Perspectives on the Greek Vote

Three interesting contributions:

  • Op-Ed from a group of economists with deep connections to Greece  here
  • Angel Ubide of PIIE on the debate “proxy war” here
  • Landon Thomas on the state of negotiations here

28 replies on “Perspectives on the Greek Vote”

That NYT article has the virtue of giving voice to the overriding issue that the Troika have, with great success, evaded: is the Greek debt sustainable and, if not, will the “deal” on offer make it sustainable? These questions put the issue in terms the technocrats ought to be able to understand. The morality of crucifying pensioners to pay off German banks doesn’t enter into these questions. Nor, on the other side, do the abrasive personalities of the Greek elected leaders.

Since the answer to both questions is clearly “no,” the next question has to be: why are we doing this? What is the point of a deal that does little or nothing to ameliorate the situation? Why kick the can down the road a third time after the first two have only led us to this sorry pass?

At that point you have to start looking for other motivations. And these, almost certainly, have everything to do with domestic politics in the “core” states and nothing to do with “technocratic” solutions to the problem at hand.

So while, as a rule, one of the major problems with the EU has been the evacuation of politics in favour of neoliberal technocrats, in this case Varoufakis is pointing out that there is a deficit of technocratic reasoning (ordoliberalism having replaced neoliberalism). In the wake of the IMF report, he should be (and has been) constantly hammering on this point. Dividing the neoliberals from the ordoliberals is now the only way for him to weaken the latter.

Very good piece by Angel Ubide
A couple of quotes:

‘But many pundits and economists on the left in the United States and Europe are not only celebrating the referendum but also advising the Greek people to vote “no.” ‘

‘It is interesting that many Anglo-Saxon economists are supporting a “no” vote, while Greek economists (and those in Latin American, who have experience with these issues) are mostly supporting a “yes” vote.’

I will add a further Anglo Saxon schadenfreude, or more specifically the Brits, they would just love to see the euro project crash and burn, partly coz it validates their own decision to give it a miss it but more sinisterly they would love to see France and especially Germany get their come uppance – who won the war after all?

Coming closer to home I sense that the majority on this blog support No. I presume that is a “leftie” zeitgeist rather than an Anglo Saxon one.

The German political perspective is understandable.

Germany has loaned large amounts of money to Ireland, Greece and others. In our case, the loans were to bail out our financial system which the Germans said they did not ask us to do and did not necessarily agree with. However, that is somewhat disingenuous as the rest of the westerm world was insisting on it and Germany has been careful to protect its own banks. The bailing out of private creditors is the source of the ‘odious debt’ idea, and essentially we and Germany have agreed to disagree on that point and to focus on the future.

Germany, and others, have in effect taken write downs on the amounts loaned by changing the terms and conditions of the loans. This is ignored by the professional politicians in the ‘anti austerity’ camp. They don’t accept that we have to an extent already got what we asked for in a manner which can be partially concealed from voters in other countries. It also means that the guarantee wasn’t quite as expensive in real terms.

Now to Greece!

Looking at it from Germany’s perspective, Germany has already put in a lot of money and has been facing a write down form day one because the debt is unsustainable. Germany has lent money to a country which cannot pay it back. Germany has already taken a significant write down in real terms by easing the conditions attaching to the loans significantly. Syriza does not see this is generous, which the Germans consider it to be.

The Greece economy was stabilising before Syriza came to power. Greece was running a primary surplus and things were getting under control even if the debt was still unsustainable. Syriza have reversed agreed policies which had been in place and have refused to honour the commitments the country signed up to before they came to power. They have also taken negotiations to the absolute brink allowing capital to flood out of their banks. The result has been a major deterioration in debt sustainability and therefore an increase of the cost of the bailout to Germany and German tax payers.

Germany simply will not give more money to a country run by a party which does not care how its actions affect German tax payers, a county that cannot be trusted in the words of Shaeuble. Germany considers that a country like that would be better off paddling its own canoe without the Germans throwing bad money after good.

Germany also knows that if it gives in to Greece then parties which ape Syriza could come to power in other countries which would be much more costly to sve and much more costly to let sink. Germany needs to let it be known that it cannot be blackmailed. Therefore, the time to draw the line is here and now. The only scenario in which Greece might be given further assistance is if the referendum is passed AND Syriza is not re-elected to govern.

I have every sympathy for Greece and I have a lot of sympathy for their resistance to further self-defeating austerity when their economy has suffered so much already. However, if they are not willing to play along and to show some respect for the people who are putting their hands in their pockets, and for their political leaders who are taking a chance making loans to Greece which will never be repaid in full, then they are not going to get more money.


