A one-horse troika

The opposite is true. Whoever makes the rules, has the gold.

Rehn has gone, replaced by recent French finance minister Pierre Moscovici, which means the Commission isn’t as committed to austerity as you suggest. In fact, hard line austerians are spooked that the Commission is becoming too flexible with its communication from 13 January: http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/2015-01-13_communication_sgp_flexibility_guidelines_en.pdf

And, the rule they make is: there’s no alternative.

That’s the fundamental problem of all the various flavors of anti-neoliberal left in Europe: they do not seem to have a clear alternative path.

There’s muddle-through and Syriza seems to be banking on a rising sentiment more in favor of vaguely socialist policy overcoming the neoliberal policy solidarity that has so far characterized European policy in the Euro era. There’s certainly been enough economic suffering doled out that one would think there would be a turning away from neoliberal policy. Even in Germany, the Hartz reforms mean that it isn’t easy to be under 30; Germans have little household wealth and real wages are stagnant at best. It is still difficult to see what that alternative would be or what its constitutional or political (coalitional) foundation would be.

I agree with Quiggin, but as he says Davies is closer to the action, so maybe I’m wrong.

Everyone seems to agree that Merkel and the European leadership don’t want to let Greece go. In the scheme of things, Greece isn’t that large, but there’s the symbolism and politics. Greece could have a contagion effect.

So Greece is in a strong bargaining position – although supposedly the people and elite don’t want to actually leave the Euro. The Troika doesn’t want them to leave and they don’t want to leave, but they also don’t want to continue with the disaster the Troika has foisted upon them obviously.

So Syriza will make some hefty demands. I liked Krugman’s analysis which JW Mason linked to yesterday.

“And if you follow that through, you find that dropping the requirement that Greece run a primary surplus of 4.5 percent of GDP would allow spending to rise by 9 percent of GDP — twice as much — and that this would raise GDP by 12 percent relative to what it would have been otherwise. Unemployment would fall by around 10 percentage points relative to no relief.”

So Krugman doubts Syriza will ask for no primary surplus, but if they get half of that, it will help turn their economy around. And if they succeed, it will inspire other anti-austerity parites. Instead of Greece being the negative example, it could become the positive example.

And the Troika could do an about face and accept half of their previous demands, just as Quiggin points out, Draghi’s QE is an about face. It would behove Syriza to paint this as anti-austerity versus austerity instead of Greece versus Germany. It appears they are already doing this. (Although of course their priority is to give Greece so breathing room. A huge bonus would be for them to do well on the corruption and tax evasion front. Maybe unlike the U.S. they could make some arrests.

On the other hand the Troika could put its foot down as the forces of “moralism” win politically, and this pushes Syriza to have to decide between Grexit or getting less than what the voters elected them to do. A Grexit would ultimately be better for Greece (see Argentina dropping its peg) and Syriza could tell the people, hey we can always rejoin once the Troika gets its act together if it ever does.

http://www.theguardian.com/world/2015/jan/19/young-talented-greek-generation-g-worlds-biggest-brain-drain

It isn’t just debt and austerity. It is a dysfunctional political system. Sadly, it is very hard to change a political culture and system nurtured over two generations. Do I think marginally less (or more) austerity matters, when bribery, corruption are the norm? It matters a lot more for those elites in power (regardless of which ones), not as much for everyone else.

@9

To take one example, here’s Dean Baker discussing Argentina recently dropping its peg which was in essence a default:

http://www.theguardian.com/commentisfree/2012/jul/30/greece-alternative-austerity-argentina-imf-germany

“As bad as this situation sounds for Greece, however, the troika, propelled by its leading actor Germany, fears this outcome even more. The issue for Germany is that Greece may provide a good example for other heavily indebted countries, most importantly Spain and Italy.

The period of transition will cause enormous economic disruption and pain, but once the new currency is in place, Greece’s economy can return to a healthy growth path. In the case of Argentina, another country that defaulted and broke the supposedly unbreakable tie of its currency with the dollar, the transition period was less than six months. It defaulted in December 2001 and was on a robust growth path by the summer of 2002. It had regained all the ground lost due to the financial crisis by the summer of 2003 and continued to have solid growth until the worldwide economic crisis in 2008.

