Greek Crisis: Krugman on why the Euro is the problem

Patched up Euro

KRUGMAN LOOKS AT EUROPE’S MANY ECONOMIC DISASTERS

– Extract from article by Paul Krugman, NYT, 3 July 2015

It’s depressing thinking about Greece these days, so let’s talk about something else, O.K.? Let’s talk, for starters, about Finland, which couldn’t be more different from that corrupt, irresponsible country to the south. Finland is a model European citizen; it has honest government, sound finances and a solid credit rating, which lets it borrow money at incredibly low interest rates.

It’s also in the eighth year of a slump that has cut real gross domestic product per capita by 10 percent and shows no sign of ending. In fact, if it weren’t for the nightmare in southern Europe, the troubles facing the Finnish economy might well be seen as an epic disaster.

And Finland isn’t alone.

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Greek Crisis: Declaration of 246 Professors of Economics and Business at Greek Universities on the Referendum

Greek flag

The following declaration is signed by 246 professors at Economics Schools and Universities in Greece. By this declaration, we want to express our great distress about the latest developments in our country. We strongly believe that, at this crucial point, it is of paramount importance to avoid excesses, to show national cohesion, to preserve our position in the Eurozone and the EU, and to regain our credibility in the international community. Further, the fiscal consolidation program, drawn jointly with our EU partners and other creditors like the IMF, should be characterized by the lowest possible recessionary consequences and the highest possible level of social protection, aiming at growth and job creation in the private sector as soon as possible. The prolonged political uncertainty has led the economy to a renewed recession, has reversed the decline in unemployment, has lowered tax revenue and has widened the fiscal gap.

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Greek Crisis: IMF says Greece needs debt relief

Greek crisis - lady before NO vote posters

IMF says Greece needs extra €60 bn in funds and debt relief

– Source: The Guardian, 2 July 2015. Click here for full article

Selected extracts:

The IMF said that is was releasing its preliminary draft debt sustainability analysis as a result of the leaks of documents reported in the Guardian earlier this week.

The International Monetary Fund has electrified the referendum debate in Greece after it conceded that the crisis-ridden country needs up to €60bn (£42bn) of extra funds over the next three years and large-scale debt relief to create “a breathing space” and stabilise the economy.

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Greek Crisis: Indicators of economic performance: 1974 – 2015

Greek flag - man holding Euro flag up top

The complete history of the Greek debt drama in charts

* By Matt Philips, Quartz, 30 June 2015. Full article and all charts available from Quartz  here

The value of any analysis depends, to a large extent, on the beginning and ending you choose.

So it is with Greece, which is seeing its simmering, half-decade-long debt crisis come to one of its periodic boils—and perhaps a final explosion.

Where to start? Records of Greek public debts stretch back at least as far as the Peloponnesian war—around 400 BCE. Should that be included? Or how about the fact that the modern nationstate of Greece has been in default for roughly half of the years since it gained independence from the Ottoman Empire in the 1830s? (After all, some trace Greek resistance to taxation to the historical taxes levied by the conquering Turks.)

For simplicity’s sake, let’s just start in the years before Greece joined the euro. In the 1980s, and early 1990s, the Greek economy was a bit of a mess.

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Greek Crisis: “On Europe’s cruel capitalism”

Greece. Lines before banks

This referendum is a fight between the Greeks and Europe’s cruel capitalism

– Aditya Chakrabortty, Economics Editor, The Guardian. 29 June 2015

Europe’s top politicians agree that the Greeks will vote this Sunday on one of the most important questions facing any nation. Yet they can’t settle what that question actually is. For Alexis Tsipras, the Greek prime minister, it is about whether his people will tolerate any more “strict and humiliating austerity”. Not so, says Germany’s Angela Merkel. She reckons the Greeks are choosing between staying in the euro and returning to the drachma. The stakes are raised higher still by the boss of the European commission, Jean-Claude Juncker: come next weekend, “the whole planet” will find out whether Greece wants to remain in Europe.

All of these may be correct, but each swerves the central importance of the moment. The reason to watch Greece this week is because a population of 11 million will hold a contest that the rest of us may one day also get to stage: a fight between democracy, and a broken political and economic system.

