Greek games and scenarios

Wow, German acquaintances are comparing the political situation in Greece in the 90s and 00s to that of Wilhelmine and Nazi Germany? Hmm, I’m not sure how this fits with your idea that the EU officials aren’t stupid, or that this is distinctly dodgy theorising about the peculiar national characteristics of “Germans” is wrong. I don’t think you need to talk about peculiar national characteristics of Germans, but certainly of the German elite, which seems, well, Wilhelmine.

Ah, sorry, I see I misunderstood your point.

However, I still don’t see that them comparing the situation now with reconstruction implies they think preceding periods were comparable.

One thing it’s important to make clear is that the European policy makers aren’t stupid.

It must be bad luck that explains the wretchedly high unemployment and political instability in the Eurozone then.

PS, well, that perhaps I am exaggerating his position. Salmon does think that, outside of contexts where they are supposed to be thought leaders, the EU and CEO establishment is competent.

“However, I still don’t see that them comparing the situation now with reconstruction implies they think preceding periods were comparable.”

If they are not comparable then why are they comparing them ?

Quote –
” it got it in the context of an equally massive national admission that the entire political system was rotten”

“I think it might even have worked if tried three years ago”

I am sorry if I am misremembering but three years ago didn’t you tell me that I was an idiot (paraphrasing ;-)) for suggesting just that course of action was what Greece should have done?
/The Atrios plan if you will.

“It must be bad luck that explains the wretchedly high unemployment and political instability in the Eurozone then.”

Yeah pretty much. I mean they did demand a raise in interest rates at the worst possible time…..

“the European policy makers aren’t stupid.”

Are they evil, then?

= = = Everyone also knows, although some of them might not be ready to admit it to themselves, that […]= = =

Somewhat difficult to tell from the outside the difference between someone not knowing something and knowing it but not admitting it to themselves. Presumably those at the very peaks of the financial world, the Princes of Wall Street as some call them, have a special type of sensory perception that allows them to make these distinctions.

Sometimes something that stinks is an exotic ingredient for a delicious made dish. Sometimes it is a lump of dog excrement that adhered to one’s shoe unobserved. Hard to tell indeed…

There’s more than a couple of Germans I’ve spoken to over the last few years who have pointed out that although Germany got massive debt relief in the twentieth century, it got it in the context of an equally massive national admission that the entire political system was rotten and needed to be totally restructured with foreign help . . .

“massive national admission” = unconditional surrender at the end of a world war in which 20 millions plus were killed

Lovely.

…the entire political system was rotten and needed to be totally restructured with foreign help

It’s tempting to say “here’s what you need to do to run your holocaust properly next time”, but that’s a bit cruel.

I asked “How much will the total bill be?” for the Germans but the bright side is, it will cost them less financially speaking then they believe. The ECB can print money. A growing Greece helps the debt/GDP ration. Etc. The problem is that they imagine it will cost a lot more. Another is that they see it as “monetary socialism.” So will the cost be too much for them to bear, ideologically speaking? So if the imagined costs are too high, not the real costs, they’ll let Greece go. But if they go ahead and give, the costs will be less than imagined.

“Umm… Greece returned to “growth” because 1) the rate of deflation was greater than the rate of contraction of NGDP, so that counts as “real growth”, even though the debt burden operates on nominal terms. and 2) the rate at which fiscal contraction occurred in order to achieve a primary budget surplus decreased this year, though still negative, so there is an automatic rebound effect from the much lower degree of fiscal contraction. But any large rebound from depressive stagnation is not to be expected from current terms and conditions, after a 25% contraction in GDP, so slow growth, even if it were to continue, hardly ameliorates the plight of the vast majority of Greeks.”

Yep.

“It’s tempting to say ‘here’s what you need to do to run your holocaust properly next time’, but that’s a bit cruel.”

In the immortal words of Pogo: “Pos’man, you is harsh, but just.”

“Let the little people suffer” is the go-to strategy for our global elites when they want to prove their courage. Or get out of bed.
~

24: Not cool.

Peter K.: The epic housing bubble and financial crisis were not orchestrated.

I can not imagine what you mean by this assertion.

Peter K.: If they were evil, they’d come out and say it.

Because that’s what evil people do? Clearly state their intentions?

I’m honestly struggling to make any sense at all of your comment.

RoyL

Idaho has little power to control Greece’s future. I’ll write mother and let her know.

I think the point of stupid versus not-stupid, as regards the leaders of the European financial system should probably be seen on multiple levels. There are certainly questions to be raised about their overall objectives and strategy, and the system has trouble making decisions quickly. But I think that Daniel is right to say that given 3 years to create a careful fallback plan, the Eurosystem elite will probably prove competent in executing it.

The only thing I mildly disagree with is that I don’t think that EU leaders is willing to go to great lengths to keep Greece in – the country seems to be of just the right size (and geographically sufficiently remote) to be an object lesson in ‘Very Bad Things that Happen when you Leave the Euro’, especially given the insulation that’s been put in place around the core system. I suspect a UK analogy would be the Miners’ Strike of ’84, as opposed to the Miners’ Strike of ’73.

Perhaps you covered this and I am too stupid to understand, but I don’t really see why Greece can’t straight default and ask to remain within the Eurozone.

Like Italy they are running a primary surplus so would be in good shape if debts were written off, since they wouldn’t need to borrow, no? Of course nobody would lend for the next two decades, but if you don’t need to borrow that doesn’t matter.

But you are arguing (if I get it) that rather than allow Greece to default honestly and stay in the euroclub, they will try to get Greece to (continue to) submit to massive amounts of intervention, while defaulting de facto by actually paying neither the capital nor the interest payments (which will be rolled up and rolled over until the next crisis).

So why can’t the new government just say “we can’t pay and never will, we aren’t going to pay any more interest either, so kick us out of the Euro or don’t, up to you”? What does the Greek government have to gain by adopting the rollover/covert default strategy as opposed to overt default? The only possibility I can see is that they will be allowed increase borrowing, not just roll it over. What else is there to bribe them with?

Ben, my understanding is that they’ll be defaulting on the ECB, the institution on whom their banking system depends to keep the lights on . The thinking is that the ECB would cut them loose and they would be forced to start printing dramachas to have a unit of account.

The “we’re not paying; your turn” strategy may cover both of Syriza’s bases, which is to stand up to the ECB while nominally remaining pro-euro. It shunts the decision to retain/boot Greece from the currency union back into Europe.

Let’s see if I’ve got this right: Having staved off the Greeks long enough to ensure that their own balance sheets are no longer vulnerable to Syriza’s threats, creditors, i.e. bankers are still in the driver’s seat. As did his predecessors, Tsipras will make enough noise and stink to hoodwink his constituents, then submit to administration from Brussels because Europe must go on, and Europe can’t go on if Greece and the Greeks, who are, after all, relatively insignificant in the grand scheme of things, are allowed even the appearance of a successful populist intervention. We mustn’t, after all, let the Italians and Spaniards toy seriously with any ideas above their station. German self-righteousness is excused by history, Greek rage is not. Which is clearly as it should be….

I realize that this piece was written for a professional, and therefore somewhat more realistic, i.e cold-blooded audience, but even so….

@ Bruce Wilder #31

The feeling is mutual. I always find your comments worthless, petulant and bitter. The Internet disease.

So you and Steve are actually proposing that the steering committee of the capitalist class got together and devised a plan to blow the housing bubble, the popping of which would cause an epic panic and credit crunch, thereby driving up unemployment, their ultimate goal. You’re going to need the emails and memos to prove such a conspiracy.

William T. @43: In further support of your/dsquared’s thesis, note the calm reaction of the markets today.

@ Peter T 36

“In my time I have met quite a few who are wedded to equally bizarre notions about the economy or society, or about people of classes they never meet. ”

Keynes was railing against elite stupidity in his “The Economic Consequences of the Peace” about the Versailles Treaty. As the Great Depression hit, the British and French declared they wouldn’t ease up on their war reparation debt demands of Germany, unless the Americans eased up on their debt demands to the British and French. The Americans didn’t and everyone suffered. In Germany, Brüning’s austerity policies were meant in part to convince the allies that Germany wouldn’t ever be able to pay back it’s debt and instead led to the rise of the Nazis. Smokestacks over Auschwitz and mushroom clouds over Hiroshima and Nagasaki.

Maybe evil is often stupid? The Germans stupidly followed the evil Hitler into war and fascism thereby wrecking their country. The capitalists class stupidly backed Hitler.

I’m hoping the Germans give in and this sparks tougher negotiations from the rest of the debtor nations.

Surely the Germans are aware of this possibility also, and thus have a strong incentive not to give in.

Because of the strong (and not unreasonable) desire of the Greeks themselves to stay in the Euro, Tsipiras has been forced into a public bluff: Don’t worry about leaving the Euro, he says, because we won’t have to. The Germans won’t call our bluff.

One problem with that is, you’re not supposed to tell the guy across the table that you’re bluffing. Germany has the stronger hand here.

I’m guessing that for Merkel and the Euro elite, keeping Europe together is the priority so they won’t force a Grexit.

As Dsquared writes “Their long term goal is, remember, for the Euro to cover as much of the EU as possible, and that goal has been going surprisingly well – in the last two years they’ve actually gained two members in Latvia and Lithuania. But if you lose Greece, my intuition is that you can forget about Poland. It’s worth remembering that the “ever closer union” is essentially an Empire-building project, and if you’re building an Empire, you don’t let yourself lose provinces just because they’re a pain in the neck.”

The ECB is doing QE now after all. The Germans will give in to Syriza, thereby inspiring other anti-austerity, pro-growth parties across Europe. It will be like Nixon going to China.

I get where dsquared is coming from here, trying to show the view from the Deutsche Bloc Barad-dûr. However I just can not let go of the “policy makers not stupid” thing.

Does anyone remember when the ECB turned their best minds to try and undermine the IMF’s belated apologia on the fiscal multiplier? I think the general consensus was that the ECB’s work was embarrassing both for the quality of its analysis and for the fact the ECB was trying to give the Austerian front “scientific” cover for an entirely political position, thereby critically wounding its reputation. This happened presumably because the ECB shared those same radical (and unsupported) political positions.

European policy makers may not be stupid but they believe a lot of very stupid things and for me that will do for stupid.

#17 Wilder quoting Dsquared :

“There’s more than a couple of Germans I’ve spoken to over the last few years who have pointed out that although Germany got massive debt relief in the twentieth century, it got it in the context of an equally massive national admission that the entire political system was rotten and needed to be totally restructured with foreign help . . .”

Wilder:

“massive national admission” = unconditional surrender at the end of a world war in which 20 millions plus were killed

Lovely.”

“massive national admission” was more like the post-war governments who worked with the West to put the Marshall plan and debt forgiveness in place in exchange for political reforms.

That seems to have worked out well for Germany. Same with Japan. It hasn’t been working well for Greece who are on more of the punitive Treaty of Versailles plan than an updated Marshall Plan.

WT: No, I do not completely trust Tsipiras, he has been behind closed doors with the European movers and shakers. I don’t trust Iglesias either, for that matter. They will have to prove it. But if Tsipiras betrays Greece and us all, it won’t stop there, because the preset regime cannot fix the economies for the people.

2) I do trust Lapavitsas and Varoufakis somewhat more. Varoufakis has resigned from UT, and I believe he is serious. If you look at his program, although moderate by Greek or Marxist standards, what he is serious about is Europe and European growth. I think, hope, that Varoufakis believes he can generate the political solidarity in Spain, Italy and France, maybe Britain to resist Brussels and Frankfurt.

3) Which might mean rather than Greece et al leaving the Euro, Germany (et al) pulls out.

4) But the US, Germany, and the vampire squid still have some very heavy cards to play. Ukraine, Russia (watch if they get Russia blocked from Swift or the banking system), gas shipments…war.

5) It has not begun to get real yet.

@ #53 mattski:

Krugman: “To understand the political earthquake in Greece, it helps to look at Greece’s May 2010 “standby arrangement” with the International Monetary Fund, under which the so-called troika — the I.M.F., the European Central Bank and the European Commission — extended loans to the country in return for a combination of austerity and reform. It’s a remarkable document, in the worst way. The troika, while pretending to be hardheaded and realistic, was peddling an economic fantasy. ”

That’s stupidity.

