
Surrender fiscal sovereignty in return for bailout, Merkel tells Tsipras - r721
http://www.theguardian.com/business/2015/jul/12/greek-crisis-surrender-fiscal-sovereignty-in-return-for-bailout-merkel-tells-tsipras
======
bhickey
As Thomas Piketty pointed out, 60% of German debt was cancelled in 1953.
([http://thewire.in/?p=5851](http://thewire.in/?p=5851)) France defaulted on
its debts after the Napoleonic wars. The United Kingdom defaulted in 1932.
Apart from Greece's inability to inflate its way out of debt, how is this any
different?

~~~
rbehrends
> Apart from Greece's inability to inflate its way out of debt, how is this
> any different?

The debt forgiveness because of the London Debt Agreement amounted to about
11% of West Germany's 1953 GDP. Most of West Germany's public debt was
internal and was wiped out by the currency reform in 1948 (which meant that
West German savings took a 93.5% haircut) [1].

Germany has to be thankful to the Allies for imposing only very light
sanctions after WW2; but debt forgiveness didn't play much of a role in
Germany's recovery.

I.e. there is a strong moral argument that you can make, especially given that
Greece largely waived WW2 reparations, but the economic situation isn't the
same.

[1] Also, East Germany wasn't as lucky and got hit hard by reparations.

~~~
igravious
Why should they be "thankful"? I'm wary of this attitude. Isn't defeat and the
brutal horror of war (especially that war) sanction enough? Not trying to be
smart here, genuine question.

Did not know the numbers though, thanks. The situations aren't as alike it
seems as people (myself included) are making it out to be. But they're not
completely unalike and people remember history ...

~~~
rbehrends
Sorry, I meant to write reparations, not sanctions. Reparations to help
restore the economies of those countries that the Third Reich had looted and
pillaged and left in ruins.

------
r721
Krugman's opinion:

[http://krugman.blogs.nytimes.com/2015/07/12/killing-the-
euro...](http://krugman.blogs.nytimes.com/2015/07/12/killing-the-european-
project/)

------
nerdcity
Fiscal sovereignty was already surrendered when the adopted the Euro in the
first place.

~~~
cryptoz
Was it? Not technically, I think; monetary policy was surrendered, not fiscal
policy. Unless you're making a comment about how there can't be sane monetary
policy without matching fiscal policy, in which case, carry on.

------
steve19
It should never have come to this. They have commendable ideals but Tsipras
and Varoufakis, and activist and an academic, were the wrong people at the
wrong time. What the Greeks needed was old-school politicians who have played
the game for years.

In an ideal world people would all work together for the common good, but in
politics it's every person for themselves, and it's naive to think anything
else.

Using mainstream media and social media to constantly attack the people on the
other side of the negotiating won over their voters, the Greek people, and the
left in Europe, but ultimately has only served to anger their creditors (the
politicians and those who voted the politicians in).

------
lifeisstillgood
It's the same demand the Euro-elite are making to every other member of the 28
states. It's not that the offer is a bad one, it's just that it's not
democratically done, not openly done, and we fucked them over for five years
before this whole thing started.

That said fiscal Union is probably a good move.

~~~
igravious
I couldn't agree more. Very succinctly put.

------
outside1234
A lot of people are comparing this to the German writedown, which in someways
is both apt and not apt. Its also important to note that there are no easy
paths out of this - money is not invented from nowhere.

The Germans took a horrific beating at the end of World War II - whole cities
(Dresden et al) were literally burned completely to the ground at the hand's
of the creditor's planes.

While it was the German people's fault to some extent, they were also
realistically under a dictatorship when it happened and that had to be taken
into account (not everyone or even a majority of people were in favor of the
war).

This is the same logic that applied during the first two Greek bailouts (and
the 60% haircut the debt has already taken in the private sector) - the Greek
people were mislead as to the fiscal state of their country and deserved some
faith and leniency.

However, after that, they have done very little to improve the fiscal
structure in their company. EVEN WITHOUT ANY DEBT PAYMENTS, the country still
is running a deficit because they are way over generous on their pensions,
have way too many people working in government, and have a continuing rampant
tax collection problem.

This has gone on for 5 years since the start of the crisis and they haven't
fixed it (or even close), and by not fixing it, have made the problem way
worse.

This needs to change now. They have proven they are not able to do it
themselves, it threatens the whole currency, and therefore, like receivership
for a bankrupt company, they need to have an external actor come in and do it
for them.

Or default and leave the currency. (Which is in my opinion what they should
do.)

This is not pretty - but that's reality - and the Greek people have earned it
at this point by not electing leaders that have put them on a path to a
sustainable fiscal budget.

There is a lesson in there for all of us.

EDIT: And there comes the predictable vote downs. I am honestly not anti-
Greek, just trying to summarize the situation as someone with an economics
background.

EDIT2: This is also not "just the Germans" \- there is also substantial baltic
opposition to bailing out Greece without reforms happening first:

[http://www.ekathimerini.com/199040/article/ekathimerini/news...](http://www.ekathimerini.com/199040/article/ekathimerini/news/eurozones-
poorer-nations-take-hard-line-on-greece)

