Though the crisis is being presented as an economic one -- with breathless financial commentators following every move of the bond markets, as if it were somehow a living being -- it is nothing of the sort. It is political through and through.
Had the Greeks accepted the sort of deal the Irish accepted -- where the government buys the private sector's bad assets, i.e. the banks, through nationalisation, and sells off the public sector's good assets through privatisation -- there would be no Greek financial crisis.
Frankly, I don't find myself all torn up the Greeks don't feel like socializing the loses of the idiot private sector and then taking austerity straight in the ass for the privilege.
The article agrees with you, if you read a little further:
That would have offered neither genuine economic improvement -- it would simply have plunged the country into an austerity-driven recession deeper than that which it is currently experiencing -- nor liberation; the opposite in fact. The country would have been laced into the logic of financial capital for good, its politics traded upwards to the empyrean realm of EU and IMF administrators by common consent.
Jephery on
}
"Orkses never lose a battle. If we win we win, if we die we die fightin so it don't count. If we runs for it we don't die neither, cos we can come back for annuver go, see!".
If it were "just" bad past debts and loans, this would not be a problem: borrow from the stabilization fund and pay it back verrrry slowly. Governments can loan to and fro over decades.
The problem is the Greek structural deficit - the continual increase in the debt. So the imminent threat is not socialization of private losses; the imminent threat is state insolvency from not taxing enough to credibly pledge to cover future spending (and so bond holders abandon now rather than wait for future bankruptcy). So this bit:
Had the Greeks accepted the sort of deal the Irish accepted -- where the government buys the private sector's bad assets, i.e. the banks, through nationalisation, and sells off the public sector's good assets through privatisation -- there would be no Greek financial crisis.
is basically nonsense. As noted, Ireland basically needed a lender of last resort. Greece needs funds on a permanent basis. OH NO, WE DON'T TAX GREEKS ENOUGH TO PAY OTHER GREEKS! clearly it's evil global financial capitalism. Man, what.
Yeah, the Greeks obviously have serious structural problems. I'm more annoyed for the Irish public, who seem to be more stuck eating a bag of cock they had little hand in filling. But I'm only tangentially aware of the situation there.
Well the main problem seems to be that Greece never should have joined the Euro in the first place. Being able to inflate their own currency would make this a lot easier.
Is the EU taking over Greece's tax collection agency not an option? Send in a team of german auditors to modernise the system and run it for a couple of years, whilst levelling heavy fines on anyone who is found guilty of cheating on last years returns.
I really think you need to learn the difference between "crime" and "taboo."
Fugitive slave act? Really? Thats your example? I suggest you read the history of said act and learn what happened when a unreceptive norther public did in response.
The difference between "crime" and "taboo" are slight, since culture usually makes taboos into crimes and vice versa. The easiest definition is that Crimes are formaly prohibited and Taboos are informaly prohibited.
Changing culture can make a formal law/crime into something thats widely ignored. See: Sodomy laws.
Kipling217 on
The sky was full of stars, every star an exploding ship. One of ours.
Is the EU taking over Greece's tax collection agency not an option? Send in a team of german auditors to modernise the system and run it for a couple of years, whilst levelling heavy fines on anyone who is found guilty of cheating on last years returns.
Not a bad idea, in theory. In reality..... Suicide.
Kipling217 on
The sky was full of stars, every star an exploding ship. One of ours.
I was kind of kidding with the German Auditors comment, but I've had thought the EU should be able to hand down some pretty heavy oversight and guidance over their tax collecting departments - holding votes or appointments hostage until something resembling a system is in place.
Rundle: shepherds, portents and Europe face-to-face in Athens
Guy Rundle writes:
Furthermore the Left's slogan -- "we won't pay for their crisis" -- has started to take hold. Narratives of fecklessness and a degree of guilt about failure to reform, appear to have been superseded by an understanding that the financial crisis is an auto-generated one.
It is not deficit spending, per se, that has pushed Greece towards bankruptcy, but the price of borrowing, escalated steadily by talk of Greece's possible bankruptcy. Now most people understand that they are being asked to sell off real assets and cut down real lives, to service imaginary entities.
