Greece, what the fuck?

[Jayjay]

I have to admit that I don't get the Greece negotiation tactics with the troika.

The IMF payment is due June 30th. The troika devices a plan to continue financing, with some conditions attached that the Greek government disagreed with. So they reject the plan, but at the same time say that they want to put it up for referendum... but after the payment is due already.

Is Greece playing chicken and forcing IMF to give it extra time until next week?

Or is the Greek government fully aware that they have to accept the conditions, but can't do it for political reasons, and are hence giving their own people a taste of what going bankrupt feels like?

Or are they determined to have a clean break, default and/or leave Euro, and the referendum is just means to give them political cover for all the hardships that it entails?

 

[SimpleDon]

I have to admit that I don't get the Greece negotiation tactics with the troika.

The IMF payment is due June 30th. The troika devices a plan to continue financing, with some conditions attached that the Greek government disagreed with. So they reject the plan, but at the same time say that they want to put it up for referendum... but after the payment is due already.

Is Greece playing chicken and forcing IMF to give it extra time until next week?

Or is the Greek government fully aware that they have to accept the conditions, but can't do it for political reasons, and are hence giving their own people a taste of what going bankrupt feels like?

Or are they determined to have a clean break, default and/or leave Euro, and the referendum is just means to give them political cover for all the hardships that it entails?

The Greeks pretty much feel that they have the upper hand. It is somewhat questionable if being bankrupt in the EU would be much different from what their position is right now. They owe the money to the troika. What is the troika going to do? Close the banks? Foreclose on the Greek embassies in the EU countries to sell to collect?

They won't be able to borrow money but they can't borrow money now. This means that they would have to run their primary budget in balance or in surplus. But that is what they are doing already.

 

[Tigers!]

I haven't ruled out stupidity (or sheer bloody mindedness) yet.

 

[SimpleDon]

What has to happen is for the troika to find some face saving way to write down the debt that Greece owes. The Greeks could issue special Greek repayment bonds paying no interest and with no fixed term for most of the debt that the troika would buy. They would use the money to pay off the majority of the outstanding debt. It would be understood that the Greeks won't ever pay off the special bonds of course.

It is important for the Greeks to be able to get their economy running well again. The Greek economy has shrunk by 25% from the financial crisis and the subsequent austerity trying to pay off this debt, 17% of the decrease due to the austerity inflicted by the troika. It should be obvious to everyone now that the austerity isn't working, that the economy keeps shrinking and the debt keeps growing as a percentage of GDP. This means that the debt becomes harder to pay off, not easier.

 

[Derec]

The Greeks pretty much feel that they have the upper hand. It is somewhat questionable if being bankrupt in the EU would be much different from what their position is right now. They owe the money to the troika. What is the troika going to do? Close the banks? Foreclose on the Greek embassies in the EU countries to sell to collect?

They should repo the Greek islands and give them to Germany.

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It is important for the Greeks to be able to get their economy running well again.

Yet they elected an extremist government that makes that all but impossible.

 

[whichphilosophy]

What has to happen is for the troika to find some face saving way to write down the debt that Greece owes. The Greeks could issue special Greek repayment bonds paying no interest and with no fixed term for most of the debt that the troika would buy. They would use the money to pay off the majority of the outstanding debt. It would be understood that the Greeks won't ever pay off the special bonds of course.

It is important for the Greeks to be able to get their economy running well again. The Greek economy has shrunk by 25% from the financial crisis and the subsequent austerity trying to pay off this debt, 17% of the decrease due to the austerity inflicted by the troika. It should be obvious to everyone now that the austerity isn't working, that the economy keeps shrinking and the debt keeps growing as a percentage of GDP. This means that the debt becomes harder to pay off, not easier.

If you tax people more, they spend less in the economy so even more business go bust more people go out of work. This is why austerity measures can be slow and sometimes not work altogether. The Greeks didn't feel that they should be penalised for the cock ups of their government, many of whom have lost their businesses.

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They should repo the Greek islands and give them to Germany.

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It is important for the Greeks to be able to get their economy running well again.

Yet they elected an extremist government that makes that all but impossible.

The Greeks voted out the government who they fell mismanaged the economy and got the country into such a mess.

 

[Derec]

The Greeks voted out the government who they fell mismanaged the economy and got the country into such a mess.

The old government started to implement some much needed (and decades overdue) reforms. Syriza told them that no reforms are needed and that they continue to retire early and live high on the hog with German money. While only about a third of Greeks got bamboozled by it, the peculiar Greek electoral system still ensured them the power.

 

[laughing dog]

The troika's package is unrealistic. The Greek economy is in a recession which makes repayment difficult but the offered packages are based on austerity measures coupled with no debt relief. No elected gov't would accept such a package. There are simple things that the troika could offer such as repacking existing debt to be indexed to Greek GDP growth or the promise of scheduled limited debt forgiveness with observed (not promised) improvements in tax collections or pension "reform".

 

[Jokodo]

The Greeks voted out the government who they fell mismanaged the economy and got the country into such a mess.

The old government started to implement some much needed (and decades overdue) reforms. Syriza told them that no reforms are needed and that they continue to retire early and live high on the hog with German money. While only about a third of Greeks got bamboozled by it, the peculiar Greek electoral system still ensured them the power.

Living high? Greece has an unemployment rate of over 25%, and even back in 2012 a long-term unemployment rate of ~15%, higher now though I didn't find more recent figures, referring to people who have been out of work for a year or more - and note that benefits are cut back to zero after that time.

Also, Greece is actually running a primary surplus. The government isn't asking for another loan or aid package in order to cover running expenses, they can cover those out of the revenues, thank you very much. The only reason they need more money now is to serve the debts accrued by previous governments.

