[cxromos]

And you can't win elections by promising not to pay back your debts and accuse everyone else of trying to destroy the democracy. New government does not mean you can erase your debt. And the fact that you won the elections by telling fairytales does not mean that someone else will pay for the fairytale. That is borderline insanity. Democracy is responsibility of the successive government for the deeds of the previous one. May that be debt or a warcrime.

[gonvaled]

> New government does not mean you can erase your debt

This is a sovereign government: they can do whatever they want. Defaulting on the debts will have consequences, of course, some good, some bad. Difficult to say if, in balance, this will be good or bad for Greece.

> Democracy is responsibility of the successive government for the deeds of the previous one. May that be debt or a warcrime

OK, bring the accused to the courtroom. And, now that you are at it, bring the rest of the players. The banks, the Troika, and all the rest that have profited from this whole saga.

The blame does not lie solely on the Greek.

The outcome of the judgement can very well be positive for Greece: maybe some banks have to repay some interest, maybe the IMF has to restructure some of the debt because they badly advised past Greek governments, maybe Germany has to repay that old loan they took from Greece and never repaid, maybe the Euro-area has to compensate some members for the prejudice of helping Germany become the world export leader at their expense by using a weak currency, maybe the UK has to pay some fines for allowing the financial markets (by opposing regulation) to bet against economies bringing them to the brink of bankruptcy ...

We can factor all those things and see who owes what to whom (impossible), or we can recognize that everybody shares a part of the blame and help one member of the European Union - which probably made huge mistakes, but can't now stand on its own.

[alextgordon]

Sovereign debt absolutely can be defaulted on, just like any other kind of debt. The risk of default is priced into it.

Greece is in a situation where there is no possible way that it can ever pay back its debts. Saying that does not make you "borderline insane". Quite the opposite.

[jacquesm]

> Greece is in a situation where there is no possible way that it can ever pay back its debts.

Other countries have managed to claw themselves out of bigger holes than this. It does take a much more hardline stance with respect to payment of taxes and reduction of the size of the state apparatus, what Greece has done is in many ways a simple strategy of postponement of action until the consequences were extremely bad for all of Greece, in particular the weaker parties.

I don't blame the Greeks for their 'no' vote, but it would have been a lot better if they had had their 'French revolution' a decade earlier. Right now there is no good or easy way out of the mess any more and the Greek economy is about to collapse.

This is not a situation where there are winners, only losers and the biggest losers are the people partying in the Greek squares today. It will take a while before that reality sets in though.

[gonvaled]

> Other countries have managed to claw themselves out of bigger holes than this

One of the main reasons why other countries have been able to quietly improve their economy is the fact that the markets are real busy betting against Greece. They have been forced to issue Government debt at huge interest rates (at some point 15% if I remember correctly).

We are living in a world with global markets for private capital, but without global defenses for the national governments. The few global institutions that are supposed to act on a global level (IMF, UN, World Bank, ...) are controlled by a market-fundamentalist ideology, making them enemies instead of friends.

All this would be nice and good if we were living in a perfect market, where all players are treated equally. Instead, we are living in a world where:

- rating agencies hold huge power because of the favoritism that they get from political elites: credit papers have to be rated by one of the international agencies for some funds/governments to be able to invest in them

- banks are too big to fail

- financial markets are rigged in favor of some players (dollar)

- banks are allowed to make huge profits with a zero risk game, unloading risky credit on taxpayers whenever deemed necessary.

The market is only there for the suckers.

[vidarh]

> Other countries have managed to claw themselves out of bigger holes than this.

Do you have examples of any that have done so without extensive debt relief? I can't think of any.

IMF's most optimistic numbers (which rests on wildly unrealistic assumptions) indicates it would take decades, and they've made it very clear that the debt isn't sustainable at all. When their past attempts at forecasting the Greek situation has consistently understated the problems, that ought to be pretty sobering.

> Right now there is no good or easy way out of the mess any more

Maybe not "good or easy", but substantially less damaging than what's been put on the table: Drastic debt cuts coupled with short term financing, coupled with reforms that aren't tied at reducing Greek government spending, or at least replaces any spending cuts with investment elsewhere (as the spending cuts have been a driver for the drastic contraction of GDP).

[jacquesm]

This is all true now, but it wasn't when this whole circus started.

As for the present my personal preference would be to simply forgive all debt and to ask Greece (politely) to exit the Euro and not to apply for re-admission until they have the house in order.

That's not going to be a very popular option but it would give the Greeks a fighting chance to solve this the Greek way.

Already a large chunk of the debt was written off (in 2012) so there is some precedent for that but back then the motivation was a different one (to keep Greece in the Euro at all costs and to offload the private sector problems onto the public one).

[maxerickson]

If you are willing to forgive all the debt there probably isn't much reason to kick them out of the Euro. I'm not watching the situation all that carefully, but I expect that kicking them out would further damage their economy, whereas if you don't kick them out, individual actors can just note that lending money to Greece isn't a good idea (so it shouldn't be the case that they are able to quickly build up a new untenable debt).

[jacquesm]

It would give the power to self-determine these issues back to the Greeks, and it would forestall any re-run.

[vidarh]

If you forgive all debt, there's no reason for them to exit the Euro: They've been operating at a surplus for a while now. Their required ongoing bailouts are at this point down to servicing the mountain of debt.

There's certainly many more reforms they ought to carry out, but none of them are necessary for a budget surplus if the debt is removed.

[varjag]

> Do you have examples of any that have done so without extensive debt relief? I'm can't think of any.

Ireland perhaps the most recent one.

