Greece and Syriza lost the public relations battle

by on July 4, 2015 at 8:21 pm in Current Affairs, Economics, Law, Political Science | Permalink

One of the most striking aspects of the Greek situation is just how much the Greek government has lost the public relations battle.  They have lost it among the social democracies, and they have lost it most of all with the other small countries in Europe.  They retain some sympathy in the American government, but we are not willing to put any money on the table and basically we want the European Union to clean up the problems for us.

If you look at the progressive economists, Stiglitz, Krugman, Piketty and Sachs all recommend a “no” vote on the referendum.  Though they would not frame it this way, they are advocating a kind of extra austerity for the purposes of a greater long-run good; Greece’s primary surplus vanished some time ago, so signaling a break with Europe will only make matters tougher.  You could call this “properly mood affiliated austerity,” cloaked by strange presumptions about bargaining, namely the view that a “no” vote will induce a more favorable offer.  It seems, with their on the ground understanding, most Greek economists are strongly in the “yes” camp.

The progressives do have some good points and I absolutely favor significant debt relief for Greece.  That said, the Greek government has handled the last few months so badly it really is incumbent on them to show they will do better.  I don’t see many signs in that direction, quite the contrary, and any reasonable democratic government will ask for Greek institutional progress before putting up much more in the way of money.  The entire handling of Greferendum should alert the progressives that they have been egging on the wrong horse; the heroic Hugo Dixon nails it.

I take the progressive “clustering out on a limb” here as a sign that, for better or worse, progressivism as an ideology has reached and indeed gone beyond its high water mark.  The progressives are siding with a corrupt, clientist state, which won’t cut its defense spending down to Nato norms, against some admittedly imperfect social democracies, thereby sustaining the meme of powerful aggressor vs. victim, Arnold Kling telephone.

Interfluidity has an interesting but quite wrong post on how to think about Greece.  International relations simply could not be run on the principles he advocates, most of all in conjunction with democratic nation states.  His weakest point becomes evident when he writes:

Among creditors, a big catchphrase now is “moral hazard”. We cannot be too kind to Greece, we cannot forgive their debt with few string attached, because what kind of precedent would that set? If bad borrowers, other sovereigns, got the idea that they can overborrow without consequence, if Spanish and Portuguese populists perceive perhaps a better deal is on offer, they might demand that. They might continue to borrow and expect forgiveness, and where would it end except for the bankruptcy of the good Europeans who actually produce and save?

The nerve. The fucking nerve. Lenders, having been made nearly whole on their ill-conceived, profit-motivated punts, now fear that if anybody is nice to somebody who doesn’t deserve it, where will it end? I’d resort to that cliché about chutspa, the kid who murders his parents then seeks leniency ‘cuz he’s an orphan. But it’s really too cute for the occasion.

That’s a non-answer, with anger filling in for the required substance as to why Germany and others should allow this.  “Your government is making things much worse.  If you want to borrow so much more from us, you have to play by the rules and also stop spitting in our face and calling us Nazis and terrorists while negotiating” is more relevant — and yes relevant is the right word here — than any point he makes.

A political program has to be something that voters could at least potentially believe, and international negotiations therefore cannot stray too far from common-sense morality, including when it comes to creditor-debtor relations.  That is the point which today’s progressive economists are running away from as fast as is humanly possible.  And for all the Buchanan-esque and public choice points about “rules of the game” this one about common sense morality unfortunately has ended up as the most important.

Look at this way: if you lost a public relations battle to Germany, you are probably doing something very badly wrong.

1 Tom Warner July 4, 2015 at 8:58 pm

Another interesting point is that the “yes” vote is coming mainly from 55+ ages and especially 65+. That is, the very people Tsipras was supposedly protecting with his “red line” against pension spending cuts. According to a poll the vote is going 56/26 for yes among 65+, 71/20 for no among 18-24.

2 Rahul July 4, 2015 at 11:48 pm

If they vote “NO” where would Tsipras fund their pensions from? Perhaps they realize this. An EU mandated haircut is better than a tonsure.

3 msgkings July 4, 2015 at 11:58 pm

Presumably they’d just pay the pensions in drachma. Obviously a huge downtick in purchasing power for importing things, but for buying stuff in Greece probably a workable kludge: food, rent, etc.

Of course, that’s what Tsipras and the gang THINK they can pull off.

4 Rahul July 5, 2015 at 12:38 am

Hyperinflation ain’t a pretty sight. And the older Greeks have seen it once. Once is enough.

