Greece

[tulak]

They should be allowed to default and go their own way. If they do it right, they could follow Iceland's path.

+many

The EU needs to figure out how to let members not be part of the Eurozone. If they did this years ago, Greece would probably be better off today.

 

[aja8888]

IF it happens, that is.

Yes, IF.....

 

[brewer12345]

+many

The EU needs to figure out how to let members not be part of the Eurozone. If they did this years ago, Greece would probably be better off today.

Ah, but likely the Germans would not. There is the rub. Germany wants to have its economic cake and eat it too. So either write the checks to subsidize disorganized ratholes like Greece, or accept the lower economic growth you would otherwise have. TANSTAAFL.

 

[ERD50]

Ah, but likely the Germans would not. There is the rub. Germany wants to have its economic cake and eat it too. So either write the checks to subsidize disorganized ratholes like Greece, or accept the lower economic growth you would otherwise have. TANSTAAFL.

Can you expand on that? What does Germany gain from Greece?

I'm bad at macro-economics

-ERD50

 

[explanade]

German companies export a lot to Southern Europe.

The SIEMENS scandal may finally reach court after 17 years of investigation – The history of the scandal goes back to the 1990s | Apokoronas News

 

[NW-Bound]

Ah, but likely the Germans would not. There is the rub. Germany wants to have its economic cake and eat it too. So either write the checks to subsidize disorganized ratholes like Greece, or accept the lower economic growth you would otherwise have. TANSTAAFL.

Is this like the Chinese selling "stuff" to us, then take our bonds as payment?

Anyway, to understand the frustration of the average Greek, one needs to see some numbers. The average Greek pension used to be 1350 euros in 2009, and has been cut to 833 euros. Nearly 1/2 of the pensioners now get only 665 euros, and some say lenders want it cut down to 500 euros. Many of the pensioners now have to support their unemployed adult children on that pitiful amount.

At this point, Greek pensions are no longer that generous, but they still add up to a larger percentage of their GDP because the GDP has shrunk. You've got debt, but have no job to work for money to pay the debt. They are in a death spiral, and just don't know how to get out of it.

 

[explanade]

And the Greeks' reluctance to sign on for more of the bitter medicine is being portrayed as wanting to live high on the hog on German money.

 

[NW-Bound]

But, but, but, how can beggars be choosy? Man, I hate to be in their position, to be down on your knees, desperate and have no way to turn. Maybe that will be a lesson to other people who think one can enjoy the good life without having to work. Ugh! Wrong thing for an ER to say. (But remember, I have that RV as housing of last resort).

Come to think of it, Greek demographics do not help, as they have more older people. You would think that the fewer young people would find job a plenty, but they don't. Economics is weird! They need a lot of things, yet there are young idle people not having anything to do.

Economic policies in the past have caught up with them. Bad, bad collective karma, as some say.

 

[brewer12345]

Can you expand on that? What does Germany gain from Greece?

I'm bad at macro-economics

-ERD50

Basically the Germans save too much, are too productive and have historically had policies that tend to make their currency a lot stronger than most of their trading partners. As a result they have a structural growth deficit as their currency tends to appreciate vs. trading partners over time. They got around this by absorbing Eastern Germany, but once that boost went away they were left hanging. Enter the Euro. It allowed them to export some of their currency hardness and get higher economic growth. The problem is that the weaker currencies that were absorbed needed to steadily weaken in order to mop up certain economic inefficiencies/structural problems that tended to crop up in these economies. Without the ability to depreciate their currency, these weaker sisters ended up building up pressures against their economies. In the case of Greece, they passed around the ouzo and cooked the books to keep the party going. Italy, Spain, Ireland and Portugal eventually took their medicine.

If the Euro goes away and the Deutschmark comes back, German economic growth will get pinched big time.

 

[Nemo2]

When I was first in Greece, (and Spain, Portugal, etc, etc), 50 plus years ago, there were small fishing villages, local industries, family farms, etc........now it appears that so much of their income is attributed to tourism.......what happens when the tourists can't afford, (or are afraid) to go?

(A friend of mine, whose travel checklist equals or exceeds mine, told me today, with the Tunisian shootings being the catalyst, that he's just not interested anymore and will restrict future trips to Aust/NZ or Maui.)

 

[samclem]

And the Greeks' reluctance to sign on for more of the bitter medicine is being portrayed as wanting to live high on the hog on German money.

?? The Greeks want these to be two separate issues (living within their means and getting more loaned money). Well, of course they do. And they've found entities willing to let them separate those issues. But now that the music apparently has stopped, who should they really be mad at?

 

[explanade]

No there are some cultural stereotypes at work, making it sound like the Greeks haven't sacrificed, because they're slippery people.

 

[Lsbcal]

I think the EU has said that they are not trying to cut pensions, just to stop the early retirements.

According to the WSJ, pension spending has fallen 13%: Greece’s Pension System Isn’t That Generous After All - Real Time Brussels - WSJ

The current Greek government says to vote them to stay and they will continue negotiations to get more favorable terms. The EU troika and Germans and French heads of state say this is a vote on staying in the Eurozone. If we believe them, there is no new negotiations possible.

If I were a Greek, I would not believe that negotiations can be restarted with the current Greek government. It appears that if the current government is kept in power, their will be no money for the pensioners. So pensioners will be totally destitute.

 

[Texas Proud]

I think the EU has said that they are not trying to cut pensions, just to stop the early retirements.

According to the WSJ, pension spending has fallen 13%: Greece’s Pension System Isn’t That Generous After All - Real Time Brussels - WSJ

The current Greek government says to vote them to stay and they will continue negotiations to get more favorable terms. The EU troika and Germans and French heads of state say this is a vote on staying in the Eurozone. If we believe them, there is no new negotiations possible.

