Completely agree. All citizens of a non-euro country should pray nightly to Jesus/Cthulhu/FSM that their nation stays away from the euro like the poison it has turned out to be.
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Technically speaking, it is already the case. You cannot bind future parliaments – what would be the point? they can just pass a law saying the previous law is abolished. Governments usually choose to follow through on their obligations, because their international credibility (and hence trust, and hence credit) depends on it; but if a country has no credibility or trust left, like Greece today, their government has nothing to lose by reneging on past agreements they were not part of. This is the situation we are in today. Smart partners, seeing where this was going, should have lent their support to the new government right away, to exploit their new mandate to actually purge the old corrupt elites and transform the country in a more credible partner they could rely on in the long run. This, of course, if their interest were in having Greece as a healthy and robust partner, and not a colony to pillage at will.
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It’s important to distinguish between Euro “the idea” and Euro “the implementation”. The idea is grand, the greatest achievement of XX century politics; the current implementation is flawed.
Economists knew this before, but could sort-of wish it away (and why not? Most of the economy is based on wishful thinking anyway). It’s now become increasingly clear there are deep problems that need to be sorted one way or the other this year. Political leaders have had 6 months to make history, and stubbornly refused to do so. I cannot fault Merkel and her friends, tbh, since they profit from the current status quo; but French, Italian and Spanish leaders should have been hard at work hammering out what could have become the Bretton Woods of the XXI century. The French government is now finally (and belatedly) making some noise, but it’s very late. If we don’t want to let the Euro be just an enlarged Deutschmark (with all that it entails), it has to be done now.
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I think in this case the more relevant observation is that debts that cannot be repaid cannot be repaid. It doesn’t matter how bound the greek government considers itself to be by previous governments borrowing, the debt will not be repaid. The debt never was going to be fully, or even mostly repaid. The last 5 years of punitive policy has only reduced the fraction of the debt that could eventually be repaid.
Jump off that horse. The 'greatest achievement of XX century politics" and the result is giant bank bailouts and 60% youth unemployment in Greece? Nah. Its one of the worst achievements of recent politics. Certainly it is a large one, but it is also a bad one.
Not like I saw this coming. I could certainly see myself voting for it if I were a European ten years ago. But, man, that would almost certainly have been one of the worst votes in my life.
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It’s also a continent, ravaged by wars for millennia, finally using the same money and trying to share that most fundamental of powers, the purse, in ways unseen since the original Roman Empire – and democratically, too! That is incredible, also considering that some of these countries were still cold-warring 25 years ago. Yes, there is still something to be done (as it is, they share money supply but not fiscal policy nor debt, the latter being the particular sticking point at this stage); but step away from the minute-by-minute chronicles, and see History in the making. Did you read Asimov’s Foundation books? The series of crisis forcing systemic evolution? This is one of those. It’s like turbulence while flying on a huge airplane with hundreds of people on board: yeah, it’s rough and could end badly, but the miracle is that you’re there in the first place, flying through the skies like humans were not supposed to. Once it gets to destination, we will all have gained from it.
This said, I live in the UK now and I don’t think this country would gain anything by joining at the current time (Britain is an island of pirates profiteering from pillaging other people’s countries – yesterday with ships, today with the careful application of financial instruments and tax havens). The Euro is France’s baby, really, and it’s for them to sort it out.
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what i don’t understand about this mess is what about the financially irresponsible lenders? up until this they were happy to lavish money on greece. this same thing happened in america after the housing bubble.
banks are printing their own cash in the form of debt. the mechanisms that rank these banks continue to give them triple-a status right up to the end. then, once the hole is so deep the spigot is turned off. the banks get bailed out because they are “too big to fail”. and their fake debt cash is turned into real cash.
whatever happened to the risk of banks loaning money? it’s gone. entirely socialized, as the saying goes, while the profits are privatized. what ever happened to controls on loaning money?
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Those saying Merkel et al should bail them out fundamentally misunderstand the great public opposition in Germany and other nations to doing so. The silly populist stuff from Greece
Oh, so the popular will in one country has to be “fundamentally understood”, but the popular will of another country is clearly “populist”. Nice game.
I didn’t make a value judgement on Germany’s actions - merely a prediction of what they’re likely to do. Germany holds the cards here, so I think Syzria and other’s actions in antagonising them for domestic political game has been really silly. That is a value judgement.
There’s no easy fix to this
Oh yes there is: knocking on the door of some of the businesses that got richer by this merry business. But that would hurt people who shouldn’t be touched, right?
Even if we accept your argument that the poor Greeks couldn’t control themselves, when tempted by the German BMWs or submarines, or whatever they bought with the money they borrowed, how exactly would your plan work? Take a nice Greek government Mercedes. Mercedes paid for the materials and labour to make it, then sold it to Greece for a nice profit, subsidised by loans on the Northern European credit card. The profit might still exist, but the debt covers all of the costs and the interest on them. Not enought money there! Before the Euro it was easy - the poor saps that lent to Greece took the risk and made the profit that resulted and priced the deal accordingly. The Euro stuffed that all up. In any event,there’s no mechanism to get the money out of Mercedes or whoever, even if we all though they ought to pay. Let’s get real shall we?
I couldn’t agree more.
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Yes there is, it’s called general taxation. In fact, because this loan now held by German authorities will never be repaid, general taxation is already taking that loan back, equally spread across all taxpayers. By not repaying the loan, Greece is forcing Germany to go find that money somewhere else. It would be intellectually honest for the German government to increase taxes on the businesses that most profited from Greek trade (banks, military industry etc), hence redistributing the penalty for risk among the sectors that benefited most. Same in France and Italy. But of course, taxing the rich is always unpopular, even when it’s the right thing to do.
