Greece about to default

[Charmonium]

And the reality check just arrived.

http://www.nytimes.com/2015/07/10/w...n-region&region=top-news&WT.nav=top-news&_r=0

Greek Plan Accepts Austerity to Get Debt Relief

ATHENS — Only a day after grim predictions of financial and social collapse in Greece, a scramble appeared underway to work out the details of a new bailout package to bring the country back from the brink of falling out of the euro.

As details of the new offer emerged, it appeared that Prime Minister Alexis Tsipras was capitulating to demands on harsh austerity terms that he urged his countrymen to reject in the referendum last Sunday, like tax increases and various measures to cut the costs of pensions.

That's not going to go over well back home but at least he seems to have gotten some concessions.

Mr. Tsipras seemed to have gained ground on debt relief, his one bedrock demand. Germany’s finance minister, Wolfgang Schäuble, finally gave a little on that Thursday, admitting that “debt sustainability is not feasible without a haircut,” or write-down of debt, even if he then appeared to backtrack.

Great article, especially the part on French involvement. The other PIIGS are probably going to squeal about this depending on how much of the debt is forgiven. But other options outlined are giving it better interest rates and extending payment schedules.

 

[theeedude]

And the reality check just arrived.

http://www.nytimes.com/2015/07/10/w...n-region&region=top-news&WT.nav=top-news&_r=0

Greek Plan Accepts Austerity to Get Debt Relief

ATHENS — Only a day after grim predictions of financial and social collapse in Greece, a scramble appeared underway to work out the details of a new bailout package to bring the country back from the brink of falling out of the euro.

As details of the new offer emerged, it appeared that Prime Minister Alexis Tsipras was capitulating to demands on harsh austerity terms that he urged his countrymen to reject in the referendum last Sunday, like tax increases and various measures to cut the costs of pensions.

Reality of that plan ends with the first paragraph. 1% surplus this year, then 2%, then 3%, then 3.5% indefinitely. 😀

 

[werepossum]

And the reality check just arrived.

http://www.nytimes.com/2015/07/10/w...n-region&region=top-news&WT.nav=top-news&_r=0

Greek Plan Accepts Austerity to Get Debt Relief

ATHENS — Only a day after grim predictions of financial and social collapse in Greece, a scramble appeared underway to work out the details of a new bailout package to bring the country back from the brink of falling out of the euro.

As details of the new offer emerged, it appeared that Prime Minister Alexis Tsipras was capitulating to demands on harsh austerity terms that he urged his countrymen to reject in the referendum last Sunday, like tax increases and various measures to cut the costs of pensions.

How very odd. I wonder if Tsipras really intends to implement these new reforms, and if so, if the Greek people and his own socialist party will go along. I also wonder how the other poor European Union nations will take this, as well as the German people who were supposedly fighting mad already.

At least the Greeks will get some short term relief, although long term I think they would have been better off going to their own currency. Hopefully the EU gives them at least five years without payments on these new funds; not much point in putting in new money and then taking it right back out. Here's hoping the Greeks can get their house in order.

Eskimospy will be happy - the Greeks did not run out of other people's money, they just had to make more promises of austerity.

 

[theeedude]

How very odd. I wonder if Tsipras really intends to implement these new reforms, and if so, if the Greek people and his own socialist party will go along. I also wonder how the other poor European Union nations will take this, as well as the German people who were supposedly fighting mad already.

At least the Greeks will get some short term relief, although long term I think they would have been better off going to their own currency. Hopefully the EU gives them at least five years without payments on these new funds; not much point in putting in new money and then taking it right back out. Here's hoping the Greeks can get their house in order.

Eskimospy will be happy - the Greeks did not run out of other people's money, they just had to make more promises.

The promises the Eurocrats extracted will crash the Greek economy even further. One of the relatively bright spots has been tourism, so what do the Europeans demand? Huge increase in taxes on tourist destinations and activities, which will make them less competitive with other destinations. So instead of Grexiting and making themselves more cost competitive, they are hit with a massive cost increase.

 

[werepossum]

The promises the Eurocrats extracted will crash the Greek economy even further. One of the relatively bright spots has been tourism, so what do the Europeans demand? Huge increase in taxes on tourist destinations and activities, which will make them less competitive with other destinations. So instead of Grexiting and making themselves more cost competitive, they are hit with a massive cost increase.

