The Greeks vote for “austerity now”

And I do mean now.  With the primary surplus gone, this means further cuts in government spending.  Confiscation of bank deposits and banks flat out of cash.  Continuation of capital controls.  Difficulties in consummating international or even domestic transactions.  Problems in paying for fuel, seeds, fertilizer, and medicines.

Austerity now.

Here are some possible Greek plans, but everything remains up in the air.  If nothing else, I give them credit for their stones.  Let’s hope this works out in the longer run, it sure won’t over the course of the next year or two.


Given Greece's long-term political instability and the utter incompetence of the clowns in charge, some sort of coup wouldn't be altogether implausible, particularly when the stupid voters figure out that they just voted themselves into more misery. They only have themselves to blame. This is almost certainly a case of democracy producing a less efficient result.

Don't worry, they will blame the Germans, not themselves.

That will only last for so long. Eventually the people will turn on the government, too. The Not-So-Serious people are promising that this will give them leverage to get a better deal out of the EU. When this doesn't happen, it will come back on them.

The question is who else will blame the Germans.

The Telegraph article says things like "[t]here are mounting signs that the creditors are stepping back from the brink, conceding that they may have to renew talks with Syriza after all," and accepting some Syriza framing as if not continuing to give ELA money is an active attempt at "liquidity strangulation".

If that had been the Guardian or the NYT, I might have rolled my eyes. But I am not sure what to make of it when it comes from the Telegreaph.

Exactly. For all his economic prowess Tyler doesn't get how the EU does work: The greeks have basically slapped the EU politicians in the face and called their bluff.

Now Juncker and Merkel and Co. will wine and cry as they always do when Greece failes to meet its agreed to obligations and then they will cave in as they always do and throw even more money at them. Because the alternative would mean to face their voters and tell them that they acted stupid to the point pure idiocy and maybe even treason for the last seven years. Not even the Germans would then stay as meek and docile as they so far did.

So more money it is. And this time there cannot even be any pretense about getting payed back later. It will be a lasting transfer of wealth to the cronies of the government that played this game of chicken the hardest.

Kudos to Alexis.

Do you think the german voters want Merkel et al to throw more money at Greece? What on earth makes you think that? They are already terribly upset at the humongus amounts of money wasted. They are probably really happy about the "No" vote, as this means that Merkel can shut off the tap and be done with it.

Leftists often complain about the lack of democracy by the troika. That is true, as there is little democratic oversight there. However, if there really had been democracy, Greece would have received far less money, and German taxpayers woud have flipped them the bird years ago. The lack of democracy has been in Greece's favor.

Greece is running a primary surplus. It can repay some of its debts - but after 7 years of recession, it never 'grew' its way out of the problem, due to austerity and tight Euro inflation policies that favored Germany.
So once the creditors openly acknowledge that only SOME debts will be repaid, they can work things out.
Privately, the creditors know this already, and have for many years. But they hate admitting it openly.
Just like with any BK, some debts must be written off. Like with a band aid, best to rip it off clean and get on with it. This farce has gone on too long. Once the creditors get real and include a partial write-down, the Greek government will make a deal that continues with an austerity-lite.

You can't seriously believe that Greece really ran any sort of surplus, can you? The only thing we know with absolute certainty is that Greek statistics are blatant lies.

But they sure did stick it to the man, didn't they!

The trouble with carrying out a coup is that it would be like carrying out a mutiny on the Titanic.

Post-iceberg, of course. Pre-iceberg, that might have made sense.

The junta in Egypt doesn't seem to mind.

The choice seemed to be pain now, possibility of a better situation in a few year, and pain now, no real possibility of a better situation for the foreseeable future. Given the choice between two terrible scenarios, they chose the one that might turn out to be less terrible.

Except that the situation in Greece was improving before Syriza came to power.

I'll refer you to Waldman's recent essay on Greece:

Particularly, focus on the charts at the bottom that show Greece's economic plunge over the past few years, as well as a hilariously wrong projections of growth from the Troika on austerity measures. As Waldman puts it:

>Creditors have had five years to mismanage Greece and they’ve done a startlingly effective job. Syriza has had five months to object. However much you may dislike their negotiating style, however little you think of their competence, Greece’s catastrophe was not Syriza’s work. If creditors respond to Syriza’s “intransigence” with maneuvers that cause yet more devastation, that will be on the creditors.

'Fraid he lost me with the first sentence: "Greece is a remarkable country full of wonderful people,".

Art, please report on the precise location of your head before making any further completely inane remarks.

"The precise location of my head?" It's attached to my neck, Barkley, which is attached to my shoulders.

There's nothing 'inane' about refusing to admire a dysfunctional foreign country.

Well Art you do live in rural New York right? Maybe he thinks you are the headless horseman.

@Art Deco:

Their dysfunction has been only economic. It can still have wonderful people. History has had many examples of great people who were terrible with their finances.

But the Greek people aren't wonderful in the least. Disliking Greeks is just as legitimate as disliking Americans, and millions if not billions of people are allowed to dislike Americans without being harassed by leftists. In fact their are two are three commenters on this very site that openly dislike the US. I've never seen you try to disabuse them of that dislike.





And he continues "but along dimensions of development and governance, the place is plainly pretty f#^$ed up." So, as far as a counterargument, Art couldn't get much weaker. I second the motion requesting he check his headspace before posting a comment. His defenders aren't really improving his argument, either.

Regardless, the Cowen v. Krugman prediction market just got very interesting. Can we get betting markets on their predictions?

It can still have wonderful people. History has had many examples of great people who were terrible with their finances.

It has handsome old artifacts, particularly Churches. Nice climate if you're not in the zones choked by air pollution. Some agreeable folk music (Zorba, etc). I think certain social metrics (e.g. the rate of bastardy) are much better in Greece than in comparable loci, IIRC

Dreadful political culture, bad as it gets for any occidental country, and characterized by malice, conspiracy fantasies, and recrimination (maybe not a bad as the norm in the Arab world).

A contributor to National Review some years ago published an article about a trip through Greece during which he was in an automobile accident. He either drew the short straw as regards the hospital to which he was sent or the vocation of nursing in Greece is staffed with the world's non-wonderful people.

