Debt cancellation indeed has always existed, greeks just bringed it to another level, with their magic combo : fraud the state's accountings, get as much as you can from the eurozone before the crisis, get as much as you can from other european countries after the crisis, and then 2 years later when things start to stabilize, declare unilaterally that you're not going to reemburse people, and party in the streets over that decision.
At least US banks had the decency to not laugh about it publicly.
Geesh. I'm no Greek and not fond of Syriza, but god damn, the brainwashing is strong here.
a) fraud the state's accountings: True, but the difference was minimal (2.7% or so to 3.07%, and by fraud you mean they accounted for the expenses on arrival and not when ordering, not cook your books). Also, this was well known by all the other countries and none of them made a peep at the time
b) get as many as you can before the crisis from banks that (correctly) assumed they would get their money anyway.
c) get as much as you can from european countries after the crisis to pay the mostly German and French banks what they have loaned before, moving private debt to the hand of the tax payer (of the 250b, only about 27 billion were for greek gov. usage and all the rest was for debt payment/interest/etc [1])
d) they never said they won't pay, they just want to change terms and not just keep getting more and more indebted to foreign institutions that through their mandate are actually 'ruling' the countries.
Again, no fan of Syriza, but enough is enough. Folks in Greece (and Portugal and Spain) are in a very bad shape, poverty is up and the only thing the troika cares is about the deficit reduction and nothing else.
This post has no connection with reality, I have no clue why it's upvoted.
a) Regarding the state accounting fraud: first of all, using the past tense ("was") is misleading. As of last year, Greece was still cooking its books[0]. It remains to be seen if they have actually stopped.
You say the difference was minimal. When? When they brought in Georgiou to fix the Greek statistics service, the 2009 deficit was revised from 3.7% to 15.8%. The reaction of the government? Prosecute the guy because he refused to continue lying.[1]
b) You say banks correctly assumed they would get their money. This is nonsense. The banks lost nearly 80% of the value of their loans in the "PSI".[2] The word you're looking for is "incorrectly". They screwed up and paid dearly for it.
c) Pure nonsense. I have no clue where you're getting that from but it doesn't even deserve a response.
d) The troika has zero power when it comes to "ruling" Greece. How do you think Greece has been able to completely avoid structural reforms and pro-growth measures for 5 years now, if the troika is ruling the country? Almost none of the reforms the troika asked for in exchange for the loans have been implemented.
Your response is hyperbolic. I also think you seem to have misunderstood (c), which is simply stating what has happened: 1) most debt are owed to French and German banks, and in order to pay them 2) the country prioritized these repayments over all else which 3) tanked the Greek economy and made all this private debt the taxpayer's problem; 4) 250b is the amount Greece received and its government financed are about 20b.
d) the troika seems to have the power to destroy the Greek economy by demanding repayments, which until now has worked because the Greek government itself did as the troika demanded. If that's not power I don't know what is. It's certainly not "zero" power.
a) you are right. I was only referring to the pre-euro accounting. Sorry if I didn't make myself clear.
b+c) I don't know the exact figure, but if I remember correctly, private loses were about 20% only.
"One estimate is that Greece actually subscribed to €156bn worth of new debt in order to get €206bn worth of old debt to be written off, meaning the trumpeted write-down of €110bn by the banks and others is more than double the true figure of €50bn that was truly written off. Taxpayers are now liable for more than 80% of Greece's debt.[219] James Mackintosh, Investment Editor at the Financial Times, noted a JPMorgan Chase estimate that "only €15bn of €410bn total 'aid' to Greece" actually went into the country's economy, the rest having been handed over to its creditors. " [1]
d) Yes, they can't 'force' any government to do as they say, but if they don't, they don't give them the money they need. They aren't open to negotiating at all. They want the gov. to sell profitable businesses and to reduce social spending. That is their 'sensible' way to deal with the issue. I don't have first hand experience of what they did in Greece, but if what they tried to do in Portugal is any indication, it was a loser's game from the start. They didn't care about economic recovery or sustainable growth. No, they were repo men trying to get as much of the money back as possible. Which is fine, it's their job and the countries accepted the money, but then, not for one second please tell me how these countries are lazy and spenders, and the damn hard worker Northern brethren has to act like a parent. Let's not forget Germany were one of the first countries to go over the 3% deficit target and got scot free through political pressure [2] [3]
Would you be happy if the your country lend them your taxes money, knowing that they decide the loan terms, not knowing when and if they will pay you back?
