# Greek crisis and lessons for Ireland



## dewdrop (22 Jun 2011)

In view of the crisis in Greece re drawdown of funds to keep the country going I was wondering is there a possibility of a similar situation emerging in Ireland when the quarterly reviews take place which we must pass in order to get the funds.  Hopefully our targets are achievable but perhaps some comments on what we have to do and how difficult, or otherwise, this will be would be interesting.


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## Protocol (22 Jun 2011)

No need to wonder, we *are* in a similar situation.

Here is the MOU with the IMF/EU/ECB:

http://www.finance.gov.ie/documents/publications/other/2011/draftmoumay2011.pdf


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## Smart_Saver (23 Jun 2011)

Couple of things

1: I presume we're in the same boat as Greece even though our problems are dis-similar. On Monday night on VB one of the persons speaking (don't know name and this was my take on it) claimed that Greece so far had met all its debt requirements from the IMF and that the problem going forward stemmed from lack of growth (and therefore taxes) becasue of austerity measures put in place thus far. 

And that's why they need the new fresher, harder austerity measures to make up the shortfall from this lack of growth and tax intake. 
If this is the case then we surely are somewhere on the same collision course with the EU. I make this assumption based on the fact that in the near future our tax intake is not going to be enough to cover our debt repayments plus our (PS/Health/Pensions/Dole) wage bills. 

2: Article in todays Indo on the Greek Crisis from Economics Professor Gary O'Callaghan at Dubrovnik University.


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## Sunny (23 Jun 2011)

Ireland is very different to Greece and Portugal in some important ways. Ireland is facing a banking and budgetary crisis. Extremely difficult and painful to solve but it can be done. The problem with Greece and Portugal (and even Italy and to a lesser extet Spain) is that their economies need way more structural reform which is much more painful and harder to achieve. Look at Geece's problems with regard to retirement age, pensions, trade unions and labour force inflexibility, tax evasion, huge public sector involvement in vast areas of the economy etc etc. You are talking about cultural as well as economic challenges. We don't face that here to the same extent. 
Not saying that Ireland doesn't face doesn't face huge problems but they are different to the problems facing Greece.


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## mmclo (28 Jun 2011)

Will a Greek default cost us? We put a billion or two into the original bailout or has this contribution been reversed?


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## horusd (29 Jun 2011)

We've all become somewhat used to Greek riots & violent protest, but perhaps the underlying threat to us and the EU is more existential. It has the potential to galvinise opposition to the whole EU project itself as the EU's failures are highlighted and the grand vision of ever greater union falters. The real threat is that the grumbling discontent within nations transmits on to the EU-wide stage. A comment from a Greek teacher reported in today's _Guardian_ points to this:

"What have politicians done to earn this debt? We live in a country with no productive base, whose economy is in tatters, which after 30 years as a signed-up member of Europe has no infrastructure to speak of. *That's why we're now demanding that the government goes, that the debt be written off and that Greece leaves the EU. *Otherwise generations will be forced to live under a regime of austerity on the poverty line."
At 61, the wiry teacher embodies the people power now surging through Syntagma Square. Unsettlingly for the government, his views appear to be echoed by an ever greater number of Greeks."

Also, Angela Merkel was recently reported as saying too much was being asked of her. She wants to lead Germany, not Europe. 

Europe is faltering for want of leadership and vision, and in my view democratic legitimacy. This crisis is far from a "mere" economic one, it threatens the EU itself. Meanwhile we have the Chinese offering support to Europe. What will they want in return? Silence on Human Rights? Advanced technology transfers to China? We have a lot more than Greek default to worry about.


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## elcato (29 Jun 2011)

> "What have politicians done to earn this debt? We live in a country with  no productive base, whose economy is in tatters, which after 30 years  as a signed-up member of Europe has no infrastructure to speak of. *That's why we're now demanding that the government goes, that the debt be written off and that Greece leaves the EU. *Otherwise generations will be forced to live under a regime of austerity on the poverty line."
> At 61, the wiry teacher embodies the people power now surging through  Syntagma Square. Unsettlingly for the government, his views appear to be  echoed by an ever greater number of Greeks."


Without gettting into long debates here, has this guy not seen an alternative ? His wage will have to be cut in half or probably worse immediately, he'll be lucky to get half his pension also. It's one thing saying default is good as we don't have to pay millions back but they would collapse totally. The only winners would be the current tax evaders who I presume are the tourist businesses as they deal in cash all the time. Of course more riots and anarchy would stem the tourist flow also.


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## Smart_Saver (29 Jun 2011)

elcato said:


> Without gettting into long debates here, has this guy not seen an alternative ? His wage will have to be cut in half or probably worse immediately, he'll be lucky to get half his pension also. It's one thing saying default is good as we don't have to pay millions back but they would collapse totally. The only winners would be the current tax evaders who I presume are the tourist businesses as they deal in cash all the time. Of course more riots and anarchy would stem the tourist flow also.


 

Well it's quite possible that he has seen this alternative and is prepared to live with it. i.e. take all the pain right up front and get on with it. Who knows?
Also check out this article also on BBC website. Some interesting facts quoted here.

http://www.bbc.co.uk/news/business-13956331

A couple of the more intriguing points for those that don’t have the time to read it all.

1: Most of the bonds are issued under Greek law, not international law. 
So in theory if cross-default or accelerated payment clauses were unexpectedly to turn up in bond documentation, the Greek parliament could legislate to make them null and void. Or to put it another way, in the immediate aftermath of a Greek default, the Greek government would have quite a lot of power to dictate restructuring and repayment terms to its creditors. Greece could choose to pay back more-or-less what it thought it could afford to pay back.

