Thursday, July 16, 2015

The Papandreouization Of Alexis Tsipras

I met George Papandreou a couple of times at conferences and had brief conversations with him. He always seemed like a reasonable and serious guy. This was all before he became Greece's Prime Minister in October, 2009, but after he became leader of the Greek PASOK party in 2004, the old socialist party of Greece, which his father and grandfather had led, with both of them serving as PMs also. George's father, Andreas, was an economist and was on the Berkeley faculty for some period of time and married an American woman, George's mother. George served as a minister of education and some other positions when his father was PM during the 1980s and 1990s. While PASOK is dead, and George's effort to start a new party and run in the most recent election totally failed, he continues to serve as president of the Socialist International, a position he has held since 2006.

The most dramatic thing that he did came shortly after he became PM in late 2009: he revealed that Greece had been lying about its national income accounts and particularly its budget deficits. These had been claimed by the previous administration to be around 6% of GDP, but were actually nearly 13% of GDP. George fessed up to this, which was the trigger for what would be called the "eurocrisis," and which went on for several years, basically until the ECB announced that they would "do what is necessary" to back up sovereign debt in the eurozone, bringing down interest rates in nearly all nations in the zone, although not in Greece.

 This admission and crisis led to the original bailout of the Greek financial system, with all that austerity imposed for financial support. That deal was unsustainable, and their would be a readjustment in 2012, which was also unsustainable, with all the more recent stuff arising due to that. So, socially and politically progressive Papandreou accepted imposition of an austerity program that tanked the Greek economy. His popularity steadily declined as it became clear how disastrous the agreement was, with him finally stepping down in late 2011 in favor of a unity government. As it is, while he remains highly respected abroad, and I have very high personal respect for him, his fall into unpopularity in Greece seems to have been total and probably permanent.

 So, it looks like Alexis Tsipras seems to have followed his path. After lots of rhetoric and admirable efforts to get a better deal for Greece, he has in the end totally surrendered and caved to the demands of German Finance Minister Wolfgang Schauble and his allies in such countries as Finland and Slovakia. While there are funds being provided, if anything it looks like the austerity being imposed may well be worse than what went down before. I am not going to repeat how unfair and unreasoanble all this, other than to note the IMF declaring that this agreement is also unsustainable without debt restructuring, totally rejected by Schauble and his allies. To get this awful agreement through the Greek parliament, Tsipras had to rely on his opponents, with many Syriza members not supporting it, and major demonstrations going on outside, even though apparently a majority of Greeks oppose leaving the euro. I sympathize with Tsipras's position, but, I fear, he has just become the next George Papandreou. As it is, Yanis Varoufakis resigned after the referendum passed that was supposed to get the troika to back off, but failed to do so. We shall see how long it will be before Tsipras follows Papandreou out of office.

Barkley Rosser

8 comments: said...

Sorry only one paragraph. I put them in, but they are not there. If anybody can tell me how to fix this, I would be most pleased and grateful. said...

Got it. Thanks, Sandwichman.

john c. halasz said...

Small correction. It was Andreas P. who founded PASOK, in perhaps partial rebellion against Giorgios Sr. , who was a close associate of Eleftherios Venizelos, in the Nationa-Liberal camp and later briefly held the PM post after the Allied liberation, and then later, before the colonel's coup. PM Jr., who spent too much time in Sweden, volunteered to play the "good European", in agreeing to the "bailout", since otherwise there would have been a disorderly unravelling of the whole EZ. Which, of course, is something the Greeks have never been given "credit" for. Tsipras might be toast, but he's a much different character than PM Jr.

blissex said...

On G Papandreou and A Tsipras there is a really ironic story involving Y Varoufakis:
"He's a great guy but you don't want to be governed by him," said Yannis Varoufakis, who advised Papandreou and worked as one of his speechwriters on economic policy issues from 2003-2006.

Initially drawn to the socialist leader's open-minded views, Varoufakis says he left disillusioned by Papandreou's chaotic and unpredictable management style.

