
Germans Forget Postwar History Lesson on Debt Relief in Greece Crisis - shawndumas
http://mobile.nytimes.com/2015/07/08/business/economy/germanys-debt-history-echoed-in-greece.html
======
dang
Those of you in this and related threads who have been abusing each other and
each other's countries are behaving shamefully. There is no place for that on
Hacker News. If you can't comment respectfully—which means _sincerely taking
extra care to be respectful_ , given how sensitive this topic is—then please
don't comment here at all.

Would everyone else please do the community a favor and flag such comments?
You can do that (if your account has 30 or more karma) by clicking on a
comment's timestamp to go to its page, then clicking 'flag' at the top.

If that proves insufficient, and HN really is incapable of discussing this
without devolving into nastiness and slurs, then we're simply going to start
killing these stories when they come up, despite the importance and
intellectual interest of the topic.

~~~
yarper
I agree with this, I'd also like to add that discussions to the extent that
Germany was or was not "destroyed" in WW2 and therefore did or did not
"deserve" debt relief are horrifying.

These threads seem to be a hotbed for people articulating their already formed
opinions and cannot be read by anyone trying to establish what the facts
actually are, which renders them useless to hn.

------
CapitalistCartr
Phillip Greenspun writes (accurately, I think): "Journalists keep referring to
the years of “austerity” that Greece has endured. Government spending has been
cut so much that it is now only 58.5 percent of GDP (heritage.org). What does
a country that hasn’t suffered austerity spend? Singapore’s government clocks
in at 14.4 percent (same source). How about a command-and-control centrally
planned Communist dictatorship? China is at 25 percent. A socialist cradle-to-
grave welfare state? Sweden is at 52 percent.

Are the Heritage data wrong? If not, how is it possible that Greece continues
to be cited as an example of a country where the government doesn’t spend
enough?"

[http://blogs.law.harvard.edu/philg/2015/07/08/greek-
austerit...](http://blogs.law.harvard.edu/philg/2015/07/08/greek-austerity-
government-spends-58-5-percent-of-gdp/)

~~~
daodedickinson
Countries with much worse pensions than Greece are being asked to bail out
much more lavish Greek pensions — it is both moral hazard and injustice. Let's
keep everybody fed and work on the medical aspect, too, and figure out how to
make the Eurozone fair, which could be a minimum pension / benefit level of
the lowest country, adjusted for local prices to other countries, and if you
want something above that you can't demand that poorer nations pay for it.

~~~
icebraining
_Countries with much worse pensions than Greece are being asked to bail out
much more lavish Greek pensions_

Which countries are those? How much are they being asked to pay?

~~~
Xylakant
For example the baltic states
[http://www.theguardian.com/world/2015/jul/09/poorer-than-
gre...](http://www.theguardian.com/world/2015/jul/09/poorer-than-greece-the-
eu-countries-that-reject-a-new-athens-bailout?CMP=share_btn_tw)

~~~
icebraining
How much are they being asked to pay?

------
mc32
What? Did Greece just emerge from the largest military conflict on the planet
utterly destroyed? Or did they more or less mismanage their eco? Not
collecting taxes and generous retirements (hair dressing considered hazardous
as mining thus eligible for early retirement, for example) is not comparable
to emerging battered and destroyed from the bloodiest conflict in history.

And it's not as if their debt hasn't been restructured.

~~~
elorant
_Did Greece just emerge from the largest military conflict on the planet
utterly destroyed?_

Yes, we did. And utterly doesn't even give it justice: [http://www.truth-
out.org/speakout/item/24456-the-math-of-mas...](http://www.truth-
out.org/speakout/item/24456-the-math-of-mass-starvation-and-murder-germany-in-
greece-during-world-war-ii)

EDIT: Someone downvoted me for this so I guess they're too lazy to read the
article. In which case, I'll just copy paste the important parts.

They destroyed 25% of the country's forests; 56% of the roads; 50% to 90% of
the bridges; 65% of automobiles; 60% of the trucks; 80% of the buses; 100% of
the trains and railways; 80% of the factories; 100% of the water and sewage
infrastructure.

...principal harbors were blown up. Installations, machinery and quays were
destroyed." The Germans also blew up the strategic Corinth canal. In addition,
the Germans sank 74 percent of the Greek ships and destroyed 100 percent of
telephone communications.

"the occupying forces applied a systematic plan for the destruction of
Hellenism: the burning of villages. 1,770 Greek villages lie in ashes. In
certain parts of the country, particularly near the frontiers, destruction by
fire reached the proportion of 90 % of the villages of every region."

