
Open letter to German readers: What you were never told about Greece - sjcsjc
http://syriza.net.gr/index.php/en/pressroom/253-open-letter-to-the-german-readers-that-which-you-were-never-told-about-greece
======
vijayboyapati
This one sentence sums up what I think is the fundamental problem: "An
insolvency problem was thus dealt with as if it were a case of illiquidity."
That is, the problem isn't some ephemeral panic where people are temporarily
unwilling to lend. The problem is there are massive capital losses that have
yet to be acknowledged. The problem is that Euro politicians believe that by
continuing to bankroll Greece they will stem a wider panic. But as John Mills
observed in a speech given to the Manchester Statistical Society in 1867,
“panics do not destroy capital; they merely reveal the extent to which it has
been previously destroyed by its betrayal into hopelessly unproductive works”

The losses must be acknowledged. The only question is by whom? By the people
who made the loans? Or will the taxpayers of Europe be called upon, as the
taxpayers of America were, to eat the losses?

~~~
TheOtherHobbes
Well, no. The fundamental problem is that Germany has been treating the rest
of the EU as an expedient export market while refusing to allow equivalent
imports, and at the same time aggressively insisting that countries in the EU
should somehow magically not need debt... to continue buying from Germany.

There's also the minor point that this is yet another excuse to indulge the
usual neoliberal hatred of social spending and everything else that improves
the condition of ordinary people who work for a living.

Germany has a long post-war history of renegotiating or ignoring debt. So
crashing the Greek economy by enforcing murderous austerity - _literally_
murderous in its effects, and not hyperbole - is a new peak in self-serving
hypocrisy.

~~~
jahewson
Your statement about Germnay refusing to allow imports is manifestly false.
The EU is a free trade area and its member states are not permitted to engage
in such activities. The EU has its own courts to enforce such rules.

It's certainly true that Germany is a net exporter: this is because of their
ability and competitiveness in engineering and technology, combined with the
fact that Germans are not big consumers and prefer to save their money. It
would be good for Europe as a whole if Germans spent more money on imports -
but the idea that they are deliberately blocking imports is bogus.

Europe doesn't really have neoliberals, so I'm not sure what your point is
there. If anything, Europe leans to the left.

If you want to find a country with a long history of ignoring debt, then look
no further than Greece, which has defaulted over 20 times. It is a country in
deep need of structural reforms in order to have a viable economy. Yet the
reforms haven't happened, due to corruption, cronyism and general foot-
dragging. This is the real problem and debt-reduction isn't going to solve it.

~~~
yxhuvud
No, Germans are not more frugal than other people. The main issue behind
lacklustre German consumption is that neither their wages nor their investment
in infrastructure has kept pace with their productivity growth.

~~~
seizethecheese
What's your source, your intuition? Germany is one of the highest savers in
the Euro area; much higher than Greece.

[http://data.worldbank.org/indicator/NY.GNS.ICTR.ZS](http://data.worldbank.org/indicator/NY.GNS.ICTR.ZS)

~~~
antman
This table does not mention personal savings. It is cannot provide insight, is
as useless as GPD per capita.

------
3pt14159
Sure. I agree that (morally) the EU shouldn't have bailed out Greece. Greece
cooked its books and Greek debt holders at the time of the bail out were
suffering the consequences of lending to a fiscally irresponsible state.

That being said, the world was uncertain as to how much economic damage had
yet to be done, and by shoring up Greece it assuaged investor confidence
across the western world. Personally I think that the level of debt in the
developed world is completely unsustainable because it relies on population
growth and productivity growth in a manner that will one day lead to a massive
global failure / inflation, but my opinion isn't really the majority opinion
on economics. Essentially Germany shored up Greece for Germany's own
interests: stabilize the Euro and investor confidence in Europe.

That being said, Greece can afford to pay back its debts. The current debt to
GDP of Greece is 175%. Before the populist clowns looked like they were about
to win the government, the interest rate on Greek debt was around 5 or 6%,
which is affordable, and the longer it is paid, the lower that rate will go.
Look at Canada during the 90s, the interest rates plummeted as soon as the
government paid off 10 points of the debt to GDP ratio, just because the
government gained investor confidence.

Greek pensions and benefits are unsustainable. Greek tax rates, while
nominally high, are not uniformly paid due to corruption. That is the real
real reason Greece can't afford this debt burden. And frankly, if they are
going to default, they should do so soon, since the world is at a high mark
financially right now.

~~~
guelo
What I don't understand about this type of logic is the refusal to acknowledge
the damage being done by the forced depression. It's like a 19th century leech
therapy, keep sucking out blood until they get better. If Greece's economy is
allowed to recover everybody will be better off, the banks, the politics, the
people living in Greece and even the German taxpayer.

~~~
john_b
> _" forced depression"_

Nothing about Greece's current situation was forced on them. Sure, lots of
politicking went on and the current situation was definitely engineered to
benefit others, but Greece was effectively bankrupt and in default prior to
the bailout. You just can't tolerate the level of corruption [1], tax
avoidance, and union greed that Greece tolerated for so long. A normal
sovereign default would have been just as painful, but in different ways.
Greece as a country decided it wanted to stay in the Eurozone, thus picking
its poison.

Comments like this remind me of people like Cristina Fernandez of Argentina,
obsessed about the pain of their economic situation to the extent that
awareness of how they got there in the first place is lost.

Greece got itself into a very deep shithole with only two main ways out.
People look at the hardship of the current path out and see that it's
obviously painful, then make the classic fallacy of the-grass-is-greener-on-
the-other-side.

[1] [http://www.independent.co.uk/news/world/europe/greece-
most-c...](http://www.independent.co.uk/news/world/europe/greece-most-corrupt-
eu-country-survey-reveals-8386456.html)

~~~
nhaehnle
> Nothing about Greece's current situation was forced on them.

