« profile & posts archive

This author has written 782 posts for Larvatus Prodeo.

Return to: Homepage | Blog Index

172 responses to “The Greek mess”

  1. Fine

    There isn’t really a short term solution to a long term problem, which you summed up so succinctly, is there?

    This reminds me of a friend with a Greek background and rather paranoid left politics, who’s convinced it’s all the fault of the Americans who waht to rob blind the lovable, carefree Greeks. Of course, they’re backed by the Germans et al. She’s ecstatic to see protestors hit the streets, but has no idea what they’re actually protesting about, except that life is tough in Greece right now. No shit, Sherlock.

  2. Brian

    Satyajit Das was good talking on LNL about it the other day and the BBC has been all over it on NewsRadio late at nights.

    It has been said that the Greek protesters are upset because they know that the grief they are going through won’t actually resolve the situation, and that seems to be right.

    There is plenty of comment that says the lenders need to take a haircut, because borrowing more money at 26% is not ever going to be repayable. So the debt needs to be ‘restructured’, which is another word for ‘default’, so that a credible repayment pattern can be established.

    The French in particular, but also the Germans, are worried about the exposure of their own banks. But the ECB as central banker is implicated. The best I can get is that a Greek default won’t bring the ECB down, but if the contagion spreads to some of the other PIGS, as would be expected, then the situation would be delicate.

    It seems that the American banks couldn’t leave well alone, so there are implications there also.

    One scenario sees the euro zone shrinking to Germany, Holland, Austria and Finland. France?

    Satyajit Das saw currency devaluation as part of the standard medicine in these situations. He reckons it has helped Iceland to get back to what looks like a forward path again. Obviously can’t happen inside the euro.

  3. Fine

    So, maybe Greece should leave the Eurozone and devalue the drachma?

  4. BilB

    How do you devalue a currency for a zone inside a region? I can’t see how, but you could apply a blanket zone tarrif (read levy) of, say, 3% to service debt in a non bank manner. This way the internal structure remains intact and the austerity is more universally shared.

  5. Chris

    Sure, it’s great that the “ordinary person” is finally taking an interest in these issues, but one might ask what the hell they were doing for the last 30 years, when in democratic elections they continued to vote in parties that enacted policies leading to the current mess

    Too busy voting for people who told them what they wanted to hear and gqve them what they wanted rather than what they could afford. Public service jobs paying 3 times what the private sector can afford – should have been a pretty big clue to the general public that something very odd was going on!

  6. Brian

    Just in from Business Spectator. This seems to capture some of the dilemma:

    Berlin is insisting that private investors – such as banks, insurance companies and pension funds – should bear some of the costs of the new package. They want investors to exchange €30 billion of Greek bonds maturing between 2012 and 2014 with longer-dated bonds.

    But the European Central Bank, with the backing of France, is staunchly opposed to this scheme, warning that it could trigger a major financial crisis in the eurozone.

    The fear that Greece will eventually default on its debts prompted investors to dump Greek bonds overnight, with yields soaring to fresh euro-era highs. At one point, yields on two-year Greek bonds surged above 30 per cent. But Greece’s financial woes are spreading to other peripheral eurozone countries, with Spain’s borrowing costs now at the highest level in 11 years.

  7. derrida derider

    Put another way, the Euro has allowed Greeks and their bankers to persist for another decade or so with the illusion that parties don’t have to be paid for, which has just made the bill bigger – too big to pay, in fact.

    It’s true there is no good solution. The banking collapse that would follow outright default, for example, would hurt a lot of innocent non-Greeks beyond the direct holders of Greek bonds. Plenty of innocent Greeks will suffer whatever is done – though as you point out in a democracy you tend to get the governments you deserve, so perhaps the distinction between guilty and innocent isn’t always so clearcut. The best practical solution would be a massive bailout by other European taxpayers but that is unlikely to happen because those taxpayers will, correctly, see that as brutally unfair.

    It is quite amazing how consistently some political cultures reach for paranoia at the slightest excuse; the Greek left, even centre-left, has long been worse for this than even the US far right. Guys, the last time the yanks took any interest at all in your bankrupt little Ruritania was during the colonel’s junta, 40 years ago.

  8. TimT

    I know, Rupert Murdoch could buy Greece.

  9. Craig Mc

    Sure, it’s great that the “ordinary person” is finally taking an interest in these issues, but one might ask what the hell they were doing for the last 30 years, when in democratic elections they continued to vote in parties that enacted policies leading to the current mess.

    They were, as PJ O’Rourke put it, “voting themselves rich”.

    What are the protestors seeking?

    Give us your money, or we shit our bed. Basically, a tantrum. You’d say it’s a ridiculous strategy, but for it having worked once already.

  10. Link

    Loans from the IMF and the conditions under which the IMF offer such loans will bring Greece to its knees regardless.

    History clearly demonstrates that the IMF is a corrupt and venal organisation, a front for US corporate hegemony. It has left a trail of havoc, social unrest, poverty, death, and misery everywhere it has been.

    Perhaps this is why they are so upset?

  11. Link

    I wouldn’t believe all that you read in Vanity Fair.

  12. Paul Norton

    Things began to go downhill for them when they lost the Battle of Manzikert in 1071.

  13. Robert Merkel

    Link, yes, the IMF and its austerity policies have their flaws.

    The fact that Greece is in a position to require their assistance appears to be largely their own work.

  14. BilB

    Robert,

    Forget what I said earlier. When you look at it 330 billion usd GDP and 1.43 GDP government debt for an 11 million population, there is a problem. But Greece’s GDP has grown strongly. The problem has been corruption and defence spending. The solution has to be for Greece to abandon 90% of its military structure and rely on NATO to defend them against the Turks (who want to become part of the Eurozone) and smash apart the blood sucking corruption. It is a big ask.

  15. Occam's Blunt Razor

    Serves all the Eurozone countries, especially the frogs and the boxheads, right for setting up the Euro in the first place. Why on earth would any soveriegn nation hand over it’s sovereignty for so little gain?

    Serves all the Eurozone members right for putting conditions into the Maastricht Treaty about debt levels etc that were then completely ignored.

    Serves the Greeks right for their selfish detachment from economic realities.

    When the GFC occurred I was fully supportive of Governments propping up the banks. I am no longer of that view given what I now see in the aftermath. Better to let the banks fail and for the lenders to take their medicine than for this death by a thousand cuts that we see in places like the US, Ireland, Greece etc where Government debt has replaced private debt.

    In my house it’s called consequences – I have a four and six year old that understand consequences – appears the Greeks don’t.

  16. BilB

    Here is a wild thought Greece could turn its military into a business. The have a disciplined work force which could become a transport, construction, maintenance and security business. Roman style. The Brits have their Royal Army that is a working Tourist attraction. It is not unheard of.

  17. Tyro Rex

    Paul Norton; downhill since 1071? I believe the Greeks have been all the way downhill ever since L. Mummius smashed the Achaean League and sacked, depopulated, and utterly destroyed Corinth in 146 B.C.

    Ahh but “Graecia capta ferum victorem cepit” as the French and Germans are discovering now, as the Italians once did, just not quite in the way that Horace meant.

  18. Katz

    RM:

    Greece would have to leave the Euro, at least temporarily. However, the Euro treaty doesn’t actually permit nations to leave once joined up.

    If the Greeks resolved to dump the euro, I couldn’t see any other member standing in their way. And if they resolved to, what would “standing in their way” consist of? Are they going to force Greece to take euros?

    On the other hand, as Brian has noted more than once, if Greece were to dump the euro, Greece would suffer massive capital outflows. The Greek government would have to do what FDR did in early 1933 — declare a bank holiday and declare illegal possession of any specie except for the New Drachma. In 1933 FDR confiscated gold on pain of severe penalties. This was to protect the credibility of the US$ as a store of value.

    But this is only a partial solution. Greece is facing a perfect storm whose only immediate solution is authoritarian.

  19. Sam

    The problem is, Razor, that while individual bank failure is just a problem for bank shareholders and management (who cares?), widespread bank failure causes whole economies to fail, as in Depression.

    It’s is no one’s interests that the economies of France and Germany go into meltdown, which is what would happen if their banks failed. These banks hold about $50 billion of Greek government debt. We’re talking real money here.

    The idiots who bought this worthless paper should be horse whipped.

    The criminals in Greece who cooked the books and sold it to them should be executed.

    As for the Greeks themselves, this is what happens when you spend like you’ve got a Swiss income when in fact you’ve got an Albanian income. The party’s over. They should get used it.

  20. akn

    Highly recommended for a fuller account of the political economy of modern Greece and for a significantly more informed account of this period and this crisis than any offered by orthodox mass media outlets:

    http://aleksandreia.wordpress.com/2010/03/11/greek-culture-credit-default-swaps-and-causes-of-debt-crises/

    For example:

    Well here is the thing. Real, live Germans are not heartless ants, and the Greeks are not broke because they are giddy crickets who sing their summers away. Greece is a grown-up country with grown-up problems: rough, tough politics, and a lot of recent history, not all of it very nice. And it is precisely that recent history, and rough politics, that are at the core of Greece’s fiscal woes today. Take the painful question of the huge public sector, and all those civil servants with jobs for life, and unusually generous retirement packages. The existence of those jobs for life is not a cultural quirk, in which Greek officials simply like coffee and backgammon too much to do any work. It is the end result of a brutal, multi-decade power struggle between the left and the right: a struggle that got people killed within living memory.

  21. Sam

    The existence of those jobs for life is not a cultural quirk, … It is the end result of a brutal, multi-decade power struggle between the left and the right: a struggle that got people killed within living memory.

    Yeah, but they can only afford it if they make and sell enough stuff to pay for it. They do not.

  22. Occam's Blunt Razor

    @20 – I used to completely agree with the analysis that banks would have the impact you suggest. Yes, there will be bad economic impacts. However I think that the short-term private sector pain is much more acceptable than the long drawn out impacts when Governments become over-burdened with debt – short n sharp versus long and chronic pain.

  23. Katz

    OCR

    Better to let the banks fail and for the lenders to take their medicine than for this death by a thousand cuts that we see in places like the US, Ireland, Greece etc where Government debt has replaced private debt.

    This refers accurately to Ireland, where the Irish government undertook to guarantee the liabilities of Irish banks.

    However, the problem of Greece is different and simpler. Foreign banks lent to the Greek government far beyond the capacity of the Greek government to pay. Perhaps, as AKN’s link asserts, this bloated government sector was a product of Greece’s bloody history. However, foreign banks were under no obligation to fund the Greek government. They did so negligently and complacently.

    And now several European banks face insolvency because the Greek government can’t repay.

    If the historical contradictions of Greece could not remain latent under the burden of a small foreign debt, by what mind-numbing leap of illogic can it be argued that the historical contradictions of Greece could remain latent under a huge, burgeoning and unpayable debt.

    This is self-delusory special pleading.

