Friday lay day – Surrendering to the Recession Cult

Its my Friday lay day blog and I have been working on various things today. But for this little blog I am still trying to work out an impression of what is going on in Greece and the Brussels. There is little uncertainty on the Troika side although the various elements of that position are still nuanced. The sheer antagonism of the Baltic States towards Greece is a newly revealed element which is interesting. If their logic prevails then it really is a race to the bottom unless the nation is Germany. Representing the desired benchmark by massive mediocrity if not near disaster (as in Latvia, Lithuania etc) seems to be the new normal in EU debates. Spare the thought. The Baltics should be joining Greece in a solidarity pact to oppose austerity and seek fundamental changes to the EU Treaties instead of siding with the Troika’s death wish for Greece. But there is quite a bit of uncertainty in trying to guage the Greek position. One is led to the most obvious, simple and consistent interpretations of that position – that Syriza is a fractured coalition and those currently in positions of authority (Prime Minister etc) are surrender monkeys who have miscalculated dramatically. But that would tell us that they are so acting with such venality towards their people as to be almost an unbelievable narrative. Looking deeper into the plot doesn’t provide anything consistent, just dead ends and speculation. We are close to finding out though.

The simple story went like this. Syriza was elected in January against the odds on the groundswell of deep resentment in Greece for the austerity program and the humiliating treatment of the nation by the Troika – it was becoming a newly-created German colony.

All the early rhetoric about outstanding Second World War damages etc was indicative of the new sense of national sentiment about its place in Europe and the sense of anger at being targetted for punishing austerity – to wipe out the prosperity the nation had built over several decades.

Syriza was an aspirational force and spoke strongly about its mission which in no uncertain terms was anti-austerity.

At the time, I pointed out that it was a seemingly inconsistent position it was proposing – to oppose austerity yet stay within the Eurozone, which apparently the majority of Greeks prefer.

Please read my blog – The incommensurate aims of the Greek people – for more discussion on this point.

It was pointed out to me by those in the know that the plan was consistent because they were calling for massive investment injections from the – European Investment Bank.

Some notable “in the know” Post Keynesians asserted I was totally wrong in my assessment that agreeing to run a primary fiscal surplus was going to continue the austerity because the EIB would come to the party with the funds to offset the fiscal drag coming from Greece’s own fiscal stance.

I was told that “they were on the ground and knew what was happening” and that I should be “more supportive of the Syriza efforts”.

Apparently, they had had a dream one night that Juncker’s measly €315bn investment plan would somehow be increased several fold and most of it would flow down to poor beleaguered Greece and things would be fine.

Well despite the ‘plan’ being way under the funds needed to restore some sense of growth to the Eurozone and help the many nations in desperate need of a spending boost, not much of it has flowed anywhere.

Certainly, the Greek economy has not enjoyed a major external spending boost.

Yes, once again, the so-called ‘progressives’ who think it is fine for Greece to remain in the Eurozone, fundamentally misread the Groupthink that binds the Troika together as a ‘Recession Cult’.

When the Greek government got a modest concession renaming the Troika – the “institutions” – apparently that was a success. It is a Recession Cult and should be thought of as such.

Anyway the big external spending boost is not about to happen – and really, it never was.

The Troika’s position has really only hardened from ridiculous to something beyond believable – if you sit outside the neo-liberal Groupthink that they are trapped within.

This is a world of mob rule where basic realities are ignored, things most people think are important that bind societies together like jobs and incomes are disregarded as being unimportant, and plain facts are denied or reinterpreted to become inanities.

It is virtually impossible having a conversation with the Recession Cult. Normal logic, rules of evidence, common sense, appeals to humanity – all fail.

That is the way the internal disciplining structures that perpetuate the Groupthink work. It builds an impenetrable barrier to reality and only recognises and acts according to its own ridiculous, self-serving logic.

Then we had months of bickering, increasingly vituperative sniping between the nations, old wounds opened to bleed, and increasingly revisionist narratives about why Greece is in the trouble it is – all pointing to the nation’s apparent ‘bloated’ public sector, wasteful and extravagant spending and being petals to precious to appreciate how well off they are compared to the Baltics, who had taken their medicine and moved on … that sort of stuff.

The reaction of the Baltics has been interesting. These are nations which have governments that have devastated their prosperity, forced a significant percentage of their skilled and younger workers out to seek livelihoods in other lands, are beset with old national versus Russian rivals and ethnic divisions, who somehow want to suggest that what they have been through should represent the template for all nations – advanced or otherwise.

When a simple spending boost would resolve most of the problems everywhere these idiot Finance Ministers and other officials, who have not been personally scarred at all by the vicious austerity they have imposed on their people, have the audacity to demand that Greeks should drink the Kool-Aid and impoverish themselves like the Baltic common folk have been impoverished. You couldn’t write about it.

Slovakia – poor country it is, has a government who wants to make it poorer just because the top officials can wine and dine in Brussels with the ‘best of them’. Their moral outrage about Greece has been a sight to behold (and read about).

And then we have Finland, not a Baltic but an austerity maven nonetheless. This is a country that is losing its technological edge because of failed corporate visions and government austerity and is not content with that – it wants to join the race to the bottom of its neighbours – who can hit rock bottom the first.

But it is more than that – it is also a contest as to who can create the lowest trough to hit! Idiocy when simple spending stimulus is all that is needed to get things rolling again.

And meanwhile Germany is acting with contempt for all its neighbours. It helped create this mess and yet it thinks it is justified in wallowing in its socio-pathological ‘inflation angst’, as if that was based in reality anyway.

So when Syriza said it was going to oppose austerity – the simple story is that it was going to pursue that option.

Over the months since January, the slippage has been monumental. As late as last week, the Greek Prime Minister wrote to Brussels saying he would accept their dirty, blackmailing deal.

