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$1,000,000,000,000 or what we must remember

by Metatone Sat May 19th, 2012 at 01:24:35 AM EST

Yesterday, the paper edition of The Guardian had the following story on the front page:
Cost of Greek exit from euro put at $1tn | Business | The Guardian

The British government is making urgent preparations to cope with the fallout of a possible Greek exit from the single currency, after the governor of the Bank of England, Sir Mervyn King, warned that Europe was "tearing itself apart".

Reports from Athens that massive sums of money were being spirited out of the country intensified concern in London about the impact of a splintering of the eurozone on a UK economy that is stuck in double-dip recession. One estimate put the cost to the eurozone of Greece making a disorderly exit from the currency at $1tn, 5% of output.

Officials in the United States are also nervously watching the growing crisis: Barack Obama on Wednesday described it as a "headwind" that could threaten the fragile American recovery.

Only of course, the paper headline was just: $1,000,000,000,000

front-paged by afew


So what is it that we must remember?

1) For all the structural faults in the setup of the Eurozone (and there are many - there are many diaries here too about them) this crisis was a result of the failure of the financial system. Spain in particular shows this, the pressure is all because of the coming debt of the banking system...

This is not a failure of governments - not overspending by the state - it's the rescue of the market system that will cost us so much....

2) That this is a crisis chosen by the EU and particularly the ECB.

When spreads first started widening, swift action could have nipped the crisis in the bud. It would have cost a few hundred million.

And there were multiple points since then, each with a higher price tag when committed action could have ended the crisis. But our leaders chose not to do so. They would rather use this excuse to kill the welfare state.

The harping on "moral hazard" and the whining about "lazy Greeks" - and this reckless application of the Shock Doctrine... that will cost us all much more now...

So most of all we need to remember where the blame lies, because the rest of this year is going to be hell and the propagandist fire will land on lazy Greeks, left-wing SYRZIA and others... but we know now where the blame really lies.

Let us not forget.

Display:
Trichet, Merkel and the rest - we will remember - you destroyed the Euro - you destroyed 50 years of progress in Europe after WW2.

We will not forget.

by Metatone (metatone [a|t] gmail (dot) com) on Fri May 18th, 2012 at 05:06:05 PM EST
Well - them and a few hundred hedge funds.

And perhaps one or two of the major finance houses, who stand to profit from a weak and divided EU with limited regulatory ability.

And the people who are making millions from shorting the Euro. Who - I'm sure - are in no way related to any of the above.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri May 18th, 2012 at 06:10:58 PM EST
[ Parent ]
Yes we will forget.

It is whoever wins that writes history. Your narrative (with which mostly I agree - though that is irrelevant) does not seem to be winning.

Take for instance the example of my country (which is actually a great example for this): the public debt was average for an EU country. Interestingly the private debt was (is) massive. But the narrative is that the state is the culprit.

Reality does not matter. Propaganda does.

Though I have to question this Europe that we were supposedly building: if it was to easy to manipulate and destroy, if it was so fragile, was it really good?

by cagatacos on Sat May 19th, 2012 at 02:50:56 PM EST
[ Parent ]
Both matter, but the effacacy of the propaganda can limit how much reality can matter for quite a long time, probably until the former truth being masked no longer matters for politics.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 19th, 2012 at 03:01:00 PM EST
[ Parent ]
The worst part is that large swathes of the population in the periphery has interiorised the narrative that it's their own fault because of their national character(s).

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Sat May 19th, 2012 at 03:48:09 PM EST
[ Parent ]
I actually think that something (bad) could be said about our national characters (tax evasion, less honesty, tolerance for excess inequality, ...).

I do not agree that the problem is being narrated as the "national character" (not in Portugal). It is "the state" or some (internal, yes) scapegoat. But the scapegoat is pointing fingers at a different group ("the civil servants", "the people on benefits", "the politicians", ...).

