The Future of Greece

Some of the best-known Greek academic economists have written an op-ed in advance of the new elections – read it here.

31 replies on “The Future of Greece”

Why on earth is anyone with a brain listening to this constant babble about voters facing some kind of existential choice between voting to stay in the Euro or returning to the Drachma and disaster?

None of the three leading parties are saying the will leave the Euro. Not one.

Being forced out of the Euro for ‘voting the wrong way’ is another matter. That will be the actions of what politicians (and those pulling their strings) in core Ez countries take but obviously, dressed up as something else.

Keep pressing the fear button guys. Fu€k democracy.

It appears that most of those supporting Syriza want to stay in the Euro but they want everyone else to pay for a return to pre-blowout ‘business-as-usual’ as PASOK used to run it. That’s not on offer.

It is also greatly encouraging to see these economists present the case for structural reform:
“The EU must also help Greece achieve immediate structural reforms to radically improve the ease with which business can be conducted, and to reduce tax evasion, eradicate corruption in procurement and liberalize the labor and product markets. It must do all this while also ensuring supervision over Greece by competition authorities, improving efficiency in its justice system and health sector, and opening access to its artificially closed markets in transportation, pharmaceuticals and engineering, among others.”

I doubt we will ever see the day when their counterparts in Ireland make the same case as effectively and forcefully (focusing on the relevant practices and sectors). All we get is the ‘three monkeys’ routine.

In the opening paragraph:

“Stay in the euro or commit fiscal suicide with a return to the drachma”
The paywall is blocking the rest, but I get the drift.

Who is going to force who to abandon the euro? Below is one possible sequence of events. Grexit requires certain choices to be made by both Greece and the Troika… but the choices seem to have a certain inevitability about them.

1. Greece and Troika fail to agree new loans => a joint failure to agree.
2. Greece defaults on exisiting loans => A Greek decision, since arguably they could continuing servicing loans by going without food.
3. Greek bonds worth next-to-nothing => Greek banks insolvent and no longer eligible for ECB ELA
4. ECB witholds ELA => An ECB decision, after all they could break their own rules and provide ELA to Greece regardless, and just take their chances with Germany, Finland, Holland etc
5. No euros left in Greek banks. “ATMs run dry” armageddon has arrived!
6. Greek government unable to pay day-to-day expenses, salaries etc.
6. Greek government re-introduces Drachma to pay day-to-day expenses and restore banking system. => A Greek decision, since presumably they could choose instead to live without money.

The Peripheral function is to transfer the remaining scarce capital(see oil & gas) to the core……. as long as we can continue to do this the Euro will keep on going much like a Duracell bunny.

LGV construction needs a huge amount of Diesel or 100,000 men with picks and shovels

How do you get that Euro symbol thingy up there ?
I was told once but somehow forgot.
I would like to know before it becomes a obsolete computer function.

@Paul Hunt

The article is fairly weak sauce (search for the headline on Google News to avoid the paywall), it does not even mention Syriza and it contains some frankly risible tripe about how structural reforms (cutting wages, privatization, gangsta capitalist friendly stuff) will help Greece escape the flaws of EMU while domestic demand remains choked by the austerity necessary to transfer more money back to the core banking system and speculators.

These reforms are absolutely necessary to develop a dynamic export- and quality-oriented productive sector in Greece.

It is to laugh.

You can read Kevin O’Rourke’s recent posting Scary Eurozone pictures, industrial production versionto see how likely it seems that manufacturing capacity will be going anywhere except Germany.

German capitalists really have played a good game, and we have plenty of people in Ireland playing for them, many under the delusion that what works for Germany in exploiting EMU will work for us in recovering from it.

Will ejecting Greece from the euro knacker rescue funds (efsf/esm)? i.e. the notion that states accessing funds might exit the euro increases the creditors/guarantors risk sharply.


re Weidmann interview:


Ian Paisley in his prime could hardly be more trenchant or anti-Greek.

A…..Credit-financed excessive demand was part of the problem, for example when we talk about the housing boom in Spain.
Q. Financed by German banks.
A. Financed by whoever. I am not discussing the question of who is to blame. I am saying this is an unsustainable situation.

Note: “I am not discussing the question of who is to blame.”