There are reasons why Greece’s economy can be expected to perform either better or worse than Argentina’s did a decade ago. We will only know for sure if it actually does go the default route, but even if it took a year to get back on a healthy growth path, Greece is still likely to look quite good to Spain and Italy. Both countries could easily face a decade of recession or stagnation on the troika’s path.”

John Cassidy believes the primary surplus is real:

http://www.newyorker.com/news/john-cassidy/greece-election-syriza-party

“Is there room for a compromise short of Greece leaving the euro zone, which is something Tsipras says he doesn’t want to happen? Perhaps. The current agreement between Greece and its lenders runs out at the end of February, but the government isn’t due to make any more debt payments until the summer. There is time yet to talk, and there is also some financial leeway. One of the ironies of the situation is that, strictly in financial terms, the two Greek bailouts—one was in 2010, the other in 2012—have proved pretty successful. After slashing spending more or less as demanded by the bailout agreements, the Greek government is now running a primary budget surplus, which means that, setting aside the interest payments on its debts, it is meeting its bills. This is the outcome that austerity policies are supposed to produce.

Shouldn’t Greece be rewarded, then, for its efforts, with a new agreement that allows it to ease up on austerity policies, and that writes off some of its debts? In an article published before the election, Paul De Grauwe, a well-known professor at the London School of Economics who has previously advised the European Commission, pointed out that most international debt crises are eventually resolved through a mixture of austerity policies and debt write-downs. “The unilateral approach that has been taken in the Eurozone in which the debtors have been forced to bear the full weight of the adjustment almost always leads to a revolt of these debtors,” De Grauwe noted. “That is now underway in Greece. It can only be stopped if creditors dare to face this reality.””

“Germans have little household wealth and real wages are stagnant at best.”

It’s important to emphasize this point. From the point of view of the average German, the majority of whom still live in rented flats and have seen the virtues of their past savings behavior decimated by current interest rates, the average Greek has some substantial wealth, with a 75% home ownership rate and, not infrequently, Greek families may have second homes in the countryside or on islands. Yes, measures of wealth are more complex than this, but this is often a basic fact a German voter brings into the poll booth.

GW@12: of course, the Greeks are dying for lack of health care, but I guess that doesn’t count. It seems to me that a lot of effort has been spent stirring up German popular bigotry against the Greeks.

Maybe I am wrong about this—I am very far from the action—but it seems to me that there is a lot of racism in the treatment of Southern Europe by the leaders of the EU.

#10 Map Maker

Do I think marginally less (or more) austerity matters, when bribery, corruption are the norm?

It ought to.

My guess is that when bribery and corruption are the norm, usually people know what to expect and they just factor that in. Instead of paying higher taxes and put up with bureaucrats who do things entirely their own way, people pay by the transaction and expect to tip for good service.

Places where it isn’t like that tend to be wealthier, and that might be a result of the wealth more than a cause of it.

The USA has a reputation for not having corruption or bribery. So when Spiro Agnew got elected and the newspapers talked about how Maryland was notorious for government corruption and Agnew had to be corrupt since he was from there, I was surprised. I was very young and I had no idea that Maryland was so corrupt. Later I heard that Texas is notorious for their corruption. Also Louisiana, Alabama, Mississippi, Tennessee and Florida. New Jersey, of course! LA. Chicago. New York City. The story is that this is why NYC doesn’t pay taxes to New York State but instead sucks so much wealth from the rest of the state, the poor virtuous suckers upstate just don’t know how to keep NYC from parasitizing them. (There is a lot of bias in these stories. But when we’re talking about illegal dealings that people need to keep secret, it’s hard to get solid info. If I didn’t have biased sources I wouldn’t have any sources at all.)

When I was growing up, pretty much every time a black man got into the US Congress he was convicted for corruption and thrown out. My black friends told me that it wasn’t just racism. They said almost all the politicians were corrupt, but the black ones didn’t know the tricks for hiding it so they got caught. And my black friends weren’t outraged about it like I was. They didn’t expect any better. They thought it was fine for politicians to get rich, the main thing was they should pass good laws.

When I looked at that, how often does a legislator leave the US legislature without being considerably richer than when he went in, when he wasn’t filthy rich to start with? I guess maybe it’s because they put their money into professional-managed blind accounts that they aren’t allowed to know about, and the professionals do so much better without owner input than they would have if the owners got to interfere? Or maybe lobbyists just find ways to give them a lot of money….

