Paul Krugman: Greece has done more, not less [Chart]

Greece has done a lot more austerity than those countries cited as supposed success stories (which is another issue—success being defined as ‘not total collapse, and slight recovery after years of horror’—but that’s a different story).”


Etikettenschwindel Euro-Krise [2011]

“Seit Anfang 2010 hat sich die Finanzkrise zur (Staats-)Schuldenkrise gewandelt. Niemand sollte sich von der gängigen Rhetorik täuschen lassen: Die Defizite und öffentlichen Schulden im Euroraum sind nämlich erst infolge der diversen Bankenrettungsaktionen und Konjunkturprogramme dramatisch gestiegen. Bis zum Ausbruch der Weltfinanzkrise hatten Länder wie Portugal, Irland, Griechenland und Spanien (PIGS), die heutigen Sorgenkinder, keine Finanzprobleme, im Gegenteil: Spanien und Irland verzeichneten gar Budgetüberschüsse. Erst in der Krise erfolgte die Kehrtwende: Der ganz große Krach wurde in Europa (wie in den USA) nur durch eine extreme Ausweitung des öffentlichen Kredits verhindert. Kaum waren die Banken und Finanzkonzerne gerettet, drohten Staatspleiten – kurioserweise vorläufig nicht in den USA oder in Japan, sondern in den vergleichsweise viel geringer verschuldeten Ländern der Eurozone. […]

Mit oder ohne Rettungsschirm, die PIGS-Länder sparen auf Teufel komm raus und treiben damit ihre Volkswirtschaften immer tiefer in die Rezession. Wenn ein Land mehr als 30 Prozent seiner laufenden Steuereinnahmen für den Staatsschuldendienst (Zinsen und Tilgung) ausgeben muss, wird es gefährlich; jenseits dieser Schwelle kommt es aus der Schuldenfalle bei steigenden Zinsen nicht mehr heraus. Im Fall Griechenlands beträgt diese Quote bereits mehr als 53 Prozent, die Iren kostet der Schuldendienst fast 37 Prozent ihrer laufenden Steuereinnahmen. Spanien steht mit einer Quote von knapp 25 Prozent besser da, und die Portugiesen können mit Recht darauf verweisen, dass sie der Schuldendienst nur 15,9 Prozent der laufenden Steuereinnahmen kostet. Italien und Frankreich sind diesbezüglich in einer weit prekäreren Lage.”

The terrible human cost of Greece’s bailouts

The Lancet has published an analysis of changes in life expectancy in Greece during the recent crisis. […]

Greek mortality has worsened significantly since the beginning of the century. In 2000, the death rate per 100,000 people was 944.5. By 2016, it had risen to 1174.9, with most of the increase taking place from 2010 onwards.

Greece’s mortality increase stands in stark contrast to global death rates, which fell during this time. Even in Western Europe, where death rates rose slightly overall, no other country experienced a deterioration on this scale. […] Among the countries included in the study, Greece’s case appears to be exceptional. […]

The report says that as part of the bailout conditions, Greece’s total healthcare expenditure (public and private) fell from 9.8% of GDP in 2008 to 8.1% in 2014. An article published by the Lancet concurrently with the paper notes that, under pressure from the Troika, the Greek government cut public healthcare expenditure to 6% of GDP.

But during this time, Greek GDP shrank by more than a quarter. So total healthcare expenditure effectively shrank by 30%.

Let’s stop playing ‘blame the Greeks’. Babies, adolescents and young adults did not cause Greece’s debt disaster. But they are paying for it – with their lives.”

The Greek Rorschach test

“In other words, though Greece may be diminished, its catastrophe has offered the rest of the currency bloc a frightening example of what can happen when governments skirt the rules. If sacrificing Greece is the price for preserving the euro, so be it. […]

Ultimately, the debate comes down to one’s definition of ‘solidarity.’

Most Germans, for example, are convinced they showed Greece the utmost solidarity by providing billions in low-interest loans. While forgiving Greece’s debt might put the country on more solid financial footing, it would open the door to ‘moral hazard,’ the rewarding of bad behavior.