  24. BilB

    There is another possibility. As the European Union has a GDP of 16 trillion US$, there is scope for all of Europe’s troubled economy’s debts to be amalgamated and managed by the central bank. In the so arranging the debts would be renegotiated with interest rates and amounts pruned. This would then require that all of those economies operate under a new set of rules. It is calling in the administrators, but at the national level. That is how, again, the Romans would have done it.

    Having this as a hovering option might help the Greeks to better focus on resolving their problem. It might also help the lenders rethink their position to Greece and the adviseability of debt restructuring.

  25. Sam

    BilB @26

    so suppose I don’t have any debts and my neighbour has maxed out his Visa, MasterCard and Amex. He did this by lying to various banks about his income and they gave him cards with huge credit limits. He can’t pay any of it back. Your solution is for he and I to share his debt.

    I don’t think so.

  26. Occam's Blunt Razor

    Bilb @26 – that is what they agreed to under the Maastricht Treaty – didn’t happen and won’t. (and you guys reckon we can get globally effective climate change agreements in place! Need I say FFS?)

  27. Occam's Blunt Razor

    @25 Katz, I see the Greek situation as not dissimilar to the US and Irish situations – simply instead of doing the borrowing through private banks, the Greek population used government debt to fund their irrational excesses.

  28. akn

    What exactly has the Greek economy got happening other than tourism, olive products, sage fed lamb and heather honey? Not much so far as I can tell in which case lending to them appears to me to be pretty much at the risk of the lenders. Letting them get into the sort of debt they have accrued looks akin to giving a high limit credit card to a known problem gambler.

  29. BilB

    Sam,

    If your neighbour becomes a bankrupt he walks away from his debt, you and I get to pay all of his bills, and 2 years later he is free to start all over again.

    If he goes into administration his debt is restructured, he is forced to go to bugetting classes, and his expenditures are monitored for the next 50 years and he pays off that debt over the 50 years that he is being “observed”.

    You decide which course is better, from your point of view.

    What might have happened in the past is different to today because Greece is effectively now a sub State. Big difference.

  30. Sam

    Greece is effectively now a sub State.

    Well, this is indeed the question. Greece is still a sovereign state in its own right. It is not to Europe what Tasmania is to Australia, or Wyoming is the US, or what Manitoba is to Canada.

  31. John D

    The logical alternatives when the Eurozone was set up were to either to move to something like our federal form of government with the central (Eurozone) government responsible for major items like welfare, defense etc. and the central government to insist that the state governments had to show some responsibility. The alternative is to forget about it.
    If Greece had not joined the Eurozone a fall in the Drachma may have reduced the damage or at least alerted the Greeks that something was seriously wrong.

  32. akn

    Uh-huh. If you guys reckon that the Greek left, the Spanish, French and German left are going to agree with Germany and the Euro-economists acting as a mini-Euro IMF promoting fiscal ‘responsibility’ then I suggest that you are out of touch with conditions on the ground in Europe. This is especially the case when the pattern so far revealed after the GFC is nothing more than governments expecting the working classes to pay for the profligacy and irresponsibility of the banking classes and corporate upper management. This situation has a lot of potential except unless you are a fan of the economic status quo.

  33. Katz

    OCR

    @25 Katz, I see the Greek situation as not dissimilar to the US and Irish situations – simply instead of doing the borrowing through private banks, the Greek population used government debt to fund their irrational excesses.

    Different paths to the same destination.

    Both the US and Ireland have nationalised much of the private debt run up by speculators and by consumers who lived beyond their means.

    The US has the benefit of having its debt denominated in US$, meaning that their creditors take an automatic, non-negotiable haircut when the US$ depreciates against other currencies. A fall in the exchange value of the US$ stimulates domestic economic activity, owing to the nature of the $US. This activity generates tax revenue, enabling debt servicing.

    Both Ireland and Greece cannot influence the rise and fall of the euro. And a decline in the value of the euro has no direct effect on the size of any debt denominated in euros. However, a distinction can be made between Greece and Ireland. A fall in the exchange value of the euro hardly influences Greek economic activity and does not ease euro-denominated debt servicing. Ireland has a more viable export economy. A fall in the exchange value of the euro would probably stimulate Irish economic activity, thus generating tax revenue.

    However, it is notorious that Irish corporate taxes are very low. Thus, the export economy is not directly contributing much to Irish government revenues. The multiplier effect may do so however. This is mere speculation on my part.

  34. Link

    Even if Greeks could be coerced into accepting more pay cuts and state sell-offs, most are convinced, probably rightly, that more austerity will just damage the economy further. Remember, they have already been taking the medicine for the past year, since public workers took a 20% pay cut. It has not worked. Greece has missed the targets set in the current bailout due to a deep recession and the chronic revenue shortfall, and debt is still projected to hit 160% of GDP. Now they are being asked to take another dose, this time in the form of tax rises.

    Source here

    While conceding the need for the fresh bailout, Berlin is insisting that the banks and other private creditors holding Greek debt take losses as part of the rescue plan, which is expected to amount to €125bn (£110bn), or about €90bn if the Germans succeed in forcing losses on holders of Greek bonds.

    Although international stock markets enjoyed a calmer day on Thursday, Juncker believes that imposing losses on investors could trigger a European version of the Lehman Brothers bank collapse – a so-called “credit event”. Juncker said: “It’s a really ugly situation. The [German] idea is dangerous. It could provoke the gravest risk, that all three rating agencies declare a credit event and then there are big contagion risks for other countries.”

    Source “Hardline IMF’ (hardline huh, well surprise surprise)

    Seems the Germans want the banks to take some of the fallout but according to Jean Claude Juncker this would be ‘dangerous’. Hmm no doubt, set a dangerous precedent.

    Too big to fail is no longer a feasible excuse, and this kind of inflammatory all American language just perpetuates bullshit and nonsense.

    I have no doubt there are thousands of backgammon playing Greeks who have much better ideas as to how to run their country. Why on earth, how on earth, do we have a situation where the IMF (read the US) can dictate to one sovereign country what it should demand from another? It is ludicrous, wars have been fought (and won) over less.

  35. Nikita Messinia

    I’ve advocated almost from day one that Greece should take the “Argentinian option”. Greece has ZERO chance of paying off its current debt, and the only solution is more austerity……under that scenario you may as well default. I think recent default histories show that nations can recover with a bit of help from their “true” friends within a few years (as opposed to the IMF/EUs decades of pain solution). The problem for Greece is that its regional neighbours (FYROM, Albania, Bulgaria, Turkey) are not exactly great “mates” theirs. Unlike Argentina who could call on it’s “socialist utopian” brothers in latin America for help, Greece may have to enter into some kind of unholy alliance with Turkey (and its allies) in order to save its sovereignty? What Turkey cherishes the most from Greece is recognition of occupied northern Cyprus, and I believe would do almost ANYTHING to achieve that…..it’s about the card Greece has to play?
    Ps. I’m about the only Greek on the planet who’s willing to sellout occupied Cyprus!

  36. Russell

    What comments! So that’s what 30 years of neoliberalism has achieved, what a triumph for John Howard. All this tut-tutting about a little over-spending. Surely all Australians are feeling sympathetic for the ordinary little Greek, trying to stand up to those famous big bullies the IMF, ECB etc. I’m hoping the Greeks manage to wriggle out of the debt and start afresh … a little more realistically.

    It’s probably the absurdly low price of flying that has done the Greek tourism industry in. With a bit of luck the price of flying will go sky high and all those carbon criminals in the virtuous North will not be able to go gadding about South East Asia or South America – they’ll be taking the train for summer hols on the Aegean.

  37. Brian

    There was a handy summary on The World Today today.

    Highlights include Ralph Norris saying that the CBA’s access to funds would be only marginally affected, Nicholas Sarkozy saying that breaking up the Eurozone was not an option and Greenspan saying that “a default could put US banks under renewed pressure and possibly push America back into recession.”

  38. dave

    yup, it’s a mess. The stock market doesn’t like it and that could cause even more mess in a different arena as the civil unrest will probably get worse once the medicine is applied.

    I don’t think it’s any coincidence that the European countries with a relatively recent history of socialist governments are currently getting fiscal haircuts, however to be fair the laissez faire freewheeling Icelanders and Irish also got caught out when the balloon when pop.

    Meanwhile I’m gratified to read the Chinese have been busy pocketing the odd bribe or three…

  39. GregM

    Why on earth, how on earth, do we have a situation where the IMF (read the US) can dictate to one sovereign country what it should demand from another?

    I doubt that the IMF (read the US) are dictating anything at all to the Germans, whose experience of the catastrophic effects of inflation in the Weimar period is hardwired into their DNA. They expect fiscal responsibility of themselves and they expect it of others. They don’t need the IMF (read the US) to prompt them in any of this.

    It is ludicrous, wars have been fought (and won) over less.

    You seem to be suggesting that the mighty Greek army will be deployed against the IMF (read the US) and inflict a Gaugamela upon them, bringing down a mighty empire.

    In your dreams!

  40. Robert Bollard

    I agree Russell. Can’t believe the neo-liberal cliches, the simplistic analogies between countries and individual neighbours, and so on. It’s as if Catallaxy had invaded this site. Greece isn’t someone’s overspending neighbour. It’s a country with social divisions, with classes and, guess what, it won’t be the wealthy Greeks that are made to suffer and pay for the debt. “Bloated public sector” which pays wages higher than the private sector can afford. What a disgrace! Send in a taskforce from McDonalds and Walmart. Teach those lazy Greeks to stop drinking coffee in cafes and enjoying their lives. Give me a break.

  41. akn

    Robert @35 + 36: I don’t but that the Greek failure is solely down to the Greek public sector wage bill in the same way that I don’t buy that NSW’s economic state is down to the same factor. I’m looking for closer focused information than we are getting about Greece. I’m delighted that there is some resistance in Europe to the sort of class biased economics routinely promoted by the IMF in South and Latin America whereby the cost of disgraceful economic behavior by state technocrats, banks and the corporate sector has been to routinely shaft the general publics of those states by attacking state service provision (health, education, transport, social welfare, pensions of all sorts where they even existed).

    What’s more, before you paint me as some sort of wayward Trot, I don’t advocate or promote any sort of ‘glorious socialist revolution’ having long ago overcome any delusions about what Rudolf Bahro called ‘actually existing socialism’ in his (Marxist; 1977 ‘The Alternative’) critique of the USSR and East Germany. The potential exists in Europe for class alliance in promoting genuinely redistributive social democratic economics with a strong focus on the public sector as the provider of fundamental social services.

    Thanks to Link @38 for the link.

  42. Russell

    GregM: “They expect fiscal responsibility of themselves and they expect it of others”

    But didn’t German banks lend to the Greeks – year after year, decade after decade, when everyone knew (even I knew) that the Greeks (and Italians) were cooking the books and breaking all the rules?

    And isn’t there some scheme in the EU where poorer regions get funds to help develop their economies, from the richer countries? So who in Brussels or wherever was doling out this money to Greece and seeing it disappear into a corrupt regime? Were they being fiscally responsible? Or did this money create a market for German exports, so could be overlooked?

    Everyone was enjoying the party and now they can all pay.

