Greece Debt Crisis - Après Oxi

Rightwing

Suryavarman wrote: »

As reported by the IMF:



The IMF do admit that the sustainability of Greece's debt was highly reliant on avoiding shocks to the economy. But apart from the election of Syriza, what economic shocks has Greece experienced this year?

https://euobserver.com/economic/118644
That's a valid question, but it must be remembered in the context of the IMF admitting to making glaring errors with their Greek policy. And in a host of other forecasts. Not all that long ago I received notes from the IMF downgrading UK growth forecasts. A few months later they were apologising. :rolleyes:

molloyjh

molloyjh wrote: »

The problem is that it takes time for the economic improvements to translate into meaningful benefits for the average Greek citizen. That's just real life. Had they toughed it out then what has been happening there in the last couple of months wouldn't have happened and they'd still be on an upward curve.

Real GDP growth was 0.8% in 2015, the EU Commission's latest forecast anticipates growth of 0.5% for 2015.

Most of the Greek economic growth in 2014 has been attributed to increased tourist numbers, and in all likelihood, lower growth as a result of Syriza's tactics in the past few weeks will be a temporary glitch. A lot depends on the outcome of the bailout negotiations.

They simply can't expect the life they once had because that life was based completely on lies, borrowings and mismanagement. You're so quick to give out about the EU and the US but you don't give out about the Greek people bringing this on themselves and inevitably asked you and me to bail them out of it.

With over ⅓ of the Greek people at risk of poverty, ⅓ of GDP wiped-out in a six-year recession, ¼ of working-age adults unemployed, and 90% of the money Greek receives in bailout funds return directly to creditors, I think we can safely say that Greeks have gone beyond the point of expecting life to return to the early years of the euro, they just want any kind of a life at all.

"You and me" are not bailing Greece out, financial institutions are bailing Greece out. We have a guarantor position which, because of European Union law and the inability of the Hellenic Republic to survive without European trade, it is preposterous to imagine a situation where that guarantee will ever be called-in. As it stands, we pay NOTHING to the crisis except the oxygen we waste in preaching about it from afar. We didn't even contribute to the EFSF because of the idiocy of our own indebtedness, and today, we are still more indebted, in terms of total debt as a % of GDP, than Greece will ever be.

Suryavarman wrote: »

The IMF do admit that the sustainability of Greece's debt was highly reliant on avoiding shocks to the economy...

You mean the projected sustainability?

Greek debt was not sustainable last year, and it was never going to be sustainable this year either.

Sustainability, if it is to make any sense at all, must refer not to the debt burden when it is lent at official rates (from the IMF, EFSF & ESM) but direct market conditions. A basic representation of debt sustainability might look like this:

[LATEX] $ \Delta D_t = \left(R_t - g_t)\right \times D_{t-1} \pm Primary $[/LATEX]

where [LATEX]D[/LATEX] is debt:GDP; [LATEX]R[/LATEX] is the interest rate, [LATEX]g[/LATEX] is growth & 'Primary' represents the primary fiscal balance (after debt servicing obligations)

This equation is good at underlining two things: the relative unimportance of the primary fiscal balance and the absolute necessity of a strong growth rate and low interest rates. Because if the interest rate on the debt is higher than the rate of economic growth, debt sustainability will fall (i.e. debt:GDP will grow), even if there is a primary fiscal balance.

Now, currently Greece's overall interest rate is estimated to be around 3.5%. Is it possible for Greece to decrease its debt with a modest growth rate and such a generous interest rate? Yes, it's possible over a long number of years, maybe in a couple of decades, Greece will return to the markets.

However, is it possible for Greece to return to the markets anytime in the near future? Yes, maybe if it pays interest of about 8—10%.

Is there any prospect of Greece's growth rate and primary balance being able to offset such a ridiculous rate of interest as Greece is likely to find on the markets in the coming decade?

Eh, lol.

Greece's debt is possibly sustainable as long as it stays in a Troika programme for years to come. That's probably the most redundant sentance I've ever written in my life. If Greece is in a Troika programme, its debt is de facto[/] seen as unsustainable.

In no meaningful way can Greece's debt be said to be sustainable.

Rightwing

A Tyrant Named Miltiades! wrote: »

Real GDP growth was 0.8% in 2015, the EU Commission's latest forecast anticipates growth of 0.5% for 2015.

Most of the Greek economic growth in 2014 has been attributed to increased tourist numbers, and in all likelihood, lower growth as a result of Syriza's tactics in the past few weeks will be a temporary glitch. A lot depends on the outcome of the bailout negotiations.

With over ⅓ of the Greek people at risk of poverty, ⅓ of GDP wiped-out in a six-year recession, ¼ of working-age adults unemployed, and 90% of the money Greek receives in bailout funds return directly to creditors, I think we can safely say that Greeks have gone beyond the point of expecting life to return to the early years of the euro, they just want any kind of a life at all.

"You and me" are not bailing Greece out, financial institutions are bailing Greece out. We have a guarantor position which, because of European Union law and the inability of the Hellenic Republic to survive without European trade, it is preposterous to imagine a situation where that guarantee will ever be called-in. As it stands, we pay NOTHING to the crisis except the oxygen we waste in preaching about it from afar. We didn't even contribute to the EFSF because of the idiocy of our own indebtedness, and today, we are still more indebted, in terms of total debt as a % of GDP, than Greece will ever be.


You mean the projected sustainability?

Greek debt was not sustainable last year, and it was never going to be sustainable this year either.

