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Beware of Greeks Bearing Debts
Syriza’s Spinning, but Nobody’s Buying
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  • Anthony

    Francis Fukuyama’s Political Order and Political Decay illuminates a striking background of governance difficulties proffered in “Syriza’s spinning” – effects of corruption and institutional history on governance and why some societies have difficulty rooting it out.

  • lawrenceperson

    Greece’s biggest problem is that they absolutely refuse, under any circumstances, to stop spending vastly more money than they take in. The Euro made that problem worse, but it isn’t the central problem. And now Greece has run out of other people willing to lend it money…

    • Eurydice

      Considering that Greece is in primary surplus now, it seems it’s no longer spending vastly more money than it’s taking in.

      • f1b0nacc1

        Actually that is debatable at best. As has been typical of the Greeks (who lied to get into the Euro in the first place), they have made some terribly shaky assumptions about revenues, and haven’t done much to document the rest.
        Much more to the point, even if we assume (for the purposes of discussion) that they ARE in a primary surplus now, they certainly would NOT be if Syriza substantially increases spending again, as they have promised.

        • Eurydice

          Syriza can’t spend any money even if it wants to – there is no money. The country has ground to a halt and anything that can be raised by selling off national treasure will only go toward making interest payments.

          Everyone knew this situation was untenable from the start. They all knew the bailout was actually a bailout of the major European banks, not of Greece, they’ve all admitted that strangling the country was a miscalculation, they knew they were kicking the can down the road. Well, the road ended a little sooner than they thought. This is a political situation, even though it’s told in economic terms.

          BTW, even France lied to get into the Euro – the contortions every country went through in order to reach the requirements was like an epic game of Twister.

          • f1b0nacc1

            There is ALWAYS money, to suggest otherwise is an accounting gimmick. Money earmarked to pay debts can be diverted, salaries can be deferred, and (as you pointed out) assets can be sold off. That the income was SUPPOSED to go elsewhere is simply a story for the rubes dumb enough to believe it.
            I won’t defend the bail-outs, but if they didn’t happen, Greece’s misery would simply have begun a bit earlier. Greece was able to borrow a great deal of money that they never had any real intent to pay back, and now those who lent that money are stuck with that reality. That they (the lenders) are not nice folks doesn’t make Greece even a bit less culpable for their own behavior.
            As for France (and the rest) lying regarding the Euro, there is simply no comparison in the level of deceit practiced by the French and the Greeks here.

  • CrassyKnoll

    “Attacking clientelism and corruption in a sort of Jacobin way…”

    Well yeah, behead enough people and capital will begin to flow again.

    • Stick

      And a loaf of bread will be cheap until there is no baker.

  • Stick

    The answer is simple, and every socialist should know this, enact slave labor. Very Greek institution. Worked for Stalin, Lenin, Hitler, Castro, Mao, Pol Pot.. It does require a nasty stick, but it will work.

  • ToursLepantoVienna

    The political lunacy ongoing in the land of its creation illustrates one of democracy’s biggest flaws …

    Disingenuous and gullible voters will collectively elect any party that claims it can stave off an unpleasant reality.

  • wigwag

    The Greeks should default and exit the Euro. There will be bank runs and plenty of short term pain; but there are no magic answers. The best thing for Greeks in the long run is to rebuild their economy in a manner which is consonant with Greek culture; they may never be as rich as the Germans, but they’re likely to be a whole lot happier. The idea that the Greeks will ever be able to fix their economy by turning into Northern Europeans is far dumber than the idea that Greeks should head for Europe’s exit.

    It may be true that the Spanish, the Portuguese and the Italians aren’t willing to go as far as the Greeks just yet; but given time, they may be. Sophisticated southern Europeans understand that strength lies in unity; the Germans, the Dutch, the Austrians and their cold-weather EU collaborationists may not care if the Greeks default but I doubt they are willing to watch the entire European edifice collapse if the Greeks make common cause with their profligate neighbors. In an economic war between Europe’s south and Europe’s north, which side do you suppose the French will be on? My guess is that they will attempt to be on everyone’s side but the reality is that the French have more in common with the happy South than dour North.

