On October 26, I had the privilege of addressing the Chicago Council on Global Affairs. My subject was the Greek crisis: what else? However, I decided it was an opportunity to go beyond the basic account of the woes in Athens and give an informed and attentive audience greater insight into what led Greece to this point.
Unsurprisingly, when talking about Greece we rarely look beyond the last three years but it is of vital importance that we start to appreciate what happened in the lead-up to the crisis. It is time to assess the economic, political and institutional mistakes that were at the heart of the country’s collapse.
This is a favourite topic of discussion between myself and Yiannis Mouzakis and we hope to soon announce a joint project on exactly this subject.
In the meantime, I hope you have the time to read the speech (it’s rather long) and post your comments. Keep in mind that it is an overview and cannot in any way be considered a comprehensive account – there’s only so much you can fit into 25 minutes. The text contains a few paragraphs, mainly on domestic political issues, that I had to cut out of the speech due to time restrictions.
If it suits you better, there is audio of the event available here, courtesy of the Chicago Council on Global Affairs, who I’d like to thank again.
If you prefer to read the speech yourself, then please do so while adopting the voice of an accomplished public speaker (unlike myself) and perhaps throw in a few humurous anecdotes of your own. I’m thinking Peter Ustinov might be good example to have in mind.
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Much as it is an honour for me to be speaking at the Chicago Council on Global Affairs today, I’m fully aware that I’m here because of a word – a Greek word – that carries many negative connotations: crisis.
Over the last three years, you won’t have read a newspaper article, seen a TV report or listened to a radio program that referred to Greece and didn’t use the word “crisis.”
And for good reason too: the problems triggered by the Greek debt crisis have sent the country’s economy into freefall, destabilized its political system and thrown its society into turmoil. Beyond Greek borders, the crisis has threatened to destroy the euro, pull apart the European Union and cause global financial havoc.
When one considers that Greece accounts for less than 4 percent of the eurozone’s total debt or GDP, it’s easy to see how unprepared everyone was for the current situation.
My main focus today will be on Greece, outlining how it got into this mess and where it goes from here. I will touch on some of the implications this has for Europe as a whole.
The reason I want to concentrate mostly on Greece is because I think there have been – and continue to be – a lot of misconceptions about what caused this crisis and how events have evolved there over the last few years.
One of America’s most famous publishers, William Randolph Hearst, who also owned newspapers in this city, said: “News is something somebody doesn’t want printed; everything else is advertising.” I can tell you this crisis has been no advertisement for Greece. A lot of revealing things have been written and said about the country. It has been painful for Greeks to have their dirty laundry aired in public.
Some of the reporting during this crisis has been of the highest order, providing insight into a complex problem, but some has resorted to clichés that hinder people’s understanding of the situation.
For example, if I were to tell you there was a country in Europe where hardly anybody paid their taxes, where hard work was frowned upon, where people were able to retire on ample pensions in their 40s, where most of the workforce was employed in the civil service and where public spending reached unrivalled levels, I’m guessing the first thing that would cross your mind is that I’m talking about Greece.
Perhaps the second thing you might think is: “How soon can I move there? It sounds like a comfortable place to live.”
But I’m also guessing that if I told you there was a European country where the majority of citizens pay without fail some of the highest taxes in Europe, whose black economy was not even the largest in the eurozone, where employees worked among the longest hours in the EU, where the average retirement age was the same as in Germany, where most pensioners earn less than 800 euros (or 1,000 dollars) a month, where civil servants make up less than 20 percent of the workforce and where public expenditure was about the EU average, perhaps the last country you’d think of would be Greece.
Too often over the last few years, stereotypes, conjecture and anecdotes rather than measured analysis have influenced media coverage and the public debate about Greece. Even the eurozone’s decision-making process has been affected at times, with policy makers disregarding the facts to present a skewed version of what has happened in Greece in order to support their preconceived ideas about fiscal or economic policy. The subject of Greece has even been used misleadingly as a salutary tale in the US presidential campaign.
If some of the myths that are perpetuated about the Greek crisis are to be dispelled then it’s vital that we improve our understanding of the factors that contributed to the current economic collapse.
This is what I hope to help with over the next few minutes.
For this, we will need another Greek word. So, let’s leave crisis aside for now and consider the word hubris, or ύβρις in Greek. Hubris is the word ancient Greeks used to describe when someone’s extreme arrogance led to them losing touch with the world around them.
No story sets out the perils and penalties of hubris as well as that of Icarus, the young man who ignored the warnings of his father, Daedalus, flew too close to the sun with his wings of wax and feathers and then fell to his death.
This is a fitting analogy for what happened to Greece over the last decade or so; the period covering its membership of the euro.
The reason that Greece finds itself in the impossible position it’s in today is the result of years of political, economic and institutional failure – weaknesses that membership of the European Union and then the euro were meant to fix but in some respects actually exacerbated.
Joining the European Monetary Union was Greece’s chance to take flight and soar above the problems that had dogged the country for decades.
The euro was much more than an economic project for Greece. Few European countries had as tumultuous a post-Second World War experience as Greece. It was a period marked by civil war, military dictatorship, political antagonism, poverty, famine and mass emigration, as some of the people in the audience today will know very well.
Greece saw joining the euro as part of strategy to be firmly ensconced within Europe and its institutions. It was a continuation of the decision to join in 1981 what was then the European Economic Community and a way to anchor itself to Europe, thereby providing its people with the stability and prosperity they had been denied for decades.
Between 1981 and 2001, when Greece joined the euro, per capita income in Greece had almost tripled. From 1984 onwards, Greece enjoyed almost uninterrupted positive growth rates each year. Europe was good for Greece and its economy. Also, the euro would theoretically solve one of the perennial problems of the Greek economy: inflation. The whole philosophy of the single currency was based around the idea of maintaining price stability, something Greek governments had failed at repeatedly.
But the importance of the euro as a political and economic project meant danger signs were not heeded.
The focus placed on fiscal indicators as a measure of whether countries were ready to join the euro meant structural factors were overlooked. A period of belt-tightening before euro entry saw Greece’s public deficit and debt fall. This satisfied European policymakers that Greece was on its way towards converging with the other economies.
This proved a monumental miscalculation. The idea that fiscal indicators alone can define convergence was later exposed as one of the biggest flaws in the euro’s architecture.
For Greece, giving up control over its monetary policy meant it could no longer rely on devaluations to regain its competitiveness as it had done several times in the previous decades. Competing with the likes of a resurgent German economy meant it had to be competitive on all levels, not just superficially.
However, a self-serving political system failed to address key problems such as bureaucratic barriers to entrepreneurship, an inefficient public administration and an outdated economic model in which the state was omnipresent.
The two-party system that had dominated Greek politics since the fall of the dictatorship in 1974 had been responsible for creating numerous rigidities. Socialist PASOK and conservative New Democracy, which together enjoyed roughly 80 percent of the vote in elections since the early 1980s and interchanged in government, engaged in a longstanding exchange of favours that involved public sector jobs and contracts being handed to party supporters.