Sustainability, if it is to make any sense at all, must refer not to the debt burden when it is lent at official rates (from the IMF, EFSF & ESM) but direct market conditions. A basic representation of debt sustainability might look like this:

[LATEX] $ \Delta D_t = \left(R_t - g_t)\right \times D_{t-1} \pm Primary $[/LATEX]

where [LATEX]D[/LATEX] is debt:GDP; [LATEX]R[/LATEX] is the interest rate, [LATEX]g[/LATEX] is growth & 'Primary' represents the primary fiscal balance (after debt servicing obligations)

This equation is good at underlining two things: the relative unimportance of the primary fiscal balance and the absolute necessity of a strong growth rate and low interest rates. Because if the interest rate on the debt is higher than the rate of economic growth, debt sustainability will fall (i.e. debt:GDP will grow), even if there is a primary fiscal balance.

Now, currently Greece's overall interest rate is estimated to be around 3.5%. Is it possible for Greece to decrease its debt with a modest growth rate and such a generous interest rate? Yes, it's possible over a long number of years, maybe in a couple of decades, Greece will return to the markets.

However, is it possible for Greece to return to the markets anytime in the near future? Yes, maybe if it pays interest of about 8—10%.

Is there any prospect of Greece's growth rate and primary balance being able to offset such a ridiculous rate of interest as Greece is likely to find on the markets in the coming decade?

Eh, lol.

Greece's debt is possibly sustainable as long as it stays in a Troika programme for years to come. That's probably the most redundant sentance I've ever written in my life. If Greece is in a Troika programme, its debt is de facto[/] seen as unsustainable.

In no meaningful way can Greece's debt be said to be sustainable.

I regard this as a well written post, succinctly and decisively nailing the main points.

Another point to be aware of is, the bond market won't and indeed can't remain this benign forever. This is when more countries will face trouble.

swampgas

A Tyrant Named Miltiades! wrote: »

Sustainability, if it is to make any sense at all, must refer not to the debt burden when it is lent at official rates (from the IMF, EFSF & ESM) but direct market conditions. A basic representation of debt sustainability might look like this:

[LATEX] $ \Delta D_t = \left(R_t - g_t)\right \times D_{t-1} \pm Primary $[/LATEX]

where [LATEX]D[/LATEX] is debt:GDP; [LATEX]R[/LATEX] is the interest rate, [LATEX]g[/LATEX] is growth & 'Primary' represents the primary fiscal balance (after debt servicing obligations)

This equation is good at underlining two things: the relative unimportance of the primary fiscal balance and the absolute necessity of a strong growth rate and low interest rates. Because if the interest rate on the debt is higher than the rate of economic growth, debt sustainability will fall (i.e. debt:GDP will grow), even if there is a primary fiscal balance.

Interesting equation - but shouldn't inflation be included there as well? Maybe something like:

[LATEX] $ \Delta D_t = \left(R_t - g_t - I_t)\right \times D_{t-1} \pm Primary $[/LATEX]

where [LATEX]I_t[/LATEX] is the inflation rate of the currency in which the debt is held?

So if growth is less than the interest rate, the only way to prevent the effective debt value climbing inexorably higher is print more money (QE)?

And doesn't inflation cause the GDP to increase in numerical terms, while debt would remain numerically the same, so Debt to GDP ratio can improve with enough inflation too?

Edit : there is probably a much better way to handle inflation rates than by shoving it into that equation as shown ...


.

swampgas

swampgas wrote: »

Interesting equation - but shouldn't inflation be included there as well?

My apologies, I should have said that I am using all nominal variables; obviously you could include inflation and use real variables, but I'm just using rough proportions to illustrate a point.

That point being that so long as g>r (lets switch to real values), the debt burden is diminishing. As long as Greece stays in a programme, g>r should be reasonably doable, but with a fairly flat slope, so it will take a long time.

So without this debt relief, any prospect of Greece returning to the markets will result in a situation where r>g by a long shot, and Greece will not be able to run sufficiently high primary surpluses to offset the difference.

That's the basic point I'm getting at in suggesting that it is senseless to put the words Greece and sustainability in the same sentence and, without debt relief, that situation will remain.

Finally, the equation I used above is not to be taken too seriously, because it takes no account of the various interactions between r, g and the primary balance (e.g. higher surpluses will diminish default risk and push down r, potentially allowing the fiscal space for increased investment and additional growth).

The IMF do a far more comprehensive technical guide on debt dynamics if anyone is sufficiently interested!
http://www.imf.org/external/pubs/ft/tnm/2010/tnm1002.pdf

swampgas

A Tyrant Named Miltiades! wrote: »

That point being that so long as g>r (lets switch to real values), the debt burden is diminishing. As long as Greece stays in a programme, g>r should be reasonably doable, but with a fairly flat slope, so it will take a long time.

So without this debt relief, any prospect of Greece returning to the markets will result in a situation where r>g by a long shot, and Greece will not be able to run sufficiently high primary surpluses to offset the difference.

That's the basic point I'm getting at in suggesting that it is senseless to put the words Greece and sustainability in the same sentence and, without debt relief, that situation will remain.

From a political POV though, if Greece can prove that it can service its loans while in a bailout, even if for many years g > r is only possible because of the low r provided by bailout funds, presumably there would be more political support for some sort of effective write-down?

But if Greece while in a bailout program cannot demonstrate some willingness to boost growth, perhaps there is a fear among the creditors that providing debt relief too soon (or even talking about it at all) would simply be seen as rewarding poor fiscal policy? And that Greece would have less incentive to do the hard graft of reform leading to growth if there were a possibility of a major debt write-down in the offing?

I agree that some form of debt reduction in the future is possible, and maybe even tacitly accepted by some of the bigger players, but I also think that the political reality in many Euro countries is that the electorates just don't want to hear about it - yet. Maybe if Greece can reestablish some level of trust - a huge task in itself - and get some solid years of growth behind it, maybe then there would be a willingness to start talking about the debt issue.

.

Labarbapostiza

swampgas wrote: »

But if Greece while in a bailout program cannot demonstrate some willingness to boost growth, perhaps there is a fear among the creditors that providing debt relief too soon (or even talking about it at all) would simply be seen as rewarding poor fiscal policy? And that Greece would have less incentive to do the hard graft of reform leading to growth if there were a possibility of a major debt write-down in the offing?

