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Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece (bloomberg.com)
272 points by Jacqued on Jan 27, 2015 | hide | past | web | favorite | 157 comments



Varoufakis wrote a blog post two years ago on the history of political economic thought on the firm. It also delves into Valve's unique management culture [1].

"There is one last bastion of economic activity that proved remarkably resistant to the triumph of the market: firms, companies and, later, corporations. Think about it: market-societies, or capitalism, are synonymous with firms, companies, corporations. And yet, quite paradoxically, firms can be thought of as market-free zones. Within their realm, firms (like societies) allocate scarce resources (between different productive activities and processes). Nevertheless they do so by means of some non-price, more often than not hierarchical, mechanism!

...

Many enlightened corporations do a song and dance about their readiness to let employees allocate 10% or even 20% of their working time on projects of their choosing. Valve differs in that it insists that its employees allocate 100% of their time on projects of their choosing. 100% is a radical number! It means that Valve operates without a system of command. In other words, it seeks to achieve order not via fiat, command or hierarchy but, instead, spontaneously."

[1] http://blogs.valvesoftware.com/economics/why-valve-or-what-d...


The fact that companies do not operate internal markets is well known in economics. The theory is that there is a balance point between the scale at which activities are most efficient operating on a command model and the scale at which activities are most efficicently managed by market mechanisms. The position of the balance point is different from industry to industry, and also varies over time with economic conditions. Idealy you want efficient markets, but also a dynamically responding corporate world that can freely consolidate, diversify, merge, etc to adapt it's structure to whatever is most efficient as technology, supply, demand, etc shift in the economy.

This is why command economies tend to be less efficient, because any given market and corporate structure is only most efficient for very specific economic conditions. Heavy regulation of companies, markets and things like employment law tends to freeze their structure in place, so they are unable to adapt as conditions change.

So markets are only one aspect of an efficient economy. A flexible corporate, finance and employment environment is the other. Hence the economic flexibility and strength of the USA. Something as a Brit I'm perfectly willing to admit to. I'm not saying economic strength is the be-all and end-all of civil society. I firmly believe regulation plays an important part in ensuring markets are fair and laws are equitable, but all these things are not mutualy exclusive.


Coase won the Economics Nobel for his analysis of why and how firms organize. The Nature of the Firm[0] is still worth reading. The answer basically boils down to "transaction costs" and how they affect economic activity at different scales.

[0] http://www3.nccu.edu.tw/~jsfeng/CPEC11.pdf


If by 'efficient' you mean 'most consistently profitable', then no, neither markets nor a 'flexible corporate environment' promote actual efficiency.

In that kind of environment - which is not too dissimilar to the one we're in - corporations simply hoard money to no great end, and markets crash unless they're propped up by public subsidies and hand-outs.

This distorts the wider economy and makes real efficiency less likely.

Of course if by 'efficient' you mean 'providing the greatest possible benefit to the greatest number of people' that would be a very unusual aim in orthodox economics.


On the contrary, 'providing the greatest possible benefit to the greatest number of people' is a central focus in economics. Start with Pareto efficiency and go from there if you want to see various ways in which economists actually define and study efficiency.


Economists might focus on that, but the point is that in actuality companies do not focus on 'providing the greatest possible benefit to the greatest number of people'.

Partially it's because that goal is far more difficult and complex than the simple aspirations of Greater Taylorism: to increase shareholder value. It's much easier to increase a stock price than it is to actually provide value for a large number of people, which leads to cases like IBM who spends billions buying back their stock while the actual value of their products declines to near zero.


I assumed by "orthodox economics" OP meant the study of economics. If s/he actually meant corporate behavior then that's of course different. Unfortunately people often conflate the study of economics with business, which leads to a lot of confusion.


Paying lip service to something is not the same as applied economics.


Are you talking about economists or corporations? They aren't the same thing.


Not that different in interests either. Economists are mostly serving a role as policy influencer in favor or either states or corporations or both.


Completely ahistorical. Capitalism clearly dominates because capitalist nation-states dominate and war, imposing that economic system.

Such economic priesthood stories conveniently omit world hegemons which send vast armies of uniformed killers across the world against anyone trying out their own systems. (Like overthrowing Iran's secular parliamentary democracy for daring to be vaguely "socialist", installing the Shah.) Or their police who literally strangle people in broad daylight, and violently attack people like the Occupy movement who imaginatively discuss alternatives to the economic order.


Well, from what I understand, the hierarchy is basically entirely political / tribal. It clearly works for them, but let's not idealize it as a utopian dream without the typical petty human inter-office struggles.


Indeed, and this is something common in startups/tech companies.

When someone tells you there's no hierarchy in their company, there is, you're just not high up on it and no one's bothered writing the hierarchy down for a number of reasons - most commonly for Cool Startup Culture Points or because if the hierarchy was drawn out on paper it would scare the bejeezus out of anyone watching.

Unspoken or undefined hierarchies don't mean you don't have one, it just means there's a covert one that isn't subject to scrutiny or accountability.

Which isn't an endorsement for documenting every minutiae of rank and hierarchy, but rather an acknowledgment that hierarchy exists regardless of how badly you want it to not exist.


When I was at EA, there was an explicit mandate to not create org charts. I mean, there definitely was an org structure ... they just didn't want it visible. I never really understood why, I mean all the data was sitting there from the HR systems (I was in IT). So one day I made an org chart visualization based on said data ... just out of curiosity. My manager quickly asked me to make sure no one saw that project to avoid raising someone's ire :P


Do you think lack of explicit hierarchy has had an effect on the quality of EA's games?


Sounds a lot like China's internet censorship. People still know about the censored topics, but they just want to push people into talking about safer subjects. Keep the org chart hard enough to find/understand and people will discuss other things.


This is on the money, and you might be interested in this essay, "the tyranny of structurelessness": http://www.jofreeman.com/joreen/tyranny.htm


Quite I know one large tecnology company where when they had a major disaster ( a divison that may or may not have had "sevices" and "Global" in its title ) a lot of problms where sorted out in the Pub on friday afternoons.


Valve has hierarchy. A good example is when the AR group was fired. The decision certainly came from someone, since the fired group wasn't notified, they were fired on the spot without prior notification. Therefore the decision was not democratic or made by everyone, but was instead secret and made by some small group or individual.



^^^ much of the above is not true


That's a rather vague dismissal. Were they not fired, or did they elect to fire themselves? Both alternatives sound kind of out there.

(BTW, I didn't downvote you. I appreciate you offering your perspective. I just find it hard to follow.)


^^^ much of the above is not true


Ironically, Valve also operates "by the means of some non-price [...] mechanism".

I wonder how an even more radically free-market organization would look like - where people are literally trading services for money within a company. I think that several industries already operate in a similar manner, where you have "rain-makers" who bring in the money, and "support staff" (everybody else). For example, traders/portfolio managers in hedge funds, and partners (who bring in new clients) in law and private equity firms. But there still is a lot of hierarchy and no transparent market within the company.