That battle – between what people want and what their rulers force down their throats supposedly for their own good – can be glimpsed at every dramatic moment in Greece’s recent history.

It was already there in spring 2010,

– – – > Full text of article here.

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Greek Crisis: Joseph Stiglitz on casting his vote

Joseph Stiglitz - Guardian Greece article

Neither alternative – approval or rejection of the troika’s terms – will be easy, and both carry huge risks

– From The Guardian, 29 June 2015. Full article here.

The rising crescendo of bickering and acrimony within Europe might seem to outsiders to be the inevitable result of the bitter endgame playing out between Greece and its creditors. In fact, European leaders are finally beginning to reveal the true nature of the ongoing debt dispute, and the answer is not pleasant: it is about power and democracy much more than money and economics.

Of course, the economics behind the programme that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.

It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned. The troika is still demanding that Greece achieve a primary budget surplus (excluding interest payments) of 3.5% of GDP by 2018.

Economists around the world have condemned that target as punitive, because aiming for it will inevitably result in a deeper downturn. Indeed, even if Greece’s debt is restructured beyond anything imaginable, the country will remain in depression if voters there commit to the troika’s target in the snap referendum to be held this weekend.

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Greek Crisis. Jeffrey Sachs: Let Greece Default

Jeffrey Sachs Bloomberg

Jeffrey Sachs, a professor at Columbia University, talks about Greece’s debt crisis and the nation’s future in the euro.

Some quick quotes from his interview:

This is really a very sad mess. The sort of situation which never should have been allowed to come about in the first place.

It shows very poor economic management from the European side.

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Thomas Piketty calls for European Debt Conference

“We need a conference on all of Europe’s debts, just like after World War II. A restructuring of all debt, not just in Greece but in several European countries, is inevitable. Just now, we’ve lost six months in the completely intransparent negotiations with Athens. The Eurogroup’s notion that Greece will reach a budgetary surplus of 4% of GDP and will pay back its debts within 30 to 40 years is still on the table. Allegedly, they will reach a 1% surplus in 2015, then 2% in 2016, and 3.5% in 2017. Completely ridiculous! This will never happen. Yet we keep postponing the necessary debate until the cows come home.”

Eruoean Debt Conference 1953

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Greek Crisis: Piketty steps up to bat on Germany and Debts

Thomas Piketty - books

In this no holds barred interview that appeared in the influential German publication Die Zeit today, Thomas Piketty reminds their readers that debt forgiveness has to be part of the on-going negotiations between Europe, the IMF and the Greek government.  For those with short memories, he reminds us about how debt forgiveness has played an important role for the restructuring of the German economy at a time of utmost difficulty.

Here are some selected extracts from that exciting exchange. For the full article in English, thanks to the excellent translations of Gavin Schalliol, click to https://medium.com/@gavinschalliol/thomas-piketty-germany-has-never-repaid-7b5e7add6fff 

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Greek Crisis: Learning from the Referendum

gREEK FLAG STORMY SKY

Athens, 27 June 2015. The leader of the Greek coalition government, Alexis Tsipras, who had previously indicated that he might be obliged to call a referendum, or even national elections, if Greece was not able to secure an acceptable agreement in the restructuring negotiations, announced this morning that a national referendum on the topic would be held on Sunday 5 July.

Click here for offical Greek Government website for the Referendum (Ministry of Communications)  – http://www.referendum2015gov.gr/en/

In the face of what he and his team considered wrong-minded, punitive and impossible to meet conditions set out in the last round of unbending proposals on the part of their negotiating partners, the “troika” of led by the European Commission (EC), the International Monetary Fund (IMF) and the European Central Bank (ECB), Tsipras announced that his government was going to turn to the Greek people and ask them, Yes of No, whether to accept the latest troika’s terms.

Within hours the swords were drawn and the harsh words started to ring out, almost always with more passion than reason.

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The “Real Economy” vs. the Financial Economy (And then I rembered Laputa)

The Greek Formula One idiocies of late — see http://goo.gl/E64Tp for ample backgrouknd there — have me asking myself, on what planet do these good souls and their ilk live? Or think  they live?  And then I remembered Laputa.
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