It’s getting interesting* down Athens’ way:
ATHENS — Greece on Thursday told the International Monetary Fund it would not make a $335 million payment due Friday, taking a little-used option to defer that payment and three others until the end of the month.
Coming amid tense debt negotiations with the I.M.F. and European creditors, Greece’s decision holds political and financial-market implications that are hard to predict.
There’s a historical resonance sounding in the brinksmanship going on here. This isn’t just a matter of debt and punishment. What’s at stake may extend as far as the post-war and then the post-Cold War idea of Europe. That would be the one intended to prevent even catastrophically incompetent or indifferent rulers from lurching into any replay of the summer of 1914.
Here’s Krugthulu, just as worried as I am — and way better informed:**
There’s an odd summer-of-1914 feel to the current state of the Greek crisis. While some of the main players are, rightly, desperate to find a way to head off Grexit and all it entails, others – on the creditor as well as the debtor side — seem not just resigned to collapse but almost as if they’re welcoming the prospect, the way, a century ago, far too many Europeans actually seemed to welcome the end of messy, frustrating diplomacy and the coming of open war.
The most troubling sign to me is the persistence of the disbelief on the part of international elites/opinion shapers that the Greeks might actually bolt from the Euro. Never mind the risk to the various institutional ties that are supposed to hold Europe together in a way that bars future conflict, armed and otherwise. The idea that someone in a dispute might do something you don’t like seems just too difficult to accept on the part of Greece’s negotiating adversaries.
But there is real hardship in Greece right now, and there has been for years. Political imperatives matter too: the Greek government is new, left-leaning, and in power because they explicitly promised not to make deals that would satisfy Germany at the expense of the Hellene in the street. There really is no guarantee — and lots of reasons to believe the reverse — that this one little, broke country will actually do the bidding of its would be financial masters — and yet even the slightest sign that such resistance is real evokes a kind of bemused wonder.
You can see something of the cognitive dissonance even in the brief “breaking” story in the Times linked above:
Although the practice of bundling I.M.F. loan payments into a single sum during a calendar month is allowed under the fund’s rules, the last time that option was taken was by Zambia in the 1970s.
I’m sure there’s a kinder way of reading that sentence, but it hits my ear as “Greece has the right to do this, but they shouldn’t.” Unwritten rules, old boy. Unwritten rules.
I’m with Krugman: whether or not Greece would be better off or not dumping the Euro, Europe and the world gain an enormous amount from financial stability — which would be badly shaken if it looked like Euro-troubles were about to overtake the currency union. In other words, it looks to me like Europe (even Germany!) needs Greece at this moment at least as much as Athens needs Brussels.
But what do I know: I once vowed as a blogger not to behave like a pundit, which is to say, to bloviate about stuff I know only superficially and at second hand. One thing I do know about, though, and have written on, is World War One. No one’s mobilizing at this moment, and historical analogies are always fraught on so many levels. But still, the insouciance, the lack of imagination about consequences — that was overwhelming then. I smell it thickening in the air now. That’s not good.
Over to y’all. What knowledge and insight lurks within the snarling mass of the Balloon-Juice commentariat.
*As in, “May you live in interesting times.”
**This was written last Friday, which is to say before this latest news dropped.
Image: Ludwig Koch, The allied monarchs and their field-marshals in the First World War, (Kaiser Wilhelm II of the German Empire with Austria’s Franz Joseph) c. 1915
piratedan
well, before guns go off, it will be up to bankers to make good on their threats no? Will the invasion be made by men in suits accompanied by real estate agents and local LEO’s or will everyone stand pat and let this play out or will the latest governmental Greek political entities go back to the table and explain that something is better than nothing?
JPL
The market is down 200 pts on worries about Greece. I’m still under the impression that they will renegotiate the loan.
trollhattan
Spousal unit is in real estate lending and her markets have been going apeshit the last couple days, rendering some of her loans suddenly unworkable. While the Greece situation hasn’t come up in the conversation I suspect it’s more the cause than this or that recently released employment numbers.
