EPTEuropean Politico-economics QA Mega-thread - Page 133
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accela
Greece314 Posts
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bookwyrm
United States722 Posts
also I was responding to the idea that syriza was elected with a mandate to 'end austerity but remain in the eurozone'. Sorry if that was not clear | ||
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Banaora
Germany234 Posts
On June 29 2015 13:53 andrewlt wrote: The problem is that austerity is not sound economic policy. It is wishful thinking at this point that Greece will see any kind of growth if they accept the demands of the creditors. Meanwhile, Greece has a current account surplus. The danger of a default is that it makes borrowing harder in the future. Again, Greece has a current account surplus. The biggest danger to the Eurozone is not that Greece falls off the cliff. It's what happens if they default, leave the Euro, bring back a vastly devalued drachma, and start growing again after a few years of painful correction. Sure beats a long austerity fueled depression with no end in sight. The next country that falls into massive debt can see that there are better alternatives to austerity. It's not only austerity. There is: - The European Funds for Cohesion Policy (http://www.espa.gr/en/Pages/staticFinanced.aspx) - A 315 billion euro investment plan to jumpstart the economy in Europe http://www.theasset.nl/wp-content/uploads/2015/02/20150115_SP_Juncker-Plan-Analysis.pdf (not finalised) - A 35 billion euro investment program for the years 2015 to 2020 only for Greece. http://www.spiegel.de/international/europe/eu-commission-president-juncker-on-greece-and-tsipras-a-1039738.html (under the condition that Greece accepts the latest proposal) So why doesn't the Eurozone want a debt cut for Greece right now? Because they consider it very likely that most ongoing reforms in Greece will be stopped immediately the moment Greece gets access to private funding again. It is feared that in the ongoing years Greece will accumulate debt like before and within ten years or so we are at the same point we are now. Another reason is that a debt cut would mean a burden to tax payers in every other country of the Eurozone. http://www.ieseg.fr/wp-content/uploads/2015-EQM-01_Dor.pdf (thx to Maenander for the link) Like I posted previously on page 123 of this thread there are reforms that make sense. You can add the pension system and various other things to the list there. | ||
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warding
Portugal2394 Posts
Also, the Greek economy was expected to grow this year, so it's not really wishful thinking. | ||
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ImFromPortugal
Portugal1368 Posts
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Silvanel
Poland4742 Posts
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Oshuy
Netherlands529 Posts
On June 29 2015 18:03 Silvanel wrote: Is it me or is Euro climbing fast right now?? Right now as in this minute, day, week, month ? 1.11$ is higher than the march all time low of 1.05$, but hasn't changed much this month (going down from 1.12 to 1.11 over the last week). | ||
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Silvanel
Poland4742 Posts
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RvB
Netherlands6263 Posts
On June 29 2015 06:23 accela wrote: No it is very clear, IMF's official forecasts always assumed high rates of growth and primary surpluses, it's more likely Santorini's volcano to erupt and colorful unicorns jump out of it. Is Greece's debt really so unsustainable? Yes, it is. You were the one using the IMF to support your point and then when I give counter evidence the IMF is untrustworthy again. Seriously make up your mind. | ||
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WhiteDog
France8650 Posts
People, for some obscure reason, seems to refuse to see reality as it is : we have no inflation, a conservative monetary policy (with a central bank that rose the interests rates in the midst of the crisis because it feared an inflation higher than 2 % !), low growth even in today's standard and a stricking unemployment rate in the entire euro zone. In this context Greece cannot pay its debt, that's as simple as it is. It's a bit tiring to hear that "austerity is not sound economic policy", as if there are tons of alternative economic policies. So what do you do when you reach a deficit of 10%, can't borrow anymore and your economy is overvalued and corrects downward significantly? You keep government spending up? Is the rest of Europe supposed to keep subsidising an unsustainable economy policy? I never understood what the alternative was. Also, the Greek economy was expected to grow this year, so it's not really wishful thinking. You default. But 10 % default during a crisis is not a problem necessarily, the problem is when you have deficit during growth time, like say France, Germany, and every country in the damn euro zone. | ||
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maartendq
Belgium3115 Posts
On June 29 2015 19:24 WhiteDog wrote: What crack me up is that most people that are so adamant that Greece "pay its debt" are arguing that it's nothing more than "reality" that force them to pay up. Meanwhile this kind of sovereign default happened a thousand time (https://en.wikipedia.org/wiki/Sovereign_default), and history also proved that there are solutions to pay your debt even if it's high (allo second world war more european debt level were way higher than today ?) BUT austerity NEVER achieved anything in this regard (the few positive exemple of austerity policies happens in an economic environment that benefitted and counter balanced the negative effect of the austerity, like in Canada for exemple). People, for some obscure reason, seems to refuse to see reality as it is : we have no inflation, a conservative monetary policy (with a central bank that rose the interests rates in the midst of the crisis because it feared an inflation higher than 2 % !), low growth even in today's standard and a stricking unemployment rate in the entire euro zone. In this context Greece cannot pay its debt, that's as simple as it is. You default. But 10 % default during a crisis is not a problem necessarily, the problem is when you have deficit during growth time, like say France, Germany, and every country in the damn euro zone. Call me a finance-dummy (or even idiot), but didn't austerity work rather well for Germany? Germany's wages remained pretty stagnant for a decade or more while Greece's increased, despite the fact that the latter's economic output and productivity do not compare to those of the former? If I recall correctly, the unions actually struck a deal with the employer organisations to keep wages low for a while in return for not laying-off people. | ||
