Greece III - It's all downhill from here.

[Ser Scot A Ellison]

Shryke,

Should lenders, or lenders assignees, be able to get judgments against borrowers who default and enforce those judgments, or should interest rates be a lenders only recourse for mitigating loss due to default.

This is regarding non-sovereign state loans.

[Lord Freypie]

My position is as long the Greeks try to achieve realistic objectives positive for european econpmy they should be supported, no matter their method to try to reach them.

Troika is clearly guilty of ingerence, by trying to force precise measures on Greek government, most in the direction of selling state assets and impoverishing their lower class more, instead of just determining objectives (ideally making them realistic) then letting the greeks decide where they find the economies, who they tax more, etc...

So I applaud the greek government that hasn't bended, and more as they involved the whole greek population in their choice. And I'd certainly vote "no" if the same kind of ultimatum was made to France, and would expect Spain and Italy to vote "no" if it happened to them, fuck UE bureaucracy/technocracy if they are not happy with democracy.

And even imagining the euro would be threatened by countries keeping some freedom, I don't see why it has so much importance for some people. There have been 60+ attempts at monetary unions before the euro in history, all failed. Won't be the end of the world if the euro confirms this statistic and we return to national currencies. We used francs most of my life, and I don't remember any difference in how we lived (nor less cooperation between european countries because they had no common money). There have been economic crises with or without the euro, they are just a natural downside of capitalism, changing the name on the notes hasn't made things better or worse.

EU on the other hand is threatened by the will of a small part of elites to dictate its members states politics (and always in the direction of more economic liberalism and less wellfare) instead of trying to conciliate them. It's what makes the union more and more unpopular everywhere, while the EU of my youth wasn't.

Parties like Podemos and Siriza are a chance for Europe, a chance to return to an approach that worked before it's too late, instead of antagonizing populations and generating more and more nationalist reactions. It's not them who will kill what really matter, the cooperation between european democracies to try to improve their prosperity and popularize their model. If Bruxelles continue to blindly support the political agenda of some non elected and sold to lobbies "experts", what will happen is nationalist populist xenophobic movements taking power (and not in remote countries like Greece only) and they will do far far more damage to the european ideal than being comprehensive with the poorest states, forgetting some debts or devaluating the euro some dozen percents would.

[Derfel Cadarn]

http://www.thedailymash.co.uk/news/international/greeks-apologise-with-huge-horse-2012051527146

The Daily Mash weighs in :)

[baxus]

Out of interest: how is the Greek drama viewed in Serbia?

Many of my football mates come from Serbia and Bosnia and interestingly they all have quite a negative view on the Greek behavior.

I don't follow the whole thing as closely as I probably should, so my impression may be off, but from the media and comments on news websites I would say that majority does have a negative view on the Greek behavior.

It seems to me it is mostly because the first news of Greek economic struggles were quickly accompanied with news articles focusing on the abuse of the system (significant bonuses for employees, early retirement etc.) which helped create the stereotype of lazy Greeks living off European loans.

Sad to say that the quality of reporting hasn't improved much (if at all) since then.

[Shryke]

Anyway, this is a great little op-ed from Krugman that covers alot of important points:

http://www.nytimes.com/2015/07/06/opinion/paul-krugman-ending-greeces-bleeding.html

There were a few points I think that don't get discussed much too. Specifically:

1) The way the troika attempted to strongarm Greece via cutting them off from bank financing to try and hit back at the Greek government

2) The fact that this now leaves them in the position where they must either reverse this decision and admit it was a pointless bit of political nastiness or don't reverse it and basically force grexit into existence

[Solmyr]

Solmyr,

I was drilling your point of view down to non-sovereign state loans. If interest is the only way a creditor has of recouping potential losses why should a creditor ever loan to a party with less than long established rick solid credit. There is no recourse in your system on $15,000.00 loan where the borrower only makes three repayments at 23% interest. The lender lost the vast majority of the money loaned on top of getting no profit from the interest on the loan made.

