Category Archives: Issues

Ending Greece’s bleeding

Paul Krugman writes: Europe dodged a bullet on Sunday. Confounding many predictions, Greek voters strongly supported their government’s rejection of creditor demands. And even the most ardent supporters of European union should be breathing a sigh of relief.

Of course, that’s not the way the creditors would have you see it. Their story, echoed by many in the business press, is that the failure of their attempt to bully Greece into acquiescence was a triumph of irrationality and irresponsibility over sound technocratic advice.

But the campaign of bullying — the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office — was a shameful moment in a Europe that claims to believe in democratic principles. It would have set a terrible precedent if that campaign had succeeded, even if the creditors were making sense.

What’s more, they weren’t. The truth is that Europe’s self-styled technocrats are like medieval doctors who insisted on bleeding their patients — and when their treatment made the patients sicker, demanded even more bleeding. [Continue reading…]

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Yanis Varoufakis explains why he resigned as Greece’s finance minister

Yanis Varoufakis writes: The referendum of 5th July will stay in history as a unique moment when a small European nation rose up against debt-bondage.

Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25th June ultimatum comes with a large price tag attached. It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms.

Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.

I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum.

And I shall wear the creditors’ loathing with pride.

We of the Left know how to act collectively with no care for the privileges of office. I shall support fully Prime Minister Tsipras, the new Minister of Finance, and our government.

The superhuman effort to honour the brave people of Greece, and the famous OXI (NO) that they granted to democrats the world over, is just beginning.

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Greece votes No: experts respond

By Costas Milas, University of Liverpool; George Kyris, University of Birmingham; James Arvanitakis, University of Western Sydney; Marianna Fotaki, University of Warwick; Nikos Papastergiadis, University of Melbourne; Remy Davison, Monash University; Richard Holden, UNSW Australia; Ross Buckley, UNSW Australia, and Sofia Vasilopoulou, University of York

The Greek people have voted, saying a resounding No to the terms of the bailout deal offered by their international creditors. What will this mean for Greece, the euro and the future of the EU? Our experts explain what happens next.

Costas Milas, Professor of Finance, University of Liverpool

Greek voters have confirmed their support for their prime minister, Alexis Tsipras, who now has the extremely challenging task of renegotiating a “better” deal for his country.

Nevertheless, time is very short. Greece’s economic situation is critical. On July 2, Greek banks reportedly had only €500m in cash reserves. This buffer is not even 0.5% of the €120 billion deposits that Greek citizens have to their names. It is only capital controls preventing Greek banks from collapsing under the strain of withdrawal.

Basic mathematical calculations reveal how desperate the situation is. There are roughly 9.9m registered Greek voters. Assume that – irrespective of whether they voted Yes or No – some 2.8m voters (that is, a very modest 28.2% of the total number of registered voters) decide to withdraw their daily limit of €60 from cash machines on Monday morning. Following this pattern, banks will run out of cash in three days and therefore collapse (note: 3 x 2.8m x 60 ≈ 500m).

There is therefore very little time for the Greek government to strike the deal with their creditors that will instantaneously give the ECB the “green light” to inject additional Emergency Liquidity Assistance (ELA) to Greek banks to support their cash buffer and save them from collapse. In other words, Greece does not have the luxury of playing “hard ball” with its creditors. An agreement has to be imminent.

Financial markets, expected to start very nervously on Monday morning, will probably stay relatively calm as the reality of the economic situation spelled out above is more likely than not to lead to some sort of agreement (provided, of course, that Greece’s creditors will listen to Tsipras). Whether this agreement is good for the Greeks, this is an entirely different story.

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Backing down on Greece’s debt is the safest, most rational option

John Quiggin writes: Lots of people have raised the suggestion of applying game theory to the the Greek debt crisis. I haven’t attempted this, reflecting my general scepticism about game theory in the absence of a well-defined strategy space.

But now the Greek government and public have made what is, in effect, a final move.

In view of the No vote, Syriza can’t accept a deal that doesn’t include an explicit debt write-off, or one that obviously crosses its stated red lines. Within those parameters, it’s clearly eager for a face-saving compromise.

