Krugman: "Suppose you consider Tsipras an incompetent twerp..."

[GliderGuider]

Killing the European Project

Suppose you consider Tsipras an incompetent twerp. Suppose you dearly want to see Syriza out of power. Suppose, even, that you welcome the prospect of pushing those annoying Greeks out of the euro.

Even if all of that is true, this Eurogroup list of demands is madness. The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for.

Can anything pull Europe back from the brink? Word is that Mario Draghi is trying to reintroduce some sanity, that Hollande is finally showing a bit of the pushback against German morality-play economics that he so signally failed to supply in the past. But much of the damage has already been done. Who will ever trust Germany’s good intentions after this?

In a way, the economics have almost become secondary. But still, let’s be clear: what we’ve learned these past couple of weeks is that being a member of the eurozone means that the creditors can destroy your economy if you step out of line. This has no bearing at all on the underlying economics of austerity. It’s as true as ever that imposing harsh austerity without debt relief is a doomed policy no matter how willing the country is to accept suffering. And this in turn means that even a complete Greek capitulation would be a dead end.

Can Greece pull off a successful exit? Will Germany try to block a recovery? (Sorry, but that’s the kind of thing we must now ask.)

The European project — a project I have always praised and supported — has just been dealt a terrible, perhaps fatal blow. And whatever you think of Syriza, or Greece, it wasn’t the Greeks who did it.

[PoliticAverse]

1. "The European project — a project I have always praised and supported" - Good to see Krugman

admit to some responsibility for this mess.

[truebluegreen]

5. Just curious, how does the praise and support of an American professor

transform itself into "responsibility" for a European project? Did they consult him? Did he have a vote?

[PoliticAverse]

8. Good question. I suppose nobody important could have read his columns. n/t

[truebluegreen]

13. Like they read his anti-austerity columns? nt

[muriel_volestrangler]

66. Not when Greece joined in 1981. Not when the Maastricht Treaty created the idea of the Euro in 1992

Because those were before he had columns.

Yes, it is completely absurd to think that Paul Krugman has any 'responsibility' for the European Union. It demands complete ignorance of history to think that.

[pscot]

78. complete ignorance of history

is America's most abundant resource.

[LanternWaste]

98. Hence, you're merely assigning responsibility due to bias

Hence, you're merely assigning responsibility due to bias, regardless of the dramatic lack of any supportive evidence for your premise.

It seems more and more dullards maintain that as a new standard of discourse. Depressing, really.

[Hekate]

10. You mean the Nobel Prize winning economist? Gosh, nobody listens to him.

[truebluegreen]

12. Well, certainly in this country nobody does.

Or hadn't you noticed.

[Nitram]

69. Many of us listen to every word Krugman utters.

He has very seldom been wrong on anything he has said on economic matters, is a moral and ethical person, and I trust the man completely.

[truebluegreen]

71. <sigh> My point was that our fearless leaders pay no heed,

even though, as you said, he is seldom wrong.

[Nitram]

73. Obama wanted to stimulate the economy a great deal more and made a number of attempts.

Blocked, of course, by the Republican House.

[truebluegreen]

76. <sigh> Obama's big stimulus package--first big move out of the gate--

was 40% tax cuts/credits (hardly Keynesian) and much too small. Making proposals later, when you know they won't pass a knee-jerk obstructionist House, doesn't have the same weight.

[Nitram]

77. <sigh> perhaps you need an anti-depressant <sigh>

Or else you're just being condescending.

[truebluegreen]

79. Pick whichever answer you like.

[Nitram]

81. I'll go for a combination of the two.

<sigh>

[rosesaylavee]

95. This is a nasty post

not to mention insensitive.

[Nitram]

102. Anyone who <sighs> before every reply is engaging in very passive agressive behavior.

I'd consider that very nasty.

[rosesaylavee]

114. So that justifies

whatever type of reply comes to mind? Step away from the computer.

[Nitram]

117. I did not reply with "whatever reply comes to mind."

I replied with my best guess as what would motivate such rude behavior. When did you become the sheriff of online good manners?

[truebluegreen]

115. Not every post, only 2 out of 3 replies to you, specifically.

I wonder why that is?

Oops! Make that 2 out of 4.

[Nitram]

118. Once I can overlook. Twice is just plain rude.

[truebluegreen]

120. "I wonder why that is."