A doctrinaire Ayn-Rand-ian got control of Sears a few years ago and tried it: http://www.alternet.org/economy/ayn-rand-sears-and-eddie-lam...

Didn't work out too well. Some units needed to work together for the organization as a whole to function -- but being forced to compete against each other for corporate resources gave them incentives to sabotage each other instead, and the overall bottom line suffered greatly.


That's actually very common. Large organisations need a way to track how departments consume various shared resources, so they start some sort of internal billing/cost assignment system. It also allows support departments to measure their efficiency.

Sometimes, the "support department" starts selling to external clients as well. Lufthansa Sky Chefs, for example, now delivers food to many airlines. I believe their maintenance operation works similarly.

The opposite also happens – where some department chooses an external supplier over the internal one, because the latter is too expensive (low-quality/inflexible/whatever).


>And yet, quite paradoxically, firms can be thought of as market-free zones. Within their realm, firms (like societies) allocate scarce resources (between different productive activities and processes).

as the saying goes - the larger the company, the more socialism there.


Wow! I certainly wasn't expecting that.

Mr. Varoufakis has been my favorite economist for many years now, and I think he has brilliant insights as to reasons for the Eurocrisis. Whether he can translate his genius into government policy is another matter, but I wish him the best luck.

I've heard him tell the story about how he became Valve's economist. Mr. Varoufakis is a regular guest on the popular left-wing podcast, Doug Henwood's Behind the News. I imagine that Gabe Newell first heard of Yanis through this podcast, but I can't confirm that. Anyway, Gabe sent Yanis a cold email explaining to him what Valve is, and asking him to join the team. Mr. Varoufakis was a long-time economics professor at the University of Athens, but he was in the process of moving to the University of Texas-Austin. Once he learned more about Valve and its virtual economy (and I imagine the fat salary), he accepted the position.

It should be noted that Mr Varfakis is a communist. Part of Gabe's pitch to Yanis was that he runs Valve on what he calls anarcho-syndicalist principles. Although I don't know anything about Gabe's politics, I suspect that his sympathies are not too far from Mr. Varafakis'.

If you want to hear some of his recent thoughts on the Eurocrisis, check out this interview from a couple months ago. IMO, no one does a better job of plainly explaining the malaise in Europe better than this dude:

http://yanisvaroufakis.eu/2014/11/24/taking-stock-of-the-eur...


It will be interesting to see if they can pare down some of Greece's military expenditures, they have over a hundred thousand in their military, nearly ninety thousand soldiers. Granted the politicians can always point to Turkey as a threat but I would be very curious how the new administration handles this.

Side effects of closing some of the nearly 500 military and releasing troops is not having jobs for them.


I'd think the first order of business would be to get tax compliance up. It wasn't very high to begin with, but since the new year tax revenue has collapsed completely.

Ref: http://marginalrevolution.com/marginalrevolution/2015/01/the...


Literally every government for the last 35 years has promised to get tax compliance up. It's not gonna happen. Beware Greeks Bearing Bonds[0] goes into good detail on the problems with the enforcement bureaucracy and legal systems that make it so difficult to actually apply the law.

[0] http://www.vanityfair.com/business/features/2010/10/greeks-b...


Higher tax compliance would help the government pay their bills, but it would in equal measure harm the people's ability to pay their bills.

Greece's biggest problems are not high debt payments, they are 25% unemployment, and GDP having dropped 27% from its peak.


I would assume so. This type of thing:

http://www.zerohedge.com/news/greece-spends-bailout-cash-eur...

...is against everything Syriza stands for.


It's highly unlikely: The government is a coalition of SYRIZA and Independent Greeks, a quite right-winged party whose president was given the Ministry of Defense and first words were "I want to apologise to the people of our armed forces for the financial injustice they were done to by the previous government".


Which probably means that wages/benefits will be raised even as expenditures on foreign military hardware are cut. They can still easily do that and cut armed forces expenditures.


"Easily" is a jump, I am not sure the right wing of this coalition will be happy to discuss any military spending. By the way, for what it's worth, "foreign military hardware" has been a very well-known ground for greek officials to receive bribes.


Most soldiers are conscripts. My monthly salary as a conscripted soldier was 8.92 euro and when I became sergeant I got 11.15 euro per month.


That may be the very least likely thing that could happen, given the historical example of the Weimar republic about a century ago. I'm not implying thats likely or good, but asking politicians to voluntarily give up possibly their only lever is rather optimistic.


How would firing soldiers and sailors help with their unemployment rate?


Well, when you don't have to pay a soldier's salary, then you can pay the salary of someone who makes stuff, or does stuff, or supports people who do stuff -- stuff that the rest of the world economy is willing to pay money for.

The whole problem is that Greece doesn't have money to do both, and hiring people to mess around with boats doesn't actually contribute to economic growth and prosperity...


I agree that soldiers and sailors are not particularly productive in a country that's been at peace for quite some time.

Nevertheless, if you've got potential candidates who make stuff that the rest of the world is willing to pay for, maybe you should hire them either way. They'll pay for themselves after all.

And if you're going to hire them either way, why fire the sailor? (Unless of course it's the sailor you want to hire for a more productive endeavor...)


It's not that soldiers and sailors are "not particularly productive", in peace or war. Its that they are what in economics is called a "deadweight loss". They contribute nothing to the productive economy of Greece and the money that pays them could be spent in many more productive ways.


Where's the loss? Soldiers and sailors are notorious for spending their money as soon as they get it, so that money goes right back into circulation. They could be wasting the labour of those able bodies, but at 25% unemployment, any company that needs labour can get it cheap.

If the greeks were putting scarce resources into the military, e.g. using metal that could build productive machines to build useless ships and aeroplanes, then that would be a deadweight loss. But in Greece right now, labour is the opposite of scarce. It does very little harm to keep them employed.


"Resources"? At the end of the day, a soldier needs you to put food in him -- just like anyone else. That food comes from somewhere. It is scarce. It is not free. This is aside from all the things he'll expect to be able to buy with his pay that use resources, or the uniform / weapons / boats / fuel / et cetera.

While an army is a useful insurance policy in a variety of situations, the best case scenario is really that these people do nothing. Believe it or not, it does not make the Greek people any more prosperous to have many people standing around doing nothing, unless the money you pay them to do it comes from somewhere other than Greece and isn't ever going to be paid back.

-- which, to be fair, is a tactic that works once every few generations! One could make a case that it is a simplified version the story of Greece the past decade. You see these debt renegotiation promises in the news now.

More broadly, though, the economy is about producing valuable things (or services), not about money. It is trivially obvious that an idle soldier is not producing much of value at his post and cannot assist the economy in any way. Even middle-management at IBM at least pretends that they're helping accomplish something worth money to someone.

