Greece Financial Crisis Thread (1 Viewer)

[Jayrod]

Germany may or may not get what they want from the Greeks, but they're going to blow Europe apart.

I said this when the Euro was created and it's coming true today - the Euro will not survive without federalization.

How could it? The only way the thing works is out of trust for the individual countries but what's in it for them not to go on a spending spree? Worst case scenario for countries like Greece is that they get kicked out of the Euro, have their debts erased, and go back to their old currency - in Greece's case effectively gaining $300 billion in the process.

The bolded is wrong.ETA: Academic now, Greece has capitulated

Greece has a "Check It, Erase It" campaign to say that their debt is illegal.

http://greece.greekreporter.com/2015/04/08/greece-parliament-video-greek-debt-check-it-erase-it/

Oh, OK. If they say so.

 

[Dinsy Ejotuz]

"Debts that can't be paid, won't be paid."

Destroying a country in the name of extend and pretend is just so dumb. All that's happened tonight is to guarantee Europe has a failed state ready to be radicalized on its border.

Isn't there already some type of pseudo nazi party there?

Yeah. Golden Dawn.

Looked some of this up and didn't know that Greece had a left/right civil war after WWII and also a right-wing coup/military junta from 1967-1974. So maybe it's a right-wing coup instead of a left-wing government. But IMO it'll be radicalized one way or another.

 

[cstu]

Germany may or may not get what they want from the Greeks, but they're going to blow Europe apart.

I said this when the Euro was created and it's coming true today - the Euro will not survive without federalization.

How could it? The only way the thing works is out of trust for the individual countries but what's in it for them not to go on a spending spree? Worst case scenario for countries like Greece is that they get kicked out of the Euro, have their debts erased, and go back to their old currency - in Greece's case effectively gaining $300 billion in the process.

The bolded is wrong.ETA: Academic now, Greece has capitulated

Greece has a "

How are you going to make them pay?

 

[timschochet]

This is always the point in Greek history when somebody goes to Olympus and begs the gods for direct intervention. Surely at least one of them is going to get involved: Zeus, Apollo, Heracles?

At the very least Dionysus could get everybody wrecked for a while...

 

[Dinsy Ejotuz]

Good article super-critical of Syriza:

Syriza has incurred a lot of the costs of leaving the euro—like a financial crisis—at the same time that it’s kept the costs of staying in the euro.

That's exactly right — and it has to count as one of the greatest policymaking failures in recent economic history.

Greece had two awful choices: Stay in the eurozone and be crushed by fiscal and monetary polices set by the Germans, or leave the eurozone and be crushed by a financial crisis.

Syriza won power in Greece by promising Greek voters a third option: Renegotiate the terms of Greece's membership in the eurozone. That option failed almost instantly, and for a simple reason: Greece had no leverage with which to force the rest of the eurozone to renegotiate, and, if anything, Syriza's anti-German rhetoric gave the most powerful players in the eurozone reason to toughen their negotiating position.

At this point, Syriza could have gone back to either of the original two options. But they didn't. Instead, they managed, horribly, to combine both of the original two options into one political-economic disaster.

First, they held a referendum that both financial markets and ordinary Greeks interpreted as a poll on leaving the euro (but which Syriza promised, falsely, would just give them more leverage in negotiations), which sparked a financial crisis, and then they decided to ignore the results of the referendum, which the rest of the eurozone (correctly) took as evidence that Greece had absolutely no leverage whatsoever. The result was the eurozone forced Greece to agree to terms even worse than the ones they had initially rejected.

As O'Brien writes, "Syriza’s strategy, insofar as there was one, couldn’t have been much more of a failure." If anything, that's too kind. Syriza's strategy, insofar as there was one, uncovered a method of failing that was much more complete and all-encompassing than anyone had thought possible at the start of the process.

I am no fan of the eurozone's position toward Greece, and as I've written before, Greece's negotiating partners bear some of the blame for Syriza's rise. But the disaster Syriza has been for the Greek people cannot be overstated.

