Greece

[MichaelB]

For some reason this song comes to mind
.
.

 

[Totoro]

So it could be that all this chart shows is that austerity was metered out to the countries that needed it the most. And that Greece among all the countries, chose not to participate in its own recovery.

Also, the UK is missing (I know, this is eurozone data). They famously did the austerity thing and are growing faster than anyone else now.

NL was hard hit by the housing crisis (price drops >20%, level of mortgage debt was unsustainable there, and is being paid off). It is now growing better & faster than Belgium even though it cut much deeper than the chart implies. Belgium is lagging in reforms and paying for it today, it escaped the housing crisis early on since lending was always alot more restrictive.

Finland spent more and shrank (!). The Nokia implosion is no small contributor to that. Once 4% of GDP and 70% of its stock market by value, now just a blip.

The main thing the chart does show in my view is that Greece is a strong outlier.

Austerity in itself is too vague to say anything useful about. What is important is where you cut, invest, and more importantly reforms. Broken window fallacy comes to mind here too.

 

[mpeirce]

Austerity in itself is too vague to say anything useful about.

It's a lot like "reform". Some reform is good, some not so good. The devils in the details.

 

[jim584672]

It takes two to tango, so the lenders should have never made the loans to a risky borrower. They are just going to have to write off most of it.

 

[DEC-1982]

The only difference with reality in the Greece bailout is that the German never gets the 100 Euro note back!

+1

Even as I feel bad for the suffering Greek people, they just need to grow up.

 

[NW-Bound]

For some reason this song comes to mind

Could the reason be that I posted it earlier, here?

 

[NW-Bound]

We used to dance to the Cha Cha beat, and Santana's tunes used to be among our favorites. I have not danced in decades, but with my daughter's wedding coming up, have tried to talk my wife into rehearsing the steps, but her response has been lukewarm. Of course, the bride and groom would not know about this music. I would have to give them my CD or an MP3 file.

Wouldn't it be great to have forum members all doing the Cha Cha steps?

While the Greeks are suffering?

 

[MichaelB]

Could the reason be that I posted earlier, here?

Probably

 

[samclem]

Also, the UK is missing (I know, this is eurozone data). They famously did the austerity thing and are growing faster than anyone else now.

NL was hard hit by the housing crisis (price drops >20%, level of mortgage debt was unsustainable there, and is being paid off). It is now growing better & faster than Belgium even though it cut much deeper than the chart implies. Belgium is lagging in reforms and paying for it today, it escaped the housing crisis early on since lending was always alot more restrictive.

Please don't tell Paul Krugman this, he'll have an aneurism. He's been Johnnie-one-note on his "austerity is dumb" campaign for so long that I don't know where he'll find anything to write about as the situation becomes more clear.

Austerity in itself is too vague to say anything useful about. What is important is where you cut, invest, and more importantly reforms. Broken window fallacy comes to mind here too

+1. I suppose "austerity" and "reform" are both loaded terms chosen by people with different viewpoints about the way forward. What is important is whether the system is fixed so that incentives are improved for activity that produces goods and services of net higher value than the starting conditions. Putting euros into the system just so they can be passed around and everybody takes some is not going to help Greece improve in the long term.

 

[Nemo2]

Please don't tell Paul Krugman this, he'll have an aneurism.

Yabbut....there's gotta be a downside too?

 

[Texas Proud]

It takes two to tango, so the lenders should have never made the loans to a risky borrower. They are just going to have to write off most of it.

Well, the problem right now is that Greece wants MORE money....


And what does write off mean.... Sure, they probably will not get paid for it, but that does not mean they will forgive the debt....

 

[explanade]

Also, the UK is missing (I know, this is eurozone data). They famously did the austerity thing and are growing faster than anyone else now.

NL was hard hit by the housing crisis (price drops >20%, level of mortgage debt was unsustainable there, and is being paid off). It is now growing better & faster than Belgium even though it cut much deeper than the chart implies. Belgium is lagging in reforms and paying for it today, it escaped the housing crisis early on since lending was always alot more restrictive.