These political parties had become the main channels through which business was conducted in Greece. Their cronyism stretched its tentacles into the judiciary, the police, the armed forces and most other significant institutions.
This practice built an ineffective public sector, fed a largely reactionary labour movement and compromised parts of the private sector, where the dominance of oligarchs in key areas prevented healthy competition and created cartels in product markets as diverse as milk, fuel and even potatoes.
Efforts to introduce structural reforms, such as an overhaul of the pension system in 2001, were repeatedly abandoned by politicians unwilling to confront the monsters they’d created. The traditionally partisan Greek media became increasingly beholden as it got caught up in this swapping of influence and money between the public and private sector. Coupled with the absence of a functioning and independent civil society, this allowed major inequalities to go unquestioned.
What Greece should have been aiming for as it entered the euro was an efficient public sector, a private sector that embraced innovation and production and a competitive services sector – particularly in terms of tourism, which accounts for about a fifth of the Greek economy – and a growing exports sector. Greece ended up with none of these.
This is where hubris comes into play. An increasingly arrogant and out of touch political system and a population appeased by the apparent prosperity euro membership promised failed to see the warning signs. Cheap money papered over the cracks.
The markets treated Greek government debt as being almost as safe an investment as German bonds. Borrowing costs for Greek citizens also declined sharply. As a result, Greece began posting growth rates of 4 percent and above – among the highest in the eurozone.
It was false prosperity. In reality, Greece’s wings were disintegrating. Prices were rising at almost twice the rate of the eurozone average. Businesses, but mostly the government, soon began increasing wages to counter this effect.
Between 2000 and 2009, employee compensation in Greece rose by 23 percent compared to the EU average. During the same period, wages in Germany fell by 18 percent against the European average. Greek wages remained low by eurozone standards but the rise eroded competitiveness and fiscal stability even further.
Worse still, this extra income was largely going towards boosting consumption. By 2006, personal consumption in Greece was almost double what it was before the country joined the euro. The housing market also enjoyed a boom, later to become a bubble as Greek banks were able to borrow cheaply from the European Central Bank and issue mortgages relatively freely. The ECB accepted the Greek bonds it received as collateral as being virtually risk free.
To compound the problem, more money was being spent on imported goods. When Greece joined the euro, it was importing about 3 billion euros of good per month. By 2008, that figure had doubled. This was compounded by the fact that exports remained stagnant by comparison. When Greece entered the euro, it exported 1 euro for every 3 it imported. By 2009, this ratio had worsened slightly.
Here, another flaw of the euro was revealed. The architects of the currency discounted the possibility that disparities in country’s balance of payment performances would have a destabilizing effect. The prevailing thinking was that current account deficits would be mostly self-financing.
On a political level, the once-mighty PASOK started to enter a period of terminal decline. During the late 90s and early part of the last decade, it had moved away from the populist policies of its founder Andreas Papandreou – the man credited with starting the process that led to the size of Greece’s civil service doubling in three decades. Under the leadership of Costas Simitis, PASOK favored a more reformist approach, one that was inextricably linked to the ultimate goal of euro membership.
But after clinching a place in the single currency, PASOK’s reformist drive hit a brick wall. It lacked the conviction to make the tough changes in the public sector, to make the pension system viable and to really attack corruption. Simitis’s premiership fizzled out and he was replaced in 2004 by Greece’s youngest Prime Minister, Costas Karamanlis.
He had spent several years reshaping New Democracy and said he was committed to fighting corruption and reforming the public sector.
In reality though, his ideas proved nebulous. With the alarm bells starting to ring, Greece needed a concrete plan to put its economy on a more productive and viable path. It needed a crisis management team but instead got a set of politicians that flew even closer to the burning sun.
2004 has gone down in history as a “golden year” for Greece. Its soccer team beat the odds to win the European Championship and Athens pulled off the successful hosting of a memorable Olympic Games.
The glory was fleeting. Within a few months of holding the Olympics, Greece became the first EU country to be placed under fiscal monitoring as part of the EU’s Excessive Deficit Procedure. The public deficit had reached 7.4 percent of GDP when the limit for the eurozone was 3 percent.
Greece’s debt was more than 100 percent of GDP – the second highest in the EU. This should have been a cause for alarm in itself but the government was still borrowing cheaply on global markets, which at the point had supreme confidence in the euro and chose to overlook Greece’s economic deficiencies.
Among the economic indicators pointing to trouble ahead was Greece’s current account deficit. It was already at almost 11 billion euros in 2004. The failure to address this led to it soaring to nearly 33 billion euros by 2007. It had tripled in just three years.
Rather than tackle the weaknesses, the New Democracy government fed the problem with more hirings and higher spending financed by more borrowing. Greece’s public debt jumped by 56 billion euros between 2004 and 2007.
So, when the global financial crisis struck in 2008, Greece was woefully unprepared. Karamanlis took the narrow view that this would only be a banking crisis and assured Greeks that their country was “fortified” and would withstand the shocks. Yet, at the same time, his government was running a deficit of 9.8 percent of GDP and was financing this by borrowing from increasingly jittery markets, where credit was drying up.
Time ran out for Greece in late 2009, when national elections led to PASOK taking over from New Democracy and admitting that the deficit for that year would come to more than 12 percent, rather then the 6 percent that had been previously forecast. This triggered a chain of events that led to Greece being shut out of the markets. In early 2010, the EU and the International Monetary Fund joined forces to create the first bailout of its type to prevent a disorderly Greek default.
Bigger economies than Greece, such as Russia and Argentina, had defaulted in previous years but the level of exposur European banks had to Greek debt and fears of contagion from a bankruptcy in Athens drove the EU and IMF to come up with a different solution. It also proved to be seriously flawed.
The frontloading of austerity measures and the slow pace of reforms formed a damaging combination. Both Greece and its lenders must take the blame for this. Greek governments shied away from some of the reforms that would involve clashing with the special interest groups politicians had bred for many years. The EU and the IMF, meanwhile, miscalculated the impact that the largest fiscal consolidation program undertaken in the developed world would have on a faltering economy.
Only a couple of weeks ago, the IMF admitted that it underestimated by more than 100 percent the recessionary impact that spending cuts – the so-called fiscal multiplier – would have on the Greek economy.
Roughly 2.5 years on from signing the EU-IMF loan agreement, Greece is suffering. It is poised to complete its fifth year of recession, with more consecutive quarters of economic contraction than the USA had during the Great Depression. The economy has shrunk by more than 20 percent since its peak in 2008 and is expected to contract by another 5 percent next year.
The unemployment rate has passed 25 percent. One in two people under 25 are without a job and have diminishing prospects of finding one. Over the last three years, salaries have fallen by 19 percent compared to the European average, the minimum wage has been slashed by 22 percent, and pensions by almost 40 percent. In the meantime, income tax, value added tax and property tax have all risen substantially. This year, Greeks have so far paid 450 percent more in property tax than they did last year.
In contrast, the cost of basic goods has not fallen and some, such as gasoline and heating oil, have skyrocketed.
