While the Euro recovered from its stumble last week and the EU officialdom put out a round of denials of a story on Friday that Greece was considering an exit from the eurozone, the Euro tea leaf readers are still chewing over the significance of a not at all secret secret meeting over the weekend. The trigger is the fact that Greece is already on the verge of breaking the terms of its loans last year. This is hardly a surprise; austerity does not work and the Greek debt burden was clearly unsustainable. Per the Guardian:
The eurozone’s first ever bailout of a debt-laden member country is failing and will need to be renegotiated exactly a year after the €110bn (£96bn) rescue package was agreed for Greece.
Following secret talks in Luxembourg on Friday between Athens and some of the key EU players, it emerged that Greece will not be able to meet the terms of last year’s rescue and is hoping to ask the eurozone for more funds.
As Britain made clear it did not want to offer any more support for Greece as part of an EU package or a bilateral loan, investors remain unconvinced of the ability of Athens to sustain its €340bn debt load.
So the solution, per a Financial Times report, is…yet another bailout:
European officials are preparing to revamp Greece’s bail-out package after concluding that Athens would be unable to raise money in the markets early next year, as envisaged under a €110bn ($158bn) rescue plan.
Eurozone ministers this weekend publicly acknowledged that Greece would probably need additional cash from the European Union or other international institutions…
Greece needs to raise €25bn-€30bn next year to meet debt repayments that would not be covered by its current bail-out loan. In addition to selling bonds to the EU rescue fund, Athens could also propose a voluntary extension of maturities on debt due to expire next year, a Greek official said.
Now these reports suggest that no conclusion has been reached, merely that there is a some recognition that Greece is going from bad to worse and Something Must Be Done. In a message circulated by e-mail, Yanis Varoufakis argued that the rumor in Der Spiegel of a possible Greece departure from the Eurozone was merely to elevate the seriousness of the discussion:
The Spiegel article was meant as a salvo that would sound long delayed alarm bells. It was intended to raise a small storm of panic as a means of reminding Mrs Merkel that the crisis so far is akin to a tea party when compared to that which will follow if she continues to live in lies and to deny basic truths.
If I am right, who sent this message? Der Spiegel would never act by itself and without coordinating with powerful German policy makers. My sources tell me that these circles are mainly located within the German Finance Ministry and, to a lesser extent, in one or two of the larger banks. In association with Der Spiegel they have been sending tamer messages along similar lines for a while, namely that the Greek debt is not sustainable under the present policy mix (see FTAlphaville’s account of that series of messages utilising Der Spiegel as the main conduit).
Having lost patience, once their signals were largely ignored, Germany’s Finance Ministry’s ‘people’ must have decided to employ the big guns of yesterday’s signal. They took a partial truth (that the Greek PM had looked at the potential costs of a Greek exit from the euro), amplified it by omitting to mention all the other scenaria which were considered and, hey presto, a small tempest was unleashed on Europe’s leadership. All they then did was to watch the panic perform its miracle. What miracle? Concentrating the mind of Mrs Merkel, Mr Papandreou and assorted ministers on the importance of living, for once, in truth.
More precisely, the message sent by the Spiegel incendiary article was that the policy of fresh expensive loans for insolvent states, combined with savage austerity at a time of deep recession, does not and will not work. That the time for debt restructuring for the eurozone’s stressed periphery has come, as has the time for a rational resolution of Europe’s banking crisis. To drive their point home, the circles within Germany that saw to it that Spiegel publishes this article illustrated vividly, for Mrs Merkel’s and Mr Papandreou’s benefit, that there is something far, far worse than a debt restructure: the commencement of a successive elimination of countries from the eurozone that will give rise to magnificent levels of speculation in the money markets as to who comes next and when.
By causing a mild, early panic, along these lines, they sent the stark message that the time for lies is over, that more liquidity to insolvent states and bankrupted banks will make things worse, that it is time to have the debate we ought to have had more than a year ago in Europe.
There are several problems with this theory. The Greeks have already missed their budget targets. They also see that the Portuguese got a better deal, the Irish are starting to saber rattle too. The Germans are divided in two factions, one that would actually like to see Greece gone in the Finance Ministry versus Schaeuble and his allies. In other words, the idea that this is a German Finance Ministry feint is disputed by my sources, and the Greeks have every reason to encourage this line of thinking as long as its top officials keep issuing pious denials.
