Debt, The EU, And Greece

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Europe Commits Action on Greek Debt

European leaders promised Thursday to safeguard their common currency, the euro, by aiding Greece during its debt crisis. But they offered no immediate assistance to the Greek government and remained silent on how they would respond if investors remain jittery about Greece and other nations with weak economies that use the euro.

Germany blocked discussion of specific bailout mechanisms, forcing the leaders of the 27 countries in the European Union to turn their attention instead to prodding Greece to get its finances under control, promising stringent monitoring of Greece’s tough austerity program.

With the euro facing its worst crisis since it was created in 1999, the leaders who gathered in Brussels offered little more than a statement pledging “determined and coordinated action” if needed to protect the financial stability of the 16 nations within the bloc that use the euro.

EDIT: Oh Wait...

Ever since Greece faked its statistics to enter the eurozone this was accident waiting to happen. Very mild to nonexistent persecution of Stability and Growth Pact constant violators (Italy, France and Germany) led Greece to believe that fiscal discipline is not really that big a deal. While Greece is definitely responsible for its plight, the big countries do have a big share in it as well. They will have to bail out Greece no matter what Merkel says because otherwise euro would be in danger. And don't forget it's the election year in many EU countries, nobody would like to lose just because of Greece's bankruptcy and the inevitable effect on euro.

I have a few in-laws living in Greece. Word on the street is people felt joining the EU and adopting the Euro was a net negative for the country. Prices of goods rose while the standard of living declined. This may have been because the government had less power to manipulate prices, or because my inlaws had trouble adjusting to the times. The 2004 olympics didn't help matters either.

Regardless, there seems to be a lot of resentment toward the EU from the general populace, and that's only going to make putting things right harder.

Regardless, there seems to be a lot of resentment toward the EU from the general populace, and that's only going to make putting things right harder.

Problem is that the EU benefits are more abstract than the 'negatives' attributed to it. Moreover, the EU has always been the local politicians' favorite scapegoat to push unpopular legislation ("Sorry, can't help it, we HAVE to because we're in the EU! Blame Brussels!"). This is the case everywhere in Europe.

Regarding the inflation: there have been some studies by consumers organisations that life has indeed gotten more expensive since the Euro was introduced. And yes, there's a general 'feeling' in Europe (certainly in Belgium) that the Euro has made life more expensive. A lot of this is superstition though. The Euro has proven to be a very strong currency in tough times, I'm guessing keeping the Drachme/Belgian Frank/... would have resulted in a slightly higher inflation :-).

Here's an article by an economist in Madrid equating the Euro to the Tragedy of the Commons, and it isn't a pretty picture. From what I understand, this has been the problem with the Euro basically since its inception; the "strong" economic countries and the "weak" economic countries at odds on what to do.

It's hard to see out being outside the Euro system would make things better in Greece. The country imports a lot of goods (let's face it- everyone does these days), and even locally produced goods could be purchased from outside the country, meaning that local prices would rise. This isn't a place like China that's designed to be mercantilist. It's an integrated part of the European economy whether it uses the Euro or not.

Minarchist wrote:

From what I understand, this has been the problem with the Euro basically since its inception; the "strong" economic countries and the "weak" economic countries at odds on what to do.

Some of you economics buffs enlighten me. Isn't this the same situation every country faces? For instance, in the US you have the various states which all have strong or weak economies of their own and they constantly disagree about how money should be spent and how taxes should be handled. Same thing in other countries where you have rich and poor provinces/counties/communities. I wrote up some of my assumptions on what the major differences are between the EU and single nations but then deleted them. I'd rather just have some input instead of telling you about my unenlightened guesses.

If they want to increase taxes in their local economies to pay Greece's bills, that will damage them somewhat, but it might potentially be worth doing, if they can fix Greece's government so that it doesn't get into the same mess. Bailouts without fundamental change, though, will be purely bad for the Eurozone.

If they try to paper over the problem by printing Euros and giving or lending those to Germany, that will be completely counterproductive. Economies reshape themselves to service money flows, and if the money flows are from a source that isn't contributing any real resources, then investment by companies servicing that cash, whether directly or indirectly, is likely to be a waste of capital. Stopping the cash injection will immediately put those companies into deep trouble, which makes it harder and harder to stop the fundamentally foolish behavior.

In other words, once interventions get big enough, it's no longer politically viable to stop intervening, because the short-term pain is so severe. Eventually, the entire economy will run out of resources, trying to prop up the bad structures that were caused by intervention.

