Greek Crisis Endgame: The Abyss Stares Back

Alexis Tsipras

If you gaze long enough into an abyssthe abyss will gaze back into you.  – F. Nietzsche

On the early morning of 27 June when reading that the leader of the Greek coalition government, Alexis Tsipras, called for a national referendum to get the views of Greece’s population on the bitter on-going disputes with Europe and the IMF, and in particular whether or not  to accept the Troika’s uncompromising  bailout conditions to settle the country’s government-debt crisis, I decided to see if we might do our bit in the context of our collaborative program in which we examine the concept of “sustainable development”, both from the vantage of the workings of the economy and challenges of equity and democracy in different countries. To this end I set out to monitor developments over these critical ten days by providing selective daily summaries and international commentary on this unfolding  the topic – and, more importantly, the uncertain evolving process behind it.

This quickly took the form of a series of daily summaries of a certain number of what I regard as the key points, issues, ideas, attitudes and players shaping this debate.  You will find just below the dozen-plus articles that were posted here since the 27th. They appear here in the order written, and each is hot-linked to facilitate your access.

The core of this story is the huge gap between the level of understanding of leading members of the economics and policy community and that of the troika members. The ever light-handed Paul Krugman put it like this in a 5 July article in the New York Times.

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Greek Crisis: Paul Krugman on Ending Greece’s Bleeding

Greek Crisis - waiting at closed bank

Ending Greece’s Bleeding

 –  By Paul Krugman, NYT JULY 5, 2015. Full text here.

Europe dodged a bullet on Sunday. Confounding many predictions, Greek voters strongly supported their government’s rejection of creditor demands. And even the most ardent supporters of European union should be breathing a sigh of relief.

Of course, that’s not the way the creditors would have you see it. Their story, echoed by many in the business press, is that the failure of their attempt to bully Greece into acquiescence was a triumph of irrationality and irresponsibility over sound technocratic advice.

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Greek Crisis: As the polls close . . .

Greek flag - man holding Euro flag up top

18:00, Sunday 5 July 2015 in Greece and the polls have just closed on this momentous day for democracy. The outcome of the unexpected but oh so important referendum will not be known for several hours yet.  So what better time to pour a glass of cool retsina white, sit down with some friends, and sort through the accumulated evidence of these last ten days in which the eyes of the world have turned to Greece.

Here are a few observations and thoughts about the future which come most immediately to mind to this ever-curious observer:

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Armistice : Greece and Germany take duel to a higher level

It has been hard slogging over the last two weeks of what we hope has been balanced discussions about the economic and political crisis that is currently racking Greece, Europe and in fact the world, so before we move into our final stage of closing comment with the urns now open but before the votes are counted in Greece, what about taking a step back and seeing what would happen if we take this conflict to another, higher level? Check it out here:

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Greek Crisis: Why all the bitter accusations from the North?

Greek crisis - Our money - multiple sources

Seven reasons why Northern and Eastern Europe are not supporting the Greek cause.

Forgetting the Germans (not that this is ever possible of course) and the more prissy lipped representatives of European institutions, why might we reasonably ask ourselves are there so many angry accusations coming in from Eastern and Northern Europe?  It’s a bit complicated, so let us consider this in several stages.

First and most reassuring to those of us who care about the economy and democracy, these are not universally shared positions in those countries.  And this is what you are not hearing from the media, as much as anything else because the real message is so complicated: namely that there are substantial portions of the populations and political alliances in each of these countries who are in fact NOT AT ALL IN AGREEMENT with the orchestrated media pronouncements of certain government representatives, including national delegations to the various European institutions.  For those of us who are concerned not only with matters of the well working of the economy but also that of democracy, this multiplicity of views is reassuring news.

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Greece’s debt crisis explained in charts and maps

Greece’s debt crisis explained in charts and maps

The roots of Greece’s crisis are simple. Before Greece joined the Eurozone, investors treated it as a middle-income country with poor governance — which is to say, a credit risk. After Greece joined the Eurozone, investors thought that Greece was no longer a credit risk — they figured, if push came to shove, other Eurozone members like Germany would bail Greece out. They were wrong.

