The view from Vilnius, part II

by on June 30, 2015 at 2:15 pm in Current Affairs, Data Source, Economics, Political Science | Permalink

When Greece’s finance minister, Yanis Varoufakis, in an early round of negotiations in Brussels, complained that Greek pensions could not be cut any further, he was reminded bluntly by his colleague from Lithuania that pensioners there have survived on far less. Lithuania, according to the most recent figures issued by Eurostat, the European statistics agency, spends 472 euros, about $598, per capita on pensions, less than a third of the 1,625 euros spent by Greece. Bulgaria spends just 257 euros. This data refers to 2012 and Greek pensions have since been cut, but they still remain higher than those in Bulgaria, Lithuania, Latvia, Croatia and nearly all other states in eastern, central and southeastern Europe.

There is more from Andrew Higgins in the NYT here.

1 jk June 30, 2015 at 2:30 pm

They also spend 0.8% GDP on defense despite the “existential threat” of Russia and the whining to the US to do their defense for them. There are reports that they will up their defense expenditures in the future. After the US spends a couple billion in their country.

2 Cooper June 30, 2015 at 4:42 pm

Lithuania is too small and too poor to build any kind of reasonable defense against Russia. No matter what they spend, they’ll still lose.

German, the UK and Italy, on the other hand, are both large and rich enough to afford serious military deterrents. Their failure to live up to NATO targets is inexcusable.

3 Bill Kilgore June 30, 2015 at 7:45 pm

Lots of NATO countries are “too small and too poor” to reasonably defend themselves against Russia- thus the treaty.

The treaty, however, functions poorly if all the small and poor countries decide to do nothing (or virtually so) rather than what they promised to do.

4 chuck martel June 30, 2015 at 9:48 pm

What was it exactly that the Lithuanians promised to do?

5 Ray Lopez June 30, 2015 at 11:21 pm

Lithuania is the trip wire for WWIII, just like Serbia was for WWI. It’s the ‘entangling alliance’ G. Washington warned against.

6 jk July 1, 2015 at 5:00 am

Bill, I think that is the tactic, or rather strategy, of most NATO countries: freeload off of the large spenders, whine about the credibility of NATO and assurance against “existential threats” when the big countries (or just the US) does not do the heavy lifting and spending, and give vague assurance in the future that they will meet their 2% minimum GDP expenditure.

This is similar to Greece saying just give us another loan and we’ll pay you back sometime in the future.

7 AnonLawStudent July 1, 2015 at 11:56 am

(1) From what I understand, the Baltic NATO members tailored their military power to niches (e.g., bomb disposal) as requested by NATO. Combat power is even more limited than their size and expenditure suggests.

(2) It’s true that it’s not reasonable to expect such countries to mount a credible defense against Russia. But they can be expected to follow the Swiss model, with very large reserve forces and pre-distributed weapons. Lithuania may not be able to win against a Russian armored push, but anti-tank rockets are (relatively) cheap, (relatively) easy to use, and can be quickly acquired and stockpiled, Let’s not even mention the difficulty in seizing and holding urban areas. Shorter version: the Baltics can (and should) rapidly develop the capability to make a Russian push VERY costly.

(3) Agreed on the lack of expenditure / freerider problem. But at least they aren’t using broomsticks as pretend machine guns, qua Germany.

8 jk July 1, 2015 at 2:11 pm

ALS, Lithuania and the rest of the Baltics better increase their spending, because their European brethren sure are not going to mobilize for them:

“More than half of Germans, Italians, and French are opposed to using military force to help a Nato ally in a conflict with Russia, according to a survey published by US think tank Pew on Wednesday (10 June).

In Germany, 58 percent said their country should not get involved in a hypothetical conflict between Russia and a neighbouring Nato state, indicating an erosion of the solidarity on which the alliance is built.”

https://euobserver.com/defence/129049

9 Jan June 30, 2015 at 2:39 pm

Please provide cost of living info. Also, in many Soviet countries, residents were simply given their state apartments to keep after the USSR broke up. So for many housing was essentially free. Does the average pensioner own a paid off house in Greece?

10 Rahul June 30, 2015 at 2:53 pm

Lithuania is only 20% cheaper on CPI basis. Does not explain the 300% higher pensions in Greece.

11 Jan June 30, 2015 at 2:59 pm

It’s part of it though. Mainly, it is the fact that Lithuania has miserably low pensions compared to everyone else and that Greece has a lot more old people than most countries.

See this for more context: http://blogs.wsj.com/brussels/2015/02/27/greeces-pension-system-isnt-that-generous-after-all/

Should Greek pensions, already cut 40%, be what they are? Maybe not. Should they be reduced by 2/3 again to compete with the Baltic basement? Definitely not.

12 Hazel Meade June 30, 2015 at 4:14 pm

Are Germans obligated to pay for the promises of the Greek government ot Greek pensioners? No.
Is anyone other than the Greek government? No.

13 Jan June 30, 2015 at 4:34 pm

You’re asking me? No of course they’re not. They probably should kick them out of the Euro and stop scolding.

14 Hazel Meade June 30, 2015 at 4:55 pm

Ok, I now see that we are in complete agreement.

15 ttt June 30, 2015 at 5:34 pm

yes, kick them out and lets all move on with our lives.