@ #56 mattski, Dsquared says the bureaucrats aren’t stupid in that they’ve stress-tested the banks in case of an Grexit, but I believe the 2008 fiasco showed the bureaucrats to be stupid and complacent. They explained it away as a once in a hundred year event.

Maybe Dsquared is right that they are on top of it now, but I kind of doubt it. Things have a way of spinning out of control.

I am such a simple boring person.

If the rich get poorer and the poor get poorer, probably stupidity.

If the rich get richer and the poor get poorer, probably smarts.

#31 Bruce Wilder

“Peter K.: The epic housing bubble and financial crisis were not orchestrated.”

I can not imagine what you mean by this assertion.

I believe he’s saying that nobody intended it to go that way, that the various individual people who had control of this-and-that were not coordinating their actions to get that result but instead each blundered along doing the best he knew how to meet his own goals.

I don’t know how to tell whether he’s right, but I find the claim reasonably plausible.

Peter K.: If they were evil, they’d come out and say it.

“Because that’s what evil people do? Clearly state their intentions?”

He says they had a plan, and they honestly believed that Greece would have some growth. That they did not predict 25% unemployment.

I think he figures if they expected Greece to have that result then they’d have predicted 25% unemployment for Greece, and possibly looked into some sort of palliation. I can see that one either way. Not so unlikely they did expect that the Greek economy would grow after the various bad policies that prevented growth were removed. On the other hand if they did predict bad results for Greece I find it perfectly plausible that they would not publish those results, because publishing that would make them look bad. Various people would say it was a bad plan that should not be followed, some people would demand some sort of palliation, etc. It’s only natural that if they settle on a plan they think is bad for somebody in the short run even though they think it’s good for everybody in the long run, they wouldn’t admit to the short-run sacrifice.

I’m honestly struggling to make any sense at all of your comment.

It’s easy for me to believe that nobody really knows what’s going to happen, and even people with some power don’t understand the consequences of using that power.

But believing that doesn’t tell me what to do, beyond not getting too convinced about conspiracy theories that say somebody in particular has it all figured out and is intentionally creating all the bad results because they think it’s all good results.

“Does anyone remember when the ECB turned their best minds to try and undermine the IMF’s belated apologia on the fiscal multiplier? I think the general consensus was that the ECB’s work was embarrassing both for the quality of its analysis and for the fact the ECB was trying to give the Austerian front “scientific” cover for an entirely political position, thereby critically wounding its reputation. This happened presumably because the ECB shared those same radical (and unsupported) political positions.”

They weren’t stupid, per se, but they spent a lot of time quite deliberately ignoring reality, because it disagreed with their politics. And presumably the ECB has lots of economic, financial and banking experts, so it’s not like they were starting from stupidity, incompetency or ignorance.

The management of the Euro has been, if not phenomenally “stupid,” then engineered to fuck over the south by design.
It’s engineered to work well for countries with an internal political economy like Germany. Influential export industry, hard currency policy, sector-wide wage negotiations to adjust to changes in external demand.

This was expected to hurt the southern countries. Because the leadership of those southern countries wanted to force their economies towards the German model. And because they wanted Germany in the Euro, and Germany would only join if the policy was based on their model. Germany was happy with their model, the south unhappy with theirs, so everyone wanted a German-style Euro.

The underlying view, on both sides, is that hardship and austerity will pressure everyone to make their economy more ‘German’. While giving in will lead to the old cycle of recurring devaluations that plagued southern Europe for so long (and that did annoy the Germans as well) .

That view might be debatable, but it’s not entirely stupid or entirely evil.

This is the bit that sticks out to me:

There’s more than a couple of Germans I’ve spoken to over the last few years who have pointed out that although Germany got massive debt relief in the twentieth century, it got it in the context of an equally massive national admission that the entire political system was rotten and needed to be totally restructured with foreign help; this was also the basis on which the integration of Eastern Germany was managed in the 1990s.

This is exactly what the Greek people have voted for, isn’t it? Total reform of their rotten political system. The EU didn’t want that; they were content to have corrupt, unrepresentative officials in place, so long as they were compliant. It’s disingenuous to suggest the Greeks don’t want change, because they want it desperately, and I’m sure they’re willing to sacrifice quite a lot to get it.

Let us not lose sight of one key issue – the national pastime of Greece. Besides football, that is – everybody loves that. The national pastime of Greece is.. avoiding tax ! by any and all means. Any government that fails to address this crucial element in their fiscal plan must, inevitably, fail – and, thereby, be considered unserious.

I doubt this issue is on Syriza’s agenda. So, unserious.

Peter K. #20: “They have their short-term goals and priorities and they have the ideology of ‘Very Serious People’ but otherwise they’re stupid and short-sighted.”

Unwise, then, rather than stupid?

But also, Layman, #72: “You mean the emails where members of the steering committee shared jokes with each other about the fact that the mortgage-backed securities they were selling to pension funds were no better than shit sandwiches?”

Unwisdom can promote evil, though. At some point the Eurocrats must have realized they were hurting a lot of the little people, and decided to ignore their little cries.

…able to shake sufficient back taxes out of the Greek elite (especially the super-rich)…then the troika would be perfectly happy with that.

A lot of that money is now in London real-estate and, ahem, London-based investment funds. I don’t think Cameron will cooperate.

This is a very interesting post. But there seems to be an implicit presumption that a post-default Greek government will continue to have deficits that need financing. Are we sure this is true? The ECB has Greece with a primary surplus for 2014. If that continues to be the case (a big if for sure), there will be no deficit, and no bills for Greek banks to finance. In which case, how does default force Greece out of the euro?

The other part of the euqation that seems to be missing from this post is that the bluffing goes both ways. Syriza may be betting that an exit will be very costly for Europe, but the other side is presumably betting that an exit will be costly for Greece. If Greece leaves the euro and does fine, that’s bad news for the empire-building project, no? Might be better to make some concessions in that case, to preserve the idea that there is no alternative.

#80 – oh, I was referring simply to the City-centric analysis Daniel gives with the word “muddle”. You are right that “anglo”, or “german”, or all these characterizing words extend the traits of a ruling elite to the entire people, who might not identify at all with that elite. In this case, though, I think that is what Daniel’s analysis is saying – we will muddle through, here. And that is the anglo soft focus version of the German policy that we will “radically remake” these places like Greece, who are seen, as Daniel’s German friends seem astonishingly to testify, to be just like Germany in the Nazi era. The smugness of the German elite, loaning money to Greece so that Greece can shift it to German banks, in making this comparison is a bit different than the British tone.

Thank you for the response Roger. Seems sensible.
:-)

JohnD 01.26.15 at 4:57 pm
“#74, I think if the Syriza government was, off the back of its corruption-free aproach, able to shake sufficient back taxes out of the Greek elite (especially the super-rich) and privileged middle classes to pay back most of the money owed to the ECB, then the troika would be perfectly happy with that. In many ways that would be the fairest outcome of all.”

Presumably the EU, ECB, etc. are as much in the hands of the financial elites as the USA.

Now, why should either like something where the rich pay more in taxes?

Seems like Syriza is in a position to have it both ways – which is politically clever regardless of the economics.

If they can deliver some type of reduction/relaxation of debt…really anything that allows them to dial down the austerity a bit (presumably in an obvious benefit restoring type of way), then they have delivered their promise and they can rule until they become as corrupt as those they’ve replaced.

If they can’t deliver a debt reduction/extension whatever – well it was nothing if not a campaign promise so that can be blamed alternatively on the Germans, the Troika, the Greek elities or anything short of sun spots….they’ll probably be bounced after some period of time and some other group will get to make fresh undeliverable promises.

Compromise on both sides is the only sensible way forward. The ECB can’t afford to let anyone think they can default without consequence, but as per the OP, they don’t want to start kicking people out as it undermines the premise of the EU in the first place…face saving gestures and time are the diplomats friend and a concept nearly alien to Americans who want all problems solved yesterday in black and white terms.

According to today’s FT, Greece current has a primary surplus of around 2 percent of GDP, and a current account surplus of 1 percent of GDP. The only reason Greece has to borrow from the rest of Europe, is to service the existing debt. So what is the deficit that Dsquared supposes they will have to finance under point 4.vi?

>One thing it’s important to make clear is that the European policy makers aren’t stupid

Of course they are. How else can you explain the fact that they’ve been pouring billions and billion into Greece without any guarantees of structural reforms? Greek politicians have played the troika like a fiddle. They promise they’ll fix their country, but (surprise!) then they just do what they’ve always done. And the troika looks on powerlessly, then proceeds to heap even more money as if that would change anything.

Unless there is alignment of incentives between the Greek economy as a whole, and Greek politicians, special interests, and bureaucrats, there is no incentive to fix anything. The country needs a complete revamp in terms of constitution, legal system, tax system, bureaucracy, etc. Every single change is going to be disadvantageous to those in power. Unless the Germans find a way to make that happen, the rest is irrelevant.

Dave: “I disagree, the idea that all economies in Europe would converge to being Germany-like net exporters is entirely stupid.”

This is one of the flaws in the Euro system. Germany wanted to be (and was/is) a next exporter to the rest of the EU. This means that Germany ended up with a surplus of money, which IIRC they invested in things like Spanish/Irish(Greek?) real estate, which resulted in a boom, which moved assets in those countries into building, etc.

The outside world seems to be fixated on the threat of Grexit, but Syriza has been explicitly rejecting Grexit all along. Grexit is politically unacceptable inside Greece and, as the OP demonstrates, no longer plausible.

As JW Mason is implicitly pointing out, Syriza seems to believe that it is possible to negotiate some kind of default or debt relief — in short, default without Grexit.

I don’t know if there’s room enough for Greece to begin a unilateral soft default, to force negotiations on favorable terms. Syriza seems to hope that their electoral victory will be followed by the election of sympathetic Parties in Italy and Spain.

Politically, it reminds me of the calculations surrounding non-violent civil disobedience: can a political drama be enacted that puts the forces of oppression into an unmistakable position?

Shorter Anon: liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.

96, I think that is a good analogy as far as it goes. But just as the civil disobedience campaign depended as much on the good will of the campaigners as of the governing bodies in the US, I think Syriza will have to depend on the good will of the Greeks – which means de-prioritizing the debt issue and going ahead with New Deal-ish types of programs to make a difference in people’s lives now. If they get caught up in Debt talk and this becomes all they are about, they will fail, I think. That is why there will be a press to make Debt talk the only issue, the only question offered to Syriza. They have to make the talk all about restoring retirement, infrastructure services, education and all the rest of it. It is such a small economy that these moves could be done relatively cheaply. I think a lot will depend on whether Spain is next – and here the issue is all the more complicated by the fact that the Catalonians are going to be splitting from Spain in one way or another.

@91 JW Mason

>The only reason Greece has to borrow from the rest of Europe, is to service the existing debt. So what is the deficit that Dsquared supposes they will have to finance under point 4.vi?

Well, you have to consider what is going to happen if Greece defaults. The Greek banking system will be wiped out overnight, how are they going to fix that? By borrowing. And then there’s Syriza’s program which involves significantly increasing expenditures. Again, the only source for that is further borrowing.

The current primary deficit is only relevant if things continue relatively unchanged.

On the question of what European policymakers are like, some useful context is here:

Geithner: The Europeans came into that meeting basically saying: “We’re going to teach the Greeks a lesson. They are really terrible. They lied to us. They suck and they were profligate and took advantage of the whole basic thing and we’re going to crush them,” was their basic attitude, all of them….

But the main thing is I remember saying to these guys: “You can put your foot on the neck of those guys if that’s what you want to do. But you’ve got to make sure that you send a countervailing signal of reassurance to Europe and the world that you’re going to hold the thing together and not let it go. [You’re] going to protect the rest of the place.” I just made very clear to them right then. You hear this blood-curdling moral hazard-y stuff from them, and I said: “Well, that’s fine. If you want to be tough on them, that’s fine, but you have to make sure you counteract that with a bit more credible reassurance that you’re going to not allow the crisis to spread beyond Greece and that’s going to require, you’ve got to make sure you’re putting enough care and effort into building that capacity to make that commitment credible as you are to teaching the Greeks a lesson….”