What would you call the fact that the Troika has forced the Greek government
to implement brutal and deadly austerity measures?

I mean, sure, technically Greece could have avoided this. If they had left the
Eurozone in 2009 or 2010, they would now be in a much stronger position (after
a brutal but short period of even more chaos). But that wouldn't have made the
European elite happy, either.

~~~
peterfirefly
Fire some of the public servants. In fact, change the constitution to make
that possible without passing laws for each and every case. That's the
absolute minimum required for it be called "brutal", "deadly", and
"austerity".

What is the cost of the Greek railways per passenger kilometer again compared
to paying for similar cab rides?

What does the Greek constitution say about firing public servants? How early
can they retire, still, after the "austerity"?

------
mrweasel
It's perhaps prudent to distinguish between the German people and the German
politicians. It's my feeling that the average German would have suggested NOT
to extend large loans to Greece. It is the EU (and German, French, Italian and
so on) politicians that believed that in the grand scheme of the Euro, it
would be the best cause of action.

The sad part is that the loans to Greece perhaps wasn't so much about Greece,
as it was about Spain, Ireland and perhaps even Italy. If we ignored
everything else, then letting Greece leave the Euro, rather than offering
large loans and unrealistic terms, most likely would have hurt neither the
Euro, nor the EU. In the real world, letting Greece leave would mean that
investors and speculators would start to question the dedication to the Euro,
given that Spain or Italy (much larger economies) might be forced to leave the
EU next.

I'm not an economist, so I might be totally wrong, but for a regular person an
investment (of this scale) in Greece was obviously a bad move, at least in
hindsight. It's sad for Greece, but they where just casualties of their own
politicians and a Euro they should never have been allowed to be part of in
the first place.

~~~
drzaiusapelord
I'm not so sure of that. Greece might be a special case. Its a tourist economy
with heavy social services and a retirement age of 58 with overly generous
pensions; about 80% of one's salary. Its fraudulent on practically all levels
of government. Its recent cozying to Putin is just more spit in the eye of the
EU partners who tried working with Greece's debt issues.

While Italy and Spain aren't the shining stars of fiscal responsibility and
anti-corruption, they're bush league compared to Greece's MLB financial
shenanigans. An Italian exit would be a huge event, considering Italy's
economy is bigger than Russia's. Greece is just a bottom feeder.

As a Greek-American is pains me to say these things, but Greece is just on the
wrong side of history here. Its incredible how corrupt that country is. Its a
clusterfuck of far-leftist nonsense that has no place in the EU. I could see a
re-entry in a few decades after they've cleaned up their act, assuming that's
possible. Expecting everyone else to bankroll Greece's generous pensions seems
unfair to working Europeans.

This should also be a wake-up call for EU expansion. Taking on these corrupt
countries is a major risk. I'm very glad they never got Turkey, considering
its deep into a spiral of Islamic autocracy and has also lost its major
economic growth around Q1 2014.

------
mysticllama
A CNN article from 2010 referenced 2008 government documents that said "6 in
10 Greeks don't pay income taxes" source:
[http://www.cnn.com/2010/WORLD/europe/12/31/greece.taxes/](http://www.cnn.com/2010/WORLD/europe/12/31/greece.taxes/)

I don't know what the rate of tax evasion is in other western countries, but
I'm willing to wager the situation in Greece is dramatically worse.

I remember reading a NYT article from the same year that provided further
insight:

 _Various studies, including one by the Federation of Greek Industries last
year, have estimated that the government may be losing as much as $30 billion
a year to tax evasion — a figure that would have gone a long way to solving
its debt problems._

 _The cheating is often quite bold. When tax authorities recently surveyed the
returns of 150 doctors with offices in the trendy Athens neighborhood of
Kolonaki, where Prada and Chanel stores can be found, more than half had
claimed an income of less than $40,000. Thirty-four of them claimed less than
$13,300, a figure that exempted them from paying any taxes at all._ source:
[http://www.nytimes.com/2010/05/02/world/europe/02evasion.htm...](http://www.nytimes.com/2010/05/02/world/europe/02evasion.html?pagewanted=all&_r=0)

I haven't seen more recent numbers, but it makes me wonder about citizens'
culpability in the government's debt crisis.

Maybe I'm overestimating the role of taxation in this debt fiasco, but it does
seem as if the attitude of a lot of Greek citizens needs to change, if it
hasn't already.

~~~
brianwawok
Here is something that maybe I am not understanding.. but saying that 6/10
greeks pay no income tax does not tell us how much tax evasion there is,
right?

From what I can google: [http://www.taxpolicycenter.org/taxtopics/federal-
taxes-house...](http://www.taxpolicycenter.org/taxtopics/federal-taxes-
households.cfm)

43% of Americans do not pay federal income tax (and some % of those get a net
gain of federal income tax). Sure 60% is > 40%... but that could be due to a
ratio of more people really poor, compared to more tax evasion.

(Not doubting Greece has a tax evasion problem, but 6/10 not paying taxes
seems bad evidence).