Malor wrote:

If they want to increase taxes in their local economies to pay Greece's bills, that will damage them somewhat, but it might potentially be worth doing, if they can fix Greece's government so that it doesn't get into the same mess. Bailouts without fundamental change, though, will be purely bad for the Eurozone.

This is true, and the problem gets much larger and deeper than Greece. If the EU bails out Greece then Portugal, Italy, Spain, and Ireland will be next in line with their hands out, and their problems are all much larger than Greece's. Getting onto the track Malor described will destroy the EU as a monetary union in very short order. The difference might be that the EU leadership, particularly in the stronger countries and especially Merkel, is well aware of that fact, and are hesitating at the top of the hill because it looks pretty steep.

The right thing to do is to stop monetizing Greek debt and let them deal with the problems. Their problems are solvable, but the only way they are going to get solved is by running out of money - the Greeks have demonstrated that, like us, they are perfectly willing to vote themselves into an entitlement corner from which there is no escape.

What really, really frustrates me is the people who insist that because we're borrowing money for stupid wars, that means it's okay to borrow money on healthcare or whatever the Program Du Jour is... completely ignoring that that money has to be paid back. So what do we do in ten years, when we have all the interest payments PLUS the programs in question? People just do NOT understand debt, even ones who think they do. They seem to think that there's an unlimited amount of wealth they can expropriate via taxes to pay those bills, and use stupid arguments about how 'that spending creates jobs!'. Argh.

There are times when you have to borrow money, even for pure consumption, and an existential threat would certainly be one of them. (None of the wars we've fought since WW2 even vaguely qualify on that score.) And it's highly sensible to borrow money for projects that turn a profit, even when it's the government that's doing it, as long as money isn't being created to fund the project. But we're just so stupid about what we borrow for. This bad thinking has infected a large fraction of the world, and it's going to end with severe consequences.

Aetius wrote:

This is true, and the problem gets much larger and deeper than Greece. If the EU bails out Greece then Portugal, Italy, Spain, and Ireland will be next in line with their hands out, and their problems are all much larger than Greece's.

Greece's is by far the biggest problem in the Eurozone. The reason Portugal, Spain and Ireland get mentioned in quick succession is to do with the cost of lending and the fear that it will rise for the weaker countries in Euro.

The other issue around the bailing out of Greece is really a done deal. Greece will be bailed out but they will be told that they have short term targets to hit. I'm sure the other Euro goodjers will echo this. Expect an emergency budget very soon from the Greece with shadows of Merkel. In comparison, Ireland had a much lauded budget in December that cut pay to civil servants by up to 12.5% percent (my own wife by 7% and other 7% from a pension levy) and many have no doubt the ECB made some quiet demands in the background. Personally, I was delighted my government hand's were tied as we are already being to show signs of getting out of the recession without stimulus packages.

A point to remember in all of this, the UK is worse off than Spain and Ireland right now. They have just devalued then printed their own currency to solve their problems. Lets wait and see what happens in Greece but if the EU combined with the ECB and the IMF can force the Greeks to reign in their spending the Euro will have succeeded in jumping another hurdle without the need of risk free bailouts or printing money. I want to be in that club in the future.

I do also love those who blame the Euro for their problems and not the massive deficits their countries are running.

They have just devalued then printed their own currency to solve their problems.

Yeah, I was hearing about how they're going to have to downsize their military. What was really bizarre was listening to the talking head on the BBC saying that 'this stuff is more expensive than it used to be, and we can't afford it anymore'. And I'm thinking to myself, 'you idiot, it costs the same amount it always did, you're just screwing up your currency to try to pretend you can spend more money than you have'.

That's what those huge social programs do, especially when they're funded by debt. But it happens slowly enough that people never seem to connect their steadily reduced standards of living with the profligate government spending.

Criticize these programs, and you're a heartless bastard who hates poor/sick/elderly people. Somehow there's always the mentality if you tax the rich more, and cut more military, trillions of dollars will pour in.

Even 100% tax rate on the rich wouldn't even come close to paying for these programs.

Somehow there's always the mentality if you tax the rich more, and cut more military, trillions of dollars will pour in.

The thing is, it will... for awhile. It's like trying to argue with fishermen that they need to stop fishing so goddamn much and let the stocks recover. Money in the economy is the exact same way; you can take a little bit out of it forever, but if you take too much for too long, you really, really screw up the source of your wealth.

