Well BBC ran a show last night. And it did show the some reasons why Greece is such trouble today.
It turns out people spent like crazy, far beyond their means. Things like electricians driving Porsche's and High End Mercedes cars. All of it imported from Germany. When a nation full of people with government included involves in such spending it is but other wise natural that they price for it later on.
The anchor did explain that it wasn't just weak institutions and bad government policies. It was reckless lifestyle spending on part of Greeks. It seems many Greeks now want to sell of their costly cars, which are now believed to sell for less than half the price they bought it. So what happens? If they are unable to pay the loans and Bank take the cars. Banks still get only ~50% of what they lent. Its step by step collapse of a whole system.
In many ways, the institutions, like Banks are responsible too, for lending out money like that- unchecked. But the whole system is to be blamed. People, Government and everybody else involved.
On the other hand they also showed, Germany and how they manage their economy.
Now lets look at it, Greeks might work harder than Germans. That is no indication of why Greece is such crisis today. Apart from working and earning you also need to manage your money well. Why spend more than what you can earn?
Also scenes in Greece were heart warming, difficult to believe its 21st century Europe. Its almost like a third world country. People begging on streets, sleeping on footpaths, Eating from what is distributed. Couples relying on free clinics for minimal healthcare. As I said, only the Infrastructure looked grand. Otherwise it looked like a third world country.
The number of Greek electricians driving Porsche is not very high. Also the German exports to Greece are also not that big (from both sides).
In reality Greece imports from all over the place. It also imports a lot of energy sources. It has a huge military with costly imports (parts from that also from Germany). Also the money does not come especially from Germany. If you look at the banks, they are from France, Italy, Germany, US, etc.
Avoiding paying tax is a sport - especially for some of the very rich families in Greece.
There are several other reasons.
There are a lot of people in Greece who work hard and a lot of people who don't work that hard. There is a huge and relatively unproductive government sector for example.
How many hours people work is really not that important. In Germany people may work fewer hours, but the work is much more focused. After the necessary working hours many workers actually go home. In many other countries workers spend more time at to workplace without being productive. Also there are large parts of the industry which have lots of robots. For example in car manufacturing you find 10000+ robots working. You would find that level of automation only in a few places on this planet. Not so much in Greece.
Larisa, which has about 250,000 inhabitants, is the capital of the agricultural region of Thessaly in central Greece.
Larissa “is the talk of the town in Stuttgart, the cradle of the German automobile industry, and, particularly, in the Porsche headquarters there”, since it “tops the list, world-wide, for the per-capita ownership of Porsche Cayennes”.
Self-confessed Eurosceptic Michael Portillo visits debt-stricken Greece. He believes that the euro crisis must have shaken the Greeks' faith in Europe's single currency and wonders if there'll be a desire to revert to the free-floating drachma. In Athens he meets everyone from a destitute young family to the former finance minister and the outgoing Prime Minister, and is surprised by some of their answers.
Meanwhile in Germany, Europe's economic powerhouse, Michael encounters the taxpayers who are paying most towards Greece's mammoth financial bailout while having to watch angry Athenians burning the German flag.
With tensions rising in the Eurozone, is this the moment it becomes more united, or will it be pulled apart?
Yes that's the documentary, Its a nice one to watch.
What I realized about the entire chapter of Greece was that you can't blame the government and corporations for all the problems in the world.
Sometimes we as individuals need to step back and think of our own financial future. Reckless spending on our behalf without planning for the future are disastrous. Savings and investments are important for our future. And we need to think of it.
There is a point where the government's job ends and ours begins.
1. I wouldn't think for a second that Michael Portillo is a reasonable unbiased analyst here.
2. How do we prevent individuals from spending recklessly? Seems like government is going to have to play a large part in that story.
On (2), it's not an issue of blame, and personally I'm not interested so much in who to 'blame' - we're doing economics, not philosophical ethics. Rather it's an issue about what we do about it. Simply telling people to act differently is unlikely to be a sensible solution.
That might be a start, but probably only if banks were suitably sized and regulated in the first place which wasn't the case this time. Better bank regulation / breaking up banks going forward seems more sensible.
I would look into Hisotry and Economic Theory befor you make such clames. Specially about the size of banks, the US had strong regulations on bank sizes for a long time (I dont know when the stoped exactlly) and that lead to a massiv amount of bank failure in the great depression. About 8000 Banks failed in the US, most of them single branch (this is in a system with a central bank), while you look at canada where you dont have a central bank (until 1935) you have only one bank failure.
