pcgeek11
Lifer
- Jun 12, 2005
- 21,595
- 4,666
- 136
When someone or some country is given a loan in good faith that they will pay it back as per contract. Then they fall on hard times and some think that it is OK to not pay it back and the loaner should just write it off. That is B.S. Regardless. They should tighten it up suffer a bit and pay the money back.
mikeymikec
Lifer
- May 19, 2011
- 18,415
- 11,028
- 136
OP,
I'm not sure that comparing a war debt scenario to a "chronic mismanagement of public finances" scenario is at all valid; any developed country is likely to rack up massive and/or unexpected expenses during a war, whereas in peace time (assuming that there wasn't some completely chaotic catastrophe), a country's finances ought to be able to add up to a reasonably coherent picture.
However I do think that fear and pride played their roles in attempting to bail Greece out: Fear of the consequences for the eurozone if Greece defaulted and left the EU and confidence in the currency, and pride in putting together the EU and not wanting it to fall apart.
As I understand it, Greece shouldn't have been allowed to adopt the Euro in the first place until they had got their finances in order.
I'm not sure that comparing a war debt scenario to a "chronic mismanagement of public finances" scenario is at all valid; any developed country is likely to rack up massive and/or unexpected expenses during a war, whereas in peace time (assuming that there wasn't some completely chaotic catastrophe), a country's finances ought to be able to add up to a reasonably coherent picture.
However I do think that fear and pride played their roles in attempting to bail Greece out: Fear of the consequences for the eurozone if Greece defaulted and left the EU and confidence in the currency, and pride in putting together the EU and not wanting it to fall apart.
As I understand it, Greece shouldn't have been allowed to adopt the Euro in the first place until they had got their finances in order.
It's not like WW1 was thrust upon Germany and they had no choice but to fight it. Your argument would be better if it were a case where the war was involuntary.
Running up big debts to fight a war that you could have chosen not to fight seems like a poor financial decision the same as running up big debts for domestic spending you could have chosen not to implement. If anything, the latter seems more moral as at least you're not channeling that money into killing people.
senseamp
Lifer
- Feb 5, 2006
- 35,787
- 6,197
- 126
When you lend money, you accept the risk of default. IMF knew that. Also, the creditors didn't go into it in good faith, since they broke their own rules and loaned Greece more money than they themselves knew Greece could sustainably repay. They then proceeded to impose austerity conditions that destroyed Greek economy. They deserve to lose what they are going to lose.
Yep
The EU should have eaten the crap sandwich 6 yrs ago, allowed Greece to fail and Euro to flounder and have the markets correct themselves.
Greece would have suffered the most but they would have had to make the hard decisions then, now they still have to make the hard decisions and the EU is out a bunch of cash
The EU should have eaten the crap sandwich 6 yrs ago, allowed Greece to fail and Euro to flounder and have the markets correct themselves.
Greece would have suffered the most but they would have had to make the hard decisions then, now they still have to make the hard decisions and the EU is out a bunch of cash
mikeymikec
Lifer
- May 19, 2011
- 18,415
- 11,028
- 136
While I would agree with you as far as your point goes, it has little to do with the point I made, being that the finances of a country at war are extremely likely to be very different and fluctuating compared to the same country during peace time, furthermore it's pretty much a given that a developed country will rack up a load of debt, mostly due to the cost of modern warfare, and partly due to unforeseen consequences.
It would be digressing somewhat to argue how many countries would officially regard themselves as having been involved in wars that in hindsight were regarded as completely avoidable.
As a side note, IMHO, I think that WW1 was very likely a wake-up call to developed countries along the lines of "you thought warfare was expensive before? Check out your balance sheets now!", which is why Germany got lumped with making monetary reparations way beyond what its economy could possibly handle, thus becoming one of the contributing factors towards WW2.
Back to my original point, if a country can't handle its finances during peace time, that really is bad news.
Perhaps the general opinion in the halls of EU power was that, given a little more time, the rest of the eurozone might be a better position to handle a Greek default a few years down the line?
dullard
Elite Member
- May 21, 2001
- 25,472
- 3,974
- 126
Greece created this problem in many ways, but Germany and the rest of Europe needs to stop kicking them when they are down. Giving Greece virtually no time to pay back massive debt (repayment of nearly 50% of the entire Greek country's GDP in just 3 years was Greece's first bailout) is a rediculous and completely non-helpful idea. That is the equivalent of telling the US government to pay off $7.6 trillion of debt in 3 years. Austerity in the time of depression is the exact wrong solution (overspending isn't right either, but austerity is like fighting poison with poison). Europe is turning this relatively minor problem into a major one. Just because someone is in a wheelchair, doesn't give you the right to kick their legs and then chide them for being disabled.
That said, Greece needs major non-austerity reforms. I went there recently after the western Easter but well before the Greek Orthodox Easter. I had a great time, but had to do everything on my own. Everywhere I went as a tourist I was willing to pay good money for services but was turned down saying "wait until after Easter". A tourist agency was filled with employees sitting idle, but when I wanted to buy one of their guided tours, I was told that they wouldn't work until after Easter. A water taxi was sitting idle day after day, when I asked about going to a nearby island, the driver said not until after Easter. Etc. I kept getting rejected left and right when I wanted to pay idle workers to do their job. Greece is going to have to learn to work more than 6 months a year if they ever want to have a proper economy.
