I think the author needs a course in decision theory - it's a better explanation of what was going on than the poker game.
How so?
Germany has already rejected his new plan.
And the troika is demanding additional cuts.
Greece literally would be better off out of the eurozone, out of the EU, and out of NATO.
Germany has already rejected his new plan.
And the troika is demanding additional cuts.
Greece literally would be better off out of the eurozone, out of the EU, and out of NATO.
1
180 degrees wrong. The Grexit threat was an obvious bluff, and Tsipris calling them on it was wise and low risk.
Well, the idea that international geopolitical and macroeconomic negotiations are just like a poker game is at least a step up from the usual "the finances of a government are just like the finances of a family" bloviating that you read so often, though it's actually only a step up in terms of complexity, not intelligence.
Even even if you accepted the poker game analogy as remotely apt, which it isn't, the story about the newcomer winning despite everyone's suspicions that he's really bluffing fails immediately, since Tspiras didn't win anything at first, and no one was taking him seriously, least of all pundits writing about the situation with almost no understanding of it. It's only when he took a stand, which shocked everyone involved to the point of needing a fainting couch (not least of whom being the newspaper commentators writing about it) that he got the creditors and their agents to even float the idea of debt relief in any form.
Even even if you accepted the poker game analogy as remotely apt, which it isn't, the story about the newcomer winning despite everyone's suspicions that he's really bluffing fails immediately, since Tspiras didn't win anything at first, and no one was taking him seriously, least of all pundits writing about the situation with almost no understanding of it. It's only when he took a stand, which shocked everyone involved to the point of needing a fainting couch (not least of whom being the newspaper commentators writing about it) that he got the creditors and their agents to even float the idea of debt relief in any form.
1
"...Mr. Tsipras went all-in, and he won, in the sense that Greece appears on track to get a somewhat better deal (a bit less fiscal austerity"
Really? Seems to me that the NYT and others report that the austerity package initially required about 8 or 9 B euros in increased taxes and spending cute; now, after Tsipras's theatricals, it up to about 12 or 13 B euros.
Where's the 'bit less austerity'? Come on!
Really? Seems to me that the NYT and others report that the austerity package initially required about 8 or 9 B euros in increased taxes and spending cute; now, after Tsipras's theatricals, it up to about 12 or 13 B euros.
Where's the 'bit less austerity'? Come on!
Either the author is not that familiar with the negotiations and what was at stake over the last few months or he's just a bad poker player.
The Greeks walked away from the talks and that meant they walked away from an offer of an extension of the 2nd aid program by the eurozone. Greece now has to secure a third program, if there will be one. The negotiations will start from zero. So the stakes are now higher than if Tsipras would have just made the same concession a few days ago.
Also in poker most players have the same at stake. That is not at all the case here. Greece has much more at stake than the other Eurozone members. There is an ever increasing number of people who actually think the Eurozone would be better off without Greece.
The Greeks walked away from the talks and that meant they walked away from an offer of an extension of the 2nd aid program by the eurozone. Greece now has to secure a third program, if there will be one. The negotiations will start from zero. So the stakes are now higher than if Tsipras would have just made the same concession a few days ago.
Also in poker most players have the same at stake. That is not at all the case here. Greece has much more at stake than the other Eurozone members. There is an ever increasing number of people who actually think the Eurozone would be better off without Greece.
6
Like other readers, I am puzzled by this piece.
Tsipras did not win; he lost, and for precisely the reasons articulated by the author: "Amazingly, the new Greek proposal for a $59 billion bailout is broadly the same as what was on offer before Mr. Tsipras walked away from negotiations. It includes the promise of potential future debt relief, and phases in some tax increases and spending cuts more slowly, but otherwise resembles the proposals before the referendum, before the banks shuttered, before tourism bookings dried up, and before everything else that has happened in the last two weeks."
In other words, at best, Tsipras got the same deal he could have had without two weeks of financial havoc. How can the author point that out and then congratulate Tsipras on his "victory?"
Tsipras did not win; he lost, and for precisely the reasons articulated by the author: "Amazingly, the new Greek proposal for a $59 billion bailout is broadly the same as what was on offer before Mr. Tsipras walked away from negotiations. It includes the promise of potential future debt relief, and phases in some tax increases and spending cuts more slowly, but otherwise resembles the proposals before the referendum, before the banks shuttered, before tourism bookings dried up, and before everything else that has happened in the last two weeks."