I hate this bullshit. As bad as US market fetishism is, the idea that they are imaginary is such pandering crap. The reason borrow cost keep going up is that everyone finally knows Greece has been lying its ass off, and has no resolve to fix the problems.
Would you loan Greece a million dollars for 3%(current rate on a 10 year T-bill)? A country that can't effectively collect taxes, and has systematically lied about its finances for decades, and has a debt to gdp ratio of 1.5:1, a massive public sector, and almost no appreciable exports?
Because If yes, I know a few guys working McJobs for $8 an hour with $30,000 in student loan debt, who buy everything with credit cards they can't pay off monthly, that could really use an extra few grand and are totally good for it.
If Greece wants to stop servicing imaginary entities, then go back to the fucking Drachma, and try running their government with no outside loans from those imaginary entities.
Is the EU taking over Greece's tax collection agency not an option? Send in a team of german auditors to modernise the system and run it for a couple of years, whilst levelling heavy fines on anyone who is found guilty of cheating on last years returns.
Between politics and nationalism that will of course never happen. Yet in a way, it's exactly the needed cure. It would also make for a great Odd Couple comedy as the German auditors try to come to terms with the Greek attitude vis-a-vis taxes, and vice versa.
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mrt144King of the NumbernamesRegistered Userregular
The notice about how 15,700 swimming pools out of 16,000 in a rich suburb were unlawful/undeclared/un-taxed also gave me a strong feeling of
TAX EVASION IS OKAY WHEN EVERYONE DOES IT
It's not just ok, it's basically required by the system.
Wanna get some construction done on your house? You are gonna need to pay under the table. Try and do it legit and the company will just jack up it's rates so you have to pay all the extra fees and taxes inherent in doing it legitimately plus an extra charge they tack on just for making them do it legit.
They make it a pain in the ass for you not to evade taxes.
Lol, how is this an excuse? Yes, doing it legally costs more. "Because it's cheaper" is not a viable reason to steal. If you can't afford it legitimately then don't get it.
Being ok with bribes, fraud and various forms of theft is not a "culture", it's a failure of enforcement. If people actually got caught and fined/imprisoned for this, it would stop. Atm there's zero risk and high reward, so people do it.
Why though? Seriously, ask yourself why you would pay taxes if you could get away with tax fraud? Why would expect people on an individual level to actively work against their own self-interest?
Because that's basically the issue here. Doing business above the table is actively discouraged and since there's little to no enforcement, there's no incentive to do business above the table. What sense (business or otherwise) does it make to pay like 10% extra (number pulled out of ass) on your home renovation project when you don't have to?
And that's even assuming they'll quote you a (ridiculously inflated) price for above the table transactions. Many apparently just won't, or so the couple of greeks I know tell me. It's not worth the hassle to them.
It's in my self interest to have a government that won't go bankrupt.
The notice about how 15,700 swimming pools out of 16,000 in a rich suburb were unlawful/undeclared/un-taxed also gave me a strong feeling of
TAX EVASION IS OKAY WHEN EVERYONE DOES IT
It's not just ok, it's basically required by the system.
Wanna get some construction done on your house? You are gonna need to pay under the table. Try and do it legit and the company will just jack up it's rates so you have to pay all the extra fees and taxes inherent in doing it legitimately plus an extra charge they tack on just for making them do it legit.
They make it a pain in the ass for you not to evade taxes.
Lol, how is this an excuse? Yes, doing it legally costs more. "Because it's cheaper" is not a viable reason to steal. If you can't afford it legitimately then don't get it.
Being ok with bribes, fraud and various forms of theft is not a "culture", it's a failure of enforcement. If people actually got caught and fined/imprisoned for this, it would stop. Atm there's zero risk and high reward, so people do it.
Why though? Seriously, ask yourself why you would pay taxes if you could get away with tax fraud? Why would expect people on an individual level to actively work against their own self-interest?
Because that's basically the issue here. Doing business above the table is actively discouraged and since there's little to no enforcement, there's no incentive to do business above the table. What sense (business or otherwise) does it make to pay like 10% extra (number pulled out of ass) on your home renovation project when you don't have to?
