Lună: iunie 2015

Beyond the Greek Impasse

A Greek withdrawal from the eurozone would make sense. It would create havoc in Greece for a while, but it would allow the Greeks to negotiate with Europe on equal terms. They would pay Europe back in drachmas priced at what the Greek Central Bank determines, and they could unilaterally determine the payments. The financial markets would be closed to them, but the Greeks would have the power to enact currency controls as well as trade regulations, turning their attention from selling to Europe, for example, to buying from and selling to Russia or the Middle East. This is not a promising future, but neither is the one Greece is heading toward now.

Many have made a claim that a Greek exit could lead the euro to collapse. This claim seems baffling at first. After all, Greece is a small country, and there is no reason why its actions would have such far-reaching effects on the shared currency. But then we remember Germany’s primordial fear: that Greece could set a precedent for the rest of Europe. This would be impossible if the rest of Europe was doing well, but it is not. Spain, for example, has unemployment figures almost as terrible as Greece’s. Some have pointed out that Spain is now one of the fastest-growing countries in Europe, which would be impressive if growth rates in the rest of Europe weren’t paralyzed. Similarly, Spain’s unemployment rate has fallen — to a mere 23 percent. Those who are still enthused about the European Union take such trivial improvements as proof of a radical shift. I see them as background noise in an ongoing train wreck.

The pain of a Greek default and a withdrawal from the eurozone would be severe. But if others see Greece as a forerunner of events, rather than an exception, they may calculate that the pain of unilateral debt restructuring makes sense and gives Greeks a currency that they can at last manage themselves. The fear is that Greece may depart from the euro, not because of any institutional collapse, but because of a keen awareness that sovereign currencies can benefit nations in pain — which many of Europe’s countries are.

I do appreciate that the European Union was meant to be more than an arena for debtors and creditors. It was to be a moral arena in which the historical agony of European warfare was abolished. But while the idea that European peace depends on prosperity may be true, that prosperity has been lost. Economies rise and fall, and Europe’s have done neither in tandem. Some are big winners, like Germany, and many are losers, to a greater or lesser degree. If the creation of a peaceful European civilization rests on prosperity, as the founding EU document claims, Europe is in trouble.

The problem is simple. The core institutions of the European Union have functioned not as adjudicators but as collection agents, and the Greeks have learned how ruthless those agents can be when aided by collaborative governments like Cyprus. The rest of the Europeans have also realized as much, which is why Euroskeptic parties are on the rise across the union. Germany, the country most threatened by growing anti-EU sentiment, wants to make clear that debtors face a high price for defiance. And if resistance is confined to Greece, the Germans will have succeeded. But if, as I think it will, resistance spreads to other countries, the revolt of the debtor states against the union will cause major problems for Germany, threatening the economic powerhouse’s relationship with the rest of Europe.

Beyond the Greek Impasse.

A letter of support for Greece from leading academics

Over the past five years, the EU and the IMF have imposed unprecedented austerity on Greece. It has failed badly. The economy has shrunk by 26%, unemployment has risen to 27%, youth unemployment to 60% and, the debt-to-GDP ratio jumped from 120% to 180%. The economic catastrophe has led to a humanitarian crisis, with more than 3 million people on or below the poverty line.Against this background, the Greek people elected the Syriza-led government on 25 January with a clear mandate to put an end to austerity. In the ensuing negotiations, the government made it clear that the future of Greece is in the Eurozone and the EU. The lenders, however, insisted on the continuation of their failed recipe, refused to discuss a write down of the debt – which the IMF is on record as considering unviable – and finally, on 26 June, issued an ultimatum to Greece by means of a non-negotiable package that would entrench austerity. This was followed by a suspension of liquidity to the Greek banks and the imposition of capital controls.
In this situation, the government has asked the Greek people to decide the future of the country in a referendum to be held next Sunday. We believe that this ultimatum to the Greek people and democracy should be rejected. The Greek referendum gives the European Union a chance to restate its commitment to the values of the enlightenment – equality, justice, solidarity – and to the principles of democracy on which its legitimacy rests. The place where democracy was born gives Europe the opportunity to recommit to its ideals in the 21st century.

Etienne Balibar

Costas Douzinas
Barbara Spinelli
Rowan Williams
Immanuel Wallerstein
Slavoj Zizek
Michael Mansfield
Judith Butler
Chantal Mouffe
Homi Bhabha
Wendy Brown
Eric Fassin
Tariq Ali

Joseph Stiglitz: how I would vote in the Greek referendum | Business | The Guardian

We should be clear: almost none of the huge amount of money loaned to Greece has actually gone there. It has gone to pay out private-sector creditors – including German and French banks. Greece has gotten but a pittance, but it has paid a high price to preserve these countries’ banking systems. The IMF and the other “official” creditors do not need the money that is being demanded. Under a business-as-usual scenario, the money received would most likely just be lent out again to Greece.