[vidarh]

Irelands debt situation was never anywhere remotely as bad as Greece's. Irelands debt to GDP peaked at 123% after the bailout. Greece's reached 177% in 2014, as is likely to go higher.

So it is in fact not an example of a country that has clawed itself out of a bigger hole than Greece.

[varjag]

Ireland's debt to GDP peaked 4x fold from it's longtime "norm" of 30%, while Greek was long at over 100% to begin with.

[UK-AL]

Even the IMF have admitted that the debt is unstainable. The Eurozone refused debt restructuring, which was the main thing Varoufakis was holding out for.

Without debt restructuring the same thing will happen 5/10 years down the line. An economist will try to fix, politicians like to push it down the line, so they don't have to deal with it.

Some debt needs to forgiven, while economy needs to competitive. Euro deal was the opposite of this.

That's what has caused the rift.

[jacquesm]

The IMF has been out to lunch when it was needed most with more reasonable and 'Greek adapted' solutions. Essentially they have forced Greece down a very narrow path that would have worked in Germany but not (in a lifetime) in Greece.

So now we have the end result of that strategy (which both the IMF and the previous Greek governments as well as their lenders are party to).

Varoufakis is a very smart man that made a whole bunch of moves that make no sense to me, I think that the last 6 months have pushed Greece into a corner taking away whatever manouvring room they had and now there are only (very) tough choices left.

Going after the tax dodgers with a really big stick should have been the first order of battle for instance, now it is very late to start to solve this in a structural way, it's chaotic at best and catastrophic at worst.

How the EU will handle this will be a defining moment in their history and will potentially make or break the union in the longer term.

[koolba]

Greece has a massive annual deficit before counting interest on existing debt. Beyond defaulting on their existing debt they need to make large structural changes to their fiscal policy for recovery to be sustainable. Otherwise their borrowing costs would be beyond junk.

Put it this way, if you make $100k per year and spend $160k, and you have no assets, what bank is going to give you a loan?

[caoilte]

The problem is that many banks gave Greece loans for many years and at very low interest rates in exactly this scenario.

And then Greece attempted to make the structural changes you described only having reduced expenditure to $100k per year they ended up reducing income to $60k per year and so actually increased the amount they owed as a proportion of their income.

Further structural changes along the lines of those demanded (leave business and rich people alone - tax the poor) would just make the situation worse.

And so we have a choice, - restructure (this happens all the time in business even for businesses with outgoings higher than incomings - the long term potential for growth is what matters). - force Greece out of EU

Kicking the can down the road only postpones the inevitable choice between these two options.

[simonh]

It's more that just about Greece's debts, it's about Greece's persistent refusal to live within it's means. Other EU countries have higher debt to GDP ratios than Greece, but they reformed their economies, increased government revenues and reduced spending to make those debts sustainable. Greece has not. They were supposed to sell of 50 Bn Euros of state assets, 5 years later they've sold less that 3 Bn worth. They've persistently dragged their feet over even basic sensible reforms. It didn't have to be this way, under Giorgos Papakonstantinou Greece was well on it's way to financial reform.

Note that the Greek banks are dying not because the ECB has stopped lending to them, it's because it has stopped automatically ramping up the amount of it's lending. Even just freezing emergency lending on a daly basis is bringing the country to it's knees. What Greece wants is for the other EU nations to forgive past debts while also continuing to keep on lending to them with no end in sight. This is why the creditor countries are getting so frustrated negotiating with Greece.

Other nations went through tough times, got their finances in order and are now paying off their debts sustainably. Greece has chosen not do that. It's inability to pay off it's debts is a choice they have made.

[crdoconnor]

So you think that where democracy and creditors clash, it should be democracy that loses?

[nnq]

> Democracy is responsibility of the successive government for the deeds of the previous one.

NO. Democracy is the right of the people to violently topple down their corrupt government when they think it no longer represents them, to put up a new government that better represents them, and not to have the hold the new government responsible for the debt and crimes of the old one.

Yes, you'd need to do it violently to be able to legitimately affirm that "the old guys don't represent us, and we're not going to pay their debts! (don believe us when we say they don't represent us at all? look over there and see their bodies impaled on stakes! raise them from their graves and sue them if you want those paid back!)".

"Real democracy" means admitting that government corruption is real, that once every XX decades you need a violent "cleanse" to get rid of it, and that "civil war" or "revolution" can be a natural way for a people to occasionally re-sort-out their priorities and take back control of their government.

That's what the Greek people should do if they had a pair!

...now, in all honesty, I'm not a big fan of violence and therefore I'm not a big fan of "real democracy" either :) But then you need to add a "reset" button to any monetary policy system, you don't want the natural "violent reset" option. You can choose between "real democracy and violent resets for crises" or "not-so-real democracy plus not-really-fair-but-functional-economic-reset-buttons".

(EDIT + : ...and yeah, there's also the third option of keeping the people too brainwashed and confused for them to realize what their real options are. And then you can redirect the people's energies from "reform and government cleansing" to more appealing high-level EU objectives like being pawns in a game leading to fiscal unification... which is what's probably really happening right now. And probably not such a bad thing either.)

And yeah, some countries, like Germany, will have to literally pay (like in "pay by forgetting about getting back that debt in reasonable time and, kissing goodbye the right to take up insanely-low-interest credit") to keep these "non violent economic reset buttons" on, because they are actually paying for the "privilege to live in an EU not thorn apart by wars and revolutions".

Homo sapiens societies are by their nature violent, unstable and corrupt. Peace is neither cheap nor fair. If you want to live in a "peaceful neighborhood" you should be willing to pay 10x higher prices on your damn house, utilities, car, school etc., and accept the ethically dubious choices you'll have to make to keep that peace!