Greece closes banks and imposes capital control

[WWGD]

By contrast
France and Germany had figures of 1532 and 1432 respectively.

reference,
http://stats.oecd.org/Index.aspx?DataSetCode=ANHRS

The greeks are definitely not slaggards

also,The downturn of the world economy was really what knocked their socks off for some reason, and they could not recover.

Seems like they may have serious productivity issues. Or maybe there are diminishing returns issues.

 

[256bits]

Seems like they may have serious productivity issues. Or maybe there are diminishing returns issues.

Economy of heavy reliance on an service based industries - tourism related I suppose might be a good part of it.

 

[phinds]

Seems like they may have serious productivity issues. Or maybe there are diminishing returns issues.

Far more significant, I think, is that they don't produce much. They once had one of the, if not the, world's leading shipping industries and it is still significant but other than that I don't think they are known for producing much of anything. The Economist's 2015 World in Figures gives their economy as 10% manufacturing and 80% services (and 3% agriculture and the rest "other"), so @256bits nailed that.

 

[WWGD]

Far more significant, I think, is that they don't produce much. They once had one of the, if not the, world's leading shipping industries and it is still significant but other than that I don't think they are known for producing much of anything. The Economist's 2015 World in Figures gives their economy as 10% manufacturing and 80% services (and 3% agriculture and the rest "other"), so @256bits nailed that.

It's way above my league how to effectively grow an economy, but it seems like a good idea to look at the cases of countries similar to Greece in many respects that have been successful.

 

[phinds]

It's way above my league how to effectively grow an economy, but it seems like a good idea to look at the cases of countries similar to Greece in many respects that have been successful.

I think when you look at such things in detail you find that high-level similarities are not nearly as applicable as one might think. A country's history and culture count for more than external technocrats credit.

 

[pondhockey]

Fascinating and informative discussion. Thanks to all and for the citations and links.

In particular, the impression I have gotten from the media (or my faulty ingestion of the media) is that the Greeks are an entitled population with short work weeks and many benefits, such as early retirement.

Evidence that is quoted above seems to debunk the idea that Greeks work less. I'm still interested to know what about benefits such as early retirement, and how those played into the crises.

 

[Vanadium 50]

I don't think any lender is arguing that they don't want to extend new loans to Greece because Greeks are lazy. They are saying that they don't want to extend new loans to Greece because they don't think they will ever be paid back. Since Tuesday, when the Greeks stopped paying them back, it's hard to say this isn't a justified concern.

You asked about Greek pension figures. Here is what Google found: http://greece.greekreporter.com/2014/12/04/75-of-greek-pensioners-enjoy-early-retirement/ I have no idea of the quality of the source.

For years, Greek candidates for public office have been promising more and more benefits, and paying for them by borrowing rather than through taxation. They are now in a situation where they cannot pay it back. The populace, justifiably, feels swindled. It's easier to redirect this anger towards the Germans and the rest of the EU than to admit that they swindled themselves.

 

[pondhockey]

I don't think any lender is arguing that they don't want to extend new loans to Greece because Greeks are lazy. They are saying that they don't want to extend new loans to Greece because they don't think they will ever be paid back. Since Tuesday, when the Greeks stopped paying them back, it's hard to say this isn't a justified concern.

You asked about Greek pension figures. Here is what Google found: http://greece.greekreporter.com/2014/12/04/75-of-greek-pensioners-enjoy-early-retirement/ I have no idea of the quality of the source.

For years, Greek candidates for public office have been promising more and more benefits, and paying for them by borrowing rather than through taxation. They are now in a situation where they cannot pay it back. The populace, justifiably, feels swindled. It's easier to redirect this anger towards the Germans and the rest of the EU than to admit that they swindled themselves.

Thank you for the article, Van.

In the mean time I had searched for information on the pension system. My own sense is that the pension system is (or at least was) way out of balance, is a huge burden to the tax payer/ bailers out and needs to be dealt with. It appears to be part of what is unsustainable about the crisis. Especially when Greeks can choose not to pay taxes.

It also looks to me that some of the debt needs to be written off, and that which cannot be needs to be restructured for there to be a possible way forward.

