În ciuda rolului pe care l-au jucat în declanșarea crizei din Grecia, băncile stau total lipsite de griji. Este însă timpul ca ele să fie supuse unui control cât mai dur, scrie pentru The Atlantic Chris Arnade, fost trader pe Wall Street.
Una dintre primele lecții învățate pe Wall Street a fost ”Găsește fraierul”. Era un principiu. Descrierea lui mai detaliată, repetată pe un ton răstit, era: ”Găsește un idiot cu bani și îndeasă-i pe gât cât de mult rahat intră. Dar fii drăgut cu el la început”.
Când m-am angajat la Salomon Brothers, în ’93, ”fraierul” erau clienții japonezi (majoritatea mici bănci și companii industriale mari). În primii cinci ani am conceput produse financiare complexe cu marje de profit uriașe pentru noi – ”deșeuri toxice” în argoul de pe Wall Street. Le vindeam aceste produse. La finalul anilor 1990 mulți dintre acești clienți au falimentat, în parte din cauza deșeurilor pe care le vindeam noi, în parte din cauza altor prostii pe care le cumpărau.
Lansarea monedei unice europene, euro, a deschis o perioadă de încredere financiară în Europa, iar noi cei de pe Wall Street am început să profităm de un alt ”fraier”: băncile europene. Mai precis, băncile din nordul Europei.
Din 2002 și până la criza financiara din 2008, Wall Street-ul a aruncat pe gâtul acestor bănci câte deșeuri toxice au încăput. Nu a fost greu. Ca și clientii japonezi de dinaintea lor, băncile europene cumpărau cu nemiluita active din toată lumea.
Aveau un asemenea apetit, încât Wall Street-ul a ajutat fondurile cu capital de risc să conceapă produse financiare special pentru aceste bănci, majoritatea formate din ipoteci subprime riscante. Aceste produse – băncile le numeau ”monstruozități” și apoi presa le-a numit ”FĂCUTE să eșueze” nu puteau fi concepute decât pentru cumpărători total nechibzuiți, iar băncile europene erau astfel de cumpărători.
Când o bancă cumpără active, ea împrumută bani; vânzătorul este creditorul. Cumparând active, băncile europene făceau ce trebuie să facă o bancă – să împrumute. Dar făcând asta în mod imprudent făceau ce o bancă nu trebuie sa facă: să împrumute fără cap.
Băncile europene nu împrumutau în acest fel nechibzuit doar Statele Unite. Împrumutau și în Europa, inclusiv guvernele Spaniei, Portugaliei și Greciei.
În 2008, când piața imobilară din SUA s-a prăbușit, băncile europene au pierdut mult. Și-au acoperit aceste pierderi îndreptăndu-și atenția către Europa, unde au continuat să împrumute guvernele – adică cumpărând datoriile acelor state – deși asta începea să fie un lucru nebunesc. Multe dintre statele sudice au început să dea semnale îngrijorătoare.
În 2010, una dintre aceste țări, Grecia, nu a mai putut să-și plătească creditele. Timp de un deceniu, Grecia acumulase o datorie masivă, rezultat al faptului că prea mulți oameni cumpăraseră prea mult, prea puțini greci își plăteau taxele și au fost făcute prea multe promisiuni de către politicieni prea corupți, toate îmbrăcate în haina unor calculefinanciare îndoielnice. În ciuda acestor probleme clare, bancherii au continuat să împrumute Grecia.
Această criză greacă din 2010 a fost redusă temporar printr-un împrumut internațional care a venit însoțit de măsuri dure pentru Grecia. Acest împrumut nu a oferit Greciei și o reducere a datoriei, ci țara a împrumutat astfel și mai mulți bani pentru a-și putea plăti creditele, permițând astfel băncilor să piardă cât mai puțin. A fost un împrumut pentru salvarea băncilor, numai că s-a numit împrumut pentru salvarea Greciei.
Grecia s-a zbătut mult, cu o scădere economică de proporții istorice, cu costuri umane care abia pot fi înțelese. Grecia a avut nevoie de un nou împrumut in 2012 și de încă unul în urmă cu două săptămâni.
În timp ce grecii suferă, băncile din nordul Europei ar trebui să-și asume responsabilitatea financiară, legală și etică pentru deciziile lor nechibzuite. Împrumutând mai degrabă băncile decât Grecia, în 2010, politicienii au transferat orice pierderi în Grecia în spatele cetățenilor europeni. De atunci comunicarea a fost viciată de un sentiment naționalist: nu te uita la băncile imprudente, uită-te la cei care împrumută imprudent.
UE a început printr-un acord economic privind industria oțelului și cărbunelui si cu multe bune intenții. Cel puțin parțial a fost o încercare de a limita prin mijloace economice riscul naționalismului care a dus la ultimele doua războaie. Uniunea economică a devenit apoi o unioune monetară care a oferit băncilor ocazia de a crește și șansa de a deveni ”fraierul”. Modificarea legislației a oferit băncilor posibilitatea de a trata în mod egal țările europene; Grecia, din punct de vedere al legislației, prezenta la fel de multe sau de puține riscuri ca și Germania.
Piețele au gândit în mod diferit, impunând Greciei un preț mai mare pentru împrumuturi decât Germaniei. Băncile nordice, văzând că pot obține profituri în mod facil, au început să împrumute Grecia, primind bani mai mulți pentru ”aceleași riscuri”. Europa de Sud (în special Grecia) a început să împrumute mai mult, permițând băncilor să cumpere mai mult, ceea ce a dus la o creștere a sectorului bancar. Această creștere a ieftinit împrumuturile, iar pentru a obțineprofit, băncile au început să împrumute mai mult și de aici un cerc vicios.
De pe urma fenomenului a beneficiat toată lumea, în special țările din nordul Europei. Sudul s-a ridicat pe măsură ce se dezvolta piața imobiliară, iar nordul s-a ridicat pe măsură ce industria vindea produsele în Sud. Băncile erau la mijloc, bucuroase că pot obține mari profituri.
Acest tip de feedback a fost unul specific european, depinzând de falsa senzație de stabilitate oferită de moneda unică, ceea ce a întărit sentimentul bancherilor că țările din euro nu pot intra în incapacitate de plată. Această bulă a continuat până când datoria Greciei a devenit mult prea mare pentru a fi ignorată de piețelefinanciare. Zguduite de criza imobiliară din SUA, piețele au devenit brusc sceptice și astfel Grecia a trebuit să plătească și mai mult pentru a împrumuta. Băncile europene, băgate până la gât în această poveste, încă doreau să împrumute, însă alte bănci erau mai prudente.
În 2010 această situație nu mai putea continua, iar piețele au refuzat să mai împrumute Grecia. Țara a avut nevoie de un împrumut internațional.
Acesta a fost însă conceput mai mult pentru a salva băncile, nu Grecia: în loc să i se șteargă o parte din datorie, Greciei i s-a impus sa plătească în continuare. Au fost împrumutați bani și de o serie de entități publice (Comisia Europeană, FMI, Banca Centrală Europeană). Băncile au răsuflat ușurate, căci majoritatea banilor din împrumuturi treceau doar prin Grecia și apoi se vărsau în buzunarele lor. Pentru a funcționa cât mai bine ca o conductă către băncile din nordul Europei, Greciei i s-a cerut să cheltuiască mai puțin, să taxeze cetățenii mai mult și să-și restructureze sectorul public.
Nu a mers. Grecia a intrat într-o depresiune economică. Doi ani mai târziu era din nou incapabilă să-și plătească datoria și a mai cerut un împrumut . De această dată a fost redusă și datoria Greciei, cu cel mult 40%, însă băncile au pierdut foarte puțin, pentru că majoritatea datoriilor către ele fuseseră plătite.