  43. akn

    Nothing like an alternative view:

    A government of accountants. In fact, a government of accountants working for foreign banking interests and against anything that might remotely legitimize them as a Greek government: The new medium-term programme for the Greek economy is out, and it is a monster that combines new onerous indirect tax hikes, new direct taxes on the poor and the middle classes (those that cannot avoid taxation), possibly the largest and most rapid privatization programme in the history of the world, and gigantic public expenditures cuts.

    This is Socialism for the 21st Century – bankster collaborator style…

    @ http://greekleftreview.wordpress.com/

    Or another view from planet Zizek who’s managed a turn towards political economy instead of the sort of pallid cultural critique that has come to characterize the post-modern left:

    While according to the Guardian 400.000 workers were marching towards Hyde Park, Slavoj Zizek emphasized that social mobilization and the emergence of European solidarity among workers is the only way to break out of the vicious cycle that neoliberal technocrats and religious fundamentalists are driving the continent..

  44. John D

    The two speed economy in Australia at the moment is a good illustration of what happens when disparate economies are locked into a single currency zone. Most of the problems with the two speed economy would be reduced if each state had separate currencies and reserve banks.
    The GFC was partly caused by the Chinese fixing the exchange rate of their currency to the the $US. This and the WTO rules prevented the US doing anything much about its crippling trade imbalance. In addition, the large Chinese trade surplus meant that there was a build-up of $US savings looking for something to invest in. As a result…..
    All this suggests that the Eurozone was a major mistake, particularly for the more marginal economies. (It may have helped Germany by keeping the currency low even though Germany was enjoying trade surpluses.) The Eurozone should be broken up unless a way can be found to unite the economies, welfare services, wage rates etc. of all the countries involved. Nothing can overcome the impact of gross incompetence but a currency of your own does make life a bit easier.

  45. GregM

    But didn’t German banks lend to the Greeks – year after year, decade after decade, when everyone knew (even I knew) that the Greeks (and Italians) were cooking the books and breaking all the rules?

    Yes they did. And being Germans they expect the Greeks to pay for it. Which they will. Don’t expect the German government to come out in favour of the Greeks before a German pension fund. They’d have rocks in their heads if they did.

  46. Robert Merkel

    Robert, there’s plenty of blame to go around, from what I’ve read. Greek’s better-off individuals, and companies, don’t pay tax and get away with it, with impunity. There are any number of cozy private monopolies enforced with a Mediterranean version of the license raj. Corruption is apparently widespread. All of these things have enriched Greece’s wealthy at the cost – either direct or indirect – of the government running up huge debts.

    And, yes, there is such a thing as a bloated public sector, which is not the same thing as a large public sector. Scandinavia has a large public sector. Greece, from all reports, has a bloated one, that employs a huge number of people but doesn’t produce outputs commensurate with its size.

  47. Link

    Greg M I think these opening lines in the article I linked to:

    Germany was forced to agree to bail out Greece for the second time in a year under strong pressure from the International Monetary Fund following the resignation last month of its head, Dominique Strauss-Kahn, the Guardian has learned.

    Under its acting chief, the American John Lipsky, the IMF has taken a more hardline stance. The fund warned the Germans in recent weeks that it would withhold urgently needed funds and trigger a Greek sovereign default unless Berlin stopped delaying and pledged firmly that it would come to Greece’s rescue

    seem pretty damn forceful to me.

    No I’m not suggesting the Greek army take up arms, it was just an observation about the sorts of animosities that can and do start wars.

    For some weird reason I grew up with the naive and ill-informed impression that the IMF was some sort of quasi-benevolent organisation giving a helping hand to the world’s poor. No doubt my false impression has something to do with how the IMF represents itself. I’ve since found out however, that nothing could be further from the truth and loans from the IMF should be avoided like the plague.

    Australia’s foreign debt has gone from 9% of GDP in the sixties to 95% now, and sits at a rather uncomfortable $628 billion (or thereabouts).

    Debt is slavery. Greece already knows this and we will probably in our lifetimes’ learn it to

  48. GregM

    Greece isn’t someone’s overspending neighbour.

    Yes it is.

    It is Turkey’s overspending neighbour. And Bulgaria’s , And Albania’s. And Macedonia’s. And Italy’s. And it is the overspending neighbour of every other Eurozone country.

    As ever, Robert, I look forward to your comments to remind me what the words simplistic and delusional mean.

  49. akn

    I’d need to see some numbers before I accept that the Greek public sector is ‘bloated’. Here’s a Greek interpretation:

    This is accompanied by the refusal of people to pay for a debt that they did not create. “We do not owe – we shall not sell – we shall not pay” has been a very popular slogan in posters or stickers. Contrary to the constant ideological blackmail by the government and the mass media that “we all ate it together”, people have realized that the reasons for the Greek sovereign debt crisis are not public servants’ salaries or social expenditure but tax breaks for big business, overpriced public useless public works (such as the one for the 2004 Olympic Games), high military spending and last but not least the participation in the monetary and financial straitjacket of the Eurozone.

    @http://greekleftreview.wordpress.com/2011/06/09/days-of-unrest-and-hope/#more-1049

    There are parallels in Australia: $45M for a ludicrous World Cup bid (one vote) and a military establishment that is so incompetent that not one submarine is currently service capable. AZnd the cost of Afghanistan? For effing what? At the same time Gillard is shafting people with disabilities saying that they’re bludgers who won’t work when anyone with experience of the disability/employment sector knows that Oz employers are notoriously bigoted when it comes to employing PWD’s.

    etc
    There are parallels in Australia: $45M for a ludicrous World Cup bid and

  50. GregM

    Australia’s foreign debt has gone from 9% of GDP in the sixties to 95% now, and sits at a rather uncomfortable $628 billion (or thereabouts).

    Link, I know from reading your comments that you sincerely want to contribute constructively to this discussion.

    The problem I have, though,is that you don’t know what you are talking about.

    First, Australia’s GDP is about $1.3 trillion, twice as much as the $650 billion that you think it is.

    Second, the 9% debt you refer to that Australia had in the 1960s was government (fiscal) debt not current account (public and private) debt.

    Third, the current government (fiscal) debt is 22 % of GDP, not 95% of GDP and its foreign borrowings for this are about 6% of GDP.

    Fourth, Australia’s gross current account debt (what we have borrowed from people in other countries) is about 100% of our GDP but our net foreign debt (what we have borrowed from people in other countries less what we have lent to them) is about 50% of our GDP.

    Fifth, our foreign debt is split roughly 50/50 between capital borrowing (for goods from which we will earn future income such as that humungous truck that will remove iron ore from an Australian port to some foreign place where it will be sold for profit and add to our nation’s wealth) and consumer goods (such as that 64″ flat screen television that adorns your living room, or that glossy expensive foreign two door convertible you own) for which you have got the loan to buy on the basis of some bank’s expectation that you’ll continue to hold down your job and be bankrolled in doing so on all that capital investment that has been borrowed to fund it.

    I’d give you all the links for this but that would choke up LP’s spaminator, but you can look it up yourself on google.

  51. Russell

    Here’s another interesting website:

    http://www.internationalviewpoint.org/spip.php?article2007

    which reinforces my hunch that one of the reasons Greece was lent the money (and Greek officials bribed) was so that they could help maintain the export industries – particularly the arms industry – of those richer countries. It’s quite reasonable that the submarines and frigates and helicopters etc be returned and those debts cancelled. For a start.

  52. GregM

    There are parallels in Australia: $45M for a ludicrous World Cup bid (one vote)

    This is a parallel for Greece’s profiligacy?

    $45 million out of an economy of $1.3 trillion? That is an infinitesmally small amount in a rich, productive and efficient ecomomy, which can well afford to indulge itself in its passions once in a while, and yet you compare it with the rort that the Greek economy is.

    How ignorant. How sad. How unsurprising.

  53. GregM

    It’s quite reasonable that the submarines and frigates and helicopters etc be returned and those debts cancelled. For a start.

    Well that’s not going to happen.

    But I’m sure that the Greeks can sell them on the second hand market. I expect that the Turks would be willing buyers at knockdown prices. Their economy, built on hard work, is in pretty good shape so I expect that they’d be willing to take that problem off their Greek neighbours in a spirit of neighbourly affection.

  54. dave

    akn I wouldn’t want to paint you as some sort of wayward Trot since I tend to think that one of the truths of capitalism is that financial loss is always carried by many and profits are always retained by the few.

    It looks like the beneficiaries of a half decent and humane social economic policy will learn their place in the “real world”. Maybe the IOC could hold a few more events there just to help get some value for the bucks spent on that little circus.

  55. akn

    GregM: if I thought you were open to persuasion I’d put in the effort to catalog the immense and mostly pointless subsidies to industry in Australia starting with R+D that rarely shows results through to money for training employees towards which industry contributes zero. There is consistent reportage of government cross subsidies that provide little benefit to Australian citizens but significant profit to shareholders; see the $100M given to Ford Australia that went to its $24.9 million after-tax profit for 2010 (http://www.smh.com.au/business/subsidies-drive-ford-profit-20110520-1ewtq.html). But your mind is as open as a rusted shut dingo trap mate so I won’t bother.

  56. akn

    Thanks for that link Russell @55. Excellent. Toussaint makes the point that Greek citizens are pissed off because of:

    Reduction of public sector wages by 20 to 30 %. Cuts in nominal wages that could reach 20%, 13th and 14th month salaries replaced by an annual lump sum, the amount of which varies according to wages. A freeze on wages over the next 3 years. In the public sector, 4 out of 5 workers who retire will not be replaced. In the private sector, massive wage cuts up to 25%.

    Unemployment benefits have been cut, and a poverty support scheme implemented in 2009 has been suspended. Drastic cuts in benefits for large families.

    Plans to end collective bargaining and impose individualized contracts instead. The existing practice of extended very low paid or even unpaid internships has been legalized. Resorting to temporary workers is now permitted in the public sector.

    Amongst other things.

  57. GregM

    It looks like the beneficiaries of a half decent and humane social economic policy will learn their place in the “real world”.

    This is your view of the Greeks’ reckless irresponsibility apparently.

    Funding their profligate ways on the backs of German workers who quietly and diligently went to work day after day and week after week, year after year, committiing funds towards their retirement.

    Doing so under what is a much more than half decent and humane social economic policy which the West German and then the united German Governments gave their people following World War 2.

    And they should let that slip away to Greek thievery? I don’t think so.

    And nor do they.

    Let the Greeks learn their place in the world, and earn it. The world doesn’t owe them a living any more than it does to you Russell, nor to Anthony Nolan nor to Robert Bollard, notwithstanding that the principal premise of each of you is that it does.

  58. GregM

    GregM: if I thought you were open to persuasion I’d put in the effort to catalog the immense and mostly pointless subsidies to industry in Australia starting with R+D that rarely shows results through to money for training employees towards which industry contributes zero.

    Anthony, I am open to persuasion, but not from ignorant people.

    I am quite aware of the government mandated subsidies for R&D in Australia and the money spent on training employees towards which industry contributes zero (both legacies of the Hawke /Kelty Accord) but all those things are a minute part of the Australian economy.

