Wednesday, January 28, 2015


"Nobody can be surprised by the victory of Greece’s leftwing Syriza party. In the midst of a “recovery”, unemployment is reported at 26 per cent of the labour force and youth unemployment at over 50 per cent. Gross domestic product is also 26 per cent below its pre-crisis peak. But GDP is a particularly inappropriate measure of the fall in economic welfare in this case. The current account balance was minus 15 per cent of GDP in the third quarter of 2008, but has been in surplus since the second half of 2013. So spending by Greeks on goods and services has in fact fallen by at least 40 per cent. Given this catastrophe, it is hardly surprising that the voters have rejected the previous government and the policies that, at the behest of the creditors, it — somewhat halfheartedly — pursued. As Alexis Tsipras, the new prime minister, has said, Europe is founded on the principle of democracy. The people of Greece have spoken. At the very least, the powers that be need to listen. Yet everything one hears suggests that demands for a new deal on debt and austerity will be rejected more or less out of hand. Fuelling that response is a large amount of self-righteous nonsense.... The best approach was set out in the “heavily indebted poor countries” initiative of the IMF and the World Bank, which began in 1996. Under this, debt relief is granted only after the country meets precise criteria for reform. Such a programme would be of benefit to Greece, which needs political and economic modernisation. The politically convenient approach is to continue to “extend and pretend”. Undoubtedly, there are ways of pushing off the day of reckoning still further. There are also ways of lowering the present value of interest and repayments without lowering the face value. All this would allow the eurozone to avoid confronting the moral case for debt relief for other crisis-hit countries, notably Ireland. Yet such an approach cannot deliver the honest and transparent outcome that is sorely needed. The dangerous approach is to push Greece towards default. This is likely to create a situation in which the European Central Bank would no longer feel able to operate as Greece’s central bank. That then would force an exit. The result for Greece would certainly be catastrophic in the short term. "
Martin Wolf, "Greek Debt and the Default of Statesmanship". The Financial Times. 28 January 2015, in
"There is no doubt that the situation in Germany is exceedingly critical. It is in fact, more critical than at any time during the last six years. During the past few days, and in part at least for psychological reasons, the situation has rapidly deteriorated and has become gravely alarming. Reichsbank has lost over 30 Million Pounds during past ten days, mainly due to withdrawals of foreign money. If movement extends to German capital it may involve collapse of mark, with disastrous consequences not only to Germany but to Austria and to Hungary....The key to the situation seems to rest with the United States and France. We should of course, be prepared to join in any action that might be deemed salutary, but it would seem best for the first move to to come from those chiefly interested, and it is no use disguising our fear that if confidence is not speedily restored we may be faced not merely with a complete cessation of reparations payments, but with a financial collapse in Germany and Austria, involving serious risk of political and social trouble in those countries and consequent repercussions on the rest of Europe".
Foreign Office to Lord Tyrrell (British Ambassador to Paris), 15 June 1931. In Documents on British Foreign Policy, 1919-1939. Second Series. Volume II: 1931 . Edited E. L. Woodward & Rohan Butler. (1947), pp. 79-80.
The results of the Greek elections this week-end just past, confirm for once and for all the dangers, the grave dangers indeed of the European Union's and the Eurozone's policy of 'Bruningism'. AKA almost completely unmitigated austerity, which results in almost mass immiseration of a given country's population. Inevitably as the always cogent Martin Wolf of the Financial Times notes, a political earthquake of late Weimar German proportions erupts. Which is the result that we have in Greece to-day. Please make no mistake: I detest and loath the new Greek government. A gang of repellent, Soixante-huitard-like, gauchiste elements 1. However the fact of the matter is that the new Greek government has been conjured up by the idiocy of the current austerity programme that the European Union and the European Central Bank (hereafter ECB) has forced down the throats of every Greek government since 2009. With pace Martin Wolf very little positive results as per reducing Greece's overall debt burden, not to even mention or consider the welfare of the Greek people of course. The inevitable upshot of a continuation of the current austerity measures will be in no short order: a) Greece leaving the Eurozone; b) the elections all over Southern, Central and Eastern Europe of similar populist governments of either the hard left (Italy, Spain, Portugal and perhaps Ireland), or the hard right (Hungary, Slovakia, Poland, Romania, Bulgaria). A further upshot is that faced not with one repellent and extremist government, but with up to half a dozen, the European Union and the ECB will then climb-down and relax the austerity programme for these countries. Meaning that just as the Entente Powers in the entré deux guerre period rejected any substantive concessions to any moderate German government before 1933, except to then offer up the very same to Hitler's Germany, similarly, the powers that be of the European Union will I predict if matters come to said pass, only relax the austerity programme in the face of governments of the extreme left and right. With the end-result of greatly reinforcing the legitimacy of the very same extremist governments. So unless it is Brussels' goal to elect and entrench a whole slew of extremist governments throughout Europe, it is high time that the Union change its austerity fixation once and for all. For as the European-American philosopher George Santanyana once famously put it:
Those who cannot remember the past are condemned to repeat it".
1. See: Paul Mason, "Greece shows what can happen when the young revolt against corrupt elites". The Guardian. 25 January 2015, in Obviously, the writer looks with favor on aspects of Syriza's politics that I abhor. For a more sceptical view of the new Greek government, which more agrees with my own point of view, see: Ian Bremner, "Will Greece Trigger a European Crisis?" The Council on Foreign Relations. 28 January 2015, in


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