As the Financial Times’ Wolfgang Munchau observes,
The reason for the frantic diplomatic activity is that the eurozone is running out of easy options for dealing with Greek debt. There are valid objections to every proposal. An exit is too risky. A haircut – a loss for creditors on the outstanding principal – would kill the country’s banking system and land the European Central Bank with losses approaching €100bn. A voluntary restructuring would not do enough to reduce the net present value of Athens’ debt to a sustainable level.
I understand collateralised lending – swapping old Greek bonds into new collateralised debt at a discount – has also been discussed. This would subordinate every Greek bondholder, including of course the ECB. The option to swap bonds of the European financial stability facility, the rescue umbrella, into peripheral bonds has been explicitly rejected by Berlin. This would probably have been the cheapest option but Germany wanted to nip in the bud anything that smells of a eurozone bond.
The problem with these debates is that they are getting close to the zero or negative sum game point. Austerity is politically popular in creditor nations – gotta make those profligate borrowers wear those hairshirts – but are terribly policy. They only make the debt burden worse, and are really and extend and pretend strategy for the Eurobanks holding periphery country debt, in particular the Landesbanken. Germany refuses to see that its export strategy is an integral part of the problem: it can’t keep running big trade surpluses with the rest of Europe and not expect debt defaults or restructuring. But if positions start to harden, this looks more and more like a game of chicken, and Lehman showed us how well those work out when the stakes are high.
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Is there not a third solution for Athens? It restructures debt, but it rescues Grecian banks by issueing all the necessary euro’s in drachma (assuming that they still can). If issued interest free, where’s the problem?
I like Professor Hoermann’s little circular explanation:
“The state borrows money from the bank to pay the interest on [existing] debts it has at that bank, to balance or rescue the bank at which it has its debts. Seriously, no one can understand who is indebted to whom and what debt really is.”
This is far worse than the blind leading the blind. At least in that case there is direction. Here we have holes, designed to grow larger, dug to try to arrest the growth of previously dug holes, to rescue the very system demanding holes be dug to fill other holes. All to destroy the environment that enables the digging in the first place.
How stupid can we get?
If I am right, who sent this message? Der Spiegel would never act by itself and without coordinating with powerful German policy makers. My sources tell me that these circles are mainly located within the German Finance Ministry and, to a lesser extent, in one or two of the larger banks….
All they then did was to watch the panic perform its miracle. What miracle? Concentrating the mind of Mrs Merkel, Mr Papandreou and assorted ministers on the importance of living, for once, in truth.
Why would banksters want politicians to live with truth? That would be the end of them.
Every bailout, no matter how convoluted the specific mechanism, is the same thing: Parasite creditors offloading their costs and risks onto the citizenry, and forcing them to pay off their bets. (And making new, ever more gargantuan bets under that zero-risk dispensation.)
So:
There are valid objections to every proposal. An exit is too risky.
On the contrary, nothing could possibly be more risky for the productive citizens (a redundant term) of any country than to remain within the financialization framework.
I am pretty surprised we haven’t heard about Greek bank runs. If conversion of euro deposits to drachma deposits is even a glimmer of a possibility, wouldn’t it be prudent to get the euros in cash form now?
Via FT Alphaville, they have a great post from JPM on who owns the sovereign debt. Pretty clear the Greeks themselves would take a near catastrophic loss from any significant haircut.
Bruce, I’ve put forth that same question, and get different answers.
It’s unclear to all who guarantees deposits. Some have said that Germany would guarantee deposits in German banks, regardless where the branches are located. Others have said that if a Spaniard deposits his Euros in a Spanish-branch of a German bank, then those deposits can be converted to the local currency at whatever f/x rate the government decrees, without Germany having to guarantee the deposits.
I think we should drop the word “single” in the € is our single currency. Greece could introduce a parallel currency Drachma 2.0 along the logic of MMT. Which would make things much easier. Then we only have to deal we’ve € denominated sovereign debt issued so far and our European zombie banks.
The full letter from Yanis Varoufakis (hat tip to lbo-talk):
The Spiegel story that “Athens is considering withdrawing from the euro zone” is not exactly false – just economical with the truth.
Yes, a few weeks or months ago, the Greek government commissioned (as it ought to) several secret studies of the repercussions of various scenaria involving different forms of debt restructure, including one desperate scenario hypothesising an improbable exit from the eurozone. The real question is why Der Spiegel chose to isolate this one scenario and focus on it even though Spiegel’s journalists know full well that Greece will never propose an actual exit from the euro?