For instance, in my country, the only measure that might be ascribed to "national character" is the removal of some holidays. Other than that, it is difficult to find that as a drive for what is being done...

by cagatacos on Sat May 19th, 2012 at 04:14:40 PM EST
[ Parent ]
It's amazing what the recently elected right-wing government is doing in Spain. The latest thing: allowing the laundering of cash earnings from this and last year which evaded tax. Also, in the last week two liberal economists voiced their impression that the way the crisis is being handled is demolishing the country or the nation itself. Luis Garicano (of the London School of Economics) calls the government Hooligans,
Reading El Confidencial today, one gets the impression that some members of the government and the PP act like hooligans, hurling stones, sowing panic, destroying institutions and confidence, and not leaving anything in their wake
Also, Xavier Sala i Martin (Columbia University) writes that Spain itself is Spain's worst enemy.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Sat May 19th, 2012 at 04:25:38 PM EST
[ Parent ]
Right wing Iberian countries seem more interested in settling scores internally (destroying the welfare state, increasing inequality, ...) then defending their own countries.

Interestingly WE (i.e. the left) are becoming the nationalists (or something like that). The robber barons are totally invested in globalization and their narrative is the opposite of nationalist.

Strange world, strange world.

by cagatacos on Sun May 20th, 2012 at 11:25:07 AM EST
[ Parent ]
According to OECD figures, your tax revenue is 35.2% of GDP, only slightly below Germany (37%) and way above the US (24%). So while it's possible that you are more likely to ignore the tax laws, rather than rewrite them to make your tax evasion legal, you can't blame your economic problems on that.
by gk (g k quattro due due sette "at" gmail.com) on Sat May 19th, 2012 at 04:27:11 PM EST
[ Parent ]
And, OECD numbers on this issue are not nearly as good as Eurostat numbers which show an even higher amount collected.

As for Greece, with such an amount collected and huge tax evasion, I can only conclude that the entire tax system needs revamping. Shipping is a big % of GDP and is untaxed, which means that tax rev to GDP is even higher than it appears at first glance.

With 14% of the populace committing the evasion, it must mean that the rest of the people are taxed regressively. I'm not sure if this is really a cultural trait, but I imagine that with a gov't that provides little in the way of services, is rife with patronage and ineptitude, that spends billions on useless military weaponry, with gov't ministers involved in corruption, the taxes high and the rich shippers not paying any, with tourism a major industry relying on cash changing hands, and with a history of tax avoidance under the terms of foreign occupation, it is no small wonder there is a tax evasion problem.

The notion that Greek revenues now go to foreign bankers who will never be fully paid back also must do wonders for tax patriotism.

by Upstate NY on Sat May 19th, 2012 at 05:44:01 PM EST
[ Parent ]
The problem with your reasoning is that it is circular: Money that is not taxed is probably not accounted as part of the GDP.

Everybody knows in Portugal that e.g. small commerce evades taxes like mad. A few years ago a (socialist party) government dabbled with the idea of automatically closing all business that were posting a loss for more than 2 consecutive years. If I remember well (memory might fail here), that would entail closing 60% of existing business.

Tax collection is indeed average for an EU country. But that probably does not account for the shadow economy.

[Speculation] Another issue would be tax distribution: due to tax evasion of business (mostly small/medium sized), the tax load is mostly on labour (which cannot evade as easily). It probably is worse than tax cheating: it is tax cheating plus an undue tax burden on labour (i.e. another source of inequality in the western European country that already has the worse gini coefficient).

In my view there are indeed strong cultural differences inside the EU. We might ignore them, but they will surface and show their ugly face (as, e.g., now)

by cagatacos on Sun May 20th, 2012 at 06:25:38 AM EST
[ Parent ]
The problem with your reasoning is that it is circular: Money that is not taxed is probably not accounted as part of the GDP.

Eurostat numbers should include a guesstimate of the informal economy.

Dunno how good they are at guessing, though.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun May 20th, 2012 at 06:47:01 AM EST
[ Parent ]
And even if my reasoning is circular, isn't the same circular reasoning involved when calculating the deficit as a percentage of GDP?
by gk (g k quattro due due sette "at" gmail.com) on Sun May 20th, 2012 at 07:43:05 AM EST
[ Parent ]
Actually there was an article today somewhat pointing in a different direction to what I have said: the tax load of labour is deemed lower than the EU average (some Eurostat statistic).

