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[Unknown Soldier]

Krugman's solution is Grexit.

He was right too, the Greek situation within the Eurozone is untenable. I still don't know know what Tsipras was playing at, this agreement is akin to creating a Greek Weimar Republic and God knows the Germans of all people should have realized how this might be a bad thing.

 

[Theonik]

In your comparisons you forget that US has the control of its own currency. Having euro only makes things worse, especially when ECB acts like a financial police and not as a central bank.

Anyhow, the solution is not to have big deficits year after year. You should have decent deficits in times of recession and decent surpluses in times of expansion.

I never disagreed with this notion!

And it is basically: keep your debt under control.

Sure. Which Greece has failed to, in part due to poor administration, in part due to the impact of European integration.

Desperate situations ask for desperate actions. Belgium as well sold Dexia/Belfius bank, mainly to France in order so save it.

That would be interesting to see. But since Tsipras didn't opt for this, result = ... ? At least for now.

There is desperate actions and there is acts of utter boneheaded stupidity. The handling of the Greek crisis fall purely on the later.

As for the second point, it's pretty obvious where it will end up. It is the definition of insanity. Repeating something that didn't work expecting a different result.

Edit:

This would be true if those properties would be loss inducing. As far as I understand most of the assets supposed to be included in that fund are profitable. So they are creating productivity and jobs. Maybe not as efficient as a private owned ones, but still they are a plus on balance. It's stupid to sell profitable properties in deep crisis and under pressure because no one will pay you a good price for them, because getting them out of the state portfolio impacts negatively your GDP, because you give away an income source in your most desperate times for a potential income source in the future (which in theory is big taxes paid to Greece, in practice is tax optimized to the hell and back).

Better yet, let's admit Greece has a tax evasion problem. Let's observe that Greek revenues are dangerously dependent on taxes more-so than some other states.
Then let us solve this problem by removing parts of the remaining revenues in hopes of greater taxes.

 

[KingSnake]

Talking about desperate actions. Why aren't the Greek banks transferred directly to that famous fund? Why aren't they recapitalized directly from there and then privatized again? If this is the magic solution...

 

[M°°nblade]

Once you get to the point Greece got themselves into it is very difficult to get out. Austerity isn't the answer definitely because it makes the problem worse, you would at the very least need major debt restructuring to avoid a default. (25% drop in the GDP)
Applying austerity in a recession is probably the most insane notion from all this as you are essentially deepening the recession.

That all depends on how you do austerity, whether you focus on taxes or cutting your spendings.
Reforms in Greece are necessary and although you won't enjoy some of them, you should applaud the other EU countries for finally providing the lever to push those reforms Greece was unable to execute themselves in the past 50 years.

 

[KingSnake]

That all depends on how you do austerity, whether you focus on taxes or cutting your spendings.
Reforms in Greece are necessary and although you won't enjoy some of them, you should applaud the other EU countries for finally providing the lever to push those reforms Greece was unable to execute themselves in the past 50 years.

Are you purposely ignoring the past 5 years?

 

[Theonik]

That all depends on how you do austerity, whether you focus on taxes or cutting your spendings.
Reforms in Greece are necessary and although you won't enjoy some of them, you should applaud the other EU countries for finally providing the lever to push those reforms Greece was unable to execute themselves in the past 50 years.

Structural reforms have absolutely nothing to do with austerity. If the EU allowed or even pushed Greece to do these reforms and also allowed them to spend themselves out of the crisis before considering reworking public spending we wouldn't be here, better yet we should have also had talks about debt consolidation/restructuring. Probably across the Eurozone. But this did not happen. You are basically purposely ignoring the facts and what has happened with some fantasy situation.

 

[East Lake]

Desperate situations ask for desperate actions. Belgium as well sold Dexia/Belfius bank, mainly to France in order so save it.


That would be interesting to see. But since Tsipras didn't opt for this, result = ... ? At least not for now.

Whether you believe it or not Varoufakis said he wasn't dogmatic about privatization, but that it depended on the circumstances. I imagine Euclid is probably similar.

Even if you don't believe them the main point which I don't think is ideological is that you're not going to get much compensation selling during a depression, and as such there's not much to gain. The sales don't really dent the debt at all, there's no guarantee private management will turn around the business, or that it will help the local economy.

