The European Union

[regwec]

Banks

You seem unable to distinguish these from treasuries. The ECB has a duty to keep banks liquid if they are solvent (the Greek banks were, at least before the ECB stopped issuing them with €uros, precipitating a run on them. If they are insolvent, the ECB as a lender of last resort has a duty to recapitalise them under the Stability Facility. This is an issue quite different from sovereign debt.

Sympathy

Far removed from the troubled parts of Europe, you and our German friend to not have any for the Greeks. That's fine- some people do not naturally have empathy fpr those who are suffering. We will just have to accept a difference on this point.

The EU and Growth

The EU has been a disaster for growth and stability, notably by the adoption of the €uro, but generally because of its propensity to over regulate and its parochial, inward-looking corporatism. The CAP has led to massive inefficiencies and waste in the agricultural sector, its employment regulations have led to sclerotic growth, its fisheries policy has led to the remarkable spectacle of rusting ships and destitute fishermen, along with collapsing stocks. Everything it touches turns to ****. It has the highest youth unemployment rate in the developed world, and the slowest growth.

Enforcement Mechanisms

These do not exist in the treaties because voters and their sovereign governments have no appetite for them, and also because even the pious/hypocritical member states (hello again Germany) always break the rules, e.g. the Stability and Growth Mechanism.

The prospect of Germany having its hand on the whip has not become more palatable to ordinary Europeans simply because it has made a huge power grab that was nowhere facilitated in the extant treaties.

You may argue realpolitik, but the pretense at least used to be that the EU adhered to principles of democracy and the rule of law.

Solidarity

Your response doesn't refer to my original statement at all.

If you think Europe is undivided in its opinion of what the troika has done to Greece, you don't read much.

The Death of the EU

No, it will fragment. Nobody in the rest of Europe wants to go back to being run by Germany- that was attempted in 1914 and 1939, and it wasn't popular. People remember these things.

 

[Mechanix]

Sympathy

Far removed from the troubled parts of Europe, you and our German friend to not have any for the Greeks. That's fine- some people do not naturally have empathy fpr those who are suffering. We will just have to accept a difference on this point.

You clearly didn't read my posts very well. But, I don't expect anything less from you.

 

[regwec]

I expect you wish you could post a middle finger to Greece.

 

[ThePhantasm]

I wish I could post a middle finger gif to this ridiculous "point."

Weren't you banned already?

 

[Mechanix]

I expect you wish you could post a middle finger to Greece.

No, I don't. And nothing from my posts have even remotely suggested that. You just think any defence of Germany's position automatically means a lack of sympathy for the Greek people or that the person is a Nazi.

You're being needlessly inflammatory.

 

[Mechanix]

Weren't you banned already?

What's your point?

 

[hippie_hunter]

Banks

You seem unable to distinguish these from treasuries. The ECB has a duty to keep banks liquid if they are solvent (the Greek banks were, at least before the ECB stopped issuing them with €uros, precipitating a run on them. If they are insolvent, the ECB as a lender of last resort has a duty to recapitalise them under the Stability Facility. This is an issue quite different from sovereign debt.

But you can only constantly keep giving the Greek banks so much money until the ESM runs out. The situation in Greece was creating a situation to where without capital controls, Greek consumers were just going to keep on withdrawing and withdrawing and withdrawing. Cutting off ESM funds is a way for Greeks to see exactly what would happen if they voted no. And they got what they were asking for.

Sympathy

Far removed from the troubled parts of Europe, you and our German friend to not have any for the Greeks. That's fine- some people do not naturally have empathy fpr those who are suffering. We will just have to accept a difference on this point.

I do have sympathy for Greeks to an extent. I feel sympathy for the Greeks when it comes to the Troika's previous plans that have absolutely devastated Greece's economy. I feel sympathy for Greeks to have had to endure decades of governments that lied and were corrupt and served special interests of the uber-rich and shipping. And I feel sympathy that they have to do things that they have no choice but to go along.

But sympathy can only go so far. I don't have sympathy for Greeks when they elected a government that has acted in poor faith as a negotiating partner. I don't have sympathy for Greeks when they are acting like they can have their cake and eat it too in regards to Eurozone member-ship. I don't have sympathy when they were told what would happen in the event of a no vote and still did it anyways.

The EU and Growth

The EU has been a disaster for growth and stability, notably by the adoption of the €uro, but generally because of its propensity to over regulate and its parochial, inward-looking corporatism. The CAP has led to massive inefficiencies and waste in the agricultural sector, its employment regulations have led to sclerotic growth, its fisheries policy has led to the remarkable spectacle of rusting ships and destitute fishermen, along with collapsing stocks. Everything it touches turns to ****. It has the highest youth unemployment rate in the developed world, and the slowest growth.