That being said, my gut feeling is against the statistic ;) . I think that there is a general consensus that there is massive tax evasion on small/medium business and that labour pays too much taxes.

But I should point out that official numbers do not seem to corroborate what I am saying...

by cagatacos on Mon May 21st, 2012 at 03:28:06 PM EST
[ Parent ]
cagatacos:
Though I have to question this Europe that we were supposedly building: if it was to easy to manipulate and destroy, if it was so fragile, was it really good?

it was a small, freshly transplanted seedling, it needed protection until it could harden off and stand up to the weather. it's not so much about good, as well designed. the manipulative destructive elements are extremely intelligent sociopaths, don't underestimate them. their fear has whipped them to high places to try and assuage it, and they are nothing if not good at their grisly jobs.

another analogy would be a child's immune system not being fully formed...

an idea may have to fail several times before gaining the balance necessary to succeed.

like surfing, bicycling, creating a solid, socially just european union...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sat May 19th, 2012 at 07:03:46 PM EST
[ Parent ]
It takes a great deal of skillful incompetence to run a 32 bn liquidity operation into the ground hard enough to turn it into a 1 tn existential crisis for the European project.

You could buy a small country for what these incompetent fuckwit ideologues have tossed into the volcano to appease their pagan god.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 18th, 2012 at 07:52:55 PM EST
In fairness to them they probably believed they could destroy the welfare state much more cheaply.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 19th, 2012 at 01:12:35 AM EST
[ Parent ]
Just like "they" believed Iraqi oil could be theirs for a mere $20 billion dollars.  Not that "they" are paying the price for the destruction of Iraq or western economies.  In fact given the phenomenal success of recent Christie's and Sotheby's auctions of jewels and art, it appears that the wealthy are doing better than ever.  
by Marie2 on Mon May 21st, 2012 at 10:06:01 PM EST
[ Parent ]
You could buy a small country for what these incompetent fuckwit ideologues have tossed into the volcano to appease their pagan god.

Well, they have tossed at least two small countries into the volcano already.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Sat May 19th, 2012 at 07:36:04 AM EST
[ Parent ]
Talking about small countries: What happened in Latvia? The latest figures don't look like like apocalypse territory.

Did they really improve unemployment by 5%?

Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter

by generic on Sat May 19th, 2012 at 07:46:39 AM EST
[ Parent ]
Fuck the trillion euros. That's nothing more than a collection of gold ingots that it would take a European Central Banker a mere 20 years to shit at one ounce per second.

It's the human cost - each suicide due to bankruptcy or destitution that could have been avoided, each parent abandoning their children at school or at the social services for lack of money to feed them, that we must lay at the feet of Merkel, Trichet, Juncker, and the rest.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Fri May 18th, 2012 at 08:13:16 PM EST
Migeru:
It's the human cost - each suicide due to bankruptcy or destitution that could have been avoided, each parent abandoning their children at school or at the social services for lack of money to feed them, that we must lay at the feet of Merkel, Trichet, Juncker, and the rest.

murder by spreadsheet...

they remind me of certain dogs who like to chase a ball, but instead of bringing it back to keep the game going, just hold on to it and look proud of themselves for being stupid.

money is like shit, you can give it to the earth and make a thousand flowers bloom, or you hold on to it and all you get is diverticulitis and an impacted colon economy.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Fri May 18th, 2012 at 08:51:22 PM EST
[ Parent ]
By spreadsheet?

I don't think they use spreadsheets at Ecofin meetings.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Sat May 19th, 2012 at 02:35:19 AM EST
[ Parent ]
the rest of this yeardecade is going to be hell

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Fri May 18th, 2012 at 08:20:34 PM EST
A hundred years later we could say again:  "The lamps are going out all over Europe. We shall not see them lit again in our time." But not just in Europe. Through the self-destructive genius of run-amok finance and a willfully stupid theory of economics this is on the edge of being accomplished without war.

