Why Greek debt is a problem

by Henry on July 8, 2015

Daniel wrote a post some months ago which has a useful point about Greek debt.

Don’t think of the Greek debt burden, either in cash € terms or as a ratio to GDP, as an economic quantity. It basically isn’t an economically meaningful number any more. The purpose of its existence is as a political quantity; it’s part of the means by which control is exercised over the Greek budget by the Eurosystem. The regular rituals of renegotiation of the bailout package, financing of debt maturity peaks and so on, are the way in which the solvent Euroland nations exercise the kind of political control that they feel they need to have if they are going to be fiscally responsible for the bills.

If this is right – and I think it is – it suggests that Greek debt is a different kind of problem than most people argue, but that it is arguably a worse one. Pretty well everybody, including most Greek people on both the left and right, agree that the Greek state is a mess (read Stathis Kalyvas’s book for history on how it got there, and on the relationship between Greece and the West). This creates problems in a common economic area, exactly to the extent that the euro area needs some rough congruence of state capacity across countries to administer all the things (taxes; fiscal policy) that the area needs to function properly as a backstop to monetary union. The story of the eurozone’s relationship with Greece post-crisis is a story of external powers trying to restructure an entire political system from outside, using the crude tools of control that are available to them. The situation is somewhere between the kinds of Washington Consensus restructuring and conditionality that the IMF used to impose as a quid-pro-quo for emergency loans to countries in crisis, and the massive efforts to restructure the political systems of Afghanistan and Iraq post invasion.

Obviously these past efforts have mostly turned out pretty badly (perhaps you can argue some of the IMF cases – but you’d have an uphill battle if you really wanted to make a general defense). There are instances of successful political-restructuring-from-outside in Germany and Japan, but both of those involved (a) military occupation over a long period of time, and (b) relatively strong pre-existing state structures. There isn’t any warrant to believe that this effort will turn out better, or that the Troika-or-whatever-they-call-themselves-these-days have the local knowledge and public legitimacy to bring real changes through. The more plausible scenario is the one we have – locals vacillating between (a) resentfully going through the bare minimum of the motions of reform that they think they need to go through to get the money, and (b) resisting outright. This is not a recipe for long term success at anything apart from fostering grudges on both sides.

However, it gets worse. If I understand Daniel’s arguments over the last few years rightly, he thinks that the Greeks should just shut up and get on with it, since (a) the alternative is worse, and (b) given the unsustainability of the debt burden, the richer eurozone countries are going to quietly disappear it at some unstated point in the future when everything becomes less politicized. This is not, contra some commenters, a stupid or evil argument – but I don’t know that it’s right either. The Greek state is not the only one that is underdeveloped – the EU/Eurozone one is too, meaning that there isn’t any single actor that can strike deals, whether informal or formal, on the part of the collectivity. It’s not at all clear that anyone can quietly make a credible commitment to Greece to knuckle under in the expectation of better things in the long run, because it’s not clear that anyone on the other side of that bargain can push through a long term restructuring of debt given how toxic the politics have become. Even if the Greeks started behaving exactly as the rich eurozone countries want them to, it’s not clear that the latter countries’ publics will be willing to forgive what appears to them as vast amounts of taxpayers’ money – and under the current system as I understand it (happy to be corrected if I’m wrong, since much of the devil is in the detail), all that it takes is one member state with a cranky right wing coalition partner to refuse a deal.

To be clear – none of this conducts towards any specific recommendations for what Greece or the eurozone countries ought to do. It’s a lot more modest than that. If we treat Greek debt as a political instrument of control rather than a quantity that is going to be demanded from the Greek people over the shorter run, we should be arguing about the project for which that instrument is being deployed, and asking whether (a) it is fit for purpose, and (b) whether the kind of project that it’s being used for is one that’s going to work over the longer term. We should also be wondering (c ) about the endogenous ways in which the instrument of debt as a form of political control affects the actors on both sides of the relationship, and whether it makes some successful and mutually acceptable long term modus vivendi more or less likely. Obviously, I’m skeptical on all of these (and given past track record, I’d have expected Daniel to be more skeptical on (a) and (b) than he appears to be), but willing to hear counter-arguments.

{ 257 comments }

1

Guano 07.08.15 at 3:18 pm

If it is the case that “the Greek state is a mess” (and I have no reason to doubt that it is) then it is reasonable to ask why is it in the European Union. It is reasonable to ask why there hasn’t been a European strategy for dealing with this mess since Greece’s accession, in 1981. The political project of Europe since the 1980s has been the incorporation of the former southern and eastern Europe non-democratic nations into a liberal democratic European Community, yet it is far from clear that the EU has developed a strategy for the development of accountable institutions in the former non-democratic member states. If anything, the strategy appears to have been based on the assumption that these states would become democratic with accountable institutions by osmosis, just by “opening up” and becoming part of Europe. I would suggest that this has not worked but nobody quite knows what to do next.

The background to the EU accession of the southern Europe non-democratic states is summarised here.

http://grammatikhilfe.eu/IDEAS/publications/reports/pdf/SR018/Karamouzi.pdf

2

Hidari 07.08.15 at 3:25 pm

“If I understand Daniel’s arguments over the last few years rightly, he thinks that the Greeks should just shut up and get on with it, since (a) the alternative is worse, and (b) given the unsustainability of the debt burden, the richer eurozone countries are going to quietly disappear it at some unstated point in the future when everything becomes less politicized”.

On the contrary, I think that Daniel’s argument is incontrevertible, as such. As Orwell pointed out long ago, the quickest way to end a war is to lose it, and (as Daniel has never failed to point out) there is little or nothing that Greece has with which it can threaten Germany (let alone the Troika) they were always going to lose. I have no idea what will happen on Sunday but it will be one of two things.

1: Humiliating and disastrous climb down for the Greeks, total defeat which may (or may not) lead to some form of debt relief at some indeterminate point in the future

or

2: Grexit, which will probably (not inevitably but probably), lead to economic catastrophe, which may or may not get better at some indeterminate point in the future.

And these two options have not changed one iota since the election of Syriza. They were always the only two options on offer. So, given that, Syriza should just have taken option 1 immediately and saved themselves 6 months of totally pointless struggle.

But things get murkier from then on. As you say: ‘This is not a recipe for long term success at anything apart from fostering grudges on both sides.’ This, not what happens on Sunday, is the problem. I mean, so what if Tsipras signs the deal? This will split his party, therefore new elections, in which it is highly likely that anti-Europeans will win, and we are right back where we started. Or else he doesn’t sign it, therefore Grexit, therefore new elections (and economic collapse) and where does that road lead to? Nowhere good.

As for debt as social control I believe that He Who Must Not be Named wrote a book about it……

3

reason 07.08.15 at 3:27 pm

Henry,
yes I agree with all this.
In the case of Greece there is debt to use as leverage, but it seems to me to work AGAINST democracy. And in the case of Hungary?

4

Hidari 07.08.15 at 3:27 pm

Sorry I should have said (for my argument to make sense) given the 2 options, assuming you think that Grexit is too risky an option to take, Syriza should have taken option 1. And it should be noted that at the moment Tsipras does seem to think it’s too risky. And he might be right.

5

Rich Puchalsky 07.08.15 at 3:53 pm

Thinking of the debt as an economic quantity is the lump-of-debt fallacy. If we’re all agreed that it’s actually political, and that the concept of repaying it is ludicrous, then people are going to have to be willing to start talking about this in political terms. Such as: why is it so important that political control over the bills of a small part of Europe be exercised at this time? How many deaths is this political control worth?

If the argument is that Greece has no control and they’d better surrender now rather than later — and continue to be ground down, because they “surrendered” already every year for 5 years — that’s ludicrous politics. People don’t stand for that year after year. Just as happened with the U.S. and Iraq, Greece may well be rubble at the end of the process, but the imperial power doesn’t get that many years before they are driven out.

6

Zamfir 07.08.15 at 3:53 pm

I was thinking on this with respect to interest rates. From a business POV, the Troika could charge 5% or 10% higher rates on the loans. This is not a huge political issue in the creditor countries. Lots of people clamour that the lazy Greeks should get less, hardly anyone says they can borrow but at a higher rate. It’s taken for granted that they can’t pay the higher rate, and the loans are not intended to maximize profits.

But because these agreements are presented as more less standard loans, this reasoning hits a bottom line. You can’t take the next step and say that Greece still can’t pay these rates, they should be 5 or 10% lower yet. 5 years loan at -5%. If the Greek economy is running again convert it to 0% loan with 75% face value, if it’s still bad perhaps stick to -5% for a while longer.

That’s super weird for loans. Out of the question. But if the ‘loans’ are really policy in disguise, it would be normal. Greece needs support now,that’s OK if they are willing to pay their again in the future. No reason why 0% is a natural bottom in that deal.

7

Sandwichman 07.08.15 at 3:57 pm

Private property and credit are strange bedfellows. The sanctity of private property rests on zero-sum mercantilist principles that are fallacious from the perspective of credit expansion. This incongruity can only be kept in suspension. It cannot be resolved by technical adjustments.

It is the nature of debt obligations to expand beyond the capacity of the debtor to repay. This is not simply an outcome. It is also a prerequisite. There would be no profit in making loans if everyone always paid back all that they owed. This seems incredible.

How can it be that extending credit is more profitable if it is not paid back than if it is paid back? The risk premium. Back in the days when usury was condemned as sin, the profit from loans came from “late payment penalties”. Nothing has changed but the nomenclature.

8

Adam Hammond 07.08.15 at 4:01 pm

Many of these discussions come down to how dangerous we think Grexit is. In 2010 it seemed pretty bad for the Greek economy, and therefore the Greek people. In 2015, the people appear to have endured most of the Grexit economic cost already – although the elite still have plenty to lose.

To me I wonder more about the military and paramilitary threats to the Greek people. Is HELBROC something that would simply evaporate, or could they be rallied by someone claiming legitimacy and used to assert authority? Are there other organizations capable of attempting to control the people by force? I just don’t know enough about the distribution of weapons in and around Greece to guess which circle of hell we are talking about.

9

Hidari 07.08.15 at 4:06 pm

“Many of these discussions come down to how dangerous we think Grexit is. “

This is the point. We just don’t know. It might be like Argentina. It might be like Zimbabwe. We just have no idea. Tsipras seems to be acting under the assumption that, at the momemt, it’s just too risky an option to take, given the various cost-benefit scenarios.

10

reason 07.08.15 at 4:08 pm

Hidari @9
“Tsipras seems to be acting under the assumption that, at the moment, it’s just too risky an option to take, given the various cost-benefit scenarios.”

Not sure – I think he is a politician – and he thinks it is risky to be BLAMED for it.

11

Sandwichman 07.08.15 at 4:13 pm

Rich Puchalsky @5,

Note my reply to your lump of labor/debt query.

I relied on extensive quotation of Wennerlind there because to do justice to the issue would require an article or a dissertation. Telegraphically, though, it comes down to the incongruity between the mercantilist zero sum vindication of private property with the dynamics of credit expansion. The expansion of credit leads inevitably to there being more property (in the sense of ownership) than there is property (in the sense of what is owned).

This is not a matter of bad debtors or bad creditors (although they can exacerbate the situation). It is how the system works.

12

John Garrett 07.08.15 at 4:16 pm

Tsipras is acting, correctly, as if this were still a negotiation, which it is. In order to find out exactly how far he can get the Eurototalitarians to move, especially re debt reduction, he must — and is — acting as if he believed that Grexit would be a disaster. Meanwhile, being smart, they are sitting on plans to minimize the effect of Grexit. Without serious debt reduction commitments (not if you’re good maybe someday) Grexit is the best option since per Hidari we know what happens to Greece if they do a deal without debt reduction, but we don’t know what happens really after Grexit. For those arguing catastrophe, exactly what catastrophe for whom? Everyone except the rich are already catastrophed.

13

Sandwichman 07.08.15 at 4:16 pm

By the way, the tendency of debt to lead to social disruption is a very, very old story.

14

Z 07.08.15 at 4:18 pm

I really liked the framing of the issue, especially in the three points of your last paragraph.

The sad truth is that I would answer “no” to the first (indirect) question (in particular, but not only, because of Krugman-like reasons), “hell, no” to the second (the diversity of European societies cannot be subsumed in a project that assumes we are all, or all soon will be, retired, qualified, middle-class, lutheran Germans with 1,9 grand-kids) and “there is a very real prospect that the behavior of the EU towards Greece will in retrospect be seen as the original crack announcing its demise” to the third.

All in all, prospects look really bleak to me.

15

Sandwichman 07.08.15 at 4:23 pm

“For those arguing catastrophe, exactly what catastrophe for whom?”

https://youtu.be/cHAqdZ2f5cM

16

Hidari 07.08.15 at 4:26 pm

“he thinks it is risky to be BLAMED for it.”
Ha! Fair point.

@12 Don’t assume that things can’t get worse. In any given situation, unless you’re dead, things can always get worse.

17

bob mcmanus 07.08.15 at 4:28 pm

Costas Lapavitsas …current, video interview on Real News

There a lot of people who want to go very quickly to full socialism, and think Grexit, or the social political consequences of Grexit, will demand it. Nationalize the banks and media, maybe ports and shipping, expropriate wealth. I would guess that would not only break a catalogue of Eurozone laws, but put Greece in full pariah mode. It would almost certainly require force to go socialist, and invite force to prevent it. Then we would have a question of where the Greek military stands.

I had a vision last night of NATO tanks and troop carriers in the streets of Athens, shooting curfew violators. Is this where the EU is now, echoing Hungary and Czechoslovakia 1956/1968?

18

politicalfootball 07.08.15 at 4:30 pm

given the unsustainability of the debt burden, the richer eurozone countries are going to quietly disappear it at some unstated point in the future when everything becomes less politicized. This is not, contra some commenters, a stupid or evil argument

I read Daniel’s argument as an application of Stein’s law: If something can’t go on forever, it will stop. The Euro folks can’t collect these debts, so they won’t.

The problem is, the unsustainability of Greek debt has implications that will take effect long before the eurozone is ready to forgive debt. Stein’s law can be reframed to take Greek agency into account: Greece can’t pay these debts, so it won’t.

19

Pete 07.08.15 at 4:40 pm

Yes. This is basically the “chapter 11” process for countries: political control is handed over to the creditors. It’s just that we’re not used to seeing it in Europe or countries that we think ought to have stable democracies. It’s profoundly anti-democratic for creditors to have a line-item veto on budgets.

“(b) given the unsustainability of the debt burden, the richer eurozone countries are going to quietly disappear it at some unstated point in the future when everything becomes less politicized”

This would be roughly analogous to the formation of the United States Federal reserve and the interstate redistribution programme that was the New Deal and the gold confiscation along with coming off the gold standard. Centralisation of both monetary and fiscal policy, with mechanisms for interstate flows.

But at that point in US history the US was past the civil war in which the supremacy of Federal law over state law was finally settled. The same is very much not true of Europe, and opposition is rising. The debt-consolidation solution requires not just abolishing the Greek parliament and its fiscal independence but the German parliament as well.

But we’re now in the opposite position. Greeks and Germans have been set up in opposition to one another. Germany insists on running a trade surplus with the rest of the Eurozone while not engaging in any fiscal transfers in the other direction. How can that be sustained?

20

Pete 07.08.15 at 4:41 pm

@bob mcmanus: I too am worried about when this gets violent, but so far it’s been remarkably peaceful.

21

Peter K. 07.08.15 at 4:49 pm

I wish there was a go-to location for economic statistics for Greece. The IMF?

From what I understand the Greek governments, post-bailouts have successfully engaged in the most ambitious austerity program ever. And the Greek state is described as faulty or unruly? And yet they did more than Spain, Portugal, Ireland, etc?

However as Krugman points out their debt-to-GDP ration actually increased because GDP shrunk so much. Was that the plan? Interest payments forever while social welfare declines forever?

Supposedly before Syriza came to power and started renegotiating with the Troika, the Greek budget was in the black except for interest payments. An unruly Greek state?

But the Troika wanted more austerity and larger primary surpluses? Why? To pay down the debt more quickly? To “reform” the Greek state more severely?

Imagine the Troika insisted on an even more austere budget. At some point the honest defenders of the Troika would have to admit that the spending cuts were too large and the primary surplus requests were too unreasonable. I wonder at what point that would be. 75 percent unemployment? 10 percent primary surplus? 75 percent poverty? An epidemic of suicides? Maybe at that point they wouldn’t worry about a Grexit being “catastrophic” given the ongoing catastrophe.

22

Bruce Wilder 07.08.15 at 4:52 pm

Gaius Publius, in blogposts published at Hullabaloo and Down with Tyranny distinguishes between the made-for-CNN cover story and the actual neoliberal reform project. In earlier comments, I called the dawning realization among participants and observers of the divergence between cover story and actual project, the falling away of the mask. This distinction you tactfully elide into a two-part skepticism of the means by which the neoliberal project is being enforced, to sandwich your skepticism of the neoliberal project itself, and your skepticism about the neoliberal project becomes gently and ambiguously pragmatic: will it work?

The rhetoric of pragmatism has been used a lot over the last generation to retail neoliberalism, because technocratic pragmatism is the cover story, is the presentation of neoliberalism in everyday life. It is the third way, the non-ideology of post-history, its fitness vindicated by its survival into our era of technocratic triumph. The convenience of pragmatic rhetoric is in never having to own the ends and means in the same sentence: we accept the aims in idealized and therefore obscure terms, and debate the means ineffectually, discussing whether the means will “work” in some hopelessly diffuse and ambiguous sense.

Everyone agrees, you sagely observe, that the Greek state is “a mess”. “This creates problems”. But, solving problems is hard, so very hard. “The story of the eurozone’s relationship with Greece post-crisis is a story of external powers trying to restructure an entire political system from outside, using the crude tools of control that are available to them.” Poor external powers, having only crude tools. Attempting the impossible. Heroes struggling against hostile gods: it could almost be a Greek tragedy!

But, really, no, it’s just game theory and asymmetric information, leavened with folksy acknowledgment of resentment. The Troika lack “local knowledge” you see. And “public legitimacy”. (It couldn’t be that the Troika started out with public legitimacy coming out their ears, that there were plenty of Greeks who dearly wanted the deus-ex-machina of technocratic probity to aid reform of Greek society long desired locally, but impossible to achieve in the local stalemate of resentments and divisions dating back to civil war and dictatorship.) The EU/Eurozone is underdeveloped as an institutional actor, and cannot deliver on a commitment to a quid pro quo, like promising a debt restructuring as a reward for success. (Again, never mind that the policy program was initiated as a debt restructuring and economic success in the form of economic growth, after a sharp recession and real wage reduction, was the promised reward that never showed up. Never mind that the commitment of the ECB to protect the Eurozone members has been turned into a weapon of political intimidation and extortion.)

At the end of his piece, Henry very modestly and earnestly avers that we should be “arguing about the project”, whether it is fit to purpose and whether it will work over the longer term, before reiterating his narrow and now exceedingly abstract point about debt as an instrument of control: the endogenous ways in which the instrument of debt as a form of political control affects the actors on both sides of the relationship, and whether it makes some successful and mutually acceptable long term modus vivendi more or less likely. (“endogenous ways” — okay, then)

But, it is a little late in the piece, to be earnest and modest. The possibility of discussing whether the neoliberal project of reform is “fit to purpose” and will “work over the longer term” was thoroughly buried beneath fatuous pragmatism much earlier in the OP.

It seems to me that we rely too much on an assumption of integrity in a common purpose to trust our own impulsive rationalizations of a degenerative politics at the end of Empire. We really would be better off, if we just assumed, evil and stupid, at the outset, and moved on from there, dismissing the made-for-CNN cover story as the propaganda that it is without reiteration or consideration.

23

Dave 07.08.15 at 4:56 pm

If the Greek debt is a political tool, who’s wielding it? Ostensibly it’s EU governments led by Merkel, since they’re at the bargaining table, but they just seem to be enforcers of ECB decisions. (Which, by the way, I don’t know why Mario Draghi isn’t in the international spotlight every day.)