And that's even assuming they'll quote you a (ridiculously inflated) price for above the table transactions. Many apparently just won't, or so the couple of greeks I know tell me. It's not worth the hassle to them.
It's in my self interest to have a government that won't go bankrupt.
As awesome as it would be if it weren't the case, I don't think many humans think that far ahead or on so broad a scope.
The notice about how 15,700 swimming pools out of 16,000 in a rich suburb were unlawful/undeclared/un-taxed also gave me a strong feeling of
TAX EVASION IS OKAY WHEN EVERYONE DOES IT
It's not just ok, it's basically required by the system.
Wanna get some construction done on your house? You are gonna need to pay under the table. Try and do it legit and the company will just jack up it's rates so you have to pay all the extra fees and taxes inherent in doing it legitimately plus an extra charge they tack on just for making them do it legit.
They make it a pain in the ass for you not to evade taxes.
Lol, how is this an excuse? Yes, doing it legally costs more. "Because it's cheaper" is not a viable reason to steal. If you can't afford it legitimately then don't get it.
Being ok with bribes, fraud and various forms of theft is not a "culture", it's a failure of enforcement. If people actually got caught and fined/imprisoned for this, it would stop. Atm there's zero risk and high reward, so people do it.
Why though? Seriously, ask yourself why you would pay taxes if you could get away with tax fraud? Why would expect people on an individual level to actively work against their own self-interest?
Because that's basically the issue here. Doing business above the table is actively discouraged and since there's little to no enforcement, there's no incentive to do business above the table. What sense (business or otherwise) does it make to pay like 10% extra (number pulled out of ass) on your home renovation project when you don't have to?
And that's even assuming they'll quote you a (ridiculously inflated) price for above the table transactions. Many apparently just won't, or so the couple of greeks I know tell me. It's not worth the hassle to them.
It's in my self interest to have a government that won't go bankrupt.
Can you finance a government yourself?
Cause if not, you are just throwing your money away down a bottomless pit.
The notice about how 15,700 swimming pools out of 16,000 in a rich suburb were unlawful/undeclared/un-taxed also gave me a strong feeling of
TAX EVASION IS OKAY WHEN EVERYONE DOES IT
It's not just ok, it's basically required by the system.
Wanna get some construction done on your house? You are gonna need to pay under the table. Try and do it legit and the company will just jack up it's rates so you have to pay all the extra fees and taxes inherent in doing it legitimately plus an extra charge they tack on just for making them do it legit.
They make it a pain in the ass for you not to evade taxes.
Lol, how is this an excuse? Yes, doing it legally costs more. "Because it's cheaper" is not a viable reason to steal. If you can't afford it legitimately then don't get it.
Being ok with bribes, fraud and various forms of theft is not a "culture", it's a failure of enforcement. If people actually got caught and fined/imprisoned for this, it would stop. Atm there's zero risk and high reward, so people do it.
Why though? Seriously, ask yourself why you would pay taxes if you could get away with tax fraud? Why would expect people on an individual level to actively work against their own self-interest?
Because that's basically the issue here. Doing business above the table is actively discouraged and since there's little to no enforcement, there's no incentive to do business above the table. What sense (business or otherwise) does it make to pay like 10% extra (number pulled out of ass) on your home renovation project when you don't have to?
And that's even assuming they'll quote you a (ridiculously inflated) price for above the table transactions. Many apparently just won't, or so the couple of greeks I know tell me. It's not worth the hassle to them.
It's in my self interest to have a government that won't go bankrupt.
Can you finance a government yourself?
Cause if not, you are just throwing your money away down a bottomless pit.
Yeah, the Greeks obviously have serious structural problems. I'm more annoyed for the Irish public, who seem to be more stuck eating a bag of cock they had little hand in filling. But I'm only tangentially aware of the situation there.
The sequence of events that led to the banking system accumulating so much debt and then the bank guarantee has been the subject of several reports. However none of the inquiries were given the scope to name individuals so we just have vague references to government policy and regulation.
In a nut shell, the previous government decided to socialise ALL of the bank debt, then after implementing a series of austere budgets had to call in the IMF. Shortly afterwards the junior coalition partner walked away, the government collapsed and a new government was elected at the end of February this year.
