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NFT: Greek election results cast doubts on future in Eurozone

Dunedin81 : 1/25/2015 9:36 pm
Quote:
ATHENS, Greece (AP) — A radical left-wing party vowing to end Greece's painful austerity program won a historic victory in Sunday's parliamentary elections, setting up a showdown with the country's international creditors that could shake the eurozone.

Alexis Tsipras, leader of the communist-rooted Syriza party, immediately promised to end the "five years of humiliation and pain" that Greece has endured since an international bailout saved it from bankruptcy in 2010.


The party moderated its rhetoric to some extent prior to the election so there is some hope that they'd be more centrist than their reputation, and at present they have a plurality (though the final vote count could give them an outright majority). But this is arguably the biggest threat to the Eurozone as presently constituted in the last couple years. Greece could leverage a better deal out of the "troika" that handles its international finances or one or both parties may provoke a crisis. Interesting times.
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I think the moral of the story is that everyone sucks...  
Dunedin81 : 1/26/2015 9:18 am : link
I think Rob is right, if and when the Greeks follow through on their threats and leave or are expelled from the Eurozone the result will be economic catastrophe, perhaps not for the islander with the fishing boat but for the urban Greeks. They still spend much more than they take in, so they'll print money because they'll have little or no access to credit. You're likely to see pretty atrocious inflation.

And if as someone else said the Germans and particularly the German banks have used the last few years as an opportunity to whittle away their exposure this may actually be a desirable outcome for the rest of Europe, particularly as a Greek basket case may serve as a powerful cautionary tale for the other peripheral states balking at economic realities. But nobody is blameless in this; the German manufacturers were the beneficiaries of the imbalances on the Greek books, the German banks made plenty of money based on the implicit guarantee that in important ways actually held true, at least for long enough. And frankly, how ----ing blind could the Europhiles have been in supposing that the Greek economy could be effectively harmonized with that of Germany, the Low Countries and other frugal, risk-averse states?
There is more than enough blame to go around  
Rob in CT/NYC : 1/26/2015 9:39 am : link
but ultimately this will be painful for the Greek people no matter what - with no discernible competitive advantage, they will move toward becoming Argentina, with a cycle of borrowing, defaulting, inflation (and hyperinflation) - at a minimum, the rest of Europe will be vacationing in Greece given the likely relationship of the drachma to the Euro.

Unless they try and peg it, then Greece can become Venezuela, sans oil.
Greece is a disaster, and their social programs and structure are  
PatersonPlank : 1/26/2015 9:49 am : link
unsustainable. However that won't stop to labor unions and people from not working, and requesting more and more benefits. They seem to think that no matter what they want they do not need to pay for it. Let them leave the EU, go back on their own nickel, and let things play out completely this time. With no bailout from the EU what will they do then
RE: There is more than enough blame to go around  
jcn56 : 1/26/2015 10:06 am : link
In comment 12109614 Rob in CT/NYC said:
Quote:
but ultimately this will be painful for the Greek people no matter what - with no discernible competitive advantage, they will move toward becoming Argentina, with a cycle of borrowing, defaulting, inflation (and hyperinflation) - at a minimum, the rest of Europe will be vacationing in Greece given the likely relationship of the drachma to the Euro.

Unless they try and peg it, then Greece can become Venezuela, sans oil.


Rob, your first paragraph basically detailed Greece post-WWII until they joined the EU. And honestly, given the circumstances and their preferences, I think they're better off going back to that. They've lived the good life for almost two decades now, though, and it's going to be a rude awakening for them.

Personally - given a fairly educated populace, I think they might be able to cash in a bit thanks to globalization and outsourcing. Most of them speak English, with a bit of training and a cheap drachma they might open up some industry there, something that's sorely needed.
It's an interesting comparison to Ireland...  
Dunedin81 : 1/26/2015 10:08 am : link
whose last few years have been far from seamless but who effectively acknowledged they had been living above their means and adjusted (again this is nationally, there are certainly exceptions to this) rather quickly to a significantly lower standard of living. Now the ultimate ramifications of that may not have played out yet, but certainly culture is a factor.
what if the entire Euro does a devaluation strategy  
idiotsavant : 1/26/2015 10:57 am : link
instead of Greece going solo and trying that alone?

