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What will happen to Greece?

B_nyvin

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Will Greece get kicked out of the EU? Will they lose control of their economy to the EU? Will countries like the UK, Germany and France be forced to bail them out?

I think Something will happen, but I still don't see the Greek economy causing the downfall of the Euro personally.
 

dc46064

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wow, I better start looking a little deeper into stuff. Didnt know there was such a problem there. I hope the new administration fixes this mess......
 

vince

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Someone needs to elaborate on this story... please?
Greece is up to it eyeballs in debt and government deficits. In October, the new government discovered a deficit at 12.7 per cent of GDP, which is more than twice the previous estimate. Rating agencies downgraded it's creditworthiness and the govt has promised to control future deficit spending to 3 percent, which no one believes.

The IMF is on standby to step-in and many people expect the larger economies of the Eurozone France and Germany to step in and bail the Greeks out if need be. The euro has fallen against most currencies (which sucks for me personally) There has been talk of kicking Greece out of the Eurozone. (Eurozone is the term applied to the countries that use the Euro as a currency. It is not synonymous with the European Union).

This debt crisis is not limited to Greece. Portugal, Italy, Ireland and Spain are all have major economic troubles. Some pundits here are saying the P.I.I.G.S. have stopped flying.
 

midlifebear

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And those EU countries that end up with economies in the hole will proceed very much like the economies of southern US States did in the first 70 years of the last century. They'll plod along in the heat producing what agribusiness they produce and attract what tourism they attract until they get back on their feet in a couple of decades. Greece, at the moment, is sort of the Mississippi of the EU. There are a couple of Balkan countries looking just as grim.

On the "up" side, if you ever wanted a villa with a majestic ocean view in Greece, even the 'Mericuhn dollar will probably be able to buy you one -- for a couple of years.
 

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On the "up" side, if you ever wanted a villa with a majestic ocean view in Greece, even the 'Mericuhn dollar will probably be able to buy you one -- for a couple of years.
I hear prices are coming back down to Earth in Spain as well. True?

Germany sure did pay for a helluva lot of asphalt in Greece in the run-up to the Olympics. Man, they are nice on a sport bike! Thx guys! :tongue:
 

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All of the P.I.G.S. are in trouble...Portugal, Italy, Greece, and Spain.

What began with worries about the solvency of Greece in the face of high deficits, fake budget figures and low growth has quickly become the most severe test of the 16-nation euro zone in its 11-year history. read more here
 

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Germany sure did pay for a helluva lot of asphalt in Greece in the run-up to the Olympics. Man, they are nice on a sport bike! Thx guys! :tongue:

You know, that's what I was thinking. That airport is fantastic (designed and built by Germans), and the new freeway system around Athens, the bridge over the Gulf of Corinth and the highway through the mountains of northern Greece are all quite impressive and sleek. I wondered who paid for all those projects when I was there a few years back. I guess the answer is: nobody...yet?
 

Jason

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Greece cannot be kicked out of the Euro. The ECB had their legal team look at this, and the system doesn't allow for a country to be kicked out of what is supposed to be an unbreakable union.

There has been some speculation that northern Europe will bail out Greece. This would represent a long term committment (10 years?) and at levels which would impact significantly on the living standards of the north. Officially this option has been rejected and while rumours continue I think it really is rejected. Were it to happen Portugal and Spain would also need a bailout.

There has been speculation that the EU would issue bonds which are EU sovereign debt to replace those that Greece is finding increasingly hard to issue. This is outside the scope of the Lisbon Treaty. It would de jure make the EU a nation state. No one really believes that right now the EU can take this step.

Greece has been required to set a budget that represents the biggest austerity drive by any country ever. Riots in Athens are already endemic. To make it work Greece would need anti-strike and anti-demonstration laws and enforce these with its army. No one really expects this to happen - rather Greece will continue to run up unsustainable defecits.

There is talk that Greece becomes a colony of the EU with the EU controlling its budget, domestic policy and armed forces (which eat up an undisclosed but massive part of its budget). Perhaps the EU would send peacekeepers to help with the expected law and order problems. This option is just too ghastly to contemplate.

