Wacko Greek govt continues on path of self destruction- Now claims Germany owes $279B

[Drako]

Greece currently runs a primary surplus.

No they don't.

The Greek government has projected a surplus for 2015. We all know how those projections work.

 

[Doc Savage Fan]

Primary Surplus Explained

http://www.slate.com/blogs/moneybox/2011/11/25/primary_surplus_explained.html

I don't normally like to explain public finance in terms of analogies to household budgets, but in this case I think it's illuminating. Imagine a household where current month-to-month expenses are lower than income. You have a salary, in other words. Then you deduct taxes and health insurance premiums and then you pay the rent and the utility bills and the groceries and the care insurance and gasoline and other basic expenses and you've got a positive number left over each and every month. You should be in good shape. Your income exceeds your expenses, so you're prepared to save up for vacations or new purchases of durable goods or the occasional luxury. But you have a problem. Several years ago you wracked up a ton of credit card debt traveling to your friends' destination weddings even though you really couldn't afford it. So today in addition to all those basic expenses you have to pay interest on the outstanding debt. You've got a primary surplus, meaning that income > expenses but an overall deficit meaning that income < expenses + interest. What are your options? Well you can cut expenses to shift into overall surplus (austerity), you can declare bankrupty (default), or else you can try to refinance your debt (bailout).

 

[fskimospy]

No they don't.

The Greek government has projected a surplus for 2015. We all know how those projections work.

Yes, they do. They had a primary surplus of about 0.7-1% of GDP in 2014, depending on how you calculate it.

http://www.wsj.com/articles/greece-misses-target-on-budget-surplus-1421244654

 

[fskimospy]

Primary Surplus Explained

http://www.slate.com/blogs/moneybox/2011/11/25/primary_surplus_explained.html

The important part for negotiations is this though, if you run a primary surplus in theory you can tell your creditors to get bent as you do not require external financing to conduct your business. (this may have other consequences of course)

 

[Drako]

Yes, they do. They had a primary surplus of about 0.7-1% of GDP in 2014, depending on how you calculate it.

http://www.wsj.com/articles/greece-misses-target-on-budget-surplus-1421244654

Not WSJ subscriber, so I can't read that.

From a newer report:

"The Greek finance ministry recently revised last year's primary budget surplus to 0.3 percent, from 1.5 percent of GDP as estimated by the former conservative government and agreed with the country's international lenders.

The finance ministry said its estimate was based on preliminary data and was partly due to a shortfall of 3.9 billion euros in state revenue late last year."

Note this has not been confirmed by the Troika, so I'm still calling BS.

 

[zephyrprime]

Possibly true. If/when they default on that debt it will lead to a huge, crazy mess. Leaving the euro and defaulting on their debts will crush Greek banks as well which will likely send Greece back into a deep recession. They could very well need help then.

They would default on all their foreign debt but not their domestic debt. That would prevent the banks from crashing. They can also freeze foreign accounts and limit them to slow withdraws. That would help their banks too. Banks can be nationalized and deposits printed out of thin air when it comes down to it. It's happened before.

There would be economic disruption of course but I argue that it would be a lot less longer lasting than the austerity has already been and will continue to be. Defaulting isn't really that bad. Lots of countries have done it lots of times throughout history. Greece has done it dozens of times itself in modern history.

After the devaluation comes from issuing the dinar, their tourism industry would receive a big boost and that is one of their biggest industries.

 

[StinkyPinky]

Right, but you don't start negotiations at your lowest price. You start asking for 10x what you'll ever get, and then negotiate down.

I always find it funny that the Euro is basically a currency that revolves around Germany's economy, meaning that while Germany lost WWII, now most of Europe uses Germany's currency, and are reliant on Germany for their economies.

At the end of the day, controlling land is a lot more expensive than just controlling a currency.

I was thinking the same thing. Germany has half of europe by the balls.

THe best thing Britain ever did was to not adopt the Euro.

 

[Greenman]

I was thinking the same thing. Germany has half of europe by the balls.

THe best thing Britain ever did was to not adopt the Euro.

I wonder if that was luck or foresight? Somebody sure made a good call.

 

[nickqt]

I wonder if that was luck or foresight? Somebody sure made a good call.

A mixture of both.

Having even a cursory understanding of the importance of a government controlling its own currency makes adopting a "neutral" currency flat out idiotic. Add on to that British people using anything other than the pound? Gross.

Anyway, the important thing for any country/government is controlling your own currency. Period.

For example, you'll find people who constantly talk about US dollar hyperinflation. Usually they're just trying to get you to buy gold coins.

