Sorry, but that's worthless blah blah. Draghi, Merkel, Juncker and the others didn't pull some numbers out of their asses and said that they're Greece's oficial debt now. ECB, IMF and the Eurozone paid the debt that Greece accumulated on the private financial market over some decades. Greece couldn't pay it anymore and got no new credits. It was "Pay for Greece" or "Say 'Bye' to Greece". Greece isn't bankrupt because Europe forced them to go bankrupt. Greece just got the bankruptcy delayed for a few years because Europe paid their debts for them and tried to work out a solution together with them. But up until now, they didn't do anything meaningful. Not even against corruption or tax evaders (ending corruption and getting people to pay their taxes is free money!).

This is not about how the world economy works. This is about how Greece tries to blame others for what dozens of Greek Governents fucked up over some decades. Greece wants to escape capitalism and go the glorious route of Cuba, Venezuela and other socialists? Great, let them go. But then they should be honest about it. Just say "Fuck you, evil capitalists. We won't pay you anything and do our own thing now." and that's it. That's not nice, but at least it's honest. But don't pull this "We've decided democratically that we can't pay our debts, so you have to give us a debt cut and give us some more billions to pay for rebuilding our country the way we want it to be." That's not how democracy works. Tsipras can have my democratically e(l/r)ected middle finger. He's sick of how our world economy works? Let him go. But don't give him any more money on his way out.

We're all playing the same game here. Planned economies. Of course it's about how the world economy works. And it's not working because we have leveraged every single commodity and currency far beyond their worth, not to mention spent ourselves into debt that not even our great grandchildren could pay off. Bills are coming due and more and more bubbles are in danger of popping. Greece is just closer to economic ground zero because their GDP and debt consolidation limits are smaller and their wealth can't offset the payments. Ultimately, bad economics is bad economics, regardless if it's being set by the IMF, the ECB or even the Fed.

And besides, if Greece really is a nation of bums who can't pay their tab, then why would you want a debt anchor weighing down the Eurozone? Seems like the ones who wanted a YES vote are the ones most hostile to Greece in the first place.

Incidentally, Greeks have it easy and they just refused any form of austerity because they want to stay on holidays forever with our money. Yadda.

Debts were cut, payment times prolonged and interest rates lowered in the process. How did that not help Greece?

Yes, the objective was to also get some European banks out of the mess in order to not cause widespread turmoil in EU, but that still doesn't make it right to claim it hasn't helped Greece at all.

What part of their economy? Tsipras wanted to increase taxing of big corporations, and channel more money to public sector wages and pensions. I fail to see how that would produce sustainable growth so that Greece could get out of its dependency to living on debt. On the contrary, it just increases their debt.

Should this money be a present from other EU countries, or a loan? And other countries should have no say how Greece spends it, e.g. if they feel that the money put on raising pensions can never be recovered as they will not create sustainable growth, but help the economy only as long as money is pumped into it?

Krugman has an ideological leftist view on it. He implies that without "austerity" Greek economy wouldn't have shrunk, as if private banks would have given Greece more and more money forever to keep up the illusion. Without the bailout program, Greek economy would have collapsed, no doubt about that.

It makes no sense to think of some what-if scenario which couldn't have realistically happened ever (Greece keeping its pre-crisis economy). If EU would have done the same what US has (IIRC) done with e.g. Detroit and Puerto Rico, ie. leave them be, then there would have probably already been a military coup in Greece.

I personally hope other EU countries would have stayed away from it just like Maastricht Treaty states, but now is now and we have to proceed somehow from here. I still don't buy the claim that other EU countries and IMF running to take over Greece's debts with better terms was somehow a bad deal for Greece, considering what the alternative would have been. The proof is in the pudding: Greece could have refused the bailout program, and even Tsipras wants a new bailout program by other EU countries and IMF. How come, if it is such poison to Greek economy?

It will be interesting to see how the situation in e.g. Puerto Rico develops, that might give us some kind of view on the alternative "what-if" scenario, ie. no bailout program for Greece in the first place by other EU countries. Not sure how good comparison it is, but apparently Puerto Rico doesn't have the benefit of its own currency which could devaluate on its own, they use USD right? At least I got the understanding that (the rest of) USA is not going to bail them out.

You mean, saving up on the good times? Did Greece do that? Or are you suggesting some kind of warped keynesian model where one spends a lot of money both at good and bad times? You can't cherry pick only parts of the model, you have to take and apply it as a whole, feathers and bones included.

Also take into account that it is wildly different whether you are talking about seasonal changes in economy, or structural problems (like too much public spending over decades which is not sustainable). Pumping money in the economy in the latter case can make things only worse in the long run. First we should analyze which are the parts of the Greek export industry and others that would bring them much more money from other countries, that needs a kickstart. Tourism is important, what else? Wikipedia says olives, olive oil and wine, anything more? Can Greece sustain the standards of living that they want with those alone?

