Tens of thousands from many parts of Greek society protest austerity

[Beet]

Beet,

1. Are they really that much in reach though?

I am just following news reports - they are claiming they will reach primary surplus by next year, according to the already passed budget, despite a deficit of 8.5% this year.

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That may be well, but surely their salaries have gone down? If so, if they have not been replaced by welfare payments of equal value, then total state spending must have fallen. Another possibility is that the private sector is the part of the economy that is actually collapsing for psychological reasons, the state sector has not seen shrinkage due to 'automatic stabilisers'.

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Well of course. But the same dynamics are at work in Spain so it is important to ask why. Because the Troika will be faced with the same problem again in Spain. If the failure is that the adjustment was not harsh enough, then that needs to be considered.

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I am talking about the ECB simply creating the money. The resources don't have to come from anywhere. The cost of seignorage is borne by each euro-country equally in proportion to its wealth. So yes, Germany will bear its share of the cost. But consider also that if the crisis is resolved, the euro will actually appreciate in value because there will be more certainty about its survival and about growth within its region.

[Gustaf]

Beet,

1. Are they really that much in reach though?

I am just following news reports - they are claiming they will reach primary surplus by next year, according to the already passed budget, despite a deficit of 8.5% this year.

You must be logged in to read this quote.

That may be well, but surely their salaries have gone down? If so, if they have not been replaced by welfare payments of equal value, then total state spending must have fallen. Another possibility is that the private sector is the part of the economy that is actually collapsing for psychological reasons, the state sector has not seen shrinkage due to 'automatic stabilisers'.

You must be logged in to read this quote.

Well of course. But the same dynamics are at work in Spain so it is important to ask why. Because the Troika will be faced with the same problem again in Spain. If the failure is that the adjustment was not harsh enough, then that needs to be considered.

You must be logged in to read this quote.

I am talking about the ECB simply creating the money. The resources don't have to come from anywhere. The cost of seignorage is borne by each euro-country equally in proportion to its wealth. So yes, Germany will bear its share of the cost. But consider also that if the crisis is resolved, the euro will actually appreciate in value because there will be more certainty about its survival and about growth within its region.

1. Haven't all projections of Greek economics stuff been too optimistic since, well, ever?

2. I think part of the problem is that they are failing to actually bring in this money. And forcing people to pay taxes is not going to change spending. Still, I see your point.

3. Granted, I agree with you.

4. Right, but then the implication is really that all members will suffer for one messing up. Which again implies fiscal union, does it not?

[opebo]

Opebo, you are clearly a right-winger's best friend. Your satire is unbeatable.

The situation is that extreme, Zarn, that speaking honestly about it does sound like satire to the duped, such as yourself.

[Zarn]

Opebo, you are clearly a right-winger's best friend. Your satire is unbeatable.

The situation is that extreme, Zarn, that speaking honestly about it does sound like satire to the duped, such as yourself.

You are using the word 'duped,' wrong.

[Beet]

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Wow, you do not know the difference between fiscal and monetary. How in God's name did you get accepted into a Master's program? I think I am going to puke.

[Gustaf]

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Wow, you do not know the difference between fiscal and monetary. How in God's name did you get accepted into a Master's program? I think I am going to puke.

No need to be a jerk. If monetary policy will be used to make some countries pay for other countries debt I doubt the ones paying (via higher inflation, for instance) will accept that without having power over the weaker countries fiscal policy. That's a fairly standard argument.

That's why I said that it implies it, instead of claiming that it equals it.

[opebo]

The situation is that extreme, Zarn, that speaking honestly about it does sound like satire to the duped, such as yourself.

You are using the word 'duped,' wrong.

And you, my man, are using the word 'wrong' wrongly.

[Beet]

You must be logged in to read this quote.

Wow, you do not know the difference between fiscal and monetary. How in God's name did you get accepted into a Master's program? I think I am going to puke.

No need to be a jerk. If monetary policy will be used to make some countries pay for other countries debt I doubt the ones paying (via higher inflation, for instance) will accept that without having power over the weaker countries fiscal policy. That's a fairly standard argument.

That's why I said that it implies it, instead of claiming that it equals it.

I apologize. But German (and European) leaders have to make a decision, one way or another. If they won't accept common fiscal or monetary policy, then they should say so and start preparing for sovereign default across the PIIGS at least, or breakup the euro.

[Gustaf]

You must be logged in to read this quote.

Wow, you do not know the difference between fiscal and monetary. How in God's name did you get accepted into a Master's program? I think I am going to puke.

