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Greek Revolt Long Overdue
Townhall.com ^ | February 10, 2015 | Peter Morici

Posted on 02/10/2015 12:00:12 PM PST by Kaslin

Germany has been sacking Greece and other Mediterranean economies for years, and the Hellenic revolt against austerity is overdue.

When the euro was established in 1999, prices were translated from the mark, franc and other currencies into euro at prevailing exchange rates. (Greece joined the Eurozone in 2001, giving up the drachma.)

National prices reflected differences in labor costs and efficiency across countries, but owing to a variety of social and demographic conditions, productivity improved more rapidly in Germany and other northern countries. Making goods in the South became too expensive, and Greece and others could no longer export enough to pay for imports.

Without a single currency, the values of the drachma and other Mediterranean currencies would have fallen against the German mark to restore competitive balance.

Europe has few of the mechanisms that facilitate adjustment in the United States, which has a single currency across a similarly wide range of competitive circumstances. A single language permits workers to go where the jobs are, whereas most Greeks and Italians are stuck where they are born. New Yorkers’ taxes subsidize public works, health care and the like in Mississippi through the federal government in ways the European Commission cannot accomplish.

Germany uses its size and influence to resist changes in EU institutions that could alter fiscal arrangements.

Hence, the Greeks and other southern Europeans were forced to borrow heavily from private lenders in the north—mostly through their commercial banks—to provide public services, health care and similar services that were hardly overly generous when measured by German standards.

All this kept German factories humming and German unemployment low.

When the financial crisis and meltdown of global banking made private borrowing no longer viable, Greece and other southern states were forced to seek loans directly from Germany and other northern governments.

Bailouts implemented by Germany through the European Central Bank, the International Monetary Fund and the European Commission required labor market reforms, cuts in wages and pensions, higher taxes, and less government spending.

All to restore Greek competitiveness, growth and solvency—and all have absolutely failed.

Starved for investment, the Greek industry is now even less capable of exporting to pay for the imports of everyday items Greeks need. GDP is down 25 percent, unemployment is about 25 percent, and health care spending is down 40 percent.

When austerity began, Greece’s sovereign debt was 110 percent of its GDP. Now it is 160 percent, grows larger by the day and can never be repaid.

That should hardly surprise Chancellor Merkel. Germany pursues many of the same policies that she wants Greece to jettison—it just does those differently.

Many German workers belong to unions that negotiate pay and work rules through national contracts. As a result they enjoy the highest wages and the shortest work week among large industrialized countries.

When recession struck in 2008, German businesses were freer from legal restrictions than Greek employers to lay off workers. So, Berlin subsidized employers to reduce hours, share work and still pay nearly full wages. And Germans were hardly required to accept huge cuts in the quality and availability of health care.

If Greece and the others really straightened out their economies, Germany and other northern countries would lose a great number of jobs to the South and political clout within Europe.

The newly elected Greek government is quite correct to eschew austerity and seek reductions in what it owes northern European governments. In making those loans, the latter chose to ignore key facts.

Namely, the single currency is punishing the South, and solving Mediterranean states’ chronic financial problems will require moving some industry from the North to the South. More austerity will only bleed the patient further.

In the near term, spending more and taxing less will help the Greek economy recover. But unless the single currency is abandoned and the EU is run to benefit all its members, Greece and the other Mediterranean states can never prosper.


TOPICS: Business/Economy; Culture/Society; Editorial; Germany
KEYWORDS: alexistsipras; amish; euro; europeanunion; germany; greece; syriza
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1 posted on 02/10/2015 12:00:12 PM PST by Kaslin
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To: Kaslin

No mention of the Welfare society that is crippling Greece right now.


2 posted on 02/10/2015 12:02:21 PM PST by AppyPappy (If you are not part of the solution, there is good money to be made prolonging the problem.)
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To: Kaslin
but owing to a variety of social and demographic conditions, productivity improved more rapidly in Germany and other northern countries

Well, that's a nice way to put it...

3 posted on 02/10/2015 12:02:32 PM PST by Jim Noble (When strong, avoid them. Attack their weaknesses. Emerge to their surprise.)
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To: Kaslin
Hence, the Greeks and other southern Europeans were forced to borrow heavily from private lenders in the north—mostly through their commercial banks—to provide public services, health care and similar services

Yeah, that's right. They were "forced" to borrow to provide benefits that they could not pay for out of taxes. Is that why the US is borrowing to pay for benefits too? Because we were "forced" to?

4 posted on 02/10/2015 12:07:16 PM PST by Opinionated Blowhard ("When the people find they can vote themselves money, that will herald the end of the republic.")
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To: Kaslin

Greece needs to depart the Euro Zone and get back on the drachma as does Spain and probably Italy. They never had the strength of economies to enter the EU in the first place. The Euro Zone is going to break up its just a matter of what moment in time. Nigel Farage is right when he says they all need to be trading partners and work together but not try to be the USA.


5 posted on 02/10/2015 12:10:16 PM PST by Georgia Girl 2 (The only purpose o f a pistol is to fight your way back to the rifle you should never have dropped.)
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To: Kaslin

One other difference between Greece and Germany -

Greeks are a nation of tax-cheats and non-payers, whereas Germans actually pay their taxes.

That’s why Germany has money and Greece doesn’t.

Is Greece interested in solving that problem?

Nope, it’s easier just to shake down those rich Germans again.

Greece is doomed - by their own actions (and inactions).