Much of the problems come from having to do with poor economic policies of member-states and not the EU itself. I agree with you on the EU's agricultural (which are designed to benefit France) and fisheries policies, but overall the EU has been good for growth. Without the EU, Eastern Europe would not have recovered the way it has in the post-Cold War period. Without the EU, with the exception of Germany and Britain, most of Europe would have faded into the wayside in favor of North America and Asia.

Enforcement Mechanisms

These do not exist in the treaties because voters and their sovereign governments have no appetite for them, and also because even the pious/hypocritical member states (hello again Germany) always break the rules, e.g. the Stability and Growth Mechanism.

The prospect of Germany having its hand on the whip has not become more palatable to ordinary Europeans simply because it has made a huge power grab that was nowhere facilitated in the extant treaties.

Much of it comes from the fact that they did not expect things like the Greek crisis to happen. It's really more along the lines of poor long term planning.

You may argue realpolitik, but the pretense at least used to be that the EU adhered to principles of democracy and the rule of law.

Except they are trying to adhere to the rule of law with the Greeks.

Solidarity

Your response doesn't refer to my original statement at all.

If you think Europe is undivided in its opinion of what the troika has done to Greece, you don't read much.

I think everyone, even those who are unsympathetic to Greece, understands what the Troika has done to Greece. The thing is that trust has been eroded. The SYRIZA government has done a lot to destroy said trust to the point where the clear majority are either open to a Grexit or while preferring to avoid it, don't see it as the end of the world anymore. Only four nations now want to avoid a Grexit at all costs: Spain, Italy, France, and Luxembourg. But even then Greece's government has said that Spain and Italy have been nightmares to deal with while France has been working tirelessly to help Greece stay.

And on a side note, Greece is lucky that Hollande is President of France and not Sarkozy. When Sarkozy returns to power, expect the Franco-German ties to be strengthened once more.

The Death of the EU

No, it will fragment. Nobody in the rest of Europe wants to go back to being run by Germany- that was attempted in 1914 and 1939, and it wasn't popular. People remember these things.

Except it's not run by Germany the way you make it out to be.

 

[Schlosser85]

Weren't you banned already?

She was allowed to return.

 

[regwec]

Inevitably, the draconian and illogical bailout conditions, as imposed by Germany, are already unraveling. The Germans insisted that Greece must accept the IMF had de facto jurisdiction to run its economy and sell its assets, to ensure the impossible conditions were met. The problem is that the IMF knows the conditions are ridiculous and unachievable without the kind of debt restructuring and write-offs that Tsipras has long been pleading for:

The IMF report highlights a massive flaw in the deal hammered out so painfully between Greece and the rest of the eurozone: the numbers don't add up.


It believes that without a restructuring of the Greek debt, it will keep on rising.
But the point about this deal is once again in the eurozone, it was a case of politics trumping economics.



The desire to keep the eurozone together was stronger (for now) than the economic forces threatening to pull it apart.



There was plenty of talk about debt restructuring during the negotiating process, but not on the scale that the IMF is suggesting.


Officially, there will be a discussion of restructuring only after a first review of the new bailout is successfully concluded. That is several months down the line.



But, while the IMF report doesn't comment directly on Monday's deal (because the report had already been written by then), it certainly implies that the IMF may feel it is unable to take part in the new bailout programme for Greece.



And that would leave a large hole - both in terms of numbers and political credibility.

(Source)

Edit: CNN's chief international correspondent hints that the IMF is indeed pushing for debt restructuring. If common sense does prevail, that would be a big vindication of Tsipras, and very embarrassing for the Germans.

 

[herakles]

Greece cannot sustain a return of the drachma. A new drachma would be utterly worthless and it doesn't have the export economy necessary to allow them to recover with a lower currency. Not only that but getting booted out of the euro will significantly reduce trade (the euro has increased trade within the EU, and Greece's biggest trading partners are EU member-states), cause even higher prices (because goods are not going into Greece), and create a banking crisis.

So your way would be to sell off everything of worth in Greece which will not resolve the issue only prolong the inevitable. Also this deal would essentially turn an entire nation and it's populous into indentured servants HH.

Going back to the Drachma may be a 5-10 year of extreme pain in Greece while this deal is a 20-30 pain. I for would take 5-10 years of extreme hardship over 20-30 of embarrassment and humiliation by a economic loan shark.

 

[hippie_hunter]

So your way would be to sell off everything of worth in Greece which will not resolve the issue only prolong the inevitable. Also this deal would essentially turn an entire nation and it's populous into indentured servants HH.

Going back to the Drachma may be a 5-10 year of extreme pain in Greece while this deal is a 20-30 pain. I for would take 5-10 years of extreme hardship over 20-30 of embarrassment and humiliation by a economic loan shark.