The former adviser recalls that when he and other aides beavered away to formulate party education policy in 2006, Papandreou "dumbfounded" his team by walking into parliament and announcing a 10-point university plan no-one had heard of, let alone been consulted on.

Such unpredictability proved to be Papandreou's Achilles heel. Days after euro zone leaders thrashed out a financial lifeline for Greece, Papandreou undid it all last week by calling for a popular vote on the plan. Hardly anyone -- not even his finance minister -- saw it coming.

In one fell swoop, Papandreou managed to roil markets, reopen the euro zone debt crisis, put his country on the path to default and out of the euro zone, and ultimately, do himself out of a job. The 59-year-old has announced he will step down to pave the way for a new coalition government without him.

"When he would feel overwhelmed he would take spontaneous decisions, more often than not of doubtful rationality," said Varoufakis. "This is probably the last of those decisions."»

blissex said...

«So, socially and politically progressive Papandreou accepted imposition of an austerity program that tanked the Greek economy.x

That seems hallucinatory to me, because there has been no substantial austerity in Greece until the end of 2014; it was simply the end of the giant exogenous (positive) shock of a flood of borrowed money that enabled Greece for several years to have government deficits and trade deficits of 15-20% of GDP:

So Greek GDP, imports, etc. (but not employment, and that's a strange story) were in 2013-2014 at nearly the same level they were in 2000-2001, when there was no austerity and no crisis. Greek GDP and imports rose 20% and 560% from 2000-2001 to 2007-2008 fueled by greek government borrowing, and then fell back quite gently until 2013-2014 to its 2000-2001 level.

Now there are many people who argue that as Greece had reached the lifestyle supported by borrowed inflows of around 20% of GDP in 2007-2008 the greek population have a vested human right to that same lifestyle and because of human decency those inflows need to be made permanent and become fiscal transfers; but the mere ending of borrowing inflows cannot be called "austerity".

«His popularity steadily declined as it became clear how disastrous the agreement was, with him finally stepping down in late 2011 in favor of a unity government.»

Y Varoufakis in the 2011 comment I just quoted stated very clearly that what was disastrous was G Papandreou's call for a referendum. Very ironically.

blissex said...

«how disastrous the agreement was, with him finally stepping down in late 2011»

The graph I mentioned previously:

shows the following approximate figures for net imports:

2004: $13 billion (GDP €227 billion) 4% GDP
2005: $18 billion (GDP €229 billion) 6% GDP
2006: $30 billion (GDP €242 billion) 9% GDP
2007: $45 billion (GDP €251 billion) 13% GDP
2008: $51 billion (GDP €250 billion) 15% GDP
2009: $35 billion (GDP €240 billion) 11% GDP
2010: $27 billion (GDP €226 billion) 9% GDP
2011: $29 billion (GDP €206 billion) 10% GDP

The 2009-2011 period still saw huge spending on net imports, and a very, very soft landing after the colossal surge in spending on imports of 2007-2008.

In 2009-2011 spending on imports summed to around $90 billion, around 10% of GDP, against the sum of around $60 billion in 2004-2006, around 6% of GDP, in the ramp up to the "halleluiah" years of 2007-2008.

Was the greek economy in 2004-2006 suffering retroactively from the austerity programmes of 2009-2011? :-) said...


Papandreou accepted massive spending cuts in the Greek budget plus tax inceases. Spending fell over 20% during the next few years.

Myrtle Blackwood said...

The Greek import surges of the early 2000s appears to coincide with Goldman Sachs (and other big global banks?) selling credit default swaps to Greece. Like subprime loans, initially reducing the cost of Greece's borrowings and later followed by surges in interest charges that were unsustainable in relation to Greece's rate of economic growth. Greenspan refers to a situation of a 'global savings glut'. The propensity to 'save' was greater than the propensity to 'invest'. [why was that???] Why not create artificial collateral in the form of derivatives and sell these around the world? Offload this excess liquidity, somehow.

"The extent as well as manner in which a country is integrated into the global economy has determined the severity of the crisis in different countries.