• Yanis, thank you for the thoughtful insight. I am afraid we are in deeper trouble after the last elections.

  • Greece as victim

    Ever since Greece hit the skids, we’ve heard a lot about what’s wrong with everything Greek. Some of the accusations are true, some are false — but all of them are beside the point. Yes, there are big failings in Greece’s economy, its politics and no doubt its society. But those failings aren’t what caused the crisis that is tearing Greece apart, and threatens to spread across Europe.

    No, the origins of this disaster lie farther north, in Brussels, Frankfurt and Berlin, where officials created a deeply — perhaps fatally — flawed monetary system, then compounded the problems of that system by substituting moralizing for analysis. And the solution to the crisis, if there is one, will have to come from the same places.

    So, about those Greek failings: Greece does indeed have a lot of corruption and a lot of tax evasion, and the Greek government has had a habit of living beyond its means. Beyond that, Greek labor productivity is low by European standards — about 25 percent below the European Union average. It’s worth noting, however, that labor productivity in, say, Mississippi is similarly low by American standards — and by about the same margin.

    On the other hand, many things you hear about Greece just aren’t true. The Greeks aren’t lazy — on the contrary, they work longer hours than almost anyone else in Europe, and much longer hours than the Germans in particular. Nor does Greece have a runaway welfare state, as conservatives like to claim; social expenditure as a percentage of G.D.P., the standard measure of the size of the welfare state, is substantially lower in Greece than in, say, Sweden or Germany, countries that have so far weathered the European crisis pretty well.

    So how did Greece get into so much trouble? Blame the euro.

    Fifteen years ago Greece was no paradise, but it wasn’t in crisis either. Unemployment was high but not catastrophic, and the nation more or less paid its way on world markets, earning enough from exports, tourism, shipping and other sources to more or less pay for its imports.

    Then Greece joined the euro, and a terrible thing happened: people started believing that it was a safe place to invest. Foreign money poured into Greece, some but not all of it financing government deficits; the economy boomed; inflation rose; and Greece became increasingly uncompetitive. To be sure, the Greeks squandered much if not most of the money that came flooding in, but then so did everyone else who got caught up in the euro bubble.

    And then the bubble burst, at which point the fundamental flaws in the whole euro system became all too apparent.

    Ask yourself, why does the dollar area — also known as the United States of America — more or less work, without the kind of severe regional crises now afflicting Europe? The answer is that we have a strong central government, and the activities of this government in effect provide automatic bailouts to states that get in trouble.

    Consider, for example, what would be happening to Florida right now, in the aftermath of its huge housing bubble, if the state had to come up with the money for Social Security and Medicare out of its own suddenly reduced revenues. Luckily for Florida, Washington rather than Tallahassee is picking up the tab, which means that Florida is in effect receiving a bailout on a scale no European nation could dream of.

    Or consider an older example, the savings and loan crisis of the 1980s, which was largely a Texas affair. Taxpayers ended up paying a huge sum to clean up the mess — but the vast majority of those taxpayers were in states other than Texas. Again, the state received an automatic bailout on a scale inconceivable in modern Europe.

    So Greece, although not without sin, is mainly in trouble thanks to the arrogance of European officials, mostly from richer countries, who convinced themselves that they could make a single currency work without a single government. And these same officials have made the situation even worse by insisting, in the teeth of the evidence, that all the currency’s troubles were caused by irresponsible behavior on the part of those Southern Europeans, and that everything would work out if only people were willing to suffer some more.

    Which brings us to Sunday’s Greek election, which ended up settling nothing. The governing coalition may have managed to stay in power, although even that’s not clear (the junior partner in the coalition is threatening to defect). But the Greeks can’t solve this crisis anyway.

    The only way the euro might — might — be saved is if the Germans and the European Central Bank realize that they’re the ones who need to change their behavior, spending more and, yes, accepting higher inflation. If not — well, Greece will basically go down in history as the victim of other people’s hubris.


    • @Demtri
      being german myself (and so never have been asked about any european issue), i have to say: you’re right with most of what you say. there are diffrent views on economics (french, greek, italian, german and so on) and different life-styles and that is what europe is all about: difference. and i think we just should accept this difference. you (ie. the greeks) should go on living as you want to do. so my solution would be a real debt cut for greece and all southern european states plus split in north and south. with all respect to each other and no matter what the costs are.

    • “So how did Greece get into so much trouble? Blame the euro.”

      Partially, yes. So the logical answer to the problems must be: Greece leaves the Euro.

    • svarez

      Thank you for your post and yes that would be a solution.
      There is also a way for all of us to be united with our differences too.

      If the broader frames of the system are same for everyone and the narrower frames of the system are according to culture many problems can been resolved.

      The true problem was and is the original design of the euro.
      It has nothing to do with any country and any culture.

      But to making a bit more personal now (not against you personally – against the blame game in general) ,logical explanations from people who found it easy to play the blame game at the beginning are not so much welcome now that ,as time passes ,truth comes forth.

      I want for everybody to pay what everybody must pay.
      Greeks ,Germans ,whatever.

    • svarez

      I emphasize that Greeks must pay what they must pay. Whatever is legal ofcourse and the system to be reset in a way that whatever other nations and taxpayers paid because of the stupid officials be returned.

      I bet they could do it as fast as lightning if they wanted too. At least in the near past. If now it got out of control ,then whatever we say ,is simply bullocks.

      I for one don’t want the country to default on it’s legal debt.

