Syriza Wins Greek Elections
The anti-“austerity” party Syriza has won a commanding victory in Greece’s parliamentary elections:
Greece’s far-left Syriza party, which seeks to renegotiate Greece’s loan deals with Europe’s central authorities, won the largest share of seats in the Hellenic Parliament in historic elections Sunday, capturing 35.5 percent to 39.5 percent share according to exit polling. Syriza’s victory made Greece the first European Union member state with a leading party openly seeking to fight austerity, according to Reuters.
The final margin of victory is unknown at present but it will be substantial, possibly more than twenty points greater than the New Democracy Party which previously held the majority. Also unknown is the full set of implications for what this might bring. Alexis Tsipras, Syriza’s charismatic young leader, has threated to take Greece off the Euro.
I can only speculate that Syriza’s victory means that Greeks have overwhelmingly rejected the view, held by the Germans, that if only Greeks would become more German and abandon their lazy, spendthrift ways their economic problems would be solved.
Greece ran its budget on outright fraud for years, with budget figures conjured up out of the ether. Their system is rife with fraud and much of the economy is black market and untaxed. They have a government where people earn massive salaries and can retire at age 50. And their future is in the hands of 1.3 fertility rate. “Austerity” wasn’t some cruel German imposition; it was math. This election shows that they still think they can have a free lunch and the rest of Europe will be happy to pay for it.
While I agree that Greece is a “low trust” environment, I don’t see their problems as you do. I think they have typical post-colonial problems: they are undercapitalized and their participation in the euro stacks the deck against them.
Wow. The Greeks were offered a chance to vote on whether or not they wanted to be serfs for the global elite, and they voted no.
Imagine if southern whites made the same choice. We’d never have another Republican in office.
Dave, did you read Michael Lewis’s article? It really gets into the problems underlying Greece’s economy. I don’t think is undercapitalization or the Euro. This is fundamentally broken economy.
@wr:
How do you think Greece is going to function if the “world elites” do not loan them money. The Greeks have benefits from borrowing money from outside of Greece and thus, there standard of living is above what their economy can support. The only way the left-leaning parties can hope to meet the expectations of the voters is to find another fool who will loan them money without expecting to be repaid.
The Greeks have run out of other people’s money and refuse to face reality. It could be a good example of what the future of the U.S. will look like in the coming one party state. The majority of voters will grant themselves an ever growing list of entitlements while expecting others (currently the rich but soon to be the upper middle class) to pay for it.
@superdestroyer: You know Margaret Thatcher’s aphorism — “the problem with socialism is that you eventually run out of other people’s money?” People like wr literally can’t grasp that concept. There are ALWAYS “other people” with money, and they’re going to take it. And they rationalize it by demonizing those “other people” and convince themselves that they’re bad people who need to be punished, who got that money dishonestly, so it’s not only OK to take from them, but a moral imperative to do so.
And with that, watch how I “suborn” wr to come back with a string of personal insults, a completely unjustified sense of superiority, and sneering dismissal. I’ll throw in a 3-2 chance of an accusation of sock-puppetry…
@Jenos Idanian #13: Will you consider telling you that you have no idea what you are talking about an insult ?
Here is the harsh truth about Greece: countries with their own currencies that face the kind of crisis that Greece faces undergo savage currency devaluations. Those cause immense hardship(and in this case, that hardship is fully warranted!), but also serve useful purpose by making them more competitive internationally. The Euro, and the strict deflationary politics the Germans insisted on, foreclosed that possibility for the Greeks post 2008.
(Quick example: my Israeli family used to go to Greece for Summer vacations, until the Euro made it way too expensive. Post-2008 crisis, depreciation would have drawn them back, but the fact is that the way German managed the Euro meant that Greece remained just as expensive as it once was, meaning that my parent’s money was spent in Turkey and Georgia).
Now, there is a continent-sized political entity in which monetary union is working well: the United States. Why? Because in the United States, richer regions (like California and Texas) cross-subsidize poor ones (like the Deep South), and when an economic disaster hits a relatively well-off area, those supports kick in (like in Nevada post the real estate pop of 2008).
What Syriza is demanding is not other people’s money, but that Germany makes up its mind: if it wants to have a monetary union in which German firms are priced at the same level as their poorer, less productive South European neighbors, a policy from which it reaps huge benefits, Germany will have to do what Californians and Texans do: pay for it. Right now, the Germans are having both of best worlds, at the expense of the rest of Europe, and that situation can’t continue much longer.
I know that stories about socialism and one party states are much more morally edifying, but take comfort: the Greeks had already suffered all the consequences they would have suffered during the depreciation period, without getting any of its benefits, so your craving for simplistic moral tales is half-fulfilled!
While it has been taken to quite the extreme in Greece, the idea that people want something for nothing, like a whole host of government services, while paying little to nothing in taxes, isn’t such a foreign concept to many people in our country…
@humanoid.panda: It remains that Greece has put itself in an utterly unsustainable position, some factors of which Hal outlined quite nicely above. The solution to this is going to hurt. Greece’s position is the entirely-understandable “we don’t want to face the hurt right now, so loan us more money to make the problem go away for a little longer.” And those with that money are saying “loan? Yeah, right, like we’ll ever get any of it back. And the longer you postpone dealing with the problem, the more it’s going to hurt when you do deal with it.”
I always thought the EU was a bad idea, doomed to fail. I hoped I was wrong, because it would hurt when it fell. But I really think that the EU — or, at least, key elements like it, like the economic interdependence — is going down.
Lets see, the Euro is headed down, fears of deflation in Europa, the Turks are getting restive, continued bails outs by Germany and Finland have considerable domestic opposition and promised benefits (and subsidies) must be paid, Syrzia may be looking for exits before too long.