The History shows that some of the banking system with less regulation (and sometimes not central bank) have shown to be much stronger. This is large subject if you are intressting look for "free banking".
The most comprehensive book on the subject is: The Theory of Free Banking: Money Supply under Competitive Note Issue by George Selgin
'Many commentators have stated that the Gramm-Leach-Bliley Act’s repeal of the affiliation restrictions of the Glass-Steagall Act was an important cause of the late-2000s financial crisis.'
Here in the UK we had something similar with the 'big bang' of bank liberalisation in the 1980s, resulting in the City of London becoming the world's largest financial centre - and subsequent problems.
Whilst I'd look into History and Economic Theory, I wouldn't look to Cato Institute fellows for sensible views on this matter.
Fanny Mea and Fredy Mac pushed down the cost of housing (the where allowed to directly lend from the fed, that had low intresst rates) and set false insentives to build houses. That (among some other small things) was the big thing that led to the crash.
The deregulations allowed banks to be more agressiv, that is only bad if you give them a strong insentiv to be agressiv. Maybe it mad some of them more unstable but it would not have changed the fundamentals of the crash and it is in such a situation only more importent that YOU DONT BAILE THEM OUT.
Prof. Selgin is btw a well regard specialist on banking and money, he does not earn his money from the Cato Institute and they dont direct his research. Its nice that only attack where somebody is working not what they say.kj
Since all you did was paste the first counter argumetn you fund on wikipedia I highly doute that you even no any ecnomics, and only posted it because of your 'deregulation = bad' bias.
I was only mentioning the Free Banking School because of the comment "suitably sized and regulated" is not the only way of looking at things. Infact I think pretty much every economist agrees that the banking regulation pre 1933 where very bad and made the great depression worse. Passing rules to make banks smaller does not really help in itself.
If you have read the article by Stigliz that is refrenced after your comment on wikipedia, you will see that stigliz agrees that the bubble was caused by inflation ("Greenspan presided over not one but two financial bubbles. After the
high-tech bubble popped, in 2000-2001, he helped inflate the housing
bubble.") and he says:
"The most important consequence of the repeal of Glass-Steagall was
indirect - it lay in the way repeal changed an entire culture. Commercial
banks are not supposed to be high-risk ventures; they are supposed to
manage other people's money very conservatively. It is with this
understanding that the government agrees to pick up the tab should
they fail."
What you will notice that he is pro bailing out bank! The banks that failed in the crash where not acctually banks that where "Commerical banks" but the government bailed them out anyways! Its funny that the free-market guys are the ones that are "pro-buissness" acctually its the other way arount people like him are the reason taxpayer are paying for failed banks.
Free Market guys dont go deregulate and then bailout, if a bank investment or not goes done thats what they deserve!
I don't tend to respond to ungrounded accusations of bias (and to pre-empt a claim, it does not follow that it's inappropriate to choose not to devote much time listening to members of the Cato Institute on the grounds they are members of the Cato Institute). Good day.
It sounds fine to me to have small banks failing with FDIC around. People don't lose their money, and someone with better business sense starts a new branch.
I think deposit insurence is great but Im not sure why the state should provide it. Most of the Bankruns happend befor the FDIC (1933). The problem with the FDIC is just that it makes, that people dont run on banks. Bank runs or often 'good' in the sence that banks that are overleveriged get finally taken down. As sooner as banks are taken town the more return you get for every doller in the bank.
With the FDIC and the FED banks can go on longer then the should and therfore pay back less when they are finally go down.
You don't need to regulate banks if you prove to them you are not going to bail them out when they are too loose in their lending practices. They'll go out of business or tighten their lending standards. The real problem here is banks the world over have convinced their people and their governments that having debt-financed possessions is the key to happiness and prosperity.
What does one have to do with the other? Bailing out banks does not happen so people can still keep spending recklessly, it comes from the belief that letting banks fail will cause major harm to the financial system.
"Financial bailouts of lending institutions by governments, central banks or other institutions can encourage risky lending in the future if those that take the risks come to believe that they will not have to carry the full burden of potential losses."
> 2. How do we prevent individuals from spending recklessly? Seems like government is going to have to play a large part in that story.
The Reserve Bank of India (India's equivalent of the Federal Reserve) does this by encouraging saving in small ways.
In India, savings accounts are the default for retail individuals, not current/checking accounts. Most banks only permit you to open an interest-free current account as a business account. The small amount of interest earned in a savings account acts as some incentive to keep the money in it. I believe no overdrafts are permitted on savings accounts either, so easy credit in the form of spending more liquidity than you have becomes just a little more inaccessible.
