Greece Votes "No"

[Sportgamma]

 

I'm not saying creditors aren't to blame, all parties are in a way.

 

As a European tax payer I feel that I have shown more compassion than most these last few years. Not only have I helped through taxes, I've also directly supported PIIGS & co quite a bit as well. I've visited Portugal twice and went to Greece mainland once (late last year) and later this year I'll be going to Spain and Iceland for a few weeks as well. Just sayin'...  :D While I go on vacation to have a good time, part of the reason I visit these places now is to support them. I do feel bad for those in Greece that can't catch a break, surrounded by relatively wealthy allies that are part of the problem. Maybe stating that I find the situation "funny" isn't the best way to put it...

 

But I'd love to go back to Athens now to see the difference. In an alternative universe I'd visit them where Syriza didn't get into power. Wonder if I would see and hear a difference...

 

Stuur mij maar een bericht als je zin hebt in een kop koffie in Reykjavík.

[yadayada]

Saw this in the yahoo comments (yeah I know), if true that is interesting:

Greece has the highest population in the world of people reporting an age of 110 years. The deaths are often not registered and pensions continue to be received. The European Union has found that there are families receiving 4-5 pensions, which they are not supposed to get. There are still pensions paid to persons who died in 1953. 40,000 girls receive monthly life pensions of 1,000 euros for the simple fact that they are unmarried daughters of deceased civil servants and it costs the state coffers #$%$ 550 million euros per year. Now they will receive only up to the age of 18.

 

The pacemakers in Greek hospitals were acquired at a price 400 times higher than in British hospitals. In Greece, many workers have benefited from early retirement, set at 50 years for women and 55 for men who belong to one of the 600 job categories identified as particularly painful, and among which are included hairdressers (because of dyes that may be considered harmful), the musicians of wind instruments (blowing into a flute is exhausting) or TV presenters (the microphones are supposed to cause damage to health). (This law was adopted by the Socialist government of 1978).

 

In the last decade, it has created over 300 new public companies. Tax evasion is massive, over 25% of Greeks do not pay a cent on personal income. In addition, the weight of the public sector on the economy is overwhelming. There are about one million officials to 4,000,000 active people. On Greek public railways the average salary of employees exceeds #$%$ 66.000.- per year. And this includes the cleaners and the low skilled. The (almost free) Athens Metro delivers about 90 million tickets a year, while the total cost of this public company exceeds 500 million.

The French retirees receive on average 51% of the last salary, the Germans 40%, North Americans 41% and Japanese 34%. Meanwhile, Greek pensioners receive 96% of their earlier salary.

Greece has four times more teachers than Finland, the best educated country according to the last PISA report, while the student performance in Greece is the lowest among many European countries by comparison.

 

yeah so at least the 96% is not true, was cut to 54%.

http://www.economist.com/blogs/freeexchange/2015/06/greek-pensions

[frommi]

Looks like a possible deal will be

 

a) greece transfers 50-70 billion € of assets into a trust fund and immediately starts realizing the proposed reforms. Money is only paid after each round of votes in the greek parliament.

b) greece exits the € but is allowed to stay in europe and gets structural help out of the EU-honeypots.

 

Ball back to Tsipras ...

 

New referendum? :)

[Rainforesthiker]

I think Angela Merkel should call a referendum in Germany for a week from now to let the German people decide if they should lend more money to Greece.  Give the Greek PM a taste of his own medicine.

[original mungerville]

I am not sure about Greece, but I am pretty sure the best Belgian beer is Westvleteren 12.

[tombgrt]

 

I'm not saying creditors aren't to blame, all parties are in a way.

 

As a European tax payer I feel that I have shown more compassion than most these last few years. Not only have I helped through taxes, I've also directly supported PIIGS & co quite a bit as well. I've visited Portugal twice and went to Greece mainland once (late last year) and later this year I'll be going to Spain and Iceland for a few weeks as well. Just sayin'...  :D While I go on vacation to have a good time, part of the reason I visit these places now is to support them. I do feel bad for those in Greece that can't catch a break, surrounded by relatively wealthy allies that are part of the problem. Maybe stating that I find the situation "funny" isn't the best way to put it...