 

[M°°nblade]

This would be true if those properties would be loss inducing. As far as I understand most of the assets supposed to be included in that fund are profitable. So they are creating productivity and jobs.

Just being profitable isn't enough. How do the assets compare in benchmarks to similar assets, are there opportunity costs, etc ...? Most state companies that were privatized in Belgium, ended up being more profitable.

 

[Theonik]

Just being profitable isn't enough. How do the assets compare in benchmarks to similar assets, are there opportunity costs, etc ...? Most state companies that were privatized in Belgium, ended up being more profitable.

Gee I wonder when that happened! And again, the difference between doing firesales during a recession and normal privatisations is night and day. Regardless of your view on privatisation you should realise it is a TERRIBLE idea. You cannot completely ignore events, context, and the nuance of the situation to go 'yeah but what about'.

 

[KingSnake]

Just being profitable isn't enough. How do the assets compare in benchmarks to similar assets, are there opportunity costs, etc ...? Most state companies that were privatized in Belgium, ended up being more profitable.

You do that in times of prosperity when you can sell them above market value, not in deep recession when you get maybe half the market value if you're lucky. Come on, it's not difficult to understand that.

In other news:

German finance minister, Wolfgang Schaeuble (pictured right) has suggested that Greece should issue IOUs to pay its bills until European authorities can extend extra financing. That's according to the German newspaper Handelsblatt today. But the newspaper points out that such a move would be controversial as it could be the first step towards creating a parallel currency.

 

[Theonik]

In other news:

Funny thing that's what Varoufakis wanted to do!

 

[M°°nblade]

Are you purposely ignoring the past 5 years?

Greece only did 1/3 of the job, which is why the austerity programme failed, and they have been called out for it several times in the past few years

Fro the article:
Here are the top 5 reasons Greece continues to fall and why austerity worsened its economic situation:

1. Greece is Greece’s largest revenue generator
2. The Protests scared away the tourists
3. A History of Corruption
4. Lack of Economic Diversity
5. Excessive and Unstable Taxation and Budgetary Management

 

[Aureon]

I got called a neoliberal for saying austerity is a tool to use to curb excessive and unwanted growth that leads to inflation because production can't meet demand. You know, the opposite of a recession.

Neoliberals don't support government intervention in the markets.

(They also don't support battle-tested, orthodox economics, and call it MADNESS)

 

[M°°nblade]

You do that in times of prosperity when you can sell them above market value, not in deep recession when you get maybe half the market value if you're lucky. Come on, it's not difficult to understand that.

I'm understanding it perfectly.
You sold your assets too late so now you need to sell them below market value.
But you still have to sell them. There's no prosperity coming in the near future. You can't wait for it. Bad luck.

 

[KingSnake]

I'm understanding it perfectly.
You sold your assets too late so now you need to sell them when below market value.
But you still have to sell them. Bad luck.

You don't have to sell them. They still bring you profit. This is getting absurd.

Greece only did 1/3 of the job, which is why the austerity programme failed, and they have been called out for it several times in the past few years

Fro the article:
Here are the top 5 reasons Greece continues to fall and why austerity worsened its economic situation:

1. Greece is Greece’s largest revenue generator
2. The Protests scared away the tourists
3. A History of Corruption
4. Lack of Economic Diversity
5. Excessive and Unstable Taxation and Budgetary Management

The current plan changes nothing about this. Really, read it again.

 

[Theonik]

I'm understanding it perfectly.
You sold your assets too late so now you need to sell them when below market value.
But you still have to sell them. Bad luck.

 

[M°°nblade]

You don't have to sell them.

It's one of the many conditions for the new loans, so yes, you have to.
http://www.businessinsider.com/gree...rogramme-twice-as-big-as-it-had-before-2015-7

The current plan changes nothing about this. Really, read it again.

It changes at least the 1th, 3rd and 5th point of the list.

 

[KingSnake]

As for Greece being called out for it's failures, I will quote this article to the death:

http://www.wsj.com/articles/SB10001424052702303873604579495000051938112

"In the last year-and-a-half, a lot really has happened and there is powerful evidence that the efforts have paid off," Ms. Merkel said at a joint news conference with Greek Prime Minister Antonis Samaras. "Greece has many more opportunities now, rather than problems."