I completely underweighted the possibility they would flail around for three years. I thought it was just inconceivable to me they would let it get as bad as they ultimately did. But the early premonitions of that were in that initial debate. They were lied to by the Greeks. It was embarrassing to them because the Greeks had ended up like borrowing all this money and they were mad and angry and hey were like: “Definitely get out the bats.” They just wanted to take a bat to them.

If nothing else, it’s a helpful reminder of what Syriza is responding to.

>Are they North-Korea supporting nuts

Pretty much, yeah.

@103

It is the KKE who are unwilling to partner with Syriza.

This very long Jacobin interview with a member of Syriza’s central committee goes into great detail about the relationships between various Greek left-wing groups:

https://www.jacobinmag.com/2015/01/phase-one/

“Peter K. clearly understood that I was drawing attention to the moral and factual vacuousness of his comment. Why didn’t you?”

Oh I know the answer to this one…

creditors, i.e. bankers

If you can’t keep up with the news to this extent, maybe leave the Greece opinion having to someone else ey?

Josh – three things really

1) that surplus includes quite a lot of one of privatisation receipts
2) if you default on the debt you bust the Greek banking system which leads to € exit via a number of failure modes
3) if the “anti-austerity” party just runs the same surplus budget people would ask what they’re for.

I think there’s a genuinely interesting question of whether Syriza can “default” on the future surplus targets in the program though -I’ve got a slightly inconclusive article up on Medium right now that touches on it.

105: The Galbraith piece is a nice counterpoint to Daniel. I think Galbraith is persuasive on the normative question. He’s correct on what should happen. But I think he’s wrong on what will happen. Daniel, I think, is the reverse.*

*I’m taking Daniel to be saying that the EU is more-or-less justified in the conditions it has imposed, and likely will impose, on the Greeks. That may be a misreading on my part.

James Galbraith at the link provided by js. @ 105 above:

[the Troika’s plan for the “bailout” of Greece] “was a punitive rather than a recuperative strategy. I don’t think anybody can really argue otherwise. A punitive strategy that was in place partly because of the interests of creditors in getting assets at fire-sale prices. That’s basically a debt collector’s attitude. And partly because of the internal politics of the German state at that time, in which a moralizing narrative was politically more useful than a more generous one would have been.

Galbraith goes on to remark that the conservative New Democracy Greek government had cooperated in the game of pretending that what they had agreed to constituted “growth and recovery and reform policies” when those policies were “simply the conditions for the financial policy of “extend and pretend” ”

I suppose all politics is a contest over socially-constructed reality, and, certainly, in America, we are all too familiar with the fantasy-land Fox News world where Obama is a Muslim Socialist, but the absurdity of that talk is an entertaining distraction. It does seem remarkable the extent to which the politics of the Euro revolves around solemn assertions about the moral labels and descriptions attached to policy intention and design, with little or no correspondence to mechanisms or outcomes. The serious people take their own seriousness very seriously.

It is also a measure of the propagandistic hegemony that neoliberal policy enjoys, that it is so difficult to outline any leftish alternative.

Syriza is regularly described in the media as “radical left”. I don’t know how much of that reflects a nostalgia among the older generation of Greeks for the “radical” PASOK of 1981-82, which turned out to be not-very-radical, but was very effective in changing the distribution of income in that short period of time.

@111

“J Thomas @ 67

Peter K. clearly understood that I was drawing attention to the moral and factual vacuousness of his comment. Why didn’t you?”

I wouldn’t put it that way.

Syriza is regularly described in the media as “radical left”.

I was wondering about this too, but it turns out to make quite a bit of sense, given that there full name translates to “Coalition of the Radical Left” and that their roots are indeed in the radical left. (But yeah, their platform at this point seems more Keynesian (broadly speaking) than any sort of “radical left”, so it can seem a bit of a misnomer.)

js. @ 122

“radical left” in a Greek context recalls the phenomenal success of Andreas Papandreou, founder of the “radical” PASOK, and “the Change” of 1981-2, when the Greek social welfare state was instituted, transforming the lives of the majority of Greeks.

Roger Gathman,

“The Anglo prejudice that all people everywhere will muddle through and settle on the lower rung lifestyle so that the EU project of banks first can keep marching gloriously onward seems to me a misjudgment on every level – here, as always, politics is not separable from economics. … it doesn’t involve the gradual diminishment of the lifestyle of the vast majority – as in the US – but the sudden and catastrophic diminishment, with no outlet except, as in Latvia, mass migration.”

I still think that in terms of the political dimension the UN Sustainable Development Goals conference later in the year has the potential to help with these problems, depending on how much support it can garner over the year by public campaigning (this is debatable given its predecessor Rio+20 was somewhat of a disappointment, but they seem to be starting to campaign now, which is well in advance to build up awareness).

Unlike the Millennium Development Goals , the SDG for the post-2015 period are intended to apply to and be met by all countries, advanced and developing. There are 17 goals, but countries like the UK are exerting pressure to reduce these to 10-12, likely wanting to cut out the goals about the environment, inequality, peace etc.

Like Australia, Canada, and the U.S. etc, overall Europe is not very sustainable in terms of its resource consumption and causing climate change etc. I think unemployment in Greece is the main problem with 1 in 4 people, and 1 in 2 young people being unemployed. So the problem is not how to grow consumption, which is too high as is, but how to enable and manage a downward trend in overall consumption, transition to renewable energy technology, etc , while providing socially beneficial work for people and ensuring equitable distribution. But how to move away from the present development model is a problem for all countries, not just Greece, so part of Greece’s solution needs to be found in international politics, not just national or pan-European.

Peter K. @20 Keynesians believe in a reformed fiscal/monetary policy where government intervention stabilizes the economy until the financial crisis has abated and things can return to normal. The austerians know that there is no normal, that it is not just a financial/monetary liquidity trap but a problem of profitability that will prevent a return to normal. Other things, such as manipulation of imperial currency or opening of new markets or favorable terms of trade on raw materials obtained from compliant neocolonial regimes or even the rare advent of a new technology can help to revalue capital and restore profitable production.

But by and large, it is done the old fashioned way, by massive destruction of capital values and reductions in real wages. Thus austerian privatizations, union breaking, social wage cuts, etc. etc. etc. But like all those insufficient Keynesian stimuli, the magnitude and intensity of the assaults are usually seen by the committed proponents as insufficient. None of this is stupid so far as pursuing the interests of the capitalists are concerned. It is merely cruel and exploitative.

It is self-defeating in the damage done to the society, inasmuch as deflationary crises promote fascist/”populist” forces like Golden Dawn. But just as the capitalists preferred the Nazis and the fascists in their countries then, so they will hold their noses, as in Greece or the Ukraine, confident in their seriously profound ability to rule the universe…and dispose of their vulgar servants once they’ve served their purpose. The thing is, just as the 2008 crisis erupted out of nowhere despite their skillful management of humanity under the Washington consensus, so too will skill management of the Greeks by their perverse lights, will still fail to prevent the eventual eruption of financial crisis.

Igor Belanov @103 The alliance with the Independent Greeks may not even be necessary. It is remarkably hard to google the actual breakdown in seats, but it appears the last I could see that Syriza needed two votes for an absolute majority. On any given legislation or appointment, it is highly unlikely that this “minority” couldn’t pick up another two votes. (Unless there is a legal requirement forbidding so-called minority parliamentary governments in Greece?)

But an alliance with the Independents I think makes the conservative appetites of Syriza very clear, especially in that the Independent Greeks are not actually Euroskeptics. They share Syriza’s conservative attachment to the EU and the Euro, while condemning the austerity policies. They are as near as I can tell much closer to a Christian Democratic party, obviously Greek Orthodox instead of Roman Catholic. Syriza is by the way signalling the preservation of all the financial privileges of the Greek Orthodox Church.

The claim that there is no viable politics that rejects the EU because the EU is supremely popular in Greece is evidently supposed to be the takeaway from the election results. But Golden Dawn is the third largest party now, and the KKE, contrary to Syriza’s hopes, was not wiped out. (Syriza evidently convinced itself the KKE vote would be cut in half.) Plus, there was a very large abstention rate for such an election, about 30% as I understand it. Given the universal alliance against the KKE and the huge campaign themes that the KKE was finished and only Syriza could win, it seems likely that the abstention is part of the PASOK/New Democracy electorate that has broken from the EU fixation, but not yet ready to commit to either KKE or Golden Dawn.

Those are the only real choices I think. Syriza cannot successfully renegotiate without having the Eurozone exit card in hand. Without it they cannot bluff. As is, it is the EU that can threaten them with expulsion. Since Syriza has totally rejected the kind of economic controls and political engagement needed to resist the subsequent soft war against the Greek people, their official program is nothing but a macabre fraud. Whether any of the leadership are sincere is irrelevant.

Syriza’s at least initial negotiating positions will be directed at preparing the Greek people for what lies ahead. They’re not ready for repudiation of debt, their own currency and nationalization, and seeking foreign economic help from Russia and/or China; so Syriza has to get the EU to do and say things that will get the Greeks there. Tsipras demanding German repayment of a Nazi-era forced loan is presumably the opening shot. Perhaps we’ll see indictments of both the Greek politicos and foreign bankers who made the obviously irresponsible loans in the first place, and then the obviously irresponsible austerity scheme that followed. Icing on the cake if some of the EU’s negotiating team can’t go to Athens for fear of arrest. Better yet if EU govts retaliate in kind, and Greek negotiators can’t go to Brussels or Berlin for fear of arrest.

Whatever Tsipras does, even if he did try to be reasonable, the EU won’t budge. On the EU side, t’s a mistake to analyze this in terms of negotiating strategies. What we have is a problem of religious faith, in the strange religion of free-market fundamentalism, and its incomprehensible supply-side theology. Even those of the EU priesthood of “technocrats” in charge of these negotiations who might be able to look at the situation from non-faith-based perspectives will be trapped by generations of religious pap they’ve fed their electorates. The line will have to be that the Greeks brought this mess on themselves (and the rest of us!) by not being good Germans, and there’s no way the authorities can back down from that line because the Greeks now refuse to at least try to be good Germans and instead demand all sorts of backsliding concessions. Any reasonable negotiators on the EU side would be like Eric Blair with that elephant gun. Whether or not it makes any sense to shoot the elephant, that’s the only thing they can do this many decades into their imperial project.

There’s going to be some theater, but no negotiations, so I’m not sure it makes much sense to think about negotiating positions here as anything but theater. Neither side can offer anything the other side can accept. The Greek side probably gets that, and so will use negotiations to make that more transparent. The EU side doesn’t seem to get that, and probably would want to keep that reality as opaque as possible insofar as they do get it, in order to leave the Greek people in some hope of EU reasonableness, so that inertia will keep them paralyzed. The question is how successful Tsipras will be at getting the EU to make its position transparent.

#111 Bruce Wilder Bruce Wilder

Peter K. clearly understood that I was drawing attention to the moral and factual vacuousness of his comment. Why didn’t you?

Because I wanted to give you the benefit of the doubt.

You said you didn’t understand what he was saying. There was the chance that with an explanation we could discuss what he said and how much truth there could be in it etc.

But it turns out you were just pissing on him. And his response was to piss on you back. This pissing match is doing nothing to further the discussion, and as near as I can see you started it.

I wrongly hoped better of you.

Meanwhile various others are attributing the EU strategy to things other than intelligence. For example Glenn Tompkins above argues that they are caught in free-market fundamentalism, and you in #118 quote James Galbraith that they were taking a punitive approach, partly to collect greek assets at fire-sale prices, and using deontic moral language independent of moral outcomes to say it was the right thing to do.

I guess my basic take on this, is probably so obvious that likely everybody in the world understands it and it doesn’t need to be said: Every nation and every corporation or individual who intends to have a permanent positive balance of payments and who succeeds for any long while will find that it does not work. You can collect their assets, their gold and fine art etc. You can buy the rights to their raw materials. You can buy whatever of their businesses are profitable and take the profits. You can buy their homes and rent those homes back to them. But at some point they will simply no longer be able to pay.

