[rhodri]

Most of this bailout money will go straight back to paying interest on the bad loans that caused the crisis. Much of these loans came from banks in the very same Eurozone countries that are imposing this deal onto Greece. So much for European solidarity...

The austerity imposed on the Greek people will shrink the economy and ensure that the next few generations will be labouring in servitude to pay off the debts of the previous generations. The supreme irony in all of this is that Germany was able to thrive after WW2 in part because of the writing-off of more than half of their government debt, something that Angela Merkel has claimed is 'off the table'.

Further reading: http://www.theguardian.com/world/2015/jun/29/where-did-the-g... https://medium.com/@gavinschalliol/thomas-piketty-germany-ha...

[tosseraccount]

Bad loans did not cause the crisis.

Bad loans are a symptom of a poor fiscal situation.

No one forced Greece to take out loans.

Consider this write up :http://www.vanityfair.com/news/2010/10/greeks-bearing-bonds-...

This was before the "Greeks as Victims" narrative gained wide currency.

“The way they were keeping track of their finances—they knew how much they had agreed to spend, but no one was keeping track of what he had actually spent. It wasn’t even what you would call an emerging economy. It was a Third World country.”

As it turned out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a piñata stuffed with fantastic sums and give as many citizens as possible a whack at it.

[yequalsx]

No one forced Greece to take the loans. No one forced banks to loan to Greece. Both parties are at fault. Both parties ought to take losses. Only one is in this case.

[yummyfajitas]

Lenders already took a 53.5% haircut in 2011. In return, the Greeks were supposed to implement structural reforms and privatization. They delayed implementing that until 2014 at which point they officially repudiated their side of the agreement (but kept the money).

https://en.wikipedia.org/wiki/Greek_government-debt_crisis#2...

So yes, so far, only one side (lenders) has taken losses.

[yequalsx]

Your view is quite selective. Greece can't repay the loans and never will. Their economy has shrunk and they are in the midst of a major depression. It is quite incorrect to say Greeks have not suffered.

Also, by the time of the haircut the banks that did the original lending to Greece were not holders of the private bonds. They had been unloaded. Ever since 2009 almost all money given to Greece from the so called bailouts have merely been transfers to primarily German and French banks. The bailout has been nothing more than a propping up of German and French banks while at the same time doing great damage to the Greek economy.

To be sure Greece has a pretty messed up government and they need to mature politically. The Greek people have suffered greatly and need to reform but further austerity is not going to help them.

[yummyfajitas]

Ever since 2009 almost all money given to Greece from the so called bailouts have merely been transfers to primarily German and French banks. The bailout has been nothing more than a propping up of German and French banks while at the same time doing great damage to the Greek economy.

In that case, Greece should be fine with no further bailouts - all they need to do is officially repudiate their debt. Then they can go on running Greece independently without any reforms and they won't need to beg the Germans and Bulgarians to send them money.

[yequalsx]

Given your previous comments with regard to your knowledge of finance you know this isn't such an easy thing. Their financial system is intimately tied into the euro and remaining part of the EU.

[hartator]

Europe is taking losses. Banking is becoming a risk-free businees, I wouldn't call this capitalism.

[kevinob11]

The banks have taken some losses as well.

https://en.wikipedia.org/wiki/Greek_government-debt_crisis#c...

[lagadu]

So? Loans carry an inherent risk with them. Banks and other institutions chose to take that risk and sometimes it doesn't pay out. Why should we protect private institutions from a risk they voluntarily assumed?

Banking is not risk free, nor should it be.

[JustSomeNobody]

So? Taking out a loan has an inherent risk associated with it that you may not be able to pay it back. How do we protect institutions who desire to loan money from losing it when they loanee can't pay back their debts?

Borrowing isn't risk free. Nor should it be.

Both sides have a responsibility in this. Actions have consequences.

[unprepare]

>How do we protect institutions who desire to loan money from losing it when they loanee can't pay back their debts?

Why would we protect institutions from the effects of the free market?

Why suddenly when it's a bank in trouble, does free market ideology not provide the solution?

>Both sides have a responsibility in this

I dont see both sides making efforts to work this out at all. I see greece in headlines owing money; i dont see headlines about DB being forced to agree to forgive interest on loans, cut employee salaries/bonuses, or take any kind of belt-tightening measures.

Where exactly do you see both sides taking responsibility?

[tosseraccount]

Socially liberal young Greeks are the main supporters of Syriza.

[ source : http://www.bbc.com/news/world-europe-18056677 ]

[leereeves]

The banks and the politicians on both sides have a responsibility. The ordinary young Greeks who will be forced to pay back the debt don't.

[zo1]

You can't have your cake and eat it to. For the 20% (guess) of "young Greeks" that are getting the raw end of a stick because they didn't vote for the government/disagree with the borrowing, there are probably > 20% of Greeks that did vote for the government, and/or did agree with the unsustainable borrowing.