All that is required to set things aright is just for enough people to look at the organization of society and the economy from a different viewpoint and to accept that those in whose interests things have heretofore been run have lost legitimacy and the right to order the society.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 19th, 2012 at 01:22:26 AM EST
[ Parent ]
More Guardian: UK 'may never recover' if Greece exits euro (18 May 2012)
Robert Chote, chair of the Office for Budget Responsibility, who was speaking to the Guardian as world financial markets staggered to the end of a week that rekindled memories of the collapse of Lehman Brothers in 2008, warned that there was risk that a fresh downturn would do irreparable damage to the UK. Britain has made up less than half the ground lost when output plunged by more than 7% in 2008-09, and Chote said there was a risk that "you go down and you never quite get back up to where you started".

In a separate exclusive interview, Alexis Tsipras, the increasingly powerful 37-year-old Greek politician now regarded by many as holding the future of the euro in his hands, told the Guardian that he was determined "to stop the experiment" with austerity policies imposed by Germany. ...

The leader of the Syriza party, whose success in last month's general election has led to political paralysis in Athens and a second general election, said he wanted Greece to stay in the euro, but was fighting capitalism. ...

...

Chote said he was particularly concerned about the possibility that a second deep recession would leave permanent scars. "That means not just that the economy weakens and then strengthens again - it goes into a hole and comes out - but that you go down and you never quite get back up to where you started."



guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Sat May 19th, 2012 at 03:01:54 AM EST
Well, duh. There's hysteresis in the economy. Who would'a thunk?

Which is why the only responsible recommendation that an "office of budget responsibility" can make is unrestricted fiscal defense of full employment.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat May 19th, 2012 at 03:37:57 AM EST
[ Parent ]
...is in full effect, I see.

It's quite convenient to say they've only made up half of what was lost, because it was the previous government that made up virtually all of that recovery (and did it within a year of the trough).  Whereas Poshboy, the OBR guy and his people are the ones who've had the country stagnating for two years.  GDP may even be lower now than when they took over.

Just wait until this all finally pushes the US, Japan and China into recession.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat May 19th, 2012 at 08:01:11 AM EST
[ Parent ]
One would think that some in Labour would point this out in a public forum - perhaps in Parliament and then in the press.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 19th, 2012 at 01:04:11 PM EST
[ Parent ]
It's not the number that matters - the 1% don't care about absolute numbers, only about relative numbers.

The trillion is just there to impress the peons and browbeat the into submission.

The issue was distribution on the way "up" the bubble, it is still distribution now on the way down.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat May 19th, 2012 at 04:17:33 AM EST
I hope the Greeks read ET on a regular basis.

The good news ... it's only a life sentence. You eventually leave this planet of idiots.
by THE Twank (yatta blah blah @ blah.com) on Sat May 19th, 2012 at 07:06:00 AM EST
Trichet in Reuters:

The monetary union has always defied economic principles, because the euro was launched ahead of European fiscal or political union. This has caused strains for countries running huge budget deficits - namely... Portugal, Ireland, Spain and Italy - that have led to financing difficulties and over-stretched banking systems.

Pure fiction. None of these countries run budget deficits pre financial crisis.

by kjr63 on Sat May 19th, 2012 at 09:25:04 AM EST
by kjr63 on Sat May 19th, 2012 at 09:27:32 AM EST
[ Parent ]
How can a director of a central bank be completely ignorant?
by kjr63 on Sat May 19th, 2012 at 09:29:28 AM EST
[ Parent ]
It's a political position.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Sat May 19th, 2012 at 10:45:36 AM EST
[ Parent ]
Current budget deficits were preceded by trade deficits and private sector deficits (i.e., private sector debt accumulation). With the reversal of capital flows (from core to periphery before the crisis, from periphery to core after the crisis) the trade deficits become public deficits.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Sat May 19th, 2012 at 09:27:54 AM EST
[ Parent ]
"..from core to periphery before the crisis"

Has there been such a thing? Wasn't private sector debt created by local banks? The credit bubble preceded trade deficit.

by kjr63 on Sat May 19th, 2012 at 09:39:36 AM EST
[ Parent ]
Varoufakis claimed a little way back that the entry of weaker economies into the eurozone was also due to the stronger countries realizing that citizens in the periphery had really low household debt.  Credit cards, car loans, mortgages were very low in the periphery. Stoke demand there and you create a windfall. The banks eventually take losses and the taxpayers mop them up. I really want to know if there is a relationship between the banks and the corporations (do they sit on one another's boards).
by Upstate NY on Sat May 19th, 2012 at 09:57:43 AM EST
[ Parent ]
Josef Ackermann - Wikipedia, the free encyclopedia