.

The thing is, from a northern European perspective, the "hard graft" required, is in fact a lot hard - even close to impossible.

Take the Greek military. In northern Europe our military big men, are not really big men at all, and the apparatus is completely subordinate to the civil government. In Greece this is not so. The Greek military is beyond anything they need or can afford. But it's a cash cow for the big men. A military coup is a very likely possibility if serious attempts are made to reel it in.

In Greece, as in Ireland, the state is a cash cow for big men running "private enterprises" (pretty much the business plan of Johnny Ronan was to build office space, that would then be rented back to the Irish government). It costs several times what it does in northern Europe to build a road or other civil infrastructure. The excess goes to big men, who then live the life of Johnny. These guys are powerful, just as our own big men are powerful.

The Greek civil service is complex system of patronage (just like our own). If the democratic government demands cuts from the civil service, the civil service will implement the cuts as they see fit. Which if you imagine like our guys, cutting front line services while protecting their own pay packets.

I had been following Yanis Varoufakis, long before he became Greek finance minister. Although hob goblins like Michael Noonan misrepresent him, it was Varoufakis' intention to carry out many of the reforms northern Europe demand (Greek economy needs reform - to get it out of perpetual basketcase state). But, Varoufakis needed some breathing space. Growth would be easy with a little stability. Tens of billions of Greek euros currently reside in bank vaults of Germany. If the prospect of confiscation was no longer likely, that money would flush back into Greece.

swampgas

swampgas wrote: »

But if Greece while in a bailout program cannot demonstrate some willingness to boost growth, perhaps there is a fear among the creditors that providing debt relief too soon (or even talking about it at all) would simply be seen as rewarding poor fiscal policy?

It's not about rewards, it's about doing what is sensible.

Baseline scenario: no change in stance
Greece's debt is unsustainable today. That puts Greece on course for a credit event with the Eurozone, leaves the ESM vulnerable, and if unbounded, would result in some nasty Argentine-type litigation and even ultimately a call-in of ESM guarantees.

Scenario II: Debt relief:
longer maturities on Greek sovereign debt and an end to the Eurozone profit on Greek interest payments (the IMF proposal) would ensure the return to Greek debt sustainability, even if it would not be as comprehensive as the equally-cost-free ('modest') proposal by Varoufakis et al. The creditors are repaid, Greek debt becomes sustainable.

Rejecting a win-win situation in favour of a lose-lose situation does not produce any winners.

K-9

What it comes down to is trust, the other member states don't trust Syriza based on their track record so far. When other countries see them implementing the programme then you'll see deals on debt, bit like how Ireland got reductions in interest rates.

spaceHopper

K-9 wrote: »

What it comes down to is trust, the other member states don't trust Syriza based on their track record so far. When other countries see them implementing the programme then you'll see deals on debt, bit like how Ireland got reductions in interest rates.

To start out our bailout terms were unfair. Every body knows Greece is getting punished. Given how Germany is trying to dominate things we are heading away from why the EEC was set up. It's not good for small nations like us and if the EU doesn't reform it won't end well. I would be very surprised if England doesn't vote to leave

K-9

K-9 wrote: »

What it comes down to is trust

Why do you need to trust someone else to do yourself a favour?

For that to stack up, an unrepayable debt would need to be in the best interests of ESM creditor institutions and guarantors.

You could argue that Germany (in particular) should hold-off on debt relief to leverage political control over Greece, but they already have that capacity through the conditionality of the release of tranches.

There is no sense to this.

K-9

A Tyrant Named Miltiades! wrote: »

Why do you need to trust someone else to do yourself a favour?

For that to stack up, an unrepayable debt would need to be in the best interests of ESM creditor institutions and guarantors.

You could argue that Germany (in particular) should hold-off on debt relief to leverage political control over Greece, but they already have that capacity through the conditionality of the release of tranches.

There is no sense to this.

Because of the last 5 months of Syriza rule basically.

A bank would have a debtor acting like that in court by now.

Labarbapostiza

K-9 wrote: »

What it comes down to is trust, the other member states don't trust Syriza based on their track record so far. When other countries see them implementing the programme then you'll see deals on debt, bit like how Ireland got reductions in interest rates.

But Greece has been following all the recommendations of the Troika since the beginning. It's the only way they've received funds. Troika policy has been an abject failure.

What is Syriza's track record.

It's very ironic to question their behaviour considering that Mario Draghi was a Goldman Sachs employee, and Goldman Sachs were active in facilitating previous Greek governments in concealing the scale of their borrowings.

Right-wing blowhards have been muddying the water as they do. What do Fidelma Healy Eames types know about economics.

Permabear

This post has been deleted.

BoJack Horseman

What is Syriza's track record.

A 4% GDP contraction, after 6 months.... With 2% more likely for the 2nd half of the year.

That takes some doing.

Labarbapostiza wrote: »

What do Fidelma Healy Eames types know about economics.

Raise your game buddy.

KingBrian2

Labarbapostiza wrote: »

Right-wing blowhards have been muddying the water as they do. What do Fidelma Healy Eames types know about economics.

Actually New Democracy imprisoned all the Golden Dawn people so it is the Far Left that is contributing to the chaos that is Greece's economic woes. They compare Wolfgang Schauble to ISIS and talk about murder. These guys are on a different planet. Lets face it the Greeks have a big problem with the Left in the country, they are disorganised, anti austerity and have nothing good to say about Europe. They forget to mention that a lot of European countries supported Greece and wanted a fair deal to be put to the people not an unfair deal.