The Germans and their allies killed or were responsible for the death of 13%
of the Greek population.

~~~
mc32
You're conflating post war Greece and today's Greece. The article's author is
comparing Greece _today_ with the post war Germany. It's completely
incongruent.

------
jacquesm
Greece has already had quite a bit of debt relief, it just did not seem to
make much of a difference. And as long as they don't have an IRS with teeth
and are willing to go after the black money parked in .ch the current
situation will likely remain.

It's a structural Greek problem, not a German one.

~~~
jerf
"It's a structural Greek problem, not a German one."

If that's so... and I generally agree it is... then why do people keep lending
them money? Or perhaps rather, "lending" them money?

I actually find that a rich and interesting question not amenable to snap
answers. But it doesn't make anybody involved look very good or ethical. Call
it old fashioned of me, but neither borrowing money that you basically know
you can't be paid back, nor lending money you basically know can't pay back,
is very ethical. (Perhaps that's why the discussions about who's at "fault"
keeps going around so viciously... the answer isn't "A XOR B", the answer is
the union of everybody involved.)

~~~
lmm
> If that's so... and I generally agree it is... then why do people keep
> lending them money? Or perhaps rather, "lending" them money?

Most of the money that's being lent is for repaying existing debts that come
due. Like any bankruptcy (which is what this is, formally declared or not),
the ECB is trying to smooth out the process and ensure creditors are treated
equitably. As for "keeping lending them money", the bailout loans are tied to
political reforms intended to fix the problems. How else would you do it?

If you're asking why creditors lent them money in the first place, a lot of
that predates the financial crisis. A lot of it was before rampant fraud in
Greek governmental accounting became apparent. And perhaps people had more
faith in European integration and expected Germany to pay Greece's debts if
they ever get into trouble.

~~~
jerf
"How else would you do it?"

Me personally? Try a lot harder to not get into that problem in the first
place.

I don't mean that sarcastically or as a snap answer exactly. My views on debt
are right now somewhat old fashioned, and they're getting older-fashioned
pretty quickly, directly in response to current events. Humans have a long
experience with debt, a lot of that experience has boiled down to "treat it as
radioactive waste", and I'm increasingly unconvinced that all of our fancy
financial tools have actually _removed_ the underlying reasons for that
millenia-old assessment, rather than _pushing_ those reasons around with ever-
more sophisticated tools into ever-more complicated cognitive blind spots,
until one day it blows up even worse than it used to be able to.

A sober analysis of a _lot_ of the debt in the world right now is that it
simply isn't going to be repaid, for mathematical reasons, and that's been
true for quite a while now. (The crisis merely revealed what should already
have been obvious, and it is obvious that many people still don't think this
is true even after that.) And a lot of that debt has been moved behind things
like "guaranteed pensions" and other things that are amenable to various forms
of jiggery-pokery on the accounting.

So, that's great and all, but what do we do now, right? Because no amount of
wishing for changes in the past will cause them to manifest. To which my
answer is basically sunk-cost fallacy, stop throwing good money after the bad.
Political restructurings don't appear to be working, so stop that. But then,
I'm an engineer, not a politician... "stop doing things that don't work" is
very easy for me but might as well be a concept from the planet Vulcan for a
politician, who is so full of nuance that they can talk themselves right out
of reality and consider it not merely moral, but _noble_.

~~~
lmm
> I don't mean that sarcastically or as a snap answer exactly. My views on
> debt are right now somewhat old fashioned, and they're getting older-
> fashioned pretty quickly, directly in response to current events. Humans
> have a long experience with debt, a lot of that experience has boiled down
> to "treat it as radioactive waste", and I'm increasingly unconvinced that
> all of our fancy financial tools have actually removed the underlying
> reasons for that millenia-old assessment, rather than pushing those reasons
> around with ever-more sophisticated tools into ever-more complicated
> cognitive blind spots, until one day it blows up even worse than it used to
> be able to.

It seems to me to be the opposite - most of the crises are caused not by the
algorithmic side but by the human side. E.g. LCTM's positions famously _were_
profitable - eventually, if humans hadn't panicked and forced them to sell
off. More recently, a lot of the subprime CDSes never actually paid out - it's
just that people worried, and lowered the value of them. As was said of a
recent DeutscheBank lawsuit, "Lehman would still be in business if they hadn't
had to mark their positions to market".

> So, that's great and all, but what do we do now, right? Because no amount of
> wishing for changes in the past will cause them to manifest. To which my
> answer is basically sunk-cost fallacy, stop throwing good money after the
> bad. Political restructurings don't appear to be working, so stop that. But
> then, I'm an engineer, not a politician... "stop doing things that don't
> work" is very easy for me but might as well be a concept from the planet
> Vulcan for a politician, who is so full of nuance that they can talk
> themselves right out of reality and consider it not merely moral, but noble.

So you're saying a lot of self-righteous words there, but what are you
concretely proposing? Just cut Greece off, revoke their authority to print
Euros, and leave them to fend for themselves with their creditors? That is
certainly an option, but it's not without costs to say the least. Arguably
even if that ends up happening, by muddling through for a bit first we've made
things better than they would have been. You can only say the things we've
been doing "don't work" if you're confident things wouldn't have been worse
without them. The current approach is certainly undignified, but fundamentally
I wouldn't say it doesn't work.