    But you compare this with what the Greeks have done to themselves.

    As I observed of you before: How ignorant. How sad. How unsurprising.

  59. Labor Outsider

    There is plenty of blame to go around here.

    Starting with Greece itself, the country was running a current account deficit of more than 10% of GDP before the financial crisis and it now turns out that the then government lied about the state of its public finances to smooth entry into EMU. The public sector is bloated and wages growth in that sector was much too high. The country faces an enormous competiveness gap vis a vis most of its fellow euro area members, which is reflected in the significant real exchange rate appreciation that occurred. There is no way around some austerity. Private investors (domestic and foreign) are simply not prepared to finance the Greek public sector or the Greek banking sector any longer.

    But the mismanagement of the Greek economy is only the start of the story. While countries like Greece, Spain, Portugal and Ireland were racking up enormous current account deficits, the counterpart was very large surpluses in the core European countries, particularly Germany. Without financial flows from Germany (and a lesser extent France) the imbalances that built up in the periphery could not have occurred. Germany itself more or less supressed wage growth in the traded good sector to secure a competitive advantage. And another key reason for the country’s surpluses was the extremely low rate of domestic investment opportunities. Simply put, German households and firms participated in and encouraged the asset price party going on elswhere in the zone through the excess savings that were distributed via the banking sector.

    Then there are the structural problems within the zone. First, in the run up to the crisis monetary policy was too lax for the conditions prevailing in the periphery and too tight in Germany. The common monetary policy added to imbalances. Second, financial integration proceeded far more rapidly than regulatory integration in the financial sector, which meant that no authority was responsible for ensuring that cross-border flows were consistent with financial stability. The European banking sector is a complete mess. The sector is generally much more highly leveraged than banks elsewhere in the developed and emerging world (including the US) and there has been inadequate recapitalisation in the wake of the financial crisis. The stress tests published last year were a complete joke because they exclused the very event that Europe is now being tested by. Third, fiscal oversight was weak, despite the stability and growth pact. People forget that France and Germany themselves undermined the pact early the previous decade by breaching the deficit limit and refusing to pay any of the penalties that were originally envisaged.

    In terms of where to go from here, things are complicated. Although some private sector involvement is necessary, the manner in which it is agreed is critical. Private sector bondholders aren’t only up to their eyeballs in Greek public and financial sector debt but are also heavily exposed to Ireland, Portugal and Spain. Italy and Belgium also have public debt ratios exceeding 100% of GDP. A disorderly default in Greece would cause chaos in the European banking sector, in a similar way to the collapse of Lehman Brothers in 2008. So, be careful what you wish for. Indeed, that is the primary reason (other than protecting its own balance sheet) why the ECB is so opposed to private sector involvement at the current time.

    The truth is that although the private sector needs to be involved in lightening Greece’s debt burden, so does the European public sector and thus of course European tax payers. The argument for that is fairly simple. Periphery countries contributed to their current problems but institutional flaws and decisions made at the European level also contributed to the imbalances. All European countries have to share the burden for the mess they created. And besides, if the financial sector falls over, it will be taxpayers that end up carrying the can anyway (whether that be the cost of recapitalisation, or the economic costs of a cycle of debt deflation).

  60. Sam Bauers

    @Sam

    Greece is still a sovereign state in its own right. It is not to Europe what Tasmania is to Australia…

    Monetarily it is. It abandoned it’s sovereign currency. Now it can do about as much with the Euro as Tasmania can do with the Australian Dollar.

  61. GregM

    Reduction of public sector wages by 20 to 30 %. Cuts in nominal wages that could reach 20%, 13th and 14th month salaries replaced by an annual lump sum, the amount of which varies according to wages. A freeze on wages over the next 3 years. In the public sector, 4 out of 5 workers who retire will not be replaced. In the private sector, massive wage cuts up to 25%.

    Unemployment benefits have been cut, and a poverty support scheme implemented in 2009 has been suspended. Drastic cuts in benefits for large families..Plans to end collective bargaining and impose individualized contracts instead. The existing practice of extended very low paid or even unpaid internships has been legalized. Resorting to temporary workers is now permitted in the public sector

    As Anthony has said, Ruseell, excellent news indeed. The scam artists have realised that they can’t continue scamming and will have to start paying back the money they took from the funds of elderly Germans whose funds contributed to their parasitical behaviour

    I am sure we all agree on that and that when Greece’s economy falls over, as it will, we should exact a levy on each of them who choose to leave their benighted country to recover whatever debts they owe to us.

  62. Link

    Greg M, No I don’t propose in any way that I have the slightest clue about international monetary policy. But I do know enough about the IMF to know it is a completely venal entity whose only consideration is to make more money regardless of the suffering to individuals or entire nations it inflicts. They have wrought despair and increased poverty wherever they have lent and re-lent money. Why more countries don’t just default and tell them to take a flying leap I’ll never know.

    I got my figure for Australia’s foreign debt from here and was careful to quote the net figure.

    I find economic discussions usually deteriorate to the point of view of seeing what are very human problems from an economic view point alone. Such discussions are both cavalier and callous about the misery such a supposed pragmatic rationalism entails.

    I am not contributing to this conversation because I believe I am some sort of expert. Heaven forbid. You could also cut the patronising tone. Dude.

    Gross foreign debt at June 2008 was $1 072 billion. After deducting Australia’s reserve assets and lending abroad of $472 billion, there was a net foreign debt of $600 billion. Foreign debt increased steadily from 1981, after being fairly low and stable through the late 1970s and early 1980s..

  63. Labor Outsider

    Link – there are good reasons why countries don’t always default. First, the IMF programs actually slow the pace of adjustment necessary in the country. Countries that default are quickly cut off from capital markets for a period of time. That means that budget and balance of payment deficits also have to be closed almost immediately. So, the austerity comes regardless. Second, it costs more to access capital markets when the country needs or wants to borrow in the future. Third, if Greece defaulted tomorrow, its banking sector would collapse as liquidity is coming entirely from the ECB. And the Greek government would not have the means to rescue and recapitalise it.

  64. Labor Outsider

    Link, where you went wrong on the net foreign liability numbers is putting it as a share of GDP. $628 billion is nowhere near 95% of GDP, as nominal GDP in Australia (the appropriate scaling factor) is well over $1 trillion.

  65. Peter Whiteford

    My view is that leaving the Euro is more dangerous for Greece (or any other country that wants to leave the Euro) than it is for the Euro itself. In a sense, the Euro is “Hotel California”

    No one can leave the Euro overnight. To leave the Euro you actually have to have a supply of coins and banknotes in your new currency. You also have to have your ATMS ready to dispense your new currency, the parking meters adjusted, your cash registers changed, and anything that either requires you to put in or take out Euros ready to do this in new drachma (or new peseta/escudo/lira etc.)

    I think it took about 2-3 years to introduce the Euro as a “physical” process and it probably takes about the same to reverse the process.

    So when you announce that you are leaving the Euro, you are announcing that you are planning to have a very very large devaluation about 2-3 years from now. So you are telling anyone who has invested money in your country that they are going to lose a substantial part of it, and you are telling your citizens in advance that they are going to lose a large part of their wealth.

    You could possibly plan for it in secret, but the idea that all the people involved in printing and coining the new currency could keep the secret for 2 years strikes me as implausible.

    So you have capital flight, no one lends you any money or invests in your economy, and you probably have mass emigration and the collapse of the banking system. Along the way, the internal politics turns very nasty indeed.

    The only country that can leave the Euro with any credibility is Germany, but that would then probably lead to a collapse of the Euro for the remaining members (and still take the same amount of time).

    I think the European banks have to cough up for their bad decisions.

  66. tssk

    Part of the problem that Greece has is the rich deciding not to pay tax. For instance check this out at http://boingboing.net/2010/05/04/satellite-photos-cat.html

    As the nation of Greece teeters on the edge of bankruptcy, its tax authorities are taking aim at Greece’s notorious tax-evading rich elite. Using satellite photos, the tax authority examined the claim of the residents of Athens’s wealthy suburbs and discovered that, rather than the 324 swimming pools claimed by the locals, there were 16,974 of them.

    The cheating is often quite bold. When tax authorities recently surveyed the returns of 150 doctors with offices in the trendy Athens neighborhood of Kolonaki, where Prada and Chanel stores can be found, more than half had claimed an income of less than $40,000. Thirty-four of them claimed less than $13,300, a figure that exempted them from paying any taxes at all.

    As GregM was saying, it’s fantatastic that the real parasites though are going to feel the pain. It’s about time the unemployed and those in the public sector pay back money to deal with the current financial crisis. I have a friend who is convinced that there is a pattern of such events, in the UK, the US and to a lessor extent Greece to get rid of unemployment benefits as well as bringing down public sector workers in order to create a cheaper workforce for the private sector. Piffle to that sort of conspiracy theory. If only people would work hard, save hard and do the right thing we would all be fine!

    If I was a German though I’d be outraged at the Greek Pension system. Not only do the Greeks get better weather but according to http://www.businessinsider.com/greece-germany-pensions-2010-4#years-of-work-to-earn-a-full-pension-greece-35-germany-45-1

    Years of work to earn a full pension; Greece: 35 Germany: 45
    Proportion of wages as pension; Greece: 80% Germany: 46%

  67. Labor Outsider

    Peter – that is right about the difficulty of leaving a currency zone.

    The challenge is to get the banks to cough up without causing a financial collapse. European banks don’t hold only Greek debt, but that of many other countries as well. Most European countries are heavily dependent on private banks continuing to purchase new issuance. Moreover, banks continuing to do business with one another is heavily dependent on them having trust in each other’s balance sheets. A disorderly credit event would: a) encourage private investors to dump the debt of other countries that were also vulnerable to default; b) make it difficult for many European countries to roll over existing debt and find buyers for new issuance; c) massively increase counterparty risk in the European banking sector; and d) encourage distressed asset sales as banks are forced to deleverage. The dire implications for the European economy are fairly obvious.

  68. Labor Outsider

    To put things another way. There is a tendency in banking and other financial crises to view them as morality plays of some kind, where the profligate (whether that be the Greeks themselves, or the banks that lend them money) have to pay for their sins. And while that is understandable, the interconnectedness of financial instutitions and their critical role as intermediaries in the economy makes that a very dangerous path to go down. This is a systemic problem and has to be addressed as one.

  69. Peter Whiteford

    LO

    I totally agree. As you have pointed out this is a European-wide systemic “crisis”, and it has to be resolved as such.

  70. GregM

    No one can leave the Euro overnight. To leave the Euro you actually have to have a supply of coins and banknotes in your new currency. You also have to have your ATMS ready to dispense your new currency, the parking meters adjusted, your cash registers changed, and anything that either requires you to put in or take out Euros ready to do this in new drachma (or new peseta/escudo/lira etc.)

    I think it took about 2-3 years to introduce the Euro as a “physical” process and it probably takes about the same to reverse the process.

    So when you announce that you are leaving the Euro, you are announcing that you are planning to have a very very large devaluation about 2-3 years from now.

