Greece

[DEC-1982]

Has anybody in Europe or elsewhere figured out the cost to have 18 finance ministers and 18 heads of state spend so much time on one country's problems (18 is not counting Greece)? I suppose they think it's worth it; anyway it's less than the @ Euro 350 billion that everybody knows is not going to be repaid.

 

[fh2000]

We need Dave Ramsey to advice the head of Greece. Beans and rice....

 

[Nemo2]

If you can get something more than olives, like some protein, to go with the drinks, it will lessen the ordeal. Like this grilled fish whose photo I linked off the Web.

Picked up a couple packets of Haddock at Costco the other day......soon as we've finished this batch of Burritos we'll cook up a little.

Shipboard, we generally have (at least some) fish twice a day.......but, late 1980s, on La Dique, Seychelles, we pretty much had fish every meal...ended up smelling like a Pelican!

 

[MichaelB]

FT reports (with no details)

EU leaders have given Greece until Sunday to reach an agreement or face bankruptcy and collapse of its banking sector, announcing a summit of all 28 leaders for Sunday.

 

[samclem]

FT reports (with no details)

EU leaders have given Greece until Sunday to reach an agreement or face bankruptcy and collapse of its banking sector, announcing a summit of all 28 leaders for Sunday.

Seems a bit odd. We know the upcoming payments to the ECB and IMF won't be made, so those loans go into default without any further action. The EU leaders shouldn't be giving Greece any ultimatums or deadlines, that just plays to Tsipras's hand. The EU leaders don't need to say or do anything--the Greek banks will become insolvent, the money will run out, external sources of goods will not ship without payment in advance, and Greece will have the autonomy she wanted to solve her problems on her own terms.

 

[clifp]

Has anybody in Europe or elsewhere figured out the cost to have 18 finance ministers and 18 heads of state spend so much time on one country's problems (18 is not counting Greece)? I suppose they think it's worth it; anyway it's less than the @ Euro 350 billion that everybody knows is not going to be repaid.

I agree this seems crazy waste of time. Imagine if all the 50 governors and the state treasurers, plus the President, Janet Yellen, and Treasury Secretary spend this much time worrying about Puerto Rico's bankruptcy.

 

[NW-Bound]

I agree this seems crazy waste of time. Imagine if all the 50 governors and the state treasurers, plus the President, Janet Yellen, and Treasury Secretary spend this much time worrying about Puerto Rico's bankruptcy.

Well, maybe if PR's debt is 370B Euros instead of US$72B, and is held inside other states' pension funds.

 

[MichaelB]

I'm not smart enough to know if this upcoming meeting is a good idea or not. It does seem they all need to be involved, because this is not so much about debt payment as it is about how the EU works and if a feasible action plan is possible within the EU framework. Or, possibly this

I think Greece should get off the Euro bandwagon. Culturally they are not fiscally self disciplined, let their own currency float based on their political decisions.

Watching that chaos will give other larger but problematic governments and their citizens pause.

Leaving the Euro should not require leaving the EU.

 

[Lakewood90712]

We can't print drachmas, says Greece's finance minister

No problem. North Korea has experience printing banknotes, as it is the largest producer of extremely high quality counterfeit US $20 and $100 bills. Should be no problem to subcontract the work. Not sure what the NK gov. would want as payment. ? Real Euros ?

 

[Fred123]

Not much sympathy here for Greece, and lots of cultural stereotyping about how Greeks lack fiscal discipline, etc. But those of you who have that view might want to take a look at this graph:

2010 and 2012 were the years in which the EU imposed austerity measures on Greece, and you can see what happened. And here's the cumulative result:

Greece is on course to have the worst peacetime depression of developed countries in recent history, and it is largely due to the punitive measures imposed by the EU in the wake of the financial crisis. And lots of suffering -- unemployment is at 25% and youth unemployment is at 50%.

 

[NW-Bound]

Yes, I saw somewhere that Greece's GDP rose rapidly until the financial bubble burst in the US. Not being an economist, I wonder how GDP is measured. Say, if the government spends $1B to hire workers to do non-productive work, does the entire $1B get counted as GDP or something less?