Josef Ackermann (born February 7, 1948) is a Swiss banker and chief executive officer of Deutsche Bank Other responsibilities:



Von überall könnte das Volk, Urbrut alles Undemokratischen, Zelle des Terrors, über die gewählten Hüter von Wachstum und Wohlstand® kommen. - flatter
by generic on Sat May 19th, 2012 at 10:08:00 AM EST
[ Parent ]
LOL, we should see who scooped up Greek gov't bonds shortly after the Siemens deal with Greece was greased with bribes.
by Upstate NY on Sat May 19th, 2012 at 10:18:10 AM EST
[ Parent ]
The credit bubble fuelled the trade deficit and the local private debt bubble was funded by and was concurrent with foreign credit.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Sat May 19th, 2012 at 10:42:49 AM EST
[ Parent ]
Not going against the gist of the argument, but actually Portugal was running a deficit. BTW, The public debt of Portugal before the crisis was more or less the same as... France.
by cagatacos on Sat May 19th, 2012 at 02:43:41 PM EST
[ Parent ]
Yep, you are right. But there is nothing dramatic there however. 1992 Portugal had public debt 60,8% of GDP. 2007 63,9%.
by kjr63 on Sun May 20th, 2012 at 07:53:34 AM EST
[ Parent ]
There is no issue here. The public debts of GDP are like Portugal's in most EU countries:

Finland 1992: 55,3% 2007: 63,9%.
Germany 1995: 55,6% 2007: 67,6%
France 1992: 39,7% 2007: 63,7%.

The "model" countries are:

Ireland 1992: 91,4% 2007: 24,8%
Spain   1992: 45,4% 1997: 67,4% 2007: 39,6%
Holland 1995: 76,1% 2007: 47,4%

Private debts:

Spain    1992: 50%   2008: 220%
Ireland  1992: 45%   2008: 220%
Portugal 1992: 50%   2008: 170%
Holland  1992: 80%   2008: 190%
France   1992: 95%   2008: 110%
Finland  1992: 90%   1997: 55%  2008: 90%
Germany  1992: 90%   2008: 110% (no housing bubble)
Italy    1992: 60%   2008: 110%

Southern countries had low private debts pre euro.

by kjr63 on Sun May 20th, 2012 at 08:26:20 AM EST
[ Parent ]
Would it have taken a couple hundred billion, or less?

Remember, Greece in late 2009 was at 115% debt to GDP, which puts their debt at roughly 250-275B.

To get that down to, say 80% would have cost 25-30B. Would there have been a crisis if Greece had a debt to GDP of 80%?

by Upstate NY on Sat May 19th, 2012 at 10:00:04 AM EST
Metatone wrote millions. With an m.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Sat May 19th, 2012 at 10:17:53 AM EST
[ Parent ]
Indeed he did. I misread that.
by Upstate NY on Sat May 19th, 2012 at 10:18:53 AM EST
[ Parent ]
by asdf on Sat May 19th, 2012 at 10:24:02 AM EST
first positive spin on the situation i've read in a very long time.

Europe's New Normal- It's Here, It's Unclear, Get Used to It | Foreign Affairs - 2012 May 17 - R. Daniel Kelemen

This new system of eurozone governance is more sustainable than the pre-crisis regime set in place by the Maastricht Treaty. It will withstand a Greek exit, for example. If Greece refuses to adhere to the terms of its bailout package and is forced out of the eurozone in the coming weeks, the ECB will likely scramble to stop contagion, but it will not be faced with the entire system's collapse. Meanwhile, by standing firm on Greece, the European Union will have further demonstrated that the conditions attached to its bailouts are serious, motivating other states to stick to their reform programs.