There is talk that the EU will do nothing - which is exatly what they have done so far. There is an unofficial meeting taking place this weekend and an official one next Thursday, but whether they will do anything is anyone's guess. Doing nothing means contagion with the problems spreading. Portugal and Spain now have big problems. Next is Ireland and Italy. Then Austria and Belgium. The meltdown scenario is a run on all EU stock exchanges (Monday morning?) and default on Eurozone sovereign debt - which would mean another worldwide great depression.

The final option is that Greece either voluntarily or with thumbscrews applied leaves the Euro. Portugal and Spain may have to follow. This option is painful but offers a way forward - it can come right for Greece pretty quickly as it did for the UK when we left ERM. The problem is that technically leaving the Euro automatically means leaving the EU. But presumably a package could be offered. Economically I think this is the ONLY policy that works, but politically it means that the EU project goes into reverse. The EU politicians hate it therefore. It is also politically difficult for the socialist government in Greece who would be perceived as having failed (actually they inherited the problem) and would probably be kicked out. The EU and Greek politicians are likely to fight for this not to happen but I think it is the least bad of the options available.
 

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I read both of the linked articles. Didn't come across anything new. It's the same old same old: that is, the UK's economic analysis -- an EU country that really isn't an EU country. The Brits, bless their hearts, (I really do like the Brits), are always willing to give free advice to countries that don't need or want it. A good example outside the UK's sphere of immediate influence is Argentina. The Buenos Aires Herald, an English language daily, parrots mid 20th Century economic ideas on how Argentina should manage its affairs, which basically comes across as just "If the Argentines would only let us show them the way, let us lead, they would be better off." Such arrogance is not new. But it's common. Sit down with any clot of Brits living as expats in Argentina and they always get around to discussing how Argentines and Argentina's economic struggles are "the white mans' burden." Of course, Argentines and Argentina are hardly so sad and not in need of the UK's "charity." However, the UK could get the Hell out of the Malvinas.

In my humble opinion, the best thing ANY country in ANY part of the world can do is close their borders to the IMF and IMF representatives to keep them out. The IMF's track record since WWII shows that every country it "helps" is in worse shape 20 years later once those countries have drank billions and billions of IMF loans. (OK, not ALL countries that have received IMF loans, but without checking I would venture that the majority of countries that have received IMF loans are worse off. I know, I know . . . check before making such rash generalities. But having lived and traveled in many "IMF helped" countries --- well. . . .) The IMF only helps itself.

Kicking Greece out of the EU? Not likely. One of the most difficult pills the EU has yet to swallow is to understand that, as a Union, states need to help states to maintain political and economic stability -- not just through the boom times, but also the bust. This is difficult for European countries -- especially for the UK -- that still think they would be better off separate and isolated. However, to be fair, in the case of the UK it probably would be better off separate and alone from Europe, (until their economy begins to spiral and the artifically supported "Sterling" is almost equal to a US Dollar).

I do have at least one positive observation about the UK (other than I like Brits) and that is Gordon Brown, the current Prime Minister, doesn't prance and drool as if it were Bush Junior's poodle. :smile:
 
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Drifterwood

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The Euro per se is not the problem, like all things and currencies, its value is notional.

The problem is fiscal management and politicians. Sadly Greece does not do well with either. Politicians sold the lie that the Euro would make quality of life equal across Europe. This is crap. The PIIGS should be cheaper than France, Germany and even the UK. So many things have gone up in price but wages have not been able to keep pace.

If you read the Demographia report on affordability indices, you should see that people tried to cover this gap by creating a higher notional value on houses against which they then borrow. The UK is a prime example of this hidden inflation. But unlike the US which is far more honest in the face of market reality, the European Keynesian system tries to avoid market realities.

It may seem a strange assertion, but what many countries need is deflation in certain areas, namely the cost of government and housing. This allows people to live within sustainable limits. But then of course, do we really expect the the politicians and the money men to be happy with this? It is very telling IMO that whilst US housing markets continue to fall, the UK is trying to maintain an unaffordable level. Why?