Anyway, with the monetary union, European state functionaries are powerless to govern and too corrupt to manage their national economies if they wanted to. See this Perry Anderson article for a good #longread on the subject. It begins, “Europe is ill.” Supposing the Greek problem is politics not economics, it looks like an early symptom of political instability across the continent.

24

bob mcmanus 07.08.15 at 5:13 pm

…the endogenous ways in which the instrument of debt as a form of political control affects the actors on both sides of the relationship, and whether it makes some successful and mutually acceptable long term modus vivendi more or less likely.

One person’s debt is another person’s Capital, and looking at the relations from the standpoint of debt is like looking at the health of a political economy from the standpoint of unemployment and wages. It treats victims as a problem.

Even given that financial Capital is a late and special form, and the stage special, I still have a library of work I can point you to, including quite recently, Fredric Jameson on Neuromancer

FJ:

My argument has been that in the face of the impasses of modernism, which proved unable to handle the new incommensurabilities of that greatly enlarged and as it were post-anthropomorphic totality which is late or third-stage capitalism, science fiction, and in particular this historically inventive novel of Gibson, offered a new and post-realistic but also post-modernistic way of giving us a picture and a sense of our individual relationships to realities that transcend our phenomenological mapping systems and our cognitive abilities to think them.

25

Glen Tomkins 07.08.15 at 5:20 pm

An imperial project

“Pretty well everybody, including most Greek people on both the left and right, agree that the Greek state is a mess.”

More or less of a mess than the govts of Somalia or Syria or Iraq?

I think it’s absolutely correct to look at this matter as a political rather than a financial problem. The financial problem is long resolved, the solution applied being to bail out the irresponsible lenders. The other part of the decision has been to refuse to bail out the arguably irresponsible sovereign borrower, yes, precisely as a political mission civilatrice.

Aren’t states that are more of a mess than Greece thereby more in need of Europe’s mission civilatrice? Of course, Europe has been there, done that, and no it didn’t work out too well. It went so double plus unwell (Eric Blair with his elephant gun is the locus classicus here) that the imperial project is pretty widely refuted. Well, until it presents itself in a slightly different form, then even sensible people entertain a go at it again in its latest incarnation. And the idea is so compelling that the empirical failure so far in this latest incarnation isn’t, at least yet, grossly evident enough to serve as a deterrent. The troika hasn’t killed nearly as many Greeks as Leopold killed Congolese, so it’s all good so far.

If we are going to discuss dysfunctional governance, the EU, and the other transnational quasi-govts involved, are much more of a mess than Greece. At worst, Greek governance might be accused of being less efficient at some of the functions we associate with successful govts. But the EU is a quasi-govt that is structurally unsound. Even what it does well and efficiently will prove systematically destructive. You cannot have a quasi-government exert its control of the currency unless it is an actual govt that is also responsible for the full spectrum, in this case the social insurance that Greece needs to sustain demand, but which the quasi-govts are destroying because that’s their means of exercising a power over Greeks not limited by any responsibility for the welfare of the Greeks.

If the people of Europe want one govt, they need to form an actual union. They need to give up their national govts in favor of giving all govt functions at the outset to a real EU. Until they’re ready for that, mendacious half-way solutions like the current fake EU won’t serve as a nidus for a slow evolution to a real union, but instead will serve as a continuing source of disunion.

26

dsquared 07.08.15 at 5:40 pm

I agree with this more than I disagree with it, with two caveats reflecting the fact that I’m more optimistic.

First, I don’t think the Greek state was doing the minimum required, grudgingly. They achieved a primary surplus! As the election of Syriza shows, the problem was the opposite-they did too much, too fast. Without getting all “shock doctrine” here, a massive amount of progress has been made in restructuring Greek society in the last five years. Even tax compliance was getting better.

Second, have a look at Bild’s five point plan of advice to Merkel. It includes a 50% write down on the debt, plus €xit. (I noted when I saw it that if Bild were in CT comments, they’d be regarded as more left wing and less pro-German than me). I don’t think at all that popular opinion won’t tolerate a writedown – the problem was always the open-ended commitment with no control over its growth.

27

Trader Joe 07.08.15 at 6:00 pm

If the “project” is to be questioned for Greece and there is some belief that the prescription was wrong for the illness – why did similar prescriptions produce such different outcomes in Ireland, Spain and Portugal.

I understand there were differences in initial starting points, but the basic gameplan of loans in exchange for reform/control was common across all of these. In Ireland it largely worked, in Portugal and Spain the results are decidedly mixed, only in Greece has it been a clear failure. The pejorative answer would be cultural differences but maybe a more constructive answer would also answer some questions about the validity of the project and how it should be nurtured through other crises as would inevitably arise.

28

Henry Farrell 07.08.15 at 6:04 pm

But, it is a little late in the piece, to be earnest and modest. The possibility of discussing whether the neoliberal project of reform is “fit to purpose” and will “work over the longer term” was thoroughly buried beneath fatuous pragmatism much earlier in the OP.

Short response is that pragmatism seems to me to beat emoting-our-way-to-victory!(or-alternatively-despair-as-circumstances-dictate). If there’s real disagreement with the arguments of the post, make ’em – but it looks to me like your major objections are more that the post had an insufficiency of rhetorical expressions of outrage. Which, depending on your politics is fair enough – but speaking for myself, I think that pragmatism properly understood is a better way towards thinking about what is actually happening and, contra your claim, provides steps towards a profound critique of neoliberalism rather than an ideological justification for it.

29

Layman 07.08.15 at 6:08 pm

“I understand there were differences in initial starting points, but the basic gameplan of loans in exchange for reform/control was common across all of these. In Ireland it largely worked, in Portugal and Spain the results are decidedly mixed, only in Greece has it been a clear failure.”

It has been a clear failure in Portugal & Spain, too. If there’s an outlier here, it’s not Greece.

30

Ronan(rf) 07.08.15 at 6:13 pm

“In Ireland it largely worked….”

(Only short post,but….)

http://www.irisheconomy.ie/index.php/2015/06/26/ireland-in-recovery-greece-in-crisis/

31

Ronan(rf) 07.08.15 at 6:15 pm

32

john c. halasz 07.08.15 at 6:17 pm

Sandwichman @ 15:

Oh no, you di’n’t!

Pete @19:

But chapter 11,- (is this just an American term?),- is not just about wiping out equity and ceding control to creditors, it’s about reorganizing the business as a going concern and maximizing its ongoing value for all concerned, rather than liquidating the business and selling off its few remaining assets for scrap, (chapter 7). But that is what the creditors here conspicuously failed to do, out of some combination of stupidity and meanness, by insisting fictitiously on full repayment.

I recall Michael Pettis, commenting on the situation, cite someone with decades of experience in default negotiations, to the effect that in the beginning everyone, debtors and creditors alike, pretty much knows what the outlines of a final deal will look like, only it takes a considerable amount of shouting and banging the table to get to the point of emotional acceptance. Only in this case, it doesn’t seem realistic negotiations ever took place, instead of creditors dictates.

This is perhaps a case where the lousy source actually bolsters the credibility of the article, but this is a pretty good and succinct read on the German mentality, which elsewhere I’ve termed “infantile Kantianism”:

http://www.economist.com/news/europe/21650565-german-ordoliberalism-has-had-big-influence-policy-during-euro-crisis-rules-and-order

33

K. Williams 07.08.15 at 6:26 pm

@25 “I don’t think at all that popular opinion won’t tolerate a writedown – the problem was always the open-ended commitment with no control over its growth.”

What I don’t understand why there’s a binary choice here: writedown on one hand, control over Greece’s fiscal policy on the other. I mean, given the size of Greece’s obligations, even a major debt writedown will still leave it in thrall to its creditors, particularly since it’ll get no relief from its IMF debt. So what’s keeping Europe from continuing to insist on conditionality for further assistance (which Greece seems likely to need for years to come), while also writing down debt that is unlikely to be paid back anyway? (It’s not a rhetorical question — I don’t understand why there’s any conceptual obstacle to doing this, particularly if, as you argue, the political opposition to a writedown has been overrated.)

34

The Raven 07.08.15 at 6:29 pm

“I don’t think at all that popular opinion won’t tolerate a writedown – the problem was always the open-ended commitment with no control over its growth.”

It’s not popular opinion; it’s Merkel’s opinion that’s the problem. Far as I can tell, she’s not grandstanding—we’re looking at someone like GWB here.

To the OP, this is the problem of federalism I’ve written about before here. We’re seeing something of the same in the USA, where right wing radicals have paralyzed the federal government, and are happily turning Kansas, Michigan, Oklahoma, and Wisconsin into failed states.

35

Trader Joe 07.08.15 at 6:51 pm

@28Layman

You’re certainly welcome to assert that Portugal and Spain have been failures bu the degree in nothing like what has been seen in Greece. Indeed, had we had this discussion last July instead of this July, we might have even debated that Greece was coming along better. It may well ultimately be the case that Spain and Portugal go the same path no one is suggesting that Portugal and Spain will be out of the Europe within a week so there’s clearly some differnce in either starting conditions or response to the perscription that has resulted in different outcomes. Ronan’s article on Ireland makes a good case for the Irish differences (and I’d agree, it was least poorly situated from day one), but understanding where say Spain and Greece diverge might be part of understanding what can work, what can never work and why.

36

Bruce Wilder 07.08.15 at 7:51 pm

Henry Farrell @ 27

Stripping out the moral outrage is fine with me — I don’t imagine that I have a personal comparative advantage in the moral outrage dept in any case. I am a Yale-trained economist, and I say this is no way to run a railroad. Does that make you any happier?

If you are going to do pragmatism, you had better bring something a bit more technically credible than the diffusion of agency, obscuring of goals and forgetting of history that you were practicing in the preamble to your modest and narrow point.

37

Henry Farrell 07.08.15 at 8:28 pm

Bruce – since you seem intent on picking a fight with a post that seems to me not to resemble the post I wrote or the argument that I in fact made, I will leave you to it.

38

Tiny Tim 07.08.15 at 8:40 pm

The neoliberal criticism of Greece as a messed up state seems rest on the fact that no one in Greece pays the taxes that they are supposed to. This is an odd criticism, given its source. Tax avoidance seems to be a pretty common sport in the EU generally.

39

john c. halasz 07.08.15 at 8:45 pm

Trader Joe @35:

One of the things that you are missing is that Greek debts in 2009-10 were especially public debt, IIRC 115-120% of then GDP, twice the official rule. Hence that was what was targeted. But what really counts is the total public + private debt load on the domestic economy, (and the current account deficit which would require unavailable external financing). I’ve posted here and elsewhere a chart of a dozen or so European countries,- (it wasn’t an EZ chart since Sweden was included),- of total debt loads in 2010. Greece had the second lowest total debt, (with Slovakia the lowest), and the big outliers being Portugal and Spain, which had low public debt, below the official limit, but huge private debt loads. So there the chain went from bailing out the private sector debts, i.e. the banks, to a huge increase in public debt, (without necessarily helping ordinary borrowers much, nor kick-starting new business lending). But the scale of public fiscal adjustment was still far lower than that demanded of Greece. In contrast, Greece had to sharply cut its fiscal spending and debt, which then damaged its banks, which then required further state support. The different “causal” chains, plus the exclusive focus on public debt, (and note that private bank debt is already highly leveraged inherently, in a way that public debt is not), accounts for much of the difference.

As for Ireland’s superior performance, nothing succeeds like success, I guess. But Ireland had long pursued a strategy of corporate tax predation to attract MNC FDI, with its financial sector turned into a back office of the City to pursue tax evasion schemes, while in the midst of its boom, a huge RE and construction bubble took place, with much fraud and corrupt complicity between developers, financiers and politicians. IOW the Irish were and are not free of the taint of sin and corruption in the least, (much as I would be loathe to return them to their priest-ridden days). Meanwhile the Greeks are endlessly lambasted as the byword of sin and corruption. I guess the moral of the story is to chose your sins, like your friends, wisely. Or, on the other hand, to recognize that the Greeks have been hugely scape-goated, both in word and deed, which is why treating the whole matter in (pseudo-)moralistic terms is to be avoided.

40

Conor O'Brien 07.08.15 at 8:57 pm

@35
“Ireland makes a good case for the Irish differences (and I’d agree, it was least poorly situated from day one”
From a macro POV the arguments the Ronan uses may well be valid.
Looking at the Irish economy from the worms-eye POV, the social welfare rates were maintained at among the highest in Europe (€180 approx). Totally unjustified and a drag on the economy one might say… but: it kept a subsistence level of helicopter money floating at ground level. The other countries cut their social welfare and gutted the local-level economies.
Another big difference is that the Irish state has the capacity to collect taxes.
Another is that while it probably has the same proportion of corrupt politicians as anywhere else, the scale of their plundering is more modest and less socially galling.
But my first argument, using social welfare as helicopter money, might have been crucial.

41

Ronan(rf) 07.08.15 at 9:08 pm

Ireland’s developmental policy (particularly low corporate tax policy ) was always unpopular amongst the major continental European powers. There’s been a lot of lecturing on this and it was a pretty consistent part of the narrative through the worst stages of the conflict. The reasons the Greek are getting harangued and not the Irish is because we got off the radar .
Conor o brien- why do you think welfare has Been so strongly protected from cuts ?

42

Ronan(rf) 07.08.15 at 9:08 pm

Crisis not conflict

43

bob mcmanus 07.08.15 at 9:13 pm

(a) it is fit for purpose, and (b) whether the kind of project that it’s being used for is one that’s going to work over the longer term. We should also be wondering (c ) about the endogenous ways in which the instrument of debt as a form of political control affects the actors on both sides of the relationship, and whether it makes some successful and mutually acceptable long term modus vivendi more or less likely.

Contradictions of Finance Capitalism Richard Peet, MR, 2011

Okay, my first punt toward the specific question is that Finance or late-stage Capitalism adds an additional layer of abstraction/reification, while incorporating more of the political economy especially areas of capitalist reproduction, and could under one view be considered horribly ineffective because of various kinds of “leakiness.” Not just the capital flow leakiness that is a problem for Keynesian prescriptions, or leakiness internal to a nation to Capital and Finance, but a political leakiness in a disarticulated economy, a loss of power or an inability to apply power at a given point or time. Rather than consider the various players ineffective inept or incompetent Marxists might posit that the system has involved to a stage (hinted at by Jameson in 24 above) beyond our ability to comprehend or control with old economic tools. This will not be fixed with smarter managers, and is not reversible. There is for optimists a possible next stage that will not look like Fordist demand management or neoliberal accumulation by dispossession. It will be bottom-up, populist, look like anarchy.

Haven’t gotten around to the Marazzi Violence of Financial Capitalism yet, but there are so many more books dealing with the same crisis.

44

Rich Puchalsky 07.08.15 at 9:32 pm

political football: “I read Daniel’s argument as an application of Stein’s law: If something can’t go on forever, it will stop. The Euro folks can’t collect these debts, so they won’t.

The problem is, the unsustainability of Greek debt has implications that will take effect long before the eurozone is ready to forgive debt. Stein’s law can be reframed to take Greek agency into account: Greece can’t pay these debts, so it won’t.”

Who can hold out longer? A corrupt financial system which has already been largely bailed out? Or a desperate Greek citizen seeing what’s left of the social safety net evaporate?

There is a pragmatic science to how many people you have to make suffer to keep a population under control. “All of them except the elite” won’t do it. Driving people to desperation means that you get left wing parties, then riots, then right wing parties (in the current situation). And all that happens on a time scale that may be long for some values of long but is still a lot shorter than the time scale needed for debt forgiveness by forgetfulness.

As I wrote here, the problem is that all alternatives to the status quo are treated as equally crazy. We can agree that, pragmatically, the situation is a failure, right? Then the main alternatives are that it’s a systemic, technocratic/economical, or political failure. And all three of those are “crazy”. It’s crazy to think that this is neoliberalism: it’s crazy to think that economic experts who have been wrong for 5 years and who appear to be incompetent should be fired: it’s crazy to think that this is deeply wrong European politics in which Greeks basically occupy the position that black people do in the U.S. If people want to be able to have a nice conversation with non-crazy comment box denizens ever again, then maybe just one of these things is going to have to be reclassified as not crazy.

45

Omega Centauri 07.08.15 at 10:41 pm

It has been said before, but I’m becoming convinced its all about teh EU elite, not having to own up to loan writedowns -which presumably will be partially covered by EU (or German and French) voters. The reality is they looked the other way as the banksters took advantage of the ability to originate loans to the periphery as if they were as safe as loans to the core countries. Too much money to be made in the shortterm I presume. So now they fear, being found out. Secondly maiing Greece an example, serves (or so Merkel and company hope) to frighten the other peripheral countries away from seeking debt relief. It is this potential second wave of writeoffs, which would be really painful for the EU core voters, so the elite wants to avoid this outcome at almost any cost. Immiseration of eleven million Greeks is a small price to pay as far as they are concerned.

46

Layman 07.08.15 at 11:02 pm

“You’re certainly welcome to assert that Portugal and Spain have been failures bu the degree in nothing like what has been seen in Greece.”

What criteria are you using to judge that the Troika policies have not failed in Portugal and Spain? Both have lower GDP than they had pre-crisis; both have far higher unemployment than they had pre-crisis; and both have far worse debt-to-GDP ratios than they did before their bailouts. Their GDP is lower now than it was in 2012! It’s a failure, right?

47

A H 07.08.15 at 11:26 pm

If the Greek debt problem is a political problem, then why does the Troika insist it is a financial problem? This has to answered prior to any of the questions in the last paragraph of the post. You can’t have a political discussion if the people with political power refuse to acknowledge there is an issue to discuss.

48

Omega Centauri 07.09.15 at 1:04 am

49

js. 07.09.15 at 1:20 am

I have been hoping that Henry would write a post on the Euro/Greek crisis, and this one doesn’t disappoint. I do think that the “modest” conclusion at the end is a little too modest —there’s plenty of (close enough) historical evidence for the last paragraph’s (a) and (b), after all.

50

thehersch 07.09.15 at 1:47 am

I’d just like to add that the idea that the austerity plan put in place in Ireland was a big success is preposterous. The contraction of public spending was very modest compared with what Greece has suffered, but they’re still nowhere near back to their GDP or per capita GDP pre-crisis.

51

Map Maker 07.09.15 at 2:19 am

pre-crisis GDP for Spain, Ireland, Greece was an illusion. In spain and Ireland’s case, an illusion built on the backs of millions of immigrants and billions of dollars of speculative real estate investment, much of which will revert to farm land over the coming decade…

Surely we don’t want success to be measured by bringing back the country (less the millions of immigrants who have left) to a GDP level built on sand?

52

ZM 07.09.15 at 3:36 am

From the O.P.

“If I understand Daniel’s arguments over the last few years rightly, he thinks that the Greeks should just shut up and get on with it, since (a) the alternative is worse, and (b) given the unsustainability of the debt burden, the richer eurozone countries are going to quietly disappear it at some unstated point in the future when everything becomes less politicized. This is not, contra some commenters, a stupid or evil argument – but I don’t know that it’s right either. The Greek state is not the only one that is underdeveloped – the EU/Eurozone one is too…”

Sorry if someone has already mentioned this, but I think SYRIZA should have waited until the UN Assembly on the Post-2015 Sustainable Development Goals.

There is a passage in a draft I have read about relieving overly high debt burdens of developing countries. Greece seems to be more like a developing country so it could form a voting bloc with other developing countries in a similar position, and also as a European country it could try to get support from other EU countries for this too.

If the Greek Government did this they could have then held the referendum after the September Assembly with more international support for debt relief and maybe a UN resolution or something to back up countries with overly high debt burdens.

53

Dave 07.09.15 at 3:45 am

Omega @ 45

I’m reminded of the so-called Ledeen Doctrine that was trotted out before the Iraq War:

Every ten years or so, the United States needs to pick up some small crappy little country and throw it against the wall, just to show the world we mean business.