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warding
Portugal2394 Posts
On June 29 2015 19:24 WhiteDog wrote: People, for some obscure reason, seems to refuse to see reality as it is : we have no inflation, a conservative monetary policy (with a central bank that rose the interests rates in the midst of the crisis because it feared an inflation higher than 2 % !), low growth even in today's standard and a stricking unemployment rate in the entire euro zone. In this context Greece cannot pay its debt, that's as simple as it is. Ireland grew at 4.8% in 2014 and is expected to grow at 3.5% this year. Meanwhile, if some economic stability is reached, there's no reason why Greece can't rebound back. The argument against austerity is that it pushes a country below its potential GDP needlessly. If that argument holds, then the argument that the current Greek GDP is under its potential is necessarily also true, meaning that high growth to bring it back to its potential is to be expected, given relatively stable economic circumstances. | ||
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WhiteDog
France8650 Posts
On June 29 2015 19:43 maartendq wrote: Call me a finance-dummy (or even idiot), but didn't austerity work rather well for Germany? Germany's wages remained pretty stagnant for a decade or more while Greece's increased, despite the fact that the latter's economic output and productivity do not compare to those of the former? If I recall correctly, the unions actually struck a deal with the employer organisations to keep wages low for a while in return for not laying-off people. Germany can be another exemple, but it's the same as Canada : at the time, France was growing a lot (like the US for Canada) which counter balanced the effect of the austerity (and France had a higher inflation rate, which greatly enhanced the positive effects of austerity on competitivity, because what matter is the difference in inflation - wage and such - and not simply to lower wage). Austerity, much like debt, work when you have the condition, and they're not there for Greece. And why not talking about 1929's austerity in Germany ? On June 29 2015 19:49 warding wrote: Ireland grew at 4.8% in 2014 and is expected to grow at 3.5% this year. Meanwhile, if some economic stability is reached, there's no reason why Greece can't rebound back. The argument against austerity is that it pushes a country below its potential GDP needlessly. If that argument holds, then the argument that the current Greek GDP is under its potential is necessarily also true, meaning that high growth to bring it back to its potential is to be expected, given relatively stable economic circumstances. I don't know much about how Ireland got out of the crisis, but Ireland is not Greece. It has most of its exchange with economies that have their own currencies and who happens to be growing more than europe (the UK and the US). Ireland is also a tax heaven, with one of the most profitable corporation tax (at 12.5 %). Sure, fiscal dumping can help a country, what's new ? And is that relevant to Greece ? Don't forget, Greece is way less developped from an economical perspective than most other european country, and lost most of its biggest industry in the crisis (the boat industry most notably), while Ireland is highly productive in high tech field such as medication (and also have some natural ressources, like gaz). Also, you don't understand the argument against austerity at all. If it is below potential growth, the longer it remain under potential the longer it destroy wealth (not only monetary wealth, but also capital - like human capital, with many people with bad health, less educated due to cuts, and less experience due to unemployment) that in turn hinder long term potential growth. Just think about it further it's not that simple as saying : when it goes up, it will catch up what has been lost. | ||
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Taguchi
Greece1575 Posts
So, after a few years, Irish people are simply mildly worse off than they were in 2007. They 'only' lost about a decade. Hooray, austerity success, they didn't collapse! Josef Stiglitz commentary on Greek referendum, can't say much other than I fully endorse it. On June 29 2015 19:49 warding wrote: Ireland grew at 4.8% in 2014 and is expected to grow at 3.5% this year. Meanwhile, if some economic stability is reached, there's no reason why Greece can't rebound back. The argument against austerity is that it pushes a country below its potential GDP needlessly. If that argument holds, then the argument that the current Greek GDP is under its potential is necessarily also true, meaning that high growth to bring it back to its potential is to be expected, given relatively stable economic circumstances. Except 'relatively stable economic circumstances' isn't in the package deal offered by the creditors. Surely you realize this, right? We're talking more than 2% gdp austerity here. Fiscal multiplier suggests a 3% gdp drop as a result of this austerity. And then you have to hit ever increasing surplus targets - meaning there will be a need for more cuts than the initial package. Not to mention the money lasts until ~November, at which point you will have to negotiate yet another bailout. Stability? Hah! On June 29 2015 12:32 zlefin wrote: Taguchi -> your response did not answer the questions of nibbler that you quoted. You did raise some interesting questions of your own, but they do not in any way answer nibbler's ones. Your nitpicking on the similarities of the proposals (that are shown on a blog, not an official site and not finalized or agreed to by the negotiators themselves) feels wrong-ish. I'm sure there's a better word to describe the feeling I get from it, but I'm not sure what that word is Mistrust is the word. I have quoted you the finalized proposals, and even added the last changes offered up by Juncker, that hotel VAT would be 13% instead of 23%. If you're interested in the subject you can do your own research, the material is widely available. As to lord_nibbler's questions: Is it not obvious from what I've been writing why Syriza would push for 'No' in the referendum? Why they would break up negotiations (they say they were issued an ultimatum, guess why they would leave)? 