This situation is not sustainable economically, politically or socially. But Greece finds itself trapped. Its only source of funding is the loans it receives from the EU and IMF. To receive these loans, Greece has to agree to more spending cuts and tax hikes.
The latest austerity package being negotiated is for 13.5 billion euros, or about 5 percent of GDP. The EU and the IMF want about 9 billion euros worth of measures to be implemented next year. It’s certain that cuts of this magnitude in an economy that’s still contracting rapidly will have a devastating impact.
But throughout this crisis, Greek policy makers have had no answer. The country is going through a painful political transition and there is a lack of good ideas and able or willing personnel.
Only the eurozone and the IMF have the power to break the never-ending cycle of debt, austerity and recession. At the moment they seem reluctant to do so.
The IMF is pressuring the Europeans to agree on a way of making Greek debt sustainable, otherwise the Fund will pull out of the program. The fact that the Greek economy is shrinking so rapidly and that the majority of the 240 billion euros ($310 billion) from its bailout is going towards repaying existing debt means the amount Greece owes has actually risen rather than fallen over the past couple of years. Figures this week showed Greek debt to be at a staggering 170 percent of GDP despite the fact that privately-held debt was restructured earlier this year.
In order for this debt-to-GDP ratio to fall to manageable levels, official sector debt will have to be restructured. This means the eurozone lowering the interest rate and extending the maturities on the loans it has made to Greece and the European Central Bank, which holds about 45 billion euros of Greek debt, accepting that it will not be able to make a profit on that investment after mopping the bonds up from the secondary market at a discount. A move to ensure that the 50 billion euros needed to recapitalize Greek banks does not pass onto the national debt would also help.
With Portugal and Ireland already having been bailed out and Cyprus and Spain heading in that direction, the eurozone faces some tough choices. It needs bold economic decisions but above all political courage. Sadly, this has been distinctly lacking over the past three years.
Too many key decision-makers in Europe have been content to allow this crisis to develop into a morality play in which the South plays the reckless grasshopper to the North’s frugal ant. This has allowed them to dodge questions about how the euro was structured, who profited and why banks in the eurozone’s core were so undercapitalized and so overexposed to the single currency’s weaker economies.
It has also left unanswered perhaps the most crucial question of all, which is how the eurozone can balance the need for fiscal consolidation and structural reform with the absolute necessity for growth.
The Greek crisis and the events that have unfolded over the last few years have proved an existential moment for Europe. This is the time when it will have to decide whether Union means marriage, as in “for better or worse”, or whether it describes a much looser association.
The tools are being put in place to strengthen the architecture of the euro and bind countries closer together. The European Stability Mechanism (ESM) – a permanent crisis fund – has been given the green light, stricter budget rules are in place, greater powers of oversight have been granted to the European Commission and a banking union, with a central watchdog, will be ready next year. The idea of debt mutualisation, or Eurobonds, is also on the table.
These are significant steps but it doesn’t change today’s reality, which is that many people in Greece and other countries like Portugal and Spain are losing hope. Mistrust and resentment between the people of the eurozone core and periphery is rising. This threatens the European project, whose main aim was to prevent nationalism and conflict. The tone that European leaders take and the decisions they make over the next few months will decide the fate of the EU and the euro.
In the meantime, Greece must cling on amid increasingly difficult conditions. Beyond its serious economic problems, the political situation is finely balanced. Greece went through tumultuous elections this summer that saw support for New Democracy and PASOK cut in half. The once-sworn enemies received enough votes to form a coalition with a third party called Democratic Left. The government’s task is an unenviable one. Its international lenders are demanding it continue with unpopular austerity measures for at least another two years, while also pushing through reforms at an unprecedented pace.
Opposing it are SYRIZA, an anti-austerity leftist party on the rise, and Golden Dawn, a racist far-right party that has come virtually out of nowhere to win 18 seats in Parliament. Greece is now witnessing fascists attacking migrants and other minorities in city streets with the police either unwilling or incapable of intervening. This has only added to the political and social tension and the sense that we are in desperate times.
The strain of unemployment is showing as families run out of money and lose access to benefits and healthcare. More people in major cities are turning to charities for food, medical care and medicines. Some hospitals are closing, universities are running out of money and even some school buses are being put out of service. This is a dramatic change for a society that thought it had entered its most prosperous era just a few years ago.
Convincing Greeks that recovery is attainable is becoming a harder job every day.
However, there are some signs of improvement. Despite the impression that Greece is missing its fiscal targets, it has managed to make substantial inroads into its deficit as a result of the cuts made since 2010. Figures published this week showed that the primary deficit was reduced to just 2 billion euros in September. It is worth noting that the primary deficit when the crisis started was 8.5 percent of GDP. Data also showed this week that Greece posted a current account surplus for the second month in a row in August.
Public spending has fallen dramatically and the government wage bill has been trimmed. The number of civil servants is on the way down and some gradual advances are being made through the use of better know-how in reducing tax evasion, which remains a key problem in some sectors.
Some of the reforms aimed at making Greece an easier place to invest and start a business are starting to pay off. In the World Bank’s annual “Doing Business” report published this week, Greece was among the countries with the biggest jump in rankings, moving up from 100th place to 78th.
Another bonus over the last few weeks has been that speculation about Greece leaving the euro has died down somewhat. For three years, Greece has had to live with almost daily speculation by the media, analysts and European politicians about whether it will have to return to the drachma. This has proved psychologically draining domestically but has also scuppered any chances of investors thinking seriously about backing much-needed projects in the country.
There is a long way to go on all fronts and if the key players in the eurozone approach the challenge facing them as an economic problem rather than a moral quandary, where supposed sinners have to be punished, there is some hope that the positives I’ve described will be form green shoots of a slow recovery.
From Greece’s perspective, it must continue with structural reforms, particularly of its public administration. There has been too much focus on relaxing labor regulations that are already among the loosest in Europe. Only minimum wages in Portugal are lower than in Greece and salaries for under-25s are actually set below what is considered to be the poverty line.
The focus has to be on evaluating staff in the public sector, shutting down organizations that serve no purpose and increasing the expertise and efficiency of key departments. Equally, liberalizing professions protected by anachronistic barriers to entry and tackling cartels will help boost competitiveness and go some way to creating a sense of fairness in society.
Then, Greece must find ways of nurturing the productive sectors of its economy and tapping into the impressive human resources it has. Greece has yet to realise its potential as a tourism destination, for instance. It has suffered from a jumbled strategy over the years as other nearby destinations like Turkey and Croatia have developed more coherent and effective plans. A revival in agricultural production is also a possibility.
But Greece also has hi-tech potential. Statistics show that young Greeks tend to be educated to a higher level and speak more languages than the European average. Greece also has a high proportion of university graduates. In some areas such as ICT and Internet-based start-ups, young, educated Greeks have being putting their skills to good use and a cottage industry of firms that are exporting their products and know-how is developing.
