In addition, since Varoufakis has been of interest to HN for a long time, some of you might like this interview that Pettis links to: http://www.zeit.de/wirtschaft/2015-02/yanis-varoufakis-greec.... (The other articles that Pettis links to about Varoufakis' proposals are behind the FT paywall.)
Michael Pettis is the Tony Stark of economics for those unaware. He has a scary accurate track record of predictive accuracy, he has influence in many central banks, perhaps most notably among Chinese decision-makers. Pettis has a rare accounting-based approach to classical economics which makes his analysis fresh, but also accessible to non-economists (me). That would be enought except Pettis, also a musician, owned the most successful music club in Beijing (D22), until he closed it at its peak. I have Elon Musk and Steve Jobs playing cards like everyone else, but my Michael Pettis and Vernon Walters cards are my most cherished.
I really enjoyed reading this as it puts the Eurozone's current crisis in historical perspective. It dismisses the unhelpful rhetoric about financial probity which has come to dominate debates over Greek debt and which has obscured the real structural problems faced by a federal state which has monetary but not yet political union. One of his most important points was this:
An awful lot of Europeans have understood the crisis primarily in terms of differences in national character, economic virtue, and as a moral struggle between prudence and irresponsibility. This interpretation is intuitively appealing but it is almost wholly incorrect, and because the cost of saving Europe is debt forgiveness, and Europe must decide if this is a cost worth paying (I think it is), to the extent that the European crisis is seen as a struggle between the prudent countries and the irresponsible countries, it is extremely unlikely that Europeans will be willing to pay the cost.
"Third, it makes no sense to blame the recipients of the capital inflows for causing the crisis. If enough money is sloshing around willing to invest in any stupid idea, you shouldn’t be too surprised that a lot of stupid ideas get funded. When, for example, Wolfgang Schaeuble, Germany’s finance minister, says: "The reasons for Greece’s problems can be attributable only to Greece and not to actors outside the country, and certainly not in Germany." As he did during the press conference following his meeting with Yanis Varoufakis, his Greek counterpart, we have to remember that Schaeuble is talking nonsense. It’s logically impossible for excess borrowing to occur unless there is someone sufficiently reckless (or stupid) to provide the financing."
And this is also good:
"I am hesitant to introduce what may seem like class warfare, but if you separate those who benefitted the most from European policies before the crisis from those who befitted the least, and are now expected to pay the bulk of the adjustment costs, rather than posit a conflict between Germans and Spaniards, it might be far more accurate to posit a conflict between the business and financial elite on one side (along with EU officials) and workers and middle class savers on the other. This is a conflict among economic groups, in other words, and not a national conflict, although it is increasingly hard to prevent it from becoming a national conflict."
The German government, in collusion with the German business establishment, has wrecked Europe, first through its irresponsible lending, and then, later, through the pressure it put on the ECB to raise rates despite the weak European economy. The German government can try to blame others for the problems in Europe, but the driving force behind all of these problems has been Germany. Germany had a trade deficit at the end of the 1990s, and they wanted to develop a trade surplus, and they did so through a series of irresponsible measures that have done great harm to Europe.
> The German government, in collusion with the German business establishment, has wrecked Europe, first through its irresponsible lending...
I do agree that this sanctimonious moralizing of the virtues of the German over the Greek is risible. However, with common assumptions in place, what Germans did makes sense. Businesses had high productivity, lots of capital investment, and nowhere to send the excess of the commodities it could produce, the domestic market was satiated. So they lent money to the Greeks etc. and had a place to send these excess commodities for a few years. They kicked the can down the road so that they could figure out what to do with this overproduction and - today is the result.
I see a worldwide self-reinforcing cycle for slow growth, unemployment, recession and depression. Companies have it over employees so money goes to profit more than wages. This happens eveywhere so money goes to capital, not consumption. But the more impoverished workers have no money to buy commodities. So a temporary solution is found - debt. Things go along again and then one day the game of musical chairs ends and you have a situation like now.
Greek youth is not going to put up with a 65% unemployment rate forever, and the election of Syriza points to that. So does the rising number of votes going to Golden Dawn and the KKE. I see news commentators calling Syriza "far left" - they are not far left, they are just socialists. People are so used to soi disant socialist and labour parties performing neoliberal cuts when elected to government, the idea that a socialist politician wants a floor to living standards is a shock to them.
What you say about Greek youth is true, but northern Europeans are also not going to put up with subsidising Greece forever. At some point the current setup will crack in some way or other. You need to look at the rise of Eurosceptic parties like UKIP, FN and AfD. They reduce the amount of wiggle room the northern governments have to drag out Greece's default.
> I see news commentators calling Syriza "far left" - they are not far left, they are just socialists.
They do have a fairly strong far-left faction, which perhaps contributes to some of that perception. However I agree the party as such isn't, particularly the leadership that is actually in control of the party. Tsipras and his allies have fairly effectively sidelined the leftist faction over the past few years, in an attempt to turn the party into an electoral force that could win. The faction around Tsipras is inclined more towards a kind of pragmatic populist socialism, not a more hardline ideological leftism (Varoufakis is de facto in the Tsipras faction too, although I believe he's formally not even a member of Syriza).
>I am hesitant to introduce what may seem like class warfare, but if you separate those who benefitted the most from European policies before the crisis from those who befitted the least, and are now expected to pay the bulk of the adjustment costs, rather than posit a conflict between Germans and Spaniards, it might be far more accurate to posit a conflict between the business and financial elite on one side (along with EU officials) and workers and middle class savers on the other.
I don't buy this for a minute. The big beneficiaries of the Greek borrowing binge were Greek civil servants, who go 50% plus wage increases.
Greek civil servants are 3.3% of the population, less than that of Germany. What about the rest of 96.7% of population who are getting crushed. How does punishing the 96.7% fix the problem of crony corruption.
The share of public worker sector workers out of overall employment was 29% in Greece vs 19% in Germany and they earned 49% more per hour than private sector employees (in Germany the difference was 19%). Source: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1406.pdf
This is not a problem of "crony corruption". It's the same problem you see in Central and South America - voters who think they're entitled to Northern European levels of services without having a Northern European economy.