    It would probably take longer if the Greeks were doing it. Even then they’d stuff it up.

    However if the Germans were doing it they’d probably take only a few months. No doubt there is a factory somewhere on the outskirts of Frankfurt already churning out Greece’s new currency so that they can dump them out of the Eurozone as quickly as possible.

  71. Katz

    Sam Bauers @64

    Monetarily it is. It abandoned it’s sovereign currency. Now it can do about as much with the Euro as Tasmania can do with the Australian Dollar.

    Not quite. As a sovereign nation, Greece is perfectly entitled to reinstitute the drachma.

    Tasmania, on the other hand, would have to secede from Australia before it could institute its own currency. Meantime, the Commonwealth Government would be perfectly within its rights to put down any tax revolt that might arise in Tasmania.

    As has already been mentioned, however, the financial consequences of Greece dumping the euro would be dire. Dumping the euro is the nuclear option.

  72. sg

    I have often seen phrases like “the Germans don’t want private sector creditors to suffer” in this situation, with the implication that they’re forcing the Greek government and population to take more of the debt than they should. I guess this is because some of those “private sector creditors” are big European banks who are in a lot of trouble if they are held responsible for their irresponsible lending.

    Which is cool, since as LO observes these systems are interconnected and important, and we shouldn’t see these issues entirely as a morality play.

    But if that’s so I wonder why all the morality-play discussion we see going on here (“what would you do if your neighbour was bankrupt” etc.) completely ignores these private sector creditors? If you don’t want to discuss the issue dispassionately in terms only of economic consequences (as LO is trying to do) then you just end up broadcasting your own prejudices. And it seems that what is being said here is that the Greeks are a bunch of lazy irresponsible and stupid bludgers, and no one else did anything wrong.

    As LO observed above, the government had been lying about the state of its finances. How is some 14k a year public sector worker responsible for that? If you follow the stench of institutional corruption there’s always a big private company somewhere at the end of it. But somehow we’ve all been conned into thinking it’s the fault of Con the grocer at the end of the street…

  73. adrian

    Labor Outsider and sg are right on this one.
    And lazy racial stereotypes are hardly indicative of a perceptive analysis.

  74. Chris

    tssk @ 70:

    Part of the problem that Greece has is the rich deciding not to pay tax. For instance check this out at http://boingboing.net/2010/05/04/satellite-photos-cat.html

    Not just the rich, but according to a BBC radio documentary a few months ago I heard, avoiding tax is pretty much the national past time in Greece. To the point where you have a a culture of paying as little as you can get away with (legal or not) whether you’re a high or low income earner. Its a culture that will be really hard to change with a lot of pain involved when people get forced to pay what they always should have been paying (but see it in practice as as a tax increase)

  75. Katz

    But somehow we’ve all been conned into thinking it’s the fault of Con the grocer at the end of the street…

    “All”?

    It is appropriate that hyperbole is a Greek word.

  76. akn

    Yes, well, there’s technocratic economics that has all of the credibility of Barry Brooks trying to convince the world that nuclear power is a viable and safe option and then there is the sort of political economy that informs this ‘Open Letter to George’ by Greek economist Yanis Varoufakis (@ http://greekleftreview.wordpress.com/2011/06/06/open-letter-to-the-greek-prime-minister/#more-1034).

    Apart from being ironic and funny his open letter it also proposes a genuinely left alternative to the current situation that insists that there is a general crisis within the Euro-zone of which there are three parts:

    (A) The banking crisis that is raging within the eurozone from France to Greece and from Germany to Spain; (B) The sovereign debt crisis that is dragging the periphery down (and along with it the ECB and the surplus regions of the eurozone), and (C) The crisis of under-investment that only a pan-European investment-led recovery program can deal with, thus putting the lasts nail in the Crisis’ coffin.

    Titled ‘A Modest Proposal for Overcoming the Eurocrisis’ it has been adopted by European Trades Union Council, at the behest of its German and Austrian chapters and can be read @ http://www.levyinstitute.org/publications/?docid=1380

    He is aware, as are all other commentators on Greek Left Review, that an economic crisis is above all a political crisis which is something that appears to me to have escaped a lot of correspondents here on LP. The other side of the economic crisis is the vigorous engagement of Greek citizens with open democracy which, of course, is only ever represented by our mass media as some form of Greek unruliness.

  77. Bill Posters

    I thought this was supposed to be a left-wing blog?

    Anyway, history shows there are no real long-term consequences when a sovereign nation defaults on its debt. (For the country, that is – the lenders might beg to differ.)

    Interest rates rise in the short term but within a decade everyone is lining up to lend again.

  78. GregM

    And lazy racial stereotypes are hardly indicative of a perceptive analysis.

    Adrian the issue with Greece is not race but culture, the way a society functions and the underlying values which drive that. Though I’d hardly expect you to be able to understand that.

    Greece is facing what Australia, and more so New Zealand faced in the 1970s and 80s with stagnant economies, high inflation, loss of markets and moribund social, industrial, economic and political paradigms.

    You may not recall those times when in Australia tax evasion was rife and protected by the notorious Garfield Barwick on the High Court. It took the Costigan Royal Commission, one of the most ill-conceived and useful Royal Commissions ever called, to expose the extent of this and then some significant, though I suspect reluctant, political courage on the part of Malcolm Fraser’s Treasurer, John Howard, to bring an end to it.

    http://www.smh.com.au/national/grime-fighters-taxing-war-on-big-shots-20090414-a69t.html

    Then it took the election of the Hawke government in 1983 to bring about the host of economic, social and industrial reforms that meant that when the Asian economic crisis struck in 1998, and later the GFC, Australia was well placed to ride them out virtually unscathed.

    Greece is not so lucky. By joining first the European Union and later the Eurozone it has had a free ride for decades and has done nothing to reform its economy but instead has borrowed money profligately to maintain their standard of living.

    Now that has come to an end and the Greeks will have to pay a terrible price for their profligacy. Their lenders will have to take a haircut but you can be sure that no-one will be lending any more money to them after this doomed to fail bailout until they have made the necessary reforms.

  79. GregM

    Anyway, history shows there are no real long-term consequences when a sovereign nation defaults on its debt. (For the country, that is – the lenders might beg to differ.)

    What evidence do you have for this?

    Not that I think that debt default should not be an option, especially where the IMF/ ECB alternative is worse.

  80. The Lorax

    There is no solution until Greece defaults and leaves the Euro, anything else is just kicking the can down the road. Of course that’s what they’ll do — anything else would be ‘lunacy’ — so Europe will get a lost decade to match Japan’s and America’s.

    John D @ 48: I wish leaving the Australian Dollar was an option for NSW and Victoria. Seriously, I think WA and NT should have their own currency.

  81. GregM

    I got my figure for Australia’s foreign debt from here and was careful to quote the net figure.

    Link I went to your link but it went nowhere. Would you please repost it so I can have a look at it?

  82. Arjay

    Greece would be much better off dumping the Euro and starting up their own Govt Banks.Greece like all of the West have their increases in GDP+inflation created as debt by the central banks.The IMF,Bank of International Settlements etc are nothing but parasites who assume the increases inour porductivity via creating money in their computers to equal it.

    China has offered to bail out Greece.China supplies 80% of its’ new money from Govt Banks.This is one of the main reasons why China has such good growth.It can provide infrastructure debt free while the West languishes in more debt.

  83. akn

    …the issue with Greece is not race but culture, the way a society functions and the underlying values which drive that.

    This is not a tossaway line. Please, extrapolate and amplify how the culture of Greece, modern Greece that is, underpins the current economic and political crisis in Greece. Avoid lazy racial stereotypes where possible in your analysis.

  84. GregM

    This is not a tossaway line. Please, extrapolate and amplify how the culture of Greece, modern Greece that is, underpins the current economic and political crisis in Greece. Avoid lazy racial stereotypes where possible in your analysis.

    I have already done that. In detail. In the very comment from which you have extracted your question.

    If you do not have the intelligence, or comprehension, to understand that then that is your problem.

    And don’t patronise me with your turd-comment about lazy racial stereotypes you self indulgent bigoted little [redacted].

  85. akn

    Ah, well Robert, I was hoping for something a little more comprehensive on the nature of ‘culture’ than mere economic behavior and something that might reflect a little more deeply on ‘Greekness’ than the tendency of people in a neo-liberal economic system to tax minimization or avoidance. For example, a mate of mine reckons that one of the significant factors in Greek political and cultural life is the way that the Greek Orthodox Church emphasizes the importance of priests embedded within a local community rather than doctrinal control from above as with the Church of Rome. This, he claims, underpins and legitimizes Greek tendencies to autarky.

    But that was just by way of example of possible discussion on Greek culture.

    I see that GregM has forgotten to wash his hands before sitting down at the keyboard.

  86. GregM

    Anthony your reply to Robert exposes your bigotry.

    In tthis discussion I have addressed culture for what it is; the way a society functions and the underlying values which drive that, but you make some arcane and bigoted reference to Greek priests, with a snide swipe at the catholic church thrown in, just, no doubt, to make you feel like a cutting edge lefty.

    It just shows what an ignorant bigot you are.

    So no, I wouldn’t soil my hands with you.

  87. Russell

    Robert – what can we call the economics that created the current worldwide mess? Maybe just ‘contemporary capitalism’?

    Earlier I wrote that “Everyone was enjoying the party and now they can all pay.” LO expressed that a little better “Periphery countries contributed to their current problems but institutional flaws and decisions made at the European level also contributed to the imbalances. All European countries have to share the burden for the mess they created.”

    I think it goes wider than Europe – the mess certainly includes the U.S. – and the solution hasn’t yet been found. But it can’t be the economics of the last 30 years which provided obscene fortunes for those involved with speculating and moving money around in ways that hardly anyone understood.

    Greeks are responsible for so much corruption and waste in their own system. They are paying for it, but they’re not solely responsible for the game that was being played. Power isn’t distributed evenly in a society, and probably most of the decisions were made and most of the benefits taken by that international financial class who still have all the commissions and bonuses.

    The Irish and Icelanders now freely admit that their booming economies were a form of madness, and see a simpler, cheaper life as reality reasserting itself. What the Greeks need is a situation where they can reform their system, agree that their recent past was an unsustainable fiction, and help to try and maintain some sort of economy while they pay off some of the debt. It’s no use demanding measures that ordinary people will see as beggaring their country for the next 5 generations.

  88. akn

    Not at all Robert. Please excuse the length of the following block quote but I think it could shed some real light on this situation in Europe in general and, incidentally but in the light of declarations in NSW and Tasmania that public sector wage rises are to be pegged at 2.5%, on our circumstances in Australia as well.

