A sick game of financial sadism is currently being played in Europe. The European Central Bank, IMF, and World Bank are the tormentors, and Greece is their victim. With the way things have proceeded, you'd think that the banksters want Greece murdered, but they don't have the heart to do the deed. Instead, they're hoping that the Greeks commit suicide
Greece isn't "ready" to default or leave the eurozone, at least for now. A huge percentage of the Greek population has been led to believe that if Greece were to exit the euro, it would be the end of civilization. But at the same time, an ever growing number of Greeks are comparing their current situation to life under the generals of the coup, or the bad old days of Nazi occupation.
Behind the scenes it's easy to find euro banker/racists in $2000 suits in the major banks disparaging Greeks for being lazy and shiftless. They blame the Greeks for phony bookkeeping, lavish pension, civil service, and union rights as the one cause of the problem., denying the fact that Goldman Sachs came to the Greek government with the proposition of cooking Greek books. The banksters have stomped on Greek hands holding onto the train in the course of the negotiation for the current tranche of financing. But they can't come out and publicly fess up to what they'd like to see happen. Instead, more and more punative provisions are imposed on the Greeks, even as a total conciliatory tone and policies (wink,wink, nudge, nudge) are given to "firewall" countries like Italy and Spain.
You can't help but thinking that the negotiators for the EU are getting ready for Greece to finally throw in the towel one way or another in the near future -- perhaps in April when there are national parliamentary elections. On balance, possibly a majority of EU officials probably want to see Greece stagger on. Given the choice, policymakers nearly always want to buy more time.
There's no question that European financial authorities have taken a variety of steps to quarantine the possible bad effects in the world market if Greece falls/jumps off the train. The European Central Bank has swapped bad Greek debt for low interest ECB paper, much like a mechanism that the US Federal Reserve uses. In addition, banks have been marking down the value of Greek assets in their portfolios and setting aside additional reserve funds. The ECB has been capitalizing Spanish and Italian banks quite richly, making them look much less likely to catastrophically swoon in the event of Greek failure. The world stock markets are now looking at Greece as some kind of isolated, special case.
You can debate how far the Greek domino will affect the finances of the rest of the PIIGS. Interest rates on Italian and other benchmark government bonds has fallen dramatically in a short period of time, reflecting the fact that much less risk premium is priced into failure. And the outstanding value of Greek paper has declined to 80B euros now, as compared to 200B euros in 2009.
The prospect of keeping Greece on track is looking a lot worse, especially if you're one of the northern European politicians who always thought that aid money to Greece was like pouring water down a gopher hole. For them, pulling the plug on Greece would send a powerful message. Beware any country that would put the welfare of its citizens before the financiers and plutocrats who want their interest and dividend payments. The market must rule!
But the other half of their brain is telling them, "What about that Lehman Brothers thing that Hank Paulson pulled in early September, 2008?" Shortly thereafter, Bank of America, Citigroup, Washington Mutual, Countrywide Capital, Merrill Lynch et. al. were in a helluva pickle. Cause and effect. And so this ineffectual dance continues, but not for long.
It's not good form to propose a cure for anorexia by having the patient go on a restricted calorie diet. And this is exactly what piling austerity program on top of Greek austerity is doing. Sooner or later, either the patient will die or rebel 100% against the treatment. And then we will see the financial markets do the equivalent of trying to shift gears in a speeding truck going down a winding mountain road without any brakes or clutch.
*Much of the material in this blog came directly from Stephanie Flanders' latest post as economic correspondent for the BBC. But I've larded my language throughout hers.
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Comments
...and cut! This is the unspoken law. Excellent post. R
But while one can argue that a naive homeowner might be gulled by deceptive mortgage agents, it seems to me that if we're bandying the word 'racist' about, that it's racist to suggest that Greece is a victim of the bankers, since that implies they didn't have the skills or knowledge to understand what they were getting into. Finance is a complex and sophisticated subject, but did no one in the Greek gov't or academia or other brain trusts have the brains or education to master it?
Further, it's hardly news to anyone who has lived in any human society in any part of the world in the last few millennia that beggars can't be choosers and there's no such thing as a free lunch.