It's one of the many conditions for the new loans, so yes, you have to.
http://www.businessinsider.com/gree...rogramme-twice-as-big-as-it-had-before-2015-7

But we are discussing here the absurdity of the new plan (and there are a lot of article out there, in financial outlets that state the same). That's what we are doing here. I see you consider this new plan like the word of God, but I don't. Based on the common sense observation that if you do the same thing under the same conditions you can't expect a different result.

It changes at least the 1th, 3rd and 5th point of the list.

How? Expand your arguments beyond "it says so in the Bible", please.

 

[Joni]

Most state companies that were privatized in Belgium, ended up being more profitable.

Most profitable Belgian state companies like Proximus are actually set-up to generate max tax revenue, not max profit.

 

[Vagabundo]

You can only grow your debt if someone is willing to lend you money.

No one in their right mind would lend Greece more money.

In reality it is austerity either way. Either by conditions attached to a bailout or by switching to their own currency. The question is in which scenario will Greece be better off in five-ten years.

 

[EloKa]

As for Greece being called out for it's failures, I will quote this article to the death:

http://www.wsj.com/articles/SB10001424052702303873604579495000051938112

the quote would now be:
"Greece HAD many more opportunities then, rather than problems."

It's a known fact that Tsipras reverted some of the most important reforms which took those opportunities away and gave problems.
Examples:
rehire all those civil servants that had to be laid off even tho there is no budget for them
rising the salaries of those civial servants to the old levels which were never sustainable

I understand that he had to give something back to the people for electing him because he made promises during the campaign which were never achievable. By beeing generous on just a few levels (even without fulfilling all those promises) he already killed some of the created opportunities and worsened the basis of the greeks budget.

 

[KingSnake]

Former Greek finance chief Yanis Varoufakis warned the cabinet that the ECB would shut down Greek banks a month before it actually happened, according to an interview in New Statesman magazine, published late on Monday. He wanted to respond by issuing IOUs, defaulting on bonds held by the European Central Bank and taking control of the Bank of Greece. He said he was "voted down".

Although I don't agree with his ideology, I swear that he's the only one that sees the economic situation beyond the political shit.

 

[Theonik]

Most profitable Belgian state companies like Proximus are actually set-up to generate max tax revenue, not max profit.

Most public investment is. Might as well complain that roads aren't profitable and then stop building them wondering why the economy grinds to a halt because you don't have roads.

 

[itsgreen]

Most public investment is. Might as well complain that roads aren't profitable and then stop building them wondering why the economy grinds to a halt because you don't have roads.

Don't worry the Belgians have stopped fixing roads a long time ago

 

[Arksy]

This is complete insanity. I've never seen people on both sides of the political divide so united here on gaf as to the absurdity of this deal.

 

[KingSnake]

Don't worry the Belgians have stopped fixing roads a long time ago

You beaten me to this. Lol. I still have nightmares about driving from Germany into Belgium.

 

[M°°nblade]

But we are discussing here the absurdity of the new plan (and there are a lot of article out there, in financial outlets that state the same). That's what we are doing here. I see you consider this new plan like the word of God, but I don't. Based on the common sense observation that if you do the same thing under the same conditions you can't expect a different result.

Whether you consider the new plan absurd or the word of God, doesn't matter. What matters is that in the past the Greek government only executed 1/3 of the things they were supposed to do, and this time, the reforms (especially privatization) will be far more drastic.
You can't argue you're going to do exactly the same thing to argue the results will be the same as well, when you aren't.

How? Expand your arguments beyond "it says so in the Bible", please.

I only have dutch sources for the plan, but to name a few:
Deadline 15 July:
- legislation for a system to limit government spending

Deadline 20 July:
- proposal how Greece will ask technical help from the institutions and other EU members for the executing the reforms

Deadline 22 July:
- Thoroughly reforms to speed up litigation to cut spendings

No date yet:
- encouraging of trade by modernizing rules and liberalizing certain markets like pharmacies and bakeries
- privatization of transmission system operator Admie
- The functioning of the labor market should be reviewed. It concerns rules in the field of determining pay and redundancy
- The financial sector must be strengthened. Supervision should be tightened, there is no political interference should happen, and there should be measures to tackle defaulters.
- The privatization fund to come into force. It is about 50 billion euros of Greek assets to be housed together in a guarantee fund.