54

dsquared 07.09.15 at 4:16 am

Seriously guys.

Greece seems to be more like a developing country so it could form a voting bloc with other developing countries in a similar position

Greece isn’t a developing country! It’s not even a middle income country. It’s an OECD economy. It’s richer than every former Communist state in the EU except Slovenia.

55

Pete 07.09.15 at 5:05 am

I think SYRIZA should have waited until the UN Assembly on the Post-2015 Sustainable Development Goals.

Er, the whole reason we’re having the crisis now is a series of immovable deadlines for delivering various sums of money to creditors. Or are you saying they should have capitulated now with the intention of repudiating later?

56

Collin Street 07.09.15 at 5:09 am

> It’s richer than every former Communist state in the EU except Slovenia.

And who wouldn’t trust greek official statistics!

57

Tabasco 07.09.15 at 5:54 am

It’s richer than every former Communist state in the EU except Slovenia.

And also except the Czech Republic, Slovakia and Estonia. This is based on 2013 data (World Bank). By now, Greece has probably been surpassed, or soon will be, by Lithuania, Russia, Poland, Hungary, Kazakhstan Latvia and Croatia.

58

Hidari 07.09.15 at 6:28 am

When assessing the success or otherwise of austerity, the logical fallacy to have printed off and posted above your computer is Post hoc ergo propter hoc. Usually in the explicit or implicit form or ‘Our country was in recession. We tried austerity. Our country returned to growth. Therefore…..’

59

Hidari 07.09.15 at 6:29 am

@54: “It’s richer than every former Communist state in the EU except Slovenia.”

By what criteria? (serious question).

60

NM 07.09.15 at 7:01 am

What about Portugal – would that count as a success case?

61

dsquared 07.09.15 at 7:05 am

I was going by AIC from this chart http://ec.europa.eu/eurostat/statistics-explained/mobile/index.php#Page?title=GDP%20per%20capita,%20consumption%20per%20capita%20and%20price%20level%20indices&lg=en

If you use GDP per capita, Tabasco is right that a couple more have surpassed Greece, but it’s clearly not a developing country.

62

Igor Belanov 07.09.15 at 7:23 am

You’re right, it’s not a developing country by any criteria.

It’s been going backwards at a rate of knots.

63

Conor O'Brien 07.09.15 at 7:40 am

Ronan @ 41.
“Conor o brien- why do you think welfare has Been so strongly protected from cuts ?”
In Ireland’s case, the Troika made it’s demand similar to it’s Greek one. Close the fiscal gap whichever way you choose: raise taxes or cut welfare, it’s your call. It did not, as far as I can see put any emphasis on keeping the money flowing.
That need to keep a flow of money is the point I would like to emphasise, however it should come about. If that is true, then a Greek solution will need to incorporate it.
As for why social welfare in Ireland was protected, I suspect that Fianna Fail was realising that it was facing into an abyss of losing power. Since the holding of power had become it’s defining institutional characteristic anything that pushed them towards the edge would be strongly resisted. That push was the protest of 10,000 pensioners against losing their medical cards. Fianna Fail recoiled from the possibility of facing an election with the pensioners on it’s back and also pulled back from major welfare cuts.
Without realising what they were doing they had retained sufficient money in the system to keep it moving.
I don’t agree with our high levels of social welfare, but it is the most immediate way of helicopter money in a crisis.

64

ZM 07.09.15 at 7:53 am

dsquared,

“Greece isn’t a developing country! It’s not even a middle income country. It’s an OECD economy. It’s richer than every former Communist state in the EU except Slovenia.”

Greece ($25,858) is much closer to Malaysia’s ($24,654) and Argentina’s ($22,582) GDP PPP per capita than Australia’s ($46,433) England’s ($39,511) or Germany’s ($45,888)

Therefore I think Greece is more like a developing country

https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

65

ZM 07.09.15 at 8:00 am

Pete,

“Er, the whole reason we’re having the crisis now is a series of immovable deadlines for delivering various sums of money to creditors. Or are you saying they should have capitulated now with the intention of repudiating later?”

Yes, they should have timed this discussion and the referendum till after the September Sustainable Development Goals Assembly.

Then they work with countries in similar predicaments or countries who are sympathetic to pass a motion on debt repayments being forgiven or something lengthier, then they campaign in the EU for forgiveness of their debts etc

As the Sustainable Development Goals are to apply to rich countries as well , especially with regards to making production and consumption sustainable in rich countries, Greece can then say they are more sustainable and the rich countries can give them transfers which will assist in cutting the rich countries consumption to more sustainable levels.

66

Conor O'Brien 07.09.15 at 8:04 am

thehersch @50, Map Maker @ 51 and Hidari @58
On the idea that austerity per se was a success, or that we even had prosperity during the bubble years. Both ideas need a lot of unpacking and I suspect that austerity for growth would be seen as one of the more seriously deflated illusions if they were.
Bubbles are by definition a bonfire of money. When they are gone people still have to restart; denying them the means of starting by restricting the supply of money into the real economy while re-inflating the financial system is blackguarding.
As I said Ireland was fortunate in holding social welfare to keep things going. There were surely other and better ways of doing so, but it got done.

67

Tabasco 07.09.15 at 9:00 am

it’s clearly not a developing country

This is exactly the mindset that has contributed to the present crisis. Greeks want to be thought of as a small advanced European country, like, say, Denmark, with consumption levels to match, hence their attachment beyond all reason to that putative instrument of prosperity, the euro. But Greek production and income levels are like, say, Slovakia. And if things go really badly from now on, it’s Albania here we come.

68

Tadhg 07.09.15 at 11:20 am

@67 Tabasco… but Denmark is NOT in Euro, while Slovakia IS…

69

engels 07.09.15 at 12:05 pm

70

Lee A. Arnold 07.09.15 at 12:22 pm

Could we please stop with the “us vs. them” shit? It is now part of the problem.

There are two conversations going on in comments here, the practical and the ideal. Their separability, for the pragmatists, depends upon assumptions about whether the system can work well enough, with a fix. I am not so sure that it would be anything other than a temporary patch. But the ideal argument, that the underlying issues need to be addressed, misunderstands those underlying issues.

So I think that this is not about growth rates per se, not about a moral and knowledge problem of “evil and stupid”, not about politics or pragmatics either. It looks like an impasse of a broader, deeper, epochal kind.

I think that each of the following sentences is true, however much they conflict: Credit and debt are necessary, intertwined, two sides of the same coin. Credit and debt are failing to secure the whole system. … Austerity doesn’t work: Debtors are forced to find something to produce that has value to the rest of the system, even though there may realistically be nothing much. Easing doesn’t work either: Writing-down debt while providing assistance, even for a temporary period, undermines the intentionality and trust of voters and private investors throughout the rest of the system; and easing, when structured at best, just kicks the problem down the road another year or decade. … Arguing about relative debt-loads or growth-rates tricks you into thinking that you know a way out that can or will work. The success of the economic system in the past (or its relative success) is not a guarantee of success in the future. … Social welfare spending brings hazards of laziness, dependency, inefficiency. Social welfare must be massively increased to prevent immediate human deprivation, and to keep people strong for future economic growth should any be possible or forthcoming.

Und so weiter.

–Does any of this stuff sound familiar? Could Grexit solve the Euro problem?! The Euro problem is IDENTICAL to the stalemates in the US and elsewhere. The political structures are different in each case, but the underlying clues poke through at every joint and junction. “Neoliberalism” and “socialism” are side issues. “Left” and “Right” are side issues. These are ways for idea-jockeys to blame one side or the other, and thus to avoid thinking about how the imperatives of our own system are pushing us beyond the boundaries of individual psychology. We have run-out of new ideas and useful distinctions and definitions, we are just motoring on the old fumes. Why do we keep going around in circles on this?

These sorts of symptomatic impasses are rarely seen, except by psychotherapists. But it’s all of us, now without exception. We are approaching a transformation beyond the millennial psychology of money — it’s been three millennia, at least — and the old rituals are ringing hollow, but we don’t know how to do it, we don’t know where it goes or what comes next.

At this point, starting with a little more grace from ALL sides is the scientific order of the day; and if things are to proceed from evolutionary emergence, then you will know them by their fruits.

71

Adam Hammond 07.09.15 at 12:34 pm

Bild’s 5-point plan should not be credited by thinking people. If Greece exits the euro (point 1) then it’s new currency will plummet against the euro. Thus, a 50% write down on debt denominated in Euros(! – point 3) is no reduction at all. Their effective debt would explode. This is a plan for people who want to sound reasonable but not actually use reason.

72

Ronan(rf) 07.09.15 at 12:38 pm

Normatively, I agree with Z:

“The sad truth is that I would answer “no” to the first (indirect) question (in particular, but not only, because of Krugman-like reasons), “hell, no” to the second (the diversity of European societies cannot be subsumed in a project that assumes we are all, or all soon will be, retired, qualified, middle-class, lutheran Germans with 1,9 grand-kids) and “there is a very real prospect that the behavior of the EU towards Greece will in retrospect be seen as the original crack announcing its demise” to the third.”

But I wonder about (b). Does it have to be that, ‘the diversity of European societies *(will)* be subsumed in a project that assumes we are all, or all soon will be, retired, qualified, middle-class, lutheran Germans with 1,9 grand-kids.’? The US seems to have maintained some significant regional differences (culturally and economically) under monetary union ?
Also, as a practical matter, is there any plausible political process where the Euro could break up without causing serious economic and political damage (an orderly breakup)? How could countries like Spain, Portugal, Ireland and Greece manage their exchange rates outside of the Euro and would they be better off (keeping in mind the institutional and political culture problems in those countries) ? (These are genuine questions, btw, as I dont understand the ins and outs of monetary policy in any meaningful way)

73

Sasha Clarkson 07.09.15 at 1:20 pm

“‘We underestimated their power’: Greek government insider lifts the lid on five months of ‘humiliation’ and ‘blackmail'”

http://www.mediapart.fr/en/journal/international/080715/we-underestimated-their-power-greek-government-insider-lifts-lid-five-months-humiliation-and-blackm?page_article=4

Because of the setup of the Euro and the ECB, Germany and Schäuble have the power here: they have chosen to use that power to destroy and not create. Unless there is a last minute change of heart, Germany will again be hated, European solidarity will step back eighty years, and the EU is finished in its present form.

I will vote Brexit, stop shopping at Aldi and Lidl, and avoid knowing buying any German product ever again.

74

Ronan(rf) 07.09.15 at 1:20 pm

“Greece ($25,858) is much closer to Malaysia’s ($24,654) and Argentina’s ($22,582) GDP PPP per capita than Australia’s ($46,433) England’s ($39,511) or Germany’s ($45,888)”

Going by GNI Greece is still rated as a ‘high income country’

https://en.wikipedia.org/wiki/List_of_countries_by_GNI_%28nominal,_Atlas_method%29_per_capita

There’s a significant difference between it and Malaysia (which I asssume is because Malaysia is an export orientated economy and profits are repatriated ? ), and standards of living in Greece are still significantly ahead of other EU countries. By any (relative) measure Greece is a wealthy country.

75

ZM 07.09.15 at 1:27 pm

Well possibly having significantly higher living standards and incomes than Malaysia but GDP PPP per capita only a little higher is why Greece has such debt problems now?

76

Barry 07.09.15 at 1:40 pm

“It basically isn’t an economically meaningful number any more. The purpose of its existence is as a political quantity; it’s part of the means by which control is exercised over the Greek budget by the Eurosystem. The regular rituals of renegotiation of the bailout package, financing of debt maturity peaks and so on, are the way in which the solvent Euroland nations exercise the kind of political control that they feel they need to have if they are going to be fiscally responsible for the bills.”

My apologies if this has already been covered, but the last clause is simply false. The Greek government proposed, among other things, raising taxes on the rich. The EU/ECB said that that wasn’t allowable, since it would be ‘recessionary’. Slashing retirement and gutting the health system wasn’t, in their eyes.

In the end it’s the financial elites crushing any resistance to their looting.

77

Rich Puchalsky 07.09.15 at 1:51 pm

Barry: “My apologies if this has already been covered, but the last clause is simply false. “

How is the last clause false? The solvent Euroland nations are exercising the kind of political control that they feel they need to have by forbidding the Greek government from raising taxes on the rich and forcing it to slash retirement.

The difference between calm, pragmatic financial expert and unserious comment box warrior is simple. It’s in how you write things.

CPFE: “the kind of political control that they feel they need to have if they are going to be fiscally responsible”
UCBW: neo-liberalism

Even though they say the same thing, the second one is obviously crazy and marks you as UCBW. Don’t get caught by this simple mistake.

78

Barry 07.09.15 at 1:52 pm

Hidari: “1: Humiliating and disastrous climb down for the Greeks, total defeat which may (or may not) lead to some form of debt relief at some indeterminate point in the future”

That’s what Greece has already suffered over the past few years – humiliation and destruction.. The Troika regards that as a ‘good start’, and are working and driving Greece from depression to depression-squared.

I’m going to Godwin here – for example, if Nazi Germany had won WWII, there’d have been ‘peace’ in the East, but only after a quarter to half of the population was killed, and the rest ground down into slaves. Somebody made a joke that Hitler looked upon Stalin’s horrors as a ‘good start’, which he intended to finish.

Similarly, the Troika regards what it has done in Greece as a ‘good start’, and their end game lies somewhere beyond horrors.

79

Barry 07.09.15 at 1:57 pm

Rich, perhaps I should explain myself more clearly – my point was that the Troika is not working to make Greece ‘more fiscally responsible’:

1) First, none of the Troika care a bit about ‘fiscal responsibility’ – look at the bank bailouts for that.

2) They are not allowing the Greek government to choose those fiscally responsible things which don’t fit into Troika goals other than ‘fiscal responsibility’. I gave a rather clear example of raising taxes on the rich.

80

Barry 07.09.15 at 2:03 pm

Rich: “If the argument is that Greece has no control and they’d better surrender now rather than later — and continue to be ground down, because they “surrendered” already every year for 5 years — that’s ludicrous politics. People don’t stand for that year after year. Just as happened with the U.S. and Iraq, Greece may well be rubble at the end of the process, but the imperial power doesn’t get that many years before they are driven out.”

This is the most important point of the whole question (note that the right dodges this);
anything which doesn’t take this into account is sadly lacking:

The Troika took a bad situation, and applied quite destructive policies.
When those destructive policies produced destruction, instead of the (stated) desired outcome, they continued and increased them.
As the cycle of destruction increase, the Troika kept on destroying.

The choice for Greece now is between whatever the Troika regards as ‘enough’ destruction, or anything else.

Somebody put it that ‘when you’ve had no job for five years, and no chance of getting a job, it’s not important if you’re not paid in Euros or drachmas’.

81

Rich Puchalsky 07.09.15 at 2:03 pm

“Rich, perhaps I should explain myself more clearly”

I know, I was just agreeing with you and being sarcastic.

82

Lee A. Arnold 07.09.15 at 2:07 pm

Well, the Troika no longer can guarantee what brings growth, though they cannot admit it. They are going with the easy “logic” that taxing the Greek rich would harm growth, and would also get them ejected from the cocktail parties.

At the risk of testing patience by going back to basic economic anthropology, it appears that many people including some economists are unable to stand objectively outside the psychology of money, and thus to see what we are really dealing with now. Money was NOT developed to avoid the necessary coincidence of barter! This came as a later supervenience.

Money has two very different functions, one of them so deep as to be a part of our being. They perhaps began in separate social systems, then became combined:

1. Money began as a method of accounting for how much grain there was in ancient storehouses, so it could be apportioned to the populace by the ancient emperors. Thus, Money = markers for enumeration of stuff.

2. Money also began, in other tribal systems, as objects to be shared in religious ritual, to be handled by everyone and sometimes to be awarded to the best or the fastest or the most admired or the leader. Thus, Money = sign of inclusion of everyone, with agreement by everyone on relative status and gradation. Universal inclusion + agreement on relative status: both integrally psychologically important.

When these two practices became mixed (Felix Martin’s new book locates this event in 6th-century BC Greece, just after Phoenician traders brought Mesopotamian accounting to the Homeric ritual tribes), all sorts of ritual and honorary transactions became listed in money units, and markets for various goods were created inside the social system. (Indeed this also may have been the reason for the beginning of Western science, as the ancient philosophers began to imagine that the natural world might be based upon numbers.)

3. There was an additional crucial function, on the ritual-money side. (Both Martin and David Graeber barely mention this.) The old ritual objects had sometimes been used as payback markers for individual private goods, services or honors rendered during the tribal year. All of these transactions would later be acknowledged in one huge ceremony that returned the ritual objects to their rightful givers at the big annual ritual, for all to see. This function was observed in the “Big Man” system of the Melanesian tribes, and in the potlatch system of the Kwakiutl. This part of the annual ritual festivities was effectively a clearing-house with society-wide recognition.

Thus, the status function is not merely the “hey, look at me” dance of the the Big Man, prancing around in a necklace with the most returned cowrie shells, or today’s young woman with a Hermès bag or Hollywood tinsel.

What is status? You don’t want to lend your own valuable stuff to someone who won’t pay you back — in some way — and you also don’t want to do it, because it will increase the number of people in the world who cannot be trusted, which makes your whole world riskier. Status the anthropological principle, properly understood, is the sign of people to whom you might lend, with expectation of being repaid: people to whom you might give CREDIT. They have that status, and it is what you hope that you have, too. It is a bedrock principle, true of people on the Left as well as the Right, and it is still unclear whether any of us is really able to think or function without it, (although it may now be required to do so).

And in a day when everybody can get access to Hollywood tinsel, and everybody knows that big cars and Learjets are embarrassing phallic symbols, then real status is proper conduct in conversation, and knowing your facts, and meeting your promises. It is unclear whether any of us would really want to think or function without that.

So this is a little bit more of what’s really going on, here. With the austerity debates in the recession, and now with Greece and the Euro, the issue of credit, debt, trust, status is front and center everywhere, for all the world to see. If recent history is any indication, it is not going to disappear, it is going to get worse.

Now there is another hitch, really a minor one, though it is enough to confuse a lot of people: Can money be printed? Doesn’t money itself have to be something valuable, like gold out of the ground, like the imputation of divinity to ritual objects, so that people will receive it readily; and isn’t the fact that it is now printed, the source of inflation, devaluation, and economic distress? I.e, aren’t the gold standard enthusiasts correct? The answer is No: money doesn’t have to have value in itself. But the answer is still: money does have to be tied to the expectation that someone will give you something back, whether it’s someone you lent the money to; or someone else you give the money to, in exchange for a good or service. That means, in today’s system, the printing of money must be linked generally to the level of expansion of production for sale. And this last part is a hitch that’s not so minor, anymore.

(I think a long-term interim strategy to get out of this mess is to directly print money for government monopsonies who pay to private providers for goods and services that are subject to unavoidable and costly market failure, such as healthcare, retirement security, etc. This means that the providers would accept income ceilings (to avoid general inflation) in exchange for employment security, which I imagine will become an increasingly attractive lifestyle option, compared to the mess-and-stress of dispossess-and-regress. In other words, the condition of what “status” is, will change.)

Anyway, back to present-day circus in Europe, or perhaps it should be expanded to, “Creditors and Debtors”…

83

Barry 07.09.15 at 2:11 pm

Glen Tomkins: “I think it’s absolutely correct to look at this matter as a political rather than a financial problem. The financial problem is long resolved, the solution applied being to bail out the irresponsible lenders. The other part of the decision has been to refuse to bail out the arguably irresponsible sovereign borrower, yes, precisely as a political mission civilatrice.”

This. A thousand times this. I notice that the neoliberals never cover the ‘moral hazard’ of bailing out the bankers.

84

Barry 07.09.15 at 2:12 pm

dsquared: “As the election of Syriza shows, the problem was the opposite-they did too much, too fast. Without getting all “shock doctrine” here, a massive amount of progress has been made in restructuring Greek society in the last five years. Even tax compliance was getting better.”