2: If Greece's parliament goes for the package of cuts, tax rises and privatisation, that may be the start of a process to make a Greek default affordable and bearable for Greece.


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## elcato (29 Jun 2011)

> Well it's quite possible that  he has seen this alternative and is prepared to live with it. i.e. take  all the pain right up front and get on with it. Who knows?


Fair enough, but I have my doubts. I suspect he thinks they default and the world goes on and his wages stay the same.


> So in theory if cross-default  or accelerated payment clauses were unexpectedly to turn up in bond  documentation, the Greek parliament could legislate to make them null  and void. Or to put it another way, in the immediate aftermath of a  Greek default, the Greek government would have quite a lot of power to  dictate restructuring and repayment terms to its creditors.


What matters is who will give them any money to make up the deficit immediately regardless of what actual Greek law dictates. I can't see anyone willing to give them any money until they're happy they can pay it back.


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## Chris (30 Jun 2011)

elcato said:


> Without gettting into long debates here, has this guy not seen an alternative ? His wage will have to be cut in half or probably worse immediately, he'll be lucky to get half his pension also. It's one thing saying default is good as we don't have to pay millions back but they would collapse totally. The only winners would be the current tax evaders who I presume are the tourist businesses as they deal in cash all the time. Of course more riots and anarchy would stem the tourist flow also.


Actually, it is Greek people that are the tax evaders: http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010




elcato said:


> What matters is who will give them any money to make up the deficit immediately regardless of what actual Greek law dictates. I can't see anyone willing to give them any money until they're happy they can pay it back.



The whole idea of default is not to borrow more, it is to get debt under control and stop borrowing. The deficit has to be brought under control whether Greece defaults or not.


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## elcato (30 Jun 2011)

> Actually, it is Greek people that are the tax evaders


Yes. What I meant was the businesses that are based in the holiday resorts, such as bars, restaurants etc.





> The whole idea of default is not to borrow more, it is to get debt under  control and stop borrowing. The deficit has to be brought under control  whether Greece defaults or not.


Agreed totally, but default means 0 timeframe, restructure allows time to bring these under control.


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## Chris (1 Jul 2011)

elcato said:


> Agreed totally, but default means 0 timeframe, restructure allows time to bring these under control.



A chaotic default would be a zero time frame, but it doesn't have to be that way. Te best time for a drug addict to stop taking drugs is straight away, the very same goes for massive government deficit spending.


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## Smart_Saver (2 Jul 2011)

Chris said:


> A chaotic default would be a zero time frame, but it doesn't have to be that way. Te best time for a drug addict to stop taking drugs is straight away, the very same goes for massive government deficit spending.


 
That analogy is a good one. However if you are a hard nosed heoin addict coming off it straight away without any assistance can often lead to death as the withdrawl symptoms are nearly as dangerous as the drug itself. Same goes for Greece in my opinion. If they use medication (financial assistance) to withdraw their deficit gradually then they have a chance of keeping the country alive. 
The alternative is pretty severe.


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## horusd (3 Jul 2011)

The scale of Greece's endemic and systemic problems are made clear in this article from today's Telegraph. See here. I know the Telegraph bats for the right, but I wouldn't like to be trying to fix all the problems they identify anytime soon.

Partial quote follows on just the problems with the rail system, unions ...mother of God, rather them than us.

"Winding its way along the *Greek* coastline, the picturesque train trip is nonetheless a tough one: plagued by delays, it takes six hours to cover just 110 miles, twice as long as by car. Apart from the odd tourist with a lot of time to spare, the only contented *faces on board are generally those of the unionised train drivers,* *who take home up to 70,000 euros a year after innumerable bonus schemes are factored in – ten times what the average Greek earns. *
It is, however, on such moribund pieces of state infrastructure as these that Greece’s hopes of salvation – and, ultimately, those of the Eurozone itself – are now riding. For as part of the new austerity programme finally passed by parliament last week, the loss-making Hellenic Railways Network, along with dozens of other enterprises ranging from casinos to gold mines and power stations to ports, is to be offered for privatisation. In will come up to 50 billion of the 320 billion Greece currently owes the rest of the world, and out will go the power base of the country’s overpaid, underworked public sector, whose militant unions are seen as one of the main political obstacles to reform.

However, rather like Hellenic Railways timetables, there are predictions on paper and reality on the ground. True, *given that the network typically loses nearly 1 billion a year – a staggering five per cent of Greek GDP* in all – unloading the entire network into private hands is an obvious money saver. Any would-be investor, though, will face war from Athnasios Leventis, president of PanHellenic Federation of Railwaymen..."


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## Chris (4 Jul 2011)

GoMayoGo said:


> That analogy is a good one. However if you are a hard nosed heoin addict coming off it straight away without any assistance can often lead to death as the withdrawl symptoms are nearly as dangerous as the drug itself. Same goes for Greece in my opinion. If they use medication (financial assistance) to withdraw their deficit gradually then they have a chance of keeping the country alive.
> The alternative is pretty severe.



But you do not treat heroin addicts by giving them more heroin. What is happening in Greece and Ireland for that matter, is that a credit junkie is being given more credit.


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## Smart_Saver (5 Jul 2011)

Chris said:


> But you do not treat heroin addicts by giving them more heroin. What is happening in Greece and Ireland for that matter, is that a credit junkie is being given more credit.


 
Yes it is. But only under very strict conditions. The IMF and the EU said that Greece had to pass into law their severe austerity budget measures before any line of credit to keep the country afloat would be given. I presume it will be the same for Ireland if the quarterly analysis is requiring of the same measures. Are you saying that they should go 'cold turkey' and turn down these offers from the lenders of last resort ?


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