It is my considered opinion that Der Spiegel, in consultation with certain circles within the German government (in particular the Finance Ministry) was trying to send a message to the German Chancellor but also the Greek Prime Minister. And what is this message? That there are far worse things than a debt restructure, the worst being a step-by-step dismantling of the euro that will begin once a country like Greece is forced into an impossible situation. And that continuing to live in denial, and to peddle blatant lies about the sustainability of the present course will no longer be tolerated.
The article and the inevitable denial
Let us begin with the quote of the day from the internet version of Der Spiegel:
Greece’s economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option: SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou’s government is considering abandoning the euro and reintroducing its own currency. Alarmed by the attempt, the European Commission has called together a crisis meeting in Luxembourg on Friday night. In addition to Greece’s possible exit from the currency union, a speedy restructuring of the country’s debt also features on the agenda.
That the Greek government is considering an heroic exit from the eurozone is false. While it is one of the many scenaria that it studied at some point, it was never a scenario that it contemplated. Alas, the Greek government can deny this (after Der Spiegel’s article saw the light of day) till the cows come home but no one will believe it. It is the price one pays for not having heeded the message of the child’s tale involving a boy, a number of fake cries and a wolf. Worse still, by blaming, quite implausibly, Der Spiegel for buttering the speculators’ bread, the Greek government is sacrificing cheaply the last morsels of credibility it has. Sad, very sad. For everyone knows that Der Spiegel is a veritable publication that would not lend itself to the games speculators play. It has much bigger fish to fry. Indeed, Der Spiegel is part of Germany’s institutional network of authority and political power. So, why would such an institution be economical with the truth in this manner and at this point in time?
The message
The Spiegel article was meant as a salvo that would sound long delayed alarm bells. It was intended to raise a small storm of panic as a means of reminding Mrs Merkel that the crisis so far is akin to a tea party when compared to that which will follow if she continues to live in lies and to deny basic truths.
If I am right, who sent this message? Der Spiegel would never act by itself and without coordinating with powerful German policy makers. My sources tell me that these circles are mainly located within the German Finance Ministry and, to a lesser extent, in one or two of the larger banks. In association with Der Spiegel they have been sending tamer messages along similar lines for a while, namely that the Greek debt is not sustainable under the present policy mix (see FTAlphaville’s account of that series of messages utilising Der Spiegel as the main conduit ).
Having lost patience, once their signals were largely ignored, Germany’s Finance Ministry’s ‘people’ must have decided to employ the big guns of yesterday’s signal. They took a partial truth (that the Greek PM had looked at the potential costs of a Greek exit from the euro), amplified it by omitting to mention all the other scenaria which were considered and, hey presto, a small tempest was unleashed on Europe’s leadership. All they then did was to watch the panic perform its miracle. What miracle? Concentrating the mind of Mrs Merkel, Mr Papandreou and assorted ministers on the importance of living, for once, in truth.
More precisely, the message sent by the Spiegel incendiary article was that the policy of fresh expensive loans for insolvent states, combined with savage austerity at a time of deep recession, does not and will not work. That the time for debt restructuring for the eurozone’s stressed periphery has come, as has the time for a rational resolution of Europe’s banking crisis. To drive their point home, the circles within Germany that saw to it that Spiegel publishes this article illustrated vividly, for Mrs Merkel’s and Mr Papandreou’s benefit, that there is something far, far worse than a debt restructure: the commencement of a successive elimination of countries from the eurozone that will give rise to magnificent levels of speculation in the money markets as to who comes next and when.
By causing a mild, early panic, along these lines, they sent the stark message that the time for lies is over, that more liquidity to insolvent states and bankrupted banks will make things worse, that it is time to have the debate we ought to have had more than a year ago in Europe.
The gist
A year ago, Greece went bust and was induced into an IMF-like program that had the added complexity caused by membership to an effectively foreign currency union which precluded, by definition, devaluation (and all the automatic stabilising effects it brings). The multiple crisis that occurred within the state sector, the real economy, and the banking sector was ‘tackled’ by throwing more expensive loans onto these insolvent sectors. The Der Spiegel article marks a turning point: Some powerful German policy makers seem no longer willing to continue down that cul-de-sac. Undoubtedly, they chose a strange way of stating their decision. However, despite the cowardly manner in which they stated their new conviction, a new chapter is beginning for Europe. It will not necessarily be well written or make for a happy read. But at least it offers the prospect of an escape from a dreary lie that delivered misery en masse and which is guaranteed to submerge the idea of a United Europe in a sea of discord.
