Tuesday, February 7, 2017

Bill Mitchell — Greece still should exit and escape the grip of the vandals

Greece is back in the news as the IMF, the Germans and the European Commission slug it out pretending to talk tough and propose solutions to the Greek tragedy. There is no solution of course. All the debate about whether the primary surplus target should be 3.5 per cent of GDP (European Commission position) or slightly lower (IMF position) is just venal hot air. Anybody who knows anything and isn’t protecting their past mistakes would assess that a fairly large and sustained fiscal deficit is required in Greece to rebuild some of the lost capacity and to provide an inkling of hope to the youth who are facing a lifetime of diminished prospects as a result of the decisions the adults around them took. All the talk about ‘deficits mortgaging the grand kids future’ – sick. The austerity has meant the grand kids might not ever emerge given the constrained circumstances their would-be parents will face as they progress through adulthood. The reality remains – firmly – Greece should exit the Eurozone, convert any outstanding liabiliites into a new currency at parity, and stimulate its domestic economy with expansionary fiscal policy. It should continue to impose capital controls. As part of the stimulus, it should introduce an unconditional Job Guarantee at a decent wage to provide a pathway back into employment for the many that the Troika have rendered jobless....
Bill Mitchell – billy blog
Greece still should exit and escape the grip of the vandals
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

10 comments:

GLH said...

Bankers, the scourge of the world.

Michael Norman said...

Never going to happen. Not even France. Not even with Le Pen. They love the euro. They don't see it as their problem.

lastgreek said...

A my parent's place yesterday I was surfing thru the Greek satellite channels ... and there was Varoufakis, in a news interview in Greek, stating that "they" now leave us no choice but to return to the drachma. Just sayin'... :)

And ...

Coming to a movie theatre near you: “She was warned. She was given an explanation. Nevertheless, she persisted,” -- The Elizabeth Warren Story ;)

Ignacio said...

People doesnt want that, majority doesnt want. Is political suicide. Mike is right.

Andrew Anderson said...
This comment has been removed by the author.
Andrew Anderson said...

Bankers, the scourge of the world. GLH

Government subsidies for private credit creation and other welfare proportional to wealth are a plague on the world.

And who supports them? Yves Smith for one.

Matt Franko said...

Looks like they are back to an external deficit...

GLH said...

I don't read Yves Smith but I agree that there should no government subsidies for private credit creation. There should be a huge increase in the minimum wage though. Put money in the people's hands and the economy will improve. Another big tax cut for the rich is not the answer.

Noah Way said...

Great idea to set the Drachma at parity with the Euro. Give Greece economic equality outside the EU.

blissex said...

«a fairly large and sustained fiscal deficit is required in Greece to rebuild some of the lost capacity»

The is the usual quite delirious argument by B Mitchell and many others, and it is delirious because the greek economy does not have any «lost capacity», at least as to *production*, as he most likely understands very well.

Between 2004 and 2012, with a peak in 2008, greek GDP surged by 20-25% entirely because of government borrowing being handed out to government supporters in various ways, financing a surge of 20-25% in imports. Then the borrowing ended and imports and GDP fell back to the previous level.

Y Varoufakis very candidly observed a while ago that «
yanisvaroufakis.eu/2012/05/16/weisbrot-and-krugman-are-wrong-greece-cannot-pull-off-an-argentina/
«idle productive resources in Greece cannot produce much for which there is increasing demand»

What the greek economy needs to get back to the higher level of GDP is large fiscal transfers in hard currency, from rich countries like the USA or the UK, for around 20-25% of greek GDP. This would «rebuild» the greek «lost capacity» for higher consumption and imports, and GDP will be restored to their 2008 level.

The question is *why* the USA or the UK should give to the greek government fiscal transfers equal to 20-25% of greek GDP.