For the other side (effectively the Troika and the German government), since Syriza’s move has already been made, the problem has now been reduced to one of decision under uncertainty, which is something I am comfortable with.

More precisely, it’s a choice between a “safe” option, with an outcome that is fairly predictable, and a “risky” option where the outcome is uncertain.

The safe option for the European institutions is to back down, write off lots of debt and lose a lot of face. [Continue reading…]

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Episcopal church votes to divest from fossil fuels: ‘This is a moral issue’

The Guardian reports: The leadership of the Episcopal church has voted to withdraw from fossil fuel holdings as a means of fighting climate change, delivering an important symbolic victory to environmental campaigners.

Two weeks after the pope’s pastoral letter on the environment, the divestment decision by a major US Protestant denomination underscored that climate change is increasingly seen by religious leaders as a deeply moral issue.

The measure, adopted by the governing body at a meeting in Salt Lake City, commits the church to quit fossil fuels and re-invest in clean energy.

It covers only a small portion of church holdings, but encourages individual parishes and dioceses to begin moving funds in their control away from coal, oil and gas. [Continue reading…]

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Koch-backed group calls for no more national parks

Claire Moser writes: Just in time for the Fourth of July — when millions of people across the country will visit America’s national parks and other public lands — the Koch brothers are rolling out their latest campaign against these treasured places: pushing for no more national parks.

In an op-ed published in Tuesday’s New York Times, Reed Watson, the executive director at the Koch-backed Property and Environment Research Center (PERC), along with a research associate at the Center, call for no more national parks, citing the backlog in maintenance for existing parks.

“True conservation is taking care of the land and water you already have, not insatiably acquiring more and hoping it manages itself,” the op-ed reads. “Let’s maintain what we’ve already got, so we can protect it properly,” it concludes. [Continue reading…]

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Greek referendum No vote signals huge challenge to eurozone leaders

The Guardian reports: Five years of failed austerity policies in Greece and a total breakdown in trust between the leftwing Syriza alliance and the political leaders of its creditors climaxed in a national vote in which Greeks said no to the spending cuts and tax increases demanded by its lenders.

As the magnitude of the result became clear, thousands of no vote supporters began pouring into the central Syntagma Square in front of the parliament in Athens to celebrate, waving Greek flags and chanting “No, No.”

The sweeping victory for Tsipras, who challenged the might of Germany, France, Italy and the rest of the eurozone, represented a nightmare for the mainstream elites of the EU. With Greek banks closed, withdrawals limited, capital controls in place and the country rapidly running out of cash, emergency action will be needed almost immediately to stem the likelihood of a banking collapse. But it is not clear whether the European Central Bank will maintain a liquidity lifeline to Greece and whether the creditor governments of the eurozone will sanction instant moves to salvage Greece’s crashing financial system.

Germany’s vice-chancellor and social democratic leader, Sigmar Gabriel, said Tsipras had burned his bridges with the rest of the eurozone. But the Greek leader believes he has strengthened his negotiating hand.

Tsipras campaigned for a no vote, arguing that this was the best way to secure a better deal, keeping Greece in the euro while obtaining debt relief from its creditors. The leaders of Germany, France and others stated the opposite, that a no vote meant the Greeks were deciding to become the first country to quit the currency, membership of which is supposed to be irreversible.

It is not clear which view will prevail. The EU mainstream hoped for a yes vote, not only because it would have represented democratic assent to the euro and acceptance of austerity, but also because the Tsipras government would have come under strong pressure to stand down. Negotiations between the two sides have gone nowhere for five months and have become particularly rancorous in the past month as bailout and debt repayment deadlines came and went, with Athens missing a €1.5bn repayment to the IMF. The country now faces a €3.5bn payment to redeem bonds at the European Central Bank in two weeks.

Eurozone confidence in Tsipras is at rock bottom and there is virtually zero faith that he will implement reforms needed to secure cash even if he agrees to them. For his part, the fiery Greek leader as recently as Friday accused his eurozone creditors of blackmail, extortion, and seeking to humiliate his country.

What happens next in the five-year saga that has shaken the eurozone to its foundations is sheer guesswork.