~~~
timr
_" However, after that, they have done very little to improve the fiscal
structure in their company. EVEN WITHOUT ANY DEBT PAYMENTS, the country still
is running a deficit because they are way over generous on their pensions,
have way too many people working in government, and have a continuing rampant
tax collection problem."_

You know that the greek government was running a _surplus_ as recently as
2013, right?

Most of the "bailout" money never went to Greece -- it went straight to their
creditors. Greece definitely borrowed too much, but it's just factually
incorrect to say that they haven't improved their fiscal structure.

~~~
outside1234
This is one of the key issues with just issuing more debt to "solve the issue"
\- paying the right hand with the left hand doesn't solve anything. The reason
the money went back to the creditor country is that the interest payments were
due and they did this to "kick the can" down the road on how sustainable those
payments were.

The can is down the road now and just throwing more money to Greece isn't
going to solve anything. Honestly, I think Greece should just flip the bird to
Europe and walk away from the debt. They should reintroduce their currency.
They won't be able to get more than humanitarian assistance but this will give
them the internal political will to balance their budget.

Re: Surplus: Here is the data I am working off of:

[http://www.tutor2u.net/economics/revision-notes/a2macro-
eu-g...](http://www.tutor2u.net/economics/revision-notes/a2macro-eu-
greece3.png)

No surpluses or even close - send a reference if you have different data -
genuinely curious.

~~~
igravious
Oh come on.

    
    
        https://duckduckgo.com/?q=greece+surplus
    

(1st hit) NY Times: "Greece Has a Budget Surplus, a Respite That Could Be
Shortlived"

(2nd hit) Reuters: "Greece sees 2015 budget surplus close to bailout target:
report"

and so on ...

~~~
sampo
Greece had achieved _primary surplus_ , which means surplus before paying
interest on debts is accounted for.

[http://www.merkfunds.com/currency-asset-
class/glossary/prima...](http://www.merkfunds.com/currency-asset-
class/glossary/primary-surplus.html)

~~~
nandemo
Yes, and timr was replying to this:

> EVEN WITHOUT ANY DEBT PAYMENTS, the country still is running a deficit
> because they are way over generous on their pensions,

So clearly primary surplus is relevant.

------
fixxer
How is this philosophically different from demanding that your drunk friend
(who, you know has always been a bit of a fuck up) surrender his car keys? He
already has been to rehab a few times and, if you let him, he's gonna destroy
a lot more than just his car.

In both cases, it is reasonable given the immediate circumstances. That said,
you knew this would happen and you enabled him, so you're still an asshole.

~~~
alayne
As long as people continue this Greeks are reckless good for nothings myth it
is going to be hard to find solutions.

~~~
duncan_bayne
Don't try to turn this into an argument about racism. There is something
fundamentally, deeply broken with the Greek economy:

[http://www.lapasserelle.com/billets/greece_GDP_growth.jpg](http://www.lapasserelle.com/billets/greece_GDP_growth.jpg)

No-one with any sense is trying to make this about "Greeks". But there is
clearly something wrong with politics and economics in Greece.

~~~
pessimizer
> There is something fundamentally, deeply broken with the Greek economy

The current growth rate is a result of austerity, not a bizarre retroactive
justification for it.

~~~
duncan_bayne
I think you're conflating two different issues:

a) the Greek economy is currently in debt with no realistic way of repaying it
in the short term, and

b) Greek politicians have adopted a socialist-minded Keynesian tinkering-
around-the-edges that has somehow been named 'austerity'.

The root cause of a), and then the body politic adopting b), is broken
economic culture:

[https://mises.org/library/greece%E2%80%99s-biggest-
problem-i...](https://mises.org/library/greece%E2%80%99s-biggest-problem-its-
anti-capitalist-culture)

"And so it is with Greece. After already securing debt relief and effectively
being allowed to default by restructuring its debts over the next fifty years
at subsidized interest rates — and after actually achieving economic growth in
2014 by cutting taxes and slashing the size of its sclerotic, bloated
government — this toxic Greek culture prevailed once more and elected a team
of socialist die-hards to drag it back into the mire. Of course it doesn’t
help that on the other side of the negotiating table is another bunch of
central planners in the EU, IMF, and ECB. Nevertheless, Greece sits stuck
between two central planning negotiation parties because its people have been
too busy demanding goodies instead of freedom."