BillinGlendaleCA
Obviously more austerity is the answer.
srv
Austerity can’t work as long as you keep throwing money at them.
And that Krugman fellow had predicted Greece would exit years ago. Derp. WW I was just another phase of creative destruction – I realize steampunk is hip, but do people really pine for the monarchies of old? Maybe a post-Wilsonian/Bush era?
How about a post about how liberal sensitivity warriors are terrifying even liberal teachers? No more Twain in the curricula. Do the tenured care? How many sensitivity sessions do you have to attend to make tenure now?
Cheap Jim, formerly Cheap Jim
Well, I hope someone is keeping the von Hapsburgs safe.
JPL
Krugman is probably typing furiously, to explain what just happened.
@piratedan: According to the NYTimes, that’s a good guess
In Parliament, the labor minister, Panos Skourletis, referred to an “undeclared war” that he said was being waged “by modern capitalism.”
Belafon
@srv: Sorry, but I call bullshit on the teacher being liberal, especially since he hasn’t actually gotten a complaint against him since the 2009 one.
Elizabelle
From what little I know, I don’t blame the Greeks. They’re in a horrible situation. Did the Hellene in the street benefit from the loans, or did those get Hoovered up by the elites (who are not in to paying taxes) for projects that may not have been planned in the public interest? (I don’t know; I’ve just heard a lot of grousing from Greek friends about waste and Germany’s WWII debt.)
Is privatization working for them? Can they survive more austerity? Don’t their young face 50% unemployment?
I get sick of seeing people lectured by the austerity hawks. Who does that benefit?
trollhattan
@srv:
You were shockingly right there at the very beginning. Perhaps your road to success is knowing when to stop typing.
BillinGlendaleCA
@trollhattan: No, they just need more austerity and better austerity. Austerity Uber Alles.
MomSense
I will hopefully be able to report from there in September.
burnspbesq
It is tempting to look at the Bundesbank and see the Wehrmacht by other means, but I’m more inclined to think that there were some countries that shouldn’t have have been in the currency union to begin with, and the sooner they get out, the better. Let the New Drachma crater on the day of issue and then Greece can start the long climb back unfettered by what Germany wants for itself.
Elizabelle
I think we are all going to be talking, directly or not, about unregulated capitalism and its effects. Peeps waking up in this country to what lots of folks have been seeing for years.
The middle class and working class needs a future, here and in Greece. There should be enough money and affluence to go around, but apparently not.
This feels like the calm before the storm.
Elizabelle
@MomSense: Are you going to Greece? Wow!
burnspbesq
@Elizabelle:
The traction that Bernie Sanders seems to be getting may be a leading indicator of what you’re alluding to.
schrodinger's cat
@Elizabelle:
Rentiers, those who live off rents, the Mitt Romneys of the world.
Archon
One of the problems I read about Greece is that they had a broken tax collection system which is pretty much what conservatives want to have here with their “get rid of the IRS” talk.
BillinGlendaleCA
@Elizabelle: Presuming it’s still there.
Bill Arnold
@Archon:
Yep. “Conservatives” want to turn this country into Greece.
BillinGlendaleCA
@Archon: There’s no need for any IRS, just put your wages* on a post card, subtract off your mortgage payment, and take 17% of that. Easy peasy.
*Since capital gains are the proceeds of doing God’s work they’re not taxed.
mdblanche
There’s still two more weeks for some damn foolish thing to derail the 200th anniversary commemoration of the Battle of Waterloo as badly as the 100th anniversary was derailed. Just sayin’.
The latest speculation from the Guardian liveblog is that Greece was set to repay the IMF before changing course today and this is political posturing by Tsipras for the benefit of his own hardliners. Interesting times indeed.
And after all this, I’d still be more worried about Germany pushing rather than Greece jumping.
burnspbesq
@Elizabelle:
The traction that Bernie Sanders seems to be getting can be seen as a leading indicator of what you are alluding to. I’m still not convinced that Bernie can win the Dem nomination, but I am rapidly coming around to the view that the longer he stays in the race, the better off we are all likely to be.