I thought of this a couple weeks ago and never managed to work it into a post here... I was listening to some BBC story about how the politicians refuse to limit fishermen to a reasonable catch, thereby ensuring the total destruction of the fishing industry eventually, just not today, and it struck me that these are the exact same people we're trusting to run the economy.

We can't even get a limit put on fishing, when the consequences of failing to impose that limit are so clear and graphic, and yet we want to trust these same people with the ability to print unlimited cash on demand and borrow as much as they want.

We are, collectively, idiots.

Axon wrote:
Aetius wrote:

This is true, and the problem gets much larger and deeper than Greece. If the EU bails out Greece then Portugal, Italy, Spain, and Ireland will be next in line with their hands out, and their problems are all much larger than Greece's.

Greece's is by far the biggest problem in the Eurozone. The reason Portugal, Spain and Ireland get mentioned in quick succession is to do with the cost of lending and the fear that it will rise for the weaker countries in Euro.

Spain is the fifth or sixth largest economy in the EU, five times larger than Greece. They have the highest unemployment rate in Europe, 17% in April of last year and projected to hit 22% this year (and that's U-3 equivalent, not U-6 equivalent, meaning real unemployment is probably even higher). Tax receipts have cratered and their government spending is essentially entirely debt-based. Their debt-to-GDP ratio is headed from 40% in 2008 to a target of 74% in 2011 - and that's including the debt-based spending in the GDP - otherwise, they'd already be over 100%. Their GDP growth rate was -4.0% in 2009. 16% of their economy was construction, and their housing bubble popped along with ours, leaving nothing to prop up the GDP for years to come.

Basically, Greece took the green kiddie slope down the hill, while Spain on the double black diamond with only one ski. Greece is getting there first because they never ascended to the same heights as Spain, but the damage in Spain is and will be far more severe. Spain has no financial out except to cut spending, but instead they are borrowing and spending like mad to maintain their lifestyle.

I do also love those who blame the Euro for their problems and not the massive deficits their countries are running.

It's amazing to me, actually, that the other European countries let them get away with that. They are literally destroying the Euro and the stronger countries are simply sitting by and watching.

My understanding was that military spending ran ~ 700 billion, with some more related CounterTerrorism/military spending in other departments. Even if you gut a number of let's say 900 billion in half, that's 450 billion.

These are extremely ball park figures, but 2008 tax revenue was around 2.5 trillion, and ~80% of that was from payroll/individual taxes, which puts it around 2T. The top 1% generate ~ 1/3 of the tax revenue (article citing IRS numbers, hope this is correct), so 660 billion.

So let's say you double the total amount of taxes collected from the 1% bracket, 1333 billion. Plus that 450 bil, round up to 1.9 Trillion. I guess it seems like a lot, but as it's a highly hypothetical situation, doesn't seem like a lot of breathing room at all

Aetius wrote:
Axon wrote:
Aetius wrote:

This is true, and the problem gets much larger and deeper than Greece. If the EU bails out Greece then Portugal, Italy, Spain, and Ireland will be next in line with their hands out, and their problems are all much larger than Greece's.

Greece's is by far the biggest problem in the Eurozone. The reason Portugal, Spain and Ireland get mentioned in quick succession is to do with the cost of lending and the fear that it will rise for the weaker countries in Euro.

Spain is the fifth or sixth largest economy in the EU, five times larger than Greece. They have the highest unemployment rate in Europe, 17% in April of last year and projected to hit 22% this year (and that's U-3 equivalent, not U-6 equivalent, meaning real unemployment is probably even higher). Tax receipts have cratered and their government spending is essentially entirely debt-based. Their debt-to-GDP ratio is headed from 40% in 2008 to a target of 74% in 2011 - and that's including the debt-based spending in the GDP - otherwise, they'd already be over 100%. Their GDP growth rate was -4.0% in 2009. 16% of their economy was construction, and their housing bubble popped along with ours, leaving nothing to prop up the GDP for years to come.

Basically, Greece took the green kiddie slope down the hill, while Spain on the double black diamond with only one ski. Greece is getting there first because they never ascended to the same heights as Spain, but the damage in Spain is and will be far more severe. Spain has no financial out except to cut spending, but instead they are borrowing and spending like mad to maintain their lifestyle.

