Anyway, there were many steps that the ECB could have taken short of that. They could have cut rates faster. They could have not raised rates in response to a short-term commodity price spike. They could have announced that their inflation target was symmetric, and if they undershot they would deliberately overshoot later.

This isn’t a politically realistic outcome, but that’s because policy makers decided that Greece had to suffer. It was a political question, and it had a political answer. Not a technocratic result of impersonal forces. I think you can even make a good case that Greece didn’t deserve much sympathy (you make a good case for Ireland, for example). But if you took determined technocrats, and gave them the job of minimizing the suffering of Greece within the existing treaty obligations, and promised them the necessary political cover, they certainly could do much more than they have.

If your solution is “Make the Euro into something completely different from what it actually is” you’re not really helping

So, despite EMU having had dubious benefits up to the beginning of the European component of the global financial crisis and disastrous consequences thereafter, despite the accepted consensus that the ECB are neoliberal boot boys with a worse record than any other central bank in dealing with the GFC, people who are arguing that EMU needs to change radically are “not really helping”?

We should just obediently “Stay the course” as Olli Rehn, another of the big thinkers fronting an EU institution, has recently announced in the FT?

If the ECB (on its current German leash) is left to its own devices the Eurozone and the EU may recover and flourish despite the baked in Romantic Gothic approach to economic and monetary policy but that is a hell of a chance to take. Anyone with even slightly progressive tendencies should be looking for a significant change in how the ECB formulates policy because the evidence so far is that they are more strongly determined than socially useful.

Slap my face and call me orientalist, but I do there’s a real clannishness about the Berlusconi circle (such as it is these days). If you hear somebody expressing doubts about blanket condemnations of Berlusconi or denials of due process or whatever – with however much much-as-it-pains-me throat-clearing – you can generally write them off at once and forever (or at least until they break with him). B & his circle want allies who raise points of principle, but they don’t want allies on points of principle.

Okay, maybe I’ve misread your position, although I’m not sure how seriously entertained an idea that was. (I remember it being suggested as a ‘negotiating tactic’ in certain quarters but was quickly dismissed as ridiculous)
Also, just reading a Sydney C. Ludvigson et al paper on ‘International Capital Flows and House Prices’, so perhaps I’m overstating that point. Still think the problem was more systemic than domestic though.

Pending proper fiscal union OR dissolution of part or all of the euro monetary unit?

But even barring that, how are they doing? How many sort-of-milestones get missed before it counts as a failure worth reconsidering? You *seem* to be acting as if the euro/increased fiscal union is the important end in and of itself. But that can’t be right. The euro has a purpose with something like stabilizing and facilitating growth. It isn’t super clear that it is fulfilling that purpose (or with comments upthread, some people are suspecting that its stated purpose is at odd with the purpose being transacted).

I also wonder about your comments about anti-fragility. They seem similar to discussions about the ‘great moderation’. It is beginning to look like the ‘great moderation’ let things get bigger and bigger until a truly awful depression busted out, rather than representing a real change in financial/economic understanding. The ECB moves strike me as much more in that vein, rather than real reductions in systemic fragility.

Give over. What policy could the troika adopt with respect to Greece that would not constitute “torturing it” under your analysis? Kicking it out of the euro? Any policy which keeps Greece in the euro involves either Greece making widespread and painful adjustments, or Greece getting absolutely massive unconditional transfer payments.

As it happens, significant technical mistakes have been made across the program over the last couple of years (although many of them had to do with maintaining political viability in Germany, which is a democracy too). Things could have been handled better. But they couldn’t have been handled on any basis that didn’t involve massive spending cuts and/or tax increases in Greece.

No, I’ve never said that. The reasons why Ireland shouldn’t have been allowed to blow up the European financial system are technical, not moral. My critique is entirely that the people pushing magic bullet solutions whereby “bondholders” paid for all of Ireland’s problems are in cloud cuckoo land, and their proposed policy wouldn’t have worked and would have caused massive and disastrous side-effects.

D-squared, if you’re going to make the evil but necessary argument, it would be nice to know when the necessary bit stops. Do you see the need for the ECB to keep/keep growing its new powers until…. Spanish youth unemployment gets below 20% so they have a hope of sustainable recovery? Greece gets trade surpluses? What specific recovery markers would cause you to believe that it is time to back down? Or on the flip side, how long does the ECB get to operate in emergency mode before you begin to suspect failure?

There is actually a roadmap document, written by Barroso, Van Rompuy and Juncker (and Draghi, but he got his name taken off the final draft). The ECB is the only game in town pending a proper fiscal union (with proper governance). There’s a straightforward agenda and set of proposals here, so I’ll judge progress against that.

JWM: Why should we interpret all this as just being code for “Time To Go, Silvio”?

DD: Because all of these things were already Italian government policy at the time.

So the letter said “Time To Go, Silvio – and to those who are already dismantling the public sector and screwing the unions – we got your back.”

The present policy of torturing a nation-state, until it coughs up the desired “reforms”, while holding the continent hostage to the uncertainty of an outcome that recedes with the horizon, doesn’t seem very democratic, and that’s not a statement about institutional form. It may be a statement akin to christian_h’s assertion @ 16: This is part of a worldwide offensive by ruling classes. Certainly, it’s a view that is easier to reconcile with Quiggin’s observation that the UK is carrying on a parallel war on the welfare state.

Contra Josh G. @133, it is not the institution of a central bank, which is per se antidemocratic, but the front of rank incompetence presented by economists and the Media. Just consider the IMF’s record of forecasts on the effect of policy on the Greek economy.
http://www.marctomarket.com/2012/11/great-graphic-imf-forecasts-of-greek.html
These are people, who simply do not know what they are doing. And, yet, they are the “experts”, whose solemn and earnest pronouncements we are expected to accept, as there is no “responsible” or “serious” alternative. And, the popular narrative blames the Greeks in a moral analysis completely untethered to the economic dynamics.

The age-old question — are they evil? or, are they stupid? — is just an argument for stupid as an effective front for evil.