Now the answers to other questions:

Q. Does the European Union have enough firewalls in place to deal with a Greek exit?
A. I don’t want to speculate about a Greek exit. ….In any case, we must not allow ourselves to be blackmailed by a country because of the contagion effects.

The accusation of blackmail is one made by somebody who refuses to discuss who is to blame.

A. The key message from Portugal and Ireland is that adjustment programmes work……… No serious forecast sees a downward spiral that doesn’t end anywhere.

It may not ‘end anywhere’ but which bunker has he in mind for this particular crisis to end.

Also, how exactly is this ejection of Greece from the Eurozone to be performed?

I am sure Merkel would love to do it but the brieftasche comes first- how do the costs of a presumably partial and negotiated default that Syriza is angling for exceed the costs of a unilateral and complete default that would would result if Germany and ECB declared economic war on Greece?

On the other side of the argument I think that neither the ECB or Germany can tolerate their will being successfully opposed so they might try to destroy Greece simply as an example and damn the political capital.

From an Irish point of view would we collaborate with Germany/the ECB? Could we be that craven and short sighted?

The Greek economists suggest that the EU/ECB should lighten Greece’s load if they vote yes.

Is there any chance the EU will do that and do it publicly so that the Greek public can feel like they are being somewhat well treated? Or will the demonising of debtor countries and/or the public hard-line statements continue? It is nto enough for the EU to help Greece. The EU must be seen by Greek people to help Greece.

Greece represents only a tiny fraction of eurozone GDP. If it introduces a new drachma, it will be very significant for Greeks but for the eurozone and EU?

On the other hand, should Italy (or Spain) decide to introduce a new currency, that would probably blow the EMU open.


The Greek economists suggest that the EU/ECB should lighten Greece’s load if they vote yes.

Is there any chance the EU will do that and do it publicly so that the Greek public can feel like they are being somewhat well treate

That struck me as extremely strange as well – Stockholm Syndrome meets delusional longing for a spirit of solidarity in the EU that is long dead.

The Eurozone countries not bordering Germany need to face up to the reality that all EU economic policy is now effectively controlled by Germany and Germany does not do charity – even for Germans. Surely the recent Irish experience with the Fiscal Compact should be that what you get for submitting to German interests is simply the furthering of German interests?

As for the ECB, as Kevin Donoghue mentioned in a post yesterday, well they have priorities that can safely be said to have nothing to do with Greek recovery.

Many people imagine that the EU we live in now, and the German political atmosphere we deal with now, are far less regressive and right wing than they are. The last four years of the EU are not an aberration, they are an unveiling.

Even Carrefour is leaving Greece (announced this morning) and they build supermarkets in even the most downtrodden parts of inner cities in France, the kind of place where you have armed security guards on the salad bar.

I hope we don’t have a ‘Lehman moment’ (some guy from Harvard is predicting) next week. I’m not quite ready for it.


“presumably they could choose instead to live without money.”

I regularly do it a couple of days a week in these austere times but I wouldn’t fancy trying it 24/7/365…. although I could do with losing some weight so perhaps it’s ok to try it for a couple of weeks.

@The Dork of Cork

“How do you get that Euro symbol thingy up there ?”

AltGr 4 at the same time does it on my keyboard. Perhaps it will still work in the core > Monday? You may need to move to Germany and become the Dork of Ork?

Angela is in great form…I think she is having a go at Ollie , Barrosso and Von Grumpy.”..

“She said there was a lack of confidence among investors outside Europe “but also a lack of confidence among the actors inside” the euro zone.
And she said a crisis of confidence could only be resolved by tackling the root causes. “I am advocating that we work on the causes and not on the symptoms,” Merkel said.
She also complained that hinging discussions about how to tackle the financial turmoil in Europe on arguments for growth versus the balancing of national budgets was “simply rubbish”.
Speaking ahead of a meeting of G20 leaders next week in Mexico, Merkel said Germany would not be convinced by “quick solutions” such as eurobonds or introducing a fund for mutual banking guarantees in Europe.
“Mediocrity must not become the standard,” she warned
Angela Merkel also said that pitting the idea of growth against budgetary rigour was a “false debate”. Germany “will not be convinced by quick solutions such as eurobonds,” Merkel said.”

