In Greece, austerity kindles deep discontent, breakdown in rule of law

[Neil]

I suppose you could blame the bankers for lending money to Southern Europeans.  Then again, if they hadn't, the EU would probably have mandated that they must.

[Martinus]

I suppose you could blame the bankers for lending money to Southern Europeans.  Then again, if they hadn't, the EU would probably have mandated that they must.

You are a retard. Did the US mandate the banks to lend money to Lehman's?

[Razgovory]

Iorm, the measures on Greece have nothing to do with punishing Greeks. Trust me, all european governments are well aware of who truly created this mess (the bankers), and do not harbour any resentment towards the Greek (and Irish, Portuguese, Spanish) populations.

Yeah, and that's why Germany and France and Belgium are also on the verge of default.   The Greeks (and the Irish, Portuguese, and Spanish) have nobody but to blame but themselves.

[Martim Silva]

Yeah, and that's why Germany and France and Belgium are also on the verge of default.   The Greeks (and the Irish, Portuguese, and Spanish) have nobody but to blame but themselves.

The rule of thumb is: weak links break faster. Which is why the countries with smaller economies are breaking first (before Southern Europe we had the very nordic Iceland collapse, and before that the Baltic States went into a Depression).

Have no illusions about German or French economic power. Germany is indeed benefitting from an influx of capital coming back from the peripheral countries, but it is only temporary. Nobody in Berlin has any doubt that things can turn very sour, very fast for everyone.

Oh, and Belgium is in serious problems: it has a mountain of debt and no elected government to take measures. Its interest rates have been rising, and if they don't do something, the country WILL be a trainwreck on the verge of default in less than 12 months.

The banks became far too leveraged in the last 20 years, and they managed to do so by convincing everyone to borrow far more than they could possibly repay. While you can eventually blame a sucker for being gullible enough to belive the lies of a con man, ultimately the blame lies squarely in the crook that started everything.

Btw, the US financial position isn't that bright, either. If the US were in the Euro, it would be requesting a bailout by now, too (and crashing the whole financial system with it).

[Viking]

The rule of thumb is: weak links break faster. Which is why the countries with smaller economies are breaking first (before Southern Europe we had the very nordic Iceland collapse, and before that the Baltic States went into a Depression).

Though, in our case we identified the problem, developed a plan to deal with it, gained popular consent by means of reasoned political discourse and modification of the plan, implemented the plan and now we'll be able to pay off all our debt with the property confiscated from the banks and the Icelandic economy is on it's way up again well before the P.I.G.S. even hit bottom.

http://www.oecd.org/document/16/0,3746,en_2649_201185_43946384_1_1_1_1,00.html

Iceland is resolving the economic problems left by the financial crisis. It is well advanced in implementing the comprehensive programme agreed with the IMF to overcome these problems. Iceland is slowly emerging from a deep recession following the collapse of its main banks. The economy stopped contracting by late 2010 and a consumption and business investment-led recovery is projected to gather momentum, lifting economic growth to 3 per cent by 2012. Inflation is projected to remain low and the underlying current account surplus to be sustained.

[Razgovory]

Smaller economies shouldn't break any faster then larger ones so long as they borrow at the same proportions anyone else.  The Austrian economy is doing better then the Spanish or Italian ones despite being nominally smaller.  The bank collapse effected everyone, but the damage it causes is based on how the country was run.  Economic crisis happen, it's a fact of life.  Often you can't control that.  You can control how you will deal with it.  The Greek government acted irresponsibly, and now they going to suffer for it.  The Greeks used to have a fable about the Grasshopper and the Ant.  They would do well to take such stories to heart.

[Martinus]

Smaller economies shouldn't break any faster then larger ones so long as they borrow at the same proportions anyone else.  The Austrian economy is doing better then the Spanish or Italian ones despite being nominally smaller.  The bank collapse effected everyone, but the damage it causes is based on how the country was run.  Economic crisis happen, it's a fact of life.  Often you can't control that.  You can control how you will deal with it.  The Greek government acted irresponsibly, and now they going to suffer for it.  The Greeks used to have a fable about the Grasshopper and the Ant.  They would do well to take such stories to heart.

Yes and no. Smaller economies become unstable more easily because the cash balance required to do so is smaller.

[Neil]

I suppose you could blame the bankers for lending money to Southern Europeans.  Then again, if they hadn't, the EU would probably have mandated that they must.

You are a retard. Did the US mandate the banks to lend money to Lehman's?

You're a faggot, and thus not a person.

