The biggest point that is rarely raised in this whole debate is that Germany has benefited for the last decade from the low Euro; which has been courtesy of the Greeks. In the last decade the Germans have had their main stock index gain some €40T (much more if you take from 2003). The increased tax income to the German state over this period would handily pay off Greece's debts. So Germany has benefited from Greece over all these years and now they refuse to pay for that benefit.
This is a case of ideological holier than thou treatment, a bureaucratic banality of evil. Meanwhile people sleep on the streets in Greece, from children to pensioners.
Both the past Greek governments shouldn't have borrowed the money, and the past European governments shouldn't have lent them the money; now both sides will suffer. And I'm starting to get the feeling that only one side will learn from this (and it isn't the EU bureaucrats, calling them technocrats is too generous; they follow the rules and ideologies even when they are wrong).
> past European governments shouldn't have lent them the money
It wasn't really European governments lending Greece money, at least not until the bailouts. It was European banks. Incidentally, that's why France and Germany broke the EU's rules and bailed out "Greece": they were protecting the European banking system by offloading bad Greek debt from European banks to European taxpayers.
The only workable solution I can see at this point is implicit restructuring through extending loan terms tied to the implementation of reforms and saddled with snap-back provisions. Raise the retirement age? Some portion of the debt is extended 5 years and inflation takes care of reducing it. Ditto tax collection, etc. Then every reform would be politically manageable in Greece because each one would carry with it some measure of debt forgiveness.
The low Euro has not been courtesy of the Greeks. They are a tiny fraction of the Eurozone, with the population of Georgia and the GDP of Louisiana.
And yes, it is ideological. Multiple Greek governments cheated their way into the Euro and their population had a super high income for years [1]. Now they want to keep their entitlement state, with early retirements, higher pensions that other comparable EU countries, and huge amounts of bureaucracy and corruption. Why should the other countries continue to finance them?
I'm sure if Germans could go back in time and realized that the no-bailout clause of Maastritch would have been ignored so much, they would have rejected the Euro altogether (at least that was the opinion of the German economists I spoke to).
Why don't just let Greece default and leave the Euro? With their lax govt and rigid markets, they are not able to deal with a single currency. Let them default, like many countries have in the past, and then they will regain competitiveness at the cost of austerity by proxy, but that seems to be the only way.
Add Italy, Spain & Portugal, and your "tiny fraction" theory goes out the window. Had Germany just stayed with the Deutsche Mark the euro would be fine today and the Germans wouldn't have exported so much to the PIGS + Rest of the eurozone. Their GDP would be at most 10% less than it is today.
What do you mean fail? You mean decrease in value? That would have been perfect, but it would have bankrupted German industry with it's sky high Deutsche Mark and noone to buy their goods in the countries with "no credibility"
>>Meanwhile people sleep on the streets in Greece, from children to pensioners.
People sleep on the streets in a lot of countries, I come from one such country(India). And I can tell you getting a home to stay is really your responsibility, its not the governments job to pay for it. Let alone expecting another country to pay for it. Nobody is entitled to a home, education, or in some cases even food. Every where else in the world, people slog their whole lives for these very basic necessities.
Europe needs to see its face in the mirror and contemplate that same things that apply to every other country in the world apply to them as well.
And Greece is no poor african nation. Its not like war lords are tearing apart a civil war ridden country, with a history of European powers colonizing it. These are pretty much self created problems. Early retirement, free education, free healthcare, insane standards of living which are unaffordable to even begin with.
This all feels like a kid born into a rich family making a virtue out of its own sins of spending away all their money. And now wants their neighbor to continue fund their party, and calling them evil if they don't.
So, if Greece has a higher relative cost of living, if the distribution of wealth is relatively more unequal and if they have a relatively worse social welfare system then, yes, they'll face hardship.
A key news story for me from a few years back was how an elderly man lit himself on fire (or hung himself? committed suicide in public anyhow) in a central square in Athens as a direct result of the hardship brought about by austerity measures. And this, in an as you say demonstratively wealthy country. Sickening.
It's the price of housing, not one's income, that determines whether people are sleeping on the streets. (Assuming that they actually are in Greece.) Plus, GDP/no_of_people is an average. Some make more, some make a lot less. Especially those 25% unemployed.
> Wikipedia gives $16,138 vs $18,863 and $29,209 vs $26,773 PPP estimated for 2015, so Slovakia is actually a bit better off.
...on average, and Slovakia also has (as far as the most recent numbers I can find) a lower Gini coefficient, so should have smaller numbers far above and far below that average.