 

But I'd love to go back to Athens now to see the difference. In an alternative universe I'd visit them where Syriza didn't get into power. Wonder if I would see and hear a difference...

 

Stuur mij maar een bericht als je zin hebt in een kop koffie in Reykjavík.

 

Super, lijkt me leuk. Ik laat je tijdig iets weten als het zou lukken want we zijn er maar voor een 5-tal dagen. Wij bezoeken het zuiden van het land en zijn enkel de eerste en laatste dag in Reykjavik. Ben je afkomstig uit België of Nederland gezien je Nederlands praat? Ik had al zo'n vermoeden via je nickname... :) Stuur gerust een PM!

 

I am not sure about Greece, but I am pretty sure the best Belgian beer is Westvleteren 12.

 

Yes on paper but I'm not sure most beer drinkers that aren't used to heavier beers will actually like it the most as well.  :) But I'm not an expert...

 

 

[original mungerville]

Agree. Not sure if you have tried Westvleteren as its availability is more limited, but it goes down surprisingly smoothly for a 12% beer. I mean it feels like 6% but with unbelievable tastes and a smooth finish. They would have it at certain beer stores and restaurants/bars in Brussels for sure; I believe I also picked some up at a beer store in Bruges. Anyway, surprisingly light/smooth.

[muscleman]

http://www.theguardian.com/world/2015/jul/13/greek-debt-crisis-tsipras-resists-key-bailout-measures-after-15-hours-of-talks

 

I don't understand why Tsipras is doing this. He is objecting IMF participation in the new bailout? Why?

Also, German is proposing that Greece post a $50 bn collateral but Tsipras said 17 bn is the maximum. Why? I can't see the difference between these two numbers. I would either say, no this is not possible. I am not giving up fiscal sovereignty to you, or I would say, ok, the conditions are so bad and you don't trust me to implement these reforms. I will post $50 bn collateral. It seems very dumb to me to say, ok I will give up fiscal sovereignty to you but I would only want to post at most $17 bn collateral. Once fiscal sovereignty is given up, there is no difference between 17 and 50 bn.

[Jurgis]

Europeans (Germans really) are shooting themselves into a head.

 

#ThisIsACoup

 

http://www.theguardian.com/business/2015/jul/13/thisisacoup-germany-faces-backlash-over-tough-greece-bailout-demands

[ni-co]

I consider Wolfgang Schäuble to be the worst finance minister Germany ever had – and this says something. He has not the slightest idea why Germany has prospered for the last few years while the southern countries have been suffering. He really thinks this is a result of austerity and, thereby, sees himself as a strict teacher bringing this lesson to the rest of Europe – I don't know whether to laugh or to cry.

[Jurgis]

I consider Wolfgang Schäuble to be the worst finance minister Germany ever had – and this says something. He has not the slightest idea why Germany has prospered for the last few years while the southern countries have been suffering. He really thinks this is a result of austerity and, thereby, sees himself as a strict teacher bringing this lesson to the rest of Europe – I don't know whether to laugh or to cry.

 

Right. This is sad.

[Guest longinvestor]

I consider Wolfgang Schäuble to be the worst finance minister Germany ever had – and this says something. He has not the slightest idea why Germany has prospered for the last few years while the southern countries have been suffering. He really thinks this is a result of austerity and, thereby, sees himself as a strict teacher bringing this lesson to the rest of Europe – I don't know whether to laugh or to cry.

 

IMO, this opinion is shared widely amongst the German populace. Given the consensus based political system, Schaueble's view is hardly surprising. This inside-out worldview is, IMO, based on the idea of meritocracy, given the productivity gap between Germany and..let's say, Greece. But, the naivete that comes with holding this worldview while trying to hold the EU together as a fiscal-but-nothing-else Union is crazy. Buffett kind of said this in answering an audience question at the ASM this year.

