So Greece, a country, known for basketball and for the invention of homosexuality, has some
problems. Apparently it lied on its credit card application and ran up a bunch of debt that it now may not be able to pay back. It's a really good place to be a hairdresser, however.
Vasia Veremi may be only 28, but as a hairdresser in Athens, she is keenly aware that, under a current law that treats her job as hazardous to her health, she has the right to retire with a full pension at age 50.
“I use a hundred different chemicals every day — dyes, ammonia, you name it,” she said. “You think there’s no risk in that?”
“People should be able to retire at a decent age,” Ms. Veremi added. “We are not made to live 150 years.”
Germany, which is another country, not really known for basketball or hairdressing, might help Greece out. But first it wants Greece to raise its taxes and cut its fairly generous social services to help close the gap. Germans, who just recently raised their own retirement age to 67 from 65 to alleviate similar concerns back home, are not generally happy about helping the Greeks, who get retirement at 60. Greece in turn is not happy about the cuts demanded by Germany, aka Europe's ATM, and some officials have gone so far as to bring up some kind of unpleasantness that happened 70 or so years ago, in protest.
A greek hairdresser:
So, Greece: unfairly put-upon land of brave and virtuous hairdressers, or unsustainable wasteland of degenerate and dissolute hairdressers?
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Essentially people have known about this for a long time, but instead of fixing it people have just hid it away in the closet and hoping the next caretakers would not be smart enough to open it (and if opening it, just hiding it further away).
Greece will have to cut back on their generous social securities if they wish to sustain an economy that can support its population. Of course the Greek government is in a tight situation. To accept aid they have to cut their social programs at the risk of angering the public (and causing city wide riots). I cannot see an easy way out of this.
At which point Germany might step in and impose austerity anyway, which will cause riots. Because, you know, seventy years ago.
Retiring at 50 with full benefits as a hair dresser...theres no way shes ever going to pay in a fraction of what she'll take out. The Germans are right, except for the taxes EVERYONE knows lower taxes increase revenue.
pink- for pinko commie motherfuckers.
Where was Greece and the rest of Western Europe stepping in to bailout the USSR when it was collapsing? The USSR did more to win WWII in Europe than anyone.
You need to add a few "if... then" statements before this becomes uncontroversial.
It's less that, and more that Germany is the most economically powerful country in the EU, or at least the euro, and therefore is largely in charge of EU finances. It's the equivalent of the US helping Haiti the most as opposed to say Turks and Caicos. If Greece becomes bankrupt then it would massively devalue the € and it would affect the other countries that use the €.
The USSRsic isn't in the EU so doesn't have any involvement in Greek finances.
Thats fucking huge.
Oh, and a bunch of people screwed leaving schools closed and hospitals operating on Emergency only staff. Greece is totally screwed. Whats awesome is how much Goldman Sachs plays into this.
I really don't buy this. A few really powerful assholes can steal a lot of cash, but the insane entitlement system coupled with ever extending average life expectancy seems a much more likely culprit. If you are over payed and the pension system was way under funded, you're benefits need to get cut. Sounds a lot like the US, except we can inflate our debt away if things get really bad.
edit: heres a story about the germans owing the greeks money from WWII. http://euobserver.com/9/29551, the Greek guy seems to think countries have money because of their gold reserves.
I wonder what their budget looks like compared to ours. Our military budget is ridiculous so you have to expect the US to get a lot less social services from the same amount of taxes than other countries.
Sort of. The US has a much higher per capita GDP, so the same tax levels bring in much more revenue. But yes, we in the US have both lower taxes and lower levels of social services. Which might not be entirely bad, given that our own long term retirement benefit commitments are also pretty huge. Having lower taxes means we have more room to raise them in the future if things start to get out of hand.
― Marcus Aurelius
Path of Exile: themightypuck
What happens when Greece doesn't pay money back? Who does what to them?
The IMF has to bail them out, which is something the ECB really doesn't want.
Hypothetically, what happens if they're not bailed out?
I'm trying to figure out what happens to a nation that runs out of money and the means to pay back money it owes.
It becomes very cheap for Americans to visit Europe.
This is kind of a hard question to answer because it happens so rarely--like, maybe never.
But basically the government wouldn't be able to pay for anything. It would essentially cease to exist.
Yeah don't really see the problem with Germany going 'Yeah we'll bail you out but you need to do X, Y, and Z for us first'.
My guess? Anarchy. Money does make even their world go round. Without the means to bribe or retire or do much of anything, people will be forced to do things much more unpleasant then trying to beg/guilt trip Germany into giving them some money. Or someone can bail them out, begrudgingly, and can try and change things.
