It is very ignorant and bigoted for people to knee-jerk blame the Greek crisis on the Greek people. If Greeks were somehow predisposed to be lazy, foolish, and profligate, then this crisis would have happened much earlier, and more often, to them. I don't know Greek economic history, but I doubt that is the case (and probably the boom-bust cycle has been worse on the average American since 1900). On the other hand, Argentina had a recent debt crisis, and now they are prospering (amazingly, mostly due to soybean exports to China). Industrial titans like Japan and Korea did too (and Japan still hasn't come out of its funk) - do we think of them as lazy? Despite our assumptions, even the US has defaulted in the past. Check out the below list of sovereign defaults over history - in fact the Greeks are far from being the worst culprits. It's ironic that France-Germany (who now tsk-tsk Greece as they hold the EU purse-strings) have had more defaults than Greece, probably due to their higher propensities to wage war.
http://en.wikipedia.org/wiki/
The common denominators in recent sovereign debt crises were deregulation (as a part of overall lax gov't oversight and risky growth) plus greedy-as-hell foreign investment banks. The average honest people had nothing to do with it, just like the US subprime crisis. Sure they were complicit in it and didn't have the foresight to stop it, but neither did most PhD economists, gov't ministers, and big-time investors, until it was too late. Blaming the common people is a shameful cop-out, like blaming the victims of Katrina. The ordinary Greeks will suffer unfairly and terribly from the proposed austerity measures, paying for the sins of their leaders and offering their pound of flesh to satisfy the foreign banks' bottom lines. And as we well know by now, austerity is just about the worst thing you can impose on a fragile, recessionary economy - unless you just want to restructure (read: blow up the system) and start anew with a leaner model.
Markets are getting saturated, and it's harder for these big banks to exploit inefficiencies and reap easy profits from "traditional investing", since it's become more transparent, computerized, and global. So they had to "innovate" and get into new markets like pay-day loans, student, and sovereign debt. Now aggregate student debt in the US is even larger than credit card debt! Sharks like Goldman don't ignore such untapped opportunities. For sovereign debt, the Greek crisis is only news because the risk got spread to so many key players (via CDS's) that it is threatening the EU and global economy. But "vulture funds" (and even USAID) have been raping the Third World for years, and some still are with impunity. It's really sick, and the short-sellers are making it even harder to rescue distressed nations.
http://en.wikipedia.org/wiki/
http://en.wikipedia.org/wiki/
Also, here is an interview of Michael Lewis' new book about the Greek crisis and the "new Third World" emerging:
http://www.npr.org/2011/10/04/
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Definitely not to defend Goldman Sachs in this case (they are pretty much guilty as charged), but Greece has spent about 50% of the time since 1800 in a state of default (i.e. not repaying its debts in full). That number puts it about in banana republic territory: http://blogs.reuters.com/the-
I think what this global crisis has taught us is that financial "innovation" and deregulation has allowed previously self-contained types of problems (locally overvalued housing markets, sovereign defaults of small states) to spread like wildfire as banks that would have previously had no exposure to these events are now hopelessly intertwined (and are often the same as!) with over-leveraged players making all-in bets on the outcomes of these seemingly minor economic events.
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To add to that the link that shows the US and many other western nations defaulting was based from a paper on domestic debt. The unique thing here is the interconnectedness of Greece's, and really, the worlds debt. No first world nation has defaulted on its debt since about WW1 and they reduced their domestic debt.
additionally...
http://en.wikipedia.org/wiki/
http://en.wikipedia.org/wiki/
from the tax evasion link...in 2005 it was estimated that evasion was at 49%. 2012 tax revenue is expected to be 52.7 billion. Their predicted debt in 2012 will be ~ 350 billion. So...if there evasion is in the range of 40-50% we are talking about their annually losing the ability to pay off 10% or more of their TOTAL debt. This is based ONLY on tax evasion. They are certainly not lazy but they are apparently unwilling to personally pay for the government benefits they are rioting in the streets to keep.
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More from here: http://www.theatlantic.com/
I think M (and the article above) are basically right, that there is a broken social compact between the people and the state. I think the reasons are more complex than the article states - Greece has been beset by a long history of conflict between the extreme left and the extreme right (and foreign intervention on top of it), so there is probably less unity-we are all in this together and more of we don't trust the government/other side than in most other European countries.
However, Greece and other countries have been down this road before (see T's account of the history of sovereign defaults) - getting Greece back to sustainable debt levels requires writing off about the same amount of debt the US had to write off for the S&L scandal 20 years ago (some $100 billion dollars) - not chump change in the slightest but it should be digestible to the world financial system.
The problem is that this time, the banks that hold the debt are so undercapitalized that writing off the debt might mean that they fail, and if BNP Paribas or some other major Euro bank were to fail, that might be the start of Lehman: Euro Edition. It's a typical story in this financial crises - banks getting bigger that their failure would be a systemic risk, yet at the same time they got bigger, they grew more heavily leveraged and *less* capitalized.
So now the question is who pays. Greece, as amply noted, can't pay it's current debt load even if it implemented the Euro Central Bank's dream austerity package. The Euro banks that hold most of the Greek notes can't afford to pay by writing off the debts. The French and German taxpayers, probably the only ones that can really afford to put up the money to cover Greek debt, definitely don't want to pay. No one can force any of the other parties to actually pay, so you have this continual kicking of the can down the road as each party slowly accepts bits of responsibility for taking the hit.