6 posted on 02/10/2015 12:12:26 PM PST by canuck_conservative
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To: Kaslin

Since the death of Demosthenes, it’s all been downhill for Greece


7 posted on 02/10/2015 12:21:09 PM PST by vbmoneyspender
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To: Kaslin

This recent Greek problem started when a government employee in Athens saw a satellite photo of Athens. He noticed that there were many built-in swimming pools at homes. You have to purchase a permit to build an in-ground swimming pool in Athens. No one had bought a permit.
There is the problem with Greece. They don’t pay their taxes so they can have the money to build home swimming pools. Then, they want someone else to pay their taxes. They want the public services, but they don’t want to pay for them. I don’t feel sorry for the freeloaders.
“Let them eat swimming pools.”


8 posted on 02/10/2015 12:33:28 PM PST by blueunicorn6 ("A crack shot and a good dancer")
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To: vbmoneyspender

Those Kojak movies weren’t quite right without him either.


9 posted on 02/10/2015 12:34:45 PM PST by wally_bert (There are no winners in a game of losers. I'm Tommy Joyce, welcome to the Oriental Lounge.)
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To: vbmoneyspender

Those Kojak movies weren’t quite right without him either.


10 posted on 02/10/2015 12:34:53 PM PST by wally_bert (There are no winners in a game of losers. I'm Tommy Joyce, welcome to the Oriental Lounge.)
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To: Kaslin

I don’t like SYRIZA because they’re a fringe left party, but I appreciate them having the decency of ending the game of charades with the Eurozone.

We’ve been calling this for years already, just let the monstrosity die already.


11 posted on 02/10/2015 12:36:53 PM PST by Shadow44
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To: AppyPappy

He sort of glides over it.

Key fact is what he sticks in up front, in that productivity has not grown in Greece, the “social and demographic conditions”. I.e., the fact that Greeks had massive obstacles and inefficiencies built in to their economic system, inefficiency and corruption throughout the bureaucracy, and the fact that Greeks just aren’t very productive workers vs the Germans.

It is correct in that the Greeks have dug themselves into a hole and there is no way they are going to get themselves out of it under the current rules.

Best to split I think, otherwise it will one way or another be a troublesome un-sovereign dependency.


12 posted on 02/10/2015 12:42:59 PM PST by buwaya
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To: Kaslin

So Townhall has become a communist mouthpiece. Noted.


13 posted on 02/10/2015 12:47:51 PM PST by Moltke ("The Press, Watson, is a most valuable institution if you only know how to use it.")
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To: Jim Noble

That one sentence says it all...but the author glosses right over it and falls back on - it’s just not fair. What a bunch of leftist tripe.


14 posted on 02/10/2015 12:49:47 PM PST by Amari1
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To: buwaya

I think they are holding out for “dead beat artist brother” status. We paid for their rent and dope every time they waved the red flag but that is no longer an option. They could offer some ports to the Russians but the Russians have nothing to put in them anymore. They could threaten to cozy up to the Chinese though.


15 posted on 02/10/2015 12:51:31 PM PST by AppyPappy (If you are not part of the solution, there is good money to be made prolonging the problem.)
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To: Kaslin
"Europe has few of the mechanisms that facilitate adjustment in the United States, which has a single currency across a similarly wide range of competitive circumstances.

A single language permits workers to go where the jobs are, whereas most Greeks and Italians are stuck where they are born. New Yorkers’ taxes subsidize public works, health care and the like in Mississippi through the federal government in ways the European Commission cannot accomplish."

This flaw in the EU structure was obvious from the beginning of its foundation. The EU is nothing but an attempt to do away with the nation state and the history, language and traditions of its various people. Every European is to be considered a mindless worker drone, laboring for the benefit of his EU overlords. All sense of national and racial and religious identity is to obliterated.

16 posted on 02/10/2015 12:55:13 PM PST by StormEye
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To: Kaslin
Greece joined the Eurozone in 2001, giving up the drachma.

Let's not forget that Greece lied and cheated its way into the Eurozone, with the generous (chortle) help of Goldman Sachs. They didn't even come close to meeting any of the criteria then, and they sure as hell don't now. But they wanted a place at the Euro trough and greedily feasted at that for many years. FUG.

17 posted on 02/10/2015 1:01:52 PM PST by Moltke ("The Press, Watson, is a most valuable institution if you only know how to use it.")
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To: Opinionated Blowhard; buwaya

“They were “forced” to borrow to provide benefits that they could not pay for “

You nailed the logical leap in the victim argument. No one forced them to borrow money. They were spendthrifts, living beyond their means - just like someone running up their credit cards into bankruptcy.

Freeper buwaya (post 12) pointed out that Greek productivity has not grown as fast as the Germans: “Greeks had massive obstacles and inefficiencies built in to their economic system, inefficiency and corruption throughout the bureaucracy”.

Those are the reasons that Greece is bankrupt. Great access to credit was an opportunity that most poor countries don’t get. Greece squandered it with a bunch of misguided left-wing economic policies that hampered growth, and cheap political tactics - using borrowed money to buy votes, and leaving the mess for others to clean up.


18 posted on 02/10/2015 1:18:11 PM PST by BeauBo
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To: StormEye

You have to remember the two previous advocates of a United Europe.

Napoleon and Hitler.


19 posted on 02/10/2015 1:18:15 PM PST by redgolum ("God is dead" -- Nietzsche. "Nietzsche is dead" -- God.)
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To: Kaslin

A Townhall article blaming Greece’s socialism-induced problems on Germany? Greece could leave the European currency zone and its corrupt, tax cheating, socialistic, and environmental extremist economy would still flop.


20 posted on 02/10/2015 1:24:35 PM PST by Socon-Econ
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