And there have been talks about how Greece did some creative accounting to show its economy in better lights in order to get into the euro.

 

[explanade]

Yup, Goldman Sachs helped Greece cook the books.

As far as govt. workers being counted in the GDP, yes they are. Even Germany and Switzerland, which are considered models of fiscal probity, have large public sectors.

Govt civil servants get paid, spend money in the economy, which allows businesses they patronize to make money.

In the US, there are towns where a big govt agency or a military base is the economic foundation of those towns. Or big govt. contractors.

Inconvenient facts for those who claim govt. can't create jobs. Maybe it's not the most efficient way to create jobs but it provides livelihood, both directly and indirectly, for a lot of people.

 

[DEC-1982]

And there have been talks about how Greece did some creative accounting to show its economy in better lights in order to get into the euro.

With the help of of our Goldman Sachs, no doubt "doing God's work". Isn't that what the Goldman Sachs CEO said at one time?

 

[NW-Bound]

Surely, government jobs are real. However, the functions are more of the public service, regulatory and administrative types, not true production. We need firefighters, policemen, tax auditors, etc... But how many of them do we need relative to carpenters, brick layers, bakers, farmers, etc...?

So, the underlying problem may be that while no country can exist without a public sector, is it possible that some may have just too much?

 

[samclem]

Not much sympathy here for Greece, and lots of cultural stereotyping about how Greeks lack fiscal discipline, etc.

Well, if you want to make the case that the Greek government is fiscally disciplined, go ahead. It absolutely is not. If you want to ascribe that to "culture", I'm not sure where that leads us. But the numbers are what they are.

Greece is on course to have the worst peacetime depression of developed countries in recent history, and it is largely due to the punitive measures imposed by the EU in the wake of the financial crisis. And lots of suffering -- unemployment is at 25% and youth unemployment is at 50%.

Yes, lots of suffering, and much more to come. The causes of that suffering are manifold.

Greece's creditors loaned that nation money that Greece requested. The "austerity" these creditors later requested was not due to the fact that Greece borrowed money. The fiscal restraint was requested by creditors as a condition when Greece requested to borrow more money, and when Greece requested an easing of previously agreed terms. Greece was free to accept or reject those conditions. They promised to implement specific reforms to get additional money--and they followed through on very few of them. Which is an important reason their economy continues to be in shambles.

Greece's public sector is a bloated mess, the product of four decades of patronage. Public sectors may provide jobs, but they very seldom increase the net wealth of a nation. Obviously a public sector of some size is essential to allow the proper functioning of the private sector, but in Greece the high tax rates and regulatory burden are effectively killing the private sector. That's what your graphs show.

 

[explanade]

That was and continues to be the national debate at this time.

Around the time of the financial crisis, there was discussions about the federal govt. accounting for 1/5 to 1/4 of GDP.

With the fiscal cliff and national debt limit crises, it's probably less now. For a couple of years, job growth numbers each month were lowered by the fiscal drag of local, state and federal jobs being shed.

Not sure if that's still the case but govt. jobs are counted in those numbers.

Of course a lot of people believe it's all too much. Some want the govt. only to provide national defense and nothing else.

 

[NW-Bound]

... Some want the govt. only to provide national defense and nothing else.

Yes, there are nut cases who believe that.

I think most people are like myself who like for us to have rangers to patrol and to protect our national forests and parks, for meat inspectors to be sure we will not die of salmonella, etc...

So, how far do we go? That's a trillion dollar question.

I guess if your GDP goes straight up, yet you also run a huge trade deficit because you do not produce the goods that you need, that should tell you something.

 

[nash031]

Greece is on course to have the worst peacetime depression of developed countries in recent history, and it is largely due to the punitive measures imposed by the EU in the wake of the financial crisis. And lots of suffering -- unemployment is at 25% and youth unemployment is at 50%.

Sure, but that's not the root cause. IMO the root cause is simply decades of fiscal mismanagement coming home to roost.

