Can anyone summarize what the Greek parties who oppose austerity suggest as solution for the financial crisis?

acntech · 2012-05-25T18:32:47.633779+00:00

Not really. Being in the Euro gave us access to cheap imports, decreasing demand for domestic goods (and we couldn't devalue our currency to make our goods more appealing), thus stunning the growth of productive sectors of our economy. The sudden post-2000s rise in borrowing was primarily the result of this loss of competitiveness, as well as the low interest rates that we could afford when we entered the euro. It wasn't all about "wasting money," although that sure is a comfortable explanation for our criminal treatment by the troika.

diamondpeople · 2 days

Really interesting, thanks! Do you have links to papers or books that talk about the tribe?

Aschebescher · 3 days

I don't think the "Madame" part was intentional. If you watch his CNN interview, you'll see that his English is horrendous.

davidreiss666 · 3 days

Germany is benefitting from the European Union. Its economy suffers from a lack of internal demand, and the shared currency system provided it with a market to which it could sell exports cheaply. Moreover, Germany was able to fight inflation (a recurrent German fear) by having a shared currency that is devalued through the participation of the weaker southern economies. The southern countries, which are less competitive, did not receive the same benefits. Indeed, their competitiveness was hurt by the cheap access to imports, and they were not in the position to devalue their currencies in order to make their own exports more competitive. This is what you need to understand: Germany is the one that is getting the free ride here. It needs to prop up the south in order for the whole currency area thing to work. It's not about being humanitarian or generous; it's just what it needs to do.

Also, the bailouts never helped Greece. They were really payments from the ECB to the banks that held Greek debt. The Germans spent almost no taxpayer money helping the Greeks. What they spent it on was bailing out banks. They were misinformed by their government, which was busy fabricating downright racist stories to sell the criminal treatment of an entire country.

psaxno · 4 days

Oh shit, I just realized how old the comment I was responding to was. I'd be interested to hear if you have anything new to say on Tsipras.

psaxno · 4 days

This means that they have to say that they will try to somehow persuade the europeans to change the way the greek bail outs work. I cannot say whether they are aware of how hard this would be and are just lying to the people, or are self-delusional. There are many arguments for the left in greece being self-delusional, the most important one being that they haven't actively participated in any decision making, since they are always an opposition party.

I utterly disagree. Europeans are already starting to soften, partly thanks to Tsipras' rhetoric. I give it until the end of June to get the first signs of a potential Marshall Plan. I don't think you (or Alavanos, for the matter) realize how catastrophic a Grexit would be.

I also don't think that Tsipras is that bad of a public speaker (although his English is horrendous), although I definitely felt that Alavanos was better.

boq · 7 days

Yeah, the ill condition of the Greek state, both in terms of tax revenue and corruption, led to it being the first to fall among the southern countries. But the crisis itself started from the Spanish real estate bubble, which led to bank insolvencies across the south. The member states had to bail their banks out, and so they over-borrowed, which led to the sovereign debt crisis.

boq · 7 days

Sure. Krugman has written many blog posts criticizing the imposition of austerity in the EU periphery. Some highlights:

Austerity and Growth

European Crisis Realities

Insane in Spain

The Unbearable Slowness of Internal Devaluation

Austerity Fantasies

Austerity Alternatives

German Adjustment

Not a Greek Problem

Two good Stiglitz pieces:

Reform the Euro or Bin It

After Austerity

boq · 7 days

CountVonTroll's comment is full of ridiculous explanations, like

Spain had similar surpluses and low debt as Ireland (and we'd be in big trouble if they hadn't had them, or if their banking system had blown up similarly), and a giant housing bubble as well. They were over-reliant on construction, which due to said housing bubble lead to wages increasing above of what their productivity would have normally permitted far too quickly, and they have nothing to replace it with.

Yeah, Spain collapsed because the construction industry was destroyed. Makes perfect sense! It wasn't that the real estate bubble, driven by irresponsible bets from European (mostly German) banks, sent the Spanish banks to insolvency. It wasn't that the Spanish state needed to bail those banks out, and so it overborrowed and went from a primary surplus and very very low debt to a debt crisis. No, according to CountVonTroll it was just that the real estate bubble led to a fall in the construction sector hires, and then productivity suffered. I wonder how many people were employed in construction - 25% of the population? Everything according to the German morality tale is driven by productivity, not by a financial sector, riddled in moral hazard, that can act as irresponsibly as it wants and expect to be recapitalized by member states and the ECB, even at the detriment of the member states' economies.

And I won't even discuss in detail his moralistic explanation of the Greek crisis, which resembles the worst of Merkel's rhetoric, nor will I talk about his astonishingly ignorant statement that "nobody is complaining about the bailouts," apart from, you know, some fringe characters like Krugman or Stiglitz.

boq · 7 days

But the crisis has nothing to do with tax evasion (which IS a problem). Damn, I'm tired of saying the same things all over again in this place... Why don't you guys actually try to read up on how the crisis was created instead of spouting nonsense?

JB_UK · 9 days

Also, it seems that the pause in monetary policy by the ECB had nothing to do with the uncertain political situation and more to do with the fact that the banks' capital was depleted (which was mostly the result of the PSI, not of a post-election capital flight)

As Draghi says:

"I want to state that our strong preference is that Greece will continue to stay in the euro zone," he said in a speech, adding: "Since the treaty does not foresee anything on exit (from euro), this is not a matter for the ECB to decide."

So Greece can still default within the Eurozone, prop itself up with tax revenue etc. (according to the last budget report, we had a 3% primary surplus the first trimester), and count on refinancing from the ECB since the ECB doesn't have the executive power to cease monetary support to banks on the basis of a potential rejection of the next bailout.