There is an alternative for Greece. We've discussed it a few times. Would you like to talk about the option they have of defaulting on their National Debt, stepping outside of the EZ (and possibly EU too to avoid legal action) in order to devalue and be free of the constraints of the Euro and the possible and most plausible ramifications for their economy and citizens as a result of exercising this option?

A Tyrant Named Miltiades!

A Tyrant Named Miltiades! wrote: »

Why do you need to trust someone else to do yourself a favour?

K-9 wrote: »

Because of the last 5 months of Syriza rule basically.

If ever there was a political example of cutting off the nose to spite the face.

I accept this is the reason. It's just a crappy reason.

K-9

A Tyrant Named Miltiades! wrote: »

If ever there was a political example of cutting off the nose to spite the face.

I accept this is the reason. It's just a crappy reason.

Why?

If Syriza had spent the last few months implementing a programme we'd be closer to some type of deal on debt, same as Greece themselves and others have got. The problem, and this is widely known, was the lack of any sort of implementable plan from them. How is that a way to negotiate?

For Greece to get write downs now they need to show intent and get on with running the country and try and get back to the performance levels of last year. If that isn't possible then the other countries I'm sure will look at easing the debt burden.

This isn't just about Greece, which has become a left/right ideological battle ground. Its about the likes of Latvia, Slovakia, Ireland etc. who have had to suffer austerity and are showing growth.

Suryavarman

A Tyrant Named Miltiades! wrote: »

You mean the projected sustainability?

Greek debt was not sustainable last year, and it was never going to be sustainable this year either.

Sustainability, if it is to make any sense at all, must refer not to the debt burden when it is lent at official rates (from the IMF, EFSF & ESM) but direct market conditions. A basic representation of debt sustainability might look like this:

[LATEX] $ \Delta D_t = \left(R_t - g_t)\right \times D_{t-1} \pm Primary $[/LATEX]

where [LATEX]D[/LATEX] is debt:GDP; [LATEX]R[/LATEX] is the interest rate, [LATEX]g[/LATEX] is growth & 'Primary' represents the primary fiscal balance (after debt servicing obligations)

This equation is good at underlining two things: the relative unimportance of the primary fiscal balance and the absolute necessity of a strong growth rate and low interest rates. Because if the interest rate on the debt is higher than the rate of economic growth, debt sustainability will fall (i.e. debt:GDP will grow), even if there is a primary fiscal balance.

Now, currently Greece's overall interest rate is estimated to be around 3.5%. Is it possible for Greece to decrease its debt with a modest growth rate and such a generous interest rate? Yes, it's possible over a long number of years, maybe in a couple of decades, Greece will return to the markets.

However, is it possible for Greece to return to the markets anytime in the near future? Yes, maybe if it pays interest of about 8—10%.

Is there any prospect of Greece's growth rate and primary balance being able to offset such a ridiculous rate of interest as Greece is likely to find on the markets in the coming decade?

Eh, lol.

Greece's debt is possibly sustainable as long as it stays in a Troika programme for years to come. That's probably the most redundant sentance I've ever written in my life. If Greece is in a Troika programme, its debt is de facto[/] seen as unsustainable.

In no meaningful way can Greece's debt be said to be sustainable.

We can argue all day about whether or not Greece's debt was sustainable at any point in the last year and get nowhere. One thing that is undeniable is that Greek's debt is less sustainable now than it was this time last year or before Syriza were elected. This time last year the yield on 10 year government bonds was ~6%. At the turn of the year it was ~8%. Now it's ~11%.

It's clear that prior to Syriza bond yields were lower and therefore debt was more sustainable. Greece would probably have required another bailout even without Syriza being elected. But it requires a far larger bailout due to Syriza being elected.

Godge

Terry5135 wrote: »

Well, I'm new to this forum, so apparently I can't yet link or provide pics, things like that. So I'll just have to settle for simple assertions.

All this talk about Greece, I presume everyone knows that Ireland's debt is much higher than Greece's. My apologies if I state the obvious, I'm coming into a conversation late. Pardon me if I don't have exact numbers off the top of my sieve like head, but Greece owes something in the range of 330 Billion, give or take, right? And Greece has a population of 10 million voters. Ireland owes something like 225 Billion, but the voting population is only 2 million.

For a start, your figures are wrong.

Greek national debt is €357 bn

http://www.nationaldebtclocks.org/debtclock/greece

Irish national debt is €181 bn

http://www.financedublin.com/debtclock.php


The population of Greece at the last census was 10.86 m

https://en.wikipedia.org/wiki/Demographics_of_Greece


The population of Ireland at the last census was 4.588m

http://www.cso.ie/multiquicktables/quickTables.aspx?id=cna13


So Greece has twice the debt of Ireland and just over twice the population. So debt per capita is not hugely different.

Why then is Ireland's debt/GDP ratio now below 100% while Greece is rapidly heading towards 200%. The answer is because Ireland has implemented balanced budgets (austerity) and ensured it is the fastest growing economy in Europe while Greece has done and continues to do the complete opposite.

No comparison.

Terry5135 wrote: »

Ireland is extolled as being such a well behaved child by the 4th Reich because, well, Ireland lies very well, we all know that, but also Ireland is really good at cooperating with the emperor having no clothes. That's the long and short of it. I trust everyone here knows that austerity has nothing whatsoever to do with economics. Don't take my word for it (I know you won't), so take Noam Chomsky's, who says that these austerity programs are simply Class Warfare. Something I agree with, incidentally. The rich don't care about the economy in the least, they win no matter how it goes.

To my shock, the Irish Times says so too, or at least Fintan O'Toole and some others do. I was surprised that any mainstream media would be so blunt as the Irish Times - I gave up on them 25 years ago and needed someone in another country to send me links to some articles.