5 msgkings July 5, 2015 at 12:51 am

Agreed. But it seems they think they can avoid that.

6 Tom Warner July 5, 2015 at 1:33 am

Rahul: Precisely. Also they have the most to lose from devaluation (more savings and more dependent on it), and the least to gain from the investment and growth that devaluation could induce (less earned income in their future, usually somewhat less equity investment among their savings).

7 Rahul July 5, 2015 at 2:00 am

The pragmatic question is which option is perceived to be the more reliable, less painful way for Greeks to come out of the swamp. People ought to quit the moralizing & ideological posturing to focus on that.

The other mistake is to equate “austerity” with “YES”. All paths ahead are austere enough. We can quibble over degree.

A third critical issue is subjective pain preference: Low pain stimulus for an extended duration. Or excruciating pain for shorter duration.

8 Jan July 5, 2015 at 6:36 am

I don’t think the outcome of a “No” option is clear enough to conclude that it is choice between Low pain stimulus for an extended duration. Or excruciating pain for shorter duration.. It is more a better the devil you know situation

9 Gene Callahan July 6, 2015 at 1:21 pm

“The pragmatic question is which option is perceived to be the more reliable, less painful way for Greeks to come out of the swamp.”

That is itself a moral claim.

10 Tassos Bassoukos July 5, 2015 at 10:12 am

Well, you need to take into account where each age group takes it’s information from – people over 45-50 watch TV and read newspapers, and all private channels essentially presented a common unified pro-Yes message to the populace; most of the newspapers followed suit.

11 Chris Purnell July 5, 2015 at 2:54 pm

Gratuitously offensive remarks such as …”if you lost a PR battle with Germany you’re probably doing something wrong.” indicate a triviality of analysis which ruins the entire piece. The ‘No’ vote is entirely sesnsible if you believe (rightly?) that the EU is attempting regime change via a cabal of bankers. The same bankers who have wrecked the world economy. The same bankers who have committed criminal acts on numerous occasions. These are the people who have the high moral ground? Organisations that make foolish loans should suffer in the capitalist way: Go bust.

12 Whatever July 5, 2015 at 3:46 pm

Your own gratuitously offensive remarks ruin your comment.

You have found a conveniently simple theory that conforms well with your priors and your mood. Congratulations, you have found a scapegoat. That the Bad Guys are called bankers, immigrants, Jews, or Germans, is really unimportant. Your worldview is simple and satisfying. Unfortunately reality isn’t like that.

13 China Cat July 6, 2015 at 10:50 am

Whatever’s comment’s second paragraph is gold.

14 Barkley Rosser July 4, 2015 at 9:07 pm

Well, they clearly have lost the public relations battle within the euro zone, even though they have much for their case. I think Jamie Galbraith lays it out as well as anybody, but they do seem to have lost the game, irrespective of what happens with this vote.

15 Rahul July 4, 2015 at 11:49 pm

Is there a precedent for a bankrupt to win the PR battle? No one likes the guy who doesn’t pay back your loans.

16 Adrian Ratnapala July 5, 2015 at 12:10 am

Americans do. At least sometimes. Dirt poor farmers oppressed by the bank are a popular theme in its art, but they are just bankrupts or near bankrupts.

17 Jan July 5, 2015 at 6:31 am

Hmm, maybe true for the generation that lived through the Depression, but not so much now. We don’t have much sympathy for the guy who walks out on the mortgage he was never going to be able to afford. That doesn’t mean we don’t also blame the banks for all those risky, high-interest loans (and subsequent global recession).

18 MP July 5, 2015 at 7:50 am

Maybe I’m just listening to too many progressives, but itthere seems to be a he’ll of a lot of sympathy for ‘ victims’ of ‘predatory lending’. Mortgages for years, student loans now getting more prominence. Greece fits easily into that framework.

19 Norman Pfyster July 5, 2015 at 9:44 am

You seem to be too young to remember Farm Aid. Or the John Mellencamp song “Rain on the Scarecrow.”

20 Jan July 5, 2015 at 4:37 pm

Farm aid was about helping farmers PAY the debt they owed before they lost their livelihoods, no?

21 Art Deco July 5, 2015 at 5:34 pm

They ‘lost their livlihood’? What does that even mean? They made bad business decisions. Or, as Michael Kinsley put it, “when you’ve had subsidized water, subsidized crop insurance, subsidized export promotion, subsidized price supports and you cannot pay off your subsidized low-interest government loans, the government is entitled to collect its collateral”.

