Wednesday, July 31, 2013

Galbraith on Greece and the (maybe short) future of the euro

Yanis Varoufakis provides the text of an interview with economist Jamie Galbraith: James Galbraith on Europe, Greece (and Syriza), Germany and America 07/31/2013, which also appears here (both in English), James Galbraith im Gespräch NachDenkSeiten 31.07.2013.

The interview is interesting in a number of ways. Here I want to quote from his comments on Greece, Germany and the sad state of crisis management in the EU. Despite the creative praise that some of her press fans have managed to find in German Chancellor Angela "Frau Fritz" Merkel's crisis-management style, Galbraith points out how high-risk and reckless it really is:

[JG:] The first necessity is to stabilize the patient, who is on the verge of collapse. This is not about stimulus, it’s not about returning to growth, or returning to full employment, this is about preventing a disaster which will lead to the breakup of the Euro Zone and the European Union, and will lead in that direction in my view quite soon if nothing is done. So that’s what I’ve been talking about over the last month. ...

JG: I think that ultimately the decision on the future of Europe will be made in Germany, and Germany has to decide, does it want it or not? If it wants it, it has to take minimal steps to stabilize it on the same principles on which they stabilized the East, and on which they built the Federal Republic in the first place. And if they don’t want it, well, it will go away.

RS: I think even if they want it, they’re not going to stabilize it.

JG: In which case they’ll lose it, and then we can see what is left. But when it’s lost, Germany’s going to have the problem it had before of an appreciating currency, and an industry that quickly loses competitiveness, and there’ll be higher unemployment. And its markets will have collapsed and its debts won’t get paid.

Germany is not going to escape the consequences of this. Again, it’s a choice that Germans can, and I’m sure, will make. But what is necessary is to state clearly what the choice actually is. ...

RS: It’s an ideology, and public opinion here as represented in the media is that the rest of Europe should become more like Germany.

JG: It’s fair to characterize how the media represent things, but an underlying fact is that the German Federal Republic was built in the postwar years on social democratic principles, and I imagine a large part of the German population still shares those principles.

RS: Very much so.

JG: The German trade unions, with whom I have good relations, have, I think, staked out one of the most progressive positions, and I think they are in Europe the force that’s most alive in northern Europe to the conditions outside the core countries. So if there is going to be a rescuing of the European project, it will be here. I’m confident it will not come from France, and the other countries of the north are too small. So there it is. It’s Germany or nobody to make a change of ideas and policies.

RS: Well, the opinion leaders, as we might call them, are going to have to change their rhetoric before that’s going to happen, because they’re still very much in the other direction.

JG: I agree. Or new opinion leaders need to emerge with a different rhetoric, so there you are.
He also discusses who the level of real despair and political anger in Greece are likely to force what could turn out to be the unraveling of the euro and the EU:

The Portuguese situation is very serious, but my sense, and I wasn’t there for very long, my sense is that the social stress is not as serious as in Greece. What will happen, is if the place is going to break, I think it will be Greece first, and that the problem after that, the immediate problem is not the same kind of social breakdown in Portugal, or Spain, for that matter, but that the speculative attack on those countries becomes overwhelming. You get a bank run, in other words.
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