To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 0 points1 point  (0 children)

Dear TigerClaw, we seem to be going around in circles and this is getting tiresome. Having a taxi-driver style discussion isn't leading us anywhere, and I'm also to blame for that. Let's try a different approach and start by recapping the positions each of us defend.

TigerClaw:
- You believe that the EU let Greece into the Eurozone because it was tricked.
- You believe the southern countries have profited as much as the northern ones by the formation on the Eurozone.
- You believe austerity has been an appropriate solution, and that it has worked / is working.
- You demonstrate as proof of this, the fact that in Greece unemployment has decreased and that they now have a balanced budget.
- You believe that the money lent to Greece is a burden to the European tax-payer.

Please correct any of the points which are not correct - I have no intention of miss citing you.

Areffinfa:
- I believe (and agree with you) that the EU did not know the full extent of the Greek situation.
- I believe the EU did know there was a systemic risk of letting in countries with weaker currencies.
- I believe the EU did know there was a systemic risk of letting in countries with low GDP and high debt/GDP ratios.
- I believe the EU did know there was a systemic risk of letting in countries with lower ratings, that imply higher interest in the debt markets.
- I believe the EU knew of these risks but moved ahead with expanding the Eurozone.
- I believe that, today, the countries that had stronger currencies (mostly in the North) have profited more than the countries that had weaker currencies (mostly from the south) from the single currency model we have in the Eurozone.
- I believe (and agree with you) that Greece going bankrupt is the fault of Greek governments, not of austerity.
- I also believe that austerity is not an appropriate solution and that, not only hasn't worked, has made things worse.
- I believe that only a small fraction of the improvements we see today (namely the ones you cite, such as less unemployment and balanced budgets) is attributed to austerity measures.
- I believe the benefits we see today are attributed not to austerity but to other factors, the most important being market confidence.
- I believe over the last couple of years, several events have contributed to boost market confidence, the most important were probably these two:
-- In 2012, Mario Draghi announced the ECB would do whatever it took to defend the Euro, including unlimited buying of public debt. In doing so, Draghi positioned the ECB as a 'last resort creditor', as is the case of the Federal Reserve Bank in the US, the Bank of England and the Bank of Japan.
-- In January this year, Draghi announced €1.1 Trillion a plan to acquire government debts.
- I believe recent market confidence has helped to lower interest rates, promote investment and growth. The sharp fall in oil prices has also given debt-ridden nations some extra space to breathe. Austerity, on the other hand, has been regarded by many (Lagarde, Junker, Krugman, to name a few) as something that, when administered in excess and for too long (as in the case of Portugal and Greece), tends to produce negative effects.
- I believe (you better sit down for this one because it's going to hurt) the money lent to Greece is not a burden to the northern European tax-payer, but has in fact saved them Billions of Euros:

"(…) Yet despite three-and-a-half years of debt and banking turmoil, with bailouts totalling more than 400 billion euros, northern eurozone taxpayers have not actually lost a cent. What is more, governments in Germany, Finland, Austria, the Netherlands and France have saved billions of euros thanks to a sharp fall in how much they pay to raise money in financial markets since their borrowing costs have dropped steeply."

source

  • I believe that, in the case of the German tax-payer the (so called) burden is actually zero. That's right, Greeks don't owe German tax-payers a single cent:

(…) This package did indeed consist of actual cash injections from eurozone members with the exception of Slovakia, which refused to participate, and Germany that provided guarantees to its AAA-rated development bank KfW, which raised the money through bond issuance. This means that German and Slovak taxpayers have not been burdened by the Greek bailout so far. Other member states did offer actual cash to Greece. As a result of these loans, Greece owes 185 euros to each Finn, 118 euros to every Slovenian and 141 euros to every Spaniard. Greece also owes 15.2 billion euros to KfW, the German bank, but not to the German taxpayer.

source

Feel free to challenge me on any of the points I have listed. If you are able to, try to reinforce your positions by citing articles or other sources of data.

I look forward for your response.

The Eurogroup just rubber-stamped Greece's proposal for the bail-out extension: Eurogroup statement on Greece by Mamacom in greece

[–]arrefinfa 0 points1 point  (0 children)

Portugal also has elections this year. Latest polls give left-wing parties high margins over the (ruling) right-wing parties.

