Wednesday, November 02, 2011

Changing times

Sarkozy and Merkel are not overjoyed, the markets are panicking, the Greek reaction is uncertain, but the decision of Papandreou to put the bailout plan to a referendum is the first real challenge to the assumptions of the European policy-making elite arising from somewhere other than the streets. Amongst the prognostications of doom, Larry Elliott stands out as a voice of optimism, though not about austerity.
There is not the remotest possibility of austerity working, because the impact of such savage cuts is to depress the economy, increasing the deficit rather than cutting it, adding to pressure for still further austerity.
It is certainly risky, but suddenly, from being the supplicant subject to the control of the Troika, Greece has remembered the old adage about debt.  If you owe the bank a hundred thousand pounds you have a problem; if you owe the bank a hundred million pounds, the bank has a problem.

Larry Elliott again:
Greece is now a bigger problem for Europe than Europe is for Greece. The short-term outlook for Greece is going to be bad inside or outside the single currency, but the balance of risks is different for the other 16 members of monetary union. For them, the calculation is simple: would it be better to cut the Greeks some slack in order to prevent a disorderly default creating a domino effect across the eurozone? Or should they take a tough line, threatening to cut off all support in the event of a no vote? That is what is known as a no-brainer.
... All this is pretty obvious. What is perhaps less obvious is that Greece now has immense power as a result of its predicament. It has the rest of the world by the short and curlies.
 Is this the moment that reality finally forces a change of policy?

UPDATE

In answer to my question, no.

3 comments:

Dipper said...

I understand Papandreou fired three generals. It seems odd to me that no one in the media has commented on this.

Could you put some colour on this? Was there a threat of a coup? Did the army threaten to either intervene? or not intervene? Is the sacking significant? Am I being paranoid?

The Plump said...

I couldn't say (especially about your level of paranoia - a Greek word BTW) though there have been odd press reports about the possibility of a coup cropping up. There are certainly anti-democratic elements in the police and armed forces, but it is also a conscript army and most probably would be reluctant to act.

looby said...

There's an excellent piece by Costas Douzinas, on the Critical Legal Thinking blog entitled The Final Blackmail of Baron Papandreou which reveals Papandreou's suddenly withdrawn gesture as the desperate action of a man who'll do anything to stay in power, rather than a generous act of democracy that many Guardian commenters seem to have been so quick to read it as.