[magical thyme]

96. Obama started out by asking for something link *half* Krugman's recommendation

and settled for a quarter.

[DallasNE]

108. Actually, It Was The Threat Of A Senate Filibuster

That caused Obama to scale back the stimulus. There were only 59 Senate Democrats at the time and the stimulus that passed got 3 Republican votes. Later, Sen. Spector switched parties and with that 60th vote Obama was able to pass the Affordable Care Act and soon after that Sen. Kennedy died and nothing more could get past the Senate. Pelosi could always get things through the House in those first two years.

[Nitram]

70. Adverse, that's a rather silly misreading of Krugman's piece.

[magical thyme]

97. supporting the European project is *not* the same a supporting the structure of the Euro

Krugman has never supported the structure of the Euro. His articles dating back to 1998 explain why it wouldn't work the way it was set up.

He predicted *exactly* what is happening now, in terms of the smaller, weaker economies ending up with unpayable debt. Even he didn't predict how terribly the situation would be handled, however. One needed to understand the nature of the current World War to explain that, and back in 1998, who recognized that we were at war?

The countries that rely on importing goods (the PIIGS) are unable to adapt to changing circumstances because the Euro allows them only to borrow. Prior to the Euro, if imports vs exports got out of balance, they could devalue their currency to raise the price of imports, thereby supporting the sales of their own products, to bring their economies back into balance.

With a single currency, they can only respond to changed circumstances by going into further and further into debt, which is ultimately unpayable.

The Euro was structured to favor net exporters, i.e. Germany. It was structured to ensure the failure of the PIIGS, in order to force "privatization." The "bailout" money to "Greece" actually went to Deutschebank, to bail out the exposed German Banks.

It is War by financial means of the 1% against the 99%.

It really is that simple.

[truebluegreen]

101. Excellent post. Thank you. nt

[Warpy]

106. Excellent post

I doubt it was designed with PIIGS failure its main purpose, but the 1% and the people they hire to make them richer saw a way to do just that, and did.

In the meantime, Greece was undone by cheaper imports that undermined the industries they did have, especially agriculture. An exit plus a devalued electronic drachma would allow them to rebuild domestic production, but it would be a very hungry procedure to do so.

I haven't had the time to read the details of today's deal. I do know the previous one, the one they voted against, was brutal.

[magical thyme]

109. from what I've read, it's the same as the previous deal, with the addition of handing ove $50M euros

worth of Greek assets to the troika to sell.

[TexasMommaWithAHat]

123. According to a speaker on the BBC

the assets are pretty much worthless - a fire sale. So many things that are so obvious, but that I haven't really considered.

Who wants to buy any kind of "business" or profit making enterprise in Greece right now? It would be a terrible investment.

[CTyankee]

2. oh, god, if Krugman is depressed, I'm depressed...how awful...

madness, madness...

[PoliticAverse]

9. "Insanity - doing the same thing over and over and expecting different results". n/t

[truebluegreen]

3. I think the usual suspects who like to rail about

those irresponsible Greeks may have a bit of trouble assimilating this most recent development....

[PSPS]

4. He's right. This is looking more and more like Germany trying to undo 1945.

[CTyankee]

6. A couple of weeks ago I watched Judgement at Nuremburg and saw something very

presient to today...I hope I am wrong, I want to be wrong, but...

[SusanCalvin]

28. I have not seen it.

Obviously I should, but, for now, might you explain? Thanks.

[CTyankee]

63. It was about one of the last war trials of German judges in Nazi Germany.

We prosecuted them and sent them to prison but they never served out their full sentences.

http://www.imdb.com/title/tt0055031/

Great film, great cast (Burt Lancaster, Spencer Tracy, Marlene Dietrich and so many more)...

[PeoViejo]

7. Kulture

The Germans have always known what's best for everyone else.

[GermanWatcher]

11. Conservatives playing power games

At least this German doesn't think so. Let's be clear here: Merkel's and Schäuble's failed austerity policy isn't backed by all Germans. In fact, there might be a majority against that unreasonably harsh stance. It's a question of ideology: The neocon austerity has failed the Greeks (and the Germans), but it has helped the conservatives and the banks.
It's unlike Merkel to admit the failure to find a way out of this mess, as it might cost her a lot of political capital. So she'll just try to blame a collapse in the talks on the Greeks.

