The euro and the fall of Greece

The people of Greece will vote Sunday on a referendum on whether or not to accept the austerity measures that would accompany a bailout from the rest of the Eurozone.  The Greek government is recommending voting “no” and just letting the economy collapse.  Catherine Rampell explains how Greece–and Europe–got into this mess, making use of the predictions of the late free-market economist Milton Friedman, who is being proven right, as usual. [Read more...]

Defaulting Puerto Rico is “America’s Greece”

The world’s attention as been on Greece, as Europe hopes its collapsing economy and its rejection of austerity measures will not pull down the rest of the Eurozone.  But what happened to Greece is also happening to the American territory of Puerto Rico, whose imminent default on its $72 billion debt–most of which is owed to U.S. investors (which don’t have that much exposure in Greece)–will have a far greater effect on the American economy.

The White House is refusing to bail out Puerto Rico but is instead asking Congress to pass a law allowing the territory to declare bankruptcy.  But that means the American investors will take the loss, which won’t be good for the U.S. economy. [Read more...]

Greeks reject austerity

The economy of Greece has been a basket case, with a national debt that is more than the gross national product, leading to a European Union bailout that has imposed an “austerity” program of slashed government spending, higher taxes, and lower wages.  But now the Greeks have voted to end the austerity, going so far as to elect a communist as Prime Minister who is demanding that Germany forgive its debts. [Read more...]

Beware of Greeks fearing gifts

The Greeks founded Europe, and now they may end it.  And the vehicle for both is the same:  Democracy.

The European powers carefully crafted a deal to bail out Greece, forgiving half of their debt at the cost of significant reforms and austerity measures.  With this agreement, the world’s stock markets soared.  But then the Greek government, despite its earlier agreement, suddenly decided to put the accord to the vote of the people.  Since the population seems opposed to  austerity, the prospect of a referendum has cast the agreement into doubt, sending the world’s stock markets into another dive and shaking the economic foundations of the Eurozone.

World leaders convening at this resort [Cannes] for a long-planned summit find themselves confronting a suddenly acute crisis over Greece and signs of an economic slowdown throughout Europe that may narrow their room for action.

Greek Prime Minister George Papandreou left a cabinet meeting in Athens early Wednesday with his government intact — for now — and backing his plan to hold a national referendum on the country’s latest international rescue program.

World leaders will gather in Cannes, France, on Nov. 3 and Nov. 4 to discuss Europe’s debt crisis and other economic issues. Thousands of protesters are gathering in France to urge the G-20 leaders to focus on the poor.

But his call for a popular vote on Tuesday has jeopardized the rescue plan and upended the agenda for Group of 20 leaders. Papandreou has been called to a meeting here Wednesday night to explain himself.

This was to have been a summit where the G-20 — the forum where industrialized nations and the leading developing economies compare notes on the world economy — puts its stamp on a plan that convincingly appeared to settle Europe’s lingering financial crisis.

Instead, with Cannes under a security lockdown that has made its streets into a virtual ghost town, the group will be looking for ways to avoid even greater problems. The 17-nation euro region is trying desperately to navigate between the budget-cutting and reform needed to bring down high levels of government debt, and the tepid economic growth that is sapping incomes, causing chronically high unemployment and straining political systems.

via World leaders to confer with Greece over referendum call – The Washington Post.

Do you think the Greek government was right to put the question of accepting the economic package to a popular referendum?  Does the world’s economic problems bring us to the limits of Democracy, the possibility that people will not vote to suffer, even when the alternative may be suffering on a far greater scale?  Can you see something like that happening here, with voters rejecting efforts to cut back federal spending AND repudiating new taxes AND demanding ever more entitlements, to the point of national bankruptcy?

UPDATE:  The Greek government has now scrapped the referendum.

The Greek retirement package

If you are a Greek public service worker, you can retire at age 53, getting 80% of your salary.   If you hold a job officially deemed to be hazarous–including hairdresser (all those chemicals) and broadcaster (bacteria on the microphones), you could retire at 50.

The austerity plan that is the condition for Greece’s bailout requires that the retirement age be raised into the 60s.  This is one reason there is rioting in the streets.

See  this and this .

Interesting linguistic footnote: The Greek word for “crisis” is also the word for judgment.


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