No, Art is correct. The blog post is full of factual errors.

It's possible to fix Greece. Here is how you do it:

Let me add that I find the resignation of Varoufakis curious.

Given that the Greek government has just received a huge vote of confidence and a mandate to exit the Euro and default on debt, why would Varoufakis go? Do the Greeks really anticipate continued negotiations with the Troika? I think the Troika have a big incentive to let the Greeks stew for a while, and they have no incentive to give a better deal than they offered before. The Troika will be only too aware that left parties in Portugal, Spain and Italy will be closely following events. If a public hard line is rewarded, every hard left party out there will be pushing for some public show of defiance towards the creditors.

In any event, Varoufakis' resignation suggests to me that the Tsipras government is terrified.

Looking at those graphs, it's remarkable that only 60% of the Greek electorate voted No.

From a libertarian standpoint, it sure seems like the Greeks would have been better off dealing with hedge funds and evil bankers rather than euro-bureaucrats. One group cares primarily about maximizing returns, and the other has had motivations that are not quite as pure.

The Euro-bureaucrats in this case were primarily furthering the interests of evil bankers, is my impression.

"The Euro-bureaucrats in this case were primarily furthering the interests of evil bankers, is my impression.

My understanding is that the bankers were already given a haircut and the taxpayers were the one's who were paying for any additional net money outflows to Greece. Is that correct? And if so, aren't the Euro-bureaucrats acting as the non-Greek taxpayers would want?


I think not. The bankers did take some haircuts. But the taxpayer funded money outflow went more into the French & German banks than into Greece.

Basically the non-Greek taxpayers took what ought to have been bank losses.

It's always the fault of da man givin' me da money.

I agree that Greece should leave the eurozone and that things will slow get better if they do. Thus, I partly agree with the theory that pain now will make for a better tomorrow. However, to say the least, the current situation is much, much worse than the situation which Syriza inherited. Greece no longer has a primary budget surplus, Greece no longer has credibility with the international insitutions (institutions which it STILL hopes will provide bailout funds and in 48 hours too!!!), capital controls are in place and there is no prospect of their being lifted in the foreseeable future, Greek banks cannot function and probably will not be able to open at all for the foreseeable future (or possibly ever), right now it is not clear how pensions or civil servants will be paid, hospitals lack medicine and other supplies, food is vanishing from store shelves, tourism has collapsed and so on. Moreover, all of this was the foreseeable result of Syriza's policy choices.

Although things obviously were not great, Greece did have a primary budget surplus when Syriza came to power which suggests that the worst would have been over if the policies which Syriza inherited had been kept in place for a few more years. Even if you believe, as I do, that in the long run Greece will be better off outside of the eurozone, the transition could not have been handled any worse than it was.

In the end, this was never about Greek debt. As long as the Greeks did not make it obvious (and cause problems for EU Finance Ministers in their respective home countries) the debt could have been dealt with. Syriza, however, came to power demanding, effectively, a permanent end to the primary budget surplus. That, effectively, would have meant that the Trokia would be subsidizing Greeks forever, and that, effectively, meant that the Germans, Dutch, Latvians, and other Eurozone Northerners would be subsidizing all of the Southern Eurozone forever. No one should be surprised that this outcome was rejected.

If progressives want to subsidize Greece forever, perhaps they should dig into their own wallets first. What do you say Paul? How much are you wiling to kick in? Jeffrey? Joseph? Thomas? Barkely? Come on boys. I guess it's a lot easier to spend somebody else's money, isn't it?

"I guess it’s a lot easier to spend somebody else’s money, isn’t it?"

That's why they call it Other People's Money.

In Athens, printing Euros is sounding better and better.

Damn those EU bureaucrats, refusing to give Greece free money.

It'll be hell for the next couple of years, but unsustainable debt loads - q.v. IMF - are worse. Kiss the German arse and stay mired in poverty forever? That's what unsustainable means. Or eat bitter, as the Chinese have it, for a couple of years and detect hope at the other end. And, as an Englishman, I say that going through hell is preferable to licking the German jackboot. This, I might add, is a common opinion throughout Europe. Individuals might be liked or admired, but the state ....

And who would have gained most had Greece buckled under? Golden Dawn.

Everything is awful, but this is the least awful

The Greeks were promised that this would lead to a better deal. It won't. The Greek public keeps choosing to try to have its cake and eat it too. That cake is gone now.

The EU has already written off most of Greece's debt. There is no intent that Greece will pay much more back.

What the Europeans are demanding is reforms to the Greek economy so that the Greek economy can grow again. What Syriza is insisting on is Germany continuing to pay for useless civil servants and hair dressers who can retire at 50. Syriza's rejection of labor market reform means taking the North Korean path. Hopefully they will not go that far. Accepting the EU deal would have meant an opening up and reform, with eventual economic growth and convergence with the rest of Europe.

It is not a question of licking the German jackboot. It is a question of accepting the real world or trying to create some sort of intellectual fantasy alternative. Alas, if you click your heels together three times and wish you are in Kansas you don't actually arrive in Kansas.

Given that the EU economy has barely grown, why would anyone place credibility on a pro-growth plan cooked up by the Troika? That' s laughable. Germany has grown a small amount since 2007, the rest, not at all.

In the end all that matters is who was giving whom resources. The flow was from the EU to Greece, no amount of liberal clap-trap will make that go away.

Still, go-go progressiveness! Go-go liberalism! I look forward to how experiment turns out. Will liberalism add incalculable human suffering to an already horrible situation? Given past performance I have to say yes.

Is it only progressives who support exit?

"The flow was from the EU to Greece, no amount of liberal clap-trap will make that go away." Was it? Was it really that childishly simple? What about the banks that are the counterparties. This is far more persuasive:

"With respect to Greece, the precise thing that European elites did to set the current chain of events in motion was to replace private debt with public during the 2010 first “bailout of Greece”. Prior to that event, it was obvious that blame was multipolar. Here are the banks, in France, in Germany, that foolishly lent. Not just to Greece, but to Goldman’s synthetic CDOs and every other piece of idiot paper they could carry with low risk-weights. In 2010, the EU, ECB, and IMF laundered a bailout of mostly French and German banks through the Greek fisc. Cash flowed into Greece only so it could flow out to rickety banks. Now, suddenly, the banks were absolved. There were very few bad loans left on the books of European lenders, everyone was clean, no bad actors at all. Except one. There were the institutions, the “troika”, clearly the good guys, so “helpful” with their generous offer of funds. And then there was Greece. What had been a mudwrestling match, everybody dirty, was transformed into mass of powdered wigs accusing a single filthy penitent (or, when the people with their savings in just-rescued banks decide to be generous, a petulant misbehaving child)."


