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

syriza.net.gr

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

#21

Post by dandare »

bagosm wrote: post #3

What isn't addressed in this letter and most people don't realize is that the Greek debt as an absolute number isn't that big. The real problem is that Greece needs more money to continue operation than it produces, and this fact hasn't changed nor will in the near future. Effectively this makes Greece a black hole for incoming money where incoming money have no actual benefit for anyone other than just keep a near-c…

The real problem is that Greece - especially under it's new leadership - will very soon generate new astronomical debt if the current one is forgiven (paid by someone else). Lenders would be silly not to lend if they know the debtor will be certainly bailed out and actually Tsipras would be silly too not to finance his communist utopia from debt if he too knows Greece will be bailed out no matter what.

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

#23

Post by cwyers »

dandare wrote: post #21
bagosm wrote: post #3

What isn't addressed in this letter and most people don't realize is that the Greek debt as an absolute number isn't that big. The real problem is that Greece needs more money to continue operation than it produces, and this fact hasn't changed nor will in the near future. Effectively this makes Greece a black hole for incoming money where incoming money have no actual benefit for anyone other than just keep a near-c…

The real problem is that Greece - especially under it's new leadership - will very soon generate new astronomical debt if the current one is forgiven (paid by someone else). Lenders would be silly not to lend if they know the debtor will be certainly bailed out and actually Tsipras would be silly too not to finance his communist utopia from debt if he too knows Greece will be bailed out no matter what.

It doesn't seem like Tsipras is trying to get debt forgiveness paid for by the Germans, though. He wants to use the threat of default to force Greek's creditors to give them a haircut -- reduce principal or interest or both. That will reduce the amount of Greek debt repayment but it wouldn't increase the ability of Greece to incur more debtedness.

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

#25

Post by stefantalpalaru »

3pt14159 wrote: post #8

Sure. I agree that (morally) the EU shouldn't have bailed out Greece. Greece cooked its books and Greek debt holders at the time of the bail out were suffering the consequences of lending to a fiscally irresponsible state. That being said, the world was uncertain as to how much economic damage had yet to be done, and by shoring up Greece it assuaged investor confidence across the western world. Personally I think tha…

> The current debt to GDP of Greece is 175%.

The GDP is not exactly a good economic indicator because in its expenditure-based determination it includes government spending which can be increased by increasing the debt.

Add to that the EU habit of making up numbers for the output of black markets like drug traffic and prostitution and adding it to the GDP and you'll see why it's useless when trying to decide the solvency of a state.

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

#26

Post by arethuza »

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…

"to eat the losses"

We already had to eat the losses of our own banks - look at the epic bail-out of RBS here in the UK.

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

#27

Post by cromwellian »

shit_parade wrote: post #18

>So, let me be frank: Greece's debt is currently unsustainable and will never be serviced, especially while Greece is being subjected to continuous fiscal waterboarding. Despite the rhetoric this is the problem of not just Greece but many other developed governments, notably Japan. Central banks have been goosing the time value of money in an effort to spur 'growth' because if an entity can become richer faster than…

I don't think you can compare Japan and Greece. Japan can afford to service their debt (for the forseeable future). The problem with Japan is long term demographics, not an economy unable to service debt.

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

#28

Post by youngtaff »

The thing that seems to be often missed about the 'Greek bailout'is it wasn't about bailing out Greece, it was more about bailing out the German bankers who'd lent Greece more money than they should have.

The Greek people were shafted by the EU, IMF etc. because they didn't want to see the German bankers take the pain.

We see a similar problem with the current round of Quantitive Easing that the ECB are undertaking - they're giving the money to the bankers in the hope they'll lend it to others.

Instead they should be giving it to people, so they can save, spend or pay off debt as they wish - it'll all end up in the banking system anyway but will actually do some benefit first.

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

#29

Post by bagosm »

tobias3 wrote: post #19
bagosm wrote: post #3

What isn't addressed in this letter and most people don't realize is that the Greek debt as an absolute number isn't that big. The real problem is that Greece needs more money to continue operation than it produces, and this fact hasn't changed nor will in the near future. Effectively this makes Greece a black hole for incoming money where incoming money have no actual benefit for anyone other than just keep a near-c…

Actually greece has a primary budget surplus, so at this point they are paying back the "loans", the problem is that they are miserable while doing so. If people are unemployed you are squandering resources.

That's actually not true, you are referring to a very bad "cooking" that Samaras presented to Merkel at the fall of '14 which was proved to be too stupid to talk about ever again...

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

#30

Post by dandare »

tobias3 wrote: post #19
bagosm wrote: post #3

What isn't addressed in this letter and most people don't realize is that the Greek debt as an absolute number isn't that big. The real problem is that Greece needs more money to continue operation than it produces, and this fact hasn't changed nor will in the near future. Effectively this makes Greece a black hole for incoming money where incoming money have no actual benefit for anyone other than just keep a near-c…

Actually greece has a primary budget surplus, so at this point they are paying back the "loans", the problem is that they are miserable while doing so. If people are unemployed you are squandering resources.

While being miserable they are better of than let's say Slovaks who paid 660 mil Euro to bail out Greece. Think about it, they are not really living in poverty, they just lost the luxury standard they were used to.
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