tag:blogger.com,1999:blog-2546602206734889307.post647086286487991123..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Why Germany wants rid of GreeceMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger140125tag:blogger.com,1999:blog-2546602206734889307.post-89044661779797738362015-07-25T04:55:07.677+00:002015-07-25T04:55:07.677+00:00Why Germany is so concerned about Greece's poo...Why Germany is so concerned about Greece's poor financial condition. It is nothing but a political gameplay which German doesn't want to lose. They are on the track of striking the iron when it is hot strategy.<br />Greece Road Maphttp://www.maps2anywhere.com/maps/greece-road-map.htmlnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-8362833572702814862015-07-21T15:07:46.194+00:002015-07-21T15:07:46.194+00:00You're point right imo - and Greece inside the...You're point right imo - and Greece inside the Euro was clearly a political decision aswell: The aim was to show the all-European reach of the currency, till the far south-east, knowing that this would also strengthen the use of the Euro in the non-EZ Balkan states. Which is why the obviously false statistics were tolerated.<br /><br />I still tend to think that Schäuble was always bluffing about the "manageable Grexit" thing, it's so clearly not the case. But I'm not 100% sure; after all there's enough ppl who believe their own propaganda...smuksterhttp://no-fishing.netnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-1752282258329029212015-07-21T14:59:46.352+00:002015-07-21T14:59:46.352+00:00Nice comment, thanks (from a German)!
One point:
...Nice comment, thanks (from a German)!<br /><br />One point:<br />Germany doesn't care about Greek debt - it's just a tool to force this ruinous austerity policy on Greece and, indirectly, on all of Europe. The real risk, from Berlins perspective, is not losing money, but allowing some kind of alternative within the Eurozone which would undermine their power. <br />Whether or not they actually believe in their own ideology is another question.smuksterhttp://no-fishing.netnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-35483106717897815192015-07-12T19:16:17.432+00:002015-07-12T19:16:17.432+00:00Tried to share this blog on my FB page - but the f...Tried to share this blog on my FB page - but the following message appears?!! Warning: This "Message Contains Blocked Content: Your message couldn't be sent because it includes content that other people on Facebook have reported as abusive."Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-11492146762590283572015-07-11T22:19:34.471+00:002015-07-11T22:19:34.471+00:00I think you miss two things. First, Germany largel...I think you miss two things. First, Germany largely ignores external advice, so Krugman etc irrelevant. Second, the dominant discourse among those who give policy advice in Germany is very different from other countries like UK/US.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-67431667040521512242015-07-11T22:16:35.366+00:002015-07-11T22:16:35.366+00:00Thank you. On the original creditor bail outs I ca...Thank you. On the original creditor bail outs I can imagine how Germany was more reluctant than other EZ countries and the ECB. But given that mistake - which meant saddling Greece with an unrealistic level of debt - I would expect some sympathy for the subsequent need to restructure debt.<br /><br />The argument against - that is that it would encourage other countries to want to renegotiate - seems weak on two levels. First, restructuring has already been done, and that encouragement did not happen. Second, circumstances change, and it seems crazy not to be able to adjust - particularly when those circumstances are in large part of your own making (austerity reducing Greek GDP). Which brings me back to a reluctance to acknowledge the impact of austerity. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-41896794365543203642015-07-11T17:59:24.927+00:002015-07-11T17:59:24.927+00:00Matt and first Anon: this rather suggests otherwis...Matt and first Anon: this rather suggests otherwise<br /><br />http://www.nytimes.com/2015/06/30/business/dealbook/the-hard-line-on-greece.html<br /><br />Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-83654254948945866772015-07-10T14:21:41.025+00:002015-07-10T14:21:41.025+00:00Yes. Much better to speak of drunken driving.Yes. Much better to speak of drunken driving.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-29593949944338648502015-07-10T10:50:06.410+00:002015-07-10T10:50:06.410+00:00You make some good points. However, you view of wh...You make some good points. However, you view of what Greece actually did is narrow: See Karl Whelan: https://medium.com/bull-market/the-ft-lets-itself-down-again-francesco-giavazzi-on-greece-92988bc675eb?