36 thoughts on “My take on the latest round in the Greek crisis

  1. @John Quiggin

    I did put “printing money” in inverted commas. My quotes included reference to electronic creation of the money. I think it’s clear that I was clear (if that note was meant for me as well as others).

    More to the point, why address a side issue but not answer the substantive questions I raised about the relative ineffectiveness of Q.E. and its bias to assist the rich? Q.E. does not have the same effects (especially equity and distributional effects) as well targeted deficit spending to assist the poor. Q.E. is rich-guys’ policy, IMO.

  2. @Ikonoclast

    When did Professor Stiglitz say the words you quote (and interpret) and where?

    To the best of my knowledge any claims Greece had for reparation payments from Germany were settled only around the time of unification of East and West Germany.

    The Marshall plan came with a new constitution and with strict supervision. The French, the British, the Russian ‘occupying forces’ all went home, the US stayed, although not strictly as occupying forces.

    It all sounds very nice to say Germany now needs to show some magnanimity to Greece. The presumption is that it had not done so. What is the evidence? What exactly the Germany government supposed to do? Send a cheque with a huge number printed on it to Greece? How would they know if the data supplied on the latest national accounts are even vaguely accurate? What incentive would there be for the new Greek government to withstand the pressure of the old oligarchs to keep things as they are? I have now idea what you have in mind that could be even vaguely related to recorded events. Incidentally, the Deutsche Bank, not Goldman Sachs, took a hair cut on its loans to Greece. Goldman Sachs ‘made money’ on two way bets. I suppose the USA could be said to make a contribution via the IMF.

    It seems to me you are totally unaware of international treaties within the EU, within the Eurogroup, and across the Atlantic.

    The elephant in the room is why does Greece not propose to sell back all the military equipment (or a large part of it) they bought from Germany, France, Britain (?) the USA (?)?

    It is amazing how talk about a ‘Euro crisis’ has supplanted talk about the GFC, as if the order of events were reversed.

    In addition to this financial mess (GFC) there is a huge number of refugees coming from Syria, Iraq, and some African countries. Many of the former arrive in Greece (and Italy) due to geographical proximity. There is a huge refugee program in Germany (the State pays Euro 7 (or 9 I can’t remember) per day per person to the owners of houses or appartments made available, public officials supervise the whole program in terms of adequacy of accommodation etc. Still, the initial impact is on Greece (and Italy). Greece is least able to deal with these people, given that it is in a state close to emergency. Now, are you, Ikonoclast going to blame the Euro on the mess in the Middle East because Greece hasn’t got sovereignty over its own currency?

    To introduce a bit more reality, what about Poland? Poland surely would have a claim to reparation payments from Germany. Poland has not demanded any.

    It is absolutely naive to characterise the actual problem in macroeconomic terms and, specifically as ‘Germany representing the austerity school of thought’ and ‘Greece’ as ‘the periphery’.

    Let me illustrate something about ‘austerity’ closer to home. Lucy Turnbull, on a Q&Q segment, put something in words which rang true to me. I can’t remember her own words exactly. She said words to the effect that Australians don’t want to owe a lot of money (government debt) because of the experience they made in the 1930s. This corresponds to Australians being interested in getting the government budget(s) into the black. One could call this wanting ‘austerity’. But, the May 2014 budget was and still is considered ‘unfair’. I conclude, it is not merely a matter of ‘debt reduction’ but who is called upon to make major contributions. Hence my repeated statement, ‘austerity for whom’. It does matter.

  3. I read this today, titled ‘Why does Germany Insist on A Failed Programme For Greece’ which claimed that, after five years of austerity economics, the Greek economy was collapsing:

    The elephant in the room, however, is the failed structural readjustment programme which was implemented in Greece since its first bailout in 2010. Five years on, the country’s economy has contracted by 25 percent, unemployment has risen to 27 percent and national debt, seen by many as the root cause of the Greek crisis, instead of contracting has soared from 124 to 180 percent of GDP.

    In my view, admirably comprehensible political economy.

    Austerity has failed. Time to put the onus of proof onto those who urge it.

  4. @Ernestine Gross

    Google “Stiglitz, Germany is the problem not Greece.” He said these words on CNBC news. All this was in my original post albeit not in proper citation or quote format so it would be easy to miss.

    There are no doubt complex reasons Greece is having problems. Some are real world problems, some are real economy problems and some are financial economy and macroeconomic problems. We seem to be emphasising different aspects.

    I have in certain posts referred to Greece’s excess military spending so I am not unaware of that issue. Of course, it takes two to tango. The USA, Germany, France and Great Britain would be (I guess) the main culprits in over-selling military hardware to Greece.

    As for this budget surplus fetish pushed by neoliberals, I just do not understand it. A deficit or surplus is not good or bad in itself. It depends on economic conditions. If the economy is overheating you need a surplus. If the economy is weak you need a deficit to pump prime. Keynesianism works most of the time. It worked for Australia in the GFC. QE too is a kind of Keynesianism except it is mostly pump priming for rich people. Governments don’t even have to go into debt to run a deficit. That’s just another neoliberal myth.

    The GFC exposed the systemic design weakness of the EU. It’s the one developed region which can’t recover from the GFC. That has to be diagnostic in my book. The USA, Canada and Australia have recovered albeit one could argue a bit tepidly.

    I think it is naive to believe that there is not a macroeconomic dimension to the EU problem. It is clearly driven at least in part by very bad macroeconomics. We will never agree on this of course.

  5. @Ikonoclast
    Apologies to Aussies for the lack of clarity. I was writing only about the legislative and policy programme of a national government. Of course Australia and the USA have capable bureaucracies that could carry out a wide legislative programme – but this is impossible in either country until a change of government in the one, or Congress in the other.

  6. @Ikonoclast

    Ernestine Gross is right that many things were wrong in Greece even before it joined EU and EZ.
    Of course it had many internal weaknesses but mostly due to being treated as colony and instigating coups by Northern European powers. So, it was a state in bad state due to perifery status for whole century.

    And you are right about bad set up of EZ and lacking proper central bank, so Greece is in focus due to being the weakest link in EZ. If Greece was not in EZ then Spain would enjoy the same status as Greece have now. Even tough Spain have had surpluses before GFC, it did not help it and unemloyment is almost as bad as Greek.
    It is only that Greece started to resist the stupidity of EZ concept as it is now. Spain will too.

    And banks are demanding some assets that bring yields and only greek assets are giving good yields. If Greece was never there, they will be forcing the same yields onto Spain today as the Weakest link.

    But lets talk about Greek’s mess even before entering EZ and also today, which Syriza has promised to takle down.
    -Land records are a mess, many properties still hold names of owners that have been dead for 100 years. (the same case is in Croatia where the war made it messier then in Greece)
    -There is no power of institutions to enforce tax obligations due to power of oligarchs wanting to avoid taxes so many others do it too.
    – A lot of economy is cash economy so no records of sales. (Croatia recently implemented Fiscalization which banned any sales without receipt and all fiscal inspectors were closing shops even for the smallest infraction. Record of sales increased by 31% in 2 months. Today, even country markets sellers print out receipts for sales directly linked to Tax agency)
    – All previous governments refused to take steps to properly enforce the law in economy.
    – Colonial mentality of central bankers is the biggest issue, they do not think of independent monetary policy that would fit conditions of Greece. Interest rates are higher then of competition to prevent high credit demand and inflation with it. But this also prevents modernization of production due to high cost of capital.
    -Another large issue is low social and retirement benefits, low minimum wage. Low wages allow for delaying modernization of production ruining competitivness with north.

    So, high interest rates and low wages destroy competitivness. Modernization is usually done with loans, so high interest rates prevent it. My experience of having businesses in high wage country and low wage country tells me that low wage i am giving does not force me to modernize my business as it does in high wage country.

    Neoliberal theory that low competitivness was caused by high wages of workers is acctually opposing to real world experience. It is the low wage and high interest rates of poorly developed countries that are the cause of low competitivness.

  7. If Greece exits the EU, it will refinance with the Yuan and to hell with Germany, the US and NATO.

  8. @Ivor

    Clearly Greece has lost its national sovereignty not to mention its worker sovereignty. Here is Jeroen Dijsselbloem, the Dutch finance minister, telling Greeks how to run their own country. It is outrageous and insulting. He is acting solely for the bankocracy of the EU; a system which feeds the rich and creates and then starves the poor. They are the ones who have driven the Greek people into poverty along with the Greek oligarchs.

    Greece should immediately repudiate all national debts and leave the EU. The property and wealth of all the Greek oligarchs should be frozen and nationalised at once. All fixed assets in Greece owned by wealthy northern europeans (over a determined wealth limit) should be also be nationalised by Greece. The Greek left should tell the neo-fascists of the EU where to go. That is exactly what the EU is. It’s a corporate, anti-democratic, neo-fascist construct.

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