[civil] "Greece moves closer to eurozone exit after delaying €300m repayment to IMF "

[Aeson]

I've moved the uncivil posts to a new thread. Keep this one about the topic and not the poster(s).

[Sava]

If I had to guess, I'd say this "crisis" benefits someone

who perhaps had a role in making it happen

and certainly not "lazy Greeks"

[Bin Kenobi]

We can make it!

[The Mad Monk]

I'm going to channel Ahtzib for a moment.

The Opinion Pages | Op-Ed Columnist
Greece Over the Brink

JUNE 29, 2015

[Paul Krugman]

Paul Krugman

It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency — above all, the kind of fiscal and banking union that, for example, ensures that when a housing bubble in Florida bursts, Washington automatically protects seniors against any threat to their medical care or their bank deposits.

Leaving a currency union is, however, a much harder and more frightening decision than never entering in the first place, and until now even the Continent’s most troubled economies have repeatedly stepped back from the brink. Again and again, governments have submitted to creditors’ demands for harsh austerity, while the European Central Bank has managed to contain market panic.

But the situation in Greece has now reached what looks like a point of no return. Banks are temporarily closed and the government has imposed capital controls — limits on the movement of funds out of the country. It seems highly likely that the government will soon have to start paying pensions and wages in scrip, in effect creating a parallel currency. And next week the country will hold a referendum on whether to accept the demands of the “troika” — the institutions representing creditor interests — for yet more austerity.

Greece should vote “no,” and the Greek government should be ready, if necessary, to leave the euro.

To understand why I say this, you need to realize that most — not all, but most — of what you’ve heard about Greek profligacy and irresponsibility is false. Yes, the Greek government was spending beyond its means in the late 2000s. But since then it has repeatedly slashed spending and raised taxes. Government employment has fallen more than 25 percent, and pensions (which were indeed much too generous) have been cut sharply. If you add up all the austerity measures, they have been more than enough to eliminate the original deficit and turn it into a large surplus.

So why didn’t this happen? Because the Greek economy collapsed, largely as a result of those very austerity measures, dragging revenues down with it.

And this collapse, in turn, had a lot to do with the euro, which trapped Greece in an economic straitjacket. Cases of successful austerity, in which countries rein in deficits without bringing on a depression, typically involve large currency devaluations that make their exports more competitive. This is what happened, for example, in Canada in the 1990s, and to an important extent it’s what happened in Iceland more recently. But Greece, without its own currency, didn’t have that option.

So have I just made the case for “Grexit” — Greek exit from the euro? Not necessarily. The problem with Grexit has always been the risk of financial chaos, of a banking system disrupted by panicked withdrawals and of business hobbled both by banking troubles and by uncertainty over the legal status of debts. That’s why successive Greek governments have acceded to austerity demands, and why even Syriza, the ruling leftist coalition, was willing to accept the austerity that has already been imposed. All it asked for was, in effect, a standstill on further austerity.

But the troika was having none of it. It’s easy to get lost in the details, but the essential point now is that Greece has been presented with a take-it-or-leave-it offer that is effectively indistinguishable from the policies of the past five years.

This is, and presumably was intended to be, an offer Alexis Tsipras, the Greek prime minister, can’t accept, because it would destroy his political reason for being. The purpose must therefore be to drive him from office, which will probably happen if Greek voters fear confrontation with the troika enough to vote yes next week.

But they shouldn’t, for three reasons. First, we now know that ever-harsher austerity is a dead end: after five years Greece is in worse shape than ever. Second, much and perhaps most of the feared chaos from Grexit has already happened. With banks closed and capital controls imposed, there’s not that much more damage to be done.

Finally, acceding to the troika’s ultimatum would represent the final abandonment of any pretense of Greek independence. Don’t be taken in by claims that troika officials are just technocrats explaining to the ignorant Greeks what must be done. These supposed technocrats are in fact fantasists who have disregarded everything we know about macroeconomics, and have been wrong every step of the way. This isn’t about analysis, it’s about power — the power of the creditors to pull the plug on the Greek economy, which persists as long as euro exit is considered unthinkable.