Please. When you launder bailouts for your own banks through the government of a third country, you cannot honestly expect others to see this as an act of generosity. Certainly not the citizens of the country you’re using.

German self-delusion continues to be a huge problem and the sooner German politicians stop pandering to the electorate’s tendency to see themselves as the victims of others at whom they can point the finger (or worse), the better.

@Ernie Ball

When you say “Don’t pay private creditors in full”, but people do so anyway, and you then foot part of the bill by giving loans you know will not be repaid, you might think that you deserve some respect and not to be called a blackmailer. Don’t forget it was the Germans who insisted that private creditors participate in Greece’s first write down and in Cyprus.

Like I said, the Germans benefitted and have responsibility to help out and contribute. However, they have no obligation to waste money. They have no obligation to fund parties whose policies increase the costs to Germany. That is what Syriza have done in the last 5 months. That is why they will not get any money. Syriza sound great in theory but their execution is pure cat.

Greece is in need of a growth plan that will raise the dismal exporting and inward investment levels but it will take a long time to see the benefits. Just consider how difficult it has been to raise the level of Ireland’s indigenous exports.

This is a priority greater than long-term debt relief because in the short-to medium term Greece will have a debt servicing cost of about 2% of GDP – compared with the 3% of GDP it receives in grants and subsidies from the EU, separate to the bailout – and long maturities.

Greece has in recent years significantly improved its ranking in the World Bank’s benchmark for ease of doing business.

Neither Tsipras or Varoufakis appear to give serious attention to a long-term growth plan and while the PM has met Putin twice, it’s the Chinese who have a big potential for FDI. However, the Greek government has put Chinese plans for its investment in the port of Piraeus on hold.

Data here on Greek exports and inward investment:

As to negotiations, it is likely that if Tsipras had more skill in this area, with the support of credible data coupled with command of what his government plans to do in coming years, he wouldn’t be risking all on some pension changes and VAT rates that would apply to particular islands.

There was a problem also in the promises on big spending programs before the election.

Sir Christopher Pissarides of Cyprus, who won the Nobel Prize for economics in 2010 and has been a critic of the level of austerity in Greece, is calling for a Yes vote.

@ zhou_enlai

By 2007 German banks had effectively no exposure to Irish domestic banks. It did have an exposure to German bank branches in the IFSC but these in terms of risk were a German domestic one.

You seem to suggest that apart from Greece the governments of the other member countries of the Euro Area and their people are sock puppets of Germany. In recent weeks Sigmar Gabriel, the vice chancellor and head of the SPD party in the coalition has also vented his frustration with the Greek government’s chaotic approach.

In the EU28 there are 12 countries that have a lower standards of living than Greece and within the Euro Area, Slovakia is one of the countries that is poorer than Greece. It has a prime minister, Robert Fico, who is a former young communist, and he is strongly opposed to concessions to Greece.

Robert Fico said last Friday that he would like to see Greece stay in the Euro Area, “but not at all costs.”

It’s quite bizarre that the democratic mandate of Greece is highlighted by armchair pundits and commentators but the democratic mandates elsewhere are irrelevant.

The likes of Marine Le Pen of France’s Front national loves these folk and wonder why a Russian-Czech bank has give her a loan of €9m.

Lenin may never have called gullible westerners “useful idiots” but Moscow knew how to flatter the types.

The conservative governments of Ireland, Spain and Portugal have political reasons for opposing concessions to Greece but wonder why the goodwill of left of centre governments in France and Italy towards Alexis Tsipras evaporated?

Even last week when Yanis Varoufakis was excluded from a meeting of Eurogroup finance ministers, the Greek Cypriot minister stayed at the meeting.

The easy bit of the task is to determine the debt writedown that is appropriate. The difficult bit will be deciding if EZ taxpayers should plough any more of their hard earned cash into a failed state. Remember, Greece had a primary surplus and Growth plus debt was sustainable according to the IMF before end 2014. Now it has none of these. Moreover there is no prospect of q return to stability while this bunch of Marxists and fascists hold power. Time for the EZ to pull out and not sink anymore treasure into this quagmire.

“the democratic mandates elsewhere are irrelevant.”

That is incredibly obtuse.

Just because the German/French electorates would want to impose the losses of their own financial system elsewhere does not give them the right to do so.