However one of the conditions of the bailout agreement was that the banks kept getting bailed out or we wouldn't get our funding so the new government had to put €24bn into them shortly after taking office.
Basically the ECB are being asshats, they're terrified of allowing private investors having to bear their own losses (which is called "Capitalism" I believe) so we're being forced to pick up the tab.
Having said all that, even leaving aside the national debt, we still have a deficit of about €16bn per annum and serious competition issues in the economy. The construction industry became very large during the property bubble and its collapse has left hundreds of thousands of people on social welfare.
I'm trying to keep the faith in the new government for now but they've basically been landed in a straight jacket and most of the decisions that will shape Ireland's future will be taken far beyond it's borders.
One way I see Ireland working out is the ECB going "you shouldn't have pledged to protect all those deposits, you're not big enough to be lender of last resort" and Ireland going "yeah, we messed up. So uh can we get you who are big enough to be lender of last resort to lend to us?" and that particular issue is postponed for a bit.
There's still the problem of insufficient inflation in the Euro periphery but at least the financial/state solvency issue can be made to go away.
Much of the caution that Ireland took toward altering its prevailing law was due to not clearly understanding who the banks it nationalized owed money to; defaulting on your own domestic rich and defaulting on foreigners (who might well be a foreign sovereign wealth fund) are quite different things. The latter can be dangerous. It is difficult to separate the lesson of "well you shouldn't have put your deposits in this Irish bank" from "well you shouldn't have invested in Ireland".
The VF piece is perhaps excessively critical in that regard.
In hindsight it is easy to say that the nationalization and full guarantee was a bad idea, of course.
There's still the problem of insufficient inflation in the Euro periphery but at least the financial/state solvency issue can be made to go away.
I don't understand that perspective. From where I'm sitting, for Greece to correct its external imbalances (i.e. the country consumes more than it produces) it needs devaluation. Since an external devaluation is off the table (fixed exchange rate) an internal devaluation is the only possible path. That means wage and price deflation until consumption has dropped and Greece has again become competitive enough.
Of course devaluation through deflation is... unpleasant. But how else can you rebalance Greece's economy?
Real consumption needs to fall and real production must rise, you mean, surely? Nominal grease makes all sorts of rigidities go away. Real wage and price decline is easier to achieve in an inflationary environment.
I mean real. So do you mean the ECB should run enough inflation Euro-wide to allow Greece real wage deflation while maintaining nominal wage freezes? Considering the size of adjustment needed, I don't see that as anywhere near acceptable to the major European economies.
In other words, I see Greece needing to reduce real wages by having actual nominal wages fall. By double digit percentages.
Well, isn't the basic problem that the "outer" Euro countries could use some inflation to make the pain more bearable but this wouldn't be as nice for the countries like Germany and France, and since those guys control the reigns, nothing is happening.
Well, no. Inflation, certainly, but not while maintaining nominal wage freezes - the goal being to make adjustment easier instead of unneeded, surely?
There are only three routes out here - internal adjustment with the costs papered over via fiscal transfers, Greek labor movement (out of Greece, into the major economies), and Euro area inflation at a level more than what the Germans would prefer; while relying wholly on the third route would indeed be unrealistic, so would relying wholly on the first.
So Germany objects to inflation; does it therefore welcome a few couple million migrants from Greece? I doubt so. Or permanently subsidizing the Greek state via some federal entity, as rich states do for poor states in the federation across the pond?
The only real (and indeed the likely) answer is some inflation, some migration, and some bailing-out, I would say.
Well, no. Inflation, certainly, but not while maintaining nominal wage freezes - the goal being to make adjustment easier instead of unneeded, surely?
There are only three routes out here - internal adjustment with the costs papered over via fiscal transfers, Greek labor movement (out of Greece, into the major economies), and Euro area inflation at a level more than what the Germans would prefer; while relying wholly on the third route would indeed be unrealistic, so would relying wholly on the first.
So Germany objects to inflation; does it therefore welcome a few couple million migrants from Greece? I doubt so. Or permanently subsidizing the Greek state via some federal entity, as rich states do for poor states in the federation across the pond?