 

[Theonik]

Don't worry the Belgians have stopped fixing roads a long time ago

I never actually drove into Belgium, only taken the train so I wouldn't know.

 

[S¡mon]

I can't believe Europe pushed it this far. I actually do feel pretty bad for the Greeks and I really hope their situation improves.

If you take out debt and interest repayments, Greece already had a budget surplus this year. We should have allowed them to pay back their debts at a later date, when their economy would have grown further.

 

[M°°nblade]

I never actually drove into Belgium, only taken the train so I wouldn't know.

Advice: Don't take a train on a Saturday this summer vacation.

F**king machinist's union.

 

[jakonovski]

the quote would now be:
"Greece HAD many more opportunities then, rather than problems."

It's a known fact that Tsipras reverted some of the most important reforms which took those opportunities away and gave problems.
Examples:
rehire all those civil servants that had to be laid off even tho there is no budget for them
rising the salaries of those civial servants to the old levels which were never sustainable

I understand that he had to give something back to the people for electing him because he made promises during the campaign which were never achievable. By beeing generous on just a few levels (even without fulfilling all those promises) he already killed some of the created opportunities and worsened the basis of the greeks budget.

He was an idiot to think the Troika would look favorably on anything except maximized misery and giving all the money to creditors. The correct thing to do would've been to organize a Grexit, default with a middle finger, then start creating make-work projects to build things. It's still the correct thing.

edit: also, weren't a lot of those people in some weird work reserve prior to Tsipras coming in power, where they got paid a little for doing nothing? That's like the worst thing.

 

[KingSnake]

...

Arguments don't mean quoting from a document that I can read myself and I read it already twice. Arguments means to describe what do you think the impact of those measures will have. What measure will have what impact that would tackle which problem. How it will tackle it.

Sorry, but I feel like I'm talking to a wall, so I won't continue this conversation. I'm better off by printing the document and talking to it.

Edit: now that I'm thinking about it, are you working at European Parliament or European Commission, because this looks like the typical dialog one would have with an European bureaucrat?

 

[oti]

Jesus, #BoycottGermany is trending in Germany

 

[norinrad]

Don't worry the Belgians have stopped fixing roads a long time ago

Hahaha whenever i exit the Netherlands and end up on the Belgian side, i know whats up, most of their roads look like something that was done 45 years ago, not to mention the holes everywhere

 

[anonymous_abc]

Jesus, #BoycottGermany is trending in Germany

Almost all tweets are about how silly that is though.

 

[oti]

Almost all tweets are about how silly that is though.

Rightfully so.

 

[Deleted member 231381]

I feel like economists enjoy confusing everyone with all of their jargon.

Austerity isn't an economist's term, it's a political one. Economists call it contractionary fiscal policy, which admittedly isn't much of an improvement.

 

[anonymous_abc]

Rightfully so.

Definitely, are you on Twitter?

 

[oti]

I feel like economists enjoy confusing everyone with all of their jargon.

Let me talk to you about opportunity costs and external effects.

 

[ElTorro]

This is complete insanity. I've never seen people on both sides of the political divide so united here on gaf as to the absurdity of this deal.

I really wonder if the only reason the Greek government is accepting this deal is because they are simply not prepared for a Grexit, as opposed to really not wanting a Grexit as the lesser of two evils.

 

[Deleted member 231381]

I really wonder if the only reason the Greek government is accepting this deal is because they are simply not prepared for a Grexit, as opposed to really not wanting a Grexit as the lesser of two evils.

I don't think so. I mean, I may be wrong, but I feel like other European countries would probably give support to a controlled exit - it's probably cheaper than a bailout programme which probably won't be paid back in the long run.

EDIT: Having said that I didn't think Germany would impose such ludicrous terms in the first place, so who knows?

 

[PdotMichael]

I really wonder if the only reason the Greek government is accepting this deal is because they are simply not prepared for a Grexit, as opposed to really not wanting a Grexit as the lesser of two evils.

Well, Schäuble was the first one who openly talked about a Grexit, which would make it impossible for Tsipras to sell it to the own party. Now he got a deal which is closer to the own proposal but couldn't be more off.