That said, Greece needs major non-austerity reforms. I went there recently after the western Easter but well before the Greek Orthodox Easter. I had a great time, but had to do everything on my own. Everywhere I went as a tourist I was willing to pay good money for services but was turned down saying "wait until after Easter". A tourist agency was filled with employees sitting idle, but when I wanted to buy one of their guided tours, I was told that they wouldn't work until after Easter. A water taxi was sitting idle day after day, when I asked about going to a nearby island, the driver said not until after Easter. Etc. I kept getting rejected left and right when I wanted to pay idle workers to do their job. Greece is going to have to learn to work more than 6 months a year if they ever want to have a proper economy.
Last edited:
http://news.nationalpost.com/full-comment/william-hague-the-eurozone-does-not-and-cannot-work
Economics has few laws, which is why economic forecasts are so maddeningly unreliable. If it has one law, it is this: that if you fix together some things which naturally vary, such as interest rates and exchange rates, other things, such as unemployment and wages, will vary more instead. And in a single currency zone, which has exactly this effect, you can only get around these problems by paying big subsidies to poorly performing areas, and expecting workers to move in large numbers to better performing ones.
The eurozone it does not work, because either Greeks have to cure their poor economic performance or Germans have to pay them big subsidies, and neither are willing or able to do so.
.
This is what happens in the United States, or indeed within the United Kingdom. In general it works. In the eurozone it does not work, because either Greeks have to cure their poor economic performance or Germans have to pay them big subsidies, and neither are willing or able to do so. This, in a sentence, is the problem of the eurozone, and continued denial of it will only make it worse.
This crisis is not the fault of the Greek people. It is easy to think the opposite when they have a government so utterly ham-fisted and unreliable in its dealings with its partners, and a demagogic and now departed finance minister who regards as “terrorism” the simple act of lending money and expecting it back one day.
They have rejected reasonable terms from their creditors, defending retirement benefits paid earlier than most in northern Europe, and protecting lower VAT rates for tourist areas. But Greeks have experienced the loss of one quarter of their entire national income, following an unsustainable inflation of spending and debt which eurozone membership facilitated. The responsibility for this crisis lies with their own former leaders and those around the EU who gave them euro membership when they were not remotely suited to it, a triumph of political desire over dispassionate economic analysis for which ordinary people are now paying the price.
This is not a short-term crisis, but a permanent one, in which any temporary accommodation will soon be overtaken by events. Greeks are being expected to do business and compete with the rest of the world at the same exchange rate and with the same interest rates as Germany, which would require their manufacturing, their education and their enterprise culture to be at least similar to those of Germany.
In their lifetimes they are not going to be able to do that. This is not because there is something wrong with them; it is because they live in a different economic environment from Germany, and one that is not suited to being in the same currency.
In such circumstances, it is better to be able to leave sooner, with some generous support, than leave later with even greater resentment and failure.
Economics has few laws, which is why economic forecasts are so maddeningly unreliable. If it has one law, it is this: that if you fix together some things which naturally vary, such as interest rates and exchange rates, other things, such as unemployment and wages, will vary more instead. And in a single currency zone, which has exactly this effect, you can only get around these problems by paying big subsidies to poorly performing areas, and expecting workers to move in large numbers to better performing ones.
The eurozone it does not work, because either Greeks have to cure their poor economic performance or Germans have to pay them big subsidies, and neither are willing or able to do so.
.
This is what happens in the United States, or indeed within the United Kingdom. In general it works. In the eurozone it does not work, because either Greeks have to cure their poor economic performance or Germans have to pay them big subsidies, and neither are willing or able to do so. This, in a sentence, is the problem of the eurozone, and continued denial of it will only make it worse.
This crisis is not the fault of the Greek people. It is easy to think the opposite when they have a government so utterly ham-fisted and unreliable in its dealings with its partners, and a demagogic and now departed finance minister who regards as “terrorism” the simple act of lending money and expecting it back one day.
They have rejected reasonable terms from their creditors, defending retirement benefits paid earlier than most in northern Europe, and protecting lower VAT rates for tourist areas. But Greeks have experienced the loss of one quarter of their entire national income, following an unsustainable inflation of spending and debt which eurozone membership facilitated. The responsibility for this crisis lies with their own former leaders and those around the EU who gave them euro membership when they were not remotely suited to it, a triumph of political desire over dispassionate economic analysis for which ordinary people are now paying the price.
This is not a short-term crisis, but a permanent one, in which any temporary accommodation will soon be overtaken by events. Greeks are being expected to do business and compete with the rest of the world at the same exchange rate and with the same interest rates as Germany, which would require their manufacturing, their education and their enterprise culture to be at least similar to those of Germany.
In their lifetimes they are not going to be able to do that. This is not because there is something wrong with them; it is because they live in a different economic environment from Germany, and one that is not suited to being in the same currency.
In such circumstances, it is better to be able to leave sooner, with some generous support, than leave later with even greater resentment and failure.
TheSlamma
Diamond Member
- Sep 6, 2005
- 7,625
- 5
- 81
They also tried the throw money at everything tactic and it failed too. Maybe there is something else that is the problem here.
It might be time for Greece to figure out what it can offer the world.
senseamp
Lifer
- Feb 5, 2006
- 35,787
- 6,197
- 126
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