Translation: FUD.
>True, the country could walk away from debts of €317 billion, or almost 180% of GDP. But that is worth less to Greeks than it sounds.
Translation: pretty please don't.
>Although the debt is huge, it is at bargain-basement interest rates and repayable over decades. Interest payments until the early 2020s are just 3% of GDP a year. Even for Greece, that is manageable.
Translation: You may have had to do with massive unemployment and without life saving drugs by kowtowing to creditor demands ( http://www.digitaljournal.com/article/325955 ), but you'll "manage" if you continue doing it.
>Nor would leaving the euro do much good. In theory, with a new drachma and its own central bank, Greece could devalue and gain competitiveness. But Greece’s trade is modest. And it has already lowered nominal wages by 16% without a boom in exports.
Translation: we believe so fervently in the power of suppressing wages to improve economic performance, that the idea of trying anything else is literally unthinkable.
>The costs of Grexit still outweigh the benefits By contrast, the cost of Grexit would be exorbitant: bust banks, slashed savings, broken contracts and shattered confidence (see article). Politics could be devastated. Syriza, Mr Tsipras’s hard-left party, is anti-market and anti-enterprise.
Translation : Attention target readers of the Economist - elites, captains of industry, rapacious financiers - Mr Tsipras is your masked villain.
>Neo-fascist Golden Dawn and the Communists, with a combined 12% of the vote, would thrive.
Translation : please ignore the fact that they already are thriving thanks to the Economist-stamp-of-approval austerity measures.
The Greeks have always been perfectly free to stop paying their existing debts, at the cost of not being able to borrow any more money. The only reason they've been negotiating with the Troika and agreeing to the austerity measures you disagree with is that they believed that defaulting would be _even worse_. Even if default is currently the best option, there is plenty of actual uncertainty, and some amount of fear seems justified.
After years of enormous unemployment and the country's slow decline into near-3rd world status, even having your savings seized and forcibly devalued loses its sting.
2. If The Economist is too capitalist for you, the current Greek finance minister also thinks (thought?) default would be very bad: http://yanisvaroufakis.eu/2012/05/16/weisbrot-and-krugman-ar....
"Does this mean that Greece ought to grin and bear the massive and misanthropic idiocy of the bailout-austerity package imposed upon it by the troika (EU-ECB-IMF)? Of course not. We should certainly default."
Defaulting could lead to further negotiations if Greece stays in the Eurozone, like slashing a big part of a loan handed out when projections showed Greece would not be able to pay it.
Why do you loan to a country when projections show the country can't pay? Is it to keep the country economically enslaved for years?
That's probably why the second-to-top-level comment translated the following as FUD. The gains for Greece from defaulting would be better than accepting the austerity measures.
>For Greece the gains from defaulting would be slight, and
the costs potentially vast.
Translation: FUD.2. This article was written three years ago, when the rest of Europe was in worse shape. It's not clear how a Greek default would affect the rest of the continent right now.
3. I have nothing against a reasoned argument that default is Greece's best remaining option (like yours, thanks!). What I object to is the semantic stopsign "FUD" in response to a situation that is legitimately uncertain and scary.
"if Grexit happens it will be because the creditors, or at least the IMF, wanted it to happen."
http://krugman.blogs.nytimes.com/2015/06/25/breaking-greece/...
I think Greece is more like the friend that keeps raking up debt rather than the person that gets pummeled by medical bills.
Translation : please ignore the fact that they already are thriving thanks to the Economist-stamp-of-approval austerity measures."
No, it just means Greeks gonna Greek. If you think most of this has anything to do with logic, I invite you to spend a week with my in-laws. 90% wild emotion and knee-jerk responses with 10% self pity.
This is a long, old crisis, many years. There is a famous graph I can't find (the world needs a graph search startup?) of the future promises of post-austerity growth vs actual results and the separation is staggering, like 30+ percent difference between promises and reality. Given the trends during the crisis the article seems to miss the point that trying year number eight, or whatever it'll be exactly, of even more austerity absolutely guarantees Golden Dawn taking over, despite that being a claimed result solely of grexit. Obviously continuing with the failed BAU strategies is a total non-starter. It is also possible that trying "anything else", which is finally a political necessity, will somehow make things even worse.
