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It ain't over yet! [Greece and EU]
Yogo
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I tried to find the previous topic on the Greece discussion, but was unable to find any pertaining to the general state. With that said, the spoiler below contains the lastest developments concerning the situation in EU and Greece.
Last weeks joint agreement between the various powers within the EU seemed to have fixed the crisis for good and the various stock markets rose as they gained confidence over the EU plan. However, as quoted in the above, Greece's PM decided to put the EU plan to a public vote. This sent the markets tumbling down again across the globe and lead to an emergency meeting between Merkel and Sarkozy.
What is of interest to me is the meeting between Merkel and Sarzoky and their "immediate implementation" of the EU plan. Are they trying to force Greece to accept the plans before they can manage to hold a referendum in order to save themselves (and their banks)? Or is it more talk of moving forward faster?
It is pretty evident that should the Greeks vote no to the EU plan, they will default almost immediately and send waves upon waves of economic devastation through the global markets. So it is understandable that France and Germany wants to avoid this scenario (and most likely the rest of the EU).
The future doesn't look as bright as it did last week.
http://business.blogs.cnn.com/2011/11/01/greece-plays-chicken-with-its-people-and-europe/?hpt=hp_c1
London (CNN) – The Greek government’s call for a referendum on its aid package is effectively a high-risk game of chicken with its people - and the eurozone peers who have kept the country afloat, analysts say.
Last night’s surprise move by Greek Prime Minister George Papandreou to seek the people’s voice on the unpopular rescue package plunged European markets deep in the red on open Tuesday, as they scrambled to understand the sudden lurch away from last week’s acceptance of the triple-pronged euro crisis response plan.
The European rescue plan - despite a lack of detail - was the substantive response markets had been seeking for months. But Papandreou’s move has thrown the plans into disarray.
Eurozone crisis fears are again sweeping the world - but this time, with more urgency than ever.
Greece, the country which triggered the crisis with its original bailout in May last year, has until now essentially played ball with the Troika - made up of the European Union, International Monetary Fund and European Central Bank - as it implemented harsh austerity measures in return for rescue funds. Now, it’s gone off track.
Stephen Gallo, head of market analysis at Schneider Foreign Exchange, calls Papandreou’s move “like shock therapy. This is a massive game of chicken. Greece has bargaining chips …if Greece leaves the euro that is it.”
As Greece seeks to assert some sovereignty from the Troika, Gallo notes, it risks bringing down the entire European project.
The move faces down European leaders who have already risked their political futures to keep Greece afloat, and the project alive. Earlier today German Chancellor Angela Merkel and French President Nicolas Sarkozy leader held an emergency call on the issue, after which they declared the immediate implementation of Europe’s crisis plan. These, the subsequent communiqué said, “are necessary now more than ever.”
A referendum would also force the Greek people - including those who have been tearing up the streets with their protests against the austerity measures - to face their harsh reality, Elisabeth Afseth, of Evolution Securities, says. “It’s easy to say ‘we don’t like [the austerity measures]’ but they don’t have an alternative,” Afseth notes. But Papandreou’s move, she adds, is “a very, very risky strategy.”
Should the rescue package be voted down via a referendum, the Greek people risk the unknown but almost certainly economically devastating consequences of messy default and potential exit from the eurozone. With polls showing 60% of Greeks opposed to the debt deal - but 70% of Greeks wanting to stay in the euro - the test will be which of the worst options will be picked.
But first, Papandreou must win a confidence vote in the government. While this morning he could have considered this a given, his position has became more fragile by the hour.
Lawmaker Milena Apostolaki has defected, leaving him with a majority of only two in Parliament. Greece's opposition leader Antonis Samaras has called for snap elections.
If the confidence vote fails, an election will likely follow and the referendum shelved, according to Royal Bank of Scotland analysts.
If it doesn’t, a referendum could take place early next year, with volatility likely to rule the markets as politicians’ comments are scrutinized as to what could follow a "no" vote, they add.
Last weeks joint agreement between the various powers within the EU seemed to have fixed the crisis for good and the various stock markets rose as they gained confidence over the EU plan. However, as quoted in the above, Greece's PM decided to put the EU plan to a public vote. This sent the markets tumbling down again across the globe and lead to an emergency meeting between Merkel and Sarkozy.
What is of interest to me is the meeting between Merkel and Sarzoky and their "immediate implementation" of the EU plan. Are they trying to force Greece to accept the plans before they can manage to hold a referendum in order to save themselves (and their banks)? Or is it more talk of moving forward faster?
It is pretty evident that should the Greeks vote no to the EU plan, they will default almost immediately and send waves upon waves of economic devastation through the global markets. So it is understandable that France and Germany wants to avoid this scenario (and most likely the rest of the EU).