Elizabelle
@BillinGlendaleCA: The land of the Parthenon. It will be there. This is a discomfiting moment in a long history.
@schrodinger’s cat: Yup. Am tired of always seeing them at the head of the line. Where is my brick?
Yatsuno
@Archon: It’s worse than that. Greece has very ineffective collection systems and very easy methods for gaming the system that helps the cheaters get away with it. Not to mention the Greek Orthodox church owns a shit ton of land and pays no taxes on it. Greece should have never even considered the Euro until there was a massive reform of their tax system that showed revenues could be paid in and income would have better tracking. But Brussels wanted as much union as possible, and got it good and hard.
Elizabelle
@Bill Arnold:
But with an enhanced army and navy.
Didn’t some US ambassador get in trouble years back for scoffing at Greece’s?
Elizabelle
@Yatsuno: How you doing?
dr. bloor
@MomSense: Infantry or artillery?
BillinGlendaleCA
@Elizabelle: Hah, the Germans will repossess it.
jl
@srv: I’d like some evidence that money is being ‘thrown’ at Greece now, on net; and that Krugman made an unconditional forecast type prediction that Greece would exit. Links please.
Actually, I think Krugman has been making, perhaps unknowingly, that the Eurozone is a bad idea that is hurting many European countries, not just Greece and the other PIIGS.
Not sure whether Krugman would agree, but I think he has (perhaps unknowingly) made the case that everyone would be better off if the Euro experiment ended, the only problem is that the risk of financial panic from one or more countries ending the Euro experiment,, is very high and the costs of such a panic would be very high. And it is not clear the countries in charge are willing to do anything to reduce those risks and costs.
burnspbesq
@Yatsuno:
All true, except that it’s not Brussels that’s going to wake up tomorrow morning with a sore butt–it will be the Greek people. and “they brought it on themselves” is neither a complete nor a comforting answer.
Raven on the Hill
“I am reminded of the mid-19th Tories, who starved the Irish.”—me, Greece: German Religious Fanatics and No Revolution
F, F, F’ity F.
Fred Fnord
Boy, if you guys get the trolls you deserve, then you really need to try harder.
schrodinger's cat
@Bill Arnold: They just want to go back to the good old days of the 50s, 1850s I mean.
Raven on the Hill
@Bill Arnold: They’re doing it in Oklahoma, Kansas, Michigan, and Wisconsin. Every US state the radical right comes to power in starts looking a lot like Europe during the 1930s depression.
I thought my motto for 2015-2016 was going to be, “Well, that was unpleasant.” But I think I have to add “F, F, F’ity F.” I’ll alternate.
Raven on the Hill
@jl: “Actually, I think Krugman has been making, perhaps unknowingly, that the Eurozone is a bad idea that is hurting many European countries, not just Greece and the other PIIGS.”
Not at all unknowingly. He was concerned before the Eurozone was created and now he takes current events as proof.
Xenos
@Elizabelle: Pretty much everybody was on the take, one way or another. Thus the problem.
The lenders carry a lot of the blame, but what they did was stupid and negligent. Not criminal.
Meanwhile, a family member is dying in a hospital in Greece, and his wife has to go out and buy sheets for his bed. The hospital has none, little equipment, no drugs. Just mattresses, steel beds, doctors and nurses. A man who paid insurance premiums through a cut of his farms production for 60 years is now dying without sheets on his bed. That is a fucking crime.
So even if the Greek people bear a lot of the blame for what has happened, they are not in the mood to talk about more austerity. If the left won’t do it, they will be replaced, and not by centrists.
hoodie
@burnspbesq: Following your logic, Greece will not be able to stand alone and will eventually align with some other power block, such as Russia, seeing as Germany isn’t offering anything much better and Greece can at least bargain with such other block based on its strategic value at the end of the Med. The Eurozone will only be as successful as the Germans allow it to be, and Germans are as pigheaded and selfish as ever. How safe are they going to feel in the middle of a sea of instability?
