Greece to Leave the Euro Zone

[ag]

Unfortunately, this seems to be it.

[ag]

Unfortunately, this seems to be it.

If anything it's better than the alternative by now.
Greece is in a downward spiral into poverty regardless, at least let them stay an independent nation.

But the way this is happening is going to lead to the worst (for Greece) of both worlds - and that is unfortunate.

[ag]

Is this, in fact, a done deal at this point?

Well, Tsipras still has about 48 hours to go to Canossa.

[ag]

Why does leaving the Eurozone have any connection with Greece in the EU? There are plenty of other EU nations not on the Euro.

One word: migration. Greeks will be fleeing in droves. I am not sure Danes will be happy.

[ag]

Why does leaving the Eurozone have any connection with Greece in the EU? There are plenty of other EU nations not on the Euro.

One word: migration. Greeks will be fleeing in droves. I am not sure Danes will be happy.

Why should we care? If they come to Denmark they have to work first to get access to any benefits and if they don't work we can send them home again, and if they have worked for the periode which they need to receive benefits, our benefits are not more generous than having a job, so I suspect they will keep working, if they have entered the Danish labour market.

I was not even thinking about the idiotic idea that anybody would migrate "to get benefits". The myth is not even worth considering. Migrants tend to work a lot more than the natives.

Of course, they will be coming to work.  I have not seen Danes being very friendly to people from poor countries trying to work. As of today, Greece is a poor country. The only difference here is that Greeks have the right to live in Denmark (as long as Greece remains in the EU).

[ag]

Anyway, I will enjoy observing Danish attitudes towards Greek migrants from afar. Fortunately, I am neither Greek nor in Denmark.

[ag]

Anyway, I will enjoy observing Danish attitudes towards Greek migrants from afar. Fortunately, I am neither Greek nor in Denmark.

This makes me sad, I thought you would argue against my statistics, I had even found them and made everything ready:(.

Nothing prevents you from publishing it, even without my argument.

[ag]

Also on a more serious note I doubt we will get many Greek immigrants, they usual go to Germany, because of a large historical guest worker community there. We get Romanians, Poles and Balts instead.

There will be enough for everyone. If things go wrong, I could easily see a quarter or a third of the Greeks leaving.

[ag]

how about increasing border patrol severalfold and banning emigration?  it could double as a public works program

Banning emigration = leaving EU.

[ag]

Well if there is another round of mass emigration from Greece, they are more than welcome to come to Chicago We have tons of space, an already strong Greek ethnic community, and Greektown needs a revival. Plus, you're in Chicago! Everyone wins!


No, but seriously, is Greece an aging society like Italy is? Brain drain would only make the problems worse.

Unfortunately, they would need visas to do that. Visa Waiver is unlikely to stay in force for the Greeks - and, even if it does, visa overstay still makes you an illegal migrant, with all the unpleasantness that implies. In contrast, for the moment, they can simply move to Germany without asking anyone.

[ag]

But again I don't see why it's a problem for us, I can see why it's a problem for Greece if their youth leave, but not for us.

I would not see that as a problem either. But, it seems, Danes are not very fond of poor migrants.

[ag]

I really hope the US will stand with Greece in all this.  The Greeks need relief, investment, and economic growth.  Not more suffering at the hands of old fashioned European sectarianism.

You would like the US to provide Greece with 200 bln dolars, or so, in cash? Otherwise, what is it that you would like the US to do?

[ag]

That wouldn't have been a bailout. That would have been unconditional debt forgiveness. And that is a desirable thing because... how, again?

Because a default/Grexit will be way more expensive than debt forgiveness would have been back in 2010. Whatever you think should happen now, Merkel's original strategy has been proven a total disaster in that it only made the crisis worse and cost Europeans much more money.

Will it? For Greeks - certainly. But Merkel is not elected by the Greeks.

[ag]

I really hope the US will stand with Greece in all this.  The Greeks need relief, investment, and economic growth.  Not more suffering at the hands of old fashioned European sectarianism.

You would like the US to provide Greece with 200 bln dolars, or so, in cash? Otherwise, what is it that you would like the US to do?