The foreign taxpayer is paying loans to the greek taxpayer, who is paying taxes to the greek government, who is repaying debt of private greek companies(mostly banks), who are repaiing debt to foreign private companies(mostly banks), who ignored or sidetracked the Basel treaty that clearly stated who can get loans or not. Deutsche Bank was one of the most hard hit from bad loans.[1]
The german media is misrepresenting their request for debt cancellation of private losses, by saying that german taxpayers would have to pay them instead, which ofcourse nobody said that but certain german politicians. (and I would not use spiegel as a credible source).
[1] http://www.forbes.com/sites/kylesmith/2011/09/28/book-review...
"When Goldman Sachs helped the New York hedge fund manager John Paulson design a bond to bet against — a bond that Paulson hoped would fail — the buyer on the other side was a German bank. Iceland, Ireland, Greece — all of their profligacy came from Germany."
But it did didn't it? It's close to 1am here so too tired for sources, but if I'm not mistaken, every country in the Eurozone contributed to the bailout in a certain proportion. Not sure how the IMF works, but I would assume something like that?
Again, no sources, but if I'm not mistaken, Germany is making a profit on these loans, as they can borrow at a very reduced (even negative) rate and lend that money to Greece.
Thanks for bringing a bit of reality check to the previous poster.
Now i would disagree a bit with you on d) : The only power the troika had was that the greek government needed to get regular loans to repay part of the interests of their huge debt and the salaries of the greek state workers. That did give the troika the power to keep a bit of pressure on the greek government and ensure it will keep reforming the country a bit.
And the reforms started to work, because now the greek budget is balanced enough for the state to be able to pay their workers without the need for additional loans from the EU.
Unfortunately, it means now that the greeks can effectively say FU to the european troika if they plan on stopping to repay their debt, without risking an internal chaos.
The only persons that will effectively have a hole in their budget as a result are the other EU states (states and not banks, meaning citizens), mostly french and germans.
> a) fraud the state's accountings: True, but the difference was minimal (2.7% or so to 3.07% ...
Interested to know where those figures are from and how reliable they are. 2.7 % to 3.07 % is not exactly minimal (one seventh higher than target) but I agree that is not yet huge.
However, reports have indicated far higher actual deficits [0]:
"Greece estimated its 2009 deficit would be 12.5 per cent of gross domestic product, far above 3.7 per cent predicted in April. It revised its 2008 deficit up to 7.7 per cent from 5 per cent."
I don't agree that the troika would only care "about the deficit reduction and nothing else." I think a lot of people are trying to think how to do things without hurting the Greek people, but on the other hand, when money runs out, the money runs out. People who do pay their taxes - that are far higher than in Greece - are fed up, and that is going to show up in the upcoming elections, too.
There are various reasons, and I never said that it wasn't their fault they got into this mess. But lets not pretend it was ALL their fault.
But independently of whose fault it is, there are two options:
a) try to get to an agreement that can get Greece back into shape, even if it means postpone debt payments, restructuring, haircut, etc where it is beneficial for all parties
b) continue to blame them for this situation and use every opportunity to punish them with more and more austerity measures while 'feeling good' about dishing out the punishment and calling them 'lazy greeks'
Also, pre-crisis, the greek debt wasn't that bad (high, but stable) [1] compared to other countries. Spain and Portugal also had levels similar to Germany until 2008, which is interesting since it was at this time that the EU stimulus plan came to effect [2] and if you see the measures, some could say it benefitted German and French industries (cars and green tech)
> a) try to get to an agreement that can get Greece back into shape, even if it means postpone debt payments, restructuring, haircut, etc where it is beneficial for all parties
And that is what has been tried. Debt payment has been postponed a lot, there' been plenty of debt restructuring. Still, that is what Syriza now does not want to do.
