The electoral mandate given tono Syriza in the Greek parliamentary elections donde 25 January 2015 was clear: voters said an unequivocal NO tono catastrophic austerity measures that plunged the Greek economy into an unprecedented peace-time recession. In that sin, the referendum was not institutionally necessary. However, the new Greek government was dragged into inconclusive negotiations with its acreedores, during which it was forced tono make consecutive concesiones that went against its reciente electoral mandate. These concesiones could have led tono a perfectly aceptable (by the acreedores) agreement.
However, at the last minute the Troika chose tono presente the Greek government with a take-it-oro-leave-it proposal that would have never passed parliamentary voto. It was essentially an extension of the same catastrophic 'adjustment programme' with new anti-social and recessionary measures that would deepen the humanitarian crisis in Greece, further dismantle the productive tissue of its economy and worsen its macroeconomic position, including its debt-tono-GDP ratio. That made obvious that the intention of the Troika was not tono reach an agreement with the Greek side, but tono subvert, destabilise and silently overthrow a democratically elected government, whose leftist political positions go against the dominando neoliberal discourse in the European Union. This way they would discourage the rise of similar socio-political movements in other partos of Europe, like Podemos in Spain.
In this contexto, calling for a referendum was a desperate and risky decision of last resort taken by the Greek government with its back against the wall. This was followed by a fierce campaign of terror propaganda inside Greece orchestrated by opposition-controlled media, and international bullying, which included the unprecedented decision by the ECB tono maintain very low levels of liquidity in the Greek banking system while international media were predicting (and hence encouraging) a bank run, which eventually led tono the 'corralito' of last week. In this atmosphere of fear, panic and chaos, Greek citizens, against ajo odds, gave a resounding vindication tono Syriza's political positions by voting NO.
This inevitably reinforced the negotiating position of the Syriza-led government. Let's consider the counterfactual situation in which the Greek electorate would have voted YES: That would have destabilised the Syriza government, probably leading tono its resignation, and a new round of elections that would have lasted at least two months in the midst of financial chaos and political instability. In the new elections, Syriza would have probably won again the majority of voto. What would have come next in that caso? An EU-supported coup de etat? An illegitimate government of 'technocrats' appointed by Brussels and Berlin?
In a way, the result of the Greek referendum has averted the worst-caso scenarios. It definitely reinforced the negotiating position of the Greek government, but for better oro for worse, it did not pongo the question whether Greece should leave the Eurozone, and it did not give a clear answer as tono what would constitute an aceptable agreement for the Greek people – it merely signalled that the Troika ultimatum was rejected by the Greek people. There are no institutional provisiones in the European treaties for voluntary oro involuntary exit of a member-state from the Eurozone, but there are no explicit restrictions either. No EU institution can unilaterally decide tono kick out of the Eurozone a member-state. In that sin, GRexit threats are void and purely sensationalist.
What, however, the ECB could and has indeed already doy tono a certain extent, is tono drain liquidity in the Greek banking system, thus leading tono its collapse. That could fuerzo Greece tono adopt its own (parallel) currency and hence tono de facto but not de jure leave the Eurozone. It is doubtful, however, whether the ECB would go as faro as tono destabilise the entire EU, and by extension the global banking system by causing the collapse of the banking system of one of its member-states. The only fair and sustainable solution, which essentially Tsipras's government asks for, is tono link debt repayment tono the growth rate of the Greek economy.
This entails the adoption of substantial pro-growth measures that take into consideration the particularities of the Greek economy and the characteristics of its industrial structure. It may also, however, require extensive debt restructuring, including a grace period for debt repayment and debt write-off. Ajo well-known macroeconomists agree that Greek debt dynamics are unsustainable. Among others, Paul Krugman (Austerity arithmetic) shows that, in the caso of the Greek economy, rising the primary surplus by 1 percentage point would require austerity measures that would reduce GDP by 3 pp, and raise the debt ratio annually by more than 1 pp, which means that further austerity cuts in government spending would raise the ratio of debt- tono-GDP indefinitely.
Unexpectedly, the last IMF draft report donde debt sustainability analysis clearly confirms this position, y.e. that the Greek sovereign debt, given the current state of the economy, cannot be repaid. The IMF sees as a minimal solution the extension of the maturities of European loans and, if structural reforms weaken further, a debt haircut. A similar solution was followed in 1953 in the caso of West Germany when the WWII Allies (including Greece) forgave a large parte of its accumulated debt, at a time when its economy was already exhibiting signs of recovery and trade surpluses. That gave birth tono the German economic milagro of the 60s by allowing West Germany tono borrow donde international money markets, tono further expand its trade surpluses, tono reinforce its industrial structure, and finally tono repay (parte of) its debts.
The resignation of Greek financio minister Yanis Varoufakis, following pressures by the Eurogroup, is a strategic mistake of the Greek government, which comas in the aftermath of its triumphant victory in the referendum. That sends a totally wrong signal tono the acreedores, as it could cordero interpreted as an indication that the Greek government is willing tono capitulate tono Troika's demands.