We have the saying in Germany: “Lieber ein Ende mit Schrecken als Schrecken ohne Ende”
Roughly translates to: “rather have a terrible end than unending terror”.
Too bad politicans always seem to prefer the latter, I guess hoping to no longer being in charge once the music stops playing.
@ Landesbanken
It should at least have been possible to develop a sustainable business model, which specifially excludes all sorts of speculation and cross-border or even cross-state activities. I think funding your local start-up bakery sounds much better compared to chasing 25% roi? Next disaster waiting to happen…
@ Exports
I only agree partially. There is always three parties involved – one making the goods, one buying them AND one handing out the credit for it.
If a country cannot afford to buy something (say 200 tanks for example) – either by lack of cash or exhausted financial ability – then they should not buy. Period.
I don’t go out and buy myself 200 Ferraris. Don’t have the cash (…) and I would not get the financing either.
Can’t afford, can’t buy, no problem.
But along comes the third party, say a Landesbank. Suprise, surprise, I get a loan, a truckload of cash and I’m off to the Ferrari-Dealer. Of course I can never pay back this loan, because I shouldn’t have been entiteld to it in the first place.
What I don’t understand is why this is Ferraris fault? (having made 200 cars and offering them). It’s either my fault, buying something I could not afford or the Landesbanks fault handing me a loan which I should not have gotten in the first place.
How comes everybody always picks on exporters, when there is buyers who cannot afford and creditors who should not hand out credit to buyers? Supply adapts to demand, so Ferrari never would make 200 cars if they couldn’t sell them.
What do you think?
I think if Ferrari know’s it’s a dude without a job and a credit card, then they should show restraint, and not ship the 200 cars.
Admittedly, this requires some degree of integrity, ethics and reflection on their role in what we can call “the world”.
It’s all a big circle, not a rising line to nowhere. :() sayeth the Monkey Man.
Well, in this world Ferrari would be sued for not honoring a bank sponsered credit card w/ a 100K+ Euro credit limit.
But vendor financing is a different issue. And the Greece government trying to hide their debt with the help of banks is another. Then the notion of government debt CDS as a credit risk hedge is like CERN declaring they are making anti-matter to make the world safer.
“Can’t afford, can’t buy” ? You should tell that to all the German international salesmen who take credit from German Banks for granted. Germany has maybe the best engineers in the world, but it is too bad that the remaining idiots are recycled in the banking sector (especially the public one).
Remember the drop of German GDP in 2009 ? This is what “Can’t afford, can’t buy” looks like. Imagine that lasting for 10 years instead of 6 months. Not pretty…
“How comes everybody always picks on exporters, when there is buyers who cannot afford and creditors who should not hand out credit to buyers? Supply adapts to demand, so Ferrari never would make 200 cars if they couldn’t sell them.
What do you think?”
The exporters and the creditors always seem to be the same country.
point taken…, but contrary to our political thinking I wouldn’t mind “giving away” our banks. Fittingly the game we call “Schwarzer Peter” is named “Pass the Buck!” in English :-D
Still I don’t see why curbing exports, telling Ferrari, they are only allowed to make 20 cars “ceteris paribus” will solve the EU’s financial problems (talk about main street not being involved…)
Maybe I am just allergic to Munchau, but: “The reason for the frantic diplomatic activity is that the eurozone is running out of easy options for dealing with Greek debt.” – Please remind me, what were these “easy options” in the first place ? Where normal people see “insolvable” problems, Munchau perceives or at least perceived “easy options” not followed. Again, what were those ?
The topic Greek debt in the bellys of Landesbanken was perhaps important a year ago, though I would ratger say it is more a myth. Dexia is in deep trouble with its exposure and HRE was until it unloaded the Greek debt in the FMSA(Germany’s bad bank). It is now not anymore a big question for the banks but for the state budget.
‘The policy of fresh expensive loans for insolvent states, combined with savage austerity at a time of deep recession, does not and will not work … the time for debt restructuring for the eurozone’s stressed periphery has come.’
With Greek medium-term sovereign debt trading at a yield of about 25%, markets are saying that restructuring is a dead certainty.
