From Bill Mitchell’s blog.
On Finland I want to highlight this quote, because I think this is very much what is happening in Finland, both at the political and at the public discussion level (because nearly all ‘economic wise men’ aka economists come from the same universities. Beyond that, Keynes has never gotten a foothold in Finland, I understand from all this.)
Finland, one of the fiercest supporters of austerity entered official recession. The Finnish response was they had to cut public spending harder because they would be in breach of the Stability and Growth Pact rules relating to size of the deficit and the volume outstanding public debt. These nations are so caught up in neo-liberal Groupthink that they cannot see how ridiculous their policies and supporting dialogue has become.
Please read this link and the post by Francesco Saraceno that I reblogged. It really seems that the ECB has been extremely political in its decision yesterday. Who can still believe it will negotiate in good faith? This stuff is escalating faster than I though possible…
Naked Capitalism has been quite pessimistic on the prospects of Yanis Varoufakis to turn the situation around, despite his considerable skills in economics and game theory. Some links on this (in chronological order):
Syriza Walks Back Initial Defiance
The ECB Ready to Put a Choke Chain on Syriza
Greek Finance Minister Varoufakis Retreats on Debt Writedowns, Public Spending Promises
The ECB now decides to play hardball. The most important thing that Greece needed was time. Time to negotiate, time to build an alternative discourse, time to make connections. The ECB put an end to that hope. The deadline now is the end of the month. Please read: The ECB Tightens the Choke Chain on Greece
With a bank run underway and funds unlikely to return any time soon, Greece is utterly dependent on ECB support unless it is willing to have its banking system collapse. And that blow in an already prostrated economy is something that Syriza cannot responsibly inflict on voters, particularly when it shifted its campaign in the weeks before election to a moderate, pro-Eurozone posture. The ECB has issued its diktat and Greece has no choice but to fold. Varoufakis may still win some concessions around the margin, but the message is clear: he will get no big breaks on any of his major issues. The most he can hope to get is whatever the Troika is willing to trade for the Syriza’s commitment to taking on the oligarchs and reforming its tax system.
This does not end well. Before you know it, there will be a new election, because the ECB crushed the new government, and then the Greek Nazis will come to power. Well played, Europe.
If you don’t understand the reference, go read 1984. After that, read this post, which in good Dutch ‘maakt gehakt’ (makes ground meat) of the Commission’s forecasts. Again an essential post by Bill Mitchell. It is so important not only to have data but also have a proper model, otherwise it still is “garbage in, garbage out”. If I were an entrepreneur, I wouldn’t rely on these kinds of statistics one but.
Europe has subjected the Greek people to a cruel experiment http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100027028/europe-has-subjected-the-greek-people-to-a-cruel-experiment/
It is more than a tragedy for Greece, it is a moral outrage and a miserable failure of the policy elites (Schäuble, Merkel, Rutte, Dijsselbloem, Urpilainen, Rehn and company).
I guess that when Germany, Finland and the Netherlands finally understand the tremendous stupidity of “structural reforms” and austerity policies, both domestically and in the “periphery” it will be far too late to repair Europe as an idea of freedom, welfare and social progress. And the idea of European democracy has already flown out of the window a long time ago.