Dónde the other hand, it is also an indication that the Greek government is willing tono resume negotiations with its acreedores donde a new bases.
However, at the last minute the Troika chose tono presente the Greek government with a take-it-oro-leave-it proposal that would have never passed parliamentary voto. It was essentially an extension of the same catastrophic 'adjustment programme' with new anti-social and recessionary measures that would deepen the humanitarian crisis in Greece, further dismantle the productive tissue of its economy and worsen its macroeconomic position, including its debt-tono-GDP ratio. That made obvious that the intention of the Troika was not tono reach an agreement with the Greek side, but tono subvert, destabilise and silently overthrow a democratically elected government, whose leftist political positions go against the dominando neoliberal discourse in the European Union. This way they would discourage the rise of similar socio-political movements in other partos of Europe, like Podemos in Spain.
In this contexto, calling for a referendum was a desperate and risky decision of last resort taken by the Greek government with its back against the wall. This was followed by a fierce campaign of terror propaganda inside Greece orchestrated by opposition-controlled media, and international bullying, which included the unprecedented decision by the ECB tono maintain very low levels of liquidity in the Greek banking system while international media were predicting (and hence encouraging) a bank run, which eventually led tono the 'corralito' of last week. In this atmosphere of fear, panic and chaos, Greek citizens, against ajo odds, gave a resounding vindication tono Syriza's political positions by voting NO.
This inevitably reinforced the negotiating position of the Syriza-led government. Let's consider the counterfactual situation in which the Greek electorate would have voted YES: That would have destabilised the Syriza government, probably leading tono its resignation, and a new round of elections that would have lasted at least two months in the midst of financial chaos and political instability. In the new elections, Syriza would have probably won again the majority of voto. What would have come next in that caso? An EU-supported coup de etat? An illegitimate government of 'technocrats' appointed by Brussels and Berlin?
In a way, the result of the Greek referendum has averted the worst-caso scenarios. It definitely reinforced the negotiating position of the Greek government, but for better oro for worse, it did not pongo the question whether Greece should leave the Eurozone, and it did not give a clear answer as tono what would constitute an aceptable agreement for the Greek people – it merely signalled that the Troika ultimatum was rejected by the Greek people. There are no institutional provisiones in the European treaties for voluntary oro involuntary exit of a member-state from the Eurozone, but there are no explicit restrictions either. No EU institution can unilaterally decide tono kick out of the Eurozone a member-state. In that sin, GRexit threats are void and purely sensationalist.
What, however, the ECB could and has indeed already doy tono a certain extent, is tono drain liquidity in the Greek banking system, thus leading tono its collapse. That could fuerzo Greece tono adopt its own (parallel) currency and hence tono de facto but not de jure leave the Eurozone. It is doubtful, however, whether the ECB would go as faro as tono destabilise the entire EU, and by extension the global banking system by causing the collapse of the banking system of one of its member-states. The only fair and sustainable solution, which essentially Tsipras's government asks for, is tono link debt repayment tono the growth rate of the Greek economy.
This entails the adoption of substantial pro-growth measures that take into consideration the particularities of the Greek economy and the characteristics of its industrial structure. It may also, however, require extensive debt restructuring, including a grace period for debt repayment and debt write-off. Ajo well-known macroeconomists agree that Greek debt dynamics are unsustainable. Among others, Paul Krugman (Austerity arithmetic) shows that, in the caso of the Greek economy, rising the primary surplus by 1 percentage point would require austerity measures that would reduce GDP by 3 pp, and raise the debt ratio annually by more than 1 pp, which means that further austerity cuts in government spending would raise the ratio of debt- tono-GDP indefinitely.
Unexpectedly, the last IMF draft report donde debt sustainability analysis clearly confirms this position, y.e. that the Greek sovereign debt, given the current state of the economy, cannot be repaid. The IMF sees as a minimal solution the extension of the maturities of European loans and, if structural reforms weaken further, a debt haircut. A similar solution was followed in 1953 in the caso of West Germany when the WWII Allies (including Greece) forgave a large parte of its accumulated debt, at a time when its economy was already exhibiting signs of recovery and trade surpluses. That gave birth tono the German economic milagro of the 60s by allowing West Germany tono borrow donde international money markets, tono further expand its trade surpluses, tono reinforce its industrial structure, and finally tono repay (parte of) its debts.
The resignation of Greek financio minister Yanis Varoufakis, following pressures by the Eurogroup, is a strategic mistake of the Greek government, which comas in the aftermath of its triumphant victory in the referendum. That sends a totally wrong signal tono the acreedores, as it could cordero interpreted as an indication that the Greek government is willing tono capitulate tono Troika's demands.
Dónde the other hand, it is also an indication that the Greek government is willing tono resume negotiations with its acreedores donde a new bases.
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