There was Abscam. The FBI posed as bribers and persuaded US legislators to accept small $50,000 or $100,000 bribes. A handful were prosecuted including one token Republican. I have no way to find out how many entrapped Congressmen were allowed to bribe their way out of prosecution, or what favors they did the FBI.

But it isn’t true that all US legislators are corrupt. When Barry Goldwater was in office the media quoted various legislators saying that he was famous for not being corrupt. They said he was honest and that everybody respected him for it because he was unique.

Oh well. Ordinary corruption is just a different kind of tax. It doesn’t mean much unless it gets too much. Special corruption is hard to measure and it’s hard to tell how widespread it is. The USA has done very well despite however much we happen to have. Likely Greece’s special problems have some other major source.

Many points of disagreement obviously but the most fundamental one is that John’s post didn’t engage with one important to economic fact – Greece has no money or ability to borrow. Any deficit spending has to come from external transfers.

So policy makers saying “we’re against austerity” is a bit like advising Brisbane “you shouldn’t have so many floods” – it’s only meaningful if there’s a plan to actually do something about it. Which in context means convincing German, Dutch, Finnish etc taxpayers that Greece (rather than Poland, Latvia or any of the other 11 member states that are poorer than Greece) should get a massive gift.

One way you might make that case might be “Greece is restructuring its economy and will get to a point where it doesn’t need external transfers any more”. Another might be “it’s part of a process of integration and Greece is giving up sovereignty”. But “trust us we’re the government of Greece” isn’t going to work.

So we’re left with either compromise or exit, and on the question of whether anyone in Brussels or Frankfurt is scared of contagion to Italy or Spain I think I really am closer.

The issue is political control. Without that you’re effectively allowing Greece to support its army and civil service sinecures using schools and hospitals as hostages. Maybe Tsipras really does intend to change the old model but Europe can hardly take that on trust.

Geece has no money

Primary surplus. Trade surplus.

@JW mason, that’s the austerity. If they cut loose, they have to continue on that path with the insulin shortages and all.

“If they cut loose, they have to continue on that path with the insulin shortages and all.”

They could cut loose from the Euro, the EU and the NATO, expropriate and nationalize the main industries, fight off the inevitable military coup and soros revolution, and then buy (or produce) as much insulin as they want. That would be fun to watch. But not bloody likely.

“was the Troika, I believe, that imposed the condition that Greece bring health care spending down from 9 percent of the GDP to six percent.”

Not really. It was in the program because it was agreed with Greece (and it was a natural place to look for savings because of the incredible amount of corruption that there used to be). But the troika didn’t go in there insisting on it; this was suggested by the Greek negotiators. And it was presumed that the cuts would be made by targeting the actual problem, not by cutting insulin.

28, well, I can find no source for that claim that it was the Greek negotiators who suggested it. But I don’t really think it matters who suggested it. It could have been suggested as a poison pill – surely they won’t go for this! That kind of negotiating ploy happens all the time in every negotiation about a budget. In fact, the troika seized on it, and have made the Greeks adhere to the letter of it. I find it very unconvincing that the troika didn’t know that negotiating for cuts like that with a system that it knew was corrupt and, besides, didn’t have the structural equipment to cut without cutting medical care, wasn’t a prescription for health care disaster. They knew it because their own countries would never accept terms like that. Germany, after all, spends 11 percent of its GDP on healthcare. France, almost 12.

Perhaps the health care debacle does show, however, how needed Syriza is. The party that negotiated with the troika was all too willing to do their bidding. They should simply have not.

Greece had no problem whatsoever to just not to do almost any other thing that was agreed. They didnt do reasonable things like taxing rich people that was unfortunately not demanded but not banned either.

That whole sentence, “Many experts say that Greece’s public health system was bloated and corrupt and in dire need of reform”, stinks. As JT alludes to, the prototype of a “bloated”, inefficient health care system is hands down the US. Imagine trying to make US health care “efficient” by forcing a spending reduction of 1/3 within 2 years [actually, in the Greek case it would have been more because the reduction was denominated as percentage of GDP and GDP was in free fall]. Who do you think would have suffered? That analogy really brings home the absurdity of trying to cut inefficiency by austerity.

