Exit Polls Suggest Syriza Has Won Greek Election

[C0ckney]

i'm glad that i managed to provide you with some data to back up your argument. greek productivity is higher than most of the 2004 entrants and portugal, but lower than the EU average. this is about what one would expect. however, as colon and i have pointed out, productivity is not relevant to this discussion; it certainly had nothing to do with the argument i made.

[dannubis]

No, you said you were going to disprove any claims that Greeks were lazy. I said you were right about Greek people in se but that they are resonsible for their inefficient society.

Regarding the relevancy of productivity, unit labor productivity is a measure for efficiency of wealth generation. Wealth generation is your base for taxation. IF Greece wants to spend more they need to increase efficiency (since they already work long hours). However, increases in efficiency were held back by labor unions and elected politicians did not have the incentive to enact proper legislation (cheap loans were availble under the umbrella of the Euro), so Greece got into serious problems in 2009.

I still do not get what your major comprehension malfunction is with that fact.

[OneFootInTheGrave]

Additional direction from the new finance minster.

He said Greece wanted to negotiate with its creditors. But he insisted that Greece was not seeking a confrontation with creditors, whether in Frankfurt, Brussels or on Wall Street.

“All we’re asking is for,” he said, “is an opportunity to put together a proposal that will minimize the costs of Greece’s loan agreement and give this country a chance to breathe again after policies that created massive social depravity.”

Time is short. Even if the new government does not want to abide by the terms of Greece’s bailout agreements, the Treasury would seem in need of a remaining €7 billion loan disbursement from that program if Greece is to pay off foreign debts coming due by August.

But, Mr. Varoufakis said, “we don’t want the €7 billion.”

“We want to sit down and rethink the whole program,” he added. “Our task is not to get the next loan tranche,” which he said would be merely “kicking the can down the road.”

Instead, the task “is to restructure the debt and the economy to get the money we need.”

To Syriza’s detractors, such remarks might signal that the new government does not understand the magnitude of Greece’s financial challenges. But Mr. Varoufakis suggested that the government could finance its obligations by reducing the target for the so-called primary surplus, the amount of cash in Greece’s coffers after expenses and interest payments.

Creditors are demanding that Greece run a primary surplus of 4.5 percent of gross domestic product. Mr. Varoufakis, however, said Athens would propose to hold the level to 1 percent to 1.5 percent of G.D.P.

[OneFootInTheGrave]

comment on how it could all work out

Introduce a moritorium on debt

First of all, the issue of the inherited Greek debt stock needs to be addressed. The key point of Syriza is that a haircut of 50% would free up a large part of the country’s primary surplus and thus allow for new spending to address the worst social problems and kickstart growth. The debt haircut is thus a means to an end.

For creditor countries it is important to show to their electorates that they are not giving in to pressure to write down loans. This is a question of principle. The solution to this confrontation is a moratorium on debt payments, further adjusting interest rates and maturities, and linking future repayments to economic growth. This would allow both sides to claim victory: Germany and other creditor nations would not suffer a debt write-down, and the Greek government would free up funds to spend on its policy priorities.

Abandon austerity, and tackle corruption

The second element is kickstarting growth and pursuing domestic reform in Greece. Several of Syriza’s own policy priorities are aimed at generating growth, and these domestic efforts should be accompanied by a reversal of the Troika’s austerity conditionality. There is overwhelming evidence that austerity has been a disaster. Admitting this and changing course will show Syriza that creditor countries are willing to turn the page.

But Syriza too has to learn from past mistakes. The new Greek finance minster, Yanis Varoufakis, has promised to destroy the foundations of the Greek oligarchy. Tackling corruption and reforming the tax system, the civil service and other dysfunctional institutions will not be easy. But it is a vital necessity for Greece itself, and to show to creditor countries that the new government is serious about reform at home.

Boost the rest of the eurozone

The third element of a possible deal is creating the European environment in which this can work. It is obvious that if you want to deal with sluggish growth and large debt burdens, a deflationary economic environment is the last thing you want. The eurozone needs to get its inflation rate back to the 2% target as quickly as possible, which would help reduce the real value of debt. Entrenched deflation does the opposite, and would create problems not just for Greece, but also for other countries with a high debt-to-GDP ratio.

