Monday, February 23, 2015

James K. Galbraith — "Reading The Greek Deal Correctly"

Alexis Tsipras stated it correctly. Greece won a battle – perhaps a skirmish – and the war continues. But the political sea-change that SYRIZA’s victory has sparked goes on. From a psychological standpoint, Greece has already changed; there is a spirit and dignity in Athens that was not there six months ago. Soon enough, new fronts will open in Spain, then perhaps Ireland, and later Portugal, all of which have elections coming. It is not likely that the government in Greece will collapse, or yield, in the talks ahead, and over time the scope of maneuver gained in this first skirmish will become more clear. In a year the political landscape of Europe may be quite different from what it appears to be today.
Social Europe Journal
"Reading The Greek Deal Correctly"
James K. Galbraith | Lloyd M. Bentsen Jr. Chair in Government/Business Relations and a professorship of Government at the Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin

32 comments:

Dan Lynch said...

Every time I read another article apologizing for and defending the Syriza sell-out, my faith in humanity dies a little bit.

On the plus side, my faith in Bill Mitchell has gone up a notch for correctly calling out the Syriza "surrender monkeys." :-)

From Yves: The best cases scenario for Greece is getting austerity lite as opposed to austerity regular. Even Varoufakis’ target of a primary surplus of 1.0% to 1.5% is still contractionary. Bill Mitchell estimates that Greece will need to run budget deficits of 10% of GDP to restore its economy."

I'm not seeing any light at the end of the Euro tunnel? Whatever minor concessions Syriza may "win" will not change the law of sectoral balances. The Greek economy will continue to contract and things will continue to unravel. Eventually Greece will exit, and someday historians will look back at this period and ask "WTF?"

Malmo's Ghost said...
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Malmo's Ghost said...

I just don't get the hard line the days following the election followed by the capitulation weeks after the election. There is no victory whatsoever. It's a political disaster for Syriza, but more importantly a disaster for the Greek dispossessed and unemployed. Frankly Syriza's fold is simply stunning. Only an out of touch economist would think to call it a victory, even of the small variety. .

Malmo's Ghost said...

" Panagiotis Lafazanis, head of the Left Platform and now the production minister, said his grouping cannot accept any departure from a "radical left orientation". He vowed to press ahead with new laws freezing foreclosures on primary homes and stretching out payments on €74bn of tax arrears. The Left Platform controls 30pc of the seats on Syriza's central committee.

Syriza leaders are alarmed by a cri de coeur on Sunday by Euro MP Manolis Glezos, the legendary resister who tore down the Swastika flying over the Acropolis under Nazi occupation.

He apologised to voters for selling the "illusion" that Syriza could overthrow the EU-IMF Troika. "There can be no compromise between oppressor and oppressed. Freedom is the only solution for the slave," he said...

... Dimitris Drakopoulos, from Nomura, said relations between Athens and EMU creditors could go wrong at any time. Syriza will have to deliver on pledges with actual legislation to meet a deadline in April before it receives the next €7.2bn of bailout money. In the meantime, Greece may face "cash flow problems" within 15 days. Syriza will need to raise €4bn to €5bn by the end of March in a hostile market. "The risk of capital controls remains elevated," he said.

Mr Drakopoulos warned that there will be a constant risk of a "new stand-off" until the political landscape changes again, perhaps with a national unity government. There may yet be a referendum on the bailout package. "Very soon the Syriza-led government will be forced to face its own contradictions," he said."


http://www.telegraph.co.uk/finance/economics/11430744/Tensions-high-as-Greece-scrambles-to-keep-rescue-deal-alive.html

Ralph Musgrave said...

I like Dan Lynch's summary above.

Kristjan said...

I agree with Dan too. We don't have left governments, so the left is of course on Syriza's side. These people were not afraid of calling themselves Marxists and hope dies last. They did have a contradictory mandate also. During the election campaign they never wanted to answer the question of how they were going to continue with euro and end austerity, like they were magicians. Sad thing is that other political forces will get the idea too: you can promise whatever and you don't have to deliver when you are in power. It is just more obvious with Syriza, "institutions" and "agreement". But this hope dies last won't last forever for them, they have no room to maneuver, tax the rich will not get Greece out of this mess.

Bob said...

Will SYRIZA resign or press onward with their victory?
Will the riot police receive extra funding?
Will the Greek people wake up?

Kristjan said...