Oh, I don't doubt financial institutions benefited. But the idea the average Greek was just standing there minding his own business when a wall of debt washed over him is patent nonsense.
Most people are smart enough to know the money has to come from somewhere. Over the long haul a country's budget isn't that different from that of a household. They voted for ever increasing levels services - if they didn't know the bill would eventually come due they certainly should have.
And the idea economists and banks didn't realize ever increasing amounts of debt would be a problem just isn't credible.
> And the idea economists and banks didn't realize ever increasing amounts of debt would be a problem just isn't credible.
So you agree the creditors have a big part of the responsibility then?
Because that is what you are effectively saying in the line I quoted.
Either the creditor banks failed to realize the problem, in which case why do you expect Greek voters to? Or they were irresponsibly speculating on a bailout.
In either scenario, it is to me ridiculous to expect the average Greek to bear the burden. The only reason they were, were because EU government basically strongarmed them into it in order to shield the creditors from taking the consequence of the risk that should be baked into their interest payments in the first place.
Even if we agreed, and we don't, you are not answering my question: Even if it is 100% the debtor's responsibility that a debt is repaid, there is the matter of responsibility for why the loan was granted in the first place. The two are separate issues. Are you claiming it is 100% the debtor's responsibility that a loan was granted too?
If the lenders had acted responsibly, they would not have faced the risk of non-payment, because a lot of these loans would not have been granted. Are you suggesting the debtors forced the lenders hands?
Back to the specific issue of repayment:
You may of course choose to consider it the moral option for the debtor to assume 100% of the responsibility of repayment. But legally, that's not true anywhere in the world that I'm aware of - every jurisdiction I know of have a vast range of situations where debts can be wiped out based on the actions of the lender in recognition of situations where the debtor is consider to not be responsible for repayment.
E.g. here in the UK, if banks allows consumers to take out loans that are blatantly irresponsible without lying to the bank about their income and outgoings, it's the bank that is responsible, and the debt can be wiped out, because it is recognised that there is an asymmetric difference in power and that people can have valid reasons for being desperate enough, or not understanding the consequences of, loans that the lender should know they can't manage.
Even in the face of a loan that was not irresponsible when granted, there's multitude of options for reducing or wiping clean the repayment, in recognition
Yet somehow you believe Greek citizens should be held 100% responsible for actions they didn't take and likely did not understand, and that they had only indirect influence on, and even more so a risk you claim the banks did understand and still took?
Personally I consider it deeply immoral and downright criminal to expect the Greek to repay these loans, and I'd strongly hope Greece refuses to pay, as creditors needs to be shown that there is a real risk in lending money without proper due diligence. They gambled with their shareholders money.
>Are you claiming it is 100% the debtor's responsibility that a loan was granted too?
Yes, of course.
>If the lenders had acted responsibly, they would not have faced the risk of non-payment, because a lot of these loans would not have been granted. Are you suggesting the debtors forced the lenders hands?
Yes, lenders always face the risk of nonpayment. That doesn't remove any of the debtor's responsibility to pay, though. It's not that Greece couldn't have paid back the money. It's that it refused to make the changes necessary to pay the money back.
>...every jurisdiction I know of have a vast range of situations where debts can be wiped out based on the actions of the lender in recognition of situations where the debtor is consider to not be responsible for repayment.
Which don't include, as a rule, that the lender should have known the debtor is of such low character he wouldn't be paid back.
>E.g. here in the UK, if banks allows consumers to take out loans that are blatantly irresponsible without lying to the bank about their income and outgoings, it's the bank that is responsible...
That's insane.
>Even in the face of a loan that was not irresponsible when granted, there's multitude of options for reducing or wiping clean the repayment, in recognition
I'm not absolute sure where you were going with that, but I assume you mean "in recognition you can get to a point where there's no other option". And that is true. Without some form of bankruptcy nobody is going to be willing to start a business, and business formation is good for more than just the founders.
But countries aren't people in that respect. The Greeks borrowed money because they could, not because they needed it for some investment. In the price they could get for their bonds was lower because investors factored in the likelihood the government would print money when it ran out. But essentially the Greeks traded on the good reputation of the Germans to bury themselves in debt as soon as they switched to the euro.
>Yet somehow you believe Greek citizens should be held 100% responsible for actions they didn't take and likely did not understand, and that they had only indirect influence on, and even more so a risk you claim the banks did understand and still took?
In a democracy you're responsible for the actions of your state. I don't understand why you think the Greeks didn't understand what was going on. Of course they did. And many times over the years they were told "Hey, we need to spend less or we won't be able to repay our debts." And every time they punished (electorally) whoever said it.
>Personally I consider it deeply immoral and downright criminal to expect the Greek to repay these loans...
Because you think the Greek voters are too stupid to have realized what was going on? How patronizing. Let me propose an alternate scenario: They understood exactly what was going on and then thought "We just won't pay them back. What are they going to do about it?"
>...and I'd strongly hope Greece refuses to pay, as creditors needs to be shown that there is a real risk in lending money without proper due diligence. They gambled with their shareholders money.
Of course they'll refuse to pay. The whole point of voting for socialists is you expect the government to make your life easier with someone else's money. As a result is the country should be unceremoniously ejected from the EMU. That won't happen, of course, as a result of cynical political concerns.
But let me ask you this: What kind of signal do you think this sends to Italian and Portuguese voters? Why should they make any attempt to get their fiscal house in order, when obviously the smart thing to do is borrow as much as possible from your northern neighbors and then stiff them?
Nonsense and victim blaming. Please look at who got what votes in the ECB board, and look who voted how. Also please check who had lent Greece the most. As far as I'm aware that was French banks. Next please take into account that the Euro was forced onto Germany. Then please realise that nobody forced Greece to take on these loans (and then use them to subsidise cushy government jobs). Finally please realise the Germany has a trade surplus because they produce goods that are internationally competitive.
Absolute nonsense indeed - in your own comment. Germany never had the euro "forced" upon it. If you recall it was called the "écu", until Germany called it the euro. Germany has benefited by far the most from euro in the sense that it has erased the serial competitive devaluations which have been a feature of non-German monetary policy for the past 100 years. It was agreed bilaterally by Mitterand and Kohl and forced upon the rest of Europe.
