Tornado Alley (PROG)

[fuagf]

Europe Wins

Peg, Merkel had no problem with Tsipras going to Russia so i don't understand why it troubles you so much .. how long was he there for? .. haven't read anywhere that the visit interrupted negotiations with Europe in any way at all, maybe you have? .. and, lol, Merkel said, 'hey guys, we went to Russia, too.' .. as you would know all the speculation re the trip, including yours, apparently proved groundless, Putin said Tsipras did not ask for money .. guess you know, too, Russia was one, probably still is, of Greece's leading trading partners, and it's reasonable i reckon that Tsipras is questioning Western sanctions against the Russian energy sector as i read the combination of the sanctions and Greece's own problems have decreased their trade with Russia some 40% .. as for the referendum, well i agree with Krugman's take on that ..

July 5, 2015 4:09 pm July 5, 2015 4:09 pm

Tsipras and Syriza have won big in the referendum, strengthening their hand for whatever comes next. But they’re not the only winners: I would argue that Europe, and the European idea, just won big — at least in the sense of dodging a bullet.

I know that’s not how most people see it. But think of it this way: we have just witnessed Greece stand up to a truly vile campaign of bullying and intimidation, an attempt to scare the Greek public, not just into accepting creditor demands, but into getting rid of their government. It was a shameful moment in modern European history, and would have set a truly ugly precedent if it had succeeded.

But it didn’t. You don’t have to love Syriza, or believe that they know what they’re doing — it’s not clear that they do, although the troika has been even worse — to believe that European institutions have just been saved from their own worst instincts. If Greece had been forced into line by financial fear mongering, Europe would have sinned in a way that would sully its reputation for generations. Instead, it’s something we can, perhaps, eventually regard as an aberration.

And if Greece ends up exiting the euro? There’s actually a pretty good case for Grexit now — and in any case, democracy matters more than any currency arrangement.

The related column .. [in full below] was published a few hours after this post.

http://krugman.blogs.nytimes.com/2015/07/05/europe-wins/?_r=0

Ending Greece’s Bleeding

JULY 5, 2015

Europe dodged a bullet on Sunday. Confounding many predictions, Greek voters strongly supported their government’s rejection of creditor demands. And even the most ardent supporters of European union should be breathing a sigh of relief.

Of course, that’s not the way the creditors would have you see it. Their story, echoed by many in the business press, is that the failure of their attempt to bully Greece into acquiescence was a triumph of irrationality and irresponsibility over sound technocratic advice.

But the campaign of bullying — the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office — was a shameful moment in a Europe that claims to believe in democratic principles. It would have set a terrible precedent if that campaign had succeeded, even if the creditors were making sense.

What’s more, they weren’t. The truth is that Europe’s self-styled technocrats are like medieval doctors who insisted on bleeding their patients — and when their treatment made the patients sicker, demanded even more bleeding. A “yes” vote in Greece would have condemned the country to years more of suffering under policies that haven’t worked and in fact, given the arithmetic .. http://krugman.blogs.nytimes.com/2015/07/05/austerity-arithmetic/ , can’t work: austerity probably shrinks the economy faster than it reduces debt, so that all the suffering serves no purpose. The landslide victory of the “no” side offers at least a chance for an escape from this trap.

But how can such an escape be managed? Is there any way for Greece to remain in the euro? And is this desirable in any case?

--
Paul Krugman
Macroeconomics, trade, health care, social policy and politics. [ 2 of 5 ]

Greece’s Economy Is a Lesson for Republicans in the U.S. JUL 10
http://www.nytimes.com/2015/07/10/opinion/paul-krugman-greeces-economy-is-a-lesson-for-republicans-in-the-us.html?rref=collection%2Fcolumn%2Fpaul-krugman

Europe’s Many Economic Disasters JUL 3
http://www.nytimes.com/2015/07/03/opinion/paul-krugman-europes-many-disasters.html?rref=collection%2Fcolumn%2Fpaul-krugman
--

The most immediate question involves Greek banks. In advance of the referendum, the European Central Bank cut off their access to additional funds, helping to precipitate panic and force the government to impose a bank holiday and capital controls. The central bank now faces an awkward choice: if it resumes normal financing it will as much as admit that the previous freeze was political, but if it doesn’t it will effectively force Greece into introducing a new currency.

Specifically, if the money doesn’t start flowing from Frankfurt (the headquarters of the central bank), Greece will have no choice but to start paying wages and pensions with i.o.u.s, which will de facto be a parallel currency — and which might soon turn into the new drachma.

Suppose, on the other hand, that the central bank does resume normal lending, and the banking crisis eases. That still leaves the question of how to restore economic growth.

In the failed negotiations that led up to Sunday’s referendum, the central sticking point was Greece’s demand for permanent debt relief, to remove the cloud hanging over its economy. The troika — the institutions representing creditor interests — refused, even though we now know that one member of the troika, the International Monetary Fund, had concluded .. http://mobile.reuters.com/article/idUSKCN0PD20120150703?irpc=932 .. independently that Greece’s debt cannot be paid. But will they reconsider now that the attempt to drive the governing leftist coalition from office has failed?

I have no idea — and in any case there is now a strong argument that Greek exit from the euro is the best of bad options.

Imagine, for a moment, that Greece had never adopted the euro, that it had merely fixed the value of the drachma in terms of euros. What would basic economic analysis say it should do now? The answer, overwhelmingly, would be that it should devalue — let the drachma’s value drop, both to encourage exports and to break out of the cycle of deflation.

Of course, Greece no longer has its own currency, and many analysts used to claim that adopting the euro was an irreversible move .. http://krugman.blogs.nytimes.com/2010/04/28/how-reversible-is-the-euro/ — after all, any hint of euro exit would set off devastating bank runs and a financial crisis. But at this point that financial crisis has already happened, so that the biggest costs of euro exit have been paid. Why, then, not go for the benefits?

Would Greek exit from the euro work as well as Iceland’s highly successful devaluation .. http://www.nytimes.com/2015/07/05/business/international/how-iceland-emerged-from-its-deep-freeze.html .. in 2008-09, or Argentina’s abandonment .. http://www.latimes.com/news/la-oe-weisbrot30oct30-story.html .. of its one-peso-one-dollar policy in 2001-02? Maybe not — but consider the alternatives. Unless Greece receives really major debt relief, and possibly even then, leaving the euro offers the only plausible escape route from its endless economic nightmare.

And let’s be clear: if Greece ends up leaving the euro, it won’t mean that the Greeks are bad Europeans. Greece’s debt problem reflected irresponsible lending as well as irresponsible borrowing, and in any case the Greeks have paid for their government’s sins many times over. If they can’t make a go of Europe’s common currency, it’s because that common currency offers no respite for countries in trouble. The important thing now is to do whatever it takes to end the bleeding. .. http://www.nytimes.com/2015/07/06/opinion/paul-krugman-ending-greeces-bleeding.html?&assetType=opinion

On your last comment?? Tsipras no doubt knew Russia was a long term member of BRIC .. https://en.wikipedia.org/wiki/BRIC .. before Tsipras visited him this latest time.