Still, you're not making a strong case for Greece.

The banks have foolishly lent, but Greece has irresponsibly borrowed, and irresponsibly spent. With no real prospect of returning the money.

So at best the banks in question would had been left to fall. Greece would had found itself in a similar situation: a bankrupt, corrupt state that cannot pay the outlandish promises made to its own public sector and pensioners. They could only do so with borrowed money, and once they defaulted (to the private banks or public institutions), they were going to be locked out of financing for the foreseeable future.

Complaining that the bail-out didn't help them is nonsense. It did help them. Instead of defaulting on the spot, they were allowed to maintain the illusion of a non-failed state. Which they wanted, by the way.

Now the Greeks are pursuing another illusion, of ending "austerity". Which can be only mean other europeans paying for their corrupt, disfunctional, and - since Syriza - ultra-populist "social justice" state. I just don't see it happening.

Greece is still for the time being within the European Union, with the free movement of workers that implies. It's unclear that the people whose work would be instrumental in their being a hope at the other end are best served by sticking around.

As Mencken would have said, the voters of Greece are about to get what they deserve, and get it good and hard.

I would put money on the Greeks printing as many Euros as they like. I wonder what Europe's response would be?

But there is a clear divide in Europe. I think it is a divide between people who can't understand how Greece got itself into this mess and people who can imagine it happening to them:

...the French economy minister, Emmanuel Macron, who said the EMU creditors are equally to blame for the crisis and must resist the temptation to "crush" the Greek people. ....

Italy's Matteo Renzi said the sight of pensioners weeping in front of banks was a black mark on the conscience of Europe. "We must start to speak to each other again, and nobody knows this than better than Angela Merkel," he said.

So what does Macron know about the French economy the rest of us do not know? And of course Renzi is moved by pensioners who can't access their pensions. He is probably worrying about his own.

I would put money on the Greeks printing as many Euros as they like. I wonder what Europe’s response would be?
Withdraw any Euro notes with the "Y" code on the back from circulation and remind people that these are no longer legal tender outside of Greece. Ditto Euro coins minted in Greece, which have a unique design.

I don't think the Greek government would print more "Y" Euros. That would quickly devalue all the paper currency Greeks are holding outside of banks, and they seem to be holding out against any form of a haircut right now.

I think they either print Euros that could pass muster in Germany, or new Euros, with a unique serial number prefix. Printing German-muster Euros would be problematic, as the ECB would be hard pressed not to drop the ELA limit in response.

"New Euros" could be a intermediary step in moving towards the new drachma, or a parallel currency that could quietly be forgotten about in the event of a deal. Schrodinger's currency.

That would quickly devalue all the paper currency

Devaluation is the whole point.

How much does the physical currency move around in Europe? I've wondered if Gresham's Law has already been causing people outside of Greece to avoid "Y" serial numbers. I wouldn't accept one in my change.

Dunno. There's a map somewhere floating around about the distribution of notes around the U.S. re their point of origin.

I grew up near the Canadian border and it was common to have Canadian coin (not bills) in your pocket, and I imagine more so if you were in Erie or Niagara County right on the border. Moving just 125 miles inland and you ceased to see much of it.

They can only print 20 EU denomination banknotes, according to some Syriza hardliner. It would take a year to print a few dozen billion EU.

They already have the banknotes currently in circulation. Notes and coin are a fraction of M1. Just renominate the bank deposits.

How does this work? Presumably the ECB dictates how many can be printed and with what serial numbers. Greek notes all start with "Y" which would make them toxic outside Greece.

As Mencken would have said, the voters of Greece are about to get what they deserve, and get it good and hard.

“Mistrust all in whom the impulse to punish is powerful.”

First time Mencken's ever been called a Pharisee.

That was directed at So Much for Subtlety.

Interest on Greek debt is a full 2.5p of GDP. Slash defense spending by half and you have a full 3.5p of GDP from nowhere. Add in 1p GDP from seignorage and we are now talking a full 4.5p of GDP.

It is more painful in the short run - no question. But now they get to run monetary policy to stabilize aggregate demand, instead of maximizing returns to German banks.

Given the social upheavals/rioting that leaving the Eurozone would entail, slashing defense spending might be impossible.

"I chucked that molotov at the police because Greece voted against the interest of Big Finance! Now we run a monetary policy designed to stabilize aggregate demand instead of to enrich financiers, and I am furious about this!"

German banks hold no Greek debt. It's all either in the Troika's hand or in the portfolios of hedge funds chasing yield.

You don't understand the argument. The Eurozone has an inflation rate of around .5%.

Greece has had deflation for years now, with all that this entails: sky-high unemployment, unemployed capital, government solvency issues, the election of radical governments.

Greece would probably benefit from a rate of inflation more in the 2-3% range. Assuming effects across the Eurozone were consistent, the ECB doing so under the Euro would push inflation in Germany and France to around 3-4% inflation, which isn't a damaging amount of inflation for German workers or business owners.

German bankers, on the other hand, lose out on bonuses if we have even a mild unexpected inflation, and given the choice between the interests of Greece and the interests of Big Finance, certainly the ECB made its choice.

Do you want a coup d'etat?

Because that's how you get a coup d'etat.

Interest in cashflow terms would have been 1.7% of GDP last year if Greece had stayed in its program and received the interest refunds from European central banks. A large part of that is for T-bills and other domestic debts. That doesn't include some deferred interest added to principal.

Greeks will see full employment growing and pressing olives to produce oil for their diesel cars and trucks.

Either that, or to trade olive oil for fuel oil, and stop using olive oil for eating.

I'm hoping for a coup. The Greek military has saved Greece that way a few times in the past.