Anyway, I highly recommend the article in the Times entitled, "Who will dare say out loud ‘emperor has no clothes’?" for some surprisingly insightful and blunt takes. As for Enda's lies, well, I watched the video before reading the piece and even I, who pays nearly zero attention to domestic politicians, recognized two of the three lies. Likely everyone here will know all three. Enda should have tacked the word "Yesterday" to the end of his statement. My apologies for being unable to provide the link.

There's another very good piece by Ray Kinsella at the Irish Times entitled "Greece would have done better to have exited". Again, apologies for the lack of a link.

And lastly, a very insightful piece at Huffington Post by Michael Brenner, entitled "Our Greek Tragedy". Same apology.

I especially liked the latter for this brief excerpt, which I thought summed the situation up pretty well:

The conclusions you draw don't match the correct figures.

Chips Lovell

Debt to GDP is a far more useful figure. If you look at debt per capita, you'd conclude that Liberia would be able to cope with a similar debt burden to Ireland.

Godge

Terry5135 wrote: »

Point taken. No, I don't.

However, I don't believe the smearing of Greece either. What's the real reason for Greece being painted as the bad boy?

I remember the same smearing of Iceland. But they resisted the pressure and by early last year, it was believed they'd reach 2% unemployment (they didn't, but they have been consistently very low since then. Ok, they had to give up McDonalds, couldn't afford the meat. So they ate fishburgers. :-)

I do however worry about this economy. And about what will happen to the sick, the poor, and the elderly.

And I do believe none of it has to do with economics. Historically, deficit reduction is not the way out of recessions.

Yes, the Icelandic people had to give up imported foods and foreign holidays.

The Greeks had to give up access to their own money.

The sick, the poor and the elderly are much much better off in Ireland than in most other countries of the world.

Yet you want us to follow the Greeks and Iceland.

johnnyskeleton

Labarbapostiza wrote: »

Right-wing blowhards have been muddying the water as they do. What do Fidelma Healy Eames types know about economics.

MOD NOTE:

Please note that this is a serious discussion board and is not the place for this type of thing. Please don't make these bald assertions - either constructively debate or refrain from posting here. You've been given chances in the past so I strongly advise you up the tone.

Labarbapostiza

Godge wrote: »

Why then is Ireland's debt/GDP ratio now below 100% while Greece is rapidly heading towards 200%. The answer is because Ireland has implemented balanced budgets (austerity) and ensured it is the fastest growing economy in Europe while Greece has done and continues to do the complete opposite.

Greece was not in the same situation as Ireland. They were in a far deeper hole. The Troika had a much stronger hand over the Greeks, than us.

Ireland isn't the fastest growing economy because of the austerity. It was a case that the austerity had not been severe enough to damage its' chances of recovery.

There's a simplistic right-wing idea behind austerity fetishism. And that is if you make the state smaller, the animal spirits of the market spring into action energised. Like many simplistic ideas, it's wrong. It nearly drove the Tory government into the arms of the Troika - they barely escaped by the skin of the teeth. They haven't given up on austerity, but there is more joined up thinking going on. Raising the minimum wage being one thing.

K-9

K-9 wrote: »

Why?

If Syriza had spent the last few months implementing a programme we'd be closer to some type of deal on debt, same as Greece themselves and others have got. The problem, and this is widely known, was the lack of any sort of implementable plan from them. How is that a way to negotiate?

For Greece to get write downs now...

Just to clarify, they're not asking for writedowns. Any mention of the word writedowns by Syriza seem to be a translation issue.

If you look at the zero-cost of the two major strains of debt relief under proposal (IMF & Syriza's 'modest' proposal), neither are asking for a reduction in the nominal amount of the principal due.

For Greece to get [write downs] now they need to show intent...

That's what the conditionality of the bailout tranches are for.

If the EFSF-ESM Guarantors do not believe that the Greek government have the intention to effect a new programme, they have no business guaranteeing money owed to the EFSF, ESM and private creditors otherwise to begin with.

According to the IMF's debt sustainability analysis update for Greece, the Greek sovereign debt is not sustainable on its current terms and profile and that is based on a compliance baseline.

There is nothing for the Eurogroup to gain from refusing a debt deal, and much to the chagrin of many commentators, I think the Eurogroup are at least amenable to the basic logical point that a deal is in their best interests.

The biggest threat to a deal is not the eurogroup, it's fear of misinformed public opinion.

Its about the likes of Latvia, Slovakia, Ireland etc. who have had to suffer austerity and are showing growth.

Greece's problems are not comparable to the problems of those countries, nor Spain, Portugal or even Cyprus. The Greek economy is such a unique basketcase that the measures adapted should also be unique, just as the PSI exercise was.

KingBrian2

Deleted User wrote: »

There is an alternative for Greece. We've discussed it a few times. Would you like to talk about the option they have of defaulting on their National Debt, stepping outside of the EZ (and possibly EU too to avoid legal action) in order to devalue and be free of the constraints of the Euro and the possible and most plausible ramifications for their economy and citizens as a result of exercising this option?

The left in Greece have shown no ability to govern a country. The devaluation process would be a nightmare for the middle classes. Jumping back to 80's levels of deprivation in Europe in terms of economic management. The only people who prospered in that time were the people traffickers. The Poles, Hungarian & Czech wanted out of that system. The EU is infinitely superior because the Soviet system did not take into account the people it was suppose to serve. I realise the Greek left want to lead a mini revolution but economically provided austerity is implemented the Greek economy will rebound. Promising the world on a platter won't.

Labarbapostiza

KingBrian2 wrote: »

The EU is infinitely superior because the Soviet system did not take into account the people it was suppose to serve.

I assume you're being sarcastic. The ECB is pumping more than two trillion of QE into European asset markets. Yes, it will serve a certain "ilk", but unless you have the kind o ideology, that sees certain people with big houses in Oranmore to be the people, and everyone else outside that gene pool, to be the god granted cattle, the EU could hardly be defined as serving the "people".

