They would need a truly massive bailout at this point given how shot their economy is (and it's going to get worse yet). Who in their right mind would give Greece another $200 or $300 billion, which will be vaporized and simultaneously not result in sustainability. Which Eurozone members can even afford to pick up that tab, given the risk involved?

Here's what is going to happen: Greece will exit the Euro, issue their own currency, and debase the Greek standard of living by a drastic amount. There is no other possible outcome than for Greece to reset its economy at a much lower basis.

It's the exact same outcome as further austerity, merely camouflaged by the lie of inflation.

" Who in their right mind would give Greece another $200 or $300 billion"

If you say that, it looks like we are short of Euros. I would like to remember you that just now we are in the middle of:

"The European Central Bank launched its long-awaited bid to revitalise the eurozone economy and counter deflation with a €60bn-a-month bond-buying programme that was far larger than investors had expected. " ( http://www.ft.com/intl/cms/s/0/aedf6a66-a231-11e4-bbb8-00144... )

So, we are missing some political will here, not money.

"It's the exact same outcome as further austerity, merely camouflaged by the lie of inflation."

It's not. It's the same numbers but very different outcome for the people in the street that have very little blame in all this. But, if something have been proof in all this Greek tragedy is that nobody cares about the people in the street.

You're right, this story's a little inaccurate. The problem with Greece is that they were given tons of money, they did change things, they did austerity - some of the best kind of austerity, too, like raising the retirement age, keeping people in the economy and working without the biggest impact on spending - and they did a little market reform to promote competition. And their recovery was underway, and then their people voted in a government which promised to change things back and make everything 100% painless, and then that government tried to be the hardball negotiator but without anything they could do to back up their bluster.

The other problem with Greece is that they're the sort of nation where you have a nationalized health care system but you need to bribe the doctor to get an appointment. (And private industry is also sclerotic and more about bribing the regulators than being able to compete.) Lying to the EU about budget deficits in the past should be seen in this context.

And the other problem with Greece is that they see Merkel in this negotiating group and think "Oh, the Germans want to occupy us again like in World War II." ANGELA MERKEL IS HITLER2.0! VOTE LEFTIST! RESIST THE REFORMS!

(and according to some reputable publications on the topic of international relations, like the Wall Street Journal, word on the street in Brussels is that a lot of these countries would be happier if Greece just walks away then if they accept bailout terms at this point, because they don't trust them to actually stick to the bailout terms.)

> And their recovery was underway

This considered bullshit by at least Hans-Werner-Sinn and Flassbeck - 2 economists that usually don't share a lot of opinions.

Also austeritiy didn't work and made things worse: http://www.interfluidity.com/uploads/2015/07/Greekovery.png

The new government wanted to change that.

Greek GDP was grossly overinflated in 2008 by overspending in the public sector. Compared to 1990, Greece still grew 80% points more than e.g. France until 2014, so they really don’t have much to complain about.

> they really don’t have much to complain about.

Really? I'd complain quite a bit about a 25% GDP drop, regardless of whether it was "overinflated" to start with.

Is the 2014 figure for Greece its real GDP without the overinflation?

If that is the case, we can simply inflate it up and problem solved.

Where do you see the austerity: http://www.tradingeconomics.com/greece/government-spending-t...

?

Public spending of GDP was 46.9% in 2008 and 49.3% in 2014.

Really, the brainwash is probably on the other side. Everybody talks about austerity, yet public spending has been growing steadily after WW II pretty much everywhere, even after 2008.

Their GDP has contracted massively since austerity was introduced. Look at Euro's spent and the government cuts are pretty clear.

http://www.tradingeconomics.com/embed/?s=greecegovspe&d1=200...

Well, 3 things. First, to define austerity, you need to use ratios, absolute values make comparisons impossible and 49.3% of public spending on GDP is not austerity, by any means. Second, the graph you linked shows similar level of spending as 2001 and I am not aware of any austerity claims during that year in Greece. Third, how much public spending do you want? 60/70% of GDP? Because that's what it takes to keep the same level of spending as 2007/8. Do you think that's reasonable? More than half of the economy managed by a (very corrupted) State?

> First, to define austerity, you need to use ratios, absolute values make comparisons impossible

In what way do actual Euro amounts make comparisons impossible? I'd say Euro amounts are much clearer, because they tell you about government spending without conflating the economic state. GDP vs spending implies that spending hasn't dropped, when in fact it's actually dropped by something like 30% since 2008. The fact that the economy has also contracted drastically in that time doesn't mean spending wasn't cut.

> Second, the graph you linked shows similar level of spending as 2001 and I am not aware of any austerity claims during that year in Greece.

I'm at a loss for words here. This just makes no sense. By this logic, Greece can never implement austerity. No matter how deeply they cut, they'll never reach a level lower than the lowest point in history.

Further, assuming just 1% inflation per year, spending the same in 2015 as 2001 means an effective spending cut of 15%.

> Third, how much public spending do you want?

What I want isn't really relevant. The question was whether the Greek government has implemented the austerity measures they agreed to. Given the 30% contraction in spending, it seems like they certainly implemented some measures.

The generally accepted theory of economics these days is that, as a nation's economy hits a downturn, the government should spend more, not less. Not "more as a higher percentage of GDP" - GDP is shrinking. No, the theory is, the government should spend more in absolute terms.

That's the theory. The theory could be stupid if too much government debt is what caused the downturn in the first place.

And the theory usually breaks in this way: There is a downturn. The government spends more. The economy picks back up eventually. The government continues to spend more. That means, to have any effect, at the next downturn, the government has to spend even more. And that eventually gets you to the situation stated in the previous paragraph.

I think you guys should read Schumpeter. There is no economist sane (or honest) in his mind proposing to do more random public spending when things go south. Think of it this way - if an economic downturn hits US, would you rather leave more money to ycombinator to invest in promising startups, or tax them more and use that money to "grow" the economy through public spending?

And let's be realistic, Greece is like Italy. An enormous proportion of the public spending goes to pay privileges (pensions that are too high, useless public jobs, useless buildings, etc.), do you really think that money will grow the economy? Don't you think it creates much more value if left to the private sector? Of course, you need a real private sector, with clear rules for everybody, and that's exactly what they don't want to do! You see the problem here?

What austerity has come to mean, is: 'slow down in spending expansion.' The same austerity talk has been frequent in the US since 2008, where there has been zero actual austerity.

Most Eurozone economies are dependent on growth in government spending to generate GDP growth. With slow government spending expansion, GDP growth in the Eurozone fell to basically zero for seven years. Panic sets in when they can't expand government spending, because everything else is so dependent on it.