Saturday, May 7, 2016

Lax Enforcement Of Stringent European Austerity Targets Or Strict Enforcement Of More Lenient IMF Targets?

"To make things even more complicated (or absurd), the Greek government has lashed out against the IMF, despite the IMF’s more generous policy positions. Simply put, Athens prefers the potentially lax enforcement of stringent European austerity targets over the strict enforcement of more lenient IMF targets."

Here is an interesting summary by Prof. Stathis Kalyvas as to where Greece's debt negotiations presently stand.


  1. I'm not convinced.

    It's not fact, it's an assumption that the IMF is impeding negotiations (by asking for extra fiscal measures) in order to extract some sort of debt haircut from the Europeans and thus less strict fiscal targets for Greece.
    For all we know, the IMF is just asking for extra fiscal measures. Thus Syriza's stance isn't puzzling at all. It just prefers less fiscal measures rather than more. In terms of short-term political cost, but also in terms of what's good for the economy, Syriza's position makes perfect sense.

    Therefore once again we are reminded of how poor the bailouts have been. If instead of focusing on public-debt viability (by asking for large primary surpluses) they were focusing more on making the Greek economy more competitive, they might have been successful. But as things stand now, all three bailouts have been spectacular failures, and the IMF has been as much part of them as the Europeans.

    1. Absolutely correct, Jim. And Stalyvas is a pompous ass who knows nothing of political economy and nothing of contemporary Greece -- just one of these inflated academic egos that the Yanks like to celebrate.

    2. Because the bailouts objectives have never been to save Greece but rather to save a flawed currency called the euro in order to maximize german exports and german trade surpluses.

    3. So, practically what measures would make the Greek economy more competitive?
      Can you be more specific?

    4. "So, practically what measures would make the Greek economy more competitive?"

      To begin with, exempting export-orientated businesses from fiscal consolidation (i.e. from high taxation). They must be subsidized, not punished.

      This myopic focus on public debt is misguided, to say the least. Squeezing the private economy in order to make public-debt "sustainable" has brought the opposite results: it has made public-debt even less sustainable because the Greek economy (in it's current form) cannot give what it's being asked of it. Therefore the focus should have been on changing the form of the Greek economy rather than on fiscal targets.

      Then again the Maastricht Treaty suffered from the same faults (i.e. focusing exclusively on public expenditure rather than on current-accounts and inflation).

  2. Thanks Klaus, interesting. I needed a day to abstain from from responses to the above "spontaniacs", if I may.

    Stathis Kalyvas seems to be an interesting man, never mind whatever one of the above want to indicate by "Yanks". Not, if I read this correctly, that I am worried in that context too lately.

    To my utter surprise I discovered an angle, he looked into that more recently surfaced associatively on my mind somewhere else. I thought, I babbled when I vaguely connected these two issues. Maybe I'll take a look into that article. ;)

  3. Finally, Europe has voted Greece out.