Maybe, but how many of us are willing to embrace terrible short term pain for a promise of a better tomorrow? Even very moderate pain such as taking and paying back an education loan makes people crazy with insisting that the universe owes them. I don't think we can blame the Greeks for wanting to avoid that severe short term pain.

On the lenders' side, I can certainly see other Europeans (many of who have lower standards of living than do the Greeks) not wanting to see their hard-earned tax dollars just given to the Greeks to spare them the pain of learning to live within their means.

Hopefully the Greeks modernize, get themselves off the dole and paying taxes, and establish a healthy economy competitive with the rest of the EU. Then they can pay back whatever they end up paying back (if anything) and not be a boil on Europe's buttocks. If that happens, then those Europeans whose hard-earned euros were given to Greece will at least have the satisfaction of knowing that it worked and the bailouts are over. Everybody wins, at least for some values of winning.

 

[theeedude]

Maybe, but how many of us are willing to embrace terrible short term pain for a promise of a better tomorrow? Even very moderate pain such as taking and paying back an education loan makes people crazy with insisting that the universe owes them. I don't think we can blame the Greeks for wanting to avoid that severe short term pain.

On the lenders' side, I can certainly see other Europeans (many of who have lower standards of living than do the Greeks) not wanting to see their hard-earned tax dollars just given to the Greeks to spare them the pain of learning to live within their means.

Hopefully the Greeks modernize, get themselves off the dole and paying taxes, and establish a healthy economy competitive with the rest of the EU. Then they can pay back whatever they end up paying back (if anything) and not be a boil on Europe's buttocks. If that happens, then those Europeans whose hard-earned euros were given to Greece will at least have the satisfaction of knowing that it worked and the bailouts are over. Everybody wins, at least for some values of winning.

It won't work. Austerity is not some difficulty you endure for a better future. It's something you endure now that also hurts your future. That 50% of unemployed youth is not becoming more productive and gaining experience in the workforce. The best minds that are leaving for greener pastures are not going to be building a better Greece. The money that is leaving Greece to pay creditors or to escape risk is not going to be invested in productivity improvements. It's all going to mean Greece will become a permanent ward of the EU.

 

[Greenman]

The promises the Eurocrats extracted will crash the Greek economy even further. One of the relatively bright spots has been tourism, so what do the Europeans demand? Huge increase in taxes on tourist destinations and activities, which will make them less competitive with other destinations. So instead of Grexiting and making themselves more cost competitive, they are hit with a massive cost increase.

It's a darn shame the folks that are making these decisions don't know as much about the issues as you.

I hope the Greeks use the money they get wisely, and put their house in order. It would be a tragedy if they fritter it away on government paychecks and handouts.

 

[werepossum]

It's a darn shame the folks that are making these decisions don't know as much about the issues as you.

I hope the Greeks use the money they get wisely, and put their house in order. It would be a tragedy if they fritter it away on government paychecks and handouts.

Agreed. It's bizarre how people who have money to loan never seem to know nearly as much about economics as people who need to borrow money.

 

[DucatiMonster696]

How very odd. I wonder if Tsipras really intends to implement these new reforms, and if so, if the Greek people and his own socialist party will go along. I also wonder how the other poor European Union nations will take this, as well as the German people who were supposedly fighting mad already.

At least the Greeks will get some short term relief, although long term I think they would have been better off going to their own currency. Hopefully the EU gives them at least five years without payments on these new funds; not much point in putting in new money and then taking it right back out. Here's hoping the Greeks can get their house in order.

Eskimospy will be happy - the Greeks did not run out of other people's money, they just had to make more promises of austerity.

Word on the street was that Tsipras and his finance minister, Yanis Varoufakis really had no other plan other than to bluff their EU creditors the whole time. When they failed to do so they pushed for a referendum where they thought a "Yes" vote would give them two opportunities,

1.) A way to accept bailout terms without looking like sell outs.

2.) A way to resign and walk away from the mess they stirred up.

When that gambit did not pan out as Tsipras and the gang thought it was going to turn out they basically had no plan. Which explains why Tsipras went to Brussels recently with ZERO plans and a blow hard speech.

