Der Spiegel reports: “So far, Germany hasn’t had to spend a single euro from the federal budget on Greece.” It’s a line one has heard dozens of times on German talk shows in recent years. Soon, though, the claim may no longer hold true. A Greek insolvency is now within the realm of possibility and if the country does go bust, it could directly burden the German federal budget.
But how many billions of euros in German money are actually at stake? It may seem like a simple question, but there are no easy answers, because Germany’s actual liability for Greek debt depends on a number of factors. [Continue reading…]
As Greek Prime Minister Alexis Tsipras stands off against the so-called Troika, questions abound about the future of his country.
But there should also be pressing questions about the future of the European Union. The shaky legal foundations of the EU have been laid bare by this crisis.
Over the past few months, Greek officials and representatives of the Troika have indulged in a succession of tit-for-tat exchanges masquerading as negotiations.
These are only the latest proof of the failure of the EU’s political and legal structures to effectively mediate conflicts and resolve differences between members.
The negotiation of a new Fiscal Compact, the creation of multiple bailout funds, and the (potentially illegal) expansion of the European Central Bank’s (ECB) mandate all failed to solve the problems that sparked the crisis in the first place.
Now, five years after Greece’s first bailout, solidarity and trust between citizens, governments and EU institutions are in desperately short supply.
All of this indicates that the euro crisis is a crisis of EU constitutionalism. The union has failed to strike the right balance between democracy and technocratic governance. It has failed to balance the needs of citizens and states in a highly diverse supranational polity.
German academic Fritz Scharpf famously asked 16 years ago whether EU governance could be both effective and democratic. Right now, it appears to be neither.
Business Insider: It’s crunch time on Sunday for Greece.
Citizens will help the government decide — in a “Yes” or “No” referendum — whether the government should accept the conditions that its creditors have put forward for a bailout deal.
In an interview with Australian radio host Phillip Adams on Thursday, Greek finance minister Yanis Varoufakis gave some color on what the Eurogroup reaction was at their meeting.
It was less than enthusiastic.
Here’s what Varoufakis had to say:
“I was told in no uncertain terms that this is a very strange and even inappropriate course of action that we’ve taken. And the argument that was given to me by a colleague in the Eurogroup, whose name will remain unsaid, while everybody was more or less nodding, was ‘how dare you put such a complex issue to common folk?’ And I was just looking at them astounded, thinking ‘you have just negated the whole principle of democracy, which is that the common folk determine government; they determine very complex questions during elections.'”
In an interview with Bloomberg on Thursday, Varoufakis said he would sign an agreement if Greeks decide to vote “Yes” to the creditors’ proposals, though this vote would force him to to resign. [Continue reading…]
On his blog, Yanis Varoufakis explains “why we recommend a NO in the referendum – in 6 short bullet points”:
- Negotiations have stalled because Greece’s creditors (a) refused to reduce our un-payable public debt and (b) insisted that it should be repaid ‘parametrically’ by the weakest members of our society, their children and their grandchildren
- The IMF, the United States’ government, many other governments around the globe, and most independent economists believe — along with us — that the debt must be restructured.
- The Eurogroup had previously (November 2012) conceded that the debt ought to be restructured but is refusing to commit to a debt restructure
- Since the announcement of the referendum, official Europe has sent signals that they are ready to discuss debt restructuring. These signals show that official Europe too would vote NO on its own ‘final’ offer.
- Greece will stay in the euro. Deposits in Greece’s banks are safe. Creditors have chosen the strategy of blackmail based on bank closures. The current impasse is due to this choice by the creditors and not by the Greek government discontinuing the negotiations or any Greek thoughts of Grexit and devaluation. Greece’s place in the Eurozone and in the European Union is non-negotiable.
- The future demands a proud Greece within the Eurozone and at the heart of Europe. This future demands that Greeks say a big NO on Sunday, that we stay in the Euro Area, and that, with the power vested upon us by that NO, we renegotiate Greece’s public debt as well as the distribution of burdens between the haves and the have nots.