The fact is that reality is often unattractive. And that's not limited to the Greeks. Look at the losers running in the Republican primary. We're going to win the war! If we cut taxes, the economy will boom! Birth control harms women! With a very few, minor and entirely painless tweaks, the crisis of health care access and cost will disappear!
Would it be hard to imagine one of them saying, we join the Euro, borrow three times as much as we can afford and our economy will expand so much we'll have no trouble repaying it?
About the same way Socrates committed suicide!
Except they will use "austerity" rather than hemlock.
I don't blame or fault the Greeks, the people or the politicians, for being hoodwinked by the financiers. It was a scam. Its intent WAS to deceive. Plain and simple.
r
I PM'd you this link which indicates that the chances of a decent outcome for Greece of the Euro-zone are bleak. It's a fun exercise to work through and maybe some others here would enjoy it.
http://crookedtimber.org/2012/02/16/so-what-would-your-plan-for-greece-be/comment-page-1/#comment-402728
Well, there's no denying euro banker/racists are qualified to judge; after all, they're experts when it comes to phony bookkeeping. Reminds me of a crack I heard back in the build-up to the Iraq War "Of course the Iraqi's have WMD; we know because we still have the receipts".
And there is the country that in absolute terms has the biggest debt of them all and is the principal actor in the start of the worldwide financial crisis (helped by the mass of americans either duped by bankers and/or overcharging their credit cards); of course its crisis is resting on the rock solid basis of the unspoken terror of the havoc that a USofA default would provoke
And then there is Italy , the third economy in Europe and the 8th or thereabout in the world (if we are piigs, wonder what we should name those humourous brits?).....here is where the game gets really tough, if we go then no Obama or any of the republican circus will be able to do much of anything to avoid a depression....
You just have to hope that besides pizza, pasta, wine, design we will
be able to be tops in fixing our problem and that of Europe. All the best to mr Monti who, having tightened our belts with measures to bring the deficit significantly down (called SaveItaly) has now started on the second phase of reforms (called GrowItaly)
Stay tuned....
Yaay!!
"Default! Default! Default!"
:-) / r
I'd just haggle on one point: 'You can't help but thinking that the negotiators for the EU are getting ready for Greece to finally throw in the towel one way or another in the near future -- perhaps in April when there are national parliamentary elections. On balance, possibly a majority of EU officials probably want to see Greece stagger on. Given the choice, policymakers nearly always want to buy more time.'
I've been of a mind with the Financial Times' commentator, Wolfgang Münchau. It's evident that at least the Germans are now actively willing for a Greek exit from monetary union. And these days, what Berlin wants, Berlin gets. They're making this plain through the draconian (and anti-democratic) policies demanded by the so-called Troika (The EU-ECB-IMF.) The screws are being tightened, so as to positively have the Greeks begging to leave. Legal note: There's absolutely no way at the moment for the Eurozone to force any of its members out of monetary union...the best they can do is make life within European Monetary Union unbearable.
' From the worm’s-eye perspective which most of us inhabit, the general feeling about this new turn in the economic crisis is one of bewilderment. I’ve encountered this in Iceland and in Ireland and in the UK: a sense of alienation and incomprehension and done-unto-ness. People feel they have very little economic or political agency, very little control over their own lives; during the boom times, nobody told them this was an unsustainable bubble until it was already too late. The Greek people are furious to be told by their deputy prime minister that ‘we ate the money together’; they just don’t agree with that analysis. In the world of money, people are privately outraged by the general unwillingness of electorates to accept the blame for the state they are in. But the general public, it turns out, had very little understanding of the economic mechanisms which were, without their knowing it, ruling their lives. They didn’t vote for the system, and no one explained the system to them, and in any case the rule is that while things are on the way up, no one votes for Cassandra, so no one in public life plays the Cassandra role. Greece has 800,000 civil servants, of whom 150,000 are on course to lose their jobs. The very existence of those jobs may well be a symptom of the three c’s, ‘corruption, cronyism, clientelism’, but that’s not how it feels to the person in the job, who was supposed to do what? Turn down the job offer, in the absence of alternative employment, because it was somehow bad for Greece to have so many public sector workers earning an OK living? Where is the agency in that person’s life, the meaningful space for political-economic action? She is made the scapegoat, the victim, of decisions made at altitudes far above her daily life – and the same goes for all the people undergoing ‘austerity’, not just in Greece. The austerity is supposed to be a consequence of us all having had it a little bit too easy (this is an attitude which is only very gently implied in public, but it’s there, and in private it is sometimes spelled out). But the thing is, most of us don’t feel we did have it particularly easy. When you combine that with the fact that we have so little real agency in our economic lives, we tend to feel we don’t deserve much of the blame. This feeling, which is strong enough in Ireland and Iceland, and which will grow steadily stronger in the UK, is so strong in Greece that the country is heading for a default whose likeliest outcome, by far, is a decade of misery for ordinary Greeks.'