Go figure? this is a comment from European Tribune:

Post-agreement polling shows that Syriza shot up in popularity.

I wrote here last week that a significant part of the left to moderate electorate in Greece, especially those in professional classes, were of the opinion that Syriza and Varoufakis wanted to be forced out of the eurozone, so as not to take the blame.

What you see now if former voters from New Democracy coming around to Syriza. It is BECAUSE of the agreement made on Friday. I argued with these people that they were mistaken about Tsipras and Varoufakis (though not about Syriza) but nothing would shake their belief.

I belief Friday actually shook them.

This gov't is becoming more popular by the day, which is proof that Greek feelings are really raw as to the treatment they have received. 90% of the population never felt the benefits of all the graft over the years. And they blame the eurozone equally as their own corrupt pols for what happened prior to 2010, and the treatment they received after 2010.

http://www.eurotrib.com/story/2015/2/21/43834/9604#65

Matt Franko said...

"During the election campaign they never wanted to answer the question of how they were going to continue with euro and end austerity"

They have said more than once that they are going to do a Piketty Tax.... that is the plan... Let's give them a chance to see how it goes...

Malmo's Ghost said...

If the left is on Syriza's side then the left is merely an extension of the Samaras government. The Piketty Tax is like pissing on a forest fire too. As for the supposed polling numbers in favor of Syriza after this capitulation, I'd say they are transient if not dubious.

Matt Franko said...

Mal,

the Piketty phenom was the biggest thing on the left for the whole 2014... lets give it a chance here in Greece and see if it works... we will learn either way.. rsp,

Malmo's Ghost said...

Matt

Work to do what? Pay off the bailout money from the Troika? You know, the bailout that YV said only last week that Greece could not be a part of anymore, only to fold and do a 180? Please explain to me how Greece under Syriza's surrender to their northern overlords has enough goods and profits to pay down exponential debt instruments without stealing from their labor and taxes like they've been doing since 2010? By not repudiating some or all of it's debts, Greece remains a dead country walking. Among her poor and disenfranchised it's called a sell out, Piketty Tax notwithstanding.

Kristjan said...

I looked Marxist web sites this morning, they are not happy with Syriza at all.

Malmo's Ghost said...
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Malmo's Ghost said...

Yeah, Kristjan, but the Eurogroup sure as hell is happy with em -:)

Kristjan said...

"Yeah, Kristjan, but the Eurogroup sure as hell is happy with em -:)"


I am still in disbelief. Galbraith's article is propaganda, he couldn't have wrote anything bad about his friends' conducted policy. My understanding is that he was in Brussels at the time and he was involved, there is RT youtube vide where he explains all this.

Here is a realistic take of the outcome.

....Such a thorough failure is not, and cannot be, a matter of chance, or the product of an ill-devised tactical maneuver. It represents the defeat of a specific political line that has underlain the government’s current approach......

.....But to present a defeat as a success is perhaps worse than the defeat itself. On the one hand it turns governmental discourse into cant, into a string of clichés and platitudes that is simply summoned up to legitimate any decision retrospectively, turning black into white; and on the other because it prepares the ground, ineluctably, for the next, more definitive, defeats, because it dissolves the criteria by which success can be distinguished from retreat.

To make the point through recourse to a historical precedent well-known to leftists, if the Treaty of Brest-Litovsk, under which Soviet Russia secured peace with Germany, accepting huge territorial losses, had been proclaimed a “victory,” there is no doubt that the October Revolution would have been defeated.....


https://www.jacobinmag.com/2015/02/syriza-greece-eurogroup-kouvelakis/

Matt Franko said...

Krugman has written positively about it also and prior to 'the deal' K was very skeptical....

maybe they are planning a Piketty Tax where somehow they tax away what becomes the surplus of the surplus nations...

Kristjan said...



Galbraith in this video is not saying really that everything is great. He seems to be happy that Greece continues with euro given the circumstances.

https://www.youtube.com/watch?v=5uO3yNaztQ0&feature=player_detailpage

Malmo's Ghost said...
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Malmo's Ghost said...

LOL

the European Commission drafted the entire letter and YV merely signed off on it. No wonder the Eurogroup loves the muddled leftist, YV, now.

https://twitter.com/YanniKouts/status/570212150381301760/photo/1

Neil Wilson said...

