The announcement that Greece is proposing a referendum on the latest bailout deal is causing “dismay and consternation”:http://www.ft.com/intl/cms/s/0/cc377942-0472-11e1-ac2a-00144feabdc0.html#axzz1cSkouRza among the usual suspects, “reports”:http://www.ft.com/intl/cms/s/0/cc377942-0472-11e1-ac2a-00144feabdc0.html#axzz1cSkouRza that markets are troubled by the possibility of a disorderly default etc etc. But perhaps this is the best news that the European Union has seen in two years. At the very least, it’s the first time that we’ve actually seen citizens actually being asked about what they actually want (elections in which they kick the bastards out to see Tweedledum replaced by Tweedledee implementing pretty well the same austerity agenda, despite pre-election promises, don’t actually count).
To put it differently, I imagine that the strong likelihood is that the Greeks will vote ‘No’ to the proposed austerity measures. But I’m not at all convinced that this will result in disorderly default. Instead, I suspect that it will result in people running around in panic for a few weeks, grave pronouncements from senior European politicians about how horribly the Greeks are betraying their European vocation, and then efforts to stitch together a deal which might actually make sense (e.g. enough aid to prevent the economy from crashing as horribly as it is doing, as a quid-pro-quo for genuinely intrusive reformation of the Greek tax collection system). This might in turn provoke an actual real argument over what EU politics should look like post-crisis (because make no mistake – the system that is being articulated on the fly at the moment is likely to have profound long term consequences for the shape of the EU).
Or, to put it differently again, the European Union is at a point where it actually has to start taking enormous – and explicitly political – decisions about what kind of entity it wants to be. I have a long piece coming out in _The Nation_ in a couple of weeks, which talks to how traditional politics has always been a problem for the EU. European politicians have preferred to integrate by stealth rather than public debate. But they cannot do that any more. They have tried repeatedly, and failed repeatedly, to treat the rolling crisis as another, albeit much more complicated, technocratic problem, which can be solved through the usual kind of technocratic solution. As they started to do this, European Union governance shifted from the so-called “Community method” (under which decisions were taken by rough consensus among the member states, with the Commission acting as a kind of neutral buffer), to Angela Merkel’s “Union method”:http://notre-europe.eu/fileadmin/IMG/pdf/Speech.Merkel-english.pdf (PDF) in which the member states1 were supposed to take decisions on their own. This in turn hasn’t worked out very well (Germany and France disagree on quite a lot), leading to the effective governance of the European Union by the European Central Bank (what might be called, for all its “perplexities”:http://www.voxeu.org/index.php?q=node/7158, the “ECB method”). Each of these steps has led to an ever greater remove between actual decision making and democratic control. But, when you are asking people to accept a fundamentally different way of ordering politics than the one that they are used to, lack of democratic input is a problem. What is being debated at the moment is not a technocratic fix to Europe’s problems of economic stability. It is a long term set of institutional arrangements which, if they succeed, will shape Europe’s politics for generations to come, and if they fail will likely take the world economy down with them.
Momentous decisions like this should not be made on an ad-hoc basis. They need democratic legitimation. Here, the German Constitutional Court, which is typically regarded by pro-EU people as a pain in the arse, is absolutely right. Its “Lisbon decision”:http://www.feps-europe.eu/fileadmin/downloads/090701_DE_LisbonTreaty.pdf (summary PDF) reads oddly in some ways – the standard of democracy that it demands is so high that arguably Germany itself does not satisfy it. But its basic claim is undeniably correct. The European Union is not a democratic constitutional order, and no number of technical fixes to the powers of the European Parliament will make it one. Andreas Vosskuhle, the President of the GCC, “recently made a speech”:http://www.bundesverfassungsgericht.de/aktuell/rede-praesident-einheit-2011.html which again pushes the argument that the European Union needs to democratize if it is to grow in competences – but which implicitly suggests that there is a path to democratization (Vosskuhle has elsewhere suggested that Germany too should have a referendum). My rough translation of the most relevant bit:
bq. Europe’s destination cannot simply be decided within elite circles. To reach the best decisions, we must engage in more open and serious debate, in the parliaments of the member states, in the European Parliament, and in the public. Criticism and opposition are part and parcel of how democracy defines itself. And without a vibrant democracy, Europe can grow no wider.
This basic claim – even if it is usually ignored in practice by European politicians – is hard to argue with. I don’t know whether there is a European Union that could be affirmed (after long and painful debates) by both the Greek and German publics. I think that there is, but I’ll grant that these are not the most propitious times for finding out. Then, there rarely is a propitious time for finding out – when things seem stable, no-one has an interest in upsetting the balance.