16 Maurice de Sully June 30, 2015 at 8:19 pm

Unless Greece is planning a mass extermination of its older citizens- which seems a bit drastic- the fact that they have “a lot” of old people is really irrelevant. That volume of old people is the milieu that Greece finds itself in and their payments to those old people needs to reflect reality. I appreciate the WSJ noting the volume concerns- but it doesn’t really change the calculus any.

The basic point remains- Greece can’t continue to pay their pensioners as they do unless countries whose pensioners receive substantially less agree to give Greece more money.

Good luck with all that.

17 chuck martel June 30, 2015 at 9:51 pm

The concept is very foreign in the west but don’t children have some obligation to the upkeep of their parents in their dotage?

18 IVV July 1, 2015 at 11:23 am

Sure, but the Greek pensioners’ children are not the Germans nor the Lithuanians.

19 Jay July 1, 2015 at 12:37 pm

Sure they do but it makes it difficult to do when a good portion of the young people exit the country for greener pastures.

20 _NL June 30, 2015 at 2:54 pm

Had the same reaction. Google gave me this:
http://www.numbeo.com/cost-of-living/rankings_by_country.jsp

Seems most of other states near Greece have lower or much lower costs of living. Not sure about intra-country variations (i.e. what if most Greek pensioners move to the Greek equivalent of North Dakota?).

Also, to what extent is Greece furthering the disproportionately high cost of living by its policies?

21 Rahul June 30, 2015 at 2:58 pm

How does a 20% cheaper cost of living justify a 300% higher pension?

22 Yankuba June 30, 2015 at 3:59 pm

Read the WSJ article – the pensions per person are not that generous

23 Yankuba June 30, 2015 at 4:03 pm

Scratch that – Lithuania is 3x less than Greece, but Greece is in the middle of the pack (Lithuania is at the bottom).

24 Taimyoboi June 30, 2015 at 5:53 pm

Doesn’t this confuse cause and effect to some extent? Don’t the higher Greek pensions inflate the overall cost of living in Greece in a manner similar to inflationary policy?

25 Aristotle Magganas July 2, 2015 at 4:13 pm

In Greece, on the whole, it is rather rare to have a mortgage on your house. Many Greeks even have second homes, also without mortgages. And pensioners often live with their children/grandchildren.

26 Moreno Klaus June 30, 2015 at 2:43 pm

Is this adjusted for purchase-power parity? Prices in Lithuania are likely much lower than in Greece. “yeah you should be miserable like us lithuania” loool

27 Sigivald June 30, 2015 at 5:49 pm

Exactly the point I was going to make.

Raw outlay per capita tells me nothing very useful, compared to the values adjusted for cost of living/purchasing power.

(Maybe Greek retirees should move to Latvia?)

28 David June 30, 2015 at 2:45 pm

Fair enough, but Greece has been in the Eurozone since 2001, and Lithuania since only 6 months ago.

It is a little rich for the Lithuanians to get invited into the Eurozone and then almost immediately start talking down to a senior member.

A little restraint is in order, or existing countries will start thinking twice about extending membership to the next post-Soviet country.

29 Anon June 30, 2015 at 3:31 pm

This is by far the weakest counterargument being offered in the comments here.

30 David June 30, 2015 at 9:52 pm

That’s a pretty weak counterargument to a counterargument 🙂

31 niav July 2, 2015 at 3:55 am

Considering that Greece got into the eurozone by cheating, I’d take all that “seniority” with a large grain of salt.

32 John June 30, 2015 at 3:38 pm

However, this particular “senior member” demands in righteous terms that the people of this “junior member” to sacrifice ~1% of their GDP to pay their people’s pensions. Is that rich? Or should we say impoverished?

For sure, it is politically impossible, whether in Lithuania or Germany. Tsipris likes to talk about democracy, but the rest of Europe’s elected leaders are not going to sacrifice their elected governments for his.

33 David June 30, 2015 at 10:02 pm

If Puerto Rico became a state and then immediately started hammering fiscal transfers to West Virginia, I would find that a little rich, too.

When the new country (or state, or person) in a group starts telling everyone else what’s what, it’s annoying, even if they are right.

34 Adrian Turcu July 1, 2015 at 11:29 am

There’s no seniority provision in the EU accession treaty.

35 Steve-O July 1, 2015 at 4:36 pm

Damn those uppity Lithuanians.

36 Interrogative Interloper July 9, 2015 at 3:37 am

David, when the senior member is coming back for the third round of bailouts because it was not following Euro rules on deficit and debt to gdp ratios for it’s entire time in the EZ (apart from the years when it was imposed by the Troika), and the poorer junior member is expected to foot the bill…I think it gives the junior member a little latitude in skirting the EU social conduct rules.

Speaking of what’s rich though is that the senior member has the chutzpah after having been bailed out twice already to call it’s biggest creditor Nazis, thugs and terrorists, then asking for another bailout and demanding a haircut because the loans are unsustainable while in the same breath asking for more money which will move the loans back into unsustainable territory.

That’s rich….really, really rich.

37 Jan June 30, 2015 at 2:46 pm

From a report this January.

The highest at-risk-of-poverty rates were observed in Greece and Romania (23.1 % and 22.4 % respectively), Bulgaria (21.0 %) and Lithuania (20.6 %) and the lowest in Slovakia (12.8 %), Denmark (12.3 %), Finland (11.8 %), the Netherlands (10.4 %) and the Czech Republic (8.6 %).

