Greece eh?

[daveon]

I've been keeping an eye on this, as you do.  It does have that grim feeling that people may have had in 1913/14 while the wise heads agreed war was impossible, the events just kept unfurling.

As I remarked on Facebook, the problem with negiating agressively with somebody who has nothing to lose, is that they might, in fact, decide that they have nothing to lose.  It feels like we're at that point.

We could discuss that the Euro project was potentially doomed from the outset for various factors:

• currency union without political union is unstable - how do you impose rules on people who are doing stupid stuff with your largess


• Germany joined at the wrong part of it's business cycle when the value of the Mark was much lower than it had been, giving Germany a HUGE price advantage in the early stages


• expecting members of your currency to depress their economies and GDPs to avoid other members experiencing any relative inflation isn't the right way to do things

Anyway, here we are.  The Greeks have called the German bluff and stated, correctly in my opinion, that this is now a matter for their voters.  They were elected, as a government, with a mandate to do something about austerity, they have tried, they have failed - it is now up to the people of Greece as a whole if they are prepared to deal with the consequences - either live with more austerity or get out of the Euro and possibly the EU.

At the crux of this is the idea that as long as you live 'within your means' and pay down your debt, confidence and growth will return to your economy.  The problem here is when your economy is running with 25-30% of the workforce unemployed, where does all the demand come from for there to be confidence?  I got nothing - there isn't a way to do it.

It has been suggested to me that all this posturing is purely because the Germans, ECB and the Commission are ok with losing Greece, as long as it shows the Spanish, Italians and Irish that they better not think about breaking ranks.  That feels potentially true especially after the tirade from the Commission Chair today where he basically demanded to know who the fuck these voters thought they were and what gave them any say in running their country?

What indeed?

Comments

[chris-gerrib.livejournal.com]

demanded to know who the fuck these voters thought they were and what gave them any say in running their country? speaking as somebody who thinks Europe needs to become much more like a "United States of Europe" or fade into irrelevance, this attitude is Problem #1 in getting from here to there.

[randy-byers.livejournal.com]

I don't feel I understand the issues very well, but I've been reminded on occasion of Jane Jacobs' argument that the US would be better off with a variety of regional currencies so that different parts of the economy could devalue their currency when problems came up rather than having to deflate the whole economy.

[a-cubed.livejournal.com]

The problem with Germany in the Eurozone is deeper than that. Germany not only entered the Eurozone with a DM/EUR rate that favoured German industry, but in capacity and infrastructure, German industry had been outcompeting most of the rest of the Eurozone for a couple of decades. This led to a gradually strengthening DM which kept things on a somewhat even keel. Then they joined the Eurozone and suddenly German goods stayed the same price, never rising, so local consumers bought German. Their balances of payments deficit with Germany kept rising. Their household debts as well as their public debts kept rising, fuelled by lending from German banks (and French banks France was in a relatively weaker but similarly "good" position wrt the rest of the Eurozone). These loans were made at German levels of interest to both the state and individuals. That didn't reflect the real risk (even without the shenanigans that went on in behind the scenes deals to get Greece into the Eurozone in the first place, which assured that it would have unpayable public debts ten years after the Euro was created...).
http://www.theguardian.com/business/2015/jun/09/time-end-pretence-greece-never-repay-bailout-loans

[surliminal.livejournal.com]

Best solution I've heard in weeks is Apple or Google buy Greece as a tax haven/ source of cheap workers. Hell they can probably even out ofthe corruption, bribe people with mini iPads...

[pmcray.livejournal.com]

What about Puerto Rico? Apparently, them leaving the dollar has been ruled out, but reintroducing the peso would allow their economy to realign with the US. The problem is that a separate currency is no panacea especially if you don't export anything (like Greece and Puerto Rico) and you are integrated into/dependent on a larger economic block. The arguments for the Greeks to introduce the drachma are the same for the Scots to have the merk when they become independent, but this isn't discussed much because the short (and probably medium) term consequences are pretty negative, economically and politically.

Since the figures were fudged politically to allow Greece to join the euro, the Greeks might feel that EU is obligated to try and keep them going if they want the euro with austerity. But the EU is a Christian Democrat/neoliberal club now and there's not much sympathy for a far left government in Athens playing silly buggers. There's always going to be a clash between democracy, the bond markets and making sure the supermarket shelves and cash machines are kept full. Look at Britain and the IMF in 1976 or, indeed, the various other devaluation crisis (1947, 1967 and 1992 - so not just Labour).