-- Lanchester, John. "Once Greece goes…." London Review of Books 33.14 (2011): 3-7. 10 July 2011
But just look at what happening in Europe (double digit declines in GDP all over the continent) and the lie is exposed. Austerity leads to unemployment, leads to reduced economic activity, leads to reduced tax revenue, leads to greater debt-to-revenue leads to a total slowdown of the economy and persistent misery.
Even with our limited bailout, particularly with key industries (like the auto biz) and public works spending, the economy may have returned to a growth mode. GDP is already at pre-2008 levels.
Conservative dogmatism is just totally wrong headed that it's hard to understand. Euro banks are cutting their own throats, and they don't even know it.
"Checkbook Arithmetic has been, is now, and will always be more powerful than the most ardent Progressive/Socialist."
It's an amazing post that can be written about the Greek tragedy and blame its current economic condition on those who want to collect monies owed while holding blameless a society that allows hairdressers to retire wealthy as early as 50 with "hazardous duty" pay under a government pension system funded by fewer workers each day. But, as we all know on OS, Socialism of this type is perfect.
As Paul Krugman pointed out last October, the bigger question is “Can the Euro System Survive?”
http://www.nytimes.com/2011/10/24/opinion/the-hole-in-europes-bucket.html?_r=1
the Greek problem is compounded by how much the govt overspent, the size of the economy, and the fact their tax administration system is corrupt and almost non-existent. no pol had the guts to try to reform it before now. (like not building levees in New Orleans) It may well be this will supply the nation with the incentive it needs to live within its means, and create a tax system that at least makes the cheaters come to task.
I'm personally able to assume I know more about it than they do. Europe worked hard to create this Union, the long range benefits of it may well be what exits here in the 'United States" and it could well be the welfare of the continent that is at stake. I know it also means a small few will as usual reap huge profits, but they are putting in some safeguards against it and that doesn't seem to be what is motivating the reformers.
And even though they are promising the sun and moon, they can always say never mind in April after elections.
Most of the rhetoric is simply to make the deal palatable to the remainder of Europe.
Greece has debtor's leverage and has used it quite advantageously.
http://freerepublic.com/focus/f-news/2846360/posts
Right now, Greece is running a massive deficit. The bailout means they can continue to run the deficit. A default means that they won't be able to fund the deficit, which would result in an immediate balanced budget.
The immediate impact of the deal would be to lower debt by $100 billion Euros through restructuring Greek bonds held by private investors. That is over 33% of GDP.
The per capita income (in purchasing power terms) of Greece was 65% that of France in 1850, 56% in 1890, 62% in 1938,[20][21] 75% in 1980, 90% in 2007, 96.4% in 2008, 97.9% in 2009 and larger than countries such as South Korea, Italy, and Israel.
Taking the money now is a no brainer.
Having said all of that, the treatment currently being ladled out to the Greeks goes way beyond shabby, and there is a clear double standard the way the Greek's budget and 'reforms' are being handled, as opposed to the way other countries like Portugal and Italy are being handled.
As far as future prospects for Greece and the euro, the place to go for required reading is crooked timber, with its article "So what would be your plan for Greece?" Written by a super policy wonk, the whole article is a decision tree that is probably actually being used by the troika to administer the Greek situation.
