LQD : What will happen to Greece?

by vbo Fri Oct 21st, 2011 at 02:15:27 AM EST

http://www.reuters.com/article/slideshow/idUSTRE79H1FI20111020#a=5

http://www.reuters.com/article/2011/10/20/us-greece-idUSTRE79H1FI20111020

The victory should ensure the European Union and International Monetary Fund release a vital 8 billion euro ($11 billion) loan tranche which the government needs to keep paying its bills past November.

The mix of deep pay and pension cuts, tax hikes and changes to collective bargaining agreements has been bitterly opposed and at least 70,000 people joined protests in Athens' Syntagma Square in front of parliament.
Groups of black-clad youths clashed with rivals from PAME, a communist-affiliated labor group, and police later cleared the square.
At least 74 people were taken to hospital with injuries and one man died of a heart attack on the fringes of the protest, but officials said he had not been hurt in the incidents.
...The head of the Greek Communist party, Aleka Papariga condemned the violence which she said had been deliberately provoked by groups of "hood-wearers".
"This was a pre-meditated attack," she told reporters, saying the rioters served the interests of what she termed "specific mechanisms".
"No matter what happens, we're not leaving," she said. "There's no other way out, people have to take the situation into their own hands."

"I will vote in favor, but this is the last time -- I am struggling with my conscience," said Vasso Papandreou, one of the dissenters who decided to go along with the package.
"Enough is enough, society is despairing, the country is collapsing," she said to applause from other PASOK deputies.
...There has been widespread speculation the government will fall early, forcing a election before the scheduled date in 2013, but Papandreou has repeatedly ruled out stepping down early.

How many more votes...
What would an election change?

"I will be protesting every day, it's a matter of survival. They must go," said 49-year-old Yannis Zahariadis, a civil servant and father of four. "I was forced to borrow money from my mother, a pensioner, to make ends meet."
..."People sent a message on Wednesday that they have reached their limits and can't take any more austerity," said Theodore Couloumbis of the ELIAMEP think-tank.

How long is this going to last until it ends? What the end actually is going to look like?

"We are at a critical point, not only for us but for European history. I have never, in my memory, heard before from leaders of major European countries that there is danger of Europe coming apart," Papandreou told a cabinet meeting before the vote.

Really ?

LQD : What will happen to Greece? | 13 comments (13 topical, 0 editorial, 0 hidden)

Re: LQD : What will happen to Greece? (none / 1)

What's absolutely appaling is the description by Krugman that a slight increase in German and French inflation up to 3-4% range would suffice to avoid having a deflation in Greece and other peripheral countries, while still allowing for relative deflation w/ respect to core countries.

A lot of suffering in Greece is coming from the 2%inflation rule of the ECB.

by Xavier in Paris on Fri Oct 21st, 2011 at 03:06:32 AM EST

Re: LQD : What will happen to Greece? (none / 1)

It seems increasingly clear that there is no real solution within the existing economic theory. Instead, that theory is the problem. And resolute adherence to that theory is the reason that all of the solutions only make things worse. Yanis Varoufakis has an excellent macro view of the situation in Europe which is now expressed in two new books reviewed by Brian Collins in The Los Angeles Review of Books. An excellent summary while waiting for the books to arrive.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Oct 21st, 2011 at 03:16:26 PM EST

Re: LQD : What will happen to Greece? (none / 1)

To the contrary, conventional economic theory, for all its faults, has been pretty clear all along that the Euro would be problematic for some European countries, and it has pretty clear solutions now -- let some Eurozone countries free of the Euro, and let defaults occur so that bankers bear the costs, not workers in indebted countries.

I'll have to look at that review, but what I see occurring, as Krugman and many others have pointed out, is a stubborn refusal to accept basic, textbook economic theory in the present situation in Europe as well as the US. Force banks to accept the losses on their balance sheets thus and relieve everyone, countries and individuals alike, from a significant portion of their debts. It's not theory that's holding things up -- it's the power of banks to stop any progress regardless of the facts.

The whole "blame the economists" narrative takes pressure off the people who are really problem -- bankers. They're completely replaceable but have somehow convinced policymakers and much of the public that they are critical to everyone's well being.

by santiago on Fri Oct 21st, 2011 at 08:54:30 PM EST
[ Parent ]

Re: LQD : What will happen to Greece? (none / 0)

Hi, Santiago! Long time no see. I see that we still have areas of agreement and disagreement:

It's not theory that's holding things up -- it's the power of banks to stop any progress regardless of the facts.