Finally, it appears that it is Greek politicians that sucked the populace into this mess. As harsh as it might be, there is not likely to be an enduring solution without some political pain and new political will.

 

[pondhockey]

On paying taxes (not that I don't sympathize!)
http://www.wsj.com/articles/greece-struggles-to-get-citizens-to-pay-their-taxes-1424867495

“Greeks consider taxes as theft,” said Aristides Hatzis, an associate professor of law and economics at the University of Athens. “Normally taxes are considered the price you have to pay for a just state, but this is not accepted by the Greek mentality.”

Is it really clear that Greece belongs in the EU?

 

[tom aaron]

Fascinating and informative discussion. Thanks to all and for the citations and links.

In particular, the impression I have gotten from the media (or my faulty ingestion of the media) is that the Greeks are an entitled population with short work weeks and many benefits, such as early retirement.

Evidence that is quoted above seems to debunk the idea that Greeks work less. I'm still interested to know what about benefits such as early retirement, and how those played into the crises.

Doesn't matter how hard somebody works. The Dutch work 'smart'. Australians work 'smart'. Vietnamese farm labourers in rice fields may work their buts off but American farmers will be more efficient using technology.

Greece is somewhere in between. They haven't invested in a First World economic infrastructure. They have been contented with 'getting by' when what they needed was initiative and innovation. The Germans, Danes, Singaporeans, Israelis, etc. prosper by moving forward.

 

[WWGD]

Doesn't matter how hard somebody works. The Dutch work 'smart'. Australians work 'smart'. Vietnamese farm labourers in rice fields may work their buts off but American farmers will be more efficient using technology.

Greece is somewhere in between. They haven't invested in a First World economic infrastructure. They have been contented with 'getting by' when what they needed was initiative and innovation. The Germans, Danes, Singaporeans, Israelis, etc. prosper by moving forward.

I know a few Greeks who just day dream of the Golden days. Maybe they are stuck in the old glory days.

 

[Czcibor]

My own personal opinion is that the unpaid domestic taxes in Greece is a symptom of a general lack of trust that exists within Greek society toward the government, due to a history of dictatorships and unstable governments.

Add Osman Turks occupation, which add additional layer to keeping tax evaders in specially high esteem...

Dictatorship... its not that in nicely governed country a few military leaders suddenly did a power grab... but more in a country close to becoming a failed state a few colonels thought they have to save their country on all price...

At any rate, your quote above (Greece has ALL of the RU to draw upon) epitomizes the very problem inherent with the adoption of the euro to begin with -- since each nation is sacrificing their ability to set monetary policy (and monetary policy, along with fiscal policy, are among the primary tools that allow governments to shape the economy to the extent possible for any governments), in essence, every member state is drawing upon every other EU nation. Implicit within the adoption of the euro is that the fiscal and monetary status of an EU nation is tied to all others.

It has been my opinion all along that both governments and regular citizens of each of the member states never understood the full implications of what it means to be in a true monetary union i.e. no single nation has control over their own respective monetary policy (that is why I have always felt that the adoption of the common currency under the current framework of the EU was a dubious endeavour). If they did, I would hasten to state that member states would not have been so eager to consider joining the Eurozone.

At the time of euro adoption, it was perceived (by economists) that as Milton Freedman was teaching - money was neutral. No chance of using any trick. So adopting common currency seemed reasonable, more in line of guaranteeing its stable value.

At this stage, it seems clear to me that the Greek government (and likely the bulk of its population -- we'll know more based on the results of the referendum) and the main creditor nations of the EU (e.g. Germany) are so far apart in terms of what can be agreed that it seems inevitable that Greece will default in its debt commitments, and I just do not see any further benefit for Greece to stay in the euro. Your posts in this thread is in itself a reflection of this (given that you are either German or French, since you stated earlier that you grew up near the German/French border) -- it seems quite clear to me that you do not really feel that Greeks are fellow Europeans who share a common fate with the rest of Europe (part of the rationale that was trumpeted with joining the euro).

At this moment I think there is shared disdain on both sides. Think about it in line of Greeks showing the rest Europe that they do not share common values or are not interested in any serious cooperation, while the EU showing unwillingness to send another bushel of money.