Then we get to the referendum. The former Finance Minister called it a “majestic, big YES to a democratic, rational Europe!” and that the victory of the NO vote meant that “dignity was restored to the people of Greece”.

Syriza Member of Parliament Costas Lapavitsas wrote earlier this week (July 7, 2015) in the article – Syriza’s Next Steps – that:

The Greek people’s rejection of austerity in Sunday’s referendum was an enormous victory.

Be reminded that the NO vote was a “rejection of austerity” and if that was translated into positive policy action then one might conclude that the “dignity was restored to the people of Greece”.

No dignity is restored by the act of ticking a box with OXI next to it and cheering in a city square, if the government of your nation then heads to Brussels and agrees to austerity measures that are worse than the ones it rejected no less than 14 odd days before.

That would amount to a capitulation or surrender to the Recession Cult. That would amount to jettisoning the peoples’ interests.

EU finance ministers, presidents etc came out on script and said if they vote NO then it was equivalent to voting to leave the Eurozone (it should have been) and the “bridges were being burned”. The last comment came from the German SDP leader. His abandonment of any notion of social democracy is a disgrace.

But come Sunday night in Europe, the threats of exit were gone and Brussels was assembling the bullies to resume business as usual.

Those pitiful Greeks had had their day in the sun, god bless them. They played ‘Democracy’, that curious game that really ends up meaning nothing, for a day and now the Eurogroup had to get back down to work. It was a Monday after all and the markets were getting busy to shuffle some more wealth and so the little Greek game had to stop.

It seems that it did.

The ECB started the Troika noose tightening by changing collateral rules relating to the on-going ELA, which is keeping the commercial banks in Greece on a drip-feed while the Government is brought to heel. In threatening to bankrupt the Greece financial system, the ECB is acting wildly outside its charter as a central bank who carries a (legistlated) responsibility to maintain financial stability.

The ECB is a political machine in the Eurozone now and that tells us, if nothing else is taken into account, that the monetary system has failed – categorically and irretrievably under the current institutional structure and leadership.

Then there was a disturbing article in the British Telegraph this week (July 7, 2015) – Europe is blowing itself apart over Greece – and nobody seems able to stop it – which was apparently the result of briefing by the outgoing Finance Minister of Greece.

The article relates that:

Greek premier Alexis Tsipras never expected to win Sunday’s referendum on EMU bail-out terms, let alone to preside over a blazing national revolt against foreign control.

He called the snap vote with the expectation – and intention – of losing it. The plan was to put up a good fight, accept honourable defeat, and hand over the keys of the Maximos Mansion, leaving it to others to implement the June 25 “ultimatum” and suffer the opprobrium.

Which if true, is a shocking reality.

That “majestic, big YES to a democratic, rational Europe” was just a great con job all the time to save a few political skins and fuck the people. The little game of play ‘Democracy’ for a day.

The article claims that the Greek leader, before calling the referendum, “had already made the decision to acquiesce to austerity demands, recognizing that Syriza had failed to bring about a debtors’ cartel of southern EMU states and had seriously misjudged the mood across the eurozone”.

But when the bullies went in for some more punches (higher VAT increases, larger cuts to pensions and other income support measures for the poor, and deeper fiscal cuts) without any debt relief, it was clear according to the outgoing Finance Minister that “They just didn’t want us to sign. They had already decided to push us out”.

That motivated the referendum which to “their consternation, they won”.

The options were clear:

  • maintain the dignity of the Greek people, respect the democratic sentiment (not only in the referendum but also in the January national election outcome, and reject austerity and tell the Eurogroup to jump.

    Next day, exit and restore growth; OR

  • Surrender like surrender monkeys, scrap the finance minister who the spivs from the north hated, and sell the Greek people down the drain.

Apparently, there had been planning whereby the Bank of Greece would issue vouchers (in euros) to keep the system afloat while the Greeks defaulted on their debts to the ECB (next tranche to be due) and fought it out with the Eurogroup.

That option was rejected as being “too dangerous”.

So now we know what has transpired. The simple and easily interpreted story is contained in the documents that the Greek government has now submitted for approval.

You can read them – HERE.

They read like some twisted Baltic-state dreamworld. Vicious, penal, capricious austerity and privatisation as far as the eyes can read.

Dirty, neo-liberal austerity that will attack the most disadvantaged and drive the nation back into a deep recession.

Filthy austerity that is the exact opposite to what the Syriza politicians said to the Greek people they would do when they went for their ‘job interviews’. They are now all earning their salaries on the basis of a treacherous deception. They should resign.

Syriza will say that as of today it looks like Germany is backing down on debt relief. But debt relief is somewhat of a side issue. The damage is not being done by the outstanding debt but the spending flows that should be occuring that are not as a result of the austerity.

The latest Eurostat figures released this week (July 7, 2015) – Government expenditure accounted for 48.1% of GDP in the EU in 2014 – show that of all the European nations, the cuts in Greek public spending have been the largest between 2013 and 2014.

They have cut their general government spending by 10.7 per cent. Only Slovenia is close at 9.9 per cent cuts and it is a basket case to as a result.

Greece’s public spending is at 49.3 per cent of GDP whereas the Euro area average is 49.0 per cent.

Yet the Recession Cult wants more.

It all looks like surrender to me. There is some consistency in this interpretation. They are so scared of leaving the Euro that anything is acceptable – irrespective of what the people of Greece have on two occasions rejected.

But then that might be too simple.

I continue to study the tea leaves to see if I can find any other less obvious interpretations of what has been going on.

Speech in European Parliament

I consider the British political party UKIP to be racist and xenophobic and, in general, a pretty unsavoury lot.

But like all populist parties that work on igniting the emotions of those who are experiencing disadvantage and dislocation, some of what the leaders say resonates.