My reading is that ultimately, there are only two paths for Greece. One is to continue to keep the country on IV drip forever. The other is to allow default one way or the other. If Greece is maintained on life support indefinitely, the EU may eventually evolve over time so that the country can be treated the same way Mississippi is treated in the USA, with an ongoing disproportionate infusion of outside revenues above and beyond its tax base.
If any kind of default option is engineered, it will be catastrophic. So, playing the percentages -- look for continued Chinese water torture, as compared to driving the car off the thousand foot cliff.
The same thing applies for countries. You cannot cut your way to prosperity. You look at the countries that are implementing austerity measures, and look at what's going on with them. They are either seeing next to no growth or they're going to slide into recession.
On the other hand, the United States, which primed the pump with the stimulus, is well into recovery.
It would be shabby if Greece was actually going to comply with all the stipulations.
" Finland and Greece have signed a collateral deal. Finland had demanded that Greece's banks provide cash and assets before it would agree to take part in a bail-out."
My opinion is that Germany and France are convinced that the bail out is worth the cost, regardless of its ultimate success.
Finland, on the other hand, has a lot less skin in the game and is demanding collateral.
Seems like rough justice to me. Germany and to some extent, France are going to benefit from keeping the Eurozone together. The smaller countries, not so much.
By the time this happens, there will have been many instances where not only (in this case) governmental responsibility will have failed, but also every pleasant reminder of the duties associated with the obligation will have been disregarded. To complain about the treatment of Greece now is to disregard the historical development of its debt problems and the number of decision points at which the incorrect choices were made, especially if the intent by Greece was to retain control over its own destiny.
The awakening to these consequences of the Greek tragedy incorporates strong lessons for the fiscal house in America. The annual deficits in Greece never quite made it to 15% of their GDP. Would anyone here care to guess what our average annual deficits for the past three years have been?
I think you are missing some crucial information about the efforts being made by the EU to reorganize, put new structures into place, and raise funds to stabilize their "Union." Please, look at the piece I've pointed out to you in NYRB. The interviewer is extremely skeptical, yet the EU Financial Minister demonstrates a tremendous grasp of what to do moving forward. I think you are presenting too few options, and not taking fully into account the options that are now being utilized. It is not so simple as "bailout" vis. non-bailout. Your analysis is incomplete.
But if you analyze the end games in the various scenarios outlined, they eventually lead towards a generalized classification of events where Greece continues to limp along, or where it leaves the euro in some fashion. While there may be a variety of different outcomes possible, I'm still of the mind that they fall within the parameter of one or the other.
SO WHAT WOULD YOUR PLAN FOR GREECE BE is an article posted a few days ago. In it you pretend that you're an all powerful financial-political god, and your brainy advisor, Maynard is asking you questions as to what you see happening for Greece in a variety of technical subissues. How you answer, will send you to a specific number out of 52 subsets. And yes, if you give stupid hypotheses, Maynard will call you out on your shit.
I learned a tremendous amount from this article. Now, if I have enough time to look at the London Review and the NY Review of Books.
U.S. support for the 21 April 1967 coup and subsequent "Regime of the Colonels" to make Greece safe for corporatist capitalism is having its blowback, but, so far, only Greece itself is burning.
President Obama's own budget says that by 2022 federal borrowing will rise to 76.5% of GDP by 2022 and the interest payment alone will be 14.4% of all expenditures. Interest payments are a total waste. We don't get any goods or services from having to make interest payments. His budget does not want to attack mandatory spending.
But he does have a plan to raise revenue. Is he going to attack the evil rich? Yes, and everybody else. His budget forecasts that income taxes will, going from 2013 to 2022, rise a staggering 92%. Honey, that ain't just on the evil rich.
And President Obama projects such a rosy picture of our future growth. One that the CBO just can't even get on-board with. The CBO projects that he is overstating growth by 4%. If growth is short then income is short and so will the projected tax revenue. So much for rosy. If the revenue is short what is his 92% income tax increase going to need to be?
The point? We can sit here and look at Greece and wonder how they are going to bail themselves out. Who will help. If we don't start with our own cutting when will we have to pay the piper and who will bail us out? Just because we are the US and we are bigger and a world leader doesn't mean that our day won't come.