But the Greek vote is a huge blow to EU leaders, particularly the German chancellor, Angela Merkel, who has dominated the crisis management through her insistence on fiscal rigour and cuts despite a huge economic slump, soaring unemployment and the immiseration of most of Greek society.

“The failure of the euro means the failure of Merkel’s [10-year] chancellorship,” said the cover of the latest issue of Der Spiegel, the German weekly. It depicted her sitting atop a Europe in ruins. [Continue reading…]

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How Europe played Greece

Alex Andreou writes: “They have decided to strangle us, whether we say yes or no”, said a Greek woman to me yesterday. “The only choice we have is to make it quick or slow. I will vote “oxi” (no). We are economically dead anyway. I might as well have my conscience clear and my pride intact.”

Her view is not atypical among friends and relations I have canvassed in the last few days. Trust has evaporated. Faith in European Institutions is thin on the ground. Lines have been crossed. At times of financial strain, a country’s currency issuer, its central bank, should act as lender of last resort and prime technocratic negotiator. In Greece’s case, the European Central Bank, sits on the same side as the creditors; acts as their enforcer. This is unprecedented.

The ECB has acted to asphyxiate the Greek economy – the ultimate blackmail to force subordination. The money is there, in our accounts, but we cannot have access to it, because the overseers of our own banking system, the very people who some months ago issued guarantees of liquidity, have decided to deny liquidity. We have phantom money, but no real money. There is a terrifying poetry to that, since the entire crisis was caused by too much phantom money in the first place. [Continue reading…]

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Greece, honor and the ancient ties of wergeld

By Alexander Douglas, Heythrop College, University of London

On the surface, it seems the Greek crisis is all about money. The Greek government has defaulted on a €1.6bn loan repayment to the IMF and is seeking a new bailout programme. Meanwhile, the Greek people are to take part in a referendum that is being billed as a choice between the euro and the drachma.

In fact this crisis is not about money. Greece’s creditors are well aware that Greece cannot repay or even service its debt. They are happy to keep finding ways to refinance it, so long as Greece agrees to punitive austerity policies. They aim for punishment, not repayment. They care about honour and vengeance, not money.

Modern Europe is witnessing an enactment of an ancient law known as wergeld. Greece is expected to continue paying, not until its financial debt has been cleared, but rather until its creditors think it has suffered enough.

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Europe wants to punish Greece with exit

Clive Cook writes: There’s no doubt that Greeks want to stay in the euro system — though I find it increasingly difficult to see why. If Greece leaves the system, it won’t be because Greeks decide to leave; it will be because Europe decides to kick them out.

This isn’t just semantics. There’s no reason, in law or logic, why a Greek default necessitates an exit from the euro. The European Central Bank pulls this trigger by choosing — choosing, please note — to withhold its services as lender of last resort to the Greek banking system. That is what it did this week. That is what shut the banks and, in short order, will force the Greek authorities to start issuing a parallel currency in the form of IOUs.

A truly independent ECB, willing to do whatever it takes to defend the euro system, could have announced that it would keep supplying Greek banks with liquidity. If the Greek banks are deemed in due course to be insolvent (which hasn’t happened yet), that doesn’t have to trigger an exit, either. Europe has the wherewithal and a bank-rescue mechanism that would allow the banks to be taken over and recapitalized. These options are foreclosed because the supposedly apolitical ECB has let Europe’s finance ministers use it as a hammer to extract fiscal concessions from Greece.

Nobody ever imagined that a government default in Europe would dictate ejection from the euro zone. The very possibility would have been correctly recognized as a fatal defect in the design of the system.

If the Greeks vote no, a Greek exit is a possible and even likely consequence. But if it happens, the reason won’t be that Greece chose to go. The reason will be that the European Union and its politicized central bank chose to inflict exit as punishment. [Continue reading…]

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Large majority of Democrats say Israel has ‘too much influence’ over U.S. foreign policy

The Times of Israel reports: Three quarters of highly educated, high income, publicly active US Democrats — the so-called “opinion elites” — believe Israel has too much influence on US foreign policy, almost half of them consider Israel to be a racist country, and fewer than half of them believe that Israel wants peace with its neighbors. These are among the findings of a new survey carried out by US political consultant Frank Luntz.