[Martim Silva]

Though, in our case we identified the problem, developed a plan to deal with it, gained popular consent by means of reasoned political discourse and modification of the plan, implemented the plan and now we'll be able to pay off all our debt with the property confiscated from the banks and the Icelandic economy is on it's way up again well before the P.I.G.S. even hit bottom.

And Iceland was also such a small economy that it was not a big deal to give it an IMF loan, as well as a Nordic loan to help it out, and it is fairly easy to give a push to such a tiny economy (any investment will have a bid impact on its GDP).

Smaller economies shouldn't break any faster then larger ones so long as they borrow at the same proportions anyone else.

Imagine you're the manager of a big investment fund/Bank director. There is a world crisis and you need to protect your investiments. Where do you pull the plug first?

1) Big countries with large and diverse economies and 'AAA' ratings, which cannot collapse without putting everyone at risk.
2) Small countries with smaller and less diverse economies, with less than top-notch ratings whose collapse does not (appearently) creates such danger.

When credit contracts, small nations (bar exceptions like Luxembourg and Switzerland) are the first ones to take it up the chin.

[Viking]

Though, in our case we identified the problem, developed a plan to deal with it, gained popular consent by means of reasoned political discourse and modification of the plan, implemented the plan and now we'll be able to pay off all our debt with the property confiscated from the banks and the Icelandic economy is on it's way up again well before the P.I.G.S. even hit bottom.

And Iceland was also such a small economy that it was not a big deal to give it an IMF loan, as well as a Nordic loan to help it out, and it is fairly easy to give a push to such a tiny economy (any investment will have a bid impact on its GDP).

Now that would be a perfectly solid argument if it weren't for the fact that we are about to pay all those loans back in the next year or two.

The "loans" to Iceland were given to cover deposit insurance. The assets of the banks in question are now being sold to pay back the loans. Icelanders pay their taxes, retire at 67 and work 60 hour weeks to pay for their extravagant lifestyles; unlike the Greeks who don't pay their taxes, retire at 55 and work 30 hour weeks while maintaining extravagant lifestyles funded by loans guaranteed by German taxpayers. You are confusing a cash flow problem (Iceland) with a debt and work ethic problem (P.I.G.S.). The Economist's comparison of Iceland to a hedge fund before the crisis is rather apt, since Iceland's solution to the problem was very similar to Goldman-Sachs, only in our case the Bankers didn't get bonuses and have gone bankrupt (as soon as we can trace down all their hidden assets).

[Martim Silva]

Before I forget:

The Austrian economy is doing better then the Spanish or Italian ones despite being nominally smaller.

Austria is in fact a massive headache for the EU. Austrian banks have loaned the equivalent of 70% of the country's GDP to Eastern Europe, and very little of it is coming back.

As a result, the country is a financial timebomb waiting to explode in the next few years (less if we let Greece default). It is a serious worry to the EU.

Now that would be a perfectly solid argument if it weren't for the fact that we are about to pay all those loans back in the next year or two.

The "loans" to Iceland were given to cover deposit insurance. The assets of the banks in question are now being sold to pay back the loans. Icelanders pay their taxes, retire at 67 and work 60 hour weeks to pay for their extravagant lifestyles; unlike the Greeks who don't pay their taxes, retire at 55 and work 30 hour weeks while maintaining extravagant lifestyles funded by loans guaranteed by German taxpayers. You are confusing a cash flow problem (Iceland) with a debt and work ethic problem (P.I.G.S.). The Economist's comparison of Iceland to a hedge fund before the crisis is rather apt, since Iceland's solution to the problem was very similar to Goldman-Sachs, only in our case the Bankers didn't get bonuses and have gone bankrupt (as soon as we can trace down all their hidden assets).

While the actual amount that will be raised by selling the banks' assets is not accurately known (the projections are based on incredibly optimistic forecasts of the value of the assets, which include a dramatic improvement of the global financial system to make them attractive) and the Icelandic ability to repay them in short order is by no means sure, Iceland so far has done some things right. It:

1 - Nationalized its private banking sector (since it's the private banks that are at the root of the problem, they should be disposed of).

2 - Has a better system of internal governance than Southern or Eastern Europe.

Point 2 is extremely important, and it is one where the whole crisis in Europe hinges on. We need a common set of governance rules to make sure our nations are better prepared to withstand and recover from these events.

Now, it is true that Southern europeans did overextend themselves too, but we must also bear in mind that banks did their best to encourage people and companies to get into debt, and that countries which did less of it seemed to 'lag behind' the others that did.

Portugal is a good example of this: the country has stagnated since 2000 and has effectively been under austerity measures to reduce its deficit since 2005. In the meanwhile, Greece continued to indebt itself (under the wise counsel of Goldman Sachs). As a result, the economies of Portugal and Greece, countries with similar populations and sizes and usually similar economies, started to diverge in growth.