22 So Much for Subtlety July 5, 2015 at 5:06 am

Rahul July 4, 2015 at 11:49 pm

Is there a precedent for a bankrupt to win the PR battle? No one likes the guy who doesn’t pay back your loans.

A reasonable chunk of the Old Testament is sympathy for the borrower and a justification of, basically, pretty much anything you might like to do to your banker. This has huge influence on Muslims and Christians – and probably contributed to Christian anti-semitism.

It is only in very recent times we have come to like our banks a little

23 The Other Jim July 5, 2015 at 6:28 pm

>No one likes the guy who doesn’t pay back your loans.

Elizabeth Warren says hi! As does every other US Democrat politician.

Warren’s people are just “victims” of “predatory” evil-doers, you see. And if we can write off the behavior of these borrowers, excuses can easily be made for a good-old fringe-left statist governments such as the one Greece has.

24 Floccina July 6, 2015 at 12:32 pm

A borrower nor a lender be. We do not like either lender or borrowers. (In a dire poverty situation borrowing can be a face saver over begging but we have that pretty much solved.)

IMO debt is good to move some of your consumption to earlier in your life and to enable a business with a better way of doing things to grow faster. I think people over 35 years old should have very little debt and not take on more and businesses growing at less that 20%/year should be debt free. Equity financing should be used more and be more available.

IMO Debt should be discouraged but our government tax systems encourage it.

25 Lee A. Arnold July 5, 2015 at 7:36 am

Syriza has done the right thing! This is an internal Greek matter, too. Syriza was elected to power, pushed it as far as their supporters would have demanded of them, and are now holding the referendum so the people can decide to cut pensions, etc.

You have to look at it while including the viewpoints of Greek internal discussion, because “preferences are exogenous”. And preferences are mutatable — a point somehow frequently lost upon economists, who formulated the phrase.

After a “yes” vote, I hope that Tsipras stays on! He’s got more sense than most commenters here, for example. Indeed the whole episode is an historical instruction to Europe and will serve as a reminder to the necessary political integration. Varoufakis deserves a position at the ECB; he probably knows more than anyone, by this time, about how to make the whole thing go forward in everyone’s interests.

Tyler: “also stop spitting in our face and calling us Nazis and terrorists while negotiating” — Tyler, in the midst of a post that misreads the working of the whole system, taking graffiti off a wall for the position of the Greek government is egregiously mood-affiliative! A link to evidence that negotiators said this in meetings, please?

26 William July 5, 2015 at 7:45 am
27 Lee A. Arnold July 5, 2015 at 10:44 am

You think this counts? But it isn’t what Tyler wrote. Negotiations are concluded. There are no negotiators in the world who believe that public statements outside the room and after the fact are anything but political spin. Emotions are high, so what? “Terrorism” is used by everyone for everything these days. In the US, the political parties use it against each other.

28 bmcburney July 5, 2015 at 3:32 pm

Lee A.,

In my experience as a negotiator, things said outside of negotiations do matter. In this context, I would think that they would matter quite a bit and probably much more than anything said in closed door meetings. In negotiations, like it or not, that a$$hat on the other side of the table is your partner. If the deal doesn’t work for both sides, you aren’t going to get a deal. In this case, the people doing the negotaiting and making the decisions for both sides are politicians and things said in public, even primarily for domestic consumption, always have a big effect on the chances of success.

For the Troika group especially, the most difficult constraints on their ability to make deals are (1) the effect of the deal on their own ability to stay in office; and (2) the effect of a deal on the political situation in other troubled economies. If Varoufakis actually gets a better deal via public name-calling you can expect a negative effect on the domestic popularity of his negotiating partners. Worse, Spain and other troubled economies also have politicians who would like better deals and they would probably be willing to insult their negotiating partners as well.

As with demagogues from time immemorial, Tisparas and Varoufakis do gain domestically by focusing Greek public anger on foreginers (and others). But they lose the ability to get a favorable deal the same way. The way the negotiations were conducted from the Greek side makes no sense unless, from the very beginning, they were planning to provode a crisis and leave the EU. This has been presented as a choice between austerity and the euro. Now, the Greeks will leave the euro and get “austerity on steroids” followed by hyperinflation. They have attempted to force the Greeks to see the EU as their enemy to gain power in Greece. The have succeeded, but the price is that they have forced the EU to see the Greeks that way as well.