The European Central Bank has, eventually, done its part by starting quantitative easing. But as Mario Draghi, the ECB president, said, QE alone will not be enough. We need a concerted investment push across the eurozone that takes advantage of the new money and record low interest rates. If you don’t invest now, when would you ever do?

The European commission could also provide an extra boost for Greece and other crisis-stricken countries by making sure that the bulk of its announced investment programme goes to where it is needed most.

Together, all these elements would put Greece back on to a growth path. If this is achieved, there is no reason why Greece could not service its debt once the moratorium runs out. It will be a significantly lower burden as the economy will have recovered by then.

The deal sketched out above would allow all parties to keep face. Germany and other creditor countries would not accept a haircut, but they would be flexible about repayment terms and about changing policy conditionality. The Syriza-led government, on the other hand, would be in a position to tackle Greece’s social and economic crisis, but would have to accept that its debt is not going to be written off. All eurozone countries, together with the European institutions, would make sure that they do not sink into a Japanese-style deflation. This is in everyone’s interest.

To sum up, there is a way forward if everybody negotiates in good faith – but the stakes are very high. The danger of political accidents is clearly there. But a messy default and potential break-up of the currency union is in nobody’s interest. So in the end a compromise is the most likely outcome.

Essentially - instead of killing your debtor (in the process potentially the EU, thus harming your own future prospects as well), you enable him to work and repay the debt.

Not to mention that those discussions could finally address some of the more pressing structural EU issues which would remain even if there was a Greek default, GRexit and EU managed to survive it.

[Sava]

they are resonsible for their inefficient society.

uhm

what?

[Colon™]

i somehow missed this. i think it gives a clue to the differences in our thinking.

i say: 10% of the population had to emigrate and those who remained's wages were slashed.
you say: but now there are more jobs, with lower wages, and look at those low, low bond yields.

Wages were slashed alongside prices, only imports became dearer. An internal devaluation is no different from an regular devaluation, except that it's much harder to pull off, and the goal also the same: making exports competitive again so that unemployment is reduced. That's exactly what happened. You seem to think that if you just raise (nominal) wages everybody will get much richer. Give everyone a salary of 1 million a month and we can all have luxury cars and villas. That's not how it works, increasing standards of living can ultimately only come from increasing productivity. What the Latvians and the Greeks did was get themselves luxury cars and villas anyway, and pay for it with loans from abroad. The Latvians realised they were living above their means and adjusted. The Greeks instead in essence are demanding they keep up their spending habits with a never-ending cycle of write-downs and new loans.

[dannubis]

uhm

what?

uhm

what what ?

[Sava]

That sentence struck me as odd. Perhaps I'm reading too much into it.

But it sounded like you were trying to assign some sort of collective responsibility toward the Greek people.

[C0ckney]

Wages were slashed alongside prices, only imports became dearer. An internal devaluation is no different from an regular devaluation, except that it's much harder to pull off, and the goal also the same: making exports competitive again so that unemployment is reduced. That's exactly what happened.

i'm well aware of what an internal devaluation is. countries on the gold standard tried it during the depression; countries in the euro, or linked to it are trying it now with the same effects. we shouldn't lose sight of who gains and who pays the price. it's usually the young who have to emigrate and take the brunt of cuts. they rarely benefit from things like housing bubbles (see ireland - another country trying an internal devaluation) which cause crises in the first place.

You seem to think that if you just raise (nominal) wages everybody will get much richer.

do i? perhaps you could point out where i said that. oh that's right i didn't, you just made it up.

[Imran Siddiqui]

comment on how it could all work out

Introduce a moritorium on debt

First of all, the issue of the inherited Greek debt stock needs to be addressed. The key point of Syriza is that a haircut of 50% would free up a large part of the country’s primary surplus and thus allow for new spending to address the worst social problems and kickstart growth. The debt haircut is thus a means to an end.

