Euro History Presented By WaPo,Presentation Criticized By CEPR

WaPo (Howard Schneider), CEPR (Dean Baker). Both are worth a read.

Greece: Germany Determined To Punish 'Wastrels'

Yves Smith at Naked Capitalism, in a post about the increasing massive failure to solve the "EuroCrisis," points to Germany's apparent determination in the face of the continuing downward spiral of Greece, a spiral which Greek Prime Minister Antonis Samaras compares to the American Great Depression, to force Greek acquiescence to continued severe austerity measures not so much as a solution but as a punishment for imagined bad behavior. Here's Smith's assessment:

But as conditions in Greece become even more desperate ..., German threats are becoming more dire:

“If Greece doesn’t fulfill those conditions, then there can be no more payments,” German Vice Chancellor Philipp Roesler told broadcaster ARD yesterday, adding that he is “very skeptical” Greece can be rescued and that the prospect of its exit from the monetary union “has long ago lost its terror.”

The immediate trigger is inspectors from the Troika are due back in Greece this week to “assess” progress towards meeting targets. Since there is no way for a patient in an intensive care ward to stave himself back to health, it is not at all obvious how Greek leaders can convince their new economic lords and masters that they can do the impossible. The Wall Street Journal sets forth the critical dates over the coming months:

But without a green light from the troika, Athens risks being cut off from badly needed aid and could run out of cash as early as August. It has sought emergency funding from Europe to cover a looming bond redemption in late August.

Greece faces a much more important deadline in September, when international creditors are due to make their next aid payment, which they delayed in June as the elections played out. Extending the deadline could require even more aid to support Greece while it delays more cuts.

An unnamed EU source told Der Spiegel [Greece] won’t reach its goal of lowering government debt to 120% of GDP by 2020 (quelle surprise!). The article states that falling short means Greece would need €10 billion to €50 billion more in funding, which the IMF and certain Eurozone governments (read Germany) will nix.

Smith then examines the economic and political consequences of various courses of action from the perspective of a number of major players; please read those in the original. Smith's conclusion sounds about right to me:

It’s hard to foresee how this ends, but if the powers that be are balking at another €10 billion to €50 billion for Greece, they will not pony up the hundreds of billions that many analysts see as necessary for Spain. The Eurocrats are running out of runway, and there’s no sign of a Plan B. If we didn’t all have a stake in the outcome, this would make for great theater.

Greg Palast: The Euro As An Instrument Of Class Warfare

The indomitable Greg Palast, an American with a seemingly steady job at The Guardian, explains how economist Robert Mundell, formerly of the University of Chicago and now of Columbia University, inventor of the concept of supply-side economics, pushed the creation of the euro as a way of obstructing nations inclined to use Keynesian methods to combat recession. Palast quotes Mundell:

...

"It's very hard to fire workers in Europe," he complained. His answer: the euro.

The euro would really do its work when crises hit, Mundell explained. Removing a government's control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.

"It puts monetary policy out of the reach of politicians," he said. "[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.

He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace – or the plumbing.

...

(You can safely ignore the remark about the plumbing, or read Palast to find out why plumbing is an issue to union-hating Mundell.) More on the euro and Mundell:

Mundell explained to me that, in fact, the euro is of a piece with Reaganomics:

"Monetary discipline forces fiscal discipline on the politicians as well."

And when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain.

In other words, power is centralized in Europe's wealthiest nations, and the rest (Greece, Spain, Ireland, etc.) can do little within the confines of the euro to avoid austerity programs, ineffective though they may be, forced upon them by the banksters of the euro. A nation without its own currency can find its back to the wall and no effective response. And this, according to Palast, is exactly what Robert Mundell intended the euro to accomplish. How about that... a real live conspiracy that may be more than just a theory!

Of course, Palast predicted that the 2008 US presidential election would be stolen by the GOP, so his record is not perfect... or is it? Did Republicans allow Obama to win as a kind of scapegoat, after whom the nation would elect an effectively permanent Republican majority? But that's another conspiracy theory (although one which IMHO deserves serious consideration), and we will have to deal with that possibility later.

(H/T Michael Moore , with the usual reservations about linking to his front page.)

ADDED: Thanks to L'Enfant de la Haute Mer, in comments on this post, for pointing us to David Dayen's post on FDL about two weeks ago. Dayen writes about Iceland's experience, how it dealt with mortgage debt, how the fact that it has its own currency (the krona, not the euro) made all the difference in its ability to cope. Dayen:

,,,

But there’s another major reason that Iceland has fared better than its neighbors, one I didn’t get to talk about on the show. Iceland wasn’t in the euro. As a result, they had the ability to manage their own currency. And they predictably and smartly dropped the currency in value. Right now, the krona sits 20% below the euro, even as the euro has plummeted lately. And that makes Icelandic exports competitive, which includes tourism. They have not had to live with another country’s monetary policy.

...

His point, which is much like Palast's, is summarized in his post's title: "Iceland’s Lesson for the World: Control Your Own Currency and Help Your People".

Greece: Elections, Currency, Threats From Lenders

The Parthenon, or
The Greek Economy
After Enforced Austerity

Of course I don't have information on all those things apart from what is in the news. According to Laurence Knight of BBC News, Greek elections are on Sunday; a growing number of Greeks are withdrawing their money from banks (in euros, I presume), "the radical left-wing upstarts of Syriza" (Knight's description, not mine) are poised to become the biggest party in the parliament (though not necessarily a majority), and Germany and other lenders are saying to Greece, again in Knight's words, "Vote Syriza and you are out." Ah, tradition! It's good to see Germany as committed to democracy as it has always been. [/snark] The fun never ends in euro-land...

AFTERTHOUGHT: this is my second post in a week containing a photo of a building with a lot of columns. (The other was the US Supreme Court building.) I suppose what my highly admired high school English teacher once told me is true: "Steve, you have an edifice complex." <grin_duck_run />

Greece And The Euro

Ellen Brown of truthout, referencing Paul Simon's clever song "50 Ways to Leave Your Lover," examines five of those "50 ways" by which Greece could remedy its dysfunctional relationship with the Euro and the ECB. In brief, the five courses of action Brown examines are these, taken from her subheadings:

• The Open Marriage: Return to the Drachma Without Abandoning the Euro
• Keep Separate Bank Accounts: Fire Up the Printing Presses at the Greek Central Bank
• Divorce: Turn and Walk Away
• Spousal Support: The Public Bank Option
• The Dowry: Impose a Financial Transaction Tax

Brown concludes with a quote from Mike Whitney, and a delightful reference to the Simon song she started with:

The problems of Greece and the euro zone stem from an arbitrary set of rules that were entered into by agreement and can be changed by agreement. Where there is a will, there is a way. The problem is finding the will, particularly among the Eurocrat leaders holding the reins of power, who may not be looking for an amicable workout. In a June 3 article titled "Europe Moves Closer to Banktatorship," Mike Whitney maintained:

These people are not interested in fixing the EZ economy. They are engaged in a stealth campaign to radically restructure EU society, to unravel the welfare safety net, to roll back the progressive gains of the last century, and to reduce much of the continent to 3rd world poverty. A banking union will further solidify the power of big finance over the individual states, and that is the main objective.

... Greece is a vivacious woman chained to a tyrannical old man. She can dance again if she can be free.

I am far from qualified to evaluate the merits of the possibilities, but the article was thought-provoking, and it reminded me of the one course of action that is simply not an option: do nothing.