What I am saying is that Europe, especially the UK, needs to allow a free market in certain internal markets. The Euro does not stop this happening. It is rather, politicians and Banks that have tried to effect the opposite.
 

Jason

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the European Keynesian system tries to avoid market realities.

This is a key point.

The old USSR thought it could buck the market. The result was underachievement and an inevitable failure - and lots of misery to millions of people. The surprise is that the soviet system took so long to collapse - aruably it should have fallen in the early 1970s, but didn't!

The EU and the nations of the EU are trying much the same. Greece has made breaches of economic policy so basic that a first year university student can see exactly what is wrong. The other nations of the Eurozone (plus the UK) are not much better. Key concepts from economics 101 are:

  • You can't spend more than you earn, at least not long-term.
  • You can probably get away with an overspend of 3% if your economy is growing at 3%pa as in effect this is just a difference in the year to which you allocate income and expenditure.
  • There are (Keynsian) arguments for spending all you can to stimulate the economy and make sure you get growth, but there are limits to Keynsianism.
  • Most of the time economies which are sound will overspend by 1-3%pa, and that is probably about right.
Greece is in a pickle which cannot be solved with Keynsian economics. Their overspend is 12% which means they need growth of 12%pa to stop the sky falling. It isn't going to happen. Rather they are looking at a crash. Either the EU (ie ECB) or the IMF must bail them out. If the former the EU will de facto rule Greece. If the latter I suppose the IMF rules, though the rule is a bit less direct. In 20 years time (to pick up on a post above) Greece will be a poor country because of this mess, not because of the actions of the ECB or IMF. It is largely brought on by a policy of expenditure which they cannot afford, encouraged and backed by the EU, so the idea that the EU is responsible is in my view persuasive. The logic of Greece and Germany having the same wages and same costs and same work ethic and same respect for law and same willingness to pay taxes might exist in some socialist utopia where the red flag flies high but doesn't exist in reality.

Comparisons with overspending states of the USA don't really work - Greece is way, way worse. And the USA for all its financial problems does not believe in the socialist dream of a world where market forces are defeated and the spirit of Karl Marx vindicated.

The media is still largely silent on the Greek issue. It isn't as easy to understand as a Connecticut gas pipe explosion or the sacking of the England football captain or the latest celebrity scandal. But events in Greece are going to impact on the lives on everyone on the globe. Greece isn't Dubai; it is part of the EU - and therefore the problem is in the end an EU/Eurozone problem. In my personal view it demonstrates why the EU project is a triumph of bankrupt socialist politics over market sense and why we should do everything in our power to get rid of this dangerous monster. I see the EU as the primary cause of the problem as well as the force that is preventing the only solution (Greece leaves the Euro and devalues). And i also think the EU is on the brink of the most catastrophic legacy - the creator of a global depression. :frown1:
 

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I promise this is not a joke.

In Athens the prostitutes have gone on strike.

Greek prostitutes are unionised and regulated and have agreed wages. They are protesting unfair competition from unregulated East European migrants who are undercutting them.
 

swordfishME

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I promise this is not a joke.

In Athens the prostitutes have gone on strike.

Greek prostitutes are unionised and regulated and have agreed wages. They are protesting unfair competition from unregulated East European migrants who are undercutting them.

Karl Marx would be proud............:biggrin1:
 

D_Gunther Snotpole

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I promise this is not a joke.

In Athens the prostitutes have gone on strike.

Greek prostitutes are unionised and regulated and have agreed wages. They are protesting unfair competition from unregulated East European migrants who are undercutting them.

The proletariat gets phukhed.
 

midlifebear

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I promise this is not a joke.

In Athens the prostitutes have gone on strike.

Greek prostitutes are unionised and regulated and have agreed wages. They are protesting unfair competition from unregulated East European migrants who are undercutting them.

This sounds like good old-fashioned collective bargaining to me. What a better world we'd have if ALL sex workers were unionized -- and legal.