Detailing the survey results to The Times of Israel on Sunday, Luntz called the findings “a disaster” for Israel. He summed them up by saying that the Democratic opinion elites are converting to the Palestinians, and “Israel can no longer claim to have the bipartisan support of America.”

He said he “knew there was a shift” in attitudes to Israel among US Democrats “and I have been seeing it get worse” in his ongoing polls. But the new findings surprised and shocked him, nonetheless. “I didn’t expect it to become this blatant and this deep.”

“Israel has won the hearts and minds of Republicans in America, while at the same time it is losing the Democrats,” he said. On US politics, “I’m right of center,” he added. “But the Israeli government and US Jews have to focus on repairing relations with the Democrats.”

Luntz put a series of largely Israel-related questions to 802 members of the opinion elites and his findings have a 3.5% margin of error. The survey, sponsored by the Jewish National Fund, was conducted last week. Among the key findings: [Continue reading…]

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The moral imperative of climate action

Johan Rockström writes: On June 18, Pope Francis issued the encyclical Laudato Si: On care for our common home. The letter has been widely praised for supporting the science on climate change. But it goes much further than many expected in documenting the phenomenal changes that our planet is undergoing, beyond climate. And the story of how the Pope has integrated science and religion (not always the easiest of companions, let’s face it) indicates, to me at least, a profound shift in world view.

The Pontifical Academy of Sciences has been bringing together climate scientists, economists and scholars pretty much since Francis’ papacy began in March 2013. My colleagues, professors Paul Crutzen, Veerabhadran Ramanathan and John Schellnhuber, have been part of a new level of dialogue between Earth system scientists and the Vatican. In April of this year, I attended a one-day scientific workshop on the moral dimensions of climate change and sustainable humanity.

At that workshop, which included economist Jeffrey Sachs and Sir Partha Dasgupta of Cambridge University, Cardinal Peter Turkson reminded us that “we are traversing some of the planet’s most fundamental natural boundaries.”

Turkson was using language referring to research on planetary boundaries led by my group, the Stockholm Resilience Centre, and carried out together with leading global sustainability scientists across the world. First published in 2009 (and updated in a paper for Science in January), our work was initiated by growing alarm at the scale of human influence on Earth. Indeed, humans, predominantly in wealthy nations that consume the most, are now the prime drivers of change in the Earth system. We are altering the carbon, water and nitrogen cycles; we are changing the chemistry of the ocean. Only last week, researchers announced further evidence that we are in the midst of a sixth mass extinction of life on Earth.

Firmly grounded in this science, Pope Francis’ encyclical suggests — in line with our analysis — that planetary stewardship must now be the foundation of our values, beliefs and economic systems. It is a remarkable document on the moral imperative of climate action, as well as a call for a new journey of hope and dignity for all world citizens. [Continue reading…]

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In defense of equality

In a review of Our Declaration: A Reading of the Declaration of Independence in Defense of Equality, by Danielle Allen, Gordon S. Wood writes: This is a strange and remarkable book. There must be dozens of books on the Declaration of Independence written from every conceivable point of view — historical, political, theoretical, philosophical, and textual — but no one has ever written a book on the Declaration quite like this one. If we read the Declaration of Independence slowly and carefully, Danielle Allen believes, then the document can become a basic primer for our democracy. It can be something that all of us — not just scholars and educated elites but common ordinary people — can participate in, and should participate in if we want to be good democratic citizens.

Allen, who is a professor of social science at the Institute for Advanced Study in Princeton, came to this extraordinary conclusion when she was teaching for a decade at the University of Chicago. But it was not the young bright-eyed undergraduates whom she taught by day who inspired her. Instead, it was the much older, life-tested adults whom she taught by night who created “the single most transformative experience” of her teaching career.

As she slowly worked her way through the 1,337 words of the Declaration of Independence with her night students, many of whom had no job or were working two jobs or were stuck in dead-end part-time jobs, Allen discovered that the document had meaning for them and that it was accessible to any reader or hearer of its words. By teaching the document to these adult students in the way that she did, she experienced “a personal metamorphosis.” For the first time in her life she came to realize that the Declaration makes a coherent philosophical argument about equality, an argument that could be made comprehensible to ordinary people who had no special training.