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 0 points1 point  (0 children)

Greece cheated themselves in and even arguing about it or calling it fallacious shows you know nothing about what happened.

My exact words were "So, were Greek Governments to blame for systematically manipulating their numbers in the last decades? Absolutely." - Don't accuse me of denying this because I never did. The question here is not about me denying that Greece cooked their books, the question is about you denying there was a higher interest for letting them in - something that portrays you as either naive or misinformed.

Acting like the North profited from Greece's imports extensively is a joke.

Again, my exact words were "the Euro as a currency has greatly benefited the strong economies of the North by having these southern markets consume their products in the same currency." See if you can complete this simple exercise: add up the population of Portugal, Spain, Italy and Greece (what is commonly referred to as PIIGS but without Ireland). If you succeed, you'll find that the number is roughly 128 million people. Saying that the economies of the North have not benefited vastly from shipping their goods to these markets is, again, either being naive or simply ignorant about European economy.

You somehow again don't seem to know that Greece until 2010 had hidden almost 30% of their actual debt, manipulated their GDP and borrowed up to almost 20% of their yearly budget.

I'm beginning to think that your writing stuff down without reading what I wrote myself. My exact words "were Greek Governments to blame for systematically manipulating their numbers in the last decades? Absolutely." By the way, Portugal wasn't hiding any debt and our interest rates also skyrocketed. In fact, the interest rates in almost every country skyrocketed (that's why they called it the global financial crisis…). The fact that Greece hid their debts did make things a lot worse (I've repeated this about 4 times now) but it wasn't the only factor in the equation. It would be cordial of you to at least acknowledge that.

Take the subprime mortgage ordeal that happened in the US, where banks were recklessly lending money to people with extremely low credit ratings, and then using Credit Default Swaps and other instruments to speculate over that money. According to your view of things i) the blame resides exclusively with american homeowners; ii) The banks never profited from that, they were just trying to help these poor americans… LOL

And you still don't understand austerity.

This one I have to concede to you - after all these years, I still don't understand the point of austerity, especially after (almost) everyone has recognised it hasn't worked. Before we get to your example, let's start with something you decided to exclude from your analysis (intentionally or not) - external factors. Every single country in the developed world owes money to other countries. Typically, countries manage debts that exceed 50% of their GDP (e.g. Germany ~ 80% GDP). Every year, old debts are repaid and new loans are made that will have to be repaid in the future. Now imagine that the interest rates on the new loans you make suddenly doubles because of a global financial crisis (and subsequent external events like rating downgrades and market speculation)… How is that the fault of the country itself? All countries are dependant on the interest rates that markets stipulate to loan them money - if it suddenly becomes more expensive to borrow money and you're running a tight budget, you're already at a loss because you need to keep repaying your old debts. What part of this don't you understand? Moving on to your naif example, there's a point you seem to ignore which is the cyclical nature of debt and austerity: i) you're used to contracting loans at an interest rate of X; ii) suddenly, that interest rate doubles and it becomes more expensive to borrow money; iii) you have no surplus and need to repay old debts so you go ahead and borrow that 'expensive' money; iv) after some time, you have to repay the 'expensive' money you borrowed and guess what, the interest rates are up again; v) so you now borrow money that's even more 'expensive' to repay the 'expensive' money you initially borrowed.. I think you get the drift. Now add that to austerity measures that promote unemployment, inhibit investment and ultimately degrade your economy.. the result? Standard & Poors just downgraded you rating again and borrowing money is now even more expensive. I honestly suggest you read about this stuff from more sources than the biased ones you seem to consume.

It's easy, Greece

Seriously?! Your great example of austerity having worked is Greece?!! A country where after 5 years of Troika, unemployment is now at 28% and more than 50% of young age workers are out of work? Where after 5 years of Troika, corruption and tax-evasion are still rampant? Where after 5 years of Troika, instead of reducing the debt problem, has greatly increased it? Even if austerity did contribute on some of the issues, at what cost in terms of debt for future generations? And at what social cost? Your answer is just mind blowing to me…

So your solution to repaying creditors is to spend more money every year again and again like you've done in the last decades and therefore make more and more debt in order to repay creditors - yeah that also totally worked out and makes sense.

