Greek debt negotiation - Page 7 - Politics and Economics

When people talk about "bailing out Greece", they're not really talking about bailing out Greece.

They're really talking about bailing out the (mostly French and German banks) that loaned money to a Greek government that was clearly not going to be able to pay it back except under the rosiest of rosy economic scenarios.

Any bailout money isn't going to the Greek government or getting pumped into the Greek economy. It's going to those foreign banks.

I just think it's important to recognize who is really getting bailed out.

07-06-2015 , 10:42 AM

#152

seattlelou

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Quote:

Originally Posted by BigPoppa

A vast majority of the debt is owed to the European tax payer. http://money.cnn.com/2015/01/28/inve...-most-to-lose/

07-06-2015 , 10:43 AM

#153

daca

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Quote:

Originally Posted by seattlelou

So what is the trioika's next playa? I am guessing they let the banks fail and see if the government stands.

I think the optimistic view is that they just offer roughly the same deal, wait until Tsipras takes it and then let him sell it. If they're going wild they will offer some debt relief based on fulfilling future conditions, but I would probably bet against that.

The pessimistic view is this:

Reuters Top News ‏@Reuters 2 t.
BREAKING: German economy minister Gabriel says - We cannot leave Greece alone, all EU countries now need to prepare to give humanitarian aid

That it moves from a financing deal to a humanitarian effort. That's a german Social Democrat btw.

07-06-2015 , 10:55 AM

#154

chezlaw

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Does lending people money so they can pay you back money they owe you count as a bailout of anything?

Seems like it's just a mechanism for letting it get written down in a controlled fashion which matters far less now than it did at crunch time but there's still uncertainty about how much it matters.

07-06-2015 , 10:58 AM

#155

BigPoppa

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Quote:

Originally Posted by seattlelou

A vast majority of the debt is owed to the European tax payer. http://money.cnn.com/2015/01/28/inve...-most-to-lose/

IIRC, this is because the initial bailout transferred a lot of the debt from the banks to the EU, without even making the banks disgorge accumulated interest.

I'm sure if they'd offered banks a percentage of the total owed or they got to take their chances on getting paid back by Greece, the banks would have eagerly accepted the haircut. Instead, the EU made the banks whole and assumed most of the risk.

07-06-2015 , 11:03 AM

#156

daca

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It's partly because some of the debt that Greece couldnt pay has been taken on by Eurozone countries, partly because the debt to private creditors got something like a 80% haircut, and partly because the Eurozone has spent 6 years financing Greek deficits and keeping Greek banks alive.

07-06-2015 , 11:11 AM

#157

grizy

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That's a common narrative.

Factually true but rather misleading.

In reality, the banks and government have taken 75+% "haircuts" already with rebates, direct contributions to bailout packages, restructuring, and just straight up forgiveness.

The Greek bonds preserved (since the first official "haircut") their face values but they weren't traded/sold at those values. The whole scheme was designed to preserve the appearance Greece was hanging on. As chezlaw points out, it's essentially a controlled writedown. I will add it's a controlled staggered writedown for reforms, not the least of which is tax reform.

Last edited by grizy; 07-06-2015 at 11:17 AM.

07-06-2015 , 11:12 AM

#158

BigPoppa

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Quote:

Originally Posted by daca

I think the optimistic view is that they just offer roughly the same deal, wait until Tsipras takes it and then let him sell it.

That's a non-starter.

Only a noticeably better deal has any chance of being approved by the Greek people (or their elected representatives).

If the Troika aren't willing to offer a noticeable better deal, then it'll be default.

07-06-2015 , 11:20 AM

#159

seattlelou

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Quote:

Originally Posted by BigPoppa

The Greeks don't like the deal offered but want to stay in the EU/Euro. They have yet to chose which option is worse. I suspect they will be forced to soon.

07-06-2015 , 11:21 AM

#160

grizy

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07-06-2015 , 11:27 AM

#161

chezlaw

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Quote:

Originally Posted by BigPoppa

Probably the case as long as we realise that 'noticeably' better doesn't mean 'much' better. Could be a better deal, could be a worse deal, could probably even be the same deal.

The next deal might be different enough so that no-one really knows if its better or not but it will be sold as 'much better' to the Greeks and 'no better' to many others.

07-06-2015 , 11:29 AM

#162

BigPoppa

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Krugman:

Quote:

But the campaign of bullying — the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office — was a shameful moment in a Europe that claims to believe in democratic principles. It would have set a terrible precedent if that campaign had succeeded, even if the creditors were making sense.