And nowhere in the history of the world has ever been able to fix economic stagnation or crisis by spending more money on the military, though it has run great empires into the ground.


> At the end of the day, a soldier needs you to put food in him -- just like anyone else. That food comes from somewhere. It is scarce. It is not free.

Sure, but a person needs food and clothing whether they're serving in the army or sitting around unemployed. Arguably the army can feed n people (who have to follow orders, show up at the mess hall at the same time and so on) more cheaply than those n people would by themselves.

> More broadly, though, the economy is about producing valuable things (or services), not about money. It is trivially obvious that an idle soldier is not producing much of value at his post and cannot assist the economy in any way.

Sure. But what would the soldier be doing if they weren't in the army? As I said, if labour in Greece were scarce then I'd be worried about the army wasting it. But 25% unemployment.

> And nowhere in the history of the world has ever been able to fix economic stagnation or crisis by spending more money on the military

What about the New Deal / WPA? I mean sure, they built some bridges and so on, but that was a pretty marginal benefit; the big value of the programme came from the Keynesian stimulus effect of giving money to those who were otherwise unemployed.


I am in favor of an unconditional basic income for all as well. But I wouldn't buy the recipients expensive equipment and teach them how to kill people. That seems expensive and potentially harmful.


Because you need money to fund the activities of those who can make stuff that the world wants. Only later will their work pay for itself and maybe for other things as well, like letting guys in uniforms play useless war games with Turkey.


I do not expect them to decrease military expenditures. Their coalition partners (the far-right "Independent Greeks" that will be "holding" the ministry of defense) will not allow that easily.


Not to mention Turkey is always a real threat -- like any expanding nation that wants to play a big role in the area, haven't forgotten it's empire status and has several assets that it covets in the Aegean area.

Even intelligent people for some reason don't grok history, and always assume "this time is different" and "wars cannot happen anymore because ..." (of course this is exactly what they said in Europe just before the first world war).


with a hard right colation partner I doubt that Greece spends more per head than teh USA does - Acoring to Charlie Stoss its to keep the Gernerals happy so they don't stage another Coup


For those interested, here is a really interesting video of Gabe Newell at the Lyndon B Johnson School of Public Affairs talking about some of the in-game economic problems Valve has faced in the past few years. I think he briefly mentions Yanis somewhere in the middle of the video.

https://www.youtube.com/watch?v=Td_PGkfIdIQ


https://www.youtube.com/watch?v=HpIsZL5FJVs&t=3m55s

Here's a great talk he did on the problems of Maastricht.


Good video, but quite long. If anybody wants a more compressed summary of the policy points, check this one out:

https://www.youtube.com/watch?v=ytXgMnm9tHs

Note that he is a mathematical economist with a PhD (focusing on game theory), and also a self-proclaimed Marxist. So his ideas and perspectives are very interesting, to say the least, and at times very unique.


A Marxist who's into Hayek? Now that's interesting. Where did you find the Marxism? It's not in his Wikipedia article (which really needs updating).


His blog: CONFESSIONS OF AN ERRATIC MARXIST IN THE MIDST OF A REPUGNANT EUROPEAN CRISIS

http://yanisvaroufakis.eu/2013/12/10/confessions-of-an-errat...


From this talk he gave, entitled "Confessions of an Erratic Marxist":

https://www.youtube.com/watch?v=A3uNIgDmqwI


I don't think he can be nailed down to Marxism or any other -ism. He seems to be part of a eclectic gang of economists that find insight and inspiration everywhere, by simply putting reality ahead of thought models.


I figured that from Marx plus Hayek :-)


Correct me when I'm wrong, but are those two not economists who gave a flying fuck about empiricism?


Marx was writing when it wasn't even called economics. Hayek was fine with empiricism, you may be thinking of his later followers Rothbard and von Mises.


Much more Godley/Minsky/Lerner.


He started a blog about his experiences at Valve [1], but stopped shortly after starting it. I was a bit disappointed, because the posts were very well written and insightful. I'd guess now he really has no time for it.

[1]: http://blogs.valvesoftware.com/economics/


Same for the Linux part of their blogs subdomain.

But Varoufakis still blogs at http://yanisvaroufakis.eu/


Yeah, perhaps it's sad but I'm more interested in the synthetic economic systems of a game than the macroeconomics of the world. Somehow the former is more honest (probably because one has all the data).


This [1] is one of his books that gives a bleak view on global economic politics. It's a comprehensive view, and it does not include a happy ending. [1] http://www.amazon.com/The-Global-Minotaur-Economic-Controver...


I found this book to be the most elucidating book on the 2008 financial crisis. Unlike other books that focus solely on the American economy, Varoufakis spins a narrative which places the American economy at the center of an increasingly complex and flawed global economy. The book makes it clear why the American economy's failing had such a dire effect on the rest of the world's economies. Moreover, it describes how the world economy developed in this way, starting all the way back to just after the second World War.


Tangentially, what is the main reason for all the protest against the EU? I understand that people in Greece are suffering and that's a terrible thing. However from a lay perspective it seems Germany et al are just trying to help.


Germany is a nation that has benefited enormously from a single currency (according to my understanding).

A large source of currency fluctuations are trade imbalances. If a country exports more than it imports, its currency appreciates. If it imports more than it exports, it depreciates. For example, if USA imports from the UK are bigger than it's exports to the UK, then USA will be buying GBP with USD (on average), so the value of GBP will go up relative to USD. This would in turn make UK products more expensive to Americans, so they would buy them less, correcting the trade imbalance.

If Greece, Italy, Spain etc. still had their own currencies, they could simply depreciate them (actually, it would happen naturally, as a consequence of trade imbalance) and so reduce their debt in real terms (similar to what has happened to Iceland). If Greece's currency would depreciate, imports would be more expensive for Greeks, so they would import (spend) less, while Greek exports would be cheaper worldwide, so they would export (earn) more.

Conversely, Germany's currency would appreciate, again because of trade imbalances (they export more than they import).

Because of EURO, this hasn't happened, and won't happen - the trade balances are averaged, making Germany's currency (EUR) less valuable than it should be, and Greece's currency (again EUR) more valuable than it should be. This benefits Germany, because it can sell its cars cheaper, but isn't helping Greece, because Greek olive oil and tourism experiences are more expensive than they should be.

The short-term solution is for Germany to admit this advantage and help the under-performing countries (by giving them money, not just loans, and correcting the trade imbalances this way). In the long term, a single currency should lead to a single fiscal government (like in the US).


I wish more people understood this. Germany has benefited enormously because of the euro, and yet you see a lot of belly aching about the southern European countries.

Countries really only have two valves to throttle their economies. Interest rates (which Greece now has the highest in the European Union), and printing more money.

Right now because the Greek economy is in a log jam, they're suffering from deflation and a shrinking economy. Interest rates have to be high so that the government can continue to borrow money to keep the country running, but that means companies aren't leveraging capital to expand.