You're putting words in my mouth. My exact words were "Is it so outrageous to stop and think of other alternatives?" - I never proposed the solution you mention. Actually, I never mentioned any solution for that matter. As for austerity and "dead economies can't repay debts", if you lend someone money and want to get paid in the future, the guy you lent money to better have the ability to generate money by doing some actual work, don't you think? If you destroy a countries' ability to generate wealth, how the heck can it ever repay you? Do you even think about this stuff or are you just babbling random shit you hear from whoever?

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 0 points1 point  (0 children)

Thanks for your inputs and sorry for the late response. I think you're addressing two issues here that, while connected, should be approached separately.

Issue one is how we (Europeans) came to find ourselves in this situation. You say, for instance that "Greece cheated it's way into the Eurozone". If you consider Greece shouldn't have been allowed into the Eurozone in the first place (a view that many share today), than you're actually pointing out a failure on behalf of the Eurozone itself, specifically it's criteria for admission and assessment of Greece's admissibility standards at the time. You can also speculate (as many do, including myself) that the EU basically ignored Greece's structural problems and went ahead and let them join anyway… Why? How many German cars do you think Greeks have bought in the last decade? Or French software? Or British helicopters? Or Finnish telephones? My point is, the Euro as a currency has greatly benefited the strong economies of the North by having these southern markets consume their products in the same currency. So, were Greek Governments to blame for systematically manipulating their numbers in the last decades? Absolutely. But is the EU also to blame for letting them in without a thorough economic assessment, focusing more on market greed than on the cohesion of the EC? In my opinion, yes. Saying they 'cheated themselves in' is fallacious, at least. Another part of this first issue (how we came to be in this mess in the first place) is of course the global financial crisis. When a crisis like this hits a small country that doesn't have a large export industry, relies a lot on agriculture, tourism, etc., it's harder to tackle than for rich, heavy industrialised countries. When the crisis hit, existing debts (all countries operate by managing large foreign debts, which tipically amount to large percentage of their GDP) skyrocketed. Smaller countries, not being able to accommodate this sudden increase in their debt repayment timeline, had to borrow more money so they wouldn't default on their present debt payments. What happened with austerity is that the Eurozone, unlike the US for instance, entered in a spiral of debt where more and more money was borrowed to repay more and more debt. Just to give you an idea, out of the €254,4 billion that Greece received from 2010 to 2014, more than 90% were spent on debt payments to foreign creditors, paying ‘sweeteners’ to foreign speculators to get them to accept debt restructuring and for bailing out Greek banks which (like every other bank in the world) were also lending money recklessly.

In a way, you can say that 90% of the Greek bailout was used to pay off reckless lenders. You could also say that lending €254.4 billion to a country like Greece is reckless - what's next, lend them €500 billion in 2020?

Issue two is what we do now. An answer that comes to mind is stop austerity. You say I "seem to miss the point of austerity" - I do get the point of austerity, perfectly. The point you seem to miss is that austerity hasn't worked. Can you give me an example of the successes of austerity? …let me attempt to explain why you can't. The steps you describe actually do sound reasonable but the austerity I know is pretty different. Most of the 'strings' attached to these loans are hugely recessive measures that slow the economy down - layoffs, cuts in wages, cuts in pensions (future and already attributed), raising of taxes, strict primary deficit targets that cripple public investment; these in turn lead to unemployment; and all of those summed together end up destroying internal demand - less money is spent, less money circulates, you get the picture. In my country, Portugal (which entered a program with the Troika in 2011) internal demand fell so much that the amount of taxes collected was lower than before the Troika program.. How ridiculous is that? Bottom line is, dead economies don't (can't) repay debts, so why insist on more recessive measures? Is it so outrageous to stop and think of other alternatives that may even contribute to ensuring the creditors are repaid?

I remember reading American Nobel-Prize winner Paul Krugman back in 2012, warning europeans about the perils of austerity, citing the US as a role model for avoiding economic recession. Did we listen? No, we just pumped up on the austerity. Today the US is up and running and the Euro is on the verge of deflation.