I’ve only seen a brief mention of QE. But it amounts to a total repudiation of austerity and of the idea that the ECB must never monetize government debt. The IMF has also abandoned its support of austerity. So, some questions

1. Even if pro-austerity Eurocrats are convinced that this time they’ve got it right with the stress tests etc, who’s going to believe them?

2. If it comes to a showdown, are Draghi and the IMF going to risk disaster to defend a policy they’ve already admitted as a failure

3. If so, why would Draghi have chosen the week before the Greek election to announce QE, years after everyone except the Very Serious People could see it was necessary?

J Thomas @ 133

I did not “piss on him”. I could not interpret his assertion (i.e., The epic housing bubble and financial crisis were not orchestrated.) in a way that made much sense and said so, with no accusation or personal slander involved. That left open the possibility of some more elaborate explanation, that would provide a context, where it made a modicum of sense. As far as I’m concerned, @ 45 Peter K confirmed the hypothesis of original vacuity.

“Stupid or evil?” becomes a cul-de-sac of the mind, when you are unwilling to make even a modest effort to acknowledge strategic behavior.

You can collect their assets, their gold and fine art etc. You can buy the rights to their raw materials. You can buy whatever of their businesses are profitable and take the profits. You can buy their homes and rent those homes back to them. But at some point they will simply no longer be able to pay.

Right. Because they’ve already paid everything. And, that scheme “works” for the party that ends up with all the assets, gold, fine art, rights to raw materials, profitable business, profits, and houses and so on.

This is fundamental to the structure of a money economy, a financial economy: the only economic usefulness of money is as insurance. The guy with the bigger pile of money can sell insurance to the guy with the smaller or no pile. The guy with the big pile can take on bets with a positive expected return; the guy with no pile is forced to choose between risk-averse conservatism or recklessness. In the end, the guy with no pile will either share his winnings with the guy with the big pile, or he will lose everything to the guy with the big pile. It’s the law of large numbers at work, ensuring that the rich get richer as the poor get poorer.

If the whole system isn’t going to end up stuck in some blind alley, where the rich guy has everything, and the poor guy chooses between being the rich guy’s slave, his murderer, or his murder victim, then there have to be reasonable rules for distributing risk. The guy with the big pile of money has to actually bear the risks he can bear; he cannot be allowed to make rules that ad infinitum privatize the profit and socialize the losses, to coin a phrase. There have to re-set procedures — like bankruptcy. Contra the macro-economists, rational expectations will always prove less important that disappointed expectations. There have to be rules against usury, bank (and other financial institution) regulation and there has to be scope for large numbers of the relatively poor to organize social or mutual insurance and public provision of some kinds of investment (e.g. public education).

None of this should be treated as political rocket science, so complicated and esoteric that no one can ever be held accountable, when the manufactured volatility of the financial system is used to destroy people’s lives and loot the countryside. As mcmanus observed @ 65:

If the rich get poorer and the poor get poorer, probably stupidity.

If the rich get richer and the poor get poorer, probably smarts.

hix @ 134 and Anon. @ 136 may represent the level at which much of the discussion — even at a high level among the so-called technocrats, unfortunately — may take place. Greece’s problem is its own moral incapacity, in this view, and the austerity policy imposed from without is scarcely more than incidental: this is an economics of moral virtue or vice, stripped of the arithmetic of cash flows.

I meant dont admit their government is bankrupt literarily by the way. They seriously dont admit they (Greece the country) defaulted on their debt.

@Hix, Anon, of course, Syriza’s position about calling the Republic of Macedonia “Republic of Macedonia” is well known:

http://www.independent.mk/articles/4381/Greek+New+Democracy+and+Syriza+Clash+Over+Macedonias+Name

Also, the fact that nominal wages have been cut by 40%, collective bargaining severely restricted, limits to lay offs virtually eliminated, etc. clearly shows that such reforms would never cross Greeks’ minds. (Whether these reforms were effective in restoring growth is a different matter.)

But I’m sure you are basing you comments on your deep insight into the darkness of the Greek soul.

@ John Quiggin #135

“I’ve only seen a brief mention of QE. But it amounts to a total repudiation of austerity and of the idea that the ECB must never monetize government debt. The IMF has also abandoned its support of austerity. So, some questions”

I thought it might be significant that Draghi just announced a big QE the other day right before the elections. Dsquared made a point in his Medium piece that the ECB had to get its ducks in a row over the stress tests first so January was the earliest the ECB could start given the bad European data we’ve seen in recent months. Who knows? But yeah I read a forwarded tweet of a conservative German professor who called WE Draghi’s “march into monetary socialism”!

https://twitter.com/schieritz/status/557851857008484352

“1. Even if pro-austerity Eurocrats are convinced that this time they’ve got it right with the stress tests etc, who’s going to believe them?”

That’s my view. If there is a Grexit, I wouldn’t be surprised if there’s panic.

“2. If it comes to a showdown, are Draghi and the IMF going to risk disaster to defend a policy they’ve already admitted as a failure”

Agreed. The QE is essentially an admission of failure.

“3. If so, why would Draghi have chosen the week before the Greek election to announce QE, years after everyone except the Very Serious People could see it was necessary?”

As I said above, Dsquared writes in his Medium piece that the ECB had to get through the stress test first, but come on, the announcement and the elections were days apart!

@ John Quiggin #135

I always saw Bernanke QE3 – which was big and had forward guidance – as insurance against the Republicans going loco with their fiscal cliff brinkmanship and shutting the government as part of their debt ceiling clown show.

It could also be that Draghi’s QE was done in part as insurance. The markets are remarkably calm given that a supposedly “radical” coalition is taking over power in Greece.

Or, as you say in your (very helpful) Medium piece, it does make a difference whether Jim is just breaking even in terms of his own budget, or if he is actually making significant payments to Aunt Agatha.

I don’t think that’s the main argument on the Greek left, though. I think they would say — as you do — that the real issue is the political one. In terms of your Medium piece, the big problem isn’t the modest payments Jim is now making to Aunt Agatha. It’s the fact that he spends all his time thinking about what will keep his aunt happy, instead of what would be good for him. Similarly here. The problem isn’t the (modest) debt service payments Greece is making now, the problem is the political program the debt is being used as leverage for. The debate isn’t really about Jim would be better or worse off, financially, if he cut ties with Aunt Agatha. It’s about whether Aunt Agatha is giving him stern but ultimately helpful advice about prudent living, or whether she is making him keep his life on hold while he caters to her every whim. You can find that scenario in novels too.

@136

“The average Greek believes that the crisis/recession is the result of the sinister plottings of The Germans/The Americans/The Hedge Funds/Goldman Sachs/The Jews.”

They’ve got it right on the first four. Four out of five isn’t bad. And that fifth one on your list would only be a valid criticism if they’ld voted in Golden Dawn rather than Syriza.

“The idea that perhaps the Greeks and the economic/political system they kept voting for is to blame does not even cross their minds. Hence there is no interest in reforms.”

Oh, I don’t know. They just voted in a literal Godless Communist. You presumably don’t agree with the direction of that reform, but it is a rather big change. When they kept voting for govts that sold them out first to foreign banksters like G-S, then to the EU, that showed a lack of spine and pride and self-confidence. Now it seems we are going to see at least that particular vice reformed.

148: well, then we get to the limits of hire far the analogy can stretch. Because a lot of the policies that Greece has been implamenting under troika pressure have been of the form “you should only get a civil service salary if you are actually doing a civil service job and showing up for work every day”.

Now obviously, if this hasn’t been the policy in the past, then implamenting it is potentially very contractionary; thousands of political cronies lose their income, and conditions mean it’s very difficult for them to get a proper job. But how much cronyism can you really expect foreign lenders to finance?

In principle, the contractionary effect of cleaning up Greek politics could have been offset by infrastructure investment. But nobody (including Yanis Varoufakis) trusted the state to do that either.

People really do underestimate the difficulties faced by a totally corrupted state in getting people to take it seriously.

People really do underestimate the difficulties faced by a totally corrupted state in getting people to take it seriously

Oddly enough, I’m teaching Machiavelli’s Discourses this week, where he says much the same thing. But in this case, in the frame of Greece vs Germany, the issue is complicity. Corruption in Greece is not wholly owned by the Greeks. An equitable outcome would reflect that. At the least, this fact is not lost on the Greeks, giving Tsipras more (electoral) security should he go the hard route.

“But yes, this is why I find it very frustrating to discuss this with American and British liberals; they’re so used to thinking about their own, generally competent and honest civil service that they find it very hard to understand the reality of Greece.”

I think that might be sort of part of the problem. Tax avoidance is an issue in South Africa too – partly because people refused to pay taxes as a protest against apartheid and then often they still don’t like to pay taxes since there are still lots of problems and inequality. Also in cultures where ties between people are important, and governments are not especially well liked, what is corruption by anglo norms can potentially be seen as a hybrid response to modernisation or something along those lines. Although I admit this sort of analysis does not really offer any help for the present plight of Greece.

dsquared…

no.

Sometimes I have a great deal of trouble treating knowledgeable people like you seriously. It’s like you’re some dude, way, way, back in in Chester A Arthur’s time, and being all muckrackety. Tammany Hall was a long time ago, and wasn’t exactly as much a force for evil as people like you seem to think. The attitude that Greek’s problems come from a surfeit of no-show jobs renders me gobsmacked–or would if I wasn’t entirely regrettably disillusioned on the score of liberal intellectual attachment to reality. Elementary reasoning would have you ask who gets the crony jobs and why, and if you’re at all an experienced observer of such social phenomenons, you’d pretty quickly recognize that they are functional (or nonfunctional as you please) placeholders for a variety of inside deals that elites make with the central government. As such, it is not…actually…possible for elites to only be causing 20% of the damage if you believe that civil service corruption causes 70%.

Moreover, just only from the top of the head, one can easily remember vender financing schemes such as what is recalled in the NYT only a year ago: http://www.nytimes.com/2014/02/08/world/europe/so-many-bribes-a-greek-official-cant-recall-all.html?hpw&rref=world&_r=0

I certainly remember vendor financing issues wrt imports of heavy machinery and cars.

And even with all that considered…Greece has a problem because the real services it (and any decent state) must provide, like health care, pensions, educations, etc all ballooned the way inflexible costs always do. Austerity is the means toward addressing *this* problem…while making high minded moralistic tales about corrupt school administrators. It’s not as if this sort of corruption isn’t a huge problem–it is, but the main effect of that corruption is to slow the overall Greek economy from optimal growth, AND that this corruption is pretty much led from the top, essentially as an invisible (or not as circumstances warrant) tax during good times. I’m just tired of intellectuals talking, in effect, how not everyone “deserves” hospitals or schools or decent government in general. DD might think he indeed supports hospitals and schools and everything decent, but that’s because they’re like Mom, Apple Pie, and Santa. However, this support tends to be just WWWWAAAAAAAYYYYYY too contingent. Sometimes a country really can’t support even minimal facilities/pop, and that’s bad. Most of the time, the absence of such facilities have a lot more to do with what any particular government is *allowed* to do. Guinea, Liberia, and Sierra Leone are all massively corrupt countries with miniscule public facilities. That bit them when it came to Ebola, right? But check out how the IMF essentially forced these WA countries to underserve health care as part of their commitments in turn for IMF help. Check out how these countries have ultra-low wages that can’t pay for shit, and the consequential brain drains, including doctors, that results. As it was, we dodged a major bullet in the sense that Ebola in WA was pretty much always what it was, and was only amplified by high pop density, porous borders, and better roads. What if Ebola had actually mutated a bit to survive better outside the body? Or survive in rats or dogs as hosts? Then the bad infrastructure would have created the slow response that then makes the cost for said late response larger and imposed quite a bit more on people who aren’t West Africans.

How much longer do any of you all in Crooked Timberland think we’ve got before reality makes inane austerity utterly untenable. Like no trade with countries that have bad health care systems (like what happened to WA these last few months), no trade with countries that do not have similar labor laws and costs, no trade without being part of a CO2 amelioration pact.

Or perhaps, we’ll just make do without governments, because they’ll no longer be able to fund themselves. Nobody trusts them to not be corrupt with their tax dollars. That mysteriously ends up in Western banks and Western real estate.