In the Greek case, let’s point out that doctors are paid in Euros and they have the choice to go elsewhere within the EU if their salaries are cut. Drugs presumably have to be imported with Euros at market price. It is not plausible that you can run the Greek health care system effectively with much less money than those of neighboring states. Given that Greek GDP is lower than most other EU countries’ and a health care sector of 9% of GDP isn’t high in comparison, I would be very suspicious of the claim that a lot of it is just “bloat”.

Greece had no problem whatsoever to just not to do almost any other thing that was agreed.

Also true and important. They didn’t deliver on the army budget, the property tax, the Port of Piraeus etc. But politically powerless and vulnerable people, they got all the cuts and a bit more. This was a big factor in Syriza ‘s victory.

“Imagine how prosperous we could get if somebody made us reduce that to 6%!”

In Australia our health spending is estimated at 9.1% , so the U.S. could just copy our proven Federal and States health system and save 9%. Then the US could spend your saved 9% on having a proper social security system. If Greece healthcare was 9% too, that seems like the right amount since it is the same as ours, although if there was corruption then by eliminating corruption they would get better healthcare for this 9% of GDP.

I still think the Sustainable Development Goals are the best hope for this year, the Greek Government should use the parts most relevant to negotiate with the E.U.

It is quite an ambitious project, there was a report at the end of last year – The road to dignity by 2030: ending poverty, transforming all lives and protecting the planet (Synthesis report of the Secretary-General on the post-2015 sustainable development agenda)

In the mobilisation section the report has some several pages about financing:

“All financing streams need to be optimized towards sustainable development and coordinated for the greatest impact. An integrated sustainable development agenda demands an equally synergistic financial framework….
…
Urgent action is needed to mobilize, redirect and unlock the transformative power of trillions of dollars of private resources to deliver on sustainable development objectives. …. The public sector will need to set a clear direction. Review and monitoring frameworks, regulations and incentive structures that enable such investments must be retooled to attract investments and reinforce sustainable development.
…
In addition, we must move, seriously and expeditiously, to correct the inequities that have long plagued the international system to the disadvantage of developing countries.
…
The regulatory frameworks, incentives and risk-return profiles that enable private investments and business models, as well as public procurement policies, must be aligned with the sustainable development goals.
…
All countries should consider adopting policies to encourage responsible and accountable investment of private financing in sustainable development, and requiring companies to undertake mandatory economic, environmental, social and governance reporting, accompanied with regulatory changes that ensure that investor incentives are aligned with the sustainable development goals. Transition periods and technical support would be needed to this effect, especially for small and medium enterprises.
…
Let us also enhance international efforts to strengthen arrangements for transparent, orderly and participatory sovereign debt restructuring. As an immediate step, let us bring together relevant authorities and other stakeholders to develop an informal forum on sovereign debt, while continuing ongoing discussions…..”

“So we’re left with either compromise or exit, and on the question of whether anyone in Brussels or Frankfurt is scared of contagion to Italy or Spain I think I really am closer.”

I think this is correct FWIW and Syriza’s failure to state that their actions probabably will end up leading to a Grexit is one of the reasons why I think their government will fail (their options are: Grexit, people blame Syriza, government collapsese. Compromise, people blame Syriza, government collapses). This in turn will probably lead to a radical rightwing/fascist government (or just possibly the KKE) much more openly committed to leaving the Euro or even the EU (caveat lector obviously, when it comes to predictions made by anonymous posters on the internet….).

I also suspect that Dsquared is right and that the Germans are no longer afraid of the contamination caused by a Grexit.

The problem here is that they should be. Outside of Clever White Boy circles, people out in the real world really really fuckin’ hate the Euro. If Greece leaves, and Greece does not return to the 11th century*, with famine plague and pestilence traversing the land, this might give other people, in Italy, for example, or Spain, ideas. **

The Euro, after all, is an imperial project (as Dsquared pointed out in his previous post) and if you let one colony escape, then others get ideas (as the Soviet Empire, another currency union, found out).

John Quiggin doesn’t think that the CWBs will let that happen, because he assumes that they have some basic connection with reality, but that is precisely what is in question.

“I just can’t see the IMF and ECB risking utter disaster in support of a policy they no longer believe in.” Just because something is totally insane, makes no sense, and will benefit no one, don’t assume that it won’t be done. Human history gives plenty of examples of that.

