I think this chart encapsulates the progress Greece has made from the creditors point of view. The amount of new money required to keep Greece afloat has been significantly reduced.

I read somewhere recently that something like 75% of all loans in Greece are nonperforming. I assume that means that regular payments are not being made.

So thats where the money went and its not there anymore... Or at least its not recoverable.

On the bright side, I am only 25% Greek.

My Bloomberg station.

Well, actually mostly dismalscientist.com for economic data and analyses.

You're answering your own question. Nobody can sustain that kind of deficit and I have said closing the gap was a good basis for negotiating a new round of reforms and bailouts that basically neutralized the debt burden in return for reforms.

Greek people said no. Syriza, faced with reality, said yes to creditors and took the bailout. They then decided to, in effect, say "just kidding."

Syriza/Tsipras hasn't put forward any legislation to implement reforms promised or negotiated since. When pushed, Tsipras cited "political constraints" and eventually called for a referendum. He basically sold the Greek people on a delusion. The Belgian guy's right. Tsipras is an electoral accident that's going to make Greek people poorer.

Tsipras still has a chance to prove rest of the world wrong but it appears he has neither the political courage or competency to make it happen.

Sure, the answer is that austerity has completely killed the Greek economy with neutral-ish impact on the budget. And further "reforms" will have a similar impact on the Greek economy. The US had pretty much the same deficit that effectively went away on its own.

Because what Europe is asking for is completely insane. For example:

But despite this completely awful tax collection effort, they basically zero-ish primary budget deficit. What does that mean? It means that the "reforms" as imposed by Europe are in the wrong direction. It means that Greece's tax rates are way too high and/or they are not spending enough. In other words, if they are collecting just a fraction of the taxes owed, yet they are almost living within their means, they don't need austerity "reforms" - they need to dramatically improve their tax collection efforts and either increase spending or reduce tax rates dramatically to offset the expected gains.

Which is exactly why the "reforms" that Europe is asking for is completely insane and Syriza was correct not to agree to any concrete reduction in spending or increase in tax rates (i.e. "reforms") before they can see what they can do about taxes. Varoufakis had a bunch of interesting ideas about how to deal with tax evasion but it takes time to implement plans. Of course, despite tax evasion being the largest single problem, so far the reforms that Europe imposed on Greece did not tackle this at all and if anything made the problem worse. Not only that, center-right European leaders have tried hard to replace Syriza with their opposition who basically represents the tax dodgers. In short, Syriza has consistently been trying to tackle the actual, structural issue that's resulting in the deficit (pervasive tax evasion), while Europe has largely been demanding "structural reforms" that pushed the economy further into recession, mainly spending cuts and statutory tax increases, that have nothing to do with the actual fiscal issue.

Did the US not manage the same thing without multiple rounds of austerity reforms? Given that the world economy is massively better off in 2015 than in 2009/10, why wouldn't the budget have improved dramatically without all these increases in taxes and spending cuts? Also, weren't you guys talking about how some of the improvements in the Greek budget aren't real, but bad accounting or something? Exactly how much of the improvement, if any, is due to austerity and was it worth completely crashing the economy?

It's actually pretty gross how the domestic politics of the individual EU nations are driving a strategy for what is essentially a hostile takeover of Greece's government which they win and the Greek people lose no matter the result.

Essentially all of the improvement was due to austerity.

And yes, it was worth crashing the economy because the alternative was perpetually financing Greece's excesses. Greece had to be called to account at some point. It's pretty similar to clipping an overspending wife's credit cards. It will be painful for everyone but it has to be done.

I didn't say improvements weren't real. I said the surplus wasn't real. Even breaking even (or just getting close) in the primary surplus is a huge achievement, one that the EU rewarded with another 8 billion (that Syriza ended up receiving) and the private market rewarded with access again.

Then snap elections and Syriza.

Yeah, it's not something that gets ANY play in the media. If the center-right parties in control of the EU were given a choice of


1) Greece recovers dramatically under its leftist leadership following its own path

2) Greece collapses completely under its leftist leadership doing everything it is told to do by the Troika


Does anyone think that Merkel, et al would really opt for #1?

Ten ****loads of worthless paper have no more value than one ****load of worthless paper.

Show your work.

I mean it's getting comical. Virtually no reputable economist would recommend a combination of tax increases and spending cuts as a response to an economic crisis. It would get you laughed out of the room. Not even the very serious Republicans would propose such a plan. Yet here we are. This is all pretty much settled standard economics - there's virtually zero disagreement among economists and even the loonies on the right wouldn't argue any of this if their own national economy is at stake.

So we're down to this bizarre primitive argument about the virtues of not spending beyond one's means and how debt must be repaid even if you have to sell your wife and children to slavery and general misunderstanding of how money and debt work in the modern economy.

Greece couldn't talk anybody into giving it more money without strings. The deficits were staggering during good economic times I can see the lenders position.

If not austerity, what else brought the deficit down? Are you trying to say without austerity, government receipts would have grown almost ~15% to balance the budget?

Plenty of serious economists (though still minority), including a few Keynesian ones, agreed Greece's situation was so out of control they had no choice but to impose austerity to restore credibility and avoid crowding out private borrowing.

It's neither bizarre or primitive to note Greek governments absurd level of deficit financed by foreign funds was crowding out investments and choking the Greek economy. Without reforms, even with all of the debt wiped off, Greece just extends its collective democratic hands all over again in 10 years, or sooner since now they are even more convinced rest of Europe will pick up the tab.

What is that even supposed to explain? Does it work like this?

"The victim couldn't talk any of the rapists into letting her go. They wouldn't have had any chance with her otherwise so I can see their position."

No one is denying that Europe didn't have leverage, especially negotiating against center-right Greek politicians who had no idea what they were doing. The question is whether the policy made sense for Greece and Europe. And the answer has always been clear.

