[sgift]

Yesterday, there was a news that Greece has reached an agreement for a new round of money in exchange for further cuts to pensions and removal of some tax exemptions. So yeah, it is going to happen again. And again. And again.

And all to save a few German and French banks, because politicians feared the results of telling them "you wanted to play in the casino and you lost, now the money is gone" after Lehmann.

[ricw]

Or rather it'll happen again and again until the casino is turned into a viable and competitive economy. I wouldn't blame the Germans and French for trying to contain a crisis at its origin..

[sgift]

> I wouldn't blame the Germans and French for trying to contain a crisis at its origin..

The origin is that banks can lend money without any risk. End of story.

Banks get interest for various reasons - one reason is risk of not seeing the money again and that has to be a real risk or banks will just lend money without thinking twice.

[Bartweiss]

> Or rather it'll happen again and again until the casino is turned into a viable and competitive economy.

By what mechanism? Each round of cuts drives up unemployment and poverty, and cutting expenses hasn't solved the deficit because trashing the economy has destroyed tax revenues.

The first few rounds were rationalization, but they were too little too late. At this point the deep restructuring that's still needed is unapproachable - it's too slow and too unpopular, and the economy is already too weak. The recent cuts haven't been sensible and structural, they've been deadline-beating short-term moves to unlock a new tranche.

Germany gains from this, certainly, but by making an example of Greece. It deters other high-debt Euro nations from getting into the same state, but it's not moving Greece closer to functionality.

[occamrazor]

Cutting expenses has not solved the _debt_ problem, but has surely solved the _deficit_. Greece has a strong primary surplus.

[shkkmo]

> but has surely solved the _deficit_. Greece has a strong primary surplus.

No, it hasn't. The "primary surplus' doesn't include any debt repayments.

[Bartweiss]

Yes, exactly. I said "too little too late" because a primary surplus doesn't resolve crippling debt - at this point it looks like the debt is far too large to handle with any kind of sensible short-term spending cuts.

[RobertoG]

I'm not sure that this approach to economics of 'beatings will continue until morale improves', it's a so good idea.

If fact, I think that, as the data show, it's in the same league of 'Trickle-down economics'.

[marcosdumay]

Each round it gets exponentially bigger... There will come a time when postponing it won't work, then what?

By the way, how injecting money in the hands of a chosen handful and taking it from a country to try to pay back can make a viable and competitive economy?