Raven on the Hill
Part of the problem seems to be religious radicalism on the part of Angela Merkel: Angela Merkel is the daughter of a Lutheran convert pastor, a man so devout he moved his family to East Berlin to evangelize the Communists. In 2012, Merkel said, “Christianity is the most persecuted religion in the world.” Martin Luther advocated giving the poor loans from a chest of contributions to get them back on their feet. Good, as far as it goes, but how when the poor cannot repay? How when everyone is poor and cannot contribute enough? This is apparently how Merkel and Germany regard Greece. (quoting my own blog post on the subject. Full post here.)
I’m tired of cussing but this is odds-on the saddest thing I’ve heard all day.
Why, what could possibly go wrong?
KB
@Belafon: PZ Myers agrees with you:
“Strangely, he doesn’t give any evidence that he’s at all liberal, and the one personal incident he cites involves a conservative student.”
http://freethoughtblogs.com/pharyngula/2015/06/04/im-a-liberal-professor-and-im-not-afraid-of-students-who-question-me/
catclub
Clive Crook, at Bloomberg, and Krugman, are singing the same tune. [‘This can be managed.’] I do not think that happens often.
catclub
@Raven on the Hill:
Typo, I suspect. Syriza has already been elected. The Neo-nazi party is something Dawn.
mdblanche
I saw this a few months ago and it seems relevant now. The reason why the author was sure this would never actually be Greece’s endgame always struck me as overly optimistic, but I’m sure somebody who knows more than me can explain the real reason why it would never work.
catclub
@Raven on the Hill:
and it is a total coincidence that what she does appears to have the backing of a very large fraction of the German electorate.
mdblanche
@catclub: Golden Dawn.
Lurking Canadian
@jl: I read Krugman a little differently. I’d say his position is that you can’t have the Euro without a genuine central bank and a central fiscal policy.
What they have now is a sort of artificial gold standard, which works about as well as gold standards ever have.
Chris
@Belafon:
I agree. I saw that article the other day and was fairly staggered when the only concrete example he could offer was of a conservative accusing him of exactly the kind of political correctness that he now claims to be worried about (without actually being able to point to a concrete example).
“Political correctness” complaints are always based on bullshit, but rarely so brazenly.
Elizabelle
@Xenos: Very sorry to hear about the family member. Sad enough that he’s in poor health, but to suffer with inadequate care (and no sheets, no meds)?
How much more austerity does he deserve?
kindness
I hear they are mobilizing down in Texas. Strangely it’s the Yankee’s that are helping them pack to go.
The Raven on the Hill
@catclub: Duh, yes.
The Raven on the Hill
@catclub: “and it is a total coincidence that what she does appears to have the backing of a very large fraction of the German electorate.”
Yes, Merkel represents the German electorate. Martin Luther was after all German and the hyperinflation of the 1920s is still strong in German memory. What is forgotten are things like the depression-fueled collapse into fascism of the 1930s and the forgiveness of German debt after World War II. German nationalism was and is a terrifying thing.
The Finns are also strong supporters of Greek austerity. Ironically, the Finns are now themselves hit with Eurotroubles. I wonder if they will find some reason that they deserve debt forgiveness, while the Greeks do not. Or will they perhaps discover compassion and economic realism?
The Raven on the Hill
If northern Europe cannot find a way to accept southern European culture—which is at bottom what this is about—things will go badly for the European Union.
RaflW
@srv:
Ah, yes. The punishment is never administered with enough force. (a.k.a. conservatism never fails, it can only be failed).
Derp, indeed.
Brachiator
@Elizabelle:
I agree with you, but I think that part of the problem is that some boneheaded economists want to insist that austerity is the “one-size fits all” answer to everything.
