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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

#61

Post by jacquesm »

teamhappy wrote: post #59

Most of you, dear Handesblatt readers, will have formed a preconception of what this article is about before you actually read it. [...] Prejudice was never a good guide, [...] How does he not hear himself? Also, "Handelsblatt" is missing a letter. Anyway ... I reject the premise of his letter. He seems to think the purpose of the money was to help the greek people, and offers a more productive way of doing so. That'…

> That's all fine, but I'm pretty sure the sole purpose of the money was to save the Euro.

It actually hurt the Euro. What it did do is save/prop up some very large French and German banks. Nothing like gambling with other people's money to see if you can come out ahead and ask for a hand-out if your plan fails.

http://www.bloomberg.com/news/articles/2011-06-05/german-ban...

The cynic in me says that no single politician that supported the bail out ever expected that money to be paid back. Greece would have to completely change its culture in order to be able to pay those loans back.

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

#62

Post by quonn »

jellicle wrote: post #55
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.

It's economics as morality play: http://krugman.blogs.nytimes.com/2010/09/28/economics-is-not...

Exactly. It's about controlling the politics of Greece, because the EU/Germany don't trust them to change and use this to put pressure on Spain and Italy. Tsipras hinted at this fear himself ("returning to the bad old ways").

Still, the price being payed for this by Greece is too high. There has to be a better way. For example: Better contracts, better checks, and active support by investing in parts of Europe that are struggling. Or by creating a Fiscal Union, effectively admitting that permanent transfers are needed. This would be more honest, but German politicians are too afraid that this will be unpopular with voters.

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

#63

Post by jacquesm »

TheOtherHobbes wrote: post #47
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…

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.

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

#64

Post by pvaldes »

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…

> only 3 possible bad outcomes

4. All south European people stop buying german products until the end of the actual bullying.

This is a no-no win for all.

The fact that the german people are not the same as the german government can not be ignored. Germans are suffering also this trap, carefully placed by a few. People at the South were increasedly thinging that a percentage of the debt is simply faked by banksters and not our responsability at all.

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

#65

Post by tomp »

teamhappy wrote: post #59

Most of you, dear Handesblatt readers, will have formed a preconception of what this article is about before you actually read it. [...] Prejudice was never a good guide, [...] How does he not hear himself? Also, "Handelsblatt" is missing a letter. Anyway ... I reject the premise of his letter. He seems to think the purpose of the money was to help the greek people, and offers a more productive way of doing so. That'…

> 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://news.ycombinator.com/item?id=8954377).

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).

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

#66

Post by arca_vorago »

Here is what I want to know. What role does the Greek central bank play? What is the fractional reserve rate in Greece? What is the interest rate set by the central bank? How is the money generated in the first place and what are the return rates and restrictions on that method (eg: in US it's treasury bonds)?

I'm increasingly convinced that central banks operate only marginally on the interest of the country they serve, enough so they don't ruin everything, but instead are primarily (and counter to what many economists will say) working for their own profit. Keep in mind that profit is actually usually in the form of political and economic power, but not money directly. Of course I'm coming from the American perspective where I think the Federal Reserve Act was passed on suspicious circumstances by suspicious men for suspicious reasons and that congress should stick to the constitution and control coin itself and not allow some outside potentially foreign entity to control our money system, but hey, every economist I know just says trust the Fed so they must be right.

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

#67

Post by john_b »

guelo wrote: post #50
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…

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 been just as painful, but in different ways. Greece as a country decided it wanted to stay in the Eurozone, thus picking its poison.

Comments like this remind me of people like Cristina Fernandez of Argentina, obsessed about the pain of their economic situation to the extent that awareness of how they got there in the first place is lost.

Greece got itself into a very deep shithole with only two main ways out. People look at the hardship of the current path out and see that it's obviously painful, then make the classic fallacy of the-grass-is-greener-on-the-other-side.

[1] http://www.independent.co.uk/news/world/europe/greece-most-c...

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

#68

Post by dpark »

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.

Forgiven debt is not "paid by someone else". It's a write-off by the creditor. Creditors would likely not write off a bunch of debt and then lend Greece more money.

Now, if the bailout actually paid off the creditors and Greece now only owes money to, e.g., Germany (the IMF, etc), then sure, the original creditors might extend new loans to Greece if Germany forgives the Greek debt. But then, that could happen anyway, because the bailout already happened.

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

#69

Post by hipsterrific »

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…

The austerity measures was the only rational thing that Greece did and even then they complained.

There's really no out for Greece on this one: their economy seems to be dependent on tourism, they have little to no manufacturing, probably little exports, and imports many of their goods. Greece's economy was never stable to begin with and I do think that they ought to exit the Euro not for Greece's sake but for the Euro's sake.

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

#70

Post by zo1 »

Spearchucker wrote: post #38
arethuza wrote: post #26

Earlier quoted context omitted.

"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.

UK.gov will turn a profit on RBS. RBS is not a loss.

Getting the government to bail out your failing business? Sounds like a big win for the business.

*Note. I don't know the details of the RBS issue in the UK. Just commenting on a simple interpretation.

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