Exactly, and unfortunately that has been missing completely in this case (saving up and throttling the economy in the good times, in order to be prepared for the bad times). Cherry picking doesn't work.

Odd. When other EU countries and IMF suggest that (cutting spending on public sector etc.), all I hear is "austerity bad!".

Since there still seem to be confusion what "austerity" means, could you repeat the exact steps that should be taken, and by whom? If you say something vague like "Greece should have money to kickstart its economy", from whom should it receive the money, should it be a loan or a gift, and to what things exactly that money should be spent. And what are we hoping to achieve with it in the long run.

People who don't have to participate in it with their money have easy time giving "good" and vague advices. I am suggesting that anyone with such good ideas how "austerity is bad" open up their own wallets and participate.

That goes to also Obama, if he is afraid Greece will leave NATO due to all this to the embrace of the Russian bear. Money talks, bullshit walks.

You're right that this is a neverending story but I don't see it so pessimistic.

My idea is to replace the "old nation boundaries" of political/economical powers by some soft criteria that go with geographical distance. What I mean is that everyone is in sync with its neighbors but not with someone further away. For example you could divide Europe in regions and then you make a transfer union between them but dependent on distance. That means Greece shows solidarity with Italy and Serbia and only little with Germany and none with Ireland. Germany shows solidarity with France, Poland, Italy, but only little with Ireland, Portugal, Greece, Portugal shows little solidarity with Finnland. Finnland shows a lot with Estonia, ...

That way you have solidarity across old boundaries without having endless solidarity.

Also you could have ranges of taxes, expenses that are allowed to spread between the regions.

That way you have competition between regions, but not endless competition or tax havens (like Luxembourg, Cyprus, ...).

So all in all what I would want is a Europe of regions with geographically limited solidarity but nevertheless with freedom of movement for everone. I think this is most natural solution. People show solidarity but not to people far away. And you always compare yourself to your neighbours. But if you don't like it, you can move to another region and try your fortune there.

Europe will never be completely equal, but it can be more equal and more wealthy than now if it agrees on more common rules and plays by them (everyone).

The regional distance dependent solidarity could become a core principle.

No, it's not. It's about one single country that went bankrupt and didn't even want to fight corruption and tax evaders to raise its income (to prevent bankruptcy). We're talking about Greece here and not about "world wide comradeship". Forget about Varoufakis "big yes to democracy". Greek's referendum means shit to other countries. The world won't turn into a huge socialist potatoe just because Greece wants a debt cut AND new loans.

As I said: If Greece wants to become the next Venezuela, they should be honest about it. Theiy're just wasting everyone's time now.

Because you can't just say "Fuck you!" and let them become a third world country. You have to try to find a way that works for both sides. That's why the European Union is a... well... Union. Nothing to do with hostility. The only ones I'm hostile towards, are the two or three Greek socialists who think that the "big day for democracy" means that the whole world has to follow Greece into socialism now.

That's an interesting concept to think about. But I wonder if it doesn't superpose too diffrent sorts of "proximities". France is generally considered amongst the dominant european countries (close to Germany), and Spain amongst the "piiigs". Greece has issues with most of its neighbours (Republic of Macedonia, Turkey, sometimes Albania) and, well, the Balkans are hardly an "area of solidarity". It's hard to anticipate the effects of institutionally-enforced "solidarity" amongst them. Greece identifies itself (and is being identified by other countries) as central to Europe, for rather empty symbolic and historical reasons but still cognitively powerful ones (and it's part of the stakes of its presence in the UE), and yet is geographically surrounded by "the margins of Europe". So, there would be some awkwardly enforced "political proximities", here and there...

Dunno.

Any cut of debts requires a vote in parliament... in all parliaments since the debt is held by state banks across all EU nations. So good luck with that pipe dream, but it will never happen, but should it happen you can expect re-elections and massive protests in many EU nations, because in all likelihood the people will never let Greece get a free pass when everyone else had to suffer through Austerity and is now in a mild growth phase...

What Greek people should worry about is that come the 20th July should Greece not repay the ECB interest payment all banks in Greece HAVE to close, indefinitely, as the ECB will be banned from giving emergency credits to said banks. The only thing that kept them open the past 5 years. Also I don't think EU will honestly negotiate with Tsipras as no government could defend (and survive re-elections) a 2nd debt cut to their own electorate. But far stranger things have happened in the EU backdoor dealings (Which I absolutely detest)

What Greek people forgot, is that all other nations govs are also democratically elected. And Greece will now be facing stiff opposition from all sides, especially once the radical parties gain election successes in the other EU nations, and those nations then will not even contemplate aid to Greece....