JB_UK · 9 days

Right in the next article by Cotterill:

The flash of that Reuters story did spook markets. It seems to have been taken as a signal that the ECB was pausing all liquidity ops to some Greek banks.

It. Really. Is. Not.

This seems to be because not many get how ELA works.

Also, I'd appreciate if you actually took the time to actually address Varoufakis' position instead of arguing that it's "wrong because it's convenient". Varoufakis is not some random blogger, he's a well-respected Greek economist. I'm not arguing by authority, of course, but simply dismissing his opinion as a "populist theory" is unfair.

JB_UK · 9 days

The situation is fucking serious, we don't get to pick whichever populist theory is the most convenient as our reality.

Whoa, your comments have generally been well-reasoned and detailed. What's going on?

By the way, I held the "default but remain in the EU" position for a long time now, so it's not like I'm reinterpreting things now because it's convenient.

JB_UK · 9 days

Also, with regards to whether the ECB will recapitalize the banks, here's a perspective:

The Greek state, let me remind you, is quite close to a primary surplus. With judicious top-down reductions wages and pensions, plus the issue of tax-bonds, the Greek public sector could finance itself for the foreseeable future. All that is needed is that the ECB continues to provide liquidity to the Greek banks. Some say that it cannot do this because it won’t be able to accept Greek government bonds as collateral (since the Greek state will have defaulted). True but irrelevant: Greek banks have already posted whatever government bonds they owned with the ECB for collateral. That creek has dried. Nowadays they are posting domestic mortgages and other such paper titles (which are, by the way, no worse in quality to those posted by Italian and Spanish banks). All that it would take to allow Greece to stay in the eurozone, in a better state than it is today (and less austerity for that matter), is the continuation of the present ECB policy toward Greek banks. As for those who argue that the ECB will take an aggressive stance, think again: the ECB will not knowingly take steps which will destroy the eurozone.

JB_UK · 9 days

Most of the €49bn went to banks that held Greek bonds, just like most of the arriving €18bn will go to the ECB that holds Greek bonds now, after the ECB bought them from the private sector. Not much was used to keep the country running. Also, the post-election bank run has been wildly exaggerated.

JB_UK · 9 days

Even Merkel denied that there's any possibility of Grexit yesterday, and signs of potential leniency from the EU have appeared [1]. A Grexit, after all, would most likely dismantle the EU for good. And the insane amount of propaganda coming from the international press ([2] is a good example) makes me believe that people abroad have recognized that Tsipras does possess negotiating power, and are trying to do everything in their capacity to stop SYRIZA from becoming the majority party.

[1] http://www.bloomberg.com/news/2012-05-14/euro-chiefs-may-offer-leniency-to-greece.html

[2] http://www.nytimes.com/2012/05/17/opinion/the-champion-of-greek-outrage.html

ask0 · 9 days

And they are on EU welfare because they spend too much.

Can you provide evidence that Greeks were overspending? The Greek household debt is one of the lowest in Europe. And if you're suggesting that Greeks don't work as much as other Europeans, according to a recent OECD study Greeks put in more hours than Germans.

JB_UK · 9 days

it actually is. just wait and see

JB_UK · 9 days

anti-austerity is not anti-euro

ibleedblu7 · 11 days

Yep. They "reject" academic philosophy - and then proceed to reinvent it, slowly, poorly.

arcadeninjasan · 11 days

If Greece exits the Euro, the Euro is almost certainly dead. The ECB won't be able to recapitalize Italian and Spanish banks after a Greek exit causes a huge speculation-driven capital flight out of those banks. Also, it's very likely that having seen where the IMF package brought Greece, Spain would have no reason to continue with austerity and instead decide to exit as well. So we would very quickly have a disintegration of the entire shared currency system.

It's not about being generous to Greece and choosing to recapitalize its banks. Member-states really have no other choice if they want the Eurozone to survive.

arcadeninjasan · 11 days

Your answer is almost completely irrelevant to what I was saying. I'm saying what needs to be done to keep the Eurozone afloat. You're arguing that Germany doesn't really need the southern countries. Then why doesn't it dismantle the union already? You're ignoring the elephant in the room, which is the shared currency system.

The problem in southern countries is that they haven't waken up to our global world economy where there is more and more competition.

Let's say I agree. How do you hope to fix that?

I never said that the Greek state doesn't need a degree of austerity or that Greece doesn't need to get competitive. But not now, when 22% are unemployed and the GDP is decreasing like crazy. Now you need spending. Does an insight from 1936 really sound that radical to you all?

arcadeninjasan · 11 days

The problem is that countries such as Finland have had to loan money in order to use it for the bailout of the Greek state.

The problem is that you think this is a problem. That's what the currency union is about. Richer countries benefit from it because they can engage in export-driven growth, which leads to a capital flow from the poorer countries to the richer ones. This needs to be rectified somehow, if you want the currency union to remain operational without one of the countries entering a recession. So you need to do fiscal transfers from the richer countries to the poorer ones. If you were a New Yorker, you wouldn't complain if you had to bail out Missouri with your taxpayer money. The main reason why this crisis has been prolonged is because Germany wanted to have the cake, and eat it too: benefit from the currency union without helping the poorer countries. A loan + austerity measures clearly wasn't help. We need investments to get our economy back on track.

I'm not talking out of my ass. All of this is described in the original paper that inspired the Eurozone, Optimum Currency Areas by Robert Mundell. The design of the Eurozone was flawed from the beginning because it failed to install a risk sharing system like the one I described.

arcadeninjasan · 11 days

What do you mean? We have one of the lowest household debts in Europe. It is government debt that we're talking about.

chrisjd · 11 days

There's too much misinformation in this comment to be worth addressing. I have no idea where you get your news from.

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