

Is Greece entering a Death Spiral? - cwan
http://www.spiegel.de/international/europe/0,1518,712511,00.html

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SamAtt
I'm sorry but this is shoddy journalism. The article leads with "unemployment
has hit an unbelievable 70 percent in some places" but waits 16 more
paragraphs before saying the nation wide number is expected to be 12.1% by the
end of the year (which incidentally is lower than the state I live in which is
California)

The whole article is stuff like that. They go on about the guy who used to
work 300 days a year but now can only get 25 or the street where half the
shops are closed but gloss over the reality that GDP only dropped 1.5% in the
last quarter (2.5% in the last 12 months)

In the end Greece has it a lot better than they could have had it. To me this
is like the guy who spent all his money and had to be bailed out by his
neighbors complaining that his neighbors aren't doing enough for him.

~~~
shaddi
_To me this is like the guy who spent all his money and had to be bailed out
by his neighbors complaining that his neighbors aren't doing enough for him._

Arguably it's not merely like that, it is exactly that.

~~~
watchandwait
Actually, it is worse. Greek politicians cheated foreign bond investors and
lied to the EU about their budgets.

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zeteo
It's somewhat unfair to limelight the situation of a one-industry town
(Perama). Greek shipbuilding was probably on its way to China anyways (just
like US steel making, and uncounted other industries), and the crisis merely
sped up the process.

The article overall seems a bit on the sensationalistic side, full of cherry-
picked alarmist anecdotes. I would take it with a decent dose of salt.

~~~
w00pla
> Greek shipbuilding was probably on its way to China anyways (just like US
> steel making, and uncounted other

It doesn't have to be that way. Japan has some of the highest labour rates and
expensive electricity. It has to import both iron ore and coal. Yet it is home
to the very profitable steel mill: <http://en.wikipedia.org/wiki/Nippon_Steel>

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jpcx01
Things need to get worse before it gets better. Seems like the best idea is to
ditch the Euro, deflate the currency, and wait for companies to come back when
prices are cheap enough where its worth doing work there.

It'd be painful, but at least it'll be over eventually and things will start
to grow again.

Right now it looks like they are on the path to perpetual stagnation.

~~~
DilipJ
I think you mean inflate the currency. Deflation would make their debt burdens
worse. But I agree, they are going to stagnate. The country owes its success
over the last few decades to generous transfer payments from the EU. Now those
transfer payments are going to the poorer former Soviet Bloc countries like
Romania and Bulgaria. Greece is going to have to learn to rely more on itself,
which means stripping down government expenses. Considering the strength the
public unions have there, I think that's unlikely to happen.

~~~
electromagnetic
Trade unions are devastating to the people they're supposedly working for. I
know here in Ontario, in the middle of a recession the Teacher's Union was
fighting like hell to get a strike going in the midst of the government
funding reeducation programs for the recently laid off. It was stupid, most of
the teachers were worried about supporting themselves because the college and
university association wasn't budging.

Unions make themselves relevant by _always_ pushing for a strike. If a union
doesn't strike, people stop caring about going union in trades where it isn't
mandatory. The careers where unionization is essentially mandatory should be
seriously be overhauled (IIRC crane operators is one here where unionization
is mandatory).

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tomjen3
Why doesn't Greece default on hits debt if things are really so bad as the
article makes it out to be?

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SamAtt
Because they share a currency with most of the rest of Europe and defaulting
on their debt would cause the value of that currency to tank. Which could very
well tear apart the European Union entirely.

That's the big reason why the IMF was willing to bail them out.

~~~
watchandwait
A Greek default has no impact on the Euro. A Greek default will drill the
French and German banks that hold their debt. That's the issue.

~~~
noverloop
European leaders have already set aside a bailout package for their banks in
case any pigs-nation defaults. It's hard to imagine the defaulting nation to
remain in the Eurozone though.

The penalties of defaulting are probably already negotiated to far outweigh
the penalty of stark austerity measures.

~~~
riffraff
but there is no way of getting out of the eurozone, both in the "no actual
procedure" and in the "no actual chance". If greece got out of the euro, it
would get instant weimar-like inflation.