Still, I am quite sure that unless there is a space for possible agreement, traditionally technocratic solutions will fail. Figuring out whether there is some such space is going to require active politics, of a kind that European politicians are innately suspicious (they systematically have tried their best to avoid consulting the public about major political changes, for fear that the public will “give the wrong answer”:https://crookedtimber.org/2008/06/16/thats-why-they-call-it-democracy/. None of this, obviously, provides a short term solution to the need to come up with some kind of fix. And perhaps, by increasing uncertainty on panicky markets, it will make things worse (equally though, markets appear not to be especially convinced by the multiple kludges we have seen to date). Even so, long term stability requires some form of explicit public buy-in – and political debates over what exactly they want to be buying into. Which is why today’s news makes me a little more optimistic – even if the politics are going to be messy we need more of them.
1 For which read: the big member states. For which read: Germany and France, with a little bit of input from Poland, the UK and Italy. Romano Prodi likes to joke that this too had its own internal dynamic – the Germany-France bilateral relationship was one in which Merkel took the decisions, and Sarkozy held the press conferences.
{ 49 comments }
Yannis 11.01.11 at 3:37 pm
Henry, all your observations are quite astute, with the exception that the Greek goverment’s proposal for a referendum is not really a cause for democratic optimism. The Greek goverment is populated exclusively by populists of the highest order. Consider in particular that the inimitable interior minister mumbled that he would propose to conduct it in two months time!
However, it does have every little sorry member of the greek political personell (left politicians and press included) frothing at the mouth for even attempting to bypass them and make that concrete a gesture towards the people.
Hopefully this revelation will leave lasting impressions.
Tim Wilkinson 11.01.11 at 4:15 pm
The governments have forfeited the confidence of the markets and the people can win it back only by redoubled austerity. Would not be easier in that case for the people to dissolve the markets and elect something else?
ajay 11.01.11 at 4:16 pm
a deal which might actually make sense (e.g. enough aid to prevent the economy from crashing as horribly as it is doing, as a quid-pro-quo for genuinely intrusive reformation of the Greek tax collection system).
Any ideas how much aid is this likely to be? Is there a consensus?
bob mcmanus 11.01.11 at 4:16 pm
I am not optimistic yet. It isn’t as if we haven’t had elections in the last two years. Ireland, UK, Latvia, US midterms. Global Finance has pretty much ensured that the only choices available are very painful and that full on Keynesian demand-side fiscal stimulus is not even in the discourse, let alone a viable option for an isolated nation.
The only nation that made the correct choice was Iceland.
Papandreou will get to decide the language of the referendum if he wins the no-confidence vote and the Greeks do want to keep the Euro. My guess is that the Greeks will try to handle austerity a while longer.
Let me know or predict when the OECD or G-8 collectively sign onto ten per cent inflation for a decade and I will feel a little optimism. Until then, only disorder and sorrow.
politicalfootball 11.01.11 at 4:32 pm
I’m not sure what an orderly default would look like in this environment. I mean, the 50% haircut was an effort at orderly default. That deal doesn’t seem likely to withstand the inevitable democratic scrutiny within Greece.
And then what?
I don’t think there is. Rather than seeing the Greek referendum as an optimistic development, I see it as an inevitable development – an inevitable step that will lead to either an affirmation of the Euro, or a rejection of it. Except that (like you) I see rejection as the likely outcome.
Will the German polity ultimately be willing to do what’s necessary to pick up the pieces and accommodate the Greeks? I’m skeptical. (But I agree that, either way, the question ultimately will be settled democratically.)
In truth, I find everything about your post very persuasive, except the optimism.
bob mcmanus 11.01.11 at 4:38 pm
Michael Hudson delivered a paper in Berlin October 29
The economics is actually simple and easy, if old-fashioned. You know what kind of politics I believe is required to get to the economics.
bob mcmanus 11.01.11 at 4:50 pm
Austerity will fail. We cannot take another decade of this and keep democracy.
Most to the left of me think that Europe and the US will help Greece out by installing a military dictator, and maybe that will convince Spain and Italy to suffer quietly a while. Sure wouldn’t be the first time for poor Greece. Those to the left of me are trying to imagine an adequate response.
Finance would certainly prefer the Greeks vote their own serfdom.
Thing is, it won’t work, won’t stabilize either the economics or the politics. Welcome to the 1930s.
Sammi C 11.01.11 at 5:03 pm
Oh, it’s tricky isn’t it!
JFK’s comment about “Those who make peaceful revolution impossible, make violent revolution inevitable.” is getting quoted a lot (in the context of the Occupy movements) and it makes the salient point: it is necessary for those who lead to respect the needs and wishes of the population, and, I think, to be more afraid of the consequences of suppressing the populace than of letting it speak and act.
The solution to the debt crises has to be technocratic insofar as most of us barely understand what’s going on. But it can’t be a purely technocratic one which reflects only the needs of the technocrats and their in-group. Those who say that the Greek people got themselves into the mess by not paying taxes, fibbing about the national accounts, etc. don’t fully appreciate that to the ordinary person, “they” (the politicians, the financiers, the power-brokers) are there to make things work, and it’s no good them coming back and saying “sorry, we made a mess of it, but it’s all your fault, you’ll have to suffer”.
