I guess as a lot of people I been reading about the troubles of Greece over the last weeks. Have to say I did find it a bit funny though when I read that their prime minister George Papandreou claims that their budget plans are credible and good. Sorry, when you are up to the neck in debt and the cost of that debt is about to choke your nation then you need to present a budget plan that brings your budget into the black, you can’t promote a budget that only reduce your deficit and thus increase in debts as a solution. You are still drowning, just a little bit slower.
I sincerely hope the EU doesn’t try to bail out Greece as it would be a long term catastrophe, European governments need to learn that they need to balance their budgets instead of pushing their problems into the future and leaving a even heavier burden on the future generations to try to solve. If Greece gets bailed out then the only result will be that Spain, Portugal, Italy and eventually France will come knocking too, not to mention some of the former east block countries.
Calling Greece a «sinking ship» seems rather sensationalist. Their public debt is 90 – 100 % of their GDP. Most other countries in the union hover between 30 and 50 %, so Greece definitely sits on one of the larger public debts in Europe. Hardly something to strive after, but that level is not unheard of. Italy, Belgium, Israel and Singapore have similar debts; Japans is almost twice as large.
That said, I agree that there is a strong need for a political shift to stop public debt. It basically amounts to borrowing money from our grandchildren in order to enable us to live above our means, and it is hardly a responsible thing to do.
Greece gouvernment != Greece people
As always the Elite messed things up and now the people shall suffer. Not particulary what I call European solidarity, but the EU is a Economic Area in the first place and from a philosophical point of view, the EU therefore is a sinking ship at all. Houston, we have a problem!
Liberté, égalité, fraternité!
@Torben: but maybe your comment shows the essence of the greek problem. When a crisis hits like now they seem to be more focused on pointing at each other and placing blame rather than solving the problem. And since I assume its the ‘elite’ that rules Greece I don’t see how you expect the EU to really solve anything unless they are to depose of the democratically elected government of Greece. I do agree that it showcases a weakness in the whole Euro structure, a pan-european currency has been established, but there is no real pan-european institutions with the power of addressing these kind of problems.
I am a Greek and I have to say that I agree with most that the OP has said. But in now there is no easy solution, the only solution is more tax on the mddle/lower-wage people. However, these are the majority and they are already at the brink of exlposion. (anyone remember the riots 2 years ago?). Also if Greece goes down so does the EU. We are at the edge of the EU, we are it’s borders. Just imagine the thrid-world immigrants that will flow through us to main europe… And yes our governments need to learn a very tough lesson.(I think the ones that will learn it will be us the people.)
@uraeus “When a crisis hits like now they seem to be more focused on pointing at each other and placing blame rather than solving the problem. ”
That’s very true…. :(
Please, check that Spain’s debt in terms of GDP is under the european mean, and well under Germany, France or Portugal. Italy or Greece are in a totally different league, with a debt around twice as big as Spain’s and 1,5 times that of those other countries.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html
Please, revise your facts before writing down those appreciations or this is getting less and less serious.
@uraeus
So if there are serious bugs in our framework we should not mess around with workarounds in applications, right?
BTW, from what I’ve heard Ireland is the next country to fall. Ironically enough Ireland put a lot of pressure on other european countries with their low taxes (some call it dumping) while receiving money from Brussels on the other hand. So how would punishing the Greek people now help us to avoid such excesses and national bankruptcy in the future. And what is next, punishing the Irish?
You really should explain how you would balance the budget, i.e. which services you would cut, which jobs you would cut. Then go and explain to those people why their jobs aren’t important. Then get on your high horse about balancing budgets.
@b: Personally I don’t care about how they balance their budgets as much as that they are balanced. I don’t know the details of the Greek economy well enough to tell them how to balance it, all I can say that having permanent deficit is not workable and only leads to bigger troubles down the line. The challenges here in Europe remind me of an interview I saw with the former US Governor Jesse Ventura (who is also famous as a wrestler in the eighties funnily enough) some time ago where the interviewer tried to paint the Democrats as wasteful spenders and the republicans as deficit cutters. To which Ventura responded that the difference between democrats and republicans was not about who spent less, they both seemed to spend a lot, but while the Republicans just spent, the democrats at least tended to try and tax to cover the expenses.
That is the same problem we have in Greece and most of the rest of Europe. That governments tries to have it both ways, by spending a lot and not making sure they have the income to cover the cost. A great strategy for buying votes in the short term as they don’t have to do the hardest thing to do for populist politicians, which is prioritize between level of public services and level of taxation, but eventually the shit hits the fan as we see in Greece now.