And among other problems, with the Greeks, it’s not just an issue of elites not paying taxes, it’s that they have a very inefficient tax system in which tax evasion is not just a norm, but a sport, huge exemptions for the Church, and an inefficient system in which grey and black markets flourish. But they keep pension and civil service payments on the books of the legitimate economy. Add to this a weak economy, high unemployment and a bizarre refusal to deal with any of the issues that they might be able to fix, and you feed the fuel of this disaster.
muddy
@Bill Arnold:
This morning George Will was wanking on that liberals want the US to be a socialist democracy and then we would be Greece. When I think of socialist democracies I think more of Denmark than Greece, but you know, this was George Will.
Southern Goth
Listen to your betters, put on your economic straight-jackets, and take your austerity medicine.
Lest Europe be consumed by the fires of populist resentment and nationalism.
(Was that sufficiently snarly? Snarky? Snarlky?)
Brachiator
@Yatsuno:
With the right stimulus, surely Brussels will sprout.
MomSense
@dr. bloor:
Retsina and figs! If you ever get to go to Greece, go when the figs are ripe. Heavenly.
I ordered Rosetta stone to see if I can get my language mojo back. Not sure if I will revisit some of the beaches I used to frequent but if the kids give me a day to myself-I just might.
I’m not enough of a hippie to go with my kids to a nude beach.
srv
@jl: That Thug Three Years Ago
And he rants about the hyperinflation that never happened.
And here’s no less than Yanis Varoufakis saying he was wrong:
http://yanisvaroufakis.eu/2012/05/16/weisbrot-and-krugman-are-wrong-greece-cannot-pull-off-an-argentina/
mdblanche
@muddy: Be careful what you wish for. Denmark is in the middle of an election campaign and there’s at least a 50% chance that its next government will be propped up by a party with Pamela Geller’s seal of approval.
Origuy
@Yatsuno:
Henry VIII knew how to take care of that.
Chris
@muddy:
Conservative “thought” essentializes entire cultures into a few buzzwords, like a live version of Star Trek with its “logical,” “honorable” and “greedy” races. For Europe, the buzzword is “socialist.” Thus, anything that goes wrong is due to Socialism, and proves that Socialism Doesn’t Work. This is actually a magnificent example, where the failing economies of the EU members with the stingiest safety nets and least developed tax mechanisms is just more evidence against Those Tax And Spend Lefties – despite the fact that countries that both tax more and spend more are doing vastly better.
Elizabelle
@MomSense: Ahhhhh. So you have a past in Greece. You must tell us more.
Elizabelle
@Brachiator: Accurate recap.
mdblanche
@Raven on the Hill: Here Merkel stands, she can do no other.
God help
herus, Amen.muddy
@mdblanche: I didn’t claim it was a paradise. But comparing it’s “socialist” economy with Greece as though they were equivalent just seems silly, they’re not in the same category. I mean, they must actually collect the taxes at least.
Origuy
I’m reading The Glory and the Dream by William Manchester. I’ve gotten to the 1932 election. A lot of the things that conservatives were saying sound like they could have been said yesterday.
muddy
@Origuy: And thus the definition of conservatism!
Brachiator
@Chris:
I don’t think this gets close to any European problems. Many governments are socialist, have been socialist, and are certainly more left leaning than anything in the US. Not even the UK embraced all that Thatcher proposed during her era. But there are nastier nationalistic or ethnic appeals on top of political and economic issues, along with real monetary and economic issues.
Stan of the Sawgrass
I think Krugman’s point for quite a while is that you shouldn’t have a common currency without a real Fed-type central bank and some kind of real political union. Visionaries like Jean Monet had the idea that something like the Euro would be the first step to a real political union– “A United States of Europe!” but instead, the Euro may have made that all but impossible.
No link, because it was a few years ago, but there was an article in McClatchy that included a bunch of German “man/woman in the street” interviews. Most of them thought the people in the PIIGS countries lazy and entitled, and didn’t want them to have one extra pfennig of “their” money.