When considering country-specific situations, the risk of poverty (after social transfers) increased the most in Lithuania (2 pp) in 2013 and decreased the most in Spain (1.8 pp).

If we consider the at-risk-of-poverty rate before social transfers a slightly different picture emerges: the at-risk-of-poverty rate remains stable between 2012 and 2013 in the EU-28 and significantly rises in some countries, with the largest increases registered in Greece (1.2 pp) and Lithuania (1.9 pp).

http://ec.europa.eu/eurostat/statistics-explained/index.php/People_at_risk_of_poverty_or_social_exclusion

Is it good that Lithuania’s elderly are so likely to be in poverty? Should other indebted countries seek to reach that level?

38 XVO June 30, 2015 at 2:56 pm

Spoken as if resources are made out of nothing and cost nothing. Is it fair that I have to pay back the credit card company or the bank the money I borrowed from them? I have to live in abject poverty to pay it back!! Where’s my bailout!! Jan, I want you to bail me out. I’d say 200k would put me on the right track…until next time.

39 XVO June 30, 2015 at 2:57 pm

They want interest too I might add!!!

40 XVO June 30, 2015 at 3:01 pm

How could I have foreseen I would not grow my income as fast as promised? I was young and foolish and those were abundant days!!! The banks gave me money, that’s all I knew, they said I would make a lot of money with my degree in the future, they said it would be easy to pay back. How could I have foreseen that due to circumstance well beyond my control that this debt load would be such a burden?! It’s only right that you help me fix this, you are after all so very kind to unfortunate people like me, and you can see I was tricked!!

41 Jan June 30, 2015 at 3:09 pm

It is a conversation between you and your lender. If you borrowed the money and can’t pay it back because you have to pay to have a roof over your head or cover a hospital bill, then you get by and your lender learns a valuable lesson.

42 Hazel Meade June 30, 2015 at 4:23 pm

Yes, a lesson that they shouldn’t lend money to you. Ever. Again.

So what happens if you STILL can’t pay for the roof over your head and your hospital bills?

43 msgkings June 30, 2015 at 4:36 pm

Chapter 11

44 Jan June 30, 2015 at 4:36 pm

Well then you get a bit of chaos and maybe a revolution. In a senior EU country. Going to be awful uncomfortable on the continent for a while.

45 Alain June 30, 2015 at 2:56 pm

You are right comrade. They should demand more resources from other nations. How dare the other countries say no to such requests.

As an aside, comrade, there is a fund for Greece that you can contribute to right now: https://www.indiegogo.com/projects/greek-bailout-fund#/story

Give comrade, give! Back up your strong words.

46 Jan June 30, 2015 at 3:05 pm

Who are the sillies that kept giving them more money? Time for a haircut, I say.

47 John June 30, 2015 at 3:41 pm

There are no more such sillies. There are only such sillies that demand that others become so silly.

48 Mike W June 30, 2015 at 7:58 pm

Would those “sillies” be the unelected social-engineering bureaucrats at the IMF and EU? What is it a taxpayer can do about them?

49 Keith June 30, 2015 at 2:56 pm

“Should other indebted countries seek to reach that level?”

Let me fix that for you. Should other countries borrow money and not repay it like Greece so they too can fund social programs?

50 Jan June 30, 2015 at 3:06 pm

Let me fix that for you.

“Should other countries and institutions lend money to financial basketcases like Greece long after it is obvious they can’t pay it back.”

51 widmerpool June 30, 2015 at 3:53 pm

“Stop! Or I will shoot myself in the foot!”

52 Jan June 30, 2015 at 4:00 pm

Sounds like both are going to happen–the stopping and the foot shooting. Everyone will win and lose, and nobody will be happy.

53 Cooper June 30, 2015 at 4:47 pm

The northern European countries don’t want to lend Greece any more money. The impetus is on Greece to prove its creditworthiness to justify further financial aid.

Beggars can’t be choosers.

If Greece doesn’t like the terms of the ECB loans, maybe they should look for alternative financing. China? Russia?

54 Hazel Meade June 30, 2015 at 4:56 pm

Out of the frying pan and into the fire?

55 Rahul June 30, 2015 at 2:57 pm

Greece is still worse than Lithuania, right? And this after a 300% more pension rate?

56 Jan June 30, 2015 at 3:02 pm

I don’t think you are reading the article correctly. The median pension is not 300% higher. It is spending on pensions per capita.

57 Rock Lobster June 30, 2015 at 4:11 pm

So many painfully ignorant responses to Jan’s comment from people who have not done their homework.

58 Thomas July 2, 2015 at 12:19 am

let us know the results of your homework, so we too can demand further reparations for Greek luxury retirement.

59 Mike W June 30, 2015 at 8:13 pm

So is the question, should anyone anywhere have a lower standard of living than anyone else anywhere else merely because the society they were born into cannot manage the higher level of wealth creation of another jurisdiction? And therefore, it is just for the lucky higher wealth-creating jurisdiction to transfer some of their good fortune to the lower wealth-creating jurisdiction?

60 majaz July 1, 2015 at 10:57 am

Here’s a bit on poverty and pensioners in Greece, specifically on the statistic that “45 % of Greek pensioners live in poverty”.
http://t.co/jjloIEI4JR

61 Hoosier June 30, 2015 at 3:03 pm

And Lithuania is better off because of this? How do their pensions compare with Spain or Italy? “We only provide our elderly with 500 euros a month!” is not something to be proud of. It’s a sad reflection of our priorities. The catholic nation of Lithuania would do well to read the Popes current encyclical and take it to heart.