*Do not get me wrong. I have no doubt that a Grexit will, in the short term, be a complete and total catastrophe for Greece, and that what they will have to go through will make what they are currently going through look like a picnic. But there is no doubt, whatsoever, that eventually Greece will return to growth. It’s a capitalist econonomy, and that’s what capitalist economies do.

**The key idea, of course, being that the Euro might not be around forever and it might be best to jump ship early rather than go down with the Titanic.

Thanks for this, John.

I think there is a lot of misunderstanding around Syriza’s demands. I don’t think that Syriza intends to play the game of chicken DD puzzled out in the other thread. Here is a member of their economic team writing in the NYT today:

The distance between the new Greek government and European officials and creditors is not insurmountable. There is a growing understanding that Greece’s existing debt payment obligations actually strangle economic growth. And there is a range of technical solutions to the issue of sovereign debt that can be discussed.

At the same time, economic recession in the European Union, created by the dogma that the economy would grow if spending is cut, has created a political crisis, with the rise of the far right. The growing number of official voices that argue for alternative fiscal policies improves the bargaining power of the new Greek government.

This has been Syriza’s tone for weeks now. Just before the official handing over of the finance ministry Varoufakis was pressed on whether Syriza would ask for face-value reductions on the debt, and he refused to commit. He instead spoke of extending the maturity on the debt as a favorable outcome.

I think many people outside of Greece underestimate the effect that not only tight, but highly uncertain fiscal policy has had on the Greek economy. Year after year of missed targets have meant year after year of new measures; simply agreeing to repayment targets that are feasible would be a significant improvement.

As for the end of austerity, Syriza has repeatedly said that it remains committed to balancing the budget and not asking for new borrowing. A major part of their “post-austerity” agenda is just the sort of thing that DD mentions: finding savings otherwise than by cutting the safety net and eliminating public investment in education, health and infrastructure. (The other part of their agenda involves resisting/reversing deregulation and privatization.) This is all supposed to be paid for. I’m sure the costings they have produced are wildly over optimistic, but it is important be clear that *this* is their program.

As for whether Syriza will be successful in curbing corruption, well this is anybody’s guess. It is quite possible that they will crack down on corruption within the civil service, as they are not beholden to the clientilist networks of the previous governments.

It is also quite possible that they will go after oligarchs, and especially media barons (who owe millions of euros in back taxes). This will actually be a very good start, as politically connected media barons have been lynchpins of Greece’s mismanagement over the years.

[Another Greek tale: Greek TV stations were essentially all squatters for about 20 years, never having paid the fees for occupying portions of the spectrum. When the Troika found out that TV stations operated without licenses they insisted that the situation be normalized — whereupon the government simply gave existing stations licenses for free. Syriza has promised to cancel the licenses and run a proper auction. Let’s hope so.]

Unfortunately it is less likely that they will go hard after tax evasion by middle-class professionals, as they are a core part of their base.

“They didn’t deliver on … the property tax,…”

Well, they did impose a much increased property tax, and lots of it was collected by the previous government, which was part of the reason for Syria’s rise. Almost every article on greece has been full of apartment owners wingeing about the increased property taxes. It’s true that many people appear to have stopped paying (i.e. they were paying before) when the geenral election became likely. But that’s Syriza’s being against the new property tax, not the previous lot. I really don’t think its true that the previous government did nothing that took on middle class interests and indeed the fact that it didnt do more is made a bit more understandable by the evidence that the things it did indeed do have contributed to its electoral disaster. Tackling the army budget, port of Piraeus, health reform etc, these are not going to be “quick wins”, and not easily compatible with any re-election incentive.

“Show me a Greek doctor who lives on his salary and I’ll show you a saint or a communist.”

These kind of statements without some sort of evidence bug me DD. Have a link?

Thanks

How about a price list?

http://greece.greekreporter.com/2014/07/13/bribery-price-list-for-greek-doctors/

#49

I don’t know about doctors in particular but evidence that Greece has been utterly corrupt for decades isn’t very hard to come by.

Everything is corrupt; you could only observe that their corruption is less organized and not legalized. Whatever Greek doctors are paid, I’m sure it’s way less than the income of any random un-corruptable US doctor.

I don’t know if this possibly a derail for John’s piece, but here’s some reporting about money transfers (after 2010) by civil servants to foreign banks:

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_30/10/2014_544158

To Ze Kraggash (@56),

Speaking as a highly random US doctor; while I feel that you had the very best intentions in referring to me as incorruptible, I wish you had more carefully considered unintended consequences of what I have no doubt was intended as a compliment.