I’m pretty sure there was something in there about absent fathers being the culprits, too, but as I said, it’s been a while since the article.
J R in WV
This isn’t totally on topic, but yet it is.
Some time ago at the very beginning of financial troubles in Greece, I read a story about how property taxes in Greece were really low, lower than expected by a lot. Then someone used Google Earth to look at a well-to-do neighborhood, where, inexplicably, no pools were recorded as existing on the estates of the well-to-do.
But on Google Earth you could see the big blue spots in the back yards, the walled compounds contained many many swimming pools. Which would bump up property values. Which would bump up property tax payments. If someone could adjust the appraised property values, using the photos from Google Earth as evidence.
But that would take inspections of every walled compound in Greece!! Because a photo of the pool in the compound, in the neighborhood, isn’t evidence, somehow. I guess if the judge is your brother-in-law’s cousin’s roommate from college, things are easier for you, somehow.
I’m not trying to gouge Greece! I think austerity is a terrible government policy, more applicable to families trying to get out from under a big mortgage than a foundation of a government’s social policy. Too Republican for me and thee!
But still, you gotta pay your taxes, and you gotta pony up based upon your actual income, and the adjustments should be minimal, or less. Declare everything, pay on a fair rate scaled up to cause a little more pain to the wealthy, and don’t try to balance the budget on the backs of teachers, mailmen, and the middle and lower income groups of people!
That’s my policy, and I’m gonna stick to it.
Chris
@Brachiator:
It doesn’t get close at all. But it’s how conservatives view it, and much of the narrative that trickles down to the general public. Hence the George Will comment I was commentinh on.
Brachiator
@Chris: You have the dishonest talking down to the ignorant. Hell, Israel is more to the Left in some areas than conservatives would admit. But there’s not much point in paying attention to any of this jibber jabber.
Raven Onthehill
@J R in WV: Greece is unquestionably corrupt. But, see, without a unified currency all the corruption means is the drachma would fall in value. With a unified currency, Greece is pressed to be as productive as Germany.
Dr. Omed
I have to say I don’t understand the whole summer 1914 analogy. If Greece defaults on its debt, the archduke is shot, Kaiser Merkel declares war and orders the bankers in Brussels to unleash Shock and Awe on Athens?
Greece should bite the bullet and default, dump the Euro and go back to the Drachma, and tell the IMF and EU to fuck themselves inside out.
Argentina defaulted on a 3 billion dollar IMF loan without causing a world war or collapsing into a black hole. The European financial elites are simply afraid that they will lose control of what they have to know is a shell game, and a Greek default will turn over the walnut with the naked emperor under it.
Raven Onthehill
@Dr. Omed: Some serious violence, at least, is likely, especially if the Golden Dawn comes to power in Greece. It’s not 1914 (I hope!) but there are real risks.
I'mNotSureWhoIWantToBeYet
@J R in WV: I went to a couple of conferences in Greece in the ’90s. At that time, one saw lots and lots of multi-story single family homes that had people living in the first floor yet the 2nd (or 3rd) floor was “unfinished” (open concrete walls, etc.). The explanation I heard was that the tax rules were that nobody had to pay property taxes until the house was finished.
“See – it’s not finished!!”
In the US, that would not be tolerated (new homes have to pass a final inspection before occupancy).
I’m sure that’s not the only abusive aspect of Greece’s tax system. But it’s so pervasive and so long-lasting to expect that it can be fixed while the country is in a depression is madness. The tax system can only be changed if the population buys-in. They’re not going to do so while there’s 25% unemployment and no signs that things will ever get better.
Cheers,
Scott.
priscianus jr
@The Raven on the Hill: If northern Europe cannot find a way to accept southern European culture—which is at bottom what this is about
You’re right, it really is about that. For example, England looted their church lands in the 16th century. Greece has yet to do that.
Fred
Greece was set up by the Wallstreet Banksters. As I recall Goldman Sux was hired to advise them and were betting against them at the same time. Can you say conflict of interest? I knew you could.