@Jenos Idanian #13: The only reason why the Greek position is “loan us more money now” is because their are on the Euro. Otherwise, as I said, their currency would be depreciating, and they may have faced a default and a period of very high borrowing costs. The Euro mechanism forestalls those avenues, leaving them two options: aid from Europe, or austerity that has no economic benefit. Basically, Greece is in the position of a family living in a an underwater mansion. It might have been irresponsible buying it in the first place, but right now, for the banker who provided it with the loans to buy it to insist the family keeps on chopping parts of the mansion to sell for scrap instead of either forgiving parts of the debt, or letting the family declare bankruptcy, is both cruel and economically irrational.
@An Interested Party:
Now where have I heard that before? Oh yeah, the last Tea Party rally I passed by.
I think @humanoid.panda has it right in that Germany needs to pee-pee or get off the pot. Unite Europe or don’t, but don’t halfway unite Europe. Unity will mean the rich subsidizing the poor, the way blue states subsidize red states in our country.
California is our Germany, but we Californians are nice people so we love pumping our money into Alabama and Idaho while gun-toting rednecks and white supremacists piss on us for being “Socialists.”
@Hal_10000:It’s certainly possible the Greece’s economy is “fundamentally broken.” That situation does not endorse the argument that the solution, then, is to keep the basic structures intact and impose more austerity. If the economy is as you describe, the final course of action available is for the banks (mostly German, IIRC) to take the hit on the hopelessly bad debt (“fundamentally broken” after all) and move on. This scenario never comes up in these discussions. Hmmmm……
@Jenos Idanian #13: The problem is that Europe decided to go with a confederacy–sovereign states in a loosely organized federation. The US made this same choice and had similar problems.
Which we solved by moving to a strong central federation government model.
Maybe you simply can’t have both federation and absolute state sovereignty.
@Just ‘nutha ig’rant cracker:
But then the question will be if no one will loan money to Greece, then what will the Syriza Party do for help the economy. If the Greeks need money from other countries, then maybe they should not be insulting other countries.
Also, why should tax payers in Germany pay higher taxes to help Greece when the Greeks themselves refuse to higher taxes.
@Just ‘nutha ig’rant cracker: Another factor I’ve been considering is that the US evolved as a single entity; from 1783, we’ve had that strong central federal model. (The unpleasantness from 1861-1865 notwithstanding. Europe was a host of independent nations (not even with a common language, like we had) that tried to half-ass unify.
Time to dig up an old comment from 2012:
I wonder what would happen if Germany had had to give away $111 billion more than it received in 2011, instead of the actual $15 billion?
Or what Alabama would do if it only received $1.6 billion more than it gave in 2005 instead of the $17 billion? (Can’t find the Alabama’s state budget from 2005, but in 2014 it was $28 billion. ($23 billion in 2005 dollars, try cutting $15 billion from that…) Not sure if that includes eduction or not.)
@wr:
Except not, because Syriza hasn’t been running on “let’s tell the Germans to bugger off and go our own way to prove we don’t need them”. It’s been running on “If we tell the Germans we don’t pay back the money we already owe them, they’ll just give us money for free”.
Even if the current situation isn’t great, Syriza’s alternative seems almost delusional.
@michael reynolds:
Well, since “states” don’t pay taxes but rather “residents” do, comparing CA to AL is nonsense from the outset, unless all residents with all ranges of incomes vote monolithically. I’m thinkin not.
You might also want to check that citation. If average receipts for “Democratic States” are $1.16 vs $1.00 taxes paid in, it’s hard to see how theirvtax dollars are subsidizing anyone.
Just sayin.
@PJ:
As a side note, many progressives keep trying to make the argument that if Alabama was controlled by Democrats that it would suddenly become a net payer of taxes. Yet, somehow I doubt that if Quinton Ross suddenly became the governor of Alabama http://www.al.com/news/index.ssf/2014/12/alabama_senate_democrats_name.html that high tech start ups or hedge funds would move to the state and create the two (of the three) conditions that help a few states controlled by Democrats to be net payers of taxes. Somehow I suspect that if Mr. Ross became the governor of Alabama that its tax paying deficit would increase rather than decrease.
Also, I have always doubted the numbers claims because how can states claim to be net payers of federal taxes when the federal budget has been running annual deficits of greater than $500 billion a year?
@humanoid.panda:
Perhaps I’m mis-remembering, but isn’t that intended? The nations that agreed to sign on to monetary union accepted this in exchange (no pun intended) for relative monetary stability. They knew the rules going in, and part of that was to allow the ECB significant authority in matters like this.
Perhaps this is just another indication European monetary union was a bad idea from the start?
@michael reynolds: more greekish mythology at work there!
but seriously, greece is screwed and they need to suck it up- trying to renegotiate your loans when you have nothing to negotiate with is pretty lame. in essence, they got what they voted for.
@superdestroyer:
I don’t recall any progressive saying that.
@gVOR08:
It is made almost daily here at outsidethebeltway, blue states good, red states bad.
@Mikey:
There is no doubt that it is true, and that Europeans could do it all over again, they would have designed a radically different system. In essence, the Euro is built on the assumption that monetary stability provided by the common currency and the power of the ECB would prevent a general crisis. That assumption was proved false in 2008, and ever since, European elites have pretended that nothing of that sort happened, and keep on running policy that presumes that 2003 is just around the corner. They managed to make this charade last for so long because the EU is at best a semi-democratic structure and because even the Greeks want to stay on the Euro and willing to pay the price for it, but there is a limit for everything. Syriza, is definitely a problematic actor (it’s foreign policy statesments, for once, are very alaraming) but at least it will force the Germans to end the charade and make a choice: to fix the monetary union, or end it.
@Stormy Dragon: “Even if the current situation isn’t great, Syriza’s alternative seems almost delusional.”
The two choices here are to continue to make the Greek people suffer to please the bankers or tell the bankers to go screw. The previous governments took the first approach, and it has been a disaster in every way. Apparently your solution is to keep doing the same thing.
I wish I could say that I’m surprised that the answer from a libertarian is to do whatever it takes to make banks happy, no matter the cost in human lives.
