NP - Here's What's at the Heart of the Crisis in Greece

[David Morris]

I think the main points are:

[?] Greece will NEVER be able to pay back this debt, and will thus be
perpetually under the boot of the Euro Bank.

[?] The amount of money at stake is a TINY amount relative the the rich
nations that control the Euro bank.

David Morris

On Fri, Jan 30, 2015 at 9:00 AM, rich <richard.romeo at gmail.com> wrote:

> will they go after the elites and get them to pay their taxes? not that
> this is an issue only in Greece. i think the new gov't has its work cut out
> for it. german banks have a had a hand in all this mess (not only german
> banks tho). they should pay for their stupidity and greed as well
>
> rich
>
> On Thu, Jan 29, 2015 at 11:14 AM, David Morris <fqmorris at gmail.com> wrote:
>
>> If you're in the market for some interesting commentary on Greece, there
>> have been a couple of good ones recently. The first comes from Paul
>> Krugman, who, among other things, makes a point that often gets missed:
>> Greece is already running a primary surplus. That is, they've cut spending
>> enough over the past few years that their budget would be balanced if it
>> weren't for interest payments on their gigantic debt. What's more, their
>> primary surplus isslated to rise to 4.5 percent in the future:
>> <http://krugman.blogs.nytimes.com/2015/01/28/thinking-about-the-new-greek-crisis/>
>>
>> If Greece were to adhere totally to the previous terms, over the next
>> five years it would make resource transfers of about 20 percent of one
>> year’s GDP. From the point of view of the creditors, that’s a trivial sum.
>> From the point of the Greeks, however, it’s crucial; the difference between
>> a primary surplus of 4.5 percent of GDP and, say, 1.5 percent of GDP for
>> the Greek economy and the welfare of its citizens is huge. The only reason
>> for the creditors to play hardball would be to make Greece an example, to
>> discourage other debtors from trying to negotiate relief.
>>
>> In other words, the EU is demanding that Greece not just balance its
>> budget, but run a large surplus that it will mostly send to large countries
>> for whom it's a trivial sum. For Greece, though, it's a *huge* sum, the
>> difference between years of penury and a return to growth. This is at the
>> heart of the conflict between Greece and the EU.
>>
>> The second commentary comes from Daniel Davies, who makes the point that
>> Greece's gigantic debt doesn't really matter *as debt*. Everyone knows
>> Greece will never be able to pay it back. But if everyone knows this, why
>> are Germany and the rest of the EU so hellbent on refusing to write it
>> off? <http://crookedtimber.org/2015/01/25/greek-games-and-scenarios/>
>>
>> Don’t think of the Greek debt burden, either in cash € terms or as a
>> ratio to GDP, as an economic quantity. It basically isn’t an economically
>> meaningful number any more. *The purpose of its existence is as a
>> political quantity; it’s part of the means by which control is exercised
>> over the Greek budget by the Eurosystem.* The regular rituals of
>> renegotiation of the bailout package, financing of debt maturity peaks and
>> so on, are the way in which the solvent Euroland nations exercise the kind
>> of political control that they feel they need to have if they are going to
>> be fiscally responsible for the bills.
>>
>> ....It is, therefore, totally inimical to the Eurosystem to hold out any
>> hope of the kind of debt writedown that Syriza wants, as opposed to some
>> smaller, cosmetic face value reduction or maturity extension. *The
>> entire reason why Syriza wants to get a major up-front reduction in the
>> debt number is to create political space to execute the rest of their
>> program.* The debt issue and the political issue are the same issue.
>> Syriza understands this, and so does the Eurosystem.
>>
>> In other words, Greece doesn't want to run a large budget surplus. They
>> want to increase government spending in order to dig their way out of their
>> massive economic depression. The rest of the EU wants no such thing.
>> They're afraid that if they let Greece off the hook, then (a) everyone else
>> will want to be let off the hook, and (b) Greece will go right back to its
>> free-spending ways and soon require another bailout. If the price of that
>> is years of pain and unemployment, so be it.
>>
>
>
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