In other words, at best, Tsipras got the same deal he could have had without two weeks of financial havoc. How can the author point that out and then congratulate Tsipras on his "victory?"
5
The Greek politicians are too obsessed with ideology and not about Economy.
It's up to them to be from the left or from the right but at the end of the day, a good economy is the only way not to have to depend on anybody. 350 billions of Euros paid by the Eurozone to Greece for less than 11 millions of inhabitants , it is about time to be looking to build a proper economy.
It's up to them to be from the left or from the right but at the end of the day, a good economy is the only way not to have to depend on anybody. 350 billions of Euros paid by the Eurozone to Greece for less than 11 millions of inhabitants , it is about time to be looking to build a proper economy.
Thank you, caroline, for expressing what Francis Fukuyama said in "The End of History?" (1989):
"The end of history will be a very sad time. The struggle for recognition, the willingness to risk one's life for a purely abstract goal, the worldwide ideological struggle that called forth daring, courage, imagination, and idealism (in the historic west, will be replaced by economic calculation, the endless solving of technical problems, environmental concerns, and the satisfaction of sophisticated consumer demands (in the post-historic west)."
"The end of history will be a very sad time. The struggle for recognition, the willingness to risk one's life for a purely abstract goal, the worldwide ideological struggle that called forth daring, courage, imagination, and idealism (in the historic west, will be replaced by economic calculation, the endless solving of technical problems, environmental concerns, and the satisfaction of sophisticated consumer demands (in the post-historic west)."
1
This article is laughable. So Mr. Tsipras "won" in this high stakes game with lenders?? Actually he made a giant fool of himself by going through the referendum,shutting down the banks and the stock market, panicking the tourism sector. The creditors remained steadfast in demanding reforms and accountability and they got what they wanted. Greece's economy was one of the fastest growing economy until Syriza took over and now its in tatters. Very sweet win indeed.
4
Tsipras only "won" in the sense that he proved to the Greek people with the referendum and his latest offer that the troika will never accept anything less than the blood of the Greek people.
Greece must be punished, according to the troika, no matter how many Greeks die, and no matter how much this weakens the European Union.
NOTHING else matters.
Greece must be punished, according to the troika, no matter how many Greeks die, and no matter how much this weakens the European Union.
NOTHING else matters.
you're right that the new deal has lower/delayed tax increases. But that is the will of the Eurogroup! THe Greek proposals were for higher corporate tax rates (they are socialists); the Eurogroup knows that this is bad for economic growth and said no. The Greek Govt has won nothing except the promise of discussions about debt forgiveness. The big problem is not austerity, but economic reform. The recipe for recovery includes both, but the government has focused mainly on 'austerity' (more taxes and cuts to spending). The Greeks need to open the economy and reform. They must privatise and reduce job security, in order to create new jobs. Goodness knows why there is any confidence that this will finally happen.
1
Tsipras's main achievement seems to be that he changed the dynamics. Unlike with previous corrupt Greek governments, Europeans know they have a committed team, dedicated to get Greece ontrack, even if it is in what they consider an awkward way. His other victory, that most previous comments seem to disregard, is that debt relief is now on the table, and this was top on Tsipras's agenda. It may be that Germany stepped down a little, and that its inadequate view on austerity-for-growth will be reconsidered.
If so, this will be of real benefit for the European economy.
If so, this will be of real benefit for the European economy.
3
Today Mr. Irwin is a rare sight: a NY Times commentator with egg on his face. Careful readers will remember his article from a week ago: http://www.nytimes.com/2015/07/02/upshot/greece-wanted-to-reframe-europe.... As Mr. Irwin notes today, Mr. Tsipras has succeeded in doing precisely what what his previous article said he failed to do. The debate is now being reframed as how large a haircut (debt forgiveness) Angela Merkel and the bankers will have to accept, and what face-saving measures can be made (e.g. calling it an extension with reduced interest rates instead of a haircut). He has succeeded in where all previous Greek governments, and indeed all "bailed-out" countries (Ireland, Spain, etc.) have failed by standing up to the bankers (and their backers) and forcing them to take a haircut so as to save his country's economy. Bravo, Mr. Tsiparas.