In 2011, Merkel, Sarkozy, Schauble and Lagarde imposed the losses from French and German banks onto the Greek people to save their own political careers. They also broke the rules of both the Eurozone and the IMF in doing so.

That is morally and ethically reprehensible and tramples all over any notion of democracy in the EU.

That 3 out of 4 of these actors are still around today to prevent any resolution of the misery they caused is an absolute disgrace.

@Michael Hennigan

I do not suggest that other Governments are the sock puppets of the Germans. Rather I suggest that there can be no deal without German agreement. My analysis is based on reporting from Germany, proceedings in the Bundestag and the German reaction to the latest Greek initiatives to the effect that they would not look at anything until the referendum is over.

It is not only Germany which will have problems writing another blank cheque. Add the Dutch, Finns, Slovaks, Etc. I would not fancy Hollandes chances of re-election if he proposed. And you can forget the Iberians as well. Judging by the Irish Times it is down to us to carry the burden. I can’t wait for the howls when MN moves that bill.

Interesting article on BloomBerg…by Noah Feldman Jul 3, 2015 2:00 AM EDT

Greeks invented Democracy…. and also Greek Tragedy!

I’m still confident that the referendum will be passed…. what I do fear the most however… is a close 49% to 51% split down the country.

I would rather see a comfortable 35% for or against… but if the split is close… then serious unrest / civil war could be a possibility.

Then the situation could be really hopeless….

Troubling reading here…assuming it is accurate or thereabouts..

Could we be looking at the end of civilization in Greece?

Running out of 20 euro notes, down to last 500 mln, food shortages predicted for next week, unable to buy foreign materials i.e. medicine etc.

Even if Syriza do have “right” on their side…. surely it is not worth going this far with self destruction?

@ bwt

Who blew the money? Did they have fun while doing it, do you think? Very little of it has gone into productive investment because, if it was, those that borrowed it would have the capacity to pay it back.

The obtuseness lies with those that think that this is a game. As the old joke has it, if someone says “it is not about the money”, “it is about the money”. It has to be. The entire international financial edifice is built on credit, aka IOU’s. If they are not honoured, the entire system is at risk. Neither the duo of Tsipras/Varoufakis and their cohort of advisers appear to have grasped this. The tragedy is that misguided Greek voters put them into power.

On how many other national governments do the Germans get a policy veto as well as a veto on government composition? And where do you think this leads? It’s one thing to say “we don’t want to lend you any more money.” Quite another to insist that VAT be raised on this or that category of goods.

The entire international financial edifice is built on the possibility of default and repudiation of debt, which provides an indispensible safety valve. The ECB behaves as if it has not grasped this, which puts the system at far greater risk of catastrophe than anything the Greeks could possibly do. The best news of the last week is that Greece has gone into arrears with the IMF. I look forward with hope to a huge default on the ECB.

@ Sportshog

I would imagine that the references during the week to all aspects of the situation being considered by the EU implies action on the humanitarian front, to which there was specific reference, will be included.

In the history of irresponsible actions by democratically elected governments, resulting in self-inflicted wounds, the performance of Tsipras/Varoufakis and Syriza will enter the record books.

“i hope Tsipiras & Narcissus have a chopper ready to take them to Russia.”

If he does than the gravity and magnitude of Merkel et als failure will really come home to roost. The american’s must be despairing at looking at the EU ineptitude at the moment. Give them their dues, they have made more than their share of mistakes but never due to chaotic proscrastination and an inability to see the big picture….and never against their own self interst


It’s the younger generation backing Syriza, which is not at all surprising given that they have no value system and expect everything on a plate. Watching too much MTV.

Watching Syriza is like watching a film about the last days of Adolf Hitler, “Downfall” I think the film was called.

I just cannot fathom how wreckless, callous and downright destructive the leaders of Syriza are. This is statesmanship of a criminal nature. We are also witnessing a polarisation of Greek society, which hopefully will remain civil.

Perhaps when the time comes, Tsipras & Co will be brought before a International criminal court in The Hague.

IG analyst David Madden said this weekend’s referendum could mark a turning point for Greece “and dealers aren’t taking any chances as a ‘no’ vote could keep the banks shut for another week”.

He said: “The country is at breaking point as ATM’s are running out of cash, and food supplies in shops are depleting quickly. To top it all off the public must make a difficult decision to accept additional austerity or risk being kicked out of the Eurozone.”

According to the head of the Hellenic Chambers of Commerce, Constantine Michalos, cash reserves at Greek banks were down to just €500m. Although banks were expected to reopen next week, Michalos said: “Anybody who thinks they are going to open again on Tuesday is day-dreaming. The cash would not last an hour.”

