As the Greek crisis stumbles towards what may be its highest noon yet this weekend, here’s an example of a far-left government doing what far-left governments do. The Age reports:
Greek journalists who criticised the Syriza administration and supported a ‘yes’ vote in the lead-up to Sunday’s referendum have come under investigation by government agencies and may be prosecuted for their reporting. The public prosecutor, the government media watchdog and the Journalists’ Union of Athens Daily Paper (ESIEA) have all launched investigations into the reporting on privately-owned media channels in the lead-up to Sunday’s historic vote.
It is alleged the reporters breached electoral law by not allowing fair and equal time to all sides of the debate. The public prosecutor said it was responding to “viewer complaints”.
Nine of the country’s most visible anchors and news directors have been called to answer to the ethics board of ESIEA – they are Olga Tremi, John Pretenteris, Maria Sarafoglou and Manolis Kapsis from Mega Channel, Stamatis Malelis, Nick Konitopoulos, Aris Portosalte and Dimitris Oikonomou from SKAI and Maria Houkli from ANT1. In a post on his personal Facebook page, SKAI news director Malelis accused Prime Minister Alexis Tsipras’ government of attempting to silence its critics…..
Meanwhile, included in a fascinating piece (read the whole thing) by Ambrose Evans-Pritchard for the Daily Telegraph earlier this week was this interpretation of what was meant to happen last Sunday:
Greek premier Alexis Tsipras never expected to win Sunday’s referendum on EMU bail-out terms, let alone to preside over a blazing national revolt against foreign control. He called the snap vote with the expectation – and intention – of losing it. The plan was to put up a good fight, accept honourable defeat, and hand over the keys of the Maximos Mansion, leaving it to others to implement the June 25 “ultimatum” [from the euro zone] and suffer the opprobrium.
Quite possibly. But there is plenty of room for other theories. Try this for size: Tsipras understood that he did not have the mandate to quit the euro (most Greeks are still in favour of staying in), but knew that the momentum of a no vote, and the angry reaction such a vote would inevitably stir up across the euro zone, could either give him the political cover he needed for Grexit or force Greece’s partners to put forward the sweeter deal he needed to keep his country within the currency union.
We’ll find out one day.
As the week grinds on Brussels, unwilling ever to accept that any aspect of ‘ever closer union’ can go into reverse, is trying to cobble together a deal, cheered on by an Obama administration that has never let economic and political illiteracy get in the way of giving advice. France is helping out too, both from ideological conviction (the current French government is none too keen on financial discipline) and, I suspect, the realization that should the euro no longer seen to be irreversible France’s ropey finances might start to come under somewhat sharper scrutiny from lenders who would now once again have to price in something for currency risk, even if the risk of Frexit were to remain (as it would) very low.
The tough line taken by Germany owes more to its finance minister, Wolfgang Schäuble than to Angela Merkel. He’s more Brussels than Berlin, so what’s going on?
In July 2012, Timothy F. Geithner, the United States Treasury secretary at the time, traveled to Sylt, an island off Germany in the North Sea. Mr. Geithner was there for a meeting with Wolfgang Schäuble, Germany’s finance minister, who would spend his summers at his vacation home on the tiny island. The topic was Greece. In the home’s library, the two men spoke about Greece’s prospects and begun discussing ways for the European Union to keep the country in the eurozone. To Mr. Geithner’s dismay, however, Mr. Schäuble took the conversation in a different direction.
“He told me there were many in Europe who still thought kicking the Greeks out of the eurozone was a plausible — even desirable — strategy,” Mr. Geithner later recounted in his memoir, “Stress Test: Reflections on Financial Crises.” “The idea was that with Greece out, Germany would be more likely to provide the financial support the eurozone needed because the German people would no longer perceive aid to Europe as a bailout for the Greeks,” he says in the memoir.
“At the same time, a Grexit would be traumatic enough that it would help scare the rest of Europe into giving up more sovereignty to a stronger banking and fiscal union,” Mr. Geithner wrote. “The argument was that letting Greece burn would make it easier to build a stronger Europe with a more credible firewall.”
I reckon that’s it. But the highly risk-averse Merkel may yet overrule her finance minister. The fact that Germany’s only (sort of) significant euroskeptic party, the AfD, may, with astoundingly bad timing, be on the edge of splitting, might well make the chancellor even more likely to do what needs to be done to keep Greece within the euro zone.
Over the longer term that would be a mistake, but, have no doubt, it is the long term that we are talking about. In a characteristically forceful speech in the European Parliament, UKIP leader Nigel Farage congratulated Greece on the no vote (judging by the look on his face, Tsipras, who was in the audience, didn’t appreciate such reactionary support) but seemed to envisage that the worst would be over in a few months. That’s far from the case. Any Grexit would be a very rough ride, but with Syriza in charge…
As to what might lie ahead for Greece, comparisons are often made with Argentina after the peso/dollar peg collapsed in 2002. In that respect this article in the Guardian is well worth a look.
Here’s an extract:
The short-term impact on the economy [of the end of the peg] was to turn recession into a slump. Argentina’s national output collapsed by almost 11% in 2002 and unemployment rose sharply. Annual per capita income fell from $8,500 in the late 1990s to $2,800 in 2002, in large part due to the fall in the peso. The pain was, though, relatively short-lived and growth in the five years after the devaluation was stronger than in the five years that preceded it. Household incomes rose by 43% in five years.
Argentina’s adjustment was aided by five factors. First, it already had its own currency and thus avoided the disruption that Greece would face if it returned to the drachma.
Second, it had commodity exports that were in high demand during an upswing dominated by China’s arrival as a global economic superpower. For Greece, the outlook is not as good. World trade is growing more slowly than it was in the early 2000s, and the Greek economy is dominated by tourism and shipping.
Third, Argentina had been forced to keep interest rates high in order to maintain the dollar peg. When convertibility was abandoned, borrowing costs no longer had to be kept so high and came down sharply. Interest rates in the eurozone are currently at 0.05%.
Fourth, Argentina’s deep recession meant it could expand rapidly for a number of years without running into inflationary difficulties. This meant it reaped the benefits of devaluation in its international competitiveness. Greece, too, has ample spare capacity. Its economy has contracted by a quarter and unemployment is 25%.
Finally, devaluation allowed Argentina to write off a chunk of its debts, which fell from 125% of GDP to 72% of GDP by 2005. Again, this would be an option for Greece were it to leave the eurozone.
It wouldn’t be an option. It would be an inevitability.