What should Greece do?

by John Quiggin on February 16, 2010

There’s been a lot of discussion of the problems of Greek sovereign debt, its implications for the euro and so on. But I haven’t seen much discussion, from a standard national policy perspective, of what the Greek government should do in dealing with the simultaneous problems of an economic downturn and unsustainable debt (feel free to point me to good discussions).

The course of action being demanded by the bondholders and their advocates, as well as by the EU governments that are likely to bear the costs of a bailout is that of drastic retrenchment on the lines the IMF would normally advocate in cases of this kind. But that is obviously not a desirable policy response when considered in macroeconomic terms. I’m not well informed on the details of Greece’s budget problems, so I’m mostly going to make generic suggestions that are applicable to a case like this.
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In praise of the European Parliament

by Henry on February 16, 2010

Not wanting to keep on bashing the Economist‘s Charlemagne, who is actually one of my favourite bloggers/columnists,1 but this “piece”:http://www.economist.com/blogs/charlemagne/2010/02/strasbourg_and_european_sensibilities on the sins of the European Parliament is a bit much. To summarize it a little unfairly, Charlemagne feels that the Parliament should really be less bolshie in its tedious efforts to try to increase its powers, and more bolshie about the really important stuff, like saving Brussels hacks five hour train rides cooped up with the _hoi polloi._ 2 I suspect that both Charlemagne and “Gideon Rachman’s hostility”:https://crookedtimber.org/2009/03/10/defending-the-european-parliament/ (I like Gideon a lot, too) to the Parliament comes from their internalization of the Economist‘s perception of the European Union as a technocratic exercise in market integration that would work very nicely if only the member states and specialists were left to run it in peace.

But the EU isn’t merely a “‘fairly impressive experiment in market liberalism.'”:http://www.economist.com/blogs/charlemagne/2010/02/spain_and_anglo-saxon_press There are lots of other things happening in the EU – most recently including lots of innovations in Justice and Home Affairs, some of them quite remarkably dubious. And it is here that the Parliament has recently proven its merits, by “decisively rejecting”:http://www.ft.com/cms/s/0/f81b6a96-1775-11df-87f6-00144feab49a.html the EU’s proposed financial data-sharing deal with the US.

bq. the parliament felt, by a 378-196 margin with 31 abstentions, that the US guarantees to protect the privacy of EU citizens were inadequate. Mr Buzek said: “The majority view in the European parliament is that the correct balance between security . . . and the protection of civil liberties and fundamental rights . . . has not been achieved.”

Now it’s worth pointing out that the Parliament’s rejection was not entirely motivated by concerns over EU citizens’ privacy. By vetoing the deal, it’s signalling that the member states (and indeed the US) have to take its policy prerogatives seriously. The member states had tried to rush the deal through the day before Parliament got jurisdiction over Justice and Home Affairs issue, but managed to screw up the technicalities, with unfortunate consequences for transatlantic security relations, but rather better results for the privacy of EU citizens. There would have been a good chance that the deal would have gone down anyway, but it probably would not have gone down in flames.

Which brings us to the main point. Just as it isn’t because of the benevolence of the butcher or baker that we get our dinner, it’s often because of the _amour-propre_ and power-lust of politicians that we get a system that works. The desire of the Parliament for a voice in international justice and home affairs issues, and of individual MEPs for the limelight, means that Parliament is likely to be a highly awkward customer. With any luck, it will continue to prevent security officials on both sides of the Atlantic from reaching mutually convenient deals that are likely to seem rather less politically attractive when they are exposed to the rigors of a public vote by elected representatives. As there are more and more of these deals being cooked up in the EU and elsewhere (a whole world of information sharing arrangements, some justifiable, some not so justifiable, but few exposed to processes of public justification,3 this would be a good thing. MEPs are surely as venal as the next bunch of politicians, but without the Parliament, there would be next to no public debate of these deals, let alone any possibility of vetoing them. It would be nice to see Economist type liberals (who care, I have no doubt about civil liberties, as well as market freedoms) acknowledging this every once in a while.

1Although I may still have one more bout of impertinence in me, depending.

2 Technically, this should really be “cooped up with hoi polloi” since ‘hoi’ is a definite article, but I’m not _that_ much of an arse.

3 The sad yet instructive tale of how the UK “came to adopt the Treaty of Prüm”:http://www.parliament.the-stationery-office.co.uk/pa/ld200607/ldselect/ldeucom/90/90.pdf being one counter-example where public exposure of the various shenanigans did diddly-squat to prevent it going through. Then, perhaps if it had gotten public traction in the Parliament as well as the House of Lords, it might have gone differently.