To the General Readership,
I hope that you will agree with me that Ze Kraggash was indulging in an unfortunate bit of ethnic stereotyping when he described random US doctors as incorruptible. As a random US doctor, I can assure you from long and personal experience that we are, as a group, every bit as corruptible as the lowest sort of Greek doctor imaginable.

So you should definitely keep a stream of gifts headed our way.

Better you than Big Pharma.

Markos Valaris @46
“Unfortunately it is less likely that they will go hard after tax evasion by middle-class professionals, as they are a core part of their base.”

Middle class is doing a lot of work here. Middle class can encompass everything from mid-level Wall Street Analyst to teachers and low level white collar workers.

My understanding (which could well be wrong) was that the middle class professionals who routinely evade taxes were not the base for Syrizia. And indeed part of the reason for their support was their rage at those who could evade taxes that had to pay.

Incidentally, while Daniel is probably right about Greek doctors. Mid level doctors of my acquaintance in Greece are not particularly well paid. And bribes often include stuff like Olives, cake and other forms of barter. And in practice I’m not sure its that different from the kind of stuff that goes on in the NHS (would you like to jump the waiting list by paying me).

I’m sympathetic to the idea that Greece’s problems were brought upon Greece by their governments/elites. But given austerity was forced upon the very same people who suffered from the corruption previously, the defense of the status quo is a little hard to take. And while the EU has taken some steps, they haven’t really prioritized cleaning up the high level corruption.

“The way the word “corruption” is used in the press and by international organizations has a huge problem, as pointed out by Nicholas Shaxsom in Treasure Island. Corruption requires two poles – after all, if you defraud or fail to pay taxes on money in one country, you have to stuff that money somewhere. ”

Not necessarily. Some of the corruption being talked about e.g. with the doctor bribery article #52 takes the form of bribery for services in euro. If a patient pays a doctor a bribe to have surgery, that has bad effects for a few reasons (the money isn’t taxed, the patient has to pay money that isn’t covered by insurance, the doctor risks arrest in order to supplement an official salary that apparently isn’t close to what they could get elsewhere) but it doesn’t really involve hiding the money somewhere else if the euro are spent in Greece. The U.S. is a “clean” country in this regard in that one can pay without having to estimate how much a bribe should be, which makes a good deal of difference in day-to-day living even if the upper levels of the banking system are just as corrupt as anywhere else.

(I think this is being posted on John Q.’s thread rather than DD’s — made the mistake of posting in the wrong thread last time.)

If you’re looking for corruption in medicine resulting in economic inefficiencies with macro consequences, you really need to stop thinking small beer, “gifts” to individual providers to grease the wheels, and that sort of thing.

Instead of thinking about Greece and its alleged penny ante corruption, imagine instead a country that, despite having more subspecialists per capita than other comparable countries, and having these subspecialists do more per capita of a broad range of expensive invasive procedures than these other countries, still averages 2-3 times the unit price for these procedures than these comparable countries. Clearly, supply and demand and free market forces are not setting prices in this breathtakingly, macro-level, corrupt country.

Anybody not know what country I’m talking about? If the answer to this riddle isn’t obscure, why are we talking about the role of alleged Greek medical corruption in that country’s economic difficulties? Greece may have a mote in its eye, but let’s solve the plank problem in US medicine before we get high and mighty with Greece.

Daniel Davies performance this time around has been bizarre. It’s not just that no one is allowed in the slightest to question his intentions or good faith, (when that is an allowable grey area to some degree in all open rational debate), but it’s not even clearly marked what is in his own voice proper and what is a description or explanation of the basic set up or the creditors’ POV. (Well, I guess justification follows behavior, much more than the other way around,- so much for philosophical idealism,- and maybe the strains of role-differentiation can not long be borne). But what ever happened to “macro-economic problems have macro-economic causes”? And whatever happened to the Wynne Godley interpretation of GDP accounting? To pay back its debt fully, (which is admitted to be impossible), Greece would have to run current account surpluses forever, in the face of German and other surpluses from much richer and more efficient economies, or else submit to privatizations at fire sale prices, which are not economically efficient in the long-run, nor conducive to recovery and redevelopment. Since when is adherence to neo-liberal public choice theory, (which is thoroughly hypocritical at best) and savage wage reduction the key to recovery? Why deny that the Troika has connived with Greek oligarchic elites, the same one’s that brought about the problem, particularly with respect to maintaining zombie banks in private hands, which has been very much a key to the steady strangulation of the Greek economy and its payment system and is its key point of vulnerability now? And why maintain the exclusive and obsessive focus of public debt fallaciously, when it is the total debt that matters and the “bail-outs” have served only to convert private debt into public debt, and when Greece, at least, didn’t have a RE bubble? Here’s the chart from 2010, at the start:

http://www.greekdefaultwatch.com/2010/09/greek-debt-in-european-context.html

The effects of the “bailout” and adjustment program were entirely predictable and predicted from the start, but those who imposed such economic voodoo are not to be blamed and are absolved of all responsibility?

In a previous go-round, the majority of commenters here, under Davies’ earnest ministration, concluded that Greece should have left the Euro from the start, as was apparent to me at the time. At least from the narrowly Greek POV. The result would have been a sharp depression, but also a sharp return to growth, instead of a slow strangulation. And now the depression has occurred slowly anyway, so the benefits of exit have been lost. But, of course, an exit at the start would have triggered the dissolution of the Eurozone via contagion and PM Jr. had spent too much time in Sweden and wanted to play the good European, even as he was swept unceremoniously aside for having the temerity to suggest a referendum, playing on the populace’s double-binded illusions about the Euro and EU. Their deluded loyalty to Europe has been suitably rewarded. And just why now are we to expect any sharp return to growth by “sticking with the program”? Is this because of the Pigou effect? Yikes! In the long run, some of us are deader than others.

Now get get back on topic, I was a bit surprised at the rapidity with which Syriza formed a coalition agreement, but, given the electoral outcome, which went as expected, ANEL, though strange bed-fellows, was the obvious and only real choice, (given that the KKE is hopeless and PASOK and its successor in To Potami are taboo for SYRIZA). But SYRIZA is in a tricky position, not just because of the face-off with the Troika, but because it actually won only a plurality of the vote, while it must hold its internal factions together, while being accountable to the majority of its voters, who were presumably overwhelmingly former PASOK voters. And I wouldn’t be surprised if incumbent establishments both domestic and abroad, pursue a “strategy of tension” to overthrow the SYRIZA government and replace it with some form of authoritarian rule. It’s not like that is without precedent, in Greece and elsewhere.

To pay back its debt fully, (which is admitted to be impossible), Greece would have to.. {blah blah self righteous blah for about a thousand words }

You’re taking about an article which specifically stated that the debt wouldn’t and shouldn’t be paid back. That’s why I’m not interested in talking to you.

Cian @61: Middle class is doing a lot of work here. Middle class can encompass everything from mid-level Wall Street Analyst to teachers and low level white collar workers.

TM @60: here Greece is ranked in the low middle of European countries, comparable to economic and geographic neighbors) attributes this high spending to a preference for brand name drugs over generics. This is of course interesting and might well be due to corruption but who would be the corrupters?

One of the reforms pushed by the previous government was requiring pharmacists to fill prescriptions with generic drugs unless specifically directed otherwise by a doctor. Pharmacists fought tooth and nail against this. While Syriza never took a position against generics, they hemmed and hawed (e.g. by talking up the need to regulate imports of generics to rule out fakes) and certainly did not side with the government. That’s the sort of thing I have in mind.

As for whether middle-class professionals are Syriza’s “base”, I shouldn’t have asserted this as I haven’t seen a detailed breakdown of the vote. But Syriza until 5 years ago was a loose coalition of left-wing intellectuals and activists, famous for its “Nikos Poulantzas” club that hosted frequent all night discussions in Athens pubs (I used to go to those). They were getting around 4% of the vote, and only had serious following in universities and professional organizations like the Chamber of Engineers (TEE). They have obviously come a long way since then, but this is where they started.

“One of the reforms pushed by the previous government was requiring pharmacists to fill prescriptions with generic drugs unless specifically directed otherwise by a doctor. Pharmacists fought tooth and nail against this. ”

Pharmacists are absolutely one of the sectors that the Greek state (and indeed other states) should be reforming to save monies. Reducing incomes of doctors and nurses is difficult for reasons of international mobility, but I expect there is little international demand for Greek pharmacists.