Since I think the Euro (currency) is "broken by design" since it was implemented based on the "crown model" I have no problem with any of that. But I fear what Greek people voted here... means that in 20 years, Greece is on the same development level as Sudan. And who wants to make vacation in Sudan? And how will you get pensions when your banks are closed? Yeah, your pensions are safe and sound, the problem was never that they could disappear, the problem could however be that you never get them paid out ever again. And once currencies change, pensions get converted, meaning you now get your pensions in currency X while everything has to be imported in Euro. It will create a MASSIVE price explosion of everything, and shortages of literally everything.

I wish the Greek people good luck..... they will be needing it.

Hopefully the Euro will be conceptually changed, because a strong currency like the Euro (yes, even now) only works for exporting nations. When the EURO was created, it was done by France to keep Germany in check and France demanded Italy to join as a (vote) counter-weight. Now Germany is the only nation profiting from the Euro. As a German, to me this is one of the greatest running jokes of the century. France wanted to keep Germany down with the Euro. And now everyone else complains Germany is evil.. hah ;) Also for the record, in Germany the media is very very.. bad. Tons of people here think that Varoufakis called the people terrorists. And you can imagine how that turned out....

First of all Trilarilion, I have to admit you are probably the most level-headed and realistic contributors in this discussion.

If I got you right (please correct me if I'm wrong), you suggested that either

- every euro country does what it wants, and in the end richer countries keep pumping free money to the poorer countries, and/or takes care of their debts

or

- more EU control, single EU countries are not allowed to deviate from the rules (something that e.g. Greece is opposing now, ie. other EU countries telling it how to run its economy; also I feel even Germany won't allow other EU countries to really govern how to run its economy).

Isn't there a third option, ie. each country mostly takes care of its economy, and takes care of its own debts? Is that unthinkable in the same currency? If someone really goofs it up, he might even have to leave the currency. I'm again thinking of Puerto Rico, as my understanding is that it uses the same currency as the rest of US, but the federal state is not going to bail them out of their huge debts. Is this somehow an unthinkable approach also in EU? Greece does what it does, other EU countries don't meddle?

What should have been done differently in the help packages? To which sectors should more money have been channeled, how much, and what good should it have achieved in the long run?

To me saying that the help packages wasn't supporting the economy at all sounds too black and white. It is merely a question which are the areas where the country is allowed to spend money coming from other countries. The other countries have their own interests to look after too, e.g. that their loan money is not spent on expenses that will not create sustainable growth (hence, that money will be lost for good). Also now there is the issue of trust as well, ie. is Greece willing to even pay any of its debts back, even if they could? Doubts are rising... After all, blame the earlier governments, and your hands are clean.

Some mentioned that "EU" demanded earlier Greece to keep or increase its military spending. If that is true (and Greece did that), then yes that was definitely wrong, as I am not expecting much of profit from the Greek army in the coming years, or like ever. I'm surprised if e.g. the Finnish finance minister didn't oppose that when agreeing with the earlier bailout packages, or was that decided somewhere else then? Then again that stupid bitch was so incompetent and gullible as a finance minister (I think her earlier profession was a primary school teacher or something, LOL), I'm sure some others just confused her and she didn't know what she was signing.

First we need to figure out what are those parts of the economy that will create sustainable growth. Pensions and the public sector should not be in the forefront there. Spending for the sake of spending is not what we need there, especially with other countries' money.

I think that any hopes for a much better bargain are in vein. So maybe this is all just a big blaming game. Syriza is determined to blame their European fellow countries in the quite likely case, Greece goes down the drain in the next weeks.

I wonder what will happen now but the only good solution I think will work currently is Greece leaving the euro and defaulting on the debt.

It's funny how Greece is shown as a negative example and that their people are supposedly lazy (who btw work 42.2 hours/week, compared to Germany 35.6 or France 38). Yet nobody talks about how this is actually the fault of the EU. The EU tolerates a cold ware between Greece (because of Cyprus which is EU member yet the north of it is occupied by Turkey) and Turkey (which incidentally is a NATO member together with Greece). Greece has huge military expenses which of course were readily financed by the banks in the EU, money which was spent on military hardware from Germany, France etc. by the former puppet governments.
And then of course there is the bailout of the banks, another "great" idea, where profits are privatized, but losses become public, thus creating moral hazard.
Taking these factors into account, I honestly hope that Greece will do as Iceland did and say FU to credit institutions.

No. The stance is "You can't spend much more than you earn". How can you accomplish that? Either a) cut expenses, or b) raise income. Greece refused to fight corruption and tax evasion (= raising income), so they had to cut expenses quite a bit more to stay within the target. This made the hit on their economy bigger than it should've been. Whose fault is it now, that Greek Governments (plural!) did nothing to fight corruption and tax evasion? Europe's? Hell, no! And who should pay for their Governments' incapability now? Europe? Well, I don't think so...

