Apparently Greek wages are like 25% to 40% too high. It will take many years of fixed nominal wages in Greece and 4% wage growth in the north to restore the balance and make Greece competitive in anything other than tourism. And I doubt those Greeks who are mobile will stick around and take 0% wage increases.

Euro bonds without Germans in Athens collecting taxes is just not gonna happen.

It is hard to conceive of a solution where Greek does not continue to suffer after its decade of fun.

So, what's a Grecian Urn...and Krugman says "too much!"

as Michael Hudson and others have argued, the debt levels are clearly unsustainable and will eventually have to result in more writedowns. A government who keeps getting bailed out but is paying a substantial portion of its revenue on interest payments isn't going to get anywhere. What say you Mr. Baker/fellow commenters?

Borrow and default, borrow and default....what's the news. This has absolutely nothing to do with the Euro.

What's with the hatin' on Greece in these comments? I expect more of your readers, Dean. For one thing, Greek wages are too high only in relation to German wages, which have been suppressed for the last decade. Check out Heiner Flassbeck's trenchant analysis of the wage disparity and its effects, http://yanisvaroufakis.eu/2012...lassbeck/. Remember, Greek workers average longer hours than nearly any other developed nation.

Then you have the attacks on Greek borrowing, but the bailouts aren't going to the Greek people, who've seen their incomes slashed mercilessly, or even the Greek government. All the bailouts do is transfer funds to the holders of Greek debt, largely German, Dutch, and French banks, so that they can be "recapitalized" at the unsustainable pre-crisis level. If those banks had to mark their Greek (and Spanish, and Italian) assets to market, they'd go under--that's what the bailouts are forestalling. Not governments' bankruptcy, but banks'.

This has been the Krugman/Keynesian argument, that Greek nominal wages are 25% or so too high after the bubble, and that the Greek labor force is on average not very productive. The wage growth in the 2000s far exceeded productivity growth, obviously. This should not be news to those who pay attention. But essentially, since this has been the way the Greeks (and the Italians) have been doing things for many many years, pre Euro when they had their own currencies, it should not be surprising. Very similar now to Argentina which had a little bubble after the last default and now is screwed again. It is really a political issue (I hate to say cultural as others do) rather than an economic issue.

Yup, David M. Can't post all the time though!

Contrary to Pete, it is very easy to think of (two) solutions that prevent further Greek suffering. And of course it has everything to do with the Euro, the stupidest monetary system of all time. Neither Greece nor any European state has been recklessly spending for decades - rather the reverse - their hyperausterity since the dark age of economics fell in the 70s has led to their economies shrinking relative to the less austerity-insane USA.

First: "Fiscal transfers" from the ECB to Greece, in the style of the unnoticed "fiscal transfers" in any normal state, like the USA. Monetary union without fiscal union is unsustainable.

A Eurozone Job Guarantee. Declared ECB backing of Greek debt. (The ECB has been "monetizing debt" all along - but only in return for suicidal policies being adopted by Greece.) The quotes are there because these "fiscal transfers" are not really transfers of wealth from Germany to the periphery. The way things are set up, the Euros will quickly go back to the German Euro-hoarders. The Greeks will spend what they get & the Germans will get what "they" spend. Result, jobs & a decent standard of living in Greece. More Euros in the German hoards. Everybody wins. A free lunch. And no inflation needed, contra Dean.

Second: Greece goes back to the drachma, if the ECB & Germany refuse to go back to "Keynesian" = numerate = addition & subtraction-consistent economics.

Gee, using economics that makes sense, that applies to the real world, that adds & subtracts correctly, gives us the FREE LUNCH that innumerate pseudomathematical neoclassical quackonomists say can't exist. Who'da thunk it?

Yes, German tax collectors in Athens will work fine with a bailout. I don't think that's gonna happen...A fiscal union is not a one way transfer...its symmetric.

"Fiscal transfers" from the ECB to Greece, in the style of the unnoticed "fiscal transfers" in any normal state, like the USA.

I wouldn't call them "unnoticed". I notice them more every time a congressman from the Confederacy starts whinging about "out-of-control GUB-MINT spending" on TV...