Now you’re just lying: ‘a massive amount of progress has been made in restructuring Greek society in the last five years’ only in the sense of ‘causing a depression’.

85

Igor Belanov 07.09.15 at 2:17 pm

“I will vote Brexit, stop shopping at Aldi and Lidl, and avoid knowing buying any German product ever again.”

Grow up man.

86

Tom Bach 07.09.15 at 3:12 pm

Massive cuts to the pensions, massive unemployment among the youths, to say nothing of a massive sell off of public properties at fire sale prices and the inability to set one’s own tax policies and, of course, the prolonged depression are evidence of the successful progress of the massive restructuring.

87

reason 07.09.15 at 3:19 pm

Barry @80
“Somebody put it that ‘when you’ve had no job for five years, and no chance of getting a job, it’s not important if you’re not paid in Euros or drachmas’.”

That was Wolfgang Münchau.
(Who is mostly very good). Writes in Der Spiegel and FT.

88

nothingforducks 07.09.15 at 4:00 pm

The closest thing to “The troika is watching out for their rich golfing buddies” sticking points in the most recent round of negotiations as far as I’ve seen were Syriza’s proposal to raise the corporate tax rate from 26% to 29% and the one-off tax on corporate profits. That’s all. But this is odd, is it not? That means either

1) Syriza didn’t propose any significant income tax raises on higher incomes or wealth taxes worth fighting over. Maybe such taxes would not actually generate that much revenue despite having the optics of being more socially fair and redistributing the burden to the well-off. Or maybe Syriza realizes the Greek state still doesn’t have the capacity to collect these taxes. Or maybe even Syriza also has to appease certain powerful, wealthy interests and cannot risk assaulting their private wealth directly. (Somewhat related: I thought Syriza promised to work with the shipping industry to remove most of their constitutional tax exemptions, but I read something about a month ago [can’t find it now] that the Troika wanted these tax exemptions gone and Syriza objected.)

-or-

2) Syriza did propose such income and wealth taxes, but this did not generate any objection from the Troika institutions and thus never really entered the news cycle. But if the Troika was on board with increasing tax progressivity to make the austerity slightly more tolerable, why wouldn’t they loudly broadcast it in the media?

89

W.T. Dore 07.09.15 at 4:00 pm

Henry Farrell @28
“Pragmatism” is often used as a cover to avoid talking about what goals and whose interests, precisely, we are pragmatically working toward.

90

dsquared 07.09.15 at 4:05 pm

Now you’re just lying:

Enjoy yourselves, lads. See you later.

91

Z 07.09.15 at 4:21 pm

But I wonder about (b). Does it have to be that, ‘the diversity of European societies *(will)* be subsumed? The US seems to have maintained some significant regional differences (culturally and economically) under monetary union ?

Why, sure, but with vast transfers and (to me the crucial point), with a much more vigorous democratic control from the population. If the US economy policy was carried over with the interests of retired Floridans, at some point electors in other states would force a change of course. Of course, the diversity of European societies will in fact endure, but most people will suffer within a woefully inadequate economic system.

92

Layman 07.09.15 at 4:31 pm

Plus, the U.S. has much greater labor mobility, at least in theory, because of having a common language. Unemployment can be uneven regionally in the U.S., but nothing like as uneven as it is in the Eurozone. Unemployed Alabamans can seek jobs in Texas much more readily than unemployed Greeks can seek jobs in Germany. This is one way that European diversity works against stronger union.

93

Sasha Clarkson 07.09.15 at 4:36 pm

@85 Igor: why would a consumer boycott be infantile? A one day boycott/picket of German-owned business all over Europe might send a sharp message!

It might be interesting to look at reforms the Troika have NOT insisted upon, namely taxing the media, which don’t pay tax on advertising, nor fees for the bands they use. But they are incestuously linked to the banks and the business and political oligarchs who have looted Greece for so long, and of course are extremely and probably illegally one-sided in their coverage.

http://www.thepressproject.gr/details_en.php?aid=79064

94

Barry 07.09.15 at 5:13 pm

dsquared 07.09.15 at 4:05 pm
Me: “Now you’re just lying:”

dsquared: “Enjoy yourselves, lads. See you later.”

I know that I’m throwing a punch in the back, but:

1) ‘There is one rule for contrarians – do not whine’.

2) Your statement “As the election of Syriza shows, the problem was the opposite-they did too much, too fast. Without getting all “shock doctrine” here, a massive amount of progress has been made in restructuring Greek society in the last five years. Even tax compliance was getting better.” is quite clearly false. I’m looking at that curve of the Greek GDP from the interfluidity post upon which you commented, and see a massive and ongoing collapse.

3) In addition, you seem to be blaming Syriza for things done by others long before they took power, although that could merely be clumsy writing.

95

Hidari 07.09.15 at 5:19 pm

“This is one way that European diversity works against stronger union.”

Another is lack of a common language, wildly different economies (a gap which is becoming wider) completely different national histories, a history (in the ‘West’) of the various countries knocking seven shades of shit out of each other…..The EU will never be the US. Never.

96

Guano 07.09.15 at 5:21 pm

Most comments to me appear to be off-topic.

Key questions:-

1 – Is it true that the Greek state a mess?

2 – How could this be more than 30 years after Greece joined a Union of supposedly effective, liberal democratic states?

3 – Is anything that is happening at present actually addressing this issue?

PS I have a certain amount of sympathy with the following observation. “There are instances of successful political-restructuring-from-outside in Germany and Japan, but both of those involved (a) military occupation over a long period of time, and (b) relatively strong pre-existing state structures.” I would add that Germany and Japan were comprehensively defeated militarily. Political restructuring from outside didn’t turn out so well in the case of Italy. There are few cases of successful political restructuring from outside because
– it is difficult
– most attempts to do so haven’t really engaged with the difficulties.

97

Hidari 07.09.15 at 5:24 pm

Anyway it’s all over bar the shouting. Syriza caved in: “We don’t yet know the details of Greece’s plan, but one report says there will be €13bn of fresh austerity. A heavy blow for the economy after years of recession, and the current banking shutdown.”

So Dsquared was right. They should just have surrendered immediately and saved them (and us) 6 months of pointless pseudo-resistance.

http://www.theguardian.com/business/live/2015/jul/09/greek-crisis-reform-plan-grexit-tsipras-draghi-live

98

Tom Bach 07.09.15 at 5:51 pm

According to the Guardian the deal is so sure to improve Greece’s economic outlook that it may well include humanitarian aid. Three cheers for massive restructuring.

99

Ronan(rf) 07.09.15 at 5:53 pm

1) ‘There is one rule for contrarians – do not whine’.

this is a good rule, but in fairness his position is genuine rather than contrarian here so it doesn’t apply.

ZM- I genuinely don’t know the answer to your question. I was really only responding to the “developing country” point (which Greece isnt, and neither are Malaysia and Argentina )

100

politicalfootball 07.09.15 at 6:01 pm

Barry in 84 and 93: Before you accuse people of lying, you really ought to take a moment to read what they’ve said, or if you can’t do that, maybe have someone read it to you. You’ve quoted the same dsquared statement twice now, apparently without any comprehension whatsoever.

The interfluidity chart that you didn’t bother to link — you mean this one, right? — supports dsquared’s point. What part of “too much, too fast” is confusing to you?

Moreover, he’s not “blaming Syriza for things done by others.” He’s explaining Syriza’s election by attributing it to the results of actions of others.

Dsquared is a sensitive guy, and appears to be bothered by a rude, boneheaded commentary like yours. If you can’t refrain from saying foolish things, you could at least try not to be nasty about it.

101

Ronan(rf) 07.09.15 at 6:02 pm

ZM – or at least, Malaysia and Argentina might be by some measure, but Im *pretty sure* theyre not considered to be generally.
There might be some comparisons that could be made though, ie

http://pseudoerasmus.com/2015/02/23/greece-orthodoxy-peronism/

102

Lupita 07.09.15 at 6:24 pm

When I see photos of Greeks lining up at the ATM, I fail to notice the aura of third-worldishness that bad teeth and old clothes convey. I do not deny they are suffering, but it is the suffering of educated, healthy, NATO people having their benefits cut. They do not seem to be carrying the heavy burden of hopelessness, seen in hunched shoulders and dead eyes of your typical third-worlder under the yoke of the IMF, who has no pension to be cut, no humanitarian aid on the way, no finance minister arriving on a motorcycle and leather jacket to speak up for them.

My point is, being a third-worder is more than per capita GNP.

103

TM 07.09.15 at 6:24 pm

72: “Does it have to be that, ‘the diversity of European societies *(will)* be subsumed in a project that assumes we are all, or all soon will be, retired, qualified, middle-class, lutheran Germans with 1,9 grand-kids.’?”

For the record, fewer than 30% of Germans are Lutherans (https://de.wikipedia.org/wiki/Religionen_in_Deutschland). The “diversity of European societies” is really not what is at issue here.

104

dsquared 07.09.15 at 6:35 pm

I’m not particularly sensitive, I’m just busy. I’ve got my family around me, I’m seeing some really interesting places and I’m trying to get a freelance career started. I have to prioritize things a lot more, so arguing with rude people who don’t really understand what they’re talking about is a lot lower down the food chain than it was when I had a desk job.

105

Barry 07.09.15 at 6:54 pm

Ronan(rf):

“Moreover, he’s not “blaming Syriza for things done by others.” He’s explaining Syriza’s election by attributing it to the results of actions of others.”

Who would these ‘others’ be? Please note that the Troika has gotten it’s way in austerity, with utterly predictable results.

“Dsquared is a sensitive guy, and appears to be bothered by a rude, boneheaded commentary like yours. If you can’t refrain from saying foolish things, you could at least try not to be nasty about it.”

Dsquared is a guy who can and does dish it out. He’s only sensitive when people strike back. I like him, and what he has to say is frequently valuable, but on these matters he’s been rather orthodox for years, no matter how badly the orthodoxy has failed.

106

Ronan(rf) 07.09.15 at 7:02 pm

Barry – (fwiw, that’s politicalfootball not me you’re responding to) My own perspective on the ‘dsquared situation’ (which I wouldnt normally offer as I try to stay out of this stuff, and I couldnt see why anyone would care) I agree with js on a past thread. At this stage I get a lot out of his input, and would prefer it to continue so it would be better (IMO) if everyone stepped back from this endlessly tedious butting of heads.

107

Joshua W. Burton 07.09.15 at 7:20 pm

A frivolous question, meant somewhat seriously. The outright Grexit scenario assumes that Greece would very quickly create a theoretical new drachma, with a floating conversion rate against the physical (and digital) euros currently in circulation, and realize that drachma as quickly as feasible through renumeration and physical printing.

What if Greece, instead, takes the Janis Joplin song to heart, and with “nothing left to lose” in the way of continental goodwill, exits and starts printing euros? Greek-marked and numbered ones at first, then when the rest of Europe stops emoting and gets the bureaucracy moving toward an effective cordon sanitaire (how long for that? hours? a week?), prolongs the magic moment by printing up some Belgian and German ones, just for the pure hell of it. The end-state to be the same, of course (an inflated Greek national currency, and lasting ill-will), but a lot can happen in a very short time if they open the banks and do it up right. No country in the world has ever been so well positioned, just in terms of having the right paper and ink, for this unfriendly act, traditionally considered a literal act of war.

But Europe doesn’t fight wars any more . . . at least to the extent that I doubt the Bundeswehr could airlift a useful force into Athens quickly enough to make a difference. So the early moves of the wargame play out as a paper race between ordinary Greeks trying to do what they all are quite happy if not desperate to do (spend money) against slow European institutions and ordinary Europeans, who are certainly not as primed to start looking closely at the fine print in their wallets. (I once tried to exchange UK money after leaving Heathrow for O’Hare, and discovered I was carrying a Gibraltar note, of purely novelty value outside the UK but handed to me innocently by a restaurant in Cambridgeshire, I think.)

My question: I don’t even know what Europe’s first countermove would be, nor how quick nor how effective. Would anyone knowledgeable care to speculate? Note that the effect of (unrealistic) mouse-that-roared success would probably be favorable to, e.g., Spain (they wouldn’t get a share of the “counterfeit” helicopter drop, but they would benefit indirectly from any devaluation of the “real” euro caused by leakage and uncertainty) so multilateral action against bad euros might be slower and more contentious than naively expected. In the upside limit of complete failure to respond effectively to an inconceivable act, Europe (after much gum-flapping) comes back to the negotiating table, and Greece gets away with a very informal partial debt forgiveness by inkwell. What’s the downside limit, from Greece’s point of view, and how much worse is it than what they’re now facing?

108

Layman 07.09.15 at 7:27 pm

“At this stage I get a lot out of his input, and would prefer it to continue so it would be better (IMO) if everyone stepped back from this endlessly tedious butting of heads.”

Everyone except him, you mean?

109

Ronan(rf) 07.09.15 at 7:35 pm

Well, I didnt specify who ‘everyone’ was on purpose; so as not to begin another round of ‘but he started it/is as bad.’
On these past few threads I do think he’s more sinned against than sinning. In the grand scheme of things, can we call it a draw ? (Last Ill say on this sub thread)

110

Layman 07.09.15 at 7:54 pm

Joshua W. Burton @ 105

Genius. The Greek version of the $2 trillion coin solution to the debt ceiling.

111

politicalfootball 07.09.15 at 7:58 pm

Who would these ‘others’ be?

Syriza’s predecessors .

I think I see where you screwed up, though I can’t imagine what you were thinking with the other part, when you falsely called dsquared a liar.

Here, you’ve quoted dsquared out of context, omitting the antecedent for the word “they.”

Here’s what you quoted:

As the election of Syriza shows, the problem was the oppositethey did too much, too fast. Without getting all “shock doctrine” here, a massive amount of progress has been made in restructuring Greek society in the last five years. Even tax compliance was getting better.

Here’s the immediately preceding sentence:

First, I don’t think the Greek state was doing the minimum required, grudgingly. They achieved a primary surplus!

So “they” is not Syriza. “They” is “the Greek state.” One tipoff here is that, as you noticed, one cannot attribute to Syriza the policy decisions that preceded the party’s election.

Unlike dsquared, I still have a desk job.

112

politicalfootball 07.09.15 at 8:10 pm

At this stage I get a lot out of his input, and would prefer it to continue so it would be better (IMO) if everyone stepped back from this endlessly tedious butting of heads.

For the record, I am in favor of butting heads. I didn’t even come out against Barry being an idiot or an asshole. I was just proposing that when Barry insists on being an asshole, he should avoid being an idiot, and vice versa.

113

Garrulous 07.09.15 at 8:11 pm

@106 intriguing scenario…:

I think the response could be surprisingly swift, decisive and if necessary brutal. Mass state counterfeiting would condense and clarify all the previously-still-slightly-vague feeling of Greece/Greeks as rogue state, scam artists, shysters, parasites, not-quite-European-(anymore), etc. All now concentrated into one clear action of betrayal and subversion, an act of economic war.

Not too hard to sell that as needing an immediate response. But it could be dressed up as a police action – GSG-9 into the Athens Mint, but as enforcing Europol warrants, or something.

114

phenomenal cat 07.09.15 at 9:07 pm

” When I see photos of Greeks lining up at the ATM, I fail to notice the aura of third-worldishness that bad teeth and old clothes convey. I do not deny they are suffering, but it is the suffering of educated, healthy, NATO people having their benefits cut. They do not seem to be carrying the heavy burden of hopelessness, seen in hunched shoulders and dead eyes of your typical third-worlder under the yoke of the IMF, who has no pension to be cut, no humanitarian aid on the way, no finance minister arriving on a motorcycle and leather jacket to speak up for them.

My point is, being a third-worlder is more than per capita GNP.” Lupita@ 101.

Always good to see a Lupita comment and the perspective it brings. I wish you would comment more often. I think your observation is mostly correct. The Greeks are not (yet anyway) third-world by any stretch of the imagination. But that is what is so fascinating, macabre, and grotesque about this ordeal. I recall thinking in 2009 when the situation in Greece began to grab headlines, “Shit, it’s really happening. The ‘West’ has begun to colonize itself. Pretty soon everyone is going to owe the World Bank or the IMF a debt they cannot repay.”

We’ve entered the terminal and extremely decadent phase of historical process that began 500 years ago. It’s an old story for 90% of the rest of the world, but for the good little people of Europe, the US, and the Commonwealth countries it’s a new and terrible fairy tale come to life.

115

kidneystones 07.09.15 at 9:26 pm

Henry is right to move the issue to the political. The Greeks owe EU taxpayers a great deal of money. Most agree the Greeks will not be able to repay this debt inside or outside the Euro. Whatever one thinks of Daniel ( an entirely irrelevant question) the fact that the current Greek government has maneuvered itself into accepting terms far worse, it seems, than they rejected as recently as a week ago entirely vindicates Daniel’s fundamental point – that Syriza bears a large part of the responsability for making a very bad situation a great deal worse. I’m keen to hear counter-arguments on that point.

I thank Henry for very subtly moving the discussion into an area where there might be some progress. The economic argument leaves very little opportunity for constructive resolution as the last five years and the numbers confirm. Thinking about the problem in political terms at least allows us to introduce a broader and probably more meaningful set of costs and benefits.

I’m all for being flip and my own posts are full of typos. However, the unforgivable sloppiness and ignorance of some comments here and in other threads is positively infantile.

116

politicalfootball 07.09.15 at 9:47 pm

the fact that the current Greek government has maneuvered itself into accepting terms far worse it seems, than they rejected as recently as a week ago

What’s the comparison here? What have they accepted, and how does it compare with what they turned down?

117

Joshua W. Burton 07.09.15 at 9:51 pm

Mass state counterfeiting would condense and clarify

Note that the older Greek euro bills (which look exactly like the new ones, and could even have the same serial numbers with trivial nefarious effort) would still be legal tender, under European law that is probably not narrowly dependent on the Greek government’s continuing fidelity to the relevant treaties. And a lot of those are already in the hands of completely innocent citizens, all over Europe. It’s not state counterfeiting in quite the conventional sense; it resembles it as ordinary burglary resembles the disposition of chattels in a messy divorce.

118

Hidari 07.09.15 at 10:02 pm

“Whatever one thinks of Daniel ( an entirely irrelevant question) the fact that the current Greek government has maneuvered itself into accepting terms far worse, it seems, than they rejected as recently as a week ago entirely vindicates Daniel’s fundamental point – that Syriza bears a large part of the responsability for making a very bad situation a great deal worse. “

Syriza undoubtedly made things worse (assuming that the deal is as bad as it sounds) because but I’m not sure whether it’s their fault, as such. As Daniel never failed to point out, although he didn’t quite phrase it that way, international politics is about power (and nothing else) which is why the referendum changed nothing (except that it made things worse). War is politics by other means. Ipso facto, politics is war by other means.

If you go into a fight you have to have something to threaten the other person with. As everyone has pointed out, Greece had a weapon when the crisis first started (i.e. before Syriza) as the EU was vulnerable and Greece could threaten Grexit. This would financially hurth the dominant (i.e. richest) powers in Europe (like Germany and France). So had they struck then, the Greeks might have been able to negotiate something. But they chickened out, and the moment was lost. Then the EU took steps to make themselves invulnerable to this threat (or seemingly so….Dsquared wrote a CT post about this) and whether or not this ‘financial firewall’ would in fact work is irrelevant. Everyone believed it would work, and suddenly the Greek threats were rendered null and void.

In other words, the Greeks took a knife to a gunfight, and were rapidly outfought.

We are then faced with a dilemma: in the absence of a credible threat what could do the Greeks do? As many on the left are very belatedly coming to realise, the Euro is an austerity machine. That’s what it does. It doesn’t do anything else.

Therefore, in the absence of credible threats, Syriza were caught in a bind. They were voted in on a promise of a: remaining in the Euro and b: being anti-austerity. But this politics does not exist. Indeed it is a contradiction in terms.