%3Fftcamp=crm%2Femail%2F_DATEYEARFULLNUM___DATEMONTHNUM___DATEDAYNUM__%2Fnbe%2FMartinSandbusFreeLunch%2FproductJfcassidy95noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-21901457452346457382015-07-10T06:04:28.638+00:002015-07-10T06:04:28.638+00:00All of Greece hits the wall when you ask about the...All of Greece hits the wall when you ask about the dodgy accounting and tax evasion, falsification of accounts and kickbacks and, ... (fill in the blank)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-14270475392789113882015-07-09T18:36:38.182+00:002015-07-09T18:36:38.182+00:00Yes, clearly it's best they stay in the EU, an...Yes, clearly it's best they stay in the EU, and there are other EU countries that aren't on the Euro.Richard H. Serlinhttps://www.blogger.com/profile/09824966626830758801noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-82243292608046087462015-07-09T17:02:56.417+00:002015-07-09T17:02:56.417+00:00@NM: As a German economist I simply affirm your ar...@NM: As a German economist I simply affirm your arguments. That's what is discussed in my department. We take macro-arguments serious but we uprate the polit-economic points.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-53490952964323592022015-07-09T17:02:30.134+00:002015-07-09T17:02:30.134+00:00I was not suggesting that the fact that most Greek...I was not suggesting that the fact that most Greek people want to stay in the Euro means it must be the right thing to do. All I was suggesting is that given this wish, it makes sense to work within a framework where they do.<br /><br />One complication with Grexit is the insistence of many outside Greece that Grexit also means leaving the EU. I suspect that would be costly to Greece. Now as far as I can see there is no reason why Greece could not stay in the EU with its own currency. But with the rest of the EZ governments in their current mood, who can say what will actually happen. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-12719647534001857272015-07-09T13:40:30.408+00:002015-07-09T13:40:30.408+00:00@NM: very good reasoning@NM: very good reasoningAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-38766632063490758742015-07-09T13:28:19.476+00:002015-07-09T13:28:19.476+00:00I don't understand why it is -obviously- a hug...I don't understand why it is -obviously- a huge challenge to state that <br /><br />A.) the huge GDP contraction was a mistake<br /><br />AND <br /><br />B.) structural reforms were sketchy and action time to shortAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-28964290453811747232015-07-09T03:26:09.987+00:002015-07-09T03:26:09.987+00:00Those standardized, measurable calculations exist ...Those standardized, measurable calculations exist in "Anglo Saxon economics". The problem is that German politicians are making judgments based upon their sense of morality via disproven austerity policies rather than making judgments based upon reliable, tried-and-true economic wisdom that has held up repeatedly, including throughout the entire Greek crisis, that clearly indicates how you can calculate the effects of austerity, deflation, etc., on an economy. The vast majority of German politicians follow a uniquely German school of economic thought called the Freiburg School that is a pre-1930s form of economic thought that is not taught or adhered to anywhere outside of Germany, except a few pockets in Austria, because its theories are rejected by economist from the left and right around the globe. Seriously. Monetarists and Keynesians alike reject their ideas, especially as it relates to the euro and Greece. Indeed, while there is some differences in explanations, Monetarists and Keynesians both agree on what needs to happen in Greece (debt reduction) and why the "bailout" has been an utter failure that has made matters much worse.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-12813274011845286232015-07-09T03:14:22.095+00:002015-07-09T03:14:22.095+00:00Anonymous 7 July (original post) - Sorry, but you&...Anonymous 7 July (original post) - Sorry, but you're simply wrong, even if you do buy into the German Frieburg School of economic thought (FYI - the article doesn't mention it, but it's the dominant school of economics in Germany by Germans and not accepted or used outside of Germany, except perhaps in pockets of Austria).<br /><br />Yes, Germany will get back considerably less money if Greece defaults. This is well-known and acknowledged by the creditors and Merkel/Schauble. They view this as a "cost of doing business" or the amount it takes to make an example of Greece to the rest of the eurozone countries if they consider leaving the euro or only request debt relief in the form of an interest rate cut. The IMF reports that the creditors would lose and extra 80 billion euros at least from a default. <br /><br />On the exchange rate thing: again, 100% wrong. You cannot legitimately compare a country that is one the euro to countries who have their own currencies because euro countries, including Germany, do not have the sovereign right to engage monetary tools such as QE. That is the responsibility and role of the ECB. Secondly, yes, the euro is