Tuesday, July 07, 2015
Eurozone officials seeking new bailout proposal from Greece
Living standards are tied to economic productivity. The latter will not be fixed by a socialist government, and until Greeks realize that and stop voting for leftists, they're going to continue waiting vainly for the impossible.
The lessons of socialism are in plain view and have been for decades. The 20th century is one giant cautionary tale against socialism, and Venezuela is already a 21st century affirmation.
Anyone who does not already see is lying to himself. Because of that lie, politicians are able to promise unicorns and pixie dust and get elected.
From the WSJ:
"Eurozone decision makers were meeting for what could be a final effort to keep Greece in their currency union, warning that without a credible proposal from Prime Minister Alexis Tsipras on Tuesday his country might have to abandon the euro.
"Not much time is left until Greece’s banks—closed for most business for over a week now—run out of cash, which would push the already suffering country deeper into recession and a possible exit from the currency.
"Arriving for a meeting here ahead of a summit of leaders in the evening, Eurozone finance ministers said it was now up to Greece to present credible new proposals after his country’s voters overwhelmingly rejected new austerity measures demanded by creditors."
The idiocy of the parties of the left risks breaking up the European Community by putting pressure on the richer countries in effect for subsidies that can't be satisfied. It is sad they would do this because the ultimate goal of the Community was to bring together countries that before WWII had been mired in endless wars for more than one thousand years. Let's hope the Community is not threatened and we don't return to that era.
Europe had been mired in endless wars for some one thousand years up to WWII. After that, and thanks to the not so subtle coaxing of the U.S., which also provided a defense umbrella so they wouldn't feel an urge to rearm, Europe decided to work towards a Community of nations instead of constantly fighting each other.
But to work with such disparate cultures and economies, a union would require that all nations exercise discipline and adhere to a set of common rules. Abuse of those rules, most especially taking advantage of them to free ride the new common wealth, could prove damaging and even destructive of the Community project. Greece did so anyway.
That's why "a viable deal is possible only at the highest political level," it is no longer about economics but about how to preserve the Community project and avoid new wars down the road.
Unless Greece comes to its senses, I believe that at this point the less damaging decision for the leaders of Europe is to let Greece go, perhaps with some assistance to ease the pain, but let Greece go. Failure to do so would only encourage leftists parties in Spain, Italy and perhaps other countries to pull another Greece and that would definitely lead to the demise of the Community and lead to more wars.
Greece is better off for being forced out of the Eurozone. They never belonged in it, having a dreadfully dysfunctional governance that freights their economy; they lied about their credentials to get in; and it wasn't until 2009 that they finally admitted that they'd been running deficits for YEARS well in excess of Europe's limits.
They need to change both their unsustainable desire to live beyond their means, AND the dysfunction of their governance. Nothing short of being cut off will force them to it.
The crisis became inevitable when they entered the Eurozone so monumentally unprepared for its discipline. If nobody will lend them money because they've defaulted on their debt and can't demonstrate a growing economy, they will need to cut outlays dramatically. And if they EVER again expect to be able to borrow, they need to grow, which means confronting the need to reengineer their bureaucracy and moderate their corruption.
Europe does them no favors by letting them skate
The referendum was very badly fashioned. If it had been a two-part vote, the first on continued "austerity" measures that they actually voted "NO" on, but the second on a willingness to undergo more intensive social and bureaucratic reengineering that Europe is at least as interested in, and they'd voted "YES", then they'd actually have something to bargain with. This is because it would suggest that Greeks understood that their governance makes their economy uncompetitive and therefore unlikely to grow. But change things by evolutions and that could change, as well.
They didn't do that, and all Europe has to consider is an unwillingness by Greeks to play by rules that everyone else is held to account for.
Germany won't be letting up, and other Euro-parties of the left can just go fish.
Greeks had a chance to influence their fate, and they made that decision. They now have to accept that the rest of Europe has a decision to make, too. Will Greece’s socialism be forever subsidized by others, or will the other Euro nations focus instead on trying to pay for their own socialisms?
Nobody was given much of a choice; but paying for your own free cheese and Band-Aids has gotten too tough all by itself to seriously entertain the notion of paying for someone else’s.
Greek will renounce the debt and its servicing, print up tons of new-drachmas, immediately devalue them thereby destroying the savings of the five people who haven’t already moved euros out of the country and hidden them … and start over. But they’ll start over without the ability to fund the pensions anyway, or the subsidies to the unemployed, or private banks for a long while, or any of the rest of it. It will probably take a generation to re-surface.
Posted by Dan Butcher