Open letter to German readers: What you were never told about Greece • Hacker News Board

Re: Open letter to German readers: What you were never told about Greece

#101

Post by nhaehnle » Fri, Jan 30, 2015, 6:20 PM UTC

jacquesm wrote: post #63

TheOtherHobbes wrote: post #47

Earlier quoted context omitted.

Well, no. The fundamental problem is that Germany has been treating the rest of the EU as an expedient export market while refusing to allow equivalent imports, and at the same time aggressively insisting that countries in the EU should somehow magically not need debt... to continue buying from Germany. There's also the minor point that this is yet another excuse to indulge the usual neoliberal hatred of social spend…

> while refusing to allow equivalent imports That very much is in citation needed territory, please give at least one example of how Germany is refusing intra-European imports in any category. Free trade is one of the cornerstones of the EU, Germany imposing a tariff or blockading goods produced elsewhere in Europe would make some pretty fat headlines.

TheOtherHobbes used a bit of an ellipsis here. There is no outright refusal of imports by law, but there is a refusal to allow the kind of economic conditions (such as wage increases in line with productivity increases) that would lead to a balance of imports and exports.

As for citations, a recent comparison of the relevant metric, the relative unit labor cost: http://krugman.blogs.nytimes.com/2015/01/29/i-do-not-think-t...

It is evident that of all Eurozone states, Germany is the one that deviates the most from a policy of stability. Unfortunately, the deviation is in a direction that ends up with Germany in a position of power.

Re: Open letter to German readers: What you were never told about Greece

#102

Post by drzaiusapelord » Fri, Jan 30, 2015, 6:21 PM UTC

mrweasel wrote: post #15

It's perhaps prudent to distinguish between the German people and the German politicians. It's my feeling that the average German would have suggested NOT to extend large loans to Greece. It is the EU (and German, French, Italian and so on) politicians that believed that in the grand scheme of the Euro, it would be the best cause of action. The sad part is that the loans to Greece perhaps wasn't so much about Greece,…

I'm not so sure of that. Greece might be a special case. Its a tourist economy with heavy social services and a retirement age of 58 with overly generous pensions; about 80% of one's salary. Its fraudulent on practically all levels of government. Its recent cozying to Putin is just more spit in the eye of the EU partners who tried working with Greece's debt issues.

While Italy and Spain aren't the shining stars of fiscal responsibility and anti-corruption, they're bush league compared to Greece's MLB financial shenanigans. An Italian exit would be a huge event, considering Italy's economy is bigger than Russia's. Greece is just a bottom feeder.

As a Greek-American is pains me to say these things, but Greece is just on the wrong side of history here. Its incredible how corrupt that country is. Its a clusterfuck of far-leftist nonsense that has no place in the EU. I could see a re-entry in a few decades after they've cleaned up their act, assuming that's possible. Expecting everyone else to bankroll Greece's generous pensions seems unfair to working Europeans.

This should also be a wake-up call for EU expansion. Taking on these corrupt countries is a major risk. I'm very glad they never got Turkey, considering its deep into a spiral of Islamic autocracy and has also lost its major economic growth around Q1 2014.

Re: Open letter to German readers: What you were never told about Greece

#103

Post by nhaehnle » Fri, Jan 30, 2015, 6:23 PM UTC

john_b wrote: post #67

guelo wrote: post #50

Earlier quoted context omitted.

What I don't understand about this type of logic is the refusal to acknowledge the damage being done by the forced depression. It's like a 19th century leech therapy, keep sucking out blood until they get better. If Greece's economy is allowed to recover everybody will be better off, the banks, the politics, the people living in Greece and even the German taxpayer.

> "forced depression" Nothing about Greece's current situation was forced on them. Sure, lots of politicking went on and the current situation was definitely engineered to benefit others, but Greece was effectively bankrupt and in default prior to the bailout. You just can't tolerate the level of corruption [1], tax avoidance, and union greed that Greece tolerated for so long. A normal sovereign default would have be…

> Nothing about Greece's current situation was forced on them.

What would you call the fact that the Troika has forced the Greek government to implement brutal and deadly austerity measures?

I mean, sure, technically Greece could have avoided this. If they had left the Eurozone in 2009 or 2010, they would now be in a much stronger position (after a brutal but short period of even more chaos). But that wouldn't have made the European elite happy, either.

Re: Open letter to German readers: What you were never told about Greece

#104

Post by tomp » Fri, Jan 30, 2015, 6:23 PM UTC

teamhappy wrote: post #88

tomp wrote: post #65

Earlier quoted context omitted.