For non-sovereign-state borrowers the lender's insurance is the collateral. Very few lenders will lend large sums of money to anyone without collateral. Credit history helps, but it can only get you so far. For small amounts sometimes insurance is not required - the lenders have statistics and know what amounts won't be repaid, they also have debt collection companies working for them and mitigating their losses. The remaining losses are factored in the interest rate - this is why credit card overdraft has higher interest than mortgage, which in turn has higher interest than interbank or interstate loans.

[Ser Scot A Ellison]

Solmyr,

Not true. There are frequently uncollateralized loans in the US. They have higher interest rates but those rate do nothing to protect a lender against someone who defaults after 3 payments. Not making uncollateralized loans would freeze people with low incomes and no credit history out of the credit market. Is that where you want this to go?

[ummester]

What you guys call collateral, I call a deposit - same difference though. But - what Ser Scot is saying is correct - many loans (in and out of the US) don't require sufficient collateral/deposit to be safe/reasonably insured.

Ser Scot,

If low income earners can't get loans, then asset prices should adjust downwards. The trouble with places like the US is that the divide between rich and poor has become too great - it's no longer a correctly functioning capitalist democracy, it is now a plutocracy. Well, probably a plutocratic oligarchy that sells democracy. Although, empire is a simpler word and also caters for the widespread military presence.

[ants]

Does the EU have any moral obligation to help out Greece? I'm just curious, because a lot of people act like the EU is out of order with their requirements attached to the bailout. I recognise that some countries such as Germany have benefited from the way Greece pulls the Euro down, but people knew that going in.

At any time Greece could have said, "nope, we prefer the solution where we don't get your help with strings attached". But obviously those in power didn't prefer those options.

But as I said - does the EU have a moral obligation to help out Greece?

[JoeyBanana]

What is most irritating about this "german" devotion to Lannisterism is that i swear, ten years ago nobody gave a fuck about debts and most people in debt weren't viewed as "lazy" or "entitled" and bankruptcy was never considered a capital sin. Yes, there was always the swabian stereotype but that was about saving enough to afford the deposit for a loan in order to buy a house or sth similarly expensive. And no Arakan, many of them didn't repay their debt just because the banks forced them to sell their car that they needed to work and eliminate the socialist (that's for you Commodore!) "food for family" program.

Well, okay some were worried about the national debt due to conservative fear mongering which produced the most hilarious eye-rolling moments when economics teachers had to answer that question again.

Nah, that shit was shoved down the populace's throats exactly like private pension schemes, for political reasons.

But as I said - does the EU have a moral obligation to help out Greece?

Yes, because Greece is a member of the EU.

[Solmyr]

Solmyr,

Not true. There are frequently uncollateralized loans in the US. They have higher interest rates but those rate do nothing to protect a lender against someone who defaults after 3 payments. Not making uncollateralized loans would freeze people with low incomes and no credit history out of the credit market. Is that where you want this to go?

We're getting far too specific, not to mention derailing the Greece thread.

Loan collection laws differ between countries. Some of the differences are quite fundamental - for example in many countries, including the US as far as I'm aware, you can declare bankruptcy and write off most loans*. Where I am from, you cannot do that. Other differences include the power debt collector companies, or even the lender himself, have over the debt collection process. All these factors influence how willing lenders will be to provide any loans, uncollateralized most of all. At the end of the day though, most lenders have a long history to base their decisions on - they know what % of what types of loans will turn bad and be uncollectable and these trends remain stable over time, barring some major financial collapse. They also know what amount of money they spend paying debt collector companies, also for lawsuits and all other expenses related to debt collection. When you add all these figures and spread it out on the loans' amount, you get the risk premium (more or less, I am simplifying a lot).

*excluding student loans for example

[Lyanna Stark]

I recognise that some countries such as Germany have benefited from the way Greece pulls the Euro down, but people knew that going in.

I don't think this is generally understood or known by a lot of people. Reading the news and talking to people here (northern Europe), it's mostly about how the Greek are lazy layabouts and how they have a moral obligation to pay their debts since they have squandered it all due to a corrupt state. And how they've "endangered" Europe.