So it’s time to put an end to this unthinkability. Otherwise Greece will face endless austerity, and a depression with no hint of an end.

http://www.nytimes.com/2015/06/29/opinion/paul-krugman-greece-over-the-brink.html

Is he correct? Also, is he speaking as an economist here, or as an activist?

[C0ckney]

he is correct on all the major points. why can't it be both? economics is inherently political after all.

[Dinner]

So Greek voters don't know the details of what they are voting on, there is not an offer even to vote on, legal experts in Greece say the vote will be nonbinding, and the Greek government is telling everyone to vote no.

So... WTF are they voting for other than to give the colossal **** up in charge a way to escape blame for his incompetence.

[pchang]

Greece's economy was recovering too, but then Syria took over
http://money.cnn.com/2015/07/02/news...omy/index.html

Also over 200 Greek Economics Professors disagree with Krugman
http://www.ekathimerini.com/198826/a...the-referendum

[C0ckney]

those damn syrians.

the logic of that opinion piece is extraordinary. the policies imposed caused the economy to shrink by more a quarter, but 2% (projected) growth means they were a success. zimbabwe's economy eventually started to recover too, so according to them mugabe's policies were the right ones!

perhaps a paraphrase would be helpful here: IMF report says rejecting IMF measures is bad.

[C0ckney]

it's interesting to note the narrative being pushed recently, the one that says that things were going great (apart from the economic collapse, vastly increased social problems, the continued insolvency and so on), until a pesky (centre-)left government was elected and created all these difficulties. in other words to shift the blame from the troika onto their recently elected critics. it is astonishing, yet at the same time completely unsurprising, that it's being so keenly lapped up by some.

[Dinner]

Here is what Cockney and a lot of the others ignore. Greece has no savings, there is not a private equity market on Earth open to them as they have no credit, nor do they have control over monitory policy so they cannot print money. That is why they have no choice but to cut spending and balance their budget. Yes, that sucks as it does decrease economic activity but they stuck themselves in a bad place where that is theor only option.

It is nice that Cockney keeps saying the Greeks should just keep deficit spending but that ignores the fact they have no access to credit so that isn't an option.

[C0ckney]

as has been explained to you many times, greece runs a primary surplus and has been doing so for the last two years; its budget, excepting debt repayments, is more than balanced. what greece should do is default on its unpayable debts.

[Dauphin]

as has been explained to you many times, greece runs a primary surplus and has been doing so for the last two years; its budget, excepting debt repayments, is more than balanced. what greece should do is default on its unpayable debts.

Is the primary surplus due to austerity imposed, or due to another mechanism?

[Dauphin]

the logic of that opinion piece is extraordinary. the policies imposed caused the economy to shrink by more a quarter, but 2% (projected) growth means they were a success. zimbabwe's economy eventually started to recover too, so according to them mugabe's policies were the right ones!
...
s has been explained to you many times, greece runs a primary surplus and has been doing so for the last two years; its budget, excepting debt repayments, is more than balanced. what greece should do is default on its unpayable debts.

If the imposed policies were absent, where would Greece now be? Both in respect of GDP and debt levels.

[C0ckney]

Is the primary surplus due to austerity imposed, or due to another mechanism?

it's a result of the policies followed of course. but the point is that those policies have had other, more serious, effects, such as causing the economy to shrink by a quarter; and they have not resolved the fundamental solvency problem.

If the imposed policies were absent, where would Greece now be? Both in respect of GDP and debt levels.

it's hard to say and it would very much depend on the alternative policies that would have been followed. had greece done what i believe it should have done right at the start of the crisis, that is, defaulted and left the euro, it would be better off now and the main problem it faced, its insolvency, would have been resolved. but as i said, it's difficult to prove a counterfactual.

[Dinner]

as has been explained to you many times, greece runs a primary surplus and has been doing so for the last two years; its budget, excepting debt repayments, is more than balanced. what greece should do is default on its unpayable debts.

"The budget is balanced except for 10% of the budget."

Do you ever listen to yourself?

If the Greeks had actually liberalized their economy and reduced the retarded regulations designed to protect special interests from competition, like Spain did, and as the EU has been trying to get them to do for the last five years, then they would probably be growing right now. Spain did this and their average 2015 growth rate should be 3.3% which is good by western European standards.