@superdestroyer: “As a side note, many progressives keep trying to make the argument that if Alabama was controlled by Democrats that it would suddenly become a net payer of taxes”
As a side note, NO ONE HAS EVER MADE THAT ARGUMENT.
As always, you are inventing phony arguments so you can triumph over them, since there isn’t a single point in the real world you’re right on.
@Stormy Dragon: You know the joke about you owing 10,000$ is your problem, but you owing 1,000,000$ is the bank’s problem? This is exactly the argument Syriza is making: every insolvent debtor, whether a country, a bank, or a large enough firm, has the power to negotiate bankrupcy, write-down, or hair-cuts, because his creditors prefer to get 70 cents on the dollar than getting nothing. German policy since 2008 was meant to stop Greece from doing that, and there is no reason why Greece shouldn’t use that position as leverage.
@wr: For a guy who keeps on railing about the crashing power of demographics leading us to a single party state, Superdestroyer is surprisingly ignorant of the concept of path dependency..
@wr: Right. A default, Grexit and depreciation would impose terrible hardship on the Greek people, but they will end up in a recovery. Germans backing down in the face of those threats will somewhat lessen the short term suffering, but will probably trap Greece in an arrangement that is bound to create another crisis down the road. Continuing down the current path would prolong the misery, for no possible positive outcome in the end. Syriza might be understating the dangers of the exit choice, and overstating the odds of Germany backing down, but going down the current path doesn’t make any sense ,economically, politically or morally.
To put it bluntly: if Syriza fails, Golden Dawn is next.
Greece has received two bailout totaling about $265 billion or so during four and half years. Add to that the $7 billion that it would normally receive during that time. That’s about $300 billion adjusted for inflation.
So, about $27,000 for every person living in Greece.
If, and that’s IF (though I can’t see why it’s no longer true), Alabama is still receiving about $17 billion (in 2005 dollars) more than it’s paying each year, then that would mean that it has received, adjusted for inflation, about $90 billion during those four and half years, or $20,000 for every person living in Alabama.
$27,000 vs $20,000. Does this mean that Alabama is getting bailed out too? But on a bit slower pace than Greece?
And remember, before 2010, Greece didn’t receive any bailout money, but Alabama was getting all those sweet billions each year…
(I probably have done some errors, feel free to point them out, but I’m sure that my main point will still be correct, Alabama has been bailed out for years.)
Oh, and to add, Greece is supposed to pay back those $300 billion.
Alabama isn’t.
@PJ: According to this site, Alabama received about $8.1 billion in federal payments in 2012. Most of that was for joint programs (Medicaid, for example) and also stimulus funding.
http://ballotpedia.org/Alabama_state_budget#Federal_aid_to_state_budget
Is it really a “bailout” if the money is sent as part of a long-established federal-state partnership?
@wr:
No, my solution is to be realistic about what the consequences of doing something different are going to be.
@humanoid.panda:
I wonder how much the fixing will negatively impact Germany and how many Germans will go along if the impact is significant.
I don’t see this going at all smoothly (but then–correct me if I’m wrong–I don’t think you do either).
@Mikey:
No, if it was, then Alabama would have to pay it back. It’s a, compared to the EU, massive wealth redistribution, on a scale that if it was the EU would have made the UK leave (and most likely Germany too.)
@Mikey: I don’t see this going smoothly at all, and I think that in the long run, everyone will be better off if Greece leaves the Euro (the problem with that is after Greece its Spain and Italy, and the Euro doesn’t survive that).
Theoretically speaking, Germany could very easily support policies that will smooth out things, but signing up to cross-regional transfers funded by deficit spending during crises- a continent level Keynsian policy. However, that is a political non-starter.
@Mikey: The thing with those transfers is that they are counter-cyclical- during a recession that hits Alabama especially hard, it gets more money intothose programs, making the distinction between bailout and transfer somewhat theoretical. Nevada is a perfect example: during the real estate boom it was a net payor to the federal treasury, but since it was ground zero of the collapse, it became a net recipient.
@PJ: Well, the biggest problem with what you are saying is that those bailouts were not for Greece, but for Greek creditors. In other words, Greece is like AIG during TARP: it got 87 billion dollars, but not so much for itself, but to keep the big banks from collapsing. Arguably, in the absence of the Euro mechanism, Greece would have been in a much better position to force its creditors to restructure and write off its debts. Accidentally, a huge proportion of that debt is held by German banks..
@PJ: OK, I missed the point of the analogy you were drawing. 🙂
This whole Greece/Alabama comparison is fundamentally dishonest. It’s a way for people to 1) find some kind of parallel between foreign events and domestic events, and 2) apply their prejudices (and express them) on the domestic matters. As noted, the payments from Alabama are individuals and corporations and other groups paying in; the payments to Alabama are government-to-government.
Also, the previous bailouts to Greece were with Greece pledging to pay the money back. Now, apparently, the argument is “everyone knew those pledges were lies, and you were fools if you believed them. Now we’re going to do it again — you’ll pony up the money, and Greece will promise to pay it back, along with those previous bailouts. And don’t even think of asking if these new pledges are valid — we’re all going to assume they are good, just like last time.”
@humanoid.panda: To put it bluntly: if Syriza fails, Golden Dawn is next.
I read that link. One paragraph leaped out at me:
Communists have out-killed Nazis by at least a factor of about 5 to 1. Shouldn’t we be worried about the Communists getting into power, too?
@superdestroyer: Got it. “…if Alabama was controlled by Democrats that it would suddenly become a net payer of taxes.” equals “blue states good, red states bad”.
You’ll forgive an observation that conservative thought often seems to rely on imprecision of language.
@humanoid.panda:
Fortunately, Syriza has been able to form a coalition with the Independent Greeks.
@Jenos Idanian #13: No, because unlike the Communists, Golden Dawn showed an inherent capacity to reach out to middle class electorate, has murky connections to some elements in the police and the security services, and was shortly considered as a viable coalition partner for center-right parties (before the leadership of the party went to jail for running a criminal organization). Again, have you considered the possibility you have no idea what you are talking about?
@Mikey: I meant, in the next election..
@humanoid.panda: I get it…LOL…the article talked about how if Syriza didn’t win an absolute majority and could not find a coalition partner, the mandate could fall to Golden Dawn. I thought that’s what you were referring to.
@Jenos Idanian #13:
The actual point of the Greece-Alabama analogy was to highlight the facile hypocrisy of Republicans who are forever demanding that some other person be responsible while they, in their own states, are dependent on the productivity, energy and intellectual heft of Californians to be able to afford their Confederate battle flags and their crystal meth.
By the way, can you point to any major economy that’s performed well with austerity? Because at the moment the US – Barack Obama’s US – appears to be the best-positioned major economy in the world. Had we been able to keep GOP meddlers entirely out of the picture we’d be doing better still.
It’s what we did in California. We drove the last Republicans out into the desert and left them there. Since then we’ve raised taxes on wealthy folks, balanced our budget, and are now able to increase funding to things like education. There are help wanted signs up all over the Bay Area and real estate is inflating so fast I may end up being priced out of Marin. Unemployment in the Bay Area – with its high minimum wage – is 4.4%. In Marin it’s 3.9%.
Amazing how well things start to work once you don’t have Republicans subverting you.
So, here’s what I think is going to happen: Germany is going to blink. Germany has done very well for itself with the Euro and if Greece leaves the Euro and their economy improves, it’s the beginning of the end of the Euro. Germany wants Greece in the Euro. And Germany doesn’t want to have to write off all those loans. So Merkel will re-negotiate. They’ll ease austerity and the Greek economy will pick up a little.
Here’s a brief story from Germany’s Deutsche Welle, giving a bit of the EU and German perspective.
http://www.dw.de/tsipras-sworn-in-as-greek-prime-minister/a-18215431
@humanoid.panda: I don’t follow Greek politics very closely (well, at all), so I’ll defer to your apparent knowledge here. But I am at least as suspicious and wary of Communists as I am of Nazis. I’d have no problem with the two groups being treated interchangeably, as I don’t see too many significant differences between the two.
@michael reynolds: Yes, michael, we get it. You have a hatred of Republicans and/or conservatives that is downright sociopathic, and you can and will use every single opportunity to express your sheer hatred at great length, no matter how far you have to stretch to tentatively connect it to the topic at hand. Why don’t you save your energy and just type “ibid” instead of your tiresome rants about how bad we are?
Hell, you’re a creative writer, but at this point I think I could crank out one of your patented rants with almost no effort.
@Stormy Dragon: “No, my solution is to be realistic about what the consequences of doing something different are going to be.”
I’m pretty sure that they are just as smart as internet commenters and have calculated that there will be consequences. They may even have gone a step further and weighed these consequences against those of continuing the present course.
Why do you assume that you, a North American internet commenter with no skin in this particular game, is so much more “realistic” and thoughtful than the political leaders who have just won this election on the platform of changing course?
@michael reynolds: “It’s what we did in California. We drove the last Republicans out into the desert and left them there.”
Hey, out here in the California desert we drove out idiot Republican Mary Bono Mack and replaced her with Democrat Dr. Raul Ruiz. I think the last Republicans are hunkering down in Bakersfield and Kettlemen City…
@wr:
Then why do they keep telling the voters there won’t be any consequences? I never pegged you for a Straussian, wr.
Not really. Basically the people who created the system knew it couldn’t work. But back then the EU countries were essentially led by WWII-era pro-Europeans. This was the way they created the political union (start with a limited union in limited areas, then, when it becomes clear that the system doesn’t work without further integration adapt the institutions), so they created the financial Union the same way. The assumption was always that the countries would “come around” once they had a semi-working system that “just needed some fixes”.
There were three problems with that:
Firstly it assumed the countries involved were invested in the system.
Secondly it assumed that the people running those countries shared the vision of a unified Europe .
And thirdly, it assumed that the countries involved had a roughly equal level of development.
Unfortunately the EU added a number of countries early on that saw the whole thing essentially as an ATM run by fools (Spain, Greece, France to a degree etc.). As a result of this and the voting system used by the EU, the whole system essentially got captured by partial interests. In addition, everybody knew the deficit/inflation numbers were cooked
Basically the old guys in charge assumed that they would have all the time in the world to convince their populations that the system was worth saving. And for a while it worked.
And then the Soviet Union imploded. Even the pretence of economic parity was thrown out in an attempt to “bring civilization” to the newly freed east. Germany started its own private bailout to the tune of 1.3 Trillion EUR and went from being the “European locomotive” to the sick man of Europe. The new Economy took off and the idealistic “old guard” was replaced by modern politicians with spreadsheets and Goldmann Sachs advisers.
The national tune changed from “never again war” to “never again unpleasantness” and the whole idealistic edifice started to look less like a work in progress and more like a monument to European hubris and national self-interest. And whether it can survive in some form remains to be seen…
Another piece from Deutsche Welle on the Greek reaction:
http://www.dw.de/greeks-have-high-hopes-for-new-government/a-18215532
@Mikey: “Perhaps I’m mis-remembering, but isn’t that intended? The nations that agreed to sign on to monetary union accepted this in exchange (no pun intended) for relative monetary stability. They knew the rules going in, and part of that was to allow the ECB significant authority in matters like this.”
Except that the reaction of the ECB/EU/Germany to a massive financial crash has been thoroughly screwed up.
For all – Krugman has written extensively on this.
@humanoid.panda: “You know the joke about you owing 10,000$ is your problem, but you owing 1,000,000$ is the bank’s problem? This is exactly the argument Syriza is making: every insolvent debtor, whether a country, a bank, or a large enough firm, has the power to negotiate bankrupcy, write-down, or hair-cuts, because his creditors prefer to get 70 cents on the dollar than getting nothing. German policy since 2008 was meant to stop Greece from doing that, and there is no reason why Greece shouldn’t use that position as leverage.”