Interestingly, austerity also led to a massive increase in debt to gdp ratio:

http://krugman.blogs.nytimes.com/201...ion-in-greece/

You are aware that US govt receipts have grown massively during the recovery, right?


That's how economic cycles work. There's a downturn, tax receipts crash. There's a boom, tax receipts grow.


The biggest problems are when people panic during a downturn and massively restrict spending (making the downturn worse) or when they go full ****** during booms and make long term plans as if the good times will never end (GW Bush, I'm looking at you).

Krugman has been rooting for Grexit since almost day 1, an idea even Varoufakis recognized as a complete disaster, citing, ironically, Greece's lack of competitive exports and reliance on imports.

More to the point, Krugman notes two things:
1. one way or another Greece was going to have to achieve a primary surplus (given the level of deficits, yes, that means even Krugman agreed Greece needed to both cut expenditures and raise taxes).
2. austerity ended up completely futile because it wasn't accompanied by massive debt relief. He's just factually wrong. Creditors didn't write down face principal amounts but Greece hasn't serviced its debt with its own money for years. More importantly, the rebates and restructurings that have already happened so far do amount to pretty massive debt relief (probably cutting present value by half, even without counting the official haircuts earlier).

Greece ran massive deficits during good times too. Spend more because "good times will never end" and spend more because "stimulus" isn't unique to Greece or US but Greece really took it to another level.

Americans say "death and taxes". I get the feeling Greeks don't feel the same way.

Tax collection reform by the way is very high on the list of demands. Note "collection" reform. The Greek governments (Syriza and its predecessors all included) have manifestly refused to actually implement reforms beyond the window dressing "go after the rich" stuff.

You compared Greece to the US and wondered if the the reduction in deficits could have been achieved without the reductions in spending. Maybe, but no lenders were ready to take that risk so they had to turn to the Northern Europeans who see things differently than Krugman. The political will was not there to dump more money into Greece.

What brought the deficit down in the US?

Either they are not serious economists or they are saying that given their bargaining situation, this was the best they could do. That doesn't absolve Europe as a whole from not more aggressively helping out Greece through both fiscal and monetary means. Also, to the extent some specific austerity reforms out of a whole bunch of random spending cuts and tax raises were beneficial at all, they needed to be enacted at the very beginning instead of being dragged out for years with no certainty as to the end. Shoot the man if you have to but make it quick.

A noted left-wing economist Ben Bernanke also not so subtly hints that Germany is at fault for the imbalance in the eurozone.
http://www.brookings.edu/blogs/ben-b...urplus-problem

Please explain how this "crowding out" is supposed to work in the scenario. Who's being crowded out of exactly which market through what mechanisms?

This is just "welfare queen" level of political rhetoric that has no policy implications beyond riling up right-wing voters. It's painfully obvious what's going on here and I'm somewhat taken aback that you've fooled yourself into thinking that you have some kind of point about economics that Krugmans and Varoufakis of the world have missed, not realizing that you just bought into centuries-old right-wing rhetoric.

I've often expressed admiration for Ben Bernanke here and also praised what Paulson/Geithner/etc did in response to Lehman, etc and this nonsense is exactly why - they managed to get everyone to do the right thing quickly without much politics involved.

Yes, that's what happened and it's exactly why Germany is to blame.

Super basic economics - no one sane is against raising taxes or cutting expenditures as a general principle - the point to make sure to do that when aggregate demand is high, not when it's low. Saying that Krugman "agreed" with this is just dishonest.

This is your basic problem - you're here to moralize about Greece's past, not to discuss what can be done about its future. A clear solution to "but you ran deficits even during the good times" is to structure your demands such that Greece runs a surplus during periods of high economic growth, not to force austerity on Greece during periods of massive economic contraction.

It's so high on the list of demands that after a gazillion reforms and multiple bailouts, we've seen nothing. Syriza is basically the first ruling party to bring up innovative ways to reform collection efforts and they have been deemed too radical or unserious and European leaders have openly begging the Greeks to replace them with politicians who won't do a thing about the tax collection problem. It clearly appears that Europe is serious about tax evasion.

Also, Syriza has been in power for like 5 months, during nearly all of which they've been too busy negotiating with the Eurocrats to implement domestic reforms. It's true that past Greek governments have been negligent - yet the Eurocrats have been openly campaigning for their return.

I mean you can't even make this up:

https://en.wikipedia.org/wiki/Giorgos_Papakonstantinou

A former finance minister and MEP who negotiate the bailout packages for Greece was caught removing his relatives' names from the Lagarde list of potential tax evaders with Swiss bank accounts. Basically this is the guy the Eurocrats wanted representing Greece, right? And people think Syriza is the problem?

The problem I see with Syriza is that he has brought his country to the brink of leaving the Euro without preparing the citizens. Maybe this is all brinkmanship and a deal can be struck but it looks pretty bleak to me. What do you think? Is Grexit near?

Krugman really can't be more explicit. He admitted Greece needed austerity, right then and there, even when the demand was flagging. Full stop. He just disagreed with the execution and thinks Greece should leave the Euro.



No, I am not. I am saying unless Greece recognizes its books must have a semblance of balancing, there is no future that doesn't include repeatedly going back to begging rest of Europe for help.


Previous governments have agreed and formed collection agencies/committees on top of tax reform legislations as part of previous bailouts. But like the parties before them and Syriza after them, they ran into cultural resistance on one end then backed off for political expediency (once snap election was called, collection efforts basically stopped).

Syriza efforts can be fairly characterized by as jokes. Wired tourists, helicopters tracking down unregistered pools, and token lawsuits against unpopular oligarchs do little to address the real problems. High profile stunts without teeth.