How the Greek rescue failed

[Tamas]

When there were plans to send German and EU personel to Greece to monitor the enaction of agreed austerity, ie. giving it a personal touch from Germany, there was a huge uproar against it.

[Kleves]

I do agree with Sheilbh that having someone other than the Greeks run Greece would have been a big help.

[The Brain]

I do agree with Sheilbh that having someone other than the Greeks run Greece would have been a big help.

[Richard Hakluyt]

They just need their drachma back so that they can have 20% devaluation and 15% interest rates like they used to have. Should never have joined the Deutschmark in the first place.

[Sheilbh]

Do you seriously believe that this level of micromanagement by Germany or the EU was feasible or even desirable? That would only work if we send hordes of civil servants to Greece and basically make this sovereign nation a province of the EU under federal administration.

Well that's not what it would have done.  And I wouldn't have sent Germans, to be frank.

The Greek state's never had a great deal of institutional capacity.  The workforce was cut and the remaining workers demoralised.  It isn't sufficient to say 'get going on those structural reforms' and then leave them for a year only to bemoan, later on, that it's not worked out.  I think a far greater degree of support could have been offered - especially as this was the period with the very positive FinMin.

The example of EU help with tax collection when the Greeks were coming up to their deadline is instructive.  It didn't create a massive furore and it was very effective.  What did cause issues was the suggestion of shifting budgetary sovereignty to the EU, which is always going to be controversial but especially in a proud country like Greece.

I am generally pretty damn skeptical of things being blamed on such "soft" causes like "Gosh, if only the German had spent more quality time with the Greeks, this could have been avoided!"

That is usually just an excuse to avoid looking at the actual hard factors involved.

It's quite lucky I didn't say that then.  We've got a 30-something page thread about the hard causes.  The soft factors matter too.  As I say the meeting thing isn't key it's just symptomatic of neglect of Greece from when they got their first bailout to when Papandreou's government fell.

[Sheilbh]

They just need their drachma back so that they can have 20% devaluation and 15% interest rates like they used to have. Should never have joined the Deutschmark in the first place.

Agreed, I'd add they should also never have been let in.  Everyone knew they were lying.  But I think the same actually goes for Spain, Portugal and Italy too.

[Richard Hakluyt]

Those countries also traditionally had pretty soft currencies. If the euro had been run more like the peseta then the Med countries would be doing fine, but of course people like the Germans and Dutch would be mightily peeved at the inflation rate that would have entailed.

[Tamas]

What should had been done then Sheilbh? Constantly bowing to the Greeks on personal meetings an in Tv while begging them to take the aid AND try to come up with a manageable country?

[Sheilbh]

What should had been done then Sheilbh? Constantly bowing to the Greeks on personal meetings an in Tv while begging them to take the aid AND try to come up with a manageable country?

I think the IMF should have been allowed to take the lead.  They have experience of running these sort of programs that the EU, frankly, doesn't.  The program should have been more hands on to avoid errors like that with the civil service.  And there should have been high-level follow up and support for the government - so the odd visit by German ministers and at least one visit by the Presidents of the Commission and the Council would seem about right during a massive EU led bailout.  I mean if they're not engaged in that what exactly are they for?

My observation would be that the EU also got the tone wrong with Greece for a long time.  I've read that Greeks thought the EU position was softening because in their last communique they (after an argument at the summit dinner) included a sentence about the significant and difficult efforts ordinary Greeks have already made.  That sort of tone - with the acknowledgement that what we're asking the Greeks to do is very difficult because it's basically that they should bear the costs of their clientilist political masters for the last decade - would have helped.  I think too much time was spent moralising and calling them lazy.  It's not helpful and it fucks them off.

[Tamas]

Sure it shouldn't have been more hands-on, and you are probably right that the IMF is way better in that.

But I am pretty sure the Greeks were too proud for that as well. And their poiticans too vary of losing control of their budget.

[alfred russel]

Greece has maintained a primary deficit and can't seem to close it.

Not just Greece. We'll be lucky to achieve a drop from 9% to 7% GDP deficit this year, after >5% or so GDP spending cuts and tax hikes.

Well yeah, you are fucked too. 

Spain is a bit different than Greece. Before the crisis started Spain wasn't breaking the rules by spending too much and producing fraudulent books. Spain's government seems to be less dysfunctional than Greece, and Spain is too big to let collapse without bother.

[alfred russel]

Those countries also traditionally had pretty soft currencies. If the euro had been run more like the peseta then the Med countries would be doing fine, but of course people like the Germans and Dutch would be mightily peeved at the inflation rate that would have entailed.

Let the Germans and the Dutch have expensive currencies, but let the good holiday destinations be cheap. This is my hope at least. 

[Sheilbh]

But I am pretty sure the Greeks were too proud for that as well. And their poiticans too vary of losing control of their budget.

I'm not convinced that was so early in the Papandreou administration.  Papaconstantinou was a relatively successful FinMin (by the standards of the bailout) and like Monti he's that rare beast - a genuine liberal.  I think if there was sufficient outside support and help a lot more could've been done in that first year.  It still probably wouldn't have been enough to matter - the IMF have set out 5 necessary conditions for internal devaluation to work, by my count Greece maybe, possibly fulfils 1.  But I think it would have had a greater chance of success than neglect.

Edit:  And if the EU had given a €110 billion loan to build infrastructure Barosso and van Rompuy would've been down there every other week to remind everyone of what the EU does.

[Richard Hakluyt]

Those countries also traditionally had pretty soft currencies. If the euro had been run more like the peseta then the Med countries would be doing fine, but of course people like the Germans and Dutch would be mightily peeved at the inflation rate that would have entailed.

Let the Germans and the Dutch have expensive currencies, but let the good holiday destinations be cheap. This is my hope at least. 

I was wondering whether to go to Greece this year, but decided to wait a while as it is likely to be a lot cheaper next year 

[Neil]

Manual workers use the equipment, but they don't... maintain it.

Utterly and completely wrong.