Geoffrey Hosking, Emeritus Professor of Russian History at UCL’s School of Slavonic and East European Studies, gives his view of what went wrong before and during the Greek crisis, and of the challenges that now lie ahead. To him the problem is centrally one of a lack of trust.
The Greek crisis goes back a long way, and at several stages demonstrated the dangers of a loss of trust.
The epic began with the creation of the euro, which was set up without several of the trust-generating stabilisers of national currencies: a common fiscal policy, a central ministry of finance and a central bank empowered to act as a lender of last resort. Without these essentials, the euro lacked the full and credible commitment of all its members, an essential prerequisite of mutual trust. A member nation could no longer cope with serious crises by devaluing its currency, yet no provision was made for a solidarity fund (the euro equivalent of the IMF) to deal with crises collectively.
Ashoka Mody, Visiting Professor at Princeton University and former Deputy Director in the IMF’s Research and European Departments, critiques the IMF report published on 2 July, on the eve of Greece’s referendum. This report found that Greek debt was not sustainable and deep debt relief along with substantial new financing was needed to stabilize Greece. This report, according to Mody, reveals that the creditors negotiated with Greece in bad faith. He suggests that the Greek debt burden is much greater than portrayed by the report, and that the policy measures proposed to reduce that burden, including more austerity, will make matters worse. This article was first published on bruegel.
On 2 July, the IMF released its analysis of whether Greek debt was sustainable or not. The report said that Greek debt was not sustainable and deep debt relief along with substantial new financing were needed to stabilize Greece. In reaching this new assessment, the IMF stated it had learned many lessons. Among them: Greeks would not take adequate structural reforms to spur growth, they would not sell enough of their assets to repay their debt, and they were unable to undertake sufficient fiscal austerity. That left no choice but to grant Greece greater debt relief and to provide new financing to tide Greece over till it could stand on its own feet. The relief, the IMF, says must be provided by European creditors while the IMF is repaid in whole.
Joseph Stiglitz’s influential call on the Greeks to vote ‘no’ in Sunday’s referendum has received attention from all corners of the globe. In this response, Kira Gartzou-Katsouyanni and Philip Schnattinger, critically analyse Stiglitz’s arguments and put forward an argument for a ‘yes’ vote.
Joseph Stiglitz’s call on the Greeks to vote ‘no’ in Sunday’s referendum has received broad international publicity and has given an enormous boost to the ‘no’ campaign in Greece. Yet many of his arguments about both economics and politics are at best one-sided.
Stiglitz talks a lot about the Eurozone’s democratic flaws. Indeed, many of us have participated in discussions about the European Union’s democratic deficit in the past, and there is no doubt that there are ways in which the Eurozone’s democratic credentials can be improved.
But the Eurogroup’s decision not to extend the economic adjustment programme beyond its expiry date was not an example of anti-democratic behaviour by European technocrats. On 20 February, the Greek government agreed to the extension of the programme which was due to expire on 30 June. It has been publically known for five months that without another agreement by the end of June, Europe’s money to Greece would run out. We all knew that this would include the end of the ECB’s emergency liquidity programme, which had already been increased in size several times to keep the Greek banking sector afloat.
Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, was Chairman of President Bill Clinton’s Council of Economic Advisers and served as Senior Vice President and Chief Economist of the World Bank. In this commentary, he describes the true nature of the ongoing debt dispute as being about power and democracy much more than money and economics—and takes a stance on how he would vote in the Greek referendum. This post was first published by Project Syndicate.
The rising crescendo of bickering and acrimony within Europe might seem to outsiders to be the inevitable result of the bitter endgame playing out between Greece and its creditors. In fact, European leaders are finally beginning to reveal the true nature of the ongoing debt dispute, and the answer is not pleasant: it is about power and democracy much more than money and economics.