Is Greece going to set off the long feared next wave of the Great Recession?

The delicate nature of the current situation should not be ignored. The entire world economy is in debt to the max. Countries defaulting, airlines in danger of going bust because of fools at the EU, we only need a natural or economic disaster to panic the market. Why did we spend all our reserves for decades to come to save the poor banks ?

Of greater concern I think is that we now have proof that governments are cooking the books just like corporations and wall street firms are. also that the EU brain trust was not good enough to figure out what Greece was up to for years.

The lack of transparency drives up risk, and capitalism hates risk.

Are you referring to the British allowances debacle or the Greece situation ?

Greece, how with Wall Street help they cooked the balance sheet to make it look like they were with-in the EU budget mandate. As I understand it this meant fraudulently moving debt off of the balance sheet, a move wall street banks perfected years ago as they toyed with the bank regulators.

I don't think the financial debacle in Greece is likely to set off a world catastrophe as is suggested in this thread. However, I do believe it offers the potential for further spread of this contagion in other European countries burdened with high public debt, inflexible labor markets, bloated unionized government bureaucracies, generous public social programs and already high taxes.

The combination of these factors has left Greece with both the lack of any means to relieve the financial crisis and, as well, an increasingly violent domestic political crisis from the actions of beneficiaries of the present system violently resisting the measures necessary to save them all.

Spain, Portugual and possibly Italy are all candidates for the possible immediate spread of this crisis. Though the financial condition of France and other European countries is much stronger, they too have the problems associated with a bloated public sector and regulated, inflerxible labor markets. Companies that can't lay off employees in bad times are reluctant to hire new ones. The result in Europe has been two tiered employment structures with highly protected older workers and younger, new entrants into the job market increasingly working on temporary contracts with little or no protection. The first results are very high unemployment among the young and a chronic iunability to economically assimilate the immigrants they have (though all European nations are much more restrictive in accepting immigrants that the U.S.). Germany has opened up its labor market more than the others and, in pursuit of maintaining its highly successful export market, has held down wage increases, thereby reducing their exposure to these issues.. This, I suspect is what is behind the public resistance in Germany to an easy bailout of Greece.

All this should be viewed as a warning of things to come in the United States if we continue on the present path of government borrowing, regulation of the economy and unuinization of a growing and already bloated government bureaucracy.

more than the financial nuts and bolts what interests me is that we are finally seeing some resistance to the "victim" power play. Greece knew darn well that eventually their overspending and lieing about it would be exposed, but they assumed that the rest of the EU would save them because they had too. Just as wall street firms and major banks assumed, mostly correctly, that they could do what ever they wanted and if things went bad the government would bail them out because they are "too big to fail".

You might be right, probably are right, that Greece will get away with this morally reprehensible and legally fraudulent behavior. But we are finally seeing some resistance to it. I think the main source of this resistance is the former West Germans, who are still bitter that they were lied to about how much unification would cost, and are not at all happy with what the spending of the great bulk of their savings has bought them. They are reaching "ENOUGH!"

What should be done George?

That's up to Greece, the EU and the IMF.

Here in the U.S. we should resist attempts to have us follow the same misguided policies associated with the "European model" and quickly reverse the steps already taken.

What a cop-out. American firms were instrumental in assisting Greece perpetrate this fraud. We have obligations as a result. Not to mention that our long running "special" relationship with Europe obligates us.

Do you mean George remove the high public debt, make labour markets flexible, slim down and de-unionized government bureaucracies, reduce public social programs and lower taxes? And enough in each case to be significant.

How is that done? That's what I'm really asking. Without a "how" they are mere words.

I have no idea how you might do it in the UK and even less on the continent. Perhaps bring back Margaret Thatcher?

Here these are hotly debated issues and, though the pendulum is going the wrong way now, it could be reversed in the normal political process. We are also not yet in as deep a hole as you.

Nonsense. The Greeks appeared to like their borrow, spend and subsidize government while the party lasted. The frauds committed on the EU and the Greek people by their government were the actions of previous Greek governments - initiated by them and propogated by them. That some U.S. banks were willing to facilitate various transactions in the process does not make them participants in the public fraud.

Amen, a mere ripple in still waters.

The Greeks came to the wallstreet firms and said "we need to move some of this debt off of our balance sheets so that we meet debt/GDP ratio EU requirements, how can we do this?" and you dont say that Wall Street actively participated in the fraud? I think in America we generally call such participation in a criminal act a crime.

I suppose you would agree that we should stop prosecuting Getaway drivers during robberies, eh? After all, they didn't rob anyone and everyone else involved initiated their own actions. How can you blame them for facilitating the transaction - for the same reason as US firms and Greece, their own financial gain.

Seriously - if you know you're helping someone commit fraud, you're not an accessory to that fraud?

Cycloptichorn

I don't think that either of us would claim to actually know - as hawkeye does - what information passed between the banks and the Greek government on this matter, or that the U.S. (and European) banks in question were complicit in the conspiracy to deceive the EU. Instead they served for a fee as bankers and agents to the Greek government for various currency swaps and loans. It was the Greek government alone that made the entirely separate representations about its debt to the EU and the Greek people. The bankers might well have guessed what was going on, but the fact is they played no role in the misrepresentations of the Greek national balance sheet to their public and the EU. Had they instead prepared or assisted in the preparation of the debt documents to the EU they would indeed be complicit in a fraud. However, my understanding is that is not the case.

I have to say whether we like it or not it is now a world economy and any single country solution is not going to address the real issues.

I don't think the available facts support your conclusion. For example Germany has avoided most of the widespread financial problems now facing most European countries. They did that by keeping national debt fairly low, by saving instead of borrowing and by liberalizing their labor regulation and avoiding excessive wage escalation. The result is the Germans enjoy much greater financial stability and indeed a higher material standard of living than their neighbors - certainly far better than Greece. If Germany can do this within the EU - while sharing a currency with their neighbors, then certainly the United States can do it too.

It does not matter what words were spoken, when someone comes to you and asks for help in misrepresenting debt you know there can be no above board reason for the request. If I walk into an auto dealer service center and ask for instruction on how to hot wire a car hopefully they at least refuse the request. Ideally they call the cops.