Ultimately, it’s in the hands of this young generation that the future lies. They’re better educated and better travelled than their parents, far more in tune with how successful economies function and how the world around them works. For now, power in Greece still remains in the hands of the older generation that failed the euro test. But as we go through the current political transition, there is an opportunity for new voices to heard and new ideas to be aired. If – and it’s a big if – Greek society is able to survive this crisis, then a new generation of politicians, entrepreneurs, activists and opinion makers has the opportunity to reshape the country.
When thinking about the story of Icarus, people often forget that while the young man crashed to the ground, the older Daedalus made it home safely. Greece is being called upon to reverse this, with the younger members of its society being the ones who set aside the folly and failure of their elders and make it over to the other side. Their goal must be to ensure that Greece is associated with much more positive words than crisis or hubris in the future and that when foreign politicians talk about the possibility of their own country “becoming like Greece,” it’s to inspire their people rather than to frighten them.
Nick Malkoutzis
Thank you for this analysis. Had I been in the audience, I would have asked a few questions for the purpose of better understanding of Greek society:
(1) Why does Greece appear such a divided and divisive society? What are the roots of that? Here in Chicago, one of the largest diaspora cities, we see Greeks sticking together, supporting one another. There is ONE Greek community. Why is this so different in Greece? Sometimes, one gets the feeling that there are two different Greece’s and two different kinds of Greeks.
(2) Greeks outside of Greece tend to be very cosmopolitan people. Many Greeks in Greece are, too. But why are so many Greeks in Greece seemingly so suspicious of everything that is “foreign”? There is a debate on Youtube between the old Karamanlis and the old Papandreou. The former argued emotionally that “Greece belongs to the West!” The latter deadpanned him by declaring “Greece belongs to Greeks!” I can’t think of any European country where that kind of an exchange would have attracted much interest in the public.
(3) Why does the ultra-rich Greek oligarchy do so little for their home country which they undoubtedly love and from which they derive great benefits?
(4) Greece may always have been a rather unfair society in terms of income and wealth distribution but this has been aggravated to extreme levels since the crisis. It often seems like the suckers & suckees. Apart from the loud Trispras followers, most of the suckees are still quite tolerant. Where does that tolerance with unacceptable conditions come from?
(5) Finally, where does the Church come in in all of this? Possibly no other European country has such a close linkage between church and state as Greece does. No cleatr separation of church and state. When church and state are close together, why does the Church not play a more active role in pointing to unacceptable realities?
I am not asking that you answer each of these questions. Perhaps other readers will comment on them. I just wanted to point out that these are some of the questions which always go through my mind and for which I have no answers.
Klaus:
It’s very simply. Division is a form of survival and in fact an extremely successful form of survival.
If all Greeks were united then anyone who wanted to control them could easily do so by manipulating the center of power.
As is, by being extremely fractionalized it’s mathematically impossible to control Greece in a political setting. It’s all by design and as I said it has been learned through centuries of survival.
The only thing one could hope to achieve in Greece is some temporary but fragile truce. The minute the truce is broken, everyone is conditioned to run in a different direction and usually towards the mountains.
>”As is, by being extremely fractionalized it’s mathematically impossible to control Greece in a political setting.”
Thats too true and the current fragmentation will lead to financial default. If not know then next year latest!
Ad 1) All western societies are very diverse and with higher education and life style it tends to further increase.
Ad 2) I personally know only very few Greeks, but they all are very nationalistic. Greek history before the Romans makes them proud (I admire that culture too). I know pretty well people in southern France and Italy and they also seem to be pretty nationalistic.
Ad 3) Maybe they have given up?
Ad 4) Mentality has formed in the last two generations before the current crisis. Part of the current protests are orchestrated by political powers, and of course there also are lots of people with realistic fear of their future.
Ad 5) In all southern countries church is more influential than in Germany, Switzerland, Holland, Denmark etc.
Even the Christian Democrat and former minister Heinrich Geissler recently published a book saying that capital now reigns the world in an unfavorable way! You certainly read what Archbishop Ieronymos said in Greek TV (http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_27/10/2012_467647) This definitely will not improve the mess.
Mehr Geld bitte und schneller!
Klaus, you are very correct in your observations but you fail to link these traits and divisions to Greece’s modern history that has played a major role in nurturing these traits. In Greece it has always been ‘us’ and ‘them’. History will show you that this has not been entirely the fault of the Greek people but those of the various conquerers and colonists who have created this divisiveness in Greek society and thus, in the mentality throughout her modern history. Even as recently as the ’70s it was between the right and left–if you had any family history of left-leaning politics you could not get a decent job. These problems were never properly addressed or resolved, only glossed-over during the boom years. As for the church, in my mind, it is a parasitic institution out of touch with reality.
I admire the conscious effort to try and keep the script positive, and dispel myths, in what are very difficult circumstances. Pinning hopes on the highly educated younger generation is noble. My hope is that Greece is able to attract home it’s vast diaspora studying and working in more stable economies -I meet them everyday here in the UK, in London, Newcastle, Edinburgh. They speak poorly of the country that so eloquently educated them: it’s a good place for a holiday, they tell me, but no place to live. Reversing the brain drain is a crucial factor in reducing the gap between import and export deficits. Greeks are great researchers; this needs to be capitalised on and turned into product. Like you I have no easy solutions but welcome the discussion and am writing on similar issues on my blog.perryeyes.blogspot.com
We can address the statement in your speech individually, but here is an umbrella statement:
It would be naive to believe that if Greece had its financial house (meaning the public house) in order that somehow it could have avoided the crisis. We now know that much better managed economies, considered to be “models”, are in deep crisis also.
I will say it one more time and please read my lips(no, it’s not hubris): “This is not an ECONOMIC crisis. It’s a POLITICAL and IDEOLOGICAL crisis”.
Germany’s long held objective is/was to achieve political union in the EU. By choosing Greece as its experiment guinea pig, Germany bit more than it could chew. Greeks are the wrong people for forced experiments. Greeks are willing participants in experiments only when they see that everybody else around them has gone through the experiment first.
It’s that simple. Germany will suffer a defeat in Greece because Greeks are not Germans nor they will ever be.
>”By choosing Greece as its experiment guinea pig, Germany bit more than it could chew.”
Dean, on what planet do you live? You still owe me an answer in the previous discussion!
Your speech is very interesting, because it seems more revealing than you like it to bee. Although many facts and conclusions are correct and brilliantly written, you manage to avoid the crucial point that Greece only managed to prematurely enter the Euro zone by some criminal financial tricks of the Greek government.
I agree that it is psychologically understandable that you and other journalists avoid to publish the whole truth, but there can be no doubt that this provably leads to misbeliefs in the Greek population that prevent the majorities in a democracy to realize those prerequisite reforms you also mention.
By your very smart use of the words crisis and hubris, you avoid to bluntly tell of what ugly death Icarus was overtaken.
>”Joining the European Monetary Union was Greece’s chance to take flight and soar above the problems that had dogged the country for decades.”
When in November 2004 the problems became obvious, Greece again had it’s fair chance to remedy the situation. Eight years later there are some results of the too drastic treatment visible, but what I learnt from reading your blog and Ekaterimini English news in the past months I no longer believe that the current political and economic system can solve those problems.
