Election results: Nothing will change

dandxg · Nov 7, 2012

Quote from Mercor:

Austerity Has Yet To Come To Greece

Nikos Tsafos
|
October 30, 2012

The idea that deep cuts are pushing Greece to the brink makes for great punditry. But it is a woefully incomplete description of what is really happening. Austerity is not killing Greece. Instead, austerity has yet to come to Greece.

There is no doubt that the plight of the Greek people is real. The governmentâs draft budget shows that GDP in 2013 will be 22 percent below its 2007 peak. Over eight hundred thousand people have lost their jobs, and unemployment is at 25.1 percent. Private deposits have fallen 35 percent as people and companies tap into savings or send their money overseas. Tax hikes have led to the highest inflation in a decade, further squeezing incomes. Households are suffering with no end in sight. Greece is in the midst of a lost decade.

It is easy to blame austerity for this. But it is also wrong.

Austerity came from the recession, not the other way around. The recession started in mid-2008 and worsened in 2009. Yet government spending rose in both 2008 and 2009. In fact, the recession started during the largest expansion of the state since the 1980s and at a time when government primary spending, or spending excluding interest payments, as a share of GDP was at a historic high. The problem was that despite this stimulus, Greece was not only in a recession but also had a budget deficit that it could no longer finance. That is when austerity started.

From 2009â2011, Greece cut its primary deficit by an impressive â¬20 billion (down 17 percent). But when you put this number in context, it looks a lot less impressive. Spending had risen by â¬28 billion in 2006â2009, so after two years of âausterity,â primary government spending as a share of GDP was still higher than in 2007, when the party had just gotten started.

Worse still, the â¬20 billion adjustment was not as painful as it sounds. Over half of it came from four sources: less public investment (down 39 percent), a cut in weapons procurement (down 84 percent), fewer civil servants due to retirements (down 8 percent) and a doubling in EU finding. These are not tough political decisions. Meanwhile, cuts in wages for civil servants and in social benefits made up just 23 percent of the deficit reduction.

As a result, if one excludes public investment (to control for the recent drop), the state spent in terms of GDP 4 percent more in 2011 than in 2006, the last ânormalâ year. Since the cuts have been skewed, government spending on wages and social benefits was higher in 2011 than in 2006. Social benefits, in particular, continue to be much higher than their 2006 level, and Greeceâs spending on pensions as a share of GDP was the second highest in Europe in 2010. All this mocks the idea that the welfare state is being starved.

The inability to retrench the state to its 2006 level is the reason why the government wants more time and why it keeps raising taxes. Of course, Greece has a chronic tax-evasion problemâno doubt about that. But revenues reached a ten-year high in 2011. All revenue items were at or above 2006 levels due to the extra taxes levied during the crisis. Only thrice before has the state collected more in revenue than in 2011 (while entering the euro zone in 1999â2001). Greeceâs fiscal woes are due to out-of-control spending, not abnormally low revenues.

The idea that austerity is killing Greece is thus absurd. The problem is the inability to practice austerity. Greece has slashed public investment, bought fewer weapons, let civil servants retire without replacing them and raised taxes that have pushed revenues to historical highs. It has done all this to avoid antagonizing the consistencies that benefit from public largesse and to avoid reining in a chaotic public sector. Output is collapsing, people are out of work, prices are rising and wealth is evaporating so that the state can keep eatingâin fact, eating better than the carefree years of the early and mid-2000s. Austerity has yet to come to Greece.
http://nationalinterest.org/commentary/austerity-has-yet-come-greece-7678
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Thanks good article.

Ricter · Nov 7, 2012

Quote from Mercor:

The idea that austerity is killing Greece is thus absurd. The problem is the inability to practice austerity. Greece has slashed public investment, bought fewer weapons, let civil servants retire without replacing them and raised taxes that have pushed revenues to historical highs.
More...

Lol

oldtime · Nov 7, 2012

Quote from oldtime:

I agree, but I'm not so sure the problem is if a few uneducated blue collar public sector employees end up doing ok (or even great) instead of broke like they deserve.
More...

I suppose, if someone gets more than they deserve it could start a whole butterlfy effect. Didn't really realize capitalism was that fragile. If just one janitor can retire in Florida, it could bring the whole system down.

Bob111 · Nov 7, 2012

Quote from denner:

Look at the most Pro-Union states in the US. The whole bunch of them are beyond insolvent. Just the sort of thing that happens when you are literally paying at least 2-3 people for the same job...the current employee and the retiree's, who in many cases are earning roughly 60-80% of the current employee PLUS healthcare benefits...and remember we have been in a "ZIRP world" since 2008. (and the S&P 500 is still at the same levels we saw in 2000). So how in the hell can we afford to pay these public sector employees? We can't.
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according to our commander and chief-YES WE CAN!

