Cyprus-Forum.com

[Talisker]

I'm not an economist, but my understanding is that Greece has some 50 Billion Euros worth of loans due in the coming weeks. Therefore, Greece needs to raise those funds almost immediately or it will default, creating massive havoc within the Euro-zone. Greece is able to borrow the money, thus buying it some time to implement the Austerity measures and completely overhaul its economy, public sector and clamp down on tax evasion. The debt will still be there, since Greece will still borrow the outstanding loan amounts in order to pay out loans approaching maturity.

Now, because of Greece's very dire situation, it is inevitable that the bonds and Treasury Bills it will need to issue to raise the funds from investment institutions, will be very high yield, since Greece will now be deemed to be a very high risk investment. Because of the high risk factor, the yield and the terms of any future loans, will be much higher than what they would be in a solvent country like Cyprus for example. If the yield and terms were the same as everyone else, then investment institutions will just ditch Greece and opt for lower risk countries, and Greece would most certainly default!

So issuing bonds is only a very temporary fix. All it will do is buy Greece some time. Greece will then need to use this time to implement the Austerity measures and begin to reduce debt as soon as possible. But even more importantly, Greece will need to completely overhaul the entire economy and tax system. The fact that Doctors and Lawyers in Kolonaki are only declaring a fraction of their income, whilst affording lavish homes, expensive cars, holiday homes and what not should raise many alarm bells and insight as to how Greece has got itself in such financial trouble.

Thanks for the economics 'lesson', Paphiti. I understand something about the issues, though, like you, not an economist by any stretch of the imagination. I also understand debts need to be repaid, and am well aware of the general culture within Greece of seeking to avoid tax payments whenever possible (not exclusive to Greece by the way!). Isn't this just part of a contempt, as it is turning out rather more unhealthy than healthy, for government in Greece rather than selfish greed?

However, in the bigger picture for the EU, there are interesting decisions to be taken here by member nation states. Is the European 'Union' less important as an economy than the state of their own individual economies, and when times are tough should they be expected to help out those that are experiencing problems (not bail out, but impose 'rules' which mean that weaker fellow EU member states are not expoited by richer, less vulnerable member states who may themselves have their own economic problems to solve)?

[Epiktitos]

This guy knows something about Greece...

Greece’s history is defined by foreign meddling

By Mark Mazower

Published: March 8 2010 22:08 | Last updated: March 8 2010 22:08

Sympathy for the Greeks is in short supply. But their European partners need to come up with a better response and this will require getting to grips with the deeper roots of Greece’s predicament. I do not refer to the widely touted claim that Greece is a serial defaulter; the research paper (by Harvard’s Kenneth Rogoff) that introduced the idea suggests that Greece’s record over the past 100 years is not exceptional. (Its only default in the 20th century came in 1931-32, a time when it was scarcely the only one to run into difficulties.)

The real constant in modern Greek history is the extraordinary degree of foreign interference in its domestic life. Greece’s first king (a Bavarian) was imposed upon it, and its first political parties were named simply for the three powers most involved in its affairs. The severity of the Nazi occupation – with tens of thousands dying of famine in a single winter, and hundreds of villages burned – was a wartime extreme. More routine but less well known is the extent to which first the British and then the Americans sought to control Greece’s government ministries, intelligence agencies, military and royal court through diplomats, missions and advisers. The touch of what Greeks call the “foreign finger” was felt right up to the dictatorship of 1967. One way of understanding the democratic consolidation that has taken place since that regime collapsed in 1974 is as an effort to restore autonomy to a country that had known little of it.

This process has worked better than anyone could have expected. For more than 20 years, a sort of two-party system has operated smoothly and the army has been marginalised as a political factor: alarmist talk during the past few weeks of a return of the tanks cannot be taken seriously. The irony, however, is that membership of the European Union has both helped and hindered. It raised the standard of living and smoothed the restoration of democracy. But the inflow of funds allowed Greeks to ignore structural economic problems. Foreign aid in itself was not the problem: in the late 1940s Greece got more Marshall Plan funds per capita than anyone else in Europe, its productivity soared, manufacturing expanded and growth was high. But in the early 1980s labour costs and foreign indebtedness started to rise sharply – between 1979-85, total indebtedness rose from 8 to 42 per cent of gross national product. The real debt problem for Greece is of comparatively recent vintage and connected to its integration into Europe.

