noemon wrote:The fact that the documentary begins with the words relating to debt by Papadopoulos(the dictator) hints in that a clear case can be made that that debt is odious, as for the fact that Greece is a liberal-democracy, it still does not change the fact that debt created post-dictatorship(.ie during the liberal-democracy stage) is still odious under certain circumstances, like when the parliament and other political forces are not informed of a purchase, which is clearly the case for certain circumstances and if you remember that is exactly the first reason the crisis begun. Papandreou as soon as he assumed office discovered this and said it and that caused the first under-rating by the agencies.
How much of the current debt was incurred during Papadopulos' dictatorship? Would repudating it help to solve Greece's problems?
As for the debt incurred after the dictatorship, as I said I don't think its feasible to call it odious debt. If anything liberal-democracies are supposed to have institutional mechanism for avoiding what you described and I find hard to believe that such massive amounts of money weren't noticed by the Greek politicians and civil society. Still, I support an audit for determining responsibilities, though I'd say you guys have quite a big incentive to declare that most debt is odious (and if a similar audit was done by international financial institutions they'd have a huge incentive for understating the amount of odious debt) so I don't think that defaulting on bad debt should be the primary concern - the primary concern should focus on jailing those responsible, even if that means beheading the Greek political establishment.
At last, there other other concerns with declaring most of the debt odious. For instance, how many pension funds would lose their money if that happened? What would happen with Greece's future access to lending markets or more precisely how would Greece be able to return to those markets?
noemon wrote:Anyhow, the public sector is bloated but that is irrelevant in figures as I told you earlier. It is too small when compared to the debt-servicing costs.
You are right about wages but you cannot put a standstill on wages and raise all other living costs, in Greece we have the most expensive petrol, the most expensive gas in Europe as well as a variety of other products. In relative terms wages have not gone up but have dramatically decreased much more than Germany's in purchasing power even though german wages have been kept into a standstill.
Well given that both Greece and Germany have the same currency, that high accumulated inflation is symptomatic of a huge competitiveness problem (but you can't really deny that it was accompanied by higher nominal unitary labour costs, of which wages are an important part - even if as you say that increase was only in nominal terms). I agree with you that the bloated public sector had a secondary role -after all this has been a feature of the Greek economy for decades but only now it's turning into an economic collapse, that's because of the loss of independent monetary policy that came along with the Euro and as such the Greek tragedy must be seen in the conext of the wider European tragedy - but it helps to explain why Greece's situation is even worse than the situation in Portugal and Ireland, and why is it collapsing so fast (as it had higher public debt when the crisis triggered, thus reducing room for counter-cyclical fiscal policy, IMHO that's not the Euro's fault and it doesn't only have to do with punishing corrupt and incompetent politicians and policy-makers but of a wider problem in the economic relations between the Greek state and Greek civil society, and maybe the overall role of the state in the economy and the tax system).
Anyway as I said I still agree with you, the main problem with Greece is not the bloated public sector. It's the competitiveness gap between the European South and the European North and the inflexibility of the Euro to deal with this. In short, the issue is that the EMU is not an Optimal Currency Area.
noemon wrote:In addition the bazaar that took place in east-germany in the 90's did not produce any output for the East-Germans.
Well I'm admittedly not an expert on the German reunification. But I think there is s fundamental difference between privatizations to increase the economic output and competitiveness of the economy and privatizations that essentially amount to distressed sales. The Greek case is clearly the second: I don't think currently Greece's top priority is to increase these companies' output, the government's focused on how much money the State could collect and how fast can it collect it. I think this is an important distinction because I would not be surprised if for example Greece doesn't enact new regulations to make sure these privatized companies don't act like monopolies (I'm assuming that a good chunk of these privatized companies are state owned natural monopolies), and I'd also not be surprised if these companies are sold at lower prices than they would have otherwise been sold if the Greek government didn't need the money now, the liquidity preference by the Greek government should definitely impact the final sell price.
If anything I'd advise the EU and the IMF to make sure this pressure is reduced and that privatizations are done focusing on getting a good price
and making sure that these privatized companies won't behave like monopolies by granting more loans to Greece if necessary. This should be used as a good chance for addressing some of Greece's competitiveness problems and badly made privatizations are not the best way of doing so IMHO.
- By litwin
- By late
- By Skynet