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Although this thread does not function under the same strict guidelines as the USPMT, it is still a general practice on TL to provide a source with an explanation on why it is relevant and what purpose it adds to the discussion. Failure to do so will result in a mod action. |
On July 16 2015 13:56 Taf the Ghost wrote:
@Evil_Sheep: "Moral Hazard" is the principle they're talking about. It's a very real problem, to the point that it's functionally how the European Banks got into this problem with Greece, which caused the first bailout..
Thanks Taf, I'm well aware of moral hazard, and I agree that it's a problem. I would also argue that in the case of Greece, we are long, long past the point where it is still an issue.
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Zurich15362 Posts
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But but.. Schäuble is supposed to be the devil, or at least Hitler 2.0! How dare he have sensible ideas!
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On July 16 2015 19:01 RapidTiger wrote:"Boycott German products" says some of the EU nations: http://www.bbc.com/news/blogs-trending-33538098Am I missing something? Germany hasn't done anything wrong yet these other EU nations are calling for a boycott of German products.
Tiny but vocal minority that is in the end insignificant.
Also they are certainly not nations calling for a boycott but people in nations. Major difference.
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Will they boycott German euros too?
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the boycott by some people from twitter is irrelevant, because as I posted earlier (the list of German export goods), it's almost exclusively cars/carparts, machines, chemical and biological manufactures. Not something the privat person would buy in big loads anyway.
The debat is full of misunderstanding, which is why the people from continent americas here often write such weird ideas. The fault are misconceptions and lack of knowledge about the EU and what it is or what it should be. There are also different views within Europe, for example the communist party in Greece, and the left parties in other countries wish to have a full transfer union, so that everything in the end becomes the same. The majority of the people in the EU meanwhile want to keep the identiy of their country and are against that.
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EU leaders are reluctant to apply a nominal haircut to Greece which might be difficult to swallow for a lot of national electorates, but ready to apply extensions on the loans with very low interest rates, effectively providing debt relief. Thus, Greece's expenditure on interest as % of GDP is kept low for the foreseeable future, with good reason to believe the EU would want to keep it that way. On the other hand, in order for Greece to regain its sovereignty it'd be crucial to be able to finance itself on the market again soon. Given it's high debt/gdp ratio that might be difficult. It's a very complex balancing act.
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The sensible thing to do economically and politically is to just keep redoing the loans with 0 intrest every few years. Its less politically charged but essentially a haircut and you still maintain leverage on Greece. They start bullshitting on reforms again hit them with the loans and force them out of the euro. Haircut now just means Greece loans more money and we go again in 5 years.
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Why not let the whole EU guarantee for Greek debts? Shouldn't that give them nice enough interest rates to start reducing the debt?
After all we are all sitting in the same boat.
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On July 16 2015 20:02 Noizhende wrote:
Why not let the whole EU guarantee for Greek debts? Shouldn't that give them nice enough interest rates to start reducing the debt?
After all we are all sitting in the same boat.
that's what the EU is basically doing for the last couple years with all the bailout money.
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On July 16 2015 20:02 Noizhende wrote:
Why not let the whole EU guarantee for Greek debts? Shouldn't that give them nice enough interest rates to start reducing the debt?
After all we are all sitting in the same boat.
The problem here is that if you guarantee someones debt, you kind of have to pay those debts when greece finally defaults. Which is probably not what most of the EU wants to do. Especially when there is a very real chance of that money just getting pissed away without doing any good.
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@Skilledblob
Would you bet your money on the EU taking over all the greek debt, whatever happens? 
@Simberto
Sure, but isn't the greek debt peanuts vs the problems speculation against single eu countries creates. A common european accountability for debt would also help other countries like italy, spain, portugal, france. germany could create a lot of stability this way.
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oO The Eurozone already owns almost all the Greek debt, what are you talking about
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On July 16 2015 20:27 Noizhende wrote:@Skilledblob Would you bet your money on the EU taking over all the greek debt, whatever happens? @Simberto Sure, but isn't the greek debt peanuts vs the problems speculation against single eu countries creates. A common european accountability for debt would also help other countries like italy, spain, portugal, france. germany could create a lot of stability this way.
Yes, it certainly creates stability, when Greece can take infinite loans from banks, does not have to care about interest or anything, the banks earn billions of it, and then just all the debt goes to the rest of Europe.
Exactly this idea is the reason why we are in this shit. Because Greece got bloated even more once they were in the Euro.
@Gorsamath he talks about Greece getting loans in the free market again
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On July 16 2015 20:27 Noizhende wrote:@Skilledblob Would you bet your money on the EU taking over all the greek debt, whatever happens? @Simberto Sure, but isn't the greek debt peanuts vs the problems speculation against single eu countries creates. A common european accountability for debt would also help other countries like italy, spain, portugal, france. germany could create a lot of stability this way.