Bob111 · Nov 7, 2012

Quote from Mercor:

Austerity Has Yet To Come To Greece

Nikos Tsafos
|
October 30, 2012

The idea that deep cuts are pushing Greece to the brink makes for great punditry. But it is a woefully incomplete description of what is really happening. Austerity is not killing Greece. Instead, austerity has yet to come to Greece.

There is no doubt that the plight of the Greek people is real. The governmentâs draft budget shows that GDP in 2013 will be 22 percent below its 2007 peak. Over eight hundred thousand people have lost their jobs, and unemployment is at 25.1 percent. Private deposits have fallen 35 percent as people and companies tap into savings or send their money overseas. Tax hikes have led to the highest inflation in a decade, further squeezing incomes. Households are suffering with no end in sight. Greece is in the midst of a lost decade.

It is easy to blame austerity for this. But it is also wrong.

Austerity came from the recession, not the other way around. The recession started in mid-2008 and worsened in 2009. Yet government spending rose in both 2008 and 2009. In fact, the recession started during the largest expansion of the state since the 1980s and at a time when government primary spending, or spending excluding interest payments, as a share of GDP was at a historic high. The problem was that despite this stimulus, Greece was not only in a recession but also had a budget deficit that it could no longer finance. That is when austerity started.

From 2009â2011, Greece cut its primary deficit by an impressive â¬20 billion (down 17 percent). But when you put this number in context, it looks a lot less impressive. Spending had risen by â¬28 billion in 2006â2009, so after two years of âausterity,â primary government spending as a share of GDP was still higher than in 2007, when the party had just gotten started.

Worse still, the â¬20 billion adjustment was not as painful as it sounds. Over half of it came from four sources: less public investment (down 39 percent), a cut in weapons procurement (down 84 percent), fewer civil servants due to retirements (down 8 percent) and a doubling in EU finding. These are not tough political decisions. Meanwhile, cuts in wages for civil servants and in social benefits made up just 23 percent of the deficit reduction.

As a result, if one excludes public investment (to control for the recent drop), the state spent in terms of GDP 4 percent more in 2011 than in 2006, the last ânormalâ year. Since the cuts have been skewed, government spending on wages and social benefits was higher in 2011 than in 2006. Social benefits, in particular, continue to be much higher than their 2006 level, and Greeceâs spending on pensions as a share of GDP was the second highest in Europe in 2010. All this mocks the idea that the welfare state is being starved.

The inability to retrench the state to its 2006 level is the reason why the government wants more time and why it keeps raising taxes. Of course, Greece has a chronic tax-evasion problemâno doubt about that. But revenues reached a ten-year high in 2011. All revenue items were at or above 2006 levels due to the extra taxes levied during the crisis. Only thrice before has the state collected more in revenue than in 2011 (while entering the euro zone in 1999â2001). Greeceâs fiscal woes are due to out-of-control spending, not abnormally low revenues.

The idea that austerity is killing Greece is thus absurd. The problem is the inability to practice austerity. Greece has slashed public investment, bought fewer weapons, let civil servants retire without replacing them and raised taxes that have pushed revenues to historical highs. It has done all this to avoid antagonizing the consistencies that benefit from public largesse and to avoid reining in a chaotic public sector. Output is collapsing, people are out of work, prices are rising and wealth is evaporating so that the state can keep eatingâin fact, eating better than the carefree years of the early and mid-2000s. Austerity has yet to come to Greece.
http://nationalinterest.org/commentary/austerity-has-yet-come-greece-7678
More...

applies to almost every city in US and everywhere on federal level

Ricter · Nov 7, 2012

Austerity accelerates in Greece

Greek Parliament approves austerity cuts
By Elinda Labropoulou and Laura Smith-Spark, CNN
updated 6:59 PM EST, Wed November 7, 2012

Athens, Greece (CNN) -- The Greek parliament early Thursday narrowly adopted a new round of austerity cuts that are required for Greece to receive the next installment of a crucial international economic bailout.

The final tally in the 300-member parliament was 153 votes in favor of the cuts and 128 opposed, with 18 abstentions.

The cuts have provoked ire among Greeks furious about the effects of multiple rounds of belt-tightening, which have resulted in cuts to pensions and pay. They have seen unemployment soar to more than 25%.

It is Greece's fifth year of recession.

Earlier, protesters in Athens threw Molotov cocktails and police fought back with tear gas outside the parliament as lawmakers prepared to vote.

As many as 70,000 people took part in the demonstration in Athens' central Syntagma Square, outside the parliament building, according to police estimates.

Analysis: Greek misery won't end with bailout votes
Greece adopts tough austerity plan
Greek protests turn violent
Jobs crisis takes toll on Greece

Passage of the cuts was needed for the payout of the next international bailout installment of 31.5 billion euros (about $40.2 billion), which the government desperately needs to stay in operation. Without the funds, it said, it would run out of money by mid-November.