    What does all of this mean for the United States? I think it means that we need an Administration far shrewder and strategic than we have now. We are entering a world that is breaking apart at the seams. Africa is a mess with increasing religious violence everywhere. The prosperous economies of Asia are becoming more contentious with each other as their economies are capable of supporting ever increasing military expenditures. The Muslim world is only ten percent of the way through its version of the Thirty Years War and corruption and economic mismanagement are as endemic to Latin America as ever. None of this even includes the disastrous conditions in Russia and its near abroad.

    America won the Cold War with the help of its trilateral partners; Europe and Japan. Despite its recent rumblings, is there any reason to believe that Japan has exited its long era of malaise? Europe is finished; anti-Semitism (which has always been Europe’s canary in the coal mine) is rearing its ugly head. Europe’s North and Europe’s South are entering a period of what could be economic warfare. The only reason the Europeans are unlikely to go at each other militarily is that the nation’s in Europe’s North invest as little in their military capabilities as the nation’ in Europe’s South. If they are to come to blows, it will have to been with spears carved from tree branches and stones flung from sling shots (assuming the Europeans are even willing to invest in weapons that are that inexpensive).

    The United States is desperately in need of a strategy to confront these changed circumstances. Unfortunately, our President’s motto is lead from behind while genuflecting to enemies and antagonizing friends.

    The European Union is finito; its kaput; it’s sooo 20th century. The sooner everyone confronts this reality, the better.

    • f1b0nacc1

      We may disagree on a few details, but that was an outstanding analysis.
      One minor quibble…what makes you think that the Germans, faced with a growing solidarity amongst the parasites of the south, will not simply write off the Euro (and much of the EU) as a failed experiment and make common cause with their northern compatriots? They would arguably lose some of the profit that they have extracted from the south, but that is coming to an end in any case (either their Euro collapses – as it must – or the Germans will have to subsidize it indefinitely), and the Germans have had some bad experiences ‘shackled to a corpse’ in the past.
      I agree with you that the French will side with the rest of the Latin bloc, but that is more of a defeat for them than anything else. Yes, they will be foremost amongst the failures, and I suppose ruling in Hell and all that, but still…
      As for the rest of your overview…very sad, but quite accurate.

      • wigwag

        An EU of the Northern tier might make sense. Professor Mead has suggested that option in the pages of his blog in the past. Perhaps the Germans would go for that. But it really doesn’t matter; Germany, like most of the rest of Europe faces a population collapse of unprecedented proportions.

        The idea that France and Germany could cement an alliance through the good offices of the European Union was always a doubtful proposition. The two nations have been at each other’s throats for a century and a half and the French have been warring with German speakers long before Bismark created a unified German State. After centuries of internecine hatred and bloodshed, the European Union was supposed to usher in a prolonged period of peace and prosperity. Everyone rejoiced at the idea of Europeans shedding their vestigial national identities for the more ennobled idea of European citizenship.

        The failure of this enterprise is as monumental as it is breathtaking. All the creation of the EU did was anesthetize Europeans; once they shed their national identity the continent’s citizens didn’t become “Europeans,” they became nothing. So emasculated were they by the project that they no longer even have the motivation to reproduce themselves. Most of the right wing movements that you see in Europe from the UKIP in the United Kingdom to the PVV in the Netherlands to the National Front in France are reactions to the destruction of national culture by the homogenization inspired by the EU. Whatever you think of these movements, they are almost certainly too little, too late.

        We live in dangerous times; not only is the Westphalian system under significant threat, the rules based international system established primarily by the United States in the aftermath of World War II is coming unglued. Mostly this is the fault of Barack Obama but he got a major assist from George Bush and the neoconservatives who supported him. After 9/11 and long after our Japanese and European allies had turned into mere shadows of their former selves, George W. Bush was convinced that we could turn a Muslim world largely tribal in nature into card carrying advocates of pluralism; our country paid a very dear price in blood and treasure for this fool-hearty notion.

        Obama, who was literally weaned on hatred of the idea of American hegemony, took over an America happy to retreat from the world. Obama’s problem was that he was a passionate advocate for a “rules based” world. As starry eyed as Obama is, he understood that without a sheriff to enforce the rules, the rules don’t matter much. But Obama was such a reluctant sheriff; what could he do?

