Greeks vote to reject incumbants, austerity

[GlennB]

I don't think so either. It could however cause problems for the rest of Europe.

As for Greece being unfairly portrayed, keep in mind that their retirement age is, what, 55 or so.

No. That was just a cute but memorable sound-bite dredged up by the German media, iirc.

As a matter of interest, here are the average effective retirement age figures, 2001-09, for Greece, France and Germany (source: OECD). Spot Greece

58.7 58.5 58.7 58.7 58.6 58.4 58.7 59.1 59.1
61.1 61.0 61.1 61.3 61.7 61.8 62.0 61.1 61.8
63.1 62.5 63.1 62.6 62.4 62.1 62.5 62.1 61.9

 

[Democracy Simulator]

I don't think so either. It could however cause problems for the rest of Europe.

As for Greece being unfairly portrayed, keep in mind that their retirement age is, what, 55 or so. The corruption is also mind-boggling. Did you know that many families do not report the deaths of relatives in order to get their pension paychecks? And these people go out and protest to demand that the rest of Europe (mostly northern Europe) whose peoples work to 65 should give them money in order to make up for the differences in their unsustainable lifestyle.

Mario Monti seems to have done good for Italy, perhaps he can take on Greece next?

I think Greece's biggest problem has been the failure to collect tax. In 2011, 37 billion euros was outstanding in arrears from the 14,700 worst culprits (and we're not even talking evasion here, just what is acknowledged as owed) and 41 billion overall outstanding. This blog has some interesting info:

http://www.greekdefaultwatch.com/2011/07/tax-arrears-in-greece.html

How can a state function if it has tax arrears of nearly 20% of the GDP? I don't think it is so much your average Greek worker enjoying amazing benefits, but rather the Greek business elite dodging or failing to pay tax that is the main problem. Yet, very little is being done about bringing the tax dodgers to heel, instead it is all about austerity for the middle and working classes.

 

[GlennB]

How can a state function if it has tax arrears of nearly 20% of the GDP? I don't think it is so much your average Greek worker enjoying amazing benefits, but rather the Greek business elite dodging or failing to pay tax that is the main problem. Yet, very little is being done about bringing the tax dodgers to heel, instead it is all about austerity for the middle and working classes.

Totally agreed, but add in large sections of the professional classes too. Those responsible for the mess are not those who are suffering most.

 

[McHrozni]

The current US deficit is 8%, in 2009 it was 10%.

Which is also unusual.

The propaganda has been that the lazy Greeks must buckle down and accept the austerity because, God forbid, the markets don't like it.

Which is exactly right, as unfortunate as it is. US deficit is much more sustainable in no small part because the interest rates are so much lower, because the markets dislike US deficits much less than they dislike Greek deficits. Like it or not, this is a fact.

If you read the news coming from Greece, unemployment is skyrocketing (over 50% youth unemployment), there is massive capital flight and the banks are effectively insolvent, regardless. This is before more austerity measures are due to be voted in. I'm not sure that the evidence that things would be worse for Greece under the default scenario is at all clear. Repudiating several hundred billion Euros of debt does have its advantages.

The downside of a default is that it's a one-way street with burned bridges behind. The evidence of the default being the better option is also scant. Both are bound to be painful.

I do agree however that the main issue should not be austerity, but effective tax collection. Austerity is still necessary however.

McHrozni

 

[SezMe]

Those responsible for the mess are not those who are suffering most.

Which makes them the same as most other countries having problems as a result of the Great Recession.

 

[Neally]

The downside of a default is that it's a one-way street with burned bridges behind. The evidence of the default being the better option is also scant. Both are bound to be painful.

Pros and cons of withdrawal:

Economists agree that Greece, where unemployment is 21.7 percent, would suffer even more turmoil and misery if it left the euro. A new drachma currency would fall by 50 percent or more against the euro.

http://abcnews.go.com/Business/wireStory/greek-euro-exit-longer-unthinkable-16327561#.T608uMXRr4F

 

[GlennB]

Pros and cons of withdrawal:


http://abcnews.go.com/Business/wireStory/greek-euro-exit-longer-unthinkable-16327561#.T608uMXRr4F

Yes, but scale, duration and possible outcomes are also vital factors.

Outside the € Greece can devalue and become competetive. Inside, it's hamstrung.

The Merkozy approach smacks, to me at least, of something that is not designed to help Greece but to help towards some deeper aim. One where Greece is essentially disposable.

 

[WildCat]

I don't think so either. It could however cause problems for the rest of Europe.

As for Greece being unfairly portrayed, keep in mind that their retirement age is, what, 55 or so. The corruption is also mind-boggling. Did you know that many families do not report the deaths of relatives in order to get their pension paychecks? And these people go out and protest to demand that the rest of Europe (mostly northern Europe) whose peoples work to 65 should give them money in order to make up for the differences in their unsustainable lifestyle.