No need to be a jerk. If monetary policy will be used to make some countries pay for other countries debt I doubt the ones paying (via higher inflation, for instance) will accept that without having power over the weaker countries fiscal policy. That's a fairly standard argument.

That's why I said that it implies it, instead of claiming that it equals it.

I apologize. But German (and European) leaders have to make a decision, one way or another. If they won't accept common fiscal or monetary policy, then they should say so and start preparing for sovereign default across the PIIGS at least, or breakup the euro.

Of course, that is what people opposing the euro (like I did) said from the outset - if one wants it one will have to accept fiscal union. If some countries mess up other countries within the union will be hurt - either through redistributive fiscal policy or monetary policy that doesn't suit them or is essentially redistributive. Obviously, for that to work there needs to be common control of the fiscal policies that may bring about such a foul-up in the first place.

I think the actions of leaders here is a combination of incompetence and sinister planning. Prodi for instance seems to have been aware all along that this would be the effect of euro but was cool with letting this be the way to a common fiscal policy. Germany is just still in denial I think. They thought the SGP would be sufficient to make countries toe the line, which was obviously rather naive.

[Beet]

Well considering Germany itself did not follow the Stability and Growth Pact... lol

...Another option is that the ECB buys bonds, but also buys German bonds in proportion to the size of the Germany economy. In that way, it wouldn't be re-distributive, right?

[Beet]

The PASOK national council has called for Papandreou's resignation:

"Six members of PASOK's national council drafted a letter on Tuesday afternoon demanding the resignation of Prime Minister George Papandreou, creating more discord in the ruling Socialist party.

The move came just hours after the resignation of PASOK MP Milena Apostolaki, which brought the government's Parliamentary majority down to two votes, and a call from PASOK deputy Vasso Papandreou on President Karolos Papoulias to form a national unity government that would serve for a fixed period of time before elections are held.

Giorgos Thomas, Vangelis Malesios, Stefanos Manikas, Dimitris Batzelis, Yiannis Nikolaou and Minas Stavrakakis called Papandreou's intention to hold a referendum over Greece's agreement with its international creditors «irresponsible,» saying that it is leading the country into political instability and division.

"The country urgently needs a government with political legitimacy, a plan of national resurrection and significant managerial skills,» the letter, signed by the six PASOK officials, said. «The present government has none of these necessary prerequisites. The government's policy leads to asphyxiation. Day by day, the country is experiencing conditions of dissolution, illegality and an absence of governance."

The letter went on to say that «there can be no political way out for the country, without elections.""

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_01/11/2011_412700

[Gustaf]

Well considering Germany itself did not follow the Stability and Growth Pact... lol

...Another option is that the ECB buys bonds, but also buys German bonds in proportion to the size of the Germany economy. In that way, it wouldn't be re-distributive, right?

Sure, that was obviously part of the problem of the SGP losing credibility in the first place. Still, Germany did reform their economy anyway to regain competitiveness so the problem still ended up being other countries needing sanctions to get things in order. I still think political sanctions would have been better than economic ones as punishment.

As regards this bond-buying idea I should preface by saying that my macro teachers have all been brainwashed freshwater types so I haven't done as much in the field of stabilization policy as I would have liked.

Still, any bond-buying scheme is fundamentally about bringing about inflation, no? As I understand it, that is how it is supposed to help debtholders. Thus, it would punish creditors wouldn't it? Fundamentally, it seems to me that there is no way, in the context of debt, by which you can make some people better off without worsening things for someone else. That's why it is so politically infected.

PS: the PASOK thing...wow. I wouldn't be surprised at blood in the streets at this rate.

[Beet]

The bond-buying scheme is fundamentally about addressing market psychology and refinancing costs, by soaking up the supply of government debt, and supporting its value. Without it, the amount of needed fiscal adjustment for a stressed nation (such as Italy) will constantly rise as its bond yields rise. This seems unfair, since Italy is running a primary budget surplus, the deficit is entirely based on interest paid on past debt, which it cannot eliminate immediately today, no matter how well its policy is run. Italy is illiquid, but it is not necessarily insolvent. Hence, it makes sense for the ECB to step in with bond buys. Unfortunately, the longer the crisis goes on, the more bond buying the ECB has to do to address market psychology. In the end it has to be willing in a credible way to soak up the entire Italian issue, although it does not necessarily have to follow through on that.