This week (July 7, 2015), with the Greek Prime Minister visiting the European Parliament, and the so-called Socialist President of the Parliament Martin Schultz presiding, having just recently threatened the Greek people with power cuts and a break down of the public transport system if they voted OXI in last week’s referendum, the UKIP leader Nigel Farage delivered one of those resonating speeches.

If you haven’t seen it, I include it below.

I note a lot of news reports are now starting to talk about EU Groupthink, which I am happy about given that is what my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – is about.

Some of what the UKIP leader said in his parliamentary attack on the Eurozone and austerity is plain wrong in terms of the economics – but most of what he said is correct and the Greek Prime Minister squirmed in his chair one imagines as the speech was directed at him, given he is proposing to accept even worse austerity than the Troika came up with a few weeks ago.

I loved his description of Kohl and Mitterand and Delors.

And you UKIP supporters, please no comments about whether it is racist or not – that was not the point of the post.

King Tubby Meets The Rockers – yeh, get down!

Here is what I was listening to this morning. It is from the Jamaican jazz reggae guitar player – Ernest Ranglin – who I have featured before. He is one of my favourites.

He is joined here with Ira Coleman (Bass), Idris Muhammad (Drums), Monty Alexander (Piano and Melodica), and Gary Mayone (Keyboards, Percoussion).

The album is – Below the Baseline – published in 1996 and it is full of gems like this. It is 55 minutes of joy.

The song is a dedication to the great – Osbourne Ruddock aka King Tubby – who was one of the top dub sound engineers in Jamaica during the early development phases 1960s and 1970s.

He worked with all the great reggae dub players (Augustus Pablo, Aggrovators, Prince Jammy, Scientist, Bunny Lee and others). King Tubby meets the Rockers Uptown – is one of the best albums ever produced (in my biased opinion).

Here is Ernest Ranglin making “some noise … hopefully, some joyful noise” in Amsterdam in 2011.

If you are in Melbourne this weekend, my band Pressure Drop is playing at Kindred Studios, Whitehall Street, Yarraville on Sunday afternoon.

The first band Blak Roots starts off around 15:00 and we will be on stage from around 17:00 to 19:00.

A big afternoon of roots, reggae, jazz, rocksteady and dub.

Saturday Quiz

The Saturday Quiz will be back again tomorrow. It will be of an appropriate order of difficulty (-:

Advertising: Special Discount available for my book to my blog readers

My new book – Eurozone Dystopia – Groupthink and Denial on a Grand Scale – is now published by Edward Elgar UK and available for sale.

I am able to offer a Special 35 per cent discount to readers to reduce the price of the Hard Back version of the book.

Please go to the – Elgar on-line shop and use the Discount Code VIP35.

Front_Cover

Some relevant links to further information and availability:

1. Edward Elgar Catalogue Page

2. You can read – Chapter 1 – for free.

3. You can purchase the book in – Hard Back format – at Edward Elgar’s On-line Shop.

4. You can buy the book in – eBook format – at Google’s Store.

It is a long book (501 pages) and the full price for the hard-back edition is not cheap. The eBook version is very affordable.

That is enough for today!
(c) Copyright 2015 William Mitchell. All Rights Reserved.

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    39 Responses to Friday lay day – Surrendering to the Recession Cult

    1. Neil Wilson says:

      The problem is while Farage owns the leaving the EU, national currency and immigration control argument, nobody with more rational economic and social policies will go there for fear of being compared to a racist, xenophobic bunch.

      Which means that they cling to the EU like a fallen branch in a swollen river, or they don’t get invited to the right sort of parties.

      Nobody cares about the people any more. They care about having autocratic control of a corporatist behemoth that is slowly selling everybody down the river.

      The left has become completely degenerate.

    2. The Dork of Cork says:

      Reading the EIB literature at least the EIB was deeply involved in expanding the capacity of the only LNG facility in Greece which is located outside Athens.
      However when you look at the IEAs latest monthly Gas report which covers the period Jan to March 2015 (the peak period of consumption) we see a major rebound in demand of all the major European customers.
      However the Greek gas demand situation continues to decline during this recent period and indeed demand is now pitiful after many years of contraction from a albeit low base.

      This is a general characteristic of eurozone activity.
      Massive overinvestment which gives austerity economies a temporary boost , but the costs of this misallocation is forover put on the backs of the people who have no access to a money supply which is not part of the commons in any way.

    3. The Dork of Cork says:

      German gas consumption Jan to March 2015 :28,498 million cubic meters (18.5 % increase)
      Greek gas consumption Jan to March 2015 : 863 million cubic meters (-7.3 %)

      Who is really living beyond its means?
      Germany is a vassal schoolboy of the ECB headmaster like all the others so therefore capitalist logic dictates it must bully all the kids in the yard to maintain the raw materials required to sustain its mercantalism.

      In reality its people are to be pitied – much like Augustus in Charlie and the chocolate factory it is destined to be eventually sucked up the pipe.

    4. Phil says:

      Bill,

      In fairness the ‘good euro’ experiment that Varoufakis was trying was worth trying. If there were political will the Europeans could have created a de facto fiscal union around the EIB and like institutions. But as the negotiations wore on it became obvious how stubborn the Europeans were. At this point I think most people who thought Varoufakis’ plan was worth a shot jumped ship and started to support an exit — preferably with the assistance of the ECB.

      That was always my conception of how things should be done: try the Varoufakis/Holland/Galbraith plan and if it doesn’t fly begin the process of exit. Unfortunately people in Syriza were either unwilling or unable to contingency plan for an exit. Now they are in a desperate position where their government looks like its going to fall apart as it goes against the sentiment expressed by the Greek people in a referendum that they called. With no Plan B on the table and a studied inability to even discuss it an exit would be absolute chaos. That is the fault of the Syriza leadership in my opinion as they placed all their eggs in one basket. We’ll see where this leads. But its going to get ugly and it could have been avoided.

