So what actually happens if the nation of Greece fails financially?

[G.A.C.O.L.B.]

Thanks for the breakdown mcsluggo. Appreciate it.

[Corcaigh]

the imf (and others) estimated this before the austerity programs... the point of the paperwas to highlight that their estimates were wrong, and that this factor is much more important than (they) previously beleived. THis debate isn't new. MANY were arguing that this would be the case -- that excessive austerity would make matters worse

My question related to the 'fiscal multiplier'. Was this computed before and known to be outside of a desirable range, or is this hindsight creating a 'factor', like some folks do in stock market 'analysis' to 'predict' a crash after it has happened.

[DCSaints_fan]

the imf (and others) estimated this before the austerity programs... the point of the paperwas to highlight that their estimates were wrong, and that this factor is much more important than (they) previously beleived. THis debate isn't new. MANY were arguing that this would be the case -- that excessive austerity would make matters worse

the poroblem is that people CORRECTLY want to attach conditions to these types of assistance programs, to ensure that the assistance doesn't just re-enforce bad behavior. The ideal conditions are to demand that Greece pursue a long run gradual shift to more austerity. However, future austerity isn't observable today (when the money is handed out) and leverage is gone at that point (in the future). So the the alternative is for Greece to really really double-dog promise to be better in the futue, if you will just give them money now.... which we know won't happen.

the IMF (and the ecb) is in a tough position ... but they could've done much better.

Yes, this is a major flaw of Keynesianism ... in theory, it works great. During a recession, you don't worry about deficits or inflation so much - so you borrow, print money and spend to stimulate the economy. The problem becomes when the recession ends, and the government starts running surpluses, thats the time to save for a rainy day, not to cut taxes and spend. But politicians just see the surplusess as a slush fund for tax cuts, pork projects and wars ... so you end up running deficits all the time.

[FrFan]

Greece could be out of the Euro zone and would go back to its former currency. That would lead to devaluation of the Drachma. This would boost the competitiveness, but first, will lead to a recession due to a dramatic increase of imported goods such as the energy bill and oil prices in particular. Their prices should logically increase sharply, undermining the purchasing power.

Goldman Sachs played an important role in the financial collapse of the country too. GS tampered with Greek accounts to support the admission of Greece into the euro zone. This was done through a secret loan of 400 million euros per year to pay up to 2037, and implementation of senior executives of Goldman Sachs in the ECB (Mario Draghi) and in European political and economic institutions (Mario Monti in Italy, Lucas Papademos in Greece).

The treaty of Lisbon does not provide any way out of the euro currency zone, only a way out of the EU. In this case, Greece must ask to get out of the EU, since according to the treaty no member can exclude the others.

[Elessar78]

I just came back from a few days in Germany. The attitude which prevailed with people I discussed the issue with was that Germany would have to shoulder a terrible economic burden, but it wasn't something they were incapable of, and they would just have to go through some years of hardship compared to the relative comfort they have enjoyed for the past 20 years, and what will happen will happen. They didn't seem to be afraid, but then again we're talking about a country that had its infrastructure destroyed, millions of its people sent off to die, a complete societal collapse for a brief period and years living under marshal law from various foreign militaries from the 1940s onward. I guess if you have that in your cultural history you don't exactly get a case of the shakes when you're faced with an economic disaster.

They've still got to get used to living in a union, huh? You don't hear New Yorker's complaining about subsidizing the existence of Mississippi or Alabama do you?