Ed., I don’t share your trust in economists. I don’t accept that “what economists think…is a simple matter of mathematics”.

If what they think is simple and just mathematics, there would not be such a wide variation of views by economists. Sure, maybe there’s not such a wide variation on Greek debt and default but there are many other wide variations, indicating that what economists think is not a simple matter of mathematics.

I’m not yet convinced that a Greek default is inevitable. I read somewhere that there is something like €250 billion obtainable from the sale of Greek assets including Athens airport and ports, lottery etc. I’m also not convinced that the discipline of austerity may not cause a shift in the Greeks’ attitude to work and remuneration and the payment of tax.

Germany rose from economic default from 1945 onwards, and the Greeks have been a great people in the past.

If foreign companies do buy up Greek assets, there will be a revenue stream into the state’s coffers over time through taxation.

As a contrarian, I’m going to be hopeful that over the coming years, the Greek people will not sabotage by anarchy, civil disobedience and non-payment of taxes, a coming through the rest of the tunnel into the light at the end.

my liberal buddy just emailed me—-see!! i told you they would solve the greek problem!!!

college grad,used to sell atomic clocks to NASA, now a hard working one man high-end trim carpenter with 1mil. in the bank.

is it really any wonder why the world is where it is?

How can any sane person believe that “reforms and austerity” are going to resolve the Greek problem? They are deeply in debt, and none of Greece’s structural problems are being addressed. Take a look at the Greek 2 year Treasury note; it’s yielding 30% as of last week. What does that tell us about whether the Greek government will pay off the principal for those 2 year treasury bonds?

Ask anyone spent a reasonable amount of time in Greece over the past 2 years and they will tell you that the very fabric of Greek society is badly torn apart. Greek people are now very distrusting of everyone, including some members of their own family.

@ John Mark:
Stuff like non-payment of taxes, ripping off the government, ripping off their local merchants, etc. is considered “normal behavior” in Greece. So to hope that “the Greek people will not sabotage by anarchy, civil disobedience and non-payment of taxes” is wishful thinking. Greece will default, with a certainty factor of 100%; it’s only a matter of time.

I think the Greek opposition party said it best:
“This is not a program to salvage the economy, it’s a program for pillage before bankruptcy,” said Alexis Tsipras.

Ed Note: The debt needs replacing with low-interest EU bonds – like Abu Dhabi did for Dubai.

The situation with Greek Government reminds me of the Holiday companies ruthlessly selling tickets for next weeks trips knowing quite well that when they lock the doors that night they will be on plane themselves to somewhere warm and sunny with no extradition agreements with anybody !!

I prefer the old adage …. if you laid all the world’s economists end to end – you still wouldn’t reach a conclusion!

Ed note: “The debt needs replacing with low-interest EU bonds – like Abu Dhabi did for Dubai.”

That is true, Ed.

But the Euro situation is far more precarious than Abu Dhabi. Abu Dhabi had only “one Greece” to deal with, and it was “a walk in the park” compared to Greece today. Greek society is disintegrating, Dubai wasn’t disintegrating. And It’s not just one gigantic Greek problem that EUR has, there’s Ireland, Portugal, Spain, Belgium, & Italy that are all in deep debt and at risk.

Obewon, Ed.’s note seems to reduce the certainty of Greece defaulting from 100% downwards.

“If the debt needs replacing with EU bonds – like Abu Dhabi did for Dubai”, and since Dubai did not default, then Ed. is suggesting, I think, that Greece’s default is not 100% inevitable.

I think that the comment by Alexis Tsipras is silly! The Greek economy does need salvaging – no one disputes this. Salvaging it is very difficult and does include selling off Greek state assets but this is not pillage. Those foreign companies, which buy these State assets, will still have to pay Greek taxes, and that will be useful income for Greece.

To try to salvage a country so that it might not go bankrupt is well worth the effort and, therefore, it is not pillage, which is theft with violence.

I’m not convinced that the Greek people are intrinsically much more corrupt than other human beings or that they are significantly less capable of learning new ways of conducting themselves given sufficient reason to do so.

However, what I am concerned about is that it may be that NO race or nation of human beings is capable of being sufficiently well-behaved to prevent a spiral of debt and default engulfing the whole world.

In that case, the world of human pleasure, so dependent on debt for its success, might cease to exist, and the world becomes a Cromwellian nightmare of puritan restrictions on all human beings everywhere.

Ed Note: Dubai told its creditors it needed to reschedule, rescheduling is a technical default – and banks are making provisions against their loans to Dubai World.

