[coldtea]

Yeah, unemployment at 40%, massive GDP drops, German banks happy, all kinds of anti-labour laws passed, exorbitant taxation, 5% of the most productive/young population left the country to work abroad, political supervision, those Greeks sure benefited much by those bailouts.

https://eu.usatoday.com/story/money/2015/08/11/greece-debt-c...

https://www.reuters.com/article/us-eurozone-bailouts-idUSBRE...

https://global.handelsblatt.com/finance/germany-profits-from...

[gutnor]

I'm personally not exactly happy how the EU handled Greece, especially the harsh social consequences on its citizen that the EU could have smoothed and the lack of proper management of Greece "creative" accounting that let Greece join the EURO.

But the EU did not cause the massive hole Greece dug for itself for years/decades. Reckoning was coming. The EU agreement was harsh, I think there could have been a softer version available, especially had Greece not been in the EURO.

But outside the EU entirely, Greece would have eventually defaulted on its debt, and considering the insane amount of debt and massive budget imbalance that caused it in the first place, that would have sent the Drachma spiralling out of control. Without the backing of the EU, Greece would have had a hard time coming up with an economic and social plan to earn back some international credibility. It is unlikely it would have maintained inflation in control, but even if it did, high inflation would have been dramatic in an economy so reliant on import for basic necessities. It is extremely doubtful they would have been better off.

One way (in the EU) or another Greece was looking at terrible consequences for their politicians mismanagements.

[coldtea]

>But the EU did not cause the massive hole Greece dug for itself for years/decades.

I think that has several causes:

1) Greek politicians (and Greek elites complicit with them) consumed a lot of infrastructure money from EU in BS overpriced public works projects. That said, Greece infrastructure wise is a totally different country from Greece in 1980. But those infrastructure projects didn't and could't themselves generate money.

2) Greek economy was traditionally based on smaller production units (SMEs). When global outsourcing (and later China and co) became an option for everything of that kind, Greece competence in the area dropped to 0. The small business owners at the time didn't have the savvy to market their products as premium goods and justify higher margins (like e.g. Italy does at least for some things), neither did they have the brand name to assist them in moving production abroad (and continue selling). The quality+price points they competed at were no longer possible. Tons of such Greek industries died off in the 80s and 90s with no replacement.

(Add to the mix a bevy of EU policies that were in fact protecting interests of major EU nations (Germany, France, mostly), against competition from the South).

3) Even so, Greece had control over its debt, which was never a major part of GDP before 2001, using its monetary policy. The inflection point was the switch to the Euro, when suddenly a volatile economy was tied to a "strong" currency, with no room for corrections (imagine the US debt if the Fed couldn't print dollars and the world didn't accept dollars as a de facto exchange currency -- now imagine that with an much weaker economy to begin with).

[pas]

The 2008-2010 crisis never would have left Greece standing, EUROzone or not.

Their debt might have been okay in 2001, but don't forget how reckless they have been with spending (photos of sport related infrastructure the 2004 Olympics is a nice reminder), and they put off reforms for decades.

Infrastructure projects are a must have for a globally competitive economy, profit generating or not. Upkeep is an issue of course, but for some reason Greece wanted to not go back to sheep herding.

[intended]

As I recall, the Greek public sector was a large part of its economy, and jobs available through connections over merit.

[coldtea]

Smaller public sector than e.g. Denmark. But worse management.

[soVeryTired]

I think one major point is that a devaluation in the drachma would have made Greek industry more competitive again. Inflation goes up, yes, but imports decrease and exports increase.

Greece would have experienced market discipline instead of discipline by government fiat. The latter is much more dangerous politically, as we saw with the election of Syriza.

I think it's telling to contrast the fate of Greece with the outcome for Iceland.

[cinquemb]

>But the EU did not cause the massive hole Greece dug for itself for years/decades. Reckoning was coming.