~~~
mysticllama
_saying that 6 /10 greeks pay no income tax does not tell us how much tax
evasion there is, right?_

You're right, the 6 in 10 figure seems rather misleading. Those people
shouldn't be characterized as tax evaders as I suggested. That said, it
probably points to an issue of not enough tax contributors.

The numbers for America are interesting, I wouldn't have guessed the rates
were that high.

Anyway, as far as tax evasion goes, I wonder how much a lack of enforcement
allows well compensated workers to get away with claiming they're below the
tax exempt mark.

~~~
brianwawok
I mean that is the trick right? You have a doctor making 100k claiming he
makes 10k and paying no tax. I have seen individual stories of it, but is that
really the common case? Or is it more like rich business owner making 300k
claims he made 200k because of the cash heavy economy in Greece?

------
bagosm
What isn't addressed in this letter and most people don't realize is that the
Greek debt as an absolute number isn't that big.

The real problem is that Greece needs more money to continue operation than it
produces, and this fact hasn't changed nor will in the near future.
Effectively this makes Greece a black hole for incoming money where incoming
money have no actual benefit for anyone other than just keep a near-corpse
alive for a little more.

If there was a surplus generated every year, the debt amount wouldn't matter
as it would be paid off eventually.

The whole point is to get to the state where the economy is healthy as a
yearly in/out amount. If that's done there is no reason to get any bigger
loans...

Edit: Forgot to add: it's in the greater interest of the eurozone to keep
Greece from bankruptcy though, and it's twofold: one is the interconnection of
markets, ie Greece IS a buyer, and the second is the geography as Greece is a
central node for shipments from the east, has natural gas reserves etc..

~~~
tobias3
Actually greece has a primary budget surplus, so at this point they are paying
back the "loans", the problem is that they are miserable while doing so.

If people are unemployed you are squandering resources.

~~~
dandare
While being miserable they are better of than let's say Slovaks who paid 660
mil Euro to bail out Greece. Think about it, they are not really living in
poverty, they just lost the luxury standard they were used to.

~~~
StavrosK
If by "luxury standard" you mean "being able to afford rent and have youth
unemployment be less than 50%", then I agree.

~~~
gaius
Oh come on, have you been to Athens? Everyone drives a Porsche and wears a
Rolex, but all the buildings are unfinished, because if they were they'd be
taxed. Greece is a poor country weirdly full of rich people.

~~~
StavrosK
Everyone? Really? Because half of my friends are unemployed, and every single
one has a university degree. And who starts building and then doesn't finish
it because they don't want it to be taxed?

~~~
jongraehl
That's how it is in Mexico, too. They leave some unfinished faux-second-story
attached to their building and never pay full property tax on the value of
property-with-one-completed-story. Re: "who starts ..." why don't you search
before you post?

~~~
StavrosK
Oh, is Mexico actually a rich country too, then?

------
youngtaff
The thing that seems to be often missed about the 'Greek bailout'is it wasn't
about bailing out Greece, it was more about bailing out the German bankers
who'd lent Greece more money than they should have.

The Greek people were shafted by the EU, IMF etc. because they didn't want to
see the German bankers take the pain.

We see a similar problem with the current round of Quantitive Easing that the
ECB are undertaking - they're giving the money to the bankers in the hope
they'll lend it to others.

Instead they should be giving it to people, so they can save, spend or pay off
debt as they wish - it'll all end up in the banking system anyway but will
actually do some benefit first.

~~~
cyphunk
"Give the money to the people". The US did this in the form of tax credits for
housing. Germany did something similar in the form of credits for car
purchases. This form of giving goes directly toward an industry in need. I'm
not sure how giving a blanket check helps. If the problem is consumer spending
and _IF_ this is an important driver for your economy it may have some impact
but I think the problems the EU were facing were not this. So giving money to
the people just sounds like dangerous populism and an action that makes little
attempt to rebalance some ailment in the economic system.

~~~
youngtaff
But at the moment we end up subsidising the banks with _our money_ so they can
make more money at _our expense_

If you want to kickstart economies then expecting banks that are up shit creek
due to their past lending and investment practices isn't the way to do it.

The way to do it is give people money to use as they wish and not pick
favourite industries.

If people save the money it increases banks capital ratios, if they pay off
debt it reduces the banks loan book, if they spend it it may increase
inflation through consumer prices.

Some people might even use it as capital to create a new business.

Our current bank focused model of QE does none of these things.

------
leroy_masochist
tl;dr: "This time it's different."

The piece was more persuasive than I thought it would be, and Tsipras'
diagnosis of the cause of the problem is dead-on: this is a crisis of
insolvency, not illiquidity.

The problem with what Tsipras is asking for is that markets get a vote, too,
and the outright forgiveness of Greek debt would cause massive upheaval --
potentially to the point of making the EU itself unsustainable.

I think the only way the Germans will agree to debt forgiveness at meaningful
quantums is if Greece leaves the Euro currency union and goes back to the
drachma. That would send a powerful message to the financial markets -- "you
get one mulligan, and the price of that mulligan is leaving the Eurozone".