By maintaining a strong currency for its customer countries, Germany has, in fully aware and calculated fashion, created purchasing power for its goods. By creating purchasing power for its goods, it has locked in its own competitive advantage, allowing more investment and consolidating its industries' lead over European competitors. The anecdotal evidence bears this out completely: witness Volkswagen's completely domination compared with the healthy competition from PSA, Fiat Group, Renault, or indeed Rover 20 years ago.
"Nobody forced Greece to take on the loans". Classic simplistic, moralising, yet false axiom, and is the entire theme of the article which you clearly have not read, or understood, properly. The point of the article is that thrusting large amounts of money in front of the nose of a potential debtor is bound to create a debt, but under such circumstances that debt, when it turns bad, does not lay blame 100% at the door of the borrower. The irresponsible creditor must also take a share of the pain. That is what is Syriza's underlying point, and is mirrored across peripheral europe, and any idea that Germany (or French banks) must at all costs get 100c return on each euro of capital invested is completely erroneous. The periphery must take some pain, yes, but the usurious and/or opportunistic lender must also be punished.
Are you kidding? PSA, Fiat Group, and Renault also had the Euro and hence should be benefiting from exactly the same enlarged market that you claim is the reason for Volkswagen's success.
As to "lay[ing] blame 100% at the door of the borrower", my point is that the money that has been given to Greece is already gone, Greece has been technically bankrupt for a while. This is understood by everybody. The questions are twofold:
1. How do the creditor countries tell their electorate that the money's gone? The modus operandi of the creditor countries has been to drag out the default over time.
2. What to do with Greece. The creditor countries want to change Greece to make it competitive. Syriza wants to keep the rest of the EU to subsidise the status quo indefinitely.
I disagree that "Germany has benefited by far the most from euro". The opposite is true. Moreover Kohl agreed with it only because without that agreement, reunification would have been vetoed by France, which is still in some sense, occupying Germany. Nobody orced upon the Euro the rest of Europe. Various EU countries (e.g UK, Poland, Denmark, Sweden) did not join.
> Are you kidding? PSA, Fiat Group, and Renault also had the Euro and hence should be benefiting from exactly the same enlarged market that you claim is the reason for Volkswagen's success.
The point is that without the Euro, these groups were shielded from Volkswagen through the ability of other governments of using devaluation as a means of improving their competitive position.
He's not claiming they were as efficient competitors as Volkswagen, but that the Euro was a benefit to Germany to consolidate existing competitive advantages that they had due to the strength of their industry, because it prevented other European countries from shielding themselves through currency policy, and thus allowed German companies to extend their already powerful positions.
To reiterate: The claim is not that the Euro in itself created a competitive advantage for Germany, but that it allowed them to take full advantage of their economic strength.
OK, that is a more cogent explanation. However, it does not take into account (1) the exchange rates that the Euro countries used when they entered the Euro. I'd argue that Germany's DM <-> Euro exchange rate was quite uncompetitive in 1 January 1999, making German products too expensive. (2) It does not take into account the symmetry of the situation: the Euro also made it impossible for Germany to use devaluation of its currency as a competitive advantage. (3) industries that need devaluation have a serious health problem anyway. (4) Germany and Greece have almost no competing industries, so the ability to do competitive devaluation does not play a role in the competition between Germany and Greece. (5) It does not take into account the distribution of power in the ECB where Germany has the same number of votes as Greece or Malta. The first two ECB presidents were French and Italian, consequently the ECB makes policies mostly in the interest of the southern members. The fact that several German ECB members and one head of state have already resigned over crazy ECB decisions speaks volumes.
Most of these points are irrelevant to the point that was made by the commenter above, that claimed that Germany was not forced into the Euro, but wanted it because they saw it in part as a means to take away devaluations as a tool of other EU nations.
I don't know if that's true or not - I didn't follow the debate that closely - but the arguments you are giving here are either besides the point for that kind of decision, or seems like plausible concessions of a party that sees itself as strong enough to be able to win big if devaluations are taken off the table.
Hm, if Greece defaults, probably Italy and Spain will follow soon after. At that point the EU will be dissolved and Germany (probably along with the Dutch and few others) might create a new "Union" with a very strong currency.
At that point the countries of the South (and North? Ireland..?) will keep devaluing daily, while the markets will push Germany's new currency through the roof, turning exports virtually impossible. Unemployment will struck Germany and all hell will broke loose. Repercussions for the South will be devastating of course.
That's not my preview. That's the scenario Varoufakis foresees and probably the author too. Makes a lot of sense to me, but Varoufakis might be wrong. Time will tell I guess.
Just keep in mind that Greece, Italy and Spain are in dire straits anyway so the prospect of defaulting doesn't seem all that scary.
1) Spanish and Italian ten year bond yields are around 1,50, an all time low. Obviously the market doesn't think that Greece defaulting would have a huge impact on them.
2) Sweden and Switzerland both have strong currencies and are doing fine. Greece's problems have very little to do with the Euro: Look at rankings like the Doing Business Report, Transparency International's Corruption index, rankings of economic competitiveness - in all these rankings Greece is doing horribly! Look at the ARWU rankings of top 500 Universities worldwide (http://www.shanghairanking.com/ARWU2014.html): Greece has 2 Universities in the top 500, Sweden has 11 and Switzerland has 7 (highly ranked) Universities. Look at patent filings, for example the US Patent office (http://www.uspto.gov/web/offices/ac/ido/oeip/taf/cst_all.htm): Sweden had 2413 patents filed in 2013, Switzerland had 2466 and Greece had 70 (!!!). Considering the countries comparable population size (Greece is biggest), this is a HUGE disparity!
Are you kidding? You make it sound like Greece is doing everybody a favour by wasting EU money.
Germany used to have its own currency and did very well exporting its goods. So does Japan, so does Singapore, so does Switzerland, so do Denmark and the US.
The racism accusation is a little strong and isn't helpful to the debate. I do agree that the post you are referring to seems to be woefully devoid of any insight into the way the benefits that have accrued to the 'northern' economies and Germany in particular, from sharing a currency with Spain, Greece etc.
That sounds mostly accurate, but I still think Germany would try and push down the value of its currency to subsidize its exports. They have a long history of doing that.