 

[robnplunder]

Come on, folks. When you are trying to get out of financial hardship, what do you do? You throw away the credit cards. You cut your budget. You get a part time job. You do things to get out of the financial disaster. You don't need to be told by others on how to tighten your belt. Greek is lucky to have allies to loan more money. If it were you who are already in heavy debt, no bank is going to loan you more money. And as a head of family, you will make the decisions on how to tighten the belt. You won't ask your child to vote for or against it.

 

[Fred123]

Come on, folks. When you are trying to get out of financial hardship, what do you do? You throw away the credit cards. You cut your budget. You get a part time job. You do things to get out of the financial disaster. You don't need to be told by others on how to tighten your belt. Greek is lucky to have allies to loan more money. If it were you who are already in heavy debt, no bank is going to loan you more money. And as a head of family, you will make the decisions on how to tighten the belt. You won't ask your child to vote for or against it.

No, that's what you do if you're an individual, not what you do as a country. If you're a country and you're in a deflationary spiral then 1) your amount of debt increases with deflation and 2) the more the government cuts back on spending confidence falls, people slow down spending, and deflation increases. It really is different, and that's just textbook macroeconomics.

Don't believe me? Here's some data (a bit dated, from 2009-2012) that shows the effect of austerity on growth (from Paul Krugman via the IMF; x-axis is a measure of austerity, y-axis is growth, more details at http://krugman.blogs.nytimes.com/2013/02/23/austerity-europe-2/):

 

[Texas Proud]

Not much sympathy here for Greece, and lots of cultural stereotyping about how Greeks lack fiscal discipline, etc. But those of you who have that view might want to take a look at this graph:

Now, go back and determine what the REAL GDP would have been if not for the huge deficit spending they were doing from 02 to 08.... then avg it out...


The GDP today is right in line with where Greece would have been if not for the increase due to all that extra spending... they are retracting to get back to their mean line.... nothing more....

 

[Texas Proud]

No, that's what you do if you're an individual, not what you do as a country. If you're a country and you're in a deflationary spiral then 1) your amount of debt increases with deflation and 2) the more the government cuts back on spending confidence falls, people slow down spending, and deflation increases. It really is different, and that's just textbook macroeconomics.

Don't believe me? Here's some data (a bit dated, from 2009-2012) that shows the effect of austerity on growth (from Paul Krugman via the IMF; x-axis is a measure of austerity, y-axis is growth, more details at http://krugman.blogs.nytimes.com/2013/02/23/austerity-europe-2/):

I do not understand the graph and the link does not work...


My next question would be... why is Greece so far from the rest of the group who seem to have been able to do austerity right? It is not austerity that is the problem as the other countries have proven.... so there is something else that has made Greece the outlier that is not on this graph....

 

[Fred123]

I do not understand the graph and the link does not work...


My next question would be... why is Greece so far from the rest of the group who seem to have been able to do austerity right? It is not austerity that is the problem as the other countries have proven.... so there is something else that has made Greece the outlier that is not on this graph....

Sorry, here's the correct link: http://krugman.blogs.nytimes.com//2013/02/23/austerity-europe-2/

The x axis is the level of austerity. The further to the right you go, the more austerity. The y axis shows how much growth there was from 2009-2012. Greece is so far from the rest of the group because the EU imposed extremely severe austerity as a precondition to the 2010 and 2012 bailouts. But, as the graph shows, this was a self-defeating proposition for EU bureaucrats, since the austerity made it even more unlikely that Greece would be able to make good with its creditors. This is something that many mainstream economists agree with, BTW.

 

[robnplunder]

No, that's what you do if you're an individual, not what you do as a country. If you're a country and you're in a deflationary ....

I was referring to people's attitude. I don't see it from the Greeks.

 

[Fred123]

I was referring to people's attitude. I don't see it from the Greeks.

I think that 25% unemployment along with a 25% GDP drop (pretty close to the US Great Depression) is a pretty tight belt for the Greeks. They're hardly living the high life these days.