Greece's debt to GDP this year is set to be well over 110% and is running a deficit of 12.5%. What ever the WSJ hopes might happen (I notice it doesn't offer the source of those debt predictions), Spain has a long way to go to hit those heights. It does have high unemployment due to the collapse of its building industry but nobody over here thinks it will or be allow to dig itself into a hole that large. Very important to remember the UK and the US have far bigger relative public debts nor did Spain have to bailout its banks. It's got some trouble ahead but I can't help but feeling that the WSJ and Murdoch's other outlets are beating a drum to fit a narrative. Certainly, the Economist does not share that pessimism and it is certainly no fan of the EU.

I do also love those who blame the Euro for their problems and not the massive deficits their countries are running.
It's amazing to me, actually, that the other European countries let them get away with that. They are literally destroying the Euro and the stronger countries are simply sitting by and watching.

They aren't. What gave you that impression? I just told you Ireland was given the terms to its help form the ECB and Greece's terms are being decided upon. Spain and Portugal, I'm willing to bet, will have tough budgets in the coming months.

Axon wrote:
It's amazing to me, actually, that the other European countries let them get away with that. They are literally destroying the Euro and the stronger countries are simply sitting by and watching.

They aren't. What gave you that impression?

Continuing to allow the monetization of debt without restraint?

I just told you Ireland was given the terms to its help form the ECB and Greece's terms are being decided upon. Spain and Portugal, I'm willing to bet, will have tough budgets in the coming months.

I suspect that what we are disagreeing on is the definition of "tough" budgets. I seriously doubt the monetization of debt will be stopped, nor will these countries be blocked from borrowing more money. A "tough" budget is one where debt is being paid down, not increased, and none of these countries are doing that, including yours. What they are doing is not sustainable - and the stronger countries are letting it happen.

And don't get me wrong - the U.S. is in a world of hurt as well, worse than any of the European countries. I'm not at all saying that we're somehow doing better, because we're not. But stupid is stupid, whether it speaks English or French or Greek.

I heard an interview today with someone important in the government of Portugal, who has said that they plan to refuse all help and deal with their problems internally. He was saying that a bailout wouldn't actually fix anything, and that they had to make some hard choices and repair things themselves.

I was very impressed. That's not something you hear from politicians very often.

Aetius wrote:
Axon wrote:
It's amazing to me, actually, that the other European countries let them get away with that. They are literally destroying the Euro and the stronger countries are simply sitting by and watching.

They aren't. What gave you that impression?

Continuing to allow the monetization of debt without restraint?

But they aren't. Greece is in trouble because it lied about how much trouble it was in. The trouble is how much is need to cut expenditure to get low interest loans from the ECB and IMF. The talk is of getting its deficit of 12.5% down to 5% in three years. That is going to hurt.

Aetius wrote:
I just told you Ireland was given the terms to its help form the ECB and Greece's terms are being decided upon. Spain and Portugal, I'm willing to bet, will have tough budgets in the coming months.

I suspect that what we are disagreeing on is the definition of "tough" budgets. I seriously doubt the monetization of debt will be stopped, nor will these countries be blocked from borrowing more money. A "tough" budget is one where debt is being paid down, not increased, and none of these countries are doing that, including yours. What they are doing is not sustainable - and the stronger countries are letting it happen.

That article is from over a year ago. We've had two budgets that have cut expenditure and completely altered those predictions and those budgets were forced out of us because we cannot get ourselves into further debt as Germany won't let it.

And yes, our view of "tough" budgets is different but that is a different discussion. For any other observer of the Irish budget in December from the FT to the Economist they were surprised and congratulatory in equal measure.

And don't get me wrong - the U.S. is in a world of hurt as well, worse than any of the European countries. I'm not at all saying that we're somehow doing better, because we're not. But stupid is stupid, whether it speaks English or French or Greek.

But that's the rub. The eurozone is trying not to print money or inject vast amounts of money into the system. Its not getting it right at every turn but so far myself and the other Euro goodjers on this forum in the eurozone are at least appreciative of the tightly defined field our governments have to work in. You seem to be suggesting that Greece, Spain, Portugal and Ireland are allowed to spend freely I just don't see it. The opposite in fact.

Edit: Malor post above illustrates my point.

You're misunderstanding me. They may not be allowed to spend freely, but they are allowed to borrow way too much - and to do things like this. And the Greek solution to the problem is simply going to make things worse (although the pay cuts are a start in the right direction). I'm glad that Portugal is at least talking about heading that way - in fact, that's two things I've heard of them recently that have been seriously headed in a good direction (the other is legalizing drugs). However, to do what needs to be done will cause serious short-term pain, and I'd be willing to bet that they will chicken out. We'll see.