Finland spent more and shrank (!). The Nokia implosion is no small contributor to that. Once 4% of GDP and 70% of its stock market by value, now just a blip.

The main thing the chart does show in my view is that Greece is a strong outlier.

Austerity in itself is too vague to say anything useful about. What is important is where you cut, invest, and more importantly reforms. Broken window fallacy comes to mind here too.

UK suffered GDP drops the first few years after Cameron took over.

Germany is on a bigger austerity kick, trying to balance its budget. They have some slogan for it. They get away with it with mercantilist behavior which gives them 8-9 % of GDP trade surplus. They're not suppose to maintain a high trade surplus under EZ rules yet nobody demonizes them.

Eu growth is much lower than the U.S. since the financial crisis. Why is that? What did they do differently?

Oh they didn't do massive bank bailouts or a fiscal stimulus or monetary stimulus. Trichet kept rates higher than the Fed and no QE until Draghi started it within this past year.

If the EU has growth at all, it's despite austerity, not because of it.

 

[Lsbcal]

I might get flamed for this, but I'd like to see this thread move to a higher plain. Let's keep our political bias in check.

 

[MichaelB]

I might get flamed for this, but I'd like to see this thread move to a higher plain. Let's keep our political bias in check.

+1

 

[Calgary_Girl]

Greece needs a bailout of $96 billion...wow!

https://twitter.com/x/status/620296473570316288

Sent from my iPhone using Early Retirement Forum

 

[mpeirce]

I might get flamed for this, but I'd like to see this thread move to a higher plain. Let's keep our political bias in check.

That's all well and good, but isn't the Greece problem at it's essence a political one?

 

[NW-Bound]

... "The desire to help in such situations, whether motivated by politics or not, has already been the undoing of Greece’s attempts to reform its pension system. In 2012, under the terms of its previous bailout deal, the Greek government promised to close one of the most infamous holes in this system: the list of so-called “arduous” professions, whose workers are allowed to retire years and sometimes decades earlier than the European average. Over the years, this list had grown to include some 600 professions—among them opera singers, hairdressers and television anchors—as a succession of Greek governments tried to win their support by letting them retire early.

“This is clientelism at its finest,” said Platon Tinios, a professor at the University of Piraeus, near Athens, who studies Greek pensions. “It is a system that’s completely mad.
...
Moreover, the revised list of “arduous” professions still includes many that do not seem arduous enough to warrant early retirement: workers in food retail, for instance, or the fish, cheese and ham industries.”...

I don't know the reason about ham, but fish and even cheese can stink, so there's that.

Nice! Everybody wins. How can any Greek voter dislike that?

Instead of asking what those 600 arduous professions are, I wonder what unfortunate jobs are not included, the few that were passed over, the ones where people have to work until full retirement age of, what, 62?

Oh, I think I know one. Greek politicians! They would volunteer to work tirelessly till death, sacrificing themselves for society wellness. They will never leave their office.

 

[NW-Bound]

... Over the years, this list had grown to include some 600 professions—among them opera singers, hairdressers and television anchors—as a succession of Greek governments tried to win their support by letting them retire early"...

TV anchors. TV anchors? How many TV anchors does Greece have? If the pols tried to get those few votes, they had to be really desperate.

Oh wait! A favorable coverage from a TV commentator is worth millions of vote.

 

[jim584672]

The whole Euro thing to me makes no sense. Why would a country give up the printing press? That is a huge loss of sovereignty.

 

[Totoro]

UK suffered GDP drops the first few years after Cameron took over.

Krugman been proved wrong on UK austerity?

Refers Krugman as well incidently. Point is that the UK cut pretty deep as far as I know and is doing fine now compared to other nations. There are some recent articles in the Economist as well discussing this. You could argue that this is despite austerity or because the UK changed its mind on austerity (did it?), I wouldn't know how to control for that.

