Greek crisis, with hippie-punching

There is an interesting habit emerging in commentary on Greece, in which some commentators make very sound explanations about the wretched macroeconomics and the arrogant, self-destructive attitude of Angela Merkel and her various supporters in the Troika. But they throw in gratuitous insults against the SYRIZA government of Greek Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis. I guess the fear of being associated with the disreputable hippies is still pretty strong!

Long-time critics of Merkel's Herbert Hoover/Heinrich Brüning austerity policies for Greece and the other "periphery" eurozone countries like Paul Krugman, Joe Stiglitz and Jamie Galbraith have been straightforward about blaming Merkel and the Troika for the disaster they so obviously created.

Merkel's supporters in politics and the press and business follow her line that the dang hippies in the Greek government are to blame for it all. SPD Chairman and German Vice Chancellor Sigmar "Sigi Pop" Gabriel makes himself even more ridiculous practically every time he opens his mouth these days ont he subject of Greece. (Ian Traynor, Alexis Tsipras must be stopped: the underlying message of Europe's leaders Guardian 06/29/2015):

[Sigi Pop] coupled the Greek situation with last week’s foul tempers over immigration and said that Europe faces its worst crisis since the EU’s founding treaty was signed in Rome in 1957.

Gabriel was the first leading European politician to voice what many think and say privately about Tsipras – that the Greek leader represents a threat to the European order, that his radicalism is directed at the politics of mainstream Europe and that he wants to force everyone else to rewrite the rules underpinning the single currency.

The unspoken message was that Tsipras is a dangerous man on a mission who has to be stopped.

Standing alongside his boss, Angela Merkel, as if to send a joint nonpartisan national signal from Germany, Gabriel said that if the Greek people vote no on Sunday, they would be voting “against remaining in the euro”.

Unlike [EU Commission President Jean-Claude] Juncker and [French Socialist President and general looo-ser François] Hollande, who pleaded with the Greek people to reject Tsipras’s urging of a no vote, the German leaders sounded calmly resigned to the rupture.

But those are perpetrators of the austerity attack. You don't expect any better from them.

Sony Kapoor and Martin Wolf both fall into the category of ritual slapping the hippies in the process of making a good analysis of the outrages perpetrated by the Troika.

Wolf's piece is How I would vote if I were Greek Financial Times 06/30/2015

In making my decision [if he were a Greek voting in Sunday's referendum], I would bemoan both the idiotic leftism of my own government and the self-righteousness of the rest of the eurozone. Nobody comes out of this saga with credit.

The Syriza government has failed to put forward a credible programme of reform that might solve the multiple problems of the Greek economy and polity. It has instead made populist gestures. It is, in brief, a dreadful government produced by desperate times.

Punch the hippies! BAM!

Kapoor (Why Greece never got a fair chance Re-Define 07/01/2015):

With no previous experience of government and ill versed in what passes for diplomacy in the EU, Syriza overplayed what was essentially a very weak hand. ...

The good-will towards Greece resulting from the guilt staffers at the IMF and the European Commission felt about their own significant role in Greece’s tragedy was also slowly eroded by the sharp elbows the Greeks brought to the table. ...

But its big mistake was to assume that economic arguments could prevail over ideology and realpolitik. Another was its failure to convince its Eurozone counterparts that it would actually deliver on the promises it made.

Slap the hippies! WHAP!

Maybe they figure the hippie-punching gives their macroeconomic criticisms a bit more weight among the Very Serious People. And in both cases, their actual analyses are on point. Wolf:

Yet the eurozone, too, deserves substantial blame for the outcome. One would never guess from its rhetoric that Germany was a serial defaulter in the 20th century. Moreover, there is no democracy, including the UK, whose politics would survive such a huge depression unscathed. Remember, when Germany last suffered a depression of this magnitude, Hitler came to power. Yes, Syriza is the outcome of infantile and irresponsible Greek politics. But it is also the result of blunders committed by the creditors since 2010 and, above all, insistence on bailing out Greece’s foolish private creditors at the expense of the Greek people. ...

The bailout extension did not offer a plausible exit into recovery: it left too big a debt overhang and, more important, demanded too much short-term austerity. Given the recent backsliding, it seems to demand a move from a primary fiscal balance (before interest) of close to zero this year to a surplus of 3.5 per cent of gross domestic product by 2018. Achieving this outcome might demand fiscal measures that would raise the equivalent of 7 per cent of GDP and shrink the economy by 10 per cent.

One does not put an overweight patient on a starvation diet just after a heart attack. Greece needs growth. Indeed, the economic collapse explains why its public debt has exploded relative to GDP. The programme should have eliminated further austerity until growth was established, focused on growth-promoting reforms, and promised debt relief on completion. ... The European Central Bank has curtailed emergency support for the Greek banks, forcing tight limits on withdrawals. [my emphasis]

Kapoor is even better:

Despite having experienced an angry German government almost push Greece out of the Eurozone in 2012 first hand, I never thought we’d be standing at this crossroads again. It took many of us - advisers, EU technocrats, American politicians and some academics several weeks to convince the key-decision makers in Berlin not to pull the trigger, and it was far from obvious we would be successful. In the end Chancellor Merkel took a fateful decision to overrule the finance minister Wolfgang Schäuble, who remained unconvinced.

Living through this process was hell not least because economic arguments, financial calculations and political scenarios are not ideal for changing the minds of often-ideological lawyers that form the core of the German financial policymaking community. For them it was less about the economics and more about rules and morality.

To be fair to them, when Greece first announced in late 2009 that it had been understating its deficit figures for years, German policymakers were amongst the first to seriously countenance debt restructuring for Greece. However, word from Trichet at the ECB as well as active lobbying by large German and French banks convinced them otherwise. They were told that restructuring Greek debt would trigger a major financial crisis through losses that the banking system could not afford to bear and through potential contagion to other Eurozone sovereign bond markets.[my emphasis]

Brad DeLong commenting on Wolf's column (Must-Read: Martin Wolf: The Difficult Choices Facing the Greeks Equitable Growth 07/01/2015) writes: "Continued cooperation with a Troika that wants Greece to run large surpluses would seem worse for Greece than a resort to cash-on-the-barrelhead balanced trade. And there seems no upside for the Troika: no German is made materially better off by a deeper depression in Greece."

Wolfgang Münchau expresses puzzlement at Tsipras' decision to call a referendum for Sunday. (The road to Grexit and beyond Financial Times 06/28/2015) But he doesn't stoop to hippie-punching:

By far the biggest tactical error committed over the weekend, however, was the rejection by eurozone finance ministers of a five-day extension of the Greek bailout programme to beyond the referendum. With that decision, they foreclosed the only way to keep the show on the road. They have unwittingly strengthened the political argument of the Greek prime minister. He will now be able to say: first the creditors wanted to destroy the Greek economy with their austerity programme. And now they are hoping to destroy Greek democracy.

And he speculates about one of the worse-case outcomes:

The conclusion I draw is that there are two probable outcomes. This first is an indefinite regime of capital controls, perhaps with a bank restructuring later as part of a broader package of debt relief. This would leave Greece inside the eurozone.

The second scenario is Grexit. The first would be preferable. The second would still be preferable to the deal Mr Tsipras rejected, or a return to a pro-austerity consensus.

My biggest concern is a political one. What happens if the Greek electorate voted Yes but Greece is still forced out of the eurozone because the creditors and the ECB left them no other choice?

This scenario would be the most toxic of all. It will imply that a monetary union without political union can only exist in violation of basic principles of democracy. It will come to be perceived as a totalitarian regime.