[RyanMcGreal]

Germany is forcing Greece to accept punitive austerity measures that will throw more people out of work, worsen its deficit/debt situation and further depress its economy.

Why Germany is insisting on fiscal policies that will actually frustrate its own efforts to bail out struggling Euro economies is anyone's guess.

[Uchikoma]

(Disclaimer: German)

"Austerity" is a media invention. Or what does "austerity" mean for you? The word is probably the most used word in the crisis, which is never explained by facts. What are those "punitive austerity measures"? This is not a rhetoric question, I'd like to know.

Germany (and others, Netherlands, Finland etc.) want taxes to be paid (could end the crisis real quick) and structural reforms to prevent bottomless pits and enable growth in the future.

Greece was not able to take 15 billions EUR over the last years of infrastructure money from the European Union because of a local administration that just does not work and is extremely corrupt. The European Union was supporting Greece growth with money for innovation projects, infrastructure money etc. over the last decade, but Greece was not able to run the necessary projects.

I was managing European IT projects 10 years ago. Poland did show how to take EU money and prosper. They were on EVERY IT project I was part of, payed every company and university that took EU money additional money, helped get projects into Poland etc. They did everything right, now - and it was of course not only EU money but a very strong spirit and enthusiasm in Poland - they prosper from what they did since they joined the EU (and before).

The crisis is kind of sad for Greece, because their productivity grew strongly in the last 10 years (contrary to Spain or Italy) and the crisis is often attributed to "lazy" Greeks.

[Uchikoma]

PS:

(The structural enhancement fonds for Greece was 20 billion EUR from 2007 to 2013, Greece was not able to take 15 billions from the fonds up to 2012)

For growth in Europe: The next structural EU fond for getting countries with lower living standards to EU level will run from 2014 to 2020 and contain 466 billion $.

I guess it's easier for people to run with the "austerity" story, as a story with victims and villains sells more magazines and blog posts. But it's sad that none of the facts get written about. And it's even sadder that this spills over to HN.

[calibraxis]

Yanis Varoufakis, who left Greece and we now know him here as Valve Software's economist-in-residence, gave a good explanation what austerity will mean for Greece. Not to mention where the German taxpayers' money is really going. (http://www.leftbusinessobserver.com/Radio.html#S120621)

[Uchikoma]

Thanks.

[theallan]

Of course, one option would be for Germany not to give Greece any money, and then Greece couldn't spend the money that it doesn't have as it is/was.

[k-mcgrady]

If they didn't it's highly likely the single currency would fall apart and the eurozone would have an even bigger crisis to deal with.

[mjwalshe]

Then they would not be able to by those nice German cars :-)

[anamax]

> Then they would not be able to by those nice German cars.

It's cheaper (for Germany) to simply buy those cars themselves. No, that's not sustainable either, but the multiplier is better.

[freehunter]

I think the intention is more like "get your shit together". Free money doesn't last forever.

[RyanMcGreal]

If by "get your shit together" you mean "maintain a functioning economy and get your deficits under control", austerity is exactly the wrong approach to take.

[tatsuke95]

Greece has, at various points, implicitly and explicitly, threatened to default on its borrowings.

So why should any lender with half a brain want to throw more money into the fire unless there are strings attached?

I don't understand the dichotomy. In the mortgage crisis in the US, we ask, "Why did the banks keep lending to these people who couldn't afford to pay it back?!?" Yet, in the case of Greece, we're angry at the lenders for not lending more and more.

Tell me, are you lending to Greece? Have you loaded up on Greek bonds? They're paying something like 25%! Great return! Unless, of course, you don't think you'll ever see your money...