Of which he got harshly rebuked for this speech by Guy Verhofstadt (ex-Belgian prime minister and EU parliament member) who angrily called out Tsipras and the government of Greece for never really presenting anything of tangible worth or value in these negotiations and accused him of playing politics at the expense of Greece and its people. The video is worth watching and is very interesting because you can see Tsipras basically squirming in his seat as Guy berates him.

http://www.bbc.com/news/world-europe-33444098

Which then explains why Tsipras is doing a 180 degree turn in these last few days and is accepting the plan being placed in front of him because he knows he has no other choice if he wants Greece to remain in the EU and be tied to the Euro.

P.S. Yanis Varoufakis resignation was also another last desperate move to show a conciliatory sign to the EU negotiators that he was removing someone who they (EU creditors, the ECB and IMF negotiators) greatly disliked throughout these talks in a "subtle" tell that he would be willing to turn around on his initial campaign position (not accepting more cuts or reductions in pension benefits) that helped him win his election in Greece.

 

[PingviN]

It won't work. Austerity is not some difficulty you endure for a better future. It's something you endure now that also hurts your future. That 50% of unemployed youth is not becoming more productive and gaining experience in the workforce. The best minds that are leaving for greener pastures are not going to be building a better Greece. The money that is leaving Greece to pay creditors or to escape risk is not going to be invested in productivity improvements. It's all going to mean Greece will become a permanent ward of the EU.

Of course the economy will take a hit, that's what happens when you are no longer allowed to spend money you don't have.

 

[werepossum]

Highlights of the "thorough" Greek proposal. http://www.bbc.com/news/business-33474605

Does look pretty thorough to me, although some of it is recycled previous promises like fully implementing the 2010 pension reforms and the 2012 pension reforms, promises to cut government payrolls, promises to cut tax discounts (at least for the wealthiest islands), and promises to collect higher percentages of taxes owed.

Germany is still saying it's not taking any more losses to Greece and roughly half Greece's other lenders are taking similarly hard stances, so that may be a problem for Greece unless France steps up big time. Paying it back may be a huge problem as well; if memory serves, the highest primary surplus target is 5% of GDP, and Greece's debt is almost 200% of GDP now. Even if Greece makes the target - and it hasn't before - that's nearly forty years of payments even assuming no interest is charged. Even assuming Greece honestly cuts is spending to a sustainable level, hard to see how they grow their economy enough to pay back a significant amount of their existing debt in any significant time period, let alone any new debt.

But at least this deal, if accepted and funded, will keep the Greek banks from bankrupting.

Of course, all this assumes that the cynics who say Tsipras is intending to get Greece kicked out of the EZ after getting all the cash he can get are not correct. lol

 

[unokitty]

Syirza's Promises

Syriza, the left-wing party that stormed to power in Greece in January, promised voters it would ditch austerity and renegotiate the country's €240bn (£180bn; $270bn) bailout with the European Union and International Monetary Fund.

...promised 300,000 new jobs in the private, public and social sectors...
a hefty increase in the minimum monthly wage - from €580 ($658; £433) to €751 ($853; £562)

...promised 300,000 households under the poverty line up to 300 kWh of free electricity per month and food subsidies for the same number of families who have no income.

Tax on heating fuel would be scrapped.

... promised to reinstate a Christmas bonus pension for pensioners receiving less than €700 ($795; £524) a month.

... plans for free medical care for those without jobs and medical insurance.

promised that its "fight against the humanitarian crisis has no negative fiscal effect".

... protection for people with mortgage arrears against the seizure of their property.

Property owners in Athens's leafy, northern suburbs were enticed with the promised abolition of a hated annual levy on private property.

Admittedly, hard not to emphasize with the Greek people.

At the same time, anyone that believes that a politician can create wealth out of thin air is likely in for a rough time...

Anyway, best of luck to the Greek people, from my perspective they deserved better leadership...

Uno

 

[glenn1]

Of course, all this assumes that the cynics who say Tsipras is intending to get Greece kicked out of the EZ after getting all the cash he can get are not correct. lol

Never assume malice when simple incompetence will do. The terms of the new Greek proposal include much more austerity than the terms they just rejected from the creditors recently, so unless that's just part of their diabolical plot to max out their borrowing before default it's impossible to say that Tsipras didn't lose huge.