You better hope the man on the white horse is like Pinochet et al and not the clown crews that ran Argentina between 1965 and 1984. Mr. Alfonsin took office in 1983 at a time of quadruple digit inflation.

And how many people are you and Art Deco willing to see shot to defend against all this "irrationality and irresponsibility"? Three fifths of the Greek population?

It is telling that they declare how awful it will be and a coup would be better, rather then how this will be better for them. You would think they would be celebrating no more bailouts and thanking them, but I guess they lack the faith of their convictions.

A coup is also more fun than living a meaningless life of drudgery paying off arrogant Germans. Let's bring back Greek greatness, and we will show those Turks and fascists with Putin's help.

Soon, the GDP per capita of Turkey will be higher than that of Greece. I'd suggest Greeks keep good relations with the Turks. They'll need a place to emigrate to.

You've misunderstood my remarks on that subject (and they're really not that opaque).
Actually, few people are given to political activity of any description, much less activity which requires they pick up a gun or face down guns. The most recent military regime in Argentina was quite bloody during its first four years in power, but there was a crucial condition not found in Greece and other loci: there were armed paramilitaries all over the place in Argentina and had been since 1965. The most recent military regime in Chile was a great deal less bloody, and most of the blood was spilled during the first four months as the dominant military faction fought opposing factions and then hunted down elements of the previous regime.
Generally electoral systems are the best you can do as regards political decision-making (and I mean real ones, not the pantomime we have in the United States), but there are loci where their operation is injurious to the order and justice which are the raison d'etre of government (see the Arab world for the best examples). The question would be whether alternative systems answer the defects in the political order (and often they do not).

This is the wierdest hostage standoff ever.

You just took the bait. The clue is the username.

Well, a new military regime isn't going to pay back the loans. Those are lost no matter what.

But at least it might bring Greece back from where it's headed, which is towards Venezuela levels of success.

The Greek people have shown on numerous occasions that they are not capable of governing themselves. Which is why there had to be coups in the past. Besides, the Greek generals like their fancy planes and tanks, and without an economy to speak of, what will they do?

That has been my nightmare for a long time. Now, I'm no longer sure anything short of violent regime change will dislodge the people who have hijacked the Greek government.

But it won't help. The new geveration of colonels aren't likely to be much more liberal than Syriza. If Golden Dawn's popularity among Greece's men in uniform is any guide, they may merely dispense with the pretense of liberal democracy entirely and complete the pivot of Greece towards Putin's Russia.

The people who have "hijacked the Greek government" are called Greek voters.

It must be this, then. Maybe, as Brecht advised the (East) Germans, it is time to dissolve the people and elect another one

That Greece might develop patron-client relations with Russia is a small injury to anyone. The question would be whether an authoritarian regime in Greece makes the right calls at the right time. The advantage of an authoritarian regime is that it can suppress obstructive veto groups and make quick decisions. If you have serious problems other than obstructive veto groups and tedious decision making, a military regime may make things worse. See Argentina after 1965 or Nigeria after 1983.

They didn't vote against the banks so much as vote against the math.

Clearly, most Greeks aren't very good at math.

It's all been downhill since Euclid.

Wrong way around. The Greek people voted that banks keep lending Greece large sums of money. They effectively voted for ongoing bank involvement and a Greek government that dances on the strings of the capitalist puppeteers.

The only reason this is going to fail is that the banks have no desire to do their bit.

"Since the peak year of 2011 the interest payments as a percent of the Greek government debt declined from more than 6% to 2.2% in 2014"

The United States was paying over 4% of GDP in debt interest payments in early 1990s. Italy, Ireland, Portugal and Spain are all paying 4% or more today.

2.2% of GDP going to interest payments just isn't that extreme. The Greeks need help rolling over their debts but it's not like they're going bankrupt paying the interest here.

I do not like to disagree with my friend Paul de Grauwe, one of the fathers of the euro, but I just looked. Maybe there is seasonal variation, but the Greeks just paid about 2.2 billion euros in interest in the first quarter. Their nominal GDP is somewhere in the neighborhood of 200 billion euros, give or take quite a few, but all interested here is in pretty rough numbers. If interest payments are made smoothly through the year, that looks like about 8.8 billion for the year. That looks like around 4.4% of GDP in interest payments, not horrendous, but also a good deal more than the 2% being touted in the linked article.

Interest payments aren't even through the year. The EU's last program document on Greece from April 2014 anticipated cashflow net interest costs of 1.6% of GDP, assuming refunds of interest paid to European central banks and not counting deferred interest. A large part of that is on T-bills and other domestic debt.

That's for this year.

On a slightly different note, From the linked article: "Greece received €4.65b of EU funds in 2014, while paying €2b as its contribution to the EU budget. That’s a net inflow of 1.5% of Greek GDP, bigger than Greece’s primary surplus."

Like spoiled children who won't eat their vegetables and then complain of your bad parenting when they start getting scurvy. Ho-hum. When is it mental illness/immaturity stopping effectiveness -or- a genuine desire to fail on your own terms than succeed on someone else's? Are Greek citizens sophisticated enough to know and feel the difference?

Perhaps time for tough love. Withdraw support. Let the Greek Banks fail. Greece can provide its own interim currency. EU countries set-up temporary work support programs (6 mnths to 3+ yrs) as long as Greek citizens will sign up to work elsewhere in the EU and then money can be transferred home. Develop a work ethic to match western lifestyle goals. Return with renewed sense of purpose. The current atmosphere in Greece is toxic to productivity and responsibility for those who want it, yet charged with a desire to have and be treated as a full Western country. Follow the Greek doctors and other professionals and work elsewhere in the EU.

In other words, expand the failed states of northern Africa into southern Europe.

Another leftist wet dream turned into anarchy and chaos, and one more place to blame Libertarians for.

In the past generation the world has changed more failed states into success states than the other way around.

Stopping Greece from becoming a failed state at all costs is not necessarily a good policy for decreasing the number of failed states in the long term.

But I believe that if Greece was responsible for itself, it would likely institute the needed reforms, so I'm kind of crazy.

I was hoping there would be some name calling, moralizing and general anger here!


It would be good if you kept your facts straight before trying to comment seriously on this situation that has indeed become quite serious and highly unpredictable (I am currently making zero forecasts and avoided doing so even to my wife who tried to get one out of me).