62 colleteral June 30, 2015 at 4:11 pm

They might be able to afford better pensions if they didn’t have to pay for Greece’s.

63 Dude June 30, 2015 at 5:34 pm

Ha! This one cracked me up. +1

64 Cooper June 30, 2015 at 4:59 pm

You have to compare it against average wages.

https://en.wikipedia.org/wiki/List_of_European_countries_by_average_wage

In Lithuania the average worker takes home 554 Euros in net income per month compared to over 1000 Euros in Greece. Greece is a much richer country than any of the other Eastern European/Balkan nations.

65 Hazel Meade June 30, 2015 at 5:06 pm

It amuses me how happy lefties are to tout the Pope as an authority on economics these days.

66 tylerh June 30, 2015 at 5:26 pm

um –the GOSPELS pretty much ignore “gay marriage.” The key New Testament passages (eg Romans 1:24-27) are in the Epistles.

I would say the current pope stays much closer to the message of the Gospels than many politically prominent “social conservatives.”

(um — you do realize that, thanks to the rending of the veil in temple (Matthew 27:51) , the Levitical injunctions aren’t binding, right?)

67 ttt June 30, 2015 at 5:37 pm

i think he forgot his sarcasm tag

68 Rahul July 1, 2015 at 1:19 am

Does the Pope’s encyclical come with funding attached?

69 GeoffBr June 30, 2015 at 3:11 pm

Varoufakis is making a political point, not an economic one, and an economic analysis misses the point. Commenters can debate what Greece’s pension “should” be all they want, but ultimately Syriza is going to have to be able to sell a deal to its electorate. That debate is as much about emotion as logic, especially since few Greeks are likely to want to benchmark themselves against Lithuania.

70 RG June 30, 2015 at 3:15 pm

And emotionally Greeks want a pension that logivally they can’t afford. So we’re back to square one. Framing it as a political question does not make reality go away.

71 GeoffBr June 30, 2015 at 3:25 pm

RG, obviously there is a problem either way. But Lithuania is attempting to persuade, and it chose an unpersuasive way to communicate to its audience. If the goal is to get Greece to accept the offer, as opposed to scoring debater’s points, then being understood is more important than being correct.

72 RG June 30, 2015 at 3:32 pm

From the snippet it seems like Varoufakis was the audience and the Lithunia minister was making both a poltical and realistic point that Greece will find very little sympathy (or bail out money) from Lithuanians in order to keep Greek living standards above their own.

73 Curt F. June 30, 2015 at 3:40 pm

Lithuania should have ended by proposing that Greece’s should only cut their pension spending by X/2 euros instead of X euros, conditioned on acceptance of the idea that Greece should have to give X/4 euros to Lithuania every year. It’s a win win!

74 RG June 30, 2015 at 3:18 pm

Vote all you want. Vote yourself any goodies you feel you deserve. Doesn’t change reality, just like the Illinios Supreme Court’s decision over pensions doesn’t change their reality.

75 Hazel Meade June 30, 2015 at 5:09 pm

Why should anyone be trying to “sell” anything to the Greek electorate. If you ask me, it’s the Greek electorate that should be desparately trying to sell things to us.

76 GeoffBr June 30, 2015 at 5:32 pm

Hazel, your premise is absurd. If no one cared whether or not Greece accepts an agreement, then there wouldn’t have been any negotiations in the first case; obviously, Europe prefers Greece’s acceptance to the reverse. Thus the need to sell the idea.

77 Larry Siegel July 1, 2015 at 1:04 am

I think she means they should produce something they can sell to get money instead of asking for a handout.

78 Hazel Meade July 1, 2015 at 9:49 am

Both, actually.

On multiple levels, the Greeks are the beggars in this situation. Why is anyone begging them?

79 Rahul July 1, 2015 at 1:30 am

Isn’t Syriza asking people to say “No” to the agreement?

80 So Much for Subtlety June 30, 2015 at 8:02 pm

GeoffBr June 30, 2015 at 3:11 pm

Commenters can debate what Greece’s pension “should” be all they want, but ultimately Syriza is going to have to be able to sell a deal to its electorate.

Greek voters want high wages, good social services, to be able to retire at 50 and make the Germans pay for it. As well as a pony.

Syriza can sell whatever they like to their electorate. They ain’t going to get a pony. Not any more. Ultimately the real world exists and the Greek voters will have to accept they cannot retire on German money any more. They will have to live within their means. Politics does not trump economics.

81 dearieme June 30, 2015 at 3:59 pm

I understood that the scandal was how early Greeks get pensions. Don’t hairdressers get theirs at 50 on account of the hazards of the trade?

http://www.businessinsider.com/in-greece-you-can-retire-at-50-with-full-benefits-2010-3?IR=T

82 MC June 30, 2015 at 4:23 pm

“Mr. Varoufakis shot back that Greeks would never put up with so little.”

Profligate Greeks expecting their poorer neighbors to subsidize their standard of living. The arrogant hubris of the Greeks apparently knows no limits.

