THE outcome of the weekend's French election may have gotten more headlines, but the results in Greece are the more surprising, and impactful. Charlemagne writes:
Enraged voters punished Greece's once-dominant parties, the socialist Pasok and the conservative New Democracy, which had formed a unity government and accepted the unpopular terms of the second EU-IMF bail-out. With the count still taking place, the two parties secured less than 35% of the vote, which means they will struggle to form a majority. Anti-austerity Greek parties, of the left and the right, have done well. Syriza, a radical left-wing party, pushed Pasok far into third place. The far-Right Golden Dawn was poised to enter parliament for the first time.
Antonis Samaras, leader of New Democracy, which won the biggest number of voters, said he was prepared to forge a government of national unity based on two points: that Greece remains within the euro, and that the bail-out terms are renegotiated. (See here for background on forming the government)
The fragmentation in Greece will inevitably raise the question of whether the country will leave, or be pushed out of, the euro zone. Until now European officials have been adamant that any breach of Greece's second austerity and reform plan would lead to the halting of its rescue funds.
Greece will try to piece together a government this week. There are more interesting elections to come. France will elect its National Assembly in June. Ireland will weigh in on the fiscal compact later this month. Meanwhile, Matt Yglesias makes a salient point:
All that said, when very plausible story of what happens next is simply that the European Central Bank will decide it needs to bring the continent's newest leader to heel. If the ECB signals that it will only support the French banking system and the French economy if Hollande sticks with the status quo program, then Hollande may well have no choice. Elections in Europe aren't necessarily what they used to be. Nobody's crying over Silvio Berlusconi but he was Italy's elected Prime Minister and he lost power not in an election but it a made-in-Frankfurt call by the central bank.
This applies not just to the French case but to the euro-zone economy more broadly. It's quite possible that the ECB will prove unwilling to accommodate a weaker commitment to short-term austerity. Such a determination would be disastrous—potentially fatal—for the euro zone, but it may feel, rightly or wrongly, that it will be unable to do its job without a sufficient political commitment to fiscal discipline. The irony, of course, is that it is the ECB's failure to aggressively ease in the face of continent-wide budget cuts that allowed those cuts to translate into a painful recession, which in turn fueled an austerity backlash. The ECB is responsible for the high multiplier on euro-zone fiscal cuts.
It's possible that elections will lead to a positive change in Europe. More probably things will continue to deteriorate, albeit in a slightly different way.
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Our country is HELLAS Anot Greece. As well as MACEDONIA IS HELLENIC not SKOPJE!!!
Read history if you want to call yourselves a credible source!!
The Greece (in)equation ... Greece < 0
Fear not my fellow Europeans. I have discovered Greece's way out of this mess. Certainly worth a look see:
http://www.metacafe.com/watch/2231298/beverly_hillbillies_opening_theme/
Greece seems to have elections every few weeks while other countries have them every few years. I know its the crucible of democracy and all that, but wouldn't Greece be more stable if it could go a while without having another election.
I don't see the problem here. Greek voters have every right - and indeed, are exercising that right! - to decide which path their government will take. Some of those paths probably mean exiting the Euro (or, if you prefer, refusing to implement policies the rest of the Euro zone demands, and ultimately being kicked out as a result - I'm not sure there's a meaningful distinction.)
Greek voters don't have the right - but they never did! - to vote in a government which does their bidding AND demand the rest of the world accomodate them in doing so. (Well, they can demand, but the rest of the world isn't required to comply.)
Do I smell something fishy here?
A massive easing of monetary discipline in EZ certainly would help the competitive balance to tilt over towards across the Pond, where the debt clock is ticking really fast.(http://www.usdebtclock.org/cbo-omb-gop-budget-estimates.html).
"Elections in Europe aren't necessarily what they used to be. Nobody's crying over Silvio Berlusconi but he was Italy's elected Prime Minister and he lost power not in an election but it a made-in-Frankfurt call by the central bank."
Is this guy trying to tell us that we live in a "bourgeois democracy" ???
If the ECB lowered interest rates from 1% to say 0.1%, then banks could borrow from the ECB at a slightly lower rate. But which of those banks would be stupid enough to loan money to the Greek or French governments, or to any business in either country, except at very high interest rates?
Maybe I don’t understand the mechanics of the Big EZ, but if your credit score is in the toilet and you’re bankrupt, I don’t see how lower interest rates will help you.
