
Greek Debt Crisis Deal Is Reached, but Long Road Remains - drchiu
http://www.nytimes.com/2015/07/14/world/europe/greece-debt-plan.html?_r=0
======
ZenoArrow
This is really reckless, I hope the Greek government rejects this deal. The
debt is already beyond what Greece can pay, unemployment is very high, and yet
the plan is to combine more debt and more austerity. This is nothing less than
a power grab, there's no interest in a strong Greek economy before its public
infrastructure has been sold off.

I hope the Greek government has the guts to go bankrupt. It'd be a short term
loss with a long term gain. It's not like the creditors have to lose out,
Argentina showed that by paying off its debts after their currency issues.
Similarly, savings could be protected by freezing their value and offering to
pay the equivalent in the new currency (assuming Greece would be required to
leave the Euro).

~~~
blumkvist
You've been drinking a lot of cool aid, it seems. This is a popular propanda
statement on a lot of TVs in the region.

The greek governments and people had many, many years to reform and they
simply refused. They have jaw dropping social spending and corruption. They
elected a populist party and voted OXI to the last proposal, which was better
than this one.

Also, Argentina is in a terrible situation, don't know why you even bring it
up. Probably more kool aid you drank from some politician you saw on TV.

~~~
grey-area
You're both talking past each other by adopting extreme positions and making
sweeping moral judgments about entire nations.

My issue with this new bailout is that it presents _yet more debt_ as the
solution to crushing debts which Greece can't even afford the interest
payments on.

As the IMF admitted, it's not a sustainable solution, the many politicians and
reporters talking about it probably know this but they just don't care because
they can more easily sell a simple morality tale about Greek profligacy or
German imperialism to their constituents.

~~~
cmurf
Right. And I don't think there is any good path forward. Greece has
essentially gone up a box canyon.

What annoys me about the IMF is, where the hell were they with these
observations and recommendation about debt even one month ago when everything
was actually working? Where were they six months ago? The debt load being
untenable is not news for everyone else.

Apparently the EU has a law that makes actual debt forgiveness illegal, all
that can be done is extend it or reduce the interest rate. Neither of these
approximates what the IMF would recommend, has recommended, to any other
country with their own currency rather than being part of a currency union:
monetize the debt through inflation.

I can understand the German affinity for rules and policy adherence over
politics. But self evidently the Greeks are not Germans, and do not share this
preference. So how does the EU system afford a compromise that at worst means
both sides are equally unhappy? Because right now, basically Germany and the
creditors are getting their way to the expense of Greece.

Europe is clearly not willing to either bail out Greece (or Portugal, or
Italy), nor long term subsidize their economies like what happens in the U.S.
It's not willing or able to setup an EU wide tax structure that's EU
administered and audited to both make compliance easy, as well as consistently
punishing tax evasion across all socio-economic levels.

None of the major problems have been addressed: Greece's debt load is
unchanged, as well as its affinity for patronage and tax evasion.

~~~
peterfirefly
> None of the major problems have been addressed: Greece's debt load is
> unchanged, as well as its affinity for patronage and tax evasion.

The current ultimatum is very much about addressing those problems.

~~~
ZenoArrow
How is adding more debt designed to address the debt load problem? Is Greece
getting a sizable interest-free repayment holiday?

~~~
peterfirefly
Yes. And they have been enjoying one for several years now.

------
civilian
Greece really needs to get rid of their occupational licenses. It's great for
the people who are already licensed, but it's just a drag on the economy:
[http://www.nytimes.com/2010/10/15/world/europe/15greece.html](http://www.nytimes.com/2010/10/15/world/europe/15greece.html)

~~~
guelo
25% of German workers require an occupational license.

~~~
radu_floricica
As a matter of principle, there is a difference between:

\- you need expertise in order to be able to safely do X: take these exams and
you're certified

\- the state sells a limited number of licenses in order to create artificial
shortage, usually combined with guaranteed profits, like the 35% profit in the
link. The certification is just a piece of paper and only loosely related to a
set of exams.

------
nugget
All they did was kick the can down the road for the 32nd time. This is the
most boring sovereign default in history.

~~~
hartator
Yes, I feel it will never end. Detroit is almost the size of the greek economy
(~ 200 billions USD vs ~ 242 billions USD) and had gone bankrupt without any
major waves.