BoJack Horseman

Labarbapostiza wrote: »

I assume you're being sarcastic.

Probably not.

No rational.... sane person would make an argument that the soviet union was a preferable existence to our present one as a member of the EU.

As I said, no one sane.

Labarbapostiza

BoJack Horseman wrote: »

Probably not.

No rational.... sane person would make an argument that the soviet union was a preferable existence to our present one as a member of the EU.

As I said, no one sane.

Ireland...or let's say "Catholic" Ireland...was a grim Soviet Republic up to relatively recently. (The only person to be prosecuted out of the Kerry babies "saga", was a protestant doctor, who had a few jumbo boxes of condoms for his personal use - three condoms, being the maximum legally allowed quantity, and then only if the man was married.)

That was in the 80s.

So....shut up.

BoJack Horseman

Labarbapostiza wrote: »

So....shut up.

Raising the bar again.

Great stuff!

ancapailldorcha

Labarbapostiza wrote: »

So....shut up.

Cut this out.

BoJack Horseman wrote: »

Raising the bar again.

Great stuff!

Please use the report post function for posts like this.

Thanks.

Godge

Labarbapostiza wrote: »

Greece was not in the same situation as Ireland. They were in a far deeper hole. The Troika had a much stronger hand over the Greeks, than us.

Ireland isn't the fastest growing economy because of the austerity. It was a case that the austerity had not been severe enough to damage its' chances of recovery.

There's a simplistic right-wing idea behind austerity fetishism. And that is if you make the state smaller, the animal spirits of the market spring into action energised. Like many simplistic ideas, it's wrong. It nearly drove the Tory government into the arms of the Troika - they barely escaped by the skin of the teeth. They haven't given up on austerity, but there is more joined up thinking going on. Raising the minimum wage being one thing.

The UK is growing fast as well. Logic and facts don't support your argument.

As for the argument about austerity, it depends on the type of austerity. Encouraging through carrot (Jobbridge) and stick (moving from OPA to JSA) people to enter the labour force is an austerity measure that will help growth. Similarly, taxing pension funds invested outside Ireland through the pension levy is a revenue measure that has little medium-term effect on the economy - it could even be a short-term boost if people increase consumer spending as opposed to putting money in pension funds - and the long-term effects can be dealt with after the crisis. So it all depends on your austerity.

Labarbapostiza

Godge wrote: »

The UK is growing fast as well. Logic and facts don't support your argument.

No, I'm correct. The first few years of the Tory government there was virtually zero growth. The GDP figures were presented by their central statistics office as positive, but the numbers were coming in at 0.1% and other such poor results. The ONS claimed their error margin was 0.3% on those results. The reality is, that even with a low number positive number, your economy is in fact contracting. And the nonsense excuses Osbourne was coming out with to explain them; like unseasonal snowfall in May. The Royal wedding; ?

The growth figures now are purely from the trickle down of QE. QE inflated the stock market, so lots of bonuses for the fearless traders. And the QE also funded a massive BuyToLet splurge. The UK now has close to a million estate agents. 85% of bank lending is concentrated on property.

For the time being they are safe, but had the figures gone consistently negative early in the last term, they would have been in very hot water. They would have needed the Troika, and all the QE would have been used by the patriotic City boys as a stick to beat them.

As for the argument about austerity, it depends on the type of austerity.
Encouraging through carrot (Jobbridge) and stick (moving from OPA to JSA) people
to enter the labour force is an austerity measure that will help growth.

I don't think Jobsbridge had a major economic impact. It may have stopped a cohort of young people from becoming lifers. But, I'm also sure, advantage was taken of the scheme. Petrol stations using Jobsbridge people, as trainee "managers", might have been fantastic for the petrol station owners. But, it's like Ireland in the time of the 7 year apprenticeship to be a shop assistant. Currently our biggest group of consumers are shop assistants. If they have no money, they can't consume.

Similarly, taxing pension funds invested outside Ireland through the pension
levy is a revenue measure that has little medium-term effect on the economy - it
could even be a short-term boost if people increase consumer spending as opposed
to putting money in pension funds - and the long-term effects can be dealt with
after the crisis. So it all depends on your austerity.

The purpose of the austerity, was to make Ireland look more credit worthy. So we could borrow more to bail out our banks, our banks in turn would fund a reinflation of the property bubble.

If you're in Dublin, you'll see glass walled offices that had been vacant for years now being occupied by smartly dressed "go getters". These "go getters" are invariably property development companies.

Builders active over lots of sites. McNammara is back on the horse, doing an office block on Stephen's Green for Denis O'Brien. At first you might assume that this project is being funded out of Denis' cash, and is intended for his Irish base of operation. But it is in fact funded by our recapitalised banks and is a speculative project, that one day in the near future will be populated by all kinds of property speculation "go getters".

BoJack Horseman

Labarbapostiza wrote: »

No, I'm correct. The first few years of the Tory government there was virtually zero growth. The GDP figures were presented by their central statistics office as positive, but the numbers were coming in at 0.1% and other such poor results.

Labarbapostiza

BoJack Horseman wrote: »

They're still pretty awful figures. Had I bothered to look up the chart instead of relying on my patchy memory it still tells the same story. For a long period the trajectory is downward. Had it continued, they would have been in Troika land.

KingBrian2

Labarbapostiza wrote: »

I assume you're being sarcastic. The ECB is pumping more than two trillion of QE into European asset markets. Yes, it will serve a certain "ilk", but unless you have the kind o ideology, that sees certain people with big houses in Oranmore to be the people, and everyone else outside that gene pool, to be the god granted cattle, the EU could hardly be defined as serving the "people".

