Monday, July 06, 2015

OXI wins in Greece!

A photo-shopped image from illustrates the results of Sunday's referendum in Greece very well, with Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel:

The problem in Dean Baker's words: "As a practical matter, it appears that the Germans and their allies are as dug into their positions as deniers of global warming. They care little about the evidence, even the research from the I.M.F. showing the harm from austerity." ((Greece and the Euro After the Referendum Truthout 07/06/2015))

Griechen sagen deutlich Nein: Ohrfeige für die EU Oberösterreichische Nachrichten 06. Juli 2015 provides a list of quotes of early reactions to the Greek referendum:


„Unterschätzen Sie nicht, was ein Volk machen kann, wenn es sich erniedrigt fühlt. Man kann den Willen einer Regierung ignorieren, aber nicht den Willen eines Volkes. Ich bin sicher, dass wir einen neuen Weg öffnen werden für alle Völker Europas.“
Alexis Tsipras, griechischer Regierungschef

„Was man mit Griechenland macht, hat einen Namen: Terrorismus. Warum haben sie uns gezwungen, die Banken zu schließen? Um Angst unter den Leuten zu schüren.“
Yanis Varoufakis, griechischer Finanzminister

„Wir müssen wieder anfangen, miteinander zu sprechen – niemand weiß dies besser als Angela Merkel. Wenn du einen Pensionisten vor einer Bank weinen siehst, begreifst du, dass ein für die Welt und seine Kultur so wichtiges Land wie Griechenland nicht so enden darf.“
Matteo Renzi, Ministerpräsident Italiens

„Was immer der Ausgang der Abstimmung ist. Wir müssen morgen die politischen Diskussionen wieder aufnehmen.“
Emmanuel Macron, französischer Wirtschaftsminister

„Griechenland ist Teil der Europäischen Union und auch der Eurozone, und ich hoffe, es bleibt dort. Der Euro ist nicht und kann kein Club à la Carte sein. Es gibt Normen und Regeln, um sein Überleben zu sichern.“
Manuel Rajoy, Spaniens Ministerpräsident

My translations:

Don't underestimate what a people can achieve if they feel humiliated. One can ignore the will of a government, but not the will of a people. I am sure that we will open a new path for all of the people of Europe." - Alexis Tsipras, Greek head of government [Prime Minister]
That's what Merkel and the pro-austerity EU parties both conservative and social-democratic are afraid of, that the democratic revolt against austerity will spread to Portugal, Spain and Italy - for starters.

What is being done to Greece has a name: terrorism. Why have they [the Troika] forced us to close the banks? To promote fear among the people." - Yanis Varoufakis, Greek Finance Minister
Varoufakis resigned as Finance Minister early Monday after the referendum that was a distinct victory for him as well as Tsipras and the Syriza party. More on that in a separate post. This quote is from an interview published in El Mundo (Spain): Irene Hdez. Velasco, Varoufakis: 'Lo que hacen con Grecia tiene un nombre: terrorismo' 06/07/2015

We must start to talk to each other agaig - no one knows that better than Angela Merkel. If you see a retiree crying in front of a bank, you understand that a country so important for the world and its culture as Greece should not end up this way." - Matteo Renzi, Italian Prime Minister
We'll see how well Angela Merkel "knows that" very soon. That strikes me as a very awkward statement. It casts Greece as a depressed, old, poor person who needs charity. It's a framing of the dispute that encourages voters in the wealthier countries like Germany to resent any kind of realistic program of debt relief for Greece. Renzi has acted as a total Angie-bot this year so far.

"Whatever the outcome of the referendum is. Tomorrow we have to take up the political discussion again." - Emmanuel Macron, French Minister of Economics
We'll see if François Hollande actually steps up to the plate for an alternative to Merkel's austerity policies.

Greece is part of the European Union and also the eurozone, and I hope it remains so. The euro is not and cannot be a Club à la Carte. There are norms and regulations to secure its survival." - Mauel Rajoy, Spain's Prime Minister
Rajoy has to be worried about his conservative party's poll numbers. The austerity program he's willing embraced and implemented in Spain is turning out to be very unpopular. Imagine that.

July 5, 2015 11:25 pm
Wolfgang Münchau, Why the Yes campaign failed in Greece Financial Times 07/05/2015:

The biggest was the clearly concerted intervention by several senior EU politicians, who said that a No vote would lead to Grexit, a Greek exit from the eurozone. One of them was Sigmar Gabriel, the German economics minister and SPD chief. He even doubled up on this threat right after the results came out. The Greeks correctly interpreted these threats as an attempt to interfere in the democratic process of their country. The news last week that eurozone officials tried to suppress the latest debt sustainability analysis of the International Monetary Fund did not help either. The IMF report essentially revealed that the Greek government had been right after all to demand debt relief. The rest of the EU gave the impression that it wanted to rig the referendum, and it did not even bother to conceal this. ...