And that's less than the amount we spend on the Defense Department and related activities today. Matter of fact, if we drastically cut military spending there is no American debt crisis. And you can go to the Simpson-Bowles Deficit Commission Report to see the options as to where the REAL wasteful spending in this country can be slashed.
So there is never a top to how far in debt we can go? Just because the ceiling maybe higher doesn't mean there isn't one.
The Simpson-Bowles Deficit Commission Report was a scam on the American people. Neither side was going to take the work they did seriously. I wish there was a way we the people could force them into it.
IMHO, disregarding a little shifting in like programs, I really hate it when one side says we will put this program in and pay for it by cutting something totally different. If you have that much money in another program you can just cut, why is it there to start with? It's either needed or not.
Now I know there are thing that come up like the car breaks down so the phone bill is going to be late, but that is not what I'm talking about. What you can't say is that just because someone in the past screwed up that the new guy -and it has nothing to do with him being black, sorry- can screw up all he wants. They have been screwing up since before we were born. At some point we have to say enough is enough. Back when Carter or Reagan were screwing up we didn't have whole countries going down the toilet and the vision down the road may not have been so clear as it is now.
So where is the end of the line for our apples? Debt equal to 100% GDP? A 100% tax rate and the government gives us everything? You tell me, I'm all ears.
And in the meantime, obsessing about the deficit is not good for the country. Remember my line about starving an anorexic to cure him/her? Well, from a fundamental economic perspective that is something that we do share with Greece. I believe what Paul Krugman and Joe Stiglitz have to say about the inadequacy of the government's economic stimulus program. If we and the Europeans spent more on supporting fragile communities at home with additional spending now, we'd be getting out of our malaise right now.
And if you're concerned about our level of indebtedness in the world and financial markets, why are our interest rates near 0%? If the world was concerned about our creditworthiness right now, we'd be paying 5% or more on government bonds for the risk premium.
Admittedly, there is a balancing act. When prosperity eventually does get rolling, it will be important to cut spending and raise interest rates as well as taxation on the 99%. But not now. Focusing on the deficit now over everything else is simply practicing Hoovernomics.
People warned the Greeks for twenty years that their fiscal path was dangerous, as to blame.
Moreover, if they default and exit the Euro, beyond the Euro damage, for Greece itself, there would be massive inflation, as no one will want to hold drachmas under that scenario, save at huge interest rates and at short premiums, and their import bill would explode, directly offsetting any stimulative effect of tourism and increased repatriations etc.
They can try that, but that would be what would trigger a coup a la Allende-Pinochet as much as anything, if of course, the lesson really is that moral hazard has to be governed much better if we are to have interlocked economies in terms of it being credible in the future that there won't be bailouts for fiscal paths that are unsustainable. Gold is still signalling that this remains a risk, even as it serves a disciplining function. Hyperinflations aren't very pretty either Old Lefty, and that's what happens in the default scenario, and who wins then again is those Greeks best able to move money, which means liquid assets, not the province of average Greeks.
A couple of things. First the Bush tax cuts. This year we spent over a TRILLION dollars more than we took in. The Bush tax cuts wouldn't come near to paying even the interest on that much money.
Then there is the starving of the anorexic. The government wants to increase personal income taxes by 92%. They want to spend 76% of every dollar that is generated in the country. Where does that money come from? It comes from our pockets. They are taking all my food (money) and spending it on what they want. Who know how to better spend your money to take care of your family, you, me, or the federal government?
The government is going to starve us. They are really going to starve those who can not afford it. While about 50% of all people in this country pay no income tax they still pay for corporate income tax. Every dime that the government takes from a corporation in taxation is another dime that they raise their prices which goes straight to the consumer. So raising the corporate income tax rate actually does starve people.
And frankly, I have a serious time trying to understand the logic of your third paragraph. One dime of federal tax does not represent one dime of passed on costs to consumers. Have you been following the inflation level lately? The biggest contributor to inflation has not been companies raising their prices in response to taxation. It's been the price of gasoline, due to both fears about an Israeli-Iranian war as well as speculation on Wall St.
Lastly, I haven't heard the Obama administration or anyone propose substantial middle class tax increases. Unless you're making more than $250,000 a year, if Obama's tax increases were imposed, it would probably be equal to about one trip a year to Wal Mart for you, even at higher income brackets below $250K.