29 RustySynapses July 5, 2015 at 5:01 pm

I view this as all tactics. They’re trying to play “the decision maker is not in the room” – in this case, the decisionmaker is the public (per the vote), but that doesn’t work where they’re clearly recommending the decisionmaker vote “No.” It’s like a car salesman saying “I have to check with my manager – but I’m going to recommend that he not accept your offer.” That doesn’t work. He needs to convince the buyer that he’d love to give you your price, but his darn manager won’t let him. Otherwise, it just looks like a tactic. A nobody likes blatant negotiating tactics. That’s why they’re losing the PR battle. We have sympathy for at least some hardship cases who can’t pay. Maybe not enough sympathy to pay for their generous pensions, but maybe. It’s hard to have sympathy for someone who is playing games.

30 Adrian Turcu July 5, 2015 at 10:38 am

Sarcasm, I hope?

31 Lee A. Arnold July 5, 2015 at 10:55 am

Hardly sarcasm, unless you think that sweeping the Euro’s problems under the rug is a good idea.

32 Adrian Turcu July 5, 2015 at 7:07 pm

The representatives of Greece were not there talkung about the Euro and its deficiencies. They were asking for more of the deficient currency, and impolitely.

33 Brendan July 4, 2015 at 9:09 pm

Anyone want to guess how many times Tyler has called for “significant relief for Greece”? (I invite you to Google the matter).

34 HelloKitty July 4, 2015 at 9:20 pm

So? What is your point? His consistency?

35 meets July 4, 2015 at 9:21 pm

How many times has he called for no debt relief for Greece?

36 MC July 4, 2015 at 10:45 pm

Even once is one time too many.

37 Phill July 4, 2015 at 11:48 pm

Tyler, I’d rather hear what you think about the *rest* of Steve’s post.

This post otherwise seems dissonant. You’ve never liked them from day one; but what of their analysis of the situation? Is the debt sustainable? Is the status quo going to improve the real economy or continue to slowly strangle it?

Because otherwise your complaints seem to have amounted to “they’re not very serious people, look at how they lack decorum! the very nerve!”.

38 Jan July 5, 2015 at 6:27 am

I was also very surprised to read that. From the tone, and content, of previous posts on the topic I assumed that relief for Greece would have been from the Not Very Serious category of options and so rejected out of hand by Tyler.

39 Ted Craig July 4, 2015 at 9:23 pm

Now this is how you win the PR battle:

“Though I would carefully avoid giving unnecessary offence, yet I am inclined to believe, that all those who espouse the doctrine of reconciliation, may be included within the following descriptions. Interested men, who are not to be trusted; weak men, who cannot see; prejudiced men, who will not see; and a certain set of moderate men, who think better of the European world than it deserves; and this last class by an ill-judged deliberation, will be the cause of more calamities to this continent, than all the other three.”

– Thomas Paine, 1776.

40 steve July 4, 2015 at 9:27 pm

“The progressives are siding with a corrupt, clientist state”

Not so much. . If you read the criticisms, they are opposed to the bailing out of the German and French banks. That aside, if it is a bad sign that progressives align themselves with Greece, what did it say about conservatives and libertarians aligning with brutal Chile? In neither case do I think progressives or conservative/libertarians actually cared about the countries involved, they just wanted to use them to push some agenda. Torture and a few thousand deaths? OK, as long we get “free” markets. Look like you are taking the side of a corrupt, incompetent government? OK, as long as we get to beat up on the bankers.


41 Ian Maitland July 4, 2015 at 9:52 pm

“If you read the criticisms, they are opposed to the bailing out of the German and French banks.”

Then they are more hopelessly out of touch than I feared. They are fighting the last war. The German and French banks are out of the picture and have been for several years. Greece’s creditors today are the European Central Bank, the European Commission and the IMF. If I recall, private lenders took an average 54% haircut in 2012 as part of Greece’s second bailout.

42 steve July 4, 2015 at 10:32 pm

That was the second bailout. If you read the Interfluidity piece he claims, and I think he is correct but can’t find the details, that the bulk of the private bank debt, at least for the important banks, was done with the first bailout and the debt was largely converted from private to public. (Also, I am pretty sure some people ares till angry over the bailout of US banks so remaining angry over these bailouts 5 years later doesn’t seem that unusual.)


43 Ian Maitland July 4, 2015 at 10:50 pm

Thanks Steve. So they are fighting not the last war, but the one before that.

44 Art Deco July 5, 2015 at 10:47 am

The “bailed out” U.S. banks received bridge loans which they serviced and then paid back and guarantees on their bond issues which expired three years ago.

The money pits, in ascending order of severity, were AIG, the auto industry components, and the mortgage maws. Losses from the three components of the AIG rescue were the smallest of the three and AIG was the only beneficiary that was not a Democratic Party client.