Yes, and that "reckoning" was a digging bigger hole. The real reckoning is when European sovereign yields go through the roof when the ECB runs out of ammo…

[RobertoG]

The ECB can't "run out of ammo", but you are right that they could stop, for political reasons, financing the Euro countries covertly in the secondary market like they are doing now.

Or maybe they just will keep that gun to the head and they will use that thread for running the show and impose more counter-cyclic policies. In that case the answer will come from the voters (like it's happening in Italy now).

[pas]

> In that case the answer will come from the voters (like it's happening in Italy now).

Could you expand on this please, what's happening in Italy, how that connects to the ECB open market policies?

[RobertoG]

I can try..

The Euro is basically a foreign currency, so Italy have lost any saying in its monetary and fiscal policies. Austerity in times of recession is craziness, but is the order that come from Brussels.

The new government in Italy is basically anti-euro. Those so called "populist" governments don't happen by accident but when the people is very unhappy with the economy.

As the Euro is, in essence, a foreign currency, there is really a risk that Italy and others could be in the situation where they can't finance themselves. That would be the end of the Euro.

In the year 2012 that almost happened. There was a public debt crisis that finished the (and this is not an exaggeration (1)) exact day that the ECB decided to finish it.

What the ECB is doing now (since 2012), is buying the public debt of Italy, Spain and others in the secondary markets (2).

They can't do it directly because is forbidden. This has to be done, because, otherwise will be the end of the Euro.

Interestingly, buying in the secondary market is also against the treaties (3) but they hide it in technicalities.

At the same time, this is used as leverage for dictating the economic policies of those countries from Brussels.

The result of those policies is what bring the "populist" to the government.

(1)-https://www.telegraph.co.uk/finance/financialcrisis/9428894/...

(2)-https://www.bloomberg.com/view/articles/2015-12-04/the-ecb-s...

(3) https://elpais.com/elpais/2012/10/24/inenglish/1351097206_05...

[emn13]

For another perspective on this: although I totally agree with what you say, there's also the side of the story where in people love to blame others for failings. When greece plunges into crisis; people blame politions, blame the EU - even though those entitities are entirely and truly democratic. They're not blaming themselves. When northern europe decides to ignore the southern problems even though they're in a union, they blame perhaps their own politicians or the EU for mismanagement, and perhaps their southern neighbors, but certainly not themselves.

But this weird perspective also correlates with a drop not just in voter participation, but perhaps also in the care taken in voting. Seriously, protest votes are a kind of shooting yourself in the foot because the guy next door is so mean - but quite common, at least nowadays.

Almost certainly those who will suffer most from populism in italy will be the voters who voted for them; just as those who voted for e.g. trump are likely to achieve the exact opposite of what they're so angry to... prevent? achieve?

It's not just one country; almost every single modern democracy is afflicted to some extent. We may have misattributed democracies past successes to the technicalities of voting, missing the much larger, less trivial social context in which it works. But certainly whatever the cause - it's much deeper than something like the ECB mishandling the situation in Italy.

[pas]

Thanks for the effort, the details, the links, and the comment!

How do these two things square against each other?

> Austerity in times of recession is craziness, but is the order that come from Brussels.

> What the ECB is doing now (since 2012), is buying the public debt of Italy, Spain and others in the secondary markets (2).

It seems to me that "austerity" is the buzzword used by states that want to inflate away their debt.

[thefounder]

I don't think defaulting could have turned out better. Once you take money you have to pay back. They got debt reduction as well so it's not like they are pay back the full amount. It's simply the result of bad governance that pilled up over the years.

[coldtea]

The worse estimation of defaulting (by people warning against it) where still better than today's numbers. And defaulting would have started a path towards reconstruction, whereas Greece now is just indefinitely held in life with an "artificial lung".

(And the debt is actually the same than it was when the crisis started, so all the "bailout" did was to save the banks exposed to it using European's people's money, so instead of DB and other private banks now it's owed to ECB, the IMF and so on -- the same debt but under a much worsened infrastructure and economy, so even less chance of ever coming over).