The ideas as far as I know them are the following one:

Problems
- Greece had a lot of debt
- Greece had a governmental budget deficit
- Greece had a trade deficit

Solution
- Greece must save money (must have permanent budget surplus to repay debt, aka the reverse of the past)
- Greece must export more and import less (must strengthen competitivity)

This implies
- Greece wages must fall
- The government must spend less or raise taxes
- The economy must grow

Greece wages fall if
- Unemployment is high and/or
- You devalue the currency
- Inflation is strong and/or
- Non-wage costs are cutted

Too high unemployment however
- decreases demand and income, increasing the debt burden
- results in social unrest

Greece could not devalue the currency or increase inflation because
- it doesn't control the currency (see optimal currency area theory in economics).

Non-wage labour costs are
- taxes (income)
- social security
- pensions

Lower income taxes would
- increase exports, due to higher competitiveness

Higher VAT taxes would
- decrease imports, due to higher prices

Cutting pensions is indeed
- a good way to have less burden on the work and increase competitivity

So what you should have done is lowering income taxes (also corporate income taxes) and increasing VAT taxes (they did it partially).

Additionally you must limit unemployment (probably to something below 20%). You could have subsidized investments, for example in research and development or in high tech industries. High tech industries could be for example: IT, pharmacy, chemistry, cars, airplanes, electronics... basically everything that has a large export part. I would have made a programm where every business that exists in Greece or elsewhere and wants to expand in Greece could have 50% (or more) of its investments in the high tech sectors have paid by the EU.

I hope this is clear enough. The aim would have been to qualify and keep several 100,000s of Greek people in work. This would have given the government enough space to cut down their expenses even more (yes, military, pensions, fight corruption, ...) and made it much easier to have a surplus and to repay the debts while still the unemployment would be high enough to cut down the wages.

So the trick is here that giving them money then (for investment) and them doing all the right things would have resulted in lots of more money back now and in the future. A win-win situation. The benefits of cooperation, if you want to see it this way.

Maybe the faster way out would have been to additionally devalue the currency and endure inflation but Greece didn't want to do this so far. But it may (probably is) the only way now to really recover because everything else is just too slow and the help packages just were not strong enough and indeed a bit one-sided (for example they only ever asked for tax increases, never for tax decreases).
Shouldn't it be clear that if Turkey would have invaded Greece there would be Italian, French, British, German, ... you name them, soldiers seizing Turkey in a second? I mean do you really need that big of a military to keep Turkish threats away or was it just an oversized, useless money hole? 1700 tanks for such a small country. Are they really necessary?

And also there was way more more spending than just military going on in Greece. Without the military Greece would still have had most of the trouble it has, wouldn't it?

Yeah great principles. However there are human realities at stake, right now. And none of these principles justify the levels of humanitarian crises that the greek population is being pushed through. None of these principles justify pushing them further through policies that currently make the matter worse. And none of these principles justify to dismiss as evil and irresponsible a government and a population that reacts to slow down on these measures. There is a matter of proportionality at stake, here, which is avoided by the narrow "financial principle" perspective.

There has been (and there is) many issues with Greek politics. Some of which are historically understandable (the greek 20th history is completely fucked up, to a large part thanks to the european powers treating this country as a puppet) and very very hard to overcome (regardless of the cheap "why don't they just do this" indignations). Some of these issues are not justifyable at all, although, mind you, they are very very much inline with neoliberal ideologies (typically, the lack of taxation for the super-rich shipping companies). There is a lot to overhaul, in Greece, in many many domains (medias, education, etc), not all of which can be done by snapping fingers and implementing a law, and some of which that have, on the opposite, no excuses of not having been done yet (especially by the leftist Syriza party).

However, this is independant from the question of the feasability of further austerity measures implementations. You just cannot keep destroying a population based on an abstract dogma and general principles. You have to take in account MANY MORE parameters than you are doing. "It's simple, it's my money, i don't give it, make more cuts in your budget" is one thing. The social and political situation is another. The DEGREE and PACE of these transformations, is a problem of its own, and it is not a simple matter of "the more the better". Even if you adhere to the strictest neoliberal ideology and worldviews.

Basically, "yay the three surviving greeks have no debt anymore (too bad they are now completely nazi)" is not the happy ending you make it sound like. But that is roughly what blindly increasing the austerity measures is heading for. I get why this strategy gets the applause of some europeans ("yay it happened without my moneys"), but it is still a "fuck the greek population" stance, and its is still improductive (if you widen the goal beyond your personal bank account).

Everybody can wave grand general principles to rationalize a (usually self-serving) stance. But many moral aspects and human responsabilities have to be articulated together. And dismissing one half of the story is devastating whichever half it is.