/rant

@158

Obviously it was a surprise, otherwise European banks would never have lent such money to Greece. Loans are made based on credit-worthiness! But the Greeks fooled everyone and so it’s only fair that their youth and pensioners should suffer retribution. The sanctity of the EU demands it.

#137 Bruce Wilder

I did not “piss on him”. I could not interpret his assertion (i.e., The epic housing bubble and financial crisis were not orchestrated.) in a way that made much sense and said so, with no accusation or personal slander involved. That left open the possibility of some more elaborate explanation, that would provide a context, where it made a modicum of sense.

Ah. Good.

Peter K. clearly understood that I was drawing attention to the moral and factual vacuousness of his comment. Why didn’t you?

I misunderstood your later response to mean that he correctly understood you were not asking for an explanation but making an attack.

“You can collect their assets, their gold and fine art etc. You can buy the rights to their raw materials. You can buy whatever of their businesses are profitable and take the profits. You can buy their homes and rent those homes back to them. But at some point they will simply no longer be able to pay.”

Right. Because they’ve already paid everything. And, that scheme “works” for the party that ends up with all the assets, gold, fine art, rights to raw materials, profitable business, profits, and houses and so on.

Given a fixed supply of stuff, that “works”. You own all the stuff and they are your slaves. But we don’t have fixed supply.

It might “work” given finite resources. If there’s only so much oil to go around, then I’m better off when I own it all and I can use it for my family and my friends and stretch it out until it’s all gone. Why should I waste any of it on people I don’t need?

Apart from that, it doesn’t work. I benefit from the scientific and technical advances of the whole world. The fraction of people who do as they are told on strictly limited resources are worthless for that. I benefit from comparative advantage, from other people doing what they’re extremely good at and selling to me for less than I could do it myself. People who lack the capital to become good at something are not much use to me. I can buy their hand-carved folk crafts when my vacation tour stops at their quaint port city, and maybe I can throw them a few coins to let me photograph their native dances.

When I “win” by denying other people resources, my standard of living does not go up. Unless it’s fixed resources.

If I play marbles with people and I win all the marbles, it doesn’t matter a whole lot to me that I no longer have anybody to play marbles with. The whole point of playing marbles is to win all the marbles. Similarly when I win a Monopoly game and the game is over. I wanted the game to end with me the winner. That’s what I was playing for. But the world economy shouldn’t be like that.

This is fundamental to the structure of a money economy, a financial economy: the only economic usefulness of money is as insurance. The guy with the bigger pile of money can sell insurance to the guy with the smaller or no pile. The guy with the big pile can take on bets with a positive expected return; the guy with no pile is forced to choose between risk-averse conservatism or recklessness.

Jesus said that, in the parable of the talents.

He also who had received the one talent came and said, “Lord, I knew you that you are a hard man, reaping where you did not sow, and gathering where you did not scatter. I was afraid, and went away and hid your talent in the earth. Behold, you have what is yours.”

But his lord answered him, “You wicked and slothful servant. You knew that I reap where I didn’t sow, and gather where I didn’t scatter. You ought therefore to have deposited my money with the bankers, and at my coming I should have received back my own with interest. Take away therefore the talent from him, and give it to him who has the ten talents. For to everyone who has will be given, and he will have abundance, but from him who doesn’t have, even that which he has will be taken away. Throw out the unprofitable servant into the outer darkness, where there will be weeping and gnashing of teeth.”

If the whole system isn’t going to end up stuck in some blind alley, where the rich guy has everything, and the poor guy chooses between being the rich guy’s slave, his murderer, or his murder victim, then there have to be reasonable rules for distributing risk.

And there are not. How can we bell this cat?

Shah8, please don’t comment on my posts any more.

151: “People really do underestimate the difficulties faced by a totally corrupted state in getting people to take it seriously.”

Which is presumably why no one takes Jean-Claude Juncker seriously any more!

Sorry, couldn’t let that go. But of course you are right regarding the justified difficulty any Greek government will have in trying to be taken seriously.

By the way, if I’m interpreting the folk theorem wrong in saying it’s a game-theoretic rationale for practically anything, I blame dsquared. That’s where I first heard of it. But to me, the arguments for austerity/for continued austerity/against whatever Syriza is up to sound a lot like the “credibility” and “stay the course” arguments that dsquared criticized in 2006.

“The fact is, everyone knows that the total burden of Greek debt is too big to be serviced by the Greek GDP, and that if it isn’t written down, then Greece will always be reliant on an increasing stream of official financing to meet its roll-overs. Everyone also knows, although some of them might not be ready to admit it to themselves, that an indefinite commitment to financing the roll-over of an ever increasing debt burden is a fiscal transfer in all but name.”

The thing is, even if you take this view, the ‘transfer’ is clearly not enough – unless maintaining Greece in its current situation of near economic collapse is thought to be sustainable. Secondly, at some point the books will have to be squared – and you could argue that there are various ways in which this is not being priced in currently.

J Thomas, yes, thanks for the corrected link. But I was thinking about the game between Greece’s government and its creditors, not between rich and poor.

Because a lot of the policies that Greece has been implamenting under troika pressure have been of the form “you should only get a civil service salary if you are actually doing a civil service job and showing up for work every day”.

Is that correct? A large number of Greek civil servants – I suppose teachers, police etc – don’t show up for work every day?

Charrua 01.27.15 at 1:27 pm
“Daniel writes that it’s difficult for totally corrupt state to be taken seriously, and I agree with that.”

Considering how both the USA and the UK (IMHO) seem to be sliding down the corruption slope, ….

@158 js

Greece used fake statistics, both to join the Euro and to keep borrowing cheaply. When they brought in someone to do the job properly (the budget deficit went from 3.7% to 15.8% when they started counting everything), the politicians and unions reacted not by accepting that past statistics were falsified, but by prosecuting him. Have a read here: http://www.voxeurop.eu/en/content/article/3555681-andreas-georgiou-learns-unwritten-rules-greek-statistics and here: http://www.spiegel.de/international/europe/chief-greek-statistician-charged-for-revealing-true-size-of-debt-a-882942.html

You could say it was naive of the EU and lenders to accept these numbers at face value. And it was: it didn’t cross their poor minds that their fellow Europeans could be so different. But I don’t think there’s much to be gained by blaming the victims, I’m sure they will be more vigilant in the future.

Ultimately the problem is that northern Europeans think of Greece as a worse version of Germany, when in reality it’s a better version of the USSR.

js@158 – “Is there some sort of due diligence the EU is supposed to conduct before it lets a state join the union?”

js – I had an identical query when this topic was last discussed a couple of years ago because the excuses on offer then seemed all too similar to the apologia issued on behalf of sub-prime mortgage lenders – they were taken in by dishonest borrowers etc ! Someone (not dsquared) responded by posting a link to a document on finance industry risk mitigation protocols or something similar – the implication being (i think) that it was all too complicated for non-experts who should stand down leave mateers to the experts.

#171 Harald

But I was thinking about the game between Greece’s government and its creditors, not between rich and poor.

To my way of thinking, this is normally the game between the minions of Greece’s rich, versus foreign rich. The poor are not players at all, they are bargaining chips and hostages. If any player cares about them, everybody else will use that care as a club to beat them into submission.

So all the actual players must demonstrate to each other that they care nothing about Greece’s poor people to get that tactic out of the way.

Now there is a new Greek government that is supposed to represent the poor, and nobody knows what they will do. I suggest that at a minimum they will do their utmost to make sure that anything which happens that the poor don’t like, can be blamed on somebody else. But if it looks like they actually care what happens to their poor people, then all the other players will look for things they can to to hurt Greek poor people — to use as bargaining chips.

When the rules are corrupted, as they have been in the neo-liberal regime, I think the term corruption becomes unhelpful. Carlo Bastasin noted something key about the pre-crisis state of Europe in his book on the Euro crisis, Saving Europe: “Even Germany had a secret that allowed it toaccommodate the challenge of globalizatin under monetary union, and actually became a primary cause of the crisis. German banks could get money at the lowest rates in the euro zone, and invest it for a decade in higher yielding assets: for much of the 2000s, those were not only American toxic assets but the sovereign bonds of Greece, Ireland, Portugal, Spain and Italy. For ten years this German version of the carry trade brought substantial profits to the German banks – on the order of hundredds of billions of euros – that did not show up on their balance sheets because the money was transferred to German firms as low-cost loans or to the German political system in the form of abundant financing for regional projects such as infrastructure development. Those profits, paid by other countrie’s taxpayers, enabled Germany to master, like no other, its restructuring for the global challenge. The relevance of this source of profit is amazingly neglected,although between 1997 and 2008 Germany exported two thirds of its substantial domestic savings. The total amount of German capital exported between 2002 and 2010 was above 1 trillion euros, which, thanks to the euro, could be rewarded at rates far higher than the cost of provision and without currency risk.” After profiting by investing in highly risky ventures, for which they earned a higher interest rate, we are supposed to cry big tears because the risks blew up in their face, and all of Europe has to repair that hole in their pockets.
I think not. Perhaps the EU will muddle along with or without Greece, but I think by the end of the year it may well be without Greece, Spain and perhaps Italy. It is time for the EU to become something other than the extension of the German Id. This, I think, is a more likely outcome than the peaceful spread of the EU throughout the European world.

dd, that’s ridiculous. I vented on you no more or less than several other people. I did expect you to be thin-skinned, so your thin reply was not a surprise.

And you know what? Most of the time, I don’t really take the trouble to write rants unless there was something really wrong with what was said, and I know enough about politics/economics/geopolitics/history in the background to know that what you said in terms of causation was pretty much 100% wrong. And I am very sick of public intellectuals being utterly blinkered in their reasoning, but said reasoning was resolute in blaming the people with the lesser/least power with the most damage, with little evidence. So much of the time, it’s just antidemocratic dross which should be pointed at and laughed at for the safety of all.

Nine @179/180:

Right, exactly. Anon. essentially just admits that there was no due diligence and now we’re supposed to feel oh, so bad for the European elites that helped engineer this disaster. Well, Anon., if any of them comes around, I’ll be sure to give them a cookie.

But of course, we ought to feel sorry for the bankers and tough on the suffering Greek children who can’t be that innocent now can they?

Charrua asks a crucial question: Is there precedent to give us any reason to think that favored prescriptions can actually do the job they’re supposed to? We’ve seen that austerity in general sure doesn’t; does anything else they’re pushing have a better footing?

@188
I think you’re referring to the currency swap deals arranged by Goldman Sachs.
Cf.
http://www.spiegel.de/international/europe/greek-debt-crisis-how-goldman-sachs-helped-greece-to-mask-its-true-debt-a-676634.html
and
http://www.wsj.com/articles/SB10001424052748703791504575079743591308292
The facilitating banker was a woman in their London office.

Greece and the troika would be two sides.

Now here is a thought which scares me: if Syriza fails, the next government in Greece will probably be formed by the Golden Dawn.

“So if the Greek disaster is primarily the fault of Greek corruption and mismanagement, what happened in Spain, Italy, Ireland and Portugal? Greece has been damaged by corruption for a long time, but why did the chickens really only come home to roost after adoption of the Euro?”

Well this is the obvious point. Macro economic events have macro economic causes, and all that ?
My impression is that dsquared is just arguing back against the simple story of the ‘evil euro elite’/german monsters narrative, but is unfortunately creating a mirror image morality play in its place where peripheral corruption/clientlism is a major factor in creating the crisis (rather than an explanation for the specific form it took in each country) This is obviously wrong, afaict, although I’m no expert by any means.

Yes the Greek political economy functioned , at all levels, like some premodern system for clan based gift exchange(if the system existed in modern day Beverly Hills), and yes the european elite are dealing with a difficult situation incredibly incompetently while also having to placate a financial sector run wild on it’s own corruption/self pity. Where does rehashing all of this get us, at this late hour ?

From Jason Manolopoulos’ ‘Greece’s ‘Odious’ Debt: The Looting of the Hellenic Republic by the Euro, the Political Elite and the Investment Community ‘ , which – among other things – is a pretty devastating attack on the Greek political economy:

“There is no excuse for European Union leaders, Greek society and politicians ignoring the lax accounting, corruption and public sector waste that occurs in Greece. Much of it was on public record. The EU policy of assuming that probity and efficiency in Greece were on a par with the Netherlands was perfectly avoidable on the basis of information in the public domain.”