 

[Dinsy Ejotuz]

The I.M.F. memo amounts to an admission that the eurozone cannot work in its current form. It lays out three options for achieving Greek debt sustainability, all of which are tantamount to a fiscal union, an arrangement through which wealthier countries would make payments to support the Greek economy. Not coincidentally, this is the solution many economists have been telling European officials is the only way to save the euro — and which northern European countries have been resisting because it is so costly.

The three options laid out by the I.M.F. would have different operations, but they share an important feature: They involve other European countries giving Greece money without expecting to get it back. These transfers would be additional to the approximately 86 billion euros in new loans contemplated in Monday’s deal.

“Wait a minute,” you might say. “The I.M.F. isn’t calling for a fiscal union; it’s calling for debt relief.” But once a debt relief program becomes big enough, this becomes a distinction without a difference; they’re both about other eurozone countries giving Greece money.

Indeed, one of the debt relief options proposed by the I.M.F. is “explicit annual transfers to the Greek budget,” that is, direct payments from other governments to Greece, which it could use to make its debt payments. This, obviously, is a fiscal union.

A second option is extending the grace period, during which Greece would be relieved of the obligation to make interest or principal payments on its debt to European countries, through the year 2053. That’s not a typo. Under this plan, Greece would make no more debt payments until Justin Bieber is 59 years old. This is a fiscal union by another name, since those lengthy and favorable credit terms would save the Greeks money at the expense of Greece’s creditors, most of which now are other European governments or the I.M.F.

The third option floated by the I.M.F., a cancellation of a portion of Greece’s debts, has been fiercely resisted by the German government, even though this is the option that least obviously constitutes a continuing fiscal union. Debt cancellation is a one-time fiscal transfer (if I lend you $100 and then forgive the debt, that’s much like me simply giving you $100), but at least in theory it would be done only once, with Greece expected to stand on its own otherwise. The important exception is that Greece would still need to rely on European governments to lend it money at favorable rates, though not quite as favorable as under the Old Bieber scenario.

Unfortunately, however, this is not Greece’s first bailout rodeo. Previous bailouts have had to be revised and enlarged, and as the I.M.F. notes in the section of its memo about “considerable downside risk,” that could happen again. The plans for Greece to regain solvency rely on fast economic growth and sharp rises in labor productivity that outperform the rest of Europe — something that cannot be guaranteed. They also rely on the country’s running a large primary surplus for an extended period — that is, collecting much more in taxes than it spends on government services, which typically does not prove popular with the voting public.

The memo makes clear what the real cost to Europe of continued eurozone membership for Greece is: If European governments want to keep Greece in, they’re going to have to put up a lot of money in one non-loan form or another, money they will give Greece that they never get back.

Of course, the main alternative to a deal is a Greek exit from the euro, which would also be costly to European holders of existing Greek debt, who could expect to be repaid in devalued drachmas, if at all. That is a reason for European governments to be willing to pay the price prescribed by the I.M.F. to make a Greek deal work.

But the I.M.F. officials are saying they cannot pretend that a bailout deal will lead to an eventual payment in full from Greece. If Greece stays in the euro, it will need much more financial support from the rest of Europe than was admitted in Monday’s deal, and the I.M.F. is asking European governments to put that admission on paper.

 

[Fennis]

"Debts that can't be paid, won't be paid."

Destroying a country in the name of extend and pretend is just so dumb. All that's happened tonight is to guarantee Europe has a failed state ready to be radicalized on its border.

Isn't there already some type of pseudo nazi party there?

Yeah. Golden Dawn.

Looked some of this up and didn't know that Greece had a left/right civil war after WWII and also a right-wing coup/military junta from 1967-1974. So maybe it's a right-wing coup instead of a left-wing government. But IMO it'll be radicalized one way or another.