Nick, please explain me why no Greek media tell the plain truth to the population?
Where is your evidence that Greece lied to enter the euro? Check the Ameco database. There are no such statistics to back up this claim, which is repeated incessantly by those with little knowledge of the facts.
The Greek deficit was revised in 2004 by the New Democracy government because it wanted to get one up on the previous PASOK administration and buy itself some time.
What they did was change the way that defense spending was recorded. Instead of recording spending when equipment was delivered, they recorded it on purchase, thereby creating a bigger deficit. For the record, Eurostat had approved both methods and the eurozone was fully aware of what happened.
That’s the plain truth.
I have given more detail in the discussion to your former blog entry about “anyone-for-debt-tennis”.
Are you claiming that all those publications like BBC with that title “Greece admits fudging euro entry” are not telling plain truth?
@ H.Trickler: I’d propose you repeat and summarize these arguments here. You shouldn’t expect Mr. Malkoutzis to crawl through the more than 100 comments of that discussion.
> Are you claiming that all those publications like BBC with that
> title “Greece admits fudging euro entry” are not telling plain truth?
Meanwhile I suppose, anywhere here you can find another main differences between the public debates in Northern Europe and in Greece, resulting in a kind of culture clash.
HT:
The essence of you argument is:
1. Why don’t Greek journalists become obedient instruments of the German line? and,
2. “when are you people will tell the “truth Made in Germany”?
And this is precisely what we want to avoid.
We want, to the largest extent possible, Greek journalists unbiased and therefore able to judge and pin point the failings of the system (whether the system is endogenous or exogenous).
I once had an issue about this with Nick but then I realized that he was entitled to his opinion.
Imagine a world where the official single line prevails. Isn’t this what fascism is all about?
What you seem to suggest is that Greeks are prolonging their own misery by resisting, which is the precise argument of a typical opressor.
Dean, if you tell me that Germany has bought all those numerous journalists that wrote all the texts I mentioned in the previous discussion, including BBC England (!!) then Greece definitely is on another planet
I think one should drop this argument about Greece’s having “cheated its way into the Eurozone”. First of all, I don’t think it is correct (my understanding of the situation is as described by Nick). But even if that weren’t so, it would be a question of a few basis points above/below the 3% limit. That is immaterial.
A lot of smart financial engineers advised probably ALL countries how they could “massage” their figures a bit. In Austria, the most popular instruments were to outplace debt into autonomous entities which had the material or immaterial guarantee of the state but did not count against Maastricht; or to use a lot of PPP-models which were PPP only pro forma but exclusively public in reality; or cross-border leasings with US SPVs; etc.
It think this alleged non-compliance as regards the 3% limit as well as the cross-currency swaps with Goldman are blown way out of proportion. To focus on these issues does not serve any constructive purpose whatsoever. On the contrary, it only distracts from what is really essential.
One thing is noteworthy, though. If I recall correctly, the countries in the South actually viewed Maastricht and the Eurozone’s straight-jacket as a blessing in disguise which they welcomed at the time. The arguments which I remember went something like: we want stability; we need reforms; we can’t manage that alone; the Eurozone will force us to do it; that is great! Well, somewhere along the way, it turned out that the Eurozone was not the straight-jacket which would force reforms but instead a seemingly unlimited source of cash flow. And as long as cash flows, one doesn’t reform.
I never checked how figures without cheating would look. But it must have been considerable. I do not know how much window dressing was done in Austria, but obviously it must have negligible because 3 years later the Austrian figures still looked pretty good, while Greec already busted.
And if you do not tell the population the beginning of the whole mess they either find marvelous writings regarding Ikarus or come to the conclusion that Germany is to culprit for everything.
My understanding is that the difference was something like 2,9x and 3,0x, i. e. a range of less than 20 basis points but perhaps Nick can clarify.
I wasn’t suggesting that Austria would not have met the targets without windowdressing (it would have by far). I was just saying that EVERYONE
was and still is massaging figures when necessary (Schäuble: “Auch wir bescheissen manchmal”). Today, it’s a bit different for Austria than it was then because with so much debt added, a very bad debt situation would turn to terrible if all debts were aggregated (about 20% higher than actual). While we are speaking from Austrian to Austrian: Austria shows almost extreme parallels with Greece (huge black economy, much tax cheating, much corruption, 2-party dominance throughout society, huge public sector; etc. etc.). The major difference is that Austria has a well-functioning and value-generating private sector and Greece does not.
Again, I really don’t think it serves any purpose to belabor the issue of the 3% more than a decade later. In fact, I would argue that Germany’s/France’s precedent of violating the Maastricht criteria and treating it like a cavalier’s delict did much more damage to the longer-term discipline in the Eurozone than anything else.
> In fact, I would argue that Germany’s/France’s precedent of violating
> the Maastricht criteria and treating it like a cavalier’s delict did much
> more damage to the longer-term discipline in the Eurozone than
> anything else.
I think the same. If there is a point to blame Germany for the actual crisis, it is the way how it violated Maastrich criteria first and was not punished for doing so. That was an bad exemple of moral hazard for each one following.
Ambiguities, contradictions, stilted questions, but truths also
http://failedevolution.blogspot.gr/2012/10/ambiguities-contradictions-stilted.html
> What you seem to suggest is that Greeks are prolonging their own
> misery by resisting, which is the precise argument of a typical opressor.
Even if (or because?
) H. Trickler is an Austrian, he seems to know quite well about the problems of societies (as well as people) refusing to accept displeasing realities and in the short-time-hurting, but long-time-liberating effects of the acceptance of even humiliating realities.
He (and I and many others) may have the growing impression, that main parts of the Greek Society still prefers to close their eyes toward “own” faults, preferring to play blame-game toward others.
That “eye closure” is the best recipe to repeat the same mistake again and again.
In no way are the Greeks closing their eyes to their ‘own’ faults. However, it is easy for an outsider to simply say accept even the most humiliating of realities or else… At this point in time and with the implementation of the newest measures demanded by the Troika imminent, the society cannot endure anymore until it has become accustomed to the new order and can stabilize itself in anticipation of possible further necessary actions. We are not talking numbers here. We are talking about people, lives, aspirations and futures. We cannot divorce the humanitarian consequences from the sudden and deep financial burdens imposed by the demands of the creditors however justified they may or may not be. Who of them cares if people cannot access health care, food or are evicted from their homes? Changing cultural norms usually takes generations but what is asked and required of the Greek people is that everything must change literally overnight. I wonder who is closing their eyes to reality.
Unfortunately argumentation by Nick and Dean proof that they are not prepared to fully open their eyes…
I see the same problem with lots of Greek comments in Ekaterimini english section. Sorry but from Austria this looks like Greece being on a different planet…
Roger:
Let me point out the major flaw of your argument.
When the Greek government(s) made cumulative mistakes that lead to its credit overextension, that’s the problem of the institution, not the people. If government is incompetent or dumb or corrupt then the government bankrupts and the problem is contained by starting fresh again.
Under no circumstances you transfer burdens of the institution into the backs of innocent folk.
What you are attempting to do here is to transfer ownership of a problem from a bureaucratic/technochratic class to millions of citizens who simply did not know, were not aware or never been informed of the true magnitude of such problems.
Can you give me one grounded reason why the Greek people should take ownership of a failure and in the process keep alive the entire banking EU system and other economies going into the tank? Who is help who here? Instead of you and other Europeans being eternally grateful that average Greek citizens are saving your a$$, you got the nerve to tell us that we ought to be more cooperative?
I think you got it all wrong my friend.
i’m with you Dean!
>”Under no circumstances you transfer burdens of the institution into the backs of innocent folk.”
Sorry Dean, but this argument is far below your level and once more proofs how feelings drag you away from logic:
It is _always_ the innocent part of the population that pays the bills of the emotional and careless elites, beeing it in war or economic crisis.
You never answered my question if you have withdrawn your savings fron the unsafe accounts of Greek banks, and I have no doubt what a honest answer would be
Less educated and poorer parts of your country do not have this possibility and contrary to you they not even know what would happen in case of default of the Greek state.
I would be surprised if the do not learn that lesson within the next 12 months.
> When the Greek government(s) made cumulative mistakes that lead to its credit overextension, that’s the problem of the institution, not the people.
The mistake has been made by the government, yes, but sadly the price usually has to be paid by the ordinary people. So usually it is the problem of the ordinary people and they should be interested to take care it wont repeat.
So I still wonder why there is not at least an kind of crminal investigation toward the responsible politicians in that government.
> Under no circumstances you transfer burdens of the institution
> into the backs of innocent folk.
Nevertheless If you devaluate the currency or increase the depts or whatever else, sadly in all cases the ordinary people will suffer. Hence they should take a better control of their government.
> Can you give me one grounded reason why the Greek should [...]
> keep alive the entire banking EU system and other economies
> going into the tank?
As I told several times I’d advise to declare bancrupt and leave the EU banking system alone with their depts. But even that will not solve all problems for Greece.
> I think you got it all wrong my friend.
I simply fear that be declaring “Greece is totally innocent” and not analyzing also the own mistakes of government and society (including the still missing check-and-balance-system that stops the goverment from ruining a country) the greek society may not learn the lectures it needs to avoid falling to the same traps in short time again. That would be a quite high price for ignorance.
Roger:
You seem to be proud of Germany/Austria merely being one step above the most imperfect form of government which is Tyranny. In essence what you are saying to us is that after centuries of tyrannical rule you are now beginning to enjoy another form of imperfect government called democracy.
Are all German/Austrians/ Northern Europeans so ignorant of what constitutes a higher form of government? Have you guys ever read Plato and the optimum hierarchy of types of government?
http://en.wikipedia.org/wiki/Plato's_five_regimes
I do not think that Greek population should feel humilated if their former government lied to EU. This is the sole (moral) responsibility of those who commited the crime.
I however see complicity if journalists today whitewash the past or play the blame game or hide behind well thought out narratives where Ikarus becomes an ideal…
HT:
We are not humiliated about our “governments”. We are simply indifferent about them. We have seen so many “governments” throughout our history to know that rarely are governments of the people and by the people.
If they mess up, that’s their problem, not ours. We do not equate temporary “governments” with the ideals of Greece or of our nation. We innately understand that governments are fallible because all of us people are fallible.
And there is no particular desire of any Greek to sacrifice so that he/she can save a transitory “government”. Governments are a dime a dozen. If you don’t like one, you vote in another and if they prove below the task you vote another yet. Until you find a competent and responsible government.
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@Dean Plassaras | October 29, 2012 at 9:06
This attitude might explain the past 30 years of Greece and many Italiens also think along these lines.
I am however convinced that with such misconception Democracy is bound to fail, and Greece might the proof to this theroy. If in Italy Mr. Berlusconi or some similar person should follow Mr. Monti they will fail too.
HT:
Austria and/or Germany are hardly paragons of democracy. You have lived for ages under authoritarian regimes, Prussian mono cultures, Kaiser and other ridiculous “Father figures”(you even call your country Fatherland whereas we call ours Motherland). In fact, your democracies are the least mature of all democracies.
You are born with an ingrained obedience to the state (even if the state turns out to be pure evil), you easily surrender your freedoms to some form of state collectivism or another and you approach your governments with some reverence as if they descended from heaven.
To us you look like immature children, afraid to be punished and unable to be free. To yourselves you appear to be “responsible” citizens and doing your part of the sacrifice required for that all of you remain in prison. Because how else you could be exploited if not by voluntarily surrendering yourselves to the abuses of authoritarianism which seems so natural to you and so abhorrent to us?
Dean, you not only live on a different planet, but also in a very different period.
Now doubt that Germany and Austria have had bad periods before and during WW2, but afterwards democracy is live and healthy and works as expected!
HT:
Are you suggesting that 60 years of democracy is enough to develop a democratic culture?
We have invented it 2600 years ago, and you want to be an expert in 60 years?
> Austria and/or Germany are hardly paragons of democracy.
I wouldnt use your words, but you have one central point: The stability proof of a democracy comes when it is burdens by heavy internal and/or external stresses, when it is close to get overburden.
Germany and Austria actually are quite fine, the burden is relatively low.
Greece instead since several years faces the heaviest internal and external stresses it had to since tens of years. So it is in a situation it may have to face a real test of its democratic stability. As long as Germany or Austria do not have to proof their own stability at a similar test in this times, we cannot judge about Greece.
And not to forget, in the last century Germany and Austria both proofed to be to weak to stay democratic under the very heavy burdens they had to carry.
> You are born with …
I dont know if this and the next chapter is the disabled attempt of an insult or simple ignorance, but its so much under your usual level I prefer to ignore it. You can do it better.
> We have invented it 2600 years ago, and you want to be an expert in
> 60 years?
So you should remind quite well that it is not only the question of “inventing” than also the question of defending a democracy toward its enemies. The ancient greek polis have shown lots of examples how a democracy has gone lost again after more or less years. Not to speak about the modern greek democratic track record of just 38 years since the last dictatorship.
By taking a look to the persons governing modern greece I got two impressions: http://en.wikipedia.org/wiki/List_of_Prime_Ministers_of_Greece
1. I feel reminded to an oligarchy of familes:
- Konstantinos Karamanlis and Kostas Karamanlis,
- Georgios Papndreu, Andreas Papandreou and Giorgos Andrea Papandreou,
- Eleftherios Venizelos, Sophoklis Venizelos and Evangelos Venizelos
2. I do not remind knowing of any other coutry requiring 185 (!) prime ministers / heads of government in the 190 years since 1822. Even Italy seems to have a solid govermental track in comparison.
HT:
Maybe you want to refresh as to civic bonds:
Only future will show if the current system in Austria is limited to fair-weather democracy. I am fully aware of the pros and cons of various systems. However, this discussion has no direct context to the current mess in Greece
But of course it does.