If I were a Greek, I would not believe that negotiations can be restarted with the current Greek government. It appears that if the current government is kept in power, their will be no money for the pensioners. So pensioners will be totally destitute.

Actually reading the various articles on the negotiations, they were trying to cut the pensions... IIRC it was by more than $200 per month...

Greek pensions as a % of spending is much higher than any other EU country and they said it had to be cut... not just raising retirement age...

 

[samclem]

The current Greek government says to vote them to stay and they will continue negotiations to get more favorable terms. The EU troika and Germans and French heads of state say this is a vote on staying in the Eurozone. If we believe them, there is no new negotiations possible.
.

I don't read it this way. If the Greek people agree to accept the EU/ECB/IMF reforms, the current Greek government has said they will accept that decision but will take no part in implementing it. From the BBC:

Mr Tsipras hinted strongly that he would resign if the result of the referendum was a "yes" vote
"If the Greek people want to proceed with austerity plans in perpetuity, which will leave us unable to lift our head... we will respect it, but we will not be the ones to carry it out," he said.

I think that means they will step down/call for new elections. If the Socialist government wins the most seats and a mandate, I'd say the situation continues to spiral down unless/until they accept reforms. Actually, with or without the additional loans/eased repayment offered by creditors, Greece won't have a viable economy unless reforms are made--now or later.

 

[NW-Bound]

I think the EU has said that they are not trying to cut pensions, just to stop the early retirements.

According to the WSJ, pension spending has fallen 13%: Greece’s Pension System Isn’t That Generous After All - Real Time Brussels - WSJ...

The above article is dated 2012, and not up-to-date.

Actually reading the various articles on the negotiations, they were trying to cut the pensions... IIRC it was by more than $200 per month...

Yes to both: More pension cuts on top of the 44%+ already instituted since 2009, and raise retirement age to 67. Also, no more early retirement at full benefits for hazardous jobs.

See this article dated June 4, 2015: Q&A: Greek pensions -- deal or no deal - FT.com.

 

[Lsbcal]

Actually reading the various articles on the negotiations, they were trying to cut the pensions... IIRC it was by more than $200 per month...

Greek pensions as a % of spending is much higher than any other EU country and they said it had to be cut... not just raising retirement age...

What I have read in a few sources is:

Greece’s creditors are demanding the government cut pensions by the equivalent of 1% of gross domestic output

see: Unsustainable futures? The Greek pensions dilemma explained | Business | The Guardian

But the pension situation is very complicated. It is not clear (to me at least) that the lowest paid pensioners would be reduced further. Reading about the pension problems in detail can put one to sleep ... hard for me to focus on all the moving parts.

 

[Lsbcal]

The above article is dated 2012, and not up-to-date.

Actually it's from Feb 2015.

 

[samclem]

This article says several preliminary polls indicate the Greek public may be inclined to accept the conditions that the EU put on the table.

Of course, when that offer was made, Greece wasn't in default. But I'd bet the EU/IMF/ECB would offer the relief if the Greek government actually agreed to implement the suggested reforms. Then we'll all get to see if they actually do it--I would bet against that.

 

[NW-Bound]

The 1% of GDP cut does not sound so bad, as pensions now cost 17.5% of GDP, so that 1% is 6% cut.

However, the article says that there are 400,000 pension applications in backlog, which will be added to the existing 2.65M pensioners. So, cutting the smaller pie into more pieces gives a cut of 18%.

And that 18% is on top of the 44% cut since 2009. That 18% seems online with the 200-euro cut mentioned elsewhere.

By the way, the 3.05M retirees represent 27.5% of the Greece population of 11.12 million in 2015. And that population includes minors who cannot work. So, what is the ratio of retirees over active workers? Bleak!

 

[explanade]

Guess it would be like China, which owns our debt, saying social security eligibility age will be raised and the payouts will be about half of what you were going to get.

 

[samclem]

Guess it would be like China, which owns our debt, saying social security eligibility age will be raised and the payouts will be about half of what you were going to get.

Not at all. It would be like China saying "reform SS or we won't loan you any more money." And we'd be free to accept or decline--just like Greece.

 

[NW-Bound]

For new debts, maybe they will want it in some other currencies.

But for interest paid on existing debt, well, they own our bonds which are in US dollars which we can just print more. Problem solved.

However, inflation will hurt retirees like the dickens. And the dollar will be so low, foreign travel will be something one reminisces with tears in his/her eyes.

 

[ERD50]

Guess it would be like China, which owns our debt, saying social security eligibility age will be raised and the payouts will be about half of what you were going to get.

Not at all. It would be like China saying "reform SS or we won't loan you any more money." And we'd be free to accept or decline--just like Greece.

Not only that, but we are paying the interest payments on time, correct? And is there any serious doubt that they will get their face value back at the end of the term?

So I don't think China (or any other bond buyer) has a word to say about how we handle our other finances.

You seem to really be stretching for others to throw money at Greece, why is that? For the record, there aren't many who want to see the people of Greece suffer, but when the can has been kicked down the road for so long, something has to give. Just throwing money at them may make for more suffering in the long run. I don't want that.

-ERD50

 

[Sunset]

Folks just don't understand. Its our duty to lend money to Greece forever. They don't want a gift of money, just continuous lending forever ! That way they can keep their dignity.

Ok, sure I was not serious, but I'm serious when I say Greece should default.

Stop importing everything, and be self sufficient in their needs. If Any Greek finds the country is missing something, he can start building/growing/making it and supply it to the rest of his/her country persons.

There is freedom in being debt free