    5. “I resign as Minister of Finance, in order to allow Tsipras room for “smoother negotiations”. LOL. There were no negotiations, just abject capitulation. This recent development confirmed everything I feared about Varoufakis, namely, that he was just simulating dissent. He didn’t expect people to vote OXI, and he decided to get off the ship because he knew Tsipras would agree to austerity. I called Varoufakis, the politician, a rat on twitter – and a certain (frustrated) bloke, GrkStav – tweeted me a Go F**k yourself, then proceeded to block me. Boy, oh, boy, if people can’t stand a little bit of criticism, you know how much they’re hurting inside.
      Lesson? Don’t ever trust someone who bails out of politics when things start to smell bad, and then after a considerable absence choose to reenter politics, carrying the torch of revolution and change.
      It seems that the Powers that Be enjoy organizing charades in public debate, just to get people’s hopes up and then dash them against the ground. A great tragedy indeed…

    6. larry says:

      I agree completely with Neil that where once the Left was is now an abyss. They have no narrative to counter the neoclassical narrative that is being touted almost everywhere. They are a disgrace, and Left supporters are forced to support the unsupportable. Liz Kendall, who appears to be slowly emerging as the potential leader, has said some economically ridiculous things, like the UK should run surpluses, which she qualified later, but qualified in an Osborne like fashion. And Osborne’s plan to legislate for surpluses is an absurdity, and not only an economic one.

      One thing that Farage said in the clip appears to be coming truer every day, and this is that the European Project is coming apart at the seams. But not for the reasons that he said, that everyone is different and that political union is therefore impossible. It has become impossible due to the imposition of the neoliberal world view, indeed a Draconian one, not unlike a straitjacket.

      A book has just been published discussing this very subject that complements Bill’s very well. Edited by Daniel Vaughan-Whitehead, it is The European Social Model in Crisis: Is Europe Losing Its Soul? I would argue that it is, due to the imposition of a Draconian neoliberal straitjacket along with its cousin, the neoclassical economic paradigm, without concern for the differences that Farage mentions. He believes that they cannot be accommodated. I, on the other hand, think the evidence to date shows that they can, but not within a neoliberal/neoclassical straitjacket. It is this straitjacket that Bill has argued untiringly must be abandoned if we are to make economic and social progress.

      Farage is right that Kohl and Mitterand, along with the crafty Delors, got it backwards. It is a common political union that supports a common currency, not the other way around. But this particular construction and management of the project suited these authoritarians and it suited their large institutions and corporations.

      While I loathe the Ukip project and its objectives and view them as dangerously wrongheaded, every once in a while Farage, perhaps accidentally, gets something almost right, as he did in this speech. Even the IMF, possibly under pressure from the US administration, has claimed that the Greek debt is unsustainable and must be restructured, which is pol-speak for writing a good bit of it off. Deutsche Bank’s debt, because of its immersion in the securities fiasco, is around 57 trillion Euros, which is more than the Eurozone’s GDP. And it would be one of the biggest losers in a restructuring. Perhaps this is a major reason why Merkel’s stance has been so rigid.

    7. Postkey says:

      ” The damage is not being done by the outstanding debt but the spending flows that should be occurring that are not as a result of the austerity.”

      Evidence that it is an increase in aggregate demand that is required rather than ‘neoliberal’ reforms?

      Greece had the largest increase {of the Euro area countries} in per caput income {measured in US$’s} between 1999 and 2008.

    8. I knew Varoufakis will be ousted, before this was being discussed within Syriza during the referendum period.
      http://kourdistoportocali.com/post/45073/papahristos
      His resignation didn’t come as a surprise to me, what did surprise me was the reasons (joke-logic) he used as motivation for his gesture – to help the Government obtain a better deal with the bankers. Varoufakis, the politician, resigned under false reasons.

    9. Ikonoclast says:

      A major global (not just EU) economic catastrophe will have to happen before the world’s political economy changes. The policies are so bad, so rigid and unchangeable in this paradigm that a total crash is inevitable. A new paradigm will only be possible after the economic catastrophe.

    10. Ucumist says:

      “He didn’t expect people to vote OXI, and he decided to get off the ship because he knew Tsipras would agree to austerity. I called Varoufakis, the politician a rat”

      Sorry I quite understand your reasoning. Without Varoufakis’s account of what transpired this is surely just your prejudice.
      If you are honorable like Robin Cook & your Gov is going to go in the opposite direction to your principles, then you have no option but to resign your ministerial position. You seem to imply that Varoufakis could have determined the decisions of the Syriza party and by ‘simulating dissent’ it was his fault!
      Am I reading your post incorrectly or have you twisted the narrative to suit your view before all the main characters have explained their actions.

    11. bill says:

      Dear All

      I note that I do not want the conversation to become one of who was/is/might be a rat or not. We cannot tell what the motivations were. It is best to keep focused on the big picture – for example, how Syriza as a collective is failing its nation and behaving in a bizarre fashion. Whether some are rats or not is small-scale compared to the main narrative.

      best wishes
      bill

    12. James Schipper says:

      Dear Bill

      As I see it, the main problem with the UKIP is not their “racism” or “xenophobia”, but their libertarian economic policies. Although many racists and xenophobes may flock to the UKIP, the party itself is not racist or xenophobic. Nigel Farrage is married to a German woman, hardly the behavior of a xenophobe.