Or are we going to single out individuals that are responsible and saddle them with billions of debt? The alternative in this scenario to democratically-shared blame is ludicrous. Blame/consequences can't just magically disappear at this point.

Look, don't get me wrong, I'm all for politicians being accountable for their actions. As a freedom minded (Libertarian/Anarcho-capitalist), I think a simple act/rule such as that would put us straight down a path to true freedom from government. But this crisis/situation is not one of those times where I'd advocate such a course.

[leereeves]

This came to light six years ago, and barring default or forgiveness, isn't going away soon. Young people who never voted for or against anyone responsible for the debt will suffer for it. People who haven't even been born yet might end up repaying the debt.

"Democratically-shared blame" is the ludicrous option.

[JustSomeNobody]

That's why voting for the best candidate is so important. Your decisions today will affect your grandchildren. So, make very wise decisions.

[lagadu]

Except we only see one side being forced to make sacrifices, not both.

[digi_owl]

Bad loans very much created the situation.

But not loans to governments, but loans to individuals, industry and finance.

What then happened was that the crash of '07-08 came and spooked the private banks issuing those loans. Only then did the various governments step in and underwrite the bad loans to effectively bail out the private banking system.

This, along with the number of companies etc that shut down, has put a massive economic burden on said governments.

Thing is that before the euro, Greece could have depreciated its currency to make its exports cheaper. But with the euro the currency is set to the export situation of Germany.

[i_don_t_know]

But what happens if you forgive 50%, 60% or even 100% of all Greek debt? Sure the Greeks have some breathing room and don't have to pay crippling interest for a while. But it won't fix the rampant corruption, nepotism, mismanagement, tax evasion, and downright fraud that seems to be quite systemic in Greece. At least that's the impression that I have, maybe incorrectly and unfairly. I don't know.

But the point is, if you forgive the Greek their debt, how do you know that they won't return to their old ways and ruin their country yet another time? How do you know that you won't have the same problems again 15-20 years down the road? And should you bail them out again then?

I'm not saying the proposed solution is great. It's not. But my impression is that the Greek are hemming and hawing, and doing their best to avoid any structural reforms that would prevent such a crisis from happening again. They don't seem to take responsibility for their mismanagement and they don't seem to see any reason why they should change their behavior. They put band aids on some parts and the people suffer, and the creditors are partly to blame. But no one seems to be interested in getting rid of the systemic issues like corruption, tax evasion and fraud.

I think that's the difference. The creditors don't trust the Greeks to fix their country because they don't seem to think any of it is their fault. But the creditors did trust Germany to fix its problems after WW2.

EDIT: replaced "debtor" with "creditor".

[leereeves]

Why would anyone lend to Greece again after debt forgiveness?

(Nitpick: the Greeks are the debtors.)

[nickik]

If they can reform their politcal system and people belife it to be sound, they should get money again.

[leereeves]

I agree, but the comment I responded to suggested they wouldn't do that, they'd get loans again despite not reforming, and this crisis would happen again.

It seems to me that if anyone loans money again to an unreformed Greece, they've accepted that risk.

[nickik]

I agree. The most important thing is to make the RULES clear for the future. But eurocrats don't seem to understand this.

[themartorana]

It's pretty insane that after the referendum, Tsipras tipped his hat that he still wanted a deal (word is the government never actually did any planning for a new sovereign currency and Tsipras was secretly hoping to lose the referendum [0] ) and Germany came back with one of the most crushing term sheets possible, basically set up to remove Greek sovereignty completely. If you love history, read the term sheets [1].

I expected Greece to be pushed out of the Eurozone just on the term sheets alone. I can't possibly see how this ends without another referendum in another handful of years and a Grexit in the end, anyway.

[0] http://mobile.nytimes.com/blogs/krugman/2015/07/12/disaster-...

[1] https://twitter.com/EdConwaySky/status/620272062771429377/ph...

[dpflan]

Krugman on the "madness" of the demands and "Killing the European Project": http://krugman.blogs.nytimes.com/2015/07/12/killing-the-euro...

[neumann]

I'd like a more indepth analysis of [1] and related stories.

At a glance it seems that there is a big push for privatisation and more power for capital over labour to encourage business, which the cynic in me assumes will be for the rest of Europe to exploit.

[yummyfajitas]

Most of this bailout money will go straight back to paying interest on the bad loans that caused the crisis.

If that's the case, then Greece shouldn't have much of a problem. If X% of the money will go to paying interest, then the Greeks can default and their budgetary shortfall is only (100-X)%.

So why is Greece so keen on having other people send them money?

Also, no austerity can be imposed on the Greeks - Greece is a sovereign nation. Greece can choose to trade austerity for money, or they can choose to default and do whatever they like (although of course they will need to pay for it themselves).

[jamespo]

As I understand it Greece has already had a lot of debt written off