And bravo, Mr. Irwin, for tacitly recognizing your error while many others are still in denial. But going forward, shouldn't you be a bit more careful about simply repeating the banker's talking points and other flavors of "conventional wisdom?"
And bravo, Mr. Irwin, for tacitly recognizing your error while many others are still in denial. But going forward, shouldn't you be a bit more careful about simply repeating the banker's talking points and other flavors of "conventional wisdom?"
7
what makes you think the "Germans" have to accept debt relief? What position of strength goes Greece occupy to force anything? A few day after a referendum, reality has forced agreement on the same package. The 1% lower corporate tax increase is at the command of the Eurogroup; the Greek side wanted higher corporate tax, so the author of this article is wrong when he claims that as victory, minor as it is.
The only thing the Greeks can offer is a willingness to work to stay in the Euro. This is probably what they should not do, but support from the Eurogroup is conditional on Greece staying in the Euro ...and why? To avoid debt writeoffs, mostly. The IMF and the ECB are forbidden by law from accepting writeoffs. Write off is a red herring since the Greek debt is mostly on extraordinarily generous terms. It's a bit silly, since the Greek's should leave the Euro, in a managed way (which would mean massive writeoffs). Leaving the Euro via default would be like steering the ship into an iceberg, so it was good to avoid that.
The only thing the Greeks can offer is a willingness to work to stay in the Euro. This is probably what they should not do, but support from the Eurogroup is conditional on Greece staying in the Euro ...and why? To avoid debt writeoffs, mostly. The IMF and the ECB are forbidden by law from accepting writeoffs. Write off is a red herring since the Greek debt is mostly on extraordinarily generous terms. It's a bit silly, since the Greek's should leave the Euro, in a managed way (which would mean massive writeoffs). Leaving the Euro via default would be like steering the ship into an iceberg, so it was good to avoid that.
1
That's simple. If the force Greece into bankruptcy they get zero Euros. If they accept a 30% haircut then they get 70% of their money back.
The haircut will not be a simple write-off, but instead a fudge involving much longer repayment times and lowered interest rates, which means the same thing. That will give Chancellor Merkel political cover and assure that no rules are violated.
The haircut will not be a simple write-off, but instead a fudge involving much longer repayment times and lowered interest rates, which means the same thing. That will give Chancellor Merkel political cover and assure that no rules are violated.
3
It's not at all obvious that Greece had a net gain by Tsipras calling for a referendum on the EU's last offer. During the time that Tsipras was campaigning for a "No" vote, the Greek economy spiraled downward. That downward direction in the economy is still ongoing. So, for whatever Tsipras gained or might eventually gain, losses in the Greek economy must be deducted from it.
3
I also don't really see how he won this round, from the referendum anyway. I can think of a couple of other ways he may have won:
1) if we assume Tsipras is that cunning and could foresee how close his referendum call would bring Greece to the edge of the cliff (exit from euro), maybe this was his only way to force his countrymen to accept reforms that were not popular.
2) Geopolitics -- would the US (and most of Europe) be that non-chalant about Greece out of the EZ and looking for whatever partnership they can get from Russia? Tsipras' visits to Russia (twice), and a few calls from Washington to some european capitals may have more to do with what looks like a more receptive ear for the third bailout proposal submitted by Greece.
Tsipras is as much attuned to the sizable part of the electorate that has received incredibly generous accomodations and benefits from the corrupt political class running Greece for the past 40 years. In that sense, he is not much different from Merkel who decided to transfer 50% of Deutsche Bank's losses to the German state and to masterfully fan populist sentiment in Germans that the bad child is only southern europe and not their bank.
At least Tsipras stood up to the corrupt financial sector unlike Merkel. Now if Tsipras wants to do something good for Greece he will exit the EZ and lead the country into a new age via all the necessary reforms.
1) if we assume Tsipras is that cunning and could foresee how close his referendum call would bring Greece to the edge of the cliff (exit from euro), maybe this was his only way to force his countrymen to accept reforms that were not popular.
2) Geopolitics -- would the US (and most of Europe) be that non-chalant about Greece out of the EZ and looking for whatever partnership they can get from Russia? Tsipras' visits to Russia (twice), and a few calls from Washington to some european capitals may have more to do with what looks like a more receptive ear for the third bailout proposal submitted by Greece.
Tsipras is as much attuned to the sizable part of the electorate that has received incredibly generous accomodations and benefits from the corrupt political class running Greece for the past 40 years. In that sense, he is not much different from Merkel who decided to transfer 50% of Deutsche Bank's losses to the German state and to masterfully fan populist sentiment in Germans that the bad child is only southern europe and not their bank.
At least Tsipras stood up to the corrupt financial sector unlike Merkel. Now if Tsipras wants to do something good for Greece he will exit the EZ and lead the country into a new age via all the necessary reforms.
2
This whole thing is absolute insanity. Greece owes tens of billions of euros/dollars and repeatedly admits they can't hope to pay now or in the future. However they want to borrow even more money on the promise that they will try to pay back a portion of what is owed. The definition of stupidity is doing the same thing over and over and expecting a different result. The only thing that is going to help Greece long term is to discount her foreign owed debt unilaterally to say 10 cents on the dollar, exit the euro currency and return to the drachma so they can be competitive in exports and tourism. Next institute serious internal financial, social, and economic reforms such as raising and fully collecting taxes on the wealthy and business, and balancing the year to year annual government budgets by reasonable spending cuts, and raising retirement ages and cracking down on disability fraud. Then promptly repatriate the phony tens of thousands of economic refugees back where they belong and keep more from invading the peninsula. Otherwise this endless nightmare of poverty, unemployment, misery, and social unrest will continue indefinitely until some "extremist regime" takes over and takes measures most citizens won't like to cure the recurring crisis. The European Union is a prison house of nations oppressed and exploited by the big banks and big business. An evil empire without the deaths and torture of Nazi Germany and Soviet Russia. It is past time for it to be dismantled.
2
I think you underestimate the benefits of microeconomic reforms such as freeing up the labor market, privatisation to remove the state from many sectors, and cracking down on protected industry groups. We know works, and if you see the comical position that Greece occupies on tables of competitiveness, we can be sure that these reforms would have a strong effect. Growth can never come from austerity, everyone knows that. The Greeks have been encouraged to tackle microeconomic reform for ten years and have done almost nothing. Then they have the audacity to blame austerity and foreigners. Not to blame the current government for that; its election was a sign of the electorate finally looking for new approaches. The referendum was obviously a complete waste of time, but in the context of ten lost years, what's two more weeks?
1
The U.S. has "reformed" its labor markets over the past 30 years in favor of neoliberal principles. All it got in return was lower real wages, a high trade deficit, high federal deficits (and now a huge national debt equal to its GDP), a ridiculously high GINI coefficient, unstable markets, slow economic growth that has not consistently gone past 3% in a more than a decade and an underfunded pension system.
While I agree that reforms are necessary in Greece, it will not be something that can be carried out over a few years. It will take a generation. And, the American experience shows that it does not guarantee a positive outcome; it just shifts the money around to a different favored population.
Someone noted that raising the corporate tax would hurt business in the debt deal. But so would raising the VAT and any number of other consumer taxes. It reduces costumer consumption and thus hurts business revenue. This is an example of what people do NOT think clearly about before they say something.
Greece at this point (after 5 years of deterioration from austerity) really does not have any good paths to choose from. It's only choices are the least worst and a possibility of a better future than can be accomplished with backseat drivers looking over their shoulder.
If the Europeans want to help Greece, they should think about some sort of Marshall Plan like what the U.S. did after WWII. The fact that modern Europe even exists is because the U.S. did not hold a grudge.
While I agree that reforms are necessary in Greece, it will not be something that can be carried out over a few years. It will take a generation. And, the American experience shows that it does not guarantee a positive outcome; it just shifts the money around to a different favored population.
Someone noted that raising the corporate tax would hurt business in the debt deal. But so would raising the VAT and any number of other consumer taxes. It reduces costumer consumption and thus hurts business revenue. This is an example of what people do NOT think clearly about before they say something.
Greece at this point (after 5 years of deterioration from austerity) really does not have any good paths to choose from. It's only choices are the least worst and a possibility of a better future than can be accomplished with backseat drivers looking over their shoulder.