      As to Syriza, as leftists, they can’t be really nationalistic since anti-nationalism has been a staple of the left since the beginning. That’s why Syriza brings up WWII, since anti-Nazism is of course kosher for leftists. Tsipras seems to forget that it was Italy that attacked Greece, against the wishes of the Führer. The Germans only intervened after the Italians failed to subdue the Greeks and British troops had landed in Greece. Until the fall of Fascism in 1943, most of Greece was occupied by Italy. The eastern part of Greece was annexed by Bulgaria. The Greeks who fared worst in WWII were those in the Bulgarian part. The Bulgarians wanted to Bulgarianize the area, so they expelled all Greek civil servants, repressed the Greek language and pursued a policy of forced assimilation of the Greeks in their newly conquered territory. Should Syriza also demand compensation from Italy and Bulgaria? Instead of dragging up WWII, Tsipras should do what the eloquent Mr Farrage urged him to do.

      If there is a cultural difference between the North and South in Europe, why does Germany have big trade surpluses while the equally Nordic UK has chronic trade deficits? The huge German, and Dutch, trade surpluses are the result of excessive wage restraint, not of cultural differences.

      Regards. James

    13. Ucumist says:

      “Varoufakis, the politician, resigned under false reasons.”

      Don’t you know how to ‘read between the lines’
      You seem to have a personal vendetta going. Did he let you down?
      Varoufakis did what the ‘Party’ wanted, that is his responsibility as a member. That’s how a political party works. Being a belligerent party rebel is not his style.

    14. larry says:

      James, I trust my comment shows that you and I agree about why we are not Ukip followers and disagree vehemently with their position. I agree that his speech does not seem to me to be racist but, rather, political/economic in character. And he is right about the European Project – it is in trouble. And I think for the reasons I mentioned, which are not his reasons, which are based, as you point out, in his libertarianism. This is as wrongheaded a view of the world we live in as we may have ever seen in recent times, and is causing immense distress.

      One difficulty I think neoclassical followers have is that they seem to be taking what they think is a leaf from Milton Friedman’s play book, which he didn’t follow rigorously himself, which is that the theory is what is important, not the data. He himself didn’t always follow his own advice when he said that if theory and data are in conflict, reject the data. This seems to me to be what the Troika and the IMF until very recently have been doing.

    15. Varoufakis SHOULD have said, ‘I resign because of internal disagreement.” Not to give us the joke-logic that he was resigning to make Tispras reach a better deal with Troika.

    16. Blissex says:

      «The simple story went like this. Syriza was elected in January against the odds on the groundswell of deep resentment in Greece for the austerity program. being targetted for punishing austerity – to wipe out the prosperity the nation had built over several decades.»

      That’s the usually hallucination that fashionable lefties have about Greece, a result of unthinking creduluousness.

      There has been no austerity in Greece so far, to the end of 2014; and there has been no prosperity built over several decades to the extent that Greece is suffering either. The numbers supplied by the greek statistics office are extremely clear as to this:

      * Private final consumption:
      https://research.stlouisfed.org/fred2/series/GRCPFCEADSMEI
      Final private consumption:
      2001: €102b
      2008: €164b
      2014: €128b

      * Active population:
      https://research.stlouisfed.org/fred2/series/LFAC64TTGRA647N
      https://research.stlouisfed.org/fred2/series/POPTOTGRA647NWDB
      2001: 4.6m
      2008: 4.9m
      2014: 4.7m

      * Activity rate:
      https://research.stlouisfed.org/fred2/series/LRAC64TTGRA156S
      https://research.stlouisfed.org/fred2/series/LRAC64FEGRA156S
      2001: 77% for males, 50% for females,
      2008: 78% for males, 55% for females
      2014: 76% for males, 59% for females.

      The only number that has really swung wildly between 2001 and 2014 has been the private final consumption component of GDP, and the reason seems to be have nearly entirely been that Greece borrowed a lot of money to fund a gigantic import boom, not “prosperity”, and then run out of it:

      * Net imports:
      https://research.stlouisfed.org/fred2/series/BPBLTT01GRA637S
      2001: $9 billions
      2008: $51 billion
      2012: $33 billion

      The total net imports of Greece between 2001 and 2014 have been around €230 billion, or $320 billion, mostly financed by surging borrowing, and that explains nearly all the up and down swing of greek GDP:

      https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1prt
      https://research.stlouisfed.org/fred2/series/BPBLTT01GRA637S

      It is amazing that in 2001-2008 an increase of 300,000 “active” people, from 4.6 million to 4.9 million, coincides with an increase in private final consumption from $101 billion to $164 billion, and in net imports from $9 to $51 billions!!! That’s a 4% increase in activity generating a 62% increase in final consumption, and an increase in imports of 560%!!!

      The greek economy up to 2014 was doing fine,  it had not collapsed in any real sense, just the net imports financed by borrowing and the related “fake” retail activity. In 2014 Greece has a slightly improved GDP than in 2001, when it was considered a rich, developed, growing country, and the greek population activity rate has not changed much. Greece in 2014 still has a GDP per person twice that of Poland and four times that of Bulgaria, both EU members, and during the “austerity” years of 2009-2014 still managed to have net imports of €70 billion.

      At the same time the EU and related “institutions” have just talked the tough talk to please their voters, while giving Greece a net transfer of €5 billion a year, or 2-3% of GNI as they have since 1981, and they have cut the greek government’s interest rate costs in half, and effectively insured the greek governments debt, evne if the greek government is bankrupt, something worth probably a few dozens billion euros per year in subsidy, or 15-20% of Greece’s GNI.

      Greece in 2014 was doing as well or better than in 2001, and most greeks were living well (many bulgarians continued to emigrate to Greece), even if they regretted missing the €63,000 per household they consumed in net imports in the 2001-2011 period.

      The greek government was bankrupt while Greece was doing well because the kleptocratic greek elites engineered a “strangle in the bathtub” neoliberal plan for the greek state, what is essentially a planned fraudulent bankruptcy: they loaded a load of debt on the state, which which they funded a massive import party for their voters, and then when the debt flow stopped in 2008, they let the state fail and asked for it to be bailed out not by clever rich greek taxpayers but by dumb foreigners.