Eu growth is much lower than the U.S. since the financial crisis. Why is that? What did they do differently?

I don't know.

One factor could be that on top of the banking crisis there were multiple sovereign debt crises as well (Greece as an example, Ireland too), and with even fewer tools and flexibility than the US to fight it.

Oh they didn't do massive bank bailouts or a fiscal stimulus or monetary stimulus. Trichet kept rates higher than the Fed and no QE until Draghi started it within this past year.

There were massive bank & insurance bailouts, although not all of it was as visible as in the US. Abn Amro for example was (almost) the largest bank in the Netherlands, they were rescued and nationalized (probably will IPO this year). Same for three financial institutions in Belgium (Dexia, Fortis, Ethias).

An overview from 2008:
EU Nations Commit 1.3 Trillion Euros to Bank Bailouts (Update3) - Bloomberg

More recent overviews
European banks: From bail-out to bail-in | The Economist

European bank bailouts - graphic of the day | Thomson Reuters Blog

I guess most of us here know about the lack of eurobonds, ECB mandate issues and indeed the fights about getting QE going as you point out. That sure didn't help to get inflation back up. To what extent low inflation actually stifles growth is a matter of unresolved debate as far as I know.

If the EU has growth at all, it's despite austerity, not because of it.

I wouldn't know how to filter the "austerity factor" out. Don't see a cut & dry causation either way.

 

[nash031]

I wouldn't know how to filter the "austerity factor" out. Don't see a cut & dry causation either way.

Good statement. I have opinions on this that favor austerity and a more fiscally conservative slant, but it is impossible for either side to definitively say what causes what, and the truth is - as always - likely in the middle.

 

[NW-Bound]

... Eu growth is much lower than the U.S. since the financial crisis. Why is that? What did they do differently?

There are so many differences between US and Europe that direct comparison is difficult. Demographics is one. And then, the US is "too big to fail" to the whole world.

Who else can run trade deficit year in/year out, and can keep on importing more goodies? Certainly not the Greeks. They wish! Man, it's nice to have people keep sending us stuff.

 

[CaliforniaMan]

I can understand the issue of trust. What must be going through the mind of the Greek Prime Minister, Alexis Tsipras. Is he going to jettison all his seeming past beliefs that socialism is the answer and embrace market economics for Greece? Can he really get his country to make the tough changes needed for long term growth knowing the short term pain it will cause? Has he really changed or is he just buying time to get back to some past idealistic view how how things should be. Considering his past antics, what is going through the mind of the Prime Minister has to be the most interesting and maybe the most important question right now.

 

[NW-Bound]

Ah, the rest of EU is having the same question: can they trust Tsipras? Nope.

They just gave him a 72-hour deadline to put their requirements into law. And they want state assets as collateral.

From Bloomberg Web site:

Euro-area leaders presented Tsipras with a laundry list of unfinished business from previous bailouts he’d pilloried in opposition and during six turbulent months in office. They gave him three days to enact their main demands into Greek law in exchange for the third bailout in five years.
...
Euro-area leaders also want Tsipras to transfer as much as 50 billion euros ($56 billion) of state assets to an independent Luxembourg-based company for sale and make him fire the workers he hired in defiance of Greece’s previous bailout commitments.
...
Greece needs to pass laws by July 15 to raise sales tax, cut pensions, change the bankruptcy code, safeguard the independence of the statistics office and make spending cuts automatic if the budget misses its target, according to the text presented to leaders.​

 

[CaliforniaMan]

And seems to me one of the biggest questions is about the future of all the unemployed youth. They are coming into a world their predecessors created for them, a word of very few opportunities and they are understandably angry, and will probably get even more so. The big question then: will they drift to the far right, or to the far left, or will there be a clash between those that choose one vs other? We have seen this happen before in Europe during times of economic crisis and the results were never pretty.