The most important point that is rarely raised is actually the fact that Greece agreed to all of the terms that have now causes its demise. It agreed to them when it entered the Euro and at every bailout starting in 2010. It agreed to the terms that are now imposed. So it begs the question: if the terms are suddenly so unreasonable now, why did Greece agree to them?
So who is at fault for loaning money to what everyone knows is "a clientelist corrupted state if there ever was one"?
Surely not the borrower? I mean, historically, for basically all time, it was the job of banks to say "no" to borrowers who were not good credit risks. That was their job, first and foremost, not to lose the principal.
In the last decade or two for some reason they decided that preserving their principal wasn't the primary goal, "returns" were.
I don't think it's surprising that people who historically have not been given enough rope to hang themselves suddenly get more rope and are expected to know that the world has changed. They don't.
I am an ultra-free-market Objectivist. Still, I think that the Greeks voted correctly.
The problem is: even in a democratic country, you are not accountable to where and how much your government's borrowing. Governments do not produce money; they take it from taxes. Which means: _they_ are borrowing money, and _you_ have to repay it.
While being responsible for debts is a good thing, it only concerns your own debts, not something that was made on your behalf. It's the businesses who will suffer the most (as they are taxable), and they are innocent.
In a democratic republic (and since the Greeks originated this concept, I think we can allow that they understand it) voters are responsible for the actions of the government they elect. To say people aren't accountable at all for government borrowing is silly; ultimately it's the electorate's responsibility to ask candidates and political parties how they intend to pay for their programs. Of course, it's very hard for voters to understand a whole economy and assess whether a party's proposals are good or bad, or to assess whether a party or politician is likely to be able to deliver on intentions, no matter how sensible, or to fall back on other measures. I'm pretty sure that when Syriza was elected their collective hope was not just to be in conflict with other EU countries but to get the Greek economy growing again so as to increase revenue and reduce the ratio of debt:productivity, but of course what you hope to achieve and what you can actually get done are often two different things.
I also think the referendum vote was the correct one because other countries, politicians, and populations in Europe have been deluding themselves about this situation to almost as great a degree as the Greeks were, and it's plain that the existing strategy has just resulted in the Greek economy shrinking more and more and the external debt becoming impossible to pay.
But this notion that the population of a democratic country is in no wise accountable for the actions of its government is just facile. It's like trying to get out of your chores by saying 'I didn't ask to be born!' Well it's true you didn't, but you still have to clean up your room before dinner.
> In a democratic republic (and since the Greeks originated this concept, I think we can allow that they understand it)
This point keeps being repeated, but even if we allowed that historical political achievement could direct the actual national mentality, please consider that since the times of ancient democracy Greece has mostly seen governments which are still remembered as the epitomes of dictatorship and politicking -- from Byzantium, through Ottoman Empire, all the way to the post-WWII military regime. Today's common mentality in most of the Balkans, including Greece, is very far from the ideals of the Athenian democracy (which was itself not really very democratic, leaving out the large majority of people such as women, slaves etc).
I completely agree, but I think that political agency also involves an acceptance of responsibility. To suggest that populations are helpless against governments that promptly borrow them into penury is as much magical thinking as the idea that you can just cut your way to prosperity. In reality you don't usually see people running out into the street to protest additional government borrowing. (Please note that I think the Greek crisis is a lot more complex than a few numbers on a national balance sheet, but I don't see any point in trying to re-summarize it in every single comment.)
As far as I'm counting, Syriza was the third government of Greece elected on the promise of no further borrowing. One other party changed his worldview as soon as elected, the other changed only after several closed-door negotiations with Troyka (that let people talking of everything, from bribery to death threats, so, no idea about what really happened).
Holding the people of Greece accountable for the action of those governments based on the fact that the country is a "democracy" is a complete delusion.
By the way, we should use the same rationale for other countries, and should hold the guilty accountable of their actions more often, instead of the innocent.
To be fair, a default is not a rosy scenario by any means. It's the Troika that is trying to extend and pretend here.
The fact that Greek representatives acted in a manner that's the complete opposition of what they claimed they'd do once elected means that the country isn't that democratic. Thus, you can't implicate the people for voting on them.
Whatever scenario those politicians sold (and I have no idea what they are) are not relevant. They promised specific actions, and they broke that promise.
> In a democratic republic (and since the Greeks originated this concept, I think we can allow that they understand it) voters are responsible for the actions of the government they elect.
Don't be ridiculous. Sure, "democracy" is better than dictatorship, but choice between two (or three) bad options every 4 years isn't actual choice, and you can't hold the voters responsible for every mistake the governments commit after they're elected.