There is a wave of deprivation sweeping across parts of Europe as stumbling economies collapse (especially the Mediterranean) ones. This could lead to big trouble as people won’t accept being made homeless and starved so that fat cats can still order champagne by the bucketful. Unfortunately, the generation that survived WW2 and rebuilt Europe is dying out and that memory and fear of deprivation is gone and that urge to collectively make things better for the many, not just for the few. We need that fear of societal collapse. We need bankers to believe that a collapsing country will cause them more personal problems than would a few per cent off their unearned bonuses.
We need more honesty. Here in the UK we have an appalling government which is funded by financiers and exclusively reflects their interests. They had a manifesto commitment to safeguard the totemic National Health Service and to avoid more top-down reorganisations, but they are deliberately and maliciously destroying it, trying to trash it so it cannot be rebuilt in the future, pushing work to private contractors who will line their politicians’ pockets, directly or indirectly. We have a bunch of traitorous liars and we’re stuck with them. How does that sort of mendacity encourage trust in “democracy” and a mature relationship between politician and electorate?
I don’t think there is a wisdom of crowds solution to this one. Personally, I’d go the Russian route and start chucking financiers into prison. If it gets a few too many, tough, there are a lot of innocent people suffering, and the alternative might be revolution.
mpowell 11.01.11 at 5:23 pm
I agree with the sentiment of this post. I’m not sure whether a 50% write down would be adequate or not but I do believe that Greece will have to bear some pain to get through this and if the people voted on a referendum it is much more likely that they’ll be willing to keep the deal. I don’t know why the EU thinks they can force austerity down on the Greeks and get a guarantee that the Greeks will never just elect a government that will default on this deal. I mean, any deal signed with the current government is basically meaningless for any time period longer than about 6 months. But the markets are incredibly short-sighted so their reaction is hardly surprising.
Pascal Leduc 11.01.11 at 5:38 pm
Thers a whole added layer to this problem coming from the fact that the “Technocratic Solution” is wrong. Austerity has never been good during a recession and it wont suddenly be good if you try it one more time. The whole “we must let the experts do the decisions” sounds even more hollow when these so called experts focus on morality plays where the greek must be punished for not being german enough.
Since the greek people presumably want to stop these cuts, they are in fact in the right and as such greece stands to suffer less by allowing the referendum to go to vote and the measures failing.
I find it rather telling that one of the EU nations that has fared better during this crisis is Belgium since the fact that its government isint working means that it cant pass these damaging measures.
P O'Neill 11.01.11 at 6:05 pm
To put it differently, I imagine that the strong likelihood is that the Greeks will vote ‘No’ to the proposed austerity measures.
One question: is the issue austerity or sovereignty? For one thing, it seems that the Eurocrats did not anticipate how what they saw as a purely technocratic element to the package — a permanently posted EU “technical assistance” unit in Athens — came across in Greece as sounding like a Viceroy. So even a revised package that was somehow heavier on the banksters and lighter on austerity might still fail on grounds of the loss of control being seen as too much.
marcel 11.01.11 at 6:22 pm
Instead of dissolving the markets, as Tim Wilkinsonproposes, perhaps it would be better, at least for the European technocrats, perhaps Brecht’s suggestion to dissolve the people.
(Or am I merely making explicit what TW was implicitly pointing to?)
bob mcmanus 11.01.11 at 6:56 pm
at least for the European technocrats, perhaps Brecht’s suggestion to dissolve the people.
Well, that is Henry’s plan isn’t it, to weaken national sovereignty in order to move toward fiscal consolidation?
I don’t know how that would affect the technocrats, but I am feeling generous and sympathetic toward them today. If they can find a path toward a United Europe, where Germans are taxed for social programs in Greece…the politicians and bureaucrats can keep whatever perks and privileges are left standing after Finance collapses in the transition. Because it must, and it will.
Corzine at MF Global bet on Med bonds while hedging with French bonds. The spreads between various national bond rates are there for arbitrage. German wages were held down so Finance could bet the German savings on Spanish real estate. Etc. Open the borders and the financial system will collapse.
Henry 11.01.11 at 7:09 pm
Bob – I feel like I’ve had quite enough of you in my comments sections over the last little bit, thank you very much. Providing 25% of the comments on a post would be a bit much even if they were full of original insight rather than the usual crackpottery and self-indulgence. Given the comments to my last post and others in recent times, I am increasingly worried that CT comments sections are increasingly dominated by a small number of voices whose loudness and insistence on being heard repeatedly and at length is at best correlated imperfectly with their contribution to debate. Accordingly, I’ll ask you to refrain from commenting on my posts for the next few days, and will likely be taking a more active approach to moderating comments to my posts in general, to see if that improves things.
