Just how much of a mess is Greece in, and what will happen?

[RegisterMe]

Some generalisations and inaccuracies ahead, but the basic line will be more or less right - Greece is in a mess. How much of one and what will happen?

* Massive budget deficit (12.7% GDP when they "fessed up", possibly more to be uncovered by Eurostat / the unearthing of currency swaps etc).
* Massive public debt (113% GDP).
* Persistent misreporting of economic stats since it joined the Euro.
* Appallingly low tax take - you could use the phrase "endemic corruption", but when it's so ingrained in daily life is it really fair to call it "corruption" any more?
* Huge, and hugely inefficient welfare state.
* Many privileged self-interest groups with a history of militancy, and where the government has a history of backing down in the face of protest by them.

So, that's the background. It is just about possible that the country might be able to tighten its belt enough, introduce fiscal and taxation discipline, move transactions from the "black / grey" economy to the "white economy", lift the pension age, face down the inevitable street protests etc etc etc to see its way through.

Just about.

But I think it unlikely. Very unlikely.

So there are two options, the first is that they go bust. This is likely unthinkable for a country in the Euro. The second is that they get a bailout and externally imposed changes on their economy and society - the EU has already stated that an IMF bailout will not happen, because of the embarassment this would heap on "a Europe unable or unwilling to help one of its own". At the same time, for example, Germany has to answer to its own electorate. Why should people in Germany work to the age of 65 to fund Greek people retiring at 60? That's a hard sell….

How are you going to get relected in Greece if you raise the retirement age from 60 to 65?

Does the EU have the stomach to force enormous amounts of painful change in the face of public opposition everywhere (the Greeks will resist the discipline, the rest of the EU doesn't want to pay for it anyway)?

I'm really not sure that I see a way out. And the longer there is a lack of clarity the greater the pressure on the other PIGS (Portugal, Ireland, Greece, Spain), and then Italy, and then the EU and the Euro as a whole.

I don't think the EU will break up, and I don't think Greece (or anybody else) will drop out of the Euro. But there are some extremely tough discussions to come, and there'll be a lot of angry people across Europe. And that's why you should be interested .

[Sp@c3Ch!mp]

indeed greece is in a mess.
I was in greece (on the island of Zakynthos) a few years ago on a schooltrip and the level of education was, to put it mildly, upsetting. The kids were running around while we were visiting.
So I don't think that the education is very decent but I could be mistaken. But if that is the case how could greece have good leadership if the education will fall short?
And this maybe rude but I also think that the Greeks are a bit too laid back about work and how things need to get done right.

[X2-Eliah]

I just love how people tend to ignore or forget of those EU countries that are post-soviet Eastern-European and rather focus on the "safe & comfortable" ancient husks - like Greece.

Rant of the day aside, the actual situation is a tough one, and can easily go in a downwards spiral loop, if the management of economic resources is sloppy. The thing is, EU needs manufacturer countries and consumer countries. If you are a consumer country with relatively scarce export, then things are properly grim.

[RegisterMe]

Another interesting angle from the Wall Street Journal.

[Dragoongfa]

As the only Greek on these boards I have to write the same things down Again.

@Sp@c3Ch!mp

What time of the year was it that you visited?

Greece has an abundance of school holidays, kids tend to run around when they have free time .

Now for RegisterMe

* Yep, 12.7% of GDP as a deficit, I doubt that it will be further increased, Eurostat has been going through them with a fine tooth comb for a month and still they haven't reported anything out of the ordinary.
* This is what we get with some persistent national and international problems, the annual spending for defense has been around 5% for at least a decade and the public sector is huge, corrupt and inefficient. The current running joke is that if the public sector worked like the private Greece would be an economic superpower.
* Something most Greeks suspected for some time now.
* Many reasons behind the low tax rate, corruption, inefficiency, the ridiculous measures to root them out and the general distrust of the public about anything run by the state, expect perhaps the military which considering Greece's recent history is a feat of its own.
* Actually huge, corrupt and inefficient public sector is more appropriate, this point coincides with the next one:

Greece has one of the weirdest laws in the world, public sector workers cannot be fired! Couple that with the petty small party politics where every time a new government is elected there will be a good number of 'hires'. The result? Somewhere around a million to a million and a half public sector workers for a country of 11 million.

Off course when someone tries to bring some sanity in the above mess he will usually be hushed withing a few days by various interest groups.

And then they say why the private sector workers call the public ones lazy, there has been some time now since the last time private and public sector worker syndicates saw eye to eye.

As to the protest that many fear, so far they have been catatonic, if they pan out as usual (by the looks of it they are, the farmers and the IRS workers have already withdrawn) there will be no tangible opposition for the austerity measures.

The retirement age for Greeks is a little weird, it is 65 for men and 60 for women for private sector workers and a little lower for public. Private sector will be equalized shortly and has been given an increase to 67 (great I will be working with a cane) while the public sector is up for discussion, an increase to 63 and then a further increase down the road.

The majority of the Greeks approve of the austerity measures taken so far, polls show an average of 60% approval rating for that (which pisses the commies even more), if you notice most of the international reporters seem to interview only members of the KKE or Synaspismoe (the commies and far lefts) which as political parties go they annoy far more people than they want to admit.

As for my personal opinion on how to resolve this crisis, cut the public sector down, dismantle the unnecessary government agencies and set those working there in the free market, fire the unnecessary workforce and create an independent internal investigation agency for the rest, anyone caught stealing or receiving bribes should be fired outright.

The above should give a rise to the unemployment rate to 30% but seeing that we currently pay a few hundred of thousands just to sit with their thumbs up their arses I can't say that I find it appalling, an other side effect would be the decrease of the GDP by a fair margin but renewed focus by the government on Greece's main 'heavy' industries, tourism and maritime shipping (which account for approx 18% of global shipping capacity) should absorb back the workforce and increase the GDP.