Primul împrumut mascat pentru bănci, cel din 2010, a folosit un discurs despre incompetența, lăcomia și trândăvia țărilor din sudul Europei. Acest discurs a permis băncilor să joace rolul părinților supărați pe odraslele lor imature.
Discursul acesta a fost încurajat și politizat prin transformarea oricăror pierderi viitoare în Grecia într-o povară pentru toți cetatenii europeni, în special o povară pentru cei din nordul continentului și astfel s-a încurajat apariția logicii ”noi împotriva lor”. A fost o formă de politică naționalistă, adica antiteza principiilor monedei comune.
De ce în 2010 au fostîmprumutate băncile mai degrabă decât Grecia? De ce i s-a cerut Greciei să-și schimbe modul de funcționare, de ce a fost acuzată de contractarea unor împrumuturi riscante și de ce nu au fost acuzate băncile?
Un argument este acela că Europa nu este suficient de coordonată pentru a face asta. S-a spus că băncile europene erau mult prea fragile pentru a suferi pierderi. Aceste pierderi s-ar fi propagat în Europa, ducând la prăbușirea altor banci din alte state și, în final, ar fi distrus zonaeuro. Pe aceeași logică s-a pus că băncile erau mult prea importante pentru sănătatea economiei, indiferent de cât de nechibzuit s-ar fi comportat, și astfel ele nu pot fi pedepsite. În timpuri de criză, acest raționament este folosit frecvent pentru a-i favoriza pe creditori în dauna celor care au împrumutat. Este un raționament puternic pentru că este adevărat. Însă, pe de altă parte, este un raționament care arată că băncile trebuie să fie extrem de bine controlate, pentru a preveni un asemenea comportament înainte ca el să distrugă țări intregi și economii întregi.
Politicienii și bancherii pot calcula costul imediat al prăbușirii unei bănci. Ei nu pot însă calcula suferințele umane pe termen lung care seproduc din cauza asta. Grecia trece printr-o perioadă mai grea decât cea din Statele Unite în timpul marii crize din anii 1930. Sărăcia, lipsa unui acoperiș deasupra capului au atins cote uriașe. O întreagă generație și-a vazut prezentul condamnat, iar viitorul în culori și mai sumbre decât prezentul.
Este partea tristă a unui vechi stereotip: când creditorii și debitorii se contrazic, cei din urmă sunt acuzați și tot ei sunt cei care suferă.
______________________________
Back in 1998 in Indonesia, I saw how the I.M.F. ruined that country’s banking system. I recall the picture of Michel Camdessus, the managing director of the I.M.F. at the time, standing over President Suharto as Indonesia surrendered its economic sovereignty. At a meeting in Kuala Lumpur in December 1997, I warned that there would be bloodshed in the streets within six months; the riots broke out five months later in Jakarta and elsewhere in Indonesia. Both before and after the crisis in East Asia, and those in Africa and in Latin America (most recently, in Argentina), these programs failed, turning downturns into recessions, recessions into depressions. I had thought that the lesson from these failures had been well learned, so it came as a surprise that Europe, beginning a half-decade ago, would impose this same stiff and ineffective program on one of its own.
Whether or not the program is well implemented, it will lead to unsustainable levels of debt, just as a similar approach did in Argentina: The macro-policies demanded by the troika will lead to a deeper Greek depression. That’s why the I.M.F.’s current managing director, Christine Lagarde, said that there needs to be what is euphemistically called “debt restructuring” — that is, in one way or another, a write-off of a significant portion of the debt. The troika program is thus incoherent: The Germans say there is to be no debt write-off and that the I.M.F. must be part of the program. But the I.M.F. cannot participate in a program in which debt levels are unsustainable, and Greece’s debts are unsustainable.
Austerity is largely to blame for Greece’s current depression — a decline of gross domestic product of 25 percent since 2008, an unemployment rate of 25 percent and a youth unemployment rate twice that. But this new program ratchets the pressure up still further: a target of 3.5 percent primary budget surplus by 2018 (up from around 1 percent this year). Now, if the targets are not met, as they almost surely won’t be because of the design of the program itself, additional doses of austerity become automatic. It’s a built-in destabilizer. The high unemployment rate will drive down wages, but the troika does not seem satisfied by the pace of the lowering of Greeks’ standard of living. The third memorandum also demands the “modernization” of collective bargaining, which means weakening unions by replacing industry-level bargaining.
None of this makes sense even from the perspective of the creditors. It’s like a 19th-century debtors’ prison. Just as imprisoned debtors could not make the income to repay, the deepening depression in Greece will make it less and less able to repay.
Structural reforms are needed, just as they were in Indonesia, but too many that are being demanded have little to do with attacking the real problems Greece faces. The rationale behind many of the key structural reforms has not been explained well, either to the Greek public or to economists trying to understand them. In the absence of such an explanation, there is a widespread belief here in Greece that special interests, in and out of the country, are using the troika to get what they could not have obtained by more democratic processes.
Consider the case of milk. Greeks enjoy their fresh milk, produced locally and delivered quickly. But Dutch and other European milk producers would like to increase sales by having their milk, transported over long distances and far less fresh, appear to be just as fresh as the local product. In 2014 the troika forced Greece to drop the label “fresh” on its truly fresh milk and extend allowable shelf life. Now it is demanding the removal of the five-day shelf-life rule for pasteurized milk altogether. Under these conditions, large-scale producers believe they can trounce Greece’s small-scale producers.
In theory, Greek consumers would benefit from the lower prices, even if they suffered from lower quality. In practice, the new retail market is far from competitive, and early indications are that the lower prices were largely not passed on to consumers. My own research has long focused on the importance of information and how firms often try to take advantage of the lack of information. This is just another instance.
One underlying problem in Greece, in both its economy and its politics, is the role of a group of wealthy people who control key sectors, including banks and the media, collectively referred to as the Greek oligarchs. They are the ones who resisted the changes that George Papandreou, the former prime minister, tried to introduce to increase transparency and to force greater compliance with a more progressive tax structure. The important reforms that would curb the Greek oligarchs are largely left off the agenda — not a surprise since the troika has at times in the past seemed to have been on their side.
As it became clear early on in the crisis that the Greek banks would have to be recapitalized, it made sense to demand voting shares for the Greek government. This was necessary to ensure that politically influenced lending, including to the oligarchic media, be stopped. When such connected lending resumed — even to media companies that on strictly commercial terms should not have gotten loans — the troika turned a blind eye. It has also been quiescent as proposals were put forward to roll back the important initiatives of the Papandreou government on transparency and e-government, which dramatically lowered drug prices and put a damper on nepotism.
Normally, the I.M.F. warns of the dangers of high taxation. Yet in Greece, the troika has insisted on high effective tax rates even at very low income levels. All recent Greek governments have recognized the importance of increasing tax revenues, but mistaken tax policy can help destroy an economy. In an economy where the financial system is not functioning well, where small- and medium-size enterprises can’t get access to credit, the troika is demanding that Greek firms, including mom and pop stores, pay all of their taxes ahead of time, at the beginning of the year, before they have earned it, before they even know what their income is going to be. The requirement is intended to reduce tax evasion, but in the circumstances in which Greece finds itself, it destroys small business and increases resentment of both the government and the troika.
This requirement seems at odds, too, with another of the demands with which Greece has been confronted: that it eliminate its cross-border withholding tax, which is the withholding tax on money sent from Greece to foreign investors. Such withholding taxes are a feature of good tax systems in countries like Canada and are a critical part of tax collection. Evidently, it is less important to ensure that foreigners pay their taxes than that Greeks do.