If Greece weren't part of the Euro, it could simply print more cash, which would reverse the deflationary pressure and allow the government to bring down interest rates. It would also mean the flow of trade from Germany to Greece would probably balance out more because the domestic economy in Greece would be cheaper than importing German goods.


> Interest rates (which Greece now has the highest in the European Union)

The averaged interest rates are actually fairly low for Greece as a lot of its bonds are held by European institutions with very good conditions. The effective interest rate is at 2.4%, slightly lower than even Germanys effective rate. The more interesting value is the debt-service burden, but even though that's higher for Greece, it's still in the same ballpark (it's about the level that the US have).

Still, the debt is horribly high and I don't see a way to repay it. I also don't see a way that Greece can meaningfully default without leaving the EU. That's impossible to sell to Spain, Italy, Portugal, Ireland or might trigger a landslide. Maybe a unified fiscal policy could help. We live in interesting times.

see http://www.socialeurope.eu/wp-content/uploads/2015/01/OP6.pd...


> It would also mean the flow of trade from Germany to Greece would probably balance out more because the domestic economy in Greece would be cheaper than importing German goods.

I read this a lot but I don't quite understand why--How does a unified currency prevent the domestic economy in Greece from being cheaper than importing German goods?

Why can't the local Greece industry lower prices (as it would effectively with a falling local currency), thus driving more domestic purchasing and exports since it would be comparably cheap to neighbouring countries?

The only thing I can think of is that it's hard to synchronize the discount of an entire industry, and nobody wants to go first. Having a local currency and printing more money allows you to do that across the board.


> The only thing I can think of is that it's hard to synchronize the discount of an entire industry, and nobody wants to go first. Having a local currency and printing more money allows you to do that across the board.

That's exactly right. The key point is time.

If you have to wait for your economy to contract, you're still borrowing tons of money to keep the country afloat. You're paying high interest rates on that debt, while at the same time you're losing tax receipts as more and more people are no longer paying taxes but instead are on the dole.


> The only thing I can think of is that it's hard to synchronize the discount of an entire industry, and nobody wants to go first. Having a local currency and printing more money allows you to do that across the board.

Not only that, but if you want to "lower the prices in Greece" (i.e. deflation), you would have to lower the wages of everyone at the same time. That is politically very hard to do.


Because of technology. Fishing in Ithaca costs more than importing fish. The sea in the island is amazing, full of fresh fish. Yet nobody eats fresh fish in restaurants because there are no fishermen left! Same goes for most of other products, in conditions parity there is no way for a Greek corp to fight on price domain a big German corp.


This x 1000000!

In the medium to long term, it's Eurozone breakup (either partial or complete) or fiscal (and thus political) integration.

I estimate the chance of the Germans ever admitting that the current system is skewed in their favor and actually taking real steps to raise their inflation rate (to counter deflation elsewhere in the Eurozone) and reduce their trade advantages at very close to zero. They're still scared of becoming the Weimar republic, even though they're staring Japan-style deflation in the face.

On the whole, Germans view Club Med as lazy, indolent, irresponsible, and deserving of their fate.

Bring on the Eurozone exits. The sooner the better. Currency unification without fiscal and political unification is a disaster and has plunged half of Europe into a depression as bad as the 30s.


Germans economic power has been enormous before the introduction of the euro, while countries like Greek had been struggling for a long while. Germany not paying reparations to Greece for WW2 might have played a role there.

But why enter in a trade union in the first place? Right, the oligarchs made Greece do it. However borrowing from the Deutsche Bank and expecting them to be nice and fair about it sounds naive to me.

Many people don't get it, but the EU is mainly about trade. Not so much about democracy or social equality. That being said, there is some redistribution of wealth between countries:

http://en.wikipedia.org/wiki/Budget_of_the_European_Union#Ne...


The corporations see the benefits, but the population does not. Same as in China.


Germany has asked Greece's government to raise taxes to pay bonds, and spend less than they earn in taxes. This is a problem for a country like Greece, because the economy is stagnant and government services were an unhealthy amount of their economy to begin with. Before the crash, the economy was mostly growing because the government was borrowing money (unsustainably) and spending it, producing most of their recent economic growth.

What Greece actually needs is growth in the real economy, where there are businesses where people make things and do things and ship things around and otherwise trade with the rest of the world efficiently, but the current economy is insanely overregulated. The classic story of oliveshop.com comes to mind, where company shareholders were expected to submit lung x-rays and stool samples to the health department before the company could sell pre-bottled olive oil online. (Greek shipping is actually one sector which has escaped this, but it's had its own issues because of reduced global trade in the wake of the recession.)

Of course, half the reason for the overregulation is so that people in the government can collect bribes to expedite your permit processing. (The rest is classic special-interest stuff). So real reform in these areas probably isn't going to happen, and the Greeks are unwilling to countenance that their previous economic gains were illusory.

Which means Germany gets to be the bad guys, asking them to actually pay for what they borrowed (gasp!) and Greece is at extreme risk of doing something incredibly stupid and not just stagnating at 1995 levels but running the economy further into the ground.


No, Germany forced the Greeks into a program of austerity even though it has been shown, very clearly, that austerity simply doesn't work (see references). The economic forecasts on which the German (really the EC, ECB, and IMF) analysis relied didn't account for the fact that reduced government spending would cause a reduction in GDP.

They assumed that reduced government spending would somehow (magic?) increase private sector investment and result in economic growth. The forecast for the WORST unemployment would get was around 12%, and by this point the recession was supposed to be a distant memory. They were so, so, so wrong.

Greece probably made mistakes, but don't pretend the Germans are innocent and being painted as the "bad guys" unfairly. The Germans ignored all reasonable economic logic and forced austerity on Greece for ideological reasons. That's exactly the kind of thing "bad guys" do and the Greeks are justified in their anger.

http://www.amazon.com/Austerity-The-History-Dangerous-Idea/d...

http://www.theguardian.com/business/2013/jun/05/imf-underest...

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/a...


I don't think we strictly disagree about the ineffectiveness of austerity. The core reason the economic growth didn't show up from austerity is all the stuff I was complaining about. And it's true, you don't get a stronger economy by having the government spend less: you get it when you tax less, more money stays in the economy and it gets reinvested effectively - which it won't do in a nasty regulatory environment with high taxes, not that Greece is taxing less to begin with.

But what exactly would you have the Germans do? Say "no bailout" and oversee the exit of Greece from the Euro? Still the bad guys, and it wouldn't have made Greece any better off today. Try to demand substantial economic reforms to actually grow the economy? Sure, that's totally going to happen, never mind that pesky "sovereignty" business and upcoming elections (which are now past elections). And they're the bad guys again.

Or maybe they should have just asked German citizens to sacrifice instead, and committed to throwing bad money after good for the next N decades, subsidizing things like a socialist healthcare system where you actually have to bribe the doctor to get an appointment.


