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<nettime> Clive Crook: Europe Wants to Punish Greece With Exit
nettime's_groving_greporter on Sun, 5 Jul 2015 19:16:56 +0200 (CEST)


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<nettime> Clive Crook: Europe Wants to Punish Greece With Exit


<http://www.bloombergview.com/articles/2015-07-01/europe-wants-to-punish-greece-with-exit>

Europe Wants to Punish Greece With Exit

   Clive Crook
   494 Jul 1, 2015 12:01 AM EDT
   By Clive Crook

   In my more than 30 years writing about politics and economics, I have
   never before witnessed such an episode of sustained, self-righteous,
   ruinous and dissembling incompetence -- and I'm not talking about
   Alexis Tsipras and Syriza. As the damage mounts, the effort to rewrite
   the history of the European Union's abject failure over Greece is
   already underway. Pending a fuller postmortem, a little clarity on the
   immediate issues is in order.

   On Monday, European Commission President Jean-Claude Juncker said at a
   news conference that he'd been betrayed by the Greek government.

   The creditor institutions, he said, had shown flexibility and sought
   compromise. Their most recent offer involved no wage cuts, he
   emphasized, and no pension cuts; it was a package that created "more
   social fairness." Tsipras had misled Greeks about what the creditors
   were asking. The talks were getting somewhere. Agreement on this
   package could have been reached "easily" if Tsipras hadn't collapsed
   the process early Saturday by calling a referendum.

   Related: Greece Default Watch

   What an outrageous passel of distortion. Since these talks began five
   months ago, both sides have budged, but Tsipras has given vastly more
   ground than the creditors. In particular, he was ready to accede to
   more fiscal austerity -- a huge climbdown on his part. True, the
   last offer requires a slightly milder profile of primary budget
   surpluses than the creditors initially demanded; nonetheless, it still
   calls for severely (and irrationally) tight fiscal policy.

   In contrast, the creditors have refused to climb down on the question
   of including debt relief in the current talks, absurdly insisting that
   this is an issue for later. On Tuesday, Tsipras made his most
   desperate attempt yet to bring the issue forward.

   Far from expressing any desire to compromise, dominant voices among the
   creditors -- notably German Finance Minister Wolfgang Schaeuble, who
   often seemed to be calling the shots -- have maintained throughout that
   there is nothing to discuss. The program already in place had to be
   completed, and that was that.

   Yes, the program had failed. No, it wouldn't achieve debt
   sustainability. Absolutely, it was pointlessly grinding down Greek
   living standards even further. What did that have to do with it?

   Juncker says the last offer made no demand for wage cuts. Really? The
   offer says the "wage grid" should be modernized, including
   "decompressing the [public sector] wage distribution." On the face of
   it, decompressing involves cuts. If the creditors were calling for
   public-sector wages to be decompressed upward perhaps they should have
   made this clear. Regardless, the increases in value-added taxes
   demanded by the creditors mean lower real wages, public and private
   alike. As for no pension cuts, the creditors called for phasing out new
   early-retirement penalties and the so-called social solidarity payment
   for the poorest pensioners. Those are cuts.

   The creditors called for a lot else, too. Remember that the Greek
   economy is on its knees. Living standards have collapsed and the
   unemployment rate is 25 percent. Now read the offer document, and
   see if you think the advance in "social fairness" that Juncker stressed
   at his news conference shines through.

   But I haven't mentioned the biggest distortion of all. Noticing for the
   first time that Greece has EU citizens within its borders, Juncker
   addressed them directly on the subject of the July 5 referendum. Greeks
   will be asked whether they accept the offer presented by the creditors
   -- an offer, by the way, that the creditors say no longer stands. "No
   [to the offer that no longer exists] would mean that Greece is saying
   no to Europe," Juncker explained. President Francois Hollande of France
   clarified: The vote would determine "whether the Greeks want to stay in
   the euro zone."

   Nonsense. There's no doubt that Greeks want to stay in the euro
   system -- though I find it increasingly difficult to see why. If Greece
   leaves the system, it won't be because Greeks decide to leave; it will
   be because Europe decides to kick them out.

   This isn't just semantics. There's no reason, in law or logic, why a
   Greek default necessitates an exit from the euro. The European Central
   Bank pulls this trigger by choosing -- choosing, please note -- to
   withhold its services as lender of last resort to the Greek banking
   system. That is what it did this week. That is what shut the banks
   and, in short order, will force the Greek authorities to start issuing
   a parallel currency in the form of IOUs.

   A truly independent ECB, willing to do whatever it takes to defend
   the euro system, could have announced that it would keep supplying
   Greek banks with liquidity. If the Greek banks are deemed in due course
   to be insolvent (which hasn't happened yet), that doesn't have to
   trigger an exit, either. Europe has the wherewithal and a bank-rescue
   mechanism that would allow the banks to be taken over and
   recapitalized. These options are foreclosed because the supposedly
   apolitical ECB has let Europe's finance ministers use it as a
   hammer to extract fiscal concessions from Greece.

   Nobody ever imagined that a government default in Europe would dictate
   ejection from the euro zone. The very possibility would have been
   correctly recognized as a fatal defect in the design of the system.

   If the Greeks vote no, a Greek exit is a possible and even likely
   consequence. But if it happens, the reason won't be that Greece chose
   to go. The reason will be that the European Union and its politicized
   central bank chose to inflict exit as punishment.


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