Note that this is a technique used by megacorps and large banks whenever they can.
@PJ: “Greece has received two bailout totaling about $265 billion or so during four and half years. Add to that the $7 billion that it would normally receive during that time. That’s about $300 billion adjusted for inflation.
So, about $27,000 for every person living in Greece.”
Those checks were likely immediately endorsed over to major European (and some Greek) banks. The average Greek probably saw nada.
@Barry: Those checks were likely immediately endorsed over to major European (and some Greek) banks. The average Greek probably saw nada.
So? It was done in their name, for their benefit, paying down their debts. Kind of like garnished wages, in a way. Or tax withholding.
@michael reynolds:
What do you know about Germans that I don’t? Or maybe it’s just my wife who never backs down…lol…Germans can be a singularly stubborn lot.
Still, Germany will do what it feels is in its best interest, and if that means preventing the Grexit, you’re probably right, they’ll accept the haircut. What better choice will they have?
And don’t doubt there is sympathy for the Greek people in both Germany and the EU–but Greece won’t be able to get all it wants, either. I think Tsipras has made some promises he will be all but unable to keep.
IMO there will eventually be a compromise of some sort, but how it looks is hard to predict at this point. I think Greece keeps the Euro, the “troika” sucks up some level of haircut, and the EU emerges intact, albeit shaken.
@Jenos Idanian #13: The significant difference between the two group, in Western Europe since about 1956, is that the latter tend to be ineffectual intellectuals and/or ossified bureaucrats. The Nazis, on the other hand, tend to be par-military.
@Mikey: Sorry- that was indeed unclear.
@michael reynolds:
I think that on this thread, I made that analogy first, and to be fair, that was not I intended at all (this is why I initially discussed both Texas and California as donor states). The key issue here is the facg that the US has a monetary and fiscal union that works, because, with exception of political junkies, no one cares which state is donating how much to a different state, because we think of everyone as Americans. The EU tried to create that kind of mionetary union, without setting up neither bureaucratic nor emotional preconditions for it to work during hard times, and that was their tragic, terrible, error.
@humanoid.panda: @Barry: For sure, and by states too, when they have monetary independence (Russia used it very succesfuly in 1998, Iceland in 2008).
@humanoid.panda: The significant difference between the two group, in Western Europe since about 1956, is that the latter tend to be ineffectual intellectuals and/or ossified bureaucrats. The Nazis, on the other hand, tend to be par-military.
What that says to me is that the Communists had better PR people. And I’d consider pushing that cutoff date to at least 1961 and the building of the Berlin Wall, but that’s minor.
And I presume you meant “paramilitary?” I can see that. Like I said, the Communists tend to have better PR people.
@Jenos Idanian #13:@Mikey:
As I understand it, Tsipras had been tiptoeing back from his more exorbitant promises for the last several weeks, so I wouldn’t take everything he said during the campaign at face value.
@humanoid.panda:
Indeed. America has a common language, a common culture (with relatively minor regional variations), and a relatively long and successful political history interrupted by just one war.
Europe, as a whole, has exactly none of that. And they bear grudges for a very…long…time.
@Jenos Idanian #13:
When you’re talking to the slow class you have to repeat yourself. And I was talking to you.
@humanoid.panda:
True, you did bring it up first. I hijacked it because, well, I like watching Jenos’ head explode. It’s not my best character trait. But hey, I have a cold and I’m bored, so a bit of sadism passes the time.
@Jenos Idanian #13:
True, but not with their consent.
For the benefit of Northern European banks and Germany. The bailout has been a disaster for Greeks.
Debt can’t be paid down when one reduces spending so drastically the economy shrinks faster than cuts can keep up with. The bailout offered by the troika was never intended to pay down any form of debt, its purpose was to allow Germany to continue living off the Greek credit card.
@Ben Wolf: (shrug) OK, so I skipped the “via their duly elected government” part. Their government racked up the debt, they’re the ones that let their debt skyrocket, they’re the ones that had its public sector spending skyrocket way, way beyond their ability to pay for.
@Jenos Idanian #13: Greece was fully able to service its liabilities, until it joined the eurozone. Germany as a member of the eurozone routinely violated its treaty obligations with deficit spending, which is why it engineered skyrocketing Greek debt. Greece got liabilities it couldn’t meet while Germany got the financial assets.
You’re blaming the wrong country.
@Ben Wolf: While it’s totally true that Germany behaved atrociously after the crisis, and that the Euro was designed to make the rest of Europe noncompetitive with the German economy, this is really taking things too far. No one forced the Greeks to fake their budgets or to stop collecting taxes while using loans to paper over the deficits..
@humanoid.panda: Faking budgets and not collecting taxes, while generally bad ideas, aren’t relevant in terms of Greece’s ongoing problems.
@Ben Wolf: Faking budgets and not collecting taxes, while generally bad ideas, aren’t relevant in terms of Greece’s ongoing problems.
Um… I can’t even begin to imagine how that could be accurate. If the books are cooked, that undermines (to put it mildly) the whole fiscal situation. That was one of the factors that brought down the Soviet Union.
@Ben Wolf: They are irrelevant in the context of post-2008 policy, but they are surely relevant when figuring out what caused it…
@Ben Wolf: Look, that is right out of coocoo-town. Spending while having no idea how much is either spent or collected is usually not a good idea.
The Euro was not the reason why they had to default, it was the reason they didn’t have to default earlier. Now, it might also be the reason why they can’t dig themselves out anymore, but absolving them of their responsibility for the situation is insane.
OK, how the hell did I end up on the POPULAR side of an argument here?
@Ben Wolf: Don’t suppose you have links to material with a more thorough explanation from this angle?
I understand MMT to a degree, but not enough to understand how Germany could have possibly engineered a Greek fiscal crisis in any sense, especially given the horrible accounting and the necessity of bribery at all levels to get anything done. That doesn’t speak to German malfeasance, but Greek.