I'm not sure where you're from, but I'm sure that your government made plenty of mistakes that you don't want to be responsible for. US - destroyed Iraq. UK - helped establish ISIS. Slovenia - unconstitutionally ignored gay rights for a number of years. Off the top of my head.
I'm from Ireland but live in the US. Of course there are things I am not happy with the government about at any given time, and technically I'm not responsible for what government does in the US since I can't vote in US elections, but insofar as I support the US by living here, paying taxes, and so on, I do feel a little bit responsible even for things I disagree with. Of course individual voters have very little power and it's very difficult to actively lobby government without getting into the 'political-industrial complex'.
But in the aggregate, having political agency means you have to live with the ramifications of the electoral decisions you make in the normal course of things.
You cannot produce value from thin air. When they produce that money, it is a form of taxation because it decreases the value of the previously produced money. Monetary inflation devalues the currency.
Even if true (which, its not, value is created "from thin air" all the time; otherwise, wealth would be zero-sum, and per capita wealth always declining with increasing population), this is irrelevant to the upthread claim which was that governments do not create money. Which is quite obviously false.
- Governments literally stamp their names and politician's faces on money. You're supposed to obtain it and give some back to the government.
- There’s a distinction between government and economy, though government enforces capitalism (social relations of "property", police, etc), and attacks other nations which try alternatives.
- The money supply is basically bureaucracy-points made on computers.
"In God We Trust" is an apt description of how we're not supposed to question simple things. With the moralistic notion of "debt", we religiously consign children to awful fates.
Money is just a reflection of production (i.e. scarcity of production). Due to market forces inertia, monetary supply can be manipulated, but you can't just start printing money left and right without causing inflation; there is a hard science of doing it without disturbing market balance.
The value ascribed to money is, of course, related to what it can be used for and how much of it is floating around, and production in the area where the particular form of money is the preferred medium of exchange is one of the factors that is relevant to that. And, perhaps the statement about governments not creating money meant that governments don't create value. Which would still be wrong, but in different ways.
> Greece saying NO is not Greece giving the finger to Europe, it's Greece giving the finger to the people of Europe.
Its not giving the finger to anyone. The Greek government was offered terms, which it could accept or reject (neither of which constitutes "giving the finger" to anyone, choosing to accept or reject an offer is just a routine part of negotiating.) The government gave this choice to the voters with a recommendation, rather than acting unilaterally on it. The voters made a choice to reject the terms, which was the recommendation given by the government.
Greece is giving the finger to the EU in the same way Argentina gave the finger to the IMF: it wasn't the people that "chose" to bail out the banks, it was the government at the time. Why should every Greek person today be held accountable for what a very small subset of them did back then?
I really dislike people saying "the Greek are doing this or that". Taken to an extreme, that is that kind of generalization and simplification that leads to xenophobia.
The bailout was also wrong, of course. But the damage was done long time ago, and it is irrecoverable in any moral way. It's impossible to make Greek politicians and government workers sell back their possessions and privileges.
Except that, exactly and literally, they do precisely that (though some, through law, outsource that function to an outside entity or combine together with other governments to do, or outsource, that production jointly.)
True, but on the Greek case a lot of that money was used in transfers to voters to prop up their income (pensions, early retirement, unemployment benefits, etc.)
In a way, most of the austerity discussion is a red herring. The key problem is not whether to raise sales tax by 1% or not. The real reforms are raising the retirement age, liberalizing labor markets, fixing their IRS, etc.
If you condone debt without reforms then Greece will be back to panhandling five years from now. Since I really doubt they will be able to pull of the reforms (after 20 years of not doing so), the only sane option seems an orderly default + Grexit. Sure, you'll likely have 6 months of crisis and a loss of confidence in the EU, but it's not going to be the end of the World...
I totally agree with you, but I think the rest of Europe is looking for a quick fix that doesn't exist. The problem has accumulated over generations and we should be taking an approach that is designed to work out over a similar timescale, like the restructuring of German war debt in 1953 (in contrast to the self-defeating hard-line approach on WW1 reparations following the Treaty of Versailles).
only sane option seems an orderly default + Grexit. Sure, you'll likely have 6 months of crisis and a loss of confidence in the EU, but it's not going to be the end of the World...
I honestly think it would be the end of the European project within 1-2 decades. I am no Eurosceptic - on the contrary I've always felt very proud to be an EU citizen and been a supporter of full-on political political union and a fully federal Europe. If you'll forgive me quoting myself from another thread, I think a Grexit is like trying to deal with the pain of a hangover by amputating one's own head. Greece is the cradle of western civilization - philosophically, linguistically an in many other respects.