The fundamental problem is you can't have a partial union. Everything else, the root cause of the crisis, the attempts to fix it, the politics, all follow from that fundamental problem.
http://krugman.blogs.nytimes.com/2015/06/25/breaking-greece/
I imagine you're talking about the monetary union, because it is of course possible to have partial unions in the EU (many EU countries are not in the Eurozone, and many non-EU countries are in the EEA or in the Schenghen zone, enabling free trade and free movement of their citizens in and out of the other Schenghen countries).
But even in a monetary union, you can absolutely have a common currency without a common fiscal policy. A currency is just a measure of account, a medium of exchange and a store of wealth. We've had centuries of common currency in the form of gold equivalence (i.e. a hard gold standard). The moments we got into trouble with gold currencies are not inherent in the gold standard itself, but in the attempts by sovereigns to jiggle around with it (seigneurage, mixing gold with other metals, creating pretend gold-standards that allow them to create more paper currency than there is gold backing it up, etc.)
You can have a partial union. That's what EU members who aren't part of the Eurozone have. Greece defaulting will be damaging for its trade prospects, but they don't need to leave the EU to recover.
Look at the origin of the crisis, the union is simultaneously strong enough for international debt to be accumulated, but too weak to control the situation to keep the accumulation to survivable levels and too weak to keep humanitarian services operating regardless of financial market issues. A weaker (no?) union would have never accumulated the debt due to lack of procedure or trust, a stronger union would have regulated the loans and cut off the flow before Greece committed debt suicide years and years ago.
Or look at midgame. The weak union had to decide if it should make German banks suffer or the Greek people suffer, the union was strong enough for them to enforce their decision, at least for several years... A weaker union would still have decided for the banks but the Greeks would have told them to pound sand and this would have been water under the bridge years and years ago. A stronger union would have sent in the tanks and troops and taken it out of their hide, pretty rough stuff but it would have all been over years ago and we'd be talking about the recovery that started years ago etc. The weak union doesn't really have any idea what to do.
Looking at the endgame, a weak union has the possibility of creating a generational depression instead of getting it over with quickly like either alternative, basically the midgame argument but emphasizing the length of the crisis, like a weak union is optimally designed to maximize human suffering.
What would happen if Greece defaulted on western debt and aligned with Russia and China is certainly not a repeat of the fascist military dictatorship they had back then.
They most likely would have social-democratic governments in the next decades, exorbitant financial investment from both Russia and China and lots of Russian military bases on their territory.
This would most likely be the end of the EU (and NATO) as we know it, because from there Russia and Turkey would work on pushing the EU out of the Balkans, which would most likely work considering that all of the populations there have a strong preference and historic ties to either Russia or Turkey, depending on what country you look at.
Even in Bulgaria, which is currently in the EU and has a pro-EU government, about 80% of the population have pro-Russian sentiments regarding the conflict in the Ukraine.
This is why the EU and US will do whatever it takes to keep Greece in the EU, even if it means that they have to orchestrate a military coup in Greece or that they will have to print trillions to cover for the debt.
China has shown no real interest in countries that don't have significant mineral or natural resources.
Your stats on Bulgaria are also completely backwards. Bulgaria has a very pro-west citizenship.
EU polls: http://www.ecfr.eu/article/public_opinion_poll311520
Bulgarians are pro EU as long as the majority still believes that they will have a better economic future. I dispute that will continue for very long considering the socio-economic collapse Bulgaria has experienced since they joined the EU.
There is no shared culture or historic ties to the West that will keep Bulgarians tied to the West once the EU starts to disintegrate.
Also, fearing Russia and loving Russia is not exactly the same thing.
We view each other as brotherly nations and there's not much that can change this, just as the Muslim populations on the Balkans view Turkey as their brotherly nation.
The only reason they all signed up for the EU is because of the promise of a better economic future, not because they want to be part of western culture.
During the last years it has become apparent that these promises will not materialize and that's why I expect that the EU will massively contract in the next years.
Bulgaria is today Orthodox Christian and has kept the culture of their "arch-enemy". If the majority of Bulgarians really viewed this as their arch enemy then they probably would have rejected this culture the same way that they have rejected the culture of the Turks (by the way in a extremely cruel way) after they regained their freedom.
When they saw it didn't work they basically started to control the church from within with their KGB.
If you don't believe me ask an Argentinian.
But not every country is equally valuable to the great powers.
China needs a strong commercial foothold in the mediterranean sea (ports) to control economic trade with the EU. (which is enormous compared to the trade with Argentina)
Russia could want to fracture the EU and NATO if the standoff with the EU & US continues and wants military cooperation and bases in the mediterranean sea.