    Europe stands at a crossroads. Successive waves of fiscal austerity have been imposed by European and domestic elites on the people of Greece, Ireland and Portugal, with Spain, Britain and Italy following suit. These programmes, almost without precedent in their severity, were barely debated either against alternative policy options or accounts of the nature of the crisis, both of which were certainly available. Governments, bureaucrats and pundits of dubious expertise simply declare that ‘there is no alternative’, and instruct the public to take their medicine……

    Neoliberalism – audaciously given the historic humiliation suffered by its market fundamentalist dogma in the autumn of 2008 – is on the comeback trail, with a renewed and reinvigorated assault on the fundamental democratic principle of economic governance in pursuit of the common good. The public itself – with its ‘generous’ pensions, social safety nets and other unaffordable luxuries – is now portrayed as a burden on the economy. A choice must be made, we are now effectively told, between sharing our common wealth to support each other in living dignified lives as human beings, or maintaining a sound fiscal policy. It’s one or the other, and that being the case, good sense dictates that the latter must win out.

    Meanwhile, the economic and policy elites who caused the crisis appear to be suffering no material penalty. “Socialism for the rich and capitalism for the poor” hardly begins to describe the absurdity, the irony, and the sheer, rank injustice of the situation in which we now find ourselves.

    More commonsense available @http://www.newleftproject.org/index.php/mayday

    The authors declare themselves socialists. I am unaware of exactly what they intend by ‘socialism’ but think that their analysis is better by far than anything served up by social democratic parties in crisis around the Western world.

  89. Brian

    akn, the link is here.

    Thanks.

  90. GregM

    The authors declare themselves socialists. I am unaware of exactly what they intend by ‘socialism’ but think that their analysis is better by far than anything served up by social democratic parties in crisis around the Western world.

    Which only demonstrates what a superficial and ignorant understanding you have of what is happening in Europe.

  91. Katz

    In any discussion of culture in relation to this crisis, the problematic culture here is the culture of investment banking.

    Europe’s leading banks were utterly blind to the inability of the Greek government to generate revenue sufficient to service their loans.

    Germany’s pensioners may take out their rage on the “lazy Greeks”. That spleen may bolster their own self esteem and appear to justify their retrogressive cultural stereotypes. But it does them no good at all.

    Better to demand of their banks and pension schemes some explanation of an extended sequence of financial lunacy and/or systemic corruption involving kickbacks to individual bank officers. For corruption is the only logical explanation. All other explanations must presume deep-seated cretinism.

  92. Mercurius

    Console thyself, akn; GregM is given to bouts of a rare keyboard-oriented form of Tourette’s that causes him to randomly insert the word ‘bigot’ into many of his missives.

    Let me draw you a picture — here’s a Wordle of comments @89, 92 and 96. Makes for lovely reading.

    I was more worried by this @81…

    Anyway, history shows there are no real long-term consequences when a sovereign nation defaults on its debt…Interest rates rise in the short term but within a decade everyone is lining up to lend again.

    Well, yes, but…that ‘within a decade’ hides a multitude of sins…for example ‘within a decade’ is plenty of time to have hyperinflation, a global depression, or regional/global conflagration…

  93. Russell

    Katz – agree re the culture of investment banking, but it did go broader than that. I think the culture of just about every country has everything in it, but various forces will accentuate different aspects of it. The forces of contemporary capitalism (and is not advertising the biggest industry in the world?) have emphasized reckless consumption.

    We in Australia haven’t been immune – our reaction can be seen in bloated waistlines and bloated houses etc. It’s what happens when you put your society in the hands of the ‘free market’ instead of guiding it according to timeless values. So I don’t think we can lay the blame on “Greek culture” – the Greeks, and the rest of us, have to just rediscover the importance of thinking about the long-term consequences of what we’re doing and making sure that’s compatible with our values – particularly social and environmental sustainability.

  94. Katz

    Katz – agree re the culture of investment banking, but it did go broader than that.

    Russell, I agree that consumerism and self-indulgence are rife. Ever since we climbed down from the trees, we humans have sought to live beyond our means. Nothing new here.

    Historically, however, bankers have been notoriously stingy about extending credit and usurious in their terms of credit. After the corporatisation and globalisation of finance in the 1980s these bankers’ reflexes were reversed. Structurally, I suppose, these changes can be ascribed to the monetisation and securitisation of assets. For a while it seemed that there was no limit to the extension of credit to borrowers. More credit would come along to continue to accelerate the rise in the price of assets. Interest rates were low. Abundance appeared to be limitless.

    Indeed, it is the myth of the limitlessness of abundance which is the central fallacy of neo-liberalism. Contrary to the addled dreams of neo-liberals, the world has limits. The world is a closed system.

    There are now fewer assets that can be monetised and securitised. Credit dries up and bubbles burst. The weakest fall first, dragging many with them.

  95. Russell

    “The weakest fall first, dragging many with them”

    Now this is the sort of cheery wisdom we need on our daily desk calendars.

    Just listening to the arts program on RN and a review of Faustus where the King Midas story was also mentioned. Greek wisdom goes that far back at least, but maybe wasn’t remembered. When the bubble bursts we remember that ‘there’s no such thing as a free lunch’.

  96. akn

    Thanks for the Wordle Mercurius. I might frame it.

    Katz:

    …it is the myth of the limitlessness of abundance which is the central fallacy of neo-liberalism. Contrary to the addled dreams of neo-liberals, the world has limits. The world is a closed system.

    Locke was overcome by the apparent superabundance of North America and now we are all paying the priced.

  97. GregM

    Thanks too Mercurius for your comment @98. It is gold even if it is my expense.

    Then though there is your comment about @81. I had wanted to comment on that but you have said all I would have want to say, beginning with your words “Well, yes, but…”

  98. Mercurius

    ‘within a decade’ is plenty of time to have hyperinflation, a global depression, or regional/global conflagration…

    I forgot to add, “…or all three”.

    And I’m someone who’s relatively sanguine about sovereign debt, even when it reaches absurd levels. Despite the fact that sovereigns are special cases when it comes to debt, sometimes the cost of default can exceed the cost of paying it back; especially if you can wangle some cents-in-the-dollar partial forgiveness…creditors do take haircuts sometimes, the smart ones price it in to their rates…

  99. Peter Whiteford

    Bill posters at 81

    All previous defaults involved countries with their own currency. When you have your own currency, and it is not floating, you can devalue overnight. Argentina has done it a number of times, and it is not fatal – but it does have very serious long term consequences for your prosperity.

    Greece and Irealand and Portugal cannot do this – because they do not have their own currency and they cannot devalue the Euro within their own country.

    GregM at 74

    Germany may well have an exit plan for Greece, but it can’t work at a physical base in Germany. The ATMs in Greece have to be able to dispense the new currency.

    This is a crisis for Europe, and it has to be resolved at the European level.

  100. Katz

    RM:

    There’s also the belief – and, thus far, an accurate one – that when the crap hit the fan, richer Eurozone governments would step in.

    The central perception — “too big to fail” — in operation.

    Yes indeed. These banking institutions aren’t products of the market, rather they are collapsed stellar giants that have sucked the market into their black holes.

  101. Arjay

    Katz.You are right about the black hole of the Central Banksters.They are actually destroying real productivity via their parasitic fractional reserve system of banking.By virtue of creating money from nothing to equal our productivity,they own our toil and then have to audacity to loan it back to us a debt.Their other ruse is the creation of inflation ie printing more money greater than GDP that devalues our currency.This is again created as debt.

    This is why the West languishes in debt while China with its many Govt Banks grows and prospers.They have far fewer parasites.

  102. GregM

    Germany may well have an exit plan for Greece, but it can’t work at a physical base in Germany. The ATMs in Greece have to be able to dispense the new currency.

    You underestimate the Gemans. These are the people who coordinate to hog beach chairs at every resort on the planet.

    Filling up Greek ATMs with drachmas will be a doodle for them.

  103. Russell

    “The European authorities have more than enough money to finance a recovery program in Greece, and to bail out their banks if they don’t want them to take the inevitable losses on their loans. There is no excuse for this never-ending punishment of the Greek people.”

    The Guardian (June 18) has spoken:

    http://www.commondreams.org/view/2011/06/18-6

  104. GregM

    There is no excuse for this never-ending punishment of the Greek people

    Hang on. Let’s not be hasty about this.

    Let’s ask the Turks what they think.

  105. Bill Posters

    Greece and Irealand and Portugal cannot do this – because they do not have their own currency and they cannot devalue the Euro within their own country.

    Nonetheless, they are going to have to default somehow, assuming the Germans won’t/can’t assume all the debt.

    Thus all the discussion of leaving the euro. Alternatively, they can default and not leave the euro, which would be interesting.

  106. tigtog

    Let’s ask the Turks what they think.

    Seeing as this thread is already bogged down in historical misrepresentation, exactly what do you think the Greeks have to defend with regard to their historical response to the Turkish (or at least Ottoman) occupation of their territories?

  107. Paul

    When it comes to Greece and Turkey, the Megali Idea was a monstrosity. It died a deserved death.

  108. skepticlawyer

    If Greece defaults and returns to the drachma, remember that its debts are still denominated in Euro (so remain large). In the long term, this option would be good for Greece (and probably for Europe; the region lacked the market discipline for monetary union in any case), but in the short term Greece would look rather like Argentina when it broke its currency link to the USD.

    The Euro was a very bad idea; this is proving it. Whether the currency survives in Northern Europe (plus, perhaps, Northern Italy) is anyone’s guess. The Brits, of course, with a large and (almost) bloated public sector, are now realising the extent to which they dodged a bullet.

  109. FMark

    skepticlawyer, isn’t that exactly what our Greek commentator upthread was arguing for?

  110. Savvas Tzionis

    #116

    NikitafromMessinia #39 also wished for Cyprus to AGAIN pay for Greece’s mistakes.

  111. Savvas Tzionis

    btw… I think any reference to Turkey vis a vis Greece is abhorrent.

    Turkey has been gifted everything since WW1.

    They have slaughtered untold Armenians, they still occupy the major part of Kurdistan, they occupy 40% of Cyprus, and have forced out every Greek in Istanbul since 1922 without redress! Yet the Turks of Western Thrace (in Greece) have lived an idyllic life.

  112. adrian

    While I understand that to most extreme conservatives a public sector that has more than a solitary employee qualifies as ‘bloated’; for the rest of us such a term, signifies nothing more than the fact that its user prefers to rely on tired, ideologically driven cliches, than actually think about the issues being discussed.

  113. David Irving (no relation)

    adrian, I think phrases like “bloated public service”, “queue-jumper” and, let’s face it squarely, “capitalist running-dog” trip so easily off the tongue because the speaker’s mouth (or writer’s hand) is directly connected to the lizard-brain without involving the frontal lobes.

  114. adrian

    DI, you’re right, but I haven’t heard about too many ‘capitalist running-dogs’ from the MSM or any pollies these days.

  115. akn

    I see the word ‘bloated’ is being used more and more in relation to public sector size and wage bills around the western world. The sheer hide of this ideological attack is gobsmacking given the earnings and bonuses delivered to corporate managers, bankers and so on. Indeed, such is their wealth and, dare I say bloated wallets, that orthodox Marxism developed a new critical approach some time ago which was to collapse the distinction between ruling classes and the managers of class interests (corporate managers) who had previously been seen as employees. Bloated public sector indeed; what is really meant by this is any state provision of services: hospitals, social welfare, public education – these things are the real targets here.

