Greece 'far right' rejects austerity after 'socialists' capitulate!

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A leader of Greece’s governing coalition pushed back against German demands for deeper budget cuts to get the bailout needed to prevent a financial collapse.

In Athens, unions struck for the second time this week and police used tear gas to counter protesters. George Karatzaferis, who heads one of the three parties supporting interim Prime Minister Lucas Papademos, said he wouldn’t support austerity measures worked out for a rescue. He spoke hours after German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that Greece was missing deficit targets.

“What has particularly bothered me is the humiliation of the country,” Karatzaferis, whose Laos party has 16 members in the 300-seat parliament, said in televised comments. “Clearly Greece can’t and shouldn’t do without the European Union but it could do without the German boot.”

http://www.bloomberg.com/news/2012-02-10/greece-pushes-back-against-german-demands-for-deeper-cuts-to-receive-aid.html

This is why I am supporting Melenchon this year. The European 'left' has been a disaster and more neo-liberal than the neo-liberals.

They're being shown up by the likes of Karatzaferis (Orthodox Rally) and Victor Orban.

[Beet]

To be fair, the communists are not part of the government, so I doubt they are backing the deal either.

[Beet]

And it looks like Orthodox Rally only pulled their support after Germany had already slapped down the deal. So perhaps it was just a PR move.

It's kind of silly for Germany to make all these demands and then slap down the deal a day after. I don't see what purpose there is for such a thing besides humiliation.

[Beet]

This is why I am supporting Melenchon this year. The European 'left' has been a disaster and more neo-liberal than the neo-liberals.

this is only because elements of the right in Europe have to at least pay lip service to xenophobic/anti-European sentiment that is crucial to their base of popular support; meanwhile the bourgeois left has been entirely bought and sold and markets the prevailing version of firm-driven faux-internationalism without reserve.  if the right is right, it's for the wrong reasons --

agreed.

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All right in certain ways (except maybe Gaddafi), but not enough to actually support them. E.g., Saddam was right about not having WMD, but I wouldn't personally go so far as too actively root for the Iraqi military under Saddam against the US-led coalition. Just because LAOS is right about austerity, doesn't mean I support them to win elections.

[Beet]

Actually I was going to say they were right in the narrow sense that no convincing evidence of electoral fraud was produced. But I still would have supported the revolution even if there was no fraud.

[Beet]

The Levy paper is correct. Had Keynes lived another decade, and the ideas he was working on at the time of his death reached their full fruition, and in the unlikely event that the designers of the euro took these ideas seriously, then precisely the present problem would have been anticipated.

At the heart of the matter is a fundamental mathematical identity, the balance of payments equation.

current account + capital account + foreign reserves = 0.

Any country without reserves running a current account deficit (like Greece) must have positive net capital inflows. If a country (like Greece) cannot convince others to continue to throw capital into the country, then it must adjust its current account. This can happen in two ways: a contractionary recession that shrinks the economy until imports fall lower than exports, or an expansionary action that grows exports until the country is earning its keep.

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Not necessarily. The value of staying in a supranational superpower in which you have all the power and leverage, versus going it alone as a nation of 80 million people with a shrinking population, is quite intangible and arguably immeasurably large.

[Beet]

Ah yes, the present creation of a lost generation, breakdown of economy, society, and political system, rise of extremism and looming revolution, and destruction of the 60-year dream, and looming return of global depression must not take precedence over the terrifying spectre of 2.5% inflation some years from now.

With 'responsible' Germany at the helm, we shall pull through!

[Beet]

It's going to be not 2.5% inflation, but something much more serious. Unless the political mechanisms that could support fiscal transfers on a much greater scale are introduced (and there is a near zero chance of that short-term, unfortunately), short-term fixes like "printing money now" are only bringing forward the "end of the 60-year dream" - or, at least, the end of the Euro. It seems, the single currency is just to costly for pretty much everyone involved. The best way to avoid "the lost generation" is to face the music and to get Greece (and, I guess, may be not only the Greece) out of the project, at least temporarily. If, once again, the desire is that the project itself survives.

Anything more than Greece and Portugal out of the Euro and you likely have a systemic collapse, depression, and lost generation. Remember, we have already started well on the way toward that path. If the Euro must be broken up, better a country that can work from a position of strength be the first to break off and go it alone - i.e., Germany. What we are facing is much worse than 1970's style inflation or even stagflation. At threat is the entire social fabric in Europe. This is not some phantom or result of mental exercise, more like reality that is creeping in right now.

[Beet]

Anything more than Greece and Portugal out of the Euro and you likely have a systemic collapse, depression, and lost generation.

Not true. Simply not true.

Do you think the banking system of Spain or Italy can survive being kicked out of the euro? Or that, given the sure devaluation of the peseta and lira, the countries' external debts would not become unbearable?

[Beet]

Perhaps. But default comes first. Default is highly popular in Greece, whereas exiting the Euro is still unpopular (I think the last poll 66% of Greeks still support it). The latter may come eventually, but not before the former.

If they can break things up in an orderly way, that would obviously be best. But I don't see it.