Of course the government will try to somehow undervalue the new currency (probably by printing more - although historically German central bankers and Governments are not flexible like the Swiss for example), however doesn't depend on them.
If everyone in Europe and abroad wants to park their assets in the new stable DeutscheMark, that alone could destroy exports. In the meantime everybody around (current markets of German products) will becoming a weak buyer.
Please realize that mathematically, any grouping of countries sharing a single currency will have some members that export more and some that import more.
Is it fair to force the countries importing more into idleness and destitution for no more reason than they share that currency?
If you look at the U.S., states like Alabama and Mississippi receive more in federal dollars than they pay out, where the more productive states like California are the opposite. The ecu lacks this facility.
Greece has already received billions and billions of subsidies / gifts from the norther EU countries. Is that fair? Greece has not used that money to improve its economy.
The "subsidies/gifts" given to Greece were accompanied with instructions for not competing in traditional markets Greece played in, for changes in agricultural policies that lead to the destruction of agricultural exports, and de-industrialization.
The big players of Europe, mostly Germany, used the EU "subsidies" to ensure an economic policy that destroys the periphery (and makes it a short-term market for their industry) would be followed.
Just an example of similar BS continuing to this day: Germany pushes for embargo against Russia for example, which Greece follows (hampering tons of exports it had) but German companies do not (it is estimated by German sources that 80% of companies continue to do business as usual with Russia). Essentially Germany faking a moral outrage against Russia to push for its economic interests.
There are some crucial differences between Germany and Greece however:
1) Greece didn't cause the death of nearly one million Germans, due to invasion, executions, and famine. Germany did.
2) Greece didn't bomb German cities. Germany did (Greek ones).
3) Greece didn't destroy Germany's infrastructure when its army left the country (out of spite). Germany did.
4) Greece didn't force Germany while being an occyping power to give it a huge loan it never repaid.
5) Greece never denied to pay war recuperations to Germany. Germany did to Greece.
6) A couple of decades after Germany slaughtered it's citizens, Greece did send hundrends of thousands of workers to work in retructuring the German economy as cheap immigrant workers (gestarbaiters). Strange how those "lazy Greeks" (and Turks) created this "German recovery miracle").
7) Greece didn't force EU legislation and economic/monetary policy to favour its exports and industry. Germany did.
8) Greece wasn't caught bribing German politicians millions or Euroes in order to close certain deals against the Greek state's interests. Germany did. And then it offered protection to people involved in the bribes.
In general, when you have a 100-pound gorilla pursuing its interests against a monkey, it's rarely the monkey's influence that determined most outcomes...
- Greece and Germany hardly compete with each other.
- EU Agricultural subsidies are premarily a gift to France which benefits most from them.
WHen in power Germany's chancellor Schroeder tried to remove the current EU agricultural, only
to be blocked by France.
- Russia sanctions are primarily driven by the US. Germany does brisk
business with Russia and tried for a while to avoid sanctions. More
imporantly Russia, via the Russian armed Ukrainian rebels is
invading Ukraine, leading, among other things, to shooting down
Malaysian airplanes. You are saying we should ignore this, and let
Russia simply have its way?
- Sanctions against Russia are fairly recent, the structural problems
of the Greek economy are much older.
Re 1) Substantially more Germans died in the last century in wars than Greeks
Re 2) The allies bombed German cities. As far as I'm aware Greece was
part of the Allies.
Re 3) You mean like the "scortched earth policy" of the Greek army
when they were forced out of Turkey?
https://en.wikipedia.org/wiki/Greco-Turkish_War_%281919%E2%8...
As to infrastructure, Germany's was way more destroyed. They rebuilt
it in a decade or so. Infrastructure needs continually to be
modernised anyway, as infrastructure is subject to wear and tear.
Note also that that other countries (e.g. Korea, Singapore, China)
have risen from extreme poverty to world leadership in a few decades.
Re 4 and 5) The war reparation have been covered by various treaties
over the decades (which were designed by the allies), and long been
settled. Speaking of war reparations, when will pay Greece reparations
for example to Turkey for the Greco-Turkish war that Greece started in
1919?
Re 6) German economic recovery, what you term "German recovery
miracle", happened in the 1950s primarily. Guest workers started
arriving in the 1960s. Note that guest workers came voluntarily. A
more interesting question is: why do so many Greeks leave the
motherland and go to the US, the UK, Germany, Austrlia?
Re 7) I'm not sure what you are referring to here. Greece and Germany
hardly compete with each other. The weakening of the Euro benefits
German and Greek exporters. But not that Germany has been trying to
avoid this weakening.
Re 8) I'm not sure I understand what you mean here. What does
Transparency International http://www.transparency.org say about
corruption in Greece?
>Greece and Germany hardly compete with each other
...after the gradual de-industrialization of Greece and the changes to agriculture imposed by EU directives. My sentiments exactly.
>EU Agricultural subsidies are premarily a gift to France which benefits most from them.
Sure. It's not just Germany that's a big fish in the Euro-centre pursuing its interests over the smaller fish.
>Russia sanctions are primarily driven by the US. Germany does brisk business with Russia and tried for a while to avoid sanctions.
In the EU, we see Germany pushing for them constantly.
>More imporantly Russia, via the Russian armed Ukrainian rebels is invading Ukraine, leading, among other things, to shooting down Malaysian airplanes. You are saying we should ignore this, and let Russia simply have its way?
I'm saying, the legitimate government of Ukraine was toppled to be replaced with some pro-West-interests friendly lackeys (and neo-nazis at that), and Russia did what it had to protect an area by its borders with 60% citizens of Russian descent -- which was in no way an "invasion". As for the "shooting down of Malaysian airplanes" that Russia had anything to do with the matter was a fairy-tale even worse than the BS pretexts of Bush and Blair during the Iraq war.
As a thought experiment, what would the US do if a part of Mexico was inhabited by 60% citizens of US ethnicity, and the legitimate government of Mecico was toppled and replaced with a, say, pro-Chinese government, with known racial hatred for that American ethnic minority among them?
Countries like Germany or the US, that ACTUALLY invaded places 10.000 miles away that had nothing to do with them and occupied them, mostly for oil and control of the area, are in a very bad place to talk about Russia and Crimea.