So, you have made a false claim on numerous occasions that I have sort of suggested that you were overdoing but that nobody has really called you on. It is that their "primary surplus is gone." Not so obvious. I confess that it may well be by this time, thus putting them into deficit territory so that announcing that they are now going to be having this awful experience of austerity is a dramatic announcement. But, I just checked. For the last available numbers on the first quarter, they were running a hefty primary surplus, very much against a lauot of forecasts.

Sorry not providing link, but can if really challenged. In last quarter of 2014 they spent 18.4 billion euros. That was cut to 16.3 billion euros in first quarter, so all the jokers around here ranting about spoiled Greeks not doing austerity, they did it big time in the first quarter at least. Maybe they have gone off the rails in the second quarter buying nuclear missiles from Iran. Of that 16.3 billions euros of spending, 2.2 was interest payments on debt. Their tax collections were 15.8 billion euros, for roughly a 500 million overall deficit, but a primary surplus of about 1.6 billion euros, pretty hefty in percentage terms, well above the 1 to 4 percent most have been talking about.

So, of course those numbers have issues. There are apparently some spending items not in there, and also some of the tax revenues are probably one off, due to incentives offered for people in arrears to come forward and pay something, and a lot of them did. So, I am not about to forecast hunky dory fiscal heaven for Greece under any circumstance, especially as it seems they have fallen back into recession after having just barely managing to scrape out of it. But, really, people claiming to "seriously" comment on all this really should get their facts straight, especially now that so many of those folks have collectively and massively fallen flat on their faces about important aspects of what is going on here.

I have been wrong about a lot of this, but so have a lot of others, with the number able to claim being right pretty small.

There is plenty of evidence on this one, Barkley, and with the collapse in tourism and bookings and everything else it will only get worse. Even the supposed Q1 primary surplus was just from a payments delay, basically an accounting trick. And that was pre-referendum.


I do not disagree that they have returned to recession, which is what the booking data tells us. However, the question is whether it is running a primary surplus or not, with you declaring that it is gone. We do not know that. Of course second quarter has now ended, so we shall probably get some real new numbers on the more recent situation,and I fully expect it not to be as good as a primary surplus of as possibly as high as 1.6 billion euros that they seem to have run (or nearly so) in the first quarter., according to the best available reports.

I do not disagree that they are in for hard times in the near future, but then you yourself forecast that this was likely to be the case no matter what the outcome of the Greferendum, which I never disagreed with.

I'm predicting that either the IMF forces a new deal, or Brussels reconfigures a solution for all its troubled economies, or Greece exits and the new Chinese bank bails them out to gain a foothold for its wannabe currency union in Europe.

It's always possible that Germany bows to pressure and pulls out the check book to make the problem go away for the near future.

And then 1 year from now we will be in exactly the same situation again.


Your comments regarding past predictions are really too modest. Nobody has been more confident, and wrong, more often then you. You are truely a special commentor. I remember well your hilarious attempts to guess the population of Mexico City. Good times, good times . . .

Anyway, your comments regarding the existence or non-existence of a Greek primary deficit are confusing. Tyler says Greece has a primary budget deficit and, therefore, austerity must commence immediately (unless the Greeks can find another source for the money they need to avoid austerity). Seems pretty reasonable to me, but you say that this is a "false claim." Not an unsourced claim, nor an unsupported claim, not even a questionable claim but a claim which is "false" outright. At the same time, however, you also contend that you are not making predictions.

Listen, dude, it is bad enough that you don't know what you are talking about, it is considerably worse that you don't know what you just said. The assertion that Tyler's claim is "false" actually is a prediction concerning the existence or non-existence of a Greek primary deficit in the thrid quarter. By saying that Tyler's claim is "false" you have put your own credibility behind the notion that Greece can sail though the current quarter without any austerity because cuts to services, government wages and pensions are unnecessary. You are contending that all current Greek government functions can all be funded by current taxes. In other words, you are in denial. Denying that you have made a prediction in this thread, as to this matter, is just another example of it.

Barkley, you apparently missed the news within the IMF report that there was zero 2014 primary surplus.

Previous published counts were by the Greek government, counted only core central government, and miscounted privatization revenues and refunded interest as primary income.

It's not true, but even if it were... so what?

Try going to your bank and explaining you need a loan but it's okay because before your debt payments, you have a small surplus over your expenses.

Especially if you wrote off of half what you owed them in bankruptcy four years ago.

The only plausible response is to laugh in your face and suggest you cut spending.

What they thought they had was a choice between austerity and repudiating their debts. They chose debt repudiation and will get not only austerity but a rapid departure from the free world.

With most of the last of European discipline removed, Syriza now are free to engage in massive redistribution of wealth from what remains of Greece's middle class to themselves and their clientele, and suppress what remains of the pro-EU "bourgeois" opposition for good measure. The January election may be the last fair one for a long time.

If revenues from the inflation tax and bank deposit haircuts are insufficient, I doubt Syriza will be above confiscating individual hoards of euros that everybody knows most people with any money left in Greece at all have spent months squirreling away.

Varoufakis met with the heads of the major banks tonight, presumably to pressure them to assist with drachmaization on pain of nationalization if they refuse. Private media will be brought to heel or nationalized next.

I notice that the margin of victory far exceeded anything implied by the exit polling available publicly, eight to ten points, according to one such by the EU, leaked to the press before polls closed. Syriza may have taken out insurance against a narrow NAI that proved unnecessary, in the form of good old fashioned ballot-box stuffing.

Put it another way---no way in hell did the OXI carry every single electoral district in Greece.

I think this was their gamut all along. If the Trioka gave them a favorable deal great, they would have fulfilled their electoral promise and cement their power. If they didn't they exit the Euro but in a bid to stabilize the country just nationalize everything of value.

Yes, it was. Now what remains of Greece's productive classes must pay the penalty.

Seems to me that the referendum and vote wasn't really about economics or finances, but politics. My summary: "better to die on your feet than live on your knees"

With regard to debt: the real question isn't, how much money do you owe, but who do you owe it to? Per interfluidity, my lesson is: don't get into debt to Germans.