Our former Prime Minister and also former European Union Special Envoy to Former Yugoslavia Carl Bildt tweeted:

Greek FinMin Varoufakis jumps ship. After having brought it to state of a wreck.

You know, helpfully.

[Ser Scot A Ellison]

Solmyr,

Over the last 5 years there have been dramatic changes to debt collection law in the US and it varies from State tomState. That's not enough time for companies to adapt particularly on a nationwide basis.

[Solmyr]

Solmyr,

Over the last 5 years there have been dramatic changes to debt collection law in the US and it varies from State tomState. That's not enough time for companies to adapt particularly on a nationwide basis.

Then they will just increase their interest premium and stay safe. Uncertainty always means higher rates.

[midi]

What is most irritating about this "german" devotion to Lannisterism is that i swear, ten years ago nobody gave a fuck about debts and most people in debt weren't viewed as "lazy" or "entitled" and bankruptcy was never considered a capital sin. Yes, there was always the swabian stereotype but that was about saving enough to afford the deposit for a loan in order to buy a house or sth similarly expensive. And no Arakan, many of them didn't repay their debt just because the banks forced them to sell their car that they needed to work and eliminate the socialist (that's for you Commodore!) "food for family" program.

Well, okay some were worried about the national debt due to conservative fear mongering which produced the most hilarious eye-rolling moments when economics teachers had to answer that question again.

Nah, that shit was shoved down the populace's throats exactly like private pension schemes, for political reasons.

Yes, because Greece is a member of the EU.

You're insane. And you want others to pay for stuff that your insanity says is great. Karl Marx would be proud.

Maastrict treaty forbids taking on of other countries debts in the EU. Everything that has been done on the Greece issue so far is illegal, immoral and insane. It needs to stop. I'm Finnish and why should I pay for debts I had ZERO control over accumulating. I can't vote who rules Greece, thus I will NOT pay their debts.

NO TAXATION WITHOUT REPRESENTATION... ever heard of that one? Taxing the Finnish (and others in the eurozone) to pay for troubles in Greece when our own economy is going down the toilet too. Doesn't work!! INSANE!!!! The answer is the same the Greeks gave: OXI OXI OXI OXI OXI!! https://www.youtube.com/watch?v=H07zYvkNYL8

[Liffguard]

You're insane. And you want others to pay for stuff that your insanity says is great. Karl Marx would be proud.

Maastrict treaty forbids taking on of other countries debts in the EU. Everything that has been done on the Greece issue so far is illegal, immoral and insane. It needs to stop. I'm Finnish and why should I pay for debts I had ZERO control over accumulating. I can't vote who rules Greece, thus I will NOT pay their debts.

NO TAXATION WITHOUT REPRESENTATION... ever heard of that one? Taxing the Finnish (and others in the eurozone) to pay for troubles in Greece when our own economy is going down the toilet too. Doesn't work!! INSANE!!!! The answer is the same the Greeks gave: OXI OXI OXI OXI OXI!!

Am I to understand you think the current situation is insane? You weren't very clear.

[Ser Lepus]

First: I refuted your claim that Greece paid an interest premium. What you are doing now is just moving goalposts.

The Banks are laughing their asses off at this stage. Anyway a discussion with you makes no sense because we simply have a different approach to life. My father taught me one thing that when you borrow money from someone your honour demands it to pay it back.

Honour has nothing to do with loans. People pay them because there are legal repercussions to breaking a contract (and a loan is a contract). Countries pay them because otherwise, they wouldn't get more loans in the future.

And that's the problem with Greece. Even if UE forgave the loans (which would have dire consequences to UE's economy, since the market would lose trust in a creditor who won't be repaid), nobody would loan money to Greece again. The Greek government wants to stop paying the interest, but it also needs Europe to keep loaning them money (which everybody would know wouldn't ever be returned) because nobody else would do it.

Greece could break from the Eurozone and create its own National Bank and make its own money, but since everybody knows Greece is bankrupt, that new dracma would be worth about as much as Monopoly's money.

Tsipras is playing with the idea that letting Greece leave the euro would have worse economic impact that forgiving the loans and giving help to Greece (both would be very bad for Europe's economy). He expects that, EU will fold at the last minute and he will win, but Greece will suffer horribly until then.