"Large-scale Keynesian policies were never on the table as they would necessarily imply exit – an expansionary policy in a new currency, with all the usual dangers. "

The danger being that it will succeed and show the European Union and the Euro for exactly what it is - a complete failure pursued to the exclusion of everything else for ideological reasons.

These 'usual dangers' strike me as being the same 'usual dangers' we trot out to five year olds before Christmas - be good or you won't get any presents from those in charge.

Perhaps it is time that the Integrationists detailed the 'dangers' so we can see whether they are dangerous and how that could be managed down.

Because the risk from The Dangers seems likely to cost a lot less than the billions of man hours of output Greece is currently pouring down the drain every day.

Kristjan said...

Reports are filtering through that the atmosphere at the Greek government’s cabinet session this morning was very heavy, with enraged ministers openly objecting to the aid extension agreement signed in Brussels last week.

From Athens, Helena Smith reports:

The energy minister Panagiotis Lafazanis, who heads Syriza’s militant Left Faction, emerged from the meeting “seeing red” according to reporters who were there.

Syriza’s parlimentary group will now hold an emergency meeting at 8pm (6pm GMT) tonight.

Malmo's Ghost said...

Like the old Trotskyite, James Burnham, used to say, the left comes up with many wonderful programs to advance humanity, only to dismally fail more often than not when it comes time to implement them.

Neil Wilson said...

I wonder at what point people will realise that a floating currency is a form of capital control.

If you don't have a counterparty to exchange your currency with you have to stay with what you have.

'Capital Controls' is another one of those Humpty Dumpty words in economics that is used to frighten the horses - like Inflation.

Dan Lynch said...

The danger being that it will succeed and show the European Union and the Euro for exactly what it is - a complete failure pursued to the exclusion of everything else for ideological reasons.

Well said, @Neil Wilson. For once we can agree! ;-)

Tom Hickey said...

Perhaps it is time that the Integrationists detailed the 'dangers' so we can see whether they are dangerous and how that could be managed down.

Pretty clear what the dangers are. Creditors would have to admit that what can't be repaid won't be and write it down. That would upset the financial industry and they might choose to blow up the global economy in a Galt-like fit of pique.

Tom Hickey said...

The energy minister Panagiotis Lafazanis, who heads Syriza’s militant Left Faction, emerged from the meeting “seeing red” according to reporters who were there.

Sounds like Syriza's coalition may be coming unglued.

Tom Hickey said...

I wonder at what point people will realise that a floating currency is a form of capital control.

Right. In a fixed rate system, capital controls are needed, where as in a floating rate system, the market takes care of it.

I thought that the people in charge were free marketers. Guess not.

Malmo's Ghost said...

Tom,

I think you or someone here has been warning the coalition was tenuous to begin with. Can't see how it holds together for another four months, cause not only did Syriza fold on its promise to not extend the original bailout (major political F-up), but does anyone really believe this Eurogruoup crafted letter of reforms will do much of anything meaningful for the dispossessed languishing in Greece herself? MMTers surely know this is a masiive fail on Syriza's part.

Neil Wilson said...

"Pretty clear what the dangers are."

I don't think it is at all, or that it can't be managed and controlled by an active state.

The dangers seem to me to be wardrobe monsters.

'Banks will go bust'. So what. The central bank can refloat any bank and protect the depositors ensuring only the capital suppliers take a bath.

'Capital flight'. Capital can only fly in a fixed exchange rate mechanism and then only if there is an offsetting inflow in the opposite direction. Otherwise all that is happening is that some people are picking up bargains as others lose money. That's just redistribution from the stupid to the clever.

'Currency collapse'. Only if banks can lend (i.e. create money) to settle, otherwise the exchange system runs out of money to settle and you get a 'bear squeeze'. So ban banks from doing that and things will simply move in a range.

AFAICS the dangers boil down to 'some rich people might lose money and wealth because things have changed'.

Tom Hickey said...

I agree with you, Neil. That was snark, to which I thought the Galt reference was a tip off.

But there is little doubt that what is driving this intransigence on the part of the core is the creditors' demand that they get repaid to the last cent — and that the debt doesn't inflated away. That's the not so hidden agenda.

Ignacio said...

There are not any dangers that can't be overcome, but there is a lot to be lost by some wealthy minority who has oversized power.

This has been ridiculous since 2008, every time the same gang with the fearmongering and people following them happily like lemmings into the abyss while they stay on the side.