novakant 11.01.11 at 7:35 pm
I imagine that the strong likelihood is that the Greeks will vote ‘No’ to the proposed austerity measures. But I’m not at all convinced that this will result in disorderly default. Instead, I suspect that it will result in people running around in panic for a few weeks, grave pronouncements from senior European politicians about how horribly the Greeks are betraying their European vocation, and then efforts to stitch together a deal which might actually make sense
Maybe, but if you actually asked the German population as well, which would be only fair, then there wouldn’t be a deal, because they’re dead set against bailouts. Frankly, I don’t think a “democratic” EU, in a populist sense, is possible if you want to get anything done. And I don’t see why such demands should be made of the superstructure when the decision making process in the nation states comprising it is similarly “undemocratic”.
mpowell 11.01.11 at 7:44 pm
Novokant@15, sorry but that story is bogus. If there were fiscal union between Greece and Germany I can see the Germans participating in the debate about whether Greece should be allowed to default. In the United States, for example, it is not permitted for a state to default. But since there is no fiscal union, German taxpayers have no democratic claim on Greek decision making re:default. But you’re talking about bailouts you say. Well, that’s a valid point except that once Greece defaults and the Germans find out their finance sector is about to collapse then they can democratically decide on whether they want to fund bailouts. I think they’ll change their mind, but in this story maybe they actually do the right thing and reform their banking sector.
Henri Vieuxtemps 11.01.11 at 8:05 pm
Is this really about the EU, or just the Euro, the currency? I mean, if they just got rid of the common currency and kept everything else intact, wouldn’t everything get, more or less, back to normal? Greece would default or wouldn’t default, and that would have nothing to do with Germany or anyone else; and isn’t it how it should be? And maybe they could even have the Euro for some internal EU transactions, just not for issuing government debt, I dunno.
Cormac 11.01.11 at 8:20 pm
But hasn’t the problem always been that national capitals have deliberately thwarted attempts to create a public sphere at the European level for fear of being ignored. A genuinely democratic EU with a robust European public sphere faces the (in my view insurmountable) obstacle of national leaders’ intense resistance to further legitimizing the EU level with (God forbid!) the same form of legitimacy which they enjoy and allows them to swagger around the continent telling people what to do.
shah8 11.01.11 at 11:48 pm
I think one point that is getting lost was that the harm was already done when Greek joined the Euro, and did not restructure the social privileges, thereby squandering the low interest rates that could made many very profitable ventures/investments happen. The Euro bankers, arms dealers, and politicians colluded in extending the unworkable financial/political framework until the situation was beyond dire.
There is no possibility of an orderly bankruptcy. Greek more or less *must* have currency inflows to function at all, like Mississippi or Alabama. Making a *reliable* country with reforms pretty much by definition would be a repeat of the desegregation efforts mid 20th century. The top of greek society are all super-parasites and the major reason why Greek doesn’t monetize its best aspects is that incompetent people completely rule the roost. Most people with good paying jobs there are useless people with good connections. Most people who have an education and energy cannot actually succeed in that society. The only successful Greeks we ever hear about are the shipping magnates, and they’re probably just like those Russian primary resource barons all looking to get listed in London. This all means that reforms that would work would almost have to happen in unconscionably harsh social pain–enough for natural selection to do it’s magic on the rentier class. Very bad things are happening on that level. Unfortunately, nobody would ever lend to Greeks money they really need, and while people would lend to Greece just as we still provide federal spending for South Carolina (it may not be an insane asylum, but we’re all better off for the crazies to stay there) because nobody needs the resulting chaos that would inevitably rock someone’s pot, the financial system might be too unstable to engage in such unprofitable ad-hoc redistribution via loan losses.
gordon 11.02.11 at 12:28 am
The EU has come a long way since the Coal and Steel Community (ECSC) of the 1950s. You could easily say it has come a good deal too far.
From being a very partial “union” of six initial member States under the Treaty of Rome (how long ago 1957 now seems!), there are now 27 highly disparate member States.
Although the initial ECSC certainly had a lot of high political rhetoric about ending war, unifying Europe, dawn of a new era etc. bouncing around at its birth, there were solid underlying economic reasons for the 1957 six-nation agreement. The accessions of UK, Ireland and Denmark could also be justified on practical grounds. But the accessions of Greece, Spain, Portugal and most (perhaps not all) subsequent countries were, it seems to me, driven more by politics than anything else, and if the EU now demonstrates some fissile tendencies, I don’t find it very surprising.
Henry’s question “I don’t know whether there is a European Union that could be affirmed … by both the Greek and German publics” therefore opens up a considerably wider issue. Is the EU too big? Is there any real sense in the present 27-nation monstrosity? Has it got so big for all the wrong reasons?
Bruce Wilder 11.02.11 at 12:48 am
“driven more by politics than anything else”
I love that phrase, so assured and knowing, and so meaningless at the same time.
I was in Greece earlier this year and was struck by how overwhelmingly popular the Euro is. If Greece were a unified, well-informed rational actor, it seems to me that it would have defaulted already and departed from the Eurozone. The political trick is to default without leaving the Euro.