[PoliticAverse]

14. If there was a vote in Germany (similar to the referendum in Greece) asking whether to lend

Last edited Sun Jul 12, 2015, 10:51 PM - Edit history (1)

Greece more money or not, how do you think it would come out?

[GermanWatcher]

15. Hmm, just my opinion...

I'm afraid it would be narrowly defeated. Public opinion is split, with a lot of Germans fearing great losses in Germany's budget. Few understand that most of the money went to the banks, not to the Greek people.
However, I think it would be even more important to restructure Greece's debt (including a haircut). Even with new loans, the debt is not sustainable.

[Ghost Dog]

90. Few understand that most of the money went to the banks, not to the Greek people.

Because of the MSM most German people consume or by which are consumed, presumably. Who controls most German MSM, if so?

[PSPS]

23. You raise the most important aspect to this

Let's say a bank in, say, Pennsylvania, were "out of money." Would the Fed insist on destroying the Pennsylvania economy before bailing out the bank? Not only wouldn't they, they couldn't. Their function is to guarantee the liquidity of all banks. It isn't subject to a plebiscite or anything else. It is assumed that, when necessary, cash will flow anywhere in the country where it is needed.

Here we have the same kind of "Fed" with the ECB with, presumably, the same responsibility -- to guarantee the liquidity of all member banks. But the EU has no political union. So, here we are. The fallacy of the EU is laid bare.

[hill2016]

27. nope

The Fed has no obligation to lend to insolvent banks.

Check out what happened to Lehman...

Similar the ECB has no obligation to lend to the all-but-bankrupt Greek banks.

[PSPS]

34. You know I never said that

The failing Pennsylvania bank would be taken over and, through the tools available to the Fed, its failure wouldn't destroy the economy in Pennsylvania. Retirees in Pennsylvania wouldn't have their pensions slashed, Pennsylvania wouldn't be forced to sell its public infrastructure, etc.

I know you're aware of this so your non-sequitur response puzzles me.

[hill2016]

37. first of all

the receivership of the bank would come under FDIC not the Fed. The FDIC only guarantees deposits below a certain limit so deposits above that would be out of luck.

You don't even need a bank to go bankrupt to slash pensions and sell public infrastructure though. Check out what's happening in Illinois.

So it's kinda similar in that the federal government isn't responsible for state's liabilities. And the Fed won't support a state government that's broke.

[brooklynite]

54. So, you're suggesting someone take over Greece?

[sulphurdunn]

67. Sure, banks make Greece

a vassal state and sell off its assets. It's called disaster capitalism now. Time was only governments did such things and it was just called looting.

[rhett o rick]

105. I don't think anyone wants to "take over" Greece. They don't need to. They can

strip them of their capital and leave them like Haiti. It's capitalism at it's best or worst if you aren't one of the 0.01%. This is why it is essential that we break the strangle hold of corporations like Goldman-Sachs.

[Volaris]

55. Agreed..you can't run a cross-border 'sovereign' currency without having a cross-border sovereign

Government to enforce fiscal and monetary standards.

[hack89]

72. Banks fail every month in America

and the Fed is not bailing them out.

https://www.fdic.gov/bank/historical/bank/

[stevenleser]

32. 98-2 to not lend to Greece I was in Germany shortly after the last loan was given. The German people

were not happy about it at all.

If such a referendum were held in Germany, it would be a landslide to not lend Greece anymore money under any circumstances.

[GermanWatcher]

110. Poll numbers support new loans

Just saw a poll from a reliable source (Infratest dimap for German Public TV) saying that nearly 60 percent of Germans Support new financial aid for Greece. Seems the majority of Germans is more decent than its conservative government parties.

[stevenleser]

121. Link please. I don't believe that at all. nt

[malaise]

16. Very well said

One way or another the neo-liberal project is dead. They are asking a sovereign democracy to give up fiscal sovereignty? Are they fucking mad? Are other countries seriously watching this madness?

[GermanWatcher]

17. If only its death throes weren't dragging us all down...

In my opinion, it's blackmail, pure and simple. I'm disgusted with German politics.

[hill2016]

39. only

if this sovereign democracy wants to continue borrowing from them.

[malaise]

45. Check your debts to China and then use your brain n/t

[hill2016]

47. the US has never defaulted on its debt obligations

who exactly wants to buy Greece government bonds now?

[lostnfound]

64. If the U.S. does default someday, it most likely will be on the Social Security fund as bondholders

Which ironically would be its own kind of austerity plan, default on pension promises. default on social security obligations, what's the difference?

