Greece has defaulted on its IMF loan. It is the first Eurozone and the first developed country ever to do so. Below is the IMF’s full statement on missing payment. Greece is “now in arrears”, not default. At least, not yet… “Greece can only receive IMF financing once the arrears are cleared.” Greece has not received IMF financing since August 2014.
Statement by the IMF on Greece
Press Release No.15/310
June 30, 2015Mr. Gerry Rice, Director of Communications at the International Monetary Fund (IMF), made the following statement today regarding Greece’s financial obligations to the IMF due today:
“I confirm that the SDR 1.2 billion repayment (about EUR 1.5 billion) due by Greece to the IMF today has not been received. We have informed our Executive Board that Greece is now in arrears and can only receive IMF financing once the arrears are cleared.
“I can also confirm that the IMF received a request today from the Greek authorities for an extension of Greece’s repayment obligation that fell due today, which will go to the IMF’s Executive Board in due course.”
source: IMF
Greece, the first euro zone country, in default. A good presentation how this was possible you may this on this article written for Americans:
http://www.vox.com/2015/6/30/8867939/greece-economic-crisis
At the end of the article you may also find an American solution to the problem (#9), which the author recognizes that it is difficult to apply in EU yet. Hopefully, in the future.
” Here in the US, as in Europe, we have states with weaker economies that require endless financial assistance. Only, in the US we don’t call them bailouts, and we don’t treat it as a crisis.
Every year in the US, richer states pay more in federal taxes than they get back in federal spending, and poorer states get more in federal spending than they paid in federal taxes. South Carolina, for example, gets $5.38 back in federal spending for every dollar it gets in taxes, according to a WalletHub analysis.
Now, the US is a political union as well as economic union, and the EU is only the latter. But the goal of European integration is to get it there, and one thing that entails is real fiscal union, including huge, unlimited, never-ending transfers from rich areas of the union to poor ones. It’s politically tough to stomach, but that’s the deal.”
https://en.wikipedia.org/wiki/Equalization_payments
South Germans don’t want this
I guess the equivalent wealth transfer mechanism from richer to poorer regions EU has is called EU Structural and Investment Funds. I am not certain whether it provides the same 1:5,38 ratio for Greece as it does for South Carolina in the US. There are two major problems for Greece:
– In addition to the EU Structural and Investment Funds, Greece sustained an inflated economic growth for 10+ years through elevated government borrowing. This kind of borrowing is no longer available. Moreover, a significant portion of the old loans need to be repaid, and that will have a deflationary effect on the Greek economy.
– With a lot of newcomers to the EU (Malta, Cyprus and a number of former Communist states that went through their own dramatic economy contraction in the past), the EU subsidies that will go to Greece are fewer since there are a lot of needy regions in the newcomer countries
In the EU budget its 1.9bn to 6.9bn
Somebody mentioned that Greece is contributing 1,9B euros to the EU budget, and getting back 6.9B euros (with a net subsidy of 5B euros, that does not have to be repaid). Is that annually? In any case, this would indicate a 1:3,63 ratio between contributions and subsidies. Not quite what South Carolina is getting within the US, but still pretty good.
These funds often don’t materialize as they always need to be co-financed with not existing 15% by the government, just like Junkers 35 billion they don’t exist.
But as funds also go into infrastructure for tourists and international logistics this picture of Greece (and other southerners) painted by this “numbers” is scary, also the booming economy until 2008 gets totally ignored and/or wrong described because the BoG “forgot” to count the “missing fleet” into their exports statistics.