The establishment of democracy after 1974 served to highlight the Achilles heel of the Greek state – its chronic lack of fiscal reach. As far back as independence in 1830, the public finances have relied upon high indirect taxation, elusive invisible earnings and recourse to loans. One might blame mountains for this or the experience of Ottoman rule. But with a few honourable exceptions, the politicians have continued deploying public sector employment as a surrogate welfare net and instrument of patronage. Lavish EU funds have enabled a stop-go debt cycle that has seen Greek governments flee cap in hand to Europe for emergency aid, enact draconian stabilisation measures in return and then loosen the reins when electoral pressures built up.

This time one hears the chickens coming home to roost. But the political challenge is huge and those in Greece protesting against the planned cuts have a historically resonant set of memories to fall back on. Appealing to the most sensitive of these, deputy prime minister Theodoros Pangalos asked how the Germans could lecture the Greeks on morality, while still evading their historic responsibility to compensate the country for war damage. (He could equally have mentioned that such limited reparations as were paid 50 years ago formed part of a deal with Bonn through which Nazi war criminals wanted in Greece escaped justice.) The bitterness is real, even if the argument and its timing are unpersuasive.

This crisis has badly dented the image of Europe in what has traditionally always been one of the most pro-European countries in the union. In the current financial maelstrom, Europe has come to be equated not with the social market, fairness, democracy or peace but with defence of the single currency, and with the rigid deflationary regime behind it. Greek civil servants may have to get used to pay cuts and longer working lives. But the government is more likely to be able to get them to accept this if Europe stops looking like the latest great power trying to control Greece’s fate. In the past, the promise of membership in the EU helped democracy entrench itself first along Europe’s southern rim and then in the former communist east. But if political autonomy in these countries is not to be undermined by the disciplines of the euro, a more solidaristic approach to defending it will need to be found.

http://www.ft.com/cms/s/0/4bede68a-2aef-11df-886b-00144feabdc0.html?nclick_check=1

[Epiktitos]

A woman weeps during the deportation of the Jews of Ioannina on March 25, 1944. The deportation was enforced by the German army. Almost all of the people deported were murdered on or shortly after April 11, 1944, when the train carrying them reached Auschwitz-Berkinau.

[Oracle]

That's a terribly sad photograph.

Unlike earlier victims, these people would have known exactly the fate which awaited them.

[bill cobbett]

Erm .... if it helps out our very distant Gr cousins, am happy, even in these hard times, to make a generous, without prejudice, donation if the Atheuneucians drop their scurrilous and ill-based "claims" to the London Marbles.

Times are hard so will 10E be OK? Perhaps they could throw in an island for that? ...... Rhodes is very nice.

[Paphitis]

Erm .... if it helps out our very distant Gr cousins, am happy, even in these hard times, to make a generous, without prejudice, donation if the Atheuneucians drop their scurrilous and ill-based "claims" to the London Marbles.

Times are hard so will 10E be OK? Perhaps they could throw in an island for that? ...... Rhodes is very nice.

[Paphitis]

That's a terribly sad photograph.

Unlike earlier victims, these people would have known exactly the fate which awaited them.

I shall remember to blame Australia's next recession on the Japanese!

[Epiktitos]

am happy, even in these hard times, to make a generous, without prejudice, donation if the Atheuneucians drop their scurrilous and ill-based "claims" to the London Marbles.

Perhaps keep your coins and instead wonder how you would feel if the Greeks asked you to drop your "scurrilous" claim to the TRNC, so that they can save some money by purchasing fewer F-16s, submarines, destroyers, and battle tanks...

[Epiktitos]

That's a terribly sad photograph.

Unlike earlier victims, these people would have known exactly the fate which awaited them.

I shall remember to blame Australia's next recession on the Japanese!

How many Japanese soldiers set foot on australian soil, grunt boy?

[Paphitis]

am happy, even in these hard times, to make a generous, without prejudice, donation if the Atheuneucians drop their scurrilous and ill-based "claims" to the London Marbles.

Perhaps keep you coins and instead wonder how you would feel if the Greeks asked you to drop your "scurrilous" claim to the TRNC, so that they can save some money by purchasing fewer F-16s, submarines, destroyers, and battle tanks...

Greek Defence expenditure is around 4% of GDP! Next idiot please......