[timrichard]

Which kinda sorta looks like German/French state aid, except that's completely against the rules...

[disgruntledphd2]

It was a bailout of large banks by stealth, much like what happened in Ireland.

Timoty Geithner apocryphally refused to even countenance burning any bondholders in Ireland (or anywhere really) out of the risk of contagion. Now, Ireland has the 3rd highest debt per capita in the world, just after Japan and the US. Note that Japan and the US can print currency, while Ireland cannot.

tl;dr totally a bailout by stealth.

The worst part was that it created this horrible dynamic between different European countries, when really we should just have been blaming the banks.

[jayalpha]

Maybe they should never have joined the Euro? They already cheated to join with the help of Goldman Sachs.

Not paying taxes, retirement with 50, not playing by the rules, people go blind very quick: https://www.csmonitor.com/World/Europe/2012/0430/Greek-islan...

There are only two options:

1. Leave the Euro (not the EU). See, what your new Drachma will be able to buy you.

2. Keep the Euro, negotiate a hair cut. Change how things are done in Greece.

[elorant]

As a Greek I hardly blame EU for all of these. They are the result of incompetent politicians who stubbornly refuse to reform and a general population that has learned to live way past their means.

And we haven't turn to China. It's just that our (incompetent) government has ties to communist parties because of their legacy. On the other hand, Greece-US relations are at their best phase in the last 40 years or so. We are and will always be a country that belongs to the West. Fuck China and fuck Russia too, and any other oppressive regiment out there.

[illuminati1911]

The fact that they fucked up their economy again (even with unconditional free money) doesn't change a thing. They still received extreme economical help from the EU and the least they could do is not cause anymore trouble. Not to mention paying the money back.

[coldtea]

>The fact that they fucked up their economy again (even with unconditional free money)

Yeah, just not unconditional, not free, and no money.

They got credit (e.g. not money but another loan), under severe conditions (e.g. not unconditional), foreign analysts have compared to those signed when you're defeated in a war, and even IMF officials have admitted they were "the wrong solution"), and it had to go directly to repayments (e.g. not free).

So in effect, the German-led EU paid the German banks and major private investors holding most of the debt, with EU money, still keeping Greece in debt (from the new credit), making some good money in the process (see linked articles above), and imposing their economic agenda on top.

>and the least they could do is not cause anymore trouble

A, those pesky Greeks always causing trouble. And ungrateful at that.

Not, like e.g. a galant nation invading their country, causing the death of a million people (including almost all Greek Jews), taking a "loan" to itself from the occupied government it had setup, bombing Greece's ports and infrastructure before leaving, and then refusing to pay recuperations...

[YorkshireSeason]

   paid the German banks and major 
   private investors holding most 
   of the debt

As far as I understand, see e.g. [1], the biggest debt-holders by far (in absolute terms and even more so relative to GDP) where Greek banks. The biggest foreign debt-holders (in absolute term) were French banks. Relative to GDP the biggest foreign debt holders were banks from Belgium, followed by France. Moreover, Greek debt held by German banks was spread over a 11 banks, rather than concentrated in 2 (Belgium) or 4 (France), hence less systemic risk.

In the light of this data, I do not think it's reasonable to speak as you did above. It was primarily a bailout of Greek, French and Belgium banks.

Aside, if Yanis Varoufakis' account is to be believed, the core reason why Germany accepted the bailout was political and twofold:

* The governing coalition under Merkel had elections upcoming, and staked its entire reputation on the EU and the Euro. A new Euro-Critical party (Alternative fuer Deutschland AfD) emerged. It was felt that Greece dropping out of the Euro and defaulting would be seen by the voters as a vindication of the Alternative fuer Deutschland.

* Powerstruggle with France: if Germany went soft with Greece, it was felt that that would give France an excuse to tap German money even more than it already does.

[1] https://www.theguardian.com/news/datablog/2011/jun/17/greece...