192 – if these things were decided in a sealed off auditorium on a university, I’d agree with you. But fault is a powerful political motive, which is the reason that fault is the center of the rhetoric around this in the newspapers and in public opinion.
I don’t think that is accidental, either. I think it is fair to compare the publicity given the sad state of greek finances and their “corruption” with the non-publicity given to European banks – notably Deutsche Bank, Barclays, UBS, BNP. Deutsche Bank was basically lent 101 billion dollars by the Fed’s as the term repurchase transactions and 277 billion under TALF. The lack of rhetoric about whether Deutsche Bank deserved these extraordinary loans was delayed until well after they were made, because they were kept secret. If Greece had only been corrupt enough to launch an offshore special purposes vehicle and gone to the Fed, who knows, they would be sitting pretty right now, since given the point spread, they could have made a killing in, say, purchasing educational debt back securities, or something like that. Of course, later Deutsche bank was involved in the Libor scandal, but such corruption is dealt with by charging a fine that eats a little bit into the profit made and dropping the case.
So I’d say that fault is going to enter into the dialogue about Greece whether one wants it to or not. Just as fault will be rigorously excluded from talk about bailing out private entities like giant banks – and when it isn’t, the bailouts can proceed in secret and the fault talk can emerge after its all a done deal.

[Oh f… last paragraph is mine]

As long as there was money to be made, the corruption of the Greek political system could be — and was, by all accounts — considered a feature rather than a bug by the EU financial wizards who stood to profit from it. The complicity of ordinary Greeks, expressed in their very ordinary tax and featherbedding fiddles, was neither here nor there then. What one would expect, etc., etc., and nothing that should stop anyone from considering them good Europeans.

Now, of course, everyone claims to be shocked to discover that the Greeks are not good Europeans at all, but rather conniving, irresponsible others who, having repeatedly voted for the bastards who’ve been fleecing them all along, deserve to be brought low. Just deserts, however, tend to be defined differently by those in power and those who are powerless. Look back a little and watch the Germans bristle at being tarred uniformly with the brush of Nazi atrocities. Look forward a little and imagine Americans incensed at accusations that they repeatedly winked at the war crimes being committed in their name. If guilt is never entirely collective — and it isn’t — then collective punishment is little more than hypocritical self-congratulation on the part of those wielding the lash — there’s nothing honorable about it at all. Since we know very well how hard it is to survive as a decent person in an indecent system, or we damned well ought to know, honesty, if not compassion, should demand that we resist the temptation to scapegoat the Greeks.

@207 and several others

Supposing one agrees that yes, in fact, the Greeks shouldn’t be scapegoated for their weakness which, afterall, wasn’t terribly differnt from others who just happened to have a few more resources about with which to bargain…..what than should be done about the couple hundred odd billion of Euros which clearly can’t be paid back, even with an interest rate approaching zero, without further withering and entirely unfair austerity.

Does the Troika (and their bankers) just say, oh well, at least you tried, we’ll write off half if you promise to never ever, ever, ever, we mean ever, do that again? Even if you hate the bankers and the bank why does that make sense?

Here’s the guessing game – if half the debt was written off, how many years unitl it was again back at the same level – I’ll pick 7 to start the bidding.

How many years until the following would ask for the same treatment:

Italy – over under line = 2 years
Spain – +/- 3 years
Ireland? Portugal? Latvia? France?

Other than Anon, I don’t think anyone is scapegoating the Greeks. You can think of it as the story of Joseph and the seven years of famine, or something. It’s just business.

Trader Joe @ 209

The ancient idea of the jubilee was never believed to be a guarantee that henceforth everything would be rosy, and cumulated debt would never trouble anyone again. The idea behind it was renewal — a redistribution, a change in the game, the unfreezing of a frozen society — necessary from time to time. The rest is just accounting, and we moderns are — as we’ve needed to be — very much better at accounting than the ancients were.

Define equity however you like — it isn’t very healthy for society as a whole to have it concentrated in the hands of a few, no matter how virtuously under the current rules they claim to have acquired it. (Yes, some of those claims will be true, but some will also prove to be exaggerated, and others downright false. For our purposes, this doesn’t really matter a whole lot.)

Dsquared argues with himslff:

Dsquared 2015:

And the 10 would be on the basis of generalising from French and German banks to all creditors. Greece is an OECD sovereign; it’s just not irresponsible to buy their bonds and for the longest time it was even reasonable to think it would be baled out by the EU.

I would shift the balance of the rest significantly if we were talking about tax evasion generally, but the 1% is a small part of the overall tax collection problem in Greece.

But yes, this is why I find it very frustrating to discuss this with American and British liberals; they’re so used to thinking about their own, generally competent and honest civil service that they find it very hard to understand the reality of Greece.

Dsquared 2008

Look, my basic point here is not to exonerate anyone or vice versa (apart from anything, that would stray into writing about the crisis itself, which I’m still not going to do). I am sure that at the levels of individual institutions, stupid things were done and irresponsible risks were taken. But likewise, I would also dare say that during the Great Depression, a lot of the workers who were made redundant were probably a little bit lazier and not quite as skilled or conscientious as the ones who kept their jobs. But if you were going to have your main comment about the Great Depression that it was the time when lots of lazy shirkers got the sackings they deserved, then I think everyone[6] would agree that you’d kind of missed the big picture. The analysis that blames it on stupid bankers, is of a piece with the kind of analysis that regards the 1930s as being the decade when the working class of the world took it upon itself to have a great big shirk.

https://crookedtimber.org/2008/10/17/those-stupid-bankers-and-their-stupid-stupidity/

@207 William Timberman

You speak of punishment. What punishment?

Troika says here’s 240 billion, you just have to promise to make some structural changes in order to increase growth.
Greece says OK. At a conservative 1.3 estimate of the fiscal multiplier, Greece has made a healthy 70b profit on those loans.
But oops, they won’t make any reforms because it’s not politically viable. They forgot to mention this when they were taking the loans, but whatever…the Europeans knew, all they cared about was limiting contagion after all. The collective profit for Europe was easily worth the money.

Now Troika says to Greece: you can’t have any more.

How is this “punishment” in any way?

Did the Troika force Greece to have terrible labor market regulations that result in high unemployment? No. Did the Troika force Greece to run deficits for decades so they had no room to maneuver when the recession hit? No. Did the Troika create a Kafkaesque, selectively enforced, corrupt bureaucratic and legal system? No.

What the Troika did is, in exchange for hundreds of billions, ask that Greece liberalize its taxi market. Not the biggest deal, it might add a few basis points in growth. The system was deeply corrupt, licenses were trading for absurd amounts in the secondary market and the government saw none of that money. That was in 2010.

What did Greece do? Well just 2 short years later, they finally introduced legislation to fulfill the requirements they agreed to. The taxi unions got everything they wanted: many special favors to benefit taxi owners, no new taxi licenses issued in large cities, and the bill ended up just adding further layers of red tape and centralized bureaucratic control. This is the Hellenic idea of liberalization.

This is not an isolated example, this is how every single item went. Literally none of the reforms agreed to were ever implemented. But of course the lack of growth cannot be the fault of Greeks. It’s those damn foreigners and the evil policies they impose on us! Is this the punishment you speak of?

If the creditors actually did something malicious to hurt Greece and the Greeks, then I would agree completely with you: collective punishment against a nation is absurd, even in this case when 80% of them are at fault. It would be doubly stupid to punish Greece because such an action would hurt the punisher as well.

But simply not giving any more money is not punishment. Are you personally lending to Greece? No? You are punishing them as much as the EC and ECB and IMF are.

If you are unwilling to bear the burden why should it be imposed on the German citizens?

#208 Shah8

J Thomas, you need to start from JW Mason@144 and read through to DD’s response to geo.

I see! The OP was listed under Daniel and I stupidly looked only for that name in the comments.

DD then responds@151 by saying that these policies are a result of Greek untrustworthiness, giving the example of no-show civil service jobs.

I don’t understand that. If it was only thousands of jobs out of a population of 11 million, what’s the big deal? They give people sinecures for political patronage reasons, and then because of foreign interference they have to take away the jobs and give those people the money some other way. Why does it matter?

I once was involved in something vaguely like that in the USA. Some politician owed one of my relatives a favor, and they paid off with one summer job working for the US government. I would have been calling grocery stores all around the country, getting them to report prices on various foods that would go into the consumer price index. I didn’t want to do that, I wanted to take organic chemistry over the summer. So one of my cousins got the job. When he got out of college he got that job permanently. He worked for the government for until he could retire. He was in the National Guard the whole time, and when he quit the civilian job he got to work full-time for them, and when the wars heated up he wound up doing important well-paid work. I got to do much more interesting work with considerably more risk and fear. His job was by no means a sinecure and he had to show up every day and deal with irate grocery store managers on the phone. He said the bigger ones just tried to get it over with but the smaller store managers were upset that they had to spend their time talking to him. He’d explain that it was the law and they could be prosecuted for refusing. He told a story once about the others using the toll-free lines for personal calls and they got in trouble for it. He could just sit there unworried because he hadn’t done it. It was a really good feeling knowing that he wasn’t in any trouble because he’d kept his nose clean.

Anyway, I again think DD’s responses make sense in an amoral context. Yes, lenders will lend if they think there is little risk and they did think the EU would bail them out. Then if that doesn’t work of course they want to make sure somebody pays them. Is the money that can be squeezed out of Greece’s proles versus elites in the ration of 7:2? Maybe. They don’t have much but there are a lot of them, and it’s harder for them to hide what they have, and it’s harder for them to run for the border with it.

You’re bothered that he seems to present things from a banker’s point of view, when he ought to regard that as evil. Right? And he understands that point of view very well and presents it to us. That’s valuable even if the attitudes look obviously evil.

Be very annoyed, then, but don’t be a twit. If you wanna ban me, then ban me. I’ll still be right, and you will still be wrong, and you’ll still be publically butthurt over the lack of “civility”.

Jesus.

DD – first of all, I would like to thank you for being a contributor to CT. I read (rather obsessively, alas for me) all your posts – the travelogue is wonderful – and all the comments; as we can once again see, your posts generate a lively, copious and often extremely… lively discussion.

I concede your expertise in finance – I don’t understand the field, I’m a humanist.

Nonetheless, I’m on the ground in Greece and have been for 35 years; I follow the news and the political scene in Greece daily, and in Greek. I hope you’ll permit me a few observations and questions:

(1) On Corruption: yes, agreed, the elite is corrupt. But frankly, where isn’t it corrupt, including in first-world countries (in my own beloved homeland, such behavior is now referred to as “legalized corruption”)? I might note that the biggest financial scandals of recent years in Greece have involved foreign partners – e.g., Siemens and Goldman Sachs. Even in high finance, as the bundlers of junk mortgages in the U.S. market knew very well, it takes two to tango.

(2) On the inherent laziness and worthlessness of Greeks: well, okay, if that’s the Euro-take. But statistics indicate otherwise, viz. that Greeks work on average 450 hours more than Northern Europeans (Germans) annually, i.e. approximately three months more than their northern masters. Speaking as an American expat here, the Greeks I hang out with are the hardest workers I ever met – and I’m from the Midwest.

(3) On the new PM / government: how just is it to decide that they’re unworthy of Euro-trust when they’ve been in office six hours? How much have you researched the political environment within which the new PM was brought up and honed? Leftist politics in Greece is incredibly fractious, and by the way, this is a genuinely leftist party; they emerged from an initially-loose coalition of M-L, Euro-communists, and others of similar persuasion, and they’re still pretty loose. The new PM has been involved in leftist politics for 25 years – from when he was in high school – and he’s been mentored by some pretty smart individuals, even though they’re not neoliberals. As far as fractiousness goes, the Eurozone is tame in comparison, honestly.

