Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I agree with you, Greece and the euro should part company.
But as to "having a fighting chance to come out of this" on their own and with their own currency, I am not all all sanguine. For the thirty years between 1980 and 2009, their government became swollen and grossly inefficient and indulged in all manner of sloppy expenditures; and then in 2009 it had to admit that previous data on government debt levels and deficits had been misreported by the Greek government in order to protect its bond sales, etc. And the Syriza administration debuted with a five month spree of thinking it could jerk the chain of its creditors and partners. But then their finance minister was a devotee of game theory, so that was probably to be expected in a country that breeds political parties with the same enthusiasm that rabbits breed more rabbits.
The political culture of the country is not capable of producing a competent government in my estimation. And Mr. Tsipras is a wet-behind-the-ears young demagogue, who has spent his political life career flitting from one Marxist group to another. The current Syriza party government is band of spouting Marxists who are going to lead Greece down the same path as the Marxist Chavez led Venezuela. However, Mr. Chavez could spin out his circus for quite awhile as he was sitting on a pool of oil; whereas Mr. Tsipras' comparable money-maker is a puddle of third rate olive oil.
Given its current leader and its political culture Greece looks geared up to become the Zimbabwe of Europe.
I just came back from Greece. I had more local food than I could shake a stick at and I filled a (French) rental car with fuel twice with no problem (I don't know where the fuel - diesel - came from). I did not get sick. No problem with electricity, but internet service is not great.
But I more or less agree with what kevxu says (with a few quibbles) and it jives with what I have written before about the quality of political economic management.
Some of you kids out there have expressed in this thread very naïve notions about money supply, debt and the bond market. That is not the issue.
To repeat, in theory, Greece would be better off leaving the euro and restoring monetary sovereignty, provided that it had sound economic management, regardless of whatever name one wishes to the money (unit of account, means of payment, store of value).
But, in practice, to quote kevxu directly, "the political culture of the country is not capable of producing a competent government in my estimation".
So, similarly to Roman times millennia ago, they ask the Europeans to do it for them (except now they complain a lot more).
It is not fair to say that Greece produces third-rate olive oil. The problem is that they are so poorly organized that they have almost no international marketing power. Greek farmers, for example, sell much of their olives to Italian olive oil producers who in turn produce the olive oil and export it internationally. Spain too has some well organized agricultural entities with international marketing power.
In any case, of the possible outcomes that I had outlined before the referendum on 5 July ...
Quote:
i) allow easier bail-out terms (e.g. some amount of debt forgiveness and longer payback terms, as well as modest primary surplus, no pension cuts, differentiated VAT, and continuing farm subsidies); or
ii) help plan and transition to a new currency (e.g. ECB liquidity for six months or year or so, then off completely at least for a number of years); or
iii) simply and abruptly tell them GFYS and just see how an abrupt transition works out ...
in the event so far, Charlemagne has actually offered:
i) slightly more severe bail-out terms, with vague promises for some sort of debt restructuring; or
ii) help plan and transition to a new currency (a loan from the EFSM to bridge Greece over to August, probably also accompanied by ECB liquidity for six months or year or so, then off completely at least for a number of years).
It could take several more months (at least August) before we know which of these two paths will be taken, possibly with a change in government in the meantime.
I read today that Germany will continue to violate the EU's stability limits, their debt relative to their GDP is clearly too high, despite a booming economy.
It shows the main problem of all 1st world countries, their standard is not possible without massive debt.
@AFP
If the EU gave up its goal of achieving a similar standard of living throughout the EU, they would be asked how and why people in poor countries should continue to pay basically the prices, despite earning just a fraction. As long as the EU - at least officially - holds on to its goal, people have some hope that things might get better. Else people would feel like they are destined to stay poor forever and refuse to continue to pay the same prices for cars, food etc. as rich countries. Issues like those would lead to the end of the Euro.
We saw it before the Euro was deliberately weakened by EU bankers (which happened much too late), it was way too strong, which didn't bother countries like Germany, but I read that some countries like Italy, Portugal etc. need a much weaker Euro, more or less like the Dollar. 1.30 to 1.40 was poison for Mediterranean countries.