One function of the European project up until now has been to try to improve standards of good government in member countries, strengthen institutions, etc. No Franco, no military juntas staging coup d’état, no religious parties imposing draconian morality laws, etc. The effort to get southern Europe to be as fiscally responsible as Germany, seems to have floundered more a bit, and, I, for one, would suggest that the technocratic assumptions behind that effort were more a bit corrupt and stupid. Be that as it may, one wonders if there is any way, politically, to marry default to the Euro to some fundamental reform of the Greek fiscal establishment — you know, actually collect taxes from the top 20%, and at progressive rates.
gordon 11.02.11 at 1:12 am
Bruce Wilder (at 21) “…to improve standards of good government in member countries, strengthen institutions, etc.”
Yup, political. And supranational into the bargain. And now you’re going to have “fundamental reform of the Greek fiscal establishment”, too. I can see we’re in agreement; all assured and knowing together.
Rich Puchalsky 11.02.11 at 1:41 am
“will likely be taking a more active approach to moderating comments to my posts in general, to see if that improves things.”
Speaking of which, CT has the worst moderation of any major blog that I read. Yes, it’s your perfect right to moderate your comments box however you like. But this blog consistently moderates for content rather than behavior, attempting to make the comment section a reflection of your own preferences for the same “civility” that you pretend to disdain when it comes from neoliberal Serious People.
Plus, you taunt people, as you did with bob here. If you’re going to ban someone, just send them Email. It’s the height of “civility” to insult someone publicly and keep them from responding at the same time.
Henry Farrell 11.02.11 at 2:37 am
Rich – you are entirely correct that we moderate for content – so long as you define content, as you seem to, so that it is analogous with behavior (your complaint seems to be about ‘civilty.’ When one of our commenters claims that a guest poster ‘s “job [is] to come up with ideological justifications for war,” we are likely, for obvious reasons, to think that this is going to lead to a downward spiral in conversation. When the same commenter decides some time later to argue on the basis of dodgy logic that another guest poster has a problem with “brown” people, we are likely to think that this is pretty shoddy behavior, and signal it publicly. It’s not exactly surprising to me that you view us as having the “worst moderation policy of any major blog” – given your past behavior, and apparent self-perception, I’d be startled if you thought differently. But it isn’t likely to change my mind. And it is probably worth making clear that most people who behaved as you behaved on those two occasions would be facing a permanent ban. That hasn’t happened – but if you want to continue to comment here, I wouldn’t be pushing my luck with any repeat performances of that kind of behavior. You are right that I shouldn’t have criticized Bob and not given him the right to reply – if he wishes to post a comment responding to that particular point, he is welcome to.
Rich Puchalsky 11.02.11 at 3:26 am
Not to derail the whole thread into meta-commentary about comment policy — well, I guess, to partially derail it, but I’ll try to stop after this — you should recognize that it’s impossible to write from certain positions with this moderation scheme. Let’s say that someone believes in something like a Manufacturing Consent system in which people really are sent out to justify war, more or less as their steady job whether they realize it or not. That may be an objectionable belief to you, but it’s hardly the crackpot idea that you make it out to be. When someone here appears to be doing just that, in a series of posts that have been contradicted by events only months later, it’s meaningless to hold off from confronting them personally. The “downward spiral in the conversation” is the only way in which you can have a meaningful conversation. Otherwise it becomes just another way in which the privileged class of people who are trusted with that role are protected from ever hearing that what they’re doing is wrong.
As for your second, I don’t particularly know why you attribute the “problem with brown people” to the poster rather than to the people in the example which the poster used to illustrate his book. But if you look at that thread, you’ll see that the poster agreed with me about t he central question he’d asked about. If I hadn’t (rudely, or whatever) said it, he wouldn’t have read it.
So, ban whoever you like — really, I have no problem with blog owners doing so. But you should realize that you’re not doing what you seem to think you are. I’ll note down, for instance, the next time that I see a poster here impute unconscious racism to someone, and we’ll see whether this is something that Just Isn’t Done, or if it just isn’t done to one of the posters.
bob mcmanus 11.02.11 at 3:45 am
if he wishes to post a comment responding to that particular point, he is welcome to.
Nah. I have been getting overexcited and uninhibited around these parts since abu Ghraib. Henry and I are not strangers. A time-out was a good suggestion.
Henry 11.02.11 at 4:09 am
Rich – people here argue from a Chomskyan perspective quite a lot and have no trouble being civil (George Scialabba being a case of someone who is both very keen on Chomsky and very keen on trying to figure out whether there is something of value in even the most unpromising of interlocutors). The point is a different one. If you want to tell people that the only reason that they are saying what they are saying is because it is their job given the system, then it is unlikely to convince them, and is likely to lead to unhappy responses up to and including flamewar. Telling people that they are arguing something because they are racist, whether they know it or not, is not a path to useful dialogue. It’s a path to direct confrontation. And I am pretty sure that Clay Shirky did not agree that his arguments were motivated by unconscious racism.