I agree with the comments about Spain, read Paul Krugmans article in The New York Times, http://krugman.blogs.nytimes.com/2010/02/09/anatomy-of-a-euromess/
@b,
come one, public sector in Greece is overblown.
@anonymous coward
“Also if Greece goes down so does the EU. ”
I doubt so, only currency will fail. As you said Greece is on the boarders and euro zone economy won’t slow down.
It is sad but i think that Greece bankruptcy is the best long term approach if Grece people still will be blocking reforms and organizing their strikes
I’m appalled to see how many people can buy so easily this propaganda that originally comes from US banks and hedge funds. The giant fuss about Greek debt is the result of a speculative operation, in which these banks want to make (I should say “steal”) more money on governments. First Greece, then other ones if this works.
This is nothing but a giant fraud. First, banks lost money in rotten investments (that they imagined themselves). They asked money from states, and states saved them from death they deserved by investing, in their turn, massive amounts of public funds. Add to that the money they had to invest in industry because banks almost killed it too, and as a result, public debt grows exponentially. Now banks are using the very money that was lent to them by states to speculate on the public debt this created! So at the same moment private banks benefit from incredibly low base interest rates from central banks, they make interest rates for public bonds raise and obtain the difference directly in their pockets.
Note that their attacks against Greece stopped as soon as Jean-Claude Trichet implied that the ECB was ready to do something. Had the ECB acted (whether on the CDS market or by directly buying Greek bonds), they would have suffered massive losses. Suddenly Greece looks better, while nothing has really changed in the state of its public finance.
Greece was indeed an easy target, and this country seriously needs to address many issues: corruption, lies in public statistics, massive waste of public money. But you won’t stop the country from sinking simply by cutting in public expenses, the only thing it would achieve is to make the whole economy suffocate, accelerating the sinking.
Another meme reflected in this discussion: Greece’s public sector is overblown.
Figures don’t say that. That’s just preconceived ideas working.
What most fiscal discipline plans show for Greece is massive and endemic tax evasion and misreporting of financial data: http://209.85.229.132/search?q=cache:bg29rI_ybzQJ:www.finanzaonline.com/forum/attachment.php%3Fattachmentid%3D1189879%26d%3D1264435764+greece+fiscal+evasion&cd=2&hl=es&ct=clnk&gl=es&client=firefox-a
http://muse.jhu.edu/login?uri=/journals/journal_of_modern_greek_studies/v017/17.1agapitos.html
Probably, Greece will better fight those problems spending some more trying to avoid fiscal evasion (estimated to be greater than 45% in VAT’s case) than reducing the public sector budget (which is already low).
For instance public health spending is around 20% of what the US and around 35% of what Germany or France spend in the same concept ( http://www.nationmaster.com/graph/hea_spe_per_per-health-spending-per-person ), while their respective GDP per capita are similar.
@pachi: I seen other reports to about fiscal evasion being a problem too. Although I can’t help but feel a little like I do when I hear US republicans fight against Obamas health care overhaul in the US with the argument that it should be scrapped and one should instead focus on ‘cross party common sense’ solutions. If it was that easy wide support for a workable solution I am pretty sure it would have happened a long time ago. The same might be true for fixing the fiscal evasion issues in Greece, I would assume no Greek political party official policy is to support tax evasion and thus it might not be a trivial issue to fix, or be something that easy to measure the return off. I mean getting that 45% of unpaid VAT collected sounds reasonable, but I assume the reason it hasn’t been done already means that it isn’t easy to do and thus not something one should base ones budget sanity on being able to do.
Totally agree with Np237.
Christian: please realize that the sensationalistic news about greece come from a very clear political agenda. Also please understand that the hedge funds, by speculating on the greek crisis, are severely aggravating it.
The Balkan wars has showed Europe that we can if we the need is large enough.
It is possible for Europe to stabilise Greece if needed. We have the money, military, and political measures to do so. It would be sad if Greek people choose to fight them self instead of solving the problems, but a theoretic chaos can and will be handled.
It seems to be wasteful for Greece to spend around 4 percentage of the GDP on the military. This could be one of several places where they can do major cuts.
I believe few people see any threats that justify that amount. Specially with the current economics problems. Greece has been a part of NATO since 1952.
Europe might have a need to look into the long term military stability and safety. But Greece has clearly been overspending.
I would also like to underscore what Np237 wrote, although I would say that this kind of propaganda comes not only from US banks. Banks and the private financial sector based in the EU are clearly at fault, too.