(Completely) Wrong way to deal with things: Greece
Award for biggest catastrophe waiting to happen: Spain
If the IMF bails them out they pay of part of the debt, restructure the rest, set up a payment plan and in return get a large say in the country's finances for a while.
If there was no one to bail them out then either the lender would have to forgive the debt or repossess something from Greece which would probably require the use of force.
Ireland: They still got that whole Catholic Vs Protestant Cagematch thing but at least it's a little bit more handled now.
Greece: See thread below.
Spain: Don't want to touch that with a 60 ft pole.
Other countries would turn on the printing presses and destroy the on/off switch, hyper-inflating their way out of it, with all the joy that entails.
Greece can't do that because it doesn't have the authority to print Euros. So they would default, their credit rating would be destroyed, and they would only be able to borrow money at very high interest rates. Since pretty much all governments borrow money to operate, they would have to enact austerity^2 measures as they went to a 'cash up front' system. In all likelihood the government would collapse until the <EU, IMF, UN, 'anyone want a country? anyone?'> stepped in to prop them back up. Which is why the EU or IMF will bail them out now.
Would the nation itself have a land value of sorts and just out-right taken over that way?
I saw Spain briefly mentioned among a few nations that are in financial trouble in the EU (the only other one I remember is Portugal, which sucks because that's the motherland). What exactly is happening with Spain though to make you guys say that it's going to be a bigger disaster?
Point of order: That's Northern Ireland, part of the UK, which has the cagematch. It's not a major issue for the Government of the Republic of Ireland.
Your thinking of Northern Ireland, the Republics economic troubles are rather different from that whole mess.
@Henroid, Spains economic growth in the last decade was based on tourism, a huge construction bubble (though one different from the US, rather than bad mortgages, Spain has a bunch of empty houses), and specialized high end products. All of which went tits up in the Recession, which coupled with long term unemployment makes things look quite bad medium term. The reason it'll be a bigger disaster is because its a rather bigger country, and thus will take a lot more to fix.
What are the implications for the rest of the Euro-Zone though? Like... doesn't it create a bit of a domino effect? Even if the IMF bails them out, doesn't that affect everyone who... pays the IMF money (or borrows their money).
I obviously don't understand how this works, but it seems to me that if the IMF/UN/Whoever bails Greece out that everyone else's interest will go up.
... or something (??)
It doesn't work that way. Sovereign debt is ultimately unsecured. If Greece defaults, that's it. The lenders don't get paid back. End of story. However, naturally Greece wouldn't be able to borrow any more on international capital markets (or only at %Texas). So now it would have to live balanced budget style, like most American states.
Spill over would affect the rest of the PIGS: Portugal, Ireland, and Spain. Their interest would rise astronomically for fear of a repeat without a bailout. As four states of the eurozone go bankrupt, the Euro would fall in value as less global wealth would be held in Euro securities. How much is unclear, as noone would balk at holding (for example) German debt, no matter what currency it is denominated in.
Which is why the civilized thing will happen here and Greece will be bailed out. Likely by Germany and a Coalation of the Shilling, if not that by the EU at large, or else by the IMF. Of course, those actors will demand austerity measures in exchange. For Greece that means: no more general retirement at 60, or 50 for some jobs. You couldn't ask Germans, who just hiked their age from 65 to 67, to pay for that.
The stuff about selling islands and wartime reparations are only to score political points. None of that is grown-up talk.
Of course the bailout produces moral hazard. Portugal, Ireland, and Spain will now have a diminished incentive to avoid their own budget crisis. After all, if the Greek get a handout, why not them?
IMF would be a last option and it won't get there.
It would be handled internally by the Eurozone(read: France & Germany would be picking up bad bonds & debt) and then hopefully somebody would realize that not having a procedure to deal with shit like that like this internally when you share a common currency is beyond retarded.
Right now, the implications are that the Euro is taking a big hit and the producers are loving it while at the same time wondering how the hell did it get so messy.
Edit: And again, Greece would not default. They can't, unless they are ok going back to the 19th century.
But as you said, the country is only being offered bailouts if they agree to conditions.
Thanks for answer you guys, I was confused as to why there was a lot of hubub about Greece.
No, I know that's a Northern Irish thing, i'm just pointing out that it didn't really help the economic situation get any better, is all.
As for Spain, Wikipedia sums it up in detail:
Which they will agree to. Taking a hostage by holding a gun to your head only gets you so far.
Speaking as a denizen of Norn Iron myself, I can say that our own politcal problems have little impact on whether the Republic of Ireland will default on their debts. If we sort ourselves out and become an economic powerhouse, it's the UK treasury that will benefit.