Opinion of Alexis Tsipras

[Hydera]

Can someone reasonably explain how austerity will help the Greek people?

Because you can't overspend forever and have some kind of faith that "everything will work out in the end".

Greece has been overspending for so long that their economy has to grow at a much more sustainable pace without borrowing so much money.

Nobody is willing to pour money into greece to re-inflate their 2000's spending bubble.

[Hydera]

Im wondering about the much bigger implications of a grexit.

People on the "soft left" aka Keynesians like Stiglitz, Krugman claimed that greece's problems wasn't that it spent too much but only they weren't allowed to spend more and if they spend more then "their problems would of been gone compared to if they done austerity". While totally ignoring that for the past 30 years the greek state has been in a state of fiscal expansion through foreign borrowing.




Although the borrowing and spending did boost the greek economy a lot of it didn't flow into investments to create industries needed to repay that spending but as an clientism in return for votes.

For one of the many examples.

Greek pensions were very generous because instead of it being employer+personal contributions the state actually subsidized a lot of it. Even in 2012 despite cuts the greeks were very generous in pension spending as % of GDP.




http://lolgreece.blogspot.com/

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Basically the greek economy was the equivalent of a rent seeking oil rich arab state but instead of oil rich was borrowed wealth rich due to large amounts of borrowing. And they created a welfare state paid not with their own industries which of tourism and shipping would be unable to afford such expenditures on its own.

But back to Krugman and Stiglitz there has been a steady decaying of keynes original ideas. Keynes said to run surpluses in good times. Greece actually kept spending even in good times.

And Krugman and stiglitz said that governments should just keep spending "to boost the economy" but have backed away silently. especially when greece spent so much money but ended up in a crisis anyway by overspending.

And the final nail in the coffin is when they advocated for greece's debt to be forgiven. If spending more and more money didn't save the greek economy then perhaps the Soft Left or basically Keynesian-ism don't exactly hold all the answers/theres no one size fits all solution/its complicated.

Perhaps its time to stop treating keynes like a god and realize that theres no easy set of solutions to all economic problems.

[Hydera]

Can someone reasonably explain how austerity will help the Greek people?

Because you can't overspend forever and have some kind of faith that "everything will work out in the end".

Greece has been overspending for so long that their economy has to grow at a much more sustainable pace without borrowing so much money.

Nobody is willing to pour money into greece to re-inflate their 2000's spending bubble.

What? Greece before the crisis had one of the flimsiest welfare states of any EU member and a low percentage of government spending as % of GDP. The countries in Europe with the biggest welfare states have been the ones least affected by the Great Recession.

They were overspending much more than what their tax revenues could pay for. Plus they lost so much revenue to tax evasion. A national sport in greece.




Other countries like in Scandinavia had a welfare state but the taxes and the trade surpluses to pay for their spending. Something greece didn't had which was the industries to have the revenue to pay for spending. Instead the greeks borrowed and borrowed.

[Hydera]

http://www.bloomberg.com/news/articles/2015-06-19/greece-s-ruling-party-goes-to-war-with-its-own-central-bank

Greece’s Ruling Party Goes to War With Its Own Central Bank

The game theory part of me still feel this is a Tsipras tactic to convince the rest of EU that he is not rational and that it is best they back down from this game of chicken because "Mad Tsipras" will not.

That would be giving Tsipras too much credit. The truth is probably that his entire negotiating tactic until now has been a huge improvisation. He and his government have no clue what they want and what they do.

He's stuck between a rock and a hard place. He can agree to the proposals by the EU in return for money to repay the IMF. Or default and leave the euro. Both choices will painful for greece. With the grexit being worse.  I think in the end he will put the proposals by the EU to a referendum and will go with whatever decision the majority chooses.

[Hydera]

http://www.bloomberg.com/news/articles/2015-06-19/greece-s-ruling-party-goes-to-war-with-its-own-central-bank

Greece’s Ruling Party Goes to War With Its Own Central Bank

The game theory part of me still feel this is a Tsipras tactic to convince the rest of EU that he is not rational and that it is best they back down from this game of chicken because "Mad Tsipras" will not.

That would be giving Tsipras too much credit. The truth is probably that his entire negotiating tactic until now has been a huge improvisation. He and his government have no clue what they want and what they do.

He's stuck between a rock and a hard place. He can agree to the proposals by the EU in return for money to repay the IMF. Or default and leave the euro. Both choices will painful for greece. With the grexit being worse.  I think in the end he will put the proposals by the EU to a referendum and will go with whatever decision the majority chooses.

He himself said just a few days ago that a referendum or new elections are not going to happen.
The political environment is too volatile and SYRIZA's big leads could easily collapse after the voters have a taste of what default really means.

Im feeling that he's learning towards caving to the EU proposals since greece literally has no upper hand. If he will then he would probably put it to a vote because his party promised at the same time to not leave the euro and not implement any more austerity so he has to give them a democratic choice.

[Hydera]

He should have told the greedy bankers to take a hike.

You mean greedy greeks.

Nobody forced greece to take loans they couldn't afford.

[Hydera]

He should have told the greedy bankers to take a hike.

You mean greedy greeks.

Nobody forced greece to take loans they couldn't afford.

and Nobody forced the various financial institutions to give them loans they can't get back.

Why can't everyone see there are two sides to this and it is not a morality play?

First nobody assumed that Greece wouldn't payback. Greece willingly signed contracts that they would borrow X money and pay back in 10 years and just kept piling on debt after debt because they wanted to use the borrowed money for votes.


One person owes the other not the otherway around.

If we subscribe to this rubbish that somebody could borrow tons and money and get away with it because "otherwise it would be unfair to have to payback". Then people would stop lending to eachother at all.

                                                            

[Hydera]

You know, this whole thing started because a batch of people who shouldn't have had loans asked for them and the banks decided to lend them money anyway.

And if they denied loans to Greece?

Imagine the outrage amongst the ultra-left that "bankers are unfair to greece!!!" and "they hate the poor because they don't want to give them money!!!"

[Hydera]

You know, this whole thing started because a batch of people who shouldn't have had loans asked for them and the banks decided to lend them money anyway.

And if they denied loans to Greece?

If they'd denied them back in the 1980s, we wouldn't be in this mess. In fact, a lot of the mess in the developing world is due to loans being given during the Cold War to military juntas so they could buy weapons... and it became so impossible for them to pay back as well as preventing governments from looking after their people properly, a lot of it (after pressure for campaign groups) was forgiven. Look up the Jubilee 2000 campaign to see what I mean.

But you can rest easily, the Greek debt was not build up under the Junta (which ran a budget surplus). In fact as the Greek had a quite low debt in the early 80ties, so why shouldn't you borrow money to a country with low debt?

It was low in 1980 and then exploded post-1981 after the election of Andreas Papandreou who created the unsustainable welfare state.



The Junta had nothing to do with greece's debt problems today, they kept it low and actually ran surpluses.

Also in hindsight if people knew that greece would use those loans to built an unsustainable welfare state they would of denied. People here who think that banks are at fault for giving greece loans would be upset just as much that "the banks are being greedy by not letting greece borrow so they could create a welfare state".