There are many other strange features of the troika bailout packages, in part because each member of the troika has its favorite medicine. As doctors warn, there can be dangerous interactions. The battle, however, is not just about Greece. It’s not even just about the money, although special interests in the rest of Europe and some within Greece itself have taken advantage of the troika to push their own interests at the expense of ordinary Greek citizens and the country’s overall economy. This is something I saw repeatedly firsthand when I was at the World Bank, most noticeably in Indonesia. When a country is down, there is all manner of mischief that can be done.
But these policy debates are really about ideology and power. We all know that. And we understand that this is not just an academic debate between the left and the right. Some on the right focus on the political battle: the harsh conditions imposed on the left-wing Syriza government should be a warning to any in Europe about what might happen to them should they push back. Some focus on the economic battle: the opportunity to impose on Greece an economic framework that could not have been adopted any other way.
I believe strongly that the policies being imposed will not work, that they will result in depression without end, unacceptable levels of unemployment and ever growing inequality. But I also believe strongly in democratic processes — that the way to achieve whatever framework one thinks is good for the economy is through persuasion, not compulsion. The force of ideas is so much against what is being inflicted on and demanded of Greece. Austerity is contractionary; inclusive capitalism — the antithesis of what the troika is creating — is the only way to create shared and sustainable prosperity.
For now, the Greek government has capitulated. Perhaps, as the lost half decade becomes the lost decade, as the politics get uglier, as the evidence mounts that these policies have failed, the troika will come to its senses. Greece needs debt restructuring, better structural reforms and more reasonable primary budget surplus targets. More likely than not, though, the troika will do what it has done for the last five years: Blame the victim.
Joseph E. Stiglitz is a Nobel laureate in economics, a professor at Columbia and the author, most recently, of “The Great Divide: Unequal Societies and What We Can Do About Them.”
Dave Coyne Goshen IN 2 days ago
This is so hopeless, so sad, and perfectly avoidable. You have to wonder what on earth European leaders are thinking. Then, you look at the congressional majority in Washington. It is truly astonishing to witness the role that stupidity and ignorance play in the course of human events.
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dairubo MN 2 days ago
Listen to Stiglitz, world. The knowledge Troika is Stiglitz, Krugman and Piketty. So long as you accept the corporatist Troika neoliberal economic myths instead of listening to the knowledge Troika, you will be treated as peons of the elite.
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John D. Out West 2 days ago
Specific details about the policies imposed on Greece have been missing from every single article I've read about the crisis, until now. Thank you, Dr. Stiglitz, for naming and explaining several of them. And shame on the NYT and every other media outlet for NEVER detailing specifics at any time during this extremely long, drawn-out crisis.
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Steve Hunter Seattle 2 days ago
Have you ever met a banker that does want to punish a debtor for even the slightest malfeasance? Have you ever met a banker that owned up to his own errors in judgement or criminal or immoral acts? Banks should not be large, should be tightly controlled by governments and their action made transparent. Most of Wall Street should be in prison as we speak.
The Greeks should have abandoned the Euro, defaulted on the debt, returned to their own currency and turned their backs on the troika. They would have suffered in the short term but eventually pulled out of this bottomless pit that they are in: I'm pulling for them.
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Chris Miilu Chico, CA 2 days ago
Will Germany eventually own Greek real estate: beaches, shorelines, and any other part of Greece Germany thinks would be good for a military add-on? In other words, will Germany loot Greece as it looted Poland, Czechoslovakia and Belgium? Germany has a history of arrogance and bullying; this appears to be more of the same. Why did European bankers loan a failing government so much money? Altruism? No. They created a permanent debtor nation with assets they coveted.
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SMS Rhinebeck, NY 2 days ago
I urge readers to read Tariq Ali's essay in the 30 July 2015 London Review of Books (link below):
http://www.lrb.co.uk/v37/n15/tariq-ali/diary
Excerpt:
….
Greece, in fact, has a lot of tanks, because the German and French arms industries, eager to get rid of surplus hardware in a world where wars are fought by bombers and drones, bribed the politicians. During the first decade of this century Greece was among the top five importers of weapons, mainly from the German companies Ferrostaal, Rheinmetall and Daimler-Benz. In 2009, the year after the crash, Greece spent €8 billion – 3.5 per cent of GDP – on defence. The then Greek defence minister, Akis Tsochatzopoulos, who accepted huge bribes from these companies, was convicted of corruption by a Greek court in 2013. Prison for the Greek; small fines for the German bosses. None of this has been mentioned by the financial press in recent weeks. It didn’t quite tally with the need to portray Greece as the sole transgressor. Yet a Greek court has been provided with conclusive evidence that the largest tax avoider in the country is Hochtief, the giant German construction company that runs Athens airport. It has not paid VAT for twenty years, and owes 500 million euros in VAT arrears alone. Nor has it paid the contributions due to social security. Estimates suggest that Hochtief’s total debt to the exchequer could top one billion euros.
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Thomas Stuttgart, Germany 2 days ago
Greece has fourteen profitable airports. These are to be sold (privatized), well below value, to a German company (Fraport), whose majority shareholders are the German and a German State government. As for the remaining airports in Greece: well they are unprofitable and therefore Greece's problem.
In Reply to John D. 147Recommend
Arthur is a trusted commenter UWS 2 days ago
First take away the a country's sovereignty, so that it cannot chose how to address its needs. Then build an economic program which is bound to fail. "Reform" the country's commerce to benefit foreign interests. Then defang labor unions, which provide countervailing power to the wealthy, and the privileged.
I see a problem: the Greeks are neither stupid nor subservient. They have tried parliamentary politics against this program and have failed. The upcoming months may not be as peaceful as the Euro Zone leaders expect.
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Bevan Davies Maine 2 days ago
Joseph Stiglitz writes eloquently about the terrible situation in which the Greeks find themselves. It should be obvious to any fair-minded observer that there is a great danger of severe civil unrest in Greece. Just as it happened in Indonesia and Argentina during their crises, things could spiral out of control in Athens and other large cities; this in turn could spread to other European countries.
There is a great deal at stake for the European Union, and allowing this economic tragedy to continue may have unintended consequences that no one can predict.
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coverstory1 New York 2 days ago
Excellent article. One could sense this is really about destroying unions, impoverishing the people, and enriching the rich and powerful . Stieglitz gives excellent concrete examples, like the destruction of local, fresh milk. The evilness of the crooked troika make me sick.
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Brian Germany 2 days ago
I wish this opinion would be translated into German and run in the Spiegel and other major newspapers. An honest and objective debate about the future of the Euro needs to acknowledge that the Euro has created winners and losers. In Germany, not everyone has benefited from the Euro and those who have have not passed those artificial gains along to society. The German finance minister, Mr. Schaeuble is now proposing a Euro-Tax, naturally to be paid for by those who have not benefited from the Euro… But in Germany, at least for now, the winners from the Euro are in control of the message, the debate, and the politics. So expect more of the same for the foreseeable future. All arguments about corruption or a byzantine tax system aside, the fundamental difference between Germany and Greece is Greece largely has an agrarian and artisanal economy that benefits from tourism. It is no wonder in Greece, that those who were on the losing-side of the Euro vastly outnumber the few “winners” and that those few Greek “Euro winners” aren’t being asked to contribute more. The Euro might be working for mid-size to large multinational corporations and a few oligarchs, but it is not working for the majority of people living and working in Europe who have to earn a living and pay taxes.