The only real (and indeed the likely) answer is some inflation, some migration, and some bailing-out, I would say.
Wasn't the Eurozone supposed to encourage labour mobility anyway? And it hasn't worked, pretty much at all?
[...] Considering the size of adjustment needed, I don't see that as anywhere near acceptable to the major European economies.
In other words, I see Greece needing to reduce real wages by having actual nominal wages fall. By double digit percentages.
(1) But why would Greece find that acceptable? and, (2) if nominal adjustment were that easy, recessions would be much less of a problem than they are. You can't claim to solve a problem by assuming away the binding constraint.
German chancellor Angela Merkel today rejected pressure from some German lawmakers to hit private holders of Greek bonds harder, saying that forcing them to take losses could unleash contagion in Europe and beyond that was hard to control.
She told members of the Bundestag's European affairs committee that imposing a so-called "haircut" on private Greek creditors would push countries under the EFSF (rescue mechanism) that are currently able to solve their problems on their own.
"Then we will have a situation in which other countries, but not Germany, are unable to recapitalise their banks without becoming targets of the markets, and we spark contagion in Europe that I don't want to be responsible for."
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mrt144King of the NumbernamesRegistered Userregular
The notice about how 15,700 swimming pools out of 16,000 in a rich suburb were unlawful/undeclared/un-taxed also gave me a strong feeling of
TAX EVASION IS OKAY WHEN EVERYONE DOES IT
It's not just ok, it's basically required by the system.
Wanna get some construction done on your house? You are gonna need to pay under the table. Try and do it legit and the company will just jack up it's rates so you have to pay all the extra fees and taxes inherent in doing it legitimately plus an extra charge they tack on just for making them do it legit.
They make it a pain in the ass for you not to evade taxes.
Lol, how is this an excuse? Yes, doing it legally costs more. "Because it's cheaper" is not a viable reason to steal. If you can't afford it legitimately then don't get it.
Being ok with bribes, fraud and various forms of theft is not a "culture", it's a failure of enforcement. If people actually got caught and fined/imprisoned for this, it would stop. Atm there's zero risk and high reward, so people do it.
Why though? Seriously, ask yourself why you would pay taxes if you could get away with tax fraud? Why would expect people on an individual level to actively work against their own self-interest?
Because that's basically the issue here. Doing business above the table is actively discouraged and since there's little to no enforcement, there's no incentive to do business above the table. What sense (business or otherwise) does it make to pay like 10% extra (number pulled out of ass) on your home renovation project when you don't have to?
And that's even assuming they'll quote you a (ridiculously inflated) price for above the table transactions. Many apparently just won't, or so the couple of greeks I know tell me. It's not worth the hassle to them.
It's in my self interest to have a government that won't go bankrupt.
Can you finance a government yourself?
Cause if not, you are just throwing your money away down a bottomless pit.
I don't look at it that way. There is a value in knowing that you're trying to provide tax revenue to a government that you have a voice in. Taxes are the price I pay for smug self satisfaction of being a good citizen.
[...] Considering the size of adjustment needed, I don't see that as anywhere near acceptable to the major European economies.
In other words, I see Greece needing to reduce real wages by having actual nominal wages fall. By double digit percentages.
(1) But why would Greece find that acceptable? and, (2) if nominal adjustment were that easy, recessions would be much less of a problem than they are. You can't claim to solve a problem by assuming away the binding constraint.
Let me be clear, it would be very costly and unpopular in Greece. I just don't see an alternative. But I also agree with you that it has to be a mix of bail outs and internal devaluation.
I also see the ECB's legal requirement of targeting 2% inflation as much more binding. I don't see them as having the degree of choice and flexibility that the Fed does.
Well, no. Inflation, certainly, but not while maintaining nominal wage freezes - the goal being to make adjustment easier instead of unneeded, surely?
There are only three routes out here - internal adjustment with the costs papered over via fiscal transfers, Greek labor movement (out of Greece, into the major economies), and Euro area inflation at a level more than what the Germans would prefer; while relying wholly on the third route would indeed be unrealistic, so would relying wholly on the first.
