News Greece closes banks and imposes capital control

[bohm2]

So the issue now is that there is no graceful solution, no single uniquely serious problem that if solved would fix things. And if the Greeks exit the EU, their drachma will plumit in value and they'll be able to import even less with such a weak currency at home...When left wing politicians try to buy their fantasy world with other people's money, nobody wins except the politicians.

I agree with the solution of a Grexit but the damage to the taxpayer has already been done. And I don't see this as a left-wing/right-wing issue. The vast majority of the bailout funds were used to bail out (directly or indirectly), the financial sector (both Greek and foreign) and not the Greek state. And in the process, the overwhelming majority of Greek government debt was shifted from the private sector to the public sector, with other eurozone governments now liable for around 65 per cent of Greece’s debt. And this wasn't the decision of left-wing politicians. Although, I doubt it would have made much of a difference who was in power at that time..

Greek Bail-Out: 77% went into the Financial Sector
http://www.attac.at/news/detailansi...il-out-77-went-into-the-financial-sector.html

 

[Finny]

Although, I doubt it would have made much of a difference who was in power at that time..

Perhaps the leftists and right wing in Greece are so inept THEY will suffer this time...but don't count on it. Betcha they have just dandy pensions and benefits. Know many poor politicians?

Shifting anything and everything from private to public sector is EXACTLY what leftists do...they buy votes by indirectly incurring debts for 'redistribution'. You and I subsequently become government dependent while they favor selected private sector supporters, and, why by golly, its a win-win-win...ah, for the politicians, that is. It's all about power.

 

[bohm2]

Perhaps the leftists and right wing in Greece are so inept THEY will suffer this time...but don't count on it. Betcha they have just dandy pensions and benefits. Know many poor politicians?

Unfortunately, ordinary Greeks will endure poverty to pay back debts run up by a corrupt Greek elite/politicians and the lenders are no better since there were incentives to give Greece money because they knew as a Euro member they would be protected from default by the European taxpayer.

 

[WWGD]

Unfortunately, ordinary Greeks will endure poverty to pay back debts run up by a corrupt Greek elite/politicians and the lenders are no better since there were incentives to give Greece money because they knew as a Euro member they would be protected from default by the European taxpayer.

There is definitely corruption in the government, but the population also has the obligation to inform itself and pressure the politicians to do the right thing. It is a shared responsibility.

 

[bohm2]

There is definitely corruption in the government, but the population also has the obligation to inform itself and pressure the politicians to do the right thing. It is a shared responsibility.

Whether individual citizens should be held directly responsible for the actions that their government/country as a whole, is a tricky question, I think. This is the line of argument used by some against Germany's position; that is, after World War II, Americans who had fought Nazi Germany, gave vast amounts of money through the Marshall Plan to help Germany rebuild its economy and become a democracy. I think there was a belief that the Nazis did not represent all Germans, although all Germans and Europeans suffered because of the Nazis. I'm unsure what is the right approach, but if one is to be consistent, could not then one argue that if the individual German citizen was forgiven, why not the average Greek citizen?

 

[russ_watters]

Whether individual citizens should be held directly responsible for the actions that their government/country as a whole, is a tricky question, I think. This is the line of argument used by some against Germany's position; that is, after World War II, Americans who had fought Nazi Germany, gave vast amounts of money through the Marshall Plan to help Germany rebuild its economy and become a democracy. I think there was a belief that the Nazis did not represent all Germans, although all Germans and Europeans suffered because of the Nazis. I'm unsure what is the right approach, but if one is to be consistent, could not then one argue that if the individual German citizen was forgiven, why not the average Greek citizen?

Forgiveness is not a concept that matters here. What matters is responsibility/accountability.

Further, the Marshall plan example is fine, but if you want to go there, then really go there: Germany received aid, but they also had their government disbanded and rebuilt from scratch by the allies. I am sure the EU would be in a more giving mood if they had complete authority over Greece.

 

[bohm2]

Im sure the EU would be in a more giving mood if they had complete authority over Greece.

But hasn't this, in some sense, been the case in Greece?