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FS NY 2 days ago
Germany and its supporters have been very successful in creating the narrative that it is Greece's fault who took the loans that it was not capable to pay back. But they do not want to hold their greedy banks responsible who gave these loans to get the high rates. It is like our subprime mortgage mess. USA tax payers paid the price. German and France on the other hand used Eurpean Central banks and IMF to give loans to Greece to pay back the loans of German and French banks and shifted the from their own tax payers to all taxpayers of EU and internationally through IMF. We are major contributor to IMF and as taxpayers responsible for bailing out German and French Banks. Germany is blaming Greece but does not mention its own involvement in this mess and clever play to shift its responsibility to others nations.
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Joe Stephens LA 2 days ago
If we must have a winner and loser in this contest, it will eventually make losers out of of all of us in the long run. Look at what happened to Germany in the first World War, when the allies' onerous demands indirectly helped Hitler's rise to power. When Greece is destroyed like this, there can be no good ending for either Greece and others in Europe.
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Steve Bolger New York City 2 days ago
No country does less to shield its citizens from exhorbitant drug prices than the US.
In Reply to Richard Huber 72Recommend
Bruce Rozenblit Kansas City 2 days ago
The conditions placed upon Greece outlined here describe not policy, but a war. Greece is under assault. Replace "troika" with "Mafia" and the article reads like Greece has been taken over by an organized crime syndicate that is extracting tribute and extorting the population in order to line its pockets.
Crime syndicates aren't interested in the well being of their victims. Apparently, neither is the troika. Self-serving corruption is the driver of their policy, not remedial actions.
Whatever Greece has done to dig itself into an economic hole pales in comparison to what the troika is doing to Greece. We should do to ISIS what they are doing to Greece.
There was a time in the first half of the 20th century where policy turned into madness. Is history repeating itself? Is the madness returning? When constructive policy is transformed into punishment and fertilized with corruption, the seeds of madness begin to grow. As usual, the voice of reason is ignored.
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M NC 2 days ago
Why does our civilization tolerate the existence of oligarchs to rule our society? Are they genetically superior in solving problems? If yes then we should have given them a cart blanche for everything.
Unfortunately they are the source of every single problem and the principal philosophy of our planet is for everyone to try to get as much as he can in as little time as he can. Everyone is trying to run their own show.
If we don't get rid of the rich elites from their place, we won't have a place soon to do anything. Either by negligence, oppression or apathy we will lose everything.
The only sensible option left is to elect ultra-high IQ academics and technocrats to protect, serve and uplift mankind. The rich have nearly destroyed it.
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Talesofgenji NY 2 days ago
When Dr. Stiglitz writes
"not a surprise since the troika has at times in the past seemed to have been on their (corrupt Greek Oligarchs) side.''
he forgets about the LaGarde list, a spread sheet containing the name of 2000 tax evading Greek oligarchs that was delivered in person by Christine Lagarde, then the French Finance Minister to Prime Minister Giorgos Papakonstantinou,
Christine LaGarde is now head of the IMF, a member of the Troika.
NO Greek government, INCLUDING that of Mr. Tsipras has acted on the list.
And Ms. LaGarde, first hand, had to learn that her advice would be spurned when it conflicted with the interests of the Greek oligarchy,
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vineyridge Mississippi 2 days ago
Germany is feeling its oats as a world power again. The German policies are the equivalent of economic warfare. The lack of German self-doubt is the equivalent of economic colonialism. Imperialism is not dead in Europe.
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delaxo Athens 2 days ago
The waterboarding of Greeks will continue until they cry uncle and surrender the rights on their natural resources in exchange for a debt write-off.
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Jerry Tampa 2 days ago
What Stiglitz says is brilliant! Is there any way to translate this into a one paragraph statement in 2 syllable English so that Congress and the media can understand it?
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New Yorker1 New York 2 days ago
History repeats itself. In the course of West Germany (~63 million people) absorbing East Germany (~13 million people) some 2 Trillion Euros (~100 billion Euros/year) were spent. In the reunification process, however, West German companies were completely predatory resulting in the closing of many East German industries and businesses which created substantial East German unemployment and lowering of their standard of living with no jobs and trying to buy expensive West German goods. Of course, unlike the Greeks, the East Germans had West German welfare/economic relief programs and the ability to move to West Germany in search of jobs in their native language. East Germans still suffer from reunification by substantially higher unemployment than West Germans and lower wages. Never once did West Germans tell Angela Merkel and other East Germans that they needed to take a "time out" from the Deutschmark or the Euro. Significant debt relief coupled with making current Greek government expenditures and revenues match along with providing more take home income for the middle and lower classes who will spend it and lift the economy is a must.
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sfdphd is a trusted commenter San Francisco 2 days ago
Thanks to Dr. Stiglitz for this helpful historical perspective.
It also helps to have specific examples like the one you gave competition in selling milk. So much in economics is hard to understand but anyone can understand that it's wrong to deceive people by pretending that fresh Greek milk is the same as milk shipped in from other countries. This is what happens when all you think about is money versus what is natural for humans to prefer... You want competition, fine, but don't pretend it's all the same milk....
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W in the Middle New York State 2 days ago
Joseph, is this genuine revelation to you.If so, let's step through things:
Q1: Why do loan sharks,payday lenders,sub-prime focused credit cards,and international lending entities (in order of respectability - your call as to whether increasing or decreasing) lend money to folks they know will barely - if ever - be able to pay it back
A1: Because it's one of the most profitable businesses around
Q2: Why do they all break the legs of their most hapless borrowers.It doesn't help those borrowers to to pay back their loans
A2: Because it helps other borrowers to remember to pay back their loans
Q3: As profitable as sub-prime lending is - how does it arise in the first place.Doesn't leg-breaking discourage most folks from borrowing
A3: It's strongly encouraged by the entities that want to sell things to the borrowers that they could never otherwise afford.And leg-breaking jobs,in the end,help lower unemployment
Q4: Back even further, how does this overall cycle start.What happens if more and more of the borrowers can't pay things back - broken legs notwithstanding
A4: The lenders and sellers get governments to structure things, so that borrower's children become responsible
Q5: Is there any alternative - is all borrowing doomed to fail
A5: No. As with housing, the litmus test for payback - and lending as a means to overall economic end - is collateral and income.If someone has neither, and folks want to lend anyway...look out
Somehow - I think you already knew
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toom germany 2 days ago
The parallels between the mortgage melt down in the US and the Greek melt down are too obvious to ignore. Goldman Sachs colluded with the Greeks to hide the excess deficits and large debt. This is just like the Countrywide salespeople fixing the credit reports on mortgages. The result is the same--bankruptcies among homeowners in the US, a country in bankruptcy in Europe. In both cases, the borrowers are blamed, but the lenders are richer.
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N.G. Krishnan Bangalore, India 2 days ago
If there is one expert who can render a sensible advice, it is definitely Dr. Stiglitz.
Hopefully the voice of Dr. Stiglitz, a Nobel Laureate in Economic Science who had the chance to serve both in the Clinton Administration and also in the World Bank, will not fall in to the deaf ears. He has much insights and experiences to impart.
His important book "Globalization and Its Discontents" is packed with fascinating anecdotes and interpretations of the events relating to the global economy, global finance and global institutions during his tenure as an economic adviser to the White House and the Chief Economist at the World Bank. He articulates the original roles of the public institutions such as the IMF, the World Bank and the WTO and shows how they do not live up to their supposed mandates. He exposes the disastrous policies of the IMF which had led countries after countries, on its crusade to impose the Gospel of Market-Fundamentalism.
Dr. Stiglitz highlight how the IMF and U.S. Treasury, and the Wall pushed the developing countries to open up for trade while erecting trade barriers themselves to protect the vested commercial interests. He had suggestions for more just and equitable global economic arrangements.