If the EU was doing what I believe they should be doing, they should be telling Greece what Portugal is saying on their own. Things that are less bad are still bad. These countries have to get on the right track. Reducing the deficit to 5% doesn't solve the problem - it just prolongs it. They have to stop spending money they don't have, just like us.

Axon wrote:

But they aren't. Greece is in trouble because it lied about how much trouble it was in. The trouble is how much is need to cut expenditure to get low interest loans from the ECB and IMF. The talk is of getting its deficit of 12.5% down to 5% in three years. That is going to hurt.

Not nearly as much as that 5% will hurt down the road. This is the deficit we're talking about, not the overall debt. If the deficit is 5%, the overall debt is still climbing, and still making things worse. They need to be paying debt off, not adding to it - and they are being enabled by the ECB to continue adding to it.

Aetius wrote:

That article is from over a year ago. We've had two budgets that have cut expenditure and completely altered those predictions and those budgets were forced out of us because we cannot get ourselves into further debt as Germany won't let it.

And yet, somehow, Ireland is running the highest deficit in the EU. Where is that money coming from?

But that's the rub. The eurozone is trying not to print money or inject vast amounts of money into the system.

They may not be trying to, but they are. Every time Greek or Irish or Spanish or French debt is monetized by the ECB, they are printing money.

Its not getting it right at every turn but so far myself and the other Euro goodjers on this forum in the eurozone are at least appreciative of the tightly defined field our governments have to work in. You seem to be suggesting that Greece, Spain, Portugal and Ireland are allowed to spend freely I just don't see it. The opposite in fact.

All of the countries you listed are running massive deficits. Where is that money coming from? None of these countries can afford more debt. You can't solve a borrowing problem by continuing to borrow more money.

The problem with the PIGS is that they are not sovereign countries. They act like they are but not having a local currency ties their hands.

Which is very good for them; it forces them to deal more closely with reality, instead of playing games with their currency to hide problems.

goman wrote:

The problem with the PIGS is that they are not sovereign countries. They act like they are but not having a local currency ties their hands.

Its called shared sovereignty. We are perfectly sovereign countries by any use of the word. Besides, going by your definition, explain to me how the US, Iceland and the UK are all in a far worse position given that they have their own currency?

The problem is government being held to their spending practices. Crazy, I know.

Aetius wrote:

You're misunderstanding me. They may not be allowed to spend freely, but they are allowed to borrow way too much - and to do things like this. And the Greek solution to the problem is simply going to make things worse (although the pay cuts are a start in the right direction). I'm glad that Portugal is at least talking about heading that way - in fact, that's two things I've heard of them recently that have been seriously headed in a good direction (the other is legalizing drugs). However, to do what needs to be done will cause serious short-term pain, and I'd be willing to bet that they will chicken out. We'll see.

If the EU was doing what I believe they should be doing, they should be telling Greece what Portugal is saying on their own. Things that are less bad are still bad. These countries have to get on the right track. Reducing the deficit to 5% doesn't solve the problem - it just prolongs it. They have to stop spending money they don't have, just like us.

I'm going to keep this simple because I feel I'm now repeating myself. Greece lied to the ECB. The ECB did not allow its debt or deficit to occur and only found out very recently the size of the debt. Now that the ECB knows the full scale of the problem it is trying to stave off sovereign default by Greece and at the same time get Greece's spending in order. I fail to see where the EU or the ECB is allowing Greece to run up a tab for free.

Aetius wrote:
Axon wrote:

But they aren't. Greece is in trouble because it lied about how much trouble it was in. The trouble is how much is need to cut expenditure to get low interest loans from the ECB and IMF. The talk is of getting its deficit of 12.5% down to 5% in three years. That is going to hurt.

Not nearly as much as that 5% will hurt down the road. This is the deficit we're talking about, not the overall debt. If the deficit is 5%, the overall debt is still climbing, and still making things worse. They need to be paying debt off, not adding to it - and they are being enabled by the ECB to continue adding to it.

That is a whole other debate but what you are proposing would quickly drive a country or region into depression. You'll find that the eurozone also limits your debt as well as deficit so while you are allowed to run both there are boundaries.

Aetius wrote:
Axon wrote:

That article is from over a year ago. We've had two budgets that have cut expenditure and completely altered those predictions and those budgets were forced out of us because we cannot get ourselves into further debt as Germany won't let it.