        I think Obama adopted two strategies; to the extent possible, he was anxious for transnational institutions to relieve the United States of its hegemonic responsibilities. When that got him only so far, he bought the realist malarkey that recommended off-shore balancing. The idea is that the United States could adopt a much lighter footprint if we worked assiduously to insure a balance of power between competing nations. Obama likes the idea of a powerful Iran because he wants to wash our hands of the Middle East and he believes if the Shia world and the Sunni world achieve military parity they checkmate each other. The idea that a resurgent Iran might cut Israel somewhat down to size is delightful to Obama. Our Dimwit-in-Chief believes that offshore balancing allows the United States to be a hegemon on the cheap.

        The whole thing has been a disaster and has cost many millions of innocent people their lives, but that’s the narcissism of Barack Obama. The world is a dangerous place and it’s getting more dangerous all the time. It would be foolish to look to Europe for support; in large part thanks to Germany, Europe is kaput.

        • f1b0nacc1

          We disagree a bit on the role of Bush in all of this (and I suppose that would be a VERY long debate….grin), but otherwise, a masterful summary of the problem. My hat is off to you!

      • Stormcrow

        Shackled to a corpse , from the Austro-Hungarians to the Italians now the Greeks. You would think the Germans would learn to cut their losses quicker. Excellent take on the wreck of the EU.

        • f1b0nacc1

          How I wish I were wrong…

  • Eurydice

    For the most part of the past 40 years, Greece has been managed by the left wing party, PASOK, which pretty much invented the country’s modern-day version of top-down political corruption and cronyism. Political labels don’t mean anything if the party members have been raised in a culture where nothing gets done without corruption. I don’t see any rays of light coming from that direction.

  • gabrielsyme

    The Greeks should have defaulted and left the Euro five or six years ago. Instead, Greece has already absorbed a 25% hit to their economy. Ironically, it’s actually a much closer question now as to whether Greece should exit the Euro than it was at the beginning of the crisis. I think the long-term calculus still significantly favours exit and default. Whether Syriza have the balls to do so or the ability to do it competantly is another matter.

  • Curious Mayhem

    Nothing to add, except to second, or third, the analysis in a different way — Greece might be able to get some concessions on its past debt. But it must leave the euro, immediately. It will never have any growth otherwise.

    I’m assuming now that a crisis will force Syriza’s hand — deposits are leaving the banks at about 1% per month. By April, the banks will be in crisis, and capital controls will be quick to follow. At that point, it’s then no more than a couple steps to having its own currency again. Germany will be relieved to see Greece out the door.

    The right and humane thing to have done was release Greece from the euro in 2010 or 2011, with some debt relief and a “bon voyage” package of aid. To have pushed things this far is ridiculous.

    • lawrenceperson

      Leaving the Euro doesn’t solve the central problem. The debts are denominated in Euros, and will continue to be even if Greece re-floats the drachma and undertakes inflation/hyperinflation. They should look at socialist basket cases like Zimbabwe an Venezuela to see how that works out.

      And if they default, that means no international entity will be willing to underwrite their spending spree.

      Granted, they still need to leave the Euro, but REAL austerity, REAL reform of the government, a certain amount of debt restructuring/pushout, and refloating the drachma with MODEST devaluation vs. the Euro would be their best bet to escape the trap.

      Sadly, I do not see any indication from any Greek ruling party since the Euro Debt crisis began that would be willing to undertake such reforms. After all, that would reduce the chances for graft…

      • Curious Mayhem

        Definitely true about graft. Greece is famous for it.

        Greece would need more adjustment on past debts, which would remain denominated in euros. What I meant was the future, which can see growth only if Greece gets its own currency and monetary policy back.

        This is also true of the all the peripheral/Club Med countries, and Ireland as well. It’s just less extreme in their cases. Ireland, in particular, has strong fundamentals. But it can’t fully realize them unless and until it’s out of the euro.

        Germany and France will eventually get fed up with this disaster and dissolve it. I think that’s a near-certainty. What is more worrisome is that this artificially-induced crisis could blow apart the EU itself. Europe needs cooperation and free trade. What it didn’t need was a Brussels-based superstate and a wholly inappropriate common currency and monetary policy.

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