Euro’s Medicine May Be Making Greece’s Symptoms Worse

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Euro’s Medicine May Be Making Greece’s Symptoms Worse

By RACHEL DONADIO and SUZANNE DALEY

ATHENS. (New York Times -analysis). Only a month after Greece installed a new government, the country is facing renewed peril. Its official lenders are signaling a growing reluctance to keep paying the bills of the nearly bankrupt nation, even as the government is seeking more leniency on the terms of its multibillion-euro bailout. Adding to the woes, there is little agreement

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July 25, 2012

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15 readers comments


1. Philip Vorgias wrote on July 25, 2012 11:23 AM	Greece spent decades building the welfare state, obviously it would cause great pain to take it apart in 2 years. But Greeks need to consider the alternative (the Armodios option) which would have been to go through an uncontrolled bankruptcy and-likely-ejection from the Eurozone. There is bad and then there is much worse.

2. ARMODIOS PAPAGIANAKIS wrote on July 26, 2012 11:29 AM	“The original plan called for Greece to return to financing its debts on the open market in 2014, an idea that one European official, speaking on the condition of anonymity, now calls a “fiction.” - Actually that was Armodios who publicly said same way back in May of 2010, and in print, in this very newspaper. See Archives September 2010. Title: Greece Should Default and Restructure Its Debt. Meanwhile, the three organizations (Troika) probably employ the world’s top economic talent with an army of PhDs punching a slew of numbers and statistics into spread sheets, yet they still “underestimated (austerity’s) negative (economic) effect”; another shining example of failed economic central planning.

3. Philip Vorgias wrote on July 26, 2012 11:54 AM	Greece is years behind their target date for introducing reforms. Before you throw the 'plan' out the window as a failure, concede that it may have been much more successful given proper support in the Greek government. At the very least, the damage is far less than an uncontrolled bankruptcy would have been. No question.

4. ARMODIOS PAPAGIANAKIS wrote on July 28, 2012 11:35 AM	Sure, it may have been a bit more successful; and Stalin’s 5 Year Plans would have been more successful if only he had the “proper support” from the peasants. History has repeatedly shown that economic central planning, whether from bumbling bureaucrat in Brussels, apparatchiks in Moscow or our own hubris filled clowns in D.C., fails to bring long term wealth and property to peoples and nations. Your “unquestioned” point on bankruptcy is pure conjecture. History also shows that bankruptcy, an integral component of a capitalism, is a cathartic, albeit difficult, process, that transfers distressed assets from the weak and incompetent (Greek bureaucrat) to stronger private hands (i.e. Deutsche Telekom). Combined with debt default/forgiveness, Greece has a chance. Two bail-outs later, Greece is still insolvent and well on their way to Troika inspired centrally planned serfdom. Ottoman pashas are laughing in their graves.

5. Basil Zafiriou wrote on July 28, 2012 3:53 PM	Armodios, help us understand your opposition to the “central plan” being imposed by Brussels bureaucrats on Greece. Alexis Tsipras and the Communist Party of Greece oppose the Greece-Troika bailout memorandum (the “central plan” in your parlance) because they’re committed to an oversized public sector and a government-controlled economy, conditions that the memorandum seeks to roll back. Why are you opposed to it? Can you identify for us the memorandum measures you believe are inconsistent with free market principles and detrimental to the performance of the Greek economy?

6. Philip Vorgias wrote on July 28, 2012 4:33 PM	Armodios is under the impression that a bankruptcy would allow Greece to repudiate all it's debt. Doesn't work that way. A Bankruptcy Court would be assigned and they'd hash out an austerity plan for Greece which would give the lenders SOMETHING back on their investment. In essence you'd end up with pretty much the same plan the TROIKA are enforcing. Bankrtupcy is not the panacea man advocates think it is, Armodios. If it was, more people would take advantage of it.

7. ARMODIOS PAPAGIANAKIS wrote on July 29, 2012 12:20 PM	Tell me gents, why does Greece need a 51 page compilation of edicts and economic micro managing, imposed on a sovereign nation a by Supranational entity, which is in itself, inconsistent with free market principles, and not much different than a Fascist government mandating what, when and where farmers plant or what infrastructure projects and or industries should be built, in order “to roll back the oversized (Greek) public sector”, when bankruptcy can do it infinitely faster, cheaper and more efficiently??? Does the EU actually pay the clown to mandate the Greek Government to publish on its website its plan for a “Business-Friendly Greece”, or practically risk loss of disbursement of bailout funds? Perhaps more critical, is that bankruptcy, would not only reduce Greek government/public sector much more rapidly and efficiently than an outside bureaucracy, it would dramatically re-price Greeks assets LOWER, making them much more attractive, and potentially profitable investments for PRIVATE investors with proprietary capital ultimately hastening Greece’s industrial privatization. This would leave much of Greek industrial assets in stronger, efficient, and private hands, sooner rather than later, and the Greek government smaller and with less debt; short term pain, long term gain.