I fail to understand what this has to do with Greece's fiscal policies. :smile:
 

B_nyvin

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It was mainly the USA and to a much lesser extent the UK and Spain that caused the reccession. Most of the countries in the EU had no part in making it. Just because the reccession caused other side effects doesn't mean the blame should be placed on them. It's the same as saying Iceland being independent was one of the worst ideas they ever had.

Besides, without the EU, european countries by themselves are rather meek and tiny little nations nowadays...they can't really project themselves alone
 

Drifterwood

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I promise this is not a joke.

In Athens the prostitutes have gone on strike..

I have to mention Lysistrata. Mr. Els would not forgive me otherwise.

The situation of the PIGS is very different to that of the UK, but the effect is the same, namely an unaffordable economy for far too many people.

This is not domesday for the EU. Greece needs to get it's fiscal house in order. Their tax people need to collect for the Government and not for themselves. True, trust me on that one. They can not continue to operate with perhaps 35% of their economy in the grey zone. These problems are solveable and then we need to accept that a coffee in a hut on a beach in Naxos should not cost the same as at the George V.

The UK has relied upon an unsustainable notional value for property against which people have borrowed to be able to live as well as they wished. It is not sustainable to have an affordability index of 5.7 (the median house price divided by the median household income). The US is now below 3 again (the buy point for investors) and is still dropping. The UK on the other hand is talking itself into maintaining an index of 5.2 and rising.

This is utter madness. The effect is that the average household spends more than 66% of it's income on tax and housing. And that does not include indirect taxes. Gordon Brown is such a fucking cunt of a liar that he is trying to tell people to spend their way out of the recession. Well how the hell are we supposed to do that you miserable piece of shit when you take so much and the property market which you helped to engineer up, takes most of the rest?
 
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I promise this is not a joke.

In Athens the prostitutes have gone on strike.

Greek prostitutes are unionised and regulated and have agreed wages. They are protesting unfair competition from unregulated East European migrants who are undercutting them.

This is great. Now while everyone is getting phucked, no one will be. Perhaps the prostitutes should replace the elected whores in government office. There's a party you can vote for.
 
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I have to mention Lysistrata. Mr. Els would not forgive me otherwise.

The situation of the PIGS is very different to that of the UK, but the effect is the same, namely an unaffordable economy for far too many people.

This is not domesday for the EU. Greece needs to get it's fiscal house in order. Their tax people need to collect for the Government and not for themselves. True, trust me on that one. They can not continue to operate with perhaps 35% of their economy in the grey zone. These problems are solveable and then we need to accept that a coffee in a hut on a beach in Naxos should not cost the same as at the George V.

The UK has relied upon an unsustainable notional value for property against which people have borrowed to be able to live as well as they wished. It is not sustainable to have an affordability index of 5.7 (the median house price divided by the median household income). The US is now below 3 again (the buy point for investors) and is still dropping. The UK on the other hand is talking itself into maintaining an index of 5.2 and rising.

This is utter madness. The effect is that the average household spends more than 66% of it's income on tax and housing. And that does not include indirect taxes. Gordon Brown is such a fucking cunt of a liar that he is trying to tell people to spend their way out of the recession. Well how the hell are we supposed to do that you miserable piece of shit when you take so much and the property market which you helped to engineer up, takes most of the rest?

Good points on the housing market, Drifter. Houses costing nearly 6x (if I've read it correctly?) annual income is a ridiculous situation. Plus shitloads of tax, etc.

I also totally disagreed with the removal of the 10% tax band a couple of years back. Improving things for people on £15k+ a year (22% tax band down to 20%), but doubling the tax burden on those who can least afford it (including pensioners), seems perverse. I know there's always a certain amount of personal allowance before tax (£6,475?), but still...

Also, Gordon's methods worked much better when he stuck to his prudence concept b4 2001. If you need to save - do it, and ppl will actually feel more confident knowing things are being sensibly and sustainably run (the markets seem to have given Ireland the benefit for now, after realistic budget plans).
 