Well, there is that whole Efficient Market thing combined with Modern Portfolio Theory and the Gaussian Copula theory that was such a major part of economic practice from the '90s on. I will grant you that most of this might not have existed when you were in grad school, but it sure has been prominent over the last two decades. And it was these sorts of theories that were used to justify the dismantling of regulation that set the stage for the GFC of 2008 to whenever the final collapse of the current system is acknowledged.

But I certainly agree about the problem of governmental capture by bankers and the need to break that control and impose the costs of the collapse on those who caused it. Any suggestions on how that might be accomplished, other than something like a neutron bomb over Wall Street, if even that would break the grip, unlikely and unwanted as that seems?

The only positive I see is that the awareness of the extent of the problem is starting to spread out of the blogosphere and into the general public consciousness. But the problem of the 99% forcing their interests onto the agenda still seems daunting, even if a majority of that 99% can agree on some common desiderata.

To the contrary, conventional economic theory, for all its faults, has been pretty clear all along that the Euro would be problematic for some European countries, and it has pretty clear solutions now -- let some Eurozone countries free of the Euro, and let defaults occur so that bankers bear the costs, not workers in indebted countries.

Granted. I recall seeing some US grad school course work, (not mine), in 1999 that went into all of the problems with the Euro in apocalyptic detail, but then the Euro wasn't a US dream, so perhaps the weaknesses in that system were more apparent to us, especially as those flaws served to delegitimate a potential currency rival.

On the other hand, the rise of the neo-liberal/neo-classical project with its emphasis on privatization, globalization and "reform" and its infiltration into the EU administrative apparatus, culminating in a Brussels Consensus similar to the Washington Consensus has not helped the situation in the Euro-zone either. And much of that thrust was bound up with the same magic market mentality described above.

Then there is the problem that the role of debt in US mainstream economic analysis was denied, for instance, by Bernanke, and, even now, cannot be dealt with from the inside of the DSGE model and is not incorporated into "mainstream" theory except, perhaps, occasionally on an ad hoc basis. Nor does the mainstream theory include a mechanism for endogenous money creation or provide a means of dealing with stock and flow problems.

Finally, I would argue that the whole intellectual foundation of NCE, resting as it does on assertion of axioms and deduction of consequences, is adequate to support a science based analysis of the existing behavior of the economy. While I agree with you that we need a system capable of dealing with moral and political implications, to me it does not follow that such a system flows more reasonably from an axiomatic, deductive system than from an observational and inductive approach more typical of the evolutionary sciences.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Oct 21st, 2011 at 10:07:44 PM EST
[ Parent ]

Re: LQD : What will happen to Greece? (none / 0)

Finally, I would argue that the whole intellectual foundation of NCE, resting as it does on assertion of axioms and deduction of consequences, is adequate to support a science based analysis of the existing behavior of the economy. While I agree with you that we need a system capable of dealing with moral and political implications, to me it does not follow that such a system flows more reasonably from an axiomatic, deductive system than from an observational and inductive approach more typical of the evolutionary sciences.

I think there's a lot of truth in this statement, and behavioral economics approaches like that of Robert Schiller of the Case-Schiller housing index offer a hopeful new way of thinking about these things for many new economists.

The axiomatic approaches are derived from the fact that economics is an evolved species of the field of moral philosophy, not of natural philsophy (i.e, natural science). And abstract axiomatic arguments are the stock and trade of philosophy (not just theoretical physics), as anyone who has tried to read Wittgenstein can attest.

Policy implications taken from economic analysis therefore are, by definition, moral arguments, and, rightly or wrongly, an argument that can connect a moral argument to one observable in nature simply carries more weight in political discourse because it provides a clearer narrative regarding what people might collectively do about problems, thus encouraging better cooperation to do it. (Why? Because political discourse is an entirely moral discourse too.)

Arguments that allow for more ambiguity between the moral sphere and the naturally observable one just aren't very useful in getting a group of people to all get on the same page and coordinate their activities toward the same end, even if they are objectively more true.