The referendum made things worse because Tsipras was forced (or forced himself) to go on TV and endlessly tell the Greek people something that was not true: that a ‘no’ vote was not a vote for Grexit (if he had told the truth and told them that it was, the result would have been very different). So the Greek populace were led to believe that there was the possibility of Euro membership and anti-austerity.

But this option did not exist, and European politicans correctly ignored the result of the referendum as the Greeks had essentially chosen, not yes, not no, but ‘not real’.

Therefore the referendum in reality weakened Syriza, or more specifically Tsipras as, because of his own position and public statements, the referendum was seen as a vote against austerity, yes, but also as a vote for continued membership of the Euro..

Therefore, he had revealed that in reality his own people did not, in fact, stand behind him. They expected him to keep them in the Euro. Had he not promised them that he would keep them in the Euro?

And so this time he went into a gunfight, not with a knife, but with nothing. And he was quickly, therefore, tied up, stripped, and forced to ‘say uncle’.

Assuming the deal is as bad as it looks, he must resign. Syriza will probably split. There will be riots and marches and so on but they will change nothing because Syriza told the Greek people for six months that Tinkerbell exists. And the riots and protests will be because Tsipras didn’t produce Tinkerbell.

But Tinkerbell doesn’t exist. If the Greeks (and the Irish, and the others) wish to leave austerity, they must leave the Euro. If they stay in the Euro, they accept austerity: permanently. There is no way out of this bind. Syriza was irresponsible in suggesting there was.

119

Barry 07.09.15 at 10:24 pm

Hidari: “Syriza undoubtedly made things worse (assuming that the deal is as bad as it sounds) because but I’m not sure whether it’s their fault, as such. As Daniel never failed to point out, although he didn’t quite phrase it that way, international politics is about power (and nothing else) which is why the referendum changed nothing (except that it made things worse). War is politics by other means. Ipso facto, politics is war by other means.”

Remember, the basic problem from the Greek viewpoint is that (a) the EU leadership has always had *far* more power, and (b) that same group has by now bailed out the EU banks. The ability of Greece to cause serious trouble was much more limited.

There’s a phrase I’ve thought to myself, about being in a very bad situation – pretend that you’re in charge of the Polish government, in the summer of 1939. What do you do? Powerful enemies on both sides, each eager to conquer you. Your allies are on the other side of those enemies, and have limited power.

120

Val 07.09.15 at 10:32 pm

@117
If you go into a fight you have to have something to threaten the other person with … the Greeks took a knife to a gunfight, and were rapidly outfought.

Boys Own Gangsta Realpolitik eh?

Meanwhile the Greek health system is collapsing, which is not the fault of Syriza, however you want to look at it. I doubt that Syriza and the 63% of Greeks who voted No were thinking the way you are.

121

Hidari 07.09.15 at 10:34 pm

“Remember, the basic problem from the Greek viewpoint is that (a) the EU leadership has always had *far* more power, and (b) that same group has by now bailed out the EU banks. The ability of Greece to cause serious trouble was much more limited.”

I wonder if the European Left, as always, will take the wrong message from these events. The message they will take, I’m sure, is ‘don’t mess with elites’. Do nothing. Give up.

But actually, if Podemos came to power, they would have a weapon because if Spain left the Euro this really would cause financial pain to the other European countries. So Spain has bargaining power in a way that Greece does not. The corollary of this is that if you threaten something and don’t make at least plans to do it, then your power vanishes. Had Greece really been planning Grexit, they would have begun planning weeks ago. The fact that they did nothing told the Germans that they were bluffing. And so their threat was seen as being empty. Which it was.

Life is a zero sum game. There are winners… and there are losers.

122

JW Mason 07.09.15 at 10:47 pm

I like that line of Dan’s. I’ve quoted it myself. But while I think the analysis here is correct, I draw a different conclusion from it.

Of course it is true that, in almost every case, the best outcome for the weak comes from complying with the wishes of the strong. (That is more or less what it means to be weak or strong.) And yet, we don’t in general say that the right thing for the weak to do is comply. On the contrary, we admire precisely those people who defy illegitimate (by whatever standard) claims of the strong even at great cost to themselves.

123

Hidari 07.09.15 at 10:55 pm

124

Joshua W. Burton 07.09.15 at 11:02 pm

There’s a phrase I’ve thought to myself, about being in a very bad situation – pretend that you’re in charge of the Polish government, in the summer of 1939. What do you do?

Send your whole navy, instead of just three ships, to Edinburgh. Load them in ballast with gold reserves and cryptographers.

125

Omega Centauri 07.09.15 at 11:08 pm

“Life is a zero sum game. There are winners… and there are losers.”
I really don’t thinks thats how it works. When we are being both smart and of good faith we can hopefully arrange toplay a positive sum came (perhaps even Pareto optimal). But is a case like this one its really a negative sum game, there are losers, and then there are LOSERS. And perhaps there are a few who can arrange to break even.

126

Lupita 07.09.15 at 11:12 pm

@phenomenal cat. I am very flattered that you remember me. Thank you for your kind post and for welcoming me back. I almost got myself banned the last time I posted so I had decided, like Jerry Seinfeld, to avoid academic circles. Unfortunately, I have been recruited into the reserve army of labor, which has given me ample time to read up on the ongoing global financial collapse and, one would hope, revise before I post.

127

Tabasco 07.09.15 at 11:14 pm

Syriza told the Greek people for six months that Tinkerbell exists.

Varoufakis told them in the days before the referendum that if the voted no a favorable deal would be done on Monday and the banks would open on Tuesday.

Having sold them this bill of goods, he got out of Dodge as fast as his motor cycle could carry him (and with incidentally a passenger who was not wearing a helmet, violating 57 different EU laws – how Greek was that?)

128

kidneystones 07.09.15 at 11:17 pm

Ambrose the disreputable at the Telegraph reports a major concession to the Greeks. – debt forgiveness, not restructuring, must be part of the solution. Putin offers a 2 billion pipeline deal to the Greeks and, one suspects, the U.S. explains to the Eurocrats that they aren’t the only ones with cards to play.

Does this development rescue Syriza from charges of incompetence?

129

Tabasco 07.09.15 at 11:42 pm

Does this development rescue Syriza from charges of incompetence?

Getting close to Putin over energy. What could go wrong?

130

kidneystones 07.09.15 at 11:47 pm

@128 Well put . Just finished reading the Telegraph pieces. They see a deal as a huge victory for Syriza. B

131

Rich Puchalsky 07.10.15 at 12:02 am

Hidari: “They were voted in on a promise of a: remaining in the Euro and b: being anti-austerity. But this politics does not exist. Indeed it is a contradiction in terms.”

They can’t stay in austerity forever. Either things get better or they eventually leave the Euro. So the politics that you’re talking about also does not exist, except temporarily.

In short, the situation is one of Lesser Evilism. People are afraid to make a break with dysfunctional politics because of the real chance that what they get will be even worse. But the dysfunctional politics that they choose as the lesser evil is not, itself, stable. They can temporize and hope. But unless a genuinely better politics comes along, they are going to get something different at some point whether they like it or not. And the “comes along” is there because by choosing the lesser evil, people have basically given up actively trying to work towards something better. Instead they have to talk up what exists in fear of too many people breaking away from it for it to be sustained.

132

The Raven 07.10.15 at 12:17 am

Lupita@102: “I fail to notice the aura of third-worldishness that bad teeth and old clothes convey.”

Give the Troika time.

133

dsquared 07.10.15 at 12:21 am

No country in the world has ever been so well positioned, just in terms of having the right paper and ink, for this unfriendly act, traditionally considered a literal act of war.

Although this would make a great movie (literally), I have to slay this beautiful hypothesis with an ugly fact. Greece doesn’t actually have material stocks of Euro note paper and ink. They have outsourced their note printing to (iirc) the Austrian central bank. The Greek central bank’s print works only has plates for €20 notes, and doesn’t have a big inventory of note stock. I checked this a couple of years ago.

On the contrary, we admire precisely those people who defy illegitimate (by whatever standard) claims of the strong even at great cost to themselves.

I have a great deal of sympathy for this view – I’ve argued for it myself in the past, in the context of various UK constituencies condemning themselves to years of incompetent representation by voting for George Galloway. But, the Greek people were not given a fair and well-informed choice. Syriza did not run for election, or in the referendum, on the basis of potential hardship and danger. They constantly claimed, and were believed, that all their policies were consistent with Euro membership and the only reason that past governments had agreed to troika programs was that they were lily-livered neoliberals. Varoufakis in particular seems to me to have made one or two very false statements in the last couple of days of the campaign – that the banks could open within 48 hours of a No vote, and that he had a plan in his office ready to deliver.

134

The Raven 07.10.15 at 12:22 am

On the other hand, debt relief is on the table for the first time. Let’s see if it stays there, or if it ends up like the public option in the Affordable Care Act.

Rich Puchalsky@131: “They can’t stay in austerity forever.” Course they can. What do you think it means to be third world?

Truth of the matter is, all poverty is now policy.

135

Tabasco 07.10.15 at 1:22 am

Varoufakis in particular seems to me to have made one or two very false statements in the last couple of days of the campaign

Varoufakis was an out-of-his-depth BS-er who made it up as he went along. You can imagine a scene last Sunday night, where Tsipras meets with Varoufakis.

“So, Yanis”, Tsipras says, “tell me about this no-austerity plan of yours that the Troika will agree to tomorrow and will have the banks open on Tuesday”.

“Actually, Alex”, Varoufakis replies, “there is no plan. I just made that up so people would vote No”.

“Resign, now”, replies Tsipras.

“Gladly”, says Varoufakis. “But let’s spin it that I’m resigning because the other finance ministers won’t work with me. We’ll both save face that way”.

Varoufakis walks away, leaving Tsipras holding a gigantic sh*t sandwich.

136

Sandwichman 07.10.15 at 1:32 am

@127 “Varoufakis told them in the days before the referendum that if the voted no a favorable deal would be done on Monday and the banks would open on Tuesday.”

Tabasco, That’s bullshit. That’s not what Mr. V. said. That’s how the hostile media twisted what he said. Do you not know that or are you ignoring it for propaganda purposes? In other words, are you ignorant or just plain lying?

137

Tabasco 07.10.15 at 1:41 am

Sandwichman, let Google be your friend

http://en.enikos.gr/economy/31760,Varoufakis-The-banks-will-open-on-Tuesday-VIDEO.html

Will the banks reopen? Varoufakis says “Of course they’ll open! Of course!”

Will they open on Monday? He replies “On Tuesday.”

And without a deal? Varoufakis says “With a deal, which is a certainty.”

Did you say the deal is a certainty? The finance minister replies “Of course it is. Doesn’t Europe know what is in its best interest?”

138

Sandwichman 07.10.15 at 1:55 am

Video in Greek. It’s Greek to me.

Yanis Varoufakis ‏@yanisvaroufakis Jul 5
“In 24h we COULD have an agreement”, I said. But our toxic media rushed to report that I predicted an agreement within 24h. Go figure!

139

Sandwichman 07.10.15 at 2:14 am

By the way, Tabasco, Google-wise your website’s translation got six repeats on the web and only two on news. Until you can provide a verified transcript of the video, in Greek, and English translation, I’ll take YV’s word for it.

140

A H 07.10.15 at 2:45 am

@118 “But Tinkerbell doesn’t exist. If the Greeks (and the Irish, and the others) wish to leave austerity, they must leave the Euro. If they stay in the Euro, they accept austerity: permanently. There is no way out of this bind. Syriza was irresponsible in suggesting there was.”

What a bizarre statement. Austerity is not a force of nature, it is a deliberate policy put into place.by people with moral agency.

For all the talk about varoufakis, Schauble has a 100 times more power. And it’s been clear that he deserves nothing but contempt from any one who believes in the european project.

141

Collin Street 07.10.15 at 2:50 am

What a bizarre statement. Austerity is not a force of nature, it is a deliberate policy put into place.by people with moral agency.

People often don’t realise that they have moral agency. “I did what I thought would serve me best”, not realising that “doing what you thought would serve you best” is a choice rather than an inevitability.

142

Sandwichman 07.10.15 at 2:53 am

“doing what you thought would serve you best” is a choice rather than an inevitability.

And it might be a poorly-informed choice. “It seemed like a good idea at the time.”

143

Tabasco 07.10.15 at 3:24 am

Sandwichman, while you are taking YV’s word for it, ask yourself why he didn’t seek to correct the record until after the referendum.

144

ZM 07.10.15 at 3:34 am

Ronan(rf)),

“ZM – or at least, Malaysia and Argentina might be by some measure, but Im *pretty sure* theyre not considered to be generally.”

The Commonwealth of Australia Department of Foreign Affairs and Trade list Malaysia and Argentina as developing countries.

They do not list Greece, but they list a bunch of European countries so I don’t know why they’ve left Greece out, but probably because they haven’t updated the list of developing countries recently enough.

European developing countries: Albania, Armenia, Azerbaijan, Belarus, Bosnia & Herzegovina, Georgia, Kosovo, Macedonia (Former Yugoslav Republic), Moldova, Montenegro, Serbia, Turkey, Ukraine.

But Greece being a developing country was not the main point of my comment, it was just a by the by part of the comment, as the main point was the Greek government should have timed the referendum and campaign to get more transfers/debt forgiveness until after the UN Sustainable Development Goals conference where they could try to get a motion passed on debt forgiveness for, or transfers to, poorer countries like themselves and developing countries to help them progress on the path to sustainable development.

Also I don’t think it is polite to say “I fail to notice the aura of third-worldishness that bad teeth and old clothes convey” — I was talking about Malaysia being reasonably poor a few weeks ago and then I found one of the women I was talking to was Malaysian and she thinks they are not so poor these days, and I think she would be more offended at this characterisation than me saying Malaysia was poor. Also it is more sustainable to wear old clothes so that is not a bad thing, and at the Sustainable Development Goals Assembly I guess this can be pointed out in the discussion on wealthy countries needing to decrease their material consumption to sustainable levels.

145

Collin Street 07.10.15 at 3:54 am

The Commonwealth of Australia Department of Foreign Affairs and Trade list Malaysia and Argentina as developing countries.

Australia is very, very very rich. We’re, like, on the top-twenty list of “richest countries on earth” by raw GDP-per-cap figures and we spend more of that on social-coherence stuff, pooled wealth, than most of the countries above us. Living in australia you don’t realise this, that most of the world — even most of the developed world — is noticeably poorer than we are.

I wouldn’t use australian-based cutoffs for what constitutes “developed”.

146

hix 07.10.15 at 6:50 am

http://www.oecdbetterlifeindex.org/countries/greece/

“In terms of health, life expectancy at birth in Greece is almost 81 years, one year higher than the OECD average of 80 years. Life expectancy for women is almost 83 years, compared with 78 for men.”

One thing i think American commenters just cant imagine is how good life can be with 25% unemployment. The kind of low mobility, strong family/local community network along with relatively universal healthcare (i know, theres a problem with that now) can make life quite alright without a regular job. The importance of regular employment in other societies is in large parts due to status, social integration and health care access. Id have no problem criticing the downsides of such a society, especially when its overdone like in Greece, but still, dont make it out to be hell.

In general, many southern European countries had periods with stagering high unemployment and the sky was not falling the way the sky would have fallen in the US or to use another example Japan.

Greece society lacks some basic stuff countries with a far lower overall development level usually have too. And ex-communist countries are another special case anyway, as they are asymetric in their development in their own way.

Theres a question if that asymetric development with a relativly good life has been sustained by EU transfer payments (remember, Greece receives quite nice amounths of net transfers on an ongoing basis besides the debt crisis bailouts) as well as well, acumulating lots of foreign debt.

147

Hidari 07.10.15 at 8:07 am

@131 ‘They can’t stay in austerity forever.’

Oh but you can stay in austerity forever. Another thing that people haven’t noticed is that even though austerity is being pitched as a ‘medicine’ (with the implication that eventually you stop taking it when you ‘get better’) in reality that never happens. The Irish and Spanish (and UK) economies have ‘recovered’ but no one is talking about removing austerity. On the contrary they are doubling down on it.

Capitalist economies, ceteris paribus, grow. That’s what capitalism is. You can hold them down for years (like holding a cork underwater) but eventually you fail, and they start to grow. As Dsquared showed in his ‘commentless’ post on CT, eventually even the Greek economy returned to growth and it will again.

Also, following on from @133, I knew that the Greeks would cave when someone in a Naked Capitalism comments thread revealed that it was part of Euro membership that the Greeks physically destroyed their mechanisms to make the Drachma. Had they been serious about Grexit weeks or months ago the Greeks would have begun to order or build new Drachma printing presses. They weren’t so it was obvious it was a bluff. And printing Euros was also not an option, as Dsquared pointed out at @133. So the Greeks had no cards to play.

148

Ike 07.10.15 at 8:08 am

A H @ 140: “And it’s been clear that he deserves nothing but contempt from any one who believes in the european project.”

At this point, what exactly is “the” European project? Fiscal union? A federal state? With all that has happened in Greece, does anyone seriously believe in plans like these anymore? To me, as a citizen and taxpayer of a country in the northern periphery of the eurozone, talk about some great common project that must not be abandoned, no matter the cost, really frightens me. Not all of us live in Germany, not all of us are doing economically well, and the prospect of having to sign blank checks to keep “the European project” afloat just to save Hollande’s or Merkel’s or Jean Monnet’s ghost’s face is not pleasant at all. This shit is going to cost us all no matter what, but I dare say the electorates in many of the northern euro countries will demand that their politicians keep the cost in check, somehow. This constraint isn’t too good from the Greek point of view, but that’s how I see the political realities now. Unless, of course, the Germans and the French come to a different agreement and then just hammer everyone else into submission.

149

Hidari 07.10.15 at 8:20 am

One last point: Tsipras must resign after this farce and there must be new elections. By definition, assuming the referendum meant anything*, the Syriza ‘government’ has no democratic legitimacy for these actions, and whether the Greek ‘Parliament’ approve them is irrelevant.

*maybe it didn’t.

150

Collin Street 07.10.15 at 8:24 am

Had they been serious about Grexit weeks or months ago the Greeks would have begun to order or build new Drachma printing presses.

Why yes! Intaglio plates are expensive — costing a hundred dollars or more — and take a long time to produce — a half-day rather than a half-hour.

I’m a printer. 90% of my posts are made at work in a printing office.

[you destroy security printing plates after they’ve been used because they embody the accurate design and you can’t let them out of your control. Reproducing them if you have the original artwork is trivial.]

151

dax 07.10.15 at 8:42 am

Infant mortality rates (per 1000 births)
Puerto Rico 7.73
Greece 4.78
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2091rank.html

Forget it, while googling I found a site (I hope accurate) which pretty much summarizes it:
http://www.ifitweremyhome.com/compare/GR/PR

If you were in Puerto Rico instead of Greece, then you would be:
1/ 18.9 times more likely to be murdered
2/ 2.8 times more likely to be in prison
3/ make 31% less money
4/ die 1.2 years sooner

And all the Americans can say is, “Well we give Puerto Ricans lots of transfer payments.” Well obviously, they should be giving more. They are, after all, more responsible for Puerto Rico than Europeans are for Greece.

152

Sasha Clarkson 07.10.15 at 10:20 am

Paul Mason’s latest blog: “What was the point of Tsipras referendum?”

“… (The proposed) deal is still redistributive on balance. Syriza can still sell this as a very different programme from those previously designed by the conservative led coalition. 29% corporation tax is one example.

… getting it through parliament is not the problem. Getting it through the EU is the problem – and it’s left many Greeks still predicting this is the last gamble before Grexit.”

http://blogs.channel4.com/paul-mason-blog/4131/

So, the question is, does the Troika use the word ‘negotiation’ merely as a euphemism for ultimatum followed by capitulation: that is, is there any room at all for internal Greek democracy in the EZ?

If not, and Grexit is inevitable: the wider consequence is that the EU is finished, because there will be little left worth defending compared with the monstrous injustice that has been done. Merkel and Schäuble’s legacy will be Eurodämmerung, and history will never forgive them: nor should it!