~~~
dotnetchris
other than it is now a complete and utter wasteland in comparison to the rest
of the US?

~~~
mikeash
That happened well before. The bankruptcy was the result, not the cause, of
Detroit's decline.

Note that "wasteland" is exaggerated. Certainly there are a lot of abandoned
buildings and neighborhoods, but many places are still thriving. It's not what
it once was, but there's still a lot going on.

Seems that there are a lot of stakeholders who are care a lot more about not
having Greece default than was the case for Detroit, while at the same time
nobody has enough power to really make anybody do anything. So Greece is
coming down to a very long and drawn-out series of negotiations where nobody
can put their foot down and say, look, here are the lines you can't cross, and
here's where you're allowed some flexibility. Figure it out.

With Detroit, it all happened in an environment with a strong legal system
that could keep the various parties under control. The fact that federal (and
even state) benefits aren't affected by Detroit's finances no doubt helps a
lot too. No matter what happened with Detroit, 70-year-old retired autoworkers
living there would continue to receive Social Security. That simplifies things
a lot since there's a backstop for how bad things can get in the worst case.

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discardorama
Ignorance alert: I'm no economist nor an European.

Since Greece's economy has been in the doldrums for a while, I'm wondering why
don't European powerhouses (like Germany) move some manufacturing there?
Greece is a popular tourist destination; so how come I'm not hearing of lots
of outside money moving in to buy hotels, resorts, etc.?

~~~
derriz
Greece is quite corrupt by western standards. Their previous minister for
defense is serving jail time for bribery. Politics and society are based on
clientism and patronage rather than rules and an independent legal system.
This is why tax compliance is so low. Even the ownership of land is murky
(they've spent 20 years and 100m of EU grant money attempting to build a basic
land registry with little to show for the money). So without connections it's
quite a hostile environment to operate a business.

Edit: seems I'm getting downvoted for some reason. So here are some links:
[http://openeurope.org.uk/blog/reforming-greece-easier-
said-d...](http://openeurope.org.uk/blog/reforming-greece-easier-said-done-
never-ending-case-land-registry/)
[http://www.nytimes.com/2013/03/05/world/europe/former-
greek-...](http://www.nytimes.com/2013/03/05/world/europe/former-greek-
defense-minister-convicted-in-corruption-case.html)
[http://www.transparency.org/cpi2014/results](http://www.transparency.org/cpi2014/results)

~~~
grey-area
The _current_ minister of finance in Germany had to resign after accepting
100,000 DM from an arms dealer, and is director of _The Institution for
Growth_ which he suggested 50B in Greek assets be transferred to. More blatant
corruption would be hard to find. Yet somehow he has the chutzpah to lecture
Greece on financial probity.

[https://www.kfw.de/KfW-Group/About-KfW/Vorstand-und-
Gremien/...](https://www.kfw.de/KfW-Group/About-KfW/Vorstand-und-
Gremien/Verwaltungsrat-und-seine-Ausschüsse/)

~~~
east2west
I know you are being rhetorical but even New York Times would agree the Greek
government is more corrupt than the German government. Some level of
corruption is inevitable in every ruling class; an old Chinese saying is that
pure water has no fish: no one will work in a graft-free institution. Your
rhetorics is not helpful at the current critical juncture; cooler heads must
prevail. It is far more important to consider whether the existing economic,
financial, and political arrangement is sustainable and whether Greeks may be
better off with a clean slate. A massive European aid program is necessary in
any case and the current level of Greek debt is unrealistic. Why not
acknowledge the facts and spend money on people to help them get back on their
feet and at least reap political good-will, which is sorely lacking right now.
Muddling through has not worked so far. If a fourth bailout becomes necessary,
it will be a political earthquake with strategic implication for the rest of
the world. God, I hope it does not come to pass.

~~~
peterfirefly
> Why not acknowledge the facts and spend money on people to help them get
> back on their feet and at least reap political good-will, which is sorely
> lacking right now.

Because giving Greece more free money will not make the Greeks reform their
country. Debt relief would just mean that they could borrow more money on the
market and let the party continue.

Debt relief (even more than the huge amounts they've already received and
squandered) is very much in the cards and has been all the time, if only they
would reform.

~~~
ZenoArrow
"Debt relief (even more than the huge amounts they've already received and
squandered) is very much in the cards and has been all the time, if only they
would reform."

Debt relief has been discussed, but has been blocked by the German government,
even despite the German finance minister admitting the debt was
unsustainable...

[http://uk.mobile.reuters.com/article/idUKL8N0ZP3P720150709?i...](http://uk.mobile.reuters.com/article/idUKL8N0ZP3P720150709?irpc=932)

"Europe's legal set-up therefore gives government leaders sufficient space to
strike a debt restructuring of some kind for Greece if they want to. The issue
is how far they go with any reprofiling as part of a potential deal with
Greece.