Greece's GDP became almost 30% bigger than Portugal's. What happened before the financial crisis? We were said to be 'lagging behind' the Greeks and there was much finger pointing as why we were 'losing the train'.

Internal comparisons did almost as much to stimulate endebtedness than the banks themselves.

Now, if we all had the same governance rules, these comparisions would not have occurred - neither the Greeks would have gone tremendously out of line, nor would european countries be under pressure to 'catch up' with the others through whatever means possible.

[ulmont]

When credit contracts, small nations (bar exceptions like Luxembourg and Switzerland) are the first ones to take it up the chin.

"On the chin," "up the ass."

[Viking]

Now that would be a perfectly solid argument if it weren't for the fact that we are about to pay all those loans back in the next year or two.

The "loans" to Iceland were given to cover deposit insurance. The assets of the banks in question are now being sold to pay back the loans. Icelanders pay their taxes, retire at 67 and work 60 hour weeks to pay for their extravagant lifestyles; unlike the Greeks who don't pay their taxes, retire at 55 and work 30 hour weeks while maintaining extravagant lifestyles funded by loans guaranteed by German taxpayers. You are confusing a cash flow problem (Iceland) with a debt and work ethic problem (P.I.G.S.). The Economist's comparison of Iceland to a hedge fund before the crisis is rather apt, since Iceland's solution to the problem was very similar to Goldman-Sachs, only in our case the Bankers didn't get bonuses and have gone bankrupt (as soon as we can trace down all their hidden assets).

While the actual amount that will be raised by selling the banks' assets is not accurately known (the projections are based on incredibly optimistic forecasts of the value of the assets, which include a dramatic improvement of the global financial system to make them attractive) and the Icelandic ability to repay them in short order is by no means sure, Iceland so far has done some things right. It:

1 - Nationalized its private banking sector (since it's the private banks that are at the root of the problem, they should be disposed of).

2 - Has a better system of internal governance than Southern or Eastern Europe.

Point 2 is extremely important, and it is one where the whole crisis in Europe hinges on. We need a common set of governance rules to make sure our nations are better prepared to withstand and recover from these events.

Now, it is true that Southern europeans did overextend themselves too, but we must also bear in mind that banks did their best to encourage people and companies to get into debt, and that countries which did less of it seemed to 'lag behind' the others that did.

Portugal is a good example of this: the country has stagnated since 2000 and has effectively been under austerity measures to reduce its deficit since 2005. In the meanwhile, Greece continued to indebt itself (under the wise counsel of Goldman Sachs). As a result, the economies of Portugal and Greece, countries with similar populations and sizes and usually similar economies, started to diverge in growth.

Greece's GDP became almost 30% bigger than Portugal's. What happened before the financial crisis? We were said to be 'lagging behind' the Greeks and there was much finger pointing as why we were 'losing the train'.

Internal comparisons did almost as much to stimulate endebtedness than the banks themselves.

Now, if we all had the same governance rules, these comparisions would not have occurred - neither the Greeks would have gone tremendously out of line, nor would european countries be under pressure to 'catch up' with the others through whatever means possible.

It's good you move to the more relevant factors other than size. Portugal and Greece were badly run countries with bad economic systems where a lack of responsibility for society by the people resulted in a lack of reform and a willingness to accept bad advice advising short term solutions.

The difference between countries which recovered quickly or were not affected (Northern Europe) and the countries which recovered slowly or were heavily affected (Southern Europe) is not size, it is governance. I suggest you try to stop blame shifting. Once the people and their elected representatives take ownership over the issue and make severe choices the problems will not be solved. Feeding your super-ego by blaming someone else, absolving yourself of blame and demanding that somebody else solve your problem for you will not help. 

[Admiral Yi]

The banks became far too leveraged in the last 20 years, and they managed to do so by convincing everyone to borrow far more than they could possibly repay. While you can eventually blame a sucker for being gullible enough to belive the lies of a con man, ultimately the blame lies squarely in the crook that started everything.

Bankers are not only evil, they are incredibly stupid, running cons they know will inevitably result in their own loss.

[grumbler]

Bankers are not only evil, they are incredibly stupid, running cons they know will inevitably result in their own loss.

Exactly.  They make such great super-villains because they behave, in real life, exactly the way they do in comic books.  Helkl, if you drop a banker into a canyon 1,000 feet deep, he will just end up climbing out of a baker-shaped hole in the ground (or, at least, that is what the ambassador from Acme assured me at lunch Tuesday).

We only have to worry if the bankers get frickin' sharks with frickin' laser beams attached to their frickin' heads.