Joseph E. Stiglitz writes: The rising crescendo of bickering and acrimony within Europe might seem to outsiders to be the inevitable result of the bitter endgame playing out between Greece and its creditors. In fact, European leaders are finally beginning to reveal the true nature of the ongoing debt dispute, and the answer is not pleasant: it is about power and democracy much more than money and economics.
Of course, the economics behind the program that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.
It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned. The troika is still demanding that Greece achieve a primary budget surplus (excluding interest payments) of 3.5% of GDP by 2018.
Economists around the world have condemned that target as punitive, because aiming for it will inevitably result in a deeper downturn. Indeed, even if Greece’s debt is restructured beyond anything imaginable, the country will remain in depression if voters there commit to the troika’s target in the snap referendum to be held this weekend. [Continue reading…]
Costas Douzinas writes: A man visits the Australian consulate in Athens and asks for a work visa. ‘Why do you want to leave Greece?’ asks the official. ‘I am worried that Greece will leave the euro’ answers the man. ‘Don’t worry’ responds the consul ‘I was talking to my German colleague yesterday who assured me that Greece will stay in the euro.’ ‘This is the second reason why I want to emigrate.’
The story expresses the impossible dilemma facing the Greeks. On one side, a continuation of the catastrophic austerity that has destroyed the country. On the other Grexit, a prospect that will further hit, for an unpredictably long period, the living standards of a people who have seen their income halved. Premier Alexis Tsipras’ announcement, early on Sunday, that the people will be asked to vote on the final proposals of the Europeans and the IMF is an attempt to divert this typical aporia (lack of passage) towards a more manageable question: Do the people back the government’s rejection of the worst effects of austerity while accepting its commitment to keep the country in the Eurozone? The stakes are high: besides the Greek destiny, the future of the European Union and of democracy is on the line.
The immediate context of the referendum is the behaviour of the European partners in the last few months. The Syriza government was elected with a clear mandate to put an end to austerity policies. These policies were carried out on two fronts, fiscal austerity and internal devaluation. Fiscal austerity was pursued through the reduction of public spending, the privatisation of key state assets and the increase of tax revenues. Large numbers of civil servants were dismissed, the social services were slashed with the health service in particular unable to meet basic needs. The humanitarian crisis that followed is well documented and there is no point in detailing it again. The creditors’ logic aimed to generate primary budget surpluses, which would not be used to restart the stalled economy but to repay the escalating debt. The previous governments had accepted the obligation to create annual surpluses of up to 5% of GDP in the next seven years, something that no government since Ceaușescu’s Romania has either attempted or achieved.
The internal devaluation was carried out through the repeated reduction of private sector wages and the abolition of the bulk of labour law protections, such a collective bargaining. At the same time, the repeated increase of taxes, including the regressive tax on real estate, meant that the bleeding of the economy reached unprecedented levels. The pauperisation of the working people, the IMF argument goes, would improve competitiveness and help economic growth. But the result was abject economic failure. The economy shrank by 26%, unemployment jumped to 27%, youth unemployment went up to 60% and more than 3 million people on or below the poverty line. The IMF admitted a couple of years ago that it had under-calculated the adverse effect of austerity on the economy – the so-called fiscal multiplier – by a factor of three.
It is against this background that the Greeks elected in January 2015 the Syriza government committed to reverse these policies. A period of negotiations followed. But these were not proper negotiations. The huge gap between the two parties in power resources and ideology made the talks brutally asymmetrical. I have called these ‘negotiations’ a European coup, an attempt at ‘regime change’ using banks and not tanks. The economic stakes for the lenders are relatively small – the Greek economy is only 2% of European GDP – and does not justify the risk of a breakdown in relations. The precautionary principle of risk theory, inscribed in the European DNA, demands that the unpredictable effects of Grexit on the European and world economy should be avoided. If the collapse of Lehman Brothers created such a huge crisis, even the consideration of Grexit is more dangerous. [Continue reading…]
Kathleen R. McNamara writes: The European Union appears to be on the brink of an unprecedented rupture. After months of meetings between the 19 E.U. states that use the euro, Greece broke off talks ahead of a June 30 deadline for continued financing of their vast debts and is likely to default and leave the euro.
