Greek Referendum Poll

[Baron von Schtinkenbutt]

Do they think time is on their side? 

Playing chicken in the global financial markets?

[Iormlund]

It's really hard to make counter-cyclical policy during a recession, and meet all the safety need repayments, when your budget is taken over by debt repayment.

It's not just hard, it's impossible when you cannot print money, set interest rates or tariffs, and your creditors have tools to keep your inflation as close to zero as possible. 

You can easily do fiscal measures in boom times. All the stuff you name here are monetary or custom matters. 

The problem taking appropriate fiscal measures in boom times is, of course, it is much more profitable to do nothing and take credit for the wonderful economy than become the bad guy for raising taxes and cutting benefits to pay down debt.

[Valmy]

Yeah it is the same political forces that have governments enabling the bubbles that are so destabilizing. Do you want to be the guy who cools off the economy for the sake of something as silly as prudence?

[viper37]

Because Germany's unchecked foreign trade surplus (something that should have been addressed at the time of Euro creation) is one of the reasons for eurozone problems. It is what exacerbates effects of the crisis across the PIGS and Ireland.

I don't understand the connection.

A country running a constant substantial trade surplus with another country is essentially generating huge amounts of cash (that it is siphoning from the weaker country) that it cannot sensibly spend on consumption or sustainable investment. The cash thus ends up being lent at increasingly speculative prices back to the weaker country, to maintain the trade surplus, thus creating a vicious cycle of sorts.

Normally, a weaker country can protect itself from that kind of predatory mercantilism by rising its tariffs (to decrease imports) or becoming more competitive, usually through price (to increase exports), usually by devaluing its own currency (this is what Poland has been doing for the last two decades) - but both of these tools are unavailable to a Eurozone member state protecting itself from another Eurozone member state's predation.

In essence, the mechanism is similar to the recent real estate bubble only that it is one country creating a bubble in another country. Once the bubble bursts, the weaker country is left with a huge debt and rapidly contracting economy. Sounds familiar?

Of course, you could easily give us a comparion of Greek bonds yeilds for the last 30 years, vs all other Eurozone countries?  I'll make it easy and only ask for post 1995 bond yield when it comes to Eastern Europe.
It would then be easy to compare if Greece was abused by extremely high interest rates totally unjustified by her situation.
An even better picture would be drawn if you add a graph for debt to GDP ratio, for comparison purpose, for all countries aforementionned.

[viper37]

Edit: Sorry, now I can see my post was misleading. I didn't mean to say Germany created a real estate bubble in Greece. I meant the effect was similar to a real estate bubble, only that it all went into consumption. Essentially, Germans were lending to Greeks inordinate amounts of cash to buy more German products.

How does that work exactly?  A German Banker goes to the Greek PM, puts a gun on the table and then says "I'll make you an offer you can't refuse" and so the Greek is forced to borrow the money when he doesn't want to?

[Baron von Schtinkenbutt]

Yeah it is the same political forces that have governments enabling the bubbles that are so destabilizing. Do you want to be the guy who cools off the economy for the sake of something as silly as prudence?

What's worse is that the nature of democracy turns it into a game of hot potato.  If you aren't the one in office when everything falls apart you're golden.

[Martinus]

Yeah it is the same political forces that have governments enabling the bubbles that are so destabilizing. Do you want to be the guy who cools off the economy for the sake of something as silly as prudence?

What's worse is that the nature of democracy turns it into a game of hot potato.  If you aren't the one in office when everything falls apart you're golden.

It's even worse that being a CEO works like this too.

[Martinus]

Edit: Sorry, now I can see my post was misleading. I didn't mean to say Germany created a real estate bubble in Greece. I meant the effect was similar to a real estate bubble, only that it all went into consumption. Essentially, Germans were lending to Greeks inordinate amounts of cash to buy more German products.

How does that work exactly?  A German Banker goes to the Greek PM, puts a gun on the table and then says "I'll make you an offer you can't refuse" and so the Greek is forced to borrow the money when he doesn't want to?

I thought I explained that. The lending was not done to the government at first.

[Baron von Schtinkenbutt]

It's even worse that being a CEO works like this too.

Mostly because a CEO can usually choose to "retire" or "move on" if they have forewarning of the shit hitting the fan.  A politician is usually stuck in the position for some period of time.

[MadImmortalMan]

Do they think time is on their side? 

Tspiras is buying time while he prepares the invasion of Sicily. It'll work this time, don't worry.

[Monoriu]

The guy is playing games again.  He is making one huge gamble that, when he presents his proposals later, they'll be accepted unconditionally.  He thinks the EU will cave in when faced with a Grexit or deal choice. 

Who knows, maybe he is right and there will be another Munich. 

[Zanza]

The problem taking appropriate fiscal measures in boom times is, of course, it is much more profitable to do nothing and take credit for the wonderful economy than become the bad guy for raising taxes and cutting benefits to pay down debt.

I guess Wolfgang Schäuble is in the enviable position that austerity is actually a rather popular policy in Germany.

[Zanza]

I thought I explained that. The lending was not done to the government at first.

I can't find the figures right now and don't want to search them, but if I remember correctly, Greece was not as leveraged as other countries and the debt held by households, financial and non-financial corporations wasn't that high. It was really mainly the sovereign that was over-leveraged.

EDIT: Found something: http://www.mckinsey.com/~/media/McKinsey/dotcom/Insights/Economic%20Studies/Debt%20and%20not%20much%20deleveraging/MGI%20Debt%20and%20not%20much%20deleveragingIn%20briefFebruary%202015.ashx

Greece households had lowish debts before the crisis and didn't build much debt during the crisis either. It was really mainly sovereign debt in Greece's case. So a completely different story than in Spain.

[Crazy_Ivan80]

The guy is playing games again.  He is making one huge gamble that, when he presents his proposals later, they'll be accepted unconditionally.  He thinks the EU will cave in when faced with a Grexit or deal choice. 

Who knows, maybe he is right and there will be another Munich.

That would end the careers of quite a few politicians in power atm. There's no more mandate to give more money to Greece in more than a few countries. Even worse: letting Greece of the hook would give the anti-EU-parties the wind in the sails.

[Iormlund]

The problem taking appropriate fiscal measures in boom times is, of course, it is much more profitable to do nothing and take credit for the wonderful economy than become the bad guy for raising taxes and cutting benefits to pay down debt.

I guess Wolfgang Schäuble is in the enviable position that austerity is actually a rather popular policy in Germany.

No it's not. I pay enough taxes already!