The problem is that a weaker currency only works when Greece has the export economy necessary to allow it. It's why nations such as China and Japan have weaker currencies in order to keep their exports cheap. Tourism can only do so much for Greece, it needs exports that it doesn't have in order to make the drachma work. I'm sorry, but your country does not have the economy necessary to have its own currency anymore. Going back to the drachma would not result in 5 to 10 years of extreme pain, it would last much longer than that and isolate Greece from being a part of a lucrative market. Also "embarrassment" and "humiliation" is nowhere near as bad as a decade plus worth of extreme pain.

And on top that extreme pain, you would also have to have the embarrassment and humiliation of still having to get bailed out, have the honors of being a developed nation that needs massive amounts of economic and financial aid, and still be pawns of the EU because the US and EU aren't going to let you guys fall into the arms of China or Russia.

My way would indeed include the selling off of assets. Sorry guy, but that's a necessity. Your country has to sell them. But on top of that, instead of focusing primarily on paying off Greece's creditors which the Troika is currently doing, funds should be used to ensure that proper growth and employment are restored in Greece. The Troika has done a lot of damage to Greece's economy and a new plan is needed to fix that damage first and foremost. A stronger and more economically vibrant Greece is far more capable of being able to repay its debts in a way that doesn't damage its economy.

 

[regwec]

Germany's demands of Greece, rightly ridiculed by the IMF, include raising VAT and corporation tax. The the **** is that supposed to help growth and investment?

I'm afraid that I find it difficult to dissuade myself that Germany doesn't simply want to strip Greece of its assets while they are at the bottom of the market. Warnings about the risks of issuing a new currency can't really contend with ordinary Greek's perception that they are being treated much as they were in 1941, without a shot being fired.

I fear for the future of Europe. There is no doubt that the EU has made another European war much more likely. An ECB bailiff working in Athens could well be this century's Franz Ferdinand.

 

[Mechanix]

Demonizing Germany seems to be a trend that people love going back to.

Especially the Brits and their newspapers. But Germany wasn't the only country calling for a tough deal with Greece. The rest of the EU were as well.

Once things settle down, I think the EU will keep trucking along. There's no need for dramatic fear-mongering.

 

[regwec]

It's not fear-mongering- I am just reflecting on the possibilities. When a people have been devastated by a foreign aggressor, and they have been left destitute, they are quite likely to revolt. Anything can happen in such an unpredictable scenario.

In any case, the EU as it was is finished. It will either have to integrate much more fully, effectively submitting to the historically incompetent rule of unelected technocrats in Brussels and Frankfurt, or it will continue to fragment with a €urozone rump left over, probably consisting of Germany and some of its smaller and richer neighbours.

 

[herakles]

Demonizing Germany seems to be a trend that people love going back to.

Especially the Brits and their newspapers. But Germany wasn't the only country calling for a tough deal with Greece. The rest of the EU were as well.

Once things settle down, I think the EU will keep trucking along. There's no need for dramatic fear-mongering.

fear mongering? It seems that only the Dutch, French and Germans have been truly benefitting form the Euro.

Turning a "Ally" into an indentured servant isn't the act a Ally makes.

Sorry while I have a great deal of respect for the German people I think Chancellor Merkel is going overboard with her attempt to cripple Greece.

 

[herakles]

The problem is that a weaker currency only works when Greece has the export economy necessary to allow it. It's why nations such as China and Japan have weaker currencies in order to keep their exports cheap. Tourism can only do so much for Greece, it needs exports that it doesn't have in order to make the drachma work. I'm sorry, but your country does not have the economy necessary to have its own currency anymore. Going back to the drachma would not result in 5 to 10 years of extreme pain, it would last much longer than that and isolate Greece from being a part of a lucrative market. Also "embarrassment" and "humiliation" is nowhere near as bad as a decade plus worth of extreme pain.

And on top that extreme pain, you would also have to have the embarrassment and humiliation of still having to get bailed out, have the honors of being a developed nation that needs massive amounts of economic and financial aid, and still be pawns of the EU because the US and EU aren't going to let you guys fall into the arms of China or Russia.

My way would indeed include the selling off of assets. Sorry guy, but that's a necessity. Your country has to sell them. But on top of that, instead of focusing primarily on paying off Greece's creditors which the Troika is currently doing, funds should be used to ensure that proper growth and employment are restored in Greece. The Troika has done a lot of damage to Greece's economy and a new plan is needed to fix that damage first and foremost. A stronger and more economically vibrant Greece is far more capable of being able to repay its debts in a way that doesn't damage its economy.

I bet to differ. If Greece could get it's house in order while under the Drachma things would be better off for them than selling everything to the Dutch and Germans which will not really fix the issue since the Greeks would end up need help again.

 

[regwec]

The Economist on why Europe is more broken and divided than ever.

In fact, they are too forgiving: the IMF's scuppering of the deal means that the best case scenario is already dead.