The future doesn't look as bright as it did last week.
Yogo on
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I really thought those crazy kids had a chance.
* literally "pushers", engaged in activities of making ends meet in a planned economy by manipulating plan allocations, making up for shortage or nondelivery of supplies, and fiddling with insufficient funds. Equivalent to the Western "fixer"
and the gengars who are guiding me" -- W.S. Merwin
I applaud DevoutlyApathetic's summary of the situation.
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http://www.washingtonpost.com/blogs/ezra-klein/post/at-the-moment-we-could-be-hours-from-the-collapse-of-the-greek-government/2011/11/01/gIQAsKZzcM_blog.html
Sounds like there might be an election very soon. Maybe Papandreou is hoping that this election will strengthen his party's control over the government? Or just bolster his popular support among the people, by forcing them to vote yes on the referendum.
It's remarkable how often on-point this picture has been during political discussions in the last few years.
So the guy (who's a socialist, remember) has a crisis of conscience and decides to ask the people if they prefer to keep getting dicked over slowly by the EU or cut their losses. Holy shit, a leader in a democracy wishing to assess the will of the people.
Crazy!
Or "not trying to destroy his own country's economy".
The deals have been destroying the economy, though.
I agree that Greece needs to get it's tax code together, but a group of (largely, I assume) Americans saying this is rather laughable.
Seems like it would be important to know which side has the least to lose from just letting everything fall down and starting over.
The deal signed last week was only good in the sense that the French/German leaders finally agreed to give the Greek debt holders a haircut and organise a bailout fund. Neither of which was really adequate, the bailout fund needs to be unlimited.
The fundamental problems in the Eurozone are the prevailing idea that austerity will get them out of the mess, when in reality their just digging the hole even deeper and the complete failure of the ECB to actually implement any policies whatsoever. They've decided their only role is to stop inflation, rather than as a lender of last resort.
The Greek issue is really a sideshow for the main issue now, which is that Italian bonds are over 6%. This is going to collapse the Italian economy very quickly if something isn't done about it. I hope the new head of the ECB has bigger balls and is less of a moron than the outgoing head.
Greece needs to default now, so everyone can see exactly how exposed the banks in other countries are and end the speculation that's killing Italy and Spain.
And for all the economic moralists blaming the Greek "taxpayers", they were repeatedly lied to for decades that their welfare state was sustainable. Goldman Sachs helped the Greek government hide their ridiculous amounts of debt in order to make everything seem fine to both the Greek people and the other members of the Eurozone. Even if tomorrow everyone started paying their taxes in Greece, it would be nowhere near enough to get them out of the hole.
The previous policies weren't doing much to help, but that doesn't mean rejecting this new deal isn't also a terrible idea.
And there's no comparison between American and Greek taxation systems. America's isn't perfect, but Greece's is appaling on every level. You can't know anything about it if you think this comparison is anything but laughable.
It really isn't.
I wasn't comparing so much as saying we shouldn't be throwing stones. Our situation is also rather a shambles.
At a certain point, a person has to go back to the term sovereignty. Greece gets to decides what is best for Greece, and since Greece says it's a democracy, I find it funny that people are so up in arms about it.
Greece has been getting shit deal after condescending shit deal here. Greece's people have had enough, if all the fires are any judge. They are the people in charge of the destiny of their country, and it's up to them to voice their will in government.
The problem in Italy and Spain is that the ECB refuses to say it will keep them afloat. The ECB, in an incredibly insanely dangerous radical act of nuttery, is refusing to act like a central bank.
I don't see how a collapse in Greece will help that.
Please. Tax evasion is a way of life in Greece. That they managed to convince themselves this was sustainable is just another example of what's wrong there.
Tax payment anywhere else you go? Largely voluntary in the end. It isn't feasible to make sure everyone is paying their taxes.
It's human nature to be inherently self destructive. To search for paragons of this axiom, look no further than Greece.
The American system isn't perfect by far. But Greece's system is incredibly fucked. Even if someone waved a magic wand, and Greece had a perfect tax system, it would arguably fail, because not paying taxes is long held Greek tradition. It's systemic and pervasive in nearly every facet of their society and culture. The Greek government had to cook the books to even fit the country into the EU to begin with.
Frankly, they need to be jettisoned from the EU, and switch back to the Drachma.
Greeks rioting is nothing new. By this measure, they've "had enough" for decades now.
And Greece isn't totally sovereign what with not controlling their own monetary policy.
And no, the situation in America isn't in the same category of shambles as Greece.
It's very feasible to make sure everyone is paying their taxes. It's called P R I S O N.