[ni-co]

Great article by Barry Eichengreen:

 

German Finance Minister Wolfgang Schäuble’s idea of a temporary “time out” from the euro is ludicrous. Given Greece’s collapsing economy and growing humanitarian crisis, the government will have no choice, absent an agreement, but to print money to fund basic social services. It is inconceivable that a country in such deep distress could meet the conditions for euro adoption – inflation within 2% of the eurozone average and a stable exchange rate for two years – between now and the end of the decade. If Grexit occurs, it will not be a holiday; it will be a retirement.

 

[…]

 

Economically, the new program is perverse, because it will plunge Greece deeper into depression. It envisages raising additional taxes, cutting pensions further, and implementing automatic spending cuts if fiscal targets are missed. But it provides no basis for recovery or growth. The Greek economy is already in free-fall, and structural reforms alone will not reverse the downward spiral.

 

http://www.project-syndicate.org/commentary/greece-debt-agreement-risks-by-barry-eichengreen-2015-07

[Rainforesthiker]

Great article by Barry Eichengreen:

 

German Finance Minister Wolfgang Schäuble’s idea of a temporary “time out” from the euro is ludicrous. Given Greece’s collapsing economy and growing humanitarian crisis, the government will have no choice, absent an agreement, but to print money to fund basic social services. It is inconceivable that a country in such deep distress could meet the conditions for euro adoption – inflation within 2% of the eurozone average and a stable exchange rate for two years – between now and the end of the decade. If Grexit occurs, it will not be a holiday; it will be a retirement.

 

[…]

 

 

Economically, the new program is perverse, because it will plunge Greece deeper into depression. It envisages raising additional taxes, cutting pensions further, and implementing automatic spending cuts if fiscal targets are missed. But it provides no basis for recovery or growth. The Greek economy is already in free-fall, and structural reforms alone will not reverse the downward spiral.

 

http://www.project-syndicate.org/commentary/greece-debt-agreement-risks-by-barry-eichengreen-2015-07

 

I would argue that spending cuts, cuts in pension payments, and other reductions in the size of Greek government / bureaucracy are what Greece needs and does provide some basis for recovery / growth if the people are willing to seize the opportunities presented to them and become more productive.  This article seems to approach things from the academic Keynesian perspective that governments should spend their way out of a recession.  I disagree with this notion.  Sure this is a tough pill for Greece to swallow, but the alternative seems to continue to allow other hardworking people to subsidize a lifestyle that they cannot afford. 

[ni-co]

I would argue that spending cuts, cuts in pension payments, and other reductions in the size of Greek government / bureaucracy are what Greece needs and does provide some basis for recovery / growth if the people are willing to seize the opportunities presented to them and become more productive.  This article seems to approach things from the academic Keynesian perspective that governments should spend their way out of a recession.  I disagree with this notion.  Sure this is a tough pill for Greece to swallow, but the alternative seems to continue to allow other hardworking people to subsidize a lifestyle that they cannot afford.

 

This is exactly the kind of ideological thinking that drives German policies. I'm not talking about propping up the Greek economy in a short recession or whatever people mean when they talk about "Keynesianism".

 

It's just common sense that you cannot outgrow such a mountain of debt by cutting your expenses. How is this supposed to work? Greece has been in a deep depression for years now – there are two ways out of this: either a huge debt haircut or inflating the debt away; the latter is impossible while keeping the euro. If your argument had any substance Spain should prosper – which it is not. It has exactly the same problems. All the imposed austerity policy has done so far is to push Greece's debt from 130 to 200% of GDP while essentially killing the Greek economy.

 

At least the IMF is facing reality here (I guess this isn't an outcome Angela Merkel expected when insisting that the IMF should be on board):

 

IMF signals it could walk away from Greek bailout deal

 

The International Monetary Fund has sent a strong signal that it may walk away from Greece’s new bailout programme, arguing that it will not be able to participate if European creditors do not offer Athens substantial debt relief.

 

[…]

 

The memo, prepared for EU leaders ahead of the summit on Greece, argues that only through large-scale debt relief — something eurozone officials have fiercely resisted — could Greece see its debt fall to levels where it would be able to return to the financial markets.

