Mr Insolence

[luvdovz.livejournal.com]

In no time, Alexis Tsipras has managed to find himself some new external enemies (naturally, from the EU): Spain and Portugal. Both countries, just like Greece, had to take loans in order to survive. But the similarities end there. They both angered Mr Messiah when they joined Germany in demanding that Greece should be honoring its commitments.

But now Tsipras is really angry with them! He has attacked the two Iberian countries with the accusation that for internal political reasons of their own they've joined a conspiracy against his country, forming some sort of "axis" aiming to "bring down" the Greek government. Sounds absurd, I know. But it's true that the Iberian peninsula is just about to enter election mode. Both countries. And both prime ministers Rajoy and Coelho are fighting for their political survival. It's notable that in a difficult situation like this, they've managed to fulfil their plans for reform and cut some loose ends, and their constituents can now breathe a bit more lightly, now that they've started registering the first fruits of the effort. But that of course has lost them a lot of political credit, because the measures they took were highly unpopular. Indeed, the shock therapy that Portugal is constantly being given as an example for, almost managed to kill the patient. Almost.

The Socialists in Portugal who 3 years ago brought the country to the brink of self-destruction, are now relying on the short memory span of the voters, and their chances for electoral victory do look quite significant. In the meantime Podemos, the Spanish twin of Syriza, has become the 3rd biggest political force in its country. It's even possible that a "broad coalition" could be born there, or why not a "national front" of some sorts. So I may've been incorrect when I said earlier here that the similarities with Greece end only with the loan.

If Tsipras somehow manages to demonstrate that he can lead the entire EU by the nose and that the right recipe is to just constantly behave impudently with all its institutions, then Coelho and Rajoy both have a very tough task ahead of them. But that's not the only reason they should be concerned and angry at him. The two Iberian countries have so far shown a tremendous solidarity to those EU members who are in need, especially Greece. The Spanish contribution to the aid for Greece has so far amounted to 26 billion euros, and Portugal's a little over 1 billion.

But if Podemos wins in Spain now, would it then be in favor of erasing more Greek debt, thus depriving its own country of lots of money? I think not. And the moods aren't very different in Portugal either, because the Portuguese are exhausted and angry after 3 years of stringent austerity - now most of them insist that the Greeks should pay their debts, period. Because otherwise what's the point in tightening the belts and pushing through hard times, if you see that others are being given a free pass like that?

Comments

[htpcl.livejournal.com]

I'm so fed up with people making dumb choices and buying all sort of populist crap.

[ddstory.livejournal.com]

The Portuguese are voting with their feet about the austerity situation that they've been hoarded into. Hell, even their PM told the unemployed to look abroad some time ago.

[dexeron.livejournal.com]

Looks like those opposition groups are relying on people thinking more along the lines of "it hurts now" and hoping they won't listen to those saying: "think about long term benefits and solutions, sometimes surgery hurts, but it makes you healthier later." I wonder if the current leadership is trying to use Greece as a kind of counter-point, a "negative" example to contrast their own situations, and make themselves look better during a hotly contested election period.

(Side note: meanwhile, some among the religious right here in the U.S.A. have decided that Tsipras fits the criteria (as opposed to all of those previous guys who've come and gone who "fit the criteria") to be the antichrist, and they're loudly preaching that the end times are upon us. Aye yi yi,)

[mahnmut.livejournal.com]

I'm thinking the Greeks should be left on their own at this point.

[mikeyxw.livejournal.com]

I'd disagree that this is the elephant in the room.

Greece doesn't suffer from austerity because of the attitude of the German voters, they may suffer from austerity right now because the Germans were some of the few fiscal adults in the Eurozone, but it would have come eventually and worse regardless. The Greeks are suffering from austerity because that's the result of making poor investment decisions with borrowed money, which they did quite a bit of in the decade between the mid 90's and 2008. This money not only stopped coming in but needs to be paid back. Not all investment of course will cause this. Making competent investments in educating your kids or building infrastructure will generate enough future growth to more than pay back the money that was invested, in this case, borrowing and spending spurs growth. Borrowing money an investing in Olympic stadiums or a retirement age of 53 will not generate enough future growth to pay for the money borrowed and will result in future austerity as that money will need to be paid back.

Greece's economy grew faster than the Eurozone as a whole every year between 1995 and 2007 due to the borrowing binge, this growth turned out to be due to deficit spending, something that the Greek government kept hidden using accounting tricks that would make an Enron executive blush. The only way to keep the economy at this inflated size is to continue borrowing, you can hardly blame the Germans for turning down this solution.

Maybe the necessary adjustments could be made more palatable to the Greeks, but they've pretty much shot their credibility. Any flexibility that's been given to the Greek governments over the past seven years has been used to delay rather than reform. I can't blame the German tax payers for their lack of sympathy at this point.

[mikeyxw.livejournal.com]

"So you don't think there's something systematically problematic in having a centrally-dictated approach to fiscal policy"

Nope, I believe that those who are loaning money get to dictate the terms of that loan. The Greeks were free to go elsewhere for a bailout, except of course they couldn't get better terms elsewhere and for good reason.

"The nations that have earnestly pursued it since the financial crisis have suffered severe economic downturns and prolonged, heightened unemployment"

The nations which pursued austerity have done so because they were over their head in debt going into a severe economic downturn. The only policy that wouldn't have resulted in tough times would be free money delivered on the back of unicorns traversing between the PIIGS on rainbows. There was a reason folks were talking about the PIIGS even before Italy and Spain started having problems, it's because these problems were inevitable given their economy at the time.

I don't believe my account is inaccurate. The collection of delinquent taxes seems to be where it was seven years ago, despite being the top issue on everyone's agenda for that period of time and being one of the major causes of Greece's current pain. What progress has been made? While the merits of privatization are more debatable, there was a schedule to be followed and it hasn't been. The current government's position is to rehire those civil servants who were laid off. As a whole, I would say that there is very little trust in their will to reform.

Greece got into this mess because their government spent far more than they brought in for a decade. I can't really imagine there is a solution to this problem that includes more spending. Maybe the spending cuts can take place in different areas, but when a country is spending more than they bring in, they need to spend less, collect more revenue, or both. Both will be painful and make the recession worse, that's basic Keynesian economics that has been demonstrated over and over.

Greece is also different from Iceland, Ireland, Portugal or Spain, whose problems were caused by overextended banks and a property bubble. In those cases, spending more for a bit can give the economy more time to recover. Greece's problems weren't caused by a housing bubble, they were caused by overspending by the government for a decade. More government spending won't give an economy time to recover from a problem caused by government overspending.