Negotiations have dragged on for months. Facing harsh demands from Greece’s E.U. and IMF creditors for deep cuts in public spending and increased taxes, Prime Minister Alexis Tspiras abruptly announced on Friday that instead of continuing the talks, he would put the “humiliating” and “unbearable” bailout terms to a nationwide referendum on July 5. Critical stopgap financing from the European Central Bank (ECB) is also in jeopardy, and even if the referendum were to pass, it would be moot given the June 30 expiration of the credit line. Greeks prepared for the banks to be closed this coming week and capital controls instituted.
After 16 years of expanding membership, the euro zone now faces the real possibility that one of its core members, Greece, may spiral out of the currency and into economic chaos. [Continue reading…]
In his book Governing by Debt, Maurizio Lazzarato argues that the creditor-debtor centred politics of contemporary capitalism is substantially different from the capital-labour centred politics of post-war capitalism. In fact, to understand what is at stake in contemporary Europe we need to approach debt in its totality – government, corporate, financial and household debt. We have to recognise that the debt relationship is not merely an economic relationship of money owed and collected, but a deeply political relationship of power exercised by one person or institution over another.
Consider the following graph. It shows the total debt by sector in selected EU countries at the end of 2014.
Data from McKinseyGlobal Institute (2015)
A continent sinking under debt
When debt is seen in its totality a different picture emerges from the one usually portrayed by the media. The total debts of the Netherlands and Ireland are nearly seven times their GDP, Denmark’s is 5.5 times and the UK’s more than four times. How sustainable in the long run are the levels of non-government debt in these countries? Is the exceptionally low exposure of the Greek financial sector to debt an indicator that its liabilities have been disguised as Greek government debt? And how sustainable is household debt?
Years of austerity have resulted in European families sinking under debt while experiencing increasing job insecurity, reductions in pensions and the gradual privatisation of welfare services and education.
These different types of debt are not independent from one other. They are mutually constitutive. Behind them are numerous creditor-debtor relations between actors with often diametrically opposed interests and unequal power: states, corporations, banks, financial institutions, small businesses, voters.
This “system” of European debt interacts with a global financial architecture, dominated by the demands of the financial sector. Far from being prudent, this sector is itself exposed to colossal amounts of debt-related risk, endangering all other sectors.
With another impending international debt deadline, Greece runs the risk of becoming the first OECD country to default on its obligations to the IMF. The country owes €448m – and many are once again raising the “spectre of Grexit” idea, accompanied by damning commentary on Greece’s failure to get successfully through the crisis.
Mainstream accounts of Greece’s economic situation emphasise how the so-called troika (the European Commission, European Central Bank and International Monetary Fund) has been aiding Greece by throwing it a much-needed financial lifeline of billions.
All this bail-out money is supposedly helping to keep the country afloat and prevent the Greek economy from going bankrupt. But in spite of all this aid, the Greek economy keeps sinking and Greeks apparently only seek to satisfy a growing appetite for easy money.
These popular accounts are, however, full of misconceptions over the nature of the financial aid Greece is receiving and serve to damage the prospect of a more balanced understanding of the situation – and effectively stymie chances for a more viable solution. Greece emerges as a country morally indebted to the troika’s help, only against the backdrop of a quite dangerous mythology, consisting of a constellation of falsehoods, dogmatic hypotheses and unwholesome oversimplifications.
But where has all the money gone?
The vast majority of the financial lifeline meant to save Greece has never entered the Greek economy. The record loan of €240 billion was mostly channelled directly for debt-servicing purposes. It was primarily meant to prevent – chiefly French and German – financial institutions from suffering losses, by ensuring that European taxpayers bought an (unpayable) debt. This, all in the name of “Greek aid”.
Moreover, Greece’s primary surpluses since 2013 mean that it needs cash only in order to service the massive debt that the bail-out money has kept in place. The Greek state has sufficient money for its domestic needs but cannot simultaneously afford to repay billions of debt at this point – not without turning a blind eye to its most needy citizens.