Of course, Tsipras doesn't want that. He wants a "European New Deal", the
details of which he provides rather sparingly. My guess is that if he were to
flesh out these details, Germans would find them not only unreasonable but
laughable.

The "wild card" scenario is if SYRIZA undertakes a project of massive wealth
confiscation from the Greek elite. That actually might move the needle of
German public opinion--one of the biggest points of outrage among the German
people over the last 5 years has been the juxtaposition of media coverage of
the excesses of wealthy Greeks (and their creative non-payment of taxes) with
the math of how much each German family was being asked to give to rescue
Greece. Start levying massive one-time luxury taxes on Greek-domiciled assets
of Greek citizens (with asset seizures as penalty of non-payment) and maybe
you get enough schadenfreude flowing in Germany to meaningfully alter public
opinion.

~~~
Fiahil
The "wild card" scenario seems especially accurate, as he speaks a lot of
"ill-gotten privileges" and "major reforms" towards the end.

------
teamhappy
_Most of you, dear Handesblatt readers, will have formed a preconception of
what this article is about before you actually read it. [...] Prejudice was
never a good guide, [...]_

How does he not hear himself? Also, "Handelsblatt" is missing a letter. Anyway
...

I reject the premise of his letter. He seems to think the purpose of the money
was to help the greek people, and offers a more productive way of doing so.
That's all fine, but I'm pretty sure the sole purpose of the money was to save
the Euro. Whether that's ethical is debatable, but I think it's important to
remember that Greece has messed up quite a lot of things without considering
how that might effect other EU member states; ignoring at least some of their
responsibilities. But that's a different story entirely.

His tone is utterly disrespectful, if you ask me. I'm really not sure who he
thinks he is or what he thinks he's doing, but I know for a fact that a lot of
my fellow germans aren't gonna like being spoken to in this tone of voice. He
mentions fear and anxiety a lot. I don't know what he means by that. We're
quite calm, as far as I can tell, and I can imagine that scares him a little.

Germany is one of the riches countries on this planet. We will do almost
anything to keep it that way. I appreciate that he needs to sell his own
agency to his people, but if he actually believes he can control the fate of
his country even so slightly, I'm afraid he's delusional.

Just for the record: I'm neither proud of nor happy about how we treated the
greek people, but I'm tired of pretending this is about anything but money.

~~~
tomp
> Germany is one of the riches countries on this planet.

A lot of that riches comes from the fact that EUR is a common currency both of
economically successful countries like Germany and of economically weak
countries like Greece. That makes the currency artificially undervalued, which
boosts German exports and hurts Greek imports, making Germany more competitive
and Greece less competitive (longer comment:
[https://news.ycombinator.com/item?id=8954377](https://news.ycombinator.com/item?id=8954377)).

I think it's time Germany admits to that and pays its dues, by which I mean
help finance the rest of EU (via a fiscal union).

~~~
sfk
This is utterly ridiculous. West Germany was FAR better off economically when
the D-Mark was strong.

~~~
teamhappy
You're assuming that the D-Mark would be as strong (or possibly even stronger)
as it was back then today. Which is a bold assumption. As a matter of fact,
nobody (apart from some utterly ridiculous right-wing politicians) even
considerers this an option.

------
bostich
I am German and have had a very negative opinion of Tsipras. He makes some
very good points in this letter and his view seems to be consistent. I can
understand his position and my opinion of him has improved a bit after reading
the letter.

Nevertheless I see no solution, only 3 possible bad outcomes:

1\. Europe loans more money to Greece and we can be pretty certain that they
can't pay it back.

2\. Europe gifts money to Greece (forgive some of the debt) to temporarily
reduce their debt and after a few years we are in the same situation again

3\. Greece defaults on its debt (and maybe exits the Euro) and can't borrow
money for the foreseeable future.

None of these options looks particularly desirable and imo Tsipras doesn't
help the situation when he says to hell with it; let's rehire all these public
servant. We don't have the money for that but it wont matter much regardless
which possible outcome becomes reality

~~~
UweSchmidt
How about 4\. Greece leaves the EU.

There could still be favourable trade agreements and some currency stabilizing
etc. so it's not the end of the world, but it would be a wakeup call for
everyone to treat their finances a little more seriously.

German yellow press also mentioned various social programs in Greece that can
only be described as frivolous even by social state standards. It's harder to
be sympathetic with the Greek cause if we're paying for higher welfare abroad
than we enjoy ourselves.

~~~
viccuad
> German yellow press also mentioned various social programs in Greece that
> can only be described as frivolous even by social state standards. It's
> harder to be sympathetic with the Greek cause if we're paying for higher
> welfare abroad than we enjoy ourselves.