The Soviet Union made stellar improvements proceeding the 1917 revolution but subsequent decades wasted the country. The cold war caused untold damage to the Soviet Union's reputation, the Trotskyites abandoned the state in the late 30's and travelled to Mexico and France. Gorbachev finished it off with his decisive declaration which banned the Communist Party of the Soviet Union. It thrived as a movement but died as a state. The Soviet Union is not a shining example for the Greek left to emulate. Not to say the EU is a perfect union, even a good union but it is certainly a beneficial organisation that has done much good work. What is missing are common values and if we here the sort of spouting nonsense coming out of Greece than this country reject European values.

Labarbapostiza

KingBrian2 wrote: »

The Soviet Union is not a shining example for the Greek left to emulate.

But the main characters in Syriza had no intention of trying to emulate the Soviet Union. There are long interviews with Yanis Varoufakis, from before they were in power on the interwebs. And his proposition comes down to bringing Greece into line with the functioning of north western European economies. The Greek right are not sensible realists. Greek conservatism had no intention of real reform. They would have embarked on it years ago.

KingBrian2

Labarbapostiza wrote: »

But the main characters in Syriza had no intention of trying to emulate the Soviet Union. There are long interviews with Yanis Varoufakis, from before they were in power on the interwebs. And his proposition comes down to bringing Greece into line with the functioning of north western European economies. The Greek right are not sensible realists. Greek conservatism had no intention of real reform. They would have embarked on it years ago.

None of the Greeks that support the EU come across as opposing hard work by the gvt, they welcome the changes that will improve the economy, that is all I am saying. The unreasonable demands are coming one way. Tsipras needs to direct his party to support him. How convenient it is for those Syriza members who jumped ship while their leader chose to stick to the programme.

SeanW

molloyjh wrote: »

That bail out enabled their economy to recover quicker (which it did do - they had strong growth, were out of recession and back borrowing on the markets). When the current Greek government came in and basically destroyed all the positive economic gains of the last number of years while attempting some sort of bizarre brinkmanship they ended up putting their country in a position where they needed yet another bail out. This would not have been the case but for the current Greek government.

Yes. Greece was doing so well that its youth unemployment rate never fell below 50% for the past 6 years, it's debt-to-GDP ratio continued to increase throughout and it's had a zombie banking system throughout the entire crisis that was so fragile that when the EU got wary and started making noises, the whole thing effectively collapsed in a mess of bank runs and capital controls - the whole Greek banking system has been on life support now for the best part of a decade and it's only getting worse. Consistently, throughout the crisis.

What's more, the country was so strong that it only took 6 months of moderately bad governance to make the place a total basket case as bad or worse than the start of the crisis (7 years ago), whereas it had been doing so well before hand, mar dhea. :rolleyes:

Meanwhile, people right across the political spectrum on both the Left and the Right haven't been thoroughly vindicated in having stated constantly for almost a decade that the austerity-only "plan" couldn't and wouldn't work because the problem was too big and the cultural, economic and other differences between the North and South of Europe were irreconcilable.

And if you belive the whole thing is only the Greek gov'ts fault, I have a nice ocean crossing bridge to sell you in Switzerland. It's going cheap and the toll revenue is phenomenal. :rolleyes:

SeanW

SeanW wrote: »

Yes. Greece was doing so well that its youth unemployment rate never fell below 50% for the past 6 years, it's debt-to-GDP ratio continued to increase throughout and it's had a zombie banking system throughout the entire crisis that was so fragile that when the EU got wary and started making noises, the whole thing effectively collapsed in a mess of bank runs and capital controls - the whole Greek banking system has been on life support now for the best part of a decade and it's only getting worse. Consistently, throughout the crisis.

What's more, the country was so strong that it only took 6 months of moderately bad governance to make the place a total basket case as bad or worse than the start of the crisis (7 years ago), whereas it had been doing so well before hand, mar dhea. :rolleyes:

Meanwhile, people right across the political spectrum on both the Left and the Right haven't been thoroughly vindicated in having stated constantly for almost a decade that the austerity-only "plan" couldn't and wouldn't work because the problem was too big and the cultural, economic and other differences between the North and South of Europe were irreconcilable.

And if you belive the whole thing is only the Greek gov'ts fault, I have a nice ocean crossing bridge to sell you in Switzerland. It's going cheap and the toll revenue is phenomenal. :rolleyes:

Sean, can you do us a favour and talk us through an alternative scenario to what has happened? It is far far easier to criticise than to create.

Let's imagine we're back at the start of the whole Greek nightmare. You get to call the shots.

• What does Greece do?
  
• How does that alternative choice affect the relationships Greece has with the EU, the EZ and other trading partners?
  
• Where would Greece be now?

Thanks

Labarbapostiza

KingBrian2 wrote: »

None of the Greeks that support the EU come across as opposing hard work by the gvt, they welcome the changes that will improve the economy, that is all I am saying.

Yes they welcome the changes that will improve the economy. But they know what will not improve the economy. Repeating the same failed strategies is not going to lead to a different result.

The unreasonable demands are coming one way.

There were no negotiations. It was Greece pleading, then the European right grandstanding as much for domestic political appeal than anything else, with "my way or the highway" offers.

Tsipras needs to direct his party to support him.

Tsipras buckled under pressure in negotiations. He fired Varoufakis, (when the right wing media crow that you need to fire your finance minister to succeed, generally they're not trying help you, but help themselves). Tsipras, was, is, very naïve. He had a wide eyed notion that if he could sit with Angela Merkle alone for a few hours he could emerge with a workable programme. Merkle can't even control Schauble.

How convenient it is for those Syriza members who jumped ship while their leader
chose to stick to the programme.

Okay, Syriza are not Fine Gael, who when elected under a clear mandate to negotiate a better debt deal for Ireland, instead made an unconditional surrender. It's possible that if the Troika had demanded a rancher tax as part of the package there would have been some resistance. But the Troika people tend to be the kind who also believe the rancher should be protected at all costs, as God gave them a big ranch. And a perpetual subsidy without ever having any strings attached is what is righteously required for God's man of the fields. Now, if you're a Greek pensioner, it's FU, and go and eat from the rubbish bins. Route in the rubbish, you dirty tramp....and be grateful we don't lock our bins.