In relation to point one. Everyone is biased no matter how hard they try not to be, at least with Portillo you know what you are getting and can treat it with a pinch of salt.
2 is a good question. One answer is presumably mandatory payments for social security and health insurance. You can't spend money recklessly anymore that you gave to the taxman.
On the other hand, if you can't save money, spending it recklessly is much more likely. Politicians who choose not to spend money now cannot expect to choose to spend it later (due to the uncertainty of being reelected), which creates a strong incentive to just spend it. It would be a rare politician who could be elected repeatedly while running on a policy of saving money for the next generation's government to spend.
I don't think that's why these stats are interesting. There seems to be a stereotype of lazy Greeks being bailed out by hard-working Germans. These OECD stats (which I originally checked out after an episode of Radio Open Source featuring economist Mark Blyth) show that this is just another example of an ugly, incorrect stereotype.
German banks have substantial exposure in Greece and other troubled Eurozone countries, through bonds/loans. Those bailouts (and we're getting a little vague here) are often used to service these debts, allowing said banks to report a profit and pretend their investments were sound in the first place.
Interesting that we rarely look at who lent Greece such vast quantities in the first place.
I agree; let us not forget that due to EU, Greeks got looser borrowing from banks, and they bought German products. Last time I was in Romania for a business trip, I saw a similar picture. Goods flow from Western Europe to Romania together with easy credit. That spoils people quickly.
I live in Romania and the picture ain't at all similar.
Surely you can spot luxury cars on our streets. But in general I haven't seen those cars purchased by people that can't afford it. Also, many luxury cars that you see have been purchased from second-hand dealers from other countries for cheap. And let me assure you that most luxury cars you see in Romania (and you can spot many of them) are bought by people that can afford to pay cash ;-)
I do worry about loans for purchasing homes.
In our country it is much better to own your apartment than to rent it, especially in the big cities, where rents are equal to how much you'd pay for the monthly loan payments. Landlords also make it difficult to rent an apartment for a long time. But young people these days do not make enough money to ever have a chance of purchasing their own property, without getting loans from banks. And as long as the system does not collapse, it is better for them.
This is not the same thing as buying luxury cars. And if this system collapses, only the banks should take the blame for passing loans to people that can't pay their debt on the long term.
Because you can generate more wealth than the interest costs you, and hence everyone can get wealthier. Government and people and companies have been borrowing money to spend on things for ages.
That is quite right and works for buissnesses, sometimes. Buissnesses are part of the market and they have competition. Government is a hole other thing, Government can creat wealth too, matters differ on how often that happens.
Specially in the last 10 year (or longer) most government didn't seam to be much of investing there money smartly.
I think there's a big difference in investing money in things that will generate more money, and spending it on luxuries that will only depreciate in value. I expect the parent was referring to the latter not the former.
When a market is flooded with easy, cheap money distortions occur. Witness the housing excesses in the U.S. prior to 2008. This is a phenomenon of human nature. Excess credit inevitably leads to too many bad loans.
I have studyed this stuff quite a bit. The deregulatian probebly had some effect but compaired with the effect the easy money had it was not that imprtend. There where other things like that the taxcode favers buying instead of renting. Asian saving lowered long term lones .....
Most importendly Fanny Mea and Fredy Mac could borrow cheap money from the Fed and went below equillibrium prices for a long time.
It's definitely not a third world country. Despite the crisis, greeks still have good free healthcare and education and crime is still low. Don't know for how long though.
The thing with the Porsches is a hyperbole, but it's also true that Greeks have become avid spenders in the past decade. There is this Nielsen report that showed that in 2008 Greece was number 1(!) in (designer) brand awareness worldwide: http://pl.nielsen.com/site/documents/ConsumersandDesignerBra... . Not a healthy sign for a country that produces almost none of those expensive products.
Most of this money went to vitalize local markets that had no future, such as construction (building very expensive houses in a country that already has one of the highest home-ownership rates in europe), food/entertainment and retail. Very little was spent on investing, mainly because tight regulations make it hard to take business risks.
The phrase "third world" has nothing to do with economic conditions, and everything to do with allegiance to a particular policito-economic block. Thanks to the work of the allies (and particularly the brits) during the closing parts of WW2 Greece is aligned with NATO after WW2. After the collapse of the soviet union I don't know that it makes much sense to talk about 1st, 2nd and 3rd world countries any more.