83 Jamie_NYC June 30, 2015 at 5:59 pm

“hubris” – they invented it! ; -)

84 Barkley Rosser June 30, 2015 at 5:21 pm

Ah, the Greeks will not be Very Serious People until they have their pensions below those in Lithuania. Right; take that, you commie Greek government that must fall!. That they have cut their pensions by 40% since 2010 as part of the austerity packiage that tanked their economy so that the French and German banks could get bailed out of their bad Greek debts (now mostly palmed off onto Euro-wide entitiies) is is not mentioned by any commenter here or by Tyler or by the article. Pretty typical. But, hey, if we are to be Very Serious People, then we must act like junior German finance ministerrs.

85 Rahul June 30, 2015 at 6:26 pm

What is your yardstick of fairness here? The Lithuanians get less than a third of the pensions of a Greek but see approximately the same cost of living as the Greeks.

Still it is fair for the EU to keep pumping money into Greek pensions at the same 300% more than Lithuanian levels? Why?

86 Moreno Klaus July 1, 2015 at 3:12 am

Not true…

87 Rahul July 1, 2015 at 8:18 am

Which part? (a) “Lithuania spends per capita on pensions, less than a third of Greece?” OR (b) Lithuania is only 20% cheaper on CPI basis.

88 Ricardo July 1, 2015 at 4:24 am

First, before we even get to the question of fairness, there is the basic economic analysis. Greece continues to be in a deep recession and has made significant cuts to its budget to the point that it will run a primary surplus in 2015. A major cut in pension spending is exactly the sort of cut we can predict will drive the economy even deeper into recession.

Second, this amounts to saying that the Greek government needs to prioritize money it owes to the IMF, ECB and various Eurozone governments and entities above money it owes to its own citizens. Why should Greek citizens go along with this?

Finally, the whole attitude of objecting to the idea that other countries should help Greece out is precisely why the Euro is unsustainable and harmful as is. This is an old point but it bears repeating. In the U.S., few people complain about how New York taxpayers have to pay for the needs of places like New Mexico or Mississippi — fiscal integration has to go along with monetary integration in the long run.

89 chuck martel July 1, 2015 at 6:46 am

“A major cut in pension spending is exactly the sort of cut we can predict will drive the economy even deeper into recession.”

There would be pain for awhile and suffering. We can’t have that. Any attempt at reorganizing the Greek fire drill must be painless for the Greeks.

What does the Greek government “owe” to its own citizens? The whole situation demonstrates what can occur when elected officials make promises that others must keep.

90 Ricardo July 1, 2015 at 8:44 am

Again, I put economic analysis, game theory and realpolitik ahead of discussions of fairness.

Greece is a democracy and a sovereign country so the ultimate decision really is up to them. Every measure that increases “pain and suffering” also increases the probability that Greece will unilaterally default on its debt, impose capital controls and exit the Euro. This, in turn, increases the probability of contagion to other Eurozone countries with probable negative consequences for all involved. It’s a brinkmanship game, in other words, and Greece might start betting that it can pull through a default and Euro exit in OK shape. We have enough experience with sovereign default (but not quite with exiting a currency union) to know that it is possible to default and bounce back.

There is no need for scare quotes around “owe.” In normal parlance, if I say I will pay you money in the future, that means I owe you. Again, Greece is sovereign so ultimately it does get to decide which of those promises — whether to pensioners or to the IFM — to keep and which ones to break. Officials — and it’s not clear why “elected” officials are worse at this than unelected ones — inherently get to make promises that others must keep. Corporate signatories get to do this by definition.

91 Randy McDonald July 1, 2015 at 2:07 pm

“Greece is a democracy and a sovereign country”

Greece is not a sovereign country. Its democratically-elected government has, over the decades, joined any number of institutions which explicitly limit Greek sovereignty, the Eurozone being only one of many.

92 Thomas July 2, 2015 at 12:29 am

Ricardo, the idea that a country can magic it’s way in to wealth by fiscal and monetary policy is perverse. Wealth is a function of production, and manipulations via policy only work so long as the participants in the economy are ignorant. Else, free lunch, magic, unicorns and ponies: just get the macro right, a unicorn in every garage.

93 Rahul July 1, 2015 at 8:30 am

Is it possible to get them out of this recession without a currency devaluation? That is the crucial question.

I see the subsidies going to pensions as life support. A safety net. Not a recession ending measure. And for that purpose this pension amount seems far too generous. Greek spending $21,600 per capita pension a year seems more than what an average American pension is.

94 Ricardo July 1, 2015 at 9:01 am

Can Greece get out of recession without devaluation? I think the answer comes in three parts. First, if Greece gets debt relief and/or subsidies from other countries in exchange for meeting reasonable targets, almost certainly yes. Second, if there is no debt relief or subsidies, maybe. But it might take several more years of prolonged deflation, economic contraction and crushing unemployment. The history of prolonged spells of unemployment and recession in Europe is not a happy one, to put it mildly, and this sort of thing can increase support for communists, fascists or other radical, anti-democratic groups. Scenarios like this are in no way guaranteed to end happily for anyone.

On pensions, the question is not whether pension spending can end Greece’s recession — clearly it can’t. But that does not mean that further cuts to pensions will not prolong the recession. The life support analogy is a good one. Life support after a serious accident won’t necessarily allow you to run marathons but cutting off the life support has predictable, negative consequences.