Greece's exit from the eurozone would be a catastrophe for Greece and a trauma for Europe, but it would not change the fundamentals of the post-2008 eurozone governance regime, which will still be based on stronger fiscal surveillance, more robust enforcement procedures, more vigilant bond markets, and a more activist central bank. With such a system in place, and with their commitment to fiscal discipline established, EU leaders will now face the slow, difficult tasks of adjustment and structural reform. And those burdens must be shared by all. It is understandable that Germany and the ECB initially demanded austerity as the condition for bailouts, but this one-sided approach has driven peripheral economies deeper into recession. Moving forward, austerity, wage reductions, and structural reform on the periphery must be coupled with public spending and wage increases in Germany, which will boost demand. There will be no quick fix, but the eurozone will recover, slowly but surely.



Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire
by marco on Sat May 19th, 2012 at 02:19:12 PM EST
'Stay the course, bear the pain and that light ahead in the tunnel is not an oncoming train.'

R. Daniel Kelemen is providing valuable FUD maintenance.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 19th, 2012 at 03:05:23 PM EST
[ Parent ]
Moving forward, austerity, wage reductions, and structural reform on the periphery must be coupled with public spending and wage increases in Germany, which will boost demand.

There needs to be investment in the periphery to improve productivity relative to the core (which has been lagging because of secular underinvestment), and this needs to take place through fiscal transfers if it is not to add to the trade imbalances. This plan does not include anything of the sort.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Sat May 19th, 2012 at 03:46:45 PM EST
[ Parent ]
Which is why what R. Daniel Kelemen extols is such drivel and why any light in the tunnel will be a train -- until and unless strong redistributive policies are included in any proposed plan.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 19th, 2012 at 07:07:07 PM EST
[ Parent ]
This plan does not include anything of the sort.

I don't think the essay is advocating a plan, but simply analyzing the current situation and what has led to it.

Do you think the following in bold counts as a form of "investment in the periphery" and "fiscal transfers"?:

The second major structural change is that the European Central Bank -- legally prohibited from purchasing any member state's debt -- has thrown its rules aside and directly purchased billions in Greek, Irish, Italian, Portuguese, and Spanish bonds. Moreover, the ECB has indirectly financed billions more loans through its long-term refinancing operation, which extended over a trillion euros in low-interest loans to commercial banks.

which has been lagging because of secular underinvestment

Who was responsible for that secular underinvestment?

Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire

by marco on Sat May 19th, 2012 at 10:55:01 PM EST
[ Parent ]
My quoted bit

Moving forward, austerity, wage reductions, and structural reform on the periphery must be coupled with public spending and wage increases in Germany, which will boost demand.

is not an analysis of the current situation and what led to it, but a prediction of future policy.

Now, in your quoted bit:

The second major structural change is that the European Central Bank -- legally prohibited from purchasing any member state's debt -- has thrown its rules aside and directly purchased billions in Greek, Irish, Italian, Portuguese, and Spanish bonds.

That is all false. The ECB is forbidden from purchasing debt directly from a member state, but not in the secondary market. That three years later people continue to peddle this austerian lie beggars belief. But, of course, there have been ECB council members from a particularly important austerian country who have peddled it, so it must be true.

Moreover, the ECB has indirectly financed billions more loans through its long-term refinancing operation, which extended over a trillion euros in low-interest loans to commercial banks.

It is false (but not surprising that commentators adhere to the notion) that the LTRO was intended to lead to more credit "to the real economy" or that it will have that effect. It was simply intended to allow the zombie banks to go on a while longer. In any case, that is not investment through transfers. No new investment has taken place, just a temporary asset swap (for liquidity purposes).

Finally,

_[productivity in the periphery] has been lagging because of secular underinvestment

Who was responsible for that secular underinvestment?

It's due to cultural and political factors. The oligarchy in Southern Europe has more the psychology of feudal rentiers than of businessmen.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Sun May 20th, 2012 at 02:33:12 AM EST
[ Parent ]
Spanish firms who were booming seemed more interested in buying firms abroad (e.g. in the UK) than investing in their own capacity.

Part of it may be the mindset you point to, but I think there's also a bit of a logjam at the top of the value chain...

by Metatone (metatone [a|t] gmail (dot) com) on Sun May 20th, 2012 at 04:08:07 PM EST
[ Parent ]
That tended to happen towards the end of the boom, as the expansion of domestic business stagnated and the only way to grow was to "internationalise" (by buying foreign firms, not by exporting) or to speculate  with the stock of firms in other lines of business (such as a construction firm taking a substantial stake in an energy company).