After reading the book I mentioned in my last comment, I'm not convinced that the euro is really such a good idea, especially for countries like Greece. It means that the only tool available to the government is fiscal policy. It also means that Germany effectively makes monetary policy on behalf of the rest of Europe, and so you can only imagine who the monetary policies benefit. So yes, ushering Greece out of the eurozone might not have been a terrible idea.

And I do think the Germans should be asked to help clean up the mess they were (partially) complicit in creating. There is plenty of blame to go around, no one is innocent. For every euro someone borrowed that they couldn't afford to pay back, someone lent a euro to someone who couldn't afford to pay it back. It was pretty clear we were in a terrible bubble years before it burst, but the market apparently assumed there would be a bailout, so things got much worse than they needed to.

Also keep in mind that the reason Greece (and Ireland, and Spain...) had so much government debt is that they transferred private sector debt onto their balance sheets. So what I would really would have preferred is to just let the owners of all those underwater banks take the hit and keep the government out of it except for making sure no one ended up starving to death (the usual social safety net stuff). I guess you could put me in the "bail out Main Street, not Wall Street" camp. But Germany didn't want that, because ultimately the money came from German banks, so...

While they were violating Greek sovereignty they could have asked for much more productive changes than they did (like the mis-regulation problems you mentioned, which I agree with). But they didn't. So who gets the blame? Germany, the ECB, the EC, and the IMF. The IMF has already admitted their terrible mistake (we'll see if they learn their lesson, doubtful), the others can apologize by working with the new Government to slash the debt so that the Greek people can at least start trying to fix the other problems we've identified.


Not when the public sector comprises most of the economy, like in southern European countries. Without public investment there will be no growth, even with 0 taxes.


This has been what I've been worried about during all of this. I'm not entirely sure why Germany has to be "damned if they do and damned if they don't". It's as if people forget that the country has had to learn how to recover from total catastrophe and might be offering realistic and practical solutions to the problem.


Paul Krugman helpfully explains the situation here: http://www.nytimes.com/2015/01/26/opinion/paul-krugman-endin...

In short, the EU and the IMF demanded savage spending cuts from the Greek government. Turns out that cutting in a depressed economy makes the depression worse (despite the wildly optimistic predictions by EU officials, who decided to ignore textbook economics). As a result, Greece now has enormous unemployment, a vastly shrunken economy, and a debt-to-GDP ratio that is only going up despite the huge spending cuts. This is clearly an unsustainable course, something now recognized by the Greek voters. Unfortunately, there appears zero chance that EC and German politicians are going to acknowledge that austerity doesn't work.


>In short, the EU and the IMF demanded savage spending cuts from the Greek government.

Let's also mention WHY those spending cuts were demanded: Because Greece was on the verge of bankruptcy, the interest rates for their bonds were exploding and the EU and IMF had to pump more than 300 billion € into this 11 million people country.


> Let's also mention WHY those spending cuts were demanded: Because Greece was on the verge of bankruptcy[...].

That, while true, leaves out the quite important fact that Greece was only on the verge of bankruptcy because they bailed out their banks. One can nicely see that on charts displaying the debt/GDP ratio: While high for quite a few years, it was more or less constant. The bailout was the one factor that created the explosive dept growth. Now it gets interesting: Whose money was in these banks, invested in high risk/ high yield projects? Mostly investments of european upper class/upper middle class (because small Greece had an even smaller upper class). That's why so many German banks like Commerzbank, Deutsche Bank and the now defunct Hypo Real Estate hold so many Greek government bonds. By bailing out the Greek (and Spanish, Irish etc.) banks the European population indirectly subsidises the risky investments of its own upper class. That's also the reason why the austerity measures are so inconsequential: While pensions get cut and hospitals closed, profiteers like Germany have no qualms to sell German tanks and submarines worth billions of € to Greece (the German submarines alone cost 3 billion) [1].

[1]: http://www.theguardian.com/world/2012/apr/19/greece-military...

edit:typo


At least Greece prosecuted the people who were bribed into accepting those ruinous defence contracts. In Portugal he was kicked upstairs and is still in office.


I was talking to someone who knows some of the Whitehall mandarins and he was saying that bond ratings are the primary reason for austerity policies in the UK. Although we aren't actually spending less money, due to the continuing injection of capital into banking, as long as we are throwing the money upwards then our bonds are worth more.


>Turns out that cutting in a depressed economy makes the depression worse

Sure, if you are insolvent but you can still get a hold on some borrowed money your situation is obviously going to get better in the short run. But you are just killing the goose that laid the golden egg, since your economy is dependent on borrowing money.

It's not black or white. On the one hand you have the economist that say that Greece must stop running a public deficit since it may risk a default if creditors believe that the Greek Government will never be able to repay the debt. On the other hand, you have the (neo)keynesian economists that believe that cutting spending during a crisis is a suicide, and therefore paying off the debt is not a priority. Which ones are right? Well, only time will tell.

> As a result, Greece now has enormous unemployment, a vastly shrunken economy, and a debt-to-GDP ratio that is only going up despite the huge spending cuts.

It's not clear how much of these is caused by the austerity measures. If you remember, at the beginning of the crisis most European governments launched public spending programs in order to reactivate the economy. It only made things worse: it did not create long lasting jobs and it only increased public deficit, which in turned also increased their debt obligations.

>This is clearly an unsustainable course, something now recognized by the Greek voters.

Actually, the only "clear" unsustainable course is to keep the economy afloat by increasing their debt. If this is the new normal, they will not be able to keep borrowing forever.

>Unfortunately, there appears zero chance that EC and German politicians are going to acknowledge that austerity doesn't work.

You have to understand that they are choosing the lesser evil. Even if austerity did not work, it still might be better than increasing their debt.


The interest rate is fast approaching zero and yet investment is still flat. No one will take a loan to create a new company or expand an existing one if 30% of the Greek market is unemployed, and therefore incapable of buying anything.


Somebody should ask Paul Krugman the following question: why not ask the US government (or indeed any other) to lend Greece lot's of money. He only ever seems to ask Germany to do so, despite Germany having already lost billions and billions on Greece.

One can ask Yanis Varoufakis the same question.

The reason why they don't is quite easy and also very unpleasant for them.


My limited understanding is that this help came with a lot of stipulations as to how the money was to be used and these stipulations were enormously unpopular.

Personally, I can find some understanding of both sides to this. On one hand, if I were greek I'd be utterly and totally committed to replacing every member of the government that so royally screwed me and I'd be insulted by the entities who are offering bail outs at the expense of my quality of life (I don't fully understand the details of how this impacted people on individual levels, this is only my attempt to epathize). On the other hand, if I had a lot of money to help people in need, and someone came to me asking to pay their loan sharks after an epic binge I would certainly have a number of stipulations placed on this and would in no way consider handing them a check without some extensive scaffolding around that exchange.