      Most greeks are fine or better off than in 2001, as GDP per person is same-y or better; the exception is those who receive welfare from the now bankrupt government, but bankrupting the government to destroy the welfare state was always part of the scam. Rich greeks and middle class greeks really dislike paying taxes to fund the welfare that helps poorer greeks.

      The whole 2001-2011 giant import boom funded by the fraudulent bankruptcy of the greek state was just a massive redistribution from dumb foreigners and poor greeks to rich and middle class greeks. Kleptocracy at its best.

      I am worried and disgusted that so many “resolutionary socialists” have been seduced by the stylish confabulators Tsipras and Varoufakis, and have not checked the numbers, and are fighting to support a policy of neoliberal kleptocracy for a rich country, when there are dozen countries in the EU that have a smaller GDP per person than Greece and haven’t been running reactionary policies.

      The foreign minister of Poland (GDP per person half that of Greece) recently said:

      http://www.independent.ie/business/world/ministers-refuse-to-support-debt-writedown-for-greece-as-fears-of-contagion-increase-31356910.html
      «Mr Flanagan made the remarks after holding talks in Dublin with his Polish counterpart Grzegorz Schetyna. Mr Schetyna said the Eurozone must consider whether to assist countries like Ireland which have shown positive engage with its partners, or countries like Greece which he said are in “the process of just spending money”. “I am in favour of supporting the first example,” Mr Schetyna told the Irish Independent.»

    17. Blissex says:

      «Greece had the largest increase {of the Euro area countries} in per caput income {measured in US$’s} between 1999 and 2008.»

      In per-capita *spending* due to enormously surging imports funded by borrowing. That’s a gigantic difference.

      If the argument is that once Greece reached $51 billion a year (20% of GNI) of net imports in 2008 they have a natural right to continue to received 1% loans to do so indefinitely without ever repaying then, why not apply the same logic to every country?

    18. Furthermore, I don’t have a personal vendetta with any of these guys, as I’m just a lowly mortal bloke from Romania. I’m simply calling things as I see them. Varoufakis portrayed Grexit as doomsday scenario for Greece, to me that’s just him being intellectually dishonest.
      http://www.twitlonger.com/show/n_1skko14
      Also, let’s be serious. Rejection of Grexit was ALWAYS at odds with rejection of austerity. If people in Syriza didn’t have a contingency plan, then it was all a great sham. If you didn’t have a solution planned in case Troika doesn’t budge from austerity – then it was all a simulation of struggle and nothing more. People got their spirits up for nothing. I my book, a politician’s loyalty ought to be owed first and foremost to the citizens, but I guess that’s just antiquated mentality for today’s world. Looks like the Greeks will have to endure (at least) a decade more of economic depression. That’s bad news for the Periphery as well.

    19. /L says:

      EU is a castle built on sand, a colossus with clay feet. They put up all the attributes of a great nation, flag anthem, pseudo parliament and even their own minted “coin” and so on. But they lacked a people in this pipedream of intellectual vanity. They didn’t have any confidence in the peoples in Europe to really share their dream to make EU one nation so they reassured that this wasn’t the case and cultural and language differences was sacred. And they here hooked (the last decades) on neoliberal dogma and despised common goods and utilities.
      In my opinion if you really wanted to create the EU federal state then they should have started at the bottom not the top. Copied the creation of modern democratic states in the 20th century. Created common public utility’s that benefited the masses of people, a common postal service, common railroad system at slightly subsides fees, introduced a common second language, possibility to organize and communicate cross boarder for average people, encouraged economic cross boarder interaction at the bottom of society. It would foster assimilation that I believe is necessary for such a project. In the past when the modern European nations was created brute force was a significant part, dissent wasn’t allowed. I believe it could be done in peaceful manner in today’s world. But in neoliberal economics where the market is everything it is impossible.

      But they didn’t do that instead they paved the way for big capitals profiteering while keeping the commons at bay. Actively dismantling welfare state and all the common goods that was created during the creation of the democratic nation state. Sorry to say but I don’t believe any phoenix bird will rise from the ashes of this “creative” destruction. Only thing in doubt is the scale of the end damage.

    20. larry says:

      It would appear that Tsipras has just caved, according to Macrobusiness. Without Varoufakis, it would appear that Tsipras was unable to take the pressure. My take on this is that all the work that Varoufakis put in to divide the Troika in which he was successful, has now been destroyed. Tsipras has just seemingly agreed to a deal that even the IMF, with perhaps US pressure behind it, was against and indeed against the result of referendum vote that he himself called, contrary to the wishes of the Troika. The democratic process has just lost a major battle.

      Along with the author of the Macrobusiness article, I am flummoxed and see no rational reason for Tsipras to have taken this step. Putting it in sporting terms, Tsipras was winning on points. Now, it seems that he has retired form the field. The deal still has to go through the Greek Parliament, of course, and I have no idea how that will play out. What I can say, with some confidence I think, is that Tsipras will not be returning home a hero.

    21. Bob says:

      Bill, I would agree but I would caution against using The Telegraph as a reputable source.
      I think Tspiras is not really left wing though.
      They ran a similar story about Nicola Sturgeon wanting Cameron to be PM and have had many controversies with people leaving due to their coverage of HSBC.

    22. Bob says:

      “That option was rejected as being “too dangerous”.
      So now we know what has transpired. The simple and easily interpreted story is contained in the documents that the Greek government has now submitted for approval.
      You can read them – HERE.
      They read like some twisted Baltic-state dreamworld. Vicious, penal, capricious austerity and privatisation as far as the eyes can read.”
      Wait I thought they were Marxists :b
      This really truely does suck though.

    23. Keith Wresch says:

      It would seem that Tsipras believes the most important mandate to be not to leave the euro — not sure this is really what the Greeks want, but it seems that Tsipras is determined not to leave the euro at all costs.