95 Rahul July 1, 2015 at 9:58 am

@Ricardo:

Historically, most nations that did come out of massive crisis of this sort did so via default / devaluation, correct? Is there a precedent for the rescue via subsidies without devaluation model?

96 Thomas July 2, 2015 at 12:34 am

I read Ricardo as basically saying: “Yes, if people who aren’t Greek give Greece money, it’s possible for Greece to pull through”

Enabling the addict doesn’t work, and it’s not fair.

97 MC July 1, 2015 at 3:36 pm

“Second, this amounts to saying that the Greek government needs to prioritize money it owes to the IMF, ECB and various Eurozone governments and entities above money it owes to its own citizens. Why should Greek citizens go along with this?”

If Greece were a municipality like Detroit or a private company it would file for bankruptcy and lose all control and have the terms dictated to it by a manager or judge who would impose the same measures, so Greek complaints about the troika not respecting their sovereignty ring rather hollow. If Greece wants more debt relief than is being offered and more discretion over its restructuring, then it should stop this endless nonsense and quit the euro already.

98 MC June 30, 2015 at 6:50 pm

Very Serious People do not repeat the greedy bankers/Germans trope. Somewhat Serious People who want to renege on their debts should be prepared to take the full consequences of doing so and not expect one more euro from their neighbors.

99 Mike W June 30, 2015 at 8:42 pm

Do you really believe anyone anywhere would “cut their pensions 40%?

100 JMU July 2, 2015 at 12:26 am

F*ing Barkley Rosser makes multiples of Greek and Lithuanian pensions but here he is, demanding that the world pay for the socialists to lay about. Doesn’t he know there are poorer majority black countries in Africa that deserve the western world’s money more? Here’s to firing Rosser for forgetting his leftist politics and supporting handouts to rich, white Greeks.

101 Poincare June 30, 2015 at 6:17 pm

Africans live in mud huts on a dollar a day, maybe those Not Very Serious spendthrift commies in Lithuania should reexamine their generous welfare programs.

102 Rahul June 30, 2015 at 6:27 pm

Yeah? Do Africans exist as a part of the same monetary union?

103 Poincare June 30, 2015 at 11:28 pm

I’m just saying there’s room for improvement.

104 Rahul July 1, 2015 at 1:16 am

With your own money, yes. Doesn’t justify awarding high pensions when you are already bankrupt.

105 Poincare July 1, 2015 at 2:38 am

Is that what you were saying when the Fed was lending unprecedented amounts of money to Wall Street banks? Is that what you would say to them now?

106 Poincare July 1, 2015 at 2:54 am

Wouldn’t it seem like the fair thing to do, if you’re going to bail out the banks that foolishly lent to Greece, to be to give Greece the same consideration at approximately the same terms? By how much were bank salaries and bonuses cut in the banks that lent to now bankrupt Greece and how does that compare to the demands put on Greece for being lent the money that was used to pay back those banks? Aren’t interest rates always justified as a risk premium? If that’s the case, then morality doesn’t enter into, it’s purely business. The risk of default was already priced in. Therefore, whatever support is given to the lender after the fact is due also to the borrower, morally speaking.

107 Thomas July 2, 2015 at 12:36 am

The group of people supporting the fed giving away money at 0% to all (privileged) takers is the group of people supporting giving Greece free money as well. It’s the group you vote with, Poincare. lol.

108 JasonL June 30, 2015 at 7:35 pm

Agree that they should be kicked out. Agree the scolding doesn’t amount to much going forward, but lets be clear. They lied outrageously for something like 20 years to keep the money coming. In a state where everyone behaved rationally with full disclosure, the Greek pension system would have collapsed many years ago.

109 Cliff Arroyo July 1, 2015 at 2:07 am

They lied and a long line of European ministers knew this and pretended to believe them and probably encouraged them. And their big troubles began when a government accidentally told the truth.

110 Mike W June 30, 2015 at 8:17 pm

Wow, this whole discussion is going to apply to California in a few years.

111 Barkley Rosser June 30, 2015 at 9:05 pm

Uh, California is running a healthy surplus. Try Kansas, Louisiana, or Wisconsin.

112 Mike W June 30, 2015 at 9:45 pm

Well yeah, if ya leave out all the unrecorded liabilities…ala Enron.

113 Art Deco June 30, 2015 at 10:17 pm

http://etf.wi.gov/news/morningstar-report2013.pdf

Wisconsin’s pensions are fully funded. California’s are not.

114 Barkley Rosser July 1, 2015 at 12:21 am

You really are good at being irrelevantly foolish, AD. Where is that head of yours again?

Yeah, big deficit Wisconsin that is massively cutting its higher ed budget while borrowing money to build a professional basketball arena does have the best funded state pension system in the US, but also big deficit KS has the sixth worst while big deficit LA has the fourth worst. CA is in the middle of the pack on that one, but running a surplus.

When you pull your head out, I really do not want to be anywhere nearby to smell it.

115 Art Deco July 1, 2015 at 9:24 am

I find it sort of grotesquely amusing that a 67 year old tenured professor enjoys his second adolescence in these comboxes (or, perhaps, that an irritated student of the real Barkley Rosser is making crank comments under his handle – I’m aware of a professor in Wyoming that had this done to him).