45 John July 5, 2015 at 12:06 am

Steve, it is a bit late to be opposed to bailing out the German and French banks. Life goes on; a counterfactual history is worth less than a drachma. Consider that all of Europe might have been months in the pickle that Greece is in this week. Or maybe that image suits the Progressive taste, somehow.

To oppose bailouts in the future, oppose TBTF guarantees now; But you’ll be fighting the conventional Left not the Libertarians or Conservatives on that one.

Speaking of not moving on, here you are still beating the drum about Pinochet, when Chile seems rather to have managed rather decently a mere 40 years later. (Venezuela, not quite so OK! Oh, hardly fair, just teasing, forgive me! 🙂 ) Want to throw in some criticism of trade with South Korea in the 80’s?

46 Olibeira July 5, 2015 at 1:08 am

Actually Venezuela is doing better than Chile.

But don’t let facts ruin your story.

Lets just pretend that Venezuela in 1999 was in great shape.

Oil price at 10,bucks, IMF program, no money to pay salaries, etc…

47 Peter Lund July 5, 2015 at 9:05 am

Venezuela doing better than Chile?!

That’s certainly news to me. Can you bring me out of my ignorance with links to non-insane sources, please? (If you really /are/ right — which I very much doubt — I would be /very/ happy to be set straight!)

48 Art Deco July 5, 2015 at 10:49 am

Actually Venezuela is doing better than Chile.

Not on any sensible metric.

49 E. Harding July 5, 2015 at 3:21 pm


50 Mark July 6, 2015 at 9:30 pm

Um, no.

Chile’s per capita GDP has been growing significantly faster than the rest of Latin America while Venezuela is lagging behinh. Chile used to be poorer than Venezuela not long ago, while now the former is at about $18,000 and the latter around $22,000.

Venezuela’s low oil prices aren’t really something to brag about. The government keeps them artificially low by prohibiting export of oil. I would try and explain the value of free trade to you and why it would be worth it to export oil even if prices went up but I suspect it would a wasted effort.

51 JLV July 4, 2015 at 9:30 pm

“But the Greeks hurt all those precious German fee-fees” is roughly the worst justification for bad actions by the Eurogroup.

52 Cliff July 5, 2015 at 12:32 am

I guess that’s why no one has given that justification for anything then

53 K. Williams July 5, 2015 at 8:44 am

“I guess that’s why no one has given that justification for anything then”

Really? What do you think “you have to stop spitting in our face and calling us Nazis and terrorists while negotiating” means, other than “the Greeks shouldn’t have hurt the Germans’ feelings”?

54 Slappyduck July 5, 2015 at 6:22 pm

Why? You can’t beg for a bailout required due to your own incompetence and then insult the people offering to help you. Don’t bite the hand that feeds.

The Germans want the Greeks to burn. And they deserve to burn. And they will burn.

55 Mark July 6, 2015 at 9:32 pm

So, you are arguing that spitting in someone’s face while you ask them for free stuff is a sensible approach then? Has it worked for you a lot?

56 Alain July 5, 2015 at 11:43 am

a) there have been no bad actions by the euro group. All of the bad actions were on Greece’s side of the table.

b) spitting in the face of someone you are begging for resources is simply retarded

c) liberals are highly into censorship based upon feelings which is a far higher bar than not hurting the feelings of those you are begging from.

57 JLV July 4, 2015 at 9:33 pm

Also, is there a term for the very specific case of writing an essay that is an exercise in mood affiliation while also accusing one’s opponents of mood affiliation?

58 Brendan July 4, 2015 at 9:35 pm

Yes, JLV, it is called “essay a la Marginal Revolution.”

59 K. Williams July 5, 2015 at 8:45 am

I was going to say “it’s called half of the essays on this site,” but your formulation is far more elegant.

60 Jan July 4, 2015 at 9:38 pm


61 Rahul July 5, 2015 at 12:23 am

The sport of Glass house stone throwing?

62 Ricardo July 6, 2015 at 6:02 pm

With what mood is Tyler affiliating?

63 dirk July 4, 2015 at 9:34 pm

Interfluidity goes on to say that “moral hazard” is a concept that traditionally applies to creditors. The original creditors who made the bad loans have already been made whole. Therefore, in what sense does the concept of moral hazard continue to apply here? Basically, the troika has already maximized the moral hazard by bailing out the irresponsible lenders, who live to irresponsibly lend another day. Meanwhile, they wag their fingers at those who weren’t part of the bailout. That’s the chutzpah. It’s a fair point about the essence of moral hazard, hardly a “non-answer”.