153

Sasha Clarkson 07.10.15 at 10:30 am

A parallel perspective from Brad deLong, which he heralded on Twitter as “Needed: Large Greek Devaluation or Large-Scale Transfers to Greece. With Bonus Godwin’s Law Violation!”

http://www.bradford-delong.com/2015/07/needed-large-greek-devaluation-or-large-scale-transfers-to-greece-with-bonus-godwins-law-violation.html

154

Raven on the Hill 07.10.15 at 12:34 pm

Maybe I’m missing something but how can continued ordoliberalism lead to anything but civil war within Europe, trade war without, and environmental disaster globally, as the rest of the world pursues different forms of neo-liberalism and neo-mercantilism and, implicitly, environmental destruction?

Feeding the corvids, are we?

“If something cannot go on forever, it will stop,”—Herbert Stein

“If this is your estimate of your relation to nature and you have an advanced technology, your likelihood of survival will be that of a snowball in hell. You will die either of the toxic by-products of your own hate, or, simply, of overpopulation and overgrazing. The raw materials of the world are finite.”—Gregory Bateson

155

politicalfootball 07.10.15 at 12:39 pm

But, the Greek people were not given a fair and well-informed choice. Syriza did not run for election, or in the referendum, on the basis of potential hardship and danger. They constantly claimed, and were believed, that all their policies were consistent with Euro membership and the only reason that past governments had agreed to troika programs was that they were lily-livered neoliberals.

But in fact, they appear to have governed according to the same set of beliefs. Indeed, the criticism of Syriza is that its leaders meant what they said and were wrong. If they hadn’t made this error, the argument goes, they could have taken an early deal and their country would have been better off. Had they done that, though, they would have been correctly seen as having lied to their constituency.

Contrast this with the discussion of the integrity and legitimacy of the Euro leaders. Yes, they were insisting that the Greek debt was going to be repaid, and yes, this was unsupportable in the long run as policy, but hey, they were lying so it’s all okay!

Philosophical discussion question: When the Troika insisted that Greek austerity would, in the short term, lead to economic growth, were they wrong or were they lying?

156

JW Mason 07.10.15 at 1:35 pm

“If something cannot go on forever, it will stop,”—Herbert Stein

True. Also true:

If something can go on forever, it will still stop.

If something can’t go on forever, it can still go on a very long time.

157

Eli Rabett 07.10.15 at 1:38 pm

The entire point of how the Germans acted in the last six months was to drive Tsipras and Syriza from office. The referendum killed that.

158

MPAVictoria 07.10.15 at 1:44 pm

“Why yes! Intaglio plates are expensive — costing a hundred dollars or more — and take a long time to produce — a half-day rather than a half-hour.

I’m a printer. 90% of my posts are made at work in a printing office.”

Now this was something I didn’t know! Thank you Collin.

159

Rich Puchalsky 07.10.15 at 1:45 pm

I agree that the “things can’t go on forever” bit doesn’t provide any real sense of how long something will go on. Frederick Douglass spoke about that much more specifically:

Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them, and these will continue till they are resisted with either words or blows, or with both. The limits of tyrants are prescribed by the endurance of those whom they oppress.

That’s the real problem with prescribing early surrender and greater endurance.

160

JW Mason 07.10.15 at 2:26 pm

Rich-

Nice, I’d forgotten that. From the same speech, perhaps relevant to the topic: “Every mother who, like Margaret Garner, plunges a knife into the bosom of her infant to save it from the hell of our Christian slavery, should be held and honored as a benefactress.”

161

Lynn Gazis-Sax 07.10.15 at 3:27 pm

It looks as if everyone has moved on to discussing the current state of negotiations, but I’m going to jump back to the questions in 96:

“1 – Is it true that the Greek state a mess?

“2 – How could this be more than 30 years after Greece joined a Union of supposedly effective, liberal democratic states?

“3 – Is anything that is happening at present actually addressing this issue?”

I’ll answer 1 and 2 together.

Here’s what Greece looked like, prior to the current ongoing disaster: A small country, low income relative to other European countries that had never been part of the Communist block, but rich in global terms (as are Argentina and Malaysia). A country that went through a civil war in living memory, and a dictatorship in even more recent living memory, but also a country that has maintained a lively democracy since the fall of the junta in 1974, with a free press and a vigorous tradition of street protests. A country that scores quite high on Transparency International indexes of corruption, for a country in Europe (particularly one that was never part of the Communist block), but also, worldwide, there are plenty of countries that muddle through with worse scores. A country with an absolutely dismal tax collection rate, relative to Germany (which has an excellent tax collection rate). A country that, by all accounts (Greek as well as non-Greek) is plagued by clientelism. A country with a lot more nationalized industries than most of Europe. A country with strong unions (and unions who more frequently go on strike than those in other parts of Europe). A country with a relatively large proportion of its GDP invested in pensions, and weaker unemployment support than many European countries (but family solidarity, and the fact that pensioners used those relatively generous pensions to help out other family members in times of unemployment, made these weak unemployment provisions survivable).

This isn’t a country that’s a hot mess in the sense of “it was a disastrous idea to let this country into the European Union.” Lot’s of trade unions work with some unevenness in the economies involved. This was, rather, a country that was badly mismatched for a currency union with a country like Germany, because at least some of its differences (lousy tax collection, high corruption, clientelism) are things that everybody (including Greeks across the Greek political spectrum) acknowledges put Greece at a disadvantage within such a union.

Now, for question 3. There turned out to be several problems.

1) It is really easy to pass austerity measures. Yes, Greeks hated passing them. Yes, they led to widespread social unrest. But all it takes to pass new austerity measures is a vote in Parliament, and, presto, you have higher taxes and lower benefits. So, if a country’s political leaders are confronted between a choice between more austerity measures and what looks like a plummet off the euro into chaos, you can get austerity measures. Structural reforms take more time and trouble to implement. This means that, even if everyone is on board with them, they may not be easy, and it also means that, if everyone isn’t on board with them, there’s more opportunity to derail them.

2) The things that everyone agrees are problems (such as tax collection, corruption, and clientelism) are still problems because it’s actually hard to change a system in which these problems are entrenched to one where they aren’t. And it’s not made easier by having a government that’s scrambling to figure out how to manage a country with skyrocketing unemployment while applying increasing austerity. Nevertheless, a small amount of progress has in fact been made, I gather, on the tax evasion front. Not nearly enough, but a small amount of progress.

3) Not everyone agrees on which of the other things are problems. Notably, Germans (and the other countries that agree with Germany) think that Greece would be much better off with more privatization, not just because they could make money (less than was actually predicted) from the sale of public enterprises, but because a more privatized economy might function more efficiently. Maybe they are, in fact, right. Greece has a lot of things that could be privatized, and a lot of clientelism mucking up efficiency in the public sector. But Greeks are much more resistant to privatization than Brussels, or the IMF, would like them to be.

In general, some of the proposed structural reforms (more privatization, removing business unfriendly regulation in ways that appear to include weakening unions) are a tough sell in a country that’s experiencing rising unemployment and where ordinary citizens, with reason, see the people proposing the reforms as the sort of people who are more concerned with rescuing bankers than with rescuing ordinary people like them, and whose idea of an optimal economy is more friendly to the well to do than to working class people. (We can argue about who’s right about which reforms, but Greeks and the institutions have definitely been on different pages on which of these things are actually a good idea.)

4) Greek politics also changed radically in ways that no one planned (notably the discrediting and collapse of the political center).

It’s not at all clear that the overall result is a win, in structural reform terms.

162

Ronan(rf) 07.10.15 at 4:19 pm

ZM – the bit you’re quoting at the end Lupita wrote not me (not that I have any problem with it, just for the sake of accuracy, I agree with Lupita – although I dont think she’s talking about Malaysia or Arg specifically ) My shorthand for trying to decide whether a country in the news is wealthy is how much interest people in other rich countries are paying ; ) You’re right that Malaysia and Argentina appear to be generally considered developing countries.

More generally, on the stock market dip in China. Going from the lack of coverage, is this a storm in a teacup or a real possibility of a new crisis ? (or something in between ?)

163

Lupita 07.10.15 at 4:38 pm

@Ike. “electorates in many of the northern euro countries will demand that their politicians keep the cost in check, somehow.”

That “somehow” includes an annual transfer of $700 billion from poor countries to rich and the preservation of the global structures that enable such flow, such as tax havens, the IMF, and NATO. I think the reason Syriza never considered leaving the euro or the EU is, to build on Varoufakis’ metaphor, that they always intended to continue partaking in the Minotaur’s feast, never to kill it.

“what exactly is “the” European project?”

DO NOT KILL THE MINOTAUR.

164

Bruce Wilder 07.10.15 at 5:49 pm

Lynn Gazis-Sax @ 161

I despair of ever reading a narrative analysis of what has happened in Greece grounded on verifiable fact. The confusion of narratives has become, itself, a feature of the crisis.

165

Raven on the Hill 07.10.15 at 6:37 pm

J W Mason, Rich Puchalsky: the game timer, I think, is environmental disaster, and I give it less than 50 years. But there are any number of ways this could go bad. It is very hard to keep the lid on oppressed peoples any more. Or conflict with Russia or the Islamic world could bring it down. Or, just possibly, the world will have an attack of sense and none of this will happen.

Bruce Wilder@164: “the first draft of history.”

166

Collin Street 07.10.15 at 9:07 pm

> Now this was something I didn’t know! Thank you Collin.

I did some digging: this isn’t my field, and I understated the cost of intaglio plates by a couple of orders of magnitude. Still, it’s not real money, as you can tell by the fact that noone’s ever been so poor they couldn’t afford to run the presses.

167

kidneystones 07.10.15 at 11:18 pm

Just reading the Telegraph (again!) coverage of the debate in Athens on the loan package accepted by Tsipras. Have to say the slanted Telegraph offers a great deal more meat, context, and detail than the Independent, which instead seems to focusing on Greek efforts to pin the blame for their greed on Goldman Sachs, the default real-life villains and principal architects of President Drone Strike’s policies

Make no mistake, I’m no fan of the banksters. But blaming them for providing the mechanisms for Greece’s collapse only tells half the story, as Daniel, Hidari, and others have noted. But I digress.

The gist of the current coverage is that the smaller EU nations, such as Finland, are going to require sweeteners of their own for the measures accepted by Greece (a likely scenario now) before signing off on the package. The Telegraph writers can barely suppress their squeals of glee anticipation the next bundle of humiliations likely to be visited on the unfortunate Greeks – Tsipras begs Syriza and the other parties to swallow their position and accept austerity, again! Days or hours later, Tsipras and the Greeks discover that nothing at all has been resolved.

Who can blame them for seeking an end to this torture? The only responsible arc that I can see is for President Drone Strike and his Goldman Sachs advisers to provide the Eurocrats with two sets of workable refinancing options – one to keep Greece in the Eurozone, and the other to support Greece outside the Euro.

That’s likely to happen, right?

168

Layman 07.10.15 at 11:53 pm

The answer to the question “what did Tsipras & Syriza gain with their antics” is becoming a bit more clear. The gains:

1) Instead of trading more austerity for the last $7 billion from the expiring bailout, they’ll likely trade the same austerity for a much larger new bailout.

2) Debt restructuring is now on the table & being pushed by the U.S. as well as France and other Eurozone members.

3) They’ve driven something of a wedge between France and Germany – perhaps between north and south generally – and likely forestalled Germany’s ambition to force Greece out.

4) The referendum has served as a popular vote of confidence in Tsipras and his government, creating a mandate he didn’t really have before, and allowing him to co-opt the opposition.

Did they mean this outcome? Probably not; but they were faced with an unsolvable problem and apparently determined that the best way forward was to challenge the terms of the debate. To push until something gave. And something gave.

169

Collin Street 07.11.15 at 12:36 am

> Did they mean this outcome?

LGBT activists in the US didn’t mean to get “civil partnerships” but they took them and kept pushing anyway.

170

kidneystones 07.11.15 at 12:46 am

@168 I think your brief summary of a highly fluid situation to be sound. Given that reports of Eurocrat concessions surfaced after the interventions of Russia and the US, I’m guardedly optimistic that Eurocrat objections to the package will wither under pressure from America. I would guess these will largely come in the form of no-money down loans to purchase US weapons systems, security guarantees, and other concessions.

Fairly clearly Henry is right to suggest that we need to think about this problem in political, rather than economic terms, while acknowledging the dynamics are social, political, and economic.

The quote from Tsipras that a Euro exit means armed guards in tourist resorts should not be taken likely, or put to the side, especially in light of the UK government’s decision to remove UK citizens from Tunisia. I’ve no idea just how fragile or robust current security arrangements are, but given Greece’s dependence on tourism it doesn’t take much to imagine what a series of attacks might do to the Greek economy, and to further ignite long simmering ethnic resentments into a full-blown conflagration.

One final irksome point on one of my favorite hobby-horses: the suckiness of the UK Labour party. Where are Syriza’s public champions in the UK? Why is it left to Nigel Farage to articulate the plight of the Greeks within the Euro? I’m not suggesting that all Labour leaders run out to give Tsipras a hug. But where is the public support by, say, one of the four leadership contenders for Syriza and Tsipras. Doubtless their press turds are busy injecting carefully-crafted tweets that show just enough support for Syriza, but not so much as to ‘alienate’ the wealth-producing class, or the Germans.

If their remarks are in the headlines, I’m not seeing them.

171

engels 07.11.15 at 1:03 am

But where is the public support by, say, one of the four leadership contenders for Syriza and Tsipras

http://lmgtfy.com/?q=jeremy+corbyn+syriza

172

kidneystones 07.11.15 at 3:56 am

@171 Well, I asked for that really, didn’t I. Cheers. I was rather hoping/suspecting that Corbyn, at least, was doing something. Nice to see Owen Jones in the mix, too. Before I add my ‘Yes, buts…” I’ll concede that there are some, including at least one leadership candidate, who are willing to speak up on behalf of Syriza.

Now, on to the task of walking that concession right back. Does anyone in Labour, or the press really take Corbyn seriously? I haven’t read his manifesto/platform, yet. I might. But the fact remains that the first Google hits that come up on the question of the current crisis link to Corbyn’s own website. He’s not getting much ink. Which actually supports my general point – namely that institutional Labour, and its press organs – the Guardian and the Independent pretty much suck.

Digging a little deeper we find that Corbyn’s support is coming from 30,000 newly-minted Unite Labour members. Jones’s puff piece on Corbyn of July 8 makes no mention of Greece, or of Corbyn’s 2008 vote in favor of a new EU referendum.
http://www.publicwhip.org.uk/mp.php?mpn=Jeremy_Corbyn&mpc=Islington_North&house=commons&dmp=1027&display=motions

Conceded. Corbyn is the real deal and he’s making noises. I’d like to see him step on some more toes and ramp-up his pro-EU referendum record significantly. The other three might as well be Conservatives.

173

kidneystones 07.11.15 at 4:30 am

19 (only) Labour MPs signed a letter to the prime minister asking for debt forgiveness.
http://www.theguardian.com/politics/2015/jun/29/back-european-conference-to-cancel-greek-debt-jeremy-corbyn-tells-pm

I find little to like in some of those who signed, but Corbyn’s profile puts him several notches up in my estimation. Thanks for the corrective. If you could demonstrate a little pragmatism and to make his idealism more workable, he’d stand a real chance of winning. Of course, he’d have drop all his class warfare claptrap and stick strictly to his principles. Can he manage that? Or is he too much married to his identity as ‘soul of the party.’ I suspect he’s widely loathed and feared among Labour’s poseurs.

174

kidneystones 07.11.15 at 4:31 am

Sorry, that should read “If he…,” not “If you…” Freudian slip? Almost certainly.

175

Hidari 07.11.15 at 8:22 am

” Where are Syriza’s public champions in the UK? …I’m not suggesting that all Labour leaders run out to give Tsipras a hug. “

Just a wake up call: Syriza has just passed a ‘bail out’ bill that is far to the right of anything that David Cameron (or for that matter Margaret Thatcher) ever proposed, in exchange for some extremely vague ‘promises’ of debt shuffling at some indeterminate point in the future.

So perhaps the reason Labour won’t support Syriza is because they are too right wing?

176

Ronan(rf) 07.11.15 at 9:41 am

Why would Labour support Syriza? It’s pretty obvious what’s in it for ukip, less so Labour.

Unlikely , I’d guess, that the US has that much influence here, much less so Russia. I’d say if there was any possibility of Greece becoming a Russian client (and consider Russia can’t even maintain client states on its borders) Merkel would be pretty tempted to take them up on the offer (the Greek people not so much) The Germans are not lying awake at night fearing such an event.

177

engels 07.11.15 at 10:07 am

Does anyone in Labour, or the press really take Corbyn seriously?

He was running second yesterday, after Andy Burnham, for number of constituency nominations.

178

kidneystones 07.11.15 at 11:57 am

@175 We disagree on this point, not on the factual accuracy of the economics, but on the mitigating factors and the political and social dimensions of the challenge. The choice is between catastrophic austerity overtime, or catastrophic austerity as shock and awe. More on this in a tic.

@176 Point taken re: UKIP and Merkel. Again, more on that. We disagree, I know, on the working class credentials and ideological diversity of UK Labour. I’ve been corrected on the particular of ‘the one with the beard at the demo.” But, Corbyn, could be the exception that confirms the rule.

@177 Thank you for the kind corrective. I hope I’ve learned my lesson. That said, the figures I looked at attributed Corbyn’s second place standing to the bump from Unite. I’ll defer to you on this point for the moment.

As chance would have it, I lunched with an old friend who happens to know rather a lot about another European country that went through something similar. I put no stock in these sorts of anecdotes when I read them myself, so I mention this only in passing. After we had caught up about one thing and, I pressed him rather directly for his opinion on the current mess in Greece.

The first words out of his mouth confirmed the miniscule size of Greece’s economy relative to Europe, which would seem to support your point at 176. He added that figures regarding GDP ignore a very substantial black economy.He was generally very sympathetic to the plight of the Greeks, and opined that the real criminals had absconded with the as much loot as they could put their hands on before the crash of 2008 which they had safely tucked away. He agreed that a propaganda campaign was being waged against the Greeks by the German banks and Goldman Sachs for different reasons. Greece, he argued, had to made to keep borrowing to prevent German banks from having to write off the unpaid Greek debt. Tis they who keep the pressure on Merkel and the Eurocrats. (I have absolutely no idea if this is in any way fair or accurate).
Goldman Sachs, he argued, created the mechanisms to allow Greece to start using Euros, and violated a ton of laws to do so. (See above). I mentioned the current Greek government’s efforts to find out what really happened with Goldman Sachs. His reply was chilling. Who, he asked, among the cast of actors had an incentive to uncover the truth?

Given these circumstances, he argued, Greece had no choice but to leave the Euro behind now and take the inevitable hit. Using the devalued drachma would trigger 100% inflation, often, and require further adjustments. (As if I have a clue if this is true). I suggested that Greek pensions would effectively disappear. Quite likely so.

That’s the short version of a roughly two-hour discussion, leaving out the really gloomy bits. I can attest to his qualifications, but can offer no opinion on his comments, other than to say he’s made a good living and reputation for two decades doing financial forensics. Re: 175 – if you’re ready to send your own cash to fund the kinds of hits you’re asking the Greeks to take, I’d be more sympathetic to your view. Your convictions about Greek actions cost you nothing. Re: 177, I very much hope Corbyn is taken seriously.

All kinds of deadlines looming. Cheers.

179

politicalfootball 07.11.15 at 4:47 pm

Given these circumstances, he argued, Greece had no choice but to leave the Euro behind now and take the inevitable hit.

If you want to leave the Euro, the best way to go is to get kicked out.

Using the devalued drachma would trigger 100% inflation, often, and require further adjustments.

Nomura via Forbes, suggests a 60% drop, so that’s another datapoint.

180

Layman 07.11.15 at 10:51 pm

The Guardian is now reporting that the Eurogroup aren’t able to agree on a response to Greece, to the extent that they cannot even agree on a post-meeting statement. Overall the group demands more measures from Greece, including some (review & approval of draft Greek legislation) which further serve to colonialize Greece. Greece in turn say they will not agree to a deal that does not at least pay some lip service to debt restructuring.