I was in Athens two years ago and the police's main job seemed to be keeping the communists' protests from crossing paths of Nazis protests from crossing paths with the Anarchists protests from crossing paths with mainstream unions' protests, and keeping them all out of the tourist areas.

 

[RedmondLonghorn]

Greek Nazis. What a world.

 

[Dinsy Ejotuz]

Greek Nazis. What a world.

Even worse than Illinois Nazis.

 

[jonessed]

Greek Nazis. What a world.

The Ancient Greeks supported slavery so it's a logical transition.

 

[shadrap]

From what I could decipher from Greece's demands/comprimises is that they would adopt the suggestive changes over the course of years. In other words, no changes in policy & no guarantee that changes would happen. It's a wakening up for those that endorse socialism.

The bills have to be paid & in this case they will never be paid.

 

[msommer]

The measures voted through last night puts Greece in line with much of Northern Europe in terms of pension age, VAT and other taxes and budget constraints.

The horror.

 

[msommer]

Interesting article from BBC

http://www.bbc.com/news/33507250

Was the Greek negotiating strategy with the Eurogroup designed to convince the rest of Europe that the Syriza government was mad?

That is a notion raised by Daniel Finkelstein in The Times today. This idea - which has fans in Westminster and Whitehall - strikes me as a misreading of the situation in Europe.

This idea has arisen because Yanis Varoufakis, the former Greek finance minister, is a game theorist, a type of economist who studies interactions in simplified versions of reality.

These stylised scenarios are known, in the jargon, as "games". Famous ones you might have heard of include "the Stag Hunt", "The Ultimatum Game" and - most famously - "the Prisoner's Dilemma".

One famous game is called "Chicken". Imagine two cars racing towards one another. If neither swerves, both drivers lose. If either swerves, however, that person is deemed to lose.

This is a bit like the Greek negotiation. Neither side wants to give in first, but neither side wants to end with no deal.

This is a hard game to be good at - unless you can send a worrying signal to the driver of the other car.

You could try to convince the other driver that you have no control of the car, so they will be forced to move.

Inside options and outside optionsRip off the steering wheel and wave it out of the window, perhaps? Or you could behave like you enjoy crashes - or are indifferent to the pain they cause. That, Lord Finkelstein has suggested, was part of the Greek negotiating strategy.

Lord Finkelstein wrote: "Varoufakis believed that if his negotiating partners - the Germans, the IMF, the Commission - concluded he was a bit bonkers, a bit reckless, they would appreciate that he might crash the Greek economy and bring down the whole edifice of the euro on top of him. Persuading your adversary that you are mad is a classic game theory gambit."

I think you can understand the Greek position much more simply: they predicated their negotiating position on notions that turned out to be untrue.

Here is another simple idea from game theory: a classic negotiation between two parties is best understood by looking at ideas called the "outside option" and the "inside option".

The outside option is the outcome for each individual if the negotiation fails. The inside option is what you get if the negotiation is completed. Negotiation is usually the process of changing the value of the inside option.

If you are trying to buy a car from a salesperson, then the outside option is walking away - keep your cash, take no car and retain the option of starting a negotiation with other salespeople.

For the seller, the outside option means keeping the car, having less cash and retaining the option of selling that car to someone else.

Fair and free negotiations will usually fail unless the inside option is better than the outside option.

Greek assumptionsIf it is better not to agree for any party, they won't. My assumption (largely based on Duncan's great reporting) is that Mr Varoufakis, a few months ago, thought that the outside option for Europe was gruesome.

So he could demand a lot, and they would still agree because it would be better for them.

For example, we know that he estimated that a messy Greek default would lead to financial contagion: for the sake of not saving little Greece, Europe could make investors worry about lending to Portugal, Spain or Italy.

He wrote in 2012 "the notion that Europe is ready for a Grexit is absurd."

Measures then underway by the ECB could not limit "the damage on Spain, then Italy etc."

In short, if Europe did not cut a deal, Greece would rip Europe in two. That would make the outside option for Europe a catastrophe.