What that reasoning ignores is that Germany was the biggest winner of Europe’s bailout policies. No country has benefited more than Germany from the introduction of the euro, which has been a boon to its industry, fueling exports across the region. So if ‘saving’ Greece was really about preserving the euro, Germany was primarily acting in its own interest.

It’s easy to see why: The loans provided to Greece by the European rescue funds have put little German treasure at risk. In fact, so far they’ve generated a tidy profit.

Europe, to quote a Teutonic saying, has left Greece with too much to die and too little to live. […]

Instead of giving Greece that breathing room, Europe, at Berlin’s insistence, only agreed to give Athens more time to pay back its rescue loans, effectively delaying the day of reckoning.”

Lessons for the Eurozone from the Greek debt crisis [Charts]

“Mr. Centeno’s claim that ‘we have all learned our lessons’ from the Greek crisis is mealy-mouthed. The Eurozone’s leadership doesn’t seem to have learned anything at all. The Troika’s disastrous handling of the Greek crisis has driven Greece into the worst peacetime depression experienced by any advanced economy in recorded history. […]

But even if Greece manages to meet its targets, there is nothing ‘normal’ about forty-two years of sustained fiscal austerity. Nor does having to maintain such a draconian regime in any way constitute ‘regaining control’. […]

French and German banks were effectively bailed out by their own taxpayers. […]

Bank bailouts are unpopular. It was politically more convenient to blame ‘profligate Greeks’ for the bailout than to admit that French and German banks had lent foolishly, still less that bank regulators had been asleep at the wheel. Even today, the tone of Mr. Centeno’s comments places all responsibility for ensuring there are no further bailouts firmly on Greece. […]

The Eurozone has also failed to take on board the need for active management of balance of payments in a currency union where fiscal transfers are limited. […] Countries like Germany and the Netherlands can run persistently large current account surpluses without sanction.

Running a persistent current account surplus in a currency union is beggar-my neighbour policy. The Eurozone is not as closed as it was prior to the crisis, so the whole bloc is now running a current account surplus, mostly at the expense of the US. But the US is becoming increasingly intolerant of being forced into the role of consumer of last resort. Beggar-my-Atlantic-neighbour is no more sustainable than beggar-my-Aegean-neighbour.”

Greece’s “bailout” was a disaster for Greece [Charts]

“Had Greece been a country with its own currency, such as the Czech Republic or New Zealand, the central bank could have plugged the funding gap and prevented an abrupt collapse in spending. Membership in the euro area removed that option. The government and the banks owed debt in a currency the Bank of Greece could not print, and the European Central Bank was not keen on helping.

The textbook response would have been for the government to default on its debt and get a loan from the International Monetary Fund to help smooth out the adjustment. The amount of money required to buy time after a restructuring would not have been large compared with the nearly €300 billion that ended up being lent.

That option was blocked, however, by a coalition of Greece’s ‘European partners’ and the U.S. They were still traumatized by the bankruptcy of Lehman Brothers and had come to believe that its default had made the financial crisis far worse than it otherwise would have been. The result was a firm commitment to avoid any reduction in what the Greek government owed.

Their concern was not about what a default would do to Greece, but about what it would do to them. […]

There was no political will in 2010 to spend hundreds of billions of euros to bail out Dutch, French, and German banks. To Greece’s eternal misfortune, however, there was enough ‘solidarity’ to launder that Northern European bank bailout through the Greek government.”

Bloomberg Editorial Board: Only genuine debt relief can ensure Greece won’t be back in crisis [Charts]

“Unfortunately, the EU’s projections involve extremely wishful thinking. For one, they assume an impossible level of austerity: Greece must run an average budget surplus (excluding interest payments) of 3.4 percent of GDP for a decade, then 2.2 percent until the year 2060—something that no euro-area country with such a precarious economic history has ever done. Bringing those projections down to a merely improbable 2 percent and 1 percent, and using growth and interest-rate estimates from the International Monetary Fund, yields a very different picture: [Chart] […]

Over the next several decades, even in an optimistic scenario, Greece will have to borrow hundreds of billions of euros from private investors to pay off its official creditors. If those investors think the government’s debts are out of control, they’re bound to pull back—and Europe’s leaders will face yet another Greek crisis.