UE, on the other hand, is trying to delay both bad choices (folding to Tsipras or letting Greece leave the Eurozone) so long as it can, hoping that Tsipras will eventually accept a deal that isn't completely awful for european economy. They are playing the attrition card, expecting Tsipras to cut a deal before the economic crisis takes popular support from him (which doesn't seem like it's going to happen soon).

It is basically like this: Tsipras wants it all, and is willing to accept the risk of total collapse, because he thinks EU will accept a very bad thing (folding to him) over the worst thing (Greece leaving the Eurozone). He is saying "gimme what I want, or I will blow up both of us".

UE doesn't expect to get a good deal, but is less willing to risk bad consecuences. They are trying to reach the least bad deal that they can.

Yanis Varoufakis is behind the plan. He has studied Game Theory, and knows that in theory, if the Greek government stays firm and is unfazed by the risk of total destruction, it can win.

Problem is, Greece may get screwed anyways in the way. The Greek government can't pull the trigger, can't declare bankrupcy and leave the Eurozone because it would have lost its only card, wouldn't be able to exert any pressure anymore, and will have to face the dire consecuences alone. Tsipras can only hope that EU won't resist the impact on the markets and will fold before that...but all the while Greek people is being crushed. It's a war of attrition, but while EU is getting punched in the gut, Greece is being stabbed...Greece can't keep playing this game for long.

And worse, the market can get used to this situation and start watching Greece as an exception, and not as a sign of what could happen to other european economies, which would reduce the fallout of Grexit for the rest of Europe.

[Lyanna Stark]

And the photoshop art is starting to flood in.

[Arakan]

You're insane. And you want others to pay for stuff that your insanity says is great. Karl Marx would be proud.

Maastrict treaty forbids taking on of other countries debts in the EU. Everything that has been done on the Greece issue so far is illegal, immoral and insane. It needs to stop. I'm Finnish and why should I pay for debts I had ZERO control over accumulating. I can't vote who rules Greece, thus I will NOT pay their debts.

NO TAXATION WITHOUT REPRESENTATION... ever heard of that one? Taxing the Finnish (and others in the eurozone) to pay for troubles in Greece when our own economy is going down the toilet too. Doesn't work!! INSANE!!!! The answer is the same the Greeks gave: OXI OXI OXI OXI OXI!!

Great Post and exactly how I see it.

NO TAXATION WITHOUT REPRESENTATION!

Let's introduce another basic economic principle: you want my money? Allright you get it, TO MY CONDITIONS. If you dont agree to these conditions, fine, I don't force you to take my money. But don't CRY ME A RIVER afterwards.

Someone said the EU has a moral obligation to help Greece....LOL LOL LOL :). So let me get this right, Greece has no moral obligation to repay debts but the Rest of the Europeans have a moral obligation to help them nonetheless? Wow just fucking wow :).

Anyway, Lyanna I don't like your quote from that Pikety guy, for a very simple reason:

Comparing the debt situation across Europe,esp. Germany, post-1945 after one of the biggest catastrophes in the history of mankind (which was the reason for this debt) with the current debt situation in Greece, at the end of the day a quite ordinary thing, is like comparing breaking my arm with the Earthquake catastrophe in Haiti, on the scale of human tragedy.

Anyway, the whole Greek tragedy has become ideological warfare, as can be seen in this thread as well. Syriza, the wet dream of some, has brought chauvinism and ideology into this game.

When the Greeks can have their referendum, I wish for the same.

Better to give 100 billion to countries like Slovakia, Slovenia, Estonia who PROVED that they can make sth. constructive with that money.

[dalThor]

Bah, multi-quote has failed me. Regarding reckless defense spending in conjunction with asking people for money. In 2010, Greece contracted for French frigates, American planes and, at least one German submarine. Whether or not you believe the purchases were coerced as part of a bailout deal or not, the fact remains that the lenders be didn't have a problem with it.

http://www.reuters.com/article/2010/03/23/us-eurozone-greece-warships-analysis-idUSTRE62M1Q520100323