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Thread: Question on Greek Financial Crisis

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    Contributor ace16807's Avatar
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    Question on Greek Financial Crisis

    I have a question regarding the greek economic crisis. Normally I'd put it in an existing thread but I don't see one that would be entirely appropriate so I just made a new one. As we all know Greek is suffering from a rather monumental financial crisis of a massive sovereign debt that has been compounding over the last several years due to corruption and tax evasion. Recently, significant civil unrest has erupted in the form of protests opposed to the austerity plans of cutting wages, increasing taxes, cutting down the public sector etc. So here's my question:

    What is the alternative? I'm not exactly well versed in these matters, but the only demand that I've seen the protestors set forth is that the corrupt politicians step down. But even after that happens, they still have a massive pile of debt that is in relative terms, overshadows the US's. So how do you start to get rid of this without the aformentioned painful changes (which are really a prerequisite for support from the EU, European Central Bank etc)? From what I know, a significant portion of Greece's population participate(s/d) in tax evasion so they are partially to blame for the problems. I just don't get what the general population at large wants to do about their little issue. They don't want increases in taxes/wage cuts, but surely they don't want to just sit on their heap of debt, pretend it's not there and default on all their loans either?

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    Being very new here - Please forgive any transgressions of Rules.

    It would appear to be a fact of History that once a Nations 'Debt' becomes untenable/unrealistic - The rest of the World either ignores it or goes to a War footing.

    Going to watch the comments and gauge the replies.

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    Quote Originally Posted by airsporter View Post
    Being very new here - Please forgive any transgressions of Rules.

    It would appear to be a fact of History that once a Nations 'Debt' becomes untenable/unrealistic - The rest of the World either ignores it or goes to a War footing.

    Going to watch the comments and gauge the replies.
    Hi airsporter! I'd like to wish you a good welcome on behalf of the WAB community!. Go ahead over to the introductions section and introduce yourself, and tell us about your interests!

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    An t-aimiréal chléthúil Senior Contributor crooks's Avatar
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    Quote Originally Posted by ace16807 View Post
    I have a question regarding the greek economic crisis. Normally I'd put it in an existing thread but I don't see one that would be entirely appropriate so I just made a new one. As we all know Greek is suffering from a rather monumental financial crisis of a massive sovereign debt that has been compounding over the last several years due to corruption and tax evasion. Recently, significant civil unrest has erupted in the form of protests opposed to the austerity plans of cutting wages, increasing taxes, cutting down the public sector etc. So here's my question:

    What is the alternative? I'm not exactly well versed in these matters, but the only demand that I've seen the protestors set forth is that the corrupt politicians step down. But even after that happens, they still have a massive pile of debt that is in relative terms, overshadows the US's. So how do you start to get rid of this without the aformentioned painful changes (which are really a prerequisite for support from the EU, European Central Bank etc)? From what I know, a significant portion of Greece's population participate(s/d) in tax evasion so they are partially to blame for the problems. I just don't get what the general population at large wants to do about their little issue. They don't want increases in taxes/wage cuts, but surely they don't want to just sit on their heap of debt, pretend it's not there and default on all their loans either?
    It's a dire situation, and the next few days are going to be massive not just for Greece, but for the future of Europe and the euro.

    It's easy enough to see the problem with the current strategy - the refusal to inflict pain on bondholders, and to attack Greece's people and public services as a first option is savagely resisted because the Greeks see straight through the ideological bias of the ECB. They are being lined up for savage austerity to protect wealthy speculators, same as Ireland and Portugal. Germany wants to burn bondholders, the ECB will not allow it because it doesn't want anything that metaphorically smell like default, no matter how much more inevitable these unrepayable loans make it. Greece's debt is going to hit 175% of GDP next year, the only option (it's not an alternative, as the current policy is long-term not an option at all) is widescale debt forgiveness, Greece will never be able to honour the debts, acceptance of that makes a solution easier. Europe can sit here and give a second bailout, a third next year, a fourth in two years, but the fact remains if Greece has to pay the money back, a default will come down the line. How will it return to bond markets to pay Europe back when rates are in double digits, and it's debt grows higher and higher with every bailout, making the rates even less likely to fall to sustainible levels? Austerity is counter-productive as it sucks growth out of the economy and leads to even higher unemployment, and how can a shrinking economy pay increasing debts without economic collapse?