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Sun May 20th, 2012 at 06:32:21 PM EST
[ Parent ]
Matt Carr seems to agree with you in part:

Spain's Year of Miracles | Matt Carr's Infernal Machine

But the water in its boating lake was not oxygenated, and is now dank and stagnant, and the town is now 70 million euros in debt because of it. In this respect it is perhaps more symbolic than it ever intended to be.  Because this was the kind of society that Spain became over the last two decades, a country run by spivs and crooks whose single objective was to get rich as quickly as possible -by whatever means it took.

Twenty years is a short time in historical terms, but with every day that passes the assumptions and expectations that once accompanied Spain's annus mirabilis have been revealed as fantasies, delusions and shallow media chatter, that heralded not the beginning of a new era of greatness, but an age of limitless greed whose chickens are now coming home to roost.

by Metatone (metatone [a|t] gmail (dot) com) on Sun May 20th, 2012 at 05:05:49 PM EST
[ Parent ]
At the end of the 1980s Socialist (ahem) finance minister Carlos Solchaga said what had become one of the most famous phrases in the recent economic history of Spain: Spain is the country in which it is easiest to get rich, and the quickest. This was, of course, in the middle of a real estate/construction/infrastructure boom. It appears the graft model of spivs and crooks is the only economic model Spain's elite can imagine.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Sun May 20th, 2012 at 05:34:16 PM EST
[ Parent ]
Telegraph: Pro-bailout parties could win majority in Greek elections
Wolfgang Schaeuble, the German finance minister, has ruled out this option, telling a newspaper: "European solidarity isn't a one-way street," adding: "Now it's up to Greece to abide by its obligations."
Does Schaeuble really think what has been done to Greece is "solidarity"? Really?
Wolfgang Bosbach, a senior member of the ruling party in Germany's parliament, said that Greece should opt to leave the Euro in its own interest. "That would clear the way for new growth," he told a German magazine. "Then we could also talk about some kind of European Marshall Plan for Greece."

...

The Greek public still support euro membership by a margin of about 80pc - but they also oppose the public spending cuts required by the bailout package. That remains the central contradiction which no politician can resolve.



guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Sun May 20th, 2012 at 07:01:05 PM EST
Alexis Tspiras needs to include in his campaign message the difficulty that all other countries would have 'kicking Greece out' of the Euro and the EU unless Greece does so voluntarily. Greeks have to be made to understand this. Couple that with pledges to stay in both the Euro and the EMU, but not to pursue domestic policies being foisted upon Greece by attempted financial strong arm tactics and instead pursue policies that grow the Greek economy. If that includes issuing their own currency, either in addition to or instead of the Euro, so be it. But let it be known that, if the Troika insists, Greece will default on ECB and other countries' bonds but they will not voluntarily leave the EMU and EU. Stress that Greece does not WANT to harm other EU countries and will try to avoid that, but not at any cost.

That way the electorate could come to the decision that the only way to save the society and remain in the EU and EMU is with Tspiras as Prime Minister. The issue is far from clear-cut, but the program above probably gives Greece the best chance of a good outcome.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun May 20th, 2012 at 07:31:04 PM EST
[ Parent ]
"That would clear the way for new growth," he told a German magazine. "Then we could also talk about some kind of European Marshall Plan for Greece."

A rose by any other name?

Face-saving...

Better yet pay the war reparations now you can afford it!

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sun May 20th, 2012 at 08:53:32 PM EST
[ Parent ]
I really hope that the Irish will kill the austerity Merkozy treaty, so as to clean the way for France's newly elected president for a renegociation (which could'nt be worse). The narrative here (in France) is that there won't be a renegociation, merely an additionnal part, and that there are significative differences between the definition of "growth enhancing policies" on each shore of the Rhein.

If the Irish kill the treaty, the focus will leave (temporarily) southern europe -I'm actually more and more convinced of the racist bias against the south, see spanish public debt before crisis- and clear the path for a political alternative (and reinforce Germany's isolation?). I hope it would also help SYRIZA against the neo-nazis in Greece in the next elections.