 

[Czcibor]

In particular, the impression I have gotten from the media (or my faulty ingestion of the media) is that the Greeks are an entitled population with short work weeks and many benefits, such as early retirement.

It makes an easier to tell story. It's easier to say something like that then describe pathologies of society / political system.
They feel very entitled, just those who don't work in public sector have to work quite hard, that must be frustrating. So in desperation they vote for a politicians who promise to relive them from such pain through early retirement, public sector work, whatever...

It also looks to me that some of the debt needs to be written off, and that which cannot be needs to be restructured for there to be a possible way forward.

Yep, just other member states demand reform first, then as reward for reforms partial debt relieve.

What - do you think that's a well thought trap, not to relieve Greek of any debts? ;)

Finally, it appears that it is Greek politicians that sucked the populace into this mess. As harsh as it might be, there is not likely to be an enduring solution without some political pain and new political will.

And to deal with dysfunctionality of their politicians Greeks, elected new guys with new ideas... Syriza... ... Not, it seems as more problem of what they expect from politician and who they elect...

 

[Buckleymanor]

I don't get your point at all. No one is happy getting clobbered during war. My point was that Germans didn't whine about it after the war, they picked themselves up and got on with building what is now the strongest economy in Europe.

Well excuse me for the literal take on it. If you bothered to read the wiki article Germany only recently objected to a statue commemorating Mr, Harris's accomplishments.
So in my wrong interpretation of events the Germans are still whining today.
May-be if the Germans did not receive the financial help they did after the war the Greeks and I might agree with your point.

 

[Czcibor]

I found another nice comment on the net:
[The referendum] gives new meaning to the term "exit poll."

 

[Czcibor]

From opinion pools it looks like "Oxi" (No), but its not certain yet.

http://www.theguardian.com/business...ferendum-gets-under-way--eu-euro-bailout-live

 

[phinds]

From opinion pools it looks like "Oxi" (No), but its not certain yet.

http://www.theguardian.com/business...ferendum-gets-under-way--eu-euro-bailout-live

That's a sign (if we still needed on) that even if the vote is "yes", the number of people in Greece who distrust the European authorities is so large that meaningful reforms will be seen as being imposed by the outside "evil" forces and thus VERY hard to legislate/implement.

 

[Czcibor]

That's a sign (if we still needed on) that even if the vote is "yes", the number of people in Greece who distrust the European authorities is so large that meaningful reforms will be seen as being imposed by the outside "evil" forces and thus VERY hard to legislate/implement.

Yes, the worst result would be a tiny majority for yes. (neither to kick out nor to save)

OK, so far (20% counted) it seems safe margin of around 60% for "No".

Politicians on both sides speak about further negotiations... So far it looks like scenario of leaving Eurozone in the most painful way...

Should ECB suggest some end of life treatment care? ;)

 

[phinds]

Yes, the worst result would be a tiny majority for yes. (neither to kick out nor to save)

OK, so far (20% counted) it seems safe margin of around 60% for "No".

Politicians on both sides speak about further negotiations... So far it looks like scenario of leaving Eurozone in the most painful way...

Should ECB suggest some end of life treatment care? ;)

It seems that the Greek people believe that a "no" means they get a better deal in the negotiations. I think they should take Junker more seriously. He's been on their side all along, but even he is fed up w/ them now and has made that clear. Hard to see why they don't take him seriously.

 

[tom aaron]

It seems that the Greek people believe that a "no" means they get a better deal in the negotiations. I think they should take Junker more seriously. He's been on their side all along, but even he is fed up w/ them now and has made that clear. Hard to see why they don't take him seriously.

The happiest people with this outcome are the German taxpayers. Finally now able to stop the travesty of leaders ignoring reality. No pouring more money into a cesspool hoping its going to make it stink less.

 

[Tosh5457]

Wow, suddenly this stopped seeming a scientific forum, and instead started looking like a Greek bashing forum based in nonsense. By all means critize what should be critized, but not based in wrong data like I see here.