The US Dollar isn't going to be hyperinflating anytime soon. The US economy is huge, either first or second to China depending on how you measure it. Our currency is a good, solid currency. You can complain and cry that $1.00 can't purchase 5 gallons of gas like it could in 1960, but there are also about 150,000,000 more US citizens since 1960. Figure it out: we need more currency, which is where tax policy comes in, keeping inflation at a controllable rate.

Anyway, the biggest mistake any country can do is give up control of its own currency and adopt another currency that the government cannot control. If you don't control your own currency, you aren't really in charge. Not really. Example: Greece. They can make demands and say whatever they want, but unless they are literally willing to walk away from the Euro (creating uncertainty and instability in the Euro if they did), the ECB and Germany can tell them to go piss up a rope and Greece will be left unzipping its fly while chugging coffee.

 

[unokitty]

China Seeks Dominance in Athens Harbor

After lengthy wavering, the Greek government-- comprised of Prime Minister Alexis Tsipras, his far-left Syriza party and the right-wing populist Independent Greeks -- has announced it will be selling the majority of its share in Athens' Piraeus Port Authority. So far, the China Ocean Shipping Company (Cosco) is the most promising bidder.

Throughout, Fu Cheng Qui, or "Captain Fu," as the chief executive of Cosco's Piraeus subsidiary is called by those who know him, will be closely monitoring the bidding process.

"The union leaders promise their members more money for less work," Fu says. "How is that supposed to work? If you want a higher salary you first need to work hard. Not lie on the beach and drink beer. Learn from the Germans! Work hard, never be lazy and always work seriously. Hard work -- happy life."

That wasn't exactly Syriza's campaign platform...

Just offshore, you can see the southern tip of the Salamina Island in the haze. Fu has announced that he wants to have a repair yard built there, along several kilometers of coastline.

The ancient Greek name of the island is Salamis. This is where the biggest naval battle in Antiquity was fought between Greeks and Persians -- in what would become a central event in the history of European civilization and for the power relations between the West and the East.

Back then, the Greeks won.

View from Deutschland.

Uno

 

[zephyrprime]

I wonder if that was luck or foresight? Somebody sure made a good call.

Foresight. Britain has drank much less of the socialist koolaid than continental europe. The EU is a fundamentally unworkable construct because of the lack a mechanism for economic payments/investments to equalize the level of the disparate nations that comprise the EU. A full union could work of course but a partial union is like a three wheeled car.

 

[fskimospy]

Foresight. Britain has drank much less of the socialist koolaid than continental europe. The EU is a fundamentally unworkable construct because of the lack a mechanism for economic payments/investments to equalize the level of the disparate nations that comprise the EU. A full union could work of course but a partial union is like a three wheeled car.

While I agree that the EU is a fundamentally flawed union due to the disconnect of fiscal and monetary policy, the UK is just as socialist as the average EU country. Maybe a bit more:

http://en.wikipedia.org/wiki/Government_spending#As_a_percentage_of_GDP

 

[Gonad the Barbarian]

What exactly did the Euro promise for those that joined when it was being proposed? Looking at it now it's like a whole continent got taken by a phone scam.

 

[senseamp]

Greece should not be running a primary surplus in the middle of a depression. It most certainly should not be running the size of surplus that European creditors expect it to run, even when there is no depression, because running such a surplus will cause one.

 

[JEDI]

Greece currently runs a primary surplus.

that was under the old leadership.

I have NO confidence the wackos elected this year will be able to

 

[JEDI]

Greece makes(?) the $500M payment due this week.
http://money.cnn.com/2015/04/09/news/economy/greece-imf-payment/index.html

"Athens said the 460 million euros ($497 million) payment has been scheduled"


Now they want the next phase of the bailout ASAP.
But the EU/Germany will only release the cash -- 7.2 billion euros -- if Greece commits to a revised program of economic reforms.

they're off to an awful start w/those reforms. In fact, they're doing the opposite!
They're going to reverse some of the earlier reforms implemented by the previous govt.

- Reintroduce a 13th month pension payment for low-income Greeks
- scrapping gradual cuts to state pensions.

These proposals would cost the Greek government an extra 1.1 billion euros this year.

 

[fskimospy]

Greece makes(?) the $500M payment due this week.
http://money.cnn.com/2015/04/09/news/economy/greece-imf-payment/index.html

"Athens said the 460 million euros ($497 million) payment has been scheduled"


Now they want the next phase of the bailout ASAP.
But the EU/Germany will only release the cash -- 7.2 billion euros -- if Greece commits to a revised program of economic reforms.

they're off to an awful start w/those reforms. In fact, they're doing the opposite!
They're going to reverse some of the earlier reforms implemented by the previous govt.