It went to Germany. But you can't hold them responsible for this mess. Germany is a export based country, they are also more productive than the Greeks. They have managed their money well.
The only thing is that the Euro facilitated such things more easily.
But Germany can't be blamed for it. Imagine you go to a supermarket and buy like crazy. You know you don't have a way of paying it back, but you keep buying. Soon you run out of your credit limit of buying more. Soon you are in a situation where you owe the bank a lot of money and have no money of retuning it back.
Who is to be blamed, can you blame the supermarket for selling stuff? Or the bank for lending you money? Or you for not knowing when to stop?
Personally, I would give the majority of the blame to the banks (say 60%) and the rest to the borrower. The reason for this is that, in my experience, banks have got a lot less careful about who they lend money to (at least when it comes to personal lending).
The last numbers I read for Greece's imports from Germany were very small, in the low one-digit range. So I am not sure this is valid to say "it went to Germany" although at the beginning of the crisis this was a picture the Greek newspapers were all too happy to paint: the wealthy, greedy Germans who got fat and rich off of all those Greeks buying so much from them...
Well BBC ran a show last night. And it did show the some reasons why Greece is such trouble today. It turns out people spent like crazy, far beyond their means. Things like electricians driving Porsche's and High End Mercedes cars. All of it imported from Germany. When a nation full of people with government included involves in such spending it is but other wise natural that they price for it later on.
If BBC did run such a show, then, as a Greek, I can tell you it was bollocks.
In fact, in you check the private (homes + enterprises) debt for Greece as compared to the GNP you will see that it is quite small, actually one of the smallest in the western Europe.
Plus, even for this private debt, the majority is in the form of housing loans (= to buy a house). So, no "electricians driving Porsches". Well, you could find one or two maybe. But I doubt you could find five of them.
"Well BBC ran a show last night" therefore it must be true and I can now give you all my expert opinion in the matter.
Private debt is much higher in the UK than in Greece, both in relative and in absolute terms. Public debt is probably second in line to Greece, it's a close race with Italy and maybe some smaller Eastern countries. I wonder if the BBC covered that last night.
I never said borrowing was wrong. I said borrowing without having means to pay back is wrong. You almost make it look as though Greece did nothing wrong in borrowing, but now Germany and alike are committing a huge sin in not bailing them out.
UK, Italy and all those countries you mentioned might definitely have the same debt. But the situation there is different because those people have a way of paying their loans back.
I am not expert in economics but I know, spending more than earning(Or what you can earn) is not healthy for any economy.
Germany has massive part on it by enforcing such shockingly low borrowing rates across the Eurozone.
It completely destroyed countries with immature Real Estate landscapes, countries used to high inflation rates that collectively shot themselves in the foot.
Germany and France took no hostages when they were stagnating and failed to meet EU requirements. They gave absolutely no regard to these countries and now they are paying for it. They will either way, because that's their main market, Europe. Because it's not just Greece that's over-borrowed, it's most of the eurozone including Italy, France, Spain, Belgium, Netherlands, ... basically most of the Eurozone by GDP.
As this pops up everywhere, could you please cite a source from e.g. a ECB protocol or otherwise how Germany "controls the rates" or "enforces shockingly low borrowing rates" in violation of the ECB charta?
The ECB back then set rates in accordance with inflation, e.g. to keep it low. That's the charta of the ECB. When a high inflation country joins a construct that has a goal of keeping inflation low, then yes you have a problem if you do not change. But I'm not sure Greece e.g. was forced to join a low inflation construct.
From the ECB homepage:
"The ECB is the central bank for Europe's single currency, the euro. The ECB’s main task is to maintain the euro's purchasing power and thus price stability in the euro area."
(Beside the obvious fact that "shockingly low borrowing rates" would lead to high inflation, which could then not lead to "countries used to high inflation rates that collectively shot themselves in the foot.")
The rates always follow the needs of Germany and sometimes France. The rates are discretionary and set by the president of the ECB.
Borrowing in most countries with a "hot" Real Estate market was unstoppable. Only higher rates like they historically had could have controlled it. The dimension of the damage done by this policy is incalculable.
There was no compromise. If a middle-ground, 5-6% rate had been set, the cost would have been shared. Now we're like Japan, the UK and to some extent the US: way over-leveraged, and the problem is our asymmetry and the fact that we really don't believe in the Union. When push comes to shove we shift blame. In the US nobody talked about expelling California from the Union when it went kaput and their hole is of a much bigger dimension than that of Greece. Germans will never consider Greeks as equals, it's a fact, so we either enforce it or call it quits.