Observe how the people who are now screaming for reduced government spending in Greece are often (of course not always) exactly the same people who screamed for billions of Euros to be thrown towards irresponsibly acting banks and hedge funds. This is part of an unfortunately strong movement that tries to cripple governments with the intent of allowing the private sector to take over after the dust settles. Make no mistake: for those managers at the very top, this would be a very, very lucrative business indeed (just look at the private security sector; and companies like Bertelsmann are already plotting to take over core government functions in the shape of subsidiary Arvato). However, this kind of privatization would be devastating for all kinds of communities as a whole, and overall a pretty bad move.
It seems that the problem of Greece is not so much irresponsible spending, by the way. Rather, the problem is an unproportionate and irresponsible reduction of taxes – this, at least, is the opinion of the chief economist of Financial Times Deutschland, which can hardly be considered a socialist / leftist newspaper: http://www.ftd.de/wirtschaftswunder/index.php?op=ViewArticle&articleId=2273&blogId=10 (German only, I’m afraid)
Makes you think, huh…
As a general comment to the comments here I would like to say I never accepted the general idea that one can blame the government in a democratic nation while the people (also known as the voters) are blameless. We all get the government we deserve and if our governments are bad its because we vote for bad governments.
I also don’t buy the corporate conspiracy ploy. If hedge funds speculate against the Greek economy its because the Greek government has created an economy that its natural to speculate against. It wasn’t the hedge fund managers who made budget after budget after budget with huge deficits. They might not make things better, but trying to pretend that hedge fund managers are to blame for the current problems is just silly. It reminds me a little on how people who build up huge credit card debt tries to blame the credit card company when they get into financial trouble. Sorry, while a credit cards are expensive credit it wasn’t the credit card company that went shopping.
The rule here are very simple in my opinion. If you create a budget which has a deficit you either cut costs or increase income to remove it. The problem is that both reducing government services and increasing taxes make governments unpopular and thus they don’t like doing either, but I am having trouble feeling sorry for them having to do their job.
@uraeus You seem to be one sided here beyond the point of logic and I will explain myself.
Greece indeed has a huge deficit created in the 80s and early 90s from governments that wanted to please the people coming out of a dictatorship. In the middle 00s the government again decided to do nothing and just speak big words and ease the capital instead of taxing them. This situation of inactivity also pleased those that could hide their incomes helped by the flawed system. So we come to today where the bad statistics give step to speculators to raise and drop the Greek market by spreading more fud thus making big amounts of money from the lending costs that Greece has to pay. These speculators are well known American and UK funds that as every big company try to make more money stepping on whatever body they can. It seems that you ignore this part of the problem for some reason.
What you are saying is that people who at some point borrowed more money that they can pay back are ok to be pushed even more from the lenders without any control.
This is a reason the EU was created so that these things don’t happen. Of course I can understand your position since you are raised in a country part of EU but so far away from it in reality.
I’d like to add something about the tax evasion. The general motive of people evading tax is this thought. “I don’t feel that the State has done anything for me, in the sense that it has not improved anything around me. everywhere there is corruption. Each year we have quite a few major political scandals that show that the political elite takes the money of the State and gives nothing in return. I won’t give them my money, they don’t invest back in the community”. I seriously don’t condone this kind of rationale. And for the most part it comes from people that are ridiculously loyal to a certain party despite it’s obvious political mishandlings. Just a pointer the current party that has the majority(and appointed the goverment) represents only ~35% of the Greeks(there was a large amount of absense in the recent elections).
@Martin I am afraid that the government spending on military is justified :(. I don’t like it, but it is necessary. And for that Turkey is to be blamed. They very OFTEN violate the greek national airspace above aegean(with their fighters). Also they want “grey zones” in the aegean. And of course they have said that if Greece extends it’s national coastline to 12 nautical miles(currently 6) that would be “causus belli”…
I can’t really agree that the voters are the problem in modern democratic (actually, democratic-republic) governments. For one, we don’t really get a choice on whom to vote for. We _can_ do write-ins, but those never work. At this point, if you have 5 popular political parties, you are almost guaranteed to get your leaders entirely from those 5. If an independent has a chance at all it’s only because he’s a rich son of a bitch and probably no different than the rich son of a bitch candidates from the major parties.
Eventually you end up with a system like the US where the parties are narrowed down to two almost identical parties, where both sides make huge claims about differences in policy despite the fact that their stances on almost every major issue are almost exactly the same, just worded slightly differently.
This is in no small part because of the mass media. A voter is given an endless stream of information about candidates, but that information all goes through a bias filter based on the media source. A pro-Democratic media source will talk about how great Obama is and a pro-Republican media source will talk about how he’s the Antichrist… based on nothing other than which party he identifies himself with. A smart voter (which is very rare, as smart people are very rare) will gather information from multiple sources and try to avoid the most biased sources, but there’s still just too much information to sift through and too much crap floating around to figure out fact from fiction without turning candidate-selection into a full-time job. Which is exactly what the political journalists do.