What I found most galling was the argument that Grexit would bring about an economic catastrophe, as though the catastrophe had not already happened. If you have been unemployed for five years, with no prospect of a job, it makes no difference whether the money you do not get is denominated in euros, or in drachma.

Münchau offers this thought about next steps:

Perhaps the most realistic solution now would be an agreement that only covers the refinancing of the Greek banking system. The Greek government defaults on its creditors, while the creditors stop paying Greece any new money. That would minimise everyone’s commitment, but such an arrangement, too, is fraught with difficulty."

In his German-language column for Spiegel Online, Griechenland nach dem Referendum: Was 2015 mit 1914 gemeinsam hat 06.07.2015, austerity-opponent Münchau writes:

Griechenland kann nur dann im Euro bleiben, wenn exakt vier Voraussetzungen gegeben sind:

  • ein Erlass der Schulden,
  • eine Refinanzierung des Bankensystems,
  • echte Strukturreformen und
  • ein Ende der aggressiven Sparpolitik.

[Greece then can remain in the euro{zone} if exactly four condition are there:

  • a remission {writedown} of the debts,
  • a refinancing of the banking system,
  • true structural reforms and
  • an end to the aggressive austerity policy.]
He doesn't elaborate on the "structural reforms." That phrase in the EU is normally used to denote neoliberal reforms that slam down the income of ordinary workers and privatize public functions, including the sell-off of public property at fire-sale prices. But if he wants an end to austerity, the structural reforms that reduce ordinary income and the size of the public sector work against that goal.

And in a commentary on the pitiful state of the SPD, he writes:

Politische Karrieren entscheiden sich in Momenten wie diesen. Sigmar Gabriels wiederholte Drohungen von einem Grexit machen es jetzt der SPD unmöglich, sich von Angela Merkels katastrophaler Europolitik zu distanzieren. Die Genossen haben sich wirtschaftspolitisch damit zu einem Anhängsel von CDU und CSU degradiert.

Die einzige kleine Chance auf eine Rückkehr zu einer rationalen Position liegt bei Merkel selbst.

Political careers are decided in moments like this. {SPD Chairman} Sigmar Gabriel's repeated threats for a Grexist make it impossible now for the SPD to distance itself from Angela Merkel's catastrophic euro policy. The Genossen {SPD members} have degraded themselves to an appendage of the CDU and CSU.

The only small chance of a return to a rational position lies with Merkel herself.
When your best hope for a rational position on austerity economics is Angela Merkel, you're really down to the seeds and stems, as the hippies used to say.

Dean Baker provides some facts and figures in a sensible analysis:

The best solution would be a turn by the euro zone leadership away from austerity. The euro zone economy has recovered from the low points of the recession, but is still far below its potential. As a result millions of people across the euro zone are needlessly unemployed. Taken as a whole, the euro zone economy is still smaller than it was in 2008 before the crisis hit. As a result, employment is down by more than 3 million from its pre-recession level even as the population of the region has grown.

And the impact of this continuing weakness has not been even. Germany and Austria both have unemployment rates that are comparable or lower than their pre-recession level. On the other hand, Spain, Italy, Ireland, and of course Greece struggle with double digit unemployment. It is important to realize that the weakness of the euro zone economy is the main factor behind Greece's deficit problems, not its refusal to curtail its profligate spending.

The I.M.F. estimates that Greece's structural deficit has been reduced by more than 15 percentage points of GDP since 2008. This is the equivalent of a reduction in the annual deficit in the United States of almost $2.7 trillion, or more than $30 trillion in our standard 10-year budget window. The reason this deficit reduction has not led to balanced budgets for Greece and a shrinking debt is that the spending cuts and tax increases used to reduce the deficit also shrank Greece's economy. [my emphasis]
Paul Kirby takes a look at various possible scenarios for the future in Greece debt crisis: Will 'No' vote lead to Grexit? BBC News 07/05/2015.

Larry Elliott recalls the 1953 debt relief that Germany received from its creditors in What was good for Germany in 1953 is good for Greece in 2015 Guardian 07/06/2015

Helena Smith looks at Yanis Varoufakis: why bold, brash Greek finance minister had to go Guardian 07/06/2015. The article

Apparently "Biblical economics" as conservative Christians understand it requires austerity policies in Greece: Anugrah Kumar, Greeks Reject Europe's Bailout Terms; Atheist Prime Minister Hails 'No' Vote a 'Victory of Democracy' Christian Post 07/06/2015