It’s very clear by now that the problems with the Euro are not technical but rather entirely political. Germany does not want to union-wide debt sharing (eurobonds) because they benefit from the current state of things vis-a-vis all other countries; others don’t want fiscal unity because they benefit from dumping other countries (Ireland, Luxembourg, Netherlands). The Euro makes these issues more urgent and transparent, but there is no need for some new financial instrument, only the political will to build bridges instead of burning them to the ground; which was the spirit of the Treaty of Rome.
(On that note, it’s particularly galling that an ex-DDR is here today lecturing others on what Europe was or was not supposed to be… like huge transfers involved in agricultural and infrastructural policies were not pillars of the EU from before the Euro was even on the radar).
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He says he stepped down so that Greek PM Alexis Tsipras can go back into negotiations without being impeded by the Eurozone finance ministers’ personal animus against him.
As Atrios is wont to say, we are governed by children.
P.S. Live Guardian link was double-pasted.
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I think you are using a useless definition of “technical problems”.
The “Euro” isn’t a vague idea it is a specific set of policies.
There are no mechanisms to prevent Germany from dominating Euro policy and pursuing its own interest. There are no mechanisms to protect the smaller, less developed nations from getting into incredibly difficult trouble. There are no mechanisms that rescue them when they do. There are no mechanisms that can force them to behave as they must.
Basically, as some economists warned years ago, sharing a currency without deeply integrated fiscal policy is very dangerous. It is a bad plan. This is a technical issue. A technical flaw right at the heart of the Euro.
One might imagine other Euros that do not have these technical flaws, but those are not the Euro that exists. Given that it was a fairly close thing getting it implemented it seems certain that those other Euros could not have existed any time soon.
Going further having a single currency across some of the richest most advanced and well governed industrial nations on earth and tiny, relatively poor, and less well governed nations like Greece and Portugal who’s populations speak different languages and with vastly different economies may be technically difficult to the point of being not worth attempting. It may simply be an inappropriate solution.
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Smart, that was the first thought I had about why he might resign on the heels of victory. That seems like a very practical and sound decision.
Precisely, the old adage is, “Never a lender nor a borrower be.”
Not, “Never be a borrower.”
It acknowledged the risk that lenders take, which is something I’m finding people are willing to do less and less. Lending money is risky, people might default. You may never get the money back. That’s why the concepts of interest and insurance were invented.
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Up to Reunification, those mechanisms were there and worked fine. The Commission, Council and Parliament were designed in such a way as to avoid having dominant actors; this suited Mitterrand, who positioned France as the mediating power between different interests. Then reunification happened, and suddenly Germany was much less interested in European cooperation. At that point, the Euro was built to be an anchor of German interests towards their Western counterparts; and in exchange for agreeing to be subsumed in the EU project, German authorities basically got to configure it as the enlarged Deutschmark it is today. Also, around that time EU enlargement was pushed hard and fast to solidify the Cold War victory, with little regard for balancing mechanisms. Now we are in a situation where Germany basically dominates a huge chunk of satellite countries, and can dominate proceedings any time they want. France has lost most of its influence, which was fatally watered down by Central European states.
So yeah, there are ways to moderate German influence, but we’ve lost them with enlargement in one direction. A possible solution would be to enlarge again towards North Africa, but that’s challenging in so many ways. Another, easier solution would be to set up a cross-national “mini-ESM” where weaker countries agree to share debt and bail each other out if necessary, nullifying the German stick. For example, if Italy, France and Spain all agreed to provide Euros to the Central Bank of Greece should the ECB pull out, the game would change dramatically; I suspect this is what Tsipras is tempted to play with the BRICS.
I don’t believe remaining non-integrated is a concept integral to the idea of having a common currency. In fact, the opposite is clearly true: this Euro was always meant to be a stepping stone towards a better Euro. This crisis is the Euro itself crying out for someone, anyone to make him a real boy. You believe it will never happen, in which case it will disintegrate back into national currencies very soon; I hope we will eventually see the birth of mechanisms for debt-sharing and integrated fiscal policy. California and Louisiana have vastly different economies (and almost-different languages, even) but they still belong to a Union much larger than Europe will ever be.
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And that’s what the euro was supposed to do. It was supposed to be a staging post on the way to a politically federal Europe. California and Louisiana work as part of a unified currency area because the correct political mechanisms are there, most importantly a federal government that is wiling to transfer wealth in times of crisis, and to the poorer states on a permanent basis. Without political unification the euro is profoundly, fundamentally dangerous. And given current events, political unification is off the table forever.
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I appreciate the fact that he calls himself a “libertarian Marxist”, because I know it will enrage a lot of US Libertarians.
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I think they know perfectly well what they are doing, and both sides understand each others position far better than they would admit. The creditors are simply pissed at Varoufakis because he refused to say “thank you” to the debt-collectors wielding bludgeons to break his legs.
Economical expertise is required for constructive solutions of this crisis; nothing the creditors did so far convinced me that they are interested in such a thing. Schäuble knows how to be pennywise, arrogant, and how to pressure people. That is all he needs to know to do what he is asked to, to squeeze Greece like a lemon.
And now Yanis Varoufakis has an article out:
Sorry if this has been posted in any of the other Greek crisis threads of doom.
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I agree with the first sentence, not with the second. The current climate is a function of a socio-economic situation that needs fixing; among other things, most European press has been dismal in its partisanship, publishing outright lies and selling casual racism day after day – this is the European equivalent of the Iraq war runup. But the world is changing. Soon, a lot of voters will have lived with the Euro all their life, will have interacted with others europeans online all their life, will have studied in other countries, and will not understand why we should have different economic policies across the eurozone. We just need to hold on a little bit longer.
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