So... We now not only have Robert Reich, Thomas Piketty and Jeffrey Sachs but also Paul Krugman telling us to stop judging Greece of blaming Greece for all of these problems.

I want to know, where is the austerity plan for Goldman Sachs?

[WillyT]

80. + 1,000,000,000 What You Said !!!

[PoliticAverse]

112. No austerity for Goldman Sachs, it got bailed out via the backdoor of the AIG bailout. n/t

[PoliticAverse]

111. The US has defaulted a few times in its history.

1979 was the most recent, brief, default:
http://www.npr.org/2011/07/11/137773341/looking-at-when-the-u-s-last-defaulted-on-treasury-bonds

[metalbot]

65. You have sovereignty only if you have a viable economy

If Europe were to forgive the entire Greek debt, the Greek government would still need a large loan in order to continue functioning. This by itself isn't a problem, but nobody is going to lend them money if it looks like they'll need yet another loan in three years, and another one 3 years after that, and another one after that...

Greece has to come up with a plan to become solvent. Had they done this years ago, they wouldn't be in this situation now. Given that they haven't done the things that they need to do, it seems not unreasonable that the European creditors would insist that they come up with a plan and agree to implement it before lending them more money. If they could figure out how to collect taxes, that would substantially reduce the degree of austerity that they'll need to adopt.

[Ghost Dog]

91. This is correct. Implementation requires time as well as will.

Syriza, I'm given to understand, like Podemos in Spain has placed at the top of its list of priorities policies to deal with tax evasion and other forms of corruption, in all areas at all levels and starting with the worst offenders (ie. at the top).

[randome]

18. Not sure why Krugman ever expected bankers to think outside the box.

All they know is balance sheets. Numbers.

I'm also confused about the military expenditures part of this. Is the IMF insisting that military expenditures NOT be cut? Cannot Greece make SOME decisions of her own regarding their own finances?
[hr][font color="blue"][center]No squirrels were harmed in the making of this post. Yet.[/center][/font][hr]

[salib]

19. Will Germany try to block a recovery?

I guess one does have to ask that now. It just seems to be vindictiveness.

[FLPanhandle]

20. Krugman never asked the hard question: Why should EU taxpayers pay for Greek spending?

It's not just Germany. Many in the EU are finding that their citizens don't want their tax money going to Greece when Greece refuses to even do the basics like redo their Byzantine tax system, go after tax cheats, stop exempting some industries from taxation, etc.

It's not German bankers but a revolt by many EU taxpayers that are driving this hardline.

[GermanWatcher]

21. Suspicious timing

For years, the troika has waved through new financial help for Greece. The controllers of the ECB, EU and IMF must therefore have found Greece in compliance with the demand for reforms.
While it's true that Greece has a lot of homework to do, it suddenly became much more pressing since January, when Syriza was elected. After the corrupt governments by Nea Demokratia and PASOK, this was the first time that anyone dared to speak out against the devastating austerity policy.
And yes, nowadays it's not German bankers: They've used the last couple of years to sell their Greek bonds - now they're home safe.

[snagglepuss]

24. Welcome to DU. Your posts have been informative..

Glad you're here.

[randome]

25. Would you expect German bankers to hold onto their bonds with a near certainty of losing money?

Of course they sold them. That's what bonds are for.

I'm not in favor of crushing austerity for Greece but it's also hard to have much sympathy for them if they took other countries' money and now want to be forgiven for that.
[hr][font color="blue"][center]No squirrels were harmed in the making of this post. Yet.[/center][/font][hr]

[kristopher]

22. Good presentation of the right wing spin...

Thank you for your efforts.

[BeyondGeography]

85. Whatever you call it, these deals have to be sold domestically

And the Greeks are seen as hopeless grifters by many voters, not just in Germany either. There's an argument that the EZ is unsustainable because it is too inflexible and counterproductive policies being are rammed through by power-drunk bureaucrats, but that's another story. Putting Greek fiscal ineptitude up for political grabs across the continent is a level of integration that invites disintegration, but it is the current reality, not RW spin.

[hill2016]

29. I noticed that

he didn't call for any money from the US to help Greece.

Like they say, put your money where your mouth is.

[daleanime]

31. ......

[herding cats]

35. The US isn't a member of the EU.

No one in all of the EU is asking for, nor wants, our assistance ATM.