Speaking of Greece, how is Kansas doing with its austerity budget?
@Liberal With Attitude: Better than Greece, not as good a Germany.
@Jenos Idanian #13: Because people love simple morality stories to explain complex events they don’t understand. It’s not just a conservative thing.
Greece never should have been able to join the euro, and only made it because they faked their budget data, and like a US mortgage broker in the early 2000s, the EU accepted it for political reasons. All the money that the EU sent to Greece for the last 3 years was not to bail out the Greeks, it was to bail out the privately held banks and convert the debt to “EU” debt that is easier to sell to your local voters than a series of failed banks. As Greece was never in a position to pay back the money, the new government’s new course doesn’t make any difference.
@gVOR08: ” Because people love simple morality stories to explain complex events they don’t understand. It’s not just a conservative thing.”
I do find it amusing that the people who scream that the Greek people must suffer to pay off debts incurred by their government to prop up their corrupt banks are exactly the same ones who scream like little babies at the notion of raising our taxes to pay for our national needs or even to lift the debt ceiling to cover the debts we’ve already incurred.
Amazing how those simple morality stories only apply to other people.
@wr: I do find it amusing that the people who scream that the Greek people must suffer to pay off debts incurred by their government to prop up their corrupt banks are exactly the same ones who scream like little babies at the notion of raising our taxes to pay for our national needs or even to lift the debt ceiling to cover the debts we’ve already incurred.
Exactly. Now, if the talk of raising taxes was tied to paying off debts, that would be different. But that ain’t gonna happen with Democrats.
And “raising the debt ceiling” doesn’t “cover debts,” it’s incurring more debts.
How the hell are such fundamental concepts so impossible for you to grasp?
@Jenos Idanian #13:
No, it allows borrowing of the money necessary to pay obligations already incurred.
This is why Republican bloviation over the debt ceiling is so much bullshit. A lot of them vote in favor of the spending, but then come around later and make a big show about actually borrowing to pay the debt they voted in favor of incurring in the first place.
@Tillman: There’s no one-stop link I’m aware of which summarizes eveything. The best place to go would be Bill Mitchell’s blog and do a search for relevant entries: http://bilbo.economicoutlook.net/blog/
There are two sources of financial assets in a modern economy: government spending and loans.
In the eurozone, the currency called the euro is controlled by the ECB. Banks under the ECB can create their own money which is denominated in euros, and this happens each time a loan is made. So when a loan is made to someone by a Greek bank the Greek money supply expands, and contracts by an identical quantity as the loan is paid back.
However there is no organization with fiscal authority. While the ECB is the monopoly issuer of euros for the interbank payments system it is not empowered to spend euros into the economies of member countries. This has two consequences, the first of which is any expansion of the money supply requires credit expansion. The second consequence is that aggregate net saving is impossible: because the money supply contracts in equal measure to the credit expansion, there is no net increase in financial assets. For one German to save money, someone elsewhere in the eurozone must dissave, and net change in savings for the eurozone as a whole is zero. For German A saves 10,000 and Italian B dissaves 10,000.
Although the eurozone cannot net save, it is possible for the private domestic sector of one member state to save against other member states. This is where Germany’s role as catalyst for the continuing crisis comes into play.
To maintain growth and allow Germans to net save the German government has pursued an ongoing internal devaluation making its products more price competitive relative to its neighbors. It has done this by strongly discouraging domestic investment and suppressing wage growth, a path not possible for a rural, agrarian country like Greece to match.
As Greeks bought less expensive German goods in ever-increasing quantities, Greece’s financial assets flowed north into the German economy. This is of course no different than trade deficits chronically run by the United States, but the U.S. government controls its own currency. American trade deficits automatically run the government fiscal balance into deficit, replacing financial asset leakage with additional government spending.
Because Greece surrendered its currency when it joined the eurozone it cannot rely on its own government to replace the assets. The only way open to doing so was continued credit expansion in the Greek economy, which is why the German government encouraged German banks to make loans to Greeks. The financial assets then flow back into German hands via the current account surplus while the liabilities for repayment remained on Greek balance sheets.
This was the German goal from the very beginning: to structure the eurozone monetary system in such a way that Germany would accumulate assets while weaker member states accumulate the asociated liabilities. It is this and only this which has kept Germany out of recession as it drains demand from its southern neighbors, living off their national credit cards. For Germany the eurozone has generated a form of fiscal stimulus which the German economy and government themselves could not provide. The problem with this is now, of course, obvious. As Germans collected the assets resulting from Greek credit expansion, the Greek economy was deprived of the assets it needed to repay the loans. So long as Greeks could continue to borrow a catastrophe could be kicked further into the future, but the demand shock of the global financial crash brought credit growth to a halt.
A system which relies upon continued growth to function is the definition of a Ponzi scheme. Germany’s scheme.
@Mikey: If we owe $17 trillion, and we borrow another $1 trillion, we are actually paying down our debts. We now owe $18 trillion, but we’ve improved our financial situation.
And in a few years, we’ll borrow a couple more trillion, owe $20 trillion, and we’ll be even better off.
Riiiiiiight.
I don’t intend this to sound too insulting here (you’re not one who has shown gross stupidity and/or rudeness to me before, as I recall), but there’s a saying that comes to mind: “this is the work of no ordinary fool. One would have to be highly educated to believe something this stupid.”
I understand that there are some things that are counterintuitive, and simply relying on “common sense” and “gut instinct” and “intuition” can put one in a position of rendering things too simplistic and wrong, but “we need to borrow more money to help our overall debt” is not just counterintuitive, but counterfactual. Debts can be restructured, and in some cases it can help (borrowing at a lower rate to pay off higher-rate debts), but that ain’t the case with the federal debt. The new debt is never directed at old debt; note how wr explicitly says that it’s for other purposes.
@Ben Wolf: So, Greece lied its way into the EU and got burned, but Germany signed up honestly, played by the rules, and is winning? And Germany’s the bad guy here?
