What is going on with Greece and the Eurozone?
It sure seems like a major crisis but I have heard little in the way of news analysis. All people here seem to be talking about are gay rights and the confederate flag.
I have seen articles by Paul Krugman and Joseph Stiglitz suggesting that Greece has been treated unfairly. They say that the Greeks have taken all the austerity measures that were asked of them, but their economy has gotten worse.
Krugman said that what countries usually do when they have a debt problem is to devalue their currency. This has the effect of reducing imports and increasing exports, the very thing needed to create a favorable balance of trade, allowing the country to pay off its debts. Being stuck with the Euro, the Greeks do not have that option. Both Krugman and Stiglitz say that either way that the Greeks vote next week, it is going to be hard on them, but they both hinted that it might be best in the long run for them to quit the Eurozone.
Any thoughts on this? Have you seen any analyses? I would think that at least among European jellies, there has been more discussion about this, though I suspect that it is likely to be mostly anti-Greece.
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22 Answers
5 things you need to know about Greece’s financial meltdown is an article that has some of the basics.
Einstein defined insanity as repeatedly doing the same thing and expecting a different result.
This is not the first go-round for Greece and bailouts.
If Greece gets another bailout but doesn’t institute any reforms, they will be facing the same situation once again in 4 to 6 months because nothing will have changed. Yes, one problem is that they cannot devalue their currency, but the extremely generous entitlement programs are a bigger problem. The article points how quitting the Eurozone may have disastrous consequences.
The crisis has been discussed in the serious press for months. Harsh austerity measures have been imposed on the Greeks in exchange for bailouts but they are not helping the economy recover. Unemployment is high and people are really suffering. I don’t have enough knowledge to determine if they should or shouldn’t stay in the Eurozone.
The short version is that Greece borrowed money to party, and now they can’t pay it back, so the people who loaned them the money are screwed and justifiably upset and nervous since they were counting on that repayment to pay their own debts.
There are as money long versions as their politicians and economists to tell them.
I usually don’t agree with Paul Krugman, but in this case I think he has it right.
Their biggest problem is that the greek government does not properly collect their taxes.
As of now, almost 90 billion $ remain uncollected.
They have a massive tax evasion problem, with some wealthy greeks being so brazen as to publicly declare that they will not pay a penny.
@josie agreeing with Paul Krugman! O frabjous day, calloo callay!!
@josie definitely no question of partying. The man in the street had nothing to do with all that and is now carrying the burden unfairly. Do not believe everything you read, the truth is so different.
@ZEPHYRA I agree. Every country has had economic downturns and the question is how best to solve the crisis. Which is not to say that reforms aren’t necessary. The people are really suffering and scared as we have been at times in the past (and now.)
I’ve been attempting to follow the situation for the past couple of years through BBC articles. The details are more complicated than my pea-brain can grasp. @2davidc8, the article linked was very helpful.
Here is what I can tell you after spending a week in Athens a year or two ago. The country is not tapping into their greatest resources of income and spending way too much on some that should take a back seat. Here are two examples:
Tourism is one of Greece’s top revenue resources. Who wouldn’t want to visit it? Lovely weather year round, chock-full of preserved artifacts and history, awesome food, and strategically located for anyone in Europe to visit for a quick holiday.
It is shockingly cheap for what is on offer. For 100€ (equivalent to $100) per night got us a room in a prime location that included a full breakfast buffet. The price of a comparable hotel in London would be ~300€. The cost of a ticket to see six of Athen’s most famous architectural sites, including the Acropolis costs 12€. The list goes on. If tourism is one of their main sources of income, then they need to raise the prices and/or charge a higher tourism tax.
One of their biggest expenses is their military. Based upon the country’s history, it is understandable why this was important in the past, but today? Do they really need to shovel so much money into defense?
It’s time for Greece to swallow their pride and get their act together.
It is true that Greece ran itself into the ground with a combination of corruption (important people in industry and government simply ignored the tax man with impunity for years) and a social welfare and pension system that failed under the above burden. But I love them. They do have balls.
When they were sent by the EU to the German government and, ultimately, Deutches Bank for a bailout a few years ago, the DB people demanded the Greek government institute strict austerity programs as a condition of the loan. This is both routine and good banking practice. But the Greeks countered with indignation. They pretty much told DB to γαμήσου; what about the one million innocent Greek citizens the German juggernaut had killed during WWII? What about that, huh? How about a little reparation for that, Mein Herren?
The DB people were aghast and, of course, refused to bend.
It was a nice try, but they a point. I love the Greeks.
@ragingloli Is correct. Basically Greece wants something for nothing. They have an expensive socialist welfare system, and no way to pay for it. The prior government tried austerity measures which didn’t go over well, and they were voted out of power. The current socialist government went against that, but as Rags said, they can’t collect more revenue because the system is corrupt. The IMF bailed them out, several times, and they have defaulted on the loan.
The Greek economy is in shambles. They’re a first world high income economy but they were so poorly run that it’s turning them into a financial pariah. Sad.
One thing is certain. The lenders will never get their money if the debtor is starved to death.
I recommend you watch the Clarke and Dawe video that @SquirrelEStuff posted for a quick overview of why there is a problem and will continue to be a problem. It is the most concise.
Global economic forces have made it impossible for Greece, and all other country, to operate as an independent, self sustaining nation. The entire intent of the IMF is to make all nations subservient by decimating their economy and making them dependent upon externally supplied monetary sources in order to function. That way they must do as they are told if they want to survive. It will be interesting to see the ramifications of this Greek insurrection.
@Pied_Pfeffer Turkey hovering over Greece and constantly provoking the country is the reason so much money goes to defence.
@ZEPHYRA Greece and Turkey relations have improved in the past several years. Turkey has been working on becoming a member of the EU for almost a decade. It would be foolish of either country to provoke one another and risk their status.
Greece might join with Russia.
Ah, yes, @ragingloli, the uncollected taxes are an even bigger problem! As things currently stand, I doubt that the Greeks have the will to collect them. The rich, who owe most of the taxes, are too powerful.
rich people not paying taxes? greece’s economy should be booming! /s
@zaku
2.5 Billion on something that is literally printed out of thin air.
If you or I print money, its called counterfeit. When banks do it, its called economics… What a racket.
“The few who understand the system, will either be so interested from it’s profits or so dependant on it’s favors, that there will be no opposition from that class.” — Rothschild Brothers of London, 1863
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