Moreover, the SPV and the bailout plans in the eu seem to be more like smoke
and mirrors than concrete stuff (e.g. bailing out greece with money coming
from portugal which is in the same position)

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bosch
Startup founders should take away from this how important good financial
records are. Also, how important a business model is that provides enough
capital to fund current operations without you having to go over your allotted
budget.

~~~
startuprules
You also want to make sure you track down deadbeat clients (bad tax
collection) and not get a long expensive office lease (offer retirement at age
50)

------
rick888
Greece is a good example of what happens with an over-reaching government,
high taxes, and expensive social programs.

If things continue, the US won't be far behind.

~~~
frossie
_Greece is a good example of what happens with an over-reaching government,
high taxes, and expensive social programs._

You are joking, right? Greece is a good example of what happens when the state
fails in two of its most important functions: efficient tax collection and an
incorruptible civil service.

~~~
d2viant
I haven't heard this before. How was their tax collection inefficient? Are you
referring to tax evasion?

~~~
ramanujan
He's talking about the satellite photo story from a while back in which Greeks
had many more (taxable) private pools than were reported to the government.

<http://boingboing.net/2010/05/04/satellite-photos-cat.html>

The question though is whether "more efficient tax collection" is really the
cure for Greece's ailments. It really boils down to whether you think a
centralized government can better allocate your dollars to your benefit, or
whether you can.

You could certainly make an argument that people would free ride and/or
greatly underestimate the benefit that spending 10 cents of each dollar on
(say) the military or roads would provide, and this furthermore justifies
taking that 10 cents by force as part of the price of membership in a
community.

However, I personally find it less persuasive to argue that centralized
allocation programs will produce greater wealth than distributed ones. A
remote government simply doesn't have all the information and can't know your
preferences.

One thing I find interesting is that many people can come to fairly good
agreement on what the problem is (bad economy, low unemployment, etc.) but
disagree very dramatically on what the solution should be. frossie is likely a
Keynesian and rick888 is probably a Hayekian; in my experience, Keynesianism
is in the water supply and the "default belief" for most college graduates,
but most entrepreneurs tend to end up Hayekian:

<http://www.youtube.com/watch?v=d0nERTFo-Sk>

~~~
frossie
_He's talking about the satellite photo story from a while back in which
Greeks had many more (taxable) private pools than were reported to the
government._

I assure you, that is the least of it.

The fundamental problem in Greece is, as I said, ineffective tax collection
and a corrupt machinery of state.

Since people are clearly having trouble understanding what ineffective tax
collection actually means, let me explain: the government is unable to tax
income or other forms of revenue. There is a huge cash (grey) economy that
means that income tax, the primary revenue raising tool for most Western
economies, is useless.

If you go into a taverna with your family and blow 100 euros on a big meal,
the bill will arrive and only cash will be accepted. At the end of a busy
night that brought in maybe 2,000 euros, the proprietor will report to the tax
authority an income of 200 - hey, slow night, eh.

Now I realise this may be a struggle for those of you with a certain kind of
politics, but believe me - a lack of an effective income tax is a terrible
thing. For starters, the state needs revenues somehow - so since they can't
reliably tax income, they have to tax secondary things - which unfortunately
are things like fuel tax, and goods taxes that hit the poor much more than the
rich. Hence a lot of the social tension that you see in the news.

This is why the swimming pools are a big deal. Yes it may sound insane that
anybody wants to tax pools - but when the person who owns the beautiful pool
in the house by the ocean claims he only earned $10,000 last year, and you are
unable to actually bust him on such an atrocious claim, then taxing his easy-
to-find pool is the only thing you can do.

This is a country than until very recently didn't even have a land registry;
yes, the state had no idea who owned a piece of land.

The point is that Greece is a bad example to use in a debate of fiscal policy,
because it works nothing like you US/UK/{Insert your big Western economy here}
people think it does.

~~~
temphn
If the people don't want to be taxed to pay for state services, then shouldn't
the state fire people, stop services, and downsize, just like a business?

No startup can point a gun at its customers to force them to give it money.
Some startups genuinely do provide a valuable service that people can't or
won't pay for. Oftentimes the difference between a viable and nonviable
startup is the culture of the people you're selling to (academics are
notoriously hard to monetize, while myspacers click on lots of ads).

So if Greeks don't want to pay taxes like Brits then the Greek state should be
a lot smaller than the British state. Replace as much as possible with user
fees and just scale it down. Do you disagree?

~~~
furyg3
The thing which communicates to governments "what the people want" is not how
they pay taxes, but how they elect officials and vote on policies.

Nobody wants to pay taxes, and nobody wants social programs cut. Therein lies
the problem.