Greeks don't like working? Greek work hours:

But the Office for National Statistics seems to be on a mission to rescue us from our own prejudices. New data published this morning shows that Greek workers actually put in longer hours than anyone else in Europe — 42.2 per week, compared to just 35.6 in Germany. If you look at full-time figures, it is even starker.

http://www.theguardian.com/news/datablog/2011/dec/08/europe-working-hours

"Greeks retire at 58". Greek effective retirement age:
http://www.forbes.com/sites/jasonob...ve-retirement-age-vs-official-retirement-age/
62.4 years, above many European countries.

Well excuse me for the literal take on it. If you bothered to read the wiki article Germany only recently objected to a statue commemorating Mr, Harris's accomplishments.
So in my wrong interpretation of events the Germans are still whining today.
May-be if the Germans did not receive the financial help they did after the war the Greeks and I might agree with your point.

I agree, if there is one country in Europe that can't complain about others paying off for their expenses, it's Germany, yet they're the ones who complain the most. Northern European countries got massive aid after WWII likewise. So the argument that others shouldn't pay for Greece problems, should really be that others don't want to pay for Greece problems. I'm ok with that, they'll go bankrupt in any case most likely, but just can't stand these supposedly moralist arguments.

Bottom-line, Greece's problem was a clear economic mismanagement that didn't allow them to increase their productivity, and also because of the fast deindustralization they went through, not because they're lazy people trying to live off others, like this thread could easily make one think.

 

[Buckleymanor]

The happiest people with this outcome are the German taxpayers. Finally now able to stop the travesty of leaders ignoring reality. No pouring more money into a cesspool hoping its going to make it stink less.

Why should they be happy, if the situation with Greece is not resolved with a positive outcome and Greece remains within the Eurozone, then there is every chance that the situation becomes contagious within Europe and the rest of the world and that the amount of money the German taxpayer is owed by that country is insignificant in comparison to other outstanding debts. Owed by other nations, this could result in crisis of confidence and should never have got to this stage.http://www.bbc.co.uk/news/business-15748696

 

[StatGuy2000]

To those on the forum who have paid special attention to this issue (I'm specifically thinking of Czcibor, phinds, Tosh5457, and especially tom aaron), here is an article written for Prospect magazine by neo-Keynesian economist James Galbraith on the situation with Greece.

http://prospect.org/article/greece-only-no-can-save-euro

 

[Czcibor]

Wow, suddenly this stopped seeming a scientific forum, and instead started looking like a Greek bashing forum based in nonsense. By all means critize what should be critized, but not based in wrong data like I see here.

Thanks for data, retirement age was new for me.

I think that mood is related to:
-having problems at their own request;
-not doing much reforms, even under EU threats;
-drowning there quite a lot of money by other member states (we in Poland are lucky that adopting euro was delayed);
-showing at the end quite nice rant with nationalistic undertones;
-showing still impaired ability to asses reality.

How was it called? Hubris? ;)

I agree, if there is one country in Europe that can't complain about others paying off for their expenses, it's Germany, yet they're the ones who complain the most.

I'd say Finns and Balts.

Northern European countries got massive aid after WWII likewise.

Some of them, while other were paying contributions or were ordered by their Soviet occupants to not accept Marshal aid.

So the argument that others shouldn't pay for Greece problems, should really be that others don't want to pay for Greece problems. I'm ok with that, they'll go bankrupt in any case most likely, but just can't stand these supposedly moralist arguments.

Which problems? Acute ones or long term ones? I mean Greece was being heavily subsidized from 1981. Just it did not work. (for example in case of Ireland smaller funds and open market did miracles) It simply looks like nothing can be done. And my guess is that EU actually tried to keep Greece in Eurozone at high cost, just not to make their prior political decisions highly embarrassing for themselves.

 

[russ_watters]

Wow, suddenly this stopped seeming a scientific forum, and instead started looking like a Greek bashing forum based in nonsense. By all means critize what should be critized, but not based in wrong data like I see here.
...
Bottom-line, Greece's problem was a clear economic mismanagement that didn't allow them to increase their productivity, and also because of the fast deindustralization they went through, not because they're lazy people trying to live off others, like this thread could easily make one think.