~~~
jerf
"That is certainly an option, but it's not without costs to say the least."

I believe I was pretty clear that none of the options are good right now.

And while that doesn't solve the problem we face now by any means, we must
also not fall into the trap of being so focused on the near-term that we
forget to _learn_ from what happened, which I think is where we are now. It is
probably rational for a lot more governments to start getting a lot more
nervous about debt load, but instead we've all but talked ourselves into the
belief that debt-fueled government spending is a moral necessity, and anyone
who disagrees is an idiot. I hope that's right, even as I fear it's not (it's
very ahistorical, if nothing else), because it's certainly the path we're
committed to now.

"The current approach is certainly undignified, but fundamentally I wouldn't
say it doesn't work."

It hasn't worked yet. It has perhaps not "failed" yet, but it certainly hasn't
"worked". I recognize this is not a contradiction of what you said, but the
same sort of idea through a different linguistic lens.

I consider this as part of the larger picture. We're still in the 2008 crisis,
still marching along, still using the same techniques to resolve it. In that
sense, this _has_ failed; we're still in 2008, we have no immediate prospect
of escaping from it, and our current plan is to continue doing the same
things. I feel I'm justified in questioning why our "solutions" are doing so
poorly.

I truly hope that you get to continue saying that this hasn't failed for a lot
longer, but I fear that we are still in a situation where 2008 was still only
the _opening salvo_ , that the "solution" to 2008 was whackloads more debt for
everybody, and that the next time the world economy burps it's going to go
much worse because that option will have been played out. If this isn't
failure, it sure isn't success.

------
PythonicAlpha
As a German myself, I must admit that this is the case.

The current attitude of Mrs. Merkel is popular in Germany and also other EU
countries are mad about Greece, because they improved their finances with much
effort and did not get that much care as Greece did.

And yes, it is right, that Greece carries a lot of fault in this problem,
since they forged their financial data. And I even think, that it was a big
mistake, to take Greece into the Euro, because the country was and is not
ready for it.

But, I fear, that now dropping Greece, after five years of endurance -- and
Greece took really a heavy load (eg. many pensions where cut 45% or more) --
will revert, what people thought, the Euro will bring: To unite Europe and
prevent further wars.

The financial crisis already has brought many new bad feelings between
countries. When kicking out Greece now, because we insist in our own financial
thinking (Greece has to privatize that, do that, do that, cut spending, cut,
cut ... cut), we risk that next maybe Italy or Spain could fall and more and
more bad feelings between countries. And we risk to loose the Euro in the long
run.

We should focus on a solution now, that last for a longer time and does not
bring new problems in the future (as was done five years ago --- everybody
knew, that the load was to much for Greece to carry, but nobody dared to look
for a long-time solution).

Of course, a new haircut (as everybody knows, will be necessary now) will cost
more money -- but without a haircut, Greece will leave the Euro and _all_ the
money that was guaranteed from other EU countries will be lost. So even the
short-time cost will be much higher -- the cost of bitter feelings and
financial dogma. For Merkel it can also be the cost of votes (because she
always looks for the voters -- but in this case, stupid looking for votes can
be horrific for Europe as whole!)

The long term costs can be even higher: Loose what was thought to be won by
the European idea and it even can be, that we loose the Euro in the long run.

I fear, by thinking, we must kick out Greece now, to limit the costs, we even
have higher costs in the long run. We add another error on a long run of
errors made in the Euro case.

~~~
jacquesm
This is exactly the dilemma the politicians are wrestling with, that + re-
election.

------
bobcostas55
A good counter: [http://ftalphaville.ft.com/2015/07/08/2133806/lets-talk-
abou...](http://ftalphaville.ft.com/2015/07/08/2133806/lets-talk-about-
the-1953-london-agreement-on-german-external-debts/)?

Also let's not forget Greece got ~160bn euros in debt relief just 3 years ago.

