Has Greece run out of time and money?


Germany and the International Monetary Fund both plan to cut off Greece as it seeks another $60 billion to avoid certain bankruptcy, reports Spiegel Online. Greece is struggling to meet the conditions of its $157 billion bailout from last March—efforts to trim its massive deficit and boost taxes were complicated by two national elections this spring.  Germany appears to have run out of patience (and political capital) when it comes to backing-up Greece, with one government minister stating, “If Greece no longer meets its requirements there can be no further payments …For me, a Greek exit has long since lost its horrors.” A decision by the IMF to pull the plug on Greece would be more worrisome, and likely mean default for the country would happen much sooner (a matter of weeks) than later.

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Has Greece run out of time and money?

  1. AEI ~ Feb 2012 ~ American Left’s Two Europes Problem:

    A century or so ago, German sociologist Max Weber observed that Protestant countries in northern Europe tended to outperform the Catholic and Orthodox countries in the south of the continent. Weber believed that the northerners had a stronger work ethic, were thriftier, and possessed more of what is today called “social capital.” Though Weber attributed these differences to Protestantism itself, we should note that countries did not randomly convert to Protestantism. The roots for the cultural differences might very well go even deeper.

    Economists have since largely abandoned Weber’s insights, and in general have turned against “cultural” explanations for economic outcomes. Yet Weber would not be surprised if shown a map of credit downgrades in Western Europe anno 2012. Western Europe can still roughly be divided into a northern, Germanic language, Protestant region, and a southern, Latin/Greek language, Catholic/Orthodox region.

    These two Europes differ both in terms of culture and in terms of social and economic outcomes. France, Italy, Spain, Belgium, Portugal, and Greece have all been downgraded by Standard and Poor’s, sometimes repeatedly. Meanwhile, Germany, the United Kingdom, the Netherlands, Switzerland, Denmark, Sweden, Norway, and Finland all currently maintain the highest credit rating.

    • is that you mr.ferguson

  2. Greece is small fry, EU needs to save its money to bail out Spain, Italy and France. Greece bailout was mainly to stop contagion from spreading into larger countries but was completely ineffective now Italy, Spain and France are under attack from financial markets. It probably won’t seem like it short term but Greece getting kicked out of Euro will help their economy long term.

    I believe there is going to be big problems within EU when Germans/Northern European countries refuse to bail out Spain, Italy and France. An almighty reckoning is brewing between leaders/countries within EU.

    • France has the same level of debt that Canada has (86% debt/GDP; we have 85%.) Certainly France spends too much on social programs — they have the highest public social spending in the world (compared to Canada which ranks #23 OECD.)

      France is a very competitive economy, however. They rank #7 OECD in productivity, compared to Canada which ranks #17. It’s absurd to suggest they will be looking for a bailout anytime soon.

      Fact is austerity can be self-defeating — causing GDP growth to slow which reduces tax revenues and triggers job losses in a vicious circle. Keynes said the boom, not the slump, is the time for austerity. He knows what he’s talking about: he created modern living standards in the post-war era.

      • You’ll notice that most of these poster ‘economic analyses’ are more political hate statements than anything. Certainly not based on the reality in Europe or elsewhere….just racism

  3. Greece’s economy shrunk by 6% GDP in 2011. Worst record in the world. These austerity measures become self-defeating: government makes big cuts; GDP growth contracts; tax revenues fall; government goes deeper in debt requiring more cuts in a vicious circle. Another name is a deflationary spiral.

    What many people don’t realize is that deflation causes the real value of debt to increase. Just imagine having a 50k/yr job and $50k credit card debt. Then you lose your job and get one paying $25k/yr. Your debt load vastly increases.

    If Greece had its own currency it could devalue which would make exports and tourism more attractive, which would allow it to build up a trade surplus, which would help it pay its bills. Unfortunately exiting the eurozone will bring with it other forms of crises (like a possible run on its new currency.)

  4. Bye Greece

  5. Of course, the worry for us is that if Greece defaults, it’ll smash up against investment firms that have been betting on Greece getting a bail out.

    This will in turn ripple back to the investment banks who will see their own portfolios dive as the firms look to save what they can, which in turn hits the commercial banks, which then go to hit up the government which will then, almost inevitably, turn to us.

    And you know what? All this would be fine if we had some rational tax policies that aggressively targeted the investment firms and the top 1% that benefit from them. If we could think, “Okay, we keep them going for now, but later on they’re going to be paying us back, and taking the brunt of the increased tax burden that’s going to be required to get us out of this public debt hole,” I’d be fine with it.

    But I don’t think that’s what’s going to be happening.

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