NCE has been able to assert a compelling, widely held moral claim about humanity -- that of individual liberty and the primacy of the individual over the community within a narrative of rights (which is so compelling because of the self-evidence that only individuals can experience our own, unique deaths -- the community cannot experience it for us). Once accepted as a given that individual liberty takes precedence over community outcomes, ceteris paribus, the set of implications from observable outcomes is naturally reduced to the Venn diagram of the intersection of the set of observable outcomes and the set of morally acceptable outcomes (i.e., that individual liberty is upheld first and foremost). This allows for essentially algebraically eliminating a lot of things that actually do occur but should not be allowed to occur, thus providing the means of apparently solving social conundrums in neat, mathematical arguments for which economics is both famous and infamous.

by santiago on Fri Oct 28th, 2011 at 11:55:11 AM EST
[ Parent ]

Re: LQD : What will happen to Greece? (none / 1)

I have to agree with Santiago.

The Standard economic solution in all schools of macro is printing money. There is a huge and great debate in the US about who must receive this money and what is the best way to print it. Give it to the state or just a threat to by any asset? give it to people with mortgages or give it to banks with a threat? It is better to target spending or nominal GDP

It is a great discussion with neo-keynnesians, modern monetarists and MMT agreeing the fundamentals (pritn money or threat that you will print money) but disagreeing on who would receive the money.

The fact is that in the US macroeconomics is cleaning itself up of crazy and paid for-WS people in the blogosphere and in accademia, and three different schools have appeared with less differences than before the crisis. RBC and austrians are considered a joke, worse they are the with-hunters or doctors bleeding the patient. Republicans are the scorn of everybody except for a small group in Chicago who is being marginalized.

Here, we are still with austerity.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sun Oct 23rd, 2011 at 04:35:05 PM EST
[ Parent ]

Re: LQD : What will happen to Greece? (4.00 / 2)

I, too, have to agree with Santiago. Macroeconomic theory explains it just fine. Even a right-wing economist like Friedman would tell you that Europe is insane to push these programs, to say nothing of raising interest rates in the face of a depression.

You have to wade pretty deep in with the nutbags to get theory that supports what's being done to the periphery.

Unfortunately, that seems to be exactly what the Angela Merkels and Axel Webers of the world have done.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Oct 25th, 2011 at 01:42:39 PM EST
[ Parent ]

Re: LQD : What will happen to Greece? (4.00 / 2)

In fact, we've spent a lot of time pointing out that even in terms of their own supposed theoretical underpinnings bugger all of what the serious people have been doing for years makes any sense.

That their theories are also bunk is another issue.

by Colman (colman at eurotrib.com) on Tue Oct 25th, 2011 at 01:46:31 PM EST
[ Parent ]

Re: LQD : What will happen to Greece? (none / 0)

WAR IS PEACE
FREEDOM IS SLAVERY
CONTRACTION IS EXPANSION

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Oct 25th, 2011 at 01:58:56 PM EST
[ Parent ]

Re: LQD : What will happen to Greece? (4.00 / 4)

I was too involved with the demos and various Greek writing to have a chance to describe the glory and the shame of the two days of unprecedented demos.

I will get to writing a diary soon I hope, but let me just add two things: 70.000 demonstrators is a very poor estimate regarding the number of people attending in Athens - and certainly all over Greece. I went over the map of Athens at Google Earth, measuring the surface of the streets I saw, heard and read were full, or semi-full at the time of the demo. I think that any estimate under 100.000 is not serious. Note though that this is a static estimate: at least 100.000 people at a single moment. Yet the fluxes of people from and to the metro stations and through the surrounding roads were constant and large. Given that the demo lasted a full 5 hours and then some after the violence began, it is IMHO most likely that the number of people who participated at some stage in the demo in Athens is in the hundreds of thousands. All major Greek cities at the same time saw historical records of participation on demos. There was some pollster that claimed that between 10-15% of the Greek population participated in these demos / strike / actions. A number that must be up there in the global demo participation rankings.

During the first day it I saw quite for the first time quite unradical demonstrators with Greek flags, applauding and cheering with each molotov cocktail thrown at the police guarding the Parliament by anarchists.

During the second day, the Communist Party demonstrated their traditional mindless muscle and bullying, but the anarchists or whatever were criminal: they were throwing molotov cocktails in the middle if the communist crowd as well as very large rocks.

Finally: here's Varoufakis telling it pretty much as it is.

