Sunday, July 05, 2015

Uncharted Waters

Greece tells Europe to pack sand.

9 comments:

rabidgandhi said...

Would that they had told the ECB to pack sand.

This is mere Kabuki theatre on behalf of the Syriza drama queens. The referendum asked the people whether they want to accept a Eurogroup offer for austerity in exchange for a bailout; but the Eurogroup took said offer off the table last week! So the referendum, aside from its tabula rasa feel good effects (see: Obama, election campaign of), was essentially meaningless.

Meanwhile, Syriza has vowed to continue punishing the Greek people with budget surpluses and privatisations and to stay in the Euro.

Quoth Flava Flav: don't believe the hype.

The Anti-Gnostic said...

The metaphor is, "Pound sand." Sorry, I can't help myself.

If Greece had an actual budget surplus, they really would tell the Troika to pound sand. They don't have a surplus; they have bloated government payrolls and absurd pension obligations and they don't pay their taxes.

rabidgandhi said...

AG:

1st: Even if Greece were to run a surplus of 10% it would still need a bailout because its banks are insolvent. As I've said several times here, the bailout money does not go to pay for public expenditures, it goes directly to pay the IMF and (mainly) French and German banks.

2nd:

--Greece had an 0.8% primary surplus in 2014:
http://www.minfin.gr/sites/default/files/financial_files/BULLETIN_12_2014.pdf

--Greece and the Troika both project a surplus of 2.0% for FY 2015. The IMF wanted a surplus of 3% and Syriza counter-offered with 1.5%.
http://www.nakedcapitalism.com/2015/06/short-greece-proposal-update.html

--On several occasions, Syriza has affirmed that it will always run surpluses ad infinitum.

Lastly, as Ive said before, the whole idea of the "bloated Greek state" does not stand up to facts in a country where the average pension is EUR 713/month, and where government services such as public hospitals are among the lowest-funded in Europe.

The Anti-Gnostic said...

rg - when you're pensioning people off in their 50's, padding payrolls, and not collecting taxes, the fact that pensions average 750US$ or public hospital funding is the relative lowest in Europe is not really the point. Greece doesn't have German or Scandinavian productivity, so they can't afford German or Scandinavian welfare. They tried to make up the difference by borrowing, and now they can't pay their debts. Every penny of debt could be forgiven (as it eventually will be) and the Greeks would still have the same problem: more consumption than production. The ride on the gravy train is over; they've run out of OPM, as will the entire Western welfare state-experiment at some point.

rabidgandhi said...

Again AG, the data do not support your theory.

Greeks work an average of 2200 hours/year, well above the OECD average of 1750, and light years ahead of Sweden (1600) Denmark (1400) and Norway (1400).

https://stats.oecd.org/Index.aspx?DataSetCode=ANHRS

The Anti-Gnostic said...

Let me guess - they pay the most taxes too. All the more reason for the thrifty, hardworking nation of Greece to repudiate the debt.

Gregory DeLassus said...

Dear Rabid Gandhi,

It is not often that I find myself agreeing with the Anti-Gnostic, but you are not really responding to his point. He said that the Germans and Scandinavians are more productive than the Greeks, and you responded with data to the effect that the Greeks are more hardworking.

Hard work and productivity are not at all the same thing. I can dig ditches and fill them in all day, and at the end of the day I will have worked very hard, but produced nothing at all. In terms of how much one can afford to consume, productivity matters much more than hard work.

In any event, I definitely agree with your broader point: the IMF bailouts are not really bailing out Greece. They are bailing out German and French banks, with Greece simply operating as the middle man.

There is some benefit to the Greeks agreeing to play this middle-man role, but also costs. It has reached the point where the disadvantages outweigh the advantages, so the Greeks would probably do well simply to default outright and get the consequences over with quickly, rather than this death-by-inches that the Troika is currently inflicting.

rabidgandhi said...

There is a reason why I didn't post the productivity numbers: productivity is directly related to employment levels, so with unemployment at 25% Greece's productivity is naturally much lower than it would be if it were not being devastated by austerity. (basically, unemployment leads to mass under-employment, which means the economy produces far below its potential)

AG's point seems to be based on stereotypes of Lazy Greeks vs. Industrious Scandinavians, an evidence-resistant trope that is omnipresent in the mainstream media, but which is directly contradicted by the data. And at least in the press, the purpose is to make people who never benefited from the financial shenanigans of the EU banks shoulder the price for them to be bailed out (something that should be very familiar to US readers). Thus the accusations that Greeks are living high on the hog or lazing around while Germans slave.

Lastly, I'm not sure what benefits the average Greek saw from being a middleman, but I totally agree Greece should default and it would do best to find a way out of the Euro that will not permanently destroy what's left of its economy.

Gregory DeLassus said...

[P]roductivity is directly related to employment levels, so with unemployment at 25% Greece's productivity is naturally much lower than it would be if it were not being devastated by austerity. (basically, unemployment leads to mass under-employment, which means the economy produces far below its potential)

O.k., but Greece was less productive than Germany or the Scandinavian countries even before the economic collapse and attendant surge in unemployment. Back in 2005 Greek productivity was €19.80 per hour worked, while German productivity was €39.90/hour and Danish productivity was €51.40/hour.

You are right that the stereotype of the lazy Greek is inaccurate, but it seems to me that the Anti-Gnostic's point about the unproductive Greek is actually fair and accurate. It is futile to argue that Greek pensions and health expenses are lower than the European average, so the EU should cut them some slack. No matter how much lower Greek pension costs might or might not be relative to Danish pension costs, one cannot say whether the Greek pension costs are or are not still too high unless one accurately assesses how productive Greeks are. Those nations who are sufficiently productive can afford generous pensions. Those nations that are not sufficiently productive cannot even afford meager pension costs.

I'm not sure what benefits the average Greek saw from being a middleman...

By agreeing to play middleman, their banks have been supplied with enough currency for Greece to stay effectively in the Eurozone. That is a non-trivial benefit. If I had a savings account denominated in Euros, I would not be indifferent to the idea of it being converted overnight into an account denominated in Drachmas.

Still and all, I do not think that this benefit is worth the attendant costs. Better to make a clean break, let Greek citizens take the (hopefully) one-time hit to their net-worths, and begin a recovery process.