First my figures came from CNN,
http://finance.fortune.cnn.com/2012/02/21/unrealistic-budget-assumptions/
How do corporate taxes hurt the poor. Very simple, corporations don't pay income tax. They just handle the transaction. Corporations X makes a billion dollars (use any number you wish) in after tax profit. You decide to raise their taxes by half a billion. Do you think they just eat that? No. They figure taxes into the costs and the next year they will again have a billion dollar after tax profit. Where did the extra income come from? They raised their prices to cover it. Taxes, all taxes, and part of doing business just like paying the light bill.
Funny things about those yachts and airplanes. They take people to build and maintain them. They take things like docks and hangers to keep them in. Finally, in your neighborhood everybody may have one. In mine people would spend their extra money on things like grocery or maybe even gasoline for their car. President Obama made a big thing today about everybody getting $40 in their paycheck. If he thinks that $40 will make a big difference to the average American then why take it away from them for their pet projects like solar companies that are projected to be doomed before the loan is even given.
But as my hometown winds down the Mardi Gras celebrations , you make a comment about the levees. My guess is you do not understand at all the geography or the levee system.
If you listened to national news then you certainly did not get told the facts. I have hijacked a thread before so I wont do it here. I have posted the real story at the link below.
So for anyone whr realy wants the no spin simple facts
and is willing to follow my directions on google earth you can see for yourself exactly what happened after Katrina and how easy the fix was. No additional levees were needed.
http://open.salon.com/blog/burstlp/2012/02/21/what_really_happened_to_new_orleans_after_katrina
As to corporate taxes, you clearly missed all of the major multinationals that pay absolutely ZERO income tax. We're talking about all of the major oil companies, General Electric, and Verizon, just to mention a few sources. The big corporations have structured the IRS Code through their lobbyists to give them incredible advantages over small businesses, taxwise. I myself, have inspected Exxon's IRS 1040s that it filed, and I can guarantee you that you pay more in income tax than Exxon does.
And of course, when we're talking about ports and harbors, or airports, those just happen to be mostly public entities. So you've made my point when I assert that the biggest welfare chiselers of them all are the uber-rich.
It is individuals that are wealthy. You accuse them of being welfare receipts because they use airports that they pay for. I see, paying for something that everyone else uses and using it at times yourself is welfare. Brilliant logic.
If the uber wealthy had their way they would build their own airports and you and I would never see the inside or be on a plane.
You are right about the big companies making most of their money overseas and keeping it there. Why do you think they don't move it back here where it will do the US some good? Because of the tax rate they will have to pay to move it back here. So where do you think their money would do the country more good? Leaving it over there tax free and not doing us any good, or bringing it back at very little if any tax where it will do us some good.
As for the uber-rich the ones that I have worked for were know for two things. Spending their uber-riches on stuff that other people have to make and take care of and giving it away to charity. Under your plan there would be no yacht that somebody built and got paid to build or nobody to take care of it or crew it, and there would be an empty dock without dock workers to take care of them. Even if they are public docks somebody has to take care of them everyday. Sure they had to be built but that's the cheap part compared to the daily up keep that has to be done by employees.
As for Exxon's taxes, I don't know what they paid. It wasn't zero. I do know that the oil companies paid millions in fines for not blending their fuel with biomass fuels. Why didn't they blend it? It doesn't exist. Not a drop. The government mandated it, the companies that had government backed loans went broke, but there is the good ol' federal government looking for their money, that should have been in your dividend check, for not doing something that is impossible to do.
Well thanks for the debate. Another 14 hour day begins in just 8 short hours. I would look up the CBO numbers instead of the numbers from the lefty news group CNN, but I think right now I would rather sleep.
I've been reading Paul Krugman in the Times talking about Keynes, who advised Roosevelt against austerity in 1937, saying the time for austerity was when the economy is healthy. Roosevelt didn't listen and the economy tanked.