Dr. Stiglitz is known for his compassion and believed in globalization and economic science to improve the disadvantaged and his voice ought to be taken seriously instead of the troika doing what it has done for the last five years: Blame the victim.
Una dintre primele lecții învățate pe Wall Street a fost ”Găsește fraierul”. Era un principiu. Descrierea lui mai detaliată, repetată pe un ton răstit, era: ”Găsește un idiot cu bani și îndeasă-i pe gât cât de mult rahat intră. Dar fii drăgut cu el la început”.
Când m-am angajat la Salomon Brothers, în ’93, ”fraierul” erau clienții japonezi (majoritatea mici bănci și companii industriale mari). În primii cinci ani am conceput produse financiare complexe cu marje de profit uriașe pentru noi – ”deșeuri toxice” în argoul de pe Wall Street. Le vindeam aceste produse. La finalul anilor 1990 mulți dintre acești clienți au falimentat, în parte din cauza deșeurilor pe care le vindeam noi, în parte din cauza altor prostii pe care le cumpărau.
Lansarea monedei unice europene, euro, a deschis o perioadă de încredere financiară în Europa, iar noi cei de pe Wall Street am început să profităm de un alt ”fraier”: băncile europene. Mai precis, băncile din nordul Europei.
Din 2002 și până la criza financiara din 2008, Wall Street-ul a aruncat pe gâtul acestor bănci câte deșeuri toxice au încăput. Nu a fost greu. Ca și clientii japonezi de dinaintea lor, băncile europene cumpărau cu nemiluita active din toată lumea.
Aveau un asemenea apetit, încât Wall Street-ul a ajutat fondurile cu capital de risc să conceapă produse financiare special pentru aceste bănci, majoritatea formate din ipoteci subprime riscante. Aceste produse – băncile le numeau ”monstruozități” și apoi presa le-a numit ”FĂCUTE să eșueze” nu puteau fi concepute decât pentru cumpărători total nechibzuiți, iar băncile europene erau astfel de cumpărători.
Când o bancă cumpără active, ea împrumută bani; vânzătorul este creditorul. Cumparând active, băncile europene făceau ce trebuie să facă o bancă – să împrumute. Dar făcând asta în mod imprudent făceau ce o bancă nu trebuie sa facă: să împrumute fără cap.
Băncile europene nu împrumutau în acest fel nechibzuit doar Statele Unite. Împrumutau și în Europa, inclusiv guvernele Spaniei, Portugaliei și Greciei.
În 2008, când piața imobilară din SUA s-a prăbușit, băncile europene au pierdut mult. Și-au acoperit aceste pierderi îndreptăndu-și atenția către Europa, unde au continuat să împrumute guvernele – adică cumpărând datoriile acelor state – deși asta începea să fie un lucru nebunesc. Multe dintre statele sudice au început să dea semnale îngrijorătoare.
În 2010, una dintre aceste țări, Grecia, nu a mai putut să-și plătească creditele. Timp de un deceniu, Grecia acumulase o datorie masivă, rezultat al faptului că prea mulți oameni cumpăraseră prea mult, prea puțini greci își plăteau taxele și au fost făcute prea multe promisiuni de către politicieni prea corupți, toate îmbrăcate în haina unor calculefinanciare îndoielnice. În ciuda acestor probleme clare, bancherii au continuat să împrumute Grecia.
Această criză greacă din 2010 a fost redusă temporar printr-un împrumut internațional care a venit însoțit de măsuri dure pentru Grecia. Acest împrumut nu a oferit Greciei și o reducere a datoriei, ci țara a împrumutat astfel și mai mulți bani pentru a-și putea plăti creditele, permițând astfel băncilor să piardă cât mai puțin. A fost un împrumut pentru salvarea băncilor, numai că s-a numit împrumut pentru salvarea Greciei.
Grecia s-a zbătut mult, cu o scădere economică de proporții istorice, cu costuri umane care abia pot fi înțelese. Grecia a avut nevoie de un nou împrumut in 2012 și de încă unul în urmă cu două săptămâni.
În timp ce grecii suferă, băncile din nordul Europei ar trebui să-și asume responsabilitatea financiară, legală și etică pentru deciziile lor nechibzuite. Împrumutând mai degrabă băncile decât Grecia, în 2010, politicienii au transferat orice pierderi în Grecia în spatele cetățenilor europeni. De atunci comunicarea a fost viciată de un sentiment naționalist: nu te uita la băncile imprudente, uită-te la cei care împrumută imprudent.
UE a început printr-un acord economic privind industria oțelului și cărbunelui si cu multe bune intenții. Cel puțin parțial a fost o încercare de a limita prin mijloace economice riscul naționalismului care a dus la ultimele doua războaie. Uniunea economică a devenit apoi o unioune monetară care a oferit băncilor ocazia de a crește și șansa de a deveni ”fraierul”. Modificarea legislației a oferit băncilor posibilitatea de a trata în mod egal țările europene; Grecia, din punct de vedere al legislației, prezenta la fel de multe sau de puține riscuri ca și Germania.
Piețele au gândit în mod diferit, impunând Greciei un preț mai mare pentru împrumuturi decât Germaniei. Băncile nordice, văzând că pot obține profituri în mod facil, au început să împrumute Grecia, primind bani mai mulți pentru ”aceleași riscuri”. Europa de Sud (în special Grecia) a început să împrumute mai mult, permițând băncilor să cumpere mai mult, ceea ce a dus la o creștere a sectorului bancar. Această creștere a ieftinit împrumuturile, iar pentru a obțineprofit, băncile au început să împrumute mai mult și de aici un cerc vicios.
De pe urma fenomenului a beneficiat toată lumea, în special țările din nordul Europei. Sudul s-a ridicat pe măsură ce se dezvolta piața imobiliară, iar nordul s-a ridicat pe măsură ce industria vindea produsele în Sud. Băncile erau la mijloc, bucuroase că pot obține mari profituri.
Acest tip de feedback a fost unul specific european, depinzând de falsa senzație de stabilitate oferită de moneda unică, ceea ce a întărit sentimentul bancherilor că țările din euro nu pot intra în incapacitate de plată. Această bulă a continuat până când datoria Greciei a devenit mult prea mare pentru a fi ignorată de piețelefinanciare. Zguduite de criza imobiliară din SUA, piețele au devenit brusc sceptice și astfel Grecia a trebuit să plătească și mai mult pentru a împrumuta. Băncile europene, băgate până la gât în această poveste, încă doreau să împrumute, însă alte bănci erau mai prudente.
În 2010 această situație nu mai putea continua, iar piețele au refuzat să mai împrumute Grecia. Țara a avut nevoie de un împrumut internațional.
Acesta a fost însă conceput mai mult pentru a salva băncile, nu Grecia: în loc să i se șteargă o parte din datorie, Greciei i s-a impus sa plătească în continuare. Au fost împrumutați bani și de o serie de entități publice (Comisia Europeană, FMI, Banca Centrală Europeană). Băncile au răsuflat ușurate, căci majoritatea banilor din împrumuturi treceau doar prin Grecia și apoi se vărsau în buzunarele lor. Pentru a funcționa cât mai bine ca o conductă către băncile din nordul Europei, Greciei i s-a cerut să cheltuiască mai puțin, să taxeze cetățenii mai mult și să-și restructureze sectorul public.
Nu a mers. Grecia a intrat într-o depresiune economică. Doi ani mai târziu era din nou incapabilă să-și plătească datoria și a mai cerut un împrumut . De această dată a fost redusă și datoria Greciei, cu cel mult 40%, însă băncile au pierdut foarte puțin, pentru că majoritatea datoriilor către ele fuseseră plătite.
