Who blinked ?

So, the latest round of the Greek debt crisis has ended in a typical European combination of delay and compromise, much as Yanis Varoufakis predicted a week ago. But in view of the obvious incompatibility of the positions put forward, someone must have given a fair bit of ground. The Greeks wanted continued EU support, and an end to the Troika’s austerity program. The Troika (at least as represented by German Finance Minister Schauble) wanted Syriza to abandon its election program and continue with the existing ND/Pasok policy of capitulation to the Troika.

Put that way, I think it’s clear that the Troika blinked. The new agreement allows Syriza to replace the Troika’s austerity program with a set of reforms of its choice, focusing on things like tax evasion. Most of Syriza’s election platform remains intact. Of course, it’s only for four months, and none of the big issues has been resolved. But four months takes us most of the way to the next Spanish election campaign, hardly an opportune time to contemplate expelling a debtor country from the eurozone with utterly unpredictable consequences.

If the negotations were a win for Greece (feel free to disagree!) how did it happen?

First, it seems clear (and contrary to claims made in the last thread on Greece) that the Syriza leaders were prepared to take the risk of being thrown out of the eurozone rather than renege on their election platform. This makes obvious political sense and is consistent with their past statements, but seems to have taken the Troika side by surprise.

On the other side of the table, Schauble (at least in his public statements) was ready to push Greece out, a policy that would also have necessitated active measures to destroy the Greek economy, since nothing could be worse from the Troika viewpoint than a successful repudiation and exit from the euro.

(Uninformed speculation begins here) But I suspect Schauble did not get the backing he wanted from the IMF and ECB.

The IMF has already retracted its support for the bogus “expansionary austerity” hypothesis, but it still pushes microeconomic “reform”, so they had no logical reason to oppose the Greek offer, merely the difficulties of an entrenched position.

The ECB has also gone a long way towards abandoning the discredited assumptions on which it was founded, pursued with vigor by the unlamented Trichet. The biggest step, taken just before the Greek negotiations was the move to massive quantitative easing, an admission of the failure of all previous policies. More importantly, though, the ECB would have had to do most of the dirty work for Schauble, at the same time risking the destruction of the currency it was set up to manage.

That’s all pretty speculative, but the combination of ECB QE and the Greek extension means that the tide may have turned against austerity. The big question now is how all this will play out in Spain and Italy.

31 thoughts on “Who blinked ?

  1. I hadn’t heard. This appears to be wonderful news. What to say:

    – Will see now see a Game Theory analysis by economists wedded to this approach to problem analysis? This would give Yanis a laugh.
    – What will the rest of the PIGS do now in their austerity negotiations and as importantly at the ballot box.
    – Where does this leave our local austerity mongers?

    I will have to explore all the other economics blogs. Their should be electric with gossip and speculation way beyond you modest self effacing and very plausible offering John.

  2. The IMF has already retracted its support for the bogus “expansionary austerity” hypothesis,

    Did the IMF ever actually support the notion of expansionary austerity? I thought they were always more nuanced.

    since nothing could be worse from the Troika viewpoint than a successful repudiation and exit from the euro

    Except that it would be very difficult for Greece to successfully exit the Euro. Their banking system would be toast, as it depends on credit from the ECB. No banks = no economy.

    A Grexit would be mutually assured destruction, and both sides know it. So if push really came to shove, Schauble would not have pushed the Greeks out. Well maybe he personally would have done it, but he wouldn’t have been allowed to do it by people above his pay grade.

    It’s reasonable to presume that the Germans will do anything to keep Europe together, despite what they say. Apart from the purely economic aspects, they have a common and serious threat to their east that they have to manage.

  3. The EU in its form up until now was never going to work. There are economists, orthodox and heterodox, who predicted this. The central economic problem was and is that the EU is not an OCA (Optimum Currency Area). This is the case whilst it is not a full Federation with full mechanisms for horizontal and vertical fiscal transfers like a true federation (e.g. Australia or the USA).