I actually don't think that is that bad of an idea.

Write your Congressman.

[ag]

Ok, since this is the economics board, I guess, I should be a bit less criptic.

1. The fundamental problem is that allowing Greece into the euro system has been initially taken to imply that it is properly integrated: that, push comes to shove, it will be helped out by the other members of the union. Unfortunately, that turned out not to be the case.

2. Greece was/is а relatively poor country that had a lot catching up to do, so it is quite natural that it would be borrowing - it would repay when it caught up, from a much bigger economy. The implicit guarantee of Greek debts meant that borrowing was available - and fairly cheap.  Euro was supposed to promote convergence in living standards, etc. - and, for a while, it seemed to work. Of course, in the process Greece were becoming less and less competitive (while, unfortunately for her, Germany was getting better and better in this), but it was concealed by the inflow of borrowing.

3. Of course, the fatal flaw here is that not only the euro nations retained their distinct economies, but also distinct political systems. In particular, Greece has a long and venerable tradition of leftist (and rightist) activism - the tradition that in many European countries finds little sympathy. More importantly, of course, EU lacks any mechanism that would justify the markets' former belief that the union would guarantee debts. Nor does it have any mechanism that would seriously restrain a sovereign government from contracting public (or guaranteeing private) debt, as long as the markets are willing to lend. Finally, the domestic political system of each country is distinct - have I already mentioned Greek traditions of activism?

4. When shyte first hit the fan a few years back, it hit a bunch of countries, not merely Greece. They all reacted in different ways. The Baltics, for instance, basically deflated themselves into competitiveness. It was extremely tough for their citizens. They were helped by the fact that those countries do not really have political opposition that could displace the governments: whatever opposition there is in Latvia or Estonia is, unfortunately, broadly speaking, Russian: untouchable for the purposes of government, while possessing enough support to prevent emergence of anybody else. Or whatever the reason - they were able to do screw their people short-term without facing political consequences. Kudos to them - though I do hear Mr. Krugman: I am far from certain that an average Latvian should have been happy to go through this (of course, he was willing to do this because he was afraid of the Russians - something Mr. Krugman won´t get). We could also talk about the Cypriots, the Portuguese, the Irish - and, yes, Spaniards and Italians. But all of this is not about them.

5. It was always obvious that the Greek political system would not tolerate "the Baltic solution". Greece is also not big enough to be impossible to contain the sh**t inside it - while too big to be just bailed out at an insignificant cost. And the debts are big.  Really, it has a horrid negotiating position. No good cards at all.

6. What about "Europe"? Well, Europe consists of a bunch of countries, with their own political processes. A lot of them are poorer than Greece. Some of these, as I have mentioned, have done it the hard way. Others have never been allowed into euro in the first place. And then there is Germany... Furthermore, there is still no European mechanism designed to cross-subsidize the countries at the required scale. Nor there is, really, a mechanism that would prevent further borrowing by a member nation if the markets decide they would like to rent.

7. So, here come the Greeks and ask for the debts to be forgiven, because they, obviously, cannot pay. If you are a northern European negotiator, you really need to be quite insane not to say: nuts, I am not doing it. Your people have no sympathy to the Greeks at all (many of them have just gone through what the Greeks are saying they cannot do). Furthermore, you realize that if you forgive, you will be implicitly providing a new guarantee of the Greek debt. And, you will be providing this guarantee to a Greek government that you find even less responsible than the ones that got us into this mess in the first place (because, of course, Greeks have - quite deservedly - kicked out the old bastards, and are now trying out somebody new). And, actually, you are really telling the Latvians and the Irish that they are suckers: they should have just gone on and insisted they cannot pay (and if you ARE a Latvian - see above). In any case, reminding the "European partners" that you are a sovereign nation, and will insist on that - well, that is the LEAST smart thing you can do here. Because it is, basically, a reminder of why they should not be helping you.

8. So, yes, Greece can't rely on a lot of good will here. Besides everything else it is being made an example of what would happen if a nation behaves irresponsibly. Unfortunately, in the absence of commitment mechanisms (which Europe lacks) things have to be enforced through threats "off equilibrium path". And for threats to be credible, they have to be fulfilled.