As I learn more about this situation I might feel differently about either side, so please understand I'm just sharing my opinion given what little I know about it so far.


> Tangentially, what is the main reason for all the protest against the EU

Austerity measures hit workers the hardest -- the people most responsible for creating economic wealth. To them, the EU is trying to take wealth and opportunity from the already-suffering average person to balance for mistakes and losses made by leaders and other nations. And the punishments have been pretty severe. I'm confident the level of austerity measures, if they faced the American people, would not go over peacefully (assuming we had much of a social net left to give up at this point).


Germany wants Greece to cut spending and wants the Greek debt to be paid back.

Greece wants more spending and the debt to be forgiven (like in a bankruptcy).

Germany wants austerity and the new Greek party that won the election wants more spending hence the protests and disagreements.

Disclosure: casual observer's opinion not a professional opinion.


For anyone interested, here's a few links collected by someone I know that point out why it's not so simple. It's not help, it's business.

https://anestis.quora.com/Links-to-credible-sources-about-Gr...


Ahm, no. That's absolutely not true. As a prominent example of German Help, here is the history of the Siemens scandal[1][3]. Also, German's choice for PM when Papandreou quit, was Loukas Papademos. It's the guy who in 2001 acted as a bridge between Goldman Sachs and Greece to false statistics and allow Greece into the EUR. Isn't a kind of strange choice? There are many more situations (military equipment, MAN, etc.) where the German government actively undermined Greece.

Germany, unfortunately, is seen as the arch-enemy along with Brussels in Greece. After 6 years of austerity measures and governments who followed policies dictated by the troika (ECB, IMF, EU but mainly it's Germany) we rank #1 in Europe in suicides, the economy is worse then ever and the public debt has gone up instead of down. At this point many Greeks don't care what a Grexit would bring because they already trespassed the point X of "caring". They are already poor by all means.

That said, it's true again that Germany flushed billions of EU in saving the Greek economy. But almost all of that money was used to keep foreign banks happy by paying high yield Greek bonds owned by German and French banks mainly. The rest of the money was flushed to Greek banks owned by heavily corrupted bankers (e.g. Latsis - Eurobank). Even in situations of small banks like ProtonBank[2] were kept because declared of "national interest" (Ev. Venizelou - Leader of PASOK former Finance Minister and Vice-President) and thus bailed-out in the sound of millions while some pensions went as down as 350 EUR/month at the same time.

So to make a long story half-long: The German government is an extreme supporter of the old, highly corrupt, heavily bribed (by many german corporations) Greek government which doesn't make sense. Merkel is crying home for the Greman tax-payer when indirectly the only thing she really did was just handing money indirectly from the German taxpayer to the German banks via Greece (with huge interests). Truth is that given the results, Germans were more than happy to vote Merkel, so in a strictly political her policy was extremely successful. The only problem is that now all over Europe there is a strong anti-German feeling: Italy (M5S), Spain (Podemos), UKIP (Farage), France (LePen). So give it another ~ 2 years and Greece will be the least of Germany's problem.

Now the real problem Germany and EU is facing is this: If they bailout Greece, they must bail-out Italy and Spain too. Maybe France will follow. But the Greek debt is small so it can be done, if there's political will and a sort of promise that Greeks won't fuck up their economy again anytime soon! But for Italy it's a different matter, if Italy and Spain require a cut oh well... I'm not sure it's even possible mathematically speaking. On the other hand mathematics was never a part of economics, it's mostly politics. There are logistical ways (e.g. the EU buys bonds from failed states and hides them in a locker room for eternity at a very low rate which the countries could start paying God-knows-when...) to bypass this, but the problems are at the level of politics mostly. If Merkel concedes now, the opposition inside Germany will literally trash her and she will not be able to come up with answers, since the story of the poor Greek who spends more than he could afford is the one she choose a couple of years ago.

Sorry the long answer! Jesus I didn't realise I produced so many chars :-P

[1] http://en.wikipedia.org/wiki/Siemens_Greek_bribery_scandal

[2] http://www.reuters.com/article/2012/01/12/us-greece-proton-i...

[3] https://anestis.quora.com/Links-to-credible-sources-about-Gr... <-- link shared by user @realunreal a couple of posts up. Summaries very well my points in the first paragraph!


You conventiently forget to point out clearly that the Troika and Germany have give Greece extremely large amount of money for free. The bailouts for (mainly French) banks was free money for Greece. What the new governent is trying to do is get more of that free money.


You are right, Germany has already flooded billions to Greece. But they didn't use it to make themselves competitive. Instead the retired early.


Varoufakis is a great economist and his placement as the Finance Minister is a smart move from the new government. At this point I would like to suggest reading To Future And Back by I. Pitsouli[1]. Somewhere in it, there is suggested (or prophecized if you wish) that in years to come scientists will replace politicians in governments. Well, that has already started happening and is right IMO because science is closely related to philoshopy which in turn by definition deals with problems related to reality, existence, values, etc. ie. the everyday problems most politicians seem to ignore nowadays.

ps. Varoufakis definitely needs to revisit Bitcoin though[2]

[1] http://www.amazon.com/Future-Back--More-than-Prophecies-eboo...

[2] https://news.ycombinator.com/item?id=7841186


"in years to come scientists will replace politicians in governments"

Not an especially new idea, especially in a Greek context. Plato, in Republic:

"The society we have described can never grow into a reality or see the light of day, and there will be no end to the troubles of states, or indeed, my dear Glaucon, of humanity itself, till philosophers become rulers in this world, or till those we now call kings and rulers really and truly become philosophers, and political power and philosophy thus come into the same hands."


"Not an especially new idea"

I didn't claim it to be one. Of course Plato and his thoughts are behind it and if you give the book I mentioned a shot you'll find out that he is heavily mentioned in it.


Wow, what a futuristic concept, to have a government comprised of scientists! I wonder which forward-thinking Western government will implement this first?

http://singularityhub.com/2011/05/17/eight-out-of-chinas-top...

;)


Germany.


Mrs Thatcher had a chemistry degree from Oxford and Jimmy Carter was a US Navy trained nuclear engineer.


Politics in Germany is an apprenticeship trade that takes countless hours from adolescence onward. You do not have the time to become a successful scientist and a successful politician in the same life.


I'm not sure if I missed the sarcasm, but Angela Merkel had a doctorate in quantum chemistry before she became the Chancellor of Germany:

"She spent the final moribund decade of the G.D.R. as a quantum chemist at the East German Academy of Sciences, a gloomy research facility, across from a Stasi barracks, in southeastern Berlin. She co-authored a paper titled “Vibrational Properties of Surface Hydroxyls: Nonempirical Model Calculations Including Anharmonicities.” She was the only woman in the theoretical-chemistry section — a keen observer of others, intensely curious about the world."

