DPC Up Sutter Street from Grant Avenue, San Francisco 1906
China private debt is staggering.
I always say bubbles burst much faster than they grow. And after exploding up 159% in one year, Chinese stocks crashed 35% in three weeks. This all happened while the Chinese economy and exports continued to fall. And two thirds of these new trading accounts belong to investors who don’t have so much as a high school degree. How crazy is that? As Rodney wrote earlier this week, the Chinese government is taking every desperate measure to stop the slide: Artificial buying to prop up the market… Banning pension funds from selling stocks… Threatening to jail investors for shorting stocks… Allowing 1350 out of 2900 major firms to halt trading in their stocks indefinitely, and stopping trades on another 750 that fell 10% or more… It’s madness!
This second and FINAL bubble in Chinese stocks occurred precisely because real estate stopped going up. Over the last year it actually declined. So after decades of speculation, the gains stopped coming in, and rich and poor investors alike switched to stocks. But the funny thing about the Chinese is – they don’t put most of their money in stocks. Only about 7% of urban investors own stocks and half of those accounts are under $15,000. In fact, it’s estimated that the Chinese only put 15% of their assets there, and that may be on the high side. What is so unusual about the Chinese is that they save just over half their income! And the top 10% save over two-thirds! And where do those savings go? Mostly into real estate! China’s home ownership rate is 90%. It’s just 64% in the U.S. even though we’re much wealthier and credit-worthy.
That’s because home ownership is a staple of their culture. A Chinese man has no chance of getting a date or getting laid unless he owns a home – no matter how small. Just look at this simple chart:
Chinese households have 74.7% of their assets in real estate vs. 27.9% in the U.S. – which helps explain why theirs is one of the greatest real estate bubbles in modern history! But the key here is – when that bubble bursts, it will cause an unimaginable implosion of Chinese wealth. In one fell swoop, three-quarters of their assets will get crushed! And just how big of a bubble is it? In Shanghai, real estate is up 6.6 times since 2000. That’s 560%. I’ve been going on and on about the massive overbuilding of basically everything in China for years now. I’ve never once flinched from my prediction that this enormous bubble will burst. And I’ve kept saying there will be a very hard landing no matter how much the government tries to fight it.
So there! “.. the Greeks last night revealed the true dysfunctionality of the system they are trying to stay inside.”
The Greeks arrived with a set of proposals widely scorned as “more austere than the ones they rejected”. The internet burst forth with catcalls – “they’ve caved in”. By doing so, however, the Greeks last night revealed the true dysfunctionality of the system they are trying to stay inside. First, Germany put forward a proposal one could best describe as “back of envelope” for Greece to leave the Eurozone for five years. There is logic to it – because Germany was signalling that only outside the Eurozone could Greece’s debts be written off. But for the most powerful Eurozone nation to arrive with an unspecified, two-paragraph “suggestion” at this stage explains why the Italians, according to the Guardian, are about to blast them with both barrels for lack of leadership.
Then came the Finns. Their government is a coalition of centre right parties and the right-wing populist Finns Party. The latter threatened to collapse the new governing coalition if the Finns take part in a new bailout for Greece. The demand is now that the Greeks pass all the laws they signed up to in advance of any new bailout deal. This is backed up by a threat to keep the Greek banks starved of liquidity from the ECB for another week. In Greece large numbers of people – on all sides of politics – believe the Europeans are trying to force the elected government to resign before a deal is concluded. If so there will be political chaos. Syriza’s poll rating is currently 38% and rising. Without a “moderate” split from Syriza the centrist parties have no chance of forming a new government, and without Tsipras’ tacit consent there can be no interim government of unelected technocrats.
On Friday I reported, on the basis of intelligence being supplied to large corporations, that the key supply concerns are gas – because of the need for forward contracts – disposables in the healthcare system, and meat imports. The screw Europe is turning on its own supposed member state now begins to resemble a sanctions regime. Without more liquidity the banks will run out of money some time this week. To be clear, it is Europe that is in charge of the Greek banking system, not Greece. Yet after last night what many in Greece and elsewhere see is that Europe has no single understanding of what it’s trying to achieve through this enforced destruction of a modern economy.
Got to stretch it out for dramatic effect.
A meeting of all EU leaders to decide Greece’s fate has been cancelled, as ministers from the narrower eurozone group struggle to agree on a way forward to resolve the intractable debt crisis. Donald Tusk, the European council president, announced that the session of the 28 EU heads of government scheduled for Sunday had been postponed. Instead, eurozone finance ministers are meeting on Sunday morning, and a summit of eurozone heads of government will take place in the afternoon. “I have cancelled #EUCO today. #EuroSummit to start at 16h and last until we conclude talks on #Greece,” Tusk tweeted. Last-chance talks between the 19 eurozone finance ministers in Brussels ended at midnight, with deep divisions persisting over whether to extend another bailout of up to €80bn to Greece in return for fiscal reforms.
Finland rejected any more funding for the country and Germany called for Greece to be turfed out of the currency bloc for at least five years. Experts from the group of creditors known as the troika said fiscal rigour proposals from Athens were good enough to form “the basis for negotiations”. But the German finance minister, Wolfgang Schäuble, dismissed that view, supported by a number of northern and eastern European states. “These proposals cannot build the basis for a completely new, three-year [bailout] programme, as requested by Greece,” said a German finance ministry paper. It called for Greece to be expelled from the eurozone for a minimum of five years and demanded that the Greek government transfer €50bn of state assets to an outside agency for sell-off.
Only some of the parties seem to want one.
Greek crisis talks between eurozone finance ministers on a new €74 billion loan came to an inconclusive end this morning in a sign that a deal which would secure much-needed financing for Athens and prevent a possible exit from the currency area is still far from certain. The ministers will reconvene at around 11am local time in an effort to reach consensus on whether economic overhauls and budget cuts proposed by Greece are sufficiently far-reaching to form a basis for negotiations on fresh loans to Athens. Then the baton will be handed over to European leaders, who will gather for an emergency summit. The heads of state and government will then have to determine how much money, and political goodwill, they are prepared to spend on keeping Greece in their currency union.
“It is still very difficult, but work is still in progress” said Dutch Finance Minister Jeroen Dijsselbloem, who presides over the meetings with his counterparts. “There’s always hope,” said Pierre Moscovici, the European Union’s economics commissioner, adding that he hoped for more progress. Only unanimous agreement on the amount of new rescue loans and debt relief to grant Athens will allow the country to avoid full-on bankruptcy and Greek banks to reopen on Monday with euros in their tills. The talks came after an assessment by the Troika estimated that a new bailout for Greece would cost €74 billion. In a letter requesting the loan earlier this week, Greece has estimated its financing needs at €53.5 billion.
Two weeks of capital controls have inflicted such damage on Greece’s banks that it will cost €25 billion to prop them up again, European officials said. Such costs would add to Greece’s already high debt load, creating more pressure for controversial action to be taken to make it more manageable. Over the past five months, Athens has exhausted the patience of most of its counterparts — particularly after Prime Minister Alexis Tsipras unexpectedly called for a referendum on creditors’ demands, asking voters to reject them. While Mr. Tsipras has since largely backed down on most of the overhauls and budget cuts creditors asked for, there are doubts across European capitals over whether his government can implement any deal it signs.
If you ask me, tempexit is the craziest notion so far.
The German government has begun preparations for Greece to be ejected from the eurozone, as the European Union faces 24 hours to rescue the single currency project from the brink of collapse. Finance ministers failed to break the deadlock with Greece over a new bail-out package, after nine hours of acrimonious talks as creditors accused Athens of destroying their trust. It leaves the future of the eurozone in tatters only 15 years after its inception. In a weekend billed as Europe’s last chance to save the monetary union, ministers will now reconvene on Sunday morning ahead of an EU leaders’ summit later in the evening, to thrash out an agreement or decide to eject Greece from the eurozone.
Should no deal be forthcoming, the German government has made preparations to negotiate a temporary five-year euro exit, providing Greece with humanitarian aid while it makes the transition. An incendiary plan drafted by Berlin’s finance ministry, with the backing of Angela Merkel, laid out two stark options for Greece: either the government submits to drastic measures such as placing €50bn of its assets in a trust fund to pay off its debts, and have Brussels take over its public administration, or agree to a “time-out” solution where it would be expelled from the eurozone. German vice-chancellor Sigmar Gabriel said they were Greece’s only viable options, unless Athens could come up with better alternatives. “Every possible proposal needs to be examined impartially” said Mr Gabriel, who is also Germany’s socialist party leader.
Creditors voiced grave mistrust with Athens, a week after the Leftist government held a referendum in which it urged the Greek people to reject the bail-out conditions it has now signed up to. A desperate Alexis Tsipras managed to secure parliamentary backing for a raft of spending cuts and tax rises to secure a new three-year rescue programme worth around €75bn-€100bn. But finance ministers rounded on Mr Tsipras for offering to implement measures that he had previously dubbed “humiliating” and “blackmail” only seven days ago. “We will certainly not be able to rely on promises,” said Germany’s hard-line finance minister, Wolfgang Schäuble. “In recent months, during the last few hours, the trust has been destroyed in incomprehensible ways,” he said. “We are determined to not make calculations that everyone knows can’t be trusted. We will have exceptionally difficult negotiations. I don’t think we will reach an easy decision.”
Germany is trying to humiliate Greece by bringing new demands for a bailout deal, Dimitrios Papadimoulis, Vice-President of the European Parliament and member of Greece’s ruling SYRIZA party, said on Sunday. Highlighting the depth of reluctance to grant another rescue to Greece, Germany’s finance ministry put forward a paper on Saturday demanding stronger Greek measures or a five-year “time-out” from the euro zone that looked like a disguised expulsion. “What is at play here is an attempt to humiliate Greece and Greeks, or to overthrow the (Prime Minister Alexis) Tsipras government,” Papadimoulis told Mega TV.
A country with a population half the size of Greece will decide?
Finland’s parliament has decided it will not accept any new bailout deal for Greece, media reports said Saturday, piling on pressure as eurozone finance ministers tried to find a way out of the impasse. The decision to push for a so-called “Grexit” came after the eurosceptic Finns party, the second-largest in parliament, threatened to bring down the government if it backed another rescue deal for Greece, according to public broadcaster Yle. Under Finland’s parliamentary system, the country’s “grand committee” – made up of 25 of 200 MPs – gives the government a mandate to negotiate on an aid agreement for Greece. Members of the committee met for talks in Helsinki on Saturday afternoon to decide their position, YLE reported.
The finance minister, Alexander Stubb, was at the crunch eurozone talks in Brussels and tweeted that he could not reveal the mandate given to him by the grand committee so long as the negotiations were still ongoing. “The mandate is not public and the Finnish delegation will not discuss it publicly,” Kaisa Amaral, a Finnish spokesman, told AFP. The Brussels talks were set to resume on Sunday after failing to reach an agreement on Saturday but opinion among northern and eastern European countries appeared to be hardening against accepting the reform’s Greece has offered in exchange for another bailout. Finns party leader Timo Soini, who is also the country’s foreign minister, has repeatedly argued in favour a “Grexit”, saying it would be better for Greece to leave the euro.
Holland in the role of Connecticut.
Economists agree: If the eurozone does not break up, it will have to move closer together. They’re right. But it’s easy to understand why Europeans are not eager to heed their advice. Basically, the proposition of European integration is that the Netherlands should end up like Connecticut. And even though Connecticut is a lovely place, the Dutch have good reason to be wary of that. It’s expensive to be Connecticut, because Connecticut has to pay for Mississippi and Alabama. Large, economically diverse areas can successfully share a single currency if they have deep economic links that make it possible for troubled regions to ride out crises. That means shared bank regulation and deposit insurance, so banks don’t face regional panics; a labor market that lets people move from places without jobs to places with them; and a fiscal union, which allows the government to collect taxes wherever there is money and spend it wherever there are needs.
The United States shows that this approach can work: America’s 50 economically diverse states share a currency quite comfortably, in part because of our banking union (Washington State did not have to bail out Washington Mutual on its own when it failed), our fluid labor market (as oil prices rise and fall, workers move in and out of North Dakota) and our fiscal union (states in economic pain benefit from government programs financed by all states). Nevada does not need to devalue its currency to restore its competitiveness relative to California in a severe recession; instead, Nevadans can collect federally funded unemployment insurance and, if necessary, move to California. If the Greeks had similar options available in 2008, they would be much better off today.
But the EU’s centralized budget equals only about 1% of Europe’s GDP, compared with more than 20% for the American federal government. A much more centralized E.U. budget, with much more money flowing through Brussels the way it flows through Washington, could provide similar macroeconomic stability to Europe by creating a fiscal union. But the American fiscal union is very expensive for rich states. According to calculations by The Economist, Connecticut paid out 5% of its gross domestic product in net fiscal transfers to other states between 1990 and 2009; that is, its tax payments exceeded its receipt of government services by that amount. This is typical for rich states: They pay a disproportionate share of income and payroll taxes, while government services are disproportionately collected in states where people are poor or old or infirm.
The obvious question, then, about a fiscal union is: What’s in it for the Netherlands (or Austria or Luxembourg)? Is it worth making the euro “work” if that entails devoting several%age points of your economic output to fiscal transfers to poorer countries, indefinitely, the way Connecticut does to poorer states?
I would not rule this out. But Greece would have to start from scratch with printing a new currency.
If Greece rejected the international “bailout” terms, defaulted on its debts and dropped out of the eurozone, would it really face economic devastation, collapse and disaster? The IMF, the ECB and most economic “news” reports about the crisis say so. But history says something completely different. Contrary to what you may have read, lots of countries have been in a similar bind to that faced by the Greeks. And those that chose the so-called nuclear option of devaluation and default did just fine. Great Britain saw a “V-shaped” economic recovery after it dropped out of the European Exchange Rate Mechanism, the forerunner to the euro, in 1992. Real economic output expanded by 14% over the next five years, IMF records show.
The East Asian “Tiger” economies boomed after dropping their pegs to the U.S. dollar and letting their currencies plunge in 1997-1998. Ditto Russia after it defaulted and devalued in 1998. Ditto Argentina after it defaulted and devalued in 2001-2002. Those countries saw huge gains in real, inflation-adjusted output per person in the years following the alleged “nuclear” option of devaluation or default. The IMF’s own data reveal that from 1998 to 2003, Russia’s output per person soared by more than 40%. So did Argentina’s from 2002 to 2007. So much for “disaster” and “collapse.” Even the U.S. has been through this. In 1933, in the depths of the Great Depression, U.S. President Franklin Roosevelt outraged bankers by abandoning the gold standard and devaluing the dollar by 70%.
Over the next five years, gross domestic product expanded by around 40% (at constant prices). If history says financial devaluation or default may turn out just fine on Main Street, the same may even be true of bank closures. Ireland suffered three massive bank strikes in the 1960s and 1970s, including one that lasted for six months. During that time, people were effectively unable to use banks or get their hands on currency. What happened? The real economy emerged largely unscathed. People coped. They circulated IOUs and endorsed checks as makeshift currencies. They understood that “money” is just an accounting system. In other words, human beings proved to be adaptable and used some common sense, even without the help of financiers. Gosh. Who knew?
Our grandparents and great-grandparents did something similar here in the U.S. in the early 1930s, at the depths of the Great Depression’s banking crisis, records Loren Gatch, a political-science professor at the University of Central Oklahoma. Towns and even employers that lacked official currency to meet payroll or pay suppliers issued IOUs or notes, he writes. In March 1933, 24 companies in the mill town of New Bedford, Mass., effectively issued their own bank notes, and those were accepted by retailers around the town and circulated at face value, Gatch wrote. It’s hardly a surprise. Only bankers or fools would think human beings are completely powerless without banks. As for currencies, whether gold or dollars or euros or drachmas: The idea that they have power in themselves is a myth. They are purely a social construct..
Her legacy is shot.
Merkel has faced a decision between two potentially disastrous scenarios. As Artur Fischer, joint CEO of the Berlin stock exchange, puts it: “Either she goes for a third bailout but risks isolating herself domestically in the process – and also faces returning to the same point we’re at now six months down the line and again a year down the line. Or she agrees to a Grexit and, as Greece sinks into more misery with pictures of their plight flashed round the world, she is blamed for that.” For weeks Merkel has talked more about Greece than Germany. So familiar is she with its politics that Bernd Ulrich, chief political correspondent of the weekly Die Zeit, half-joked that “she could co-govern in Athens any time”.
The Neue Osnabrücker Zeitung summed up in an editorial what it described as the “Herculean task” that has faced her over the past few days. “This is Angela Merkel’s hour. She was the one expected to negotiate between the Greeks and the other euro partners. She was the one expected to find the compromise between the interests of 11 million Greeks and 320 million other inhabitants of the eurozone.” She will now have to bring the decision made in Brussels back to the Bundestag, where she will find an increasingly rebellious mood in her own conservative ranks, many of whom are seething that she has not pushed for a Grexit. They have also refused to even contemplate a haircut or debt restructuring, which the IMF is insisting upon if it is to remain involved.
They all say they are representing the voices of their angry constituents. And while there is not much doubt Merkel could get a bailout deal of some sort through the Bundestag if she wanted to, thanks to the backing of her junior coalition partner, the Social Democrats, the question remains: at what cost to her? A revolt within her party ranks could prove critical to her future as German chancellor. She sees her legacy at stake just as there are murmurings that she may contemplate a fourth term in 2017. In the past days an online petition by the economist Thomas Piketty, which appeals for the German government to grant Greece a debt cut like the one Germany received to help it to restructure after the second world war, has made a huge impact.
That and headlines such as the New York Times one last week: “Germans Forget Postwar History Lesson on Debt Relief in Greece Crisis”, accompanying an article that referred to “German hypocrisy” and a picture of the signing of an agreement that effectively halved West Germany’s postwar debt in 1953, has left some Germans smarting.
Greek myth, which is in case you missed it full of tragedies, is the cultural mine that keeps on yielding for the present crisis. Last night we had a Eurogroup meeting. Greece offered everything the Eurogroup wanted, and more. The Eurogroup demurred and the Finns, in thrall to as populist a bunch of vote grabbers as ever was in the True Finns (the hint in the name is chilling) apparently said Aye, which is apparently Finnish for yes, although as nobody speaks Finnish outside Finland, who knows. So delving into Greek myth, today we see Tantalus. Tantalus fits right on the button. He was condemned to stand in a lake of water with a grapevine over his head. If he stooped to drink the water receded, if he stretched to eat the grapes drew back.
If Greece tries to cut its way from a depression the debt burden worsens, if it seeks aid the aid is yanked out of reach. What was Tantalus’s crime? Again, it fits. He took from the gods that which they would not give, in some myths ambrosia (not the custard dish but the food of the gods), in others it was Nectar. These he distributed to humans, angering the gods who believed that these goodies were theirs to distribute and not his. Greece entered the Euro and ..well, you see it. We should also note that Tantalus had form for hiding things, notably the golden hound of Hephaestus , the smith of the gods who made all things. Greece, let us not forget, hid the true state of the finances, a well functioning state statistical apparatus being the foundation of all things in a modern economy.
Interestingly, in myth he was aided by Pandareus, who could gorge forever on the finest things and neither be satiated nor suffer. Greece was aided in its concealment of the true state of its economy by Goldman Sachs… A further crime that Tantalus committed was, in an attempt to appease the now vengeful deities, he sacrificed his son Pelops and served a Greek version of Frey Pie to the gods. They recoil and his punishment is sealed. Syriza have killed, baked and served up to the Eurozone their own mandate and policies, only to have them thrown back faceward. Mind you, in myth Pelops was revived, repaired, and taken on board by the gods, Demeter (the bountiful goddess) having eaten of the pie and wanting to turn back time. The IMF, under Lagarde, have eaten of the pie and taken on board its central spice, the need for debt relief, and are now busy with time travel experiments.
Can’t cover all ideas in a summary. Read original.
On Twitter recently, someone posted that anyone who doesn’t understand the importance of the difference between a sovereign money supply and a non-sovereign money supply does not understand economics. I wholeheartedly agree with this. And the majority of comments I see on articles about the Greek situation confirms that most people don’t understand economics. I don’t even know where to begin with criticisms of the idea of a shared currency without shared government. There are three main problems:
Problem 1: It is very easy to get into debt: A country in the Euro has no control of its monetary policy. Therefore when Greece had negative real interest rates during the boom time, there was nothing it could do to prevent people borrowing money. When added to a government also borrowing to appease special interests, this can be disastrous. But Spain had this problem even whilst running government budget surpluses. A country in the Euro has very little control over fiscal policy due to the rules determining how much governments can borrow and save. So even if a government wanted to combat loose monetary policy with correctly tight fiscal policy, it couldn’t.
Problem 2: Once in debt is impossible to get out of debt: There are three main ways a government has historically gotten out of debt. The first is economic growth; a growing economy means that debt to GDP ratios go down as GDP rises. The second is inflation; if a government’s debt gets too large it can always resort to the printing press to help it out. The third is outright default.
Problem 3: After both of these are realised, economic growth becomes very difficult: Governments, chastened by the experience of Greece and knowing that they are effectively borrowing in a foreign currency, can not borrow much more. A sovereign nation would have no problem issuing 150 or 200% debt to GDP. The central bank would support them and they would know that real interest rates could not get too high. Not so a borrower of a foreign currency.
I think I show three things here:
• The only policy a country can follow if it wants to avoid debt crisis is to run a current account surplus.
• This leads to a policy of internal devaluation and deflation.
• This creates a positive feedback mechanism which leads to a spiral of deflation and unemployment.
This is true certainly as long as Germany insists on low inflation and trade surpluses but possibly anyway, just by the nature of the riskiness of sovereign borrowing. I would like to hereby offer my humble advice to the leaders in Europe; now is the time to give up on this unworkable idea before it becomes even more of a disaster.
Very good. “Two crises with the same cause but very different outcomes.”
The Great Recession and the Eurozone crisis are normally treated as different. Most accounts of the Great Recession see this as a consequence of a financial crisis caused by profligate lending by – in particular – US and UK banks. The crisis may have originated with US subprime mortgages, but few people blame the poor US citizens who took out those mortgages for causing a global financial crisis. With the Eurozone crisis that started in 2010, most people tend to focus on the borrowers rather than the lenders. Some ill-informed accounts say it was all the result of profligate periphery governments, but most explanations are more nuanced: in Greece government profligacy for sure, but in Ireland and other countries it was more about excessive private sector borrowing encouraged by low interest rates following adoption of the Euro.
Seeing things this way, it is a more complicated story, but still one that focuses on the borrowers. However if we see the Eurozone crisis from the point of view of the lenders, then it once again becomes a pretty simple story. French, German and other banks simply lent much too much, failing to adequately assess the viability of those they were lending to. Whether the lending was eventually to finance private sector projects that would end in default (via periphery country banks), or a particular government that would end up defaulting, becomes a detail. In this sense the Eurozone crisis was just like the global financial crisis: banks lent far too much in an indiscriminate and irresponsible way.
If borrowers get into difficulty in a way that threatens the solvency of lending banks, there are at least two ways a government or monetary union can react. One is to allow the borrowers to default, and to provide financial support to the banks. Another is to buy the problematic loans from the banks (at a price that keeps the banks solvent), so that the borrowers now borrow from the government. Perhaps the government thinks it is able to make the loans viable by forcing conditions on the borrowers that were not available to the bank.
The global financial crisis was largely dealt with the first way, while at the Eurozone level that crisis was dealt with the second way. Recall that between 2010 and 2012 the Troika lent money to Greece so it could pay off its private sector creditors (including many European banks). In 2012 there was partial private sector default, again financed by loans from the Troika to the Greek government. In this way the Troika in effect bought the problematic asset (Greek government debt) from private sector creditors that included its own banks in such a way as to protect the viability of these banks. The Troika then tried to make these assets viable in various ways, including austerity. Two crises with the same cause but very different outcomes.
Taking Syriza apart?
Greece’s embattled prime minister is expected to come under intense fire in the coming weeks after leading figures in his own leftwing Syriza party rebelled against the adoption of further austerity as the price of keeping bankruptcy at bay. The prospect of the crisis-hit country being thrown, headlong, into political turmoil drew nearer amid speculation that Alexis Tsipras will be forced not only to reshuffle his cabinet, possibly as early as Monday, but to call fresh elections in the autumn. “I cannot support an austerity programme of neoliberal deregulation and privatisation,” said his energy minister, Panagiotis Lafazanis, after refusing to endorse further tax increases and spending cuts in an early-morning vote on Saturday.
“If accepted by the [creditor] institutions and put into practice, they will exacerbate the vicious circle of recession, poverty and misery.” The Marxist politician, who heads Syriza’s militant wing and is in effect the government’s number three, was among 17 leftist MPs who broke ranks over the proposed reforms. Other defectors included the president of the 300-seat parliament, Zoe Konstantopoulou; the deputy social security minister, Dimitris Stratoulis; and the former London University economics professor Costas Lapavitsas. All described the policies – key to securing solvency in the form of a third bailout – as ideologically incompatible with Syriza’s anti-austerity platform.
Whatever the outcome of this weekend’s emergency summit, Tsipras will face intense pressure at home when he is forced to push several of the measures through parliament. The house is expected this week to vote on tax increases and pension cuts – crucial to receiving a bridging loan that will allow Athens to honour debt payments including €3bn to the ECB on 20 July. “It is very hard to see how a government with this make-up can pass these measures,” said the political commentator Paschos Mandravelis. “Already several prime ministers have been ousted during this crisis attempting to do that very thing. The idea of a leftist trying is almost inconceivable.”