[hill2016]

40. you sure?

Greece would certainly welcome any US "loans".

What's stopping the US from that?

[herding cats]

43. The EU?

Just guessing off the top of my head here.

[hill2016]

46. nope

I'm sure the EU would more than welcome if the US decided to lend 85b Euro to Greece.

[herding cats]

50. Really?

You think the EU wants us to bailout Greece? Because why?

[hill2016]

51. they

sure seem reluctant to do so.

[herding cats]

53. I don't understand what you're saying.

Sorry, I'm tired. I've been doing home repairs all weekend. Who seems reluctant to do what, exactly?

[Travis_0004]

84. Why should the US loan money to Greece?

Until they fix some major problems, they don't have the ability to repay anything. I'm fine with humanitarian aid, and Greece may need that, but if we make a loan to Greece, I doubt we will ever see that money again.

[PoliticAverse]

42. Tsipras has been in repeated phone contact with US Treasury Secretary Lew. I wonder how

the conversations have really gone.

[herding cats]

48. Oh, you know, it's complicated.

Like how that IMF report was released. Stuff happens, but the US isn't meddling in the EU affairs.

[awoke_in_2003]

94. We have our own

tax cheats to worry about without taking on theirs, too

[daleanime]

30. K&R.....

[sadoldgirl]

33. It is not just Germany, even though

they and the troika made the first serious mistakes.
As I said before the Finnish population is threatening their
liberal government over a new agreement. Bulgaria and
other Eastern European countries are also against it.

Besides all that I think that the Northern parts of Europe
would welcome and love a split from their Southern
neighbors. This may be the first effort. However, one should
never forget, who insisted on the Euro:Mitterand, who made it
a condition to German Reunification.

So, it is not surprising that Hollande now goes against Germany
to insure that France stays covered by the Euro. The economy
in France is not the greatest either, hence the insistence from
their side to help Greece.

It will be interesting to see the hidden battle between Germany
and France. Publicly they appear united, but that is nothing
but a facade.

The Euro was a mistake from the beginning on. Unless every
member shares the same laws, you cannot proceed with a
common currency. If anyone thinks though that France ever
offered to submit to common laws among partners, they are
just delusional

[LittleGirl]

56. ^^^YUP ^^^

In a nutshell:
The Euro was a mistake from the beginning on. Unless every
member shares the same laws, you cannot proceed with a
common currency.

[moondust]

62. The Euro isn't a bad idea on paper.

Conceived in the early 90s, it may have been Europe's answer to rapid globalization. I think eliminating all the old currency exchanges and calculations has probably made travel to and trade with European countries more competitive globally with powerhouses like the U.S., China, and Japan.

From what I can gather, the problems with the Euro seem to lie in implementing and managing a common currency within multiple economically disparate, sovereign political entities.

[roamer65]

36. I guess Mario Draghi and Darth Schauble got into quite an argument.

Good. Maybe Draghi is showing some balls. Now get real ballsy and keep the ELA open, Mario.

Even Hollande from France is showing a bit of backbone as well...tell Merkel to fuck herself, Francois!

Krugman dead in correct as usual.

[Ccarmona]

38. This from Robert Reich:

Greece is all over the news this week—

People seem to forget that the Greek debt crisis—which is becoming a European and even possibly a world economic crisis—grew out of a deal with Goldman Sachs, engineered by Goldman's Lloyd Blankfein.
Several years ago, Blankfein and his Goldman team helped Greece hide the true extent of its debt—and in the process almost doubled it. When the first debt deal was struck in 2001, Greece owed about 600 million euros ($793 million) more than the 2.8 billion euros it had borrowed. Goldman then cooked up an off-the-books derivative for Greece that disguised the shortfall but increased the government's losses to 5.1 billion euros.

In 2005, the deal was restructured and the 5.1 billion euro debt was locked in. After that, Goldman and the rest of Wall Street pulled the global economy to its knees—whacking Greece even harder.

Undoubtedly, Greece suffers from years of corruption and tax avoidance by its wealthy. But Goldman Sachs isn't exactly innocent. It padded its profits by catastrophically leveraging up the global economy with secret, off-balance-sheet debt deals.

Did any of its executives ever go to jail? Of course not. They all got fat bonuses and promotions. Blankfein, now CEO, raked in $24 million in 2014 alone. Meanwhile, the people of Greece struggle to buy medicine and food.

