James K. Galbraith: The Greek Hope Jan 27, 2015 http://www.socialeurope.eu/2015/01/greek-hope/
Fifty-four years ago, in his inaugural address, President John F. Kennedy declared, “Let us never negotiate out of fear. But let us never fear to negotiate.” They were not the most soaring sentences in that short speech, but they were among the most important. For they signaled, deliberately and unmistakably to the Soviet Union, that the Cold War might be ended without turning hot, and that the world need not live forever under bluster, threat, and the shadow of nuclear war. Today, Europe faces a negotiation over debt and depression. On one side there will be the young government of Greece. On the other, the financial powers of Europe and the world. Now as then, the question of fear cannot be escaped. The European powers hold three cudgels as negotiations start. First, Greece has debts coming due this year that it cannot pay. Second, Greek banks rely on the Emergency Liquidity Assistance of the European Central Bank, which could be cut off. Third, Quantitative Easing gives the ECB a new way to insulate the rest of Europe from Greece’s agonies. Should Europe choose, these cudgels can be used to enforce a policy of threats, so as to maintain austerity, foreclosures and penury in Greece. Threats are in the air. The Telegraph summarized the EU finance ministers meeting on January 26: “The eurozone has ruled out debt forgiveness for Greece and warned its new anti-austerity coalition government must honour all past agreements…” The German government spokesman Mr. Steffen Seibert told the oligarchs at Davos that Greece must “take measures so that the economic recovery continues.” And that means “holding to its prior commitments and that the new government be tied in to the reform’s achievements.” Or as German Finance Minister Wolfgang Schäuble put it last December, “New elections change nothing”. To Greeks these comments must be a cruel joke. What economic recovery? What achievements? If elections change nothing, why bother to hold them? And of course the premise is that “prior commitments must be honored” is just stubborn dogma. What SYRIZA’s victory drove home, above all, is the unanswerable point that failed policies must be changed. UK Prime Minister David Cameron summarized the Greek view with British understatement: “What the Greek election will also show is that there are some warning signs in the global economy, including in the eurozone.” Well, yes. When policies fail, economies decline. Greeks are not alone in seeing the failure in front of their eyes. As the Telegraph reported, there are two issues: the agreements and the debt. On the first, Greece now proposes to recover command of its own fate. The experiment of troika control has been tried. The results are in. New policies to help the destitute and vulnerable, to stabilize the economy and to foster recovery, will be put in place. The past record of the Greek state is not good – this no one disputes. But the heavy-handed diktat that followed has been a disaster. The issue behind the debt write-down is only in part an issue of resources. The alternative of “extend and pretend” is after all a form of fiscal transfer. The problem is that the practice piles debt on top of debt, and this is the lever that keeps the country under tutelage, always in the position of begging. A write-down is the means back to policy autonomy. The form and precise terms are, in part, what negotiation is about. Talks under short deadlines, coercion and ultimatums would likely mean that Europe has taken the decision to prevent a real discussion and to blow up the talks at the start. If that is the decision, then the historical burden will be on those who took it, including for the chaos that may follow. What leverage does Greece have? Obviously, not much; the heavy weapons are on the other side. But there is something. Prime Minister Tsipras and his team can present the case of reason without threats of any kind. Then the right and moral gesture on the other side would be to throw the three cudgels out of the room, and in particular to grant fiscal space and to guarantee Greek financial stability while talks are underway. If that happens, then proper negotiations can proceed. On this issue, Chancellor Merkel has made some of the mildest comments so far. Possibly she understands that the choices she makes – very soon – will determine Europe’s future. In this situation, both halves of Kennedy’s dictum – drafted for him, by the way, by my father – apply. Greece must not be compelled to negotiate under fear. And Europe, for her part, must not fear to negotiate – calmly, without bluster or threats, in good faith. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