And yet, somehow, Ireland is running the highest deficit in the EU. Where is that money coming from?

I've already said that article is from a year ago and it was a prediction. Ireland is not running the highest deficit in the EU and that article never even state that. And the EU is the 27 members not the 15 of the Eurozone. Here is an article from February 3rd, 2010 over a year later because of the measures we have taken. And the FT can hardly be described as either being predisposed to the Irish or the EU.

As for where the money is coming from, Germany's current account. Why do you think the media over here are hanging on Merkel's every word?

But that's the rub. The eurozone is trying not to print money or inject vast amounts of money into the system.

They may not be trying to, but they are. Every time Greek or Irish or Spanish or French debt is monetized by the ECB, they are printing money.

Now they are not. Germany (and France to a lesser extent) are paying for it out of their current accounts. The ECB is not allowed to print more money for the very simple reason that the Germans have learned their lesson from history.

Its not getting it right at every turn but so far myself and the other Euro goodjers on this forum in the eurozone are at least appreciative of the tightly defined field our governments have to work in. You seem to be suggesting that Greece, Spain, Portugal and Ireland are allowed to spend freely I just don't see it. The opposite in fact.

All of the countries you listed are running massive deficits. Where is that money coming from? None of these countries can afford more debt. You can't solve a borrowing problem by continuing to borrow more money.

But the eurozone is aware of this. You are allowed to run deficits and debts, thats for precisely when things like the recent recession. However there is a limit to the amount of debt you can run which is why Greece lied about it.

And just to repeat; The money is coming from Germany. Greece hid its problem from the EU, EC and ECB. Ireland is already getting rewarded by the markets for its budgeting. The ECB doesn't print money, nor allows unlimited deficits or debts but does allow countries to run then for a time.

Malor wrote:

Which is very good for them; it forces them to deal more closely with reality, instead of playing games with their currency to hide problems.

Right?! It is Greece's fault that there is a global financial crisis.

goman wrote:
Malor wrote:

Which is very good for them; it forces them to deal more closely with reality, instead of playing games with their currency to hide problems.

Right?! It is Greece's fault that there is a global financial crisis.

Who said they did? What is at fault here is cheap credit and Greece membership of the eurozone and its abuse of both. The PIIGS group (Italy is now getting added to the group) are all guilty of it.

Axon wrote:
goman wrote:
Malor wrote:

Which is very good for them; it forces them to deal more closely with reality, instead of playing games with their currency to hide problems.

Right?! It is Greece's fault that there is a global financial crisis.

Who said they did? What is at fault here is cheap credit and Greece membership of the eurozone and its abuse of both. The PIIGS group (Italy is now getting added to the group) are all guilty of it.

Guilty of what? Not hitting an arbitrary number?

The ECB is not allowed to print more money

As long as they're not monetizing the debt with new money from thin air, there's nothing really wrong with what's going on. The effects on Germany and on the EU will be clear and easy to understand; Germany will either have to borrow or raise taxes, and those are quite well-understood.

It's kind of like Grandpa Joe bailing you out of a financial jam; if you repay Grandpa, everyone is good. Grandpa maybe loses some opportunity cost on his money, and you have to suffer with a lower standard of living while you repay the debt, but there's no nasty side effects to the transaction.

Basically, printing money to pay a debt or to extract resources is a form of lying, and lying is never good for an economy, even though it often feels wonderful for awhile. But honest taxation or borrowing, followed by a transfer to Greece, involves no deception, and doesn't damage anyone but the parties to the transaction.

Not balancing their books; assuming that the cash-flow surplus from the boom was a permanent thing, instead of saving money for the bad years.

They also, apparently, used some deeply dodgy accounting to get themselves into the EU, but I'm not familiar with the details.

Malor wrote:

Not balancing their books; assuming that the cash-flow surplus from the boom was a permanent thing, instead of saving money for the bad years.

They also, apparently, used some deeply dodgy accounting to get themselves into the EU, but I'm not familiar with the details.

You're talking about entering EMU, not EU (there's no financial criterion for that, except general financial stability), but you're right. Greece knowingly overstated some of its income, thus reporting better deficit numbers. They even done it several times, and even after they had been caught falsifying the numbers. I still wonder how this would affect euro in the long run. I wouldn't be very confident about a currency where its issuers can't even effectively enforce their own rules.

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