Ok, next.

EDIT: Something I forgot to mention, Greece is currently under economic monitoring by three committees: the European commission, the European Central Bank and the IMF, Ecofin will also receive extra powers in mid march, powers that will allow it to pass austerity measures without going through the Greek government.

EDIT2:Correction

[RegisterMe]

Thanks for that Dragoonfa (I was hoping you were going to post in reply). That's a more positive message than I am reading in the UK / "international" press. The fact that there is more public support for the required austerity measures than is being currently reported "over here" is very good news. I still suspect it'll be pretty damn painful though.

For instance a 30% unemployment rate is going to hurt badly, and it will take a strong national stomach (especially on the part of the politicians) to push through a pain barrier like that.

[Java Jawa]

To put it bluntly, Greece is about to go tits-up.

IMHO, the EU should not bail out Greece. The best medicine is that which tastes the worst, and Greece needs to move away from the current government attitude of "let's spend some more of what we don't have, then hire people who shouldn't have jobs!"

It won't be easy, given how easily Greek tempers flare up it won't be pretty either, but I think it's better in the long-run if Greece, as well as Portugal, Italy and Spain [PIGS ] are allowed to collapse so that, ultimately, they come out stronger for it, assuming that their respective governments can be bothered to put the effort in to reform finance, employment and the public sector.

[KarlHemmings]

Why should people in Germany work to the age of 65 to fund Greek people retiring at 60? That's a hard sell….

How are you going to get relected in Greece if you raise the retirement age from 60 to 65?

Funny enough this is one of the "Big Debates" on BBC World News at the moment - I did not realise that the plan was to raise the retirement age from 65 to 68 in the UK with future plans to raise it to 72.

Next country to watch is France. They can not afford to pay for their pensions and have been trying for many years to change the system.

[Dragoongfa]

@Java Jawa

Contrary to widespread belief Greeks do not want a bailout, the support Greeks want is in the form of solid political backing against profiteering and fear mongering by the markets, Greece has not asked for a bailout and the average Greek would see it as an affront.

As for the rest, I more or less agree with you, whoever messed up should clean his own house.

EDIT:

And this maybe rude but I also think that the Greeks are a bit too laid back about work and how things need to get done right.

Overgeneralization, I have had to work with people from every walk of life in my work life; I have seen people work for 60 hours a week at a fast food joint (me included) and I have seen a public sector worker who thought that playing solitaire while on the job was more important than answering the phone.

Eurostat data indicates that Greeks work an average of 42 hours per week.

A couple of links:

http://www.billshrink.com/blog/working- ... the-world/
Link 2

EDIT2: Could someone fix the second link? its a little long without the shrinkage.

[RegisterMe]

One of the problems that Greece (and Italy, Spain, and Portugal) face is low productivity. Hours worked =/= productivity.

Pre-Euro they could have devalued their way out of it. Now they can't.

[BeidAmmikon]

"Greece loses EU voting power in blow to sovereignty" (Telegraph)
http://www.telegraph.co.uk/finance/fina ... ignty.html
And here's another "angles" from CNN...
"Analysis: Wall Street banks behind Greek crisis?"
http://www.cnn.com/2010/BUSINESS/02/16/ ... index.html
... and the New York Times
"Wall St. Helped to Mask Debt Fueling Europe’s Crisis"
http://www.nytimes.com/2010/02/14/busin ... 4debt.html

Dragoongfa, I feel really sorry for your country. You were once a mighty Eurasian empire, but above all, Hellenika gave birth to democracy and Olympic Games - and these two mean People and Peace.
To see your country stripped off the right to vote at a EU meeting - a shabby conglomerate that should have stayed purely an economic organisation - and a military offensive launched in Afghanistan just at the start of the Winter Olympics, makes me feel shame for what happens to your country and to your Greek heritage.
May you find the power and means to fight and overcome any evil that covers your country these days, and the wisdom to prevent such situations from occuring again. Your country is too precious to be lost to humanity, so you'd better try and take good care of it, as best as you can.

[Dragoongfa]

@ BeidAmmikon, Thanks.


Now if only we could reinstate the death penalty.

[muppetts]

Fingers crossed I am really hoping the Euro has a collapse and the pound gets back to 1.5 against the Euro. The collapse of the pound was hmmm horrible is all I can say!

[Dragoongfa]

Fingers crossed I am really hoping the Euro has a collapse and the pound gets back to 1.5 against the Euro. The collapse of the pound was hmmm horrible is all I can say!

That scenario is unlikely, not because of the euro but because the UK has its own fiscal problems, a 14% deficit and a 80% debt of the GDP. Although it doesn't face the same underlying problems as Greece (corruption, ineffieciency and tax evasion) similar measures will have to be taken in order to avoid a devaluation of its currency.

[RegisterMe]

No argument there.

Also, any idea how I post a cartoon image (it's under the forum size limits etc so should be legit)? It's amusing and relevant. I don't have a link to it, I have the actual file....

[X2-Eliah]

Host it on imageshack or some other free picture hub..

[RegisterMe]

Found the source for the cartoon .

[BeidAmmikon]

Goldman Sachs (in name only, that's right...) steps in the mayhem:
"Head Of Greek Debt Office Replaced By Former Goldman Investment Banker"
http://www.zerohedge.com/article/head-g ... ent-banker

The irony of it all.

[RegisterMe]

Three good articles in the Economist for those who are interested:-

Leant on
Let the Greeks ruin themselves
Charlemagne

[BeidAmmikon]

German MPs suggest cash-strapped Greece should sell islands (The Local)