This looks more reasonable, although most of the commentators here agree without admitting it. They do not like the Greek government because they think that they are a bunch of commies who should be taken out and shot, period. So-called economic arguments made have generally been so devoid of anything backed by either facts or intelligence that they have just been a cover for the political agenda. The troika made their bet on this, hoping for a Yes vote and a fall of Syriza. Bad mistake. I think the tide went to No when this became clear, with Tsipras and Varoufakis saying they would resign if Yes went through. Maybe they are "not serious," but they are popular in Greece, and they successfully made it into a confidence motion on their government, and they won big, and those now suspecting they stuffed the ballots are almost certainly as wrong on that as they have been about most of the rest of this.

They are probably among those who were convinced, absolutely convinced, that Mitt Romney was going to win the 2012 election...

Well, good for you, MAMRC!

So, you support policies that have been forecast to keep Greek per cap GDP lower than what it was in 2007 until well after 2030. Surely it is "best for Greece and the Greek people" that an entire generation not responsible for any of the bad
Greek fiscal misbehavior prior to 2010 should remain in poverty (over 30% unemployment rate now, likely to decllne only slowly), to basically having ruined lives, not jobs, families, houses, whatever. But, since they are all just children, they do not know how good for them this is. Or maybe you think the solution is to have a Pinochet come in and shoot a whole bunch of them. That would surely reduce all that future misery.

Is this the new leftist method of argument? First a satirical leftist comes in and makes a joke "right-wing" comment and then another leftist comes in and argues against it?


Sadly, you are grossly over-estimating Barkely's level of self-awareness. This is authentic "blue on blue" friendly fire. You just have to stand back and drink it all in. This is the Barkely we all know and love. First, comments that the right is too consumed by politics to recognize reality but then unable to recognize that he is flaming his own troll.

Aw shucks, bmcb, you are just ticked off that you were shown to be wrong in your latest hysterical forecasts about ACA. As a matter of fact the latest report from Kaiser Foundation shows the likely average national rate of premium increase to be only 4.4%, down from last year's 5.4%. Oh my, doom is at hand.

I'm almost starting to wonder if "Barkley Rosser" is some sort of parody. Perhaps a cranky right winger who is just trolling everyone for comedic purposes. If so, well done, sir. Well done.

I would think at this point that the moderators would have contacted the real Barkley Rosser in Harrisonburg, Va. to tell him that someone had appropriated his handle.

Yeah, I'm beginning to think it's a troll and indeed Tyler has personally responded to the poster. It would be humorous if the poster turned out to be an impostor.

Well if it is the real Barkley Rosser, I think I have a pretty good idea of what a typical class period looks like:
1. Student dares to disagree with the great Professor Rosser
2. Rosser responds by listing his academic credentials and unleashes a stream semi-coherent personal attacks.
3. After it becomes increasingly clear that the student is actually correct, Rosser quietly disappears from the room. The class ends.

Rosser's academic credentials are the "Jr." after his name.

The Barkley Rosser at JMU has actually published quite a bit, though looking at the abstracts a mess of it is in an off-center idiom and more than most he signs on to collaborative work. In my limited experience, the hydrogen sulfide emitting orificies I've encountered in the professoriate have been people who've suffered persistent professional failures or give signs interpersonally that they're suffering more than you are or are genus humorless feminist. Never met the JMU guy in the flesh so cannot say about tics, but 'persistent professional failures' does not describe him (unless he set his sights on a position at a research institution). You do not get positive feedback in Harrisonburg for being rude to waiters, either; it's a place where the self is small.

I was actually pleased at Syriza's victory at first. I'm ashamed to say I defended them on MR.

I do not want a repeat of 1967 Greece or 1973 Chile---on the contrary, that's the nightmare of all who mean Greece well. I merely believe that that is the most likely final act of the Greek tragedy at this stage.

Syriza are not only clearly in over their heads but their own commitment to liberal democracy becomes less credible by the day. If the disintegration of the Greek economy continues at the current pace, it will be easy for Golden Dawn or sympathizers in the army or police to sell their coup as their attempt to save Greece from "anarcho-communists" and foreign bankers both.

And they will be only too happy to shoot not only "anarcho-communists" but anything resembling a European liberal.

Does the left have to produce evidence anymore before imputing pro-coup sentiments to people that they oppose politically? Or do you hippies just pop your old copy of Seven Days in May into the VCR, adjust your ponytail and let loose. I find this tactic of confronting the inevitable failure of campus left politics by claiming "but the right is plotting a coup so we have to double down" so immature. Their is no incipient coup in Greece. Franco is still dead man you know like that 30 year old Chevy Chase joke, the Greek colonels are dead, the party that would actually be most likely to have the backing of the military to orchestrate a coup, ANEL, is a part of the governing coalition for goodness sake.

You are terrified of a political party that has five percent of the seats in the Hellenic Parliament and whose leader is under house arrest. Compare that with the Italian and French Communist parties of the Cold War (who I'm sure you saw as completely harmless and never suspected of plotting a coup) and you come to see that shouting coup is what the Besserers and Rossers of the world do when the parties close to their heart embarass themselves.

The number of people confidently predicting executions presents an opportunity: Who wants to bet on that, bets going up to $500? I'll give you even odds on mass political executions (say n > 3) by the Greek government, timeframe in the next three years. Feel free to offer in comments or e-mails. My bet, to be clear, is no. Or as the Greeks might say, Oxi.

To quote Alex:" "a bet is a tax on bullshit". So, good call on your part Peter, and I assume you'll have no takers.

And I'm sure you were convinced Scott Walker was going to lose.

I had great professors at Penn so I always kind of roll my eyes when people talk about left-wing academics, but honestly Rosser is a perfect reminder that petulant, little prima donna leftists do continue to stalk obnoxiously around college campuses. How is that you lose your temper in every single comment you make at this site? Compose yourself Barkley and stop imputing violent predilections to people just because you don't like them. It's especially obnoxious when everyone knows you'd be the first in line to join the Committee of Public Safety if the your hard left ever seized power in this country.

@Barkley, the post title is "Greece". Internal US politics have their dedicated posts, gratuitous mention of Romney is boring considering he's in the political limbo.

Also the super popular Varoufakis resigned, that's the epitome of confidence.