You may reasonably believe that the “downward spiral” into direct confrontation is the only way to get to meaningful conversation. That is not a stupid argument, especially not if you think that it is necessary to correct systematic injustices. But it isn’t what we want here in this particular space (where the injustices are in any event likely to be local ones). My strong impression – and I think this is shared by other CTers – is that if people start accusing each other, and us, of racism, or of anti-Semitism, or of whatever, it will lead to a breakdown in the kind of conversation that we want to have here. That kind of conversation is not the only kind of worthwhile conversation, but it is what we want here.
Perhaps the best metaphor is to think of this as a party, and the posters as hosts. We like good vigorous argument (for our values of good, vigorous argument). We don’t really mind people arguing with us, or calling us rude things up to a point, as long as we get the opportunity to call them the same things back. But we don’t like it when people throw drinks into our faces. We are likely to take action when we think that people are doing stuff that will start a brawl. If people repeatedly start fights, we are probably not going to invite them to stay, and may give them the bum’s rush out the door. If they are regular guests, they’re likely to get more consideration, but not infinite amounts of it. And if people start to hog the conversation, we will likely ask them to cede the floor. And with that, I will cease the metacommentary.
Meredith 11.02.11 at 4:32 am
Bruce Wilder: “One function of the European project up until now has been to try to improve standards of good government in member countries, strengthen institutions, etc. No Franco, no military juntas staging coup d’état, no religious parties imposing draconian morality laws, etc.” I see BW’s larger point, but in all fairness, the infamous colonels were installed thanks to our very own CIA. And Greeks haven’t forgotten that. (They don’t forget much, sometimes to their own detriment.) Not fair to lump Greece in with Portugal and Spain (themselves two countries with very different histories), olive-oil and sardine/anchovy wars notwithstanding.
Greece is roiled right now. Between a rock and a hard place. No way to know where this will all go or what it will mean.
I think back to a someone I briefly knew in the late 90’s, when Greece was preparing for the Euro, a beautiful, mid-30’s, university-educated, but basically working-class woman, who’d landed a solid government job (yes, one of those many government jobs). Working-class not really the right term for her, though. She was from a small town in Crete (all her family there, her heart there) but she worked in Athens, where she was raising her two young-teen-age boys on her own. Her husband was back living in their town in Crete, where he had what can best be called a concubine. In the US or Germany or UK, she’d just have divorced the guy (or he’d have divorced her), but Cretan village norms still ruled — and Greek laws about child-custody. To keep her sons, she had to pretend the marriage was still intact by living in Athens (where her sons would also receive a better education) and putting up with her husband’s humiliating treatment of her. Old village norms ruled: the man got what he wanted (even if many in the town actually disapproved of his behavior, they acceded to the husband’s “rights”). Plus, laws favoring the father re children also limited her. (I grant that I only knew her side of the story.)
Anyway, she had mixed feelings at the prospect of the Euro. She believed it promised more prosperity, but also more drugs and licentiousness (she was no prude — just a mother concerned for her children). I think she also had a vague notion that “going with Europe” (Greece has other options) would help her, as a woman and as a mother. But she was also still tied to that small town in Crete.
This just one anecdote I could tell. (I refrain from stories about people I actually know well.) And, of course, it’s “merely anecdotal.” But I think this one woman’s story may speak to the complexities of Greeks’ possible responses to what’s being dealt them now by German politicians and EU bankers who are so superior to these morally careless southeners.
simple mind 11.02.11 at 4:39 am
Just wished to point out to politicalfootball upthread that according George Ugeux (“Démystifier La Finance”), Greece’s public debt of EUR 350 bn was not cut in half, but was reduced by only EUR 38 bn.
Tim Wilkinson 11.02.11 at 7:33 am
It’s OK, panic over. Half the money needed to make this go away has just been found down the back of the sofa: http://www.reuters.com/article/2011/10/31/us-germany-blunder-idUSTRE79U5MW20111031 . Something always turns up, doesn’t it.
Martin Bento 11.02.11 at 10:55 am
Tim, Jesus Christ! Good catch, man.
“What? They’re going to ask the people before taking their money? Hold on, I just remembered I left about 50 billion in my other pants!”
Andrew F. 11.02.11 at 11:48 am
It’s far from a forgone conclusion that the Greeks would vote no. While the most recent poll I’ve seen shows 58% of Greeks opposed to the latest deal, some 72% of them are in favor of staying with the euro. If the referendum is framed as a choice between the drachma and the euro – which it credibly can be – then it has a solid chance of succeeding.