'Ending austerity' is a leftist policy? This question beggars belief. Someone tell the Republicans (not the Tea Partiers mind you) that right wing means austerity - Reagan would be rolling in his grave. Right wing means pro business via tax cuts, smaller government, private sector, what on earth does austerity (balancing the books) have to do with any of that? How are tax hikes a right wing policy? The guy asks what the point I'm trying to make is regarding the fact that proposals are quite similar when he says: This delusion of Syriza voters, that apparently their new government is going to spark this worldwide revolution in how we do business with each other, is hilariously sad. This is supposed to be a grown up discussion, no? Should I start multiquoting and replying in each separate quote so I don't get this sort of reply? Come on. | ||
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WhiteDog
France8650 Posts
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accela
Greece314 Posts
On June 29 2015 19:14 RvB wrote: You were the one using the IMF to support your point and then when I give counter evidence the IMF is untrustworthy again. Seriously make up your mind. There is nothing there to make up my mind, what i'm saying is that the IMF projections and forecasts are just a PR tool just like any bank's quarter reports spiced up to make investors happy while hiding the skeletons deep inside the celar. + Show Spoiler + ![[image loading]](http://multiplier-effect.org/files/2013/08/Fig4-Real-GDP_Greek-SA-2013.png) ![[image loading]](http://multiplier-effect.org/files/2013/08/Fig6-Unemployment-Rate_Greek-SA-2013.png) Look at the colors! Art! + Show Spoiler + ![[image loading]](http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/07/IMF%20world%20growth%20July%202014.jpg) They do know very well that the greek debt is unsustainable, that was the only common ground between the IMF and the greek government during the negotiations (europeans know that too but taxpayers), not just now but even from the beginning of the crisis: IMF bent its rules to hobble Greece with unsustainable debt In a 90-minute documentary aired this week on the French-German public television station Arte, an executive director from the international lending agency said that in 2010, when the Greek bailout was initially arranged, the IMF violated its own lending rules, apparently for political reasons. Brazilian executive director Paulo Nogueira Batista said the agency’s rules were changed in a clandestine manner to allow the IMF to provide its share of bailout funds far beyond the normal limits allowed, and above all to violate the principle not to make any loans that have no chance of being repaid. | ||
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WhiteDog
France8650 Posts
On June 29 2015 21:34 accela wrote: There is nothing there to make up my mind, what i'm saying is that the IMF projections and forecasts are just a PR tool just like any bank's quarter reports spiced up to make investors happy while hiding the skeletons deep inside the celar. + Show Spoiler + Look at the colors! Art! + Show Spoiler + They do know very well that the greek debt is unsustainable, that was the only common ground between the IMF and the greek government during the negotiations (europeans know that too but taxpayers), not just now but even from the beginning of the crisis: IMF bent its rules to hobble Greece with unsustainable debt The IMF previsions are made on model that take no account on difficult matters like currency and debt, while most of the current world economy problem are directly or indirectly linked to those two so... They are not purely cosmetic, but based on real economic work, the problem is that said work has flaws. | ||
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warding
Portugal2394 Posts
On June 29 2015 21:15 Taguchi wrote: Except 'relatively stable economic circumstances' isn't in the package deal offered by the creditors. Surely you realize this, right? We're talking more than 2% gdp austerity here. Fiscal multiplier suggests a 3% gdp drop as a result of this austerity. And then you have to hit ever increasing surplus targets - meaning there will be a need for more cuts than the initial package. Not to mention the money lasts until ~November, at which point you will have to negotiate yet another bailout. Stability? Hah! AFAIK the troika was willing to bring down the primary surplus targets. Greece was already expected to grow this year if it wasn't for Syriza. Also, what's austerity to you? A move from a primary surplus of 0% to 3% is austerity. A move from 3% to 3% is NOT austerity. Furthermore, if you're enjoying economic growth, keeping a primary surplus of 3% once you're there is not a big deal. Finally, Portugal is still under austerity and growth is expected at 2% this year. | ||
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Narw
Poland884 Posts
On June 29 2015 21:29 WhiteDog wrote: I would be a european official, I would also be pissed at Greece tho. This small country, with no big banks, still teaching europe how democracy is done. You can't do that. What. How votes from Greece people are more important than votes from people that elected politicians in Germany when it's about fiscal policy of Eurozone? How proposing referendum in which point is "do you want to have less cash" is any kind honest democracy? Europe wasn't perfect in those negotiations, far away from it, but to present such one sided slogan as the summary of whats happening is cringe worthy. Greece is at the verge of collapse at the moment, but Cipras sure did show those greedy European bankers to not mess with him! | ||
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accela
Greece314 Posts
"You shouldn’t commit suicide because you're afraid of death. You should say 'yes' regardless of what the question is." EU President Jean-Cleaude Juncker - 29/6/2015 I rest my case. | ||
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