It is almost mathematically impossible for an economy which is shrinking due to austerity, hobbled by a strong currency, and shouldering a heavy interest burden, to grow its way out of a steadily rising debt/GDP ratio.
Facts are inconvenient things. But Greece has two, and ONLY two, options: (1) restructure now; (2) restructure later. Although theoretically a restructuring could be done while retaining the euro, the hand-in-the-sand approach of the EC authorities practically guarantees that Greece will have to go the Argentina route: dumping the euro, stopping external debt payments, and reverting to a drastically devalued drachma.
The results would be dramatic: capital would pour into Greece. What are they waiting for?
Yves thank you, articles like this and the accompanying analysis is why I read your blog everyday. I don’t agree with everything you post, but my understanding of the world is vastly better for it and it points me in the right direction for further research. Cheers!
Friends, I did not come to praise Keynesian economic but to bury the dismal contraption.
Let me explain. My following of the Greek crisis has led me to revise my views and now I believe that though JMK was brilliant man, most of his epigones are snake-oil salesmen who deserve to be tarred and feathered. People for whom I had great respect, like Stiglitz who supposedly is the Greek prime-minister’s adviser, are totally clueless about what is ailing the Greek economy and how to fix it. Greece had applied supercharged Keynesian consumption stimulus since the seventies and by 2008 it seemed to have become one of the richest countries in the world. The hell it had! The GDP growth had been truly amazing but only due to consumption with borrowed money. Most productive industries had disappeared and everyone was aspiring for a job in the public sector, which almost half the working adults achieved. By 2008, the Greek economy was an almost empty shell!
Greece was like the fellow who fell from a tall building. The fall was extremely gratifying (it was like defying gravity or like flying!) Everything was so wonderful and the fellow probably would recommend to everyone else to fall! Until of course he hit the ground!
In 2009, with actual deficit about 20% GDP (15 was admitted plus 5% from local governments and health systems), Greece finally crashed on the ground and what we all saw was not pretty. Not only was the “real” economy essentially destroyed but so was society. People had been made outrageous promises and most everyone was in a protected caste with privileges guaranteeing them fat profits. For example pharmacists who are guaranteed 35% gross profit ever for medications that cost 2 thousand dollars per vial, all paid by the government (can you imagine the opportunities for corruption?). All this money was pumped into the economy that thrived. So hardly anyone seemed to care and the foolish bankers kept lending.
How do you tell these casts that the party is over? How do you tell Denmark that it is … Albania? The risk of civil war (and I mean it!) is very real!
The loan agreement to support Greece, reached in May 2010, involved a very large amount of money, not intended to preserve the system as it was but to smooth the transition by generating sustainable jobs in production and export. The Greek government took the money but did not do what it was supposed to have done. It reduced expenses (75% of total expenses are in salaries, wages, and pensions) by a miniscule 3-4% but raised taxes significantly. Inflation went up (imagine!), raising the already high cost of living, and the private sector collapsed as jobs in retail disappeared and no new jobs were created anywhere! Greece exports are less than 10% when Romania’s are 45% of GDP, speaking from memory.
And now we are told that the problem is that austerity does not work? Please!
In response to your comment on my interpretation of the Spiegel article and the Luxemburg meeting, allow me to say the following: I think that, while there are elements of truth in your take, I am afraid your comment missed the main point. It is not a couple of weeks ago that the Greek chickens came home to roost. We have known since well before the May 2010 ‘bailout’ that such an expensive, massive loan would come with terms that Greece would not be able to meet. To put it bluntly, piling up a new high-interest loan on an already insolvent state on condition that it takes measures to… shrink its GDP is a recipe for disaster. Schauble certainly knew it and was ready for a different approach back in Dec 2009. Alas, he was trumped by Merkel. Additionally, it is not the case that Portugal got a better deal (even though the acting Portuguese PM has unwisely claimed so, for purely electoral reasons of his own). Lastly, on the intra-German division on what to do with Greece, the dilemma that causes tensions within the German government has to do with one concern alone: The effect of a Greek default on the German banks. Schauble’s deep worry is not so much the banks’ exposure to Greek debt but that a collapse of Greek banks will start a domino effect that will force German banks to reveal the extent to which their books are full of pre-2008 toxic waste. (If interested in the complete argument, see my piece “It’s the German banks stupid! – http://goo.gl/ywhuv.)