- Reintroduce a 13th month pension payment for low-income Greeks
- scrapping gradual cuts to state pensions.

These proposals would cost the Greek government an extra 1.1 billion euros this year.

The Greek government is in a bad place where there aren't any good options. The amount and pace of fiscal consolidation that's happened there has probably been a really bad idea from an economics standpoint, so in that respect at least the current government has the economics right. While staying on the Euro they don't really have much choice though other than to do what the troika wants.

As I said before, unless Germany relents on some of its demands Greece's best bet is probably to exit the Euro, default on its debts, and deficit spend/devalue their currency to get it back to where it should be.

 

[senseamp]

The Greek government is in a bad place where there aren't any good options. The amount and pace of fiscal consolidation that's happened there has probably been a really bad idea from an economics standpoint, so in that respect at least the current government has the economics right. While staying on the Euro they don't really have much choice though other than to do what the troika wants.

As I said before, unless Germany relents on some of its demands Greece's best bet is probably to exit the Euro, default on its debts, and deficit spend/devalue their currency to get it back to where it should be.

Then the question in the Euro-zone will become "who is next?"
So they will get hosed for the money they already lent to Greece, plus increase the borrowing costs and uncertainty for peripheral Euro countries. And then what if Greece recovers nicely in a couple years thanks to it's more competitive currency and reduced debt load? Then you are going to get other Euro countries thinking of bailing on the common currency.
Germany wants the benefits of common currency for its exports, but doesn't want to pay for them. Now that fairy tale is ending.

 

[werepossum]

Then the question in the Euro-zone will become "who is next?"
So they will get hosed for the money they already lent to Greece, plus increase the borrowing costs and uncertainty for peripheral Euro countries. And then what if Greece recovers nicely in a couple years thanks to it's more competitive currency and reduced debt load? Then you are going to get other Euro countries thinking of bailing on the common currency.
Germany wants the benefits of common currency for its exports, but doesn't want to pay for them. Now that fairy tale is ending.

The likelihood that Greece will "recover nicely in a couple years" is approximately equal to the chance that Greece will rise up in the air and fly to a magical part of the world more hospitable to an eternal parasite nation.

 

[senseamp]

The likelihood that Greece will "recover nicely in a couple years" is approximately equal to the chance that Greece will rise up in the air and fly to a magical part of the world more hospitable to an eternal parasite nation.

It's very likely with a weaker currency. In fact, Europe will probably impose tariffs on Greek exports because they would have a huge cost advantage over the Euro countries.

 

[werepossum]

It's very likely with a weaker currency. In fact, Europe will probably impose tariffs on Greek exports because they would have a huge cost advantage over the Euro countries.

Maybe, but remember that Greece imports half again what it exports. Just as exports get cheaper with a weak currency, imports get more expensive. To avoid poverty, Greece would have to up all those government salaries, pensions and hand-outs to reflect the new cost.

And Greece's biggest importer is Germany, also Greece's biggest creditor. Unless the EU slaps on tariffs to reimburse EU banks for Greece's default, I suspect exporting to Germany ends with Greece's default.

 

[Jaskalas]

The reparations claim is stupid and Germany should ignore it.

That being said, Germany's position here is insane. They want Greece to run basically a 5% primary surplus for the foreseeable future. That's the approximate equivalent of the U.S. increasing taxes enough to not only eliminate the deficit, but be paying other countries about $800 billion a year, all while facing a national economic calamity.

If Germany doesn't soften its terms the best thing for Greece to do is leave the euro and watch its euro creditors get crushed. It will be terrible for everyone involved, including Greece, but it will be less terrible than trying to do that.

We may find ourselves in agreement on this one.

 

[MongGrel]

Those wild and wacky Greeks.

They ought to start a reality show.

 

[fskimospy]

The likelihood that Greece will "recover nicely in a couple years" is approximately equal to the chance that Greece will rise up in the air and fly to a magical part of the world more hospitable to an eternal parasite nation.

Not necessarily. Argentina defaulted on its sovereign debt in 2002. What followed was about a year or two of terrible recession and then a return to pretty good growth. Defaulting on its debt will suck for Greece, no doubt, but Argentina has shown it doesn't necessarily lead to a long term malaise.

 

[nickqt]

Not necessarily. Argentina defaulted on its sovereign debt in 2002. What followed was about a year or two of terrible recession and then a return to pretty good growth. Defaulting on its debt will suck for Greece, no doubt, but Argentina has shown it doesn't necessarily lead to a long term malaise.

You're trying to reason with someone who is labeling an entire country as a parasite simply because wealthy Greek oligarchs have thoroughly corrupted and bankrupted their country.