Primul împrumut mascat pentru bănci, cel din 2010, a folosit un discurs despre incompetența, lăcomia și trândăvia țărilor din sudul Europei. Acest discurs a permis băncilor să joace rolul părinților supărați pe odraslele lor imature.
Discursul acesta a fost încurajat și politizat prin transformarea oricăror pierderi viitoare în Grecia într-o povară pentru toți cetatenii europeni, în special o povară pentru cei din nordul continentului și astfel s-a încurajat apariția logicii ”noi împotriva lor”. A fost o formă de politică naționalistă, adica antiteza principiilor monedei comune.
De ce în 2010 au fostîmprumutate băncile mai degrabă decât Grecia? De ce i s-a cerut Greciei să-și schimbe modul de funcționare, de ce a fost acuzată de contractarea unor împrumuturi riscante și de ce nu au fost acuzate băncile?
Un argument este acela că Europa nu este suficient de coordonată pentru a face asta. S-a spus că băncile europene erau mult prea fragile pentru a suferi pierderi. Aceste pierderi s-ar fi propagat în Europa, ducând la prăbușirea altor banci din alte state și, în final, ar fi distrus zonaeuro. Pe aceeași logică s-a pus că băncile erau mult prea importante pentru sănătatea economiei, indiferent de cât de nechibzuit s-ar fi comportat, și astfel ele nu pot fi pedepsite. În timpuri de criză, acest raționament este folosit frecvent pentru a-i favoriza pe creditori în dauna celor care au împrumutat. Este un raționament puternic pentru că este adevărat. Însă, pe de altă parte, este un raționament care arată că băncile trebuie să fie extrem de bine controlate, pentru a preveni un asemenea comportament înainte ca el să distrugă țări intregi și economii întregi.
Politicienii și bancherii pot calcula costul imediat al prăbușirii unei bănci. Ei nu pot însă calcula suferințele umane pe termen lung care seproduc din cauza asta. Grecia trece printr-o perioadă mai grea decât cea din Statele Unite în timpul marii crize din anii 1930. Sărăcia, lipsa unui acoperiș deasupra capului au atins cote uriașe. O întreagă generație și-a vazut prezentul condamnat, iar viitorul în culori și mai sumbre decât prezentul.
Este partea tristă a unui vechi stereotip: când creditorii și debitorii se contrazic, cei din urmă sunt acuzați și tot ei sunt cei care suferă.
______________________________
Back in 1998 in Indonesia, I saw how the I.M.F. ruined that country’s banking system. I recall the picture of Michel Camdessus, the managing director of the I.M.F. at the time, standing over President Suharto as Indonesia surrendered its economic sovereignty. At a meeting in Kuala Lumpur in December 1997, I warned that there would be bloodshed in the streets within six months; the riots broke out five months later in Jakarta and elsewhere in Indonesia. Both before and after the crisis in East Asia, and those in Africa and in Latin America (most recently, in Argentina), these programs failed, turning downturns into recessions, recessions into depressions. I had thought that the lesson from these failures had been well learned, so it came as a surprise that Europe, beginning a half-decade ago, would impose this same stiff and ineffective program on one of its own.
Whether or not the program is well implemented, it will lead to unsustainable levels of debt, just as a similar approach did in Argentina: The macro-policies demanded by the troika will lead to a deeper Greek depression. That’s why the I.M.F.’s current managing director, Christine Lagarde, said that there needs to be what is euphemistically called “debt restructuring” — that is, in one way or another, a write-off of a significant portion of the debt. The troika program is thus incoherent: The Germans say there is to be no debt write-off and that the I.M.F. must be part of the program. But the I.M.F. cannot participate in a program in which debt levels are unsustainable, and Greece’s debts are unsustainable.
Austerity is largely to blame for Greece’s current depression — a decline of gross domestic product of 25 percent since 2008, an unemployment rate of 25 percent and a youth unemployment rate twice that. But this new program ratchets the pressure up still further: a target of 3.5 percent primary budget surplus by 2018 (up from around 1 percent this year). Now, if the targets are not met, as they almost surely won’t be because of the design of the program itself, additional doses of austerity become automatic. It’s a built-in destabilizer. The high unemployment rate will drive down wages, but the troika does not seem satisfied by the pace of the lowering of Greeks’ standard of living. The third memorandum also demands the “modernization” of collective bargaining, which means weakening unions by replacing industry-level bargaining.
None of this makes sense even from the perspective of the creditors. It’s like a 19th-century debtors’ prison. Just as imprisoned debtors could not make the income to repay, the deepening depression in Greece will make it less and less able to repay.
Structural reforms are needed, just as they were in Indonesia, but too many that are being demanded have little to do with attacking the real problems Greece faces. The rationale behind many of the key structural reforms has not been explained well, either to the Greek public or to economists trying to understand them. In the absence of such an explanation, there is a widespread belief here in Greece that special interests, in and out of the country, are using the troika to get what they could not have obtained by more democratic processes.
Consider the case of milk. Greeks enjoy their fresh milk, produced locally and delivered quickly. But Dutch and other European milk producers would like to increase sales by having their milk, transported over long distances and far less fresh, appear to be just as fresh as the local product. In 2014 the troika forced Greece to drop the label “fresh” on its truly fresh milk and extend allowable shelf life. Now it is demanding the removal of the five-day shelf-life rule for pasteurized milk altogether. Under these conditions, large-scale producers believe they can trounce Greece’s small-scale producers.
In theory, Greek consumers would benefit from the lower prices, even if they suffered from lower quality. In practice, the new retail market is far from competitive, and early indications are that the lower prices were largely not passed on to consumers. My own research has long focused on the importance of information and how firms often try to take advantage of the lack of information. This is just another instance.
One underlying problem in Greece, in both its economy and its politics, is the role of a group of wealthy people who control key sectors, including banks and the media, collectively referred to as the Greek oligarchs. They are the ones who resisted the changes that George Papandreou, the former prime minister, tried to introduce to increase transparency and to force greater compliance with a more progressive tax structure. The important reforms that would curb the Greek oligarchs are largely left off the agenda — not a surprise since the troika has at times in the past seemed to have been on their side.
As it became clear early on in the crisis that the Greek banks would have to be recapitalized, it made sense to demand voting shares for the Greek government. This was necessary to ensure that politically influenced lending, including to the oligarchic media, be stopped. When such connected lending resumed — even to media companies that on strictly commercial terms should not have gotten loans — the troika turned a blind eye. It has also been quiescent as proposals were put forward to roll back the important initiatives of the Papandreou government on transparency and e-government, which dramatically lowered drug prices and put a damper on nepotism.
Normally, the I.M.F. warns of the dangers of high taxation. Yet in Greece, the troika has insisted on high effective tax rates even at very low income levels. All recent Greek governments have recognized the importance of increasing tax revenues, but mistaken tax policy can help destroy an economy. In an economy where the financial system is not functioning well, where small- and medium-size enterprises can’t get access to credit, the troika is demanding that Greek firms, including mom and pop stores, pay all of their taxes ahead of time, at the beginning of the year, before they have earned it, before they even know what their income is going to be. The requirement is intended to reduce tax evasion, but in the circumstances in which Greece finds itself, it destroys small business and increases resentment of both the government and the troika.
This requirement seems at odds, too, with another of the demands with which Greece has been confronted: that it eliminate its cross-border withholding tax, which is the withholding tax on money sent from Greece to foreign investors. Such withholding taxes are a feature of good tax systems in countries like Canada and are a critical part of tax collection. Evidently, it is less important to ensure that foreigners pay their taxes than that Greeks do.
There are many other strange features of the troika bailout packages, in part because each member of the troika has its favorite medicine. As doctors warn, there can be dangerous interactions. The battle, however, is not just about Greece. It’s not even just about the money, although special interests in the rest of Europe and some within Greece itself have taken advantage of the troika to push their own interests at the expense of ordinary Greek citizens and the country’s overall economy. This is something I saw repeatedly firsthand when I was at the World Bank, most noticeably in Indonesia. When a country is down, there is all manner of mischief that can be done.
But these policy debates are really about ideology and power. We all know that. And we understand that this is not just an academic debate between the left and the right. Some on the right focus on the political battle: the harsh conditions imposed on the left-wing Syriza government should be a warning to any in Europe about what might happen to them should they push back. Some focus on the economic battle: the opportunity to impose on Greece an economic framework that could not have been adopted any other way.
I believe strongly that the policies being imposed will not work, that they will result in depression without end, unacceptable levels of unemployment and ever growing inequality. But I also believe strongly in democratic processes — that the way to achieve whatever framework one thinks is good for the economy is through persuasion, not compulsion. The force of ideas is so much against what is being inflicted on and demanded of Greece. Austerity is contractionary; inclusive capitalism — the antithesis of what the troika is creating — is the only way to create shared and sustainable prosperity.
For now, the Greek government has capitulated. Perhaps, as the lost half decade becomes the lost decade, as the politics get uglier, as the evidence mounts that these policies have failed, the troika will come to its senses. Greece needs debt restructuring, better structural reforms and more reasonable primary budget surplus targets. More likely than not, though, the troika will do what it has done for the last five years: Blame the victim.
Joseph E. Stiglitz is a Nobel laureate in economics, a professor at Columbia and the author, most recently, of “The Great Divide: Unequal Societies and What We Can Do About Them.”
Dave Coyne Goshen IN 2 days ago
This is so hopeless, so sad, and perfectly avoidable. You have to wonder what on earth European leaders are thinking. Then, you look at the congressional majority in Washington. It is truly astonishing to witness the role that stupidity and ignorance play in the course of human events.
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dairubo MN 2 days ago
Listen to Stiglitz, world. The knowledge Troika is Stiglitz, Krugman and Piketty. So long as you accept the corporatist Troika neoliberal economic myths instead of listening to the knowledge Troika, you will be treated as peons of the elite.
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John D. Out West 2 days ago
Specific details about the policies imposed on Greece have been missing from every single article I've read about the crisis, until now. Thank you, Dr. Stiglitz, for naming and explaining several of them. And shame on the NYT and every other media outlet for NEVER detailing specifics at any time during this extremely long, drawn-out crisis.
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Steve Hunter Seattle 2 days ago
Have you ever met a banker that does want to punish a debtor for even the slightest malfeasance? Have you ever met a banker that owned up to his own errors in judgement or criminal or immoral acts? Banks should not be large, should be tightly controlled by governments and their action made transparent. Most of Wall Street should be in prison as we speak.
The Greeks should have abandoned the Euro, defaulted on the debt, returned to their own currency and turned their backs on the troika. They would have suffered in the short term but eventually pulled out of this bottomless pit that they are in: I'm pulling for them.
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Chris Miilu Chico, CA 2 days ago
Will Germany eventually own Greek real estate: beaches, shorelines, and any other part of Greece Germany thinks would be good for a military add-on? In other words, will Germany loot Greece as it looted Poland, Czechoslovakia and Belgium? Germany has a history of arrogance and bullying; this appears to be more of the same. Why did European bankers loan a failing government so much money? Altruism? No. They created a permanent debtor nation with assets they coveted.
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SMS Rhinebeck, NY 2 days ago
I urge readers to read Tariq Ali's essay in the 30 July 2015 London Review of Books (link below):
http://www.lrb.co.uk/v37/n15/tariq-ali/diary
Excerpt:
….
Greece, in fact, has a lot of tanks, because the German and French arms industries, eager to get rid of surplus hardware in a world where wars are fought by bombers and drones, bribed the politicians. During the first decade of this century Greece was among the top five importers of weapons, mainly from the German companies Ferrostaal, Rheinmetall and Daimler-Benz. In 2009, the year after the crash, Greece spent €8 billion – 3.5 per cent of GDP – on defence. The then Greek defence minister, Akis Tsochatzopoulos, who accepted huge bribes from these companies, was convicted of corruption by a Greek court in 2013. Prison for the Greek; small fines for the German bosses. None of this has been mentioned by the financial press in recent weeks. It didn’t quite tally with the need to portray Greece as the sole transgressor. Yet a Greek court has been provided with conclusive evidence that the largest tax avoider in the country is Hochtief, the giant German construction company that runs Athens airport. It has not paid VAT for twenty years, and owes 500 million euros in VAT arrears alone. Nor has it paid the contributions due to social security. Estimates suggest that Hochtief’s total debt to the exchequer could top one billion euros.
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Thomas Stuttgart, Germany 2 days ago
Greece has fourteen profitable airports. These are to be sold (privatized), well below value, to a German company (Fraport), whose majority shareholders are the German and a German State government. As for the remaining airports in Greece: well they are unprofitable and therefore Greece's problem.
In Reply to John D. 147Recommend
Arthur is a trusted commenter UWS 2 days ago
First take away the a country's sovereignty, so that it cannot chose how to address its needs. Then build an economic program which is bound to fail. "Reform" the country's commerce to benefit foreign interests. Then defang labor unions, which provide countervailing power to the wealthy, and the privileged.
I see a problem: the Greeks are neither stupid nor subservient. They have tried parliamentary politics against this program and have failed. The upcoming months may not be as peaceful as the Euro Zone leaders expect.
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Bevan Davies Maine 2 days ago
Joseph Stiglitz writes eloquently about the terrible situation in which the Greeks find themselves. It should be obvious to any fair-minded observer that there is a great danger of severe civil unrest in Greece. Just as it happened in Indonesia and Argentina during their crises, things could spiral out of control in Athens and other large cities; this in turn could spread to other European countries.
There is a great deal at stake for the European Union, and allowing this economic tragedy to continue may have unintended consequences that no one can predict.
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coverstory1 New York 2 days ago
Excellent article. One could sense this is really about destroying unions, impoverishing the people, and enriching the rich and powerful . Stieglitz gives excellent concrete examples, like the destruction of local, fresh milk. The evilness of the crooked troika make me sick.
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Brian Germany 2 days ago
I wish this opinion would be translated into German and run in the Spiegel and other major newspapers. An honest and objective debate about the future of the Euro needs to acknowledge that the Euro has created winners and losers. In Germany, not everyone has benefited from the Euro and those who have have not passed those artificial gains along to society. The German finance minister, Mr. Schaeuble is now proposing a Euro-Tax, naturally to be paid for by those who have not benefited from the Euro… But in Germany, at least for now, the winners from the Euro are in control of the message, the debate, and the politics. So expect more of the same for the foreseeable future. All arguments about corruption or a byzantine tax system aside, the fundamental difference between Germany and Greece is Greece largely has an agrarian and artisanal economy that benefits from tourism. It is no wonder in Greece, that those who were on the losing-side of the Euro vastly outnumber the few “winners” and that those few Greek “Euro winners” aren’t being asked to contribute more. The Euro might be working for mid-size to large multinational corporations and a few oligarchs, but it is not working for the majority of people living and working in Europe who have to earn a living and pay taxes.
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FS NY 2 days ago
Germany and its supporters have been very successful in creating the narrative that it is Greece's fault who took the loans that it was not capable to pay back. But they do not want to hold their greedy banks responsible who gave these loans to get the high rates. It is like our subprime mortgage mess. USA tax payers paid the price. German and France on the other hand used Eurpean Central banks and IMF to give loans to Greece to pay back the loans of German and French banks and shifted the from their own tax payers to all taxpayers of EU and internationally through IMF. We are major contributor to IMF and as taxpayers responsible for bailing out German and French Banks. Germany is blaming Greece but does not mention its own involvement in this mess and clever play to shift its responsibility to others nations.