64 Ian Maitland July 4, 2015 at 10:03 pm


“The original creditors who made the bad loans have already been made whole.”

“Made whole”? What makes you think that? In Greece’s second bailout in 2012, according to the Economist. private creditors took writedowns of 75% on their loans.

Here is the Economist: “Private creditors have accepted a haircut of 53.5% of the nominal value of Greek bonds they hold, plus a reduction in the coupon for new bonds, starting at 2% and rising to 4.3% from 2020. This amounts to a loss of net present value of about 75% (up from the 21% originally agreed in July)”.

65 dirk July 4, 2015 at 10:16 pm

If Interfluidity’s post got the basic facts wrong, then that should have been the thrust of Tyler’s criticism. (I believe he actually writes “almost whole” and focuses on the 2010 bailout. Was the first bailout more significant? I don’t know.)

66 Hesam July 4, 2015 at 11:10 pm

Has everybody forgotten what happened?? The 2010 bailout (110 billion euros) was the one where Greece accepted harsh austerity and the bondholders got off free. However within a year the fiscal adjustment produced such bad results that Greece needed the second 2012 bailout.

67 bjssp July 4, 2015 at 11:38 pm

Isn’t that what this SHOULD be about? How crappy the economy has been as a result of the actions of the previous five or so years?

68 Hesam July 4, 2015 at 11:44 pm

Yes it should be.

People also forget that in the June 2012 election Syriza got only a quarter of seats of the parliament. So in 2012 people chose the “approved” candidates and it got them even deeper into depression. Only then you got the 2015 result.

69 Cliff July 5, 2015 at 12:35 am

What is “this”? Blame the ECB if you want to, I certainly do. That doesn’t mean free money from Germans for Greeks to retire at 50. Even if you forgive all the debts it will just happen all over again without structural reform which Greece has steadfastly refused to implement.

70 M July 5, 2015 at 4:58 am

Why would it happen again if the German lending & saving institutions are reformed to not make foolish lending choices?

71 Jan July 5, 2015 at 6:22 am

They don’t retire at 50 anymore, Cliff. Jesus Christ.

72 TMC July 5, 2015 at 1:50 pm

75% of Greeks retire before age 61. No 50, but still too young.

73 Jan July 5, 2015 at 4:52 pm

I also think it is too many, but to be clear that 75% refers to two particular two particular pension funds, one of which is public sector. So it is not “75% of Greeks.” And they take hits on the amount of the pension for opting in to the early retirement.

74 Mark July 6, 2015 at 9:36 pm

Hesam, are you forgetting the upturn Greece was beginning to experience during 2014 that Syriza effectively sabotaged (the upturn interfluidity dismisses out of hand because ‘someone who was wrong before is inevitably always going to be wrong again’ or something)

75 Hesam July 4, 2015 at 9:42 pm

Am I missing something? Where is the evidence that Syriza has lost the PR battle? It is not like Tyler was ever an impartial observer in this debate.

76 John July 5, 2015 at 12:10 am

You are missing the apparent fact that writing off Greek debt remains political poison in every other nation in Europe. No one is going to bat for Syriza.

77 Hesam July 5, 2015 at 12:15 am

A number of points:

1. My impression (which could very well be wrong) is that Syriza’s plan was to exit euro without appearing to have made such a choice. In that context what other EU countries think isn’t really important, the PR battle that matters is tomorrow’s referendum.

2. Other EU countries will have elections, if a different government comes to power they tone might change.

78 AcidDC July 5, 2015 at 1:29 am

That’s a good point. They’ve failed to get any other European governments on their side, but that a) was never really on the table and b) has nothing to do with the PR battle.

79 Mark July 6, 2015 at 9:39 pm

They seem to have picked a rather circuitous route to leaving the euro then. Leaving would be the right choice for them and everyone, but given the erratic and inconsistent nature of the Greek government, I don’t know if I buy that they planned that far ahead.

I really doubt the next round of governments in the EU will be more in favor of another Greek bailout; seems to be headed in the opposite direction.

80 Joël July 5, 2015 at 10:35 am

Some anecdotal evidence in favor of Tyler’s claim: in French newspaper’s comments I read, especially the one of Le Monde, it is clear that the overwhelming majority of the readers are now very upset against Tsirpas and against Greece in general. And I say that with sadness, because I agree with the policies Tsirpas want for Greece in Europe.

