Friday, November 04, 2011

Greece is the word

And it is on everyone's lips at the moment. I got the conclusion to my last post on the crisis spectacularly wrong, so here are three links to articles that are worth reading, though they may be no more reliable.

First up is a post on Naked Capitalism, not one of my regular sources, by investment analysts Marshall Auerback and Rob Parenteau. It takes on the conventional wisdom about Greece with gusto:
Historically, Greeks have been very good at constructing myths. The rest of the world? Not so great, if the current burst of commentary on the country is anything to go by. Reading the press, one gets the impression of a bunch of lazy Mediterranean scroungers, enjoying one of the highest standards of living in Europe while making the frugal Germans pick up the tab. This is a nonsensical propaganda.
And, after an assault on 'faith-based economics' and 'Fiscal Austerians', they make a clear point about economic union:
What is most remarkable to us is that the largest net exporter, Germany, does not appear to recognize that its insistence on fiscal austerity for all of its neighbors will cook its own golden egg-laying goose. If Germany wants to run a perpetual current account surplus in order to pursue their Asian-like mercantilist, export-led growth strategy, then some other nation, or group of nations must be prepared to run current account deficits ad infinitum. Which means issuing liabilities ad infinitum to the current account surplus nation in order for the current account deficit nations to spend more than they earn on tradeable goods and services. What this means is that default is inevitable unless there is a policy or price mechanism that encourages the current account surplus nation to reinvest the reserves they earn in foreign trade back into productive, income generating capital equipment in the trade deficit nations. This much is elementary international economics, but somehow it completely eludes Berlin.
The German Chancellor and her Finance Minister like to say that no real economic union is possible if one party to the union (Greece) works shorter hours and takes longer holidays than another (Germany). What she should say is that no real economic union is possible if the governing plutocrats of ALL nations ... consistently evade their fair share of the cost of that party’s own state expenditure, expecting the union either to pay the bill itself, or to force the bottom 90% to pay it. And there is no real economic union (or any hope of a future political union) if current account surpluses are not properly and sustainably recycled into the trade deficit nations. It would be as absurd as Texas perpetually insisting on running trade surpluses with the other 49 American states. 
Then, from the other wing of the political spectrum, Anthony Barnett defends Papandreou and his attempt to hold a referendum (well someone has to I suppose) in Open Democracy. He was shocked by the vitriolic language used about the referendum plan and the tactics used to undermine it:
According to the BBC, after "Mr Papandreou told reporters in Cannes his referendum would in effect be a vote on whether Greece should remain in the euro...  the European Commission said if Greece left the European single currency, it would have to leave the European Union as well: "The treaty doesn't foresee an exit from the eurozone without exiting the EU," spokeswoman Karolina Kottova told a briefing in Brussels.
Since when was it that you could be in the EU like Denmark or the UK and not in the Euro but that if you left the Euro you would have to exit the EU as well? This was heavy duty blackmail.
Finally, The Economist makes an astute point:
Mr Papandreou has created an almighty mess, but he is better cast as the messenger than the villain. He was not to blame for the summit’s shortcomings.
 It too is critical of austerity,
The euro zone’s emphasis on austerity rather than structural reforms has aggravated Greece’s political woes. Instead it should favour medium-term fiscal consolidation. The creditor nations could boost domestic demand, to provide a bigger market for debtors’ exports. Most of all, they should dispel the threat of contagion by putting the ECB’s balance-sheet behind the debt of solvent governments, like Italy and Spain. Throughout this crisis, creditors—particularly Germany—have worried about being too soft on the euro zone’s weaklings, for fear that they would go slow on reform. Mr Papandreou has shown that they also need to worry about being too austere.
 Auerback and Parenteau use far less measured tones:
Myth-making at the expense of the Greeks does not serve anybody’s interests, as there will be a cascade of defaults everywhere, and a Soviet style collapse in incomes, hardly an enticing prospect for the global economy. Not an attractive ending, but this is the kind of outcome which the troika’s self-serving, immoral and cruel policies could lead to before long. The Greeks, and the vast majority of Europe’s citizens, can surely do better than this. The existing policy path is literally bankrupt and bankrupting, and this game of chicken cannot go on for much longer.
"Self-serving, immoral and cruel"? "Bankrupt and bankrupting"? These words from a hedge fund manager and an investment analyst, the heart and soul of the market that must be appeased through blood sacrifice? If ever there was a sign of something seriously wrong, this is it.

What will happen is anyone's guess, but if you want a better illustration of Andrew Rawnsley's comment about the Occupy protests, "The protesters shun formal leaders and hierarchies – and I also don't see why they should be criticised for this at a time when conventional leaders and hierarchies have been so conspicuously useless", then I would like to see one.

1 comment:

Dipper said...

yes ... agree completely ... another terrific post.