And Mr Varoufakis also assumed that the outside option for Greece was not all that bad. That means his hand, in a negotiation, would be very strong.

That is because, quite recently, Greece was running a so-called "primary surplus" earlier this year.

That means if it got cut off from financial markets because it failed to pay its debtors, it could still keep its public services running.

I would presume he also thought the banks would be kept afloat by the European Central Bank: in previous chapters of the crisis, it actually rewrote its own rules to keep the banks open and liquid in Greece.

In that situation, Mr Varoufakis thought the damage would be much worse to Europe than it would be to Greece of a failure to agree.

And, in that situation, the best strategy for Greece is to wait. This isn't a "madman" strategy. It's a quite rational calculation about the outside option.

So he wanted to wait for investors to start fretting and fussing, for bond yields to rise, for bank shares to start shedding value and for a credit squeeze to start moving through Europe.

If contagion ever made it look like Spain or - heaven forbid - the vast Italian debt could not be serviced, the Eurogroup would race to offer a deal to Greece on good terms.

There was a catch, though. All of his assumptions were wrong.

What went wrong?First, investors have been very unconcerned by Greek default. They see the politics and arithmetic of Greece as different to the rest of the continent and do not see parallels between them.

So the market panics never came. The Eurogroup could afford to wait.

Second, Greece nosedived into recession. It is surely not now running a primary surplus.

That means that Greece needs help just to run the existing level of public services. That means pain to Greece for not being able to access new financing. It cannot wait.

Third, the ECB did not keep Greece's banks going, which means the economy is being suffocated.

Every day that this runs on makes the situation worse, businesses being shut down and individuals suffering. This whole scenario is dismal for the Greeks - and worsens every day.

In short, the outside option turns out, in the past few weeks, to have been much worse for Greece and a lot less damaging to the rest of Europe than they thought.

So the inside option they thought they might be able to extract from the rest of Europe turns out to be much worse than they once imagined.

That all strikes me as a simpler explanation of the Syriza strategy than a "madman at the wheel" gambit.

Indeed, put this argument another way: if you were to pursue that strategy, would you do it like this?

If I were pursuing that approach, I would start openly preparing for a messy default and exit from the Eurozone.

This is not to say that I think Syriza solely misjudged the economics.

Natural allies in Rome and Paris were alienated. Syriza misunderstood what role the US State Department would play.

They made it politically difficult for German and Dutch politicians to help them.

They also behaved, at times, as though the governments who lend them money do not have their own democratic mandates.

But I think a misreading the outside option for the rest of Europe is a major part of what went wrong - not a failed plea of insanity.

 

[cstu]

Thought the Greece deal was going to be good for the Euro, but after an initial pop it's down to 1.0849.

 

[Fennis]

Young Greek women selling sex for the price of a sandwich, new study shows

Young Greek women are selling sex for the price of a sandwich as six years of painful austerity have pushed the European country to the financial brink, a new study showed Friday.The study, which compiled data on more than 17,000 sex workers operating in Greece, found that Greek women now dominate the country’s prostitution industry, replacing Eastern European women, and that the sex on sale in Greece is some of the cheapest on offer in Europe.

“Some women just do it for a cheese pie, or a sandwich they need to eat because they are hungry,” Gregory Laxos, a sociology professor at the Panteion University in Athens, told the London Times newspaper. “Others [do it] to pay taxes, bills, for urgent expenses or a quick [drug] fix,” said Laxos, who conducted the three-year study.

When the economic crisis began in Greece, the going rate for sex with a prostitute was 50 euros ($53), the London newspaper quoted Laxos as saying. Now, it’s fallen to as low as two euros ($2.12) for a 30-minute session.

Laxos said the some 400 such desperate cases he found may be “nominal compared with the thousands of other sex workers operating nationwide, but they never existed as a trend until the financial crisis.” He said Greek women now account for 80 percent of the prostitution trade in Greece.