You don't have to jail everyone, just enough to show people that maybe gambling 20 years in the joint over the taxbill isn't a winning bet in the end. Hell, they'd employ a shitload of auditors for the first few years of the crackdown, at any rate.
And if that's what Greece actually wants, then what's the problem?
Debtor's prison is a terrible fucking idea. Better to garnish their wages or seize assets as compensation.
Oh really?
http://en.wikipedia.org/wiki/Al_Capone
If you have a bullshit punishment for the offense, you're going to get bullshit cooperation. They need to fix their tax code and then enforce the shit out of it otherwise nothing will change on that front.
Nothing at all. They're going to get 50% debt reduction, and the ECB is going to eat a hefty financial loss. The only thing I can think of is that this should have happened a lot sooner.
No, it's not. It'd cost more money to verify everyone's taxes then you'd make in taxes.* Taxes work largely on a sort of pseudo honour system where the IRS or the like takes your word for it that you aren't completely misrepresenting anything.
They do pursue strategies to essentially scare you into paying though. Random audits going back years into your records and all that jazz.
It's alot like speeding. You don't catch them all, but you make them aware enough that enough people don't act too stupidly.
What Greeks have is a system where not only is it insanely corrupt, but there is an active long-nurtured culture of tax evasion that means they are in the shitter.
*Though the US isn't on that side of the hump yet. But there's a very definite hump.
Which is just another reason why whining about it is completely pointless. It's not going to change for years and even if it did it would make little difference to the current crisis.
1. Massive austerity to balance the budget.
2. Accept EU money in exchange for serious austerity, which is less than (1.) by the amount of the EU money.
3. Default, stay in the Euro. Massive austerity to balance the budget and you've nuked your banking system which the government cannot recapitalize.
4. Default, reintroduce Drachme. Massive austerity to balance the budget, nationalize the banking system to recapitalize.
I think 2 and 4 are the best options and I'd take 2 out of those.
Are you seriously equating the behavior of a European country with that of a Prohibition-era gangster?
Yes, but it needs to change and since it's going to take awhile, you damn well need to start as soon as possible. Otherwise Greece isn't going to be sustainable in the long term, which is the whole point.
"Massive austerity, reaching a balanced budget in 2-3 years, in return most private banks will write-off 50% of their loans (In total, this was an estimated ~25% reduction), and the EU members will loan (via the emergency fund / IMF) at a reduced rate to lower the interest pressure."
There never has been a 'directly give money to Greece" option on the table. It's very politically unviable. (It would have ~90% chance to collapse the Dutch government for one).
The main damage done by this referendum proposal is that it has completely shattered the Eurozone leaders faith in Greece as a negotiation partner. It appears that Papadopolous has doubled down on it too. Perhaps, perhaps it will be a nonbinding referendum, but even then it'll create massive political unrest. Refenderums 101 is 'don't hold them when the government is unpopular.'
Well, a lot of these European countries use them to avoid enforcing european stuff they don't like; see the referendums that rejected the various treaties in half a dozen countries.
One of the benefits to Greece for joining the euro was so that they could get the benefit of a well-respected central banking system, all they had to do was give up their autonomy over their monetary system. Which seemed like a good deal, since nobody really trusted the Greek central bank (or government) at the time. Of course, by papering over their existing problems, they merely delayed the inevitable for a decade or so, but hey, it probably seemed like a good idea at the time. Since kicking a problem down the road is always the popular thing to do.
I was pretty much directly referring to the "EU Constitution refenderum" fiasco in the Netherlands and France (after which some other countries said "we're not going to bother then" if I recall correctly). Impopular governments and years and years of shooting at the EU by national politicians as easy scapegoats for impopular measures (such as budget cuts to meet the 3%/60% norm, ironically) meant that even with the backing of the 7 most central political parties (Only 2 fringe parties opposed) the measure failed over here.
It got redesigned as the Treaty of Lisbon, with only the most minor of changes, and not put to any direct vote as a result.
I'd also note the ridicilous swiss referendum to ban new minarets (When there were only 4 in the country, and no plans to build new ones at the time), or perhaps how the state of California has pretty much refenderumed itself into financial ruin over a few decades.
A shared currency was a huge economic gain for many.
But you can't do that without losing direct control of your monetary policy to the ECB.
While I agree, we can't make people pay their taxes in the US, so pot kettle blah blah blah.
Technically to the ECB, which isn't simply 'Germany' even if it is in Germany and modeled on the German central bank. The reason is the same as why Equador, Panama, and El Salvador use the USD as their official currency. Because having a hard currency brings tremendous economic benefits. Brazil did it the hard way by introducing a whole new one: the Real.