Rather, I see you chasing at phantoms. America dealt with 5-10% inflation in the 1970s, it was bad, but not nearly what Greece or Spain face today, with their 50% unemployment rates for youth. And it's far off. And not certain. The Fed has printed trillions... US inflation today has not exploded. What level of inflation is unacceptable? 6%? Well let them print some, and if inflation starts to get to that level, then let them reverse policy and do it your way. But you are willing to drive the car into the ditch now to avoid a pothole 10 miles down the road, which is only predicted to exist.

What's needed is obvious- expansionary policies. It doesn't matter how you do expansionary policies, just do it somehow. Instead of bailing the Greeks out, get them working for the Germans. Print the money, but don't give it to the Greeks, give it to the Germans... to buy from Greece. Say every German family that vacations in Greece gets their vacation paid for. Germans get free vacations, Greeks get employment. Expansionary, see? Because it gets the economy going. It gets people to work. Such is the nature of these things... you scratch my back, I scratch yours. It's simply a question of coordination. When that fails, is when you get what we see now, and will be seeing.

[Beet]

The main problem is that, once you start printing money to save one country, EVERY national government would be irresponsible towards its own populace, if it behaves fiscally responsibly. If you borrow to the hilt, you can force the ECB to inflate out of your debts - spreading the cost of your borrowing. If you don't, you still suffer from the inflation, forced by other member-states. And there is no pan-European political authority that can internalize what each and every member will be doing. The result will be that the "new euro" will become weaker than the weakest european currency would be on its own. Of course, you could have all member-states pass balanced-budget constitutional amendments (not very efficient, but, ok), to prevent that - but, I am afraid, even then the incentives to misbehave would be strong enough for these to be circumvented. Before long, cutting zeros off the euros will become a common thing to do. Except that, of course, long before it happens, many, if not all, countries simply reintroduce their own currencies.

That's a marvelous theory you have there - Europe turning into Zimbabwe- but rather fantastical, and frankly, incredible. It would never happen.

Governments wouldn't borrow to the hilt, because then it would be obvious what they were doing, and the ECB wouldn't help them. There's a difference between a basically stable and growing economy with a government that increases budget deficits 'just for the heck of it' versus a country in the 4th year of recession which can't reduce its deficit despite the self-destruction of the ruling political party because revenues are shrinking too fast and automatic stabilizers from a collapsing labor force are kicking in. Your story doesn't allow for that vast and obvious difference. It's like, if we save the life of this heart disease victim who has been desperately trying to get healthy for years but can't because he was too far gone to begin with ,then every person in the world will start eating Big Macs three times a day. If you disallow for common sense, then of course we're screwed.

On contrast to your fantastical story - I point to the present situation in Greece, and the present social situation in Europe as a whole, taking care to note the widespread disillusionment, slow growth, and youth unemployment - and point to the clear and present dangers ahead if the whole thing were to break up. It's crazy to me at least, how anyone could take your fantastical world as more of a threat than what I'm pointing to, which is happening before our very eyes.

Of course there are many other things I disagree with - expansionary policies do not necessarily mean transfers (unless you mean transfers in both directions), and while they may lead to more inflation than the alternative, their essential character isn't inflation. The essential character is activity. For the Germans complain the Greeks are lazy, yet their austerity policies are putting Greeks out of work -- in other words, making them more lazy. You can't solve a problem of laziness by adding more laziness. If a person is in debt to others, the natural thing to do is for that person to do something to repay others, in as much as he or she is able. That is common sense. This requires activity. What the contractionary policies being pursued now result in the opposite - less activity, less work, less production, less wealth, and less ability to handle debt.

[Beet]

But the German economy will have all activity it needs even without the "expansionary policies".  Germany will suffer the inflation it does not need.

Not as much as Germany will suffer if the euro area breaks up.

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I concede Greece may to be too far gone to stay on the Euro. But anyway, the point isn't for Greece to have inflation so it can get rid of obligations. Greece is going to hard default, and get rid of its obligations like that. The point is to get the Greek economy going again. That's the only thing that will help Greece.

[Beet]

Expansionary euro monetary policy will do very little, if anything, for Greece.

Rubbish. What Greece needs is money, and printing creates it.

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Actually, Greece has more potential than Germany, so if the conditions were right (i.e., contractionary policies replaced with expansionary ones), Greece would be more profitable than Germany, and private money would go there.

In any case, I have no problem for profitable investments that cause inflation. Without profitable investments, we would still be throwing stones at each other in Africa, so the Austrians/Ordoliberals will just have to suck it on that one. They can masturbate to low prices in the privacy of their own bedrooms.

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Not at all - nothing needs to be cut, the Greeks just need a chance to earn what they spend. And really, it's possible - the Greek government primary deficit is quite low - about 2 or 3 percent, compared to many other advanced countries.

[Beet]

I have the same answer to the questions 'what is capitalism?' and 'what is nature?' although I obviously consider them to be very different things. For in both instances my answer will be to simply throw my arms up, palms out, in a gesture signifying the general surroundings, and go 'This!' Now, one might be more appropriate in the woods and the other more appropriate in the middle of Times Square, or a shopping mall, but one gets the point. It's what we have. It's what is.