What the institutions (formerly troika) are demanding is not that the Greek government present a balanced primary budget - that, they already have. The institutions are demanding that Greece increases its primary surplus by another 3% of GDP. That would 3% of GDP being drained from an already strained economy, since all of this is going straight to international creditors. The Greek government knows that bowing to that demand would cause a further recession. A further devastation of the Greek economy is catastrophic not only for the livelihood of the Greek people, but even for the creditors themselves. We're at a point where the EU's playing hardline is no longer economically rational and, simply put, nothing but dangerous pandering to Northern European domestic audiences.‚

 

[Loren Pechtel]

I think it's a case of playing chicken.

 

[arkirk]

The Greeks voted out the government who they fell mismanaged the economy and got the country into such a mess.

The old government started to implement some much needed (and decades overdue) reforms. Syriza told them that no reforms are needed and that they continue to retire early and live high on the hog with German money. While only about a third of Greeks got bamboozled by it, the peculiar Greek electoral system still ensured them the power.

Your assumption that these people are all extremely lazy and not light skinned like the northern Europeans. Your assumption is that the retirement is voluntary and not really simply insufficient economy to sustain society period leading to people simply not being able to find employment past the "retirement" age. That puts a lot of people in a class where they become virtually powerless. This problem will occur over and over whenever any of the economies in the EU go into recession. It is part and parcel with the single currency issue for countries with disparate economies. It creates unsolvable internal problems in some countries.

 

[Jokodo]

I think it's a case of playing chicken.

It's pretty chicken of Merkel and the ECB to not admit that pushing Greece into a prolonged recession through massive austerity was a bad idea in 2010, was still a bad idea in 2012, and remains a bad idea in 2015, not least from the perspective of someone who wants to ever get their money back from Greece. It's also pretty self-centered to risk ruining the Eurozone and potentially breaking the EU just to keep some face.

Somehow, I don't think that's what you meant, though.

 

[laughing dog]

I think both parties are playing chicken and both are going to lose big time.

 

[fromderinside]

The old government started to implement some much needed (and decades overdue) reforms. Syriza told them that no reforms are needed and that they continue to retire early and live high on the hog with German money. While only about a third of Greeks got bamboozled by it, the peculiar Greek electoral system still ensured them the power.

Your assumption that these people are all extremely lazy and not light skinned like the northern Europeans. Your assumption is that the retirement is voluntary and not really simply insufficient economy to sustain society period leading to people simply not being able to find employment past the "retirement" age. That puts a lot of people in a class where they become virtually powerless. This problem will occur over and over whenever any of the economies in the EU go into recession. It is part and parcel with the single currency issue for countries with disparate economies. It creates unsolvable internal problems in some countries.

As with every issue those who think people who have basically nothing are in any way living high off the hog are nuts. Governments are not just economies.

 

[Jayjay]

Also, Greece is actually running a primary surplus. The government isn't asking for another loan or aid package in order to cover running expenses, they can cover those out of the revenues, thank you very much. The only reason they need more money now is to serve the debts accrued by previous governments.

I'm not convinced that Greece is running a primary surplus. It has cooked the books before, and is probably cooking the books now.

But even if Greece was running a primary surplus, that was during the last government. Is that still the case with Syriza being in charge and reverting many of the austerity measures?

 

[Loren Pechtel]

I think it's a case of playing chicken.

It's pretty chicken of Merkel and the ECB to not admit that pushing Greece into a prolonged recession through massive austerity was a bad idea in 2010, was still a bad idea in 2012, and remains a bad idea in 2015, not least from the perspective of someone who wants to ever get their money back from Greece. It's also pretty self-centered to risk ruining the Eurozone and potentially breaking the EU just to keep some face.

Somehow, I don't think that's what you meant, though.

Greece pushed itself there, the ECB simply isn't saving their asses.

 

[Loren Pechtel]

Also, Greece is actually running a primary surplus. The government isn't asking for another loan or aid package in order to cover running expenses, they can cover those out of the revenues, thank you very much. The only reason they need more money now is to serve the debts accrued by previous governments.

I'm not convinced that Greece is running a primary surplus. It has cooked the books before, and is probably cooking the books now.

But even if Greece was running a primary surplus, that was during the last government. Is that still the case with Syriza being in charge and reverting many of the austerity measures?

Yeah, at this point I wouldn't trust Greece to make change for a $1. They want to continue to live on borrowed money and aren't interested in addressing their economic problems.

 

[Jayjay]

Or are they determined to have a clean break, default and/or leave Euro, and the referendum is just means to give them political cover for all the hardships that it entails?

I'm beginning to think that the Greece government has decided to leave Euro, and it's moves are actually a carefully planned steps to do so with minimal damage.

Greece will probably keep its banks closed for at least one week, and limiting withdrawals, while preparing to move to Drakhma. But the trick is that they can't just go out and say so, because everyone knows that the new Drakhma will plummet in value compared to Euro no matter what, so if people knew that the Euros in their bank accounts would be forcibly converted to Drakhmas, they'd withdraw all the money they can, then riot and protest when they can't, and that would cause Drakhma to be worth even less. So the transition has to be done as quickly as possible, and throughout the process everyone involved has to insist that Greece will stay in Euro.

 

[tupac chopra]

The Greeks could issue special Greek repayment bonds paying no interest and with no fixed term for most of the debt that the troika would buy. They would use the money to pay off the majority of the outstanding debt. It would be understood that the Greeks won't ever pay off the special bonds of course.
.

Interesting idea but how do they stop Portugal or Italy wanting to do the same thing?

 

[tupac chopra]

I favour making Goldman Sachs pay for doctoring the books to get Greece in.