"Greece has made a big, decisive, optimistic step, a step towards recovery," Prime Minister Antonis Samaras said after the vote. "Today we made a first important step for which I am obviously happy."

There is a second step needed before Greece can get the bailout funds: Sunday's vote on the 2013 budget. Because it contains many of the measures from Wednesday's vote, it is expected to pass.

More than one-fifth of the population could face poverty, defined as a family of four on an income of 13,842 euros (about $17,500) per year, state news agency AMNA has reported.

The austerity bill sets out reforms and fiscal measures worth 13.5 billion euros over the next two years. It will raise the retirement age from 65 to 67 and cut pensions on average between 5% and 15%.

Some salaries in the public sector will be reduced by about a third, and several bonuses will be scrapped. Some judges must take a 30% pay cut, for example.

The thorniest issue is that of labor law changes.
Can exports save Greece's economy?
The human cost of austerity in Greece

Analysis: Euro crisis opens old wounds for Greece, Germany

The bill gives the government the right to set the minimum wage as of April 2013. It also reduces the redundancy notice period -- the time given to workers to leave their jobs after being laid off -- and limits compensation for workers with more than 16 years of service, as well as allowing stores the right to ask employees to work more flexible hours.

The anger in the Greek population against the latest round of cuts, which come on top of many others, runs deep.

"The measures just never stop. Every time, politicians say they are going to be the last measures ... they are never the last," Melina Grigoriadou, a 50-year-old married businesswoman with two children, told CNN.

"There is no end in this, there's no solution. The measures are awful -- it's not austerity, it's something even worse."

Although Grigoriadou works for an export company that has not cut wages, she said her family's income has fallen by almost a third because of new taxes, higher utility bills and inflation.

As she looks around in Thessaloniki, Greece's second-largest city, she sees real poverty affecting those who've had their incomes and pensions drastically cut, or suddenly lost their jobs. Despite paying for social security from her wages, getting a doctor's appointment now takes months and medicines are costly, she added.

What makes the hardship worse is that the international funds Greece stands to receive will not go to help create jobs or support infrastructure, Grigoriadou said, but to service its huge debt.

Some critics of austerity have called for economic stimulus programs instead, like those implemented in the United States.

But if Greece is to stick to the course laid out by the so-called troika -- the European Commission, the European Central Bank and the International Monetary Fund -- more budget cuts will be necessary, as the country's debt woes are worse than previously believed.

Read more: Journalist who embarrassed Greeks with 'rich list' acquitted

Recent budget projections for the Greek government exceed the worst-case scenarios drawn up by international lenders when they agreed to a bailout, according to a Financial Times report published by CNN.

However, the hardship many Greek people are suffering has resulted in dogged opposition in parliament to deeper cuts, including within the ruling coalition.

The Democratic Party of the Left, or DIMAR, one of three parties making up the coalition headed by Samaras, said it would abstain from the vote on the new round of austerity measures, turning in blank ballots. Still, it plans to vote Sunday to approve the government's new budget.

Samaras' own center-right New Democracy party was expected to vote in favor of the package.

Although the third coalition member -- the socialist party Pasok -- supports the cuts, individual party members came out against them.

Radical leftist party Syriza, bitterly opposed to austerity and closely connected to Greek unions, called on its website for Greeks to demonstrate against the "rape" of democracy and the dashing of the hopes of the people.

Samaras warned that if the measures didn't pass, international funds would not arrive and the nation could plunge into chaos. He pushed for Greece to receive more than the 31.5 billion euros expected in the latest installment "so that there is a significant effect on the real economy."

Greece, and particularly Athens, has seen repeated street demonstrations against the austerity measures imposed on the nation, some of which have turned violent.
More...

denner · Nov 7, 2012

Quote from Bob111:

according to our commander and chief-YES WE CAN!
More...

As a few other members here have stated...an Obama win = higher probability of a bailout of the most insolvent states (i.e. Illinois, California, etc). And a bailout = safeguarding a hopelessly broken pension system for public workers that has never had a chance in a million years of working (unless you thought the stock market of around 1995-99 would last indefinitely).

Bob111 · Nov 7, 2012

Quote from denner:

As a few other members here have stated...an Obama win = higher probability of a bailout of the most insolvent states (i.e. Illinois, California, etc). And a bailout = safeguarding a hopelessly broken pension system for public workers that has never had a chance in a million years of working (unless you thought the stock market of around 1995-99 would last indefinitely).
More...

i can smell that by today's performance of muni etf's. i've been waiting and waiting for at least some pull back,cause to be honest-the systems is broken and many states and counties are bankrupt..but..rationality and common sense does not apply on today's markets..QE to infinity and beyond!

Daring · Nov 7, 2012

It will get worse, and when it does Bubble Ben will show up with his helicopter, and then we can kiss the USD goodbye.

Humpy · Nov 8, 2012

California isn't really bust. It's richer people won't pay enough tax to pay it's public employees and welfare etc.

Mean might be a better description.