> Germany is one of the riches countries on this planet. A lot of that riches comes from the fact that EUR is a common currency both of economically successful countries like Germany and of economically weak countries like Greece. That makes the currency artificially undervalued, which boosts German exports and hurts Greek imports, making Germany more competitive and Greece less competitive (longer comment: https://n…

I'm not entirely sure what it is you're suggesting. The EU is designed to make us (Germany, France, etc.) more competitive. That unfortunately also means that countries like Greece don't profit as much (or at all, for that matter), but then again, nobody was forced to join to EU. > I think it's time Germany admits to that and pays its dues, by which I mean help finance the rest of EU (via a fiscal union). Do you real…

> I'm not entirely sure what it is you're suggesting. The EU is designed to make us (Germany, France, etc.) more competitive. That unfortunately also means that countries like Greece don't profit as much (or at all, for that matter), but then again, nobody was forced to join to EU.

I'm suggesting that Euro (this has nothing to do with EU directly) can't survive if PIGS countries keep on loosing while Germany keeps on winning. Personally, I think it would be beneficial to keep the Euro and instantiate a fiscal union (like the US), but it's not up to me to decide. If Germany thinks it's in their interest to keep the Euro (and not have current Euro members exit the currency), it will have to think about other's interests as well. Ultimately, it's not a question if EU/Euro makes some countries more competitive (edit: relative to others) on this continent, but rather, if we stick together as a major global player.

> You do realize we're talking about the fact that Greece can't pay it's dues,

That's just because it doesn't control it's own currency. Otherwise, it could just devalue it, reduce the real value of its debt, and export more, i.e. normal monetary policy.

> There is no way any german is going to vote for that

The politicians will have to convince them, or do without the popular vote. It's not like the Greeks voted for austerity either...

Re: Open letter to German readers: What you were never told about Greece

#105

Post by UweSchmidt » Fri, Jan 30, 2015, 6:25 PM UTC

bostich wrote: post #54

I am German and have had a very negative opinion of Tsipras. He makes some very good points in this letter and his view seems to be consistent. I can understand his position and my opinion of him has improved a bit after reading the letter. Nevertheless I see no solution, only 3 possible bad outcomes: 1. Europe loans more money to Greece and we can be pretty certain that they can't pay it back. 2. Europe gifts money…

How about 4. Greece leaves the EU.

There could still be favourable trade agreements and some currency stabilizing etc. so it's not the end of the world, but it would be a wakeup call for everyone to treat their finances a little more seriously.

German yellow press also mentioned various social programs in Greece that can only be described as frivolous even by social state standards. It's harder to be sympathetic with the Greek cause if we're paying for higher welfare abroad than we enjoy ourselves.

Re: Open letter to German readers: What you were never told about Greece

#106

Post by tspareme » Fri, Jan 30, 2015, 6:26 PM UTC

frandroid wrote: post #96

mathattack wrote: post #42

Earlier quoted context omitted.

I agree with everything you say up to “panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works” In todays fractional banking system where banks only hold a fraction of liquid assets to cover their liabilities, a run on a good bank could still put it under. (Lehman, Bear and others were both illiquid and insolvent, but ru…

Yeah, but unless you have massive disinformation, you can't create a panic on a solvent bank in today's world. The examples you use were ones where capital had been destroyed.

I guess you have to define what a solvent bank is. I don't think any bank can handle a sustained run given their liability duration mismatch. So I am not sure what do you mean that you can't create a panic. Its always possible to have runs just not very easily.

The financial crisis showed that bank liabilities are really liabilities of the country that the bank incorporates in. So in case of Ireland, Greece, Iceland, it is up to the country to step up and backstop their banks. If a country can not, then you will have panic on a bank. And in order for a country to be able to backstop their banks, the debt of the country must be credible.

Re: Open letter to German readers: What you were never told about Greece

#107

Post by brianwawok » Fri, Jan 30, 2015, 6:27 PM UTC

mysticllama wrote: post #16

A CNN article from 2010 referenced 2008 government documents that said "6 in 10 Greeks don't pay income taxes" source: http://www.cnn.com/2010/WORLD/europe/12/31/greece.taxes/ I don't know what the rate of tax evasion is in other western countries, but I'm willing to wager the situation in Greece is dramatically worse. I remember reading a NYT article from the same year that provided further insight: Various studies,…

Here is something that maybe I am not understanding.. but saying that 6/10 greeks pay no income tax does not tell us how much tax evasion there is, right?