Economists Thomas Piketty and Jeffrey Sachs also have weighed in, writing in The Nation that the results of European austerity in Greece have hit the vulnerable the worst—"40 percent of children now live in poverty, infant mortality is sky-rocketing and youth unemployment is close to 50 percent."1
Debt restructuring must be part of any solution for economic reforms in Greece. But instead of doing that, the European powers have made eleventh-hour, draconian demands: slash pensions, privatize even more core state functions, and attack unions and workers' collective bargaining rights.2

The U.S. can help make things better (instead of worse, like Goldman Sachs did). In addition to diplomatic power, the U.S. has voting power in the International Monetary Fund—one of Greece's creditors.

President Obama and Secretary of the Treasury Jack Lew can use their pulpits and their votes to yield a positive and just outcome. The Greek parliament on Friday approved a new plan that Prime Minister Alexis Tsipras proposed, but so far the European parties aren't offering up the debt restructuring that's needed for a real solution and instead are demanding even more draconian austerity measures from Greece to even keep talking.
What happens in Greece will impact the economic agenda in America, and it will have ripple effects around the world

Sources:
1. "Austerity Has Failed: An Open Letter From Thomas Piketty to Angela Merkel,"The Nation, July 7, 2015
http://www.moveon.org/r/?r=305385&id=124142-8375006-Revt0Ox&t=1

2. "Eurogroup draft on demands for Greek reforms," Reuters, July 12, 2015
http://www.moveon.org/r/?r=305398&id=124142-8375006-Revt0Ox&t=2

[Ilsa]

82. Thank you for posting this.

You explained some tidbits I had heard only mentioned.

I heard that Greece must pledge assets to a fund. Can you explain what these assets are? Income-producing infrastructure? And so the banks could foreclose and sell it off to private corporate investors?

[WillyT]

83. + 1,000,000,000 What You Said !!! - Thank You !!!

[Lee-Lee]

100. While the banks do have blame that was a deal they made with the Greek government

That whole debt hiding deal was a corrupt deal made between the banks and the Greek Government to hide the true level of debt so they could join the EU.

Without that deception they wouldn't even be in the EU.

So at a minimum the Greek government shares that blame 50-50. I would actually rate their share higher, as they had to have gone looking for a deal to hide their debt and they agreed to the terms as a way to defraud their way into the EU. So more of a 75-25 blame split with the Greek government carrying most of that blame.

[truebluegreen]

104. The "Greek government" that cooked the books and made the deals

and got the loans is not the same Greek government that is on the hook now, and that the troika is trying to push out of power. Does that make any difference in your blame calculus?

[Lee-Lee]

122. Nope

No more than it would if Goldman-Sachs said "oh, we fired the guy in charge of that deal". Would you let the banks off easier if they just fired the guy who ran the deal?

The country used fraud to join the EU, enjoyed many benefits from that, and still does in many ways.

[truebluegreen]

128. Got it. 'Nuff said.

Countries are just like vampire squids and should be punished.

[Lee-Lee]

129. Crime and fraud should have consequences

You can't just fire a few people and expect that it's all forgiven.

Had the next Greek government who discovered the fraud said "Hey, these guys defrauded our way into the EU so we need to back out and/or do whatever to make this right" then you might have a case for saying that the nation bears no blame just because the people who did it are not there anymore. But that never happened, and every subsequent leadership has been more than willing to enjoy the EU membership that was fraudulently obtained- including this one.

[rdking647]

41. my solution

1. greece tells the eu to get bent. repudiates its debt
2. reintroduces the drachma
3. seizes all bank accounts over x amount of euros (and i dont know what that number will be)

greece will still be in for a hard time but it cant be any worse than what they are going thru now.

[hill2016]

44. except

Greece is the one getting forced out now.

The banks are insolvent so nobody gets anything back.

[rdking647]

57. it depends who the banks creditors are

if its foreign entities the grek government can declare their debts null and void
after all its not like they would need to play by the euro rules anymore

[hill2016]

59. the creditors

are people and businesses who left their deposits with these banks

[sadoldgirl]

49. In other words: Grexit, okay

that will please the Northerners, in spite of their loss.

However, the Southerners as well as France will
hate it.

In that case it is also possible that there will be
a revolution in Greece, even though they should
have learned that it only increases the pain
for their country.