If the Europeans want to help Greece, they should think about some sort of Marshall Plan like what the U.S. did after WWII. The fact that modern Europe even exists is because the U.S. did not hold a grudge.
1
In truth, the cost of the gamble far outweighed the benefits, even under the unlikely assumption that the Europeans will accept the Greek offer (or something close to it). It cost Greece at least several percent of GDP (2 weeks of an economic heart attack - and counting). It also greatly amplified the distrust and ill will amongst European policymakers, making them less likely to be generous in negotiations.
And the reality is that the Greek offer is nowhere near enough to sell an extra 50 billion in aid. The Northern Europeans are gonna require significantly more structural reforms and plausible revenues/savings before they sign up to a new deal - and I doubt Greece has too many allies to argue with them.
I don't think it ends Sunday tho - I think the Europeans will at least drag it a bit longer as the ATMs run out of cash for a few days in hopes that Tsipras resigns and they get a technocratic or unity government with adults to deal with.
And the reality is that the Greek offer is nowhere near enough to sell an extra 50 billion in aid. The Northern Europeans are gonna require significantly more structural reforms and plausible revenues/savings before they sign up to a new deal - and I doubt Greece has too many allies to argue with them.
I don't think it ends Sunday tho - I think the Europeans will at least drag it a bit longer as the ATMs run out of cash for a few days in hopes that Tsipras resigns and they get a technocratic or unity government with adults to deal with.
4
I agree that the gamble outweighed the benefits. But I do think EU will accept the offer, they don't have any other option.
Greece will never pay back any debts, loans, whatever, and the core EU policymakers will continue to behave like a group of red wine guzzling old colonial farts.
This gamble cost Greece their reputation within Europe, but it also cost the EU its reputation globally.
Greece will never pay back any debts, loans, whatever, and the core EU policymakers will continue to behave like a group of red wine guzzling old colonial farts.
This gamble cost Greece their reputation within Europe, but it also cost the EU its reputation globally.
1
I beg to differ. Costs incurred are completely based upon time horizon. Too much of what has been said to date has been on the time horizon of politician election cycles and currency/bond/commodity traders. Not helpful.
No one is really trying to solve the main problem: how to get Greece to a point where it is self-sustaining. Everyone is just covering their you-know-what on all of the bad decisions they have made in the past 20 years.
No one is really trying to solve the main problem: how to get Greece to a point where it is self-sustaining. Everyone is just covering their you-know-what on all of the bad decisions they have made in the past 20 years.
3
It would be far more accurate to say that Mr. Tsipras refused to fold before the flop without checking with the Greek voters first. But either way, the poker analogy is too flawed to be useful. Going "all in" in negotiations isn't a matter of style ("The creditors... were personally irked by Mr. Tsipras and his negotiating team, who had a style of bluster and attack that is just not how things are done among European leaders"). Nor is it something that can happen right away, as in poker--everyone makes aggressive offers and refuses to budge at the start. If the Greek offers never change, increase, or backtrack, that might be the negotiation equivalent of "going all in." But nothing in this article or any others I've read suggests any of that has happened.
2
The financial interests in this problem remind me of Payday Lenders - they don't want their client to ever get out of debt, just keep paying interest and borrowing more, and more, and more,...
Unless/until the EU starts doing things to create actual wealth producing jobs in Greece nothing will improve. Unfortunately, the financial people are advising a starving person to go on a diet believing that a country or business can cut its way to profitability. Meanwhile the financial folks are raking in the interest payments and blaming the Greeks for being lazy and corrupt.
Yes there are real structural problems but nobody is addressing them, only trying to make more money for the financial sector at the expense of the Greek people (or any other citizens of poor nations).
The wealthy nations don't want to give up their employment or purchase the products that Greece has to offer, but they do want them to borrow more money and pay more interest.
Unless/until the EU starts doing things to create actual wealth producing jobs in Greece nothing will improve. Unfortunately, the financial people are advising a starving person to go on a diet believing that a country or business can cut its way to profitability. Meanwhile the financial folks are raking in the interest payments and blaming the Greeks for being lazy and corrupt.
Yes there are real structural problems but nobody is addressing them, only trying to make more money for the financial sector at the expense of the Greek people (or any other citizens of poor nations).
