Greece SHOULD vote on Europe...

[devifemme]

I've posted stuff about politics, recounting material from the Washington Post -- thinking it'd be of interest to those from other regions or countries. Sometimes I do so when the Post says something contrary to the general view

Comments

[matrixmann]

Good to hear that even some Western reporters find the issue to be good - and not talk it down to some malicious act.

[devifemme]

The long and short of it is that banks NEVER should have lent Greece (or Italy or Spain) so fucking much money. As for austerity, countries in trouble inevitably find the only way out is to throttle back their economy. (Even successfully taxing the rich isn't going to fix a severe fiscal problem... if Greece got a thousand bucks each from the top 10,000 wealthy individuals [or, more unlikely, $10,000 each from the richest thousand], that's $10 billion -- only a third of the public debt.)

[ggary]

Politics had a lot to do with it, I think. The EU did not want the economy of a European country to collapse, threatening the European Community. Their economy was underwritten in order to shore up a political dream. It was a political rather than economic decision, and given that it is perhaps a bit silly for them to expect the Greeks to pay up. I think that the Greeks are aware of this, and it has been something of weapon in the negotiations--'Make things too difficult for us and we'll just leave, and then all that money you spent will have been absolutely pointless.'

[devifemme]

You're right about the run-up to the Greek crisis being more political than economic: Ignatius wrote that Brussels had issued a "German credit card" to Greece as the Maastricht Treaty was implemented in the 1990s, effectively softening the adjustment to being in a wide-open Europe. And (I'm extending the metaphor here), the Greeks -- plus the Italians and Spaniards --delighted in using it for a decade-long shopping spree.

The same thing, in effect, happened in Latin America in the 1980s. The big international banks had "recycled" -- as unprecedented amounts of so-called "sovereign debt" -- the petro-dollars accumulating after the 1970s jump in oil prices. By the mid-80s, Latin governments could no longer service* that debt -- and the US Government (playing the Brussels role) created "Brady bonds" to rescue them.

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* As an international economist of sorts, I always liked the irony of countries "servicing" debt and hookers "servicing" their johns.

[ggary]

The problem is that the European Union is run according to a very specific sort of democracy, which can be described 'Just do what we tell you!!!" The EU was sold to Britain in the form of the Common Market back in the 70s as a glorified trade agreement with its partners. Only gradually did it become apparent to the general public that they were expected to buy into political and monetary union as well. After recent world events the idea of ditching the pound and adopting the Euro is pretty much a dead duck, and the public en masse is against handing over further powers to Europe

[devifemme]

Exactly so, Gary. What's needed is rescheduling the Greek debt over a much longer term. That's harder to do than in the 1980s (see my comment to you above) for two reasons: (1) current near-zero interest rates in the US and Europe mean bankers cannot argue to their boards that "present value" of future debt service is substantially the same* -- and mainly (2) Merkel doesn't want to underwrite the banks' resulting losses.

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* This is arcane, but finance folks deliberately justify writing down debt in terms of assuming that "discounted cash flow" from the rescheduled debt has a smaller impact on banks' balance sheets than booking an absolute loss (as in a bankrupcy).

[devifemme]

Euro-skeptics do seem to be carrying the day -- the "no" vote in Greece yesterday rather proves the point: the strong Greek rejection of "Brussels" -- and Berlin -- require EU discipline in avoiding more damage to Europe in general. (Though my quick read of the London papers just now shows that discipline in short supply -- the French proving they own the word "pique" whilst the multilingual Germans use up their stock of "hauteur"...)

Meanwhile, Tsipras reshuffles his cabinet (?) and neglects to notice he's painted himself into a tight corner.

And, I admit, my man Ignatius may be doubting his own edict of "let them eat... referenda." Bruselles won't accept his argument on the best of days -- and today it will actively suppress the putative lesson from "outsiders."

Drachmas, anyone?