significantly undervalued for the German economy (numerous studies and vast amounts of data confirm this, not the least of which is the fact that Germany has the world's largest trade surplus and trade imbalance, not China, which is a country and economy much larger than Germany's. China is also undervalued but in their case, it is more direct and deliberate since China does not have a free floating currency - it has a managed currency with semi-official pegs, especially to the US dollar, and still the Germany/euro undervaluation is larger). Conversely, the euro is greatly overvalued for some economies, including even France and Italy. Again, plenty of data available to show this. So, yes, Germany has benefitted enormously from its position in the euro. It is effectively an N-th currency in a gold exchange system (such as the US in the Brettonwood system after WW2) where all the other economies in a currency union are tied to one economy (Germany) and that one economy sets the monetary policies for the whole group. The benefit of being the N-th currency in such a regime is that you get to "export" any and all inflation to your fellow currency union members, but you also can export deflation, which is actually worse, which Germany is doing and the US never did under Brettonwood. <br /><br />Oh, and yes, I am an Anglo Saxon economist. And an American. And an EU citizen (Irish). And did a master's dissertation on 20th century economic history. So, please save your breath and time and rather than responding, you should go pick up a non-German economics textbook, or at the minimum, a history book or last week's IMF report.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-86680886461249820462015-07-09T01:43:10.080+00:002015-07-09T01:43:10.080+00:00"From that report, unless there is a clear ev..."From that report, unless there is a clear evidence that Greece has changed..."<br /><br />There is clear evidence that Greece has changed since 2010. See http://coppolacomment.blogspot.it/2015/07/a-new-deal-for-greece.html for a comment of the IMF report.<br /><br />Nowadays, Greece leaves within its means. Salaries, pensions, spending (health cares), ... have been cut and taxes have been increased as requested by creditors. What SWL and other explain is that unemployment and GDP fall (by 25%) are the mechanical consequence of such a politics unless it can be offset by devaluation, which Greece cannot within the EZ. It is not the result of Greece not having fully implemented all requested reforms. In fact, the requests that Greece cut more the pensions to produce a higher primary surplus would only make the problem worse since it would take money out of the Greek economy. <br /><br />What is infuriating is that the creditors (except partially IMF) have never admitted that the Greek predicament is the very result of such extreme austerity. Making debt reduction contingent to additional reforms like further pension cuts or tax increases is self-defeating. Blaming it on the lack of implementation of the "reforms" is disingenuous. <br /><br />The problem is not that Greece has not reformed (it has) or does not need further reforms (it needs), but what kind of reforms we are talking about. Greece would benefit of reforms such as improvement of its tax collection capacity, pension system, public administration, etc. as long as there reforms are NOT asphyxiating Greece economy. In fact, Syriza has proposed to continue to implement this type of reforms and is probably well if not better placed than previous government to implement these reforms. <br /><br />The real point of discord is the insistence that Greece should be able to reimburse the whole debt in the future. To keep this fiction, creditors impose that Greece must produce significant primary surplus (starting immediately with further cuts and tax increase to aim at a 3.5% surplus in the coming years) while continuing to negate the cost and inefficacy of such policy. <br /><br />Another infuriating aspect is that the fact that the cost linked to the impossibility by Greece to fully reimburse the debt without some kind of arrangement is entirely placed on the shoulder of Greece. While Greece has a clear responsibility for pre-2008 debt [note below], the responsibility for ballooning of the debt since 2010 is to a large extent related to the policies that were imposed to Greece by its creditors in the following years. Citizens of other countries should hold their own government responsible - and not Greece - for that.<br /><br />Note: There would be much more to say about responsibilities pre-2008 in relationship to the disparities, winner and loosers of the EZ (the discourse here should be how EZ policy might favor some countries to the detriment others). Spain and Italy would be much better examples to discuss this issue but a significant part of the problems of Greece originate from belonging to this club. At the political level, the fundamental problem might be that the countries that benefited from the club might feel entitled to these benefits (such as a comparatively low exchange and interest rate) which exist only because they are part of the club and come as a costs to the other members of the club.