Sovereign debt bubble thread

[Admiral Yi]

I was a little surprised to learn that Spain is running an 8% deficit.  That's almost as big as the US'!

[Sheilbh]

I read an article recently which basically said that they haven't passed a single meaningful reform yet. They haven't been able to cut more than a 1000 of the 750,000 state employees apparently. They have still not been able to open up closed jobs such as truck or taxi drivers. And so on and so forth.

A lot of what they're doing is not replacing staff who are retiring, they're not replenishing the police or army at the full rate (I think they're going 1:5 compared to a hiring freeze in the rest of the public sector) and there are tens of thousands of furloughed employees. 

But it's a mistake simply to see the number of public employees as entirely bad.  One of the problems Greece has is that their state bodies simply don't have the the administrative capability or capacity to implement the reforms.  This is especially a problem with revenue collection. 

One of the most unpopular reforms has been to effectively outsource the collection of some property taxes to the utilities companies.  It's bundled in with your bill.  If you fail to pay then you get prosecuted for not paying your taxes and your electricity cut off.  But one of the reasons that reform was passed was because the Greek Inland Revenue wasn't really capable of fully collecting property tax.

Another part of the problem the Greeks have is that they're struggling to successfully privatise anything given the current economic climate.  My understanding is that some of these projected privatisations have also been hugely overvalued.  The privatisation of assets so far were, according to the plan, meant to net the Greeks €1.7 billion.  They didn't even hit €400 million.

The latest IMF report said on strucutral reforms that most of the legislation has been passed, but that the Greek state is struggling to implement.  This is again an issue of state capacity.  But there have been reforms.  But if you simply think about it this government's furloughing employees and not replacing them and implementing largescale reforms in almost every sector from the judiciary to social security.  That's inevitably going to cause problems getting from legislation - which is easy to pass - the full enactment.  Though it's ongoing.

On the fiscal side in addition to the general austerity I believe they've halved the percent of the population able to retire early with social security, and cut pensions - this is probably necessary because Greek social security will be decimated by the haircuts.  It's also worth remembering that so far the Greeks have actually delivered the austerity requested in all of their budgets - if any of the projections on their economy were right.  They've always been very optimistic.

On the structural reforms the IMF have said there's the same problem of implementation.  But they have liberalised the labour market and the energy market.  The restricted professions you've mentioned are apparently an issue and full implementation's been pushed back.  But they've actually cut them by around 20% and have gone from a level near Scandinavia to the OECD average.

Having said that taxi drivers should be a restricted profession.

Passing an austerity budget is easy when you know you won't make it anyway.

As I say the budget was passed by all parties but the Communists.  That makes it difficult for anyone to run against it.

[The Larch]

I was a little surprised to learn that Spain is running an 8% deficit.  That's almost as big as the US'!

2011 has been a pretty shitty year.

[Iormlund]

And 2012 is going to be worse.

On the bright side, we've entered the new year with enough projects to last it all. With a bit of luck most of our clients will survive and pay us as well.

[The Larch]

And 2012 is going to be worse.

On the bright side, we've entered the new year with enough projects to last it all. With a bit of luck most of our clients will survive and pay us as well.

Heh, I just finished my contract and I'm looking for a new job. I'll take it reeeeeally easy, given the circumstances. 

When I started in early 2009 I thought "wow, I'm so lucky, I can weather out the worst part of the crisis and when I'll be out things will surely be better". Oh how I was wrong.

[Iormlund]

Damn, that sucks.

But at least you've got options. These days I'm commissioning a production line at a big factory. There are a lot of young people working at the assembly lines with nothing to fall back on*.





*Including a surprisingly large number of HOTT girls.

[The Larch]

Damn, that sucks.

But at least you've got options. These days I'm commissioning a production line at a big factory. There are a lot of young people working at the assembly lines with nothing to fall back on*.


*Including a surprisingly large number of HOTT girls.

Well, the last year was particulary bleak, and the perspectives don't look any better. Almost all public funding for my line of work is being gutted, so I don't have any particular hope for finding work in that in the short term in Galicia, or even in Spain. I'll most probably explore my possibilities abroad.

[Zanza]

Meanwhile, Germany is having a pretty good crisis...

The federal government can sell short-term debt at negative yields, meaning people pay for the privilege of lending money.
Unemployment is lowest in 20 years.
Economy in 2011 probably grew at more than 2%.
Exports grew, breaking one trillion Euro for the first time ever (higher in absolute terms than 2007 and 2008).

The important automotive industry just had its best year ever, despite Western Europe struggling.

Germans don't feel the crisis. It's very abstract for us. 

[DGuller]

Meanwhile, Germany is having a pretty good crisis...

The federal government can sell short-term debt at negative yields, meaning people pay for the privilege of lending money.
Unemployment is lowest in 20 years.
Economy in 2011 probably grew at more than 2%.
Exports grew, breaking one trillion Euro for the first time ever (higher in absolute terms than 2007 and 2008).

The important automotive industry just had its best year ever, despite Western Europe struggling.

Germans don't feel the crisis. It's very abstract for us. 

Of course it's easy to prosper economically when you prey on other countries with your sound fiscal policies.

[Admiral Yi]

Of course it's easy to prosper economically when you prey on other countries with your sound fiscal policies.

What's shocking is that more countries don't take this easy way out.

[PJL]

Of course it's easy to prosper economically when you prey on other countries with your sound fiscal policies.

What's shocking is that more countries don't take this easy way out.

Incorrect. Austerity IS the easy way out compared to the alternative. However bad it is for them now, goverrnments in problem countires know it will instantly get worse if/when they leave the Eurozone, and they will get the blame for it whatever happens, even if they make a faster recovery later out of the currency union than in. Perversely it's the actual short-termism of politicians to prevent a very nasty shock that is actually making them do things that would rather not do, and forces their hands to at least try mend their economies structurally etc.

[Sheilbh]

Of course it's easy to prosper economically when you prey on other countries with your sound fiscal policies.

What's shocking is that more countries don't take this easy way out.

That's like saying the easy way out of America's problems is that she becomes China.

Hope Germany continues to have a good crisis.  If they don't then I imagine things will be even worse for the rest of us, and we need someone to do well in Europe

[Admiral Yi]

Languish down for two days has not helped out y'all's sense of irony.

[Iormlund]

Of course it's easy to prosper economically when you prey on other countries with your sound fiscal policies.

What sound fiscal policies may those be?

[Sheilbh]

Languish down for two days has not helped out y'all's sense of irony.

Sorry.  It seemed too close to your views