I think you are drawing conclusions about what people think that do not match or follow from what they have said. Being lazy (or not) and wanting others to bail you out of your mistaks are not necessarily related issues.

 

[Czcibor]

To those on the forum who have paid special attention to this issue (I'm specifically thinking of Czcibor, phinds, Tosh5457, and especially tom aaron), here is an article written for Prospect magazine by neo-Keynsian economist James Galbraith on the situation with Greece.

http://prospect.org/article/greece-only-no-can-save-euro

Honestly? I've read the article and consider it as full of emotionally loaded language and seriously biased.

I think that this guy should just lend some of his own money to this [unique] "political leader".

 

[phinds]

To those on the forum who have paid special attention to this issue (I'm specifically thinking of Czcibor, phinds, Tosh5457, and especially tom aaron), here is an article written for Prospect magazine by neo-Keynsian economist James Galbraith on the situation with Greece.

http://prospect.org/article/greece-only-no-can-save-euro

Actually, not particularly helpful, just a lot of overly emotional statements.

I've been following international affairs and finances for decades and I can absolutely guarantee you that if you put 4 economists in a room, you will get 5 different, and strongly held, views on how most any particular issue should be dealt with. Often these conflicting views are all, or mostly all, seemingly well reasoned but at the end of the day just boil down to a restatement of the particular school of economic thought that each particular economist subscribes to and are not necessarily helpful to a particular situation.

 

[Czcibor]

Actually, not particularly helpful, just a lot of overly emotional statements.

I've been following international affairs and finances for decades and I can absolutely guarantee you that if you put 4 economists in a room, you will get 5 different, and strongly held, views on how most any particular issue should be dealt with. Often these conflicting views are all, or mostly all, seemingly well reasoned but at the end of the day just boil down to a restatement of the particular school of economic thought that each particular economist subscribes to and are not necessarily helpful to a particular situation.

Honestly I thought more Keynesian thought was mostly absorbed into neoclassical synthesis, and within the mainstreams the quarrels are more or less limited. And what was done in this article was more an ideological story, rather unrelated to economics (like about how the negotiations went).

An awkward question about democratic mandate:

An opinion poll by Infratest Dimap for public broadcaster ARD published on Friday showed 68% of Germans blame the Greek government for the escalation of the debt crisis, with only 4% pointing the finger at other eurozone countries. The poll of 1,501 voters was conducted from June 29 to July 1 and had a margin of error of 1.4% to 3.1%.

In a separate Forschungsgruppe Wahlen survey for public broadcaster ZDF on Thursday, 85% of Germans said Europe was right not to have made more concessions to the Greek government. The poll of 1,234 respondents was conducted from June 30 to July 2 and had a margin of error of 2% to 3%.

Read more: http://www.nasdaq.com/article/greek...-open-resentment-20150704-00002#ixzz3f3pzmEOJ

As Tsiparis insisted, the will of People has to be respected ;) And more seriously with so big gap between societies the deal had been hard to get.

 

[Vanadium 50]

The problem with this referendum is that the Greeks cannot vote that Germany will give them a loan.

I also find it hard to blame the Institutions. Are their terms stupid and counter-productive? Yes. But the only reason they are being discussed is because nobody else will lend, and the reason that nobody else will lend is because Greece is not going to pay them back.

 

[Evo]

I thought that this article from 2012 citing what is wrong with Greece was good. It might be a good refresher on why they went downhill.

Tassos Chronopoulos, owner of Tassos, a Greek food importer based outside Chicago, says that the country’s disorganized agricultural business all but disqualified itself from partaking in the fancy-food craze of the past few decades. Greek growers never banded together to establish uniform quality standards and trade rules. (Chronopoulos often found bottles spiked with cheaper vegetable oil.) Frequent strikes at large ports damaged food and reputations. Until he found a reliable partner, Chronopoulos says that he constantly opened new shipments to see bottles with labels askew, wrinkled or missing. “They do not understand,” he says, “that a label not applied properly will make the sales suffer.”

Money from richer European taxpayers flowed to Greek farmers to upgrade their farms, “but the Europeans and the Greek government had no control mechanism,” he says. Instead of investing in new tractors, “the farmers were taking the money and buying things like Mercedeses.”