>Re 1) Substantially more Germans died in the last century in wars than Greeks
So? It wasn't Greeks that killed them. Plus, those Germans went looking for it, and exterminating millions of people in the process. More Germans died than Jews too, but I wouldn't make a big deal out of it.
>Re 2) The allies bombed German cities. As far as I'm aware Greece was part of the Allies.
Not the part that bombed German cities, as it hardly had an air force. Greece, utterly destroyed after the German Occupation, didn't even send any real army to Germany along with the rest of the allies.
>Re 3) You mean like the "scortched earth policy" of the Greek army when they were forced out of Turkey?
Yeah, I mean like that, but from an invading army that didn't have any place being in Greece at all (whereas Greece had around 1.5 million Greek population living under Turkish occupation in Asia Minor that it tried to liberate. An area, furthermore, inhabited by Greeks since ancient times, that was, like mainland Greece and most of the Balkans, under occupation by the expanding Ottoman Empire for a few centuries).
But even if it wasn't so, your example would just mean that the Greeks also owe to Turks, not that Germans don't owe to the Greeks for what they've done.
>As to infrastructure, Germany's was way more destroyed.
Yeah, when you declare nazi expansion war on the World, these things happen. Cry me a river.
>They rebuilt it in a decade or so.
Mostly thanks to being the new darlings of the West, in a cold war ploy against USSR/East Germany Europe. Not exactly "left to their own devices" and with hard work, as the myth says.
>Infrastructure needs continually to be modernised anyway, as infrastructure is subject to wear and tear.
A, so the occupying nazi forces actually did Greece a favor, destroying it's infrastructure so it could modernize it!
>Re 4 and 5) The war reparation have been covered by various treaties over the decades (which were designed by the allies), and long been settled.
Actually not settled at all, and with Greek goverments of the time (cold war puppets) forced to consign to BS deals unlike most of the other countries.
>Speaking of war reparations, when will pay Greece reparations for example to Turkey for the Greco-Turkish war that Greece started in 1919?
Greece went under financial supervision as a result of exactly that. But you seem to forget that Turkey started an ethnic cleansing campaign years before that, and that the Ottoman Empire had kept Greeks (and lots of others besides) under occupation for several centuries.
>A more interesting question is: why do so many Greeks leave the motherland and go to the US, the UK, Germany, Australia?
Because Greece, not a rich country to begin with, was left destitute by the nazis at the end of the war, never got the recuperations it should, and then, in the Cold war the followed, due to its lots of communist sympathizers, it was kept under close guard, including foreign powers organizing a full blown civil war, and helping establish friendly lackeys in place down to a full blow dictatorship in 1967. That's what happens to official or unofficial colonies and neo-colonies when the big players have their way.
>Re 7) I'm not sure what you are referring to here. Greece and Germany hardly compete with each other. The weakening of the Euro benefits German and Greek exporters. But not that Germany has been trying to avoid this weakening.
Germany with its already high exports had tried to deny any policy to weaken the Euro for ages, hurting EU countries with less fortunate import/export ratios.
>I'm not sure I understand what you mean here.
I mean that German companies, like Siemens, bribed Greek politicians / lackeys for decades to win huge public tenders, and when found the German government protected them, and even gave asylum to Greek representatives of the companies.
You didn't answer to any of my points. Let me briefly address some of your rambling.
(a) "gradual de-industrialization of Greece and the changes to agriculture imposed by EU directives" That's wishful thinking. Can you point to the EU directives that
deindustrialised Greece? You mean all the billions and billions that
the EU gave Greece to modernise and to build up a working
administration?
(b) "In the EU, we see Germany pushing for them constantly."
No you don't. You see Germany slowing down the US who are the chief
driver behind sanctions against Russia. Germany has major economical
interests in Russia. Germany has also got to accommodate US demands, after all the US is still occupying Germany. Finally, it is worth noting that the German chancellor grew up under Soviet occupation. Please inform yourself about the facts rather
than mindlessly reciting Syriza propaganda.
(c) "I'm saying, the legitimate government of Ukraine was toppled to be
replaced with some pro-West-interests friendly"
This is not the time and place to discuss what is going on in Ukraine.
Let's just say that what you write here is indistinguishable from what
the Kremlin says.
(d) "So?" My salient point (that you did not address) was that plenty of countries
started from a much worse place than Greece and are doing much better
after a couple of years. Go to South Korea some time ... Maybe look at
your neighbour Turkey and see their stunning economic development.
(e) "(whereas Greece had around 1.5 million Greek populate living
under Turkish occupation in Asia Minor that it tried to liberate" Look what you are doing here: you justify greek imperialism and racist
wars, conveniently forgetting that lots of people living in Anatolia
were not Greek and had no intention of being governed by Greece. Most
countries have some of their citizens living in neighbouring
territory, so what you are doing here is legitimising invading your
neighbours.
(f) "But even if it wasn't so, your example would just mean that the
Greeks also owe to Turks, not that Germans don't owe to the Greeks
for what they've done."
As has been pointed out before, and is widely known by anybody with interest in this subject, Germany paid reparations a long time ago. This has all been formalised
in contracts with the allied occupiers. If you think Greece didn't get
enough, please address the occupiers in charge, i.e. the US, the UK,
France, and the Soviet Union.
(g) "Mostly thanks to being the new darlings of the West, in a cold war
ploy against USSR/East Germany Europe. Not exactly "left to their
own devices" and with hard work, as the myth says."
You are channeling that odious Varoufakis guy. If you / he really
belived that, then the rational thing to do would be to go to
Washington (or rather the CIA headquater in Langley, where Varoufakis
claims such decisions are taken) and ask for Greece to be the new
darling ... and magically Greece will become the new Switzerland /
Singapore. Neither you nor Varoufakis do this. In Varoufakis case
that's because he doesn't believe this -- it's just easily consumed
propaganda for dumb voters, in your case ...
(h) "Greece went under financial supervision as a result of exactly that." Greece didn't pay Turkey for Greece's war of imperialist agression. So
your moral position is that you expect others to do what you yourself
are not willing to do.
(i) "Germany with its already high exports had tried to deny any policy
to weaken the Euro for ages, hurting EU countries with less
fortunate import/export ratios." You clealy don't understand
macro-economics. A weakened Euro helps Germany more, because
Germany exports more. A weakened Euro makese German products more
competitive. That aside, Greece doesn't export much to speak of to
non-Euro countries.