Turkey wants to reestablish its influence over the muslim countries in the Balkans and since they are now EU candidate for almost 30 years (meaning: they will never be allowed to join) they will try to find an alternative. Even worse for them, the EU and US appears to be actively working on fracturing the turkish nation via the Kurds. For them it might be a question of life and death to push the West out of the balkans and the middle east.
But last time I heard of Hungary their government was seeking stronger ties to Russia and McCain called the PM a Nazi and compared his policies to those of Hitler.
I can't imagine that anyone would currently see Hungary as tightly integrated and focused on a future in the EU.
Edit: I believe the future of Hungary will be sovereign and block-free.
Fact is, no one can prove that his stategy is the best alternative.
http://www.faz.net/aktuell/wirtschaft/eurokrise/griechenland...
My crystal ball says, if that's going to happen, the EU or at least the Euro will be toast.
http://krugman.blogs.nytimes.com/2013/03/22/ireland-recovers...
And it proves Krugman wrong so I guess since that 2 year old article with its disingenuous graph (sneakily shifting the y-axis to make the up tick look insignificant), he'll never mention Ireland again.
Irish GDP grew 4.8% last year - one of the highest in the EU. Unemployment is 30/40% less than peak (although still high at 9.5% but it's falling). The government deficit is falling faster than expected. So despite the fact that apparently "austerity doesn't work", it did for Ireland (and it looks like it's starting to work for Spain and maybe even Portugal and Italy).
Here are some more up-to-date economic numbers: http://www.rte.ie/news/business/2015/0312/686549-cso-gdp-gro...
Greece is the most enticing tourist destination in the world. It has everything .. history, culture, beaches, food etc. A devalued Drachma would draw an increasing portion of an industry that is poised for dramatic growth as more Indians & Chinese become rich enough to catch the tourist bug.
It's world-class shipping industry would also become more competitive against Korea, Scandinavia and Japan.
Syriza is not as "far left" as portrayed, and they are not as corrupt as previous Greek governments. Their finance minister, though he has described himself as a "libertarian marxist", has received strong praise from free-market institutions for various proposals.
https://en.wikipedia.org/wiki/Yanis_Varoufakis
The big problem for establishment magazines like the Economist has become, is that he dares to think for himself.
On the other hand, Greece imports energy, food, medicine and technology and those things will all have to be paid for with hard cash. The result of a 50% devaluation of the new Drachma will be a doubling in prices for basic life necessities.
It's clear to me that Syriza's policies have been and will be absolutely disastrous for the ordinary Greek person. Things may have been bad last year but at least there was a small uptick in GDP and employment and seemingly a small improvement in government finances. With a busted bank system, capital controls and no cash to pay for essential imports, I can see Syriza turning Greece into a fully failed state.
Some of those things, particularly medicine & food, are artificially high priced because you are in the EU:
http://www.firstwordpharma.com/node/1065529#axzz3ePfuiLQG
I grant it will be difficult for a year or two, but I predict you will be better off in the long run.
> Syriza, Mr Tsipras’s hard-left party, is anti-market and anti-enterprise.
Only if by "market" you mean no social security and zero-hour contracts, and by "enterprise" you mean a fire-sale privatisation of state assets.
Their own electorate.
For Greece the gains from defaulting would be slight, and the costs potentially vast. True, the country could walk away from debts of €317 billion, or almost 180% of GDP. But that is worth less to Greeks than it sounds. Although the debt is huge, it is at bargain-basement interest rates and repayable over decades. Interest payments until the early 2020s are just 3% of GDP a year. Even for Greece, that is manageable. Nor would leaving the euro do much good. In theory, with a new drachma and its own central bank, Greece could devalue and gain competitiveness. But Greece’s trade is modest. And it has already lowered nominal wages by 16% without a boom in exports.
The costs of Grexit still outweigh the benefits By contrast, the cost of Grexit would be exorbitant: bust banks, slashed savings, broken contracts and shattered confidence (see article). Politics could be devastated. Syriza, Mr Tsipras’s hard-left party, is anti-market and anti-enterprise. Neo-fascist Golden Dawn and the Communists, with a combined 12% of the vote, would thrive. Most of the parties in the middle, already discredited, would struggle. This week Mr Tsipras was due to play footsie with Vladimir Putin in Russia. Ejected from the euro, and possibly the EU, a country with a history of coups would risk becoming violent and even more corrupt.
http://www.economist.com/news/leaders/21654598-greece-and-eu...