From what I can google: http://www.taxpolicycenter.org/taxtopics/federal-taxes-house...

43% of Americans do not pay federal income tax (and some % of those get a net gain of federal income tax). Sure 60% is > 40%... but that could be due to a ratio of more people really poor, compared to more tax evasion.

(Not doubting Greece has a tax evasion problem, but 6/10 not paying taxes seems bad evidence).

Re: Open letter to German readers: What you were never told about Greece

#108

Post by panarky » Fri, Jan 30, 2015, 6:27 PM UTC

vijayboyapati wrote: post #20

This one sentence sums up what I think is the fundamental problem: "An insolvency problem was thus dealt with as if it were a case of illiquidity." That is, the problem isn't some ephemeral panic where people are temporarily unwilling to lend. The problem is there are massive capital losses that have yet to be acknowledged. The problem is that Euro politicians believe that by continuing to bankroll Greece they will s…

Why do news reports keep saying that Greece got bailed out?

Let's say you lend $100,000 to my startup. I have to pay you $10,000 a year until the loan is paid off. I hire a thief as a CEO who gives the $100,000 to his friends and family, and my startup has nothing to show for it.

Now my startup is bankrupt. I'm working as a waiter in a restaurant to pay the rent. I can't make my annual payments to you, much less pay back the principal. You've just suffered a $100,000 loss. That's the risk you take as a lender.

Surprise! Now the government steps in and gives you $50,000 to buy this bad loan from you. What a great deal! It would have been a total loss!

Then the government garnishes my wages from my waiter job for the next 50 years to reimburse the government.

Who exactly got bailed out here? Me (the Greek people), or you (foreign banks and bondholders)?

And what happened to the thieving CEO who stole the money in the first place?

Re: Open letter to German readers: What you were never told about Greece

#109

Post by cyphunk » Fri, Jan 30, 2015, 6:27 PM UTC

As other comments have pointed out, and Tsipras pretty much says himself in this article, good money was thrown at bad but was done so not to prevent a productivity fallout in Greece but to prevent one in the rest of the EU or world. And now Tsipras is arguing bluntly that Greece's economic system will not rebound as expected because it's productivity problems are deeper than liquidity.

It is worth looking at Detroit here. Not because of where they are similar but where they are not.

Detroit could not repay debts and required restructuring (aka hair cuts). Importantly they decided the type of hair cuts on their own. They had to do this because there was no Federal bailout. Michigan agreed to pay 194 mil for pensions as a lump some (aka a gift) but Detroit had to sell off assets, renegotiate with creditors on their own and reform where they could. But again, they did this because they knew they had to. It wasn't directly dictated by "The Union" (Fed).

Importantly they were given some breathing room because at least some portions of social services providing stability are Federal (social security, medicare, medicaid). And though they just exited bankruptcy it's likely without investment from overloads (state and federal) a full recovery will not happen. Or at least, investment will certainly help that become more possible.

What is missing in the EU are these social safe guards. And it seems a good time to build them. Rather than dictate to Greece how to alot retirement or social welfare or other social services, they should provide a baseline EU wide option for entities that default. This option makes it easier to let them get at least as close to default as is required for them to be in a place to consider what changes they could make to provide future stability. And when it comes to bailouts it should come in the form of investment. Both seem to be a rather obvious steps in maintaining the Union and providing greater trust and integration. Anything else should be decided in negotiations only after Greece begins the hard negotiations with its creditors after all accept imminent default.

Re: Open letter to German readers: What you were never told about Greece

#110

Post by seizethecheese » Fri, Jan 30, 2015, 6:27 PM UTC

yxhuvud wrote: post #89

jahewson wrote: post #78

Earlier quoted context omitted.

Your statement about Germnay refusing to allow imports is manifestly false. The EU is a free trade area and its member states are not permitted to engage in such activities. The EU has its own courts to enforce such rules. It's certainly true that Germany is a net exporter: this is because of their ability and competitiveness in engineering and technology, combined with the fact that Germans are not big consumers and…

No, Germans are not more frugal than other people. The main issue behind lacklustre German consumption is that neither their wages nor their investment in infrastructure has kept pace with their productivity growth.

What's your source, your intuition? Germany is one of the highest savers in the Euro area; much higher than Greece.

http://data.worldbank.org/indicator/NY.GNS.ICTR.ZS