116 Barkley Rosser July 1, 2015 at 11:41 am

Tell us who you are, “Art Deco,” and I might treat you with some respect. Otherwise, you are utterly undeserving of any. Note, while I insulted you, and will gladly do it again, I did reply to your silly point. You had no reply other than to poke at me\, while you hide behind your phoney moniker. “Art Deco” indeed, how ridiculously pretentious.

117 Art Deco July 1, 2015 at 1:15 pm

I use one handle and have only ever used one. I’m here to discuss issues, not my work life or my domestic life or anything else. I’m not interested in your ‘respect’.

I stated a factual point, which appears to irritate you greatly.

118 Farkley Foscker July 2, 2015 at 12:38 am

RAAAAAAAAAAAAAAAAAAAAAAH!!!!!!!!!!!!!!!! JMU!

I HAVE A PHD!

119 Blag the Ripper June 30, 2015 at 8:28 pm

Greece is about to learn the meaning of the term “Greek style”.

120 FC June 30, 2015 at 10:50 pm

If we don’t get a “Rage Against the Machine: Live at the Acropolis” album out this class struggle I will be deeply disappointed.

121 Axa July 1, 2015 at 6:46 am

+1

122 Art Deco June 30, 2015 at 11:04 pm

I find it interesting that a country with a per capita income less than half that of the United States has a body of pensioners who receive $1,800 a month.

123 Cooper June 30, 2015 at 11:42 pm

Average Social Security recipient in the United States receives only $1400/month.

124 Ricardo July 1, 2015 at 6:44 am

Who wants to volunteer to live on $1,800 per month, before taxes and at developed country price levels? It’s possible if your house is fully paid for and you live in a place with socialized medicine (and/or you are in perfect health).

125 chuck martel July 1, 2015 at 6:53 am

The very concept of a well-funded retirement for everyone hasn’t been proven to be viable, since it’s been in existence for only two generations.

126 Thomas July 2, 2015 at 12:41 am

No, no!

School until 35. Work until 50. Retire for 40 years.

If your country doesn’t let your retire after 15 years of 30 hour weeks and 11 months per year, well, I’m indignant. Rich people, remember! Rich people exist! Why should I have to work, just be reality fails to deliver finished goods to my address by nature?!?!

127 Rahul July 1, 2015 at 9:40 am

Isn’t Greek CPI barely 20% more than Lithuanian? Is that a developed country price level?

128 Thomas July 2, 2015 at 12:39 am

“Who wants to volunteer to live on $1,800 per month, before taxes and at developed country price levels? It’s possible if your house is fully paid for and you live in a place with socialized medicine (and/or you are in perfect health).”

Approximately every human who is living or has ever lived. Are you daft?

129 Mr. Econotarian July 1, 2015 at 1:30 am

BTW, just because Greece defaults on various debts does not mean it has to stop using the Euro.

For example, Montenegro and Kosovo have unilaterally adopted the Euro with no formal agreement with the ECB, just as El Salvador unilaterally adopted the dollar with no formal agreement with the Fed.

From day one, Syriza could have announced that they were doing this, and could have forestalled runs on Greek banks. If Greece really has a “primary surplus,” then why bother replacing the Euro, just default on your debts. Sure, the ECB may decide to not back Greek banks, but it might be better if there was no “banker of last resort” for Greece.

130 Ricardo July 1, 2015 at 4:59 am

This is true but it misses the larger picture. Greece’s two big, fundamental problems since the start of the Euro crisis have been a large government debt (relative to GDP) and a price level that makes the Greek economy uncompetitive compared to other Eurozone economies. Defaulting (temporarily) fixes the first but staying on the Euro leaves the second problem untouched. Following a Greek default, it would still be the case that Greece faces insufficient demand for its goods and services both at home and abroad and it would also still be the case that the government would be unable to use monetary policy (because of the Euro) or fiscal policy (since it would have no chance of borrowing at reasonable rates for the next few years) to help address its underlying economic problems.

Going off the Euro, by contrast, would be incredibly messy but it is precisely what would help fix the second problem. One needs to understand both of these problems in order to grasp the mess Greece is in. Otherwise, Greece’s budget is in better shape than most OECD countries and its debt, while very high, is still smaller than Japan’s. The reason Greece is in crisis and Japan isn’t is because of the Euro and the huge disadvantage it has led to for Greece in terms of competitiveness.

131 Rahul July 1, 2015 at 9:55 am

Greece’s debt is smaller than Japan, yes. But Japan’s GDP is 20x as large. Not an apples for apples comparison.

132 dustydog July 1, 2015 at 7:04 am

The endgame is clear. As an American, I welcome all our new voting illegal immigrants from Greece. All those old people coming to America will actually bend the cost curve for Obamacare and Medicare down even more.

133 Bill Reeves July 1, 2015 at 10:17 am

Meanwhile the average US social security benefit in in May 2015 was equivalent to 1098 Euros. About two thirds of the average Greek Pension. Greeks are totally, comprehensively pathetic. They deserve everything they get. Good and hard. Me, I’m getting a case of popcorn for the show.

134 Floccina July 1, 2015 at 11:57 am

Some people in the USA only get $600/month.

135 Sirr Duende July 1, 2015 at 12:12 pm
136 Chris July 1, 2015 at 3:03 pm

Greece got to pretend it was a far wealthier country thanks to the Euro and the stupidity of people loaning them money they could not pay back.

Now Greek politicians don’t want to admit to their people that Greece is not actually on par with the older EU members – not even Spain or Portugal who joined the EU afterwards, but more like Lithuania.