I also question whether any reasonable amount of aid from the EU/IMF could quell the unrest in Greece. A huge portion of their economic activity is accounted for by public sector wages and payments (75%, or thereabouts, I believe); tax evasion among the upper earners is rampant; and the private sector, for many reasons, is sclerotic. Given all that, and that their public debt will hit 120%-150% of GDP in the near future, I don’t see a politically feasible aid plan that could simultaneously spare Greece recession while allowing for absolutely necessary reforms.
I think Greek voters will come to understand that unless they approve the deal, they will likely be cut off from external financing, with truly catastrophic results for them. The EU is far better able to build a firewall around Greece, and backstop countries more amenable to reforms, than it is able to float the Greeks without pain through their reform process.
Ignoring Papandreou’s self-interested motives for the referendum, the political buy-in from the Greek people is an essential ingredient to the success of these reforms. The market may pale at the uncertainty of a Greek vote (“we’re going to let the guys throwing firebombs vote on austerity measures?”), but that’s the price of progress in any democratic system.
I’m optimistic about the probability of success.
Barry 11.02.11 at 12:38 pm
Henry @ 27: “And if people start to hog the conversation, we will likely ask them to cede the floor. And with that, I will cease the metacommentary.”
More of this, please. We see this a lot on CT, that downthread there are 2 people contributing half of the posts, frequently to each other.
Barry 11.02.11 at 12:40 pm
“The market may pale at the uncertainty of a Greek vote (“we’re going to let the guys throwing firebombs vote on austerity measures?â€), but that’s the price of progress in any democratic system.”
I’d like to point out that the ‘market’ (meaning elite bankers and their bought-and-paid-for politicians and pundits), looking down on those guys, has proven to be infinitely more destructive. When the experts and elites trash the place, they’ll eventually lose credibility.
politicalfootball 11.02.11 at 1:05 pm
29: Yes, it’s some bondholders who are losing the 50%.
Regarding the meta-thread, I appreciate Henry’s response – it clarifies the issue for me.
I remember the “because it’s their job given the system” thread. I wasn’t the target of that argument, so it was no doubt easier for me to reflect on the ways that “the system” influences my thoughts and behavior. It was an interesting thread.
You don’t need me to tell you that you are acknowledging part of Rich’s point here – that certain legitimate topics are beyond the scope of Crooked Timber. As you also don’t need me to tell you, unconscious racism is a pretty common and influential phenomenon, and some of the very nicest, smartest people at cocktail parties are subject to it. I certainly have been. I don’t think it’s necessary to take offense at the accusation that one is subject to a common human failing.
But comment moderation is a difficult art. Commenting communities invariably have boundaries for acceptable discourse – it’s more-or-less a law of nature – and people who are rightly considered trolls on some blogs are just normal commenters on others. Ultimately, while I might prefer a more laissez-faire approach to moderation, I can’t argue that CT would be a better place with no moderation.
MPAVictoria 11.02.11 at 3:03 pm
“price of progress”
This word. I do not think it means what you think it means Andrew F.
marcel 11.02.11 at 3:40 pm
Mpowell @ 16 wrote:
“In the United States, for example, it is not permitted for a state to default.”
Since when has this been the case?
Obviously all the Confederate States defaulted on debt taken on during the Civil War; they were forbidden to honor by the 14th amendment.
Before the Civil War several states defaulted in the 1840s & apparently Mississippi never came to terms with its creditors. Has there been any change in the law since then? I don’t believe that there is anything in the 14th amendment about this, nor in any later amendments, and I think that the Federal government would be blocked from doing anything along these lines by 10th amendment.
Please instruct me.
ajay 11.02.11 at 4:29 pm
Half the money needed to make this go away has just been found down the back of the sofa
I don’t see a route by which “FME Wertmanagement has €55 billion more assets than we thought” gets converted into “Greece now doesn’t have to borrow so much money”. Unless you’re suggesting that Germany should just give the assets to Greece? Those assets are toxic non-performing German real estate loans – not exactly what Greece needs.
Tim Wilkinson 11.02.11 at 4:47 pm
Oh no, I won’t use that gag at your dinner parties then.
Tim Wilkinson 11.02.11 at 6:13 pm
Sorry, that was a touch snide, but no I wasn’t really suggesting that anything like that would happen. Though you are saying, are you, that these assets have been overvalued?
Rich 11.02.11 at 6:47 pm
Marcel @37
Mpowell @16 is probably referring to the fact that states in the United States cannot file for bankruptcy protection. However, you are right that this does not mean that they cannot default on their obligations. States enjoy sovereign immunity and do not really need bankruptcy protection (see the 19th century defaults to which you refer). Moreover, their primary obligations are governed by state law. They can effectively discharge liabilities by simply changing their own laws (see 20th and 21st century defaults on collective bargaining agreements). If creditors could somehow get past sovereign immunity (and there are some slight possibilities), they could claim a violation of the contracts clause of the federal constitution. However, the Supreme Court does not employ an absolutist test and a court would likely uphold a modification of the creditors rights if they would it would have been willing to uphold a bankruptcy reorganization on teh same terms over the objection of the creditors.