@Jenos Idanian #13: Raising the debt ceiling does not create more debts, it authorizes the Treasury to issue securities highly desired by the non-government sector.
1) Congress, by passing a budget, orders the Treasury to spend. The Treasury then directs the Federal Reserve to credit the appropriate reserve accounts.
2) Treasurys are put on auction after the money is spent.
3) They are bid on and purchased using bank reserves supplied by the Federal Reserve and the Treasury itself.
4) The reserve accounts of the buyers are debited and their securities accounts are credited. When the reserves credited by initial order of Congress are factored in, the net financial wealth of the non-government sector has increased by the quantity of Treasurys issued. $100 billion in additional Treasurys means $100 billion in additional non-government financial assets.
Why have you been told otherwise your entire life? Because economists, politicians and other elites consider little people too stupid and irresponsible to be told how it really works.
http://m.youtube.com/watch?v=-V6-GnsvcG0
@Ben Wolf: Very nice conspiracy theory, and very fitting for the Merkel government. Too bad that Greece joined the euro under the Schroeder SPD/Green government, not known for its clever economic Machiavellian planing.
@Jenos Idanian #13: Did you not read anything i wrote? Germany rigged the game in its favor. If Greece has been scrupulously honest the same dynamics would have been in play.
@Mu: There is no conspiracy. No laws were broken and the euro designers were very open about their goals for it. Numerous monetary economists warned ahead of timw this would be the result and were ignored because no one wanted to hear it.
@Jenos Idanian #13: Dude, it’s a simple fact: the debt ceiling is entirely divorced from the budgeting process. Congress doesn’t even have to consider it, and therefore never does, when passing a budget.
The point at which you should focus, if you want to actually reduce the growth of the debt, is the actual budgeting process. I understand many Republicans do focus on that, but once the budget passes, preventing the government from borrowing to pay its commitments is a sideshow.
@Ben Wolf:
But would Greece still have ended up in a sovereign debt crisis? My understanding is Greece’s high level of corruption, tax evasion, and book cooking contributed a great deal to that. I’m interested to hear your thoughts.
@Mikey: The point at which you should focus, if you want to actually reduce the growth of the debt, is the actual budgeting process. I understand many Republicans do focus on that, but once the budget passes, preventing the government from borrowing to pay its commitments is a sideshow.
As I recall, we spent most of the Obama administration without actually passing a budget, so we wouldn’t have to deal with such unpleasant topics. When the Democrats held both Houses, they didn’t try. When the Republicans took back the House, they passed budgets, where the Democratically-controlled Senate ignored them.
So just how can we address this through the “budgeting process” when the process itself is ignored?
@Jenos Idanian #13: Refusing to raise the debt ceiling is not like cutting up your wife’s credit card. It is like ripping up the BILL for the credit card.
@gVOR08: Well, one solution to an unraised debt ceiling would be to divert funds from general expenditures into debt service. Or just not spend as much so the debt doesn’t need to increase.
@Jenos Idanian #13: Then vote against the CRs. Do something besides approving the commitment, and then opposing actually fulfililng that commitment.
@Mikey: I agree with you that Greece’s public sector is bloated and corrupt. Tax evasion is rampant and that is also a problem.
The Greek government lied about its budget deficits in the years 1999 – 2003. To join the eurozone governments must certify their deficits feom 1999 on has never exceeded 3% of GDP. Greek dedicits during this period ranged from 3.5% to 5.7%, which isn’t dissimilar from Germany’s own repeated deficit violations. Greece’s debt/GDP ratio was quite stable at around 100% up until 2008 when it exploded in the following demand shock.
My personal opinion is the same problem would have occurred regardless of the deceit. The euro area is simply not structured properly for states with such different economies and cultures to co-exist. It’s like putting New York and West Virginia into a monetary union and expecting the latter to compete. It can’t happen without an authority that can make fiscal transfers.
@Mikey: So you’re cool with what the Democrats did to the budget process? Is that what you’re saying? ‘Cuz that’s how it sounds — you say use the process, I point out how the Democrats short-circuited the process, you say just roll with it.
@Mikey:
The troll knows what he’s writing is some rancid combination of dishonesty and stupidity, but doesn’t care. There’s no point in engaging as he is not interested in a good faith discussion, and he already knows you are correct.
@Ben Wolf:
This is what I said back when it was created. Not as technical as you have put it in your comments, but I understood Germany was going to overwhelm everyone else.
@Mikey: Here is where Ben’s logic, which is generally sounds, fails. The dynamics he described happened everywhere in Southern Europe, but Greece’s economic collapse is much worse than that of Italy or Spain or Portugal (also, for the latter, much of their debt burden was created by bank bailouts, which is not the case for Greece). The gap between the Greek conditions and conditions elsewhere was pure product of uniquely Greek problems: budgetary fraud and failure to collect taxes.
@David M: Kindly cite where I was dishonest, jackhole. It’s a FACT that the Democrats refused to pass budgets for several years. And when they’re doing that, recommending “using the budget process” as a solution is somewhere between naive and insulting.
@Ben Wolf:
You are totally right about that, but still you have to account for the gap between Greek performance (catastrophic) and elsewhere in Southern Europe (terribly bad). That seems like an academic distinction, but it is important, because the decline in Greek standards of living really is much more drastic than anywhere in Europe.
@Mikey: This is what I said back when it was created. Not as technical as you have put it in your comments, but I understood Germany was going to overwhelm everyone else.
If you want a little troll-like entertainment, go and find some of the arguments from the time, see who disagreed with you, and see what they said. Then ask them if they still stand by those arguments (and, if my experiences aren’t unique, what insults they levied against you).
In my experience, they’ll usually double down on the insults and ignore the rest. If they don’t ignore you entirely.