But am I still able to understand which is the best way for a EUropean Union? I feel I'm growing less and less  pro-UE, as every reform or power given to the UE institutions is systematically turned against the political intentions of people around me. Is that just an effect of the mandatory need for compromises between countries of different political traditions in Europe? Is the french model, with its strong universalist state created to be legitimate to very different traditions, inside France itself?

I just read "l'invention de la France" by Todd. I recommend it to french speaking people around here...

A free fox in a free henhouse!

by Xavier in Paris on Mon May 21st, 2012 at 03:06:42 AM EST
[ Parent ]
Xavier in Paris:
Is that just an effect of the mandatory need for compromises between countries of different political traditions in Europe?

I don't think so. I would rather put it as depending on weaker civil organisations at the EU level, lack of EU wide media, weak Parliament, obscure decision making in the Council and unaccountable Commission and Central bank. With a general trend towards pro-1% policies, the trend will be stronger at the EU level because all of these create a structure where it is hard to channel popular resistance.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Mon May 21st, 2012 at 10:29:45 AM EST
[ Parent ]
"Please exit the Euro so we can lend to you in Euros when it's no longer your currency and so keep you in debt bondage forever like African or Latin American countries in the 1980s. We'll even call it a Marshall Plan."

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Mon May 21st, 2012 at 03:26:44 AM EST
[ Parent ]
No austerity or no euro is only a political contradiction, not a logical contradiction.

A rational plan would be rejecting bailout money, having Greece subsist on the primary budget, install measures to grow the economy (i.e. changing austerity policies), stop purchasing military weapons from France and Germany, a new tax regime...and only then do you renegotiate your debts.

That's not contradictory in the least. Politics, however, will go as Juncker and Schaubele want. If Greece rejects the dictats with a new policy (an entirely rational one) then the EU will inflict lots of pain on Greece to make an example of it.

In such a scenario, Papandreou, Venizelos, Samaras and Papademos can be seen as traitors for not reneging on the Greek debt back in 2009.

by Upstate NY on Mon May 21st, 2012 at 09:50:53 AM EST
[ Parent ]
If Greece rejects the dictats with a new policy (an entirely rational one) then the EU will inflict lots of pain on Greece to make an example of it.

The sad part is that the EU has already inflicted lots of pain on Greece to make an example of it, in exchange for accepting the dictated policy.

(The language of EU, member state and ECB officials is clear on the record: "punitive rates", "it has to hurt", etc)

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Mon May 21st, 2012 at 10:10:02 AM EST
[ Parent ]
Alexis Tsipras interview: 'Greece is in danger of a humanitarian crisis' - Guardian
The leader of Syriza, the party spearheading the anti-austerity backlash, says Greece is descending into 'social hell'

... The absurd thing would be if the Greek people didn't react and allowed destiny to take its course. No one has the right to reduce a proud people to such a state of wretchedness and indignity. What is happening in Greece with the memorandum is assisted suicide.

You ask if I am afraid? I would be afraid if we continued on this path, a path to social hell. Defeat is the battle that isn't waged, and when someone fights there is the big chance of winning; and we are fighting this to win. Lost battles are battles that are not fought.

... HS: But isn't this very risky? Greece is receiving loans on which its economic survival depends.

AT: But who is surviving? Tell me. Greeks are not. Banks are surviving, but Greeks are not surviving. In reality, we have the salvation of Greece with the destruction of the people of Greece.

... European taxpayers should know that if they are giving money to Greece, it should have an effect ... it should go towards investments and underwriting growth so that the Greek debt problem can be confronted. Because with this recipe, we are not confronting the debt problem, the real problem.

by epochepoque on Mon May 21st, 2012 at 03:22:39 PM EST
The more I read his interviews, the more I like him.

And yet he is so often described in the press as a fringe, lunatic extremist...

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Tue May 22nd, 2012 at 06:41:42 AM EST
[ Parent ]
Cyrille:
And yet he is so often described in the press as a fringe, lunatic extremist...

ditto grillo, who won Parma last night...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Tue May 22nd, 2012 at 09:24:53 AM EST
[ Parent ]


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