(j) "I mean that German companies, like Siemens" I still don't see your
point. According to http://www.transparency.org Greece is a lot more
corrupt than Germany. You could find numerous Greek companies and
individuals doing dodgy things with their money ... how much tax are
greek shipping magnates paying again?
In essence you are following Syriza, and whipping up racism (in this case
anti-Germanism) so as not to address your own problems. It's a well-known pattern
of behviour.
Of course not. Germany has a policy of producing a trade surplus. In order for that to happen other countries must run a trade deficit. This isn't some moral failing, it's simple fucking arithmetic.
This is nonsense. Of course the plan is to save Greece by turning it into a productive, normal European state, so it can eventually pay back the money that was lent to it. However, this is unlikely, and it is also important to avoid a contagion via bank defaults, when Greece's debt will finally be written of -- of course everybody knows that Greece is bankrupt.
You cant have a trade surplus just by having great goods. People need money to buy them. The Germans lent them the money, with no means for it to be paid back.
Are you kidding? Credit can be used productively, for example by investing in new transport infrastructure, new factoris, better education and the like. Greece did none of those and subsidised the lifestyle of its public servants.
So you're saying that without Germany, Europe has no economy?
The answer to this problem is for the public to demand stronger financial regulations from their own government. The problems facing you (rhetorical 'you') are mostly due to corruption in your own government - they're the ones taking crappy loans. So what if you blame one other country. Cut all ties with them... and the corruption in your own government will find some other way to spend your money on their personal baubles.
>The problems facing you (rhetorical 'you') are mostly due to corruption in your own government...
If that were the problem the solution would be fairly straightforward. But it's not corruption that broke the bank. Greece simply isn't wealthy enough to provide the level of services to which the citizens have become accustomed. That's why there's no way out here. The voters will not allow the changes that need to happen for the country to become solvent.
After they stiff the Germans and after they leave the euro the people in charge will bring some sanity to the budget by printing Drachma (or whatever the new money is called) until consumption is brought roughly in line with production.
Germany was basically financing their exports. It's as if GM offered great terms to all comers regardless of creditworthiness, then complains when the buyers can't make the payments.
Victim blaming. The Euro, and it's easy credit was forced upon Germany by France as a price for reunification.
Several German members of the
Executive Board and the Governing Council of the European Central Bank (ECB), and one German head of state resigned in protest against the insane monetary policies that the southern European states voted for.
Why the downvotes? What I state above is historically well documented. I'd also like to remind the readers that Germany is still an occupied country and cannot make decisions about the Euro according to its own needs and wants.
When you think about it, Germany is like the hot girl in a small town high school. She doesn't care if she's pretty (rich) in the absolute sense, she only cares that she's prettier (richer) than all the other girls in the small town (Europe).
Instead of focusing on optimizing Europe's collective wealth, they are trying to maximize their wealth relative to the rest. There is certainly concerns about things like corruption in the periphery, and Spain and Greece certainly had their inefficiencies, but Germany is going about fixing it in a completely wrong way.
What I don’t understand about the current stance of Brussels and Germany, is their distorted view of reality. Michael Pettis apparently and many others, view what Brussels and mainstream economic magazines fail to see.
Take this excerpt from Buttonwood's article[1] in the “economist” on Feb 3rd.:
—
Yes, the Greek voters have given their opinion but what about voters in other democracies? German voters, when polled, seem pretty clear that they don't want Greece to be given debt forgiveness. Since they would bear the cost of a Greek write-off, why should their views count for nothing? And what about the Finns, Dutch, Austrians etc?
—
For some reason ‘Buttonwood’ ignores Podemos in Spain, UKIP in the UK, M5S in Italy and LePen in France. All these anti-EU parties are leading the polls in their respective countries. It’s not something that will happen in the future it is something that it IS happening NOW.
The rhetoric has it that by punishing SYRIZA the current French, UK, Italian and Spanish governments can make a bad example out of Greece and reclaim lost votes. While to me seems a very unlikely outcome. No matter what will happen to Greece, LePen is going to win Frances election if Frances economy doesn’t change drastically in the next months. Same goes for Spain, Italy and the UK. The economy can not change following austerity prescription by the Germans unfortunately, that’s crystal-clear, so why are they sticking with austerity?!?
I might be wrong, I don’t know time will tell, but I get the feeling that people in key-positions throughout EU right now are severely under-educated.
The article was quite refreshing. Let’s hope for the best.
UKIP is not an anti austerity party, you should not mix them in, and the National Front in France should not be lumped in with Syriza and Podemos. Syriza is not really anti-EU, either.
Nor is debt forgiveness a pro/anti EU issue, other than in the construction of the ECB.
You're right, they shouldn't be mixed and SYRIZA is not really anti-EU. But UKIP and LePen are anti-EU while Podemos and SYRIZA will probably not comply with Brussels.
All of them may be oppose to the EU (or EU's austerity policy) for different reason, however the fact that all these new parties are a product of the EU's choice of policy remains IMHO.
UKIP is mainly a product of the Labour party policy rather than EU policy. Upon the expansion of the EU in 2004, the Blair government did not put any restrictions on freedom of movement[1] unlike Germany, France, Netherlands, etc. Predictably, the UK was drowned in a torrent of migrants.
UKIP is a nationalist party: they don't just want to be removed from the EU, but the EEA and the Council of Europe too.
Neither FN (Le Pen) nor UKIP has any chance of winning power in their respective countries regardless of economic conditions.
The local centers of wealth and power in each nation is committed to transnational politics and mass importation of cheap labor to control and depress wages of working people. They own the media and the mainstream parties and will not allow that control to fade. If necessary, the Labor and Tory parties will unite and dissolve their differences in order to defeat UKIP.
Well, I can't say what will happen in the UK. Time will tell but nothing is impossible. You seem to underestimate widespread despair and irritation the EU spread throughout Europe.
SYRIZA in 4 years grew from a 4% party to a 36.5%. Now it is steadily floating above 40%. The local centers of wealth controlling the mainstream media outlets are strongly against SYRIZA, making counter-arguments and spreading panic at every step the current government takes, which results in further popularity spikes.