Right. This election strikes me as a good example of how important the idea of moral hazard continues to be. It's not surprising me that R.A. and I reach the opposite conclusion based on the same evidence, but if any country needs its public sector reformed, that country is Greece. Austerity might be the wrong solution for Ireland, Spain, Portugal and Italy but I can't imagine Greece getting better without a much smaller public sector and I can't see why anyone would loan Greece money while the voters are being petulant.
I guess what RA wants is for the ECB to give the "wink and nod" to Europe's banks to lend to the governments at low rates. Then when the governments default on the debt and the banks fail, the ECB can step in and save the banks.
That way, it doesn't look like the ECB is giving the governments a blank check to spend as much as they like with no consequences.
The left thinks that with less austerity France and Greece can grow their way out of their crises. But they can't because they don't have the structural reforms (lower wages, less rigid labor rules, etc.) in place to do so.
Less austerity means nothing but more borrowing to keep failed socialism alive as long as possible.
As one commenter on CNN said, Greece has since 1990 to reform its economy and become competitive in the Big EZ. Instead, Greece chose to borrow to keep its socialist model going. If it can continue to borrow without making reforms, why should Greece change anything?
No, no, no! In the Krugmanite fantasyland where R.A. lives, there is nothing so unpleasant as sovereign debt default. The scenario simply cannot arise, since high inflation will reduce the debt burden while simultaneously stimulate rapid economic growth. In any event, the fantasy ECB is committed to unlimited purchases of sovereign bonds, so no government would be forced to default. It can always borrow money to service its debt.
While it is true that the public sector badly needs to be reformed(although it is the private sector the troika demands affected most violently), this time you cannot blame it on the voters because
a)the government that agreed to the troika measures was the result of outright fraud, as it was elected after promising to do the exact opposite of what they did
b)the people repeatedly and very vocally showed their disagreement with the proposed measures, by any legal means: huge demonstrations until elections came and now that they had a chance, by elections. I understand people who say "we try to support them and they don't want that?", but the actual troika demands are having the exact opposite effect of what they are supposed to achieve and are actually exacerbating the problems. Not that it is the troika fault though: it's the government that should have a clear plan of how to get from A to B.
So to a 'take it or leave it' proposition by the troika the people are very clear: Leave it, as the 'medicin' is much worse than the disease. It's not a question of being bitter, it's a question of not curing, but killing the patient. The problem in Greece is that there is no party with the leadership to choose the right path and lead the country out of the crisis.
Without doubt, so impactful a catalyst will incentivize EuroZone synergy. Doncha think?
If the ECB signals that it will only support the French banking system and the French economy if Hollande sticks with the status quo program, then Hollande may well have no choice.
So what Mr. Yglesias is saying is that Central Banks only care about its customers, damn unemployment and inflation.
In the US, the Federal Reserve's customers are the Wall Street banks
who are protected because they are "bank holding companies".
Damn the unemployment and inflation.
To wit:
The most recent bickering occurred last week during a meeting between Fed officials and the CEOs of Goldman Sachs (GS), J.P. Morgan (JPM), Bank of America (BAC), Morgan Stanley (MS), State Street (STT) and U.S. Bancorp (USB).
According to various reports, the CEOs reaffirmed their frustrations with the so-called Volcker Rule, which would severely limit banks from putting their own capital at risk. Bank executives also expressed concern about new proposed regulations that would limit the amount of exposure big banks could have to any one counterparty, most notably other big banks.
The meeting "was notably largely for the long silences from the central bank's side of the table," The WSJ reports.
From: http://finance.yahoo.com/blogs/daily-ticker/big-bank-ceos-haggle-bicker-...
WSJ report cited (subscription):
http://online.wsj.com/article/SB1000142405270230387760457738049261149889...
NPWFTL
Regards
This goes to show how stupid and short term voters in France and Greece are.
When you borrow money for 10 years then you have to pay it back for ten years which means a lower standard of living than the previous debt fueled one. It is right and proper that these leaders are reeled in to prevent a worse form of collapse.
When you borrow money for 10 years then you have to pay it back for ten years...
Or you do what the US does.
Just make the interest payment.
When the note comes due, just roll it over.
It's called refunding.
http://www.treasury.gov/resource-center/data-chart-center/quarterly-refu...
NPWFTL
Regards
Refunding for whom? Hedge funds, and the "mysterious" government auctions buyers that buy JUST IN TIME so the interest rates in US stay low? Greece doesn't have this kind of help, the only "help" they got was from Goldman Sachs.
"Such a determination would be disastrous—potentially fatal—for the euro zone"
Perhaps for the EU itself.