German Finance Minister Wolfgang Schaeuble said on Thursday the IMF was
correct in saying Greece's debt was not sustainable without a haircut, but he
added: "I think the leeway we have ... is very low.""

------
vamur
Syriza government is laughably incompetent. They had 6 months to introduce a
cryptocurrency and remove reliance on ECB for running internal economy and
exports. They also had 6 months to start reforms to reduce bloated government
spending and invest to reduce food imports.

Instead, they let ECB take Greek deposits as hostage, wasted 6 months on
negotiations before imposing capital controls, did not get anything in return
for not vetoing the Russian sanctions and signed a deal that is worse than any
worst case scenario from the default. After the deal, they will give ECB
direct control of Greek economic sovereignity. And 50 billion of state assets
as a repayment for interest on the debt that is essentially permanent! With
only vague promises of haircuts sometime in the future.

In 3 years after this new deal, Greece will likely lose 20% of its GDP and 10%
of its population, as anyone with a brain will try to emigrate. That is if
Greek people do not object to this deal, which seems highly unlikely.

------
vessenes
I'm a Greek immigrant kid, so I have some emotional attachment, and lots of
family in Greece, but little actual knowledge of life on the streets in Greece
since they joined the Eurozone.

That said, it has seemed to me for some time that exiting the Eurozone would
be far preferable to this sort of solution, e.g. one that leaves the debt high
and lets Germany force austerity measures down into the local economy.

Isn't precisely what is required right now massive currency inflation, leading
to far cheapened Greek exports (tourism and olive oil?). I would love to buy a
villa in Greece, if I had the cash. And, if the new drachma is issued, and
inflates heavily, it will become much less expensive to do so.

It seems like the Eurozone has locked in these smaller countries with an
import friendly lifestyle; they get Germany-quality goods in without tariffs,
and it's emotionally very hard to think about going back.

~~~
_rpd
Currency devaluation is usually preferred to inflation - that's why exiting
the Euro is under consideration, so that there is a local currency to devalue.
High inflation erodes savings and discourages investment - it can be socially
destabilizing.

~~~
vessenes
Yes, you said it better. I was imagining devaluation. The interviews with
Varoufakis are interesting this week; they indicate he had a "don't leave
eurozone, but get leverage" plan which involved nationalizing banks and
issuing their own 'ious', presumably senior in some ways to their existing
debt. Seems like the administration didn't have the stomach for it.

I don't think this ends well for Greece, frankly. This kind of authoritarian
punishment is what drove Germany into WWII at some level; crushing debt and
'punishing' as a thing you do to countries just isn't a great plan.

~~~
_rpd
I think the plan is to sacrifice Greece to keep Portugal, Spain and Italy in
line. If Spain or Italy starts demanding debt forgiveness, the Euro really
will collapse.

------
kazinator
Can the homeland of Archimedes return to buoyancy?

Edit: I am satisfied with zero points (a circle!) for this comment, which
seems fair. I therefore implore you good people, "noli turbare circulus meus!"

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drjesusphd
Can someone answer this simple question: why do Greek banks have no money?
They are private companies and are not the ones that defaulted.

~~~
bradleyjg
The big danger inherent in a bank is a liquidity crisis-- their loans can't be
called in all at once and their assets generally can't be sold all at once
without losing a lot of value, but their liabilities in the form of demand
deposits can be withdrawn at any time. So in the modern era central banks
generally stand as a lender of last resort, if all the depositors want their
money out at the same time then the central bank will lend individual banks
cash against their assets to give to depositors. This promise, if made
credibly, has the effect of preventing bank runs.

The Greek banks have a different problem, a solvency crisis. They have made
investments and loans that have not done well, in part because the economy as
a whole has not done well. That includes lending money to the Greek government
in the form of bond purchases. So it is simply the case that their liabilities
(including money owned to depositors) are greater than their assets (including
the risk discounted value of outstanding loans).

~~~
peterfirefly
> This promise, if made credibly, has the effect of preventing bank runs.

That, and the depositor's insurance, which is supposed to be for the first
100,000€ in the EU. The insurance is funded and legislated at a country level
and the Greek insurance fund is simply way too small.

> They have made investments and loans that have not done well, in part
> because the economy as a whole has not done well.

Don't forget bad loans to connected people/companies.

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chappi42
I hope and wish that they are able to reform their country. And limit the
influence of the extreme right/left wishful thinkings.

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guelo
When Greece finally leaves the Euro I hope they deny travel visas to Germans.

~~~
neokya
LOL - that would be funny cause tourism is only proven way Greece makes money.

~~~
peterfirefly
That and EU subsidies.