[RobertoG]

There is a very simple fact: in order to develop an economy you need investment, not austerity. There is not democratic country that would accept for its population what the Europeans have forced on Greece.

You want Greece start thinking in the EU like "us" when they deal with China, but, at the same time, we Europeans, talk about how "they fucked" it.

You can't have it both ways: or Greece are "us" or Greece are "they".

In my opinion, the debt crisis showed them, and others, clearly that it's not* the former.

*edited: added the 'not'.

[thefounder]

As long as there is no fiscal union you can't simply share the loss between member states. Is as simple as that. We can talk about we and the "EU budget" all time long but if we want to talk about "our" money and "our" debt the we need some kind of fiscal union. We can't talk about "our" money only when we get bankrupted.

[pjc50]

Without a fiscal union there should never have been a monetary union.

[RobertoG]

..and many economist warned about it.

[growlist]

And politicians - pretty sure I recall that Michael Portillo predicted exactly the sort of problems the euro has been through over recent times.

[thefounder]

You would think that and here we are.

[RobertoG]

That's precisely my point.

You can't talk about "our" European exterior policy and then, when the time arrive impose a bigger austerity, in part of the population of Europe, causing a bigger and longer crisis that the Great Depression.

Never mind Greece previous sins, that would never be done to a German land or a USA state, for instance

Ergo, there is not "we".

If something, Brussels, has show to be the antagonist to the Greeks (and not only the Greeks).

[saiya-jin]

> in order to develop an economy you need investment, not austerity

That's a nice theory, but considering all the stuff that came out about how dysfunctional Greece, on outside they were just bunch of liars. How can any politician justify to voters such a decision?

If you lend somebody money to improve his life, and he burns through them by doing stupid things and lying to you, and has no way to pay back, do you lend them more "in order to develop"?

Btw if I recall correctly your suggestion is what Obama did - pumping more money into economy after 2008. From what I read it was very ineffective and basically trillion(s) were mostly wasted without lasting effect

[RobertoG]

For an alternative economic explanation of what happened, you can read other posts (mine and other) in here. Basically what it has been done is saving, by an indirect route, the Germans and French banks exposed to Greece without improving (worsening actually) the life of the people there.

Consider that, theoretically, the problem to be solved was the public debt and now, many years later, and after forcing the solution on the patient, the debt is the same or worst.

I have to say, that I find totally alien the moral perspective from wich somebody can say something like "they are a bunch of liars" about an entire country.

Who is the liar? the taxi guy in Athens? the children of the school in the corner? the old people that miss the drachma? the young people that had to leave the country?

Never mind where you are from, a little of introspection (and some history reading) will show you how you could be easily any one of them.

[rcMgD2BwE72F]

>They still received extreme economical help from the EU

The EU only tried to get Greece to pay back most its debt, at all costs (social/political/economical...). Who do you think they were helping the most: the big banks or the Greek citizens?

[sgift]

The banks obviously. If someone here says we "helped" Greece they either don't know better or lie. Plus, the bailouts were all credits. We Germans get money from the markets for 1% (or whatever the rate is at the moment), give it to Greece for 5%, make money as a lender (as long as Greece pays it back and we did make sure that they do, didn't we? First order: You pay back every credit. People are hungry? Irrelevant. First pay back credits) and then we have the audacity to call that a bailout and demand gratitude.

[Arn_Thor]

The money was very much conditional. Mandatory austerity, for example, which crippled the state and economy as a whole with effects that could last a generation

[tanilama]

I think those EU money will need to be paid back one way or another.

EU has a fundamental problem: it is a now a unified economical entity, but not a political one. Using Germany's money to bailout other countries' economy is frown upon by both sides, thus can't sustain.

[wott]

> The fact that they fucked up their economy again

Uh? Their economical politics have been dictated by EU since the crisis.

> even with unconditional free money

Uh? You mean mostly extra loans that they had to repay, like any loan. And it was not unconditional either, since they had to apply the economical politics of EU, so that EU was sure they would repay.