Choose your own Greek adventure

[Nazdakka]

What would your plan be? Solving the Greek debt crisis: The choose-your-own-adventure edition!

INTRODUCTION

Welcome to Choose Your Own Troika Program For Greece! You are a junior member of the One World Government, and you have been given the job of coming up with a proposal to resolve the Greek crisis. You have also been given an advisor who will help you talk through the consequences of decisions. Remember that you have to consider the economic consequences of the various policy choices, but that there is no point in submitting a proposal which is politically unacceptable to either the Troika or the Greek government. Good luck!

Where did you end up first time? What's your ideal solution, working within the bounds of what is politically and economically achievable? Why?


Easier to navigate HTML version

(Also, instead of just a 'page' number, it would be a good idea to summarise your result so we know what you chose!)

[SaroDarksbane]

Step 1: Tell the bankers to **** off, leave the euro, and default.

There is no step two.

[Nazdakka]

Step 1: Tell the bankers to **** off, leave the euro, and default.

There is no step two.

OK, so in the short term you're precipitating a Eurozone-wide credit crunch and making a giant mess of Greek society. In the medium-long term you're bringing into play a bunch of unpredictable downside scenarios; nobody knows how the already weak Greek political structures will weather the storm, or how Greece will choose to fund itself in the future.

That's just the Greek story. What we also don't know is the wider consequences of the Greeks crashing out of the Euro, which could go in any number of ways.

That's the best outcome in your view?

[SaroDarksbane]

That's the best outcome in your view?

It's the only outcome. Everything else is just can-kicking for political expediency.

The choice for Greece is whether they want to default now and remain a sovereign nation, or default later after they've become a puppet state for the EU core countries.

in the short term you're precipitating a Eurozone-wide credit crunch

The credit crunch exists regardless of what happens to Greece. Spain, Portugal, Ireland, and Italy are the next to go, and they will be much worse. Saying that a Greek bailout is going to prevent a 'credit crunch" is like saying that you can prevent a quickly sinking ship from going under if only you can tie it to a slightly-slower sinking ship in time.

nobody knows how the already weak Greek political structures will weather the storm

You say that like it's a bad thing.

how Greece will choose to fund itself in the future.

I assume that what you mean is, "But, but, but, how will the Greek government guarantee their citizens the free ponies and chocolate fountains that is their right, if they can't borrow heaps of money they'll never pay back???"

They should try living within their means sometime.

(Remember, free **** is a right! If a Greek citizen can't pay for that ****, the cost should be borne by the Greek government. And if the Greek government can't pay for that ****, the cost should be borne by the German and French governments. And if German and French governments can't pay for that ****, the cost should be borne by the EU in general. And if the EU in general can't pay for that ****, the cost should be borne by the Fed via dollar swaps. And if the Fed can't pay for that ****, the cost should be borne by the IMF. And if the IMF can't pay for that ****, we should scream in impotent rage at a universe where we all have a right to free ****, but where it doesn't fall from the sky like mana from heaven.)

[Vivi]

I'm a Gorgon. Not sure how snake-hair would help.

[Nazdakka]

It's the only outcome. Everything else is just can-kicking for political expediency.

The choice for Greece is whether they want to default now and remain a sovereign nation, or default later after they've become a puppet state for the EU core countries.

Maybe. Maybe not. Greece is not a huge economy in relation to the size of the Eurozone, and I think that there is probably a better solution to be found than a disorderly default and messy exit from the Eurozone. Whether the Eurozone leadership is of sufficient calibre to find it is another matter.

The credit crunch exists regardless of what happens to Greece. Spain, Portugal, Ireland, and Italy are the next to go, and they will be much worse. Saying that a Greek bailout is going to prevent a 'credit crunch" is like saying that you can prevent a quickly sinking ship from going under if only you can tie it to a slightly-slower sinking ship in time.

The other problem EU nations are not all carbon-copies of Greece, or each other. The Greeks were in a class of their own in terms of mismanagement. Poor governance is not the only story here; there is also the structural story about the Eurozone. Pre-crisis, the Spanish, Portugese, Italian and Irish governments were not running huge deficits relative to the rest of the Eurozone, and yet they are also in trouble now. There's clearly more going on here than a simple tale about budget deficits.

...nobody knows how the already weak Greek political structures will weather the storm

You say that like it's a bad thing.

If the Greek government completely collapses, then things will be very messy in the short term. After that, it's possible that they will get their arses in gear and elect some competant people. However, it's also possible (and IMO more likely) that the military will step in and impose order by force, or they'll sell themselves to the Chinese/Russians. Neither you or I can predict what happens next with any clarity, but there are a lot of potential downsides.

I assume that what you mean is, "But, but, but, how will the Greek government guarantee their citizens the free ponies and chocolate fountains that is their right, if they can't borrow heaps of money they'll never pay back???"

They should try living within their means sometime.

If you're saying that the Greek government was incompetant and handled its finances very poorly, then yes, I agree. However, if you look at the Eurozone as a whole, a high pre-crisis budget deficit is not a very good predictor of post-crisis financial trouble (Spain had a surplus up until 2008). I would also point out that Greece's creditors knew that the Greeks were not behaving sensibly and still chose to lend to them at low rates. It take two to tango.

I know that you'd love for this crisis to line up nicely within your idealogy, but the facts suggest that it's not that simple.

[krischan]

You can be the new German ambassador in Greece. Feel free to bite or petrify anybody who makes nazi comparisons there.

Step 1: Tell the bankers to **** off, leave the euro, and default.

There is no step two.

I agree. It's the banks who lent money to them, I'm not willing to pay for their mistakes or greed.

If the Greeks want to keep their pride, it will come for a price. I think the price is worth paying, but if the Greeks think it isn't, I might have overestimated the value of what they can be proud of.

[stillman]

I got killed by an orc chieftain.

[krischan]

Hmm, is that good or bad for Greece?

[SaroDarksbane]

I think that there is probably a better solution to be found than a disorderly default and messy exit from the Eurozone.

I don't, obviously. I have hunch that private participation in the write-down scheme is going to end in complete failure. Greece will either default on those bonds, triggering a CDS event, or the other EU countries will have to muster the political capital to put even more money in the pot to buy those investors off, which is a huge longshot.

Pre-crisis, the Spanish, Portugese, Italian and Irish governments were not running huge deficits relative to the rest of the Eurozone, and yet they are also in trouble now.

The fact that no one see anything wrong with every country in the world running deficits, no matter how "huge", speaks volumes about the crisis we're in.

Neither you or I can predict what happens next with any clarity, but there are a lot of potential downsides.

People get the government they deserve, so whether or not they end up with a competent government will be entirely dependent on the willpower and moral fortitude of the Greek people.

I would also point out that Greece's creditors knew that the Greeks were not behaving sensibly and still chose to lend to them at low rates.

And by "tell the bankers to **** off", what did you think I meant? :P

I know that you'd love for this crisis to line up nicely within your idealogy

Reality reasserts itself. Whether people recognize it for what it is, or simply scramble for another needle of cheap credit to shoot up with remains to be seen.

EDIT: