Nicholas Crafts is director of the CAGE Research Centre and professor of economics and economic history at the University of Warwick. A full exposition of this argument can be found in the author's CAGE-Chatham House policy briefing paper, “Saving the Eurozone: Is a ‘Real' Marshall Plan the Answer?”.
FOR the last year or so, there have been a number of suggestions to the effect that there should be a new "Marshall Plan" for Greece. The person in the street thinks of the Marshall Plan as generous American aid which kick-started growth in war-torn Western Europe 60 years ago.
The attraction to its proponents is that Grexit would be avoided because aid would ease the pain of fiscal consolidation and it would reward Greek politicians in favour of staying in the euro. This could appeal to other European countries since a Greek exit would in all probability have a very damaging impact on their economies, while a break-up of the euro zone would likely trigger a deep recession. Critics of the proposal think that Greece has already been treated much more generously than anything provided by the original Marshall Plan and that further rewarding Greeks for bad behaviour is not acceptable to hard-working northern Europeans.
Both sides fail to understand the reality of the European Recovery Programme (Marshall Plan) as it was implemented in the years 1948 to 1952. The United States provided grants (not loans) of about $12.5 billion, equivalent to around 1% of its GDP for each of 4 years. The key point to recognise is that the Marshall Plan involved strict conditionality which pushed European countries towards pro-market reforms. It was the indirect effect of these reforms—in particular, moves to liberalise trade—which had the big positive effect on growth.
Sounds familiar? Yes, the real Marshall Plan was a "structural adjustment programme" of the type implemented by the World Bank at the time of the Washington Consensus. According to a much-cited 1993 paper by Brad DeLong and Barry Eichengreen, it was the most successful one ever devised.
Would a "real" Marshall Plan, i.e., a structural adjustment programme, be good for Greece? If it could be made to work, the answer is definitely yes. But this is a big "if".
Greece has much scope to improve its very poor productivity performance. Its pre-crisis labour productivity level was only about 55% of the EU15 median and its productivity growth was greatly inferior to the transition countries that joined the EU in 2004. A "real" Marshall Plan would entail conditionality that targets reforms in Greece that would improve productivity performance but have previously been politically too difficult to introduce.
The list of what needs to be done is familiar from the work of OECD economists and includes reforms to economic regulation, the tax system, to introduce competition, to increase the flexibility of the labour market and seriously to implement the Single Market in services, etc. Serious money would be offered to Greece most of which would only be disbursed conditional on reforms having been satisfactorily achieved. Probably, the IMF would have the task of verifying this. It has to be credible that non-compliance means no money.
If all the structural reforms proposed by the OECD were followed to the extent necessary to bring Greece up to the OECD average, it is estimated that in the long run the level of real GDP would rise by 40%. Such reforms would improve not only productivity but also international competitiveness. A faster rate of growth, which could emerge within a year or two, would help both Greek living standards and fiscal sustainability. It would make life inside the euro zone more tolerable for Greece.
Unfortunately, there is a big problem with a "real" Marshall Plan. Structural adjustment programmes generally have not worked well. The record of World Bank programmes was generally disappointing except where domestic politics was very supportive and the lending was to what David Dollar and Jakob Svensson memorably called "good candidates".
It is the politics of a "real" Marshall Plan that are challenging rather than the arithmetic. Following the American example of 60 years ago and committing 1%t of German GDP per year would represent a potential inflow to Greece of over 10% of its GDP each year. However, does anybody seriously think Greece is a "good candidate" for structural adjustment lending? And, given the experience of the European Stability and Growth Pact, is it really credible that non-compliance would be punished by the withholding of funds?
It is difficult to know who would least like the idea of a "real" Marshall Plan: the Germans who would think it an expensive gamble or the Greeks who would find the political pain unacceptable.
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I read that the Bavarian minister of Finance has stated in the "Augsburger Allgemeine" that Greece "does not want and will not manage to stay in the euro" (at least, though, this German sub-official acknowledges that Germany has benefitted from the common currency more than any other European country). My question is simple: why now? Has the Bavarian state established a taks force or any other research team in order to investigate the willingness or the ability of Greece to stay in the euro, or are we, again, whitnessing the birth of another turn of German bullying?
Of course, I do not expect an answer; the Bavarian state or any other German state has not run any kind of simulations, scenario analysis, impact analysis or even descriptive statistics analysis. He just wants to turn the lights on Greece, once more, just before the assessment of the EU/IMF commission (and even form its result?). These is compatible with the old school of war; quoting on von Klauzevic "the threat of war is even more efficient than the war itself". In reality nobody knows what the Greeks are truly capable of doing or willing to do. Even if there was a will to change, reforms implemented until now have not found their way to publicity, because of such German fuzz and threatening. The result is that Greeks are frustrated against foreigners insulting them and investors that would otherwise might consider investing in Greece, if they were informed on the reforms implemented, delay this decision; and of course this last element (i.e. expected FDIs), which introduced in GDP forecasts of Greece, leads to failures of forecasts.
Just consider how many German official warnings and threats of havock in Greece have been proved to be wrong: civil war, communists' rule, Grexit in summer etc. Not to mention that even if austerity has hit the Greek economy hard, now running its fifth year in recession, the Greek LOAN (and not grant) is being served just as foreseen in the program; which makes the "Greek bottomless pit" a myth.
So, I think it is time arguments started going the other way round and requests from German officials to not undermine investment confidence towards Greece started rising. Then, we would really know if Greece can and will implement changes.
"In reality nobody knows what the Greeks are truly capable of doing or willing to do."
lol...in fact, we do know. just look at their performance the last 20 years. just comsumption. but blaiming germany is the easiest way of course.
Yes, if you see the Greek performance the last 20 years, without lenses, you will find out that its median growth rate was around 4.5%. While its long-term growth rate, since WWII, was around twice as much. How much was the grant-driven German rate, do you remember? Maybe you want me to remind you who was the 'sick man of Europe' just 5 years ago? But by that time nobody run around the world propagading against Germany.
Which brings us to German politicians. Of course, there is nothing to blaim them for: except for some exaggerbations on risks for Southern European countries that have lead investors even pay for the privilege to leand their money to Germany...
yeah, sure, but growth of what? growth of tourism, cultivation of olives and most of all public sector...so growth of selfconsumption. and the so called sick man of europe was sick on a level where most states would like to be called healthy....and he just adjusted... but, hey, lets just all devalue and see where the real values are.
You are terribly wrong. The Greek economy is a trade driven economy: the maritime and not the public sector has always been its main driver. And if you go in years before its accession to the EU, you will see that its growth rates (from the devastated state the German occupation had left it) were also driven by industrial production as well (such as refriferators, shipyards and even motors). But, then as a conditionality for entering in the EEC (in 1981) we had to shift the economy towards services. And still the Greek economy thrived in a region with both geopolitical and social (communist states all around) dangers. You see, yes it was our time to face the downturn of the economic cycle (which by the way was an incident that started in 2008, after almost 18 years of sustained growth). But this time we did not face our peers patience, but rather threats and allegations, like the ones you make.
I have a suggestion for you: why don't you just run your own analysis, instead of reproducing rumours and propaganda, with which we all fed up? It is the economic cycle, and it has both downturns and upturns. And be sure that the next time that we will be running an upward trend, we are again going to show solidarity to our peers; like the one we showed after the German unification, during which Greece also paid for structural funding towards Germany even though several Greek regions were (and still are) poorer than the former Eastern Germany.
"why don't you just run your own analysis, instead of reproducing rumours and propaganda, with which we all fed up?"
well...
- first, i've talked about "the last 20 years"...so i am not "terribly wrong" as you claim, but have said just what you yourself say: "1981 we had to shift towards services."...so, it wasnt a greek decision, he? seems like nothing was your own decision...
- "solidarity."..."facts" oh, i have some for you...as you learn form this graph (http://www.financeblog.ch/wp-content/uploads/2010/02/20100228_EU_Funding...), germany gave 164 billion into the diffrent eu-fonds in 2010...she got back 78...so the german balance was minus 86 billion...greek funding was 15 billion in 2010 and she got 40...so the greek balance after funding and spending was 35 billion...and im not talking about "bailouts"...and you can go back the last 30 years, there never (!) has been a positive balance for germany, even not during unification...so please, run your own analysis
...numbers of course not for 2010, but for 2007-2012
Arrogance but no intellectual strengths...
Perhaps you don't understand the meaning of 'structural funds'; rich European countries have decided (by their own decision) to contribute to poorer countries in the EEC and later in the EU, in order for convergence to happen and the Europeans to prosper and live together in a Union of their own. So, that would make (a pre-nationalist) Germany a provider of funds towards the poorer-then-average European countries; sounds reasonable, if one aims at smoothing out differences across Europe. And believe me, for reasons hard to explain in the limited room of a post but would rather require a publication, Greek multipliers (and not consumption) have led it to converge faster than other countries that also benefitted from these funds.
But of course, this kind of analysis is relevant only for those that still believe in the European project. And if I am not mistaken the first objection of the Merkel government, back in 2008, was exactly on structural funds; seems like it is not Greeks (or Czechs, Portuguese, or others illustrated in your meaningless graph) that suddenly changed the rules that we have all been living with in the last 30 years or so.
And just as a reminder the post you replied and I defended has a clear message: just stop propagading against Greece or other South Europeans. Germany was the first to have benefitted, and by far the one receiving the greatest benefits from the European project. So, try to stay in subject, instead of being obsessed by the 'don't pay the South' propaganda. Nobody has asked for any more money (spare the propaganda, the so-called bail-out is a bail-out of our creditors and of Greece itself); we just ask for patience and no fuzz, threats or undermining of our efforts.
Parroting the media with a total ignorance of history and political reality - that's brilliant. Then again, that's 80% of the people worldwide: sheep.
GREECE CANNOT DO THE IMPOSSIBLE
"Everybody expects Greece to do the impossible and pay excessive debt payments at a time when the economy of Greece is rapidly deteriorating. Everybody is asking for the impossibly knowing that what they're asking is impossible. How long does this charade go on?"
Richard Michael Abraham
The REDI Foundation
www.redii.org
What made the Marshall Plan work was the 1953 London Debt Modification agreement that allowed Germany to repudiate most of its prewar debt. This needs to be done. Germany was also given something unique. Instead of the US charging Germany for the Ocuupation and stationing of US troops on its soil, this became a constant source of foreign exchange that immediately helped Germany's balance of payments.
Germany should transfer to Greece and equivalent amount every year for the foreseeable future as reparations for the devastation and atrocities committed against Greece by Germany.
Then you will see Greece grow and thrive.
dream on...where do u think the billions are gone greece got in the last 20 years or so? greece growing is like a black swan, apparently
Germany owes this to Greece and the other formerly occupied states. Germany starved hundreds of thousands to death in the cities. Germany deported and murdered almost the entire Jewish Community of Thessaloniki. Germany looted Greece for everything she could steal including a forced loan in 1943, and extorted billions of drachmas from the Jewish Community of Greece.
As an American i am still paying for the debts that Germany never paid the US and for defeating the Germans twice in the last one hundred years.
Germany owes this to Greece and the other formerly occupied states. Germany starved hundreds of thousands to death in the cities. Germany deported and murdered almost the entire Jewish Community of Thessaloniki. Germany looted Greece for everything she could steal including a forced loan in 1943, and extorted billions of drachmas from the Jewish Community of Greece.
As an American i am still paying for the debts that Germany never paid the US and for defeating the Germans twice in the last one hundred years.
if germany owes it, then she should pay of course. so how much? 300 billion? 500? i dont care, just provide any number. im sure they gonna waste it within one month anyway. just as long as we can get rid of this black hole once and for ever. and as an american, soon your gonna pay for your own debts, dont worry.
Germany owes it to Greece and the other countries she occupied. There is no one number because we can't know how long it will take. What we do know is that the destruction caused by the Germans cost other Europeans trillions of Euroes, and in particular Greece probably at least 1 trillion Euroes.
Germany owes it to Greece and the other countries she occupied. There is no one number because we can't know how long it will take. What we do know is that the destruction caused by the Germans cost other Europeans trillions of Euroes, and in particular Greece probably at least 1 trillion Euroes.
Even if your pipe dream is fulfilled and Germany transfers "equivalent amount every year for the foreseeable future" to Greece, Greece would never "grow and thrive".
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'Cause Greece would make a good cheer of the money (more ouso and syrtaki, another several thousand state sinecures for "our" people, couple of paid national holidays... in one word, consumption) instead of structural development and market improvements. It's in the blood, bro!
Not true. The Germans killed the most dynamic and hardworking people of Greece, so it will take generations to recover. Besides that, The Germans owe Greece, so whatever the Greeks decide to do with the money is their business.
well as i said, as long as there is just one number, this 1 trillion for example, and as long we can just be sure that thats it afterwards, germany should pay...just to get rid of them once and for all...
If "the most dynamic and hardworking" of Greeks perished in WW 2, that was 3, not one generation ago. Still no sign of recovery?...
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Aw, I know, I know - ouzo and syrtaki haven't left Greeks any time to procreate. Or have Germans stolen their mojo, too?
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Oh, that's why German tourists coming to Greece are so admired by the local womenfolk... they help poor Hellenic babes out with procreation!
I think the war should be left out of this. Surely the attitude of some German middle-class citizens is provocative when they're blaming ALL GREEKS for something that, in their own mind, was caused by generations over 20 years ago while at the same time they're constantly complaining for allegedly being frowned upon over things that were caused by older generations 50 years ago. I'm sure everyone can see the double standards in that, but we shouldn't fall to that level and use WW2 as an argument, no matter how good an argument it may be. Surely close to 20% of the population of Athens died through starvation, surely massive destruction was caused and was never compensated, but this doesn't need to be mentioned (eventhough 90% of Germans probably don't even know that Greece ever took place in WW2). Greece did recover, Greece did develop industry (even car industry) but it all died out with the rise of the EU, as it did in countries like Spain and Italy who are pointed out as the black sheep today.
Always spending tomorrows money today... always blowing up he bubble... and artificially keeping the frankenstein monster alive... this shows the bankruptcy of the theoriticians of the capitalist system. Nowhere is there any economic plan. All you can offer is more trillions of dollars to the incarnately corrupt bankocracy, assett-strip the globe, and plunge humanity into chaos, degradation and poverty...
The international proletarian socialist revolution unites the human race! capitalism will soon be put in its rightful place, the dustbin of history!
Working men and women of all countries unite!
Agree. All plan and no money (communism as fulfillment of socialism) is much more preferable than "just" money and no economic plan (condemned capitalism).
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After all, genuine equality is possible only if "chaos, degradation and poverty" are evenly spread all over the world - and there is no better means to this end than "international proletarian socialist revolution"... as experience shows.
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It was Marx who wrote that the best check of truthfulness of any theory is experience/practice.
Marx tried to explain that capitalism was merely A STAGE in the economic development of mankind, an inevitable and indeed a progressive one. But that even this system itself was preparing a new, and inevitable-NATURAL- higher phase of production... and that mankind would then make the leap from necessity to the leap to freedom, once socialism finally abolished the class system forever...
Mankind stands on the threashold of this new socialist society. I only wish Marx and all the great revolutionary thinkers were alive to see this.
I think most people in the 70s an 80s would have agreed that we were all spectators in the race to see which of the two systems, communism or capitalism, would collapse first. In the end it was communism so don't go round pushing nostrums which have provenly failed. What's more it is arguable that Soviet communism would have collapsed much sooner than it did (probably the early 50s) if it wasn't for the galvanising effect of World War 2.
Also I wouldn't be too quick to promote the demise of capitalism, it ain't dead yet.
The reason that people thought like that was because of corruption. The problem with trying to achieve a fair society, you know 'from each according to his ability, to each according to his need' is that individuals will start gaming the system and getting more than their fair share. This prompts the authorities to go in for progressively more authoritarian methods of enforcing fairness which usually spirals down into outright totalitarianism and the suppression of dissent (in a perfect society there would be no dissent, right?) Those who want to keep gaming the system separate out into the underworld (they probably see them selves as freedom-fighters) and from there they proceed to corrupt the totalitarian forces aimed at controlling them. From then on its a race (to the bottom) between the authorities trying to eliminate the influence of the underworld and the underworld subverting the very mechanisms the authorities use against them. Somehow it's the underworld that always wins.
Capitalism isn't about fairness, it's about grabbing everything you can and hanging on to it (which doesn't last). 'Creative destruction' where for a while wealth accumulation triumphs over wealth destruction (like wars, take-overs, bankruptcies etc.) It's not a fair society but the issue of fairness is handed over to referees of one kind or another, and it's the referees who are the targets of the corruption. Here the term is cronyism or crony capitalism. People bend the system for personal benefit, and the corruption then really gets going. The underworld here are not direct players, the corruptors are all in the 'right' side of the law, but the outcome is the same in the end.
Mao (not Marx) was right - you need perpetual revolution. In western democracies it involves elections and throwing the scoundrels out once in a while but to-day too many oppositions are too like each other so it doesn't matter who's in power, it's usually the unelected civil service who's in charge, in any case, and somehow they have all the same policies. This leads to corruption because of a lack of any means of throwing these particular scoundrels out. It also leads to an erosion of public belief in the rule of law (another referee) and promoting the rule of law is a central tenet of capitalism. And in the end you'll get collapse.
The question then is whether it is the end of society or just another step in the process of 'creative destruction'. That's up to us, I guess.
So don't be too eager for your 'fair society'. You are really advocating totalitarianism, corruption and collapse. And it will be you who'll be first against the wall when the revolution comes.
How looooooong will you people still punt this drivel that "communism" existed ANYWHERE in the world at anytime...you don't suppose China is communist? and why not? and as for Mao being "right" right what? right wing?... certainly a deluded bastard child of the murderous Stalin bureaucracy!
You really will have to read what I wrote properly before commenting on what you think I said.
Many people claim that soviet and chinese communism aren't 'true' communism but my critique was couched not in terms of them but any society which attempts to practice the concept of fairness which they wind up paying lip service to. The ill that befell (is befalling) them comes from the same source, that 'fairness' involves sacrifice and the instant anyone tries to cheat the system then it all falls apart very quickly. That is until the state steps in and holds it together by sheer bloodymindedness.
In any case, if communism hasn't existed anywhere (except maybe in the Paris commune in 1878 - and that didn't last long), doesn't that tell you something about its impracticality?
My comment about Mao comes from the fact that I believe he is the one best known for the concept of perpetual revolution. Aside from that I made no attribution to him whatsoever, favourable or not. The other thing he's best known for is being the biggest mass murderer in the 20th century. Even Stalin didn't come close and Hitler was an amateur by comparison with them both. And the Nazis were communist heretics, which is why Hitler was so desperate to destroy Russia and why the Russian front was a place of such degenerate bestiality. It was a religious war.
It's strange isn't it that all these advocates of 'workers paradise' wind up creating the most awful,hell-holes when given the chance. And there is a reason for that which my comment addressed and you didn't.
If you were being sarcastic or are some kind of fanatic, I'm out of here. By try addressing the critique next time.
Lenin, Trotsky and the whole Bolshevik Party CC made it crystal clear to the whole world the fate that awaited the young workers state as the 22 armies of the capitalist west, and the whites, bared down on them in 1918 that: UNLESS THERE IS A SUCCESSFUL SOCIALIST REVOLUTION IN THE INDUSTRIALISED WEST, THEN THE "SOVIET UNION" WOULD GO UNDER TO A BOURGEOIS REACTION...
Not being sarcastic, nor am I a fanatic, nor hold anything against you at all, I have spent the last 28 years of my life explaining to people that YOU CANT BUILD SOCIALISM IN ONE COUNTRY, THAT THE VERY IDEA IS SO UTTERLY ALIEN TO MARXISM...
You really haven't got it, have you?
Marxism and all these other nostrums for a 'fair' or 'perfect' society give you a system that is inherently unstable. It won't matter how many countries go 'socialist' they'll all go tits up, riddled with the cancer of an unstoppable corruption.
Arguably the cruellest thing you can do to society is to try to achieve some form of perfection. A perfect society is at once the most perfectly awful society, conformist, fascist, utterly intolerant of dissent. Most importantly it is frozen, unable to progress because there is nowhere to progress to, and it is hugely fragile - and hugely vulnerable to corruption also. In the end it’s unfixable no matter how much you try.
You can see this in the various deluded attempt at creating such societies in the 20th century (earlier?). Long before they achieved that perfection they had to introduce the apparatus of repression, and in time that very apparatus was subverted into uselessness. And then the whole system fell apart under its own contradictions. China is showing sure signs that it is in an advanced stage of this process to-day, although once again it seems to be in a race with the west to see who’ll fall apart first (US politics –and arguably EU -also becoming increasingly deadlocked, so progressing towards that deadly frozen state).
So don't quote Marx at me and certainly not in capital letters - only the crazies do that. Just look at some other posts and you'll see what I mean, the nuttiest are full of words and phrases in capital letters and its a sure sign to get out of here when people do that to you.
You are light years wrong. "Perfection" isn't in the vocabularly of Marxism! and the capital letters are for agitational purposes NOT FOR YOU! Also, the Marxists are not trying to "create" anything, THE WORKING CLASS WILL ENTER THE SCENE OF HISTORY SOON AS THE NATURAL INHERRITORS OF A NOW DEFUNCT CAPITALISM- WHITHER THE MARXISTS LIKE THIS OR NOT!!!
WORKERS OF THE WORLD UNITE!
Having the privilege and the curse of being a Greek citizen please let me write down a few words about the crisis in my country.First of all it is not correct that crisis is a 100% Greek problem.Greek finance is not a virus infecting the economies of other countries.There is a major problem affecting all Europe and maybe the rest of world step by step.Back to Greek things ,now.Any financial support will fail unless the vast majority of Greek people change their attitude.That means they have to start thinking seriously that they have obligations too(not only rights).Simple people should try forgetting their life standards(mythical) through the last 20 years and cope down with reality.The minority of people with great economic power should be enforced to act like real patriots,start paying full taxes and pull their money in the Greek markets instead of sending them away by establishing off-shores etc.Politicians must talk the language of truth to the people instead of stupid imaginary programs.Solidarity is sth to work on and gain it.If all these will be achieved then a so-called Marshall plan or whatever can be helpful otherwise,unfortunately nothing will change except that middle and lower classes people in my country will become poorer and the 5 % of rich people will collect more power(economic and other) in their hands..
Yes, the tax-dodging criminal 5% will gain more power, thats the plan.
Greek workers unite!
Why is productivity so low and quality of products so poor??? Gee that's a tough one UNIONS. The employees have jobs for life and receive annual raises regardless of the quality of their work. This is the exact same problem the taxpayers in the US dealing with the US government bureaucracy
You haven't got a clue where Greece is, let alone what makes it tick, or fail.
What makes Greece tick is its communist governemnt
You can't be serious.
Its certainly not a democracy
This talk of a Marshall Plan is total nonsense. As if a transfer of any amount of money will make any difference.
What is the problem is what in the heads of the people, whether it is Greece, France, and Argentina (a quick visit). a mixture of marxism and local parochialism is the heady mix which leads to doom. These three countries have it in good in good measure. Until that changes nothing will change,
Do you mean to say that the EU is a Marxist plot? Is Marxism in your terminology everything short of full flexed liberalism (new or classic, is there a difference?)? I believe Milton Friedman´s grandson, David, who is co-author of a trial with a fully liberal economy in socalled free cities in Honduras, has discovered and declared that a pure liberal economy cannot go hand in hand with democracy. The ideal system of government (which should be miniscule) would be some kind of oligarchy, a rule by a few selfprofessed connaiseurs in the art of governing in the true libertarian spirit.
"Great News !! Zero Income Taxes Solves Worldwide Economic Crises."
by justaluckyfool.
America is the Monetary Sovereignty of the worlds reserve currency and as such America should lend the P I I G S up to 100% of their present debt from a newly create pool of $3 trillion.The note will bear an interest rate of 2% with a 36 year term.
Based on the "Don't End The Fed, Amend The Fed" new agenda this would create a revenue source for America.
Excerpt from "justaluckyfool", "We must stop the stupid practice of paying interest on our own money...start earning revenue (income)
instead of paying personal income taxes."
Read more...“Justaluckyfool”(Google)
or
Summary
To lower taxes,you must raise revenue somewhere.How does a government fund, "a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,..."” at the same time reduce personal income taxes to zero ?
Instead of a Marshall Plan, Greece needs a Time Machine.
What Greece needs is an Infinite Improbability Drive. The likelihood of the country reforming itself is below that of a sperm whale spontaneously materializing five miles above Athens.
Some intelligent comments and some not-so-intelligent comments below here.
Prof. Crafts, thank you for this article. It is nice to see someone mention the Marshall Plan.
The idea is very good for Greece. Our approach in the EU to Greece has been all stick and no carrot. A carrot is needed.
My refinements:
1) No use and no need to talk about Germany (just to reinforce German paranoia on the issue) and no need to talk about 1% of gdp.
I would say from the Original Six of the EEC - I would talk about 0.2% of their gdp (and perhaps a concomitant suspension of other EU monies to Greece - Does anybody think Greek companies need a 50% gift of factory machinery or private individuals capital to build a B&B right now?)
2) Use the monies to purchase Greek bonds on the secondary market - redeeming debt at a fraction of their face value and helping other troubled EZ sovereign borrowers by "pushing up" the market prices of the worst case country.
3) Tie this aid to further austerity programmes - the Greeks need to see a light at the end of the tunnel. So do the banks and other investors in EZ bonds...
It's time to admit that some of us are more productive than others.
Some of us are going to be on the dole forever.
Some countries are going to be on the welfare forever.
Adding to the insightful comment of Ron_2, Greece would squander the money. It does not have the discipline to put the money to good use. Bluntly put, they cannot be trusted. Additional facts: Germany kept part of the Marshall help and put it in a fund and financed exports, as of today there is still money in that fund. Germany has the discipline to make things work. England simply used the money and used it, when they discovered in 1988(?) that Germany still had some money saved, they were furious. France (General De Gaulle) got mad at the American meddling, and paid the Marshall help back, and stepped out of the NATO.
Etc. etc.
I think the relevant comparison is that the European social programs developed AFTER the success of the Marshall Plan. Any similar program for Greece today would likely be perverted to support the social programs, not lead to lasting economic growth.
Imagine if it had been the American "Tea Party" running things at the time of the Marshall Plan. Europe would have become Fortress Stalin across the pond.
The Tea Party would have insisted on pro-market reforms. Re-read the article.
The Tea Party would have insisted on no US taxpayers´ money spent on aid to Europe. Ergo: Wellcome to Soviet-Europe. With pro-market reform minus financial aid, that would have been the result, for sure. Luckily the Republican party at the time was not controlled by Tea Partiers.
Look. Different problems, different times. There was certainly a right-wing consensus that the United States needed an economically healthy Western Europe to help confront the looming Soviet threat. The Tea Partiers are needed now, to face a different set of problems, and luckily here they are.
You don't like it, that's fine, but don't get yourself in high-dudgeon with imaginary and preposterous scenarios of alternative history.
Structural adjustment lending should focus on Ukraine, Moldova and the Balkans (and to a lesser extend, Romania & Bulgaria and the other Eastern accession countries).
Put the money where there is credible political interest in economic development, and where the people are in far greater economic need.
Greece could fully self-fund its own Marshall plan if it cut military spending from more than 3% of GDP to approximately nothing, gave the planning permission for new airports where there is chronic under-capacity, sell of the airbases for quick development to airports, sell off the naval ports for commercial use, free up military beeches for tourist resorts, and generally liberalised its economy/ raised pension ages/ rationalised the tax system.
All Greece needs is better politicians and a competent civil service... perhaps a return to a confederacy of city states?
When was Greece a confederacy of anything?
Still not used, BTW, to this newfangled usage of "the Balkans" to exclude Romania and Bulgaria*. I think it started with the disintegration of Yugoslavia and the attendant wars?
* Given the context, presumably you're also excluding Greece? So in your usage, Balkans = former Yugoslavia + Albania? I presume European Turkey is excluded if Bulgaria is.
I had the Delian League in mind (a loose Athenian led union of democratic city states - I meant to say federation, though I guess confederacy works too).
Yep - I usually think of the "Balkans" as former Yugoslavia + Albania. Entirely excluding Greece, Turkey, Bulgaria or Romania.
I guess this grouping really should be called the "Western Balkans" - but as you say, Balkans has become a new word for "semi-failed states of former Yugoslavia, Albania and the breakaway sub-entities thereof". In that sense, it's probably a blessing that Greece, Turkey, Bulgaria and Romania have become dissociated from the term (when used in a political sense).
Its all in the perspective. To the Turks, the parts left out of "the Balkans" would be Rumelia. The point that the Greeks would be better off without their military spending is probably a good one. Its not like they need to worry about Macedonian or Neo-Ottoman invasions. Military cuts and giving up their perennial dreams of a Greater Greece, starting with Greek Cyprus, make sense. Apparently Greece and Greek Cyprus have much more in common than ethnicity, lke requiring debt bail-outs.
Send money to Ukraine, Romania and Bulgaria.
Yeah, sure...
Yeah, me thinks Greece should sell off couple hundred of islands, too. That will really fill their purse... but only if they manage to neutralize the knee-jerk reaction of their elite to any influx of real money.
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That is, if they manage to keep "elite's" sticky fingers off the purse.
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The hope here is almost negligent.
Do you have any real feeling/understanding of the Balkan geography? Presumably, you've just forgotten of Kosovo. Or have you included it, a lil' bit anticipatorily, into Albania? As... hmm... antonym for "breakaway sub-entity" (I loved this one!)
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However, if Kosovo is part of "Western Balkans", and Bulgaria isn't part of Balkans whatsoever, can I remind you that it's just 70 km from Bulgaria to Kosovo?
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Lying right in the centre of the Peninsula, Bulgaria is very convenient for demonstration how tight the Balkans is: it's half an our drive from the Bulgarian capital Sofia to Serbian border, about the same to Macedonian, and couple of hours to the Greek one. Turkish border is 3 and a half hours drive, and the most remote one is Rumania: approximately 5 hours drive.
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So, how would you manage to take them apart? In the sense, that when Wesley Clark and Sleek Billy decided to bomb Serbia into oblivion, several rockets went astray and hit Sofia... which were not part of "Western Balkans", right?
Does anyone really care? The Balkan Peninsula is small. The East side is countries on the Black Sea/ Greece and the West is the rest. That doesn't change the usual political/ nation state grouping typically referred to by "the Balkans" (essentially a shortening of "Western Balkans").
We just don't need a collective name that includes places as diverse as Greece, Bulgaria, Romania et al. So the more inclusive sense of the word isn't typically used in print media or in discussions.
Nothing more interesting to talk about?
The Delian League turned soon enough to an extractive empire where the other members paid Athens for the privilege of not being sacked by ... Athens. The present mess seems like an improvement.
Kosovo being part of the former Yugoslavia, I'm guessing shaun39 is including it in that, not Albania.
That's the difference: he thinks about past (former Yugoslavia), I think about future (future Greater Albania). Earth trembling when ferocious warriors of Islam aided by the US National Guard tread down the Balkans once again.
:-)
To my point of view, this is a well defended opinion; one that deserves attention and promotes discussion on the issue.
I have one main issue to highlight; why jumping into conclusions that Greece cannot deliver? I understand, and regret to do so, that this is the mainstream opinion formed in the last two years that Greece is under an adjustment program. But I would like to pose mainly one objection; that Greece has not (yet?) been given a true chance to grow out of its fiscal problems. And I believe that we all agree that reforms are succesful only when they produce results; in essence growth. You cannot expect that the Greek, or any other European, people will approve reforms without the expectation for positive results.
We all know that the Greek politicians carry a part of responsibility for this failure. But we have not talked about the responsibility of those that have made Greece the negative example, being largely unjust on doing so; after all life has (and most probably will continue to do so) proved that Greece was not a special case. For example the EC's report on Greek statistics (link: epp.eurostat.ec.europa.eu/.../COM_2010_REPORT_GREEK-EN.PDF) has mainly pointed out the process of adjustment that was made every year in the state budget figures with the inclusion of horpital debt only in the end of the year. However, this proces is compatible with the ESA standard chosen by Greece before 2009 (but not with the one chosen by it after the elections of 2009) and followed by other countries as well in several state-related expenses. And based on this fact, Greece was stigmatized as fraudulent and ever since all we see is threats of cutting the credit provided by its partners and of expulsion from the EA (and even from the EU).
In case, though, one decided to ease tensions and saw things in a more sobere way, would understand that, all this time, the Greek people have had a largely moderate stance, given the conditions they face. For example just think what political sciences predict that happens after 5 years of depression, such as the one faced by Greece; radicalization. But in the case of Greece a largely forgotten fact is that 48% of the electorate voted for parties calling for calm and cooperation with the European peers. Of course one can focus on the 25% of the radical left, if one wants to lean towards the negative side. But then I would argue that the conditions faced, as a consequence of the combination of severe austerity and severe recession, are those of 25% of unemployment and 30% cuts of wages and benefits for those that are still emloyed.
To my point of view the combination of the elections' result with the economic conditions show a people that at least may be (if is not already) ready for the right kind of reforms: those that will deliver competitiveness, growth and jobs. And believe me the most frequent opinions heard are those arguing that there is the need to adjust and produce.
To sum up, I think that, just as a change, instead of the combination of threats and punishing-austerity (which have certainly failed) both creditors and debtors would benefit from patience and support. And I don't think it will be a waste (as it has not been for all the companies that have cooperated with Greek pharmaceuticals, maritime and energy enterprises or Greek employees).
A "real Marshall plan" is where the CIA fixes the Italian election, and provides the Greek government with weapons to shoot the Democratic Army of Greece. Then, we support a military coup, because the Greeks can't be trusted to run their own country. And a good thing too, this is how the cold war was won. Now that there isn't a Soviet threat, I don't see why we should bother.
The US should continue to "bother" about the Balkans because it involves Turkey and Cyrpus. Now that Greek Cyprus and Isreal are in bed with one another, its going to get tense with Turkey. Now that the Isreali air force is conducting training (read "war"?) exercises in the Balkans (well... Romania), who knows where things will go. Next we'll read in the HDN that the Israeli navy is conducting joint exercises with the Greek Cypriot navy(all of three corvettes perhaps)to defend "their joint oil interests". This is all quite speculative of course, but entirely plausible given events of the past two years.
Right, your post was well overdue. How come no one has detected till now that the root of all Greek... no, just all problems in general, is Israel? Thank you for your sharp eye, Mr Leatherstocking!
There are some who think anyone who criticizes Isreali policy, however implicitly, is somehow an anti-semite or conspiracy nut. Apparently Mr. Reluctant Polluter is one of them. My basic point is that the crisis in Greece has also extended to Greek Cyprus and outsiders (e.g., the USA, Europe) should pay attention because of the growing expansion of Isreali interests into the Aegean and Balkans, and the brewing conflicts over natural resources will probably widen eventually. To imply that someone expressing this view is absorbed in 19th century romantic fiction is pretty pathetic. At least Hawkeye stood with his Mohican "brother" Chingachgook to stop the incessant conflict between the Mohicans and the Hurons. So if we follow your line of thought, does this make you Magua????
Oh yes, forgot to add this timely link:
http://www.economist.com/node/21558261
My fantasies must be group fantasies apparently.
BTW Magua- Another name for Natty Bumppo was "straight-tongue".
- Cheers
Remember, Germany received a debt jubilee. All its debts were forgiven, including the pre-war debts owed to Greece (not to mention the forced loans to Germany from Greece during the war). That means the "grants" flowing to Germany for structural adjustment were applied to the economy. This isn't the case for Greece currently. The writedown of debt in this year's restructuring eliminated just 15% of their debt, and on a real basis, reduced their debt to GDP by just 4% (it's in the 150% range now from 160s). Not to mention that these are loans and not grants.
In short, Greece's current adjustment is being undertaking while a lot of money is being EXTRACTED from the economy through budget cuts and ever increasing payments on ever increasing loans. No money is being invested IN the economy.
The author also doubts Greeks can adjust. Maybe he is right, but I'm not sure he has looked at the actual Greek program. The Greeks have fallen behind on reforms, but plenty of onlookers have remarked that Greece has been passing faster reforms than any other country in euro history. The austerity program was simply overambitious. Its budget has been cut by 34%. If Greece is reforming at a very fast rate (though apparently not fast enough) without any grants to invest in the country, then it may be possible for them to complete the structural adjustment with grants.
Quote:
"...Greece has been passing faster reforms than any other country..."
Talk is cheap, it takes money to buy whiskey.
Passing laws are a greek favorite hobby. Just like monopoly, backgammon, politics.
Just a game, nothing more.
You really do sound as an expert on Greece, I wonder what kind of experiences and qualifications have granted you that role.
I have some questions:
1) While the United States provided grants to Germany at the time of the Marshall Plan, did the United States provide grants (not loans) to developing economies in conformity with the World Bank programme at the time of Washington Consensus?
2) Wasn’t the term ‘international competitiveness’ a buzzword that doesn’t give a clear definition?
3) In some economies where structural adjustment programmes are considered to have worked well, has the problem of international balance of payments, i.e. current account deficit and capital account surplus, been sorted out?
4) Why is it not grant but lending when ‘structural adjustment’ is being considered for Greece?
The Marshall Plan is only part of the story. Before the Marshall Plan, German had a well-respected free market economist in Wilhelm Roepke and free market politicians who wanted to implement free market structural reforms. The structural reforms made the Marshall Plan succeed in Germany when similar attempts by the World Bank and IMF since then have failed.
In fact, free market reforms in China rescued Chinese from starvation without the aid of a Marshall Plan (other than the US loaning China $ billions to feed its people while China implemented reforms).
Greece has no economic or political champions for free market reforms, so any Marshall Plan for Greece will do nothing but waste the money. Without free market reforms, Greece is nothing but a money pit.
There already is a reasonably-free market in Greece. A Greek wanting to provide a product or service is able to secure financing and sell it, without many governmental restrictions. Red Tape is there, but it isn't largely at root in this crisis.
A huge part of the problem is Greece is that they are in the Euro and can't devalue. Greece has to exit the Euro, or work around those problems. Same story for much of the rest of Europe.