(Or am I 'talkin ou me aas')
To me,  
WideRight : 1/26/2015 10:59 am : link
Its more like Argentina in the 80s

Annual inflation at 1000%, with a complict population who will know how to cope.
re: the greek shipping industry  
idiotsavant : 1/26/2015 11:01 am : link
(in ships built in Korea?)...I wonder to what extent, if any, the Germans and other Euros use Greek shippers to ship autos and industrial goods.
RE: To me,  
Dunedin81 : 1/26/2015 11:02 am : link
In comment 12109727 WideRight said:
Quote:
Its more like Argentina in the 80s

Annual inflation at 1000%, with a complict population who will know how to cope.


As others have pointed out there are people in Greece who are virtually recession-proof, as their standard of living is not much impacted by the vicissitudes of the market. But around 40% of the population lives in just two cities and I doubt they're going to have as easy a go of it. You're likely to see a rise in out-migration and you'll probably see resulting political and potentially social instability. It is very difficult to go from a couple decades of relative prosperity to a period of managed decline to out and out chaos.
RE: what if the entire Euro does a devaluation strategy  
giants#1 : 1/26/2015 11:05 am : link
In comment 12109724 idiotsavant said:
Quote:
instead of Greece going solo and trying that alone?

(Or am I 'talkin ou me aas')


They're already doing that...
Dunedin81  
BobOnLI : 1/26/2015 11:08 am : link
Ireland has a long tradition of emigration, especially during times of economic distress. They nearly all speak English and nearly all are well educated allowing them to get employment in other countries. Without this as a safety valve, the situation would appear much worse.
Wow.  
manh george : 1/26/2015 11:14 am : link
Quote:
wow
giantfan2000 : 8:53 am : link : reply
still grasping at the strawman of greeks not paying taxes and having a bloat bureaucracy to explain the 26% unemployment in Greece

and not austerity policies of Berlin and Brussels that have been tried for Six YEARS!

so how do you explain 25% unemployment in Spain
or 17% In Croatia and Cyprus
15% in Portugal?

I think Albert Einstein said the definition of insanity is doing the same thing over and over again and expecting a different result.

the Greek people finally had enough with the EU's insanity and are charting a different course.


Yes, austerity was overdone as a solution in a number of countries. But to suggest that the Greek situation is about that rather than being about a system of rampant tax cheating; lazy, corrupt overpaid government workers; and corrupt leadership that has gone along with a massively unbalanced budget for decades is exactly about Einstein's definition of insanity.

As was noted above, it was a horrible mistake to let them into the EU in the first place. Greece tripped all over itself to get access to capital it didn't deserve.

Under the current system, Greece has no comparative advantage in any sector of the global economy except archaeological ruins and pretty islands. Neither of those export very well, and living off of tourism is a third world strategy.
The EU's behavior, and that of its member states...  
Dunedin81 : 1/26/2015 11:20 am : link
from Greece's accession to the present was abhorrent. But the idea that a country should not be responsible for its fiscal decisionmaking is equally abhorrent. If you spend more, much more, than you take in even in relatively good economic times, you will ultimately fail. That is true of people, of businesses and of states. Nothing wrong with sympathy for the people who are suffering because of this, but to pretend the Greeks and the people they voted to govern them have no responsibility for this is absurd.
mg  
BobOnLI : 1/26/2015 11:23 am : link
Given all you've said what solution is there? Can the EU survive letting a member secede? Can the EU reform the Greek economy sufficiently to allow them to stay?
possibly what you have in Greece was the result of the merging  
idiotsavant : 1/26/2015 11:25 am : link
of two diametrically different social and economic views at the end of the greek civil war

as they incorporated [some aspects of] the marxists view [government programs broad and large] they allowed those opposed (and ultimately many others) to have an 'out'....[that they could avoid taxes].