 

[theeedude]

Agreed. It's bizarre how people who have money to loan never seem to know nearly as much about economics as people who need to borrow money.

Read IMF's 2010 projections when they did the original bailout. Off by a little bit... Like 30% of GDP... But hey, creditors know their stuff.

 

[glenn1]

Read IMF's 2010 projections when they did the original bailout. Off by a little bit... Like 30% of GDP... But hey, creditors know their stuff.

So I guess that makes the lessons learned for places like Greece "don't borrow more than you can afford to repay if you don't want to have your every action dictated by a creditor who 'knows his stuff' and might impose austerity on you as a condition of further loans." Or maybe just more simply "no one is obligated to loan you money" is a better choice for when you're planning your unsustainable spending.

 

[werepossum]

Never assume malice when simple incompetence will do. The terms of the new Greek proposal include much more austerity than the terms they just rejected from the creditors recently, so unless that's just part of their diabolical plot to max out their borrowing before default it's impossible to say that Tsipras didn't lose huge.

Maybe, but he's still getting money for promises, including some things promised once or twice before.

Read IMF's 2010 projections when they did the original bailout. Off by a little bit... Like 30% of GDP... But hey, creditors know their stuff.

Read Tsipras' proposal summary, specifically where he promises to do some of the stuff they promised to do in 2010 and 2012. This is hardly one party tied to the railroad tracks and the other twirling his long thin mustaches.

 

[theeedude]

Read Tsipras' proposal summary, specifically where he promises to do some of the stuff they promised to do in 2010 and 2012. This is hardly one party tied to the railroad tracks and the other twirling his long thin mustaches.

That's exactly what it is.

 

[Darwin333]

I guess they don't care about getting their money back either, since they insist on crashing the economy of their debtor with austerity and making repaying of their own debt unsustainable.

So..... They can't pay back their current loans so the lenders should lend them even more money so that everyone can pretend that they can pay it back by making their next interest payment?

The Greeks need to have a big ass bonfire with all of their outstanding debt and flip all of their creditors the finger. This will force them to live within their means but it will also get them out from under the huge debt and debt servicing that they can not and will not be able to handle. It's their only real option and everyone knows it.

 

[fskimospy]

Maybe, but he's still getting money for promises, including some things promised once or twice before.

Read Tsipras' proposal summary, specifically where he promises to do some of the stuff they promised to do in 2010 and 2012. This is hardly one party tied to the railroad tracks and the other twirling his long thin mustaches.

Haha. "Austerity was a total failure but I'm sure it would have succeeded with a little more austerity".

It's amazing how little impact facts have on ideology sometimes.

 

[Doc Savage Fan]

Haha. "Austerity was a total failure but I'm sure it would have succeeded with a little more austerity".

It's amazing how little impact facts have on ideology sometimes.

What facts are those? That Greece would be fine and eventually be able to pay off their debts if everyone just keeps lending them money?

 

[fskimospy]

What facts are those? That Greece would be fine and eventually be able to pay off their debts if everyone just keeps lending them money?

Do you think that the fiscal multiplier for spending in Greece is above or below 1 right now? Once you answer that you've answered your own question.

 

[mu11et]

“The problem with socialism is that you eventually run out of other people's money.”


― Margaret Thatcher

 

[glenn1]

Do you think that the fiscal multiplier for spending in Greece is above or below 1 right now? Once you answer that you've answered your own question.

When the numerator of "money available to spend" is zero then your golden calf "multiplier" is moot. I do give it to you though, no matter how many times your great ideas are rejected by sane governments you keep on coming back just like Wile E. Coyote. Self introspection about why they keep on telling Keynesians to ah heck off just never occurs to you.

 

[TheSlamma]

“The problem with socialism is that you eventually run out of other people's money.”


― Margaret Thatcher

Now they just expect the gov to keep on printing it off and handing it out, the way FIAT money was "intended"
Thanks Richard Nixon

 

[theeedude]

“The problem with socialism is that you eventually run out of other people's money.”


― Margaret Thatcher

The problem with austerity is that you eventually run out of other country's GDP.