Bailouts are required when things go seriously wrong. If you want to do a bailout it’s not a bad idea just to follow the footsteps of Mr. Helicopter and just hand over the money.
Then THINK about how you can get the money back? Blaming people may make you feel good, but it won’t help you get your money back. Handing it over with conditions doesn’t always work. Compare Turkey which “took” the IMF medicine, and is still in the doldrums with Argentina which just told everyone to “go hang” and is now doing fine.
Europe has to decide, does it want to help Greece or punish it? There are other options to hanging a bailout package just out of reach and beating Greece with a stick every time it makes a grab for it. For example, Greece could leave the EMU, or Germany could leave the EMU, or Greece could just default, Argentina did that. ______________________...
You ask an interesting rhetorical question........does Europe want to help or punish Greece? But the more important question is what does Greece want and what is it willing to do to get there? This is more important than the former because the structure of Greece's economy is not sustainable; without changes from within, external funding would only be wasted in perpetuating current policies.
The government appears willing to subject itself to harsh terms of the IMF/EU plan which contains stringent measures to reign in an out of control primary account deficit; people rioting in the street want the status quo. It's up to the leaders of Greece to bridge this divergence and explain to its citizens the choices before the country and attending economic consequences.
Greek Crisis: Who Is Really Being Bailed Out? [View article]
Doubtless, German and French banks will benefit from a Greek bailout as will all others that hold Greek bonds or debt.
In my eyes, though the primary driver behind this rescue effort is the EU and the ruling commission.
The leaders of the eurozone have a vested interest in continuation of the EU and defaullt of a member state would create a fissure within the community and reinforce doubts about the economic purposes of the zone and its structural viability.
The Greece / EU Ballet Enters Act III [View article]
All of the noise about recently announced austerity measures is designed to allow Greece to return to the bond market and borrow around $6 billion on its own but at high rates. Angela Merkel will not commit to assistance.
They have to refinance and finance around $100 billion and nobody is anxious to guarantee, loan or otherwise assist with this amount with or without austerity measures. Without austerity measures, its simply more of same with Greeks living well by spending borrowed money (sounds familiar); with austerity measures, the economic growth and deflationary forces will make default on existing and new debt more likely. After years of self-indugency, apathy, lethargy, profligacy, deception, corruption and fraud they are in a box canyon with no way out.
How do you justify to Germans, who retire in their late 60's, that its in their interests to help the corrupt and ouzo swilling Greeks who retire in their late 50's or early 60's on fat pensions. Rather than tell them how to make baklava and micromanage their economy, It would be far wiser to force Greece to sell its islands and/or its massive investments in state controlled enterprises that span tourism, utilities and shipping to meet its spending needs.
Recognizing a chain is only as strong as its wekest link, the EU should spin them off with a highly depreciated drachma with debts remaining in euros.
Greece: New Austerity Measures Expected to Precede Outright Aid [View article]
We had thought it reasonable that whatever mechanism Europe agrees upon for Greece would provide not simply a precedent but a framework for other euro zone members. However, the ad-hoc approach floated of using German and French government investment arms, seems particularly difficult. ______________________...
I would disagree with the above inasmuch as I think the EU is imposing harsh and austere reforms upon Greece to maximize the benefits of any financial assistance and to make others think twice before asking for community assistance. To prevent the latter and avoid moral hazard, the terms must be harsh and address unsustainable spending policies.
Separately and lastly, Greece is simply not a viable country as presently constituted with the public sector accounting for 46% of GDP and 30% of employment, with the private sector offering little more than tourism, shipping and ouzo. The Greeks are known as people who live well in a poor country, continually consuming more than what they produce.
In addition to eliminating the culture of corruption and entitlement, the private sector must be revitalized (however you do that) and the size, cost and reach of the public sector must be reduced. And tax evasion, which has reached art form, must be curtailed.
Greece Enters Its Death Spiral [View article]
Then THINK about how you can get the money back? Blaming people may make you feel good, but it won’t help you get your money back. Handing it over with conditions doesn’t always work. Compare Turkey which “took” the IMF medicine, and is still in the doldrums with Argentina which just told everyone to “go hang” and is now doing fine.
Europe has to decide, does it want to help Greece or punish it? There are other options to hanging a bailout package just out of reach and beating Greece with a stick every time it makes a grab for it. For example, Greece could leave the EMU, or Germany could leave the EMU, or Greece could just default, Argentina did that.
______________________...
You ask an interesting rhetorical question........does Europe want to help or punish Greece? But the more important question is what does Greece want and what is it willing to do to get there? This is more important than the former because the structure of Greece's economy is not sustainable; without changes from within, external funding would only be wasted in perpetuating current policies.
The government appears willing to subject itself to harsh terms of the IMF/EU plan which contains stringent measures to reign in an out of control primary account deficit; people rioting in the street want the status quo. It's up to the leaders of Greece to bridge this divergence and explain to its citizens the choices before the country and attending economic consequences.
Greek Crisis: Who Is Really Being Bailed Out? [View article]
In my eyes, though the primary driver behind this rescue effort is the EU and the ruling commission.
The leaders of the eurozone have a vested interest in continuation of the EU and defaullt of a member state would create a fissure within the community and reinforce doubts about the economic purposes of the zone and its structural viability.
The Greece / EU Ballet Enters Act III [View article]
They have to refinance and finance around $100 billion and nobody is anxious to guarantee, loan or otherwise assist with this amount with or without austerity measures. Without austerity measures, its simply more of same with Greeks living well by spending borrowed money (sounds familiar); with austerity measures, the economic growth and deflationary forces will make default on existing and new debt more likely. After years of self-indugency, apathy, lethargy, profligacy, deception, corruption and fraud they are in a box canyon with no way out.
How do you justify to Germans, who retire in their late 60's, that its in their interests to help the corrupt and ouzo swilling Greeks who retire in their late 50's or early 60's on fat pensions. Rather than tell them how to make baklava and micromanage their economy, It would be far wiser to force Greece to sell its islands and/or its massive investments in state controlled enterprises that span tourism, utilities and shipping to meet its spending needs.
Recognizing a chain is only as strong as its wekest link, the EU should spin them off with a highly depreciated drachma with debts remaining in euros.
Greece: New Austerity Measures Expected to Precede Outright Aid [View article]
______________________...
I would disagree with the above inasmuch as I think the EU is imposing harsh and austere reforms upon Greece to maximize the benefits of any financial assistance and to make others think twice before asking for community assistance. To prevent the latter and avoid moral hazard, the terms must be harsh and address unsustainable spending policies.
Separately and lastly, Greece is simply not a viable country as presently constituted with the public sector accounting for 46% of GDP and 30% of employment, with the private sector offering little more than tourism, shipping and ouzo. The Greeks are known as people who live well in a poor country, continually consuming more than what they produce.
In addition to eliminating the culture of corruption and entitlement, the private sector must be revitalized (however you do that) and the size, cost and reach of the public sector must be reduced. And tax evasion, which has reached art form, must be curtailed.