The Troika would send teams of ‘inspectors’ on missions to Athens where they would assess if the sitting government was on track with its promised reforms, thus determining whether they would continue to disburse bailout funds. Troika officials in Athens would function as visiting emissaries from a foreign empire, accompanied by bodyguards and met with protests by the Greek people. The ‘inspectors’ from Brussels, Frankfurt and Washington would enter Greek government ministries, dictating to the Greek government and bureaucracy what their priorities and policies should be, with the ever-present threat to cut off funds if their demands were not followed, holding the fate of successive governments in their hands. Thus, unelected officials from three undemocratic and entirely unaccountable international institutions were dictating government policy to elected governments.

In addition to this immense loss of sovereignty over the past five years, Greece was subjected to further humiliation as the European Commission established a special ‘Task Force for Greece’ consisting of 45 technocrats, with 30 based in Brussels and 15 at an outpost in Athens, headed by Horst Reichenbach, dubbed by the Greek press as the ' German Premier'. European and German officials had pushed for “a more permanent presence" in Greece than the occasional inspections by Troika officials. Thus, the Task Force was effectively an imperial outpost overseeing an occupied nation.

http://andrewgavinmarshall.com/2015/07/16/blaming-the-victim-greece-is-a-nation-under-occupation/

But even such measures did not deliver the goods because (and note I'm no expert) the whole structure of the bailout appears to have been flawed from the get-go as acknowledged by many economists and even one of the lenders themselves (IMF). The new plan will only worsen things. See previous IMF links above. But I suppose this is a moot point as Grexit appears the only viable option.

 

[russ_watters]

But hasn't this, in some sense, been the case in Greece?

Absolutely not - they are, in fact, near exact opposites! The "deal"* Germany got was imposed on it by bombing it back to the stone age and killing a significant fraction of it's population, including most of it's government. The allies had complete control over what happened next. Conversely, any deal Greece gets, it enters into willingly and can reneg at any time (as it already has several times). The EU's actual control over Greece's actions is precisely zero.

*Deal is in quotes for Germany because by definition when terms are imposed on you with zero input of your own, much less a vote on accepting it, it really isn't a deal.

 

[bohm2]

Absolutely not - they are, in fact, near exact opposites! The "deal"* Germany got was imposed on it by bombing it back to the stone age and killing a significant fraction of it's population, including most of it's government. The allies had complete control over what happened next. Conversely, any deal Greece gets, it enters into willingly and can reneg at any time (as it already has several times). The EU's actual control over Greece's actions is precisely zero.

I guess this is the reason why I will never understand politics or economics. I mean, why would any nation/government/peoples 'willingly' submit to such outside intrusion into their sovereignty? Why don't they just leave the Eurozone?

 

[Czcibor]

I guess this is the reason why I will never understand politics or economics. I mean, why would any nation/government/peoples 'willingly' submit to such outside intrusion into their sovereignty? Why don't they just leave the Eurozone?

If they leave eurozone their savings would turn into Drachma. Would you sacrifice your life savings to get instead of some not responsive, technocratic outside governor, a not responsive (except nepotism and clientelism), not specially competent, highly corrupted local politician?

Add to it hopes on extracting some more money from the EU, and risk of being kicked out from the EU and losing all money transferred there each year.

Think for a while which fully independent and sovereign decisions of Greek nation moved them in such mess... Treat this "losing sovereignty" part not as a suddenly appearing problem, but as a symptom of internal chronic disease.

 

[Finny]

Forgiveness is not a concept that matters here. What matters is responsibility/accountability.

Greece and the EU is in a catch 22 of its own making. On one hand bailing out or forgiving a significant portion of Greek Debt in a shared deal would be theoretically a nice leftist approach... After all no one should really be held accountable, there is nor real right nor wrong. It is nice to help those in need, but they have to be willing to help themselves.

On the other hand, everyone there knows Spain, Portugal and maybe even Italy would be quick to follow the Greek 'model' of securing 'free' money from other EU members. And whose to say the Greeks wouldn't be back again dipping into the collective pot if they see others success at living ins style.

Why don't they just leave the Eurozone?

Because Greece would almost certainly soon be in a full fledged depression with post WWII type currency inflation: Ever see the pictures of wheelbarrow full of German marks just to buy a loaf of bread? What trading partner would trust Greece after they walked away from their debts.

Profit is the end product of commerce and capitalism that feeds all government. It may not be pretty, but it deserves respect seldom given by greedy politicians.