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-56847712689563930542015-07-09T00:54:54.815+00:002015-07-09T00:54:54.815+00:00As far as the politicians, there's an aggravat...As far as the politicians, there's an aggravating common norm to take their words and positions as what they really want, and then say, oh, why do they think this. A good example is how Obama was not for gay marriage when he first ran in 2008, and then he "evolved". I've never heard a pundit say what should be obvious; based on Obama's history, level of education, all of the other things he's said and done, and positions he's taken, and the political situation at the time, it's very unlikely he "evolved". Very likely, he was pro gay marriage in 2008, and well before, but he lied because he thought the cost in political capital, and to his odds of winning at that time, were too great to say so. <br /><br />Obama was also against the individual mandate for his health insurance program in 2008. Did he suddenly have a lobotomy in that particular region of his brain, because there's no other way to explain how a man with that kind of demonstrated intelligence and doing his homework over a lifetime, could not understand that his health insurance program was impossible without an individual mandate. And then, of course, the lobotomy healed just after he won the election, and he supported and passed the individual mandate. Because we can never say that he was obviously lying; a man that intelligent and educated and prepared obviously does not believe something so obviously wrong to anyone who's studied the situation; he's obviously lying for what he thinks is a very worthy cause, to help his odds of election and actually being able to implement the program. <br /><br />So, I would not be at all surprised if Tsipras secretly preferred to get the hell off the Euro as soon as possible, but he says he wants to stay on, and that he's trying to stay on, as a political strategy. That way, when the short-term hardship sets in he can say, it's not my fault, I tried to stay on the Euro but they made it impossible.<br /><br />As far as the people of Greece, a strong very low inflation currency feels like a very good thing to laypeople. Few understand the economics of being able to devalue; the importance of being able to stimulate if your tiny economy is doing much worse than the giant zone is doing on average, the ZLB, etc. So it's not surprising at all if the Greek public wants to stay on the Euro, and just get debt and austerity relief.Richard H. Serlinhttps://www.blogger.com/profile/09824966626830758801noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-89689388585400578392015-07-08T20:56:07.442+00:002015-07-08T20:56:07.442+00:00One reasonable hypothesis as to why they were bail...One reasonable hypothesis as to why they were bailed out is contagion fears. One can retrospectively debate how great those risks really were in 2009/2010 ("huge" seems a reasonable assessment to me, but I may well be wrong & am happy to stand corrected), but surely that was a reasonable concern at the time?<br /><br />In any case, the German right was always pretty aggressively in favour of private creditor bail-ins, and I've repeatedly heard (again this may be incorrect, tho' I tend to believe it) that Schaeuble personally was all along very much in favour of private-sector bail-ins -- but of course he was not the only one taking decisions. ECB, I understand, was most strongly opposed to it.<br /><br />Obviously no country would want to go through the Greek experience, but isn't that also slightly beside the point? The concern, from the "tschörrmäähn" perspective, is not that other countries would want to become the next Greece, but that the Greek case is setting a precedent for whether or not reform agreements must be adhered to, or whether one can always rely on another bail-out of some sort. (Note that I'm not sure I fully subscribe to this view -- tho' I am sympathetic to it, as I am also sympathetic to the idea that requiring surpluses in a depression is a bad idea -- I'm primarily trying to reconstruct an argument.) <br /><br />I would strongly urge you to take these political-economic concerns more seriously, not because these are "my" ideas (they are not), but because they probably provide a better avenue for understanding the Northern-Eastern European perspective than, if you will forgive me, pop-psychological ruminating about debts, guilt, morality, and unwillingness to give up received perspectives. I'm not urging you to accept these ideas -- I'm not sure I do so myself -- but I think taking them very seriously will make for a richer dialogue --- and frankly make it easier for you to engage "German" academics and policy makers (if that is in part your concern).Nicholas Martin (NM)noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-90037673333103982012015-07-08T16:57:04.458+00:002015-07-08T16:57:04.458+00:00This is absolutely nonsense what you tell here. Th...This is absolutely nonsense what you tell here. The centralist wage fixing system is not existent. You have certain industries were you have bargaining between trade unions and employer organizations which results in what is called Tarifvertrag. These are private organizations that ultimately represent workers and employers. This is often not without frictions, Germany experienced a string of strikes this year. Everyone remembers pilots, train drivers, etc.