    The central political problem was that the EU, precisely because it was not a proper federation, did not determine economic policy in any way which was genuinely democratic (involving all the peoples of all the nations). Instead it was a technocrats and bankers construct and it gave the technocrats, bankers and capitalists exactly what they wanted. This was the removal of currency sovereignty and general economic sovereignty from democratic nations (and thus from the people) and its delivery into the hands of technocrats, bankers and capitalists.

    A genuine, democratic economic and political federation of Europe would be a different animal and perhaps a worthwhile and workable setup. However, given the failings of the current setup, it would be better for nations whose economies are being trashed by the current setup and the “Troika” to exit the EU. I mean nations like Greece, Italy, Spain and Portugal at least.

    Iceland provides the model for recovery. Currency sovereignty and fiscal and monetary sovereignty are the way to go. I mean this in the sense of being able to run deficits and surpluses in a counter cyclical manner at the determination of democratically elected government, being able to float the sovereign currency and being able to default and/or refuse requests or pressure to indemnify and pay back foreign banks and creditors (who took their risks and should take their haircuts accordingly).

    Iceland’s path has not been without adjustment pain. Nothing comes without a cost. However, its trajectory since the GFC has been far superior and its current position is far superior to the economic position of Greece. Greece should definitely leave the EU. So should other countries still being forced to take the EU/Troika snakeoil which wrecks their economies and creates unemployment of up to 25%. This is Great Depression territory or worse. This is what Greek workers, students, unemployed and pensioners have been going through.


    Iceland’s medicine has worked. It’s empirical proof that it can work but not necessarily proof that it will work always and everywhere. However, the serious ongoing problems suffered by Greece, Ireland, Italy, Spain, Portugal and even much of the rest of the EU do constitute empirical proof, to a high degree of certainty, that austerity policies appllied to recessionary economies do cause economies to plunge into depression.

    But then accepting empirical evidence has not been the strong point of monetarist and neocon economics. They prefer blind adherence to falsified ideological positions because these positions suit a tiny minority of capitalists at the expense of everyone else.

  4. The biggest step, taken just before the Greek negotiations was the move to massive quantitative easing, an admission of the failure of all previous policies.

    Perhaps. But with the euro CPI figures showing deflation (ie nominal prices are falling) over recent months it could be characterised as merely being an appropriate monetary response to the inflation outlook.

    But four months takes us most of the way to the next Spanish election campaign, hardly an opportune time to contemplate expelling a debtor country from the eurozone with utterly unpredictable consequences.

    Short of an invasion I don’t see how anybody can make Greece or any other nation abandon use of the euro. Even if Greece decided to repay none of it’s debts it could still use the euro.

  5. The central economic problem was and is that the EU is not an OCA (Optimum Currency Area).

    Robert Mundell pioneered the idea of optimal currency areas. He certainly believed the EU was an OCA.

    I actually think the problem is too much fiscal integration. National governments in the EU should stand alone in honouring or dishonouring their debts and private lenders should wear the consequences of any default and price the risk accordingly.

  6. During tense negotiations last week, Mr Varoufakis was said to have shouted ‘liar’ at Jeroen Dijsselbloem, chairman of the eurozone group of finance ministers, with some observers fearing that punches were about to be thrown.

    That’s why the Troika blinked.

    From that impeccable source The Daily Mail (Oz).

  7. I don’t quite agree with the summary of what happened in JQ’s post.

    I believe the outcome is a ‘win’ for Greece but not because of ‘the Troika had to blink’ but because the new Greek government worked with the EUROgroup. How did it happen? I can only summarise what I read in the Suedeutsche Zeitung.

    Yanis Varoufakis’ (Greek Finance Minister, ex academic from Sydney uni) first 1.5 page letter to the President of the Eurogroup, containing a proposal for an extension of financial aid was rejected last week. This letter was published in the said paper. The Greek government was given until Monday 23/2/15 to submit a detailed proposal. It arrived at mid-night CET. During the interim period there were direct communications with the President of Greece and many EU Heads of Government as well as a telephone conference among Finance Ministers. The new proposal – 7 pages long including the accompanying letter – can be found in English on the Sueddeutsche Zeitung website. (google Sueeddeutsche Zeitung. Click on “Griechenlands Reform-Liste im Wortlaut” and scroll down one paragraph)

    The 7-page letter shows very clearly that any debate about Greece framed in terms of ‘austerity’ vs Keynesian stimulus as well as debates about Euro vs Drachma miss the point about the reality of the political-economy and the associated administration in Greece. The problem in Greece, as it has accumulated over a long time, is outside the conceptual framework of macroeconomics.

    “The Troika (at least as represented by German Finance Minister Schauble) wanted Syriza to abandon its election program and continue with the existing ND/Pasok policy of capitulation to the Troika.”

    It would take a very detailed and thorough analysis to reach a firm conclusion on the validity of the above opinion. I can report that Schaeubele got exactly what he wanted, namely explicit measures on fighting corruption, tax evasion, a tax system that takes note of social justice. (See previous issues of the Sueddeutsche Zeitung). I have mentioned before on this blogsite that it is a mistake to characterise Schaeubele or Merkel as a) advocating ‘austerity’ as understood in the Anglo-Saxon press and b) that they determine what happens in the EU. This is why I kept on saying: Austerity for whom?

    On the other hand, it would also require a long analysis to compare Syriza’s election program with the details of its 23/24 February proposal. For example, the original Syriza program on privatisation and debt relief is seriously altered and abandoned respectively.

    I like the proposal because it makes sense in terms of real politics and it is perhaps as good as it can get now for social justice and the European program. (Applied economic theoretical models, in particular comparative static models, tend to start off as if there is no history – they ignore the actual initial condition. Alternatively put, they tend to start off as if there is a once off choice between two economies.)

    It seems to me the 23/24 February 2015 proposal, which has been accepted by the EUROgroup, is the outcome of a new government in Athens, which has been branded radical left, but is not prepared to do harm to the population for the sake of living up to the image, and EUROgroup heads of government who are knowledgeable about the actual circumstances in Greece and are willing to assist but not without limits or conditions. In short, it is not a fight between ‘the left’ and ‘the right’.

  8. No.

    Syriza-gov has signed onto “labour market reforms” and is now lined-up to commence attacking trade unions.

    It has also accepted privatisations but reduced from previous government onslaught.

    That is all that the more strategic “Troika” would want.

    Syriza-gov has offered up at least one sop to its rank and file. There will be an increase in the minimum wage – no details thank you.

  9. @Ernestine Gross

    Your post begs a lot of questions.

    “The problem in Greece, as it has accumulated over a long time, is outside the conceptual framework of macroeconomics.” – Ernestine Gross.

    You make this assertion without supporting it. Your assertion may or may not be valid but a reader has no opportunity to assess your reasons as you state no reasons. Since you mention “explicit measures on fighting corruption, tax evasion, a tax system that takes note of social justice”, one might assume you mean that Greece is so corrupt, tax evasion so rife and the tax system so unprogressive that “standard” macroeconomics won’t work in Greece. Again, you could mean that the country is so stripped of natural resources that it can’t run a supportable economy. Indeed, without details it’s hard to know what you mean.

    “I have mentioned before on this blogsite that it is a mistake to characterise Schaeubele or Merkel as a) advocating ‘austerity’ as understood in the Anglo-Saxon press and b) that they determine what happens in the EU. This is why I kept on saying: Austerity for whom?” – Ernestine Gross.

    The general consensus (so far as I can tell) is that “austerity” has been applied to Greece since the GFC. If it was “austerity” who argued for it and who applied it? I get the impression that Germany is strongly involved somehow but I don’t just “blame” the Germans or Merkel in particular. But either somebody, as in some group, applied it or some mechanism was permitted to apply it. The latter amounts to an earlier act of commission by some group (to create an inflexible, poorly designed mechanism) and to a later act of omission in failing to amend the mechanism or prevent it applying to a case where it would do more harm than good.

    “In short, it is not a fight between ‘the left’ and ‘the right’.” – Ernestine Gross.

    I am sorry but I don’t buy this statement at all. It is precisely a fight between ‘the left’ and ‘the right’ if by those terms we mean workers, students, unemployed and pensioners as ‘the left’ and bankers and capitalists as ‘the right’. The so-called bailouts for Greece have to date been linked to austerity measures which have meant cutting wages, pensions etc. for ordinary Greeks. The bailout funds thus certainly never bailout ordinary Greek citizens. They allow the Greek government to pay its debt back to (mainly) European Banks and I suspect these are often but not always private banks. Thus these bailouts are really bailouts for rich banks and their clients so they don’t take a “haircut” or at least don’t get it cut so short.

    The whole current world structure of government debt (and the notion that governments need to fund by borrowing from private fund sources) is a nonsense, a false construct set up to give private capital guaranteed returns and a (relative) safe haven as required in government bonds.

    “Iceland has approximately 385000 citizens.” – Ernestine Gross.

    And Greece has about 11,120,000 citizens. What do these numbers tell us? They tell us that a nation of 384,000 citizens can successfully run an economy and a sovereign currency and that a country of 11,120,000 citizens can be foolish enough to give up currency sovereignty and partial national sovereignty without ensuring it was entering a fully functional deomcratic federation.

    Why are so many periphery nations of the EU in economic trouble? It’s not just Greece. There appears to be an imbalance between the core and the periphery; an imbalance that goes beyond national failings, real or imputed, and is diagnostic of systemic failings in the design of the EU itself.

  10. I agree with Ernestine Gross on most points.
    And, yes, Syriza did not ask Eurogroup for what they campaigned on because Syriza only wanted extension from February 28. end of the program without commiting to previous program after that.

    But Eurogroup wanted exactly that, absolute Syriza capitulation and accepting previous program without option to change it later on. They did not get that.
    Syriza wanted 6 month extension with option to negotiate further aproach to programme. They did not get that. They got only 4 months extension with option to change the bailout conditions.

    So, nobody got what they wanted and nobody lost all they wanted. But YV got more, much more then Eurogroup was offering in beggining. Eurogroup won less, much less then wanted in beggining. Outcome is about 75% for YV to 25% for EU if we take zero sum game.
    But it wasn’t zero sum game. it was 66.6% for Yanis (4 out of 6 months) and 12% for EUgroup (4 out of 48 months)

    And negotiations about further developement is about to start.

  11. @Ikonoclast

    Where are the questions for which you want an answer from me, Ikonoclast? You seem to have provided your answers. I don’t subscribe to your theory.

    I volunteer a few clarifications.
    1 I wrote the fight is not between ‘the left’ and ‘the right’. I had in mind the negotiating parties and not within Greece. I should have made this clear.
    2. It is not true that I did not support my statement about ‘macroeconomics’ at all (see segment on models). I can add, macroeconomic models either implicitly assume there is a particular institutional setting, including administrative rigour, in place (ie these settings are just right for the conclusion) or this problem is totally ignored. To support my point, I refer to your arguments.
    3. May I remind that it was a former Greek President who spoke about the problem of corruption and tax avoidance on Australian TV. Prof Q, in his very first post on Greece, wrote about this problem as well as the role of Goldman Sachs in massaging the books before Greece entered the EUROgroup via currency derivatives. Even an English commedian did not forget about this one in a recent gig on the topic. Talking with people of Greek origin with informational links to Greece could provide you with details.
    4. The term periphery is not helpful. Spain is not a ‘peripheral’ country in the EUROgroup, nor is Italy. Spain shared with the USA a debt problem in the private sector due to a housing bubble. Is the USA also a peripheral country? To answer my own question, obviously not because the centre of the GFC was in the USA. Look at the wealth distribution of Italy and Spain in Thomas Piketty’s book to gain an insight into the nature of the problem.
    5. Greece is a contemporary case where your term ‘oligarchs’ is useful; it is also used by the Greeks themselves.
    6. I have provided a reference to the list of proposed policy measures, agreed between the new Greek government and the EUROgroup. Surely, reading this list provides an insight into what actually is going on in Greece. For example, there are starving people. Issuing foodstamps is one of the measures listed.
    7. Now I have a question to you. Does it make sense for ‘country A’ to give money to ‘country B’ when it knows that the money will end up in the pockets of people in country B who use it to buy real estate in country A and any leftover is sent to Luxemburg which refuses to cooperate with taxation authorities from country A? (All this is current affairs stuff and can be read up on in the international press.)

    The numbers. It is easier to achieve a consensus in smaller than in larger populations because the communication problem is smaller. Iceland’s problem is not the same as that of Greece. The Icelandic government was not involved in the banking debt bubble. Hence, it, on behalf of the population, could refuse to accept responsibility. The Icelandic government did not massage the books, etc etc. The people decided they will revert to living of the sea. And so they did (again the numbers matter). Incidentally, Iceland is the most peripheral country in geographical terms in Europe. The other day I read a temple to a Norse god of times past has been built in Iceland. Now this is a statement of difference; a clear break with anything which came from the edges of the big lake that separates Africa from Europe – religions, high finance, celebrity life style, oligarchs….. you name it, anthing other than science which is international by methodology.

  12. @Ernestine Gross

    1. The battle is still between capital and labour. German workers have been squeezed too. I won’t go into that in this post.

    2. Hmmm, maybe I am not looking hard enough. I cannot find “the segment on models”. Nor can I find anything matching “Griechenlands Reform-Liste im Wortlaut” by following the instructions “The new proposal – 7 pages long including the accompanying letter – can be found in English on the Sueddeutsche Zeitung website. (google Sueeddeutsche Zeitung. Click on “Griechenlands Reform-Liste im Wortlaut” and scroll down one paragraph).” So I am pretty much still in the dark as I do want to read that new proposal.

    3. So Greece is corrupt and the USA is not corrupt? Okay, I know you are not saying exactly that, at least not so simplistically. The issue must (I think) revolve around how far corruption and incompetence extend right into the government apparatus in relation to compromising revenue raising. The USA is an enormously corrupt country but also an enormously wealthy country. It can carry a lot of corruption. Greece does not have that latitude. It is a relatively poor country and corruption and tax evasion immediately cut into what it can do. The USA also benefits from enormous subsidies (essentially) via its currency’s status as a world reserve currency.

    4. The term periphery is helpful in relation to the EU which I was writing about. The economies I mentioned are peripheral to the main economic powers in the EU and in whose interests the EU is mainly managed and valued. Italy is perhaps not peripheral and Spain perhaps is. The rest certainly are. Peripheral was not meant in a primarily geographic sense though geography plays some role.

    5. Oligarchs is useful term everywhere IMO. The Koch Bros. have too much power in the USA. Gina Rinehart has too much power in Australia (to give some examples).

    6. As I say, I can’t follow or find that reference. I will have to search on my own.

    7. As to your question, it is loaded in a certain way, but I will still answer the literal question and say “No”. I don’t think Germany and France (for example) via the EU should give money to Greece. Mind you, I think much of this money will end up back in banks in Germany and France thus protecting these banks from the risks they took. Nor do I think Greece should take the money. Greece should leave the EU, float its own currency and repudiate all foreign debt. At the same time it should freeze, confiscate and nationalise all the assets of all its oligarchs.

    As a side question, why is Luxembourg tolerated or any tax haven for that matter? Clearly, the major and corrupt players in the EU, US tolerate and heavily use these places for special reasons. It is not so much that Greece is corrupt as it is that capitalism in toto is corrupt. Greece is simply one kind of sore on an entirely festering body.

  13. @Ernestine Gross

    The problem in Greece, as it has accumulated over a long time, is outside the conceptual framework of macroeconomics.

    The problem as you seem to present it is twofold: Tax avoidance and public debt. Am i wrong?
    You might claim that tax avoidance caused public debt and that is the only problem you talk about. But then that would not be true for rest of the PIIGS that are in the same problems as Greece.

    But economics solved the problem of tax avoidance long time ago and it is not talking about it anymore. It is not true that it is not in perview of economics, it is just that is not talking about it anymore. What environment incentivizes people to avoid taxes?
    And about public debt, economics do not have the correct assumptions and it is doing really bad about it. Econometrics from government accounts are signals, not a disease, that should be played with. Underlying economy is what produces such and such results in public accounts and where the problem is. Public deficit is not problem iit is the signal that there is a problem in economy and that institutional setup is causing those problems.

    How to set up institutions to correct those problems is the fight between “left” and “right”.

  14. @Ernestine Gross
    Another problem Greece has is what to do with public debt level now that is allready outside off economic conceptual framework. The question why is this crucial question is outside of macroeconomics is very important. But some heterodox economics dealt with such question and Krugman recently accepted it: Public debts in domestic currency is never the problem only debts in foreign currency can be big problem. And the level of foreign debt is not at issue, is it at 20% or 100%, there are cases when countries with 25% of debt/GDP had to default. The issue is the international standing of the country, is it center, periffery or perifery’s perifery.

    In normal nonconfrontational times, public debts of any country are not a problem since they are refinanced regulary and without phanphare, but when powers decide to destroy a country they order banks to stop refinacing old public debts. The level of debt is not an issue, only decisions by power countries.

    Some countries decide to not be independent, not to have their own monetary policy that can lower interest rates when crisis hits. Those countries decided to peg their currency, forced on it by oligarchy or by outside “consulting”. By pegging the currency they can not have a monetary policy and lower interest rates as needed. They are forced to raise interest rates on their own public debt when crisis strike. It is very countercyclical. This is the weaknes when outside powers can strike and destroy country and easilly extract benefits from it. This is what is happening to Greece.

    It is not the level of debt, it was dependent monetary policy used to create crisis and then to decline regular refinancing of debt as other central powers enjoy. Self inflicted wound by perifery’s Central Banks is invitation to put more salt on it.

  15. @Ivor

    I was wrong.

    Greek workers will not get a timely rise in minimum wages.

    It has been “delayed”.

    The Syriza-gov IR policy looks like it was drafted by Eric Abetz:

    Here are their words (translated?)

    Phasing in a new ‘smart’ approach to collective wage bargaining that balances the needs for flexibility with fairness. This includes the ambition to streamline and over time raise minimum wages in a manner that safeguards competiveness and employment prospects. The scope and timing of changes to the minimum wage will be made in consultation with social partners and the European and international institutions, including the ILO, and take full account of advice from a new independent body on whether changes in wages are in line with productivity developments and competitiveness.

  16. @Ivor

    The triumph of capitalism is almost complete. It is at the point of its complete triumph that it becomes antithetical to its own existence.

  17. It’s not just the IMF and the ECB that are going soft on austerity. Pierre Moscovici from France has replaced hardline Finn Ollie Rehn in the EU Commission’s economic portfolio, and Juncker is a lifelong trimmer whose only aim is to keep the European show alive. Moscovici has ruled out Grexit, the key threat for the austerians. The Troika have become very unreliable hitmen for the German agenda. So I tend to agree the Greeks have probably won.

    The objection to this reading is the fierce Greek objection to the Troika term, and the mid-level officials going to Athens as proconsuls. But this wasn’t necessarily an objection to the IMF, ECB and Commission as monitors. They insisted on negotiating with principals, and AFAICT won the point. I don’t think this was a trivial semantic issue.

  18. Prof John and friends:
    A key ingredient in the strong standing that Greece made under pressure from Europe’s heavy hitters must surely be that the Minister for Finance was literate and articulate in heterodox economics. Punch his surname into Google Scholar to get a sample of his published work.

    No doubt the fact that he lived in Australia and shares Australian citizenship is not irrelevant. Australians are more likely than nationals of most other countries to punch hierarchy on the nose.

  19. Short answer on the Greek economic crisis. Greece via a left-wing government like Syriza should;

    (1) Leave the EU, float its own currency and repudiate all foreign debt.
    (2) Run large deficit budgets in its current deflationary depression.
    (There is no doubt Greece is in a deflationary depression.
    The unemployment rate = 27% and inflation rate = – 1.5%.)
    (3) Implement minimum wage and pension rises.
    (4) Increase the size and scope of its public services.
    (5) Crack down on corruption and tax evasion with a larger police force and larger
    internal revenue service.
    (6) Freeze, confiscate and nationalise the assets of the oligarchs.
    (7) Cut back on military spending.
    (8) Take pre-emptive steps to prevent a right-wing military coup.

  20. I think the best way forward for the Greek Government is to manoeuvre themselves out of the Eurozone in a way which the Greek people overwhelmingly perceive as Greece getting thrown out instead of Greece choosing to leave. Then they can create a new currency, redenominate ALL debts into the new currency, and spend heavily to create jobs, build infrastructure, and provide social services. Maybe that’s their strategy. They want to buy more time to pin an exit on Germany. For presumably sentimental reasons 80 percent of Greeks want to remain in the Eurozone. In the eyes of the Greek people their country’s accession to the Eurozone symbolizes progress – a decisive move away from the dictatorships and violence of the past. This prevents them from seeing that, as an intensely practical matter, the Eurozone destroys their wellbeing.

  21. A recurring theme on this thread is the question of who pulls the strings in the EU. Schauble and Merkel are often put up as straw-figures but I doubt they are really making the calls. The question must come back to who controls the money? Like the Koch brothers in the States, there is some group behind the official political front that is making the calls here. It seems they are far better at hiding themselves than in the States, probably because they have been at it longer and know the negative sentiments that they can cause.

    A quick prerusal of the wealthiest families in Europe shows the majority derive their wealth from retail (including fashion and supermarkets). There are very few banking familes in the vein of the Rothschilds, although I am sure the others trillions are well invested via the large european (swiss?) banks. These retailers are the people with the most to lose from a collapse of the EU and the euro. Schauble has nothing to lose. The German public would for the most part cheer a Grexit!

  22. On a side note, Australia’s new treasury secretary has made it clear he is a big fan of expansionary austerity and disagreed with the IMF’s assessment of austerity’s destructive effects. On what grounds is not clear, other than that he is (his words) “an old-fashioned economist”. I suppose, given his position, it is in a linguistic sense pleasing that he subscibes to the Treasury view. In all other ways it could contribute to the next budget being as much of a disaster as the last.

  23. @Jordan

    You are mistaken if you assume tax avoidance (including profit shifting by multinationals) is no longer a hot topic in economic policy in the USA, the EU, Australia and possibly elsewhere. See the daily press.

  24. Mark Blyth austerity speech to the SPD

    Back in the 1970s, a period that now seems quite benign, corporate profits were very low, labor’s share of income was very high, and inflation was rising. We were told that this was unsustainable, and new institutions and policies were constructed to make sure that this particular mix of outcomes would never happen again.

    In this regard we were singularly successful. Today, corporate profits have never been higher, labor’s share of national income has almost never been lower, and inflation has given way to deflation. So are we happier for this change?

  25. There’s a lot of talk about tax avoidance but nothing substantial is ever done about it. There’s a lot of talk about climate change but nothing substantial is ever done about it. There’s a lot of talk about inequity but nothing substantial is ever done about it. The talk occurs in lieu of action. Late stage capitalism is manifestly unwilling to change its direction. When it collapses through unsustainability, then things will change.

  26. @Ernestine Gross
    Sorry for my ambigous statement, i really meant that the solution to tax avoidance is solved. Yes there is a lot of talk about the problem but nobody wants to implement solutions that are well known (so no need to look for economical solution) but the problem is purely political.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s