The EU consists of independent countries which have their own governments, their own economic policies, their own banks, ... a real-estate bubble in Greece is fully the responsibility of Greece.
A hot 'real-estate' market not stoppable? Where was it tried?
How about Mexico? Would the US pay for Mexico to prevent a bancruptcy there?
If someone in the US decided the interbank interest rate, then they would have shared responsibility.
You are very misguided. The EU is one thing and the eurozone is a different thing. The UK does have some economic independence and very importantly, monetary independence. Those countries in the eurozone have surrendered their monetary policy to the ECB, and the ECB responds mostly to the interests of Germany, followed by France, followed by Italy, Spain and then smaller countries.
The economic cycle of Germany is substantially out of phase with that of most countries from Southern Europe, who in turn thought the Germans would pay for the party. In any case it wasn't their call. Turns up things have snowballed out of control.
Yes it is out of sync b/c Germany cut costs in the 2000, cut social security, changed job laws, increased the minimum pension age etc while the southern countries increased spending and increased massively labor costs.
You seem to think "southern countries" collectively decided to increase costs while Germany took the high road. Southern Countries HAD their costs increased and their internal inflation out of control, so the ECB could help out the then-struggling Germany and France duo.
Germany was stagnating in 2000 and MISSED their promised objectives, while Southern Countries were growing healthily. Then they found themselves with extremely low rates to help growth in Germany and France, which was basically "free money" and an out-of-cycle policy they simply did not know how to deal with. Their internal corruption did the rest.
There is one way to enforce responsibility: stop giving away free money, either be it through low rates, or through "rescue packages" done to ensure your banks won't need to swallow a massive hole from not having their lent money back.
A bit too late for this, but hey, better late than never.
- raise the rates. NEVER drop the rates below 5% as long as there is a single overheating economy in the monetary Union.
- drop the debt. Suck it up. No more rescue plans, also buh-bye to the money irresponsibly lent away. Maybe you didn't know this but you have already dropped a lot of it. Now it's when the big monster Merkel has been avoiding will rear its ugly head: the same will have to happen with other MUCH bigger countries than Greece. This will cost Germany and all the other countries massively, you will be in RECESSION for some years.
Otherwise they will be out of the Euro and then you can bet your lucky pants they will declare bankruptcy and they won't repay the debt or any rescue we (EU members including the UK that's not even in the eurozone) have given them, as Argentina did not that long ago when they let their currency float. Simply because they are unable at this point to go into a position from which they can repay.
Even with those "cuts" the German wages are still 2 times over the "southern countries".
Except if you mean to say that those in the South are less humans and do not deserve even half the wages and social welfare that Germans do --which Germany has historically said in a few occasions...
"The ECB is the central bank for Europe's single currency, the euro. The ECB’s main task is to maintain the euro's purchasing power and thus price stability in the euro area."
Which has been done at the expense of causing massive persistent damage in some "secondary" countries in the EU.
As a said before, there was a middle ground, but it wasn't considered. Higher rates during the last decade would have caused stagnation in Germany but would have avoided the complete demolition of some countries. Note that this demolition process was not only beneficial for Germany, but also for bank tycoons in these countries - their direction is now a bunch of billionaires despite whatever happens to their banks now. In these countries 2 full generations basically have had their lives destroyed from being out of the housing and job market chronically, and those with a job will have most of their disposable income confiscated. These are the really important figures usually not told in the BBC, Euronews or Deutsche Welle.
And the worst part of it is the "rescue" - the rescue consists in ensuring the banks in the most affected countries don't need to sell their massive housing stocks in a firesale. It basically consists in pegging housing prices in these impoverished countries so their average house costs twice the price of a house in an average German city, keeping 30+ year olds (the generation coming out of school during the euro-originated frenzy from last decade) homeless or living with their parents. The rescue basically consists in perpetuating this tragedy: a lost generation, birthrates to the ground (impossible to emancipate), people deprived of a sane life plan and forced to be enslaved for decades. Because that's what happens when you "so kindly" inject money to these over-stocked banks. They. Won't. Let. Their. Stocks (housing mostly). Lose. Value. This will only happen when you cannot continue "helping", the sooner the better. But this will ultimately happen, thankfully.
That's the rescue plan. Social collapse in several countries from the eurozone so all banks (both rescued banks and very especially lenders - in supposedly "responsible" countries) can be happy and, very importantly, German banks (and French banks, Spanish banks, British banks in the case of Ireland, ...) don't have to take responsibility for over-lending. The rescue is mainly a rescue to the banks of ALL parties disguised as a rescue to these "filthy irresponsible P.I.I.G.S."