You are free to move there.

~~~
UweSchmidt
This has nothing to do with me:

\- I wouldn't be eligible to most of these purported benefits in Greece \- My
standards of living would likely be lower even with funny welfare \- Moving
there would theoretically make it worse since theoretically I'm currently
helping/paying

So, why not write another open letter that discusses reasonable ways to save
some money, OR debunk myths that discourage peope from helping?

------
lovelearning
Paul Krugman's opinion on this is rather eye opening. He feels even Syriza is
not radical enough!

[1]:
[http://www.pennlive.com/opinion/2015/01/new_pms_plan_to_save...](http://www.pennlive.com/opinion/2015/01/new_pms_plan_to_save_greece_-.html)

------
cyphunk
As other comments have pointed out, and Tsipras pretty much says himself in
this article, good money was thrown at bad but was done so not to prevent a
productivity fallout in Greece but to prevent one in the rest of the EU or
world. And now Tsipras is arguing bluntly that Greece's economic system will
not rebound as expected because it's productivity problems are deeper than
liquidity.

It is worth looking at Detroit here. Not because of where they are similar but
where they are not.

Detroit could not repay debts and required restructuring (aka hair cuts).
Importantly they decided the type of hair cuts on their own. They had to do
this because there was no Federal bailout. Michigan agreed to pay 194 mil for
pensions as a lump some (aka a gift) but Detroit had to sell off assets,
renegotiate with creditors on their own and reform where they could. But
again, they did this because they knew they had to. It wasn't directly
dictated by "The Union" (Fed).

Importantly they were given some breathing room because at least some portions
of social services providing stability are Federal (social security, medicare,
medicaid). And though they just exited bankruptcy it's likely without
investment from overloads (state and federal) a full recovery will not happen.
Or at least, investment will certainly help that become more possible.

What is missing in the EU are these social safe guards. And it seems a good
time to build them. Rather than dictate to Greece how to alot retirement or
social welfare or other social services, they should provide a baseline EU
wide option for entities that default. This option makes it easier to let them
get at least as close to default as is required for them to be in a place to
consider what changes they could make to provide future stability. And when it
comes to bailouts it should come in the form of investment. Both seem to be a
rather obvious steps in maintaining the Union and providing greater trust and
integration. Anything else should be decided in negotiations only after Greece
begins the hard negotiations with its creditors after all accept imminent
default.

------
bibabo
Some notes:

1\. Greece is talking about Germany because it helps mobilize masses. Germany
does not decide on it's on on this nor is the most agressive player. Most
northern and eastern countries are more agressive in their opinion against
Greece. But it helps to mobilize Greek masses with a simple enemy.

2\. Greece has defaulted have a dozen times in modern times. This is the Greek
way of doing things and will continue, whatever the EU, Germany or the IWF
thinks and does.

3\. People in Greece don't think of taxes as something you have to pay. Many
Greeks stopped paying taxes the last months in anticipation of a new
government. This will not change and is the main driver for Greek defaults.

~~~
atmosx
Some counter-notes:

1\. That's b*shit. It's Germany all way. The Fins and Dutch are easy to bend.

2\. Germany has defaulted 3 times in the last 100 years. The Marshall plan was
issued in 1948, otherwise now Germany would be worse than you date to imagine
+ wars damages to Greece were never paid.

3\. Why don't you come live in Greece and find out. Try to deal with the
state, then run a business WITHOUT tax-evading in this environment. Then share
your knowledge, show us how you did it.

~~~
bibabo
1\. The Baltic states, Poland, everyone except the southern countries (and I
assume Spain with a thriving economy in 2014/2015 will join the club when
unemployment drops) is on the same page. But as an excellent demagogue Tsipras
knows he needs a simple enemy (Germany) to rally the mob.

2\. Yes Germany defaulted, but did not make it it's modus operandi.

Excellent that you've brought up the Marshall plan:

The Marshall plan was essentially the same as what the EU imposes on Greece:
"The Marshall Plan required a lessening of interstate barriers, a dropping of
many petty regulations constraining business, and encouraged increase
productivity, labour union membership, and the adoption of modern business
procedures."
[http://en.wikipedia.org/wiki/Marshall_Plan](http://en.wikipedia.org/wiki/Marshall_Plan)

Where it differed: Beside that the Marshall Plan required European countries
(beside Germany e.g. France, Britain, essentially everyone else) to buy from
US companies: "Much of the Marshall Plan aid would be used by the Europeans to
buy manufactured goods and raw materials from the United States and Canada.
[...] The Marshall Plan aid was mostly used for the purchase of goods from the
United States" (Same source)

Last interesting tidbit from the Marshall plan "The first substantial aid went
to Greece and Turkey in January 1947". (Same source)

 __Indeed Greece got nearly twice the money from the Marhsall plan per person
compared to Germany. __

(For comparision Germany got 1.5B, Greece 0.4B, UK 3.3B, France 2.3B)

2\. On war damages: I agree they were not paid and I agree with you on moral
grounds, but I'm not sure it is economically relevant. The billions from the
EU and the (2015 Euro) Marshall plan did not help, so I would not assume
paying war damages would put Greece in a different situation. Except perhaps
this makes Germany (see 1) a nice enemy.

While we're at war damages, I don't think Greece has paid war damages for any
of the wars it started over the last 2500 years. The invasion of Turkey, the
baltic war or going back to the support of Alexander the Great - I wonder if
Greece paid war damages to Iran for that. Or to Italy for the occupation and
exploitation of Sicily (or the other colonies when Greece was an imperialistic
colonial power house). So while I agree that Germany should have paid damages
on moral grounds, this is a very slippery slope.

3\. Tax cheaters always find moral explainations for their behaviour.

~~~
atmosx
Germany defaulted 3 times in 100 years, you can find the dates on Google (if
you can't let me know, I'll help you). Greece has defaulted 3 times (actually
4 counting 2010).