    Greece is also a special case PIG in that in addition to the collapse it has uniquely serious political and societal problems, but the underlying thread is the same - tax-dodging and unsustainible governance notwithstanding, the only way it can recover is with the removal of the unrepayable debt. The Greek people may be having a PR disaster by rioting but that no more makes them responsible for Greece's governing classes screw-ups. We are moving towards some sort of settlement every day, the only question now is can we save the euro? If Greece goes messily it could collapse the entire project - that's the Greeks best card ironically, saw a headline today 'help us or we'll take you all down'. There's some truth to that.
    Although it is not true that all conservatives are stupid people, it is true that most stupid people are conservative.
    - John Stuart Mill.

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    Senior Contributor Doktor's Avatar
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    If I were Greek I wouldn't bother, the wealthier nations WILL pay the bill as they did so many times in the past (UK and France).

    My grandfather used to say "He is in debts like Greece", and what happened, they loaned more.

    Time and again they spend a lot when they can't afford. By your logic is those who lend the money's fault, not those who borrowed and can't pay back. Greece is still major arms buyer but can't safeguard 42km of their border and need EU Forces to do that for her.

    I feel sorry for the ordinary worker in Greece, but those who still work still receive 14 salaries/year and go to retirment youngest in EU and with biggest pension as % of the salary.
    No such thing as a good tax - Churchill

    To make mistakes is human. To blame someone else for your mistake, is strategic.

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    Can't speak about Greece's debt specifically, but this is ONE instance where I agree with Paul Krugman. The U.N. should back some sort of a Jubilee debt scenario. This would be a way to keep all debt from getting so far out of control, that it destroys both the debtor and the creditor, which is what is happening now. I think it would be very helpful, from a global fiscal responsibility POV, to have a published time period, and international standards for the forgiveness of debt. The concept goes back to Jewish law, and during biblical times, was practiced every 7th and 50th year. Seems to make very good economic sense to me.
    Don't listen to me, I'm a wack job.

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    Senior Contributor Doktor's Avatar
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    Laser,

    In the case of Greece the problem is they forged their annual reports about their budget, and the EU wasn't too upset as the things were under control. If the things in USA didn't escalate the why they did, I bet the Greek government would still forge reports.

    Another thing is those who had fiscal discipline and didn't expose too much to debt are screwed (less money forgiven).
    No such thing as a good tax - Churchill

    To make mistakes is human. To blame someone else for your mistake, is strategic.

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    But that's my point. Greece forged documents. The entire western banking system was allowed to redirect debt into all kinds of 'off balance sheet' and uncollatralized accounts ( CDO's, FANNIE MAE, and FREDDI MAC)that were uninsured and poorly regulated.
    The over allocation and mismanagement of debt now has the world economy on its knees, and may well become responsible for the destruction of entire countries. It will be DECADES before it gets unwound and sorted out. And in the end, even the fiscally disciplined will suffer, in reduced trade, employment, and economic output.
    It seems to me the whole idea of debt, as an economic tool, is to act as a mechanism to overcome the natural limits on growth and expansionism. Simply put, it is a way for the haves, to take even more than the have nots, have. But even countries and central banks are vulnerable to fiscal mismanagement. In fact, I would say predisposed. It just doesn't make sense that something as important as the world economy would be left up to the governments of individual countries, whose citizens seldom understand the implications, and who,in the end become the unwitting guarantors; while the architects and instigators sneak off into obscurity with their profits. Call me crazy, even a conspirosy theorist, but am I wrong?
    Don't listen to me, I'm a wack job.

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    As I understand it is correct to say that rich Greeks have been evading tax for a long time, whether due to corruption or badly formed tax systems I am not sure. The EU now insists on a massive priavtisation of Government assets etc as part of the cuts package before the next relief funding is given. Who then will buy the privatised sectors? The people who don't pay tax!

