Germany and Greece…history repeats itself

Tyler Cowen has a superb post :

…the Greek Finance Ministry had warned of “complete collapse” if the whole system…was not rethought…”Prices and value move in an atmosphere of imminent catastrophe,” he wrote.  “In Greece for a while now all the foundations of a healthy economy have been overturned.  There can be no stability, neither in economic equilibrium nor in monetary or financial affairs.”

…While the Italians…were genuinely worried by Greece’s financial crisis, it was the Germans who needed to be persuaded.  Initially, Altenburg’s advocacy of the Greek position was not well received even in his own Ministry.  But then the political stakes were suddenly raised…

…In Athens people expected the Finance Minister to win substantial concessions from the Germans.  In actual fact he was in a very weak position.

…It was not that the Greek financial crisis could be ignored; nor that the Greek Finance Minister lacked the wit or intelligence to present his case.  It was simply that no Greek politician carried enough weight to be heard seriously in Berlin.

That’s from yesterday’s Financial Times, no…whoops, sorry!  That’s from Mark Mazower’s Inside Hitler’s Greece: The Experience of Occupation, 1941-44.  It’s a good book

Just amazing isn’t it. As Cowen says, you are reading the same lines everywhere now. So, again knowing history is very important. THose who say, this is the first time this has happened etc are mostly wrong. Dig up history and you find parallels.

Reinhart-Rogoff recently said:

Since independence in the 1830s, Greece has been in a state of default about 50% of the time

Given this frequency, Greece should have many such cases in the past as well. The question that comes to my mind is why was Greece allowed to be a part of EMU with such a poor track record? And then allowed to carry on despite having debt levels over 60% for so many years after joining EMU.

Another worry is a financial crisis strikes, govts are asked to bail out. The revenues and expenditure of govts decline and deficit looms. As financial crisis eases, the govt goes into a debt crisis. And now the financial firms start penalising the govt asking for higher interest rates, credit rating agencies lower ratings etc. Eitherways , govt is pushed into a corner. How do we end all this?

It is surprising that most reports now say the govt needs to have better public finances in order to manage future financial crisis. Fair point. But why not some criticism for the way financial firms operate?

I had also pointed out to the financial jugglery used by Goldman Sachs and Greek govt to lower latter’s debt levels. Robert Peston of BBC looks at Goldman Sachs’ defense. GS says the impact was marginal. Moreover, financial firms will always look for business opportunities and there needs to be a stricter code to prevent govts from using financial jugglery. This is sad really. There is no corporate conscience anymore.


6 Responses to “Germany and Greece…history repeats itself”

  1. Germany and Greece…history repeats itself « Mostly Economics | Germany today Says:

    […] original post here: Germany and Greece…history repeats itself « Mostly Economics Share […]

  2. Germany and Greece…history repeats itself « Mostly Economics Economic Finance news Says:

    […] The rest is here: Germany and Greece…history repeats itself « Mostly Economics […]

  3. Takis Kouvatseas Says:

    You people are unbelievable. Have you read the book this Cowen person is quoting? The book describes the plight of Greece under Nazi occupation when the country was relentlessly exploited by the Germans who forced the Greek government to pay the cost of the occupation and even extorted an enormous War Loan to the Third Reich. Your insensitive comments are an insult to the thousands of Greek citizens who suffered and died of privation and hunger during that period.

  4. Takis Kouvatseas Says:

    Of course there may be a historical parallel in modern Germany trying to impose once more its domination over Europe and blaming once more its financial problems to some lazy sub-race that is stealing its money.

  5. Greece Prime Minister takes on financial speculation « Mostly Economics Says:

    […] ignore the fact that Greece has been in debt problems 50% of the time since its independence (see this interesting history as well). So the problems of debt have always existed and not really worked on. So, the meltdown had to […]

  6. Takis Kouvatseas Says:

    So has the United States my friend. And even more than 50% I dare say. What does this mean? Are you so naive or malevolent to consider debt solely a greek problem?

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