I'd say it's _a modus operandi_. One even might assume that making _world
wars_ is a modus operandi given the fact that it happened twice the last
century.

> 3\. Tax cheaters always find moral explainations for their behaviour.

So does anyone else[1] [2] [3] (there are least another 4 well known cases).

[1] [https://anestis.quora.com/Links-to-credible-sources-about-
Gr...](https://anestis.quora.com/Links-to-credible-sources-about-Greek-euro-
crisis)

[2]
[http://en.wikipedia.org/wiki/Siemens_Greek_bribery_scandal](http://en.wikipedia.org/wiki/Siemens_Greek_bribery_scandal)

[3] [http://www.theguardian.com/world/2012/apr/19/greece-
military...](http://www.theguardian.com/world/2012/apr/19/greece-military-
spending-debt-crisis)

~~~
bibabo
About the modus operandi: Greece in years of financial crisis

[http://uk.businessinsider.com/greece-spends-90-years-in-
defa...](http://uk.businessinsider.com/greece-spends-90-years-in-
default-2015-2?r=US)

------
junto
If Greece was to finally capitulate to the markets and declare bankruptcy, how
different is that to the 2001 Argentina default?

It seems crazy to me that banks are allowed to deal with corrupt inept
politicians who accept debts that are not repayable on the behalf of a
country's people. Countries should be allowed to declare themselves bankrupt
and after should follow a period of distrust not unlike personal bankruptcy.
As a result banks would think twice before lending to poor debtors. Or is this
a completely niavie viewpoint? I'm not in any way an economist so I'm
genuinely interested to hear people's thoughts

------
jasonisalive
When people start writing contractual obligations in quote marks, things are
getting bad.

------
drcode
tldr; Instead of taking new loans and servicing our existing debt, we'd like
new loans and NOT have to service our existing debt.

EDIT: To those responding "he didn't ask for loans" in the last line he's
asking for a "European New Deal"... what else could that be besides new loans
or a straight-on gifting of more money?

~~~
ewzimm
I am having a hard time getting that from this message:

>My party, and I personally, disagreed fiercely with the May 2010 loan
agreement not because you, the citizens of Germany, did not give us enough
money but because you gave us much, much more than you should have and our
government accepted far, far more than it had a right to.

>Our task is not to confront our partners. It is not to secure larger loans
or, equivalently, the right to higher deficits.

There will have to be some money injected somewhere in Greece, but not in the
same way, and the point is to get away from loans.

~~~
drcode
Well, there's only two ways I know of that you can use to "inject" money into
a person: You either give it to them as a loan or a gift.

~~~
ewzimm
Money doesn't have to go directly to the government. Their plan to fund things
is more along the lines of making the many, many tax-evaders actually pay.
Businesses that need loans can take them out on an individual basis, injecting
money into the economy, but the government can get money from its own people
rather than other countries.

~~~
drcode
Sounds like the same end result to me.

BTW- I'm not disagreeing that giving Greece more money one way or another
doesn't make sense, I'm just pointing out that I see nothing in OP where
Greece is saying "let us go our own scrappy way without your money, we can
fend for ourselves". Instead they want debt forgiveness, followed by more
money.

------
mtmail
The title of the letter in the German newspaper was (translated) 'fiscal
water-boarding'.

~~~
mhd
If I recall correctly, that's the favorite phrase of the new minister of
finance.

------
arca_vorago
Here is what I want to know. What role does the Greek central bank play? What
is the fractional reserve rate in Greece? What is the interest rate set by the
central bank? How is the money generated in the first place and what are the
return rates and restrictions on that method (eg: in US it's treasury bonds)?