[muriel_volestrangler]

68. Unilateral action like that would get them thrown out of the EU

from which they still get net benefits of over 2% of their GDP: http://ec.europa.eu/budget/financialreport/2013/annex/3/index_en.html

and being outside of the EU (and reviled by all its members, because its debt to other countries' taxpayers, not banks, they'd be repudiating) would not be a good position to rebuild an economy in. It'd be like, perhaps, Serbia.

[hack89]

74. Do you think rich Greeks have their money in Greek banks?

as for the drachma, introducing a weak currency does not help in a global economy where transactions are done in dollars or euros. See Venezuela to see Greek's future.

[Nitram]

103. All ordinary Greeks with any savings have them in Greeek banks.

And that's where their pensions are coming from, too.

[stevenleser]

119. Right but that's not what that person asked. Do you think Greek 1%'ers have their money in Greek

banks?

[Nitram]

127. sorry, I overlooked the word "rich".

[Rex]

125. The 1% took their money out of the Greek banks ages ago.

Normal people are going to be waiting around for a long time if it is over money, the uber wealthy ran off with most of it.

[MFrohike]

52. Wow

I always knew he was behind the curve, but damn. People like Yves Smith and Yanis Varoufakis were writing about these issues for years while he was busy confusing himself with what he thinks is the liquidity trap. While it's nice to see him very slowly wising up, it's way past time he did and there's a lot of work yet to be done.

Oh, the news is even worse than he thinks. It's not just that Grexit has become overwhelmingly likely, it's that Tsipras and his merry band of morons didn't bother to plan for it. I don't mean they got distracted, I mean they actively chose not to plan for it because they thought it couldn't happen. That's unbelievable negligence on the part of a ruling party. I simply cannot understand leadership that has not or will not think through the worst-case scenarios if only for the purpose of being prepared. Sure, a Grexit would be devastating even if they were ready for it, but now they've ensured it will be catastrophic if it happens. Good work, assholes.

[BillZBubb]

58. Who is behind the curve?

Krugman? If you are claiming that you don't what you are talking about.

[MFrohike]

60. Heh

If you say so, friend.

[Ghost Dog]

92. Well, by the same token,

every responsible Eurozone & EU government that feels itself to be under the (economic) neoliberal thumb and (political neoconservative Northern Reich should think through the worst-case scenarios if only for the purpose of being prepared. And have ready printed and minted stockpiles of their potential post-Euro currencies available for fast distribution at a moment's notice.

To this we have come. This will be the new, at least Southern, European solidarity, I predict.

[MFrohike]

113. Maybe not quite that far

I don't know if they need to have it on hand, but there needs to be a plan of how to do it and how to do the necessary IT work to bring a new currency online. Other than that quibble, I think we're pretty much in agreement.

[DFW]

61. Can Greece pull off a successful exit? Will Germany try to block a recovery?

1. Yes

2. No

1. It would be painful, but I think it can be managed, and once the decision was made, I'm confident the rest of Europe would try to soften the effects domestically to the extent they can afford it. As they say in Brussels, "domestic unrest at night, Putin's delight."

2. Germany would like nothing better for Greece to recover ASAP and stop making demands on the taxpayers of the rest of Europe. Greece isn't the only country in Europe whose politicians have to stand for re-election every now and then. It's typical of European politicians to stick their heads in the sand and hope trouble will go away. Greece and Germany don't have a speck of difference between them in this regard.

[WillyT]

75. HUGE K & R !!! - THANK YOU !!!

[unblock]

86. here's my read, and yes, the economics are quite secondary --

in terms of the economics, this third bailout will only throw greece into a fresh contraction. the government will be able to pay its bills, but the economy will suffer further. this is basic economics; the troika wants greece to extract more taxes without reinjecting the money back into the economy. this is simple contractionary policy.

but that's not what the troika cares about. and arguably, they don't even care about getting repaid, because the policies they're pushing won't achieve that, they may claim to, they may pretend to, but they will fail.

instead, i believe it's mostly the politics regarding the rest of the eu they care about, particularly regarding other weak countries like italy, spain, and portugal.

what a third bailout will to is buy enough time until the next greek crisis so that these other countries can hopefully get back on a more sound footing, i.e., be less close to an exit themselves. *then*, when the next greek crisis comes in another 18-24 month, they can more comfortably push greece out of the euro with less fear of "contagion".

all of which is stupid and short-sighted, because even if it works, eventually there will be another global contraction and the weaker counties in the eu at that point (quite possibly the very same ones) will have to be dealt with, and they've really solved nothing.


ultimately, they have to accept that weaker economies need to be subsidized, one way or another, in order to have an economic union. otherwise they need to abandon the common currency.