  116. Dr_Tad

    Wow, I think that was the most right-wing post I’ve ever read at Larvatus Prodeo. I presume from its hostility to the Greek people that Robert Merkel is Angela’s brother.

  117. akn

    Having read the vituperative and condescending crap in the Vanity Fair article cited in this post I found the following entry about the author (Michael Lewis) in Wiki-P:

    Lewis was born in New Orleans to corporate lawyer J. Thomas Lewis and community activist Diana Monroe Lewis. He attended the private, nondenominational, co-educational college preparatory Isidore Newman School in New Orleans. Later, he attended Princeton University where he received a BA in art history in 1982 and was a member of the Ivy Club.

    After graduating from Princeton, he went on to work with New York art dealer Daniel Wildenstein. Despite his degree in art history, he nonetheless wanted to break into Wall Street to make money. After leaving Princeton, he tried to find a finance job, only to be roundly rejected by every firm to which he applied. He then enrolled in the London School of Economics to pursue a Master’s degree in economics.

    While in England after graduating from the LSE, Lewis was invited to a banquet hosted by the Queen Mother at St. James’s Palace, where he was purposely seated by his cousin, Baroness Linda Monroe von Stauffenberg, one of the organizers of the banquet, next to the wife of the London Managing Partner of Salomon Brothers, in the hope that his intelligence might impress her enough for her to suggest to her husband that Lewis be given a job with Salomon Bros., which had previously turned him down, and as it turned out, this strategy worked, for Lewis was granted an interview and did land the job.

    I guess unsubstantiated claims and a frothing sense of ruling class self righteousness will do for Vanity Fair authors. Thank heavens, in a robust democracy, that we have the education and knowledge to be able to dismiss nitwits like Michael Lewis.

  118. Adam

    “Thank heavens, in a robust democracy, that we have the education and knowledge to be able to dismiss nitwits like Michael Lewis.”

    The education and knowledge to get as far as wikipedia and find material there for some ad hominem. A real testament to democracy, that.

  119. David Irving (no relation)

    adrian, “capitalist running-dogs” was never commonly used by the MSM, but many of us on the left said that as reflexively as any right-winger talking about queue-jumpers. Not recently, however, since we grew up.

  120. akn

    Well Adam, I had the wit to look his background up and sufficient education to contend that his pure blood American Ivy League ruling class background isn’t adequate qualification or substantiation of the unsupported, unreferenced claims he made in his article. Vanity Fair would have to be the Pravda of the international bourgeoisie.

  121. Adam

    I’m familiar enough with your sort of wit and education, akn. Let’s see some support and substantiation for your claims about the Vanity Fair piece, shall we? Which particular parts of the article are inaccurate and why?

  122. adrian

    DI, the phrase seems totally alien to me, or maybe a caricature of what a mythical lefty might say, but I’ll take your word for it.

  123. akn

    That’s the point Adam – the VF piece provides no references for any of the claims about the Greek economy. None. Moreover, it is full of the sort of shit sheet journalism that sets off alarm bells – unnamed respondents all over the place all of whom claim to have the inside dirt but whose existence cannot even be verified. Most of all the author rarely identifies the fractional and specific interests with whom any responsibility might lie – the blame is mainly sheeted home to The Greeks as if an entire nation is on the take. This idea confounds even the most basic undergraduate sociology and political economy. If you find it convincing then that is down to your prejudices.

  124. Chris

    This is from 2010 – ABC foreign correspondent transcript and worth a read…..

    http://www.abc.net.au/foreign/content/2010/s2878167.htm

  125. Dr_Tad

    The VF piece is just propaganda to create the notion that ordinary Greeks have been profligate, dishonest and corrupt. It is full of national stereotypes designed to divert attention from the actions of richer Eurozone nations and bond markets. I recall reading it after Malcolm Turnbull recommended it strongly on Twitter, so that should give you some idea of its pedigree. Sad to see Larvatus writers falling for this kind of rubbish.

    If you want serious analysis of the crisis in the Eurozone, the Research on Money and Finance people at SOAS in London have done the most convincing work, from a mixture of heterodox and Marxist viewpoints. Their stuff has impressed people like Keynes’ biographer Robert Skidelsky and The Guardian’s economics editor, Larry Elliott.

    The point they make is that the structure of the Eurozone has allowed the more powerful capitalisms (especially Germany) to use their advantage to drive the poorer peripheral countries into crisis in the context of the post-GFC world, and that because deflation is the only option in the EMU setup (default and devaluation are not really possible within the Eurozone), austerity becomes the only possible methodology to stay in the Euro for countries like Greece. Of course the human suffering this entails in the service of bond markets is massively undemocratic and so the people have quite rightly risen up against it.

    RMF’s two reports on the Eurozone are worth a read if you’re into the minutiae, but it’s also worth reading RMF chief Costas Lapavtsas’ recent short essay on Left strategy in the crisis, where he argues that exit from the Euro should be high up the Greek Left’s policy agenda.

  126. Adam

    akn, I find ad hom unconvincing – hence my objection to you dragging out irrelevant details about the author. There have been a number of explanations offered on this thread that seem better, or at least more complete, than those offered in the VF piece. LO’s stands out among them. Indeed there seem to be some consistencies between his more orthodox views and those suggested by Dr Tad – about the role of Germany in particular.

  127. Incurious and Unread

    akn @124,

    That is a disgraceful slur on Michael Lewis. You didn’t quote (perhaps didn’t read) any more of the wikipedia article, describing how Lewis is the author of “Liar’s Poker” (the book that the movie “Wall St” is based on) and so probably did more than anyone else to discredit the financial markets of the 1980s. (Unfortunately, everybody had forgotten about it all by the time that the GFC came along, but that is hardly Lewis’s fault).

    I haven’t read the VF article, so I am responding to you purely ad hom to ad hom.

  128. akn

    I+U: a disgraceful slur? Oh dear, that is funny. Perhaps then you need to read the VF article in full before you lurch into action.

    Adam: well, to you the author’s class backgound may be irrelevant but not to me. Class always shows through in my experience.

  129. Adam

    Class may “show through”, depending on what you mean by that. I’ll grant, just as an example, that the sense of entitlement of the overpaid and underworked public servant will inevitably show through in all they say, no matter how left wing it sounds. But surely the content of their arguments could have merit in spite of their class position?

  130. adrian

    I think that I&U comes from the Tony Abbott school of outrageous hyperbole. However you pronounce it.

  131. Incurious and Unread

    adrian @137,

    OK, fair enough. “Disgraceful” might be OTT, but a slur nonetheless.

  132. David Irving (no relation)

    adrian, I think the phrase “capitalist running-dog” came out of one of Mao’s speeches (someone with more accurate recall may care to correct me on this), and it was taken up to some extent by younger and less reflective lefties in the 60s. Admittedly, sometimes its use was ironic.

  133. Paul Norton

    The original phrase was not “capitalist running-dogs” but “running dogs of capitalism” which Mao Zedong used in relation to the bureaucratic, landlord and bourgeois supporters of the Kuomintang, and which he later worked into “running dogs of US imperialism” to desrcibe allies of the US. Maoists and other 60s lefties picked these phrases up from the Little Red Book and/or each other. The Philippines Maoists and their supporters now deploy these phrases to denounce non-Maoist elements of the Philippines Left.

  134. akn

    Adam: content substantiated by either reference, names named or direct experience cited does have merit and authority. However, none of these things is exactly over abundant in Michael Lewis’ aticle which is why, in the end, I concluded that his article was a load of bollocks written from a class privileged position by a genuine US patrician for a magazine that appeals to the ruling American class interests and does so by appealing mostly to ignorant racial sterotypes of incompetent and acquisitive, avaricious, bottomlessly selfish, grasping, greedy, insatiablly mercenary Greeks (FFS). That’s not economic or political analysis. It’s bigotry and the fact that it was published by that esteemed journal, VF, does not excuse it.

  135. Adam

    So you’re disputing the idea that corruption is widespread in Greece at all levels? Or that tax evasion is massive and has been effectively excused by government? Or that quite a large number of people have happily swallowed their government’s lies about the financial situation of their state?

    I’m not going to attribute these facts to some essential Greek character – indeed, they are symptoms of systemic pathologies that extend across Europe and beyond – but I take Lewis’ portrait to be accurate in some respects. Partial, yes, but not merely stereotype or propaganda.

  136. Katz

    Dr Tad’s cited reference argues a strange line:

    These [supporting the development of a single European state with the Euro as its currency] are creditable ideas and much of the Left – Europeanist or not – would probably concur with them. The trouble is that they do not deal with the pressing nature of the crisis. By far the most acute aspect of the crisis is the debt of the periphery.

    Clearly this (mainstream leftist) alternative to a return to the drachma is orthodox marxism.

    There may be sentimental leftist arguments for cultural peculiarities such as national currencies. But I fail to see how they promote a leftist agenda interested in the demise of capitalism.

    Costas Lapavtsas goes further by referring to debt as the salient aspect of the present crisis. Why should a revolutionary leftist care if banks are repaid? Each escalating crisis is another lesson about the irrationality of capitalism. Why attempt to curtail these lessons?

    Crisis and repudiation are significant steps toward the demise of capitalism.

  137. Dr_Tad

    Adam, the methodology of Lewis’ article (as I recall; I haven’t re-read it) was to take partial truths and elevate them to a general explanation. It is also analytically class-blind in its descriptions, for example mixing up the tax evasion of the capitalist class, small business people and workers when they are of different magnitudes and qualities.

    I think the RMF people (and others) have much more accurately placed the Greek situation in the context of wider economic developments and the structural peculiarities of European monetary union (some of which were predicted as problems even before the first Euro coin had been minted). The stuff Lewis raises is just noise to distract from the fundamentals (and serves the interests of the richer European nations and bond markets). All propaganda has some truth to it, after all, or else it wouldn’t be very effective. Truth be told, it sounds little different to the nasty stuff being churned out by the Right in Germany to bolster nationalist resentment against Greece.

  138. Dr_Tad

    Here is Larry Elliott in today’s Guardian on why Greece must exit the Euro. He explains the structural problems with the EMU project very clearly.

  139. Adam

    Let’s not be deaf to genre. It is a feature article and a portrait piece – it doesn’t have to be rigorous to an academic level to nevertheless provide some insight.

    “It behaves as a collection of atomized particles, each of which has grown accustomed to pursuing its own interest at the expense of the common good.”

    If this isn’t the picture of neoliberal success at the level of subjectification, I don’t know what is. Not everything of value is visible only at the macro or systemic level, and neither is every small scale piece of observation merely noise.

  140. Stuart

    Small fact I gleaned from “This Time Is Different: Eight Centuries of Financial Folly” is that Greece has spent 50 of the last 200 years either in default or restructuring from default. Yet they are lent money again and again.

  141. Dr_Tad

    Katz, I think you raise the key question that has exercised the European radical Left greatly in recent times. It is the problem of whether general anti-capitalist opposition to EU and its constituent national capitalisms is enough, or whether strategically breaking from the Euro is a necessary (but not sufficient) step for the Greek working class in this concrete situation.