 

“Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far,” the memo reads.

 

[…]

 

Such a solution would not have to come immediately and talks could drag on well into the autumn with the IMF’s current programme now not due to expire until March 2016. But under its rules, the IMF is not allowed to participate in a bailout if a country’s debt is deemed unsustainable and there is no prospect of it returning to private bond markets for financing. The IMF has bent its rules to participate in previous Greek bailouts, but the appetite to do so has diminished.

 

[…]

 

[T]he IMF is now making clear that if Germany wants it to remain on board then Berlin will have to make room for significant debt relief.

 

http://www.ft.com/intl/cms/s/0/444a0bc8-2a46-11e5-8613-e7aedbb7bdb7.html [paywall]

[rukawa]

It's just common sense that you cannot outgrow such a mountain of debt by cutting your expenses. How is this supposed to work?

 

In the time of Keynes there were few public goods and government was small. There was huge positive utility associated with government spending.

 

In the present world government is huge and bureaucracy overbearing. The Keynesian logic is reversed. There are now huge economic benefits to reducing regulation. In the case of Greece there benefits are ridiculously large.

 

See the following articles:

http://www.macleans.ca/economy/economicanalysis/stupid-rules-are-sinking-the-greek-economy/

http://www.theglobeandmail.com/news/world/the-roots-of-the-greek-tragedy-bloated-bureaucracy-and-tax-evasion/article582943/

- you need a license to serve coffee!?

- shareholders have to provide chest x-rays and stool samples

- building a resort took 10 years and 6000!!! signatures from bureaucrats.

- 4.3 million workers of which 1 million are public sector workers

 

Structural reform is the only solution to the problems Greece faces. But austerity need not accompany structural reform.

[stevevri]

The word austerity has become too dirty and talk of it way too dogmatic instead of practical. If spending is wasteful in government then in the long run you will benefit from cutting that spending.

 

Why do you think the Greek people haven't been paying their taxes? Because they don't want to? No.. because they don't trust the government and how it's being spent.

[Zorrofan]

The word austerity has become too dirty and talk of it way too dogmatic instead of practical. If spending is wasteful in government then in the long run you will benefit from cutting that spending.

 

Why do you think the Greek people haven't been paying their taxes? Because they don't want to? No.. because they don't trust the government and how it's being spent.

 

As an interesting side note, it is also a cultural thing, derived from centuries of occupation by the Ottoman empire. Who wants to pay taxes to an occupying force? 

 

https://en.wikipedia.org/wiki/Ottoman_Greece

 

your history lesson for today  ;D

 

cheers

Zorro

[stevevri]

The word austerity has become too dirty and talk of it way too dogmatic instead of practical. If spending is wasteful in government then in the long run you will benefit from cutting that spending.

 

Why do you think the Greek people haven't been paying their taxes? Because they don't want to? No.. because they don't trust the government and how it's being spent.

 

As an interesting side note, it is also a cultural thing, derived from centuries of occupation by the Ottoman empire. Who wants to pay taxes to an occupying force? 

 

https://en.wikipedia.org/wiki/Ottoman_Greece

 

your history lesson for today  ;D

 

cheers

Zorro

 

To be fair that kind of thing is very common in history. There was frustration with Roman Tax collectors. Heck America was founded on frustration with being taxed without representation. Countless examples.

 

That being said I'm not drawing this conclusion haphazardly. I've been to Greece and have family that still lives there. People avoid toll roads because they believe the toll taker is keeping the money. And the way things work they probably are. There is that at play.

[Jurgis]

The problem with "Government is corrupt, so I won't pay taxes" attitude is that it's not a solution. The corruption and fraud just perpetuates.

 

 

My experience with this is from Soviet Union where the attitude was to steal everything that was "Government's". Twenty five years later and the attitude has changed a bit, but there are definitely still leftovers of that thinking.