In my opinion, one serious PR mistake of the Tsirpas government was not to make good use of the sympathy it had (and in part still has) in the US, amongst economists (Krugman etc.), an important part of the press (the NYT) and the Obama administration. Instead, they resorted to the usual leftist anti-american rhetoric and Tsirpas preferred to show himself with Putin.

81 Hesam July 5, 2015 at 2:08 pm

See my reply to John. I never thought Syriza had to fight a PR battle in other EU countries. In fact, reading the title of the post my first thought was that the YES campaign had pulled ahead in the polls. At any rate NO seems to be winning comfortably (61% with a third of the votes counted so far).

82 Joël July 5, 2015 at 5:02 pm

Yes, the “no” is winning and that’s great news! That means Syriza has the legitimacy to continue negotiating for a better deal with the creditors. But for this to work, the creditors, that is, the Eurogroup, has to soften its position. Here,
a better PR situation for Greece would have been helpful.

83 Jan July 4, 2015 at 9:48 pm

Look at this way: if you lost a public relations battle to Germany, you are probably doing something very badly wrong.

Kind of funny because Germany is literally the most popular country in the world now, and not because of this. Turns out it is very easy for just about anyone to lose a PR battle to Germany these days.

84 Feanor July 5, 2015 at 4:56 am

Haha, good point. Never mind fighting the last war, or the one before that; seems Tyler’s also fighting the one from seventy years ago hardly anyone’s still alive to remember!

Not that I necessarily disagree with the central point but I’m quite confused about this entire Greek quagmire anyway.

85 Alain July 5, 2015 at 11:49 am

I have been struck by how well Germany has behaved throughout the negotiations. No matter what stunt was pulled by the Greek representatives the Germany representative would say the right thing in front of the camera: ‘ that while we are sad that an agreement could not be achieved today, we are ready to start anew tomorrow and we believe that a compromise will be found.’

It was remarkable given the continual ploys of Syrzia.

86 Just Another MR Commodore July 4, 2015 at 9:50 pm

Gentlemen! We have missed the most vital part of this plot. If Greece goes under then the Bosh will be able to use this opportunity to secure a vital port in the Mediterranean. I say we should send out a few dreadnoughts to secure the Cyclades! If Greece is going to fall apart we have to make sure Britain is getting her share.

87 Randall Parker July 4, 2015 at 11:58 pm

Who gets Crete? America should. It’d be cool to have an America colony to visit in such a nice locale. We could grant Puerto Rico independence and switch our attention to the Med.

88 Rahul July 5, 2015 at 12:41 am

Yes, and for Crete the Jones Act won’t even matter.

89 dearieme July 5, 2015 at 9:43 am

“If Greece is going to fall apart we have to make sure Britain is getting her share.” The last British interest in Greek land was the Ionian islands, which were handed over as a gift to the new independent Greece. I object strongly to any suggestion that we occupy (say) Sicily, just to had it over to Greece. Let them reconquer it for themselves.

90 Slappyduck July 5, 2015 at 6:24 pm

This is my favorite MR gimmick account

91 Just Another MR Commodore July 5, 2015 at 6:55 pm

Its happened, Greece is in crisis and the Royal Navy is nowhere in site to take control! Shame on the Admiralty!

92 dirk July 4, 2015 at 9:53 pm

Common sense about creditor-debtor relationships is that the financial risk should be shared by both parties. You make risky loans while reaching for yield to a country which offers high yields precisely because the loans are known to be risky, if those loans become unpayable, both parties should get hurt and learn their mutual lessons.

What does Tyler have in mind by common sense here? Seemingly, something else.

93 Ian Maitland July 4, 2015 at 10:45 pm

When A lends B money, B promises to repay it according to the terms of the loan. I have never heard of a loan where the terms include a promise by the lender to share any losses that may result if the borrower gets into financial difficulties (though the parties are free to do so if they wish). So the moral and legal obligation rests entirely with the borrower. A lender may force a borrower into bankruptcy and seize its property to settle its debts.

Now, as a practical matter the lender may rationally choose to forgive some of what the lender is owed in order to salvage the rest and/or to expedite the payment of some fraction of what is owed to it. But that is the result of a hard-headed calculation of what is in the lender’s best interest. There is no “should” about it.

Usually, when things go wrong, both parties do end up suffering. And did in this case — according to one estimate to the tune of 75% of what the lenders were owed (see above). But it is wrong to say that lenders are legally or morally obliged to share the any losses incurred by the borrower (except for possible exotic exceptions that don’t apply here).

Try the experiment in reverse: If the lender gets into financial difficulties, does the borrower have an obligation to repay the lender more than the principal and interest of the loan it took our?