So how much should it buy? The bond buying, to my mind, can be calibrated or fine-tuned however the ECB wants by interest rate targeting. For example, the ECB can say, if you enact X reform or Y reform, we will target your sovereign yield at 5%, but if you do not, it will go up to 5.5%. We will buy or sell as much bonds as necessary for the target rate we need fair to you. So it can still punish countries and exert control if it wishes to. But it would have to have a much longer time horizon. Right now what you have is a disorderly retreat in the bond market, no set expectations, and hence no confidence. The ECB could still buy bond and set a cap on interest rates, while at the same time 'punishing' countries if they do not adjust by enacting reforms in the long run.

And of course, to the ECB can buy German bonds in proportion to Italian bonds to equalize the effect of its intervention. The overall effect may be inflationary, but if the crisis goes unchecked, the value of the euro will fall as well, and this will also be inflationary. So overall I actually can't say that it would be inflationary in an unmitigated sense.

[Beet]

Oh, and the New York Times...

"Supporters of a return to the drachma note that the severe budget cuts of the last two years had resulted in almost closing the budget deficit — as long as interest payments on its debt are not counted.

Stripping out interest payments, Greece is expected to register a budget surplus next year of 1.5 percent of its gross domestic product (compared with a budget deficit of 8 percent of G.D.P., when interest is counted), and that, in effect, would give it the freedom to stop paying its debts."

---

So the interest payments alone are currently 9.5% of GDP! I completely forgot that the explanation of this lies in the fixed coupon payment. Greece is running a lower primary deficit than Germany.

[ag]

They are just procrastinating. Baring major advances in political integration, return of the drachma is nearly inevitable. Yes, costly, yes, excruciatingly painful - but the alternatives are worse.

[2952-0-0]

This is truly unbelievable. How can a 21st century EU state even have to head off a military coup?

http://www.telegraph.co.uk/finance/financialcrisis/8863728/Greek-military-leadership-changes-spark-opposition-outcry.html

[© tweed]

This is truly unbelievable. How can a 21st century EU state even have to head off a military coup?

http://www.telegraph.co.uk/finance/financialcrisis/8863728/Greek-military-leadership-changes-spark-opposition-outcry.html

History has not ended.

[Boris]

This is truly unbelievable. How can a 21st century EU state even have to head off a military coup?

http://www.telegraph.co.uk/finance/financialcrisis/8863728/Greek-military-leadership-changes-spark-opposition-outcry.html

History has not ended.

I lol'd when I saw that you 'liked' the Greek Drachma

[Nhoj]

This is truly unbelievable. How can a 21st century EU state even have to head off a military coup?

http://www.telegraph.co.uk/finance/financialcrisis/8863728/Greek-military-leadership-changes-spark-opposition-outcry.html

Well its not been that long since it was a military dictatorship,  Papandreou of course could be paranoid or on some powertrip.

In any case a military coup would be the fastest way to get Greece kicked out of the EU.

[Joe Republic]

Incidentally, when did Jack Layton come back to life and become Prime Minister of Greece?

[Landslide Lyndon]

Α military coup was highly unlikely, to say the least. But there was some kind of turmoil and restlessness among the armed forces, mainly because of the salary cuts.
So the civilian leadership decided to have a clean slate and send a message to everybody to stop having any weird ideas.

[2952-0-0]

Α military coup was highly unlikely, to say the least. But there was some kind of turmoil and restlessness among the armed forces, mainly because of the salary cuts.
So the civilian leadership decided to have a clean slate and send a message to everybody to stop having any weird ideas.

But the mere action of firing the CoS and the heads of the three services suggests that Greece is closer to a Latin American banana republic than we'd hope.

[Fmr President & Senator Polnut]

http://www.abc.net.au/news/2011-11-03/no-money-for-greece-until-debt-deal-cleared/3616830

So Merkel and Sarkozy have told Papandreou that Greece won't get another cent until after the plebiscite. Good.

It was a cataclysmicly stupid stunt meant to protect himself politically... and if the austerity measures aren't put in place... Greece will be kicked out of the Eurozone.

[© tweed]

This is truly unbelievable. How can a 21st century EU state even have to head off a military coup?

http://www.telegraph.co.uk/finance/financialcrisis/8863728/Greek-military-leadership-changes-spark-opposition-outcry.html

History has not ended.

I lol'd when I saw that you 'liked' the Greek Drachma

my esoteric sense of humor has left me utterly abandoned, save the select few!  of which you can claim proud membership.

[afleitch]

Greek PM George Papandreou is expected to offer his resignation.