“Any transparency index that ranks the US as relatively uncorrupt has a methodology problem.”

Nice understatement.

Re: pharmaceuticals in Greece

This is fraught, and involves: (1) multinational pharmaceutical producers (aka “Big Pharma”); (2) Greek pharmaceutical companies (both subsidiaries of major players and independent, i.e. domestic producers); (3) the Greek NHS; (4) the Greek pharmacists’ lobby.

I don’t recall all the details – this is extremely complicated, and was fought out a couple of years ago – but it’s worth noting that one product Greece does produce is high-quality pharmaceuticals, both under the name of multinationals and under the name of domestic producers (e.g. Galenica).

One problem (out of many) I recall is that Greek producers were required to export their production for sale abroad, and then re-import that selfsame production back to the domestic market for sale at “international” (i.e. maximum) rates, as opposed to the subsidized Greek NHS rates previously obtaining for domestically-produced drugs. The result has been that the domestic costs of critical drugs (e.g. for chemotherapy) which are being produced, exported, and then re-imported, have skyrocketed, and neither the state nor individuals can afford them.

JQ@ 76: It’s absurd to suggest that Greece’s problems are caused by footdragging on this kind of smallbore reform.

I am in complete agreement with this, if this is meant to be directed at me.

Keynesian analysis seems somewhat ill-adapted to the case.

The Keynesian idea is that the state can and should manage the economy, but mainstream economics was never much interested in the institutional detail. The design of the Euro is fundamentally about disabling the state as an economic manager.

It isn’t just that austerity is a mistake. To be a mistake, austerity would have to be a product of policy discretion. The policy discretion has been eliminated, and austerity is simply pressure on the state to reform, but to reform in ways that eliminate management of the economy through monetary or fiscal policy as options. This is a world in which Keynesian economics is no longer relevant, by reason of abolition. It doesn’t matter that much that austerity is discredited, because effective alternatives will have to be invented within a framework designed to prevent Keynesian economic management by the state.

Politically, I would think the Greek state is not held in high esteem by many as a potential economic manager. Talk of corruption is effective propaganda, and it keeps people from thinking about what the state ought to be held responsible for in terms of economic management.

The road to Mont Pelerin is the real road to serfdom. It’s a matter of marching back from there as quickly and orderly as possible.

“The Mont Pelerin Society was created on 10 April 1947 at a conference organized by Friedrich Hayek (Friedrich August von Hayek). Originally, it was to be named the Acton-Tocqueville Society. After Frank Knight protested against naming the group after two “Roman Catholic aristocrats” and Ludwig von Mises expressed concern that the mistakes made by Acton and Tocqueville would be connected with the society, the name of the Swiss resort where it convened was used instead.”

I confess that I had to look up Mont Pelerin to get the reference. Of course, as a child of my times (that sounds so much better than “dotard of my times”), I went straight to the Google, where I found this gem.

These are folks who shy from the implications of naming their society for TWO Catholics, or that someone might criticize them over differences with Acton or Tocqueville, and choose instead to go by the name of a Swiss resort. Classic AND classy.

@81

Yep.

the moral vacuity that attaches to Keynesian know-nothing economics

Says the man who isn’t willing to pay the price paid by so many who went before, the likes of which include JFK, MLK & RFK.

Masturbating in public not a pretty sight, Bruce.

I don’t think it’s been three centuries. And I think getting the history right matters, because it’s hard to understand the possibilities if all you see is “feudalism” or “capitalism”. Money is always attractive, and command of resources is an essential to doing anything – even cathedrals cost money. But money can be seen as an enabler or as a central goal. The British political nation had a variety of goals: maintaining the Protestant Succession and the Settlement of 1688, keeping the Empire and so on. They were quite prepared – as in 1805, 1915 and 1940 – to sacrifice the interests of money to other goals. So too was the US establishment, in the New Deal. Money creeps back as a central goal when the forces pushing other goals decline (and money helps the decline and re-frames the politics to put money back at the centre). As with the US since 1980 and the EU since the Euro.

What other goals can people rally around to push money back? Here in Australia the social democrat ethos is quite strong, so industrial relations and welfare are touchstones for push-back (see our latest two state elections). Nationalism is a strong alternative in other places, and the environment keeps inching up the ladder. The southern revolt is going to push alternatives to the fore in the EU faster than anything in the US is my guess.