Take a look and how the NSDAP rose to power in (1925-33). It's kind of watching history repeating itself like a farse. Even in Germany today, the anti-immigration 'Pegida' party on the rise[1].
In 2014 EU elections the FN came first[2]. That was before all this anti-islam frenzy driven by the Charlie Hebdo tragedy, alledged Jihadists killing live one hostage after another, etc.
Keep in mind that Hollande was a huge disappointment for the French population and since each vote counts equally I can't see how bankers are going to protect the current 'status quo' in France.
What Varoufakis says (that the only ones who will benefit from austerity are the extremists) is totally spot on and it's already happening...
If Le Pen can make it to the second round in France, it will be in Hollande's place. Sarko will be Le Pen's opponent and will win 70+% of the vote, most of Sarko's support coming from socialist voters.
And remember NSDAP could do what it did only because of the Communists; NSDAP alone never had the support of even a quarter of DE voters. There are no more Communists around. Well, hardly any.
I can't imagine that a unified Conservative and Labour party in the UK would do anything but utterly disgust their respective voters, and ensure a UKIP victory.
UKIP are unlikely to win seats in London, Scotland, Wales or NI, which are 190 out of 650 seats. That means they'd have to win >71% of the remaining English seats for an outright majority.
UKIP won't win in London because London is full of migrants. These migrants are unlikely to vote for their own christmas, so to speak.
UKIP won't win in Scotland, Wales, or NI because these areas already have alternative parties (SNP, Plaid Cymru, DUP).
Anti-EU sentiment has actually been decreasing as UKIP support increases[1]. In 2013 and before, most people wanted to leave the EU, but now it's more of a wash.
This is inconceivable. However, UKIP has an important influence on UK politics even if they only win a few seats in the sense that both major parties are mortally afraid of loosing voters to UKIP. To avoid that, the big parties take some of UKIPs policies on board.
By telling her that minumum (or median) wage is not the be all end all.
Rate of economic development, cost of living and personal debt matters as do relative changes in wage levels.
The minumum wage doesn't matter at all also, when you have ~40% youth unemployment and 27% general unemployment (so those people's wage is zero).
If Americans, for example, started getting mass 40%-50% pay cut across the board, a huge amount of them would end in bankruptcy, small business closed, houses lost to unpaid loans, etc.
The Latvians got that 5 years ago. GDP -26%, mass government layoffs, 30% paycuts for those that were left, housing prices -55%.
Once the housing cost factored out (extreme heating bills, unlike at least most of southern Greece!), cost of basic necessities here is not so incredibly different from Western Europe.
A very good answer would be to ask her to come and live in Greece for two years, but to save her the shock... I will share a few sporadic thoughts.
The official unemployment rate among youths (below 32 IIRC) it's 50.60% today. Given the fact that part time jobs like working as a delivery boy counts as employment for the prior government, you can rest assure that finding a steady salary in Greece these days is extremely hard.
In the private sector almost no one is going to give you a full time job. If they do, you're expected to work at least 10 hours per day, maybe more, while you're officially paid for ~ 8.
The local social security found takes a large cut of your salary ~ 30%. Then you are taxed. Last year taxes rose at incredible levels. People lost their houses because by governments math, if you owned a house at some remote location, mostly parent's heritage, theoretically you had a income even though you resulted as unemployed. This led to extremely tragic situations where people became homeless overnight. There are other taxes like these that add up to your electricity bill. Can you imagine living without electricity? What would you if you had to choose between having EUROs but not having electricity at home or having Drachmas and having electricity at home?
Although in current Greece you pay a large amount of your income to social welfare state, that's totally inexistent. You have to double pay for your child's school, because he will never get into the University if he doesn't take extra (private) classes. You have to double pay for your health if a member of the family has a problem. Drugs became increasingly more expensive, although the prices of the actual drugs in many cases where slashed, because of added taxes at every drug prescription.
In Greece we had ~ 7.000 suicides in the last 6 years. We became from last country in suicides, to first in the EU on average, within 6 years.
[...]
---
That's only the tip of the iceberg. Greece, is a third world country right now and the population is suffering. That's why a large % of the population doesn't care much about staying in the EUR or not.
Also note that among the Greek population there's a feeling that Brussels and Germany is heavily corrupted[1]. Indeed the fact that Berlin and Brussels so openly support the governments and oligarchs who created the financial crisis in Greece instead of punishing them, says a lot IMHO about their real interests. Most of the bail-out money went to French and German banks who held Greek Bonds.
So the private banks got away with high-yield Greek bonds while the Greek and German tax-payer had to pay the difference.
---
Now that said, it's not like everything is Greece was okay. We have an extremely awful local elite who act as an oligarchy. Indeed Varoufakis refers to them as "Oligarchs", because that's what they are. In Greece we never had a justice estate. I don't know how are things in Latvia, might be better or worst I don't know, really I don't.
Anyway Greece needs restructuring. It needs a wages alignment, but if anything, the average wage has to go up not down.
---
In view of current events, are you sure that entering the monetary union, was a good move in the long run for Latvia? I mean Czech Republic didn't enter the EURO nor Switzerland. I see them both extremely happy that didn't.
To be clear, I don't wish anyone this kind of suffering! At the same time, all you mention seem to be very similar to what the Latvians went through in 2009.
I do see the difference of the enormous Greek state debt after years of structural overspending by the Greek government. Latvia simply had almost non-existing debt before it went through the 2008-2009 economic crisis.
You say "Also note that among the Greek population there's a feeling that Brussels and Germany is heavily corrupted." The EU structures seem to be intact, if serving other (corporate?) interests than you and I would like. Greek structures seem to be crumbling under corruption much more.
I'm genuinely interested in how you would ideally see Greece regain solvability.
Kind regards,
Mark
P.S. In the case of Latvia, eurozone was not an option. It was a requirement of joining the EU. Will that be good or bad in the long run? They lost a bit of economic flexibility (no independent currency floating possible), but they still have an internal devaluation as an option. They used that once. Basicly, lower wages by 20% by decree and make local products cheaper that way. Socially quite insensitive instrument. On the other hand, jobs are plenty again here...
