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Very rosy outlook, if you ask me.

If the IMF were truly this beneficent, then you would think it would try to alter its modus operandi after one colossal flub after another.

If the IMF really wanted to insist that Greece change and become a better member of the union, it would not have pissed around the margins of the Greek economy by installing half measures (if you look at the IMF plan for Greece, it doesn't really make any sense) and instead created more permanent cuts that would put the country on better footing. Increased VAT, pensions cut when pensions are already at poverty level, this is nibbling at the margins, especially when Greece has purchased tens of billions if not hundreds of billions of armaments in the last decade.

I think Talos's article makes clear that Greek GDP, Greek tax revenue, is more than enough to sustain the rather meager salaries and pensions. So what exactly is this "transfer" of wealth?

Aren't we talking now about Greek gov't debt? If so, the first question that needs to be asked is, How did Greece build that debt?

But, as of yet, no one has answered that question with facts, least of all the Greeks. The current Greek gov't needs to come clean, because in the absence of facts from the current Greek gov't, the rest of the world is more than happy to fill in the details with speculation and half-truths or even outright lies. Read the IMF's document on Greece.

Lots of suppositions there, many of which contradict annual IMF assessments of Greece and prior analysis of the Greek economy inside the euro.

I think the current Greek government is not telling the truth for political reasons. They are absolutely avoiding the elephant in the room, and that elephant is corruption. What do they fear? The nation's political stability. But unless they carve out the cancer at the heart of their debt, the political climate inside Greece will not improve.

All the talk from outside Greece is simply platitudinous chatter until Greece comes clean.

by Upstate NY on Tue May 25th, 2010 at 05:34:55 PM EST
[ Parent ]
This has nothing to do with being beneficent.  This is, as are all political conflicts, a raw fight over resources, so the question is, on which side are you in this particular conflict?  (And I know you're Greek from past posts, so you might have more ambiguous allegiances than most of us.)

If Greek GDP, tax revenue, etc. were more than enough to sustain Greek pensions without IMF help, then there wouldn't be the crisis at all, would there? The problem is that it when you tie your policy options to a larger group like the EU, which means that you transfer your power to that larger group, you limit your ability to solve domestic conflicts over resources, and that is what has occurred because of Greek adoption of the Euro as its currency.  Because Greeks are unable to increase taxes on the wealthy exclusively, and because so many of the rest of us don't think we should be on the hook for Greek consumption smoothing, the IMF is actually doing its job for its constituents -- the rest of us -- by compelling Greece to lower its consumption so we don't have to lower ours. The question is, should it do its job?

by santiago on Tue May 25th, 2010 at 05:56:49 PM EST
[ Parent ]
Actually, I'm an American of Greek extraction, and also an EU citizen via Italy!!

"If Greek GDP, tax revenue, etc. were more than enough to sustain Greek pensions without IMF help, then there wouldn't be the crisis at all, would there?"

I think this is where we disagree. It's as though you believe that only social spending could get a nation in fiscal trouble.

by Upstate NY on Tue May 25th, 2010 at 06:09:35 PM EST
[ Parent ]
No, military spending can also get a nation into fiscal trouble, but that isn't the problem in Greece right now.  

And actually, its not that any type of spending causes the trouble, but rather it is an inability of a country to resolve, internally, its own political disputes over resources that get countries into fiscal trouble. Given that one part of a polity wants more spending or less taxes, if it can't convince/compel another part of the same polity to pay for it it means the spending/tax policy is fiscally unsustainable and will eventually result in a crisis of some kind, either for that particular country, or, if the country is big enough, for others too.

by santiago on Wed May 26th, 2010 at 12:39:55 PM EST
[ Parent ]
Economics is political. Nobody could have foreseen...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Wed May 26th, 2010 at 12:53:10 PM EST
[ Parent ]
It may not be the problem in Greece right now, but I would wonder if it has been the problem all along.

We're talking 5% GDP in purchases and 2.3% GDP in weaponry service.

Over a decade, that's a big chunk of change.

by Upstate NY on Wed May 26th, 2010 at 01:19:41 PM EST
[ Parent ]
This has nothing to do with being beneficent.  This is, as are all political conflicts, a raw fight over resources, so the question is, on which side are you in this particular conflict?

Given that a confederation (nevermind a federation) is not sustainable between countries of widely disparate wealth (at least not if it wishes to retain a semblance of democracy), I think I can safely say that I'm on the side of preserving, deepening and widening the European institutions and integration and greater transfers from richer EU members to the median Greek (just as I am on the side of greater EU transfers to the median (North) African resident).

"Old Europe" knew (or should have known) full well what we signed up for when it went for larger and deeper integration over the past two or three decades. Yes, the European Union could jettison the Mediterranean... If we want to have between ten and twenty politically and economically unstable third-world countries right in our back yard. Me, I have a whole slew of reasons to Not Want that, only some of which are humanitarian and altruistic in nature.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 25th, 2010 at 06:36:21 PM EST
[ Parent ]
I think what has happened with the Greek debt is becoming clearer:

The Greek government spent around the EU average and received 5% of GDP less than the EU average for two decades at least. This sustained a debt which was bearable as long as the economy was perceived as expanding. Greek national debt was at 20% of GDP in the 1980s, and expanded to 80% in 1990 and 120% in 1993 (this was partly due to developing a social welfare system, a socially productive debt). It has remained at these levels more or less ever since.

So it has to do with not gathering the revenue required. Not collecting enough taxes however is not due to corruption as a flaw of the system. Its a feature not a bug. The way a corrupt political and economic elite and the whole two-party system could create the social alliances it needed to legitimize itself (and undertax itself BTW), was to
a. bribe the professional classes and the government bureaucracy through gaping tax loopholes and associated corruption,
b. develop a clientilist system in which public employment was some sort of prize for the party faithful and their families
c. control the media, as thoroughly as money can

This was a very inefficient system as far as creating  decent social services is concerned, it debauched social relations and was not sustainable in the long run. This 45% of GDP spent, bought few and inefficient social services and a lot of illegal private gains.

This system might be dissolving at this moment (for quite external reasons mostly), but it seems to be preparing some even more oligarchical solution in its place. An impoverished and broken population is not conducive to a democracy. This is why it is important for a progressive alternative to appear if not to dominate in the short-term, at least to create a pole around which future hope can be organized. This BTW is not and cannot be simply a Greek project, it has to be part of a similar paneuropean movement.

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Tue May 25th, 2010 at 06:40:20 PM EST
[ Parent ]

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