 

[Red Mask]

My way would indeed include the selling off of assets. Sorry guy, but that's a necessity. Your country has to sell them. But on top of that, instead of focusing primarily on paying off Greece's creditors which the Troika is currently doing, funds should be used to ensure that proper growth and employment are restored in Greece. The Troika has done a lot of damage to Greece's economy and a new plan is needed to fix that damage first and foremost. A stronger and more economically vibrant Greece is far more capable of being able to repay its debts in a way that doesn't damage its economy.

Greece already can't compete in the world market. It has no strong trade with world markets like the Asian region and I've already noted that it's moved over twenty of its shipping vessels to Africa to cut down on costs.

 

[regwec]

Another reason it should ditch the €uro and devalue.

 

[hippie_hunter]

Another reason it should ditch the €uro and devalue.

Again devaluation only works if Greece has an export economy to handle it. Greece doesn't produce very much on the global market. In this case devaluation will only hurt Greece more.

 

[regwec]

No, it will make its exports more competitive, partly as a result of its labour becoming cheaper and internationals favouring it over the overpaid and over regulated €urozone.

It is very important for Greece to make the supply side reforms it needs to become competitive now, and it would be far better doing so outside the EU and without the proceeds going to their German masters. Tsipras has a great opportunity, with the reform bill passed, to reshape Greece's future on a much happier trajectory. Debt restructuring or default is still a certainty; the latter much more likely outside the €urozone. Greeks just need the courage to lead the way in saying "FU EU".

 

[hippie_hunter]

No, it will make its exports more competitive, partly as a result of its labour becoming cheaper and internationals favouring it over the overpaid and over regulated €urozone.

Again, and I repeat this AGAIN, in order for Greece's exports to become more competitive, Greece actually needs exports to begin with.

And going back to the drachma is not going to result in Greek labor being cheaper. Keep in mind this is SYRIZA in charge, a very pro-leftist party that isn't going to just do away with the regulations associated with labor protections. They have been very resistant to the Troika's demands to liberalize the labor market in Greece (and thus make it more competitive) and will only do so when forced.

As a matter in fact, Greece's biggest exports are refined petroleum products. But Greece's most important export, requires imported crude oil to produce, that crude oil is valued in dollars and as a result it would do almost nothing to make Greek refiners more competitive or profitable on the global market.

Tourism, another important industry for Greece, wouldn't save Greece either. While a lower valued drachma would give tourists more purchasing power, Greece isn't going to look very attractive to tourists when people are protesting outside because of unemployment, austerity, high costs of living, etc.

Devaluation is not some magical wand that fixes everything. If that were the case, every country would try and make sure that their currency was worthless. Even in countries that have the export economies capable of handling a lower currency can only go so low before it becomes dangerous, just as Wiemar Germany.

It is very important for Greece to make the supply side reforms it needs to become competitive now, and it would be far better doing so outside the EU and without the proceeds going to their German masters. Tsipras has a great opportunity, with the reform bill passed, to reshape Greece's future on a much happier trajectory. Debt restructuring or default is still a certainty; the latter much more likely outside the €urozone. Greeks just need the courage to lead the way in saying "FU EU".

Except Greece is ****ed outside of the EU. I have already said this so many times, outside of the EU, Greece will see lower volumes of trade because it will be restoring barriers between it and its largest trading partners. Prices will go up due to fewer goods entering Greece, increased costs of trade due to currency exchanges, possible tariffs, a currency that will be garbage, etc. Greek interest rates will be far too high. Greek savings accounts would be wiped out. Greek corporations and banks would still have debts that would be valued in euros, which would then become harder to pay off. And without some kind of deal about Greece's debt, Greece is going to have a hard time finding new lenders, with or without the euro.

Also, switching over to a new currency will be expensive. Computers will have to be reprogrammed, payment and vending machines will have to be re-serviced, printing presses will have to be made, and capital controls will have to be put in place in order to ensure that people will get the needed drachmas.

But of course, I am very willing to bet that you will literally ignore every logical point I have just made and you will continue to act as if Greece will be all fine and dandy once they leave the Eurozone.

 

[Mechanix]

Hippie,

 

[regwec]

Well, it's clear that we have a difference of opinion on this, and I am sorry if AGAIN I am appearing to "act like" I disagree, but I retain the view that devaluation will stimulate inward investment and that will give a fillip to exports in the long run. Nobody doubts things will be tough for Greece for a generation- Germany and the EU will certainly set out to take a brutal revenge- but by far the worst outcome is the retention of Frankfurt's fiscal straightjacket and the associated erosion of political freedom, both of which will lead to Greece's permanent cyclical immiseration.

 

[Mechanix]

Ah yes, defy Germany and the Fatherland will hunt you down

It would be funnier if it wasn't so overly dramatic.