Good article.

http://www.nytimes.com/2012/07/08/magazine/what-greece-makes-the-world-might-take.html?_r=0

 

[mheslep]

"Greeks retire at 58". Greek effective retirement age:
http://www.forbes.com/sites/jasonob...ve-retirement-age-vs-official-retirement-age/
62.4 years, above many European countries

The relevant retirement age to this discussion is that at which the government began paying pensions before the deficit frauds were discovered, as pensions are the major problem. No country in the EU spends as much as Greece (share of GDP). Apparently that age at the beginning of payments was 58.

 

[bohm2]

Bottom-line, Greece's problem was a clear economic mismanagement that didn't allow them to increase their productivity, and also because of the fast deindustralization they went through, not because they're lazy people trying to live off others, like this thread could easily make one think.

Yes, and according to this 2015 parliamentary report on the Truth about the Public debt, the increase in debt before 2010 was not due to excessive public spending but rather due to the payment of extremely high rates of interest to creditors and loss of tax revenues due to illicit capital outflows. Excessive military spending was another reason. But I'm not knowledgeable in this area to evaluate the accuracy of this report. Actually having relied on national media in Canada/US, I did believe that Greece got into trouble due to economic mismanagement. Now, after further reading, I'm less certain.

The Truth Committee on Public Debt (Debt Truth Committee) was established on April 4, 2015, by a decision of the President of the Hellenic Parliament, Ms Zoe Konstantopoulou, who confided the Scientific Coordination of its work to Dr. Eric Toussaint and the cooperation of the Committee with the European Parliament and other Parliaments and international organizations to MEP Ms Sofia Sakorafa. Members of the Committee have convened in public and closed sessions, to produce this preliminary report, under the supervision of the scientific coordinator and with the cooperation and input of other members of the Committee, as well as experts and contributors.

Truth Committee on Public Debt (Debt Truth Committee)
http://debt-truth.gr/wp-content/uploads/2015/06/Report_UK.pdf

 

[mheslep]

" increase in debt before 2010 was not due to excessive public spending but rather due to the payment of extremely high rates of interest to creditors... Excessive military spending was another reason."

10 year Greek bond rate going back to 2008. Average around 4%. And I think it is fair to say that no country in Europe has "excessive" military spending.

 

[votingmachine]

" increase in debt before 2010 was not due to excessive public spending but rather due to the payment of extremely high rates of interest to creditors... Excessive military spending was another reason."

10 year Greek bond rate going back to 2008. Average around 4%. And I think it is fair to say that no country in Europe has "excessive" military spending.

I've done this calculation before. Greece has 175% of GDP as debt. If they have borrowed at an average 8% (and the data shows 8% rate at early 2010), then they have to make interest only payments of about 14% of GDP. That is unaffordable, especially with the crushing unemployment and Great Depression they are in.

I think there is plenty of blame. Corruption and irresponsibility. Greece never should have been allowed to join the EU in the first place. There government budget did not qualify them at that time, when they had a prosperous economy.

Without some kind of economic miracle, Greece cannot repay the debt they owe. It seems better for all involved to agree to that. It seems better for Greece to not be in the EU, and for the EU to work out what bailouts they need to workout directly with the banks. They can try to bailout the banks via Greece, as they have been, but that really does work with an unrealistic economic miracle happening eventually.

Greece has issues they need to fix, in order to have self-sufficiency, and lower corruption. It seems best if they work those out as an independent country.

Whether they keep using the Euro as the ordinary currency is not ovious. They might be able to do that, although it seems that the immediate need for the government to write IOU's within Greece leads immediately to a de facto new currency.

Those borrowing interest rates for Greece say to me that the interest they are paying on their current debt is already at an unsupportable level.

 

[StevieTNZ]

I just read an article about what the 'no' result of the vote means for Greece: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11476530

NZ's dollar has hit a new five year low, due to the result: http://www.stuff.co.nz/business/699...are-for-repercussions-of-a-greek-debt-default -- however it appears New Zealand's economy will be effected very lightly by the result.