The wealthy nations don't want to give up their employment or purchase the products that Greece has to offer, but they do want them to borrow more money and pay more interest.
3
Love this line: "Unless/until the EU starts doing things to create actual wealth producing jobs in Greece nothing will improve."
How about the Greek government doing things to create actual wealth?
How about the Greek government doing things to create actual wealth?
It is not clear to me why this article points to a victory of Tsipras (albeit minimal), whereas other newspaper are saying that the new conditions are in fact worse than those of two weeks ago (e.g. Larry Elliot on The Guardian).
12
Sorry, I just don't get your point; if Tsipras is basically accepting the same proposal that the creditors put on the table 2 weeks ago (before the referendum,) in what sense has his "tactic" worked? He might just as well have accepted it when it was first offered, and spared his country the further damage of the last week or two, with cash-starved businesses failing, pensioners fainting in bank queues, people crowding around empty ATM's, tourists cancelling holidays in their thousands, and a 20 million bill for the referendum to add to the debt pile. Furthermore, in what sense is the country better off if this deal goes through, compared to what it would have been if Syriza hadn't come to power, and the previous government had continued broadly In tune with the creditors, secured the rest of the bailout and avoided default (or arrears?) Debt relief, perhaps? Maybe a tweak to the payment terms but not a haircut that's for sure, according to Merkel & Co, and certainly not enough to compensate for the increased debt and decreased ability to service it that has developed since January. "Poker player?" No, I am with Michael O'Leary on this one.. "Lunatic."
17
"The Greek prime minister got a somewhat better deal by risking it all, but he may want to choose his bluffs more carefully from now on."
The question the Times needs to ask is, was the price for this "better" deal worth it? Greece's recovery has been set back significantly. Unquestionably by years. Greece's relations with most of Europe have turned seriously damaged. It will take years to mend these. Domestically the political scene has been made more toxic than ever. This too will take years to bandage. The credibility of his party, if not the nation, has been seriously damaged, especially in the eyes of the world. Foreign nations and international institutions like the IMF will not be able to take him seriously in any future administration and any bargaining on his part will not be trusted. This will carry a cost in any future agreement agreements.
Considering all these costs how can one make the claim that he ended up with a "better" deal than that on the table 6 months ago?
The question the Times needs to ask is, was the price for this "better" deal worth it? Greece's recovery has been set back significantly. Unquestionably by years. Greece's relations with most of Europe have turned seriously damaged. It will take years to mend these. Domestically the political scene has been made more toxic than ever. This too will take years to bandage. The credibility of his party, if not the nation, has been seriously damaged, especially in the eyes of the world. Foreign nations and international institutions like the IMF will not be able to take him seriously in any future administration and any bargaining on his part will not be trusted. This will carry a cost in any future agreement agreements.
Considering all these costs how can one make the claim that he ended up with a "better" deal than that on the table 6 months ago?
12
It's called at Pyrrhic victory. And it comes at a feasting cost (I invite you to read history). The Greek economy was growing last year. Political uncertainty and the negotiations of Syruza that have pushed the country to the edge of the cliff . The economy is in recession and will remain so until banks can get back on their feet. Some victory.
12
Reader, the part you're missing is that despite a small Greek recovery last year, it was no where near large enough to cover debt payments and creditors were demanding even more austerity that would surely crush that recovery. It was a catch 22 with no possibility of a positive outcome. What's frustrating is that now, after standing up to the creditors, the Greeks are now capitulating instead of leaving the Euro. There is no possible way they can pay their debt, no matter how much they cut government spending.
2
Yoda: Sorry, but I disagree. If anything, Mr. Tsipras and the Greeks have finally shown some backbone and self-respect, and the solidarity that the prime minister's defiance has generated will serve the country well in the difficult months and years ahead (think Churchill and the British following the disaster at Dunkirk). The losers in this tawdry drama are undoubtedly the Germans. I suppose they will come away thinking they have imposed "discipline" on a slovenly southern neighbor but the enduring message to the rest of Europe is they are bullies who only look out for themselves rather than broader interests. It will come back to haunt Frau Merkel.
10
If you believe Evans-Pritchard at the Daily Telegraph, Tsipras actually only scored an own-goal with his referendum:
http://silverberg-on-meltdown-economics.blogspot.co.at/2015/07/greek-deb...