will be from position of even more weakness than before, and I really don’t see any way for him to remain PM if there is a “Yes” vote.
Also, part of a global crisis involving unregulated derivatives:
A proper intro t modern Grek history:
This is what the Germans are grinding into the ground in order to maintain full employment at home and an iron grip on European finances.
Takes a lot of blinders to read that in a positive light and say “look what the Germans are wrecking!”. Bizarre.
Few countries go from another political system to effective democracy and accountability without decades of maturing institutions.
It suited Germany and others to ignore the immaturity of Greek democracy and institutions, and now those lenders want the Greek people - primarily the working class - to pay.
This isn’t only Germany vs. Greece, it’s exploitation of working people in Greece.
You would have had that the EU should have treated Greece as an immature child unable to make adult responsible decisions for their own good? In hindsight that would probably have been for the best but I doubt it’d have gone over nicely at the time.
Besides Germany is not the ones being most adamant that Greece stick to the program. The other South European nations are generally harsher in their demands of Greece (those 56 billion that Italy sent to Greece or the 38 billion from Spain could probably have been spend at home to help some of their own many problems), and (poorer) East European countries (Lithuania subsidizing Greece is pretty absurd when you have been to Lithuania and seen the kind of poverty they’re struggling with there)
I mean, make greece a high-growth high tech mecca for business?
Suppose you were the president of Greece, and decided to emulate Singapore-could you do it? Suppose you slashed business taxes, gave incentives-how long till greece would have 7%/year growth, zero unemployment?
I don’t know. A coup? Because you are not getting elected under a campaign based on slashing the tax revenue supporting the impressive percentage of public workers in Greece.
The point really is responsible lending.
It’s not okay to take advantage of a working class population knowing the transient politicians who signed the loans on their behalf have long since been forgotten.
Lenders have to take a hit, sometimes it helps if it’s a big hit. It might not make them sincere but it’ll make them wiser next time
So what then? The IMF will only lend money to the US and China? The ones who are already rich enough not to need it?
Because it wouldn’t be one hit. In this case you make one exception and countries in similar situations, my own included, will want the same exact treatment.
Plenty of ways for a solvent economy to raise money. The IMF isn’t on most lists.
Lending is about risk vs. return - I know they managed it it in 07-08,but it sounds like Goldman Sachs still have you guys believing lenders should be indemnified.
Krugman comments on other Eurozone countries, noting that Finland escaped from a previous crisis by devaluation, an option no longer open to it.
BTW, a one-time devaluation is not the same as ongoing hyperinflation. This obvious distinction seems lost on some:
Such lavish condescension is unbecoming when it is your understanding of economics that is fundamentally confused. Greeks trading Greek goods with each other are limited by Greek production (i.e. employment), not by the value of their currency. Economists may debate whether deficit spending or an increase in the supply of money is the best way to deal with severe unemployment but neither option is available to a country without sovereign currency. That was the essential point LinusK made. But Shodan’s "grasp of economics seems to be one with Ninevah and Tyre, so if this doesn’t sink in, I won’t worry about it too much. "
I am puzzled. Loans or bonds are floated at an interest rate that (should) reflect the risk of default. in the case of Greece (long history of defaults), the rate should have been high enough to compensate. Of course, the lenders should have known the true state of greek finances-that is what bank lending officers are paid for. Was Greece paying high interest rates? If so, why not just get the principle back, and write any new loans at 20% or more.
I stand corrected.
So, what you are saying is that the Greeks aren’t responsible enough to manage their own affairs? In that case, it would make sense that Greece ceases to exist and becomes a territory of whatever country is willing to buy up the most debt.
They do seem to want to rip everyone else off rather than pay their taxes.
Perhaps a good war with Persia would set them up.
Are you sure Shodan has such a fundamental misunderstanding of the situation? The comments above seem as if they may be taken out of context. If he did have a such a lack of understanding it would be pretty amusing though; considering the forcefulness with which the arguments are presented.
I really don’t think the irregularities of the Greek tax code, nor the generosity of their civil servant salaries, are the *actual *issue here.
Not only previous Greek governments, but the Greek private sector, were able to borrow a lot of money at relatively low interest rates due to fiscal union with Europe, and the economy overheated as they tried to play catch-up with the wealthy north.
When the 2008 crash happened (and let’s remember, Greece had nothing to do with that; that was bankers in various countries investing in swindles substantially developed in the USA) anybody tied into the European/global economy got slammed. Greece went from a very hot boom to a terrible bust, and suddenly found that without a general European boom or general European inflation, they couldn’t pay back the enormous amount of debt that had been accrued both by the state and by private businesses.
This was go-go borrowing, to echo a phrase from the USA’s 1980’s S&L collapse. It has more to do with reckless banking than with government salary & pension policy.
ETA: I think Krugman is probably right that the whole of southern Europe would be having a less hard time–still a bad time, but less bad–if Eurozone inflation were between 2% & 4% instead of below 1% or whatever it is now. Tight money is going to tend to depress economic recovery.