[kokey]

I find the dynamics of the expectation of countries having to bail other countries in the Eurozone out quite interesting. Normally, inside a nation, say France, you have wealth distribution since politicians and the public can, through taxes, take money from the rich people in order to help the poor. This works where the notion exist that it's fair, because the rich are rich because of luck or power, or whatever. Now it gets interesting where you get the same dynamic in the Eurozone, where the countries that can't manage their economy well because of their bad policies, corruption, incompetence, etc. want countries that do manage their economy better to bail them out. It gets extra interesting, since Germany is a country where wealth is not something that was created because of imperial conquest or the likes, or because of abundant natural resources. They lost a war, and half of it was even under communist rule until two decades ago. They achieved their wealth, and Merkel in particular don't see having to pay guilt tax on that achievement as making any sense.

[freehunter]

If you ask your parents for money, they might give it to you at first. If you keep asking, they might increasingly make it less attractive for you to accept the money. Free money is attractive, money with serious strings attached is much less so. Germany doesn't want Greece to take the money, they want them to not need the money.

Alas, HN isn't the place to debate international politics. That's just my take on it.

[RyanMcGreal]

Macroeconomics isn't microeconomics writ large, and a country isn't a dependent child. The "put your house in order" analogy doesn't hold.

> Alas, HN isn't the place to debate international politics.

Maybe not.

[vrotaru]

> a country isn't a dependent child.

Sure. But the proposed measures still must make sense. For those willing to risk their money first and foremost. Otherwise those (with the money) will just shrug

[anamax]

> If by "get your shit together" you mean "maintain a functioning economy and get your deficits under control", austerity is exactly the wrong approach to take.

You're assuming that Greece's spending helps to maintain a functioning economy. That's arguable.

"Get your deficits under control" requires increasing revenues and/or decreasing spending. Maintaining Greece's spending choices does not address the latter and if it addressed the former, they wouldn't have deficits.

[pfraze]

Because it doesn't want to devalue the Euro, which creating more money would do.

[streptomycin]

Germany would love to devalue the Euro, for the same reason basically every country is trying to devalue their currency (US, China, Brazil, etc). They all think it will help their manufacturing sectors by increasing outputs. Unfortunately, not all currencies can simultaneously devalue.

[pfraze]

Relative to other currencies, sure, but within the EU (and any euro-based market) more euros would decrease buying power & devalue the debt (much of which Germany owns). Neither of those effects are beneficial to them.

[streptomycin]

But in total, it would be beneficial. Probably not popular due to the irrational fear of hyperinflation that is prevalent in Germany for historical reasons, but beneficial.

[RyanMcGreal]

I'm not sure why. Devaluation would give the PIIGS some breathing room to get their internal affairs in order, and the worst Germany could expect is some inflation. That seems like a better risk than watching Greece leave the EU and triggering a wave of other defections.

[Uchikoma]

No country is "defecting" the EU. Some talk about leaving the EUR. But even the larger leftist Greece parties do neither want to leave the EUR (which enables them to survive) or the EU. Why should countries - "poorer" ones - leave the European Union when it spends billions of EUR every year to increase the living standard of those countries and spends billions mostly on agricultural subsidies? The European Union has been a large money transfer project in the last 20 years.

[dr42]

Printing money and creating inflation has never historically been found to be a good idea. Germany are not forcing anything on these PIIGS countries, but if they want money they need to make some changes that will get their economies back in shape. Otherwise why would Germany lend them any money if they are just going to fritter it away like they did getting themselves into this mess.

Decades of inept economic, infrastructure and education policies by incompetent leaders has put them in this place.

Germany, meanwhile, has dealt with a the huge unification problem with its formerly communist sister, and they have prospered, so just maybe Greece and the other bankrupt sovereign states should listen to Germany and take the bail out with their conditions.

If you look at it from a bigger picture level, what's happening is that you have a bunch of countries that have a terrible history of running their affairs that are hanging on to the idea of their sovereignty, despite the fact that a more united federal system would be better. Economics is driving Europe into a United States model, where a federal policy making system of government helps prevent this kind of gigantic screwup by Greece and co.

[tallanvor]

The policies that Germany is forcing on other countries prevents inflation in Germany. If they were willing to accept a reasonable amount of inflation, the situation could be eased for the majority of the EU countries.