[1] http://www.newyorker.com/magazine/2014/12/01/quiet-german


She's the exception that proves the rule. Her rise was made possible by the turmoil caused by the reunification that opened up that career path for highly educated people who kept their distance to the regime. [1] is another example with ... comparable ... charisma. But again, they are rare exceptions. [2] says that there are 27 members of parliament with a doctorate in engineering, 8 with a doctorate in biology, 7 in math, 2 chemistry, one in geology, and one in computer science. And I doubt that many of them have been working in science after the doctorate.

[1] http://en.wikipedia.org/wiki/Matthias_Platzeck [2] http://scienceblogs.de/frischer-wind/2011/03/21/wissenschaft...


I think practical politics are closer to hustling than philosophy. Main problem with politicians IMO is that they often stand behind domain experts and claim that political decisions are inevitabilities of natural law.


Why do you say he has to revisit Bitcoin? Genuine question, just curious to hear your thoughts about his view.


Maybe he didn't read closely enough his thoughts. Actually, Varoufakis from his twitter account said that since there is this post around[1] by our beloved Berlinese internet-economist TechieChan he didn't had to analyze BTC any further.

A couple of points he made are:

* He believes that the BTC market can be manipulated by big players easily. * Having a central bank regulating your economy is a good thing, because you know to whom point the finger when shit hits the fan. * He understands that liberals like the perception of freedom that bitcoin gives but it's ultimately false.

All points which I share and believe although I have bought and sold BTC in the past. These are not insights really, these are elementary economics. It's strange that programmers who understand algorithms and cryptography can not wrap their around these things. It always amazed me, I can't explain it :-/

[1] http://www.techiechan.com/?p=1954


Maybe reading his post twice wasn't enough. Or maybe it's just that Bitcoin is not just "money" but the whole underlying technology ie. the blockchain is about to introduce huge changes into things we have been used to do in a certain way.


The post was about Bitcoin (the currency) not bitcoin (the protocol). You read it twice and didn't get that part? :-P


Well, that's exactly why Varoufakis has to revisit Bitcoin. Because the protocol's pros outweight by far the currency's cons.


Okay than this is a misunderstanding. I am sure Varoufakis was talking about the currency. There is no doubt whatsoever that the protocol is one of the most important technological advancements of the past decade, maybe of the 21st century.


See my reply in atmosx's comment.


Smart. Does this mean I can have a vote and decide to not pay for any games from Steam now?


You're implying Greece did take Euro money without any intention to repay other countries. The reality is much more nuanced.

Greek did take part of a fund destined to boost their economy, like Western european countries with the US's Marshall Plan. Whether the investments made with this money were profitable or not it's up to debate, but the end game (as for Spain, Portugal and Italy) always were to improve the greek economy and middle class in order to strenghten the overall euro economy.

Now that the "southern" euro countries are in deep financial troubles, Euro bons were lended to them, not donated. Thoses bonds has to be repayed fully, but without sucking dry the Greek economy or burdening it for too long (western countries have a rap sheet of taking advantage of African countries in debt).

Please do not mistake Greeks for their representatives.


"Greek did take part of a fund destined to boost their economy, like Western european countries with the US's Marshall Plan."

Unless I'm mistaken, you are very mistaken, and confusing things.

"Greek debt" has nothing to do with the EU Cohesion fund (which is open to all member states which meet the criteria) or Euro Bonds (which , to this date, do not exist), but with a large number of national bonds that have been bought by the ECB and IMF specifically.

So yes, basically Greece took Euro money and now is planning not to repay it.

I agree though that saying that every Greek is responsible for this situation, or that the conditions for repayment are fair, are other matters entirely.


Depending on which funds you are referring to, this may or may not be accurate. If you're talking about investment from the European Investment Bank (EIB), then yes, those funds were meant to bolster the economies of all European countries. However, in order to receive funds for a project, the country sponsoring the project has to put up some percentage of the budget. Last I heard it was 50%. That's not really feasible for insolvent countries to do.

If you're talking about the bailout, then no, it was never meant to be a Marshall Plan sort of deal. More or less, it was meant to give money to an insolvent country so it could save its insolvent banks and pay off their creditors. The vast majority of the bailout money did not stay in the country and put to productive use, but instead left the country to pay off its debt.


I don't confuse Greeks with their representatives.

However, and leaving out the current bailout, the reason for Greece to be in the situation it is is because successive governments have provided lavish benefits that they couldn't pay for.


Yes, much like Germany after 2 WW ... They did a damage that they couldn't repay. Then Marshall came but they didn't learn much, did they?


Oh, Germany learned a lot and the Marshall plan succeeded in saving Europe. Germany is now surrounded by friendly nations and no longer a military threat.

I think Marcus Brigstocke says it best: https://www.youtube.com/watch?v=GsaKgz1v-f8


What about forging documents to get accepted in the eurozone? Forging documents to get more loans? The rampant corruption on every level of the Greek society? [1] Obviously this is not politically correct, so downvotes are expected.

[1] http://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_G...


Politicians from parties who now get 3-4% of the vote lied years ago (to the Greek public as well as EU bankers), so let's take Greek workers' pensions, crush their unions, slash their social services, and offer no jobs or future to 60% of Greek young people. The bankers may not get their money anyway, since the debt is still increasing, but at least the Greeks* will get what they deserve!

*may not apply to the elites who actually bankrupted the country, who don't rely on government services and can keep their money in Swiss accounts


This is vastly mentality problem and consequences that comes with it. Simple fact is, southern european countries have laid back attitude which is nice to enjoy and so on, but doesn't perform well and has more drawbacks in long term, as we can see. The st had to hit the fan hard, and it did for people to wake up.

What do you expect - full pardon on all mistakes? It won't happen next time, we promise? You know, one of life's lessons is - you pay for all your mistakes, and youth is no excuse for them. Sometimes, in a very hard way.

We all have crappy politicians in one or other way, but guess what - unless vote was rigged, they were elected by majority. I do agree with notion that in democracy nation has leaders that it deserves, exceptions will even out in broader average (either location or time based).

One generic example - when there was massive tax evasion, people should have outsted it's government for closing an eye on it. They didn't. Now they face consequences for what every sane moral person must have felt is wrong.


"one of life's lessons is - you pay for all your mistakes"

This isn't true though. The people with the most direct responsibility for crashing the world economy, like those with the most direct responsibility for bankrupting Greece, haven't paid at all.

Also, I think the "citizens of democracies are responsible for the crimes of their leaders" moral principle is one you probably don't want to consistently apply. To try a reductio ad absurdum, I assume you're not in agreement with Bin Laden's reasoning for the WTC attacks, for example.


I am from South Europe but I agree with most of stuff you say. Nobody complained when we were receiving more than we were giving back. And worse, we got used to it.

Everybody is guilt here. Man up.


Out of interest, where do you think the money to pay for pensions, social services and create jobs for young people will come from in Greece in the future?

Surely these all have to be set at a level that is actually sustainable by the Greek economy?