The blame here, as with the case of most of the financial crisis, is largely diffuse. Of course the Greeks shouldn't have been so profligate in their spending, but who's the bigger sucker - the irresponsible spender or the fool that lent him the money? The banks shoulder a lot of the blame, as they should be secure enough to suffer the (relatively) modest kind of hit that this default brings on. On the other hand, it's tough for a bank to be capitalized enough to survive a major world financial crisis and then a major developed European economy lying for years about its credit worthiness (i.e. Greece was lying about its debt levels for years).
Mostly, though, I think this is an indictment of the political failings of the EU as an institution. The S&L crisis forced the US taxpayer to intervene and eat a lot of bad debts, but the US did it and the financial system survived. The buck has to stop somewhere and now that the disaster has occurred you need resolute leadership that can save the system first and sort out who to prosecute/blame later. The EU lacks this, and hence why you have a major run on the other PIIGS, as investors are getting nervous that if the EU can't deal with the relatively small case of Greece, if Italy or Spain were to get in trouble you really would get a major financial meltdown in Europe.
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Thanks, Gents. I agree that Greece isn't a model of fiscal responsibility, but the mistake was the EC's lack of due diligence before granting them EU membership. The guy who bets on the Clippers to win the championship doesn't get to blame the Clippers when they predictably fall short. Not that I'm accusing you of this, but blanket blame of "the Greek people" is ridiculous (and much more negative media coverage of Greek rioters vs. their stupid creditors is a form of implicit blame I think). Sure the Greeks don't have the reputation of being efficiency freaks like the Germans or workaholics like Americans/Koreans, but they are not a bunch of freeloaders on welfare either. And even if they were, that shouldn't be enough to compromise the entire EU and send global markets reeling at the mention of a referendum vote.
http://finance.yahoo.com/
Yes, tax evasion is a problem - and it is a problem in many stronger economies besides Greece. Tax evasion in the US (mostly by businesses and the rich of course) costs us about $3T/year. And that is on top of the very generous and misplaced tax deductions and other perks that are 100% legal. US federal tax revenue in recent history is about 20% GDP, so if US GDP was $14.7T in 2010, that means we collected about $2.94T in taxes. So America's evasion % is similar to that of Greece! Bottom line, people will pay less if they can get away with it. Poorly structured tax laws and incentive programs have led to the behavior we're witnessing, either in the US or Greece. And like here, the majority of the Greek evasions is from the upper class parking their earnings in Swiss banks and whatnot. The people rioting in the streets are not the big culprits. So for sure, Greece is getting assaulted from outside creditors now, but their own elites have been screwing them for decades, with their dysfunctional gov't complicit most of the time. But no one held a gun to Soc Gen's head to make them loan Greece money (just like Countrywide approving a $400K mortgage to a part-time janitor). They should have known better, but the incentives and controls were all out of whack.
"[Greeks] are apparently unwilling to personally pay for the government benefits they are rioting in the streets to keep." Maybe true, but they are definitely not the only ones. Again, if the rich paid "their fair share", a lot of these problems wouldn't be as severe. But the elites and big financial institutions pushed gov't around and ultimately got their way at the expense of "the 99%". Like the Colonial Era, I find it so maddening that the big powers (used to be empires, now are financial institutions) are engaged in this global rivalry, where they don't care how many nations and peoples they destroy just to win the game. An honest Greek won't be able to retire in security, or a disabled American won't be able to get a caretaker, just because some asshole banker met his insane quarterly returns target and expects his big bonus.
Here's a Stanford study ranking nations for sov. fiscal responsibility:
http://www.scribd.com/doc/
Greece is #34 of the 34 OECD+BRIC nations analyzed, while the US is #28 (if we fully implement the Fiscal Commission's debt reduction plans, we'll jump to #8 according to them). The best nations are AUS, NZ, EST, SWE, CHINA, and LUX. But those nations are not like fundamentally more budget-savvy or anything. Some of it was lucky timing. AUS, NZ, and EST all had fiscal issues a decade or two ago during a worldwide growth economy, so they restructured during generally fat years (when we didn't have a shortage of credit, capitalized banks, and economic confidence) and are now better positioned to weather the current storm. CHINA is a singular case protected by surplus from their exports. LUX is just a small, rich country filled with rich people, so they don't need much gov't spending. SWE has very high tax rates and is one of the most high-functioning societies in history. Turn back the clock and give Greece some of these favorable conditions, and maybe we'd have a much different result. And in a couple decades, this list is probably going to look very different.
But like A said, if tiny Greece is causing this much disruption to the EU, I wonder how they will handle the rest of PIIGS and their almost certain default issues in the near future. Or maybe if we're glass-half-full types, the lessons the EU learned from the Greece crisis (assuming a positive outcome) will allow them to better handle the future ones? But I worry that after the US S&L crisis, the financial players and their gov't minions took notice, and then set about to do everything they could to avoid a repeat. Their behavior only grew riskier, but now they have structurally insulated themselves from punishment (either legal or financial), in general.
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