Still, the nature of the bail-out is overshadowed by deceptive representations which give the impression that the Greek economy is rescued by being the recipient of billions of euros. It would be truly interesting, indeed, to know how many of Europe’s taxpayers know that more than 90% of the €240 billion borrowed by Greece went directly to financial institutions.
AFP reports: The Greek finance minister Yanis Varoufakis – who has become a media phenomenon since Greece’s radical government came to power – has been warned by his own prime minister to talk less and do more.
Alexis Tsipras appeared to confirm reports he had ordered Varoufakis to keep a lower profile in an interview with the German magazine Der Spiegel on Saturday.
Asked if he had pulled up his charismatic finance chief for giving too many media interviews, Tsipras said: “I have called for less words and more action from all members of the ministerial council (the official name of the cabinet), not just Mr Varoufakis.”
The ruling Syriza party’s own newspaper, Avgi, complained of his “toxic overexposure” this week after much criticism – and not a little ridicule – of Varoufakis in the Greek media.
Avgi warned that Varoufakis was “going to spend all the profits” of the support he had garnered for Greece since his unexpected elevation to international economics rock star. [Continue reading…]
Philippe Legrain writes: Ever since the initial bargain in the 1950s between post-Nazi West Germany and its wartime victims, European integration has been built on compromise. So there is huge pressure on Greece’s new Syriza government to be “good Europeans” and compromise on their demands for debt justice from their European partners — also known as creditors. But sometimes compromise is the wrong course of action. Sometimes you need to take a stand.
Let’s face it: no advanced economies in living memory have been as catastrophically mismanaged as the eurozone has been in recent years, as I document at length in my book, European Spring. Seven years into the crisis, the eurozone economy is doing much worse than the United States, worse than Japan during its lost decade in the 1990s and worse even than Europe in the 1930s: GDP is still 2 percent lower than seven years ago and the unemployment rate is in double digits. The policy stance set by Angela Merkel’s government in Berlin, implemented by the European Commission in Brussels, and sometimes tempered — but more often enforced — by the European Central Bank (ECB) in Frankfurt, remains disastrous. Continuing with current policies — austerity and wage cuts, forbearance for banks, no debt restructuring or adjustment to Germany’s mercantilism — is leading Europe into the ditch; the launch of quantitative easing is unlikely to change that. So settling for a “compromise” that shifts Merkel’s line by a millimeter would be a mistake; it must be challenged and dismantled.
While Greece alone may not be able to change the entire monetary union, it could act as a catalyst for the growing political backlash against the eurozone’s stagnation policies.
For the first time in years, there is hope that the dead hand of Merkelism can be unclasped, not just fear of the consequences and nationalist loathing.
More immediately, Greece can save itself. Left in the clutches of its EU creditors, it is not destined for the sunlit uplands of recovery, but for the enduring misery of debt bondage. So the four-point plan put forward by its dashing new finance minister, Yanis Varoufakis, is eminently sensible. [Continue reading…]
The New York Times reports: Ending an acrimonious standoff, European leaders hashed out a deal on Friday to extend Greece’s bailout by four months, giving the troubled country a financial lifeline and avoiding a bankruptcy with potentially destabilizing consequences for the region.
The agreement, reached at an emergency meeting of eurozone finance ministers here, paves the way for Greece to unlock further aid from its bailout, worth 240 billion euros, or $273 billion. But the creditors will dole out the funds only if Greece meets certain conditions, setting the stage for tense negotiations that could unsettle the markets and create more political friction with Germany and other European countries.
If Athens moves slowly, it might not get the money for months. Or the deal could fall apart altogether, again raising the prospect of a messy Greek departure from the euro currency. [Continue reading…]
Helena Smith writes: Varoufakis is muscular, fit, amiable, slightly off-centre, everything he seems on camera. But what film does not capture is his energy, focus and intensity. An hour in his company will take you places; in our case, from Marxist theory to the joys of jazz; the eurozone and its incomplete architecture; sartorial tastes; Nazism; the bigness of America; austerity politics; debt traps; poetry; exercise and Varoufakis’ tendency to keep his hands in his pockets (the result of a shoulder injury).