Mario Monti seems to have done good for Italy, perhaps he can take on Greece next?

Massive tax evasion as well, I read that 2/3 of Greek MDs report income below the taxable threshold of 12,000 euros.

But don't you think you should pay more so they can continue to pay less?

 

[Virus]

Greece is more corrupt than Rwanda and has less economic freedom than Nigeria.

If you have institutions like an African state, you'll have an economy like one.

 

[aleCcowaN]

Maybe one of you may add a link to press in English. I've just read in the paper about most probable new elections during next June, if president Papoulias fails in the last chance to form government.

A recent poll shows radical left winning (and getting the 50 extra congresspeople) with 23.8% -from its 16.8% last election- and traditional New Democracy and PASOK falling to 17.4% and 10.8%, respectively. So, now I'm worried about the way Greece is going to "flee" the Euro, what was bound to be anyway -though it would have been easier in the very beginning-. It always looked like the later the worse, and now Syriza might do it the Argentine way or worse (I'm not dismissing the possibility of political grandeur in any party involved, but the way politics work in a context of shot lived governments make me sceptic about that)

 

[Childlike Empress]

I've read the same. With the 50 extra seats, Syriza should be able to form a coalition with one or two other rising parties and give the finger to the eurocrats.

Argentina is doing quite well, isn't it?

 

[DC]

Greece is more corrupt than Rwanda and has less economic freedom than Nigeria.

If you have institutions like an African state, you'll have an economy like one.

oh common, that's impossible in the so superior west.

 

[GlennB]

Greece is more corrupt than Rwanda and has less economic freedom than Nigeria.

If you have institutions like an African state, you'll have an economy like one.

Or one from Central or S America. Or Asia or Europe. Or Oceania.

Anyhoo, thanks for popping in and illuminating us with your analysis.

 

[aleCcowaN]

Argentina is doing quite well, isn't it?

Yes and no. She comes from doing pretty well from 2004 to 2009 -while planting the seed of a few future structural crisis- and now it's time to face the music. But that is a topic for a different thread.

About "leaving the dollar", it all started to get well once the brutal menu of measures was digested. It could have been better had it started earlier -when Argentina had currency reserves that were about 50% of all passives in dollars that would be affected-, and conducted by more skilled people -what doesn't happen when you decide to stand a seepage, both political and economical, and get shrunk to a few peanuts, both political and economical, before having no choice but to do what you should have done in the first time-. Greece goes there. Some others could follow in what would be -Darwin forbid- a nasty decade.

 

[GlennB]

....
-what doesn't happen when you decide to stand a seepage, both political and economical, and get shrunk to a few peanuts, both political and economical, before having no choice but to do what you should have done in the first time-. Greece goes there.

Agreed.

 

[Neally]

Argentina is doing quite well, isn't it?

Sure, if 24% annual inflation is considered "well".

 

[WildCat]

Sure, if 24% annual inflation is considered "well".

"There is one glaring exception. Since 2007 Argentina’s government has published inflation figures that almost nobody believes. These show prices as having risen by between 5% and 11% a year. Independent economists, provincial statistical offices and surveys of inflation expectations have all put the rate at more than double the official number (see article). The government has often granted unions pay rises of that order.

What seems to have started as a desire to avoid bad headlines in a country with a history of hyperinflation has led to the debasement of INDEC, once one of Latin America’s best statistical offices. Its premises are now plastered with posters supporting the president, Cristina Fernández de Kirchner. Independent-minded staff were replaced by self-described “Cristinistas”. In an extraordinary abuse of power by a democratic government, independent economists have been forced to stop publishing their own estimates of inflation by fines and threats of prosecution. Misreported prices have cheated holders of inflation-linked bonds out of billions of dollars."
http://www.economist.com/node/21548242

Looks like a good model for Greece!

 

[Humes fork]

How can a state function if it has tax arrears of nearly 20% of the GDP? I don't think it is so much your average Greek worker enjoying amazing benefits, but rather the Greek business elite dodging or failing to pay tax that is the main problem. Yet, very little is being done about bringing the tax dodgers to heel, instead it is all about austerity for the middle and working classes.

What is the Greek business elite? Greece's business climate is worse than that of Yemen and Guatemala, and only slightly better than that of Pakistan and Lebanon. Greek businesses flee to Bulgaria. There is a reason the Greek economy keeps contracting you know.

 

[Humes fork]

But don't you think you should pay more so they can continue to pay less?

No I absolutely don't. And apparently the Germans are getting fed up with it as well. It is starting to be domestically difficult for Merkel to continue these policies.

 

[Virus]

oh common, that's impossible in the so superior west.

It actually proves my point that success or failure of a country isn't a matter of resources, or geography, or climate or sheep or cows or other passive determinants that the politically-correct left are told to believe.

It's the inverse of resource-poor countries prospering by taking on Western culture. A Western country becoming pathetic due to its ideas becoming more like the pathetic non-West.