Tiny, tiny people

[koganbot]

This long post by Steve Randy Waldman has been getting attention in the econ blogosphere and is a slamming bit of writing that's also clear and coherent and seems to explain a lot.

http://www.interfluidity.com/v2/5965.html

The two money quotes, so to speak:

With respect to

Comments

My perspective (responding mainly to the original Renzi query):

[dubdobdee]

Syriza came on the scene - won the election/formed the coalition - with a tactical plan and a strategic plan.

The tactical: to negotiate a new package with the troika (as the previous one was shortly to run its), which gave much better protection to the vulnerable and did not impact so ruinously on growth etc.
The strategic: to begin to enable a Europe-wide pushback agains the ideology of austerity

Grexit was/is strongly contra-indicated at both levels: (first) with Grexit you'll get (probably much) worse austerity. The balancing argument that at least you now have control of your economic destiny is, unfortunately, weak - Greece is a net importer of food and fuel. Second: the general pushback could/can never be effective if it only manifests in one quite small country (population-wise, it’s quite big geographically), with not much economic leverage (see point above, abt being a net importer). For pushback to become a thing at all, Europe-wide, and for it to benefit Greece, Greece has to be in Europe still, working closely

Re: My perspective (responding mainly to the original Renzi query):

[dubdobdee]

It’s historically a problem for a new political party, that while it has the enthusiasm iit (in effect) can’t get the staff. In particular (in this instance), it likely doesn’t have experienced high-end diplomats to hand - they are all working for the established parties, who pay better and have been around longer. They may happen to discover a natural genius for it in their own ranks - there are plenty of very smart people in Syriza (though they tend to be academic smart rather than practical smart). But it’s a gamble, to say the least,. The Syriza solution (I’m afraid I largely blame Varoufakis for this, though Tsipras plainly went along with it) was a kind of punk rock, technique-is-bullshit showboating bluster. Diplomacy is all a fraud! Game theory is a con! It’s all just the powerful playing games! We will blow the cover on their meaningless games! Result: I think the (very experience) negotiators on the other side saw an adolescent shitshow coming a mile off, and simply sat down to wait it out. By their own admission, the Greek

Re: My perspective (responding mainly to the original Renzi query):

[koganbot]

Thank you for this terrific commentary, most of which I'm not yet ready to respond to.

About the IMF, and its recent report (which I haven't read but wouldn't have understood if I had): as soon as the report came out there was a battle over how to spin it. The first news account I saw was actually claiming - perhaps correctly - that fundamentally the report was an attack on Syriza for hurting the Greek economy over the last five months, about how things would have been progressing well if only Syriza had not come to power, and that the release was intended to hurt the "No" campaign and help the "Yes." Then I read commentary that emphasized how the report called the current debt burden unsustainable and was an implicit call for debt relief, and the claim (has it been verified, or this just more spin?) that the other two troiks had attempted to suppress the report's release for fear it would encourage a "No" vote

Re: My perspective (responding mainly to the original Renzi query):

[koganbot]

there are people in every country who can recognise themselves in the Greek pensioners

Hmmm. My fear is that the people in other countries who should identify with Greek pensioners, or with Greek school teachers whose savings and employment are at risk or gone, don't get it at all, that, e.g., German and French school teachers and pensioners have no idea that it was potentially their own savings and jobs that were rescued in the first two "Greek bailouts"* but do believe that bits of their own money are being taken away to pay for the profligate Greeks

Re: My perspective (responding mainly to the original Renzi query):

[dubdobdee]

yes i'm completely behind on the details, which still seem to be emerging, or being hashed out as we speak

re the effect of grexit: i don't know enough to know at all myself what the result would be (from what i've read i tend more to be persuaded by the people saying it would worse -- as you say, krugman never seems to have answered this) but up above i was trying to outline what i think syriza's line is, rather than mine

a lot of what i read is basically daniel davies's twitterfeed @dsquareddigest, where he discusses matters with economists, journalists and the like -- he's much more of a pragmatic believer in "kick it down the road" than krugman, esp.with regard to euro-stuff, and i think has a better practical instinct for the difference between what the agreement says right here right now and how it will actually be operating in a year's time

Re: My perspective (responding mainly to the original Renzi query):

[koganbot]

Has dsquared spelled out how he thinks Greece will lower unemployment and grow the economy (which requires getting cash into the hands of Greek consumers)?

I assume Krugman's argument would be that the past five years of can-kicking has made things much worse, that the longer you prolong it the worse you make it.