 

[KingSnake]

The eurozone should take over Greek banks says Reuters Breaking views columnist Hugo Dixon. He says that the European Stability Mechanism could directly pump funds into the banks and then sell stakes in those banks at some stage in the future. He concedes though that this may be difficult politically - as a foreign takeover of Greek banks is unlikely to be popular.

Yeah, I talked about this myself earlier in the thread. I don't think that would be so unpopular if it guarantees (even partially) people's money. It's not like the banks are owned "by the people" now.

 

[ElTorro]

I just read the document [1], and many parts are impossible to understand for a layperson. On thing, for instance, that is hard to extract from the document is their budgetary surplus goals. I am aware that the document is just a list of prior actions and not an actual ESM deal. But the only mention of that central austerity benchmark is this:

That only seems to be concerned with an administrative framework, not with actual numbers. The same is true for most of the rest of the document.

So what are the most controversial parts of the document? IMF involvement and privatization goals with oversight of the Institutions?

[1] https://s3.amazonaws.com/s3.documen...xt-of-the-euro-summit-statement-on-greece.pdf

 

[Chariot]

This is complete insanity. I've never seen people on both sides of the political divide so united here on gaf as to the absurdity of this deal.

Well, it's a situation where every outcome is shitty and they somehow took one that is even shittier than the others. Like falling out of a plane without parshute. Yes, there isn't much to do anyways, but that doesn't make breaking your arm a good idea.

 

[Prime crotch]

Greece only did 1/3 of the job, which is why the austerity programme failed, and they have been called out for it several times in the past few years

bullshit, the austerity reforms have been implemented as intended, the notion that austerity doesn't work because of culture reasons has been pegged everytime it happens. Every single time neoliberal policies doesn't work, it's because of cultural aspects or that they weren't done right, that the neoliberal principle is obviously not wrong, it can't be wrong!

 

[mnz]

I can't believe Europe pushed it this far. I actually do feel pretty bad for the Greeks and I really hope their situation improves.

If you take out debt and interest repayments, Greece already had a budget surplus this year. We should have allowed them to pay back their debts at a later date, when their economy would have grown further.

That happened already. Not possible for every loan, though. Especially with the IMF.

I just read the document [1], and many parts are impossible to understand for a layperson. On thing, for instance, that is hard to extract from the document is their budgetary surplus goals. I am aware that the document is just a list of prior actions and not an actual ESM deal. But the only mention of that central austerity benchmark is this:

That only seems to be concerned with an administrative framework, not with actual numbers. The same is true for most of the rest of the document.

So what are the most controversial parts of the document? IMF involvement and privatization goals with oversight of the Institutions?

[1] https://s3.amazonaws.com/s3.documen...xt-of-the-euro-summit-statement-on-greece.pdf

I think they still have to decide on specific numbers. https://twitter.com/Hugodixon/status/620656701251973120
And yes to the bolded part. Atleast for Tsipras, those were the important points.

 

[ElTorro]

I think they still have to decide on any numbers. https://twitter.com/Hugodixon/status/620656701251973120

Yeah, that's my point. Isn't it still an open question whether the final deal will impose harsh austerity? After all, they could end up with a goal of a, let's say, 0,x% budget surplus, which in combination with 35 billion of EU subventions doesn't sound too bad.

Just trying to understand where that harsh austerity is formulated. They also mention VAT and pensions, but the text there is absolutely vague.

 

[mnz]

There's a lot of implied austerity in the details, like "introducing quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets" and we know what the Troika goals were in the past and how Varoufakis desperately wanted to lower the primary surplus target to about 1.5% from 3.5% or something.
But I think you're right, it's not set in stone yet.

 

[Theonik]

Yeah, that's my point. Isn't it still an open question whether the final deal will impose harsh austerity? After all, they could end up with a goal of a, let's say, 0,x% budget surplus, which in combination with 35 billion of EU subventions doesn't sound too bad.

Just trying to understand where that harsh austerity is formulated. They also mention VAT and pensions, but the text there is absolutely vague.

They have to implement the reforms they had proposed that involved billions for cuts by the 20th if they hope to even get a shot at getting the ESM deal. THEN additional cuts will be decided and new surplus targets. But the way it sounds, surplus targets will be directly controlled at the discretion of the institutions.