    • The logical answer is is ditch the Euro in the dustbin of history´s most idiotiv ideas.

    • if this keeps up we are going to solve the deficit problem at once.There will be no trade.And trade is a prerequisite for a deficit to exist.Dead people dont buy things..

  • If only the BBC could understand the situation as you do, All brit media brands Greeks as theiving, swindlers who need to be punished. What a traversty!

  • Poor old Yanis! The same story over and over again and not even the sustenance of a glass of water. You are repeating to everyone including Uncle Tom Cobley.

    The 38 minutes duration is too long. I would suggest that you limit your interviews to 20 minutes maximum. I am sure that Robert Write of bloggingheads.tv is a highly regarded academic but at times it felt like someone trying to explain certain intricate Barcelona football moves to a housewife in Mississippi. Perhaps more selectivity with the programmes that you grace with your presence.

    A word of congratulations to Demitri on his comments following this piece

    • LOL, Dimitri’s comments are actually stolen from Krugman! {I don’t think Demetri intended to imply his own authorship}

    • “A word of congratulations to Demitri on his comments following this piece”

      Credit who deserves it: the large comment by Demitri following this piece is a 100% copy & paste of a Paul Krugman article.

    • Ofcourse it is not my comments. I have a HUGE LINK redirecting to the article of Krugman.

  • Dear Yanis,

    Thank you for a good blog,

    To put it simply, I think the disagreement is that while Brussels may have put the liquor on the table and everyone went out to party for a while the other nations more or less knew when to stop. Being naive and financially illiterate is not a free-pass for acting irresponsibly.
    Blaming Brussels for having been “too nice” in the past is akin to a rebellious teenager being treated with gloves and then growing up to blame the parents for his/her lack of character and failure as an adult.
    Up north, Norway, a country blessed with oil rich deposits, is currently pooling and investing worldwide to secure safe long-term returns on equity. Any government has the power to build reserves rather than consuming. In Switzerland some cantons force a public vote if the local government attempts to push deficit spending.

    The innocent greeks are the victims, but to blame Brussels is wrong. Previous greek governments should have called a taxi and gone home much earlier.


    Thomas Schoeneburg

    • Ermm, I have no idea what you are talking about. Could you use normal language about political and economic decisions, instead of these peculiar comments about liquor, parents and taxis? You sound like Frau Lard-Ass with this morality nonsense.

    • “The innocent greeks are the victims, but to blame Brussels is wrong”

      There are not many “innocent Greeks”, since the vast majority is responsible for the current situation, since they voted for ND and Pasok since Χούντα των Συνταγματαρχών ended in 1974.

      BTW, today I learned that it is written in the Greek Constitution that shipping company owner don’t have to pay taxes on the proftis. So, in the past 10 years alone, around 175 billion euro in profits remained untaxed. Well done, my Greek friends!

      And the very same people who are proud for this mafia constitution scream bloody murder because the German constitution forbids to take over limitless guarantees and loans for foreign nation’s livestyles.

      Mad world.

    • “Being naive and financially illiterate is not a free-pass for acting irresponsibly.”

      But they weren’t naive at all. Everybody knew exactly what they were doing. As they do now by bailing out their banks disguised as an aid to southern countries using the sovereign debt as cover up.

      You think you pay for us?

      NO NO NO.

      You pay money for the banks and we pay for you with suffering.

      If you want your banks bailed out ,then you decide about it and pay if you like.

      And if we want we will pay for our banks only.

      If you want us to share the debt for all the banks to save the euro ,no problem. The German and French banks have the most bad debt. Not the Greek ones.

      But now the northerners are exempt from the crisis because the southerners pay for them with austerity and they get the blame too.

      Who is the immature one??????

    • In other words ,we are the parents and you are the children.

      In any conceivable way.

      Ofcourse the parents made mistakes as well. But stil….

    • vss

      I do not believe i am going to say this to you but you are right about that.

      Ofcourse this time you posted something that is true.
      Still it is not enough for the crisis.

      And you have to know the psychological reasons for the previous generations voting for the same parties.
      As for your own behavior too.

    • @guest (Xenos):
      Is it possible you really don’t understand??
      “Morality” is boring – but with a severe lack of it…
      …you end up as a country where Greece is today!
      Never occured to you?

    • Hey ,what the hell are you doing here?

      Did you ask for permission? 🙂

    • Why don´t you blame the French that got everybody in the mess in the first place? It was their idea to come up with this messed up one size fits none currency.

    • So ,Dean ,

      I guess Tsipras won ,right?
      He got the advantageous second place.

      What next? What does your mind’s eye see?

    • Pedro

      Ofcourse ,yes.

      But it wasn’t the French that insulted us to cover themselves.

    • What are you still doing here? Four days ago you promised to leave this blog forever within two days. But then, a Greek and his promises…

    • Racist vss.

      You are the Schumacher of racism.

      The fastest insult in the city.
      The swiftest comeback of shallowness.
      The speedy draw of slimeness.
      The smoking gun of smallness.

      Run to the finish line.
      The winner gets one year subscription of Merkel SM bondage.

  • Great! The German Surpreme Court has ruled today (again) that the parliament needs to be involved more what EU matters are concerned. It has ruled that the government did not inform the paliament early enough in the negotiations about the ESM. There are no implications in terms of validity of the ESM, but for it will make life for Merkel & Schäuble more difficult in the future to throw around German tax money after an ill designed and failed currency.