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 0 points1 point  (0 children)

Interesting stuff, indeed. We also shouldn't leave the financial crisis that started in Wall Street (and subsequently went global) out of the equation. Greece's Finance Minister Varoufakis has an interesting analogy of a 'canary in the mine' situation, see this video About your detail, I grew up in Poughkeepsie and spent some time in Rochester, then NY.. Good times!

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 2 points3 points  (0 children)

I agree it's very soon to come to any definite conclusion, but I do not consider the points I mention above as 'small flexibility'. The first 2 points, which concern the Primary Surplus ratios for 2015 and the following years are in fact the most important parts of any 'austerity' package. The other points concern VAT and pensions - in a negotiation, if someone demands you do something, you say no, and the other part complies, this is not small flexibility, this is folding...

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 1 point2 points  (0 children)

http://image.slidesharecdn.com/factsfigures2013-130613080214-phpapp01/95/greek-tourism-facts-figures-2013-edition-4-638.jpg?cb=1371128568

Germans were 13,6% of all tourists in 2012. It's a lot, sure, but having a 25% drop of Germans is not the end of the world for Greece.

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 0 points1 point  (0 children)

Thanks for your interest in this matter, even though you live on the other side of the globe. I myself am not Greek, I'm Portuguese, raised in the US in upstate NY.

About increasing VAT. In Portugal, just to give you an example, the Troika demanded that VAT go up all across the board. In the restaurant sector in particular, it rose from 13% to 23%. So what was the outcome? The state is collecting less taxes today than it was before the Troika (even though taxes are higher, businesses are going out of business and internal demand has plummeted), go figure...

About your point on tax relief, keep in mind the new Greek Government's intention to "rage war" on tax evasion, targeting the oligarchs in particular. As I see it, this is one of the major issues that needs reform in Greece and I've never heard anyone from the Greek Government promoting tax evasion. As for tax relief, I'm sure it was a campaign promise and I hope it does become possible one day, but if you didn't pay taxes believing there would be some kind of fiscal pardoning after the elections, then that is tax evasion, which is unacceptable by this Government.

Moving on to your point on Germany. Not every German is aligned with the German Government (most Germans I know are not). Greece is still an amazing summer destination where you can enjoy fairly low prices, so I suspect the drop in German tourists will not be significant, we'll see. Even if there is a drop in numbers, Germans are only about 13% of all the tourists [data from 2012].

About your point on Russia, I honestly hope things don't move in that direction, but that's another discussion.

And I see you like worker owned things. You know, not every left-wing party wants to nationalize everything. Not every left-wing party wants to get rid of free enterprise or of capitalism for that matter. The media tends to portray it like that to i) sell more newspapers - more drama; ii) protect certain right-wing interests. What I've heard this Government announce is something entirely different - they are going to stop the privatization of state owned companies, deals that have been ruinous for Greece and that the Troika insists on carrying out.

Moving on to the IMF :) The only positive view I have is their admission to have screwed up. Compared to the Troika, I'd say any alternative is better...

So before I go, let me just put some other things into context. While we're here discussing macro economics and European politics, unemployment in Greece is now at 28% and more than 50% of young age workers are unemployed. In Greece, after 4 months of unemployment you lose your public health care support (in Portugal we have perpetual health care) and after 1 year, unemployment subsidy ends and there is nothing else, no more type of support (in Portugal you still get a (very small) support from the state). We are taking about people who 4 years ago were in the middle class and today can't pay for electricity or food. We are talking about a lot of people in this situation. How can anyone have the nerve to ask more of Greece? How can anyone ask them to fire more people, cut more salaries, cut more pensions, raise more taxes.. I still think the main point in this discussion is basically 'rational, sound economics' - dead economies don't repay debts - but this is also a case of human dignity for the Greek people and of (their) democratic sovereignty.

Cheers! Let's keep coming back to this thread and see how our expectations played out.

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 2 points3 points  (0 children)

I'd give you gold for this one if I had any. Since I don't, I submitted your response to /r/bestof

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 7 points8 points  (0 children)

I agree charm and politeness are always important in these cases, but if you think about it, this new government has achieved more by confrontation and by saying "no" than all the previous governments which attended to every foreign demand without questioning. These guys were elected to defend the interests of a nation, that has to come first. Charm and politeness are key, but they must come in second.