A people as a whole has little chance of challenging a modern government without another modern government helping them out. Something like the American Civil War or French Revolution could never ever happen again; no civilian army could possibly stand up against the government’s military given the disparity in modern arms technology.
You can get peaceful protests and marches, but they truly require a level of outrage and devotion that most people just don’t have about how a government spends its money. Million man marches don’t happen to protest stupidity, they happen to protest injustice and inhumanity.
And even if the people did march and get all the crappy senators/ministers/monarchs/whatever out of their government… whom are they to be replaced with? Inexperienced “everyday folk” who think they know how to run a government? More politicians?
The simple fact is that democracy is a failure, but it’s the best failure we have. Democracy exists to weed out the truly terrible leaders, to keep dictators and such out of office, but that same effect keeps the truly great men and women out of office as well. The system averages out a huge pool of people and the result you get is just average; and average is pretty damn stupid.
As a programmer, look at any design-by-committee protocol or software. It’s a total mess, isn’t it? The greatest protocols and software were designed by skilled individuals or teams of skilled individuals (which is a bit different than a committee, which has no individuals in the decision process). Unfortunately, for every great protocol or software designed by such a person, there are 1,000 crappy protocols and applications designed by people who had no clue what they were doing.
That’s how governments work. You get the best government with a skilled, benevolent, competent dictator… but you’re going to get a thousand insane evil tyrants for every one of those good dictators that come to power. The solution is a democracy, which is almost by definition the least intelligent decision-making process known to man. A democratic-republic is just the same thing with a bunch of additional comprises (e.g. voting on people instead of voting on issues) made to work around the fact that you just can’t practically have every single decision ratified by a population of 250 million.
Maybe they are wrong but many believe that not bailing out greece will make things a lot worse in spain and ireland, and if 3 EU countries collapse it will not be good for other EU economies
The problem with balancing budgets *now* is that: 1) the global economic cysis has decreased tax revenues 10-20% across the board, 2) double the unemployment means double the unemployment support that is needed right now, 3) without government support a much deeper recession is a very frightening possibility.
It is possible to cut spending to compensate for the Nr.1 and cut social security rates to compensate for Nr.2, but that means that Nr.3 will hit that much harder in the future unless the EU helps out a lot.
It is possible to cut internal spending by 20% even with the currency pegged to Euro (or being Euro) as proven by Latvia over the last year. The problem with that is the public unrest – Latvia has been blessed with minimal unrest, but Greece … it might get ugly.
EU will help its member countries recover. EU will put down strict rules, but it will help. The idea will be to both strengthen the Euro and to make sure that EU countries recover from the crisis faster than the ones that are not in the EU thus getting an edge on the global competition market and thus having a good chance of repaying the loan with interest.
What is more important? NATO and Europe can fix issues with the neighbors.
It should have been done years ago.
to Aigars:
There are means of channeling unrest… While I’m obviously russian and, therefore biased, I’m inclined to point out that declining standards of living inevitably lead to nationalism — “blame thy weird-looking neighbour”.
And indeed, the government-sponsored nationalism targetted against the more-than-30% russian minority is as present as ever.
to Aigars:
Sorry, I omitted a crucial bit of context: wrt. unrest containment and russian minority I was speaking about Latvia, not Greece!
uraeus: “Personally I don’t care about how they balance their budgets as much as that they are balanced. I don’t know the details of the Greek economy well enough to tell them how to balance it, all I can say that having permanent deficit is not workable and only leads to bigger troubles down the line.”
In fact this disqualifies your position. To take one state out of the european union and to simply tell them to “balance” their economy relies on mechanistic view on economy. In fact one huge problem which lead to the real crisis is a disproportion between wages and capital. Germany has dropped wages ~10 % during the last ten years and forces a very export friendly policy against its eurpoean neighbours. While export was dependant on US consumation over the last three decades and therefore the export for the german economy was just the other side of the deficit of the US, current german policy of further social cuts and savings forces weaker european economies to give up their democratic rights of social welfare policies.
Therefore while current capitalism is mostly focused on unproductive financial markets and actually barely invests in strong future technologies unless they give competitive profits to all the speculative capital, it gains much of this profit from simply raping the working class of their social standards. In Germany alone 1 trillion euro have been moved ifrom the poorest to the richtest ten percent in the last ten years. Economically this destroys consumation and weakens productive growth, while enlarging the casino even further. (~600 trillion dollar in financial capital, ~60 trillion dollar gross world income) It looks like capitalism really is in contradiction to its own only category: growth. This will llead to more and more heavy crisises in the near future. (Most of the toxic papers are still in the bank bilances and they can crash immediatly when the next bubble/state fails.