The political payload of a Grexit would be a tacit admission that capitalist/mercantilist considerations trump those of citizenship or political identity. I agree completely that we can't solve the problem by just writing off debt, as we'd be back in the same place in a few years. But nor can we solve it by opting for Grexit + drachma + devaluation, ie throwing up our hands at the fiscal problem and switching to monetarist tricks instead.
The EU has to stand for something deeper than a set of accounting principles, or it can't stand at all.
"...only a new “heresy” (represented at this moment by Syriza) can save what is worth saving in European legacy: democracy, trust in people, egalitarian solidarity."
I'm glad the Greeks voted No. The zeal with which austerity politics has been unflinchly pursued has caused enormous hardship for people in Greece and across Europe. But do people in Europe really feel a sense of solidarity with each other?
I'm from the UK, a country often lambasted for it's aloof and isolationist attitude to Europe. I used to be embarrased by the scepticism shown by British MPs towards closer EU integration. Now, however, I'm just a bit indifferent. The reason? I've seen clearly that self-interest among European countries (almost) always trumps a greater collective good. Yet the press and politicians continue to pretend otherwise. I don't blame individual countries for doing this, but I wish they would drop the pretence that they are pursuing a greater collective goal for Europe when in fact they are often pursuing a best-for-my-country approach. And who can blame them when it will always be to their own electorates that they must first appeal?
The migrant crisis in the Mediterranean really amplified this for me. I was ashamed of the UK response, but no other country was willing to share fairly the number of migrants rescued either. And even the rhetoric around Greece is rarely about solidarity and common European humanism, but instead about keeping the integrity of the financial system in place.
But do people in Europe really feel a sense of solidarity with each other?
Yes, yes they do.
I'm also glad the Greeks voted No. About time this charade that is the €zone was fixed properly. And I say that as an ardent proponent of the €. The sooner a politico-fiscal framework is set up the better. Of course people _hate_ the idea because it means that sovereign states become even more closely knit. And they also hate the idea that a mechanism will be put in place whereby regions that benefit more from the integration help regions that don't benefit as much. By all means, the Greeks should get their house in order, but the stereotypes that are being bandied about the place are embarrassing.
Smart move by you guys (UK) to stay with the £ while the € experiment got under way. If people put aside their differences and fix it though the € has a chance at becoming by far and away the world's second reserve currency. We're closer than we imagine to that state of affairs I believe.
Regarding the immigrant crisis in the Med. Surely a tragedy that every EU citizen should be ashamed of. How many have died already? I don't even know. UK has responded now though (and bravo for that), as has Ireland, Germany, and others?
Ultimately, the market has to bare the loss of the Greek government. It's really no different than when a corporation fails to pay its debts. Mind you, it does cause a massive decline in the country's economy. I think the IMF has the right idea, give Greece a means to grow its economy and put a hold on all debt payments. To do otherwise, I think is to court failure of the entire Eurozone.
Almost all Greek debt is from other EU governments, and in several cases the governments raised the bailout money with extraordinary taxes (Portugal comes to mind) so voters are well aware that it's their own salaries bailing out the Greeks.
Most of the banks that loaned the money were akin to Credit Unions or similar. EG: La Caixa in Spain, the Landesbanks in Germany [1], etc.
So they had to give in to the banks, because one way or another the Governments were on the hook for that (due to deposit insurance for instance).
Now the question is "why did the banks lend to Greece?" and the answer is because Greece and other countries pushed in the Basel agreements to have a risk weight of 0% [2] in order for them to accept the agreements (or else the Greek banks themselves would have been reluctant to hold Greek bonds).
At the end of the day, even if default is allowed, the borrowing parties should bear responsibility, in the same way people do when they borrow too much and then default. This is not moralistic but practical, because otherwise you end up with huge moral hazards and everyone and their brothers defaulting all the time...
except the "market" already got a bailout laundered through the greek government so merkel, sarkozy, strauss-kahn, et al, could pretend they hadn't given their banks giant checks
The ECB bought the debt from the private banks, right? So, I think the burden is still to be carried by someone. So, I don't think the ECB should've never bought back the Greek debt at all. The banks need to learn that there's no such thing as a free lunch when it comes to loans. But it seems all governments are hell bent on making the lives of banks far too easy (where the rest of us if we should fail are told to get bent).