I'd think the poor "kick-the-can" metaphor had been kicked to death by now, but not only did it reappear last week ("It is no longer possible to kick the can any further"), but the apparent agreement does, in fact (or in metaphor, at least), kick the can down the road once more. In the long run we'll be dead, but the can will still be rolling.

I think a lot rides on whether hints and promises of debt relief are actually credible.

Re: My perspective (responding mainly to the original Renzi query):

[koganbot]

(1) Also, does Davies have ideas not just for how Greece can grow its economy, but for how anyone can change or counter German ignorance and intransigence?

(2) Another version of the Renzi question - who will stand up to Merkel? - might be, what the hell do Mario Draghi and Christine Lagarde think they're doing? I'm assuming, perhaps very incorrectly, that (a) Krugman is more-or-less right in his Keynes-Fisher-Friedman arguments for being anti-austerity, and (b) Draghi and Lagarde would likely agree with him, and agree that recovery of Europe as a whole, not just of Greece and not just of the periphery, are at risk from austerity. If so, what do they think they're doing, and why

Re: My perspective (responding mainly to the original Renzi query):

[koganbot]

Any idea if in the short run* it makes a difference or not to the Greek economy if (1) Greece gets new loans and an easing in when it has to pay old and new debt back or (2) it gets some actual debt forgiveness? And, again, beyond the new loans keeping Greece's banks afloat, does any of the money make its way to actually stimulating the Greek economy, as opposed to just paying off whatever Greece has to pay off? I understand neither the finance nor the economics of these things.

*In the long run, Greece is dead.

Re: My perspective (responding mainly to the original Renzi query):

[koganbot]

Hah! Krugman claims "I’m even hearing from people who should know that Ambrose Evans-Pritchard is right, that [Tsipras] hoped to lose the referendum, to give an excuse for capitulation."

(But "people who should know" is not a good source. If they're not willing to go public, you either don't say what they told you or at least you say why they're not willing to go public. Even if you're just blogging.)

Also this, a couple sentences earlier: "Tsipras apparently allowed himself to be convinced, some time ago, that euro exit was completely impossible. It appears that Syriza didn’t even do any contingency planning for a parallel currency (I hope to find out that this is wrong)."

So, Syriza organizes its life even worse than I organize mine.

Re: My perspective (responding mainly to the original Renzi query):

[koganbot]

Tsipras says the agreement* includes "the restructuring of debt and funding for the medium term," and said that there's also a growth package for 35 billion euro (in NY Times words). But he also called the deal "recessionary." Reuters says (citing Merkel) that 12.5 billion euros will go for "investment in Greece" (Reuters words). Those numbers don't mean anything to me one way or another. My question is: by what path does the Greek economy actually grow under this deal?

[UPDATE: I found Tsipras's actual statement. An excerpt: "The measures include those that Parliament has voted on. Measures that will inevitably create recessionary trends. However, I am hopeful that the growth package of 35 billion euro that we achieved, debt restructuring, as well as securing funding for the next three years will create market confidence, so that investors realize that fears of a Grexit are a thing of the past-thereby fueling investment, which will offset any recessionary trends."]Meanwhile, our friend Matteo Renzi has been heard from, crediting

Re: My perspective (responding mainly to the original Renzi query):

[koganbot]

Ah, there's the actual text! 50% of 25bn

will be used for decreasing the debt to GDP ratio and the remaining 50% will be used for investments.
Perhaps "decreasing the debt to GDP ratio" should really read "for paying down debt while the GDP shrinks even more, but what the hell."

the Eurogroup stands ready to consider, if necessary, possible additional measures (possible longer grace and payment periods) aiming at ensuring that gross financing needs remain at a sustainable level...

The Euro Summit stresses that nominal haircuts on the debt cannot be undertaken.
Presumably, Krugman would consider this document delusional.

Also, it actually includes what I would consider insulting language if I were the Greeks. And, language aside, it's basically saying that, contingent upon you Greeks doing what you've shown yourself to be too irresponsible to do before, and instead doing what we tell you, we will consider - not commit to, mind you, but just consider - "possible longer grace and payment periods

correction

[koganbot]

Oliver Blanchard = Olivier Blanchard

Re: My perspective (responding mainly to the original Renzi query):

[koganbot]

Any thoughts on the SNP, about whom I know little more than zero? I remember before the referendum seeing frustrated posts by Krugman and Wren-Lewis to the effect of: You can't play this game of saying you'll go all independent and control your own destiny while claiming that nonetheless everything will continue humdrum and the same economically, and we'll even still be on the pound, hurrah! Krugman was like, Are you crazy? Look what not having your own currency is doing to Greece and Spain and Portugal.