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Joe Stephens LA 2 days ago
If we must have a winner and loser in this contest, it will eventually make losers out of of all of us in the long run. Look at what happened to Germany in the first World War, when the allies' onerous demands indirectly helped Hitler's rise to power. When Greece is destroyed like this, there can be no good ending for either Greece and others in Europe.
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Steve Bolger New York City 2 days ago
No country does less to shield its citizens from exhorbitant drug prices than the US.
In Reply to Richard Huber 72Recommend
Bruce Rozenblit Kansas City 2 days ago
The conditions placed upon Greece outlined here describe not policy, but a war. Greece is under assault. Replace "troika" with "Mafia" and the article reads like Greece has been taken over by an organized crime syndicate that is extracting tribute and extorting the population in order to line its pockets.
Crime syndicates aren't interested in the well being of their victims. Apparently, neither is the troika. Self-serving corruption is the driver of their policy, not remedial actions.
Whatever Greece has done to dig itself into an economic hole pales in comparison to what the troika is doing to Greece. We should do to ISIS what they are doing to Greece.
There was a time in the first half of the 20th century where policy turned into madness. Is history repeating itself? Is the madness returning? When constructive policy is transformed into punishment and fertilized with corruption, the seeds of madness begin to grow. As usual, the voice of reason is ignored.
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M NC 2 days ago
Why does our civilization tolerate the existence of oligarchs to rule our society? Are they genetically superior in solving problems? If yes then we should have given them a cart blanche for everything.
Unfortunately they are the source of every single problem and the principal philosophy of our planet is for everyone to try to get as much as he can in as little time as he can. Everyone is trying to run their own show.
If we don't get rid of the rich elites from their place, we won't have a place soon to do anything. Either by negligence, oppression or apathy we will lose everything.
The only sensible option left is to elect ultra-high IQ academics and technocrats to protect, serve and uplift mankind. The rich have nearly destroyed it.
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Talesofgenji NY 2 days ago
When Dr. Stiglitz writes
"not a surprise since the troika has at times in the past seemed to have been on their (corrupt Greek Oligarchs) side.''
he forgets about the LaGarde list, a spread sheet containing the name of 2000 tax evading Greek oligarchs that was delivered in person by Christine Lagarde, then the French Finance Minister to Prime Minister Giorgos Papakonstantinou,
Christine LaGarde is now head of the IMF, a member of the Troika.
NO Greek government, INCLUDING that of Mr. Tsipras has acted on the list.
And Ms. LaGarde, first hand, had to learn that her advice would be spurned when it conflicted with the interests of the Greek oligarchy,
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vineyridge Mississippi 2 days ago
Germany is feeling its oats as a world power again. The German policies are the equivalent of economic warfare. The lack of German self-doubt is the equivalent of economic colonialism. Imperialism is not dead in Europe.
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delaxo Athens 2 days ago
The waterboarding of Greeks will continue until they cry uncle and surrender the rights on their natural resources in exchange for a debt write-off.
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Jerry Tampa 2 days ago
What Stiglitz says is brilliant! Is there any way to translate this into a one paragraph statement in 2 syllable English so that Congress and the media can understand it?
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New Yorker1 New York 2 days ago
History repeats itself. In the course of West Germany (~63 million people) absorbing East Germany (~13 million people) some 2 Trillion Euros (~100 billion Euros/year) were spent. In the reunification process, however, West German companies were completely predatory resulting in the closing of many East German industries and businesses which created substantial East German unemployment and lowering of their standard of living with no jobs and trying to buy expensive West German goods. Of course, unlike the Greeks, the East Germans had West German welfare/economic relief programs and the ability to move to West Germany in search of jobs in their native language. East Germans still suffer from reunification by substantially higher unemployment than West Germans and lower wages. Never once did West Germans tell Angela Merkel and other East Germans that they needed to take a "time out" from the Deutschmark or the Euro. Significant debt relief coupled with making current Greek government expenditures and revenues match along with providing more take home income for the middle and lower classes who will spend it and lift the economy is a must.
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sfdphd is a trusted commenter San Francisco 2 days ago
Thanks to Dr. Stiglitz for this helpful historical perspective.
It also helps to have specific examples like the one you gave competition in selling milk. So much in economics is hard to understand but anyone can understand that it's wrong to deceive people by pretending that fresh Greek milk is the same as milk shipped in from other countries. This is what happens when all you think about is money versus what is natural for humans to prefer... You want competition, fine, but don't pretend it's all the same milk....
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W in the Middle New York State 2 days ago
Joseph, is this genuine revelation to you.If so, let's step through things:
Q1: Why do loan sharks,payday lenders,sub-prime focused credit cards,and international lending entities (in order of respectability - your call as to whether increasing or decreasing) lend money to folks they know will barely - if ever - be able to pay it back
A1: Because it's one of the most profitable businesses around
Q2: Why do they all break the legs of their most hapless borrowers.It doesn't help those borrowers to to pay back their loans
A2: Because it helps other borrowers to remember to pay back their loans
Q3: As profitable as sub-prime lending is - how does it arise in the first place.Doesn't leg-breaking discourage most folks from borrowing
A3: It's strongly encouraged by the entities that want to sell things to the borrowers that they could never otherwise afford.And leg-breaking jobs,in the end,help lower unemployment
Q4: Back even further, how does this overall cycle start.What happens if more and more of the borrowers can't pay things back - broken legs notwithstanding
A4: The lenders and sellers get governments to structure things, so that borrower's children become responsible
Q5: Is there any alternative - is all borrowing doomed to fail
A5: No. As with housing, the litmus test for payback - and lending as a means to overall economic end - is collateral and income.If someone has neither, and folks want to lend anyway...look out
Somehow - I think you already knew
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toom germany 2 days ago
The parallels between the mortgage melt down in the US and the Greek melt down are too obvious to ignore. Goldman Sachs colluded with the Greeks to hide the excess deficits and large debt. This is just like the Countrywide salespeople fixing the credit reports on mortgages. The result is the same--bankruptcies among homeowners in the US, a country in bankruptcy in Europe. In both cases, the borrowers are blamed, but the lenders are richer.
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N.G. Krishnan Bangalore, India 2 days ago
If there is one expert who can render a sensible advice, it is definitely Dr. Stiglitz.
Hopefully the voice of Dr. Stiglitz, a Nobel Laureate in Economic Science who had the chance to serve both in the Clinton Administration and also in the World Bank, will not fall in to the deaf ears. He has much insights and experiences to impart.
His important book "Globalization and Its Discontents" is packed with fascinating anecdotes and interpretations of the events relating to the global economy, global finance and global institutions during his tenure as an economic adviser to the White House and the Chief Economist at the World Bank. He articulates the original roles of the public institutions such as the IMF, the World Bank and the WTO and shows how they do not live up to their supposed mandates. He exposes the disastrous policies of the IMF which had led countries after countries, on its crusade to impose the Gospel of Market-Fundamentalism.
Dr. Stiglitz highlight how the IMF and U.S. Treasury, and the Wall pushed the developing countries to open up for trade while erecting trade barriers themselves to protect the vested commercial interests. He had suggestions for more just and equitable global economic arrangements.
Dr. Stiglitz is known for his compassion and believed in globalization and economic science to improve the disadvantaged and his voice ought to be taken seriously instead of the troika doing what it has done for the last five years: Blame the victim.
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