The academic, who had a faithful following on the lecture circuit, despite being a self-described accidental economist, subscribes to the view that one should have an opinion about all and sundry. It is, he says, something he picked up long ago. “I was told, once, by a leftwing scholar that as a Marxist you have to do two things: always be optimistic and always have a view about everything. That advice still sounds good to me.”
At 53, Varoufakis is still clear that he “understands the world better” as a result of having read Marx. But he no longer considers himself a diehard leftie, whatever others may think. Rather, he says, he is a libertarian or erratic Marxist, who can marvel at the wondrousness of capitalism but is also painfully aware of its inherent contradictions, just as he is “the awful legacy” of the left. “It is a system that produces massive wealth and massive poverty,” proclaims the economist who taught at the universities of East Anglia, Cambridge, Glasgow and Sydney after gaining his doctoral degree at the University of Essex. “I don’t think you can understand capitalism until and unless you understand those contradictions and ask yourself if capitalism is the natural state. I don’t think it is. That’s why I am a leftwinger.”
More than that, Varoufakis is an iconoclast, a self-styled “contrarian” who is also an idealist, “because if you are not an idealist, you are a cynic”. And he has, he laments, lost a lot of friends on the left who believe that Grexit, Greece’s exit from the currency bloc, would be the country’s best course.
“It’s one thing to say you shouldn’t have gotten into the euro, it’s quite another to say you should get out of the euro. If we backtrack, we fall off a cliff. This is my argument to everyone.” Europe, he insists, is stuck with Greece because Athens is never going to ask to leave the euro. Fittingly, perhaps, the new MP, who has dual Greek-Australian citizenship, is not a signed-up member of Syriza, the party he now represents in the rambunctious Athens parliament. Syriza’s militant wing wants nothing more than to get out of the monetary union. [Continue reading…]
Ambrose Evans-Pritchard writes: Greece’s finance minister Yanis Varoufakis has spelled out the negotiating strategy of the Syriza government with crystal clarity.
“Exit from the euro does not even enter into our plans, quite simply because the euro is fragile. It is like a house of cards. If you pull away the Greek card, they all come down,” he said.
“Do we really want Europe to break apart? Anybody who is tempted to think it possible to amputate Greece strategically from Europe should be careful. It is very dangerous. Who would be hit after us? Portugal? What would happen to Italy when it discovers that it is impossible to stay within the austerity straight-jacket?”
“There are Italian officials – I won’t say from which institution – who have approached me to say they support us, but they can’t say the truth because Italy is at risk of bankruptcy and they fear the consequence from Germany. A cloud of fear has been hanging over Europe over recent years. We are becoming worse than the Soviet Union,” he told the Italian TV station RAI.
This earned a stiff rebuke from the Italian finance minister, Pier Carlo Padoan. “These comments are out of place. Italy’s debt is solid and sustainable,” he said.
Yet the point remains. Deflationary conditions are causing interest costs to rise faster than nominal GDP in Italy, Spain, and Portugal, automatically pushing public debt ratios ever higher.
Berkeley economist Barry Eichengreen warns that Grexit would be “Lehman squared”, setting off a calamitous chain reaction with worldwide consequences. Syriza’s gamble is that the EU authorities know this, whatever officials may claim in public. [Continue reading…]
Der Spiegel reports: Minister of Administrative Reform Georgios Katrougalos sits cheerfully in his new office and rejoices about his little revolution. He has just announced that soon the first 3,500 public-sector employees can return to work, including the famous cleaning ladies who led the protest against job cuts. With their rubber-glove-clad clenched fists, they embodied a feeling shared by many Greeks — that they had been mistreated by Europe. Now the cleaning ladies were becoming the symbol of the new beginning.
According to the administrative reform minister, these aren’t new hires — they are the reversal of unfair layoffs. “The cleaning ladies were the weakest, and the troika needed numbers.” He claims this is primarily a redress for the absurdity of the austerity measures. After they were let go, the financial authority’s 595 cleaning ladies — who had to be fired in September 2013 in order to fulfill the requirements of the savings plan — continued to receive 75 percent of their earnings. Their work was then done by private cleaning companies — in the end, the whole thing was more expensive than it had been before. It was these kinds of decisions by the previous government that had made the Greeks furious — and led them to vote for Syriza.