    Such a strategy is inseparable from the Lapavitsas/RMF analysis around debt, because in Europe today there is an attempt by the “core” nations (and markets) to shift the generalised crisis onto the “periphery” through that mechanism. Of course all of Europe’s national bourgeoisies are trying to push the crisis down on their own working classes, but for German capitalism (as an example) if they can also drive Greek capitalism down in order to soften the task for themselves then so be it.

    So for Greek workers there’s not only their own bosses’ and state’s class war from above to contend with, but how this concretely manifests as a result of the structural inequalities in the EU inter-capitalist set-up. The Greek ruling class clearly sees a lot of advantage in staying as part of the Euro and transmitting suffering downward, using the demands of the ECB and IMF for austerity as the reason.

    Breaking from the general EMU project (one that has always been premised around restructuring EU capital to make it more competitive by driving down working class living standards through a panoply of neoliberal policy mechanisms) would thus be a double victory: Against the powerful imperialist aspirations of the “core” nations and against the desire by the Greek ruling class to be better integrated into EU capitalism overall (with all the potential benefits for them that alliance brings, even as weak junior partners).

    Of course, it’s a necessary but not sufficient step. The general tenor of the resistance in Greece indicates that ordinary people are creating something of a European Spring that could lay the seeds of a more radical process.

  142. akn

    I’m not ‘deaf to genre’. It is just that this piece in VF is of the genre of ruling class propaganda designed to tar the entire Greek nation with the same brush.

  143. Katz

    Breaking from the general EMU project (one that has always been premised around restructuring EU capital to make it more competitive by driving down working class living standards through a panoply of neoliberal policy mechanisms) would thus be a double victory: Against the powerful imperialist aspirations of the “core” nations and against the desire by the Greek ruling class to be better integrated into EU capitalism overall (with all the potential benefits for them that alliance brings, even as weak junior partners).

    But the problem of this interpretation is the fact that the loans in question were advanced to the Greek government. They weren’t used to build factories, etc., that may have taken advantage of cheaper Greek labour (if there is indeed such a thing). I fail to see how French or German employers benefit from these arrangements unless the Greek government proves itself to be capable of taxing their citizens to pay back loans, hopefully made easier by improvements in infrastructure and in social capital.

  144. GregM

    …unless the Greek government proves itself to be capable of taxing their citizens…

    The problem with your analysis, Katz, is that Dr_Tad doesn’t accept that countries have either governments or citizens. For him they are respectively the ruling class (which is conducting the state’s class war from above) and the toiling masses, hopefully to become the revolutionary masses.

    http://internationalviewpoint.org/spip.php?article2091

    Who will no doubt do as well as happened last time until the Red Flag was pulled down from over the Kremlin in 1991.

    Anthony, if you think that Michael Lewis’s Vanity Fair piece is contentless have a look at the Lapavitsas/RMF analysis That Dr_Tad refers us to. Not one bit of it substantiated by either any meaningful reference, names named or direct experience cited which you believe have to be found in an article in order to have merit and authority.

  145. Dr_Tad

    For those (apart from GregM, as he is clearly only interested in particularly moronic redbaiting) who want “substantiation” I happily provided a link to RMF’s own meticulously researched and stat-heavy papers, on the basis of which Lapavitsas makes his strategic intervention. Here’s the link again.

  146. Dr_Tad

    Katz @150: I think once the debt issue is perceived as an instrument of transmitting some of the crisis from core to periphery, rather than being seen as an end in itself, it becomes clearer what’s happening. The austerity demands are the usual structural adjustment things: privatise, cut jobs, cut wages. If they leave Greece in greater penury at least there will be cheap labour & cheap assets for core capitalists to snap up.

    It’s not really different to the approach they took in Latin America and elsewhere — guaranteeing the “opening up” of new investment opportunities. The actual repayment of the loan was of much less consequence when all things were weighed up (except for ordinary people, of course).

    Not that they won’t try to get the loans repaid by higher taxes on the Greek working class too!

    Of course the flies in the ointment are that by demanding repayment & austerity they might inadvertently (a) spread the crisis back into the core by unleashing a total meltdown in more than one peripheral economy and/or (b) provoke a spreading revolt across the Eurozone.

  147. GregM

    Dr_Tad, what’s moronic?

    Your primitive, religiously inspired, nineteenth century analysis of the economic relationships in Greek society with the ruling class conducting the state’s class war from above, as you have expressed it, on the toiling masses, hopefully to become the revolutionary masses, or my pointing out what you are saying?

  148. Dr_Tad

    Ho hum.

  149. GregM

    Ho hum.

    Oh dear. Our little Lenin awaits his Finland Station moment. He’ll be a long time waiting.

  150. akn

    GregM: Dr Tad speaks for me.

    Thanks Dr T as I don’t have the energy to read this facile redbaiting anymore. If the reactionaries had ever shown the least degree of authenticity, like post Marxist socialists have shown, then we would be living in a different world.

    Venceremos.

    akn

  151. Katz

    Dr Tad @ 153:

    Katz @150: I think once the debt issue is perceived as an instrument of transmitting some of the crisis from core to periphery, rather than being seen as an end in itself, it becomes clearer what’s happening.

    Are you arguing that German bankers lent the Greek government money with the intention of ensnaring the government and its taxpayer in a debt trap? If so, I find that very hard to believe.

    Perhaps, on the other hand, German capital finds it difficult to make an economic return in “core” as opposed to “peripheral” regions. This is an old Hobsonian argument. But if an economic return on capital investment were sought, I can think of 100 safer places where German bankers could invest their money than in Greek government bonds.

    However, if one concedes that German bankers are well aware that their banks are “too big to fail” then investment in even the dodgiest Greek bonds serves as a guaranteed money-maker. In other words, ironically, the most expensive failures are the safest investments.

    And who guarantees those investments? Why, the German taxpayer, of course!

  152. GregM

    If the reactionaries had ever shown the least degree of authenticity, like post Marxist socialists have shown, then we would be living in a different world.

    But not a better one.

    First of all you you are not post-Marxist. And you have not the slightest degree of authenticity. You parrot Marx’s tropes and don’t have the intelligence to move on from them.

    Second, we have no reason to believe that you won’t hark back to Lenin’s glorious experiment in slaughtering and enslaving the very people he claimed to be the liberator of, joined by his co-psychopath, Trotsky, and followed by his worthy successors, Stalin and Mao.

    You and Dr_Tad have offered no better model.

  153. Dr_Tad

    Katz @158: No, I don’t think the EMU planners wanted this to happen, but the nature of the EMU structures creates this kind of debt imbalance in the circumstances that obtain in the post-GFC world. The other key thing that has occurred is Germany’s great success in driving down its workers’ wages since 2000, thus further tilting the core-periphery economic balance.

    However, it’s worth noting that the core economies already used the PIIGS as markets and debtors before this crisis broke, and therefore it is not fanciful to believe that German bankers wanted to maximise interest from the Greek state. That’s what bankers do, and sometimes they drive their customers to the wall. Especially if they have implicit state guarantees of their own to fall back on, as you rightly say. Or a belief that eventually they will screw adequate austerity out of the Greeks to have an eternal line of repayments guaranteed.

    None of which is to say that debtor-led default is a panacea, but it does create a better (national) terrain for the Left and the workers’ movement to fight on, especially as the national government will no longer be able to fall back on the limits set by EMU structures as an excuse for attacking its people.

  154. Katz

    Dr Tad

    However, it’s worth noting that the core economies already used the PIIGS as markets and debtors before this crisis broke, and therefore it is not fanciful to believe that German bankers wanted to maximise interest from the Greek state. That’s what bankers do, and sometimes they drive their customers to the wall. Especially if they have implicit state guarantees of their own to fall back on, as you rightly say. Or a belief that eventually they will screw adequate austerity out of the Greeks to have an eternal line of repayments guaranteed.

    I think this is a sound statement of the case. German banks win either way.

    As to the question of Greek default, certainly the politics of compromise and consent in Greece are placed under severe strain by creditors’ demands.

    I believe that it is more likely that Greece will endure a fascist liquidation of constitutionalism than a successful left-wing uprising. Indeed, an abortive left-wing uprising is likely to precipitate a fascist counter-coup.

  155. Paul

    Dr Tad must be enjoying life in 1973 where socialism and communism are not discredited like they are in 2011

  156. akn

    Oh dear oh dear GregM, that’s exactly what I meant by the failure of reactionaries to reconsider their position. You are still fighting the cold war which is so far over that it is ashes; you are stamping around in those ashes and the resultant dust cloud of obsurantist objections to history is coating only you with dust and only occluding your vision but no-one else’s. Frantic to establish the legitimacy of your deluded triumphalism you quickly resort to insult and lodge hysterical accusations of Maoism, Leninism, Trotsyism against anyone who even considers alternatives to the trajectory of current world history. Pathetic.

  157. Russell

    “joined by his co-psychopath, Trotsky”

    GregM: can I recommend that you read Barbara Kingsolver’s latest novel, The Lacuna? Trotsky is in it, and he seems very nice. I always think, if you can’t believe a novelist, who can you believe?

  158. akn

    In fact, GregM, so rankled am I by your accusations that I’m prepared to offer you the opportunity to plunge into the darkest recesses of Marxist arcana. I was never a Pabloite (bet you never heard of that one) but here is an opportunity to completely lose touch with reality by absorbing the ideological positions around Trotsky and Pablo and then attempting to tar me with … something … http://www.marxists.org/history/etol/newspape/socialistvoice/Trotsky.html … and BTW, I always thought that Maoism was a problem in Oz because of the absence of peasants but don’t let that stop you from the sort of accusations that used to see people executed in China during the ‘Cultural Revolution’.

    Short: you have the heart of a Stalinist. Eff you mate.

  159. GregM

    I was never a Pabloite (bet you never heard of that one) but here is an opportunity to completely lose touch with reality…

    Thank you Anthony.

    Your post is so silly that I can’t believe that you are what you represent yourself to be.

  160. akn

    I can see why you thank me; it is too obvious. You get some very small gratification in your sad and empty life from the little attention you receive by being a troll on blogs like this. I regret giving you that minute pleasure but and it won’t happen again.

  161. Paul

    It strikes me that the exchange above has the same spelling, grammar and tone as those notes Jack the Ripper left.

    So that’s another mystery solved.

  162. akn

    Now really Paul. I’m up at this hour of the day because I’m on my way to work. From your misreading of the posts my guess is that you’ve just come home from a night on the piss.

  163. tigtog

    ^moderator hat^

    A bit less slinging of personal remarks all round, please.

  164. Paul Norton

    Back on topic, here’s Simon Jenkins in today’s Age.

  165. Savvas Tzionis

    #171…. I have been reading the umpteen articles on Greece and the trend appears to be heading towards bailing out Greece. Some opinions are even throwing the blame back at other’s!

    Go to http://www.athensnews.gr/ and scroll down to Greece on Media section for a great rollcall of Greece related articles from aroudn the world. Obviously the current crisis is front and centre.