By reading and analyzing the words of the Declaration deliberately and with care, her night students

found themselves suddenly as political beings, with a consciousness that had previously eluded them. They built a foundation from which to assess the state of their political world. They gained a vocabulary and rhetorical techniques for arguing about it.

The entire experience with her students “re-gifted to me a text that should have been mine all along. They gave me again the Declaration’s ideals — equality and freedom — and the power of its language.”

Allen is most interested in the idea of equality, and rightly so. Equality has always been the most radical and potent idea in American history. [Continue reading…]

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New coal plants ‘most urgent’ threat to the planet, warns OECD head

The Guardian reports: Governments must rethink plans for new coal-fired power plants around the world, as these are now the “most urgent” threat to the future of the planet, the head of the OECD has warned.

In unusually strong terms for the organisation – best known as a club of the world’s richest countries – its secretary general Angel Gurria, told governments to think “twice, or three, or four times” before allowing new coal-fired plants to go ahead.

“They will still be emitting years from now,” he warned. As a result, many could turn into “stranded assets”, having to be mothballed decades before their economic lifetime had expired. “We are on a collision course with nature,” he warned.

New research, published by the OECD on Thursday, has found that, on current trends, coal-fired power generation will result in more than 500bn tonnes of carbon dioxide released into the atmosphere between now and 2050. That is the equivalent of about half of the “carbon budget” – the amount of greenhouse gas that we can safely pour into the atmosphere – for this half-century, if we are to stay within the 2C limit that is widely agreed as the threshold for dangerous climate change. [Continue reading…]

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Prince Charles calls for ‘profound changes’ to the global economic system to tackle climate change

The Guardian reports: Prince Charles has said that “profound changes” to the global economic system are needed in order to avert environmental catastrophe, in an uncompromising speech delivered in front of an audience of senior business leaders and politicians.

The heir to the throne – often criticised for his meddling in political affairs – argued that ending the taxpayer subsidies enjoyed by coal, oil and gas companies could reduce the carbon emissions driving climate change by an estimated 13%.

Although the prince’s passion for environmental causes is well known, the speech delivered on Thursday evening in St James’s Palace, London was particularly pointed in its criticism of companies that protected vested interests and came with a report that proposed raising taxes on them. [Continue reading…]

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Kurds intent on carving new state out of Iraq after ISIS fight

Fox News reports: Kurdish fighters and leaders are intent on carving an independent state out of Northern Iraq after they wrest back vital territory from the Islamic State “whether the U.S. likes it or not,” according to American and international security forces on the ground.

Kurdish forces, whose commanders say they aren’t getting enough help from the U.S. and other allies, have been making headway against ISIS. But while re-taking Mosul from ISIS was seen as a key achievement by the U.S., the new focus is squarely on holding Kirkuk, a northern Iraqi city claimed by many to be the cultural Kurdish capital.

“They are pushing hard in Kirkuk to hold Kirkuk and keep ISIS out and once that is done, they will move forward with plans for their country,” one operator on the ground with direct connections to Kurdish leaders told Fox News. Another source, who is directly advising Kurdish leaders, said “they have only one goal, whether the U.S. likes it or not.” [Continue reading…]

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Hillary Clinton to Jewish donors: I’ll be better for Israel than Obama

Politico reports: Hillary Clinton is privately signaling to wealthy Jewish donors that — no matter the result of the Iranian nuclear negotiations — she will be a better friend to Israel than President Barack Obama.

But, even as donors increasingly push Clinton on the subject in private, they have emerged with sometimes widely varying interpretations about whether she would support a prospective deal, according to interviews with more than 10 influential donors and fundraising operatives.

Clinton’s private responses in some ways resemble a foreign policy Rorschach test; donors who see a deal as important to world peace have come away thinking that Clinton shares their perspective, but so, too, do donors who oppose any prospective agreement as compromising Israeli security. [Continue reading…]

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