looking back, as in other parts of Europe, while the occupying german fascists were certainly big government state-ists,

those supporting them locally may have been more of the anti-marxist variety, in other words, people wanting little to no government in their business, old fashioned independents.

if the current system was the result of those two groups seeking compromise, and taking a sort of strange view on each, that could explain the weird disconnect between what they spend and what they take in.
The Greek shipbuilding industry  
Rob in CT/NYC : 1/26/2015 11:26 am : link
Essentially didn't make it out of the '08 downturn, now Greek shipping companies buy ships elsewhere.
The rank and file there were duped  
jcn56 : 1/26/2015 11:28 am : link
into believing that joining the EU was both inevitable (they wouldn't be able to compete otherwise) and beneficial (access to capital, an increase in exports). The positives were oversold - they would be a realistic shot to host the Olympics (which they did, and benefited the rest of the EU, Greece, not so much).

Reminds me in a way of when a company agrees to a merger that doesn't seem so favorable - and then you realize that the senior management cashed out big time, leaving the rest of the suckers to hold the bag. Greece is a democratic country so they don't have that excuse, they could always have voted it down, but there were promises made that were greatly exaggerated.

I still have family there, so it's mixed for me. I knew they were heading toward disaster, but so did half of them. The ones who didn't thought they could latch on to all the benefits of being a first world nation without the work ethic or proper functioning economic system.

As for the statement above that their culture advanced ahead of their economic system, that's untrue. Just remember that in between ancient times and today, there was Roman occupation, 400 years of Ottoman occupation, and then the clusterfuck that was WWII and the Marshall Plan. Parts of Greece haven't even reached a hundred years of independence since Ottoman rule. All of that mixed together means there's very little left from ancient times beyond the pride and the archaeological ruins.
It's not entirely unlike the Scottish secession movement...  
Dunedin81 : 1/26/2015 11:37 am : link
had the Scots succeeded I as a proud fractional Scot would have wished them well, but certainly even some of the yes voters acknowledged it was a pretty dicey economic proposition. The benefits of Eurozone membership absent fundamental change were oversold, and certainly some, particularly in northern Europe, benefited from the lack of fundamental change.
When Greece got rid of the drachma for the Euro  
RB^2 : 1/26/2015 11:41 am : link
it was the world's oldest currency at the time. Ironically, it will become the world's newest currency when Greece converts back to it.
shipping  
idiotsavant : 1/26/2015 11:41 am : link
I thought the shipping itself counted for much more than the old ship building, which is mostly in south korea?
Greece's problems run deeper than  
Rob in CT/NYC : 1/26/2015 11:43 am : link
Simply the cost of social programs.

Depending upon your perspective, we may have a problem with politicians promising programs to garner votes- Greek politicians promise and deliver government jobs to supporters, with salary and benefits and iron clad provisions against being fired. No matter who won in Greece, the bureaucracy - decade by decade - won.
Greek shipping companies are alive and well  
Rob in CT/NYC : 1/26/2015 11:46 am : link
As are their billionaire owners - but if the ships are built elsewhere, crewed by non-Greeks, and no one is paying taxes, does the industry help the country?
Bob, I'm not sure it's a solution...  
manh george : 1/26/2015 11:47 am : link
as opposed to the lesser of two evils, but I think they leave the EU. In a sense, the election makes that easier, because this exit won't be held up as a successful solution by others who might want to consider leaving. Rather, it brings to mind a large herd of human lemmings.

As noted above, it IS sad for Greeks who will suffer from this, but it also reflects the adage of voters getting the government they deserve. The economic culture of laziness and cheating got out of whack decades ago, and I do not suggest I know enough of the history as to why.

The disaster they are going through is one of simple arithmetic--massively more spending than revenues, no identifiable economic strategy, entrenched laziness among too large a proportion of the population, and a sense of entitlement among those with the financial wherewithal to pay more in taxes if they had to. They simply cannot get their budget deficit under control, and the downward spiral was just made worse by the new election. So, let them spend more--they just can't expect German banks to cover the shortfall this time.
And as if the corrupt politicians weren't bad enough  
jcn56 : 1/26/2015 11:50 am : link
remember that they've got the church to contend with there as well.