    I honestly am sick of this European idealism that demands we throw good money after bad and prop up broke banks and countries for some sort of imagined 'European dream'. Grrece should default on payments to banks abroad unless they are prepared to wipe off the Greek debts by a substantial percantage. Sure we have shall banks go bust and probably have another recession etc but thowing more tax payers money at holes that can't be filled will only delay the inevitable.

    Idealy the 'PIGS' (Portugal, Ireland, Greece and Spain) should leave the Euro, devalue and recover from export driven growth (and cheap tourism). To hell with this Euro idealism and the whole European project. The whole idea that if you vote no to European idea once it doesn't stop the idea but you get more votes on the same thing until you say 'ok' and then you can never vote again is repugnant for a start and to see the EU bankers selling off Greek assets to their rich Greek pals is absurd. We are suffering a dictatorship of bankers and beaurocrats and the sooner we stop propping up broke countries and banks the better as hopefuly the bankers and ilk in the beaurocracy will follow in the demise.

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    Senior Contributor Mihais's Avatar
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    To be fair,I'm not sure how much of UK standard of living depended on the financial industry and all related paper pushers,but I heartily concur that the entire banking industry has to go back to its roots and the EU in its current form can go to hell.
    A healthy economy and a Europe of nations,that would be my slogan if I were in politics,which fortunately for me will never happen.
    Those who know don't speak
    He said to them, "But now if you have a purse, take it, and also a bag; and if you don't have a sword, sell your cloak and buy one. Luke 22:36

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    Defense ProfessionalSenior Contributor tbm3fan's Avatar
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    Quote Originally Posted by Laser View Post
    who,in the end become the unwitting guarantors; while the architects and instigators sneak off into obscurity with their profits. Call me crazy, even a conspirosy theorist, but am I wrong?
    You may be on to something when Greece privatizes her services. Who will be the first in line to buy these assets at the extreme detriment of the average Greek in the long term. I have yet to see a situation where privatization on a large scale has ever benefited the country or people.

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    Quote Originally Posted by tbm3fan View Post
    You may be on to something when Greece privatizes her services. Who will be the first in line to buy these assets at the extreme detriment of the average Greek in the long term. I have yet to see a situation where privatization on a large scale has ever benefited the country or people.
    I had to think about this statement for a minute. About privatization never benefiting the people. Because I am a capitalist, and my inclination would be to say just the opposite. I seldom see GOVERNMENT ever benefiting the people.
    Then I realized that the capitalists, and the socialists are suffering from the same problem, but from different entities. The capitalists are suffering from corporate corruption,( bailouts, unreasonable profits, mismanaged debt), while the socialists suffer from Government corruption (bailouts, unreasonable salaries and pensions, and mismanaged debt). But in both cases, in the final analysis, the ordinary citizen will suffer, while the politicians, bankers, lawyers, and crooks skate away.
    I have not checked the accuracy of this, but I heard an economist today say, that worldwide GDP is about $60 Trillion, while worldwide debt is $160 Trillion. How is the world supposed to move forward, in any meaningful way, from such an indebted situation? FUBAR
    Don't listen to me, I'm a wack job.

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    Senior Contributor Doktor's Avatar
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    What's average annual salary Laser? How much people owe in mortgages on average? You are not suppose to payback your debts within one year, right?

    I am curious how are these concerned politicians helping Greece or Ireland at the moment. It's utter madness to me that they (Greece) have all 330 bn to pay back at once now.
    No such thing as a good tax - Churchill

    To make mistakes is human. To blame someone else for your mistake, is strategic.

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    They don't have 330 bn to pay right now - they have 17bn to pay to keep up the interest payments on their debt by next month.
    Mihais - I am advised that aprox 2 pounds worth of every ten in the world goes through the City Of London at some point.
    Last edited by snapper; 21 Jun 11, at 23:24.

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    Senior Contributor Doktor's Avatar
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    Erm, they received 110bn last year. This year they need 120bn. And the total is 330bn. Yes it's not all at once now, but in 3 consecutive years. Still it's very weird to me. Another thing. Greek debt is above 100% of their GDP for more then a decade, but it is a problem now?

    If I was ordinary Greek I would've start reading CT novels
    No such thing as a good tax - Churchill

    To make mistakes is human. To blame someone else for your mistake, is strategic.

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