Will we see a return of the Colonels?

@ bwt

When the US government decided to leave Lehman Brothers go bust after bailing out 2 giant financial firms, it was a shock that the move triggered a deep recession in the developed world in 2009. That scared decision makers elsewhere, in particular in Europe.

In 2010 if Draghi had been the ECB chief then rather than just a governing council member, he may have made the “whatever it takes” commitment to save the euro that he made 2 year later. I doubt it.

Hurlers on the ditch who may have never made a consequential decision in their professional lives, know the ‘answers’ as they don’t have to make real world choices.

In a big crisis situation what seems obvious later is not always so when decisions are made and in the US during the Depression it took President Roosevelt some time to develop policies that went against conventional wisdom and had an impact. Within weeks of taking office in March 1933, he proposed a 20% cut in the federal budget.

On the obtuse charge, should poorer Slovakia have any say in chipping in to help Greece?

The Slovakian PM said last February that European authorities should enforce tough measures on Greece to ensure money already lent to Athens is repaid, noting the hardship endured by his own citizens.

“This is a red line for us. It would be impossible to explain to the public that ‘poor’ Slovakia . . . should compensate Greece,” Robert Fico told the Financial Times. “To explain to people that we have to give money to Greece for their salaries and pensions? Impossible. Impossible.”

Finland is going through an adjustment at present because of the Chinese steel glut (China accounts for half world production); EU sanctions on Russia and the demise of Nokia.

The government which includes a party that originated from opposition to the earlier Greek bailouts, would have to get parliamentary approval.

Tsipras makes charges of ‘blackmail’ and ‘pillaging’, and political leaders have to make a case for giving him more money.

If the Greeks put forward a credible growth plan vetted by the OECD (it has asked the think-tank for help) and there was trust that the leadership had the interest in ensuring promises are met rather than giving priority to placating party factions, there wouldn’t be a crisis about VAT rates that could result in an exit from the euro.

Even though the country is bust, last March Tsipras approved spending of €500m on overhauling military aircraft (the defence minister is leader of a right-wing party) and several planned privatisations have been put on hold for ideological reasons – to the annoyance of Red China!!

The crux of the policy decision facing the ECB and the governments of the EA on Monday, whatever the outcome of the Greek referendum!

The blog comments are particularly informative (with some familiar voices), especially this extract (Finster);

“The current ELA and target2 process allows any Greek depositor in a potentially insolvent Greek bank to transfer his claim to a foreign (probably solvent) bank with the ECB and receiving central bank guaranteeing the balance. This process cannot go on when trust in the Greek government and its commitments to its banking sector are destroyed.”

The siphoning evidently had to stop.

A further week or two of closed banks and indefinite capital controls should, hopefully, prove Tusk right that Greece may be able to remain in the euro with months of effort to sort out the problem of a “a member of the eurozone in bankruptcy”; with some kind of government amenable to making the essential changes identified by the “13 economists” (whose article also now figures in Ekathimerini). The phrase used by Ruairi Quinn (one Irish finance minister who knew what he was about) of Ireland having been “put into administration” comes to mind.

The Greek crisis has again illustrated the tendency for economists to express political opinions which are deemed economic by virtue of the speaker’s profession. Hence the wide spectrum of opinion.
Most (all?) economist would accept that contractionary fiscal policy ( call it austerity if you like)will dampen domestic demand and therefore lead to a fall in national output although in certain cases it may be ameliorated or even offset by the impact of looser monetary policy and/or a depreciating currency. Economies also differ in their degree of openness , competitiveness and in the transmission of monetary policy and yet we see high-profile economists ( some with Nobel prizes) taking entrenched positions , when the evidence does not support such a view.
The degree of uncertainty about the future for Greece is also very high, yet this does not prevent some economist from making definitive pronouncements from on high. The debt issue is a case in point- it is fairly straightforward to construct a debt sustainability analysis on a spreadsheet, but small changes to growth or primary surplus assumptions lead to wide variations in debt forecasts. The latest IMF DSA on Greece, for example, gives a debt ratio range of 134% to 250%.
Treat political views for what they are, whether coming from an economist or a politician.

The NBER in the US date the end of the Great Depression as March 1933. FDR was inaugurated in the same month (it was later in those days than the current practice)

Your astute observation is noted & most unwelcome in these parts. May I also add that the usefulness of most contributions is in inverse proportion to both the frequency and certainty with which it is delivered.

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