
Europe's Moment of Truth - fulafel
http://krugman.blogs.nytimes.com/2015/06/27/europes-moment-of-truth/
======
thrill
"If you ask me, it has been an act of monstrous folly on the part of the
creditor governments and institutions to push it to this point."

In Krugman's Nobel Peace Prize world, it's folly that creditors expect to be
paid back, or to even require that debtors show a workable plan for such
payment.

~~~
autokad
I generally agree with statements like that about krugman, but in this case I
believe he is right.

demanding a country raise taxes during a recession, with no less than 25%
unemployment, is ... well i don't know the exact word, but its bad.

its clear that nations in joining in this union gain some benefits, but they
loose the control of their own money. and that has been show to be more than
just paper, they loose their sovereignty.

~~~
Confusion
If you believe the proposed solution was 'increase taxes', you are uninformed
and should have refrained from commenting on this topic.

~~~
rockinghigh
The offered deals included reducing pensions and increasing tax revenues.

~~~
Confusion
Yes, increasing tax revenues. That does not mean increasing taxes. A major
problem in Greece is that taxes aren't being paid. Raising taxes does not
solve that problem.

~~~
pvaldes
Increasing VAT means increasing taxes. The funny fact is that the experiment
backfired totally in other countries and both Tsipras and the Troika know it.

When Spain increased VAT forced by the Troika, revenues dropped instead to
increase. People just started refusing to buy at the new prices and the
government lost millions in its expected tax revenue, increasing the crisis
instead to solving it. Maybe by design.

The troika for instance force the government to raise VAT from 4% to 21% in
barbershops. As result of this, more than 13.000 small beauty salons,
otherwise doing reasonably well, closed in only two years. This means adding
about 34.000 people to unemployment statistics (and also that VAT revenues
from those business fell suddenly from 21% to 0%).

Finally, as expected, troika nonsense is hurting also Deutschland. As
companies were earning less and being taxed more, some closed or relocated and
people get fired and stop buying as happily as before. German products are
losing grip in the market at the new tax prices imposed by germany, just
because China can always offer cheaper replacements. Germany industry was
selling 'trust', not 'cheap', but troika repeated failures blowing up the
middle class had damaged seriously the trust or the need to the germany
expertise.

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ra1n85
What kind of precedent would it set if Greece's debts were forgiven? Would
there be any willing future creditors should another (very likely) financial
crisis arise?

~~~
calibraxis
Germany owes its prosperity to Europe writing off most of its debts in 1953.
(Despite acting like total Nazis.) Not to mention getting out of paying Greece
for WWII reparations.
([http://www.cnbc.com/id/102495059](http://www.cnbc.com/id/102495059)) So it
can work out quite well!

Also, the debt run up by a US-supported Greek dictator is “odious debt”, and
not owed by the population. ([http://www.euronews.com/2015/04/17/chomsky-says-
us-is-world-...](http://www.euronews.com/2015/04/17/chomsky-says-us-is-world-
s-biggest-terrorist/))

~~~
Canada
Was all that German debt borrowed or was it largely war reparations?

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IndianAstronaut
Good choice on making Greek voters make the call. It is still amazing to me
that with all our technology, we aren't going to the people more to make
decisions.

~~~
r0naa
Except that this is just a manoeuvre from Tsipras to gain time and put the
blame on the rest of the EU when they are forced to leave the Eurozone.

The referendum is planned for July 5th while Greece's obligations to pay their
debts are on June 30th.

It's clear in the eyes of everyone that it's a political move. Tsipras has
been feeding lies to the Greek people. He is a populist.

The following scenario is likely to happen on June 30th: \- The European
Central Bank will maintain ELAs to their current level, it means that Greek
banks will have to default.

\- The Greek government will have to refill their bank and nationalize them.
Since they have no power over the euro, they will start printing their own
money which will be worth very little.

~~~
gonvaled
Tsipras does not have mandate to do the opposite of what he promised during
the election. He can still do it, but for this important turning around in the
promised politics, and for this important decission for the greek people,
asking them in a referendum makes sense.

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jayess
If there are any Greeks on HN, I'd love to hear the sentiment on the ground.

------
yc1010
Didn't the Greeks pretty much do for years what the likes of Krugman and his
fellow Keynesians advocate (more government spending etc)

~~~
rors
Keynesians advocate for large amounts of public spending during recessions to
stimulate the economy. They don't advocate for racking up a large amount of
public dept to spend during the periods of growth, which is what happened in
Greece.

There are many other issues with the Greek economy such as clientism, the
inability to collect taxes, etc that all economists would agree needs fixing.