If you had to pick one chart that encapsulates Greece’s crisis, it would be this one:

Chart - Eurozone bond yields

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Greek Crisis: Paul Krugman on “Europe Wins”

greek europe flags

Ending Greece’s Bleeding

 –  By Paul Krugman, NYT JULY 5, 2015. Full text here.

Europe dodged a bullet on Sunday. Confounding many predictions, Greek voters strongly supported their government’s rejection of creditor demands. And even the most ardent supporters of European union should be breathing a sigh of relief.

Of course, that’s not the way the creditors would have you see it. Their story, echoed by many in the business press, is that the failure of their attempt to bully Greece into acquiescence was a triumph of irrationality and irresponsibility over sound technocratic advice.

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Greek Crisis: Last night I dreamt I wandered the stacks . . .

thinking about economy - fb top page - versailles treaty

Signing of Versailles Treaty imposing ruinous economic sanctions on the defeated Germany

Last night I dreamt I was wandering the stacks of the great Butler Library at Columbia, in a search to see if I could identify a certain number of what I would like to call “leading political economists” who have through their work and contributions over the last several centuries helped to shape our understanding of the relationship between economy, efficiency, democracy and governance. In particular I was looking for indications in their work that would allow me to make an educated guess as to what their position might have been in the case of the Sunday Referendum in Greece.

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Greek government-debt crisis timeline *

wikipedia logoEssential reading from Wikipedia on this subject:

This article contains the timeline of events for the Greek government-debt crisis which began in 2009 and is ongoing. During this period many changes have occurred in Greece. The income of many Greeks has declined, levels of unemployment have increased, elections and resignations of politicians have altered the country’s political landscape radically, the Greek parliament has passed many austerity bills, and protests have become common sights throughout the country. A brief summary follows highlighting some key events since the Greek elections of October 2009. Continue reading

Greek Crisis: Krugman on why the Euro (not Greece) is the problem

Patched up Euro

KRUGMAN LOOKS AT EUROPE’S MANY ECONOMIC DISASTERS

– Extract from article by Paul Krugman, NYT, 3 July 2015

It’s depressing thinking about Greece these days, so let’s talk about something else, O.K.? Let’s talk, for starters, about Finland, which couldn’t be more different from that corrupt, irresponsible country to the south. Finland is a model European citizen; it has honest government, sound finances and a solid credit rating, which lets it borrow money at incredibly low interest rates.

It’s also in the eighth year of a slump that has cut real gross domestic product per capita by 10 percent and shows no sign of ending. In fact, if it weren’t for the nightmare in southern Europe, the troubles facing the Finnish economy might well be seen as an epic disaster.

And Finland isn’t alone.

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Greek Crisis: Declaration of 246 Professors of Economics and Business at Greek Universities on the Referendum

Greek flag

The following declaration is signed by 246 professors at Economics Schools and Universities in Greece. By this declaration, we want to express our great distress about the latest developments in our country. We strongly believe that, at this crucial point, it is of paramount importance to avoid excesses, to show national cohesion, to preserve our position in the Eurozone and the EU, and to regain our credibility in the international community. Further, the fiscal consolidation program, drawn jointly with our EU partners and other creditors like the IMF, should be characterized by the lowest possible recessionary consequences and the highest possible level of social protection, aiming at growth and job creation in the private sector as soon as possible. The prolonged political uncertainty has led the economy to a renewed recession, has reversed the decline in unemployment, has lowered tax revenue and has widened the fiscal gap.

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Greek Crisis: IMF says Greece needs debt relief

Greek crisis - lady before NO vote posters

IMF says Greece needs extra €60 bn in funds and debt relief

– Source: The Guardian, 2 July 2015. Click here for full article

Selected extracts:

The IMF said that is was releasing its preliminary draft debt sustainability analysis as a result of the leaks of documents reported in the Guardian earlier this week.

The International Monetary Fund has electrified the referendum debate in Greece after it conceded that the crisis-ridden country needs up to €60bn (£42bn) of extra funds over the next three years and large-scale debt relief to create “a breathing space” and stabilise the economy.

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