For creditor countries it is important to show to their electorates that they are not giving in to pressure to write down loans. This is a question of principle. The solution to this confrontation is a moratorium on debt payments, further adjusting interest rates and maturities, and linking future repayments to economic growth. This would allow both sides to claim victory: Germany and other creditor nations would not suffer a debt write-down, and the Greek government would free up funds to spend on its policy priorities.

Abandon austerity, and tackle corruption

The second element is kickstarting growth and pursuing domestic reform in Greece. Several of Syriza’s own policy priorities are aimed at generating growth, and these domestic efforts should be accompanied by a reversal of the Troika’s austerity conditionality. There is overwhelming evidence that austerity has been a disaster. Admitting this and changing course will show Syriza that creditor countries are willing to turn the page.

But Syriza too has to learn from past mistakes. The new Greek finance minster, Yanis Varoufakis, has promised to destroy the foundations of the Greek oligarchy. Tackling corruption and reforming the tax system, the civil service and other dysfunctional institutions will not be easy. But it is a vital necessity for Greece itself, and to show to creditor countries that the new government is serious about reform at home.

Boost the rest of the eurozone

The third element of a possible deal is creating the European environment in which this can work. It is obvious that if you want to deal with sluggish growth and large debt burdens, a deflationary economic environment is the last thing you want. The eurozone needs to get its inflation rate back to the 2% target as quickly as possible, which would help reduce the real value of debt. Entrenched deflation does the opposite, and would create problems not just for Greece, but also for other countries with a high debt-to-GDP ratio.

The European Central Bank has, eventually, done its part by starting quantitative easing. But as Mario Draghi, the ECB president, said, QE alone will not be enough. We need a concerted investment push across the eurozone that takes advantage of the new money and record low interest rates. If you don’t invest now, when would you ever do?

The European commission could also provide an extra boost for Greece and other crisis-stricken countries by making sure that the bulk of its announced investment programme goes to where it is needed most.

Together, all these elements would put Greece back on to a growth path. If this is achieved, there is no reason why Greece could not service its debt once the moratorium runs out. It will be a significantly lower burden as the economy will have recovered by then.

The deal sketched out above would allow all parties to keep face. Germany and other creditor countries would not accept a haircut, but they would be flexible about repayment terms and about changing policy conditionality. The Syriza-led government, on the other hand, would be in a position to tackle Greece’s social and economic crisis, but would have to accept that its debt is not going to be written off. All eurozone countries, together with the European institutions, would make sure that they do not sink into a Japanese-style deflation. This is in everyone’s interest.

To sum up, there is a way forward if everybody negotiates in good faith – but the stakes are very high. The danger of political accidents is clearly there. But a messy default and potential break-up of the currency union is in nobody’s interest. So in the end a compromise is the most likely outcome.

Essentially - instead of killing your debtor (in the process potentially the EU, thus harming your own future prospects as well), you enable him to work and repay the debt.

Not to mention that those discussions could finally address some of the more pressing structural EU issues which would remain even if there was a Greek default, GRexit and EU managed to survive it.

[dannubis]

That sentence struck me as odd. Perhaps I'm reading too much into it.

But it sounded like you were trying to assign some sort of collective responsibility toward the Greek people.

For the situation in Greece ? Or for the ensuing problems of the EU ?

[Sava]

For the situation in Greece ? Or for the ensuing problems of the EU ?

In general.

If we're opening the Pandora's box of collective responsibility, Germany isn't going to be on the winning end of this debate.

[Dinner]

Negotiation is such a joke.

Greece: Give me free money!

EU: No.

Greece:...

What is there to negotiate? Just kick the lazy, worthless dead beats out already and tell them they might be let in again later after they have made the necessary reforms and are no longer mooching dead beats. The days of using back mail because they don't want to change their ways are over.

[Imran Siddiqui]

You do realize that the absolute last thing Germany wants is for any country, even Greece, to leave the Euro? The Euro already has tons of crappy PR. Having countries leave would be a disaster - that's the main reason Germany wanted to do a bailout for Greece in the first place as a default and leave the Euro was feared to potentially lead to a domino effect that would unravel the currency.

[C0ckney]

The days of using back mail because they don't want to change their ways are over.

will they have to use front mail instead?