      Bob, not sure the Telegraph is correct, but that does seem to make the most sense of what is really a crazy situation.

    24. Andy says:

      Bill
      I’m loving the book. Still in the early stages but the history of European political and monetary coordination is detailed and fascinating. Worth every penny.

    25. Derek Henry says:

      I’ve said it before and I’ll say it again.

      These neoliberals know what they are doing it is not because they are stupid. They know how it works in reality and they have set up so that commercial banks are the ones calling the shots not the ECB.

      It’s been project managed for decades now and it is an asset stripping machine and they know it. It’s exactly how they want it. Ban Fiscal policy and let the commercials do that job instead and oh boy it has worked like a dream for the top 1%.

      It’s time to stop calling them stupid our narritive must change. They are deceitful parasites end of story.

    26. larry says:

      /L, you make some valid points about how one might go about creating a viable federal union. but one mustn’t confuse the EU with the EMU. The EU doesn’t really require a federal system to function while the Euro does. For those who can see, the Euro doesn’t function as it really ought to in order to benefit the populations concerned. Bill has pointed out many times what the Euro system needs in order to function as it ought to. Its failure to operate properly isn’t only because it was designed from the top down; its design is faulty at its very core. This was not perhaps obvious until the GFC, but given the GFC, no attempts have been made to rethink its structure, which essentially is to go the federal route. Possibly too many vested elite interests impeding this rethinking. It won’t be the first time an elite has shot itself in the foot, as it were, should the manifest failure of the Eurozone cause the EU to crack.

    27. Postkey says:

      Ex post, Y is equivalent to C + I + G + X – Z

    28. Bob says:

      “wallowing in its socio-pathological ‘inflation angst’, as if that was based in reality anyway.”
      Right. So convince the Germans to leave the euro and launch new DM. Will boost value of savings and reduce inflation, plus you could say “don’t have to pay for bailouts.” Should be an easy sell. Why is nobody selling it?
      Then the buck stops with them and they will act to prevent deflation by loosening fiscal policy. Or not. But they can’t force deflation in the eurozone.
      I also think Hollande is to blame to an extent. France is the second most powerful nation in the EU arguably and kept inflation on the 2% target. There was a chance to change policy in 2012 but it didn’t happen.
      France is pretty much self sufficient in energy as far as I know due to nuclear power and has reasonable export capacity so could easily reintroduce the Franc and maintain the excellent French healthcare and social services and persue full employment. Open immigration could be restricted to countries with full employment/JG and reasonable wealth, encouraging a new Schengen Area (or whatever it is called) that eliminates poverty and enforces brain drain on non-JG countries. The French seem to understand public purpose.
      Nobody wants to sell that vision, so you have a choice between LePen and champaign socialists, and Sarkozy who will enforce even more austerity.
      I think 2017 French election will determine if the eurozone disintegrates.

    29. Adam K says:

      1. Does anyone know what Jack Lew promised Alexis Tsipras?

      2. They lasted quite long anyway. From my own observations made in 1989 during the system transition in Poland it only takes about six weeks on average for an ordinary, well-intentioned person entering politics to be transformed into a pig. That’s why I trust moderate psychopaths more than positive thinkers.

      3. Let’s wait a few more days / weeks until the dust settles. There is still a remote possibility that something unexpected happens. However even now we can say that the educational value of the Greek crisis is immense. 60% of the people rejected the austerity proposals only to get an even worse deal shoved down their throats. Young, unemployed people in Europe will take note of this. This is Democracy in Action (TM). Next time young people will not vote with a voting card but with their feet. As workforce and consumers they can be happily replaced by migrants coming from the countries disturbed by the neo-colonial interventionist policies in the Middle East and Africa. In the end, maybe Sharia law is more suitable for Europe than social democracy and will complement Prussian values?

    30. Daniel D. says:



      We may never know for certain, however, the pressure being applied from the US and others from the Master of the Universe club on Syriza et al must be incredible. There is no way that the US will allow Greece to exit the EMU, the EU or NATO, that’s not going to happen. If they left or were forced out, they would have no option other than to look to the east (Russia / China) or live with isolation, and that is not in the play book of US hegemony.


      In so many ways, the destiny of Greece lies in the hands of Germany as a US vassal and de facto head of Europe. It is what the German elite decide for Greece and the rest of the member nations that is applied, democracy as commonly understood, does not apply.

    31. James says:

      ‘We underestimated their power’: Greek government insider lifts the lid on five months of ‘humiliation’ and ‘blackmail’

      08 juillet 2015 | Par christian salmon

      In this interview with Mediapart, a senior advisor to the Greek government, who has been at the heart of the past five months of negotiations between Athens and its international creditors, reveals the details of what resembles a game of liar’s dice over the fate of a nation that has been brought to its economic and social knees. His account gives a rare and disturbing insight into the process which has led up to this week’s make-or-break deadline for reaching a bailout deal between Greece and international lenders, without which the country faces crashing out of the euro and complete bankruptcy. He describes the extraordinary bullying of Greece’s radical-left government by the creditors, including Eurogroup president Jeroen Dijsselbloem’s direct threat to cause the collapse of the Hellenic banks if it failed to sign-up to a drastic austerity programme. “We went into a war thinking we had the same weapons as them”, he says. “We underestimated their power”.

      http://www.mediapart.fr/journal/international/080715/we-underestimated-their-power-greek-government-insider-lifts-lid-five-months-humiliation-and-blackm?onglet=full

    32. SteveK9 says:

      Was going to bring up the Farage speech but I see you didn’t miss it. One of the things that makes it so refreshing, is that he is saying exactly what he thinks. The look on Tsipras face was really hard to interpret … he obviously wasn’t smiling at the encouragement. He was probably thinking ‘my God, I hope my people don’t listen to this.

