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This isn't peaceful but belligerent demand for change but rather throwing molotov cocktails and gasoline bombs at police. It is true that they have plenty to be angry about as their government is taking away money and rights that the Greeks thought they had for life and there is a very justified perception that the rich countries of France and Germany are the driving force behind these unpleasant changes. That said, there is no logical basis for this protest. At least the Occupy protesters are getting attention, being nonviolent and have achievable goals - the Greek protests are utterly hopeless. What could they possibly get that would satisfy them aside from the rest of Europe pouring more and more money in an endless upward spiral into Greece? They already know that down that road lies isolation and disaster as the EU will not put up with it.
So now they scream and shout and loot and burn and shut down the country for days to tell the government that instead of austerity they want catastrophe. The demands that the government continue to pay out as it has always done are an impossibility; there is no way in which that can occur. The solution now is to get the government to act quickly to resolve the situation as best it can and work to try to rebuild. Here we have a disastrous example of fear of loss destroying any rational attempt at a solution. The people of Greece fear losing their benefits and they fear a collapse but there is no appropriate weighting of those two things. They are rushing into a burning building to recover a wallet left behind in a dresser drawer and they don't seem to see that the building is going to collapse long before they can get out again.
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I admittedly know very little about this situation except what I read on Tobold's blog a while ago but the Greek poster he had was very much against the 'bailout'. He wanted the country to default on their loans since he thought it would be better than essentially being bought by Germany. Losing the Euro is seen as a boon, not a bane, since the Euro existing has prevented them from using any sort of inflationary measures to try to combat their current problems.
ReplyDeleteAt some point the investors need to actually assume some sort of risk and suck it up in these sorts of situations. Investments that I make can fail. Investments that big banks and big countries make apparently can't; instead they just get someone else to suffer while they keep collecting interest without any possibility of failure.
The current situation is that the people who have loaned money to Greece took a 50% writedown on the debt in exchange for Greece running a balanced budget and paying off the debt very, very slowly. The investors have taken a crushing hit. The Greek protesters aren't willing to accept that the government balance its books even in the face of their creditors forgiving 50% of their loans instantly. The investors *are* sucking it up.
ReplyDeleteI doubt very, very much that Greece could somehow inflate its way out of its financial crisis if they got kicked from the EU and completely defaulted on their loans. They would still have a massive deficit and zero way to finance it and they would have the problems of starting up a new currency from scratch - one that is almost sure to be considered worthless.
I don't think the idea is to inflate out of it, I think the idea is to default plain and simple. Their currency would almost certainly be considered worthless, but the goods they produce for export would not, so it would mean essentially being forced to run a trade surplus. I think what a lot of Greek people want is out of the insane system that produced this catastrophe in the first place. They don't know what the alternative is, and I'm quite sure it's extremely bad, but I'm not sure that the current system isn't just delaying the problem.
ReplyDeleteThis is an acute problem and I understand that people don't think peaceful protest will work fast enough. Remember that the suggestion of a referendum was considered a disaster by the world economic community. To rephrase that, economists said that a democratic country allowing its people to vote on a tremendous decision about its own future was a disaster and so the government backed off. Those people in the streets think of themselves as freedom fighters - their country has been occupied without putting a troop on the ground.
Of course throwing fire bombs at police is insane - unless your plan is to actually kill your government and take over you should leave the fire bombs at home.
Well, there were real problems with the vote that make the issue more complex. First was that Greek debt was effectively impossible to finance because the risk was insane and any investor knew they would lose either 50% or 100% of their investment. Second was that the referendum would have taken months to set up - they weren't expecting to have it arranged until the new year. Third was that every other nation who was doing any lending would have faced intense pressure to also have a referendum on whether or not to offer the 50% at all!
ReplyDeleteSo Greece could not finance its debt during the period between the 50% deal and the referendum. Also the other countries desperately wanted to get 50% of their money and to not have to boot a country out of the EU and they were sure if it went to a referendum that this is what the Greek populace would vote for. This wasn't as simple as just 'have a choice or not' for the Greek people - the very act of making that choice was going to create chaos.
How would Greece deal with the situation of aiming for a referendum with the government totally unable to pay its bills because no investor would put money into a 'lose or lose more' situation? This would be no choice at all, by the time the referendum was held Greece would already been in full default and be hoofed out of the EU anyway.
As I understand it they weren't actually getting 50% off of everything. The Greek banks were getting 50% back but the foreign (read: German) banks would get the full 100% back.
ReplyDeleteI wasn't able to find specifics on exactly who got 50% chopped but everything I saw said that any private investor or private bank had to take the cut. The IMF, for example, didn't have to take a writedown but any private bank certainly did. The deal also included other countries like Germany coming up with a ton of extra cash to keep Greece afloat, without which they were certainly in full default.
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