Some Thoughts On Greece

I first heard that the latest talks with Greece had broken down from this post entitled “Is Greece Really Going to Leave the Eurozone?” by Tyler Cowen that appeared on Marginal Revolution early Tuesday morning. He offers some sobering views, broadly consistent with our classroom discussions:

First, I do not see that (most) extant commentary is properly accounting for the very recent fiscal collapse of the Greek economy.  I am not sure there is any fix, and the expression “failed state” comes to mind ...

Second, I do not assume Syriza … have a coherent bargaining strategy at all.  I take this point from a broader reading of history, where I see that quite often leaders in critical positions simply do not know what they are doing.  By no means is that always the case …

Third, I believe we as observers tend to overestimate the permanence of … Greece in the eurozone.  In a broader historical perspective, the arrangement simply doesn’t make sense to me …

Fourth, I still don’t think enough commentators are stressing how much the creditor eurozone countries see this as a nested game, where concessions to Greece would have to imply larger concessions elsewhere …

KH sent in a link to the article “Greek Financing Talks Break Down Amid Deep Divisions Over Bailout” from the February 17 issue of The Wall Street Journal. It gives some details on the current tone of the talks (or lack thereof). It also had this interesting chart:

This shows, by month, how much Greece’s government owes, and to whom it owes the money. The first several months on the left show that Greece owed a lot of money to owner of their own treasury’s bills — that’s probably mostly Greek banks, and remember that the ECB started refusing to accept those bills as collateral about 10 days ago. Also, bills are short-term, so those gray bars indicate a rollover of other debt that expired fairly recently. The orange bars are problematic too: that’s loans from the IMF that Greece has not been able to roll over. And then there are the big payments due in July and August, with the biggest chunks (in blue) to the ECB, but also over a billion to the central banks of various countries (in yellow).

FWIW: Syriza is opposed to raising their VAT. Tim Worstall told me over the weekend that austerity programs are so tight in Portugal that the police will tail cars from shopping areas, pull them over, and ask to see their receipts to check that they’ve paid their VAT.