No one knows what the short-term outcome of the negotiations between the EU and Greece will be. I won't even guess. What I do instead is agree with Larry Elliott of the Guardian whose article published last night was headed:
Creditors' economic plan for Greece is illiterate and doomed to fail
Larry's logic was almost identical to that in the piece I wrote here when sitting in Copenhagen airport yesterday afternoon. Demanding more austerity from an economy that is already as depressed as the Greek economy is really does make no sense at all, unless, of course, the politics of the situation are taken into account. Then bullying and even persecution may be added into the equation and at that point an explanation for what is happening is possible.
Or am I being too kind? Could it be that those demanding Greece suffer yet further cuts are really so economically illiterate, and have an economic understanding so singly dominated by their perception of the relationship between the micro-business and its bank manager that they think that what they are doing is appropriate and even plausible?
I don't rule out vindictiveness for a minute: that is especially apparent in the attitude of countries like Portugal and Ireland. Nor do I rule out German debt paranoia, which they really do need to grow out of. But what really worries me is that some of those undertaking these negotiations might think they are doing the right thing. And that's really troubling.
Just as austerity is both wholly unnecessary and deeply counter-productive in the UK, so is the EU policy towards Greece profoundly wrong in economic terms. So the question is, are we really ruled by economic fools? Or don't they care because they feel so insulated from the reality of what they're doing? Whichever is true the need for change is very, very real.
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But how can Greece go on with public services it can’t afford? Surely it has to live within its means at some point? Unless the eurozone agrees to permanent redistributions of wealth to the Greeks? Isn’t ‘austerity’ simply living with the reality of how rich you are as a country rather than how rich you would like to be?
Three points:
1) If you agree to economic and fiscal union you agree to subsidy and redistribution. Your comment does m=not make sense in that context
2) The EU is offering subsidy now – but not the way the Greeks wants. The question is who decides
3) The question of viability is not about balancing books for a government. How many times does that have to be said?
“The question of viability is not about balancing books for a government. How many times does that have to be said? ”
It seems endlessly, Richard -indicative of the strength of one of the most pernicious myths of our era. Some people new to this blog might not know that you and others have made the point 100’s of times – Perhaps you should have the words ‘THE GOVERNMENT IS NOT A HOUSEHOLD’ emblazened at the top of the home page in flashing lights!
Though i doubt it will sink in even then, such is the success of the propaganda machine of fictionalisation.
Greece is a case of Odious Debt-when you can’t eat or get basic health care you are manifestly not living beyond your means – why can’t people see that the banks are syphoning up everything???
With reference to your three points:-
1) There is no democratic mandate for economic and fiscal union in the EU, you can imply it is the logical next step, you can state it is needed for the currency to work……….but no politician has put it to a vote, not only because of treaty change but because it would lose, you claim to put great store in democratic legitimacy…….well fiscal union does not have it!
2)The people who decide are the politicians elected to represent 98% of the EU population, not those elected by 2% (ie Greece). If you agree to a shared currency then you lose sovereignty and have to abide by the decisions of the whole group, I doubt you would support Cameron in his quest for National overrides so why do it for Greece.
3) The question of viability is not about Greece but the whole EU and the rules that make the EU work, if the Euro leadership require the rules to be enforced and debt to be repaid, no matter how harsh that is on Greece. The interests of Greece, although important, do not override those of the wider EU community and its tax payers. If you allow national Governments to abandon rules over balancing the books (no matter how damaging you may think) then you cannot have a wider currency union.
This is one of those occasions when your compassion for Greek society and social damage is overruling your normal economic reasoning for the EU to work and exist. I am sure that tomorrow you will be back to claiming the EU is great because of some minor tax amendment………
The possibility that one can hold different positions on different issues relating to the same organisation has never occurred to you, has it?
It mist be really easy to live in your simple world
Well, if you think the answer is printing Euros then Greece has a problem – it can’t do that. And surely having a eurozone where governments are financed by the printing press is deeply problematic. Whi gets how much free money from the ECB? It seems like a nightmare of moral hazard where each country is incentivised to play beggar thy neighbour.
I didn’t say it could
I said the EU could
Keep up, will you?
And that is exactly what the EU says it will do if it gets its way
As for the moral hazard of the printing press – the real issue is that this hazard is in the private sector. That was what caused 2008. Again, please pay attention
In amongst all the destruction of value in anIMF-style economic contraction, a small number of people become very, very wealthy. Or rather: wealthier.
It isn’t ‘counter-productive’ if the IMF’s intentions are hostile. This makes sense to me as finance itself as I understand it is hostile, the function of the economy is hostile (wealth extraction), the reason we have money the entirely artificial way we do is itself hostile, the whole point of it being the creation and maintenance of an artificial banking elite. Now the IMF are trashing Greece. What’s new? I keep on saying we need local publicly-controlled currencies to fight this and Greece of course have gone completely the other way, surrendering their own self-controlled Drachma for the bank-controlled Euro. There’s a school of thought you know which suggests British Imperialism was simply a tool of the City of London bankers, the whole point being to get self-sustaining communities all round the world forced off their lands and reliant on City money just as our ancestors on the Commons had been here. It seems entirely plausible to me that the whole Euro project is simply another outing along similar lines. I read a lot about banking history as I’ve said here before. Perhaps this has made me cynical but, frankly, nothing that’s happening here surprises me at all.
“But how can Greece go on with public services it can’t afford? Surely it has to live within its means at some point? Unless the eurozone agrees to permanent redistributions of wealth to the Greeks? Isn’t ‘austerity’ simply living with the reality of how rich you are as a country rather than how rich you would like to be?”
…And yet it is perfectly OK to spoon feed the banks hundreds of billions of pounds in government borrowing and QE when they went bust because of their naked greed.
How odd!
It makes sense if what you are insisting on is the selling off of state assets at knock down prices to the existing wealth grabbing elite.