@Tortoise
You should read the numbers better.
1. Just for the record, not half the working people in Greece are civil servants. They are closer to one-in-four. But as a percentage of the total population they are close to US standards (1 in 11). The percentage of total population is a better measure because in the public sector you need teachers, policemen and nurses which their numbers depend more directly on the total rather on the working population. The bad ratio of civil servants versus working population is a result of the private sector not creating enough jobs, not the other way round.
2. Half of the current Greek public debt was piled over 2004-2009 during the reign of a neoliberal and not at all keynesian government. It was classical voodoo economics: you are supposed to collect more tax income by lowering tax ratios (well, you don’t, but you collect more votes). Then you spend public money which goes to large corporations (Greek construction sector and foreign pharmaceuticals, for example). Look at the G. W. Bush years in the US and you will understand what happened in the Karamanlis Jr. years in Greece (2004-09).
3. Nota Bene: The anti-Greece was Ireland. Well, Ireland lays in the same pit of triumph as Greece does now. Both were victims of what I would call “the Japanese disease” – an overvalued currency which led to asset bubbles and a 20 year stagnation. Here in the West we deny that the problem of Japan was the overvaluation of the yen after the Plazza Accord in mid-1980s. Ask the Chinese what they do think on the matter.
4. The Euro was a good project. It was mismanaged by the ECB (it was left to become overvalued during the Trichet years). The Titanic was a splendid ship, it was her captain that took a wrong route and hit the iceberg.
@Kostis Papadimitriou
You are totally misinformed regarding employment in Greece. The percentage of working population in the narrow and broad public sector (who for all practical purposes are controlled by or are the responsibility of the government) is over 45%. This includes local governments, thousands of local-government companies, utilities like DEH, public transportation, dozens of public (government) controlled organizations including banks. The fact the exact number is not known is a symptom of the disorganization.
As for Ireland, a year ago in posts at Ambrose’ s column I predicted that Ireland would be in as bad a shape as Greece. I must admit that I was probably wrong: Greece is in worse shape.
Ireland was anti-Greece maybe 15 years ago. Once the housing bubble started, Ireland became Greece. And here is an important issue: Greece has not yet faced the “Irish Problem”, i.e., the collapse of housing prices and the subsequent damage to the banks. One way or another, the Greek banks will face horrendous difficulties that will be piled up on top of all the other problems.
To call the Karamanlis government neoliberal is beyond description. An exceptionally incompetent government even by the standards of Greek politics for sure but neoliberal it was not. They tried desperately to avoid having the bomb explode in their hands by doing more of the same, which was increasing the deficit at ever increasing rate. They gave the highest annual raises to public employees than any government since 91. (Did you know that by now a blue-collar collar worker with 25 years experience makes 120 thousand dollars a year at the government controlled Greek Oil?) They did zero to open the economy to competition or to encourage business activity. They did next to nothing to deal with the festering pension problems.
Your most amazing and enlightening statement was: “The bad ratio of civil servants versus working population is a result of the private sector not creating enough jobs, not the other way round.”
Actually, the euro was a terrible idea. It required that every member nation surrender its Monetary Sovereignty, thus making inevitable their inability to pay debt.
I predicted all this way back in 1995, in a 1995 speech at the UMKC, when I said, “Because of the Euro, no euro nation can control its own money supply. The Euro is the worst economic idea since the recession-era, Smoot-Hawley Tariff. The economies of European nations are doomed by the euro.”
Rodger Malcolm Mitchell
“Germany refuses to see that its export strategy is an integral part of the problem: it can’t keep running big trade surpluses with the rest of Europe and not expect debt defaults or restructuring.”
The fault is not with Germany. As a monetarily non-sovereign nation, it must obtain money from outside its borders. Exporting is the only way currently.
Now, if Germany were Monetarily Sovereign, like the U.K. and the U.S., it could create money at will and never need to export.
The solution for Greece is:
1. Become Monetarily Sovereign by opting out of the EU
or
2. For the EU to change its program, and begin to support its member euro nations.
As the author of the post says, austerity doesn’t work.
Rodger Malcolm Mitchell
“This is hardly a surprise; austerity does not work and the Greek debt burden was clearly unsustainable. ”
What then, does our learned author suggest? Spend more? Spend less? Luckily we won’t need to wait to wait for an answer.
The markets will decide in time. They always do.