tag:blogger.com,1999:blog-8764541874043694159.post2059167882790155360..comments2024-03-29T07:31:06.703+00:00Comments on Coppola Comment: Sisyphus,Tantalus and a prisoner's dilemmaFrances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger23125tag:blogger.com,1999:blog-8764541874043694159.post-14954944848187215542016-06-16T14:22:12.385+01:002016-06-16T14:22:12.385+01:00When the PSI haircut took place, debt relief had b...When the PSI haircut took place, debt relief had been promised with the conclusion, in 2015, of the then-new program (the second MoU). Unfortunately the last (fifth) evaluation that would have concluded the program never happened due both to lack of time (the failure to elect a new President of the Republic leads to elections) and an imminent new government that openly intended to abolish the program.<br /><br />One has to wonder why Syriza did not hold back for some months in order to let the program conclude successfully, and only then to claim the "prize" of debt relief. If not else they would have been in a very strong negotiating position.<br /><br />The issue of debt relief has always been a matter of political theatrics. It depended on the successful implementation of a stabilization program (fiscal consolidation and some structural reforms) which would allow EZ leaders to pass debt relief through their parliaments. This scheme failed twice because of intransigence on the part of the Opposition. First in 2011 (when the PM resigned, the opposition changed its stance and a second bail-out propped up the first), and again in 2015 as mentioned above. We are now in the third attempt, scheduled to conclude in 2018.<br /><br />Alas, the more the attempts on a painful but relatively simple program, the lengthier the adjustment, the deeper the recession, and yes it's true, the less it looks reasonable.<br />no_such_thinghttps://www.blogger.com/profile/01836234103222238942noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-6029527001748906782016-06-13T10:09:04.837+01:002016-06-13T10:09:04.837+01:00IIRC Greece has gone bankrupt no less than 6 times...IIRC Greece has gone bankrupt no less than 6 times since it became independent of the Ottoman Empire, and since joining the EU had received aid equivalent to twice the US spending on the post-WWII Marshall Plan.<br /><br />Also from Stratfor's "The Geopolitics of Greece: A Sea At Its Heart":<br /><br /><i>With the collapse of the Soviet threat at the end of the Cold War and the subsequent end of the Balkan wars with the 1999 NATO bombing of Serbia, the political geography of the region changed once again. This time the change was unfavorable for Athens. With the West largely uninterested in the affairs of the region, Greece lost its status as a strategic ally. And along with that status, Athens lost the political and economic support that allowed it to overcome its capital deficiencies.<br /><br />This was evident to everyone but the Greeks. Countries rarely accept their geopolitical irrelevance lightly. Athens absolutely refused to. Instead it did everything it could to retain its membership in the first-world club, borrowing enormous sums of money to spend on the most sophisticated military equipment available and producing erroneous financial records to get into the eurozone. This is often lost amid the ongoing debt crisis, which is commonly described — mainly by the Western European press — as a result of Greek laziness, profligate spending habits and irresponsibility. But faced with a geography that engenders a capital- poor environment and an existential threat from Turkey that challenges its Aegean core, Greece had no alternative but to indebt itself after its Western patrons lost interest, and now even that option is in doubt. (Trying to keep up with its fellow EU states in terms of quality of life obviously played a role in Greece's financial overextension, but this can also be placed in the context of keeping up with a modernizing Turkey next door.)<br /><br />Today, Greece cannot even dream of achieving its fifth geopolitical imperative, dominating the eastern Mediterranean. Even its fourth imperative, the consolidation of inland Greece, is in question, as illustrated by Greece's inability to collect taxes. Nearly 25 percent of the Greek economy is in the so-called "shadow" sector, by far the highest rate among the world's developed countries.</i>George Cartyhttps://www.blogger.com/profile/12170378024031141482noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-70751092465898220432016-06-12T23:55:31.079+01:002016-06-12T23:55:31.079+01:00You already mention that there are discordances be...You already mention that there are discordances between the Eurogroup and the IMF (whose bluff was called).<br /><br />Is it conceivable that rifts might occur within the EU creditors themselves -- perhaps because of another debt crisis elsewhere -- which would lead some creditors to attempt to shaft the ones with less political and financial weight, or those with a much weaker hand because of a higher, risky exposure besides Greece? <br /><br />My point being: to what extent is the Eurogroup actually a monolith, and what could bring its members to diverge on the Greek case -- which would as a consequence potentially break the stalemate?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-65607393370894104052016-06-12T21:39:42.947+01:002016-06-12T21:39:42.947+01:00I don't share your a negative view of Greece. ...I don't share your a negative view of Greece. It is not an incipient failed state only still functioning by virtue of its undeserved EU membership. It is poor, yes, but that is not the same as non-viable. It was an economically viable state before it joined the Euro and it could be so again if it left, though admittedly the damage done by the Euro crisis would take a very long time to repair. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-41278440423716457952016-06-12T20:17:52.323+01:002016-06-12T20:17:52.323+01:00But isn't tourism -- the only functional secto...But isn't tourism -- the only functional sector in the Greek economy -- already running at full capacity though? Greece is an economically non-viable country -- its mountainous terrain impedes capital formation (and is also the reason why ancient Greece was made up of independent city-states), while its multitude of Aegean islands demand a large military budget.<br /><br />Greece's dependence on imported food and fuels means that Grexit would be utterly catastrophic -- didn't Syriza MEP Kostas Chrysogonos say that a Greece expelled from the Euro would be more impoverished than Zimbabwe?George Cartyhttps://www.blogger.com/profile/12170378024031141482noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-53029922065084420972016-06-09T21:46:50.946+01:002016-06-09T21:46:50.946+01:00The economies of western democracies are - it woul...The economies of western democracies are - it would appear - performing poorly compared to past performance. Austerity policies suggest that the design of the "engine" is at fault and must therefore have parts switched off if not dismantled. Credit acts like the oil in an machine. The current credit system is full of sludge that is adding to the damage already done. An oil change is required ... urgently. A better performing (lubricating) credit system can only arise after the sludge is cleared away - by writing off bad debts or providing some degree of debt relief.<br /><br />Failure to do so only harms the engine more - on top of the unnecessary damage caused by Austerity economics. The longer it takes for this reality to be realised the greater is the lost opportunities for the precariat and young of all Western democracies. Perhaps we need an economic equivalent of war crimes that can be judged by the International Criminal Court in The Hague?Prisoner of Hopehttps://www.blogger.com/profile/12101614242785360125noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-17150475974616808712016-06-09T20:27:58.870+01:002016-06-09T20:27:58.870+01:00Below is how the Encyclopedia Britannica described...Below is how the Encyclopedia Britannica described Greece and Greeks back in 1911, i. e. 104 years ago. Just for those who have great hopes that Greece and Greeks will ever change. Frankly, perhaps it is good that they don't change!<br /><br />http://klauskastner.blogspot.co.at/2013/12/encyclopedia-britannica-1911-on-greeks.htmlkleinguthttps://www.blogger.com/profile/12491174042954678023noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-30210256508877488822016-06-09T14:56:27.386+01:002016-06-09T14:56:27.386+01:00And it strikes me that if rich people are characte...And it strikes me that if rich people are characterized as those with money and poor people as those without it and who work for it , then "internal devalution" , lower wages and prices, means within that country the rich get comparatively richer and the poor get poorer. Thats a different political dynamic to an exchange rate adjustment of currencies between trading countries.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-84721840676617169382016-06-09T14:30:02.509+01:002016-06-09T14:30:02.509+01:00Well...the wage cages were meant to keep the south...Well...the wage cages were meant to keep the south of Italy competitive because the Gov feared that salaries there would have increased above the local productivity otherwise as they would follow the dynamic of the more productive north. The main tenet was purely neoclassical and it reflects the idea that unemployment is caused by excessive real wages. There's a whole lot of evidence against this and there's actually some support for the opposite argument that a "wage push" is good for productivity as it keeps pressure on companies to keep investing and become more capital intensive. I don't have a definitive answer. I only note that despite 3 decades of "wage cages", the South of Italy remained the South of Italy - even before entering the EZ. Now the relative situation is far worse of course. Mirco Tomasihttps://www.blogger.com/profile/04422757122795456350noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-17438276447389773242016-06-09T14:05:32.172+01:002016-06-09T14:05:32.172+01:00the "wages cages" that interesting, did ...the "wages cages" that interesting, did they work.<br /><br />Internal Devaluation - The purchasing power I am noting is that of people in the devaluation area who are holding money before the devaluation starts. That money has more purchasing power within the devaluation area after the so called internal devaluation, and so it is not politically neutral, and that is in addition to the debt burdens you identify.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-69698289722364265712016-06-09T13:55:38.013+01:002016-06-09T13:55:38.013+01:00This comment has been removed by the author.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-74239601218699168312016-06-09T13:43:00.963+01:002016-06-09T13:43:00.963+01:00The EZ works through internal adjustment (prices a...The EZ works through internal adjustment (prices and wages) rather than external adjustment (currency) precisely because there is no political union. The founding fathers of the Euro were very clear about this, they never tried to hide it. Read the Delors Report from 1989. It clearly says that after losing the flexibility of the E/R, the economies of the MS will have to become internally flexible to respond to demand shocks.