The obvious solution is for the EU to provide Greece with genuine debt relief. The sooner, the better.”

The Greece bailout’s legacy of immiseration

“This was a bailout? The word reeks of indulgence and implied disapproval. As it was often said, ‘The Greeks had their party and now they must pay.’ Yes, there was a party—for oligarchs with ships and London homes and Swiss bank accounts, for the military, for engineering and construction and armaments companies from Germany and France and the United States. And yes, there was a bailout. It came from Europe’s taxpayers, and went to the troubled banks of France and Germany. Greece was merely the pass-through, and the Greeks who paid dearly with their livelihoods were just the patsies in the deal. […]

So Greece, which is to say its creditors—especially French and German banks—received the largest loan in IMF history (relative to its ownership share). And that 289-billion-euro loan came largely from U.S. taxpayers. […]

But the damage done extends far beyond Greece. The cynicism and brutality of what happened there is for everyone to see. The fact that Europe imposed a policy of privation on one of its weakest members—not for its own sake, and not with any expectation of economic success, but to intimidate the Italians and the French, as the German Finance Minister Wolfgang Schäuble conceded to the Greek Finance Minister Yanis Varoufakis privately in 2015—was not lost on British voters who chose Brexit in 2016.”

Greece is still being betrayed by the EU …

“In spite of personal appeals from the International Monetary Fund’s euro-supporting managing director Christine Lagarde to forgive Greece its debt burden and allow the country to be given a fresh start, the eurofanatics have been unrelenting in their determination to keep the debt anvil hanging around its neck.

Greece is in an armlock it cannot escape because of a combination of its debt burden and the fact that its membership of the eurozone means it can no longer devalue its currency. And the EU and Germans are determined to keep it that way to save their precious euro.

So despite the joyous news bulletins about the bailout yesterday morning, be in no doubt that this Greek tragedy is very far from over.”

In charts: Greece’s economy is rebounding — but there is far to go

“Greek output is now 3.7 per cent higher than its trough in mid-2015, which makes it 25 per cent below 2007 levels. Despite strong growth expectations, Greece’s economic output in 2023 is forecast to be 17 per cent below 2007 levels, according to International Monetary Fund data. […]

Though more than 300,000 new jobs have been added since March 2015, many are temporary or part-time positions, and average wages in real terms are 22 per cent below 2009 levels. In Spain, Italy and Portugal, average wages in real terms have recovered to between 4 and 6 per cent below pre-crisis peaks.

In 2007, Greeks were better off than people in half of the countries that now form the EU. After adjusting for price differences — so-called purchasing power parity — Greece had a similar per capita output to Spain, was 21 per cent more well off than Portugal and 71 per cent richer than Poland. Now, Greeks are almost 9 per cent worse off than Portuguese and Poles, while Spaniards are almost 40 per cent better off. Greece has become the fourth-poorest EU country, after Bulgaria, Croatia and Romania.”

The Greatest Depression

“The Greek people have just lived through a Depression as deep as the Great Depression and considerably longer. It is now the greatest recorded peacetime Depression. […]

Despite all the pain the Greeks have endured to fix their country’s finances, Greece’s fiscal situation remains extremely precarious. The IMF staff predictions show absolutely no room for fiscal expansion, even though it is desperately needed, not least to relieve extremely high poverty levels. One in four people in Greece is living below the poverty line.

Greece’s government is critically hampered by ridiculously tight fiscal targets not of its own making. […]

In a few years’ time, when Greece once again faces debt default and Euro exit, what will the price of debt relief be? Well, unless there is a change of heart among Eurozone governments by then, the price will be yet more harsh spending cuts and tax rises, and perhaps another Depression. Greece does indeed have more pain to come.”