He said his wide-ranging study showed that the number of desperate young women — the ones offering the cheapest sex — appeared to be on the rise. “It doesn’t look like these numbers will fade,” he told the Times. “Rather they are growing at a steady and consistent pace.”

The price of sex is falling globally, as the Internet provides more and more sexual content online. The 180 euro ($191) average price of a one-hour encounter in Europe has dropped dramatically, the paper reported.

Prostitution is legal in Greece, but very few of the country’s brothels are licensed, the paper reported, pushing many of the estimated 18,500 prostitutes operating in Greece onto the streets.

“Factor in the growing number of girls who drift in and out of the trade, depending on their needs, and the total number of female prostitutes is startling,” Laxos was quoted as saying.

The study showed that most of the Greek women just coming into prostitution are between the ages of 17 and 20.

The study comes after a shocking report last month of an unemployed Greek mother pimping her 12-year-old daughter to a priest and a retired man for money. The mother, 44, was sentenced to 33 years in prison and fined 100,000 euros ($106,153), the paper said. The Greek media dubbed the woman “monster mom,” and the country was outraged by the case.

Laxos said last month’s widely publicized incident — and his study — “reflects a society in denial about the changes taking place” in Greece.


“State authorities must finally act rather than continuing to remain indifferent,” he warned.

 

[Chemical X]

I'd rather a gyro

 

[Chadstroma]

Young Greek women selling sex for the price of a sandwich, new study shows

Young Greek women are selling sex for the price of a sandwich as six years of painful austerity have pushed the European country to the financial brink, a new study showed Friday.The study, which compiled data on more than 17,000 sex workers operating in Greece, found that Greek women now dominate the country’s prostitution industry, replacing Eastern European women, and that the sex on sale in Greece is some of the cheapest on offer in Europe.

“Some women just do it for a cheese pie, or a sandwich they need to eat because they are hungry,” Gregory Laxos, a sociology professor at the Panteion University in Athens, told the London Times newspaper. “Others [do it] to pay taxes, bills, for urgent expenses or a quick [drug] fix,” said Laxos, who conducted the three-year study.

When the economic crisis began in Greece, the going rate for sex with a prostitute was 50 euros ($53), the London newspaper quoted Laxos as saying. Now, it’s fallen to as low as two euros ($2.12) for a 30-minute session.

Laxos said the some 400 such desperate cases he found may be “nominal compared with the thousands of other sex workers operating nationwide, but they never existed as a trend until the financial crisis.” He said Greek women now account for 80 percent of the prostitution trade in Greece.


He said his wide-ranging study showed that the number of desperate young women — the ones offering the cheapest sex — appeared to be on the rise. “It doesn’t look like these numbers will fade,” he told the Times. “Rather they are growing at a steady and consistent pace.”

The price of sex is falling globally, as the Internet provides more and more sexual content online. The 180 euro ($191) average price of a one-hour encounter in Europe has dropped dramatically, the paper reported.

Prostitution is legal in Greece, but very few of the country’s brothels are licensed, the paper reported, pushing many of the estimated 18,500 prostitutes operating in Greece onto the streets.

“Factor in the growing number of girls who drift in and out of the trade, depending on their needs, and the total number of female prostitutes is startling,” Laxos was quoted as saying.

The study showed that most of the Greek women just coming into prostitution are between the ages of 17 and 20.

The study comes after a shocking report last month of an unemployed Greek mother pimping her 12-year-old daughter to a priest and a retired man for money. The mother, 44, was sentenced to 33 years in prison and fined 100,000 euros ($106,153), the paper said. The Greek media dubbed the woman “monster mom,” and the country was outraged by the case.

Laxos said last month’s widely publicized incident — and his study — “reflects a society in denial about the changes taking place” in Greece.


“State authorities must finally act rather than continuing to remain indifferent,” he warned.

Goodness that is sad.

And pimping a 12 year old to a priest and old guy. Disgusting. I don't understand how a person could violate a little girl. So much messed up with this world.