I'll be back on this with a diary (I hope)

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Fri Oct 21st, 2011 at 09:05:52 PM EST

Re: LQD : What will happen to Greece? (none / 0)

From the above linked quote:

YANIS VAROUFAKIS: What is happening at the moment is an inability of the political class and the political elite of Europe to handle and to manage a process of disintegration that began with the great - the Global Financial Crisis a few years ago. The euro system was never designed to sustain such a major earthquake and now it is collapsing. The political class is not up to the task of shoring up, of injecting cement into the foundations of the euro system. And the tragedy is that the euro, however badly-designed and ill-conceived it might have been, if it collapses in the effects few weeks, months, whenever, is going to drag down with it the whole concept of a European Union. Europe is going to turn into a postmodern 1930s of everybody hating everybody else, or the war of all against all, hopefully not a war involving tanks and machine guns, but at least a process through which the peoples of Europe, instead of finding a common home and a common interest, they indulge in a kind of Hobbesian tit-for-tat between themselves.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Oct 21st, 2011 at 10:26:23 PM EST
[ Parent ]

Re: LQD : What will happen to Greece? (none / 0)

Europe is going to turn into a postmodern 1930s of everybody hating everybody else, or the war of all against all, hopefully not a war involving tanks and machine guns, but at least a process through which the peoples of Europe, instead of finding a common home and a common interest, they indulge in a kind of Hobbesian tit-for-tat between themselves.

So true...Similar SHOULD happen in USA, but they will organize some shity big war instead of those small wars that ruined Middle East (not good enough) and they will throw all of us in to the deep shit. That's the best way for everyone to forget about economy and money and to take a struggle for our plane lives.
They have NATO (totally criminal organisation) and are wrecking countries at their will. But as we Serbs say "Black Friday will come to you too" so wait for this theatre to come to your town...
Very depressing...and history will repeat as always because we do not learn...

Science without religion is lame, religion without science is blind...Albert Einstein

by vbo on Sat Oct 22nd, 2011 at 07:46:25 PM EST
[ Parent ]

Re: LQD : What will happen to Greece? (none / 0)

http://www.heraldsun.com.au/news/world/greek-unions-plan-new-strikes-next-week/story-e6frf7lf-122617 3603524

Greek unions plan new strikes next week

GREEK labour unions have threatened further strikes next week, a day after parliament approved new harsh cutbacks to secure international loans, despite protests and riots that left one man dead and about 200 injured.
...Ilias Iliopoulos, secretary-general of the Adedy public servants' union, insisted the new law "will not be implemented" and accused the Socialists of turning a blind eye to the toll these measures would take on workers.
"This government has ignored the popular uprising by approving this terrible law," Iliopoulos said.
"Our answer is: get out as fast as you can, there is no place for you in Greece any longer."
"We are planning new strikes next week," he added.
More than 150,000 people took to the streets of Athens on Wednesday and yesterday during a two-day national strike against the cutbacks, which follow 20 months of deeply resented austerity moves. Police arrested about 20 people following extensive rioting on both days.
But yesterday's vote further weakened Prime Minister George Papandreou's government, after a former labour minister who objected to reducing workers' bargaining rights was expelled from the party. The Socialists now control 153 of parliament's 300 seats, down from 160 after their election victory two years ago.
But the new cutbacks have caused deep anger in a country struggling in a third year of recession with record unemployment, which reached 16.5 per cent in July.
Ferries were confined to port for a fifth straight day in a strike that is already causing shortages in the country's islands, and is set to continue until early Sunday.
Municipal employees, state nurses and prison guards also walked off the job today. Mounds of rotting rubbish - uncollected for nearly three weeks - continue to pile up on the streets of Athens.
Greek unions held a small march today in central Athens to protest at the death of a 53-year-old construction worker who suffered a heart attack after attending yesterday's rally, which saw savage clashes between peaceful union protesters and anarchists armed with firebombs and stones.
The fighting raised the possibility of a vendetta between the two groups.
Early today, three Communist party offices were firebombed in the northern city of Thessaloniki.

Science without religion is lame, religion without science is blind...Albert Einstein

by vbo on Mon Oct 24th, 2011 at 09:12:52 PM EST

LQD : What will happen to Greece? | 13 comments (13 topical, 0 editorial, 0 hidden)

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