9. So, yeah, austerity here is cruelty. Unfortunately, I am not sure the entire euro project is sustainable without this cruelty - or severe restrictions on national sovereignty, which are not on the political agenda.

10. So, would Greece have been better off without taking part? It would have been, most definitely, better off without joining euro. Instead of the politically impossible deflation, it would have devalued. Of course, it would have been a much poorer country than it was 10 years ago - but it would have not had this pain. And, as an EU member it would have still been going through the (more gradual) convergence process, gradually becoming wealthier.

11. But Greece did join. At this point, it is screwed.  And now it is doing the worst job getting out. Getting out of the euro is going to be very painfull - but that pain, probably, is a sunk cost, at this point.

12. Nevertheless, the ONLY force that can mitigate the pain is still EU. European solidarity, etc., etc. - these are not mere words. And Europeans, however inflexible, are still a lot more flexible than anybody else is going to be. They have been, subject to the constraint I have mentioned above, bending backwards - yes, for solidarity sake. No America, China, Russia or Turkey is going to be any better towards Greece. Whoever is going to represent the Greeks at the table should eat crow, be humble, and just ask for help. Because doing anything else is going to end in tears.

[ag]

the idea for the ECB is to have Greece as an eternally depressed, slave state, and a vehicle for transferring wealth to foreign creditors.  I believe the number is 8 of 9 Euros worth of loan/"aid" to Greece go to foreign creditors.  the idea is to keep this going for eternity.

you'll never push the Troika into some Keynesian-bent economics because they don't want that.  they hate any possibility of inflation.

If that is THE ENTIRE idea, then, of course, the Greeks should just get off, default, reintroduce the drachma and get on with their lives. Why were there any negotiations at all?

[ag]

the idea for the ECB is to have Greece as an eternally depressed, slave state, and a vehicle for transferring wealth to foreign creditors.  I believe the number is 8 of 9 Euros worth of loan/"aid" to Greece go to foreign creditors.  the idea is to keep this going for eternity.

in this sense Greece's situation is akin to an American's with $200k in 8-11% interest student loans.  they're designed to not be paid back, but to take a cut of your paycheck (including your Social Security check in 40 years -- or even if you get disability payments).

Then why did you get those loans? Your friendly local community college, most certainly, did not charge 50 grand a year.

[ag]

the idea for the ECB is to have Greece as an eternally depressed, slave state, and a vehicle for transferring wealth to foreign creditors.  I believe the number is 8 of 9 Euros worth of loan/"aid" to Greece go to foreign creditors.  the idea is to keep this going for eternity.

in this sense Greece's situation is akin to an American's with $200k in 8-11% interest student loans.  they're designed to not be paid back, but to take a cut of your paycheck (including your Social Security check in 40 years -- or even if you get disability payments).

Then why did you get those loans? Your friendly local community college, most certainly, did not charge 50 grand a year.

I wasn't speaking in the first person -- but it is telling that you seek to blame the market-sense and rationality of a 17 or 18 year old before you think of the social structures and situation than makes $50k/year loans to 18 year olds widespread.

17 year olds sign up for loans without talking with their parents?

[ag]

the idea for the ECB is to have Greece as an eternally depressed, slave state, and a vehicle for transferring wealth to foreign creditors.  I believe the number is 8 of 9 Euros worth of loan/"aid" to Greece go to foreign creditors.  the idea is to keep this going for eternity.

in this sense Greece's situation is akin to an American's with $200k in 8-11% interest student loans.  they're designed to not be paid back, but to take a cut of your paycheck (including your Social Security check in 40 years -- or even if you get disability payments).

Then why did you get those loans? Your friendly local community college, most certainly, did not charge 50 grand a year.

I wasn't speaking in the first person -- but it is telling that you seek to blame the market-sense and rationality of a 17 or 18 year old before you think of the social structures and situation than makes $50k/year loans to 18 year olds widespread.

