7 ms·

What's at stake is not just the debt of Greece, but also Italy, Spain, and possibly others. Forgiving Greece part of its debts sets a precedent for those countr

What's at stake is not just the debt of Greece, but also Italy, Spain, and possibly others. Forgiving Greece part of its debts sets a precedent for those countries, raising the stakes greatly.

com2kid 11y ago
It is a hard problem. Forgiving the debt once is likely the right thing to do, but if you keep doing it, what is to prevent countries from just never paying at all? The sorts of restructuring plans that are put into place are designed to solve this problem, but I think whoever designed them is a sadist. It is said you cannot spend your way out of a recession (and I'd agree that one off projects that don't kick start a continued source of income don't work), but you also cannot make so many budget cuts that no one in the country has a job, or a house, or a support network of any kind. Zero tax revenue does not make for a stable government. (It does make for a really corrupt one though, and a much worse type of corruption than what Greece had before)
- benmccann 11y ago
  If debt is forgiven or defaulted upon, then it becomes harder to borrow in the future (i.e. they must do so at higher interest rates to account for the risk). If countries never paid their debt then no one would loan to them or would loan only at astronomical interest rates.
andybak 11y ago
So Greece will be forced to accept conditions that prevent her ever paying her debt and why? So that other countries will be too terrified to follow in her footsteps? Is this brutal and bleak blunt instrument really the most sophisticated strategy that we can muster in the 21st century? Can we really do no better?
- x0x0 11y ago
  Well, what is the alternative? Germany admits they've juiced their export driven economy via an artificially depressed currency, then either (1) leaves the euro themselves, or (2) agrees to permanent support to the less-productive peripheral countries inside the currency union? You may find this interesting: http://blog.mpettis.com/2015/02/when-do-we-decide-that-europe-must-restructure-much-of-its-debt/ http://blog.mpettis.com/2015/02/when-do-we-decide-that-europ...
  - eli_gottlieb 11y ago
    > Germany admits they've juiced their export driven economy via an artificially depressed currency, then either (1) leaves the euro themselves, or (2) agrees to permanent support to the less-productive peripheral countries inside the currency union? Yes. Shouldn't the German national ego be counted less important than making everyone's accounting add up?
    - x0x0 11y ago
      preaching to the choir now what's your strategy on bringing germany around to that pov? Because their politicians are poisoning the environment so that you can't even start that discussion.
aikah 11y ago
Debt are forgiven all the time. Germany had some of its war debt forgiven, by countries such as Greece.
Tsagadai 11y ago
Greece is unlikely to pay back more than a small percentage of its current debt (it will default eventually, no country can lose a quarter of its GDP and then suddenly have surplus budgets). The current scheme is about turning Greece into an example for Portugal, Spain and Italy (who are all playing around with austerity with varying degrees of success). What this all comes back to is that many of the loans should never have been made and banks made loans for stupid and unprofitable projects. One of the core problems in all of this is that neoliberal political thought is forcing collective responsibility for what was poor commercial and economic management of a few companies, banks and governments on taxpayers in both creditor and debtor states. Responsibility is being enforced through tax dollars going into both debt forgiveness and service cuts. Poor due diligence and risk management on the part of creditors and reckless borrowing is burdening the populations of both "Germany" and "Greece" (where Germany and Greece are the creditor and debtor nations) with the costs.

What's at stake is not just the debt of Greece, but also Italy, Spain, and possibly others. Forgiving Greece part of its debts sets a precedent for those countries, raising the stakes greatly.

com2kid 11y ago

It is a hard problem. Forgiving the debt once is likely the right thing to do, but if you keep doing it, what is to prevent countries from just never paying at all? The sorts of restructuring plans that are put into place are designed to solve this problem, but I think whoever designed them is a sadist. It is said you cannot spend your way out of a recession (and I'd agree that one off projects that don't kick start a continued source of income don't work), but you also cannot make so many budget cuts that no one in the country has a job, or a house, or a support network of any kind. Zero tax revenue does not make for a stable government. (It does make for a really corrupt one though, and a much worse type of corruption than what Greece had before)

benmccann 11y ago
If debt is forgiven or defaulted upon, then it becomes harder to borrow in the future (i.e. they must do so at higher interest rates to account for the risk). If countries never paid their debt then no one would loan to them or would loan only at astronomical interest rates.

andybak 11y ago

So Greece will be forced to accept conditions that prevent her ever paying her debt and why? So that other countries will be too terrified to follow in her footsteps? Is this brutal and bleak blunt instrument really the most sophisticated strategy that we can muster in the 21st century? Can we really do no better?

x0x0 11y ago
Well, what is the alternative? Germany admits they've juiced their export driven economy via an artificially depressed currency, then either (1) leaves the euro themselves, or (2) agrees to permanent support to the less-productive peripheral countries inside the currency union? You may find this interesting: http://blog.mpettis.com/2015/02/when-do-we-decide-that-europe-must-restructure-much-of-its-debt/ http://blog.mpettis.com/2015/02/when-do-we-decide-that-europ...
- eli_gottlieb 11y ago
  > Germany admits they've juiced their export driven economy via an artificially depressed currency, then either (1) leaves the euro themselves, or (2) agrees to permanent support to the less-productive peripheral countries inside the currency union? Yes. Shouldn't the German national ego be counted less important than making everyone's accounting add up?
  - x0x0 11y ago
    preaching to the choir now what's your strategy on bringing germany around to that pov? Because their politicians are poisoning the environment so that you can't even start that discussion.

aikah 11y ago

Debt are forgiven all the time. Germany had some of its war debt forgiven, by countries such as Greece.

Tsagadai 11y ago

Greece is unlikely to pay back more than a small percentage of its current debt (it will default eventually, no country can lose a quarter of its GDP and then suddenly have surplus budgets). The current scheme is about turning Greece into an example for Portugal, Spain and Italy (who are all playing around with austerity with varying degrees of success). What this all comes back to is that many of the loans should never have been made and banks made loans for stupid and unprofitable projects. One of the core problems in all of this is that neoliberal political thought is forcing collective responsibility for what was poor commercial and economic management of a few companies, banks and governments on taxpayers in both creditor and debtor states. Responsibility is being enforced through tax dollars going into both debt forgiveness and service cuts. Poor due diligence and risk management on the part of creditors and reckless borrowing is burdening the populations of both "Germany" and "Greece" (where Germany and Greece are the creditor and debtor nations) with the costs.