So Germany objects to inflation; does it therefore welcome a few couple million migrants from Greece? I doubt so. Or permanently subsidizing the Greek state via some federal entity, as rich states do for poor states in the federation across the pond?
The only real (and indeed the likely) answer is some inflation, some migration, and some bailing-out, I would say.
Wasn't the Eurozone supposed to encourage labour mobility anyway? And it hasn't worked, pretty much at all?
Its worked rather nicely in some sectors, and in some country->country routes, and not at all in others. Its been a benefit, but its hardly what's needed in a true common market.
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Magus`The fun has been DOUBLED!Registered Userregular
edited June 2011
Is it feasible just to abandon Greece for the EU? Just like, cut ties until they get their shit together?
HonkHonk is this poster.Registered User, __BANNED USERSregular
edited June 2011
I don't know, but seeing as how they apparently sort of bluffed their way into the monetary union in the first place it would sort of be an ethically okay suit yourself move.
Honk on
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Tiger BurningDig if you will, the pictureRegistered User, SolidSaints Tuberegular
Is it feasible just to abandon Greece for the EU? Just like, cut ties until they get their shit together?
Does Greece have shit we need?
A fear there is that it would have a domino effect. I.e. - if they're willing to kick Greece out, what about Portugal, or Ireland? Spain? All of a sudden every EU economy (minus Germany) looks like a bigger risk to investors, if the EU shows that it's willing to kick underperforming economies out.
What is amazing is that the greeks went from a 15% premium on their debt with no personal loans to having a cushy 5% loan and freely available credit when they joined the EU. Whats even more amazing is that there weren't huge opportunities for arbitrage by corporations during the boom. I mean, if you aren't paying income tax as a company, why the hell aren't you in Greee manufacturing widgets. I guess the labor costs still made it too terrible? a 35% savings off the top is still pretty sweet. Why didn't private business run to Greece?
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The article agrees with you, if you read a little further:
"Orkses never lose a battle. If we win we win, if we die we die fightin so it don't count. If we runs for it we don't die neither, cos we can come back for annuver go, see!".
The problem is the Greek structural deficit - the continual increase in the debt. So the imminent threat is not socialization of private losses; the imminent threat is state insolvency from not taxing enough to credibly pledge to cover future spending (and so bond holders abandon now rather than wait for future bankruptcy). So this bit:
is basically nonsense. As noted, Ireland basically needed a lender of last resort. Greece needs funds on a permanent basis. OH NO, WE DON'T TAX GREEKS ENOUGH TO PAY OTHER GREEKS! clearly it's evil global financial capitalism. Man, what.
(do remember that Germany invaded Greece once... a couple years ago I did not expect that this would be still a thing, but apparently it is)
Fugitive slave act? Really? Thats your example? I suggest you read the history of said act and learn what happened when a unreceptive norther public did in response.
The difference between "crime" and "taboo" are slight, since culture usually makes taboos into crimes and vice versa. The easiest definition is that Crimes are formaly prohibited and Taboos are informaly prohibited.
Changing culture can make a formal law/crime into something thats widely ignored. See: Sodomy laws.
Not a bad idea, in theory. In reality..... Suicide.
Is selling off US land to pay off its debt not such a bad idea? Or how about when we default? Because it amounts to the same thing.
I hate this bullshit. As bad as US market fetishism is, the idea that they are imaginary is such pandering crap. The reason borrow cost keep going up is that everyone finally knows Greece has been lying its ass off, and has no resolve to fix the problems.
Would you loan Greece a million dollars for 3%(current rate on a 10 year T-bill)? A country that can't effectively collect taxes, and has systematically lied about its finances for decades, and has a debt to gdp ratio of 1.5:1, a massive public sector, and almost no appreciable exports?
Because If yes, I know a few guys working McJobs for $8 an hour with $30,000 in student loan debt, who buy everything with credit cards they can't pay off monthly, that could really use an extra few grand and are totally good for it.
If Greece wants to stop servicing imaginary entities, then go back to the fucking Drachma, and try running their government with no outside loans from those imaginary entities.