Most American children would, if they went to a decent school (not at all a given!), have “acted out” our Constitutional Convention and read some or all of “Federalist Papers” (against confederalism, in favor of federalism). It might be useful for European leaders to sit in on one of these re-enactments 🙂
I am an American and a Brit (courtesy of my father); I am a professor of world/European history (France, in particular). I am anguished to find that I now agree with my hypocritical, immigrant-/Roma-cursing, tax haven-seeking, EU-skeptic/ultra-patriot English cousin who is currently trying to sell his 500,000 euro house in…Spain (all the while extending his curses to lazy Spaniards who can’t afford to buy such a house from him!). The EU is fatally flawed…
How to save the EZ and EU? I think you have to re-construct the entire system. Unelected officials have *way* too much power to make monumental decisions. The “checks” on power are exercised by non-elected officials/institutions rather than primarily by elected ones. The US President ((almost) directly elected by the US people) has extremely limited powers to take direct action (all legislation must originate in Congress and the legislature can undermine just about any “executive order” if it is minded to do so; the Supreme Court could also invalidate an “executive order” if it usurps Congressional power or violates the Constitution…). The House of Representatives (states are represented according to population) is balanced by the Senate (states are given equal representation, regardless of numbers). So, in a new EU system, the European parliament would have two houses of equal power, with one that reflects population and another that grants equality among member states. The Parliament would have to gain power at the expense of the Commission.
Another idea: all employers (regardless of size!) should send salary/employment records to Brussels (all businesses/employers in the US send data to the federal government about their employees; they withhold and remit federal taxes on behalf of those employees, along with paying an equivalent portion of tax per employee). Banks and investment firms also send information to the federal government when bonds, stocks, etc are sold so that capital gains are recorded (unfortunately, collection depends on the honesty of the profiteer or the diligence of the tax auditors…). I propose this for a few reasons: it improves tax collection and it could enable the EU to do better than the US at taxing capital gains (if it chose); it would certainly do better than it is presently doing at taxing wealthy citizens who exploit tax havens within the EU. If an American wants a tax haven, s/he has to look outside the country for one (I think that bringing Luxembourg, for instance, in line with the other countries would go a long way to improving solidarity and reducing the impression of hypocrisy when leaders preach about tax dodging…)
To be honest, I don’t think *at all* about the portion of my tax money that stays in Virginia as opposed to the amount that goes to S. Carolina or Alabama or Texas. I grew up in Connecticut; I went to university in Virginia and graduate school in North Carolina; I have taught at universities in South Dakota, Nebraska, Louisiana, and Virginia [the distance between Nebraska and central Virginia = Paris to Moscow, for a point of reference 🙂 ]. The standards and costs of living are vastly different – but I don’t think they should be. In fact, I would be strongly in favor of far greater fiscal/economic harmonization. It’s not the fault of a poor child that s/he was born in Texas as opposed to Massachusetts or Vermont (states in which social protections are better)! Why should a child be punished for having been born in one part of a country rather than another? If you are in a single *community*, then shouldn’t everyone be given an equal chance to realize his/her potential and make choices about how to live? Isn’t that the spirit articulated in the founding documents of the EU?
Unfortunately, Obama wants TAFTA so much that there is *no* way that he will be more pro-active (except, maybe, to sing “Amazing Grace” to Angela Merkel 🙂 ) – but there are many American progressives who are cheering for you, Greece 🙂
The problem is that the jerks that call south Europeans lazy would snuff it working half an hour in the Mediterranean sun.
So the best solution to this would be to cut down the welfare in the north to the oh so high Greek level and all these idiots die out faster.
One problem: we are not all Europeans, we are Greek or Dutch or French or German and so on. We are not an united country. Each country has his own culture and society standards. The Netherlands has big pensionfunds because we save our entire working live. We have to pay a lot of taxes, more than the Greek for our social society so we can support our unemployed, disabled, ill citizens and pensioners. If Greece governments have done the same they would had created a beter life standard for the Greek people. I don’t say the Netherlands is utopia but we have taken care for eachother since WO II. We were willing to help Greece untill Tsipras came in with his elephant feets. So trust is gone and the Greek people are suffering. Nobody buys anything anymore, economy went down. Thank you Tsipras, I thought you would care as a communist but he is just another Greek politician.
But it’s a bubble, it’s not sustainable as it depends on resources-mass-murder for cellphones, cars aso. Sustainable would be if the European population would live from what it can produce without exploiting the 3rd world, it’s agriculture.