The administrative reform minister is a counterpoint to Athens’ new culture of laxity, characterized by Alexis Tsipras and Finance Minister Giannis Varoufakis, who like to appear tie-less in public. Katrougalos wears a suit and a tie. He has given up his role in the European Parliament and joined the government in order to reform the administration — a thankless task. He is a gambler, he says with a laugh. He loves calculated risk. All of his friends had advised him against it. “But I want to help shape the new beginning,” he says, “and only a left-wing party can tackle this kind of reform.”
Katrougalos says he wants to “break the system of patronage and clientilism.” The minister, who isn’t affiliated with any political party, is well-qualified for the job: He wrote his PhD about administrative reform in Greece. He comes across as open, non-ideological and competent — and he makes an effort to show that this new beginning will be different than the previous ones, that he too wants to save money, but on the backs of the politicians instead of the citizens. He wants to get rid of about 70 percent of the official cars used by top officials. He has removed the police surveillance in front of his ministry, because it sends a “bad signal” and is unnecessary in any case. And he has cut advisor positions — which had previously often been granted as favors — in half.
Something has happened in Greece that has not happened like this anywhere else in Europe: A handful of neophyte politicians, intellectuals and university professors have taken over the government. It feels like a small revolution instead of a handover of duties. And that’s not only because many members of the previous administration deleted their hard drives and took their documents with them, or that there initially wasn’t even any soap in the government headquarters. No, the new government has upended the rules of the Greek political system — and spurred into action a Europe that is still unsure how it should react to the rebels. [Continue reading…]
Dan Hancox writes: When Ernesto Laclau passed away last April aged 78, few would have guessed that this Argentinian-born, Oxford-educated post-Marxist would become the key intellectual figure behind a political process that exploded into life a mere six weeks later, when Spanish leftist party Podemos won five seats and 1.2m votes in last May’s European elections.
Throughout his academic career, most of which he spent as professor of political theory at the University of Essex, Laclau developed a vocabulary beyond classical Marxist thought, replacing the traditional analysis of class struggle with a concept of “radical democracy” that stretched beyond the narrow confines of the ballot box (or the trade union). Most importantly for Syriza, Podemos and its excitable sympathisers outside Greece and Spain, he sought to rescue “populism” from its many detractors.
Íñigo Errejón, one of Podemos’s key strategists, completed his 2011 doctorate on recent Bolivian populism, taking substantial inspiration from Laclau and his wife and collaborator Chantal Mouffe, as he explains in this obituary. To read Errejón on Laclau is to take an exhilarating short-cut to understanding the intellectual forces that are shaping Europe’s future. Syriza’s victory in Greece, for one, has been directly driven by the ideas of Laclau and an Essex cohort that includes among its alumni a Syriza MP, the governor of Athens, and Yanis Varoufakis. Syriza built its political coalition in exactly the way Laclau prescribed in his key 2005 book On Populist Reason – as Essex professor David Howarth puts it, “binding together different demands by focusing on their opposition to a common enemy”.
On the Mediterranean side of austerity Europe, the common enemy is not hard to discern. During Spain’s massive indignados protests and encampments of summer 2011, one of the principal slogans was the quintessentially populist “We are neither right nor left, we are coming from the bottom and going for the top”. It is, in Laclau’s terms, “the formation of an internal antagonistic frontier” like this, between a broadly defined sense of “the people” and a ruling class unwilling to yield to their demands, that readies the ground for a populist movement like Podemos.[Continue reading…]
Peter Eavis reports: Europe’s most powerful policy makers dismiss the idea, investors fear it, and it would almost certainly face fierce resistance from within the Continent’s richer countries.
Yet talk of slashing the government debt loads of European countries, starting with Greece, is back. For all the opposition, the idea has resurfaced with a vengeance in recent days as the new government in Athens, facing a cash squeeze and aiming to make life easier for its citizens, looks for immediate ways to reduce what it owes. The pressure on Greece increased on Wednesday when the European Central Bank cut off direct funding to Greek banks, forcing them to rely instead on emergency loans from the country’s own central bank. The move followed a meeting in Frankfurt between Mario Draghi, the central bank’s president, and Yanis Varoufakis, Greece’s new finance minister, and appeared to signal a hard line in negotiations over debt. The E.C.B.’s announcement roiled markets in the United States late in the trading day.