For Greece- I would suggest- sell state assets. THEN – elect a government of the People and for the people – and then – NATIONALIZE!

i do not believe the kings(princes?) of the UAE have to face their people and get reelected after any bailouts.

dubai was not a dominoe…..basically just a city.

the EU dominoes will demand to get the greek treatment long as it involves sacks of german taxes.

a very well laid out and informative site,peter.

@ John Mark:
Your comment ( “I’m not convinced that the Greek people are intrinsically much more corrupt than other human beings” ) certainly has merit.
However, history shows us that when the vast majority of people within a society behave in a negative way (e.g. cheating, lying, etc.), the resultant behavior of the masses within that society gradually leans in that negative direction.

Back in 1990, my neighbor & his wife, who were born in Greece, used to tell us stories about how the Greek society was degrading rapidly (they spent 2 weeks in Greece every summer). Back then, company employees had a very low productivity, didn’t care about quality workmanship, cheated their employer on a routine basis, cheated the government out of tax revenue, etc. etc.

Fast Forward to 2008:
The so-called “normal behavior” that I summarized in my first post above has been going on for over 35 years now. One small example here is the tax revenue collected by the Greek government. The average Greek worker pays less than 7% (approximately) of the taxes that they should pay; Greek lawyers, medical doctors, engineers, etc. pay less than 3% (approximately) of what they should pay. My Greek friends often told me that the Greek people never learned to pay their taxes, because no one is ever punished. And this has been standard behavior for over a generation.

Since 2001, the wage bill of the Greek public sector has doubled (after adjusting for inflation) and that number doesn’t take into account the massive bribes collected by public officials. The average government job pays three times the average private-sector job, and government employees have lavish homes as well as vacation homes/ villas. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus another 300 million euros in “other” expenses (it’s cheaper for the government to hire a taxi every day for all Greek citizens, than to run that railroad!!!). The Greek public school system is the lowest ranked system in Europe (Finland’s is the highest), yet it employs four times as many teachers per pupil as Finland. The Greek “retirement age” is a total joke (55 for men, 50 for women).
Everybody rips off the Greek government because the Greek government expects it. I could go on, but you get the point.

Bottom Line:
So even without significant “new reforms and austerity” imposed by the IMF and EU, if the Greek government suddenly clamps down and tries to get their population to pay what they should pay in taxes, what do you think their reaction is going to be? Yeah, you guessed it!

Now add a dose of IMF austerity to this mix; the IMF already knows that after the austerity measures are signed, the Greeks will never adhere to even a modicum of austerity measures.
Never happen.

Then what?

Obewon, I found your post very interesting and persuasive. I shall maintain my position that Greece will not default mainly to have a discussion but also because I still think that the Greek people might pull this off with the help of further loans and asset sales.

Greek society’s attitude to government and, in particular, government’s need for finance from the populace (as you vividly describe), is disgraceful and, indeed, criminal. However, it is because it is SO bad that there is room for a vast amount of unpaid tax to come to the government.

Also, because their behaviour has been SO bad and the consequences for the country are grim, there is every possibility that the hitherto weak and lax Greek governments will chase the tax defaulters now with energy, desperation and new tax laws.

So, a combination of:
* new tax legislation and searching for the many tax avoiders;
* a significant cut in public expenditure;
* EU and IMF loans;
* a rolling over of bond repayments, haircutting bondholders;
* state asset sales;
* longer hours of employment for less remuneration, probably requiring changes in employment legislation

will stop Greek defaulting at the present time, and may prevent it happening at all.

As I understand it, Greek default is not a panacea for the global banking system and european tax payers, who will have to pay vast sums whether or not Greece defaults. So pay up now banks and taxpayers to prevent possible catastrophic bank losses if the Hellenic country does default on its debt.

The Greek people know they have been very naughty in the past, and may accept the medicine that’s coming with greater responsibility and national self-interest than we are all predicting.

Austerity decision has been made by the Greek parliament by 17 votes above 50%. So, no default today at least, and it gives Greece and Greeks the time to show that, as human beings, they can change when their backs are against the wall.

@ John Mark:

I view the Greek situation like thls:

The corrupt Greek government is simply shoveling sand against the incoming tide. Eventually, the incoming tide will win, then dominate the entire situation!

human nature changing……….. i can guarantee u i’m not waiting on that.

in fact, i am betting my life savings that it won’t.

@ boatman:

Well said!