[GliderGuider]

87. Good analysis. But I'd add in a strong measure of punitive intent as well

There may be other member nations who are be considering not following the orders from Brussels and Berlin - this should be considered a warning shot across their bows.

[unblock]

88. indeed.

[Rex]

126. That's it right there.

A union has to have shared sacrifices or cut it's loses early.

[Doctor_J]

89. I thought Krugman was in favor of the coup a week or so ago

Confused

[Babel_17]

93. The unwillingness of the Greek government to govern is a large part of the problem

The European leaders and bankers are no sentimental softies but imo it's likely they'd have had a much easier time of putting together bailouts if the Greek government would have delivered the absolute minimum of a responsible government that's deeply in debt.

It's often noted that tax avoidance is something of a national sport. Tax collection is a challenge for any government but the Greek government's record has been consistently abysmal. What doesn't get discussed much is that workers in other European Union countries are extremely unamused at their tax dollars going to prop up a government that fails to collect billions of Euros in taxes every year.

These workers vote and are ready to bring down one government (Finland) over the issue. These workers see mostly just what's in front of them and they aren't impressed by the accurate argument that their economies have a built in advantage over nations like Greece.

The bottom line is that it's not only about a group of elites huddled in a room deciding how much of their hoard of gold they'll invest in Greece. It's also about European voters deciding whether or not the Greek government is going to finally get real.

I think Krugman is feeling a bit burnt by how ill prepared the Greek government has shown itself to be in dealing with today's foreseeable circumstances. They look like they wanted to lose the referendum and seemingly have no stomach for leaving the Euro and switching to Drachmas.

That switch would require sweating out the addiction to the Euro and they apparently are unwilling to do that. The Greek government would need to rise above itself to weather that switch (they'd have to resist endless pressure to give in to peoples demands that would quickly result in hyperinflation) and they'd need lots of trust from the populace to navigate through the turbulent, rock strewn, waters of the first years to get to the stability of having a manageable, sovereign, currency.

Frankly, I think Krugman is very disappointed in the Greek government. They are finding it convenient to allow the Germans, et alia, to force their hands to make economies. It would be better if a Greek government would rise up that owned the situation, and dealt with it.

Finally, I want to mention another thing that doesn't get mentioned much. Similar to what's happening here, but to a much greater degree, it's the youth of Greece that is paying the largest price for the fecklessness of past decades. And also worth mentioning are the people who didn't benefit from past excesses. Many people had their relatively modest pensions cut quite a bit.

P.S. https://www.washingtonpost.com/world/greece-agrees-to-a-punishing-ultimatum-from-european-leaders/2015/07/13/4b6c2f2a-28f3-11e5-960f-22c4ba982ed4_story.html?hpid=z1

Well, I do agree with Krugman that the Greek people need more generous terms in order to grow their economy. I can only hope that this deal is mostly about posturing. I hope that if the Greek government shows it's acting faithfully then the European lenders will accordingly send along more cash for investment purposes. Something like, as tax collections improve, so do interest rates decline. As trust gets built, then more discretion is given in how to distribute funds.

This is politics and I hope the European lenders can find a path to quickly ramping up the aid to Greece. The level of austerity I see being proposed doesn't look sustainable. While I'm not a fan of the leadership Greece has been getting I do admire the fortitude of the people, and their great culture. I have no desire to see them punished for the bad acts of the bankers, lenders, and the governments of Greece and the rest of Europe.

[Dont call me Shirley]

99. K & R

[PATRICK]

107. Maybe the "European Union"

like the TPP was on paper already a flawed compromise that in fact was a trap to get what the corporate leaning elements of the design(mainly banking) wanted in the first place. What was in place as as far as national sovereignty was meant as a palliative to get centralized money started on this relentless path. Once Britain joined things seemed to get worse(for others especially) and national sovereignty was a noose for weaker nations to go hang themselves as they tried get on the better playing fields of the big guys. United Germany seemed to deify the demon in the machine.

[JDPriestly]

116. K&R. Thanks for posting.

[Rex]

124. All countries should now be wary of the multinational investment vulture.

If not, then another Greece is right around the corner.