I'm increasingly convinced that central banks operate only marginally on the
interest of the country they serve, enough so they don't ruin everything, but
instead are primarily (and counter to what many economists will say) working
for their own profit. Keep in mind that profit is actually usually in the form
of political and economic _power_ , but not money directly. Of course I'm
coming from the American perspective where I think the Federal Reserve Act was
passed on suspicious circumstances by suspicious men for suspicious reasons
and that congress should stick to the constitution and control coin itself and
not allow some outside potentially foreign entity to control our money system,
but hey, every economist I know just says trust the Fed so they must be right.

~~~
atmosx
What role does the Greek central bank play? None. Just distributes the money
it gets from the ECB to local banks. Like a post-office for money.

------
squozzer
The situation bears a certain resemblance to a period of history in the USA
between the successful bid for independence and the ratification of its
constitution. During that period, the articles of confederation was the
document in force and among its many disasters was economic chaos. It was a
monetary union (actually not even that as each state printed its own money but
efficient currency exchanges were still a century or two in the future)
without a political union.

I didn't invent that phrase - Der Speigel mentioned it several years ago in
reference to the Greek crisis.

And while I lack the expertise to prescribe the form of a "more perfect union"
in Europe, the USA can at least address competitive imbalances bewteen states
through a process of income redistribution. Take for example West Virginia. It
perennially ranks in the top of USA states that receive more federal money
than it generates in federal taxes. Some people complain about this, but most
accept it if for no other reason than the knowledge that WV is DC's fallout
shelter.

Last time I checked, only two or three German Laender (sorry for not using
umlauts) generated net positive federal revenues. Certainly some Germans
complain about it, but it's not realistic to expect every political
jurisdiction to break even on the tax / revenue ledger.

Both Germans and Greeks (and everyone else in the EU as well) should be
willing to bear some of the blame and some of the burden as well.

The Germans are smart enough to know one cannot maintain a competitive
advantage forever without bankrupting one's customers. If beggaring the Greeks
was part of the plan, then EU rests upon a foundation of bad faith and does
not deserve to exist.

The Greeks are smart enough to know that remaining uncompetitive is also not
sustainable. If mooching off the Germans was part of the plan, then the EU
rests upon a foundations of bad faith, you know the rest.

------
bibabo
Main point is: Poland got a lot of money from the EU and worked hard and today
is a prospering country. Greece got billions from the Marshall plan, billions
from the EU through many programs, cheap credit based on the Euro and
squandered all of it.

------
jcfrei
Tsirpas article is as shallow as it is boring. His statement "Greece's debt is
currently unsustainable and will never be serviced" is a typical, bold,
populist statement, twisting reality. Greece's debt would indeed be
sustainable, if it wasn't for Tsipras' recent claims that they would rehire
some recently laid of government workers and stop the privatization process.
The debt is serviceable, it just isn't repayable. But that's no problem since
the ECB can always take over these bad loans, once the Greece government has
fulfilled all the requirements for reform. When he says in his last paragraph:

 _I understand that, behind your 'demand' that our government fulfills all of
its 'contractual obligations' hides the fear that, if you let us Greeks some
breathing space, we shall return to our bad, old ways._

Then this is exactly the reason why the debt needs to be retained. Tsipras has
already proven with his recent actions that he's very tempted to return to the
"bad, old ways" of Greece government spending. European solidarity means
helping out equal partners in the union, it does _not_ mean funding
dysfunctional governments at the expense of others.

~~~
imarg
The "rehiring" refers actually to only a relatively small number of employees
(~3500) that were unlawfully fired. They went to court and won their case but
the previous government still refused to take them back.

And because most of them were actually suspended and not really fired they
were still receiving 75% of their wages. This means that financially speaking
the extra cost is a drop in the ocean.

I do not know if Syriza's politics/policies will be successful but keep in
mind that most of what is circulating in media, both in Greece and abroad, are
usually half-truths and sensationalist journalism.

When the crisis started a lot was written about Greece's big government and
its spending. After the dust settled down and more dispassionate voices were
heard, a good look at the data showed that Greece's government and spending
was more or less around the EU average. But by then no one was paying
attention.

------
bibabo
As Tsipras and his party compared Mrs. Merkel to Hitler, what is happening to
Greece to the Holocaust (implying fired state employees have the same fate as
victims in concentration camps) and calling the German finance minister
'Gauleiter' this is a tough sell.

------
marcamillion
Can I say that it is quite refreshing to see a politician talking straight &
frankly with the stakeholders publicly about what the issues are and the way
forward no matter how bitter the medicine.

It is quite inspiring actually.

I feel like going to Greece to help.

I hope they follow through, and it works!

------
jongraehl
Poor Greece. Exports so low. Wages and local prices so high. But nobody will
hire anybody. They voted for the impossible. Better inject some more capital;
they're expecting it.

------
fdik
German translation:
[http://blog.fdik.org/2015-01/s1422553522](http://blog.fdik.org/2015-01/s1422553522)

------
marcusgarvey
Excellent. I fervently hope he can help call time on the "fiscal
waterboarding". Here's the truth: the EU bailouts of Greece, Ireland, Portugal
and Spain were mainly about protecting private creditors from taking losses on
their investments. In fact this week the IMF had this to say about the Irish
bailout:

"The failure of policy makers to impose losses on some bank creditors at the
height of Ireland’s financial crisis was a mistake that forced Irish taxpayers
to foot a bill that should have been borne by the wider eurozone, according to
the International Monetary Fund.

The failure to 'bail-in' unsecured creditors to a bank rescue that cost Irish
taxpayers €64bn and bankrupted the country was based on the view that doing so
would have serious adverse 'spillover' effects in other eurozone countries,
even though such risks were 'not obvious'."[1]

All of the developed world bailouts have benefited the most well-connected,
the most wealthy, entrenched interests, i.e. banks and investors. And in the
case of the U.S. banks this has not led to an end to Too Big To Fail, in fact,
they've just gotten bigger and the relatively modest reforms that were passed
are now even in danger of being rolled back.[2]

All of these extraordinary measures have led to paltry growth at best. And
this includes quantitative easing which has not worked in Japan, has not
worked in the U.S. and is not likely to work in Europe...unless you are
wealthy or a bank, in which case it has worked just fine.[3][4]

No wonder we have Davos-man plotting his escape.[5] Any fool can see this kind
of economic leadership is not sustainable.