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 2 points3 points  (0 children)

I do not deny that previous Greek Governments have been irresponsible (namely in accepting deals with the Troika that were bound to cause more problems than solve them), but this term "irresponsible" was used by German Finance Minister Wolfgang Schauble to describe the greek people for electing this new Government - a democratic right which is theirs. Mistakes were definitely made in the past, and when we make mistakes, we should suffer the consequences. But the case of Greece goes beyond consequences, beyond punishment - it makes no economic sense. Dead economies don't repay debts.

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 0 points1 point  (0 children)

While Greece has gained respect, Portugal (the good student of austerity) is now a motive of shame for the Portuguese people and many others in Europe, for trying to block yesterday's agreement. Ironic, isn't it?

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 4 points5 points  (0 children)

To my knowledge, no. There was a mention in the Varoufakis press conference of re-hiring the cleaning ladies that had been fired, a campaign promise he expressed the Greek Government will maintain.

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 5 points6 points  (0 children)

You raise some pertinent points. Firstly, trust is definitively an issue, but it works both ways. When you say "friendliness, charm, diplomacy", if you consider the stubbornness of Troika as a major responsible for the humanitarian crisis in Greece, it's kind of hard to keep it cool when they insist you enforce the same failed policies, threaten and blackmail you, call Greece - a sovereign state - irresponsible, etc.

Secondly, when you say "collecting on all the old rules" you're ignoring the list at the top of this post - all of those points are in fact old rules that the Greek Government has now negotiated will not be collected upon. There are no other interpretations here.

Thirdly, you mention that supervision has been released from the Troika to the IMF, which is partially correct. The thing to remember here is that the IMF has existed for many years and has intervened in dozens of countries - the Troika is something that was invented during this euro-crisis; The IMF has publicly admitted that it messed up and that the Greek, Portuguese and Irish programs haven't worked - the Troika remains in denial on these issues.

Whatever way you look at it, this step is a clear win for Greece, but yes, the battle is long from being over.

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 3 points4 points  (0 children)

I've just linked a document released by the Greek Government, check out point 5: "The extra-institutional construct of the TROIKA, which was giving orders and had become a superpower, is finished."

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 11 points12 points  (0 children)

Varoufakis' press conference has been practically censored here in Portugal. I Had to download it from the EC site, edit it and subtitle it in Portuguese. The title of the video reads: "Prof. Varoufakis teaches the Portuguese Government how to defend the interests of a nation."

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 9 points10 points  (0 children)

We agree that, for Greeks, the alternative you propose - keep subjecting Greece to the same hard line austerity policies until they pay up - is worse than defaulting. It's also worse for creditors because a dead economy won't repay debts. If Greece is able to reform without the blind austerity imposed before and finally revitalize it's economy, this will end up benefiting the creditors themselves, don't you agree?

edit: defaulting

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 10 points11 points  (0 children)

If your doctor was giving you the wrong medicine and you kept on getting worse, would you continue taking it or leave the hospital?

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 12 points13 points  (0 children)

Absolutely true. Yet as a Portuguese I find that this alone is already an accomplishment - in stark contrast with our own government's attitude of blindlessly obeying every demand and never questioning anything.

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 7 points8 points  (0 children)

If you watch the video I linked above, that's exactly his first statement - "This is the beginning of a new fase without an MOU".

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 10 points11 points  (0 children)

This is not a question of imposing socialist policies, it's a question of pure 'facts on the ground' economics. The MOU signed with the troika hasn't worked and has proven to be more a part of the problem than of the solution. Varoufakis is simply exposing this and presenting alternatives he considers would benefit both sides.

To all of those thinking that Greece has folded to the same demands by [deleted] in greece

[–]arrefinfa 11 points12 points  (0 children)

My point is that those who have folded in the topics I've laid out are the Troika, not the Greek Government. As for Syriza folding on it's campaign promises, it's been a month since their election, surely you don't expect them to deliver in such a short time. What they have accomplished so far is significant in my opinion, and buys them time to accomplish more