Seriously now guys. I think it will do you a world of good if you quickly read the synopsis here. Not only it will assist you tremendously with understanding the ideal but it will also clarify many issues we seem to be struggling with. It only takes a few minutes.
http://www.cliffsnotes.com/study_guide/literature/republic.html
And if you are of short-attention span, at least read this:
http://www.cliffsnotes.com/study_guide/literature/republic/summary-analysis/book-viii.html
@ Dean: Even if you seem to open a side show, its a quite interesting one. I have to admit I didn’t know that book of Plato neither his dialog of an ideal state, so his valuation was quite surprising for me, but worth thinking about it. So I have to sidestep a bit for reading and thinking.
Roger:
What is most amazing is that the book was written 2500 years ago and is still more advanced than anything you can think of today.
Oh, well! Here come the Greeks again!. 
Excurse about Platon, his five regimes and his critic Karl Popper
> and is still more advanced than anything you can think of today.
Hmmm. If I were Greek maybe I would say so too.
But as it is with everyone human beeing there is a good chance that time has shown the flaws of its ideas – and I suppose it did.
I am a bit puzzled for getting the impression that German philosophers discussed a lot about the ideal government system of philosphers king, but seems largely having ignored the other four options that Plato seemed to declare as beeing more realistic, and Platos motivation to balance them up in that succession.
Spontaneously I felt most sympathetic with the critic of Karl Popper, even if he seems to be unfair in accusing Plato to ignore developments and findings that happened thousends of years later, that Plato could not know about it.
But I feel more comfortable with Poppers sceptical approach I would describe as “Measure the leaders design in “How to avoid the worst, if the government fails and abuses its power” than in “How to get the best way if the leaders remain perfect”. As you actually see in Greece, a failing government is able to ruin the country. And as we know in Germany, it is also able in muatrdering millions of people and destroying a continent too. So its important seriously trying to avoid the worst.
Following Popper I see the main advantage in a democracy in the ability to displace a leader without the need of a bloodshed. Additionally I see the strict neccecity to install checks and balances to prevent ill-fated governments of abusing their power to much.
Maybe Germans in history concentrated too much in search of the ideal leader in kind of “philosophers king” and hence forgot installing solid checks and balances.
- Even in my family some ancestors were really idealistic followers of Hitler and its proposed idea of a nation uniting the whole people as a “race state” (even if it is really hard for me to understand that today), later felt bitterly betrayed. As far as I know about them they were really honest people in ordninary life, what makes it nowadays even harder to understand their enthusiasm for Hitler.
- As well in Eastern Germany I personally know several really idealistic minded people and strong followers of communistic ideals feeling bitterly betrayed by the abuse of the idea in real communist regimes. trong ideals but no controls against power abuse.
- As well I remind well to the Prussian King Frederick the Great (http://en.wikipedia.org/wiki/Friedrich_II_of_Prussia) who aspired to be like and partially was like a “philosophers king” in the Plato style (eg writing an “Anti-Machiavel”), but who had by far too many flaws to depict him as a role model for a government. By having nearly absolute power of course he also abused that, e.g. by starting totally hazardous, kamikaze-style wars against Austria.
History has proven much too often that idealistic utopians, if not bound by checks and balances, anytime abused the power. And I suppose among the best check and balance is the democratic election of ALL people as best chance to displace leaders without bloodshed.
So I won’t follow Plato in weighting the lead of few above the democratically elected leaders of all in his five regimes neither in despicting a “philosophers king” with abolute powers as an ideal leader.
But nevertheless thank you a lot for opening that side show.
Roger:
That’s not a side show. That’s the main course
Dean:
> That’s not a side show. That’s the main course
What do you mean with it?
Is there a serious discussion in Greece that following Plato, a government of a small elite (eg a military junta or a communist group following the leninist avant-garde modell) should be preferrable toward the democracy modell for Greece?
Or what are you talking about?
Roger:
What I mean is that politics (especially the good type) are far, far, far more important than economics. The main course of society is its brand of politics not the state of its economy.
In any event here is the latest:
http://www.reuters.com/article/2012/10/30/us-greece-austerity-idUSBRE89T1BI20121030
Klaus, I’m coming late to this commentary but I’d like to have a go at answering your (very pertinent) questions.
I start by reversing the order of 1. and 2. -
(2) The Karamanlis – Papandreaou debate refers to our recent post-war history as a client state of the USA.
Greece was the first guinea pig of the Domino theory due a) to its geopolitical importance in the Eastern Mediterranean, and b) because it emerged from WW2 with its infrastructure totally destroyed, and surrounded on all its land borders by new communist states. Greece rapidly descended into civil war, communists vs non-communists. The anti-communist side won with the help and intervention of the British and USA, and when this was over the war-impoverished Brits handed their part to the Americans. Immediately following the cessation of conflict, the Truman Doctrine was formulated and put in place in 1948, to re-construct the infrastructure in Greece, with the US Embassy ‘keeping an eye on’ and advising the government. (The Truman Doctrine mutated into the Marshall plan for the rest of Europe in 1950).
To cut a long story short, the USA failed to support the modernising government of the first (George) Papandreaou, and gave succour to the junta which replaced it, of which one of its 3 Colonels was a former CIA link.
Karamanlis was not pro-junta, but he was pro-west and pro-American (with a pinch of salt). Older than Andreas Papandreaou, he had been the government technocrat who oversaw the infrastructural reconstruction of the country under the Truman Doctrine. His pro-West attitude was also based on earlier modern history, the Balkan wars and Turkey/ Micrasia, in which he saw that Greece needed NATO and western backing for self-protection.
Andreas, who had been jailed by the junta and fled the country immediately after, (as did Karamanlis), is talking about the need to free ourselves from being a US vassal state and Greece taking back his own destiny. On becoming PM, his first 2 acts were to throw the US bases out of the country, and join the (then) EEC.
In effect they are talking past each other – while basically agreeing with each other though not on the details. A fascinating debate.
1) Greeks are divided on the surface but not underneath when push comes to shove. Partly geography (islands & highlands – we’re hard to conquer), and again, the recent history in (2) above. Specifically, the communists suffered immensely and unfairly after the civil war from the US hegemon, many incarcerated for years, and denied jobs. Yet most greeks had joined the communist party not as cold war ideologues, but because it was the most effective social force after WW2 for interior aid and social help. Spirou Mercouri, Melina’s father, the greatest and only effective Mayor of Athens, was Communist.
This political divide lasted basically until we joined the eurozone.
3) Good Question!! This was not the case historically. Modern Greece from the Filiki Etairea onwards benefitted enormously from diaspora and interior benefactors – Syngrou, Pezmazoglou, Zappeios, Benaki..the list is incredible. It benefits now from many of the foundations of the shipping magnates – not least the Onassis Foundation which is the main supplier of student scholarships abroad.
Today’s bunch are nouveau riche benificiaries of government cronyism. The ones who when they cheat you, see you as the fool.
4) “Apart from the loud Trispras followers, most of the suckees are still quite tolerant. Where does that tolerance with unacceptable conditions come from?”