Angela and Weidmann are preaching from the same hymn sheet and it doesn’t look like the Greeks have any chance of a reprieve of any kind.
A bit like us and the PNs.
Mediocrity? Maybe, just maybe, Angela Is suffering from that malady.

“She also complained that hinging discussions about how to tackle the financial turmoil in Europe on arguments for growth versus the balancing of national budgets was “simply rubbish”.”

No mention of current account imbalances in a fixed currency union.

“The eurozone’s overall current account (nearly balanced), trade account (mild surplus), overall fiscal deficit (manageable) or indebtedness (moderate), all indicate that its problems are internal. “


Ireland advises on horse stable design might be more apt.

It is astonishing how much hindsight is about at the moment.

As an ordinary hewer of wood and drawer of water I wrote to Lenihan criticizing the bank guarantee within a week of it being announced. Anyone with any commercial sense could see it was crazy. I also formed my own impression that bad loans at Anglo were around 30 billion having a feel for the property market over the years.

The warnings were all there from the land crash of the early 80s, to the property down turn in the early 90s, but this time it would be different – so the experts told me says Minster X in defense.

The tragedy was that a lot of bright intelligent people didn’t follow Morgan Kelly’s analysis at the time.

Soft landings all round, and make mine a double seemed to be the main request at the bar.

The future of Greece … is

in Europe
in the European Union
In the EuroZone

In Solidarity.

Minor point: Their largest industry – Shipping – pays zero tax. An institutional hand or two will be needed …

For Europe to progress democratically, The Solidarity Principle must hold.

@The Ork of Ork

As Sundance and Butch would have asked: “Who are those guys?”

An electorate under surveillance
15 June 2012 To Ethnos Athens

Never has a Greek population gone to the polls under such international pressure — at a level close to blackmail complains left-wing daily To Ethnos. Nonetheless, Athens’ partners have chosen their man — conservative Antonis Samaras — and not left-wing leader Alexis Tsipras.

“In view of its performance on 6 May, Syriza can legitimately expect to be in with a chance of winning this election, and it is this outcome which has struck fear into the hearts of the Germans. Having said that, the main cause for concern is not what Tsipras intends to do if he becomes Prime Minister. What is troubling Berlin is the fact that a Syriza victory will pave the way for the first far-left government to take office in Western Europe since 1950.

It will mean that the left will once again come to the fore – and in a critical time of economic crisis. Following the end of “real socialism” in 1989 and the fall of the Eastern Bloc in 1991, the Germans and the other European leaders thought that they were permanently rid of the left.”

Maybe Gilmore will reinvent the Workers Party!!!!!!!

Der Spiegel’s take on Greece and Elections

Greece Votes on Sunday
Europe’s Future Hangs in the Balance
By Charles Hawley

[how can 97% hang on 3%? added]

Greek voters head to the polls on Sunday, and the future of Europe’s common currency could hang in the balance. Investors fear that a leftist victory could trigger Greece’s exit from the euro zone, magnifying problems in Spain and Italy. Adding to concerns, depositors are rapidly withdrawing their savings from Greek banks.

One way to look at Alexis Tsipras, the 37-year-old wunderkind of the Greek left, is as the leader of a small yet rapidly growing political party on the edge of Europe — a party that stands to attract some 3 million votes in Sunday’s election. Three million votes out of a European Union population of a half billion. Just over half of 1 percent.

There is another way to look at Tsipras, however — as the European politician who, perhaps more than any other, holds the fate of the European common currency in his hands. It is this second interpretation that has the entire world gazing with fear as Greeks head to the polls this weekend. Tsipras, after all, has promised Greece that he will abandon the deep austerity measures imposed by the EU in exchange for bailout aid — with Brussels threatening to suspend those payments, and send Athens into bankruptcy, should he do so. It is a game of political chicken that could bring down Europe.

Saturday, June 16, 2012
Austerity Kills: How the EuroCrisis is Being Used to Break the Social Contract

One aspect of the Eurocrisis that has not gotten the attention it deserves is the way it is destroying not just jobs, but the very underpinnings of society. People who took actions that were prudent at the time are increasingly at the mercy of forces beyond their control. And this isn’t a tsunami-type disaster but a man-made one whose severity is worsened by the callous attitudes of the European elites.

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