<br /><br />The difference in a political union, like the UK, is that the settlement of internal trade imbalances is continuously done via official transfers among regions through the central government. People may not even notice them. But they are there, unconditional and undisputed. <br />Yet, there may be calls for some forms of "internal" devaluation even in the case of a political union. For example back in the days of the Lira Italy had the so-called "wage cages" to keep depressed regions "wage" competitive. <br /><br />Anyway, a currency devaluation only decreases the purchasing power of the citizens with regards to foreign products whose currency has symmetrically appreciated. It does not necessarily reduce the purchasing power domestically, unless you take the extreme and historically unfounded assumption of a one-to-one relation between inflation and devaluation.<br />Internal devaluation is much more vicious because it takes away income from the people while it leaves nominal debt burdens untouched. In this sense it creates a lot more trouble for the economy as a whole than a currency devaluation. Mirco Tomasihttps://www.blogger.com/profile/04422757122795456350noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-55481462600177581702016-06-09T12:52:43.441+01:002016-06-09T12:52:43.441+01:00to some extent the policy of an "internal dev...to some extent the policy of an "internal devaluation" within a "union" is self contradictory.<br /><br />By the way, Internal devaluation is a bit of a misnomer as unlike a currency devaluation , savers, ie those with money, see the purchasing power of that money increase , unlike a currency devaluation.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-18997918215716033632016-06-09T11:33:40.886+01:002016-06-09T11:33:40.886+01:00" Greek prices and incomes have a lot further..." Greek prices and incomes have a lot further to fall. "<br /><br />That policy doesn't seem to tally with the principle of the European Union as a political Union, and also a social and political union of people, for example the UK is a political union and Unemployment benefit is the same in Scotland as London and a box of cornflakes costs the same in Scotland and London.<br /><br />You would not expect to see a British Prime minister trying to lower wages and prices in so called "depressed" regions of the UK, in fact the opposite , they are usually trying to raise them.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-66373697310212611972016-06-09T11:32:23.118+01:002016-06-09T11:32:23.118+01:00This comment has been removed by the author.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-7496289229913295462016-06-09T11:06:26.769+01:002016-06-09T11:06:26.769+01:00The creditor countries want their money back , the...The creditor countries want their money back , they can help that along buy buying goods and services from Greece. Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-64625024343879596612016-06-09T08:51:50.704+01:002016-06-09T08:51:50.704+01:00Ioannis, read the OECD Going for Growth 2015. It h...Ioannis, read the OECD Going for Growth 2015. It has a nice chart about which country did more "structural reforms" (as they call them). You will be surprised to find Greece at the top. <br />The "Structural reforms" the creditors want are those meant to reinforce the internal devaluation process, hence create more deflation and downward wage adjustment, because that's how a fix exchange rate system like the Eurozone is supposed to work. Structural reforms have nothing to do with reviving the economy of Greece, they are simply meant to balance the current account. In Greece as everywhere else in the EZ. Mirco Tomasihttps://www.blogger.com/profile/04422757122795456350noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-27257856653443318182016-06-09T06:36:52.350+01:002016-06-09T06:36:52.350+01:00Wonder where the Goldman Sachs is now? They got Gr...Wonder where the Goldman Sachs is now? They got Greece into the mess, maybe they could lend a hand to get Greece out of the mess?<br /><br />Richard.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-49710234355334592252016-06-09T06:26:09.368+01:002016-06-09T06:26:09.368+01:00Very interesting. I wonder what might happen next ...Very interesting. I wonder what might happen next if Greece and others leave. Would this actually lead to EU institutional change? The problem here seems to be structures that undermine approaches which could reflect shared European values and find a better collective outcome. What reforms could promote collaboration, do you think?The New Economisthttps://www.blogger.com/profile/18214560860913361884noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-27158024241658537002016-06-09T01:46:25.349+01:002016-06-09T01:46:25.349+01:00I doubt itI doubt itPaintingWithNumbershttps://www.blogger.com/profile/04626024525506054863noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-61003871521391960442016-06-08T23:27:03.464+01:002016-06-08T23:27:03.464+01:00Rubbish.Rubbish.Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-14536221473879950002016-06-08T21:30:15.901+01:002016-06-08T21:30:15.901+01:00Your article assumes that Greece has attempted str...Your article assumes that Greece has attempted structural reforms <><br /><br />Previous governments did little of that, and the current offers none.Anonymoushttps://www.blogger.com/profile/13787211267732186053noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-72934302635151543562016-06-08T19:04:07.705+01:002016-06-08T19:04:07.705+01:00Very clear article. I agree. Very clear article. I agree. www.MiguelNavascues.comhttps://www.blogger.com/profile/00880006105532291958noreply@blogger.com