      On a sunnier note the BRICS and SCO summits in Ufa in the Russian Federation were a resounding success. These are people that really seem interested in bettering the lives of billions of people. We tend to forget but those leaders at Ufa represent more than half the human race. I don’t think Vladimir is really missing the G7 much these days. Apparently more nations are prepared to join these groupings, whose mission really does appear to be what we used to call ‘progress’.

    33. ” I am still trying to work out an impression of what is going on in Greece and the Brussels.”

      I think what’s happened is that Syriza called for the referendum to give themselves a way out. They didn’t really expect to win it and neither did they really want to win it. They could then have slunk away and said, in effect, “OK guys, if that’s what you want you go ahead with another government but don’t expect us to help”.

      What a surprise then that they did win it and by such a convincing margin!

      They then had two choices. Battle on or surrender.

      We can decide for ourselves on which option they’ve chosen.

    34. Fat Canuck civil servant says:

      Beautiful piece. There is one disruptive typo: the text reads “this” where it should read “things”. Here is what text now reads “this most people think are important that bind societies together like jobs and incomes are”…

      By the way, big interview with Ranglin on CBC’s Q today, from T.O., where he recorded his latest album!

      http://www.cbc.ca/radio/q/schedule-for-friday-july-10-2015-1.3146129/reggae-legend-ernest-ranglin-returns-with-resplendent-sound-1.3146132

    35. larry says:

      Varoufakis has just today, in Saturday’s Guardian, published his reasoning concerning the intractability of the Troika in restructuring Greece’s debt. In doing so, he doesn’t explain Tsipras’s acceptance of the Draconian agreement. The most fascinating part of his argument about why the Troika will not agree to restructure Greece’s debt lies with Schaeuble. In Varoufakis’s view, it is Schaeuble’s intention to use the threat of a Grexit to frighten the French to such an extent as to “put the fear of God into the French and have them accept his model of a disciplinarian eurozone”. Schaeuble apparently thinks that Grexit is a price worth paying in order to get the system to sing to his tune. In acting in this authoritarian manner, he isn’t doing either the Euro mechanism or Germany’s reputation any good, but, then again, he doesn’t seem to care.

    36. larry says:

      Update: According to reports coming out today, Sunday, meetings of Eurozone ministers show that even this latest Draconian proposal may not be good enough for the European deficit hawks. Schaeuble, supported by certain European countries, those who have considered that they have paid enough and those who consider that they have taken the austerity medicine, consider that Greece has not done enough and that, therefore, it should be expelled from the Eurozone for a period of five years and, to top it off, transfer 50Bn Euros of state assets to an external agency for a sell-off. My suggestion for Greece’s response to this outrageous stance is unprintable. I would urge Greece to make an urgent exit and refuse to pay a single penny, much like Iceland. Unlike Iceland, which closed its banks, Greece should immediately nationalize them as it exits, thereby protecting them to the extent possible from retributive action from the Eurozone, most particularly Schaeuble and his cronies.

    37. kevin harding says:

      Irony you could not make up. It seems that the only agency which will drive Greece
      from the Eurozone is the neo-liberal groupthink!
      There remains a distinct possibility that Finland have vetoed Syrizas’ deal.
      It seems the European heirs of neo-liberalism lack their US teachers pragmatism. They
      seek to punish the Greeks to keep other opposition in line. Greece outside the Eurozone
      may well be subject to economic sabotage and does anyone have any faith in the current
      governments ability to mange such a problematic change?
      Hate to come over so doom and gloom but I genuinely think dark days are coming to not just
      Europe. Then there is my own sanity how to recalibrate political understanding when
      “hard left” governments privatise and cut pensions.

    38. John Hermann says:

      It may be true that Tsipras is determined that Greece will not leave the Eurozone. However in my view the reality is that he holds the whip hand in any genuine negotiations with the Troika. This is contrary to the perceptions held by most of those who write for the mass media. And the reason is very simple. The Greek people have much to gain and little to lose by a Grexit from the Eurozone, while the autocrats who control the European economy have everything to lose if the Greeks decide to repudiate their crushing debt burden. The latter are well aware of this and are brainlessly playing chicken. That is their style, and they are emboldened in this endeavour by the Syriza government’s capitulation on almost every front – grounded in their apparently willingness to do almost anything to remain within the Eurozone. The “negotiations” are really a sham, because Tsipras is simply unwilling to effectively use the negotiating power that has been handed to him on a plate – care of the referendum result.

    39. bill says:

      Dear Blissex (at 2015/07/10 at 22:39)

      I don’t know why you bothered to present us with all the data in an attempt to prove that “Greece in 2014 was doing as well or better than in 2001” and that therefore “There has been no austerity in Greece so far, to the end of 2014”.

      For example, the measures of consumption you use are nominal yet you want to claim they tell us something about a collapse in a “real sense”. A basic error.

      The facts are obvious and do not require any “left-wing confabulation” to sustain their meaning:

      1. Real consumption fell by 24.7 per cent between the peak June-2009 quarter and the March-quarter 2015. That is a dramatic real collapse almost unprecedented in history.

      2. Between the March-quarter 2008 and the March-quarter 2015, real gross capital formation fell by 59.8 per cent. The investment ratio fell from 24.6 per cent to 13.8 per cent at a time that the denominator (GDP) fell by 26 per cent. That is a dramatic real collapse almost unprecedented in history.

      3. Real GDP fell by 26.5 per cent between the peak June-2007 quarter and the March-quarter 2015. That is a Depression-type fall.

      4. Unemployment remains above 26 per cent (March-quarter 2015) after rising from 7.3 per cent in the September-quarter 2008. That is a Depression-type rise.

      Your analysis is pathetic to say the least and I only published it to allow you to show how foolish your attempts at denying the austerity were.

      best wishes
      bill

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