Where is Ireland at the moment?

NAMA has announced they're 26% through deleveraging. What this means is not entirely clear, but it's probably a case of Irish banks, which have been recapitalised, lending to the same developers to buy back the same crap that caused the crisis in the first place.

FreudianSlippers

Let's not exaggerate though: not all development is bad - we have had an extreme lack of development over the past 6 years which is equally as bad.

Labarbapostiza

FreudianSlippers wrote: »

Let's not exaggerate though: not all development is bad -

Very true, not all development is bad.....But, in the context of Ireland, development has been an unequivocal, irrefutable, exhaustively historically documented, unmitigated disaster.

But of course, every disaster is a matter of perspective. From the prospective of estate agents and builders, and other fly-by-nights, there's lots of gain to be gained, before the music stops and the pain comes.

we have had an extreme lack of development over the past 6 years which is
equally as bad.

One of the aims of NAMA, was to keep a vast portfolio of property off the market. Because the reality is, we have office space coming out of our arse. And in the last 6 years we haven't had an explosion of new export orientated white collar enterprises desperately in need of space. And many of our very impressive buildings are completely unsuitable that purpose to begin with.

I live in a "prime location" area......I know what's been empty since it's construction. The latest wheeze, is to put property "professionals", in high visibility (ceiling to the floor windows) office space, that never had real tenants (though always had a To let sign ....followed by a LET "you're too late!" sign a few weeks later.) This is to give the impression the market is on the up. And it is. But it's precisely the same clowns as the last time. McNamara, the man who couldn't count, rides again. (Hear the swell of 1950s cowboy film music).

It's not really completely our fault. The Anglo Saxon model of capitalism is heavily over-leveraged in property. Ireland would not be allowed to deleverage, even if our "leaders" understood the problem. People like Christine Lagarde, their warped understanding is that their little personal property portfolios, (Like Fagan's box of Jewels), should magically make them free money by inflating to infinity. You have people like Coveney, the brother of the minister, and Greencore bossman (very talented family - that is in fact sarcasm), accusing the Greeks of having some mad get rich quick scheme. Re capitalising banks, so they can fund a re-inflation of a toxic property sector....if that isn't a harebrained get rich quick scheme....then I'm Shergar...having wicked difficulty typing on this laptop keyboard with my big hoofs.

KingBrian2

Labarbapostiza wrote: »

There were no negotiations. It was Greece pleading, then the European right grandstanding as much for domestic political appeal than anything else, with "my way or the highway" offers.



Greece had ample opportunities to negotiate instead they reneged on the terms of the deal. Tsipras has a lot to answer for by making his country a pariah of Europe.

Labarbapostiza

KingBrian2 wrote: »

Greece had ample opportunities to negotiate instead they reneged on the terms of the deal. Tsipras has a lot to answer for by making his country a pariah of Europe.

First, they didn't renege on any deal. And the second point is the Troika does not negotiate. It's "My way or de high way". Either be reasonable and accept the Troika's offer, or be unreasonable and don't.

Schauble is not only grandstanding, he is liar. He feeds a popular misunderstanding that's now among the majority of Germans, that Germany is being asked to give free money to Greeks. Who they believe to be lazy. (in terms of finance, a hotdog stand worker in Berlin is more productive than a hotdog stand worker in Greece. But it's not because German hotdog stand worker has more grit, determination, personal responsibility and industriousness than the Greek. Or that the German has a work ethic, and the Greek doesn't. No. It's that wages in Greece are much lower than Germany, people have less to spend on hotdogs, you can work as hard as you like at your hotdog stand or whatever you have, if people don't have money to spend, you are "unproductive". )

Many Germans feel they're being ripped off, but their media points the finger at the Greeks. But who is really ripping them off? Mario Draghi, current head of the ECB (former Goldman Sachs director), is pumping more than 2 trillion Euros of quantitative easing into the European financial system. What this means for the average German Joe, is like even more than the Greek debt picked from their pockets, and transferred to the richest people in Europe. And there's more shenanigans with this. Draghi lied when he said the QE program couldn't be used to help Greece.

In light of Draghi's QE. Any sanctimonious finger wagging at Greece, is beyond disgusting.

Godge

Labarbapostiza wrote: »

First, they didn't renege on any deal. And the second point is the Troika does not negotiate. It's "My way or de high way". Either be reasonable and accept the Troika's offer, or be unreasonable and don't.

.

Kenny, Howlin, Burton and Noonan must be great then. When they came to power, they got the Troika to change large parts of the deal including reversing the cut in the minimum wage. Fair play to them if they got the impossible.

Labarbapostiza

Godge wrote: »

Kenny, Howlin, Burton and Noonan must be great then. When they came to power, they got the Troika to change large parts of the deal including reversing the cut in the minimum wage. Fair play to them if they got the impossible.

The Troika never asked for a cut in the minimum wage. That was Lenihan and Cowen, "helping the lads out". Hard times were ahead, and they used the opportunity to do bit of burden transferral to make it softer on the most vulnerable in Irish society; the village publican, who'd pay his staff less only it's against the law. The chief IMF negotiator from November 2010 (who's name escapes me), has claimed it was Lenihan and Cowen who put a cut in the minimum in the pot, and he was a little baffled by it. Now he could be lying. But I fail to see how a cut in the minimum wage was relevant to the issue of sovereign debt.

Permabear

This post has been deleted.

Godge

Permabear wrote: »

This post had been deleted.

But, but, but the Troika demands can't be changed, so say the defenders of Greeks and haters of Kenny, but they can be changed, so say the defenders of Greeks and haters of Kenny.

It gets so confusing sometimes.