 

I am not sure there is a fast solution to this. Clearly, if you would get incorruptible government that would pass tough reforms, but at the same time dole out carrots for doing the right thing, it might work. Mindless austerity won't work though. Whatever anti-Keynesians say, budget cuts, pension cuts, etc. just push country into endless recession. There have to be balancing pro-growth actions, for example, tax cuts. If nobody's paying taxes anyway, why not drop them to 10% or whatever so that people would have some incentive to pay them?

 

Clearly balancing pro-growth actions need either monetary policy that Greece does not control or allowance for some freedom in fiscal policy that is being suppressed by Eurocrats.

[stevevri]

The problem with "Government is corrupt, so I won't pay taxes" attitude is that it's not a solution. The corruption and fraud just perpetuates.

 

 

My experience with this is from Soviet Union where the attitude was to steal everything that was "Government's". Twenty five years later and the attitude has changed a bit, but there are definitely still leftovers of that thinking.

 

I am not sure there is a fast solution to this. Clearly, if you would get incorruptible government that would pass tough reforms, but at the same time dole out carrots for doing the right thing, it might work. Mindless austerity won't work though. Whatever anti-Keynesians say, budget cuts, pension cuts, etc. just push country into endless recession. There have to be balancing pro-growth actions, for example, tax cuts. If nobody's paying taxes anyway, why not drop them to 10% or whatever so that people would have some incentive to pay them?

 

Clearly balancing pro-growth actions need either monetary policy that Greece does not control or allowance for some freedom in fiscal policy that is being suppressed by Eurocrats.

 

Yup.  I think you're pretty spot on here.

 

This is not an easy problem and it's going to take more then just cutting things. It's going to take multiple steps and many different actions and take time and patience.

 

I also wonder if they have the flexibility needed to get out of this. The eurocrats seem very inflexible in their approach. It seems like decisions are made more for various political reasons than for what will get Greece operating strongly again

 

[yadayada]

Not jsut that, but also the fact that Greece public spending is probably lower. Since gov spending as % of GDP is only barely higher then in other EU countries, but a much larger % of GDP actually goes unreported (20-30% i think is the estimate?). So if anything they are not spending that much now. A lot of the wasteful spending was cut in 2011-12. So the problem here is tax collection.

 

And it seems if you squeeze the government, it will only cause populists to get more power. Which is bad for the country.

 

So essentially you are squeezing the government, and causing instability there by demanding austerity, while claiming to try and help solve the problem by demanding reforms? That doesn't make a whole lot of sense. What happens is likely another government change, more instability and more chaos. And more unwillingless to pay taxes.

 

It really seems like Europe is using Greece as an example. Because the exact same thing is happening elsewhere in southern Europe. Except they can get the ponzi scheme going for a while still because they have not ran out of lenders.

[SharperDingaan]

It is very clear that Varoufakis was prepared to pull the trigger. Only, a political decision stopped it. http://www.telegraph.co.uk/finance/economics/11764018/Varoufakis-reveals-cloak-and-dagger-Plan-B-for-Greece-awaits-treason-charges.html.

 

Political parties change, & so do finance ministers; both German & Greek.

 

It would appear the Germans want an orderly exit in return for debt forgiveness; to get there they need to make an example to others, and de-fang IMF insistence on debt relief/extension, and French refusal to cede budget power to Brussels. To win; everybody has to continue playing the game under the tyranny of the commons.

 

But under the tyranny, everybody wins a bit; and one or two win a lot – if they can keep the tyranny together.

Ban the Greeks forever …. and may they never return!

 

Thanks to Germany, on any given day; Greece could wake up to a new, and more radical, parliament. And it will be very easy; in their first act of power - to do an Iceland, and immediately switch back to drachma. We know the machinery is already there. We know that both the IMF and the French would have stronger positions than they would otherwise have. And Germany loses a lot - as the tyranny of the commons collapses. End of dumber.

 

Orderly exit terms for Greece, would also apply to all others – including Germany and France. Move from Euro 1.0, to a more manageable Euro 2.0 by shedding members, and the big winners also get to monetize their gain. Graceful, but end of dumber.

 

If you’re Greek, a disorderly exit has to be the preferred route. If you’re dumber you have to be thinking it’s getting time to exit gracefully; while you still can.

 

SD