 

[russ_watters]

I guess this is the reason why I will never understand politics or economics. I mean, why would any nation/government/peoples 'willingly' submit to such outside intrusion into their sovereignty? Why don't they just leave the Eurozone?

It is a basic principle of life that if you violate an agreement, people may not be willing to make another one with you! So in this case, violating their ageements (loans) means bankruptcy and economic collapse.

The secret about politics and international economics is that there is no secret: there is nothing unique about it. It works exactly the same as what happens when you borrow money from a bank and refuse to pay it back.

 

[mheslep]

I guess this is the reason why I will never understand politics or economics. I mean, why would any nation/government/peoples 'willingly' submit to such outside intrusion into their sovereignty? Why don't they just leave the Eurozone?

Access to cheap money for the small/southern EU countries, and fear of old national conflicts flaring up (again) for the large ones. Faulty solution on both counts.

 

[Evo]

Please stay on topic, off topic posts will be deleted. (I had to delete some off topic posts)

 

[bohm2]

If they leave eurozone their savings would turn into Drachma. Would you sacrifice your life savings to get instead of some not responsive, technocratic outside governor, a not responsive (except nepotism and clientelism), not specially competent, highly corrupted local politician?

It's not clear that leaving the Eurozone is necessarily a bad idea for Greece:

http://www.washingtonpost.com/posteverything/wp/2015/07/13/why-greece-should-leave-the-euro-zone/

http://seekingalpha.com/article/3092156-why-greece-should-follow-the-example-of-argentina

 

[Vanadium 50]

I'm wondering if the reverse makes more sense - to have Germany leave the Euro. That would certainly be less disruptive, and it would let the Euro fall somewhat, which would help the PIIGS.

 

[mheslep]

Germany's inclusion in the Euro makes possible its level of exports, which at ~40% of GDP are easily the largest in the world (relative to GDP). That is, if Germany returns to the DM it would be an very expensive currency and similarly make Germany exports expensive. Yes, it follows that a German exit of the Euro would help the export potential of the PIIGS.

 

[bohm2]

Shifting anything and everything from private to public sector is EXACTLY what leftists do...they buy votes by indirectly incurring debts for 'redistribution'. You and I subsequently become government dependent while they favor selected private sector supporters, and, why by golly, its a win-win-win...ah, for the politicians, that is. It's all about power.

I never took an interest in politics/economics until very recently primarily because my wife has some properties in Greece and we were hoping in the distant future when we retire, to live in Greece for 6 months of the year and the other 6 months in Toronto, Canada, where we live. I had always thought that Greece has a huge public sector. But surprisingly, Greece has a lower percentage of public employees than a number of other European countries. Sweden, Denmark and Norway were tops. Greece (at 22.3 percent) ranked close to Canada.The European countries with the lowest percentage of public workers are the Netherlands, Austria and Portugal. I looked at some papers on this topic and their conclusion was that there was no correlation between per capita GDP and percentage of public workers in a nation’s workforce. I'm not sure what it means, but I found it interesting that many of these European nations, particularly the Scandinavian countries should be as prosperous as they are, despite having such a high percentage of public workers.

As an aside, our property taxes in the house in Greece (Volos) has doubled in the past few years from $400 euros to $800 euros/year, but it is still very significantly lower than our property taxes for our Toronto home and both houses are about the same size.

 

[Finny]

I looked at some papers on this topic and their conclusion was that there was no correlation between per capita GDP and percentage of public workers in a nation’s workforce.

Love to see some of those...
I bet I can guess who funded them...
and likely you can too!

yet the Scandinavian countries do seem to do better. Could be related to long term subtle changes...
maybe analogous to the decline of the Roman empire...
even that has disputes about the causes...

 

[WWGD]

Love to see some of those...
I bet I can guess who funded them...
and likely you can too!

yet the Scandinavian countries do seem to do better. Could be related to long term subtle changes...
maybe analogous to the decline of the Roman empire...
even that has disputes about the causes...

Instead of "I can guess" , and "maybe" , make an actual argument, provide actual data and/or references and show that you are doing something other than pushing an anti-left, anti-government (or any other type of ) agenda here. PF is data- and reference- driven. You don't have to document _everything_ , but you have made the same claims in many posts without making any argument ( other than a tautology).
There are tons of anti-left, anti-right, anti-anything trash sites on the web, we (I think I speak for many here) want to keep this site as a site where arguments are made.