I don't know if the Latvians went through a similar situation in 2009, but Greece is in this situation for 6 years and no one feels that it's going to end anytime soon. Indeed large part of the population[1] is semi-depressed on a daily basis.
There's another part that's important to mention here: Greeks have been heavily accused of being lazy and corrupted. Of course there are lazy on corrupted people in Greece. But the majority is not like that. Indeed, I dare to say that Greeks are among the most hard-working people in Europe. No one I know works the pre-determined hours. EVERYONE works overtime, me too of course. This accusation led to a feeling of lost dignity which now SYRIZA is trying to restore.
Most Greeks don't even know when that happened, but I know... It was first the 'Karamanlis' government who initiated the myth of Greeks not paying taxes and then Papandreou went over the roof making rounds in Europe stating that he is the PM of a corrupted country in order to avoid all responsibility for non-taxing the local oligarchy.
In a sense, Greeks, deserved to be punished because we supported (as a nation) largely corrupted politicians. It's easy to blame, it's a lot more complicated in real life, but I won't bother you with details. Truth is that there are no innocents.
However, we found ourselves in a spiral of a Crisis that we didn't create, private banks did. I feel that Greece was the weakest link.
In 6 years of austerity, Greece has implemented so many reforms that no other first world country had ever made. It create a (I believe false, but whatever) surplus last year, but at a huge financial and social cost. The troika's program, led the debt (which in theory everyone wants to lower) go from 125% to 180% of the GDP. Clearly, it doesn't work for us.
From the amount received by the troika, only 11% went to Greece. The rest went to pay Greek maturing bonds held by French and German banks. Doesn't make sense to me. At the same time, Germany was selling broken submarines in Greece and military equipment. Indeed the only part of the public spending that wasn't slashed was the military spending. I assume that is because most of our military expenditures came from Germany and France.
In 2001, Greece falsified the countries stats to enter the EURO. Everyone knew. Personally I believe that many other countries did the same (Italy, Portugal and probably others). What is known now, is that everyone knew but didn't care at the time. The man who made this possible was Loukas Papademos. He acted as a bridge between Goldman Sachs and the Greek government. Loukas Papademos was A. Merkel's choice for PM after Papandreou resigned and country for some reason wasn't ready for elections. Isn't that a strange choice to make? It looks very suspicious to me to choose to work with the same people who accuse of fraud. Mostly in the same vein, Germany supported the same parties that brought Greece, financially speaking, to it's knees... Which doesn't make sense to me.
The current government is the first clean government in 40 years. It might our last chance to straight up the country.
> I'm genuinely interested in how you would ideally see Greece regain solvability.
I like Varoufakis (our new FinMin) "Modest Proposal"[2]. Varoufakis believes that, although Greece has it's fair share of problems as is, the Eurozone crisis is mostly structural. It's not a Greek problem, it's a European problem. Many renowned economists have expressed the same idea. You might be familiar with Paul Krugman and Joseph Stiglitz for example, two American economy nobel-winners, but there are many others which believe so in mainstream financial media magazines like the NYTimes, FT, WSJ, The Economist, etc.
That said, I believe that the Greek economy is a symptom. Greece has a total lack of justice estate. If the current government manages to re-structure our justice estate in order for it to break the chains of corruption, the rest will follow.
Sorry for the long response!
Take care :-)
[1] I live in a small town in North Greece. The crisis didn't strike our town as much as other major Greek cities. I work with people, elderly mostly and I get a first-hand idea of how they feel.
There is something I completely missed in this piece: the distinction between public and private debt. For public debt, there is a single agent that decides: the Government, that is elected democratically. How does the "there is no Spain" argument apply to that?
you are right. And the same applies in the other way. If most of the lenders are in Germany or some other country, of course they are going to be annoyed if Greece defaults.
Unfortunately, the length and tone of the article are going to convince many people that the author was on to something.
"People sometimes mistake their own shortcomings for those of society and want to fix it because they don't know how to fix themselves."
"It is possible for individuals, and even for whole cultures, to care about the wrong things, which is to say that it's possible for them to have beliefs and desires that reliably lead to needless human suffering."
I'm outraged. I was born in Greece to Greek parents and feel extremely unlucky about this, sort of being born in a completely third world country.
The level that the Greeks (not all of them, but to an extraordinary extend) fail to comprehend reality is astonishing. The modus operandi here is "do whatever other people do around you". And what is that? Slowing drag your feet through education, which is laughable and teaches almost nothing of practical value, go out as much as you can, drink coffee for hours on end talking about crap every day, study "whatever you like" failing to understand that some (most!) university departments are terribly anachronistic and will lead to unemployment with certainty, etc, etc. It's a failure from top to bottom: parents and especially teachers are freeloader lazy people and this is exactly what they teach to the young, by every aspect of social interaction.
I lost too many years of my life, trying to find out what's wrong with me, and eventually found out about Paul Graham, and startups, and ambition, dammit!
I read a comment somewhere about the US/western Europe just nuking the place and felt so in tune with it.
In fact, the people here are just unlucky, like me. They don't even comprehend what it means to work. They say stuff like "Greeks work more than Germans!" and they go to work 1 or 2 hours late and talk for hours about last night's football match.
Empirical data towards a proof of what I'm saying: I was saying those stuff to a sibling of mine, and they were hating me, as most people do here. But then, they moved to a Western European country, and after several years of trying to adjust, they now tell me that they themselves regard the Greeks to be lazy whining freeloaders.
I apologize for the rant. My question is this:
Why the German government, and Western European countries more advanced and with better "culture" in general, doesn't try to help Greeks become more like them, starting from education? Is it because of politics, or is it that this might be happening already, but to see actual results you have to wait a very long time?
maybe the real problem is lack of grocery stores in places like Spain and Italy, http://flowingdata.com/2014/05/29/bars-versus-grocery-stores... now admittedly this might have nothing to do with the current economic problems faced by the EU, but at least in some of those places they have plenty of places to grab a drink!
In addition, since Varoufakis has been of interest to HN for a long time, some of you might like this interview that Pettis links to: http://www.zeit.de/wirtschaft/2015-02/yanis-varoufakis-greec.... (The other articles that Pettis links to about Varoufakis' proposals are behind the FT paywall.)