I've had some work in Russia on and off the past year, and although I knew about the kleptocracy there, I had never seen it first hand. After witnessing it for myself, I walked away unimpressed in comparison to the Greeks (although on a much larger scale).
one never knows  
idiotsavant : 1/26/2015 11:54 am : link
there have been cases (brazil?) where leftists came into power, and faced with economic reality, and a sense of responsibility to the people, actually made changes in favor of free market policy/changed their stripes.

and other cases (venezuala?) where they just ramped up the rhetoric and played fake econ / votes for jobs rackets for a while, before the bubble burst.

jcn  
manh george : 1/26/2015 11:59 am : link
Russia got by on the illusion created by the massive petro revenues. It isn't a better system or mentality, merely a better set of economic circumstances--until energy prices collapsed.

It's tough to recover from the mentality created by 90 years of autocracy combined with rampant cronyism.
mg  
BobOnLI : 1/26/2015 11:59 am : link
I've had some experience with the Greek-American community and the ones I knew were industrious and hard working. Moreover, they seemed much more sophisticated politically than the average American (maybe not a great comparison). Did only the ambitious emigrate? Was the situation in Greece such that ambition and hard work were seen as not very rewarding?
As to taxes, I don't think there is a country in the world where people pay what they should when they think enforcement is selective and/or very lax.
RE: mg  
jcn56 : 1/26/2015 12:05 pm : link
In comment 12109831 BobOnLI said:
Quote:
I've had some experience with the Greek-American community and the ones I knew were industrious and hard working. Moreover, they seemed much more sophisticated politically than the average American (maybe not a great comparison). Did only the ambitious emigrate? Was the situation in Greece such that ambition and hard work were seen as not very rewarding?
As to taxes, I don't think there is a country in the world where people pay what they should when they think enforcement is selective and/or very lax.


There are plenty of hard working Greeks, both here and abroad. The ones you see here emigrated mainly due to the lack of opportunity there. The ones who are there, who all look lazy and just thrilled to be suckling at the govt's teat, are really only doing so for lack of any suitable alternatives.

As for tax enforcement - there really is no such thing in Greece. Not that tax evasion doesn't exist everywhere, it just doesn't exist on the scale it does in Greece. Granted, the tax code there is a little ridiculous (example: some possessions result in luxury tax, like a pool or an expensive car, despite the fact that you should have been taxed on your wages and paid a VAT when buying them).

I had someone who used to work for me who was a former Greek IRS-equivalent employee. His job was to study maps to find homes that had pools that were undeclared and tax them. They started to do patrols by helicopter, until ultimately giving up because even when they did find someone, their chances of collecting were close to nil.
idiotsavant  
manh george : 1/26/2015 12:06 pm : link
Brazil had the luxury of NOT being able to rely on oil revenues, plus a vibrant populace that was/is willing to earn their keep. When Lula was elected, yes, he abandoned hard left strategies in a hurry, because he saw that he could, and that the alternatives could work.

Venezuaela could have fared a lot better, I think, had they not had in power a skilled demagogue such as Chavez to help keep alive the illusion that living off of oil revenues was OK.
thanks MG  
idiotsavant : 1/26/2015 12:19 pm : link
check this out




apparently greek GDP had some dips prior to  
idiotsavant : 1/26/2015 12:24 pm : link
austerity

does this show some sort of structural problem even with all the spending?

It shows that  
RB^2 : 1/26/2015 12:28 pm : link
Greece was a huge net importer for a long time, which is unsurprising given their lack of any domestic value-added industry.
for example  
idiotsavant : 1/26/2015 12:31 pm : link
2000 to 2001

spending up, inflation down, but GDP was 'meh'

not sure, but it looks like, what was a boom globally in 1990s through the 2000s was sort of 'meh' in greece.
Hot off the presses: Venezuela as Latin America's Greece.  
manh george : 1/26/2015 12:34 pm : link
Quote:
Falling oil prices and incompetent governance mean Venezuela might default on its debts, leaving major trading partners like Brazil holding the bag.

