Tuesday, June 30, 2015

Greek crisis, Tuesday

Those dang hippies running the Greek government are giving poor Angela Merkel fits! The Finance Minister Yanis Varoufakis says Greece will sue in the European Court of Justice (ECJ) if the eurozone members try to kick Greece out of the euro currency. (Griechenland-Krise: Varoufakis droht mit Klage gegen Grexit) As long as Greece remains within the euro, the ECB will have legal obligations to support Greek banks.

Angie is used to Greek governments just knuckling under. But, hey, if the Greeks vote against the government in Sunday's referendum, she may get "regime change" there. Prime Minister Alexis Tsipras says, "If the Greek people want to have a humiliated prime minister, there are a lot of them out there. It won't be me." (Michele Kambas and Lefteris Papdimas, Anti-austerity protests in Greece as bank shutdown bites Reuters 06/29/2015)

This interview actually considers the question of whether Tsipras and Varoufakis are something like hippies: Johanna Bruckner, Rhetorik der Griechenland-Krise: "Tsipras und Varoufakis sind Punker" Süddeutsche Zeitung 30.06.2015

In the interview, rhetoric professor Dietmar Till suggests that they are more like part of the "punk" scene. But he doesn't seem to mean it as a put-down. Rather, he's pointing out that's its a style used in this case to appeal to the public of the EU:

Tsipras mag innerhalb des EU-Establishments ein Sonderling sein, er verzichtet auf eine Krawatte und ist vergleichsweise jung. Bei Varoufakis dagegen ist das gegenkulturelle Moment viel stärker ausgeprägt.

Er trägt Motorradklamotte, läuft mit heraushängendem Hemd herum, verbreitet eigentlich immer gute Laune. Tsipras und Varoufakis richten sich gegen die neoliberale Ordnung, das äußert sich auch in dem Image, das sie sich geben: Sie wollen sich nicht einreihen in die Riege der anderen europäischen Politiker. Sie zelebrieren eine Gegenkultur, fast wie im Punk - Tsipras und Varoufakis sind Punker. Deshalb wirken sie auch so sympathisch, weil sie sich nicht konformistisch verhalten. Ob das wirtschaftspolitisch erfolgreich ist, ist eine andere Frage.

[Tsipras may be an eccentric within the EU Establishment. He forgoes a tie and is relatively young. With Varoufakis, on the other hand, the countercultural moment is much more strongly marked.

He wears motorcyle gear, walks around with his shirt hanging out, really always spreads a good mood. Tsipras and Varoufakis are opposing themselves to the neoliberal order {"neoliberal" here means Herbert Hoover economics}; that shows in the image that they project: They don't want to be ranked among the other European politicians. They celebrate a counterculture, almost like in "punk" - Tsipras and Varoufakis are "punks." It's also because of that that they come off so sympathetic, because they don't act in a conformist way. Whether that is successful in economic policy is another question.]
But Till is obviously impressed with the image that Varoufakis in particular projects in public.

Tsipras and his whole cabinet have made a practice of not wearing ties anywhere until they have a deal that ends the debt crisis.

Tsipras' government has proposed a brand new assistance program from the eurozone's European Stability Mechanism (ESM) (Lefteris Karagiannopoulos and Matt Robinson, Greece makes new aid proposal, seeks debt restructuring Reuters 06/30/2015)

This seems to be an idea similar to some of those proposed in A Modest Proposal for Resolving the Eurozone Crisis – Version 4.0 (July 2013) by Varoufakis, See CONCLUSION: Four realistic policies to replace five false choices.

One good thing about a crisis like the one around Greece is that the American media start covering it. It's a variation on the cynical European saying, "Wars are God's way of teaching Americans geography."

The bad thing is that the American media start covering it. Which means our star pundits and reporters start pronouncing on it, with their usual level of preparation. First George Will did a column about it. Just a few minutes ago, I saw Erin Burnett on CNN talking about it. The sound wasn't on, but the closed caption was saying something like, "Greece is a deadbeat country." Even if that was out of context, just the thought of Erin Burnett talking about the Greek crisis is enough to make my head hurt.

Of course David "Bobo" Brooks, the official Beltway Village authority on Character, will have to declare on the Greek crisis soon. Media geography lessons come at a high price.

Here's an example of such sloppiness from Andrew Flowers, The Extreme Economic Outlier That Is Greece, In 7 Charts FiveThirtyEight 06/30/2015

What’s the driver of all this economic misery? Well, the answers depend on whom you ask. Germany, the IMF and other creditors see Greece’s huge amount of government debt as the main culprit. But many Greek politicians and citizens point to what they consider unnecessary and counterproductive austerity policies — the cutting of government expenditures and the raising of taxes — as the source of their current ills. Either way, the Greek government now has to pay far more to borrow in the open market. Because the European Central Bank lowered eurozone-wide short-term interest rates between 2007 and 2015, most countries now pay a lower interest rate on their government debt — but not Greece.
Some say the Earth revolves around the Sun. Others say it doesn't. Opinions differ.

Joe Stiglitz and Martin Guzman, on the other hand, have something substantial to say in this piece drawing lessons from the Argentine crisis of 2001-2, Argentina Shows Greece There May Be Life After Default The World Post 06/30/2015.

Debt contracts are voluntary exchanges between creditors and debtors. They are done in a context of uncertainty: when the debtor promises to repay a certain amount in the future, everyone understands that the promise is contingent on the debtor's capacity for repayment. There is risk involved -- the reason that creditors demand a larger compensation (higher interest rates) than if they were lending under no risk.

Debt restructurings are a necessary part of the lender-borrower relationship. They have occurred hundreds of times, and they will continue occurring. The way in which they are resolved determines the size of the losses. Bad management of debt crises, such as demanding austerity policies during recessions -- in spite of theory and empirical evidence showing that austerity in recessions only makes recessions deeper -- inevitably leads to larger losses and more suffering. [my emphasis]
The basic fact that there is risk involved for buyers of sovereign bonds seems to be lost on some people. Like the Nixon-appointed zombie judge Thomas Griega, who bizarrely rule last year in favor of vulture funds trying to drive Argentina into default.

Speaking of risk, it's of course not only Greece that is at risk in this high-stakes game. High quality global journalism requires investment. Marcel Fratzscher writes in A failed euro would define Angela Merkel’s legacy Financial Times 06/29/2015:

But what is at stake is not only economic and financial stability. The long-term political damage could be devastating, in particular for the German government. The blame game is heating up about not only who is responsible for the Greek tragedy but why the eurozone failed to get its act together over the past five years and end the crisis. This is a game Berlin and Angela Merkel, Germany’s chancellor, can hardly win. As the strongest economic and political member of the eurozone, Europe and the world have been looking to Berlin to solve the crisis and to reform Europe.
But she will have remained true to the principles of Herbert Hoover and Heinrich Brüning. So there's that.

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