EDIT: Sorry for my tone. Please make an effort to stay on topic and document your claims.
Let's keep PF the oasis of sanity and rationality it has been for so long.

 

[Vanadium 50]

Germany's inclusion in the Euro makes possible its level of exports, which at ~40% of GDP are easily the largest in the world (relative to GDP). That is, if Germany returns to the DM it would be an very expensive currency and similarly make Germany exports expensive. Yes, it follows that a German exit of the Euro would help the export potential of the PIIGS.

So, by the argument that Germany receives a benefit by sharing a currency with the PIIGS, one could conclude that there is some amount of money Germany would be willing to pay to maintain this benefit. (Actually, I think that this assumes everyone is a rational actor - probably not a good approximation.

 

[bohm2]

Love to see some of those...

Here's a fairly recent one looking at total general government expenditure in the EU Member States for 2014 (as % of GDP):

http://ec.europa.eu/eurostat/docume...P-EN.pdf/797f4af9-c37f-4631-8211-5dd0b32fcb31

Also looking at size of public sector. Government as a percentage of the labour force (fig. 6) is worth looking at:

http://www.ipa.ie/pdf/PUBLICSECTORTRENDS2014.pdf

 

[mheslep]

So, by the argument that Germany receives a benefit by sharing a currency with the PIIGS, one could conclude that there is some amount of money Germany would be willing to pay to maintain this benefit. (Actually, I think that this assumes everyone is a rational actor - ...

Yes, and Germany has already paid that ante to Greece, repeatedly, via cheap loans and benefits long given to poorer European countries as a condition for the creation of the EU.

 

[Finny]

My prior comment:
"Love to see some of those...
I bet I can guess who funded them...
and likely you can too!"

I asked to see studies that were not provided: I implied that if any 'studies' show no relationship between national wealth and big government, they are 99% certain to be funded by big government advocates.

But I admit I AM weird: I believe governments should be run by responsible people serving their constituents.

Boehm: Thank you you for posting your sources. There is some great fodder within to help see why the EU might be stagnating. [I not getting into that here.]

I looked at some papers on this topic and their conclusion was that there was no correlation between per capita GDP and percentage of public workers in a nation’s workforce.

I see no such conclusion in either paper. Anyway, the first is published by the EU itself, the second by a source in Ireland dedicated to educating public officials.

Let's put everyone in government in some country and see what happens to an economy.

Here are the kinds of things I did find:

EU paper:
"In 2014, total general government expenditure accounted for more than half of GDP in eight EU Member States, with the highest shares being recorded in Finland (58.7%), France (57.2%) and Denmark (57.0%).

My goodness, that's a lot of 'social spending'. You'd think they'd be boosting government expenditures...oh no wait, even the IMF realizes that doesn't work.

"In 2014, the ratio of general government expenditure to GDP decreased in a majority of EU Member States compared with 2013."
I am surprised to see that; apparently financial calamities can slow down big government spending! Who knew.

From the IPA paper:

"Ireland’s score on an indicator ranking the upholding of traditional public service values such as independence
from political interference, freedom from bribery and corruption, and reliability and administrative fairness
has improved in each of the last four years.
• The World Bank produces an annual composite indicator of government effectiveness. In 2012 (the
latest year for which data is available) Ireland ranked 9th of the EU28 against this indicator, maintaining an
improvement every year since 2009.
• From 2010, the opinion of executives that Ireland’s education system meets the needs of a competitive
economy has improved.

"In many ways the figures presented here show a positive picture of the state of the public service in Ireland in 2014.

...[yet] "Trust and confidence in public services remains low."

So the study claims largely positive results, those served, think otherwise:
Is that not a strange dichotomy? Hmmm...

Whatever the causes of financial malaise, the near 'perfect storm' seems to be Greece. If the world can't figure out Greece and what went wrong, we are mostly all doomed.

Besides aren't there plenty examples of dictatorships that stole their country blind and prevented economic development even without massive governments?...Nigerian oil, Idi Amin, Ghadaffi, Uzbeki president and family, Msbsago [Guinea, the guy who took owneship of the national treasury]...So the mere lack of any effective government can also lead to financial calamity.