On the other hand, the Finnish government will fall if they agree to another bailout, so they’re irrevocably in the ‘no’ camp and will not even agree to a progress statement. Germany demands €50b worth of Greek national assets as security against further bailouts, and suggests that Greece consider a Euro vacation instead, leaving for 5 years so they can default outside of the Euro Union, and then returning after they’re clean. One wonders if this is meant to become a standard procedure, and what future lenders will think of it. Italy has broken with Germany and Italian sources have leaked that Italian PM Renzi will tackle Merkel tomorrow.

181

kidneystones 07.12.15 at 2:04 am

@179 There’s very little evidence suggesting the majority of Greeks want to exit the Euro. So, there’s that.

@180 Thanks for the Guardian summary. Here’s a brief clip from Emmanuel Macron via Le Monde trying to put lipstick on that pig: http://www.msn.com/fr-be/video/celebrites/emmanuel-macron-%C2%AB-la-gr%C3%A8ce-peut-sortir-de-la-zone-euro-mais-elle-restera-dans-l%E2%80%99union-europ%C3%A9enne-%C2%BB/vi-AAcMR26?refvid=BBj6G1O

How Macron managed to deliver this statement ‘Greece can leave the Euro zone, but remain within the EU’ with a straight face is beyond me. He very quickly emphasizes the immense political and technical difficulties of such an arrangement. And remember, France is Greece’s strongest advocate. What do Macron’s remarks tell us about French optimism. Unless the US steps up with some cash, I don’t see Renzi bending Merkel.

The good news is that crisis is the new normal, so when things fall apart, again, on within the next 24 or 48 hours, the latest smash in the face will simply be painful, not shocking. Hints of a possible, less worse, resolution lie in the Guardian piece. Only 85 percent of the EU states need sign off on the agreement. Finland’s government may fall and there will be plenty of squealing from the hawks, but if the US wants to keep the Euro zone intact, the US will have to step up and press Germany hard, no matter how miniscule the Greek economy is.

182

politicalfootball 07.12.15 at 2:46 am

There’s very little evidence suggesting the majority of Greeks want to exit the Euro.

I don’t disagree, but perhaps you and dsquared oversell this a bit.

Tsipras and Varoufakis were quite clear with the Greek electorate on their strategy. They didn’t exactly say that they would do whatever needed to be done to remain in the Euro, but rather that the Euro would do what was necessary to keep Greece in because (they argued) the creditors would be nuts to do otherwise.

If Tsipras’ capitulation isn’t accepted, I think he will be able to make a strong argument that the eurozone is nuts. When it is revealed that Tsipras had an insane negotiating partner, will the Greeks blame Tsipras? Remember that this is the only the eurozone’s latest insanity regarding the Greeks and regarding monetary policy in the eurozone itself – there’s a history here.

The Greeks might blame Tsipras – and, in fact, maybe they should. Tsipras did indeed promise them a sane negotiating partner that wasn’t intent on crushing Greece.

But what was Tsipras’ negotiating alternative? What was his alternative in discussing these issues with the Greek people? To whom will the Greeks turn? Who has been more right about the Greek situation than Syriza, starting years ago?

The good news is that crisis is the new normal

Certainly Syriza, with Europe’s collaboration, is correctly blamed for/credited with this.

And isn’t Dijsselbloem right, when he wonders how the Greeks can be trusted?

“There is a major issue of trust” between Greece and its eurozone partners, Eurogroup president Jeroen Dijsselbloem said before Saturday’s finance ministers’ meeting.

Given the Greeks’ impossible preferences – remaining in the Euro without crushing austerity – how can Europe trust Greece to live up to any deal?

183

kidneystones 07.12.15 at 3:14 am

@182 Re: overselling the Greek love of being in the Euro. Normally, this would be a fair charge. Once I get started I’m always at risk. This is me at my most restrained. But, as we agree, the Greeks for the most part very much remain married to the delusional notion that somehow the Euro is going to continue to be a viable currency. That untenable situation looks to come to a very sharp end barring US intervention, which I actually rate about 50-50. I meant to thank you, btw, for the excellent Nomura link. From there I went to Roubini, and to lists of US companies looking to take a hit should the Euro fail. Ford ranked high on that now somewhat dated list.

Re: Insanity. I think you fall into the Bush fallacy – I want to kill my enemy, so my enemy must be a monster, evil, and insane. Now, we might agree that anyone who wanted to rule as Saddam did must by definition be insane, and that much of Europe’s behavior seems strange to the point of insanity. I prefer to look for the internal logic informing the bizarre behavior.

German banks must punish Greece because Greece made the unforgivable error of allowing German banks and others to deceive Greece into joining the Euro way back when. Last Sunday I watched Lee Marvin in “The Iceman Cometh,” four hours of excruciating drama complete with hypocrites galore crowned by the arch-self deceiver Hickey. Hickey had to murder his wife, you understand, because she kept forgiving Hickey his whoring and drinking. So, she really drove Hickey to commit the crime.

That’s where we are now, I believe. Germany must punish the Greeks into becoming more German in order to prevent Germany from screwing Greece over endlessly. See? It’s really all Greece’s fault, and the bank hawks are just trying to help Greece.

Who wants to wake up to that nightmare?

184

dsquared 07.12.15 at 4:47 am

1) Instead of trading more austerity for the last $7 billion from the expiring bailout, they’ll likely trade the same austerity for a much larger new bailout.

This is not an advantage. They now *need* a bigger bailout. Something like €14 bn is going to be needed for a bank recapitalisation to cover the damage done by the last month – uncertainty is toxic to payment culture and a load of loans have gone non-performing.

Schaeuble’s idiot plan took my breath away. I’d expected him to throw a few bombs, but this is straight out of the worst bits of Varoufakis’ playbook – showing up at a details meeting, holding a half baked plan of your own invention that hasn’t been discussed with anyone else. He certainly doesn’t have a mandate to do that and I very much hope he will be out firmly back in his box. The Finns are more of a problem, though, and I think they will need to be bought out of the deal somehow. I really hope we didn’t lose the Euro some time over the last month.

185

kidneystones 07.12.15 at 5:40 am

@ 182 And isn’t Dijsselbloem right, when he wonders how the Greeks can be trusted?
This appears to be the issue. More from Le Monde on how article 352 allows Greece to abandon the Euro whilst remaining in the Euro zone.

« On ne peut pas décréter un Grexit, les traités ne prévoient pas l’abandon par un pays de l’euro. Mais on pourrait utiliser l’article 352 du traité de l’Union », explique une source européenne au Monde. Elle ajoute :
« Cet article prévoit l’adoption par le Conseil, statuant à l’unanimité sur proposition de la Commission et après approbation du Parlement européen, de mesures appropriées pour réaliser l’un des objectifs visés par les Traités, sans que ceux-ci n’aient prévu les pouvoirs d’action. On pourrait l’activer pour permettre à la BCE d’autoriser Athènes à émettre une autre monnaie que l’euro. L’avantage, c’est que la Grèce ne sortirait pas de la zone euro, et qu’on n’aurait pas l’impression que le caractère irréversible de l’euro a été entamé. »
[ However, not everyone sees this strategy in the same light It does not provide the solution the problems require, nor is it workable given the political landscape.]
« C’est une vieille idée du professeur allemand Sinn qu’on ressort : une sortie sabbatique de la zone euro. Cela ne peut pas être pris au sérieux. Ce n’est pas faisable juridiquement, cela n’a pas de sens économique, et cela n’est pas en ligne avec la réalité politique » assure a contrario une source diplomatique à Bruxelles. « Le temps est venu maintenant pour des discussions sérieuses et des solutions, pas pour réactiver des thèses universitaires inappropriées » ajoute cette source.

@184 Schäuble looks to me very much the man of the moment, whether that means he’s a lunatic wearing an explosives vest with his thumb on the detonator, or simply the leader of the Eurocrat hawks bent on dumping Greece out of the Euro zone and the Euro no matter what Merkel wants. This development, as you implicitly note, is as much a crisis for Merkel and the Euro as it is for Greece. We may see Merkel resign before Tsipras gets the chop. If the Euro survives another week/month/year its very difficult to imagine the same actors on stage given the scale of this debacle, which is a good long way from being over. Stay tuned never sounded worse.

186

Hidari 07.12.15 at 10:34 am

” I really hope we didn’t lose the Euro some time over the last month.”

People shouldn’t be working out how to ‘save’ the Euro. People should be chasing it to the ruined castle with pitchforks and burning torches, scream ‘burn the abomination!’.

More seriously, I seem to remember a CT post (although I can’t find it now) in which it was revealed that the Euro was intended as a bulwark against the post-war imperial power of the dollar, thereby stopping the long term trend of Europe’s decline into complete political and economic irrelevance. It was a cute idea, but it’s obvious now that it hasn’t worked.

Here’s a factoid I read somewhere on the interwebs: In 1900 Europe comprised 25% of the world’s population. In 2100 it will be 4%. China, India, the United States, Canada…these countries are prospering (amongst other reason) because of economies of scale. That’s why South America is trying to unite. In economics, big is best. The only way the Europeans could compete is if we united, but that’s not really something we are any good at, as history shows.

187

hix 07.12.15 at 1:08 pm

Merkel will never resign because of the Euro crisis. What is it about the Eurozone crisis that makes people so hyperbolic.

188

Layman 07.12.15 at 1:09 pm

Me:

“1) Instead of trading more austerity for the last $7 billion from the expiring bailout, they’ll likely trade the same austerity for a much larger new bailout.”

dsquared:

“This is not an advantage.”

For Greek leaders, of course it is. If they’re going to be forced to accept austerity anyway, why not do it in exchange for a 3-year funding commitment than a 3-month funding commitment? If the bid succeeds, blame crazy northerners for the austerity, and you can always default later rather than sooner. If it fails, blame crazy northerners for Grexit, and default sooner rather than later.

189

kidneystones 07.12.15 at 1:32 pm

@187 I’ll accept that under ordinary circumstances, Merkel’s resignation would be unthinkable. I just finished reading Der Spiegal’s assessment in English before Schäuble pretty much booted Greece out of the Euro on his own. Only the full resignation of Greece’s leadership and an immediate election is likely to begin to win back German confidence. And Tsipras might never resign. If it turns out Schäuble is advancing his own agenda, not that of Merkel, ( a possibility raised by dsquared in my reading of Schäuble being put back in his box), I don’t see how Merkel can remain in power. Today’s meeting has been cancelled, an extremely unusual development.

@188 The European press is acting as though Greece is going to be dumped out of the Euro this week, within days. Consider where we were ten days ago. Are things better now, or immeasurably worse? Granted, much of the world will simply go about their business as Greece tips over and becomes a failed state in all but name.

It may be that the US is stitching an agreement together right now, and that’s the reason the meeting today was cancelled. Let’s hope so.

Again, I ask @187, did you or anyone else ten days ago imagine this is where we’d be now? And if the answer is no, what makes you think things will be any better ten days, ten weeks, or ten months from now. I’d really like to know.

190

politicalfootball 07.12.15 at 1:51 pm

Germany must punish the Greeks into becoming more German in order to prevent Germany from screwing Greece over endlessly. See?

Sure, I’m an American and we know this logic. One variant: “It became necessary to destroy the town to save it.”

Kissinger had a variant that also applies. Discussing the seemingly useless Hanoi Christmas bombing in 1972, he said: We had to bomb them into letting us accept their terms.

191

Bruce Wilder 07.12.15 at 2:49 pm

“The most important currency has been lost and that is trust,” Ms. Merkel said.

In terms of the drama, I think many of the hardliners are operating under the delusion that they are to be trusted and that they have proven this, by their inflexible commitment. They are the stern father, who follows thru on his threats of violence.

It’s a curious thing about games: sometimes, having only one move is a very powerful position to be in, in prospect, but once the move is made, . . . well, things change, don’t they?

Somehow, I think many in the Eurozone are learning about trust, but I doubt that the long-term lesson is that it is the Greeks, who are not to be trusted.

192

Rich Puchalsky 07.12.15 at 3:17 pm

I just read an article by Monbiot retrospectively thanking Thatcher for keeping the Euro out of the UK. This whole situation is a classic Tory “are sure you want to reinvent politics? how sure are you that you’ve gotten it right?” example that is going to keep conservatives going for another 50 years.

193

Sasha Clarkson 07.12.15 at 4:03 pm

Merkel might not resign over the Greek crisis, but she might have to sacrifice “Dr Seltsam” Schäuble. The SPD in the coalition are now briefing against him², and do not support his Grexit plan. Other EU partners are getting more and more nervous that his financial weapons of mass destruction might turn out to be a Doomsday weapon instead.

If Schäuble were made to resign for leaking the Grexit plan his own side had not agreed, that might just help defuse the crisis.

¹’Dr Strangelove’ in German

²“Schäuble spielt falsch …” tweeted SPD Bundestag chairman Hubertus Heil earlier today. Google for the Twitter link – I don’t want to go into the moderation queue again.

194

MPAVictoria 07.12.15 at 9:34 pm

195

MPAVictoria 07.12.15 at 9:37 pm

@stiglitzian: Stiglitz: The West is “criticizing Greece for failure to collect taxes” while fostering “a framework for global tax avoidance”.

196

js. 07.12.15 at 10:14 pm

I realize that Greek people have more important things to do right now than fuck around on CT threads, but does anyone reading this have any ground knowledge of what the mood is among Syriza supporters?

197

kidneystones 07.13.15 at 1:03 am

@196 No. The buzz is that the finance ministers will stitch something together that will satisfy the Germans, adding a new set of conditions/laws that must be approved by Syriza by Wednesday in order to begin discussions for a third bail-out. Reuters (14 hours ago) is reporting that Syriza supporters in Athens are already livid, and that’s before the new demands become public. Tsipras seems utterly out of his depth and appears to be doing everything he can to prevent Greece being tossed out of the Euro. As others have noted, Syriza and Tsipras promised Greeks they could reject austerity and continue to use the Euro. Syriza and Tsipras have failed spectacularly to achieve their principal objective – end austerity. And in their spectacular failure the Greek economy has collapsed, meaning the package Tsipras will ask Greeks to accept following the ‘successful’ negotiations this weekend, if in fact they do succeed, will include measure significantly more austere than Tsipras asked voters to reject last week. Oops!

The right and the fascists will point to German intransigence and dishonesty and condemn Syriza incompetence. God alone knows what comes next – apart from more of the same only worse.

198

Val 07.13.15 at 1:33 am

Below is an excerpt from a recent editorial in the Lancet

… Amid talk of new deals, exit from the Eurozone, and the closure of Greek banks, the fact that the crisis in Greece is not only economic, but also about health, should not be forgotten.

The recession and crippling austerity measures imposed on the country in the first rescue package in 2010, including cuts to social welfare and health, have damaged the health of the Greek people. The effects include increased rates of child poverty and undernutrition, HIV among those who inject drugs, suicides and suicide attempts, and stillbirths. Other health indicators might well worsen. To reduce costs, cancer screening has been cut and the management of cancer, as with many other disorders, has suffered from serious drug and medical shortages. Many Greeks who have lost their jobs have also lost the health insurance that came with them. Health-care costs that have been passed to patients through various health charges present barriers to accessing care.

… Experience of other countries’ responses to the global economic meltdown of 2007–08 could hold some lessons. As documented in The Lancet’s Series on Health in Europe, Iceland rejected austerity in favour of social protection and active measures to get people back into work; it has weathered the fallout from the global financial crash with no long-term health costs to its population. Although, as the authors note, “extrapolation to other countries should be undertaken with care”, we hope that a humane response to Greece’s economic recovery, whatever that might be, can be realised to ease the health crisis facing the country’s 11 million people.

199

Val 07.13.15 at 1:34 am

Sorry the two paras following the italicised part are also from the Lancet.

200

Tabasco 07.13.15 at 1:52 am

@195

Germany is basically trying to destroy Greece

Germany is basically trying to destroy Greece
Germany is basically trying to destroy GreeceEurope. Again.

All fixed now.

201

js. 07.13.15 at 2:00 am

No.

You might’ve stopped there.

202

Tabasco 07.13.15 at 2:21 am

Iceland rejected austerity in favour of social protection and active measures to get people back into work

Iceland could do this because it has its own currency, which depreciated 50% against the Euro in the 18 months from the beginning of 2008 to the middle of 2009, and which remains at this level today.

203

kidneystones 07.13.15 at 2:33 am

@201 Yes. Try to think this through, would you. You state the problem clearly – few Greeks have time to browse this thread. So, you’re either asking a different kind of question, or expressimg frustration. If others have ‘no’ information in the absolute sense, what useful purpose would be served by readers each posting a monosyllabic negative. You can see how stupid your reply is. Better would be something along the lines of ‘please don’t post anything in reply if you can’t provide precisely what I request. Suggesting I simply post ‘no’ and the stop there makes no sense at all.
The information from Reuters is more than 14 hours old and therefore does not meet the strict criteria of ‘now.’ It is relevant, however, as your broader question is for information about Syriza sentiments on the ground. In this context my initial ‘no’ serves as a reasonable caveat to generous readers. Pricks and pedants will whine about the wording.

204

The Raven 07.13.15 at 2:51 am

Headline: “Creditors Demand Tsipras Defile Mother’s Grave.”

Snark from fairly radical blog.

205

Layman 07.13.15 at 2:54 am

“Tsipras seems utterly out of his depth and appears to be doing everything he can to prevent Greece being tossed out of the Euro. As others have noted, Syriza and Tsipras promised Greeks they could reject austerity and continue to use the Euro. Syriza and Tsipras have failed spectacularly to achieve their principal objective – end austerity. And in their spectacular failure the Greek economy has collapsed, meaning the package Tsipras will ask Greeks to accept following the ‘successful’ negotiations this weekend, if in fact they do succeed, will include measure significantly more austere than Tsipras asked voters to reject last week. Oops!”

One wonders where the Germans are in your recap of events. Apparently, Greece has imposed austerity on itself, and then ‘failed spectacularly’ to end it.

206

Tabasco 07.13.15 at 3:18 am

Creditors Demand Tsipras Defile Mother’s Grave.

Now that’s just ridiculous, because she is still alive.

207

The Unwanted 07.13.15 at 3:45 am

Has no one responding to k-stones reminded him or herself that s/he referred to Atrios and TPM as the lefty equivalent of redstate?

Also at this point I think it’s time for D2 to sit down or walk away. But I think he has, hasn’t he.

208

magari 07.13.15 at 4:16 am

^ I’m sure Schauble is hard at work on that one.

209

kidneystones 07.13.15 at 4:23 am

@ 205 Fair question. The Germans are examined in @183. The Germana have been punishing the Greeks for not being German for a long time. The Germans and others got rich selling products the Greeks and other could not have otherwise afforded. Their behavior is immoral and was very possibly criminal, if the charges of collusion with Goldman Sachs are proven.

210

kidneystones 07.13.15 at 4:27 am

@205 To reiterate, Syriza promised to end the austerity imposed upon Greece and conditions agreed to by previous Greek governments. Does it appear to you that Tsipras is fulfilling the promises he made to the Greek electorate as recently as last week?

211

js. 07.13.15 at 4:38 am

Val,

That bit from the Lancet is very much to the point. Thanks for that.

(And magari @207 for the macabre win.)

212

Collin Street 07.13.15 at 4:45 am

Does it appear to you that Tsipras is fulfilling the promises he made to the Greek electorate as recently as last week?

This is the wrong question, in a technical sense: giving you the answer will hinder, and not help, your understanding. The answer doesn’t mean what you think it means.

[specifically: it’s a very narrow focussed question that’s focussed on an issue that honestly isn’t very important. “He did what he promised” isn’t actually that important to most people: what people want isn’t people not doing what they “promised” to do, but not holding in mind the things they “promised” to consider, to hold in mind before acting. The lies — falsehoods, really, but I’d guess you’d call them lies — that matter to people are the ones about intent, not outcome.]