There's a paradox with European debt accountability though. Greece, Spain, France and some other countries insist on their national sovereignty, up to the point that some politicians have convinced parts of their electorate that a "return to more national sovereignty, or even an exit out of the EU will automatically erase all ills and bring the country back to its former prosperity or even glory. Basically what they say is that they want to pursue their own economic policies, preferably without the EU interfering.
Now if you combine EU-wide debt accountability with that, you basically kill off any incentive for countries to behave responsibly when it comes to fiscal matters because debts will be covered by the stronger EU member states. EU-wide debt accountability cannot exist without a fiscal union, which in turn cannot exist without moving fiscal governance from the nation-state level to the EU level, which is something Europe is not ready for, and probably never will be.
If Greece insists on its national soveignty, it should stop asking the rest of the EU for money and clean house itself. However, Greece did the exact opposite: it did ask for more money and has shown very little intention of cleaning house. Quite the opposite: the newly elected Syriza arguably made an even bigger mess after somehow having been able to convince a staggering amount of people that they would "magick away the debt" if they got elected.
This pretty much resulted in the situation we are in now. In less than half a year Tsipras and Varoufakis not only managed to nearly singlehandedly blow up the Euro, but they also destroyed the last shred of trust people had in Greek politicians, and pushed their country into an even deeper hole. Their colleagues in Podemos even hastened themselves to assure everyone that Podemos was not Syriza, and that Spain is in a way better economic situation than Greece.
I've mentioned earlier that the conditions for the bailout have little to do with economics and everything to do with politics. The only people who should be surprised of that are economists who think their models apply to every situation regardless of cultural situation, and people who just parrot what economists tell them. It is politics at play: the EMU can't have one profligate country drag the whole pack down, and it can't give in either: southern countries would then suddenly be wanting to renegotiate their debts too, while the north-east would be angry because it actually did force its population through often severe austerity. On top of that, the EMU has clearly lost its patience with Greece: it has spend over 200 billion euros in keeping the country afloat and yet Greece has not tackled any of its structural issues despite having pushed through the most reforms of all EU countries since the eurocrisis began. I think that the mass privatisations forced upon Greece for the third bailout is the Troika wanting to forcibly break the hold of Greece's public sector on the Greek state.
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On July 16 2015 20:27 Noizhende wrote:@Skilledblob Would you bet your money on the EU taking over all the greek debt, whatever happens? @Simberto Sure, but isn't the greek debt peanuts vs the problems speculation against single eu countries creates. A common european accountability for debt would also help other countries like italy, spain, portugal, france. germany could create a lot of stability this way.
Put it like this, if I tell you that I will always cover your personal debt, no matter what you do, how would you behave?
Would you:
A: Live a life where you don't spend more money than you can afford?
B: Go buy a Ferrari to drive onto your new yacht?
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On July 16 2015 13:01 Evil_Sheep wrote:Show nested quote +On July 16 2015 05:36 lord_nibbler wrote:
You are still making the mistake of not differentiating between dept relief and dept restructuring Debt restructuring includes either a) debt relief (aka forgiveness aka haircuts) or b) debt rescheduling (extending maturities etc) Look, although you do not give of a keen on debate vibe, I will try one more time.
It does not matter how you (or the BBC apparently) define dept restructuring, it matters how the German government does!
And for them there is a clear difference between a 'debt relief' and a 'debt restructuring'. And the later does certainly not include the former.
In the eyes of Merkel forgiving debts will never happen, can not happen, is not allowed to happen inside the EZ.
Extending debts and reducing interest rates or pause them for some time is perfectly fine for Merkel. It did happen in 2012 and it will happen in half a year (and they have been saying that, just today Schäuble acknowledged it again).
That pushing a debt into the future and reducing it through inflation is a de facto debt relief in the real world, does not matter at all.
So this conflict between the IMF and Germany, that some commentators make out to be this huge rift, is in actuality relatively small. And if you followed the story of the leaked IMF proposal, you will have realized, that after last Sunday's negotiations IMF does not talk about plain haircuts anymore but uses the word restructuring instead (gee, I wonder why...).
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1)is greece in any way being punished for faking the economic numbers that made it possible to enter the EU?
2)why exactly are they that angry at the european ministers, especially the german one? the whole situation is that bad because they lived beyond their means without paying taxes for too long. why does the whole eu, especially young greeks have to pay for this, why not the older generation that lived that way?
3)is the greek people acknowledging in any way that they have to blame themselves and the EU is just trying to help them?
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varoufakis himself in an interview acknowledged (way back when he only started out as a FinMin) that he understood quite quickly that the word "debt relief" is a word german people don't like. In the same interview he said that Germany would be fine with extending maturities which defacto is the same thing as he went on to explain. Just a different way of going about it.
And he said that he'll refrain from using that word because according to him it's a taboo word in Germany while we'd be totally fine with rescheduling for some reason that isn't understandable to him.
That's probably part of the picture as well.
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EPT