I thought that it is better to choose the time and manner of your death if it is inevitable.

Some out of the box thinking here - what if Greece did a bombing run of Munich - real bombing run.....
Would NATO turn on itself ? Doubt if Germany can take on Greece - and the USA wont get involved. NATO was not built to deal with intra NATO wars...
Is it an Endless loop or Recursive ?
No one in Europe would countenance German tanks moving in anywhere.
If you are going to lose the game might as well have a good biffo.
If you are Greece why go quietly.

Hmmm... Greece has no land border with Germany.. so how exactly are they supposed to get there? Maybe around the Mediterranean Sea to the north sea... maybe via Turkish airspace. .I'm sure that could be negotiated! Or Indian airspace?

Even though I guessed wrong on today's outcome, I am glad it wasn't close and glad that the issue is being forced. This had to come, sooner or later- better for all involved for it to come now.

Oh, this country. It owed money to its neighbors,
and because it wasn't able to pay its neighbors for these obligations ,
particularly during an economic downturn. a leader unpopular with its neighbors, but popular with the locals, emerged.

I bet you think I am talking about Greece,

But I am talking about Germany after World War I.

What did Germany learn from its own experience following WWI.

Not to acquiesce to unreasonable demands from its creditor-neighbors, who will leverage them into penury if given the chance.

WW I? I thought you were talking about WW II. After all, Greeks voted for allowing German debts to be totally cancelled in 1953, and the Germans had been so very adult and responsibly behaved during the years that they ran that debt up.

Why did German owe after WW1? Why did Greece owe? Is there a difference? Did one do it willingly and did one do it at the end of a barrel?

Oh so terribly reasonable Alain. The real issue is WW II, not WW I. The Germans ran up that debt that the Greeks forgave them for trying to save the world from the Jews and decadent people. Of course those debts needed to be forgiven.

The real issue is WW II, not WW I.

Meh. Like all Leftists, you're making up the rules as you go along.

Why don't you try sticking to the topic at hand instead of doing the whole red herring fallacy thing (over and over and over again)?

Nodbarb, You don't see any inconsistency in position from those who argue it is the principle that is important.

Trick question, they became (more) anti-semitic. Are you implying that the Greeks will become anti-semitic as well?

Credit for their stones? Haven't their marbles already long since been cut off and hung up in a museum in Britain?

Save us from people who can't govern but can "win" elections.

Save us from people who "think" they should govern, but don't want to bother with elections.

Can't govern? They cut spending 2.1 billion euros in the first quarter of 2015 and ran a primary budget surplus of 1.6 billion euros. Oh, so irresponsible!

"Can’t govern? They cut spending 2.1 billion euros in the first quarter of 2015 and ran a primary budget surplus of 1.6 billion euros. Oh, so irresponsible!"

The IMF has just announced that Greece had a primary deficit in 2014, despite the Greek government's claims to the contrary. Given that, it seems unlikely that Greece actually had a primary surplus of that magnitude in the first quarter of 2015.

So...I assert democracy is a form of free market, whereby the people vote with their votes, rather than their dollars (or drachmas, or Euros, or whatever). I believe this is a fairly non-controversial proposition. would stand to reason, then, that the "free market" has selected Grexit as preferable to German-imposed austerity measures.

So...if the free market is always right - and Tyler Cowen, being a Libertarian, has staked his political ideology and reputation on that being the case - then why isn't the Greek action the "right" one? People had the liberty to make a choice, and they chose.

To not agree that the Greeks chose correctly is tantamount to saying the market doesn't always work, and well...doesn't that throw the entire premise of laisez faire Libertarian-ism into chaos?

Just Saying July 5, 2015 at 8:27 pm

So…I assert democracy is a form of free market

I assert that democracy is a type of dessert. Very popular in California, but originating in Spain.

How does that advance the conversation?

Libertarianism doesn't claim the free market is always right.

It claims people acting within the free market will be rewarded for correct decisions and get the living hell beat out of them for choosing wrong.

I agree with you about the impact of the free market, and I think your statement sums up perfectly why it should not be a system of governance for a society.

Governments can use the printing press and transfer payments to shield people from their own stupidity only for so long.

But you just claimed that democracy is the free market, so...?


I laughed out loud.

Problem with your analogy is that market prices are determined by both supply and demand but here, only one part of the market has voted. The Greeks have voted that people give them money, but no democracy has voted to give money to the Greeks.

From Chapter 1 of Thomas Sowell's "Applied Economics":

"Politics and the markets are both ways of getting people to respond to other people’s desires. Consumers deciding which goods to spend their money on have often been analogized to voters deciding which candidates to elect to public office. However the two processes are profoundly different. Not only do individuals invest very different amounts of time and thought in making economic vs. political decisions, those are inherently different in themselves. Voters decide whether to vote for one candidate or another but they decide how much of what kinds of food, clothing, shelter, etc. to purchase. In short, political decisions tend to be categorical, while economic decisions tend to be incremental.

Incremental decisions can be more fine-tuned than deciding which candidate’s whole package of principles and practices comes closest to meeting your own desires. Incremental decision-making also means that not every increment of even very desirable things is likewise necessarily desirable, given that there are other things that the money could be spent on after having acquired a given amount of a particular good or service. For example, although it might be worthwhile spending considerable money to live in a nice home, buying a second home in the country may or may not be worth spending money that could be used for sending a child to college or for recreational travel overseas. One consequence of incremental decision-making is that increments of many desirable things remain unpurchased because they are almost–but not quite–worth the sacrifices required to get them.

From a political standpoint, this means that there are always numerous desirable things that government officials can offer to provide to voters who want them–either free of charge or at reduced, government-subsidized prices–even when the voters do not want these increments enough to sacrifice their own money to pay for them. The real winners in this process are politicians whose apparent generosity and compassion gain them political support."

My take is up on my blog. In a nutshell, Greeks have volunteered to be held hostage, and if Tsipras is willing to make good on his threat to not introduce any new currency even as euros run out, there will be a very deep crisis, real suffering.

I analyzed the latest available data on the Greek banking system's and government's cash reserves last week:

Tom those are thoughtful, well articulated posts. Thanks.