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vince

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It was mainly the USA and to a much lesser extent the UK and Spain that caused the reccession. Most of the countries in the EU had no part in making it. Just because the reccession caused other side effects doesn't mean the blame should be placed on them. It's the same as saying Iceland being independent was one of the worst ideas they ever had.

Besides, without the EU, european countries by themselves are rather meek and tiny little nations nowadays...they can't really project themselves alone
You can lay blame at the American door for much of the current worldwide economic crisis, but that does not let countries like Greece off the hook for mismanaging their own books. Greece has run huge deficits for years (13% of GDP), has external debt amounting to 170% of national income and has increased the govt. budget from 47% to 52% of GDP in the last two years.

The Greeks seem to think they are as wealthy as Germany and can have all the social perks that the Germans and Danes and Dutch et al can afford. Well, sorry they aren't and they need to live within their means. It's going to be tough on them and they should have to bear the brunt of their own folly. But I think they will expect someone to bail them out again.

Kenneth Rogoff has called them "serial defaulters". Here is a link an article by him.
Can Greece Avoid the Lion? - Project Syndicate
 

Drifterwood

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Maybe if Turkey paid for that part of Cyprus they stole......:biggrin1:

The thing about Keynesian economics Joll is that you have to save when you can and spend constructively when you have to. Brown has done neither.

New Labour does not represent its traditional supporters. They represent those on hand outs, tax credits and the public sector. The "working man" is as fucked as anyone else.
 

Jason

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The thing about Keynesian economics Joll is that you have to save when you can and spend constructively when you have to. Brown has done neither.

New Labour does not represent its traditional supporters. They represent those on hand outs, tax credits and the public sector. The "working man" is as fucked as anyone else.

Agreed. Brown spent and borrowed through the good times to buy electoral popularity for Labour. It worked. They're still in power. And every day they risk the future of the British economy to cling to power. And it is quite possible that they will get a hung parliament and continue to inflict their odious policies on the people of Britain. Under Labour we've seen a loss of free university education, great increases in social inequality, development of a benefits dependency culture of despair, an illegal war fought to increase Labour's popularity and a disregard of the fundamentals of economics to buy votes. Plus their betrayal of the British people over the Lisbon treaty. Plus a stench of corruption around illegal donations and cash for peerage, and now it is 3 Labour MPs being tried for theft (a peer, the Conservative, isn't quite the same thing as an MP). And who killed David Kelly? The sadness is they might even manage a hung parliament.

The UK economy is in a mess, but it isn't like Greece. We do have a massive overspend, but most of that has gone to buy bank shares which are an asset which one day can be sold. Even Labour has a luke-warm plan to bring the defecit down, and Conservatives can convince the markets they can do more. We can devalue and doubtless will. We have a legacy of good behaviour which is keeping the credit rankings right. I'm very far from complacent - we're ever so vulnerable - but at least I can see a way through this mess, basically if we can avoid an upset in the next few months. With Greece (and Portugal and to some extent Spain and Italy) I really can't see a way through unless they leave the Euro.

Yes Greece should solve its grey economy. But it won't, at least not in the next few weeks. Yes Greece should start an Ireland style austerity policy, but it won't make it stick. An inspirational leader of Greece would lead Greece out of the Euro and the EU, default on debt, devalue, give people the salary rises they want, work with the Greek system of corruption and popular dissent, go on an export drive - and do it all wrapped in the Greek flag and singing patriotic songs. It would work and Greeks would be happy.
 

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Good points on the housing market, Drifter. Houses costing nearly 6x (if I've read it correctly?) annual income is a ridiculous situation.

6x is a UK average. In London and the SE in many areas it is 10x. The fundamental problem is that the supply is static (very little building right now and planning restrictions make it hard to see any big change hapening) while demand is rocketing up. I don't see there being any falling off in prices. Indeed prices didn't come down much on average in the recession (I know some areas saw falls, but others didn't) and they are now going up. Our property stock is adequate for just under 50m people. And our population is 62m (or more). I don't think the earnings to price multiplier applies when the imbalance is this great and rising. If our population goes up to 70m then property prices in today's values will need to almost double. :frown1: