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Thu Sep 3rd, 2015 at 08:12:27 AM EST
Back in 1989, around the time school started for me at the start of September, Budapest was full of East Germans hoping to leave for West Germany (for a mix of political and economic reasons), hopeful because Hungary started to dismantle the Iron Curtain a few months earlier. A large group camped out at the West German embassy, but there were makeshift camps around the city. The government finally opened the borders for them on 11 September, launching a mostly car-riding emigration wave (at least 70,000 people in three months). A few weeks later, East Germans camping out in Warshaw and Prague were taken to West Germany in sealed trains.
Yesterday, something similar happened, only this time the refugees are dark-skinned and faced much worse treatment. In line with both the government's xenophobic campaign and the EU's Dublin Agreement (whose main aim was to keep refugees from moving to the richer EU members), Hungarian authorities prevented the mostly Syrian refugees without EU visa from boarding trains bound for the west. Most of the stranded refugees who refused to be taken to Hungarian camps stayed in the underpass at main station Budapest Keleti (up to two thousand), in a makeshift "transit zone" lacking basic hygiene and only cared for by an NGO.
I don't know whether it was concern about image (to have such misery as the first sight of arriving Western tourists), or anger at the German foreign minister's denouncement of the anti-refugee wall built at the Serbian border, or anger at general Western hypocrisy; but yesterday, the government decided to withdraw police and let refugees board the trains. Without any plans about how to manage the thousands of extra passengers (all transit countries refused to send extra trains), entirely predictably, the result was utter chaos, from Budapest to Munich: ticket counters were (actually, still are) clogged, some trains left with an hour delay due to over-loading, the first train was stopped in the last city before Munich but local police didn't have the capacity to process more than half of the refugees on-board; other trains were stopped at the Hungarian–Austrian border station, but after the filtering-out of refugees who already filed for asylum in Hungary the trains still travelled on over capacity; on the parallel highway, Austrian police started checks of all trucks, causing a 50 km traffic jam.
For the hectic events since, especially today, check the comments.
Thu Aug 27th, 2015 at 02:37:04 PM EST
Many on the UK left seem caught in the middle between escaping from an EU that, after the treatment of the Greeks, looks like an instrument of torture, and the gloomy prospects for the politics of an unreformed UK state...
The long-awaited in-out referendum on the UK's continued membership of the European Union (EU) is coming soon, in 2016 or 2017. But it isn't clear what, if any, clear options exist within a morass of unpredictable consequences and a rapidly growing uncertainty at the heart of a European project increasingly dominated by a single, politically rootless German state.
EU reform and the left.
Those of us on the left, seeking more genuinely internationalist outcomes, might place faith in the prospect of a reformed EU. Perhaps this would entail a wholly improved and empowered European parliament, which would either involve a diminution of national sovereignty or a decrease in inter-governmental decision-making. It might involve a newly remoulded European commission, dedicated to developing new forms of actual co-operation across Europe, rather than simply pushing for liberalisation and strange policy minutia which barely flirts with regulating a fairly destructive consumer economy.
It should be noted that realistic chances of such reforms to parliament or commission happening appear to be exceptionally remote, and that the commission appears to lack both the drive and resources to engineer a form of internationalist social enterprise as many of us would perhaps like to see. Despite the presence of some fairly underdeveloped countries and regions on Europe's south-eastern borders, we are unlikely to see pan-international development strategies along the lines of a Marshall Plan.
Instead, given that fundamental institutional reform is such a remote and unpopular prospect, a pro-reform stance would perhaps require a more explicit political union of Eurozone countries in order to engineer pan-European Keynesian economics in the core EU federation. It holds out the prospect of Eurobonds, and increasing fiscal union, with political structures which would increasingly cement the Eurozone states into an inseparable federation.
Of course, with the UK unlikely to adopt the Euro in any case, this would not be an option which the UK could seriously engage with or promote, even if it were to continue its reluctant and grudging acceptance of EU membership. If the Eurozone were to allow a Keynesian approach to deficit spending, it would require the amendment of treaties extending back, at least, to the 1992 Maastricht Treaty. Once again, one is forced to conclude that such a development appears unlikely.
What I think is uniquely frustrating in 2015, is that there are these huge transfers going on from the richer to poorer countries in the EU; but with hugely inequitable results... And if it all falls apart at some stage, the opportunity for any kind of solidarity might be even harder.
Mon Aug 24th, 2015 at 08:32:42 AM EST
Also sprach Krugman:
... More than a decade ago, Ben Bernanke famously argued that a ballooning U.S. trade deficit was the result, not of domestic factors, but of a "global saving glut": a huge excess of savings over investment in China and other developing nations, driven in part by policy reactions to the Asian crisis of the 1990s, which was flowing to the United States in search of returns. He worried a bit about the fact that the inflow of capital was being channeled, not into business investment, but into housing; obviously he should have worried much more. (Some of us did.) But his suggestion that the U.S. housing boom was in part caused by weakness in foreign economies still looks valid.
Tue Aug 18th, 2015 at 02:11:09 AM EST
Wolfgang Streeck, in the Guardian's Comment Is Free, has a summary of recent events in the Eurozone and future developments (if that's the word).
Brutish, nasty - and not even short: the ominous future of the eurozone | Wolfgang Streeck | Comment is free | The Guardian
Politics can make strange bedfellows, but sometimes just for a one-night stand. In the end Varoufakis was overruled by Alexis Tsipras and Schäuble was overruled by Angela Merkel. The latter, displaying truly breathtaking political skills, managed within a day or two to redefine the resounding no of the Greek people to their creditors' demands into a yes to "the European idea", defined as a common currency - allowing him to sign on to even harsher conditions than had been rejected in the referendum (called, it seems, at the suggestion of Varoufakis, who was sacked on the very evening the results were in). Afraid of the unimaginable economic disaster publicly imagined by fear-mongering euro supporters, and perhaps encouraged by informal promises by Brussels functionaries of future injections of other peoples' money, Tsipras was ready to split his party and govern with those who had for decades let Greece rot in clientelism and corruption, offering the parties of Samaras and Papandreou an opportunity to regain legitimacy as pro-European supporters of "reform".
Merkel, for her part, used Schäuble's exit plan as a bargaining tool, certain that Tsipras would eventually cave in and get rid of Varoufakis. The new three-year rescue programme will carry her beyond her next election; it also avoids, or at least postpones, conflict with France, which wants Greece in for the same reasons that Schäuble wanted it out (Merkel expects less of France than Schäuble does, which makes it easier for her to live with François Hollande). It also spares her having to eat her famous motto from 2011: "If the euro fails, Europe fails" - as well as, for the time being, from having to let German voters in on the fact, commonplace among the cognoscenti but still mercifully hidden from the public, that the Greek rescue money will never be repaid. Moreover, after Schäuble had in earlier rounds talked the other EMU countries into sharing the Greek public debt, Merkel could count on their support for her refusal to consider debt restructuring. Most importantly, with Greece staying in common currency, she can now reassure her core constituency, the German export industry, that none of the captive members of eurozone will ever be released, not even on probation - something much appreciated also by the German trade unions, the Social Democrats, and her geostrategically-minded American friends.
Of course none of this means the euro mess won't continue. On the contrary, with a historic window for a fundamental recalibration of the euro system missed we are in for more of the same, and the next act of the drama is already beginning.
I think the whole article is a must-read. Another teaser below the fold:
Mon Aug 17th, 2015 at 10:55:56 PM EST
In April of 2015 at a forum on the British Columbia carbon tax at MIT, I heard Merran Smith of Clean Energy Canada (http://cleanenergycanada.org) say if you add up the GDP of all the individual countries which have some kind of price on carbon, either an emission trading scheme (ETS) or a direct tax, it adds up to 42% of global GDP now and, by the end of 2016 when another five provinces in China come on board, it will be over 50%. (You can hear and see Merran Smith say this at 28:20 into this video of the MIT event at https://www.youtube.com/watch?v=HWQRi8bmbrw ).
Having heard expert after expert say, "We need a price on carbon" in order to address climate change, this struck me. Was Merran Smith correct? Have we already begun to put a price on carbon? Looking a little further, I found a variety of carbon pricing structures - carbon taxes, emissions trading schemes, and even internal prices on carbon from individual businesses.
The World Bank 2015 carbon report advance brief (http://documents.worldbank.org/curated/en/2015/05/24528977/carbon-pricing-watch-2015-advance-brief-s
tate-trends-carbon-pricing-2015-report-released-late-2015) puts it a little differently than Clean Energy Canada:
"In 2015, about 40 national and over 20 subnational jurisdictions, representing almost a quarter of global greenhouse gas emissions (GHG), are putting a price on carbon...
"The total value of the emissions trading schemes (ETSs) reported in the State and Trends of Carbon Pricing 2014 report was about US$30 billion (US$32 billion to be precise). Despite the repeal of Australia's Carbon Pricing Mechanism in July 2014, and mainly due to the launch of the Korean ETS and the expansion of GHG emissions coverage in the California and Quebec ETSs, the value of global ETSs as of April 1, 2015 increased slightly to about US$34 billion. In addition, carbon taxes around the world, valued for the first time in this report, are about US$14 billion. Combined, the value of the carbon pricing mechanisms globally in 2015 is estimated to be just under US$50 billion...
"In addition, the adoption of an internal carbon price in business strategies is spreading, even in regions where carbon pricing has not been legislated. Currently, at least 150 companies are using an internal price on carbon. These companies represent diverse sectors, including consumer goods, energy, finance, industry, manufacturing, and utilities."
Fri Aug 14th, 2015 at 01:33:38 PM EST
So old-timers will recall that I've spent countless electrons worrying about the lack of thinking about how centralising forces in our modern economies creates regional wastelands.
At least in the context of the Euro, it seems Krugman has noticed the issue:
Tue Aug 11th, 2015 at 03:30:08 AM EST
After the surrender of the Syriza government in the Eurozone vs. Greek democracy battle, the focus of European public opinion shifted to the new wave of refugees. And it gets even uglier than in the case of Greece. Especially in Germany, where xenophobia in public speech is fast on its way to catch up with and surpass Britain or the Netherlands, now going into terrorism territory. Last week, the outspoken commentary of a German TV journalist triggered a debate on on-line racism:
German TV presenter sparks debate and hatred with her support for refugees | World news | The Guardian
Anja Reschke used a commentary slot on Tagesthemen, the nationwide news bulletin of German public broadcaster ARD,to lambast hate-filled commentators whose language she said had helped incite arson attacks on refugee homes.
She said she was shocked at how socially acceptable it had become to publish racist rants under real names.
"Until recently, such commentators were hidden behind pseudonyms, but now these things are being aired under real names," she said.
Mon Aug 3rd, 2015 at 03:58:51 PM EST
Owen Jones has had a good go at trying to describe why the zombie-followers of Blair are being rejected:
Guardian - Owen Jones - Jeremy Corbyn's supporters aren't mad - they're fleeing a bankrupt New Labour
How have the Labour left, from arguably its lowest ebb in the party's history, apparently ended up on the brink of taking the leadership on a wave of support? If you listen to many self-described "centre-left" voices, it's because the Labour party has gone quite, quite mad. Cod psychology now abounds to describe the rise of Corbynism: narcissism, people wanting to show off how right-on they are on Facebook, mass delusion, an emotional spasm, and so on. Corbyn supporters are having a temper tantrum against the electorate, so this patronising narrative goes, they think voters have "false consciousness" on a grand scale. Some sort of mass psychological disorder has gripped one of the great parties of the left in the western world, and the only real debate is how it must be cured or eradicated. And the tragedy is this: the great "centre-left" condescenders are able to identify any factor for Corbyn's spectacular rise other than the culprit: their own political cause, or rather its implosion.
Some of these commentators huddle together on social media, competing over how snarky and belittling they can be towards those oh-so-childish/unhinged/ridiculous (delete as applicable) Corbynites, unable to understand that rare thing, the birth of a genuinely grassroots political movement. And that's the problem: this snarkiness is all some seem to have left. Much of the self-described "centre-left" - I'd say Blairism, but some embrace the label more than others - now lack a clear vision, or a set of policies, or even a coherent distinct set of values. They increasingly define themselves against what they regard as a deluded, childish left. They have created a vacuum and it has now been filled by the Corbyn left.
Their plight is quite straightforward....
However I want to make a stab at a slightly larger question : Why Corbyn, like Bernie Sanders in the US, is managing to attract such enthusiasm from all quarters of political opinion except the gate keepers and agenda setters of the professional commentariat.
Clinton famously had a sign on his desk that read "It's the economy, stupid!!". And he was right, but the follow-on question that always needs to be asked is "what economy?" or, more precisely, "whose economy?"
by Frank Schnittger
Wed Jul 22nd, 2015 at 12:46:29 PM EST
Microsoft is one of the most successful corporations in the world, having blazed the trail for personal computing and making its founder, Bill Gates the World's richest man. Windows has become almost ubiquitous on PCs and laptops and MS Office is the office productivity tool of choice for most business and personal users. But what has Microsoft accomplished in the last 20 years beyond leveraging its early mover advantage and dominant position in PC computing? I would argue very little, and I would like to invite you to argue otherwise. But first a little personal personal computing history...
Back around 1990 I was given responsibility for end-user computing in part of the business I was working in, although nobody quite knew what that meant at the time. WordPerfect had just replaced Multimate as the corporate standard word processor, and Lotus 123 was replacing earlier micromodelling programmes used by accountants and other business analysts. The truly adventurous management consultant types started giving management presentations using Lotus Freelance and some had even used DBaseIII for rudimentary database applications.
Mon Jul 20th, 2015 at 10:50:03 AM EST
In recent days I have seen an uptick in comments in how the whole Greek thing is going to bring down Podemos. I think the fact that Syriza was unsuccessful will indeed be a drag on the performance of Podemos and right now it seems unlikely that they will take power in the next election.
Yet, confronted with the truly ugly side of Eurozone government, will people in the crisis countries simply back down?
Maybe, and people have been citing evidence for this on Twitter
So you see, Podemos is going down! Schäuble plan is working!
I found that somewhat difficult to believe.
And here we go: Opinion polling for the Spanish general election, 2015
The newest polls put Podemos at 19%. Which seems consistent with its previous results which indicate that Podemos has a ceiling at about 20%.
The Wikipedia page is actually pretty fantastic. They even provide a nice fit through all the data point which give you a feeling where things are heading.
So again: These are not earth shattering results and most likely some type of Great Coalition will govern Spain very soon, but Podemos will most likely have a decent showing in the Election.
by Frank Schnittger
Mon Jul 20th, 2015 at 08:56:41 AM EST
Now that the EU has effectively taken over the running of Greece, it follows, logically, that it should also be held responsible for the outcome of its policies. So what happens if Greece goes further into even deeper recession, the debt becomes even more unsustainable, and the "reforms" do not bring about the turnaround in economic performances that neo-liberal economic "theory" says they will?
It's those lazy Greeks of course! It's the untrustworthy left wing Government that didn't implement the reforms properly! And the slightest upward blip in performance will be treated as overwhelming proof that "the reforms are working" whilst the widespread evidence of poverty and decline will be ignored.
And what will the European "left" do then? The maiden speech by 20 year old Scottish MP, Mhairi Black, is instructive (h/t Helen).
Parties which have lost touch with the growing under classes in our societies have no idea what is really going on. Perhaps a "study group" of high ranking politicians will visit Greece; stay in 5 star hotels, listen to a few think tank presentations, talk to a few waiters, and declare all is well.
After all the people living on the street don't vote and don't really count.
Meanwhile Schäuble is playing a clever game. By floating the negotiated Grexit option and declaring his lack of confidence in the "reform" programme, he is insulating himself and his government from criticisms that austerity doesn't work when the economy shrinks further and the debt becomes even more unsustainable. "We told you so", we offered you the Grexit option but you turned us down!
Apparently Schäuble has discovered that debt write-downs aren't legal within the Eurozone. But what about the debt write-down in 2010? Can only banks write down debts? So why were banking debts transformed into sovereign debts then? To make a further write-down impossible? But it was the banks which Greece borrowed from. What the banks did later to lay off their responsibilities isn't Greece's problem.
Meanwhile Merkel is trying to play good cop to Schäuble's bad cop. It's not going well...
Thu Jul 16th, 2015 at 04:02:19 PM EST
As has been apparent in the Greek fiasco, figuring out what the US government is going to do can be like sorting out the Gordian Knot. I'm not going to offer solutions to this problem, because there aren't any, but I have found these guidelines helpful
Thu Jul 16th, 2015 at 05:14:36 AM EST
Disclaimer: I really want to write a few more diaries. But I do not have the time to got through the web and search for the references. So you have to trust me! Let me also credit 'some story written somewhere' with the idea for the title where the Following was pointed out.
The democratic deficit of the EU has turned into a democratic insolvency
Now the lack of democracy on the EU level has been discussed quite often. But I have always found this discussion to be to imprecise. Democracy can not mean 'my ideas should be implemented'. Very often it can absolutely mean the opposite. Now I want to try to point out several clearly undemocratic feature of the EU.
A lot could be said about this. For example the nature of the Eurogroup meeting, where ministers seam to meet to conspire against the democratic will of the European people. However all this is relatively ill defined. I want now to focus on two key features which make any change in actual policy basically impossible. No matter how large the majorities.
The European Central Bank
Independent central Banks are all the rage toady. But the European central Bank is quite unique in the sense that its independence is protected by something akin to a constitution. In all other countries the independence of the central bank is established by law. Which means in principle independent central banking can be abolished by the normal majorities need to pass a law.
The question of the nature of our central Bank has today become quite urgent. The central Bank has failed now for at least three years in a row to fulfill its inflation Mandate and the German representative on the ECB board openly advocates to abandon the inflation mandate as a means to force specific policy choices one the EU member nations.
In Cyprus and Greece the ECB went even a step further. While in principle its duty is 'to guarantee a functioning payment system' the Banks in Greece have now been closed for almost three Weeks. The destructive impact is massive. While the ECB tries to hide behind the problem of Greek banks holding Greek debts, this action is clearly unlawful. The ECB could wind down Greek bank if they are insolvent. But stopping the payment system completely is a very extreme act.
I already wrote a diary about the actions of the ECB in 2011, when they enforced a specific set of policies on Italy and similarly on Spain and other countries.
The ECB is the most powerful tool in the Hand of the EPP and its affiliates. While Draghi might not toe the line of the Christian Democrats in quite the way Trichet did, in the end the ECB Governing board see itself as a enforcer for the EPP.
Without getting the ECB under full control of the European Parliament including the ability to order direct Government financing the democratic decision making within the EU is highly constraint.
The inability to tax capital gains
You heard it all, the rich get richer, and they get richer by taking the surplus value of our work. In general the quota of the amount of GDP going to capital gains is extremely high. Yet at the same the tax income from capital gains is low. Instead the IMF recommends to 'broaden the base' which means to make the effective tax system even more regressive by increasing VAT.
And there is no way out. The structure of the EU makes taxing capital gains on the level of a single nation basically impossible. At the same time taxing it EU wide is also impossible, since the there is no actual way to do this.
Therefore: Within the EU the possibility to tax capital gains has been abolished.
This is quite a crass situation for everybody who wants to create a somewhat fairer wealth distribution. The combination of not being able to print money and not being able to enforce tax laws makes every national democracy in the EU basically impotent against the power of moneyed interest. At the same time no supranational body exist which could actually do anything about it.
Wed Jul 15th, 2015 at 03:29:40 AM EST
Wolfgang Schäuble, or Dr. Schäuble as many people have started to call him, is without a doubt a total dick. He has basically zero idea of macro economics. He professes to believe in rules, but only those that he likes. Without any doubt he is one of the key figures who is to blame for the current disastrous state of Eurozone politics and economics.
Yet... somehow in recent attacks on Dr. Schäuble I detected a somewhat contradictory set of arguments. Lets call it Euro Schizophrenia.
Basically it is my opinion that the Euro is beyond redemption. While I am not convinced that the Euro is fundamentally unworkable, at present the Eurozone in economically and politically at a stage were I see little.
From this I conclude that it is a good idea to leave the Euro. Now it seems that Schäuble wanted to convince Varoufakis and Tsipras to leave the Euro from the very start of the negotiations. Lets be clear here: This is one of the most reasonable things Schäuble has done recently.
Of course the 'temporary exit' thing was total bullshit, and the way it was leaked was unacceptable. Yet the general idea to help Greece leave the Euro is a good one.
Varoufakis and Tsipras should have taken the offer.
Tue Jul 14th, 2015 at 07:11:44 AM EST
Since we are all turning totally against the EU I thought I excerpt this relatively funny piece from the Spectator:
As a long-time Eurosceptic, I should be happy about the Johnny-Come-Latelys now swelling the sceptic ranks. Following Euro-institutions' wicked treatment of Greece, many European liberals have finally realised that Brussels might not be the hotbed of liberalism, internationalism and bunny rabbits they thought it was.
So far so standard.
But similar to the author I have recently also started to reflect on the whole referenda thing on the European constitution:
Where the hell were you guys in 2001, when the Irish people rejected the Nice Treaty and were subjected to a tirade of abuse from EU officials before being made to vote again? Where were you in 2005, when the Dutch and French peoples were libelled by EU officials as racists and xenophobes and `the generally pissed off' for having the temerity to reject the EU Constitution?
Especially the rejection of the European Constitution by French voters seems today quite different then how I perceived it back then. I remember that there were discussion here the the Eurotrib regarding this whole affair, but this was a little before my time.
Another point to consider
The second reason I'm not rolling out the red carpet for these people coming around to a way of thinking they once branded a phobia is because they're doing it wrong. They aren't genuinely opposed to the EU; they're just really angry with Germany.
This is mostly direct at British criticism of recent event in the Eurozone.
This Germany-mauling guff is grating for two reasons. Firstly because it's so goddamn lazy of Brits to fall back on the caricatured view of Germany as a machine-like, monstrous nation always itching to take over Europe. Seriously, guys, the war ended 70 years ago -- stop refighting it. And secondly, this Germany-bashing misses the true, profound problem with the EU. Which is not that one nation wants to run the show. It's that all nations, all political elites, including ours, and including Greece's, have pooled their sovereignty into Brussels in order to allow them to do politics in a more technocratic, far-from-the-madding-crowd fashion.
Mon Jul 13th, 2015 at 05:58:47 PM EST
I've changed my mind. I will be voting for the UK to leave the EU.
Whatever deal the UK Conservatives negotiate will only make matters worse.
I think leftists across Europe worthy of the name should transform themselves into Eurosceptic parties. The euro is an abomination. It must be abolished and national currencies restored. The Maastricht Treaty should be repealed.
These policies are nothing more than attempts to force ordoliberal policies across the continent. The EU is a thuggish, vicious oligarchy and I want no part of it anymore.
Further analysis and good discussions in the comment section - Bjinse
by Frank Schnittger
Mon Jul 13th, 2015 at 06:38:45 AM EST
Killing the European Project - The New York Times
Suppose you consider Tsipras an incompetent twerp. Suppose you dearly want to see Syriza out of power. Suppose, even, that you welcome the prospect of pushing those annoying Greeks out of the euro.
Even if all of that is true, this Eurogroup list of demands is madness. The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for.
Can anything pull Europe back from the brink? Word is that Mario Draghi is trying to reintroduce some sanity, that Hollande is finally showing a bit of the pushback against German morality-play economics that he so signally failed to supply in the past. But much of the damage has already been done. Who will ever trust Germany’s good intentions after this?
In a way, the economics have almost become secondary. But still, let’s be clear: what we’ve learned these past couple of weeks is that being a member of the eurozone means that the creditors can destroy your economy if you step out of line. This has no bearing at all on the underlying economics of austerity. It’s as true as ever that imposing harsh austerity without debt relief is a doomed policy no matter how willing the country is to accept suffering. And this in turn means that even a complete Greek capitulation would be a dead end.
Can Greece pull off a successful exit? Will Germany try to block a recovery? (Sorry, but that’s the kind of thing we must now ask.)
The European project — a project I have always praised and supported — has just been dealt a terrible, perhaps fatal blow. And whatever you think of Syriza, or Greece, it wasn’t the Greeks who did it.
Fri Jul 10th, 2015 at 05:07:56 AM EST
In July 2012, a paper titled Tax Evasion Across Industries: Soft Credit Evidence from Greece was published by Nikolaos T. Artavanis of the University of Massachusetts at Amherst, Adair Morse of Berkeley's Haas School of Business, and Margarita Tsoutsoura of the University of Chicago's Booth School of Business.
The paper was referenced by The Wall Street and in turn by The Washington Post that summarizes:
Comparing bank data with government data, the authors found that the true income of the average Greek person is about 1.92 times larger than what's actually reported to the government. In 2009, that shrunk the tax base by about $34 billion. Assuming that money was taxed at a 40 percent rate, that's 31 percent of the country's budget deficit in 2009 right there.
Tue Jul 7th, 2015 at 03:49:32 PM EST
From Wikipedia (my emphasis):
On 12 November 2011, after a final meeting with his cabinet, Berlusconi met Italian President Giorgio Napolitano at the Palazzo del Quirinale to tend his resignation. As he arrived at the presidential residence, a hostile crowd gathered with banners shouting insults at Berlusconi and throwing coins at the car. After his resignation, the booing and jeering continued as he left in his convoy, with the public shouting words such as "buffoon", "dictator" and "mafioso". Following Berlusconi's resignation, Mario Monti formed a new government that would remain in office until the next scheduled elections in 2013. On 16 November, Monti announced that he had formed a Cabinet and was sworn in as Prime Minister of Italy, also appointing himself as Minister of Economy and Finances.
This was after he failed to pass an austerity budget. All this happened after increasing interest rates on Italian debt had created an unsustainable situation.
However, the increasing interest rates were neither a coincidence nor a direct result of a particular alarming debt situation. The debt crisis happened directly after the ECB started to raise interest rates from 1% to 1.4% betwenn April and July 2011. The market reaction was drastic. The move of the ECB was obviously insane. At that point the Federal REserve had already started its second quantitative easing program.
When the ECB interest rates had reached 1.4% in July 2011, the interest rates for Italian bonds started a slow upwards trajectory. Also in July Draghi and Trichet send their now infamous letter.
The letter is truly something to behold and I recommend that you should read it in full.
Berlusconi did not perform well. In October 2011 it had become clear that the ECB would not back Italian debt if necessary and interest rates started to explode. A self fulfilling prophecy was underway.
Om the 16th of November 2011 Mario Monti was sworn in.
from his Wikipedia page:
On 4 December 2011, Monti's government introduced emergency austerity measures intended to stem the worsening economic conditions in Italy and restore market confidence, especially after rising Italian government bond yields began to threaten Italy's financial stability. The austerity package called for increased taxes, pension reform and measures to fight tax evasion. Monti also announced that he would be giving up his own salary as part of the reforms.
After Mario Monty had implemented austerity, the ECB started a program of direct bond purchases. Interest rates fell rapidly to the level of early 2011. Of course it is not clear exactly who did what and exactly why. But in principle it is more or less clear that an explicit deal was in place that Mario Monti needed to become Prime Minister, and only then the ECB would start buying bonds. I can cite e.g. Matthews Yglesis
who is certainly neither a raging lefty nor a rightwing conspiracy nut.
Nobody likes Silvio Berlusconi except for the Italian electorate, so the world largely shrugged when the European Central Bank and the government of Germany perpetrated a coup d'état last year and removed Italy's prime minister from office as a condition for not destroying the Italian economy.
The rest of this blog post is also quite good.
Under Mario Monti unemplyment rose from 8% percent when he entered office to 11% when he left. Today it is still around 13%. Throughout his whole tenure GDP kept falling. On top of all this the Debt to GDP ratio rose faster than under Berlusconi.
We all disliked and still dislike Berlusconi and for good reason. But looking at the situation in Greece and the actions of the ECB I feel that what happened around 2011 should be clearly remembered.
Update [2015-7-8 4:13:58 by rz]: I changed the title a little.
Tue Jul 7th, 2015 at 05:57:11 AM EST
I can't read German and thus know little about this country's politics.
Germans want to believe the crisis is the Greeks' fault. I get it. I also get why a conservative party like the CDU would pander to that. But I see no daylight between the CDU and the SPD.
Whereas if you look at the French PS, the consistent pattern appears to me that the French government is trying to restrain German intransigence. Generally failing at that (as at much else) but at least trying. Most of this is done in private while a united front is presented publicly, but the cracks are clearly visible.
There is no sign of this with the SPD. A SPD government would be as harsh on Greece as the CDU has been. Again, I get why the CDU would like Syriza to be removed from power, but why on earth would the SPD want that?
Why is the SPD taking such a hardline position? I really don't understand.
by DoDo - Sep 3
by marco - Aug 24
by car05 - Aug 27
by Helen - Aug 3