Fucking let them bankrupt and take the hit, you have done enough damage already. Say buh-bye to all the money lent instead of pretending to be "saving Europe".
"Higher rates during the last decade would have caused stagnation in Germany but would have avoided the complete demolition of some countries."
No. There is consensus that during the decade Germany as a country, the people and companies were not borrowing enough. Low rates had no impact on that. So there would not be any stagnation in Germany with higher rates, as companies and people did not borrow. The government is cutting costs especially on the social cost side for a decade now, they have not been Keynes spenders in any way.
Economy growth in the last years came from massive social cuts, restructuring employment laws, increasing the minimum pension age over several years (will be 67 in 2012), cutting early pension programs and cost cutting in companies. Germany is exporting (too much?) because the price per unit cost is low compared to other European countries.
If your argument would have anything behind it, there should be numbers how borrowing increased in Germany , which it did not.
>"The ECB is the central bank for Europe's single currency, the euro. The ECB’s main task is to maintain the euro's purchasing power and thus price stability in the euro area."
Hmm, they forgot to add that they are a front for the interests of Germany foremost and France second.
Germany 'enforced' the borowing rates? Let's look a few years back. The rating agencies rated all kinds of junk very high. The banks all over the place where very creative with products hiding the risks. When Germany was asking for tighter regulations we were ignored or laughed at. Now the Germans simply demand that the lessons are learned and we see structural reforms - reforms which can not be done by just throwing more money at countries high in debt.
This is not "a few years back" - this clusterfuck has been brewing since year 2000 with the euribor. At that point several countries needed high rates to stop their overheating borrowing and they were given a shower of petrol to stop their fires.
Spending more than you earn can sometimes be quite healthy, for an individual, for a company, and for an economy. It's called investment.
An example: when you buy take a mortgage to buy a house several times your annual income, you've spent more than you earned. Typically you need two or three decades to pay off the extra money you spent.
>I never said borrowing was wrong. I said borrowing without having means to pay back is wrong. You almost make it look as though Greece did nothing wrong in borrowing, but now Germany and alike are committing a huge sin in not bailing them out.
Actually it's a long and convoluted history.
Do you know for example that when the newly independent state of Greece was established (after fighting for liberation from the Ottoman empire), Germany (the Bavarian state) appointed a king and cabinet of it's own there?
The new state, being very poor and having an immediate need for money to bootstrap itself (for the army, to build infrastructure, etc), got a series of loans from abroad with very ominous terms, worse than usury that they had to accept, because there where no other sources of income at that early state. The terms were like you get only 60% of the actual loan value and leave the rest 40% as insurance against not paying --but you have to repay everything plus interest. Even those loans were embezzled in large part by the bavarian cabinet (and Greeks connected to it), leaving like 10-20% of the actual loan to the state.
So, those were some of the starting steps of the new Greek state, 180 years before.
Now, in the WWII, Germany not only invaded Greece and destroyed it's infrastructure, but also took a loan (Germany FROM Greece), amounting to something like 1/5 of the current debt in today's money. When I say "took a loan", actually the appointed government of the occupying German forces gave them one, it's not like the Greek people approved it. Then, after the war, they refused to pay the recuperations...
It turns out people spent like crazy, far beyond their means. Things like electricians driving Porsche's and High End Mercedes cars. All of it imported from Germany. When a nation full of people with government included involves in such spending it is but other wise natural that they price for it later on.
The anchor did explain that it wasn't just weak institutions and bad government policies. It was reckless lifestyle spending on part of Greeks. It seems many Greeks now want to sell of their costly cars, which are now believed to sell for less than half the price they bought it. So what happens? If they are unable to pay the loans and Bank take the cars. Banks still get only ~50% of what they lent. Its step by step collapse of a whole system.
In many ways, the institutions, like Banks are responsible too, for lending out money like that- unchecked. But the whole system is to be blamed. People, Government and everybody else involved.
On the other hand they also showed, Germany and how they manage their economy.
Now lets look at it, Greeks might work harder than Germans. That is no indication of why Greece is such crisis today. Apart from working and earning you also need to manage your money well. Why spend more than what you can earn?
Also scenes in Greece were heart warming, difficult to believe its 21st century Europe. Its almost like a third world country. People begging on streets, sleeping on footpaths, Eating from what is distributed. Couples relying on free clinics for minimal healthcare. As I said, only the Infrastructure looked grand. Otherwise it looked like a third world country.