~~~
bildung
_> Also let's not forget Greece got ~160bn euros in debt relief just 3 years
ago._

Let's also not forget that most of that debt did not exist a few years
earlier. Yes, Greece had and has a massive tax evasion problem, and debt
wasn't exactly low pre-crisis either. But most of the current debt is a result
of bank bailouts:

[https://en.wikipedia.org/wiki/Greek_government-
debt_crisis#/...](https://en.wikipedia.org/wiki/Greek_government-
debt_crisis#/media/File:Greek_debt_and_EU_average_since_1977.png)

~~~
bobcostas55
I don't think that's an accurate view of things, the causal chain goes the
other way. Banks had to be recapitalized because of the PSI, because the Greek
default wiped them out. The bailouts were directly caused by the default. And
in any case, they had no choice: without the Evil Bank Bailouts Greece would
have been left literally without a banking system, that's not really an
option.

------
supernikita
Germany had to loan money to pay the reparations the allies demanded for the
losses in WW1. Despite all Debt Relief, the last payment on these loans was
made in 2010.
[http://content.time.com/time/world/article/0,8599,2023140,00...](http://content.time.com/time/world/article/0,8599,2023140,00.html)

------
ThrowThrow2
Discussion from yesterday on that NYT piece

[https://news.ycombinator.com/item?id=9850147](https://news.ycombinator.com/item?id=9850147)

------
jackgavigan
The roots of Greece's current problems lie in the failure of the EU to enforce
its own rules. They overlooked the fact that the Greek government of the day
cooked its books to meet the Maastricht criteria for joining the Euro, then
failed to enforce the Stability and Growth Pact rules when France and Germany
broke them.

Eurozone interest rates were set at a low level to stimulate the post-
reunification German economy, ignoring the risk of over-stimulating (and
inflating asset bubbles) in the faster-growing Portugese, Irish, Greek and
Spanish (PIGS) economies.

The end result is that the German economy benefited, at the expense of the
PIGS economies, which wound up tatters. Even today, the rule-breaking
continues; Germany's current account surplus is in breach of the 6% limit
defined in the EU's Macroeconomic Imbalance Procedure but the EU turns a blind
eye.

The first Greek bail-out deal "was about protecting German banks, but
especially the French banks, from debt write offs", according to a former head
of the German central bank:
[http://www.spiegel.de/international/germany/former-
central-b...](http://www.spiegel.de/international/germany/former-central-bank-
head-karl-otto-poehl-bailout-plan-is-all-about-rescuing-banks-and-rich-
greeks-a-695245.html)

But even if you decide to ignore how the current situation arose and whose
fault it is, the simple fact is that Greece _cannot_ repay the amount of debt
it is now lumbered with. Even the IMF has sais that it's "unsustainable". The
Greek economy has suffered far worse than any other country in Europe:
[https://pbs.twimg.com/media/CJYl1rTXAAAQvju.png](https://pbs.twimg.com/media/CJYl1rTXAAAQvju.png)

The EU is partly responsible for that, and it is morally wrong, in my opinion,
for them to refuse to face up to the fact that the only acceptable solution is
to reduce the amount of debt that Greece has to repay (and/or extend its
maturity to achieve the same result).

EDIT: By the way, it's not like the Greeks have done nothing. They were on
course to generate a primary budget surplus this year (i.e. before you take
interest payments into account).

------
ikeboy
>But the Greek economy has shrunk by a quarter. Its pensioners have been
impoverished. Its banks are closed. That counts as suffering consequences. No
sane government would emulate the Greek path.

>Greece has done little to address its endemic economic mismanagement. But it
has few incentives to do so if the fruits of economic improvements will flow
to its creditors.

So ........

I detect a contradiction between those two claims, that appears to go
unaddressed in the article. Which is it? Does Greece have what to gain by
improving things or not?

~~~
crdoconnor
It does, but if it continues to follow Troika diktats nothing will ever
improve.

They realize that the policies foisted upon them are self destructive. That's
why they're rebelling.