Greece is only a very small part of a the new casino capitalism and in fact although Greece might not be your favourite society, the current situation is not the fault of the Greece population, still they must pay for the high profits on the market and the radical social policy in Germany, as long as the system may not fail (be replaced).
@Uraeus
Who talked about a conspiracy? This is not a conspiracy, this is not about taking power, this is a fraud. And if you don’t understand how some companies can set up giant frauds to increase profit, then you just need to inform yourself better.
So yeah, sure, Greek people did stupid things. They elected right-wing governments who cut off taxes without cutting expenses, and left-wing ones who did not hunt corruption as they should have.
Still, is Greece’s economy in a worse state than, say, Lebanon? Or Syria? Or Pakistan? Because you know, interest rates for Greek state bonds were raised to more than those of these countries. This, alone, is enough proof that this is the result of a speculative operation.
Any reason to have my post with published data about public spending and taxes still in moderation? I think it contributes to a more rational discussion.
When Socrates, Plato, Aristoteles and other Greek hackers was writing patches for “Life`s Kernel”, some European people was still at the trees speaking with monkeys. So give some respect to the country which teach you how to think, and show you the way to became a Gnome developer…
@r-tz
Judging a people based on what some of their ancestors did (either good or bad) is quite misguided. The invention of democracy by ancient Greeks 2500 years ago implies nothing about the quality of modern Greece. Similarly, the Nazi movement of 1930-40 does not imply anything about the state of Germany now. Why should you respect or despise one person because of what their great* grandfather did?
Furthermore, although the great philosophers you mentioned, did indeed contribute greatly to humanity, their ideas were not without fault. Unfortunately, when teaching history, we tend to idealize such personalities instead of presenting them as normal human beings.
I say leave the politics to politicians, since they have nothing more to do other than quarrel (and then go to a local pub and share drinks, without the media around). Give me more code to enjoy. :)
Debt rose from 1981 to ~ 2000 by 100% in Greece, most of it during the rule of the Socialist Party (PASOK). After the Dictatorship, the Socialist party, with the aid of the people that voted for it, who in general got rewarded for their support with the privileged position of the public sector employee, formed a country that is closer to communist regimes than probably most other countries in Europe (huge government sector, with most of the economy depending on it rather than the private sector, 800.000 public sector employees with probably the worst efficiency in developed countries (I have personally witnessed public sector employees spend their day shopping while supposedly at work!!!), with higher wages than the private sector for equivalent positions and lower performance in general, huge tax invasion caused by the general amoralism of the declining society, that was encouraged by Andreas Papandreou and other mediocre politicians that ruled at the time, and by the fact that the state is considered a burden on people’s lives due to its high inefficiency.
The loss of contact with reality of the public here is such that most consider the financial problems the result of foreign funds that attempt to speculate on the state of the economy. The fact that the ruling party is mainly responsible for the current state of affairs is never mentioned by the government-controlled press that comprises most of the media (another indication of the sad state of the greek society is that there exist more than 10 daily newspapers, that are heavily supported by the state through the allocation of the advertisement budget of a large government-controlled company, that always prospers regardless of the economical environment. That company is the national lottery OPAP, with profits that approach those of UK’s equivalent!)
This brings me to the last point that lucidly illustrates the deterioration of the society here and is probably the cause of most of the above, including the demonstration of trust to politicians that were basically promising anything at the expense of the future generations: the education system produces citizens with minimum critical skills, with fear (not aversion, fear!) of books, with the sole purpose of providing the typical means of access to work for the… you guessed it, the public sector!
No wonder that most of the educated here see the dead-end this situation leads to and migrate abroad, where education is at least acceptable (you know nothing about “rebellious” students unless you see them holding university professors hostage for a day, because they refused to break the law!) and people don’t usually get rewarded just because they happen to have the right acquaintance.
George Billios’s line about taxation of the high class is exactly the one propagated by the government-controlled media. Of course, the fact that the Socialist party was almost exclusively ruling at the time, or the fact that there isn’t much left in terms of large investments in Greece, apart from the prospering sectors of tourism and sea shipping, doesn’t seem to make a difference to him. Already, most of the shipowners have moved abroad, because of the cumbersome (maybe even hostile) taxing system, what more do people want?
Also, please note how most of the Greeks above typically try to shift responsibility to the lender! It is a common meme accepted by most irresponsible politicians and the not-so-well educated here that the Greek people are never to blame for their mistakes…