How is Greece different from Iceland? I thought Iceland is a success story here, now Greece are fools for making the hard choice. The easy choice is to allow outside political control over your national finances in return for money to pay your bills tomorrow, shifting the hard choices into the future. Procrastination is seldom the good policy choice. Maybe they are stupid because they don't understand what they've chosen (they are commies after all), but taking all your lumps up front is the hard choice and always the best choice if you can do it. Greece has chosen the discipline of the market whether they know it or not, they've also chosen sovereignty and responsibility.

"I thought Iceland is a success story here,"

I think the opinion around here is that Iceland screwed over a lot of foreign pensioners, but it's such a small country that it really doesn't matter.

Mostly not pensioners.

Sure, the taxpayers of the UK and the Netherlands were probably mostly screwed over.

And the Germans keep on giving it.

Now my comment makes no sense, because the the comment I replied to was deleted.

Why isn't anyone calling for a German / French or any other creditor country referendum to hear the people of those countries, if they are willing to help Greece?

Yeah, but not the French.

There is already a site for that:

Give liberals, give.

You fool. It's about free money--nobody has to "give." Now please, stop linking to that garbage libertarian website in every damn thread.

Free? Is that how you describe OPM? Well that's taking it a bit extreme isn't it?

I think the standard far Left position is that OPM is mostly rich people's money and they obviously don't deserve all the money they have, so taking it from them is like getting free money.

The good news is Greece will be in the hands of the Greeks. That may also be the bad news, but better forward than no where.

I just wonder how a fine economist like Barkley would count arrears in a government budget. Is it a debt, or not? I also wonder how he would count one-time items in a budget, like say payments made from the EUs PIP.

I said nothing about "arrears," Yancey. It may be that they will lose their primary surplus in the second quarter going forward. But the bottom line in the fist quarter is that they cut 2.1 billion euros in spending while obtaining a 1.6 billion euros in primary surplus. Deal with it, Yancey. Time some of you faced facts and stopped spouting silly rhetoric.

> Deal with it, Yancey

Wow, strong words. You seem upset.

Anyway, we'll see if it was an accounting trick or not in the next couple of months. If it wasn't an accounting trick Greece will do fine. If it was, Greece will be in for some level of pain.

We'll see how it plays out. If I was betting I would go with Tyler's prognosis.

Yeah, pretty much explains why you refused to put any links earlier. It ain't a surplus if all you have done is refuse to pay bills to people in your own damned country who are providing goods and services. It is almost like you don't even understand what the entire point of having a primary surplus is. I call it deficit spending without a formal bond being issued, but I guess a fine economist like yourself calls it something else.

Oh gag, Yancey.
Should have recorded first link as I cannot now find it. Have found two other sources, which have somewhat different numbers, but both with primary surpluses in excess of 1 billion euros for the first quarter. I'll put them here momentarily. One is from May 11, which shows monthly data. It also makes projections for the second quarter, showing a sharp fall in the primary surplus down to a mere 94 million euros. Tyler is almost certainly right that the primary surplus is declining, if and or when it goes into deficit. But we do not have those numbers. The second link is from a news story put out earlier today, but it makes no forecasts about second quarter, just the outcome for first quarter, again showing a primary surplus in excess of a billion euros. Oh, and the Greek economy almost certainly went into a recession in the first quarter, probably a -2% rate.

First link (apologize if these do not link);en.the.agpra.2499

Does not look good, but here is the second one.

Oh well.

Is anybody seriously going to believe Greek numbers at this point? The IMF numbers were substantially lower for 2014.

I wonder how many Greeks who voted 'No' thought they were voted for 'Austerity Now'? It seems more like the majority agreed with Syriza that rejecting the creditors offer would lead to the rest of Europe caving in, giving better terms, and turning the cash tap back on. In which case this is less about giving them "credit for their stones", and more about them having rocks in the head. What odds would you give on the Troika doing an about face and agreeing to a bailout on Syriza's terms?

All these talks of coups makes me think that there is another group of "Not Very Serious People" discussing the referendum.

Fortunately blog commentators do not run a national government

If any young Greek ladies are seeking escape, please contact me about a personal bailout arrangement.

Haha, beautifully done. This is the best comment.

Ireland left its bail out plan after austerity because it is #2 top rated country in the Eurozone for economic freedom.

Guess who is last in the Eurozone for economic freedom? Greece.

Well, I'm surprised. I thought they would be feeling the bite by now.

Next come the food shortages and mass business closures. How soon till they're printing drachmas?

Well, now that Varoufakis has resigned in the interests of a deal being made, you can all have a big laugh and applaud yourselves. He really should have learned to wear a tie.

Oh, and Varoufakis has resigned. Hope you all are pleased. He should have learned to wear a tie.

I'm not pleased, I truly believed there was going to be an agreement 24 hours after the "NO".

You won't have Yanis Varoufakis and his designer jeans to kick around any more!

The Greeks made the correct choice and it now falls to the wealthier countries of Europe to come back to the table (quickly!) with a more fair and reasonable assistance program. The Germans have had the power to *end* this crisis all along, but refused to use it. Will they use it now?

They voted themselves more German money. The "correct" choice. Now if only those pesky Germans are more "fair and reasonable" and hand it over...

By the way I came up with a creative plan to solve this Greece issue by having Greece sell off some of their lesser used islands to more solvent countries. Norway could use some of their massive sovereign wealth fund to bail out the Greeks, and in exchange the Norwegians could all move to a sunny island paradise in the Mediterranean. Win/win.

Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.

So, is this a case of the Prime Minister taking an about face in order to facilitate further discussions or is this about the Prime Minister consolidating power in his cabinet?

" sure won’t over the course of the next year or two."

Is there a bet in the making here?

Do we know what the people voted for. My one contact with Greeks says they voted no in hopes that it would get them out of the euro.

if the Greece is going down, I will invest all my economies and buy a land/house there. In 20 years the greek economy will recover and I will be retired there :)

Until then, I recommend to all the greeks to learn from Romania history. In 1981 FMI forced Romania to pay back the dephts, because the romanian government didn't respect the conditions (to move the economy far away from Moscow and to build a private industry). 20 years regular romanian suffered: electricity 1-2 hours daily, cold, no food, working 6-7 days per week and after in small gardens to have minumum of food etc.

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