------
npalli
If you look at the Greek situation from an American lens you will mistakenly
consider debt forgiveness to be a solution to the Greek problem. There are two
big issues with the Greek situation that go beyond the debt forgiveness issue

1\. Even if substantial portion of the debt is forgiven, the Greek state runs
a deficit with a corrupt clientalistic system built since 1980 that provides
Denmark type social benefits with baltic-area economy. Unless this social
structure is completely reworked in line with the fundamentals of the Greek
economy, there will always be a mismatch and Greek will continue to need
bailouts. BTW, this is Europe wide problem where old people voted massive
benefits for themselves in the past thirty years and adjustment is needed.
Greece happens to be the most extreme case of mismatch. As Angela Merkel says,
Europe has 7% of the world population, 25% of the economy and 55% of the
social programs. In contrast, the US is only 20% of social spending (if you
don't include military). So the US lens is always towards more social
spending.

2\. Moral Hazard across the Eurozone, debt forgiveness for Syriza will
embolden other left wing parties in Spain (Podemos) and Italy to make noise
and 'democratically' choose to default on substantial portion of their debts.
Spain and Italy are much larger economies with much larger debts, if they
decide to default it will lead to massive problems in the Euro area. The
German solution is to make the Greek situation so utterly painful (via Grexit
if needed) that much bigger problems with Spain and Italy don't come down the
line.

~~~
gizmo
1\. Greece needs reform, this not disputed. However, corruption and the size
of their welfare system are not the cause of this crisis. The conservative
parties in Europe want to dismantle the welfare system and they're simply
exploiting the crisis for this purpose.

2\. The banks got a huge bailout as a reward for crashing the economy. How's
that for a moral hazard? But when it comes to funding for schools, hospitals,
and the rest of the population who got stuck in this depression through no
fault of their own a bailout is suddenly a moral hazard? Your view is morally
abhorrent.

~~~
npalli
1\. The welfare system is unsustainable, given European demographics and
economic situation. So, adjustment is necessary. Having a balanced social
system in line with what your economic situation is doesn't mean dismantling
everything.

2\. Somehow people think Banks are this magical entity that creates money out
of nowhere. Or that some hedge fund money is in the bank. The money that Banks
have are deposits of other common people!. So if you don't pay the banks then
some common person on the other side loses money. Yes, money that could have
been used for schools, hospitals etc. So when Greek people borrowed money,
spent it all and now don't want to pay it we are supposed to feel sorry for
them. But, the German/French pensioner who has already lost money during prior
debt relief in 2010 and 2012, we shouldn't feel sorry for them. Something
about Nazis and WWII etc. etc. Strange ideas.

~~~
gizmo
1\. The welfare system in Europe is entirely sustainable in the long term.
It's just a matter of national priorities. Conservatives consistently attack
the social safety net: in their view the government is always "too big", taxes
"too high", and the welfare system "too expensive". A welfare system can also
be large and balanced. Just raise the taxes necessary to pay for it.

2\. Greece CANNOT pay the money back, because they don't have it. The question
that remains is whether we punish the Greek people for something they had no
say in and did not benefit from. I say punishment here is counterproductive
and immoral.

When banks or institutional investors make dumb investments they have to lose
their money. The responsibility for due diligence lies primarily with the
lender. The amount of interest they charge is compensation for the riskiness
of the loan. The banks decided to lend money to Greece and Germany at the same
interest rate. That's plain insanity. You can't expect financial mastery from
regular people, but you can --and should-- demand it from billion dollar
pension funds.

------
higherpurpose
Giving the government tens or hundreds of billions of euro more will not solve
the situation and will likely make it worse. The government can't manage that
kind of money in an efficient way given the current levels of tax fraud and
other kinds of corruption in the country right now.

The EU would be much better off if it offered loans only to private
individuals and (small) businesses, if it really wanted to help Greece. Taking
a more "decentralized" approach would ensure the "waste" would be minimal from
such loans.

------
ThrowThrow2
With all the US government pressure in this topic, and Syriza styled after
Venezuela populists, I wonder why the US is not giving money to Venezuela but
the EU should pay left populists.

------
murbard2
German debt relief came with the creditors rewriting the entire constitution.
I think if Greece is willing to go for that, they can probably get themselves
a deal!

------
cuillevel3
Yeah, let's split Greek into two countries and micro manage their regimes for
a few decades.

Seriously, if anybody got the money to do this.. it really helped Germany.

~~~
jeremysmyth
To further emulate the German success, don't forget that you'd have to force
severe indoctrination of the next several generations from school age up by
_requiring_ certain horrific historical retellings, and force similar thought
policing by making certain forms of political support, speech, and activity,
however peaceful, utterly illegal.

------
ThrowThrow2
I wonder if Greece will give 30% of it's country for the debt relief as
Germany did when losing the war.

------
ThrowThrow2
Greece already got a 50% debt relief which everyone seems to forget.