Mrs Tilton 11.02.11 at 10:03 pm
Tim @30,
and it’s not just those 55bn that were found beneath the sofa cushions.
(No point in clicking through if you can’t read German. But if you can, it’s a good example of that extremely rare phenomenon, Germans successfully being mildly amusing.)
Chaz 11.02.11 at 11:01 pm
“The European Union is not a democratic constitutional order, and no number of technical fixes to the powers of the European Parliament will make it one.”
Henry, could you clarify what you think constitutes a a democratic order, and what you mean by “technical fixes”? Is there a set of deeper “political fixes” that would fulfill your standard, or do you just think the EP is hopeless? What is your vision for a democratic EU?
Personally, it seems to me that consolidating power with the European Parliament is the natural solution to Europe’s problems of lack of democratic accountability and indecisiveness in joint action. A lot of what the EU does can work as mere treaties, but the euro and the free banking area demand a federal government with a centralized budget, tax system, central bank, regulatory authority, etc. controlled by an elected European body.
On the other hand, the fragmentation by language and political culture, evidenced by the EP’s many diverse party groupings and reliance on grand coalitions, suggest that it may not be able to serve as an effective governing body. I think the EP would improve dramatically if it had some actual responsibility, which would both cause voters to take it seriously and increase the pressure on MEPs to coalesce toward majority-oriented platforms. But if it turns out the EP is incapable of effective government, then I would have to say that integration has already gone farther than is advisable. I don’t see an alternative to parliamentary rule.
Chaz 11.02.11 at 11:29 pm
Merideth’s Greek woman is a nice example of the root of this problem. She lists the pros and cons of the euro, all of which are a bunch thoughts about European assimilation having nothing to do with currency. France wants it as a symbol of unity, the UK rejects it for the same reason, and no one seems to notice that it is a dramatic policy change with enormous implications on economics and sovereignty. I frequently see commentators talk about money as some special symbol of nationalism, and I don’t get it at all. The U.S. currency notes are just unattractive bits of paper covered with various past politicians, including some I despise. But even if it makes no sense to me, it sure does explain things.
It seems like it would help a lot if one politician in each country just said, “Hey guys, by the way, when we adopted the Euro we gave up all national control of our economies and replaced it with a bank that’s not allowed to do anything.” Then maybe they could talk about that for a bit.
Martin Bento 11.03.11 at 12:46 am
For the record, I was just furthering Tim’s joke, but 55 Billion popping up out of nowhere is extremely odd.
Andrew F. 11.03.11 at 1:12 am
Barry @34: I’d like to point out that the ‘market’ (meaning elite bankers and their bought-and-paid-for politicians and pundits), looking down on those guys, has proven to be infinitely more destructive. When the experts and elites trash the place, they’ll eventually lose credibility.
Hmmm… agreed in part, but I think in the present the elite have the only way out for Greece, given that the EU seems to be taking the line I suggested earlier: it’s easier for us to build a firewall around you and backstop the rest, so your vote on the austerity measures/relief-package will be a vote on your membership in the Euro – choose wisely! For all the unpopularity of the austerity, an electoral defeat here would be the economic equivalent of Greece opening an artery to help a broken leg heal.
MPAVictoria @36: [Progress.] I do not think it means what you think it means Andrew F.
Well, but perhaps we agree that a very wide range of meanings for progress would require Greece, in some way, to democratically opt for whatever the end-game is to the crisis. If that end-game involves austerity measures, they need to democratically opt in for those measures to be sustainable and credible. If the end-game involves an exit from the Euro, then they need to opt in for that as well.
Chaz, I think the Greeks are about to have that very conversation over the next five weeks.
ajay 11.03.11 at 9:54 am
Though you are saying, are you, that these assets have been overvalued?
I don’t know, actually. They’re in FME because (AFAIK) the German government decided to save HRE by doing the tried and tested good bank/bad bank thing and FME is the bad bank. “Overvalued” is kind of a theological term here; there’s not much of a market for toxic non-performing real estate loans right now, so it’s difficult to say what their value is, and in a sense it doesn’t really matter – FME isn’t going to sell them or anything, it’s just going to wind them down. We know what the notional portfolio value is, but that’s a different issue.
42 is funny even to someone with my limited German. I got to the point about “der Suche nach einer Toilette in den Keller” and was anticipating a sign on the door saying “Achtung! Leopard!” but alas, Douglas Adams’ influence hasn’t spread that far.
Anon 11.03.11 at 12:46 pm
@ Bruce Wilder 21:
One function of the European project up until now has been to try to improve standards of good government in member countries, strengthen institutions, etc. No Franco, no military juntas staging coup d’état, no religious parties imposing draconian morality laws, etc.
I fail to see how the EU ousted Franco.
ajay 11.03.11 at 2:14 pm
48: no, it means that the EU wouldn’t have allowed a Francoist Spain to join. No one ousted Franco. He died in office.
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