At the heart of Greece’s problems is its eye-popping government debt load, equivalent to 175 percent of the country’s gross domestic product. Now, as Greece’s nightmare grinds on, some economists fear that high debt levels could hamper recoveries in other countries. That is why they are pressing for policies that would alleviate the debts of other European nations, to help get the region out of its rut.
“Greece is more acute, but it is not as completely different as it is portrayed,” said Kenneth Rogoff, an economics professor at Harvard. The economies of Spain, Portugal and Ireland, he added, might benefit from such “haircuts” to their obligations. Podemos, a Spanish political party that has surged in popularity in recent months, wants to restructure the country’s government debt to make it less of a burden. [Continue reading…]
Simon Jenkins writes: A yawning gulf has opened in the world of financial diplomacy. It is not whether to bail out Greece yet again. It is how a Greek finance minister should dress when visiting a chancellor of the exchequer. Yanis Varoufakis arrived in Downing Street yesterday in black jeans, a mauve open-necked shirt that was not tucked in, and the sort of leather coat Putin might wear on a bear hunt. If George Osborne still didn’t get the point, Varoufakis had a No 1 haircut. What was going on?
What was going on was real life. If I were a banker and had seen Varoufakis arrive in the same dark suit as Osborne was wearing, what would I think? I would think here was a man eager to be accepted into the club. He dresses like a banker, therefore he thinks like a banker, which is how today’s finance ministers are supposed to think. I would be reassured.
We don’t want bankers to be reassured by Varoufakis just now. We want them to be terrified. Don’t mess with me, he is saying. I have a sovereign electorate behind me, and I have a bankrupt country. When your banks go bankrupt you bail them out. When your businesses go bankrupt you write off their debts and let them start again. Do the same to me. Your banks have lent my country crazy sums of money, way beyond the bounds of caution or common sense. Now you honestly think you will get it back. You can’t. Read my lips, look at my jeans, feel my stubble. You can’t. Get real. [Continue reading…]
Bloomberg: Prime Minister Alexis Tsipras sought to repair relations with Greece’s creditors ahead of a diplomatic push to win support for his economic program, as euro area officials said they’re looking for concessions from the new government.
Greece will repay its debts to the European Central Bank and the International Monetary Fund and reach a deal “soon” with the euro-area nations that funded most of the country’s financial rescue, Tsipras said in a statement e-mailed to Bloomberg News on Saturday.
“The deliberation with our European partners has just begun,” Tsipras said. “Despite the fact that there are differences in perspective, I am absolutely confident that we will soon manage to reach a mutually beneficial agreement, both for Greece and for Europe as a whole.”
Joschka Fischer writes: Not long ago, German politicians and journalists confidently declared that the euro crisis was over; Germany and the European Union, they believed, had weathered the storm. Today, we know that this was just another mistake in a continuing crisis. The latest error, as with most of the earlier ones, stemmed from wishful thinking – and, once again, it is Greece that has broken the reverie.
Even before the leftist Syriza party’s overwhelming victory in the recent Greek election it was obvious that, far from being over, the crisis was threatening to worsen. Austerity – the policy of saving your way out of a demand shortfall – simply does not work. In a shrinking economy, a country’s debt-to-GDP ratio rises rather than falls, and Europe’s recession-ridden crisis countries have now saved themselves into a depression, resulting in mass unemployment, alarming levels of poverty and scant hope.
Warnings of a severe political backlash went unheeded. Shadowed by Germany’s deep-seated inflation taboo, Chancellor Angela Merkel’s government stubbornly insisted that the pain of austerity was essential to economic recovery; the EU had little choice but to go along. Now, with Greece’s voters having driven out their country’s exhausted and corrupt elite in favour of a party that has vowed to end austerity, the backlash has arrived. [Continue reading…]