@Jenos Idanian #13: Where you are dishonest, or perhaps ignorant, is in the fact that in the US budgetary process, the budget itself is absolutely unimportant. Appropriations bills, CRs and riders are actualyl the laws that allow money to be spent, and those get passed regularly. (Also, as side note, we actually did have a budget passed, in early 2013, an event so insignificant you haven’t actually noticed it in your holy indignation).
@Jenos Idanian #13:
In fact, plenty of lefty economists strenuously opposed the Euro bloc, mostly because on Keynsian grounds. The Right dislikes the EU and the Euro-block, but much more for reasons having to do with regulations than with fiscal and monetary policies.
To step away from my brief rudeness to David M, it still sounds like it boils down to this: the EU was set up in a way that offered Germany tremendous advantages over other member states, but it was all there for all to see. Among the potential members that would likely suffer was Greece, who technically should not have qualified for admission anyway, but their lengthy history of fraud and dishonesty both 1) allowed them to fake their way in, and 2) put them at even more of a disadvantage under the EU as established.
At this point, Greece is suffering from the predictable (and predicted) consequences. Why is it so imperative to punish those who played by the rules in order to protect Greece?
@Jenos Idanian #13: I don’t think anyone is talking about punishing Germany. What I personally am recommending is that Greece, Italy, Spain, Portugal leave the eurozone . Now this will in the end harm Germany’s balance of trade because those countries will be able to devalue against the euro and compete, and it’s why Germany hasn’t yet tried to force anyone out.
@Ben Wolf: Perhaps “punish” is a bit harsh, but that was the subtext I was picking up here — Greece needs to be rescued, while Germany’s benefited form the circumstances that put Greece in its current dire straits. I drew the line from those two points.
I never followed the whole EU thing that carefully, but was skeptical about it at the time. I know that the idea of bailing is also gaining traction in the UK.
@Jenos Idanian #13:
This is exactly the problem with moralizing a situation that has very little to do with morality. At this point, no one is talking about punishment. Instead the debate is about what should Greece, and Germany do. Thus, the question becomes: is it in Germany’s interests to shifts its policy for Greece’s benefit, in order to maintain the Eurobloc? From the Greek point of view, how and whether should it use the debtor’s power to default?
Compare this to a bankrupcy proceeding: do courts punish creditors when they restructure debts in bankruptcies, sometimes forcing huge haircuts on debts? Are people and corporations immoral for using the threat of bankruptcy as leverage in negotiations with their creditors?
@Jenos Idanian #13:
Actually, I tjhink most people here are actually opposed to baling out Greece, because that bailout is intended to continue the arrangements that make Greece incapable of being competitive viz. Germany. What people are opposed is the moralizing language Germany is using to pressure not only Greece, who it would it be happy to go, to maintain current course.
Just as a sidebar remark there’s nothing particularly controversial or surprising about Ben Wolf’s comments above. He’s just explaining the implications of the Eurozone being a financial sovereign with a fiat currency.
I also want to thank humanoid.panda. Both Ben and panda have been doing yeoman’s service in explaining the sources of the present mess in the Eurozone.
@Dave Schuler:
Hear, hear. They have certainly expanded my knowledge, for which I also thank them.
Well he’s categorically stating German intent to fleece its partners which I find doubtful, bordering on conspiracy theory territory. And he claims that he can prove the negative impact of the Euro by pointing to Greece economic data pre-2010, which is questionable given what we now know of their accounting methods. Of course the Greek economy looked largely intact pre-crash. That was the whole point of falsifying the data in the first place.
His conclusions are largely correct, but like Jenos he manges to throw quite a lot of bombs on the way to them.
@Dave Schuler: Hear, hear. Ben and panda’s efforts are appreciated.
@Ben Wolf: in particular is a really nice summary.
@Mikey: I agree with you that Greece’s public sector is bloated and corrupt. Tax evasion is rampant and rhat is also a problem.
The Greek government lied about its budget deficits in the years 1999 – 2003. To join the eurozone governments must certify their deficits feom 1999 on has never exceeded 3% of GDP. Greek dedicits during this period ranged from 3.5% to 5.7%, which isn’t dissimilar from Germany’s own repeated deficit violations. Greece’s debt/GDP ratio was quite stable at around 100% up until 2008 when it exploded in the following demand shock.
My personal opinion is the same problem would have occurred regardless of the deceipt. The euro area is simply not structured properly for states with such different economies and cultures to co-exist. It’s like putting New York and West Virginia into a monetary union and expecting the latter to compete. It can’t happen without an authority that can make fiscal transfers.
@Ebenezer_Arvigenius: On this issue are effectively two camps in Europe: those who want to see a United States of Europe and those who want to exploit this for personal gain. The two have quite a bit of overlap, as one would expect in capitalist economies where the primary motivation is expected to be self-interest. I don’t consider the German leadership to be particularly nefarious; I think many want a Europe united in peace and a Germany first among equals. Nor would I argue they intended to plunge their neighbors into crisis, although they did work to structure the currency union to disproportionately benefit Germany — again, totally understandable. But that structure is flawed and is responsible for this seemingly endless economic disaster.
It is the continuing refusal of the current government to recognize “The Plan” is falling apart at the seems which appears little short of criminally negligent. Merkel herself appears either immune to rethinking or so insulated by her advisors she might as well be. In the case of Greece I do believe there was a special effort to inflict pain via harsh restructuring requirements, retribution for the dishonesty of its leaders. That I don’t agree with because I don’t believe in beating people up unless there’s no choice.
As for Greece’s debts prior to joining, the troika and Germany were all aware the GDP/debt ratio was well in excess of the 60% limit. To my knowledge Greece has been accused of hiding a few billion via complex derivatives, but those debt levels are not really relevant. If they had been exactly as Greece promised there still would have been an enormous competitive imbalance. Greece could never generate or import sufficient demand vis-a-vis northern european states to sustain growth so long as it remained in the eurozone.
@Ben Wolf:
This. To create a flawed plan, or even to exploit those flaws for your own interest is one thing. To refuse to address those flaws even at a cost of an economic cataclysm is a totally different matter altogether.