Troika gutted the entire economy. Takes time to rebuild no matter what.
Greece has become so gloomy that even escapism no longer sells, the editor of the celebrity magazine OK! admits. “All celebrity magazines have to pretend everything is great, everyone is happy and relaxed, on holiday. But it is not,” says Nikos Georgiadis. Advertising has collapsed by three-quarters, the rich and famous are in hiding because no one wants to be snapped enjoying themselves – and even if OK! did have stories, a ban on spending money abroad means it is running out of the glossy Italian paper that the magazine is printed on. “We have celebrities calling and asking us not to feature them because they are afraid people will say ‘we are suffering and, look, you are having fun on the beach’,” Georgiadis says. “One did a photoshoot but then refused to do the interview. They don’t want to be in a lifestyle magazine.”
It might be easy to mock the panic of Greece’s gilded classes, if the only thing affected was the peddling of aspiration and envy. But the magazine provides jobs to many people whose lives are a world away from the ones they chronicle, and like thousands of others across Greece they are on the line as the government makes a last-ditch attempt to keep the country in the euro. “If we go back to the drachma, they told us the magazine will close. It’s possible we won’t have jobs to go to on Monday,” Georgiadis says bluntly, as negotiations with Greece’s European creditors headed towards the endgame.
Prime minister Alexis Tsipras pushed a €13bn austerity package through parliament early on Saturday, overcoming a rebellion by his own MPs and sealing a dramatic and unexpected transformation from charismatic opponent of cuts to their most dogged defender. It seemed like nothing so much as a betrayal of those he had called out in their millions less than a week earlier to reject an almost identical package of painful reforms. Greece’s creditors had soon made clear though that they were not ready to improve bailout terms, even to keep the country in the euro. And so after painful days of cash shortages, closed banks, dwindling supplies of anything imported, from medicine to cigarettes, and mounting fear, the extraordinary U-turn was met with more resignation than anger.
In the US.
The Oklahoma Supreme Court, in a 7-2 decision, has ordered a monument of the Ten Commandments removed from the Capitol. Calling the Commandments “religious in nature and an integral part of the Jewish and Christian faiths,” the court said the monument must go. Gov. Mary Fallin has refused. And Oklahoma lawmakers instead have filed legislation to let voters cut out of their constitution the specific article the justices invoked. Some legislators want the justices impeached. Fallin’s action seems a harbinger of what is to come in America — an era of civil disobedience like the 1960s, where court orders are defied and laws ignored in the name of conscience and a higher law. Only this time, the rebellion is likely to arise from the right.
Certainly, Americans are no strangers to lawbreaking. What else was our revolution but a rebellion to overthrow the centuries-old rule and law of king and Parliament, and establish our own? U.S. Supreme Court decisions have been defied, and those who defied them lionized by modernity. Thomas Jefferson freed all imprisoned under the sedition act, including those convicted in court trials presided over by Supreme Court justices. Jefferson then declared the law dead. Some Americans want to replace Andrew Jackson on the $20 bill with Harriet Tubman, who, defying the Dred Scott decision and fugitive slave acts, led slaves to freedom on the Underground Railroad.
New England abolitionists backed the anti-slavery fanatic John Brown, who conducted the raid on Harpers Ferry that got him hanged but helped to precipitate a Civil War. That war was fought over whether 11 Southern states had the same right to break free of Mr. Lincoln’s Union as the 13 colonies did to break free of George III’s England. Millions of Americans, with untroubled consciences, defied the Volstead Act, imbibed alcohol and brought an end to Prohibition. In the civil rights era, defying laws mandating segregation and ignoring court orders banning demonstrations became badges of honor. Rosa Parks is a heroine because she refused to give up her seat on a Birmingham bus, despite the laws segregating public transit that relegated blacks to the “back of the bus.”
In “Letter from Birmingham Jail,” Dr. King, defending civil disobedience, cited Augustine — “an unjust law is no law at all” — and Aquinas who defined an unjust law as “a human law that is not rooted in eternal law and natural law.” Said King, “one has a moral responsibility to disobey unjust laws.” But who decides what is an “unjust law”?