(4) On “Greece has no money and is broke”. Yes, true, and this will continue until a massive development- growth plan is implemented. One thing northern Europeans often fail to note – although I’m certain they’re perfectly aware of it – is that the Industrial Revolution entirely bypassed Greece (Ottoman rule until the 19th century in the south, until the 20th century in the north). I haven’t heard anything more than lip service from Schauble, Junker, Merkel et al regarding the absolutely critical need for a 21st-century development plan, in the absence of which, imho, GDP will just keep tanking (internal deflation and its inevitable knock-on consequences). Tourism is an okay source of foreign currency, but cannot be the main engine of growth as it’s highly sensitive to financial vagaries elsewhere in the world (for example: it’s estimated that Greece will lose up to 200.000 Russian tourists this season).

(4) On the civil service (in response to others as well): well, the Greek civil service has pretty well been decimated in the past three years (this, via Paul Krugman). Hospitals are now tragically (for those who die in them) understaffed and under-equipped. Patients’ families must somehow find bandages and sutures and chemotherapy drugs, even presuming there’s a doctor in sight. The majority of medical school graduates now emigrate upon graduation to Germany or England – Greece is paying for the education of physicians who will never work in the country whose citizens paid for their education. New teachers teach 24-25 hours per week for a salary of around 700 euros – 400 of which goes to rent, 200 to food and other associated daily living expenses, as new teachers are posted to the provinces, normally far from home. Entrance to this branch of the civil service – i.e. primary and secondary school teaching – has long been subject to a strenuous examination system (ASEP.), which, mirabile dictu, has not been accused of corruption. Regional IRS offices are drastically understaffed, thanks to the Troika-imposed reform of the civil service; understandably, this makes pursuing tax evasion by the 1% (or 5%, or 10%) pretty challenging.

(5) On shipping/ ports, etc. (not a response to dsquared but to others upthread): actually, Greece has a port or two: Piraeus, Thessaloniki (in northern Greece – the sole Balkan deep-water port, for those not up on the geography). Oh, and there’s a port in Crete which the 7th fleet once rather fancied. As for revenues from shipping: yes, the Greeks are the global shipping masters, but most Greek shipping firms are not registered in Greece – they are in England, and the tax implications are, to put it mildly, complex.

As dsquared/ Daniel/ DD very astutely noted in the OP, the debt burden on Greece (utterly unsustainable, as everybody with half a brain has known from the get-go) is really political in nature – I think that’s the major take-away from the post, in agreement with other commentators. But politics is unpredictable and fickle. So here – based solely on the new government’s members and my experience in Greece over the past three and a half decades – are a couple of predictions:

(1) the new government will not go it alone. This party is very, very long-tested in coalition-forming, and they will reach out to like-minded parties, first in the Eurozone “periphery” – Spain and Italy, then probably Portugal and France – to form a broad Eurozone coalition of those opposed to neoliberalism and TINA. Giannis Dragasakis, an economist, has been appointed as the new PM’s second-in-command, and I predict he’ll be accompanying the PM on every trip abroad.
(2) the new government will search actively for development prospects, and these will not be solely, or even primarily, in the Eurozone. Another economist, Kostas Tsakalotos, has been tasked to the Ministry of Foreign Affairs as Deputy Minister for International Financial Relations, and I predict he’ll be accompanying the MFA, asking for foreign investment from everywhere and anywhere.

And finally, for anon: I know where you’re coming from, and there are plenty of times I’ve thought the same. But then I think about my Post Office (ELTA), where three women serve 300 clients daily – with a smile, and they know our names – or my branch of the NBG (= National Bank of Greece), which serves an equal number of clients with two tellers – both of whom, by the way, are university graduates, like most tellers in Greek banks, both private and public (the tellers in my bank in the U.S. last time I was back didn’t know what a Swift code was, sigh), or the wife of my dry-cleaner, who was born and raised and graduated from university in Germany, and who now drives to five different primary schools weekly to teach – and who never, ever complains that it costs half her salary to commute – or my friends who are university professors whose salaries have been cut by 40% and can now barely survive, or my spouse, who has worked for 35 years, 12 hours a day, for Greece … well, anyway.

Great post dbk.

Thank you and good luck.

Great post dbk.

“Except now there are food coupons, so it’s Totally Different.”

Well… People would have food. So you know…. They would have that going for them.

How do leftists view Syriza’s cozy relationship with the Russians?

Leftists are far from monolithic, and have some very sharp differences among themselves on current geo-political affairs.

I don’t know many that aren’t rooting for Syriza and Greece.

“No one ever claims Greeks are lazy.”

Well, except for Angela Merkel:

https://euobserver.com/political/32363

More generally, a lot of people pile on to the Greek patronage structure. I’m not familiar with Greece, but I did spend a lot of time understanding patronage in SE Asia. There’s nothing particularly inefficient or corrupt about these, so long as – as Bruce Wilder keeps saying – patrons are held accountable. If you put cousin Fred in the Ministry, you have to suffer if he stuffs up. Patrons, of course, find this condition irritating. So far, Greece is not much different to Kansas, or Wisconsin, or New South Wales. Or, in a different way, Mecklenberg.

So it’s the accountability condition that’s missing. Did the Troika try to write accountability into the picture? It seems not. Did they try to write conditions that would insulate the small people from the worst of the damage? It seems not. Could they have done so? Probably much more then they did.

As for 225: bit quick to write off a government that has been in power for two days. If the Allies had taken the same attitude to Germany (look, it’s a week since April 45 and they still haven’t got it!) they’d have offed the lot.

How could the Troika write accountability into the picture, though ? I guess there are some institutional changes they could make, ie in Jason Manolopoulos’ book mentioned above he argues:

“It is institutionalised. Politicians, for example, have awarded themselves immunity from prosecution. Article 62 of the Constitution grants immunity for members of government: they may not be prosecuted, arrested or imprisoned without the approval of Parliament. 2 Given this flagrant breach for a founding principle of democracy – that no one should be above the law and that the judiciary and parliament should be separate – it could be called into question whether Greece is really a democracy at all. Similarly, in 2003 the Greek supreme court ruled that it was not illegal to give bribes, provided they were given after the actions they were supposed to influence! So ‘gratitude gifts’ are allowed. 3 No minister has gone to jail in the last 30 years, marking Greece out alone among all of the European Union.”

So you could make politicians more accountable by removing their immunity from prosecution, but that’s still only a tiny change if the problem is society wide. (which it seems to be) ie on corruption he says:

“A study by the Brookings Institution published in 2010 portrays a similar picture. It found that bribery, patronage and other forms of public corruption are major contributors to Greece’s public debt. Its estimate was that the Greek state has been losing the equivalent of at least 8 per cent of its gross domestic product each year to these practices, or more than € 20 billion (about $ 27 billion).
If Greece had better control of corruption – not to Swedish standards, but even at Spain’s level – it would have had a smaller budget deficit by 4 per cent of gross domestic product, on average over the past five years’, says Daniel Kaufmann, senior fellow at Brookings and the study’s author.”

And even if the Troika do push for institutional changes , how do they make sure the changes are enforced ? My understanding is that if reform doesnt come from interests and factions commited to them *inside the country* then it’s more than likely not going to be effective, as it has no buy in domestically.
I think it’s worth bearing in mind aswell the role that the Troika might be playing in Greek politics (I say ‘might be’ because I dont know about Greece specifically) Outside actors can work as a useful scapegoat for governments that want to implement changes but not take full responsibility for them. (or who want to implement reforms piecemeal/or implement reforms in the interests of their constituents, specific elites etc) This can work in complicated ways, so Id be wary of the way ‘Troika reforms’ can function as a narrative in Greek politics. (for example Nicolas Van de Walle’s book ‘African Economies and the Politics of Permanent Crisis, 1979-1999’)
I mean, I dont mind accepting that corruption and clientilism are exaggerated causes here (though I’m open to correction on that) but how do you actually reform Greek politics/economy in a meaningful way (if youre the Troika) ? What are the alternatives here, policy wise ? Do you just not bother with reform ?

dbk,

Thanks for @223. That was immense, in the best kind of way.

> Anon is clearly pretty right-wing.

See, here’s the giveaway from me:

Which is why there is no point to framing the issue as the troika “punishing” the Greeks. First of all they are not responsible for the present situation

The troika did what they thought was best and this was not a “choice”. Only other people chose, only other people have responsibility.

Yes, I noticed that phrasing too.

Look, I agree that his argument is highly dubious, I’m just trying to be somewhat fair-minded here.

then the troika could surely have looked at investing in infrastructure, rather than in selling it off?

No. The troika was an ad hoc small body set up in an emergency with only a small staff. There was no way it could have run a port, or a motorway. That was the reason for Yanis’ idea of bringing the EIB in to do it. But even that would have required the cooperation of the Greek state, which wasn’t forthcoming, precisely because the nationalised industries were where some of the most powerful crony groups were located.

We’re up against the same problem here- lots of things could have gone a lot better if Greece had given up more sovereignty. But that’s one thing Syriza definitely doesn’t want to do (and nor do it obviously). The optimistic view is that it doesn’t matter so much now that the good guys are in charge.

Imagine that you have suddenly been given official control of Greece and you are thinking about how to improve the Greek economy. Of course really your ability to take initiative is limited even if you are officially the dictator who can have anybody shot. They say that Czar Alexander said on his deathbed, “I never ruled Russia. Ten thousand clerks ruled Russia.” But still you are thinking about what to do.

And then foreigners come to you and say “Your predecessor borrowed 1 trillion euros from us and gave it to his friends. Now you owe us 1 trillion euros plus 500 billion euros interest, and you must pay up.”

What do you do?

They say “The first thing you have to do is get rid of the friends of the former government, take their money away from them and don’t give them any more. Don’t give your own friends any money either. Give all that money to us.”

Then they say “Second, you have to cut social services. You’re doing too much for your poor people. Stop spending money on the Greeks and give the money to us.”

Third, “You have some state-run businesses. Shut them down, sell them for parts, and give the money to us.”

Fourth, “You have some people who are trying to build successful new businesses, and they’re investing money in Greece. Take their money and give it to us.”

What if you try to track down the money that your predecessor gave away to his friends, and you find that a lot of it was deposited in the very banks that are demanding you repay them, and some of it bought bonds through those banks, and they refuse to give any of it back. How would you feel about that?

For myself, I think there’s a big difference between demanding that those creditors give you more money, versus insisting that you will not pay them their $1.5 trillion euros.

You might find that attempting something like autarky is better than giving in to those demands.

I’m real unclear what’s possible for Greece. If they have a bunch of bloodsucking leeches sucking wealth out of their economy they might be better off to get rid of them. But it doesn’t help them to get rid of their native bloodsucking leeches and replace them with foreign bloodsucking leeches.

If they have some state-run enterprises it might or might not be more efficient to replace them with private businesses. I don’t know. It will not help Greece to shut them down and not replace them with anything.

If you offer to make payments based on the new production you intend to invest in, and they insist that they don’t trust you to increase production so you have to pay them back without increasing production….

At some point you have to accept that this is not business, but war.

[also deleted – you just don’t get to post rambling manifestoes if you’ve been asked twice not to comment]

Greeks aren’t Turks and Spanish aren’t Ugandans, Peter T.

“creditors that wants localities and governments to give up sovereignty do not wish so out of any sort of good will or far sighted greed”

Creditors are not known for being far-sighted. The risk of being far-sighted is that someone runs off beforehand with the money you’re expecting. So it’s actually pretty normal creditors, when faced with the possible loss of being paid, try to get their money any which way. For all those people who think it’s no biggie their own country has lots of debt, wait a little. Debt is *always* an infringement on current sovereignty and democracy. It *must* be, because it’s the past which has decided the present needs to give up resources. (And for those who think the US will of course get by because it has the biggest military, that fact isn’t assured to still be the case in twenty years time.)

“This is just the sort of argument our annoying government keeps making to cut services, not mitigate climate change, and sell off what remains of our public infrastructure.”

Uh, you could raise taxes. BTW, selling off public infrastructure is not necessarily a reduction in net debt (debt is reduced, but so are assets), so the government is being dishonest on that one.

“Uh, you could raise taxes.”