Someone mentioned olive oil. Today there is that strange contempt for agriculture, but I think troubled countries should focus on agriculture. At the end of the day, food is what people need the most. And in countries like Greece extensive agriculture could employ a lot of people. Sure, that kind of agriculture is expensive, but only when trying to export stuff, not when doing it for subsistence where efficiency is basically irrelevant.
That whole focus on services is a dangerous way to go, it makes vulnerable. I think the economy pie should be divided in thirds, one third agriculture, one third industry/manufacturing, and one third services and other modern stuff like knowledge. Currently agriculture is way too weak in many countries.
I read today that Germany will continue to violate the EU's stability limits, their debt relative to their GDP is clearly too high, despite a booming economy.
As you know, the euro is mostly a political project, not an economic one. None, repeat none, of the eurozone countries met all of the Maastricht criteria, none (to the choir-master, selah). To be sure, some are worse "offenders" than others, but it is sort of hypocritical when the German finance minister says that debt write-offs for Greece would be "illegal". Well, you know the golden rule: he who has the gold makes the rules.
Quote:
Originally Posted by Neuling
Someone mentioned olive oil. Today there is that strange contempt for agriculture, but I think troubled countries should focus on agriculture. At the end of the day, food is what people need the most. And in countries like Greece extensive agriculture could employ a lot of people. Sure, that kind of agriculture is expensive, but only when trying to export stuff, not when doing it for subsistence where efficiency is basically irrelevant.
That whole focus on services is a dangerous way to go, it makes vulnerable. I think the economy pie should be divided in thirds, one third agriculture, one third industry/manufacturing, and one third services and other modern stuff like knowledge. Currently agriculture is way too weak in many countries.
Can't give you any more rep at the moment, Neuling, but you are spot on, man, spot on. And EU policy certainly doesn't help.
The region of Greece that I know best is mainly agricultural, more sheep than people, for example, but it is highly fragmented, with only a small portion of farmers using industrial means like tractors and irrigation. If done properly, it could be a little powerhouse, at least to the point of being self-sufficient regionally, and probably even an exporter. But, on the contrary, in the 10-15 years before the crisis broke out in 2009-2010, small farmers and plot owners were rather encouraged to abandon production as a result of (poisonous) EU subsidies (loans/debt/money supply). As a result, agriculture has remained fragmented and many people who used to practice it have had to relearn many skills that they had forgotten.
Anyway, I won't hold my breath waiting for better organization.
i) allow easier bail-out terms (e.g. some amount of debt forgiveness and longer payback terms, as well as modest primary surplus, no pension cuts, differentiated VAT, and continuing farm subsidies); or
ii) help plan and transition to a new currency (e.g. ECB liquidity for six months or year or so, then off completely at least for a number of years); or
iii) simply and abruptly tell them GFYS and just see how an abrupt transition works out ...
in the event so far, Charlemagne has actually offered:
i) slightly more severe bail-out terms, with vague promises for some sort of debt restructuring; or
ii) help plan and transition to a new currency (a loan from the EFSM to bridge Greece over to August, probably also accompanied by ECB liquidity for six months or year or so, then off completely at least for a number of years).
It could take several more months (at least August) before we know which of these two paths will be taken
In the event, the deal, not yet completely finalized, is some combination of the above, calling for around €86 billion in new loans disbursed over three years, virtually no primary surplus in 2015 (economy has fallen back into recession) and increasingly higher primary surpluses thereafter (assuming a return to growth - good luck with that), higher VAT, phase-out of early retirement pensions, bankruptcy law reforms and some agreement on how to manage bad bank debt, natural gas market reforms, state asset sales of up to €50 billion, and vague promises for some sort of debt restructuring going forward.
In short, Syriza members saved their own jobs and abdicated the challenge of economic management to Charlemagne.
It would be wholly feasible, but Brussels, Frankfurt, Washington and Paris won't allow this, for a host of reasons. And as they have total power over this decision (certainly not Athens), it's a foregone conclusion...
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