Don't throw the idea of money under the bus. Money in itself is not the root of the problem. Money is a tool, an instrument -- let's keep that perspective clear in our minds. We can innovate in the money space (crypto-currencies, blockchains, and all that) if we want better solutions.
Somebody posted a G.K.Chesterton quote on this site a mere 6 hours ago that is apropos: https://news.ycombinator.com/item?id=9845506
[But donkeys, I fear, will never be abolished.]
Look to how money is misused abused and try to figure out how we can remedy those situations. Much better :)
Which is exactly the point Zizek was making. You (in the guise of a so-called technocrat) say that your position is not ideological -- "contracts must be adhered to" according to you -- "while the EU technocrats talk as if it is all a matter of detailed regulatory measures" according to the article. Notice a similarity?
You wish poverty on millions? You wish social unrest? You wish the perpetuation of an unjust financial state of affairs then.
I've said this until I'm blue in the face, the €zone as it exists cannot function without fiscal transfers. That requires _political_ redress. Until that happens sovereign states within the €zone are not playing on a level playing field. Each state gave up a lever of power (sovereign currency) to join the club and a similar virtual lever must be established in return (fiscal transfers). Within the USA there are fiscal transfers. Between regions in sovereign states (Germany, UK, Spain, etc.) there are. The €zone has got to have them.
But nooo - "Pacta sunt servanda". That simple is it? Give me a break.
> You wish poverty on millions? You wish social unrest? You wish the perpetuation of an unjust financial state of affairs then.
I don't wish poverty on millions (or even on one). I don't wish social unrest. But I also don't wish to force the rest of Europe to keep throwing money into a sinkhole. That would also be to "wish the perpetuation of an unjust financial state of affairs".
Greece needs more than just an infusion of money. It needs more than just debt forgiveness. It needs a transformation of its society, government, and politics. Only Greece can do those things - the EU can't do it for them. Currently, to this outsider, it looks like Greece refuses to even try to do so. But they complain about the cruel Europeans who will let Greek children starve in the streets. Well, it seems to me that Europe is much more willing to help those who at least try to help themselves.
Sorry if this seems heartless. As I said, I am an outsider - not just to Greece, but to Europe. This is my perception from afar. But even with the best will in the world, it appears to me that no outsider can really do much to help Greece until Greece is willing to see that it must change.
How much does Greece have to pay per year? I think it's something like $5bn? AFAIK they have a GDP of $300bn and $100bn of that are converted into taxes. Why would paying $5bn result in poverty of millions then? Isn't their spending on military alone in the billions?
If more austerity measures are imposed the rate of unemployment will go up even more. This translates to increased poverty. Those repayments have to come from somewhere else within the Greek economy. That somewhere else will have a knock-on hardship.
If that is the case then Greece should default and leave the €zone. But that is not a great outcome. As the next weakest economy will come under fire. Also, others will be reluctant to join the €zone.
Restructuring and short- to mid-term solutions kick the can down the road. Ultimately a fair system of fiscal transfers needs to be put in place. Loans are _not_ fiscal transfers. Like it or not the €zone is in this together now.
There is no natural law that says this. People, organizations, and governments can very much accumulate debt that they cannot repay, it happens all the time. You can't squeeze blood from a stone, but you can enslave a person or throw them into debtors prison if a punitive approach is what you're after.
No matter what you do the debt will not be repaid because it cannot be repaid. We would like to think that in our modernity we have come up with civilized and merciful ways to deal with this situation, like bankruptcy for example. Unfortunately in the case of Greece the creditors seem less then enlightened.
Greece has tax incomes of what, $100bn a year? Why do you say they cannot repay their debts? I don't know the numbers, but I guess it is less then $10bn per year they have to pay.
It's a bit amusing how suddenly everyone seems to be an expert in economics.
In any case, what all those people are missing is this: The Greeks signed the contract. The contract hasn't changed since then. If they are "correct" now they shouldn't been willing to sign the contract.
My Great Depression Economics professor at university had the opinion that the newly formed ECU was going to be temporary or at least limited in scope, due to the lack of exchange float - similar to the gold standard. I also see a lack of "political float" here. op/ It's too idealistic to expect separate nation states to ignore their differences. /op
This is a case of ideological holier than thou treatment, a bureaucratic banality of evil. Meanwhile people sleep on the streets in Greece, from children to pensioners.
Both the past Greek governments shouldn't have borrowed the money, and the past European governments shouldn't have lent them the money; now both sides will suffer. And I'm starting to get the feeling that only one side will learn from this (and it isn't the EU bureaucrats, calling them technocrats is too generous; they follow the rules and ideologies even when they are wrong).