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Have you been following Venezuela's sovereign debt pricing  
RB^2 : 1/26/2015 12:44 pm : link
the past few months? Not exactly new news.
Nope.  
manh george : 1/26/2015 12:51 pm : link
Guess not. It was inevitable with the oil price collapse. It just came to a head as we were having this conversation.
RE: idiotsavant  
njm : 1/26/2015 1:00 pm : link
In comment 12109847 manh george said:
Quote:
Brazil had the luxury of NOT being able to rely on oil revenues, plus a vibrant populace that was/is willing to earn their keep. When Lula was elected, yes, he abandoned hard left strategies in a hurry, because he saw that he could, and that the alternatives could work.

Venezuaela could have fared a lot better, I think, had they not had in power a skilled demagogue such as Chavez to help keep alive the illusion that living off of oil revenues was OK.


As much as the illusion of living off of oil revenues, the further illusion that your national oil company can provide for the nation when it is being run by a bunch of political henchmen.
and in light of some recent deals (e.g. Bennett)  
giants#1 : 1/26/2015 1:09 pm : link
this was actually a pretty shrewd "prove it" deal by Reese and co. It didn't work out, but if Walton looked good (or even average), they would've had him on a very good deal for this season and it was structured such that if it didn't work out, they could cut him immediately and move on (with a minor $625k dead money hit).
oops  
giants#1 : 1/26/2015 1:10 pm : link
wrong thread
I guess he was not 'productive'  
idiotsavant : 1/26/2015 1:14 pm : link
hehehe
RE: Hot off the presses: Venezuela as Latin America's Greece.  
Rob in CT/NYC : 1/26/2015 1:16 pm : link
In comment 12109896 manh george said:
Quote:


Quote:


Falling oil prices and incompetent governance mean Venezuela might default on its debts, leaving major trading partners like Brazil holding the bag.

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I thought Greece was Europe's Venezuela?
Can you get good Venezuelan food in Greece?  
manh george : 1/26/2015 1:17 pm : link
I rest my case.
No, but you can probably find plenty of Venezuelans in Greek  
jcn56 : 1/26/2015 1:26 pm : link
owned diners, so the circle is complete.
yeah, I forgot the other major Greek export.  
manh george : 1/26/2015 1:30 pm : link
Diners and coffee shops.
Also  
RB^2 : 1/26/2015 1:40 pm : link
cheesy wedding movies and ruthless Baltimore mobsters.
mg  
BobOnLI : 1/26/2015 1:54 pm : link
Also, frats and sororities.
RE: yeah, I forgot the other major Greek export.  
njm : 1/26/2015 2:02 pm : link
In comment 12109995 manh george said:
Quote:
Diners and coffee shops.


No Coke! Pepsi.
Moral of the story:  
manh george : 1/26/2015 2:08 pm : link
If you want to experience Greek life nowadays, emigrate, enroll in a fraternity at Johns Hopkins, go to the local diner, and say high to the large muscular guy sitting at the back table.
funny  
giantfan2000 : 1/26/2015 2:17 pm : link
everyone screams about the social safety net of greece
but noone mentions that their military spending has been out of control for years

although Greece military spending was cut after the 2009 meltdown it was cut much less than social services

As a percentage of GDP Greek military spending is still double that of any other country in the EU



And whose fault is this?  
manh george : 1/26/2015 2:25 pm : link
It's just another form of cronyism.


Quote:
Other analysts agree that the Greek armed forces can always resist big defense cuts by playing the Turkey card. “The generals will always have an excuse to keep the budget high,” Mr. Kritikos said.

Indeed, over the past several months, the Greek media have written that Turkey violated Greek airspace at least once...

There is another political reason for exempting the army from cuts. Closing some of the 500 military bases and 17 training centers would mean sending tens of thousands of young soldiers into the ranks of the unemployed, adding a dangerous component to social unrest, according to Sipri, a Swedish research institute. Perhaps, analysts said, the Greek armed forces will have to wait for any major restructuring until the country’s economy picks up.


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