<br /><br />The biggest bul*sh** is what yoú call wage fixation system. There is no government intervention in this process. If you want my explanation why Germany had such moderate wage inflation it is the following:<br />After unification starting in 1990 Germany had a kind of boom and bust scenario in the nineties with fiscal expansion in the nineties, suddenly "negative" current account (unbelievable today, but look at the numbers) and later rising unemployment and slow growth (the sick man of Europe story). <br />Before Schroeder started Agenda 2010 he had double digit unemployment (therof up to 20% in the Eastern part) soaring social security spendings and increasing uncompetitiveness esp. due to illiberal labor markets.<br /><br />By introducing Agenda 2010 he made it easier fire people and reduce the incentive to stay unemployed for longer time by reducing the time and amount of unemployment payments. Unemplyment peaked in 2005 at 12.5% and it took nearly a decade to halve it. The liberalization of the labor market and the reduction in unemployment benefits led to a weaker negotiation position of trade unions.<br /><br />In the last three years Germany had one of the highest increases in real wage rate amongst Eurozone countries. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-21286747150134207102015-07-08T16:39:30.488+00:002015-07-08T16:39:30.488+00:00“But I disagree that the Euro is inherently unstab...“But I disagree that the Euro is inherently unstable. It is the austerity mindset that has led to this crisis.”<br /><br />And this gets back to a point I made above (in response to your 9:15 comment). You think this is just an issue of policy X vs policy Y. Both policies are out there. WHY advice X is taken & advice Y rejected is a different matter.<br /><br />And this contributes to euro instability—no mechanisms in place to stabilize the euro, to create common interests to counteract the different interests (and nationalism). To take a page from Polanyi—no state = no currency or economy that can last. Without that overarching state—which does more than transfers and stabilizing factors—you rely on hoping (against hope) that a few ministers agree on the useful policy. <br /><br />It’s politics, Simon, not economics—and it’s institutions taken seriously.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-53161664293297784792015-07-08T16:38:45.643+00:002015-07-08T16:38:45.643+00:00No, Simon, that is not the problem. Other advice i...No, Simon, that is not the problem. Other advice is out there in spades. The problem is that German (and other) politicians, technocrats, and electorates reject it--either out of hand, or as not feasible, etc. Something is clouding their judgment, as it were. <br /><br />What might that be? Racism (as I suggested above). Class (bail out the financial elite but try to cover the tracks, so blame the Greeks). Political power (make an example of Greece so Germany is hegemonic, with a few close allies in tow). Some combination of the above.<br /><br />This is not just an issue of “good advice versus bad.” When you write, “The problem is not what is taught in universities, but the policy advice given by economists in Germany,” you are stating a tautology. The advice given would be “good” if the policies were followed are “good”—otherwise, they are not getting good advice. But like I said, it seems there is plenty of alternative ideas—from the IMF, the Greeks themselves, you & Krugman & Piketty, et al. <br /><br />Until someone addresses these deeper problems—classically exogenous to economic theory—then this problem will repeat itself.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-84077197465658052015-07-08T16:21:41.368+00:002015-07-08T16:21:41.368+00:00I have avoided answering this question, because I ...I have avoided answering this question, because I do not know the answer. But I do know that Greece wants to stay in the EZ. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-74107065991503702862015-07-08T16:19:54.260+00:002015-07-08T16:19:54.260+00:00I agree that Europe is not ready for a European su...I agree that Europe is not ready for a European super-state. But I disagree that the Euro is inherently unstable. It is the austerity mindset that has led to this crisis. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.com