Between politics and nationalism that will of course never happen. Yet in a way, it's exactly the needed cure. It would also make for a great Odd Couple comedy as the German auditors try to come to terms with the Greek attitude vis-a-vis taxes, and vice versa.
It's in my self interest to have a government that won't go bankrupt.
As awesome as it would be if it weren't the case, I don't think many humans think that far ahead or on so broad a scope.
Can you finance a government yourself?
Cause if not, you are just throwing your money away down a bottomless pit.
This is textbook tragedy of the commons.
Now imagine if there were no consequences to doing that for your income/property tax.
The sequence of events that led to the banking system accumulating so much debt and then the bank guarantee has been the subject of several reports. However none of the inquiries were given the scope to name individuals so we just have vague references to government policy and regulation.
In a nut shell, the previous government decided to socialise ALL of the bank debt, then after implementing a series of austere budgets had to call in the IMF. Shortly afterwards the junior coalition partner walked away, the government collapsed and a new government was elected at the end of February this year.
However one of the conditions of the bailout agreement was that the banks kept getting bailed out or we wouldn't get our funding so the new government had to put €24bn into them shortly after taking office.
Basically the ECB are being asshats, they're terrified of allowing private investors having to bear their own losses (which is called "Capitalism" I believe) so we're being forced to pick up the tab.
Having said all that, even leaving aside the national debt, we still have a deficit of about €16bn per annum and serious competition issues in the economy. The construction industry became very large during the property bubble and its collapse has left hundreds of thousands of people on social welfare.
I'm trying to keep the faith in the new government for now but they've basically been landed in a straight jacket and most of the decisions that will shape Ireland's future will be taken far beyond it's borders.
There's still the problem of insufficient inflation in the Euro periphery but at least the financial/state solvency issue can be made to go away.
The VF piece is perhaps excessively critical in that regard.
In hindsight it is easy to say that the nationalization and full guarantee was a bad idea, of course.
I don't understand that perspective. From where I'm sitting, for Greece to correct its external imbalances (i.e. the country consumes more than it produces) it needs devaluation. Since an external devaluation is off the table (fixed exchange rate) an internal devaluation is the only possible path. That means wage and price deflation until consumption has dropped and Greece has again become competitive enough.
Of course devaluation through deflation is... unpleasant. But how else can you rebalance Greece's economy?
In other words, I see Greece needing to reduce real wages by having actual nominal wages fall. By double digit percentages.
There are only three routes out here - internal adjustment with the costs papered over via fiscal transfers, Greek labor movement (out of Greece, into the major economies), and Euro area inflation at a level more than what the Germans would prefer; while relying wholly on the third route would indeed be unrealistic, so would relying wholly on the first.
So Germany objects to inflation; does it therefore welcome a few couple million migrants from Greece? I doubt so. Or permanently subsidizing the Greek state via some federal entity, as rich states do for poor states in the federation across the pond?
The only real (and indeed the likely) answer is some inflation, some migration, and some bailing-out, I would say.
Wasn't the Eurozone supposed to encourage labour mobility anyway? And it hasn't worked, pretty much at all?
(1) But why would Greece find that acceptable? and, (2) if nominal adjustment were that easy, recessions would be much less of a problem than they are. You can't claim to solve a problem by assuming away the binding constraint.
I don't look at it that way. There is a value in knowing that you're trying to provide tax revenue to a government that you have a voice in. Taxes are the price I pay for smug self satisfaction of being a good citizen.
Let me be clear, it would be very costly and unpopular in Greece. I just don't see an alternative. But I also agree with you that it has to be a mix of bail outs and internal devaluation.
I also see the ECB's legal requirement of targeting 2% inflation as much more binding. I don't see them as having the degree of choice and flexibility that the Fed does.
Its worked rather nicely in some sectors, and in some country->country routes, and not at all in others. Its been a benefit, but its hardly what's needed in a true common market.
Does Greece have shit we need?
Steam Profile | Signature art by Alexandra 'Lexxy' Douglass
A fear there is that it would have a domino effect. I.e. - if they're willing to kick Greece out, what about Portugal, or Ireland? Spain? All of a sudden every EU economy (minus Germany) looks like a bigger risk to investors, if the EU shows that it's willing to kick underperforming economies out.