17 year olds sign up for loans without talking with their parents?

no, they generally need a "co-signer".  the loan is also immune to bankruptcy protection and collection rates on defaulted loans is close to 90% (compared to a fraction w/credit card debt).

the alternative path for people in the situation is to work a low wage job for eternity.

1) So, you have an adult to take the decision - no issue of a 17-year-old's financial wisdom.

2) Are you saying that the debt is worth it, because without it you are financially worse off? Because it sure seems like that.

3) Are there no schools that charge less than $50 grand a year for tuition during the 4 years? In-state tuition and fees in Rutgers is about $14 grand, and Rutgers, surely, is a decent school. And Stony Brook is $4.5 grand in-state ($12 grand out of state). Don't like any of that? Berkeley is $14 thousand dollars. Live in the South? UNC is $8.5 thousand dollars a year in tuition. UT Austin is about $ 5 thousand a year in-state (or $17 thousand out of state).  Midwest? Wisconsin Madison is $4.5 thousand in state ($12 grand out of state). I was just randomly looking up state schools - no real selection here. And, note, all these are very good universities - I am not talking community colleges (though, why not save on the first two years by going to a cheaper place?). And all that is without scholarships, etc.

Ah, Harvard degree is better value (see point 2)? Ok, fine. But then... what exactly, you say is the problem?

[ag]

1. Why are those flagships "not an option"? Because one cannot get in for academic reasons? Ok, fine. CUNY runs open admission. CUNY City College is 3 thousand dollars a year for city residents. And that is the City College - most certainly, you are better off there than in many private schools. And community colleges of some sort exist throughout the country: if you are not very smart (could not get into a decent public four-year college), you will not do any worse by going there than by paying tuition at a private residential college. And if you are smart, you can always transfer from a community college to a better school - saving on the first two years of tuition.

2. If you are planning, say, an academic career (the one that will not pay high sallaries), there are multiple options out there that would allow you not to get that debt. I know: I did it (and I went to both college and to grad school in the US, without being eligible for any in-state tuition, or whatever).

3. A 17-year old can choose to go to war. In many countries at the age of 17 you are supposed to choose whether you are going to study chemistry or romance languages for the rest of your life.  In this particular case you, actually, need consent of an adult. I simply do not see what is the problem.

[ag]

You assume that everyone thinks as rationally as you do about financial decisions when it comes to paying for college.

What do yo mean by "rationally"?

And if they do not "think rationally", this is, basically, an invitation to lock the young people out of college: stop subsidizing all thos cheap loans, and they will go work in McDonalds, as they should.

[ag]

What do yo mean by "rationally"?

In this instance rationality means financial literacy.  Most people aren't as financially literate or informed as you seem to be.  Although I suppose you think these people have it coming.

There are many other decisions people do without being experts. Choosing the major, for instance, is almost as momentous. And then a job. And a house. Perhaps, the university should have mandatory placements and the municipal authority should determine which house is appropriate for you.

[ag]

City College is not what it once was, I'm afraid. That is in a good way- it no longer has open admissions, for example.- but it is mostly in a bad way.

It is a lot better than quite a few private (and, especially, for profit schools). If you cannot get into Stony Brook, tell me, which school is going to be a better deal than City or Hunter?

[ag]

You assume that everyone thinks as rationally as you do about financial decisions when it comes to paying for college.

What do yo mean by "rationally"?

And if they do not "think rationally", this is, basically, an invitation to lock the young people out of college: stop subsidizing all thos cheap loans, and they will go work in McDonalds, as they should.

I know a lot of smart kids that are choosing to go to more expensive private colleges out of state rather than take great deals at decent in state public universities because the private college is ranked higher by US News. I am not taking that route, but it would be easy for me to get into most private colleges, and if my parents cosigned on loans, I could get all the money I would even need to attend school. Of course, I would have considerable difficulty paying it back, but for some, the temptation to go to a more expensive private school is just too much.

Well, that is why you have parents. They, somehow, brought you up alive - they should be able to consult you on this.

[ag]

Not if they didn't go to college

Are you suggesting that those who did not go to college should be wards of the state?