What’s more, they weren’t. The truth is that Europe’s self-styled technocrats are like medieval doctors who insisted on bleeding their patients — and when their treatment made the patients sicker, demanded even more bleeding. A “yes” vote in Greece would have condemned the country to years more of suffering under policies that haven’t worked and in fact, given the arithmetic, can’t work: austerity probably shrinks the economy faster than it reduces debt, so that all the suffering serves no purpose. The landslide victory of the “no” side offers at least a chance for an escape from this trap

07-06-2015 , 11:36 AM

#163

grizy

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Krugman is losing his mind even as Italy, Ireland, Spain, Portugal, and UK recover their credibility and slowly begin to grow.

Krugman is absolutely right Europe is trying to communicate the dire consequences of Greek refusal to reform.

Put it this way, it's Greek people's right to say they won't reform. It's rest of world's right to not finance Greece.

07-06-2015 , 11:56 AM

#164

chytry

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Some people here don't understand the threat of contagion to other countries demanding more if Greece gets more concessions.
There just can't be a soft deal.

See this article - Greece is doomed

Quote:

After all, if electing a bunch of far-left types to parliament so they can demand a better deal actually worked, then voters in Portugal and Spain and Italy and Ireland would take note of that fact. And the last thing the current crop of elected officials in Lisbon and Madrid and Rome and Dublin want is to all be turned out in favor of a bunch of far-left types.

07-06-2015 , 12:36 PM

#165

daca

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Quote:

Originally Posted by BigPoppa

I dont think this is true at all.

Every poll seems to show that the Greeks want to stay in the Euro. These poll numbers are from last week, so didnt hold up too well on the yes/no vote, but still show a pretty clear picture. A majority of Greeks seem to have voted no because they think they can get a better deal (which is probably wrong), but would still prefer any deal over no deal.

Last edited by daca; 07-06-2015 at 12:42 PM.

07-07-2015 , 12:07 AM

#166

BigPoppa

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Shortvideo explaining why a crisis like this was inevitable and why the Euro was probably doomed from the start:

07-07-2015 , 02:33 AM

#167

Dutch101

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They make it sounds like the EU is not supporting poorer countries by transferring tax money from the richer nations to the poorer ones. Greece gets billions of euros in EU subsidies to improve their economy and that money comes from the richer members. Greece is to get 36.5 billion euro's between now and 2020 and that is independent of any bailout money.

07-07-2015 , 03:10 AM

#168

O.A.F.K.1.1

Ted Patrick

Join Date: Dec 2007 Posts: 27,952

Yea that video does ignore the fairly massive grant funding that comes out of Europe, not sure how much that grant funding measures upto direct fiscal union tho.

http://ec.europa.eu/regional_policy/...t/index_en.htm

I live in one of the poorest areas in the UK and we have had 500M~ of this funding over the last decade. Its really helped project managers stay in employment.

07-07-2015 , 03:59 AM

#169

Gin 'n Tonic

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Quote:

Originally Posted by O.A.F.K.1.1

I live in one of the poorest areas in the UK and we have had 500M~ of this funding over the last decade. Its really helped project managers stay in employment.

I sort of agree, but it seems to me that poor areas are something that's really difficult for governments to deal with. You can throw a lot of money at better parks and facilities, but getting proper good quality jobs and creating prosperity is somewhat intractable.

07-07-2015 , 05:06 AM

#170

O.A.F.K.1.1

Ted Patrick

Join Date: Dec 2007 Posts: 27,952

Quote:

Originally Posted by Gin 'n Tonic

I sort of agree, but it seems to me that poor areas are something that's really difficult for governments to deal with. You can throw a lot of money at better parks and facilities, but getting proper good quality jobs and creating prosperity is somewhat intractable.

Yea, definitely so, but in the context of this discussion is irrelevant.

07-07-2015 , 05:25 AM

#171

Sholar

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Quote:

Originally Posted by grizy

Krugman is losing his mind even as Italy, Ireland, Spain, Portugal, and UK recover their credibility and slowly begin to grow.

Som€ of th€s€ ar€ not lik€ the oth€rs.

07-07-2015 , 06:17 AM

#172

O.A.F.K.1.1

Ted Patrick

Join Date: Dec 2007 Posts: 27,952

Quote:

Originally Posted by Sholar

Som€ of th€s€ ar€ not lik€ the oth€rs.

Only one is different in the way I think you are implying, so a bit of nitpick imo.

07-07-2015 , 06:53 AM

#173

Sholar

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True, "one of these is not like the others" would have been cleaner, but the UK was thrown in there.

But it's not really a nitpick -- criticizing Krugman while endorsing Iceland's approach is incoherent. Greece can't deflate its currency.

07-07-2015 , 07:58 AM

#174

O.A.F.K.1.1

Ted Patrick

Join Date: Dec 2007 Posts: 27,952

Quote:

Originally Posted by Sholar

I think he was more implying that those economies have done "ok" under austerity in what is the tallest midget economic contest of all Euro countries except Germany.