But, again, it’s not about the money. It’s about using “deadlines” to force Greece to knuckle under, and to accept the unacceptable – not only austerity measures, but other regressive and punitive policies.

But why would Europe do this? Why are European Union leaders resisting the referendum and refusing even to extend by a few days the June 30 deadline for Greece’s next payment to the IMF? Isn’t Europe all about democracy?

In January, Greece’s citizens voted for a government committed to ending austerity. If the government were simply fulfilling its campaign promises, it would already have rejected the proposal. But it wanted to give Greeks a chance to weigh in on this issue, so critical for their country’s future wellbeing.

That concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project. Most of its members’ governments did not seek their people’s approval to turn over their monetary sovereignty to the ECB. When Sweden’s did, Swedes said no. They understood that unemployment would rise if the country’s monetary policy were set by a central bank that focused single-mindedly on inflation (and also that there would be insufficient attention to financial stability). The economy would suffer, because the economic model underlying the eurozone was predicated on power relationships that disadvantaged workers.

And, sure enough, what we are seeing now, 16 years after the eurozone institutionalised those relationships, is the antithesis of democracy: many European leaders want to see the end of prime minister Alexis Tsipras’ leftist government. After all, it is extremely inconvenient to have in Greece a government that is so opposed to the types of policies that have done so much to increase inequality in so many advanced countries, and that is so committed to curbing the unbridled power of wealth. They seem to believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate.

Joseph Stiglitz: how I would vote in the Greek referendum | Business | The Guardian.

Stiglitz would vote NO. Me too.

Greek bailout extension refused: a panel of leading economists give their verdict | Comment is free | The Guardian

The conditions of the bailout therefore should have been conditions that emulate the kind of public sector reform and investment strategy that characterises many of the competitive powerhouses of northern Europe – including Germany. Indeed, Greece should not do what Germany says it does (austerity), but what Germany actually does (invest).

Over the last decade, Germany has invested in all the key areas that not only increase productivity, but also create innovation-led growth. Companies like Siemens are the result of a dynamic public-private eco-system in Germany, with high government spending on science-industry links (Fraunhofer institutes), the existence of a large and strategic public bank (KfW) that provides patient, long-term, committed capital to German businesses, a long run-focused stakeholder type of corporate governance (rather than the short-termist shareholder Anglo-Saxon model that southern Europe has copied), an above-average R&D/GDP ratio (rather than the below average one in Greece, Portugal and Italy), investments in vocational training and human capital, and a mission-oriented ‘energiewende’ strategy focused on greening the entire economy.

Imagine the very different types of result we would have witnessed had the negotiations been about stuffing an investment strategy down Greece’s throat, rather than more cuts. “OK, we will bail you out, but reform your country, and kickstart public investments (of the type named above), so that you are ready for the 2020 innovation challenge.”

Instead, insisting on the status quo full of more austerity produced an increasingly weaker Greece, more unemployment and more loss of competitiveness. Now alone, the only hope is that Varoufakis’ insistence on a European-wide investment programme will at least find a national solution. Perhaps it can begin with Greece forming a development bank like the KfW, and use it to kickstart the kind of long-term investment strategy that should have been part of this ‘pact’ from the start. Oh, and Italy’s competitiveness is just as bad. So if Grexit now happens— and Europe does not finally get a proper doctor in the room – get ready for Itexit over the next year.

Greek bailout extension refused: a panel of leading economists give their verdict | Comment is free | The Guardian.

If only politicians ever listened to economists…

Greek PM Alexis Tsipras calls referendum on bailout terms | World news | The Guardian

Greek PM Alexis Tsipras calls referendum on bailout terms | World news | The Guardian.

Tsipras makes a democratic and very intelligent move.


The question will be whether voters accept the terms of the ultimatum issued by creditors or not. It will not ask whether they want Greece to stay in the Euro zone or return to drachma.

The government will campaign for a „resounding NO” and this is what the Greeks will vote on July 5.

Tsipras’ move is a powerful tool to consolidate his position at home and in the negotiations. The saga continues as there are no easy answers to Greece’s problems, but he’s earned my respect.

What Greece Means For EUR/USD – Goldman Sachs

With respect to EUR/$, we think the Bund sell-off increases EUR/$ downside if tensions over Greece escalate further. This is because the ECB, including via the Bundesbank, would almost surely step up QE to prevent contagion. We estimate that the immediate aftermath of a default could see EUR/$ fall three big figures. The ensuing acceleration in QE would then take EUR/$ down another seven big figures in subsequent weeks,” GS adds.

We thus see Greece as a catalyst for EUR/$ to go near parity, via stepped up QE that moves rate differentials against the single currency,” GS concludes.

EUR/USD forecasts:

GS maintains its EUR/USD forecasts at 0.95 in 12 months and 0.80 by end of 2017

What Greece Means For EUR/USD – Goldman Sachs.