The new and the recurring mistake

Article by Elias Papaioannou, published in Kathimerini on 14.6.15 (in Greek).

The article draws on ideas expounded in a joint article with Richard Portes and Lucrezia Reichlin published by Project Syndicate.

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One Response to The new and the recurring mistake

  1. HUGH Prysor-Jones says:

    I am a cynical old journalist. I offer my best apologies to distinguished academic economists trying to offer solutions to Greece’s financial difficulties.
    This is a geo-political matter, and has little to do with Greece.
    Greece found itself in the frame for a forced “grexit” or “grexident” because a target was necessary – just as Algeria feared they would be invaded in 2003 when they saw the United States looking for a victim. Small states have little to bargain with in these circumstances.
    The eurozone was unprepared for the “bankers’ crash” of 2008. Scapegoats were needed. Several candidates suggested themselves. The Irish wriggled hard and escaped. Greece was caught and pinned down with punishing austerity programmes. One of the reasons Greece was tortured was because its fiscal structure was the least transparent and therefore the best able to evade the worst social consequences of keeping Eurozone banks afloat. At that time, this was vital.
    By 2012, the dollar swap lines had stabilised the eurozone but the price was becoming too high for both ends. Germany, having failed to win in Ukraine, was faced with a dilemma. Its predatory economy has needs that can no longer be met within the EU. By now desperate to break up the Union, Germany demanded total IMF support for a “Grejection” on the grounds that it had given the US total support over Russian sanctions, Iran etc.
    Hence the IMF’s apparently nonsensical behaviour during the “negotiations”, which was of course nothing of the kind, just as the “negotiations” were nothing of the kind.
    The IMF has been burned because it is over anyway.
    Greece, a serial defaulter since 1822, needs to persuade its voters that they want out again now. Everone from Tsipras to Lagarde has been doing their best.
    Brussells needs to save the EU and all those careers and will sacrifice the euro if needs be to achieve this. They hope this may not be immediately necessary as the ECB may pull another rabbit out of the hat.
    But who doubts now that the euro was a mistake ? Not just Britain.
    Capitalist self-defence by austerity does not work. Economists have known this since the 1920s. It has only been necessary as a smokescreen for the ECB’s preparations.
    The wild card is Russia but the timidity of Mr. Putin and his oligarch friends is reassuring. China needs Russia so will not press any point at the moment.
    You may think all this alarmist but Goldman Sachs has got wind of it, and has been shroud-waving frantically.
    Really big policy changes are finally in the wind. Negative interest rates are a general likelihood. Washington has blundered and unnecessarily made an enemy not just of Russia but of the emerging BRICS machine. The dollar is finally in play. Riyadh has been talking to Moscow about the pricing not the price of oil. Game on.

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