8. Philip Vorgias wrote on July 29, 2012 1:25 PM	Why does Greece need it, because otherwise nothing would change Armodios. The Greek economy is hopelessly skewed with anti-productive laws and edicts, the net result of endless decades of union and socialist mandated labor rules. If you really think opening up professions, making sure work hours are reflective of other EU nations and the like are really that bad for Greece than you're totally confused. These reforms are long needed and would never happen in Greece if NOT mandated by the TROIKA-because Greek politics is about populism and rubber stamping every non-productive initiative put before the legislature by a union or other power group. Of course, the above is obvious.

9. Basil Zafiriou wrote on July 29, 2012 4:18 PM	Armodios apparently has no issue with the ends of the bailout memorandum (he identified no measures in it that he disagrees with) -he just does not like the means. Except that the two go together. As Philip points out, without the memorandum the structural reforms Greece needs would not take place. Decades of experience attest this. The notion that bankruptcy is a better option rest on the false equation of sovereign countries with business enterprises. Unlike businesses, countries that go bankrupt do not cease to exist: their debts therefore are not wiped out. Besides devastating Greece, all that a bankruptcy would likely do is to bring Tsipras to power. And though Tsipras is Armodios’s bedmate on the memorandum, he is no pro-market reformer.

10. Philip Vorgias wrote on July 29, 2012 5:04 PM	The only specificity we are getting out of Armodios is "I just don't like it!'. Well, I don't LIKE the deal either! Problem is, what other viable options does Greece have? None that I can see.

11. ARMODIOS PAPAGIANAKIS wrote on July 29, 2012 8:34 PM	LOL gentlemen. Let’s try this gain. Why does Greece need a 51 page compilation of edicts and economic micro managing, imposed on a sovereign nation a by Supranational entity, which is in itself, inconsistent with free market principles, and not much different than a Fascist government mandating what, when and where farmers plant or what infrastructure projects and or industries should be built, IN ORDER “TO ROLL BACK THE OVERSIZED (GREEK) PUBLIC SECTOR”, WHEN BANKRUPTCY CAN DO IT INFINITELY FASTER, CHEAPER AND MORE EFFICIENTLY???

12. Basil Zafiriou wrote on July 29, 2012 9:35 PM	Armodios, the 51 pages of “edicts” is an agreement freely entered into between Greece and her creditors: you’ll have to explain why binding agreements between borrowers and creditors –an integral feature of financial markets- are a violation of free market principles. You also need to explain how bankruptcy will “cheaply and efficiently” reduce the power of the Greek state over the Greek economy. Merely capitalizing the assertion does not make it more convincing.

13. ARMODIOS PAPAGIANAKIS wrote on July 29, 2012 10:06 PM	Creditors just want their money and do no try to micro manage and/or fundamentally change the company or entity (Greece), shareholders (citizens) do. Your claim that Greece cannot or will not implement market reforms without the Troika’s memorandum is utter conjecture since none of us, including myself, know what, if any, pro-market reforms would or wouldn't come to POST DEFAULT Greece. However, I’m quite confident that bankruptcy, and without the memorandum, would do a decent job of shrinking the public sector since there would be very little money to pay them.

14. Basil Zafiriou wrote on July 29, 2012 10:40 PM	But to ensure they get their money back, creditors insist that you use the money they lend to you for the purposes you borrowed it. They don’t thereby micro-manage what you do: they facilitate what you decided to do. Ditto the Greece-Troika mnimonio. The claim that pro-market reforms are less likely without the mnimonio is conjecture, but conjecture buttressed by decades of experience (where were the reforms to now?), not to mention the current political debate in Greece (where the coalition government’s key weapon against the opposition is that without the reforms Greece will be denied the promised Troika assistance and be forced to leave the euro). Finally, less money does not equate to less government involvement in the economy. In fact, the opposite is more common: witness North Korea or just about any other socialist republic.

15. ARMODIOS PAPAGIANAKIS wrote on July 30, 2012 10:04 AM	Yes, true on the bonds however I don’t agree with an “agreement freely entered” upon. The memo is not a conventional prospectus of typical bond offering. It is more akin to an agreement between executioner and convict. Furthermore you’re North Korea/socialist republic doesn’t apply since they are not in a post default scenario as I mentioned.
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