That is fine for services, but infrastructure gets used for a long time so you may as well use debt and then pay it off over a portion of the infrastructure’s life. Plus I think the government might have got some debt for the financial stimulus during the financial crisis – this is quite an area of contention here, but it did seem to work since we didn’t have such a bad contraction as elsewhere.

dsquared @248

I did not intend the analogy to be about blame. “Who started it” is surely not the issue, unless we are talking moral fault, is it? The issue is the competence and depth of knowledge of the players. Okay it was an emergency. But I thought the IMF, ECB and associated institutions had research staffs, analyst teams, a responsibility to keep watching briefs on their areas of responsibility and so on. And it wasn’t like this was the first time the financial fire brigades had gone into action. Now you’re telling me they just make it up as they go along?

Things would have gone a lot better if… They usually would have, because in counterfactual Heaven our dreams paint the picture.

It was put together because of an emergency that Greece caused,

What do you mean by “greece”, here? Government, population, or state?

No, “greeks have to many holidays and retire to early”, is absolutly not the same as Greeks are lazy. Its rightwingish, supply sidish structural reform targeting the little people, whatever. But that a far cry from “greeks are lazy”. By the way, id love Germany to become a little more Greek with regards to attitude towards work.

hix

“No, “greeks have to many holidays and retire to early”, is absolutly not the same as Greeks are lazy. Its rightwingish, supply sidish structural reform targeting the little people, whatever. But that a far cry from “greeks are lazy”. By the way, id love Germany to become a little more Greek with regards to attitude towards work.”

Greeks have fewer (a lot fewer) holidays than French and other Europeans. A few of them, mostly working mothers, retire too early. That’s it. That’s the only nugget of truth today, 2015, in what you say.

As for our attitude towards work, you came to know it how exactly? Give me a break and wag a finger to someone else.

BTW, even for working mothers the retirement age has been increased to what is the standard elsewhere in Europe. Although this only applies to younger workers (so for that category the steteotype is partially true).

“support Putin’s land grab in Ukraine” — did he quite do that?

#256 Hidari

Things would also have gone a lot better if Greece had never joined the Euro (or been allowed to join the Euro) in the first place.

It’s always a little uncertain how history would have gone if things were different.

Anon @266 – Not quite correct. Tsipras was supporting Putin and echoing his (false) claims about the ‘Kievan nazi-junta-oogabooga!’ way back in March, and his FM Kotzias appears to be close to Alexander Dugin, an extreme Russo-chauvinist reactionary, and currently one of the Kremlin’s favourite ‘philosophers.’

I don’t know why 21st century socialism (of the Chavez/Tsipras variety) involves applauding kleptocratic dictatorships, who pursue explicitly imperialist policies and bash their domestic minorities in the name of religious and ethnic chauvinism, but it seems to be a bit of a trend.

Now it starts to get truly entertaining!

Golden Dawn issues statement in support of Syriza’s pro-Russia, anti-EU, and anti-privatization policies: http://www.xryshaygh.com/enimerosi/view/ochi-stis-kurwseis-kata-ths-rwsias-ochi-stis-idiwtikopoihseis

Ronan 233: “Article 62 of the Constitution grants immunity for members of government: they may not be prosecuted, arrested or imprisoned without the approval of Parliament. 2 Given this flagrant breach for a founding principle of democracy – that no one should be above the law and that the judiciary and parliament should be separate – it could be called into question whether Greece is really a democracy at all.”

Parliamentary immunity is standard legal procedure in many countries, including Germany.

there’s a difference between parliamentary immunity (ie immunity from prosecution for things you have done in your capacity as a parliamentarian – and there’s a scale in the relevant countries of what immunity covers) , and immunity from all prosecution, even as a private citizen (which afaik is what the Greek law guarnatees. Although Im open to correction on that)

Just to be clear as well, Im not really agreeing with the ‘Greek corruption’ angle. It seems kind of a weak argument to me.
I think John Q is right, ie it is ‘a problem about the troika, the banks, and financialised capitalism in general’, rather thean DD.

TM- ok, fair enough. Thanks for the clarification.

“kleptocratic dictatorships, who pursue explicitly imperialist policies and bash their domestic minorities in the name of religious and ethnic chauvinism”

Who would that be? Sounds like a good description of the neonazi puppet regime in Kiev, currently terrorizing and exterminating people of undesired ethnicity in the eastern provinces of former Ukraine.

But Syriza doesn’t applaud it. On the contrary: I read that their spokesman characterized the latest western russophobic campaign as “neocolonial bulimia”. Colorful. “Imperialism” would do just fine.

Well, that kind of national work culture view is always dangerous as one tends to overempashice and reinforce national generalisations after one learns the averages and its also a good case in point here that debating the differences can be emotional difficult. Its still not a rabit out of my hat. By intense i mean that work time is more strictly work time, less (not none, and again, individuals vary, im obviously lazy and unfocused for example) private chatting, reading blogs etc during official work hours. In part thats also a question of dominanting job types. E.g. assembly lines vs tourism service . Theres also less flexibility based on short term needs and hours tend to be shorter: So definitly not a question of whos more or less lazy. The US is somewhere in between Greece and Germany.

Shorter William Berry: I’m a full-of-shit deranged russophobe and a nazi symp.

http://www.liveleak.com/view?i=c05_1422310781
http://www.bbc.com/news/world-europe-28329329

“Your”, of course.

hix@287 – “The US is somewhere in between Greece and Germany.”

No, I don’t think so. I don’t know about “assembly lines vs tourism service”, i’m talking enterprise computer systems – software specifically. The kind of schedules our german counterparts were used to would be considered unacceptably generous & lax in the US. If anything things have gotten even intenser in the US since the 90’s.

“Vlad the Paler”, hero of the anti-imperialist left.

Shove it yourself, tiresome, one-note fanatic.

There is no promise from Syriza to double the minimum wage. The minimum wage will go from €586 to €751, as it was before the agreement with the troika. These are not net values. People on minimum wage won’t buy expensive clothes or go from trips abroad, they will spend money buying what they need to survive. This will create jobs and save small businesses from collapsing.

I think DD is saying that the social and political was not on the EU bureaucrats’ radar, and didn’t generate much interest among the EU’s political actors either. Basically, he’s showcasing the financialization of the EU project, which is really sad. I think there is a lot of hand wringing around Greece’s sociopolitical situation because EU actors fear that trying to be seriously engaged would look like colonialism or something. OTOH, it’s not clear why they don’t understand that threatening to throw the economy under the bus by cutting off support by our *collective* central bank also looks similarly imperial.

Vasilis has a good point that a lot of good work has been done under the program – lots of people thought that primary surplus couldn’t be achieved at all. But surely the troika has to get some credit for that. Greece really wasn’t, under PASOK, planning to do anything about the extent to which some of its citizens were supporting their consumption by helping to run up government liabilities. This did have to be done and it wasn’t likely to have been attempted outside a crisis. I mean, the forerunner parties to Syriza existed in 2008, and how many votes did non-crony politics get?

>I mean, the forerunner parties to Syriza existed in 2008, and how many votes did non-crony politics get?

…how many votes did non-crony politics get in 2015?

dsquared@234

Agreed: trust must be earned, although we’d hope for good will during the trial-of-trust period.

From my perspective, the long-term, truly challenging issue is “how does one bring a country which missed out on the Industrial Revolution” into the (post-industrial, services-oriented) twenty-first century? Can it be done? I think it can, but it would be a unique accomplishment in economic-development history.

What does Greece “produce”? Currently, agricultural products of very high quality, primarily destined for the 1% of northern Europe (vegetables – fruits), and tourist services. (Also, btw, very high-quality pharmaceuticals, but that’s a comment for the other thread!) Obviously, neither sector is remotely competitive with the powerhouse of high-tech, German-French heavy industrial output. To put it another way, what can a poor country possibly produce that would raise its per capita GDP to a level comparable to that of northern Europe? I don’t have the answer, but I understand the challenge, and to me at least, it is as fascinating as it is bedeviling.

To offer a comparison that might be useful to U.S. commenters: how would one proceed to raise the GDPs of the eleven poorest U.S. states (southern) to an equivalent level of the eleven richest U.S. states (northern, East-West Coast)?

Why is this so crucial? If I understand correctly (dquared, help, please!), the EU is a monetary union, but not a financial union like the U.S., i.e. it did not incorporate into its founding document a mechanism for the automatic redistribution of revenues from rich center to poor periphery. As long as this situation continues, there will be an imperative requirement for the periphery to enrich itself in order to avoid catastrophic imbalances of payments.

A couple of observations:
Greece has natural access to the capability of generating nearly-infinite wind power. One of its Cycladic islands (specifically, Melos) possesses an untapped treasure of geothermal energy which could power the Aegean region for a very long time. Additionally, Western Macedonia is sitting on unexploited metal deposits (~40 billion euros est. value). Furthermore, Greece – a tiny country, roughly the size of the state of Pennsylvania – has the longest (and least-polluted) coastline in the Mediterranean. Experts have long proposed (since the late 1960s, at least) that Greece dedicate its coastline to fisheries and become the world’s fish-provider, rather as Denmark has become Europe’s pork-provider (to the economic benefit of Danes, though perhaps not to their environment).

These are the real longer-term challenges, and one can only hope that the new government will address them forthwith.

Oh, crap. I missed that the Czech Republic isn’t a Eurozone member. That might invalidate the POV I expressed in the previous post.

@Matt, I think you just made the argument for Grexit!!!! External devaluation hurts less and the hurt is spread more evenly….

Tsipras madman act does not center on Grexit anymore, his madman act centers on a unilateral default. OECD estimates Greece is running a primary balance of nearly 8%, which makes default a credible option/threat. EU creditors are particularly vulnerable since they hold 60% of the debt (ECB 10%, IMF 10%, Private 20%). One massive write-off and Greece runs a major budget surplus. Therefore the negotiations (should) center on saving what can be saved.

Promising to drastically lower interest rates in lieu of debt write-off is unfortunately not enough. Remember the EU money was lent to tide the Greeks over until they can access the private bond markets again, without being forced to borrow at unsustainable interest rates. Now look at that current debt of 175% of GDP. Looks risky to private creditors, doesn’t it? And risk means higher interest rates. The Greeks have already extracted one write-down from private creditors, another would shut them out of the markets until a common EU bond system is set up (which I wouldn’t count on coming anytime soon). So it is clear to the Greek government that a write down of EU debt better occur before much of the rollover is financed by the markets. Otherwise the markets might demand painfully high interest rates and the cycle of EU loans and austerity begins anew.

In other words, markets think a default now would make Greece bonds safer, which lowers interest rates, which facilitates an exit from EU debt. Note how the oft-cited iron laws of the markets don’t necessarily work to the advantage of EU creditors. Note also that even if the OECD is overestimating the primary balance, Syriza will be in power for another 4 years. Any future improvements in the Greek finances work entirely to Syriza’s advantage, and they might retaliate to a humiliating backdown with an unannounced unilateral default later.

In further refutation of Grexit as a Greek negotiation tool, it was the German government that leaked a report to Der Spiegel, claiming a Greek exit was inevitable if Syriza wins, though on the upside Europe would be able to cope with it. So is the German government too stupid to understand the main threat lies in unilateral default? Too stupid to realize Grexit is therefore unlikely? Too stupid too see that such talk causes capital flight (see Greece earlier, Cyprus later), undermining the Greek banking sector, potentially forcing the Greek government to ask for help from the ECB? Or are they diabolically clever? :)

The 8% OECD number is an estimate of the structural primary surplus, i.e. an estimate of what the surplus would be at full employment (I know, black humour). It is an indication of the stance of fiscal policy, not an actual sum of money.

It’s not just up to Greece to decide on default. The debt used to be under Greek law; it’s now under English law (this was one of the major results of the last rollover). Greece can pretend to default, but its creditors will simply sue it in English courts (which are supposed to be creditor-friendly).

How does that matter if UK courts decide the default is not ok? All i would be expecting from that are some more or less amusing attempts to posses some Greek government buildings abroad that are not officially part of the embassy.

@dax, if the Greek government defaults I don’t think that means that Greek corporations’ and individuals’ assets are subject to seizure, only government assets. If I was them I would be disposing of them right now.

dax@316

Actually, most of the Greek fleet of tankers flies under foreign flags today, and most Greek shipping firms are headquartered in London, not Piraeus. Seizure is pretty much impossible under these circumstances.

Honestly, people need to sort of forget about “Greek” shipping, which is for all intents and purposes now “global” shipping and immune to Greek taxation and law.