213

Lynn Gazis-Sax 07.13.15 at 5:23 am

@196: Well, all the Syriza supporters that I follow on Twitter are now boosting the #ThisIsACoup Twitter tag.

In general, at the moment, Greeks on Twitter, whether they love or hate Syriza, are too busy being furious at Merkel, Schäuble, Eurogroup, etc. even to quarrel among themselves about Greek politics.

214

Sebastian H 07.13.15 at 5:33 am

” I really hope we didn’t lose the Euro some time over the last month.”

We talked about it on the recent university scandal thread: how you never really know what will catch the public eye. #thisisacoup shows an interesting level of interest well outside of Greece. This really seems to be discrediting the entire EU project in a way that the anti-EU right never could have pulled off.

215

Sebastian H 07.13.15 at 5:50 am

D-squared, this is a good explanation of how I view the last few years of Greek debt juggling: “Bottom line: what could be achieved in 2012 was severely constrained by what was (not) done in 2010, and the 2012 restructuring destroyed a core assumption of the 2010 program. In particular, when debt restructuring [private sector involvement (PSI)] was done, the hit on the remaining private sector creditors, including Greek banks, had to be larger because other private creditors were gone and official creditors that had taken on their debt, including the ECB, were off the table in the restructuring. It was then much harder for Greece to return to the market as the 2010 program had assumed, and the banks needed a lot more money to recapitalize.”

Essentially each kick of the can down the road made Greece’s position worse (vis-a-vis EU creditors) in addition to saddling them with a greater number of bad years in a row with no hope of serious recovery.

A normal debt restructuring is meant to allow recovery so that the remaining debts can be paid off. The Greek debt restructuring compounded the problems and made the remaining debts just as impossible to pay as before.

216

Lynn Gazis-Sax 07.13.15 at 5:53 am

@196: And Syriza friendly paper Avgi is writing that “a coup is underway to overthrow the legally elected government in Greece” and quoting Der Spiegel’s headline about the catalog of horrors.

217

Sebastian H 07.13.15 at 5:58 am

Probably the best line I’ve seen on it is from Kevin Drum: “Actual shooting wars have ended with the victors demanding less onerous terms than these.”

218

kidneystones 07.13.15 at 6:01 am

The Guardian live feed has an excellent set of sub-threads from Athens detailing a Syriza split and imminent elections – the term disastrous appears throughout.

219

Peter T 07.13.15 at 6:36 am

While the institutions of the EU will go on, the terms imposed on Greece put a severe dent in its underpinnings of belief. “Our Common European Home” now looks more like an Irish church orphanage.

220

Tabasco 07.13.15 at 7:11 am

Various media, social and old, are reporting that an agreement has been reached.

Whatever the terms, the pre-July 2015 European comity is gone forever.

221

Hidari 07.13.15 at 7:44 am

Oh well that was all fun. Back to the real world for me now.

See you all next year for the next exciting crisis in the never-ending soap opera we call ‘Euroland!’.

222

Lynn Gazis-Sax 07.13.15 at 2:46 pm

@217: At least Germany did a little more to earn the excessively onerous Treaty of Versailles than Greece did to earn this.

223

Sebastian H 07.13.15 at 3:16 pm

The agreement document is breathtaking. I thought that Kevin Drum was being slightly hyberbolic when he said that “Actual shooting wars have ended with the victors demanding less onerous terms than these,” but it turns out that I should have trusted his normal understatement mode.

To be done IN THE NEXT TWO DAYS:

the streamlining of the VAT system and the broadening of the tax base to increase revenue;
upfront measures to improve long-term sustainability of the pension system as part of a comprehensive pension reform programme;
the safeguarding of the full legal independence of ELSTAT;
•full implementation of the relevant provisions of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, in particular by making the Fiscal Council operational before finalizing the MoU and introducing quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets after seeking advice from the Fiscal Council and subject to prior approval of the Institutions”

TO BE DONE IN THE NEXT NINE DAYS

the adoption of the Code of Civil Procedure, which is a major overhaul of procedures and arrangements for the civil justice system and can significantly accelerate the judicial process and reduce costs;
the transposition of the BRRD with support from the European Commission.

I don’t care how ready to go you think the Code of Civil Procedure changes are, you are talking about the revamping of essentially the entire Greek court and civil justice system. Nine days? Really?

As Matt Yglesias says, the tell is in things like requiring Greece to get rid of its Sunday laws. Germany hasn’t even gotten rid of its Sunday laws.

The bullshit at the end is breathtaking:

“There are serious concerns regarding the sustainability of Greek debt. This is due to the easing of policies during the last twelve months, which resulted in the recent deterioration in the domestic macroeconomic and financial environment. The Euro Summit recalls that the euro area Member States have, throughout the last few years, adopted a remarkable set of measures supporting Greece’s debt sustainability, which have smoothed Greece’s debt servicing path and reduced costs significantly”

That is is “Big Lie” territory, and yes I’m aware of the origin of the term. There were serious concerns about the sustainability of Greece’s debt because when you enforce a 6 year depression on a country on a debt that your most rosy analysis requires 3% growth for 10 years out of, they can’t pay. Oh and by the way if you are counting the last 12 moths that includes the only time since your fucking program was implemented where there was any growth whatsoever.

#thisisacoup is looking real.

224

Sebastian H 07.13.15 at 3:21 pm

The crazy thing for me on a personal level, is that as anyone who has read me here or elsewhere would know, I’m fairly right of center on most things. But believing in markets generally doesn’t mean siding with bankers any time they want absolutely anything. Moral hazard in a capitalist environment requires that if you make a bad investment, you might lose the money. The seeds of the next “we can’t stop ourselves from loaning too much money” crisis have been carefully planted and are going to be watered by Greek blood.

225

MPAVictoria 07.13.15 at 3:28 pm

100% signing on with Sebastian. This actually is a coup of a democratically elected government by greedy technocrats who are looking to strip mine the Greek nation of anything of value.

/People attacked myself and other commenters for hyperbole a few weeks ago. Turns out we were understating what was going on.

226

Ronan(rf) 07.13.15 at 3:30 pm

I’ve been having disagreements with people on who took what haircuts on Greek debt in 2011-12 (?), can anyone fill me in on the specifics or recommend something to read?*(and Something to read on the more general response to the banking crisis would also be appreciated . Is there any comparative study or something like that?)

* I’ve read some by Miranda Xafa, karl whelan and Zettelmeyer, Trebesch & Gulati, so anything else.

227

Ronan(rf) 07.13.15 at 3:31 pm

It’s not a coup

228

Ronan(rf) 07.13.15 at 3:34 pm

229

MPAVictoria 07.13.15 at 3:36 pm

Ronan what do you call it when a democratically elected gov’t has to submit all its laws for pre-approval to an outside power?

230

Rich Puchalsky 07.13.15 at 4:04 pm

There’s a general argument from some people on the left that the Greeks should have left the Euro years ago. Basically, that this kind of outcome was inevitable, and that the Greeks should break from the system before they were worn down by additional years of austerity. This is kind of like the argument for doing something about global warming: as the years go by, the situation gets worse and worse, but since it’s always going to get worse it’s never “too late” to try to do something about it, even though the chances of success keep going down as time goes by.

The counter-arguments were the usual: people don’t know anything about Greece: people are just using Greece as a talking point in their hatred of “austerity” whatever that means: people don’t know anything about the financial system: people don’t understand how bad things will get if the technocrats aren’t allowed to fix things; it’s largely Greece’s fault because they communally cheated on their taxes or voted in the wrong politicians.

The best counterargument is basically explanatory, and says “Greece hasn’t left the Eurosystem because the Greek people don’t want to, even though that might be the best thing to do.” In this case all the technocrats who advised Greece to stay in the Eurosystem really were advocating for the wrong thing and using the trust that the public gives to experts to give bad advice.

231

Bill Benzon 07.13.15 at 4:12 pm

http://www.nytimes.com/2015/07/14/world/europe/greece-debt-deal.html?action=click&pgtype=Homepage&module=b-lede-package-region&region=top-news&WT.nav=top-news&hp

In the name of preserving the “European project” and European “solidarity,” the ultimatum put to Greece required something close to the surrender of the nation’s sovereignty. For all of Greece’s past sins, and for all of the gamesmanship and harsh talk of the governing Syriza party, this outcome arguably had elements of punishment as well as fiscal responsibility.

232

The Raven 07.13.15 at 4:36 pm

Jared Bernstein wrote a measured angry-economist comment. My remark in response: “You just don’t understand greed, guy. Rather a failing in an economist, I would think. This isn’t about austerity: this is about taking. They’re going to strip that place bare. The Parthenon marbles—that will be nothing compared to what is coming.”

Tabasco: “Now that’s just ridiculous, because [his mother] is still alive.” Well, but you see, first he has to kill her.

Sebastian, this is what the left has been trying to tell you, all these years. When greed and sanctimoniousness are in the saddle, all the fine conservative words mean nothing—they are rationalization, nothing more. What could be less conservative than looting the place where Western civilization was founded? It is not the left who would tear down the order of the world. “All fixed, fast frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all which is holy is profaned, and man is at last compelled to face with sober senses his real condition of life and his relations with his kind.”

Marx, I think, was optimistic. No compulsion, it seems, is enough. If Syriza had faced the “real conditions of life and [their] relations with [their] kind” they would have never have agreed to this. And even now, new rationalizations are being prepared.

Lynn Gazis-Sax, my sympathies to you and yours. Dsquared, it seems you were right.

233

Lupita 07.13.15 at 4:50 pm

In an interview in New Statesman, Varoufakis reveals his plan B to be implemented after the referendum and that it was Syriza’s inner cabinet of six that rejected it 4 to 2. Plan B, the “triptych”, was:

– issue euro-denominated IOUs;

– apply a “haircut” to the bonds Greek issued to the ECB in 2012, reducing Greece’s debt;

– seize control of the Bank of Greece from the ECB.

I wonder if the NSA overheard this cabinet meeting because it would certainly explain the fury of the reaction that came afterwards plus Varoufakis’ exit, which he admits to be because of this meeting.

234

The Raven 07.13.15 at 4:58 pm

235

magari 07.13.15 at 5:07 pm

You just don’t understand greed, guy.

Greed is the wrong conclusion. It’s 100% about German political and ideological dominance over Europe. Syriza directly named and challenged Germany, austerity, and neoliberalism — it had to be put down. This is what a hegemon does. It’s got the rest of Europe drinking its koolaid; and now has made an example of those who refuse to go meekly.

236

Lupita 07.13.15 at 5:11 pm

Re-reading the interview, the first vote on the triptych took place a week before the referendum, when banks were first closed, and Varoufakis came up with his blueprint for Grexit the month before. I definitely think Merkel somehow got hold of this information which explains all the talk about losing trust and the humiliating conditions Tsipras is enduring. Petty but understanding. What I do not understand is Tsipras.

237

Trader Joe 07.13.15 at 5:24 pm

I said it at the time – the referendum stunt was very costly and put Syriza in a worse position no matter the outcome. They have a much better deal before all that.

While there were clearly some that wanted to punish Greece, its also very apparent that the message to Spain, Portugal and most of all Italy is “don’t try it.”

Tsipras did win one concession, he still gets to fly the Greek flag.

Now lets see how much recapitalization the devastated Greek banks require…certainly nothing about the deal will encourage the re-domestication of the 50B of euros that have left in the last 30 days.

238

Andarte 07.13.15 at 5:33 pm

@237

Imagine how much smoother things will run if we can get rid of other stunts of popular will, like elections.

239

The Raven 07.13.15 at 5:33 pm

“It’s 100% about German political and ideological dominance over Europe.”

Only 50%, I think. The other 50% is simply looting Greece. A deal, more-or-less, was struck between the imperialists and moralists and the money.

240

politicalfootball 07.13.15 at 5:35 pm

I said it at the time – the referendum stunt was very costly and put Syriza in a worse position no matter the outcome.

What I didn’t realize was the depth of Tsipras’ commitment to the Euro. The referendum makes sense as a preparatory move to either capitulation or Grexit (depending on which way the vote goes). Having the public vote “no” then capitulating makes no sense at all.

Are the rumors true that Tsipras called the referendum with the intention of losing it? That would explain a lot, but wow.

But Tsipras, and his co-conspirator Schauble, have certainly heightened the contradictions. I’ve been impressed by the resilience of the EU, but I’m still not seeing the non-Grexit scenario. I wonder if Schauble can see it.

241

The Raven 07.13.15 at 5:41 pm

“I wonder if Schauble can see it.”

By Varoufakis’ account, the economics simply was ignored. Like, so far as I can tell, every political leader of Western democracies, and every finance minister or treasury secretary, Schaüble does not believe in economics, only in money. It may be that the plan is to drain Greece dry and then kick it out.

242

The Raven 07.13.15 at 5:41 pm

These people are fools, and we are fools to let them rule us.

243

Trader Joe 07.13.15 at 6:01 pm

@240
I don’t have a view on the “called to lose it” scenario. I’d agree with your view though, seemed like he set himself for an exit and did a 180 (or maybe a 540).

On Schauble however I think he figured he could absorb a Grexit now if he had to, and imposed the calculus of what he would need to show to get it approved. By various counts there were 6 to as many as 10 ministers with no interest in even offering terms post June 30th. There is another $85 that defaults tomorrow.

244

magari 07.13.15 at 6:15 pm

Tasty tidbit from Varoufakis’ interview with NS:

Only the French finance minister has made noises that were different from the German line, and those noises were very subtle. You could sense he had to use very judicious language, to be seen not to oppose. And in the final analysis, when Doc Schäuble responded and effectively determined the official line, the French FM in the end would always fold and accept.

245

MPAVictoria 07.13.15 at 6:21 pm

“With deep sighs and heavy hearts, in sorrow not anger, they always inform the hippies that, like Will Smith’s parents, they just don’t understand. They never manage to explain just what isn’t being understood. It’s just the deeper truths of the universe which are out of reach, things which can only been seen by those with clear eyes and a distinct lack of patchouli smell.

If only the people of Greece paid their taxes! shriek tax haven countries and those who allow their corporations to use them.

It’s be funny, expect I’m a bit tried of those who rejoice in the suffering of other people. The Very Serious People never want to punish the perps, just the victims.”

http://www.eschatonblog.com/2015/07/the-very-serious-people.html

246

Lupita 07.13.15 at 7:56 pm

Varoufakis is nothing if not communicative. He gave another interview to the Late Night Live radio program of Australia in which, is seems to me, he sets the stage for a coup of his own, saying that Tsipras will have to step down as prime minister, that he lacks the personal and emotional characteristics to confront the crisis, that he was defeated.

He also talks about Schäuble-his-nemesis, who has his own shady plan for re-structuring the Eurozone, which includes Grexit, (Varoufakis knows this because Schäuble told him) and he will reveal it (this on his blog) in an article that will be published on Thursday in Die Zeit.

I think Varoufakis is getting ready to take over by making public his political manifesto.

247

The Raven 07.13.15 at 7:57 pm

MPAVictoria: yeah. And don’t trust the “hope and change” types unless they show they’re tough, too. We forget just how stern a man Gandhi was. I think that a big part of what went wrong here is that the Syriza negotiating team just didn’t understand the kind of pressure they were going to be under. They had to walk planning on saying: “if that’s your offer, we’re leaving” if necessary. Varoufakis understood this, or at least he says he did, but it doesn’t look like the rest of the Syriza leadership did.

I’m trying to assemble more thought-out comments, and they may show up on my blog.

And CT headliners? Could we revisit this in six months? Right now, matters look dire, so let’s see how dire the actual results are, a little ways down the road.

248

MPAVictoria 07.13.15 at 8:03 pm

“And CT headliners? Could we revisit this in six months? Right now, matters look dire, so let’s see how dire the actual results are, a little ways down the road.”

Agreed. Seeing how things look One Friedman Unit in the future would be interesting.

/Not that total failure will bring any accountability but still.

249

The Temporary Name 07.13.15 at 8:29 pm

He gave another interview to the Late Night Live radio program of Australia in which, is seems to me, he sets the stage for a coup of his own, saying that Tsipras will have to step down as prime minister, that he lacks the personal and emotional characteristics to confront the crisis, that he was defeated.

Wow.

250

Collin Street 07.13.15 at 8:40 pm

> These people are fools, and we are fools to let them rule us.

The evidence on Schauble in particular points to autism — the utter reality-denying intransigence is very distinctive — but I doubt that your average high-level government negotiator has the experience to spot the signs. And even if they did I expect they’d just think it normal, because like I’ve been saying for years the entire hard right, pretty much without exception, shows exactly the same behaviour.

251

Salem 07.13.15 at 8:46 pm

They had to walk planning on saying: “if that’s your offer, we’re leaving” if necessary.

I think they absolutely understood this. What I think they were totally unprepared for is the rest of the Eurozone saying – “OK, bye then.” In other words, they were prepared to threaten to leave, but they weren’t prepared to leave. And the bluff having been called, you get the current outcome.

The Syriza negotiating tactics would have been well suited to 2010. And indeed, the entire Syriza platform seems to be an attempt to relitigate 2010 – on which subject I have a great deal of sympathy for their position… but that time has passed. They have an obligation to make the best of the current situation, which they have totally failed to do.

252

Collin Street 07.13.15 at 8:56 pm

From the new statesman

It was not even annoyance, it was as if one had not spoken.

[But] Schäuble was consistent throughout. His view was “I’m not discussing the programme – this was accepted by the previous government and we can’t possibly allow an election to change anything. Because we have elections all the time, there are 19 of us, if every time there was an election and something changed, the contracts between us wouldn’t mean anything.

So that would be the first phase. The second phase was where they’d ask us what we intended to do on VAT. They would then reject our proposal but wouldn’t come up with a proposal of their own. And then, before we would get a chance to agree on VAT with them, they would shift to another issue, like privatisation. They would ask what we want to do about privatisation, we put something forward, they would reject it. Then they’d move onto another topic, like pensions, from there to product markets, from there to labour relations, from labour relations to all sorts of things right? So it was like a cat chasing its own tail.

Autism.

Whose autism?

HL: And is that group controlled by German attitudes?

YV: Oh completely and utterly. Not attitudes – by the finance minister of Germany. It is all like a very well-tuned orchestra and he is the director. Everything happens in tune. There will be times when the orchestra is out of tune, but he convenes and puts it back in line.

Schauble’s autism.

100%, top-to-bottom, this happened because a person with a severe, unmanaged cognitive problem was put in charge of fiscal policy of europe.

253

PaulB 07.13.15 at 10:51 pm

There should be an internet law that an argument is deemed lost by anyone who advances a lay diagnosis of psychiatric disorder.

254

Ray Lopez 07.14.15 at 1:26 am

I live in Greece and in the Philippines. The Greek state bureaucracy is a mess, as is the Philippines. Yet the people are better off in many ways than in the USA. In the USA roughly half of your income goes to the state (if you make six figures, the rest of the wage owners don’t matter IMO), and you get little for your money. In Greece, and in the Philippines, about 10% to 30% of your money goes to the state, and you get nothing for your money. But cost of living is less, so it’s great for retirees and people like me who get their money from outside. The weather in GRE is like California, USA, great, and in the Philippines it’s a Third World without the disease and violence of Africa. What’s not to like? The Greeks used to outlive the Americans before they started eating junk food, and sugar ruined the diets of the Filipinos, but aside from these imported (Western) bad habits, it’s all good.

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magari 07.14.15 at 4:14 am

In the USA roughly half of your income goes to the state

Say what? Not true. Nowhere near 50%, even for the most squeezed of the middle class (those who can’t benefit from various special tax breaks).

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Lynn Gazis-Sax 07.14.15 at 6:29 am

and you get little for your money

I’m reminded of this Monty Python skit: https://www.youtube.com/watch?v=9foi342LXQE

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Lynn Gazis-Sax 07.14.15 at 6:30 am

That said, the weather and the food in Greece are indeed excellent.

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