##

[1]
[http://www.ft.com/intl/cms/s/0/5f3131a4-a7ca-11e4-8e78-00144...](http://www.ft.com/intl/cms/s/0/5f3131a4-a7ca-11e4-8e78-00144feab7de.html#axzz3QKHoCwxb)

[2] [http://www.stltoday.com/business/local/republican-led-u-s-
ho...](http://www.stltoday.com/business/local/republican-led-u-s-house-to-
vote-on-diluting-financial/article_b3f171f0-21dd-55ca-aa61-705f25e23803.html)

[3] [http://www.ibtimes.com/was-qe-effective-europe-awaits-qe-
que...](http://www.ibtimes.com/was-qe-effective-europe-awaits-qe-questions-
remain-about-its-success-us-1793564)

[4] [http://economix.blogs.nytimes.com/2013/09/10/the-rich-get-
ri...](http://economix.blogs.nytimes.com/2013/09/10/the-rich-get-richer-
through-the-recovery/?_r=0)

[5] [http://www.theguardian.com/public-leaders-
network/2015/jan/2...](http://www.theguardian.com/public-leaders-
network/2015/jan/23/nervous-super-rich-planning-escapes-davos-2015)

------
peshkatari
The author also forgets to tell the german people that he is going to just
steal from them 160€ billion.

------
netcan
Europe had and has a fundamental problem in its dealing with sovereign
bankruptcy, or insolvency as Alexis Tsipras puts it. The reality is that the
government of a state cannot go out of business and make way for a new one.
But, it's not uncommon for states to become insolvent. State collapse is not
an option.

The way it is normally dealt with is inflation, which is kind of treated as
default by economists but not really by financial markets and law. The print
money which (A) can be used to continue operating and (B) reduces the value of
the debt (sovereign and private) as the currency devalues. The 'C' is one that
Greece really needs. It's also one of the hated (or loved) mystery components
of "Keynsian _" economics.

Inflation lowers salaries, and other pre-agreed contracts. It allows (for
example) houses to sell at a lower (real) price without the "animal spirit"
responses involved when someone sells a house 5 years later at a 15% nominal
loss. There's debate in pedantic circles about whether this effect is indeed
emotional or if it's related to mortgages being denominated nominally and
other "rational" reasons.

Whatever the theoretically best way of understanding it (the two most vocal
sides are Austrian vs Keynsian economists with actual politicians usually
adopting a confusing mix of both vocabularies), it remains the case that the
tried and tested (though certainly not free) solution is printing money.

The German solution is just to stay solvent. They manage to do it and they
want other EU countries to do it too. This is a combination of strange
optimism, stubbornness, fear of inflation and belief in Beaurocratic controls
(which work better in German than in Greece).

This is the core of the issue. A State that runs its own budget (a fundamental
EU principle) that does not control its own currency (a fundamental EU
principle) cannot make it through insolvency.

One option that I quite like is letting states go into a sort of "bankruptcy."
The banks would have to take the hit. This means the system must be robust
against bank failure (which is easier to swing than state failure, but we're
not there at this point. Too big to fail, Systemic risk, etc.) But, that
doesn't prevent the problem overall. It prevents states from digging quite as
deep as their interest rates rise sharply, but it doesn't completely block off
the risk of failure.

I don't really have a solution. I don't like the Keynsian approach, but it is
popular because it offers a solution to recession and state solvency at the
same time.

We can see similar things happen in sub-state governments. US cities & States
(provinces elsewhere) can go bankrupt. They are locked into spending on
salaries, physical maintenance and such which require future revenues that
were never realistic or haven't been achieved for some other reason (eg
migration). They control a budget, they don't control a currency.

The EU needs to solve this in a way that doesn't make it happen again. bailing
out Greece with an actual cash transfer would not achieve this. It would (A)
make it easier for other EU states to get into the same trouble and (B) take
the pressure off Greece to do what they need to do, become solvent.

Greece's governmental spending is unsustainable. Not of the currently
declining tax revenues. Not on the pre-austerity revenues. Not even in a best
case scenario. Inflation causing a (quite but extensive) reduction in
government salaries, contracts, pensions, etc. is not an option in the EU
context, but it may not have been enough anyway.

It's actually quite scary. I have no idea how they solve this. I have no idea
how the EU gets "fixed."

_I use Keynsian quite loosely. It's only tangentially and perhaps spiritually
related to John Maynard Keynes the person.

 __Printing money doesn 't always work either. Hyperinflation can destroy the
State. Borrowing in foreign currency (as the poorest countries must do) takes
away the option.

------
bcheung
tl;dr

If there is a fire, you can't put it out by drenching it with gasoline.

------
shit_parade
>So, let me be frank: Greece's debt is currently unsustainable and will never
be serviced, especially while Greece is being subjected to continuous fiscal
waterboarding.

Despite the rhetoric this is the problem of not just Greece but many other
developed governments, notably Japan. Central banks have been goosing the time
value of money in an effort to spur 'growth' because if an entity can become
richer faster than their debt will grow then it's a win-win situation.

~~~
quonn
Japan is doing just fine. Most economists accept that it will keep on like
that for a long, long time.

Since their debt is in yen, in the far future they can still reset their
currency. Germany has done this twice in the 20th century and while it was
certainly a disaster for people who has saved some money, the economy always
recovered quickly.

It's the same for everyone predicting doom for the US. Let's not forget that
even a currency reform does not wipe out a country. It merely wipes out all
wealth stored in banks.

It's bad, but it's not worth keeping everyone worried for decades, when it
might just happen once in a century.

------
randomname2
Tsipras' spoken english is very limited, it is unlikely he wrote this himself.

~~~
bnegreve
It was probably translated from Greek, why is it a problem?

~~~
titanomachy
Yeah, it's reasonable that a leader should do all his writing in his native
language and have it professionally translated. Why would it be any other way?