It is certainly not true that only Tsipras (SYRIZA) followers are intolerant of conditions. The vast majority of the country is totally intolerant, they are simply following different political paths. Dem Left, ANEL, Chrysi Avgi, KKE are all “anti” parties. And most of the recent ND voters are intolerant but terrified of being kicked out of the euro. These recent ND voters proved to be mostly over 55. I can’t speak about PASOK – joke! – except to say they are intolerant on paper.
5) The church has just this week taken a hard public line against Chrysi Avgi. I think they’ve been keeping a low profile due to their immense land wealth – which of course has proved to be a liability with all the land taxes. However on the ground they have been unbelievably pro-active. Under Ieronomos, and studying the social programmes of the Church of England, they instituted Church in the Streets 4 years ago (feeding hot meals to 2000 illegal immigrants a day in Athens centre), set up adult and children’s Hospices, education programmes, are building hostels for the homeless. Every parish church in Greece feeds a hot lunch to needy parishioners, and provides clothes, blankets and other succour.
Thx for your very interesting answer!
I had asked in serveral forums how much a Greek judge earns before and after the recent cuts. Anybody to give me a hint?
http://www.thenewamerican.com/world-news/europe/item/12890-greek-judges-and-prosecutors-strike
Dean, that link does not give any news. I still lack a precise figure which would allow me to make a comparison to Austria and other countries.
I also want to thank for that very interesting answer!
Thank you for your most interesting comments!
Dean, I’d like to thank you for the time and effort you spent to defend your standpoint. The links to publications you gave have helped me to understand how a very well educated and intelligent person actually can happily live on another planet in a different epoch.
> “If government is incompetent or dumb or corrupt then the government bankrupts and the problem is contained by starting fresh again.”
You certainly are not alone with your attitude towards the state in Greece. It is well known most people in southern countries see no problem when politicians go the line of least resistance and finance the state by inflation and in worst case by default once per century
By asking to become part of the Eurozone, Greece had to change such attitudes and follow the rules of the austere regime. If you now blame the Germans, this is psychologically understandable but an unfunded and unfair reaction. If Nick now publishes a beautiful story about Ikarus, it pulls the wool over the eyes of the population and will not be helpful at all.
During the past 8 years Greece had a fair chance to become a modern and efficient state of the euro zone. This was the duty of Greek parliament and Greek population, not of Euro bureaucrats. You got a lot of money from EU which was not spent to do vital reforms.
Now, I see only two solutions:
Go bankrupt and change to Drachma as you explained before. This will not be the end of the Euro, and in maybe four years Greek economy will have recovered and inflation will help to make the balance as we all know. The other solution is highly speculative and of high risk: Get some Greek to go the way Ataturk went in Turkey.
In both cases I wish you good luck, and Dean, you certainly will find some old Greek philosopher explaining that hatred always falls back to the person applying it (even if there would have been reason for hate!!).
I go to holidays now and will no longer respond.
Happy time off.
We will bankrupt as you suggested but we will remain in the euro. Just follow what Ackermann says:
http://www.spiegel.de/wirtschaft/josef-ackermann-fordert-schuldenschnitt-fuer-griechenland-a-864145.html
Probably. But how will it secure Greece to get into the same mess soon again if they shouldn’t install better checks and balances controlling the government?
@ Dean: The discussions of the last days started me to rethink several economical questions. In some points I am still totally controverse to your positions, maybe partially due to a different cultural background. In other points at least I started understanding your logic, even if not beeing convinced if I should follow it, in even others I would follow you in huge parts. By also reading some economical blogs I wouldt be interested to know your opinion about two special articles. As far as I understand ypu they may be compatible to your opinion and also seem to be very logical for me. What do you think about them and their conclusions?
1. (Same article in German and English): http://kantooseconomics.com/2011/08/16/ryan-avent-und-das-gespenst-der-1930er-jahre-ryan-avent-and-the-ghost-of-the-1930s/
(Comparing the actual economical crisis with that of 1920′s and 1930′s and calling for dept cut, but also asking if a leaving of EURO-currency may help))
2. (Same article in German and English): http://kantooseconomics.com/2011/04/18/hundert-jahre-alte-lehren/#more-3502
(A comparison with a european gold standard 100 years ago and some conclusions)
Roger:
I have enough trouble conversing with at least 3-4 guys here than to start another disagreement with another blog.
In general, I consider the arguments of gold bugs sort of ridiculous and self-serving. If you are into wealth protection you should have bought gold when it was $200 an ounce not when it’s 9 times higher at $1800/ounce.
The sad conclusion of the gold argument is that whatever you think your total assets are today, in reality their true value is about 1/10th . So, if your total wealth is 10 Million then it’s real value is about 1 Million or below.
I am far away of advising any goldbugs.
I was more interested in the comparison to a former monetary union.
It’s closer to the ideas that:
- indeed a debt cut is nessecary
- perhaps the core inflationary rate of EZB actually is to low for such a diverse economy as europe and has to be increased (Something I start to believe but what will be really (!) hard to tell germans.)
- it still is not shure if it is better for greece to stay inside eurozone and adapt or leave eurozone and devaluate.
PS: I dont stick in Gold because it has no real inner worth.
You can’t eat it (like food), you cant’t live in it (like houses), you cant produce stuff with it (like industry), you cant heat with it (like oil), you simply can adore it as a golden calf.
Thats not mine.
Roger:
Gold is a form of money. It may not be a form of money easily converted but it is money novertheless.
My point here is that most German savers fear inflation, not realizing that 9/10ths of their wealth has already evaporated.
Their behavior reminds the proverbial “closing the barn door after all the cows have left”. What they think they are protecting is already gone. And what’s left will be gone too. It’s just a matter of time.
The entire world has already decided that the debt burden which weighs throughout the globe will be addressed with controlled inflation.
Germans for some reason or another seem willing to fight the inevitable. They could try but they will lose for sure.
Hear! Hear! A well-balanced and nuanced presentation of the current predicament Greece is faced with.
That said, is it possible that more weight to the origin of the Greek crisis should be placed on what happened in the eighties rather than in noughties? There is a discourse going on in Sweden (where I am based) that the euro is to blamed. While there is some truth to that argument, I believe that it conceals the fact that the seed of the current crisis goes way back to eighties.
What is your take?
If one is to believe Prof. Yanis Varoufakis, who is probably the most quoted Greek expert in the world these days, the “terminal decline of the Greek economy started in the 1970s”. At least that’s what he said in this 1993 interview.
Klaus, we both know Yanis. He is a “leftist” economist. The fact he is the most quoted is not material.
Yanis is letting his core ideology dictate his message. According to the Greek Left, the decline of Greece started with the junta collapse because the Left failed to take control of power. And as long as the Left is out of the power game, Greece will continue to “fail”. Greece will begin to “succeed” as soon as the Left installs itself in power….or something like it the message goes.
The problem with the Left (aka Yianis) is that they can make a pretty accurate diagnosis of the problem but then take a sharp left turn (no pun intended) and fall over the edge of the cliff. The fact that they could identify the problem correctly throws off many people into believing that they can pin point the right solution also. Nothing could be further from the truth. Yianis and I agree on about 90%-95% of what he says but then we radically disagree on the solution required.
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