Greeks are still paying less taxes (in proportion to their national income) than anyone else in the eurozone (except Lithuania, who adopted euro one month ago).
I honestly don't know about Greece, but I can tell you that graph is very wrong in so many levels. For example, Sweden is at 44.5%, but they count all money paid as taxes (according to a Deloitte report I was given when I had a job offer there, I can try to dig it up if needed) including what will go to social security/retirement/etc. In Portugal, you pay income tax (let's say around 20% give or take), but then, you as an employee pay 11.5% to social security and your employer pays 22.5%. So roughly, 34.5% to social security alone, but this doesn't go to the 'tax revenue' bracket. So, if we take in account corporation tax at 23% (lower in 2015), VAT at 23% for most stuff (including electricity!!), and income tax (variable between 14 and almost 50%), + social security, that 33.1% is way off. In 2012, a person in Portugal would have to work until August to have his 'taxes paid'. This means, more than 60% of his work output is taxes one way or the other.
No, I did not look at that picture; data is much more easy to handle in text format. I looked two days ago at Wikipedia [0], but primary source should actually be Eurostat [1].
And you are of course right in that different countries have different systems, and numbers are not always directly comparable. A small difference is not necessarily significant, or there may be quite some difference in practice even if numbers are the same.
But if we look at those Eurostat numbers, what the paper says is Total revenue from taxes and compulsory social contributions - % of GDP so also for Portugal and Greece, those mandatory social security contributions of employer and employee are included as tax revenues in this comparison, like they are for Sweden.
What is significant is that the employment rate of people varies a lot in different countries; it is 73-74 % in Sweden, Netherlands and Germany, while it is below 50 % in Croatia and Greece.
It should also be noted that tax revenue to GDP is just a ratio, a number. It does not mean that taxes are a certain proportion of GDP, because a sum of all tax revenues is not a component of GDP.
Interestingly, in Portugal this ratio actually dropped from 33.2 % to 32.4 % between 2011-2012. Most countries were tightening taxes at that time. But since this number is ratio to GDP, if GDP increases and tax revenue stays the same, the ratio drops.
Hi! This is late but I seem to have missed your reply but didn't want not to reply to it :)
In any case, you are probably right and it includes all taxes, including Social Security and the likes. I just find it odd, that at least on normal people's taxes (income tax + social security + VAT) the numbers don't add up. Maybe GDP in Portugal is generated a lot by non individuals (corporate, where tax is around a fixed 23%) and the income gap is quite large giving out those percentages?
I know I'm on the top percentile tax wise, but my tax percentage, if we include VAT is close to 60% (I bill through my own company, so I'm responsible for all tax). When I was working for a third party circa 2010, it was around 45% or so. Not doubting your figures at all, they may even bring to light the actual problem which is, normal folks actually pay a lot of the countries taxes (so, not exactly lazy, which was my main point a few posts ago) but a lot of the elite is syphoning the money somehow. There is a reason our former prime minister is in jail (preventive, sorta like pre-bail) for corruption charges, like most of our politicians, they seem to be able to get very rich in short amount of time while having very small tax declarations.
you can negotiate the option to pay the debt in 30 years and avoid shutting down public healthcare, or you can fire a million people and try to pay it in 3 years.
The common feeling is that the "shock cure" has not been effective in any way, cause it in turn has caused a spiraling recession.
I'm not defending either position, but it's something that has been debated ad nauseam.
Also consider that a lot of the policies post 2008 have been influenced by the "expansionary austerity" thing that has been proven to be effectively bonkers.
> you can negotiate the option to pay the debt in 30 years
The Greek repayment schedule has already been negotiated to extend to 2054. That is in 40 years.
I would say that if Greece can't handle a debt in 40 years, we can forget about it.
(With the Greek history, that is. Elsewhere there are longer debts; in Sweden, a mortgage for a house may be amortized in 100 years - but it can be handled because people pay what's due).
At least US banks had the decency to not laugh about it publicly.