Greece is what I might call cashflow positive - its government is taking in more money than it's spending in its business of running the country. It's only the bond repayments that are pushing it down.

Government spending should be countercyclical - and smart creditors (which, sure, a government beholden to populism can't always be) would realize that. Prop up the economy now, get growth up again, and then cream off some "repayments" when times are good - I'm sure a contract could be structured to specify that they'd repay their bonds in proportion to e.g. growth above 3%. Running Greece into the ground benefits noone, not even Germany. But sadly, decades on, politicians are still ignoring Keynes.

Or they could have simply defaulted. It's worked out pretty well for Iceland. The argument as I understand it for every nation being perpetually indebted is that it ensures outsiders have an interest in that country being successful - if you own Greek bonds you're less likely to invade Greece. But if your bondholders are forcing a lot of suffering on your country, maybe the costs outweigh the benefits.


"Jobs for young people" is not something that's supposed to cost money. The value of what employees produce is supposed to exceed their salaries.


If they stop making interest repayments that will free up a lot of Euros.

Additionally, if you don't pay for pensions, social services and create jobs then people don't have any money. If they don't have any money they don't spend. And not spending isn't sustainable for any economy.


Well, I'm a bit of a radical, so I could give a lot of answers to that question. But even in conventional terms, and even after all the economic destruction of austerity, Greece has been running a primary surplus since 2013. At this point they're borrowing just to pay debt.


See, a friend of mine owned some of those bonds (Icelandic in that case, but similar). He saved money to support his family in case where they'd need it. The money evaporated when Icelandic banks defaulted. The money that was used to prop up Greece came from people that worked for it - some directly, some indirectly. Why should their money be taken from them? Why should German social services be slashed because the EU still needs to funnel more money into Greece? [1] I totally agree that Greece needs help, but I don't have a good answer for those that need to pay for it.

[1] we had a major slashing of social services with the Hartz4-laws. Things are certainly not as ugly as in Greece, but Germany has the highest percentage of low-wage labor in Europe. Germany as a country is rich, but a lot of Germans pay the price.


Would be better to take this money from the Greek oligarchs and keep some level of social safety net. But isn't it up to the Greeks to make that happen?


Oh well, we did on Jan 25 ;)


Yup, and I'm rooting for them.


These things are not solely responsible for the ruinous state of the Greek economy, which can be proven very easily:

Every periphery economy suffered from the same economic malaise caused by a housing boom, a crash, a bailout of their banking sectors and austerity imposed from above (all actions ordered by Brussels).

Yet Greece was the only one that played silly games with Goldman Sachs to get accepted (for which nobody has been punished except the Greek people).


What about working with Goldman Sachs to hide the true level of debt that Greece had from Eurostat?

http://www.spiegel.de/international/europe/greek-debt-crisis...


Legal at the time. Same thing the Italians did.


Not to justify the practice, but pretty much every periphery country fudged the numbers in order to be admitted to the Eurozone because none of them had a strong enough economy then to be let in. One did it, then the next looked at the last one and said "If them, why not us?"

Greece is pretty corrupt though.


>Not to justify the practice, but pretty much every periphery country fudged the numbers in order to be admitted to the Eurozone because none of them had a strong enough economy then to be let in. One did it, then the next looked at the last one and said "If them, why not us?"

The real fun starts when Greece defaults and Italy/France/Spain/Ireland/etc. go...

If them, why not us?


The conspiracy theorist in me suspects that's the reason Greece is being forced to go through painful austerity measures even though everyone knows they won't work. The system survived a Greek defaul^H^Hvoluntary restructuring, but it wouldn't survive every country doing that, so the Greeks have to be seen to suffer.


That's not really a conspiracy theory - it's pretty much all in the open. The ECB and European Commission (even the IMF!) don't pretend that austerity works, they just pretend that there's no alternative and periodically tell us that the seeds of recovery have sprouted.

Why they do it is another matter. Theories I've heard:

* (like you said) They want Greece to be an example for the other periphery countries. * It is used as a pretext to chip away at Greek sovereignty and give the (unlected) European commission additional powers over the country. * The core banks' insolvency becomes totally apparent if Greece defaults, so they pressure the ECB to keep up the charade that it's all necessary. * It's used as an excuse to sell off valuable Greek state assets on the cheap to politically connected individuals and companies. * Or all of the above.


This sort of snark isn't constructive. The situation is obviously much more nuanced than this, and while this sort of reduction is cognitively convenient, it's not accurate nor useful.

For example, when the money was obviously not going to be repaid, but the Troika continued to lend them more -- at what point does the lender become at least partially responsible? Obviously I don't advocate irresponsible borrowing, but certainly irresponsible lending is also bad.

Ultimately, the bond holders are going to have to take a hair cut, or have their Euros devalued, because the Greek economy cannot possibly hope to repay its current debts. To think otherwise is to hope foolishly for the impossible (all questions of right or wrong aside).


>>For example, when the money was obviously not going to be repaid, but the Troika continued to lend them more -- at what point does the lender become at least partially responsible? Obviously I don't advocate irresponsible borrowing, but certainly irresponsible lending is also bad.

But that isn't the cause of their issues, that is just the latest symptom. The cause is electing a series of governments that promised benefits that they couldn't afford. EG [1] letting trombonists retire at 50 because their work is "hazardous".

[1] http://www.independent.co.uk/news/world/europe/greece-to-cal...


Yes yes the Government was corrupt. What the parent is saying is: the lender should have checked to make sure that the debtor (Greek Govt.) was actually capable of paying back what it borrowed. But the lenders didn't, because Governments are excellent debtors: they represent the nation! Governments are excellent credit risks: because they will most likely want access to more capital in the future, they cannot tarnish their image in the international community. One of the first thing the Soviets did when they came to power was to repudiate all foreign loans owed by the Tsarist government (which incidentally led to a crisis in France, which had been the biggest lender).


I have to admit to a certain confusion about your point. I guess what you're saying is that anyone who thought to help Greece should have expected to be jerked around and told to pound sand?

I feel like this is some form of victim blaming.


Yes, they should have known exactly what they were getting into. You automatically assume a certain kind of risk when you lend to sovereign nations, which by definition, are not compelled to return your money (although they often are, due to many factors).


You have been able to for a long time. Buy Steam games with a credit card, then don't pay it back. There may be consequences, but you can do it.


The site (ibtimes) is full of malware and spammy ads. Beware!


Can anyone suggest a better URL for this story?

Edit: It seems Bloomberg has the most substantive article that isn't behind a paywall, so we've changed to that from http://www.ibtimes.co.in/valve-economist-yanis-varoufakis-ap....


Does this mean that hats are going to be the new Greek economy?


I was going to write the exact same thing!


λ is greek: HL3 confirmed


To bad the Greek government doesn't own Steam, then they would have more to export than just Ouzou.


*Ouzo.


Proposed solution to Greece's financial woes: free Bill's hat for everyone.




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