As the woman said, at some point you run out of other people’s money.

The German response can be said to be self serving, but that does not excuse the culpability of the Greeks. They are not as rich as they wanted to believe, and they are now paying the price. That is not the fault of anyone else.

If there is a problem with the German response, it is not against the Greeks. It’s that they turned the losses from private German banks to the German taxpayers.

137 Boonton July 1, 2015 at 3:11 pm

My personal proposal:

1. Greek banks cannot use Greek debt to either create Euros or as collateral for loans from the ECB.

2. The ECB creates cash equal to Greece’s current debt. That debt is paid off entirely and new Greek bonds are issued and held by the ECB. These bonds would be due in full in 10 years but be set at 0% interest. Principal payments of 1% per year would be due.

3. Greece agrees to service these new bonds. Every year the ECB will sell 5% of its inventory off to the open market so in 2025 half of these bonds will be in the private sector.

From this point on, Greece’s budget is up to them. They don’t have to perform any particular combination of pension/spending/tax increases. They just can’t borrow from the ECB. If private parties want to buy new debt from them, no problem. If not then the gov’t lives within its means.

In ten years the absolute debt will have shrunk by 10% due to the principal payments. Hopefully as a % of Greece’s GDP it will also have fallen a bit. At that point Greece would have to float a new bond issue to make the balloon payment. Or they default. Either way the crises is averted for now, the debt is controlled and new debt isn’t piled on top of old. The zero interest rate is in line with general interest rates these days. If Greece plays well but still needs help, the EU can talk about it in 2025 but there might be a good chance such a provision isn’t needed and Greece can simply refinance back into normality.

138 Pshrnk July 2, 2015 at 5:15 pm

WHO 2013 reported Life expectancies overall of 81 in Greece and 74 in Lithuania. An extra seven years.

I gather Greece is increasing retirement age to 70. I’m not sure Lithuania’s retirement age. I think 65.

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140 Peter July 2, 2015 at 11:30 pm

I tried to warn as many people as I could in the January ’15 elections but it was in vain. People are starting to understand that things can get WAY worse than what they are now, but unfortunately, not enough of them. My country is now doomed because these bolsheviks fooled people by telling them they can both keep us in the euro and restart the spending sprees of the past! I am beggining to think they had a hidden agenda all along, to bring us back to the drachma and out of the EU.
PM Alexis Tsipras went all-in, lost it all, and is now using the EU as scapegoats for his failure. He did manage to get himself into a win-win situation for himself and his party, by using the referendum to remove any responsibility for the 5 months he has been in power. This is what I believe can happen after this Sunday’s referendum: In case of a major YES win, he will resign and call for elections, with the banks shut, pensions & wages unpaid, and a dead market. He will again blame the EU and the previous governments for the mess. In a major NO win, he will pretend to go back and “negotiate” with the lenders, only to come back without a result and again put the blame on the EU, then he will either go for “Plan B” i.e. get out of EU, start printing inflationary drachmas or simply resign, and go back to his parliamentary comfort zone: being the opposition. In the cases of slight YES or NO wins, he will be “obliged” to call in elections due to the “unclear answer”. In any case, he will be in a very good position compared to now. These people are either huge amateurs or professional liars that have a hidden agenda. They have forged alliances with the most extreme and dangerous groups including neo-nazi Golden Dawn and far-right ANEL, supporting their parliament motion to initiate the referendum and standing together for a NO vote. The forces of populism have been brewing for decades and now all kinds of extremists (left or right) are seen as patriots, mostly for people with lower education, which makes things even worse.
I certainly wish for a YES win, even though this referendum is a complete farce, as it is asking to vote on a proposition that is no longer valid! The governement announced it in a dictatorial fashion by waiting until the very end of the bailout programme, one rainy Friday night! Of course banks never opened since except for some pensioners that are allowed to get a part of their pension. They changed the way the referendum is held overnight by shortening the length of time required to vote on it among other changes. When the French held a referendum on the EU constitution they had 5 or 6 months time to decide. Now, a decision that will shape the country for decades will be decided in _one_ week, and people still have no clue what it’s about. The government is also breaching the constitution by placing pro-NO posters everywhere in the city, using (allegedgly) public funds. In case of a YES win, we will at least be sure of Tsipras’ resignation and establish a new pro-EU foothold in people’s hearts & minds, and hopefully, arrange a better deal with Europe, with MORE free market reforms and LESS low-income pension cuts and tax increases. A NO vote can lead this country to look like anywhere from Bolivia to Mozambique. It could be the beggining of a dictatorship or a civil war. This referendum has divided people over matters that most people have no idea what they are talking about, and reviving ghosts of the civil war between communists and loyalists.
What is also alarming is that there will not be any foreign observers to watch over the election process, which is why I have volunteered to be an electoral representative for the YES campaign, which, by the way, is the only official campaign. NO doesn’t have an official campaign because then the Golden Dawn-Syriza-ANEL coallition will start to become official and things might get… awkward.
– See more at: http://marginalrevolution.com/marginalrevolution/2015/07/the-battle-for-greece.html#comment-158510622

141 Lahcen July 9, 2015 at 6:45 am

Hi guys, is here any person who speaks Bulgarian for a job position in Vilnius 🙂
Feel free to send me an email to discuss about this 🙂
Benkerkiche@gmail.com

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