The reasoning is pretty simple and I'll use my own analogy to explain it:
Everyone says the deficit is like a hole. OK. The taxpayer base and customer base is your shovel. It's easier to dig your way out of a deep hole with a good shovel than out of a shallow hole with a spoon. The moral: Concentrate on the shovel, not the hole. Austerity dismantles the shovel.
This morning's Times has a front page story about Greece. It seems the IMF projected the Greek economy to shrink by 2.8% in 2011. Now they have the figures. It shrank by 6.8%. There goes the shovel - and with it Greece's ability to dig out of the hole. That's what austerity did.
You can't dig your way out of a hole. The more you dig the deeper the hole becomes. If you want out of a hole you have to fill in the bottom so that the floor rises to meet the top.
As far as Greece shrinking more than expected you are right. The cause, well that's a different story. Last year Greece was getting bad press all over the world. People were trying to burn a country down. Civil unrest was everywhere. Why would you want to go and spend you "vacation" money someplace where you were not sure of your safety or being able to do what you wanted? The only way you are right is if you want to blame the riots on the cuts they had to make. You can only promise the receiving class everything until the giving class runs out of stuff to give.
Greece is a country with a lot of problems. Cutting costs is not one of them.
Where does that come from in this case? Earning money so you can be taxed enough to fill this particular hole, and also earning money so you can spend it with people who in turn will be taxed enough to fill this particular hole and who hire people who will in turn be taxed enough to fill this particular hole. In short, to get out of a deficit you need a whole lot of employed people. If you want to eliminate a deficit, worry about employing people first. Because of the ripple effects of spending, leading to phenomena like actual wealth creation, it is easier on a government level (though not on a personal level because they aren't strictly analogous) to spend your way out than to save your way out, assuming you're careful about where you spend it.
Europe has been pummeled by the Republicans as the "thing we don't want to become." Its balanced Capitalistic/Democratic/Social-net system of government is branded as Socialistic or even, Communistic by the Right in the US – all to scare us away from even looking at the success of what Europeans have achieved.
The joke is that many countries in Europe are much more modern and reasonable than we are, and far more sophisticated. Germany boasts a robust economy with only 4% unemployment. Their people are well off, have job security and are given 5 week vacations from the get-go; plus they have universal healthcare for all, and virtually free college educations. The same goes for Norwary, Sweden, Denmark, France and many other countries in Europe. Is it any wonder that Europeans have much less stress in their lives, along with a lower incidence of cancer and other serious diseases.
It should be noted that if the Greeks are in trouble, responsible European nations are not so quick to be sympathetic since they were far more careful about their banking and spending practices. Germans gave up a lot of treasure to help their East German compatriots join the West in comfort; their individual taxes are much higher than ours, but they get all of the aforementioned benefits for their tax money, plus they can feel proud that everyone in their country is valued and cared for. It's hard to blame them for balking at bailing out the Greeks, the Spanish and the Italians for their more reckless behavior. Yet they continue to help their less responsible neighbors to save the European Union.
Europe doesn't always get it wrong and we certainly don't always get it right. Peculiarly, the European bankers are acting a whole lot like American Republicans. My problem with them is not what I think they owe to the Greeks, it's that their solution is likely to make matters worse rather than better. What Greece needs is a whole lot of jobs because that's the only way they're going to generate the tax revenue to deal with their deficit problem. What austerity will do is get rid of jobs, hampering their ability to get rid of their deficit. So now they're borrowing from people who are dismantling the mechanisms to generate the money to repay the debt.
It's not quite as simple as Greek irresponsibility. It's also that all these very different economies are now stuck on the same currency. Under normal circumstances, if Greece was having trouble paying its bills, it would devalue its currency. That would make its exports cheaper and its imports more expensive, which would force its population to live with more expensive imports (as, if you want to think like a banker, punishment for profligacy). Instead, its currency is now the same as Germany's, which has completely different fiscal needs and way more clout to affect what happens with the currency.
In the meantime, Germany likes the clout of having more power behind its currency, and also likes that its exports to Greece can't be priced out of competitiveness by currency adjustments, even if that would make sense to stabilize the Greek economy. For the same reason, Germany is protected from Greek exports getting comparatively too cheap. Don't think for a second that Germany assists Greece strictly out of the goodness of its heart; German interests are absolutely at stake here.