94 cineminded July 4, 2015 at 11:31 pm

When A lends to B, A acknowledges that A may take a 100% loss. That’s why A demands yield in excess of the risk free rate.

In this case, the original lenders assumed the EU would make them whole — and in a rookie mistake, the EU did make them whole, which perpetuates the problem. At this moment, Spanish and German yields haven’t diverged all that much. This means the market expects — as demonstrated by the first bailout — that the EU will bail out any bank/speculator debt that the PIIGS assume. This isn’t a problem, unless you don’t agree that Spexit and Ger-exit are roughly equally likely.

95 Cliff July 5, 2015 at 12:37 am

The EU did not make them whole

96 Rahul July 5, 2015 at 12:43 am

It saved them substantially. Just look at the figures for the Exposure of French Banks in 2010 versus now. It is incredible.

97 cineminded July 5, 2015 at 1:33 am

Greek yields were above 20% prior to joining the EU. I think they dropped to just a couple points above German yields before the bubble burst. This means the Germans/the Greater EU were absorbing the extra 15 or more points of risk, which is crazy. Bankers are made whole or whole-ish, while the EU/EZ absorbs all the rest of the risk, i.e., the EU has implicitly committed to sucking up all that debt.

That extra 15+ points of risk didn’t just evaporate. Through political slight of hand, they were shifted from the speculators to the EU… and the EU didn’t get anything in return for this shifting of risk! Risk had a price — the price of assuming default risk as a creditor is embedded in the pricing of bonds. We could monetize this risk, and figure out how much in 2010 Euros or dollars the EU stupidly decided to hand over to the initial investors. You could think of it as a straight cash transfer from the EU to banks/investors.

98 Alain July 5, 2015 at 11:54 am

Uhm, the lenders didn’t get anything for the risk: the Greeks did. The lenders got EUZone rates.

99 Debating Issues July 5, 2015 at 3:24 am

If the private banks can take a debt write off >54% then what prevents the Troika from offering a similar deal. Normally wouldn’t a “Union” created for convergence be expected to have more fraternal feeling than a hard-headed private bank?

100 Yancey Ward July 5, 2015 at 1:14 pm

The governments of the EU would then have to cough up money for the creditors of ESM/EFSF, and money for the ECB. Those guarantees suddenly become budget items.

101 Mark July 6, 2015 at 9:45 pm

I still don’t see why the lenders having already gotten bailed out makes bailing out the borrowers too any less bad. The ship has sailed with the creditors. That hardly entitles Greece to a new line of credit, which seems to be what it thinks it would need to stay in the Euro.

If bailing out the creditors was a mistake, well I don’t think it justifies making a second mistake, just for the sake of symmetry or something.

102 Peng Dehuai July 4, 2015 at 9:57 pm

What’s so bad about recognizing a mistake and cutting Greece loose; as long as you make sure they stay in EU and NATO through debt relief. Promise to do whatever it takes to keep the rest of the eurozone together. Don’t put blame on people, different cultures can’t easily share a currency union. And ignore the American left on any topic relating to Europe.

103 bjssp July 4, 2015 at 10:07 pm

What’s so wrong with Interfluidity’s post?

104 steve July 4, 2015 at 10:35 pm

Not sure. I think Tyler is implying that since the private lenders already got away with murder, the Syria leaders can’t re-litigate the past. Inter fluidity should spend more time criticizing the current Greek leadership for not moving past that.

105 bjssp July 4, 2015 at 11:33 pm

Maybe they should get over it in time, but then, considering a lot of the posturing and negotiatons have supposedly revolved preventing a situation that could be a one off but could also spiral out of control, it’s a bit rich, isn’t it?

And really, if it is, what about this part of his post?

But don’t the Greeks want to borrow more? Isn’t that what all the fuss is about right now? No. The Greeks need to borrow money now only because old loans are coming due that they have to pay, and they have been trying to come to an agreement about that, rather than raise a middle finger and walk away. The Greek state itself is not trying to expand its borrowing. Greece’s citizens and businesses would like to expand the country’s borrowing indirectly, by withdrawing Euros from Greek banks that the Greek banks won’t be able to come up with unless they are allowed to expand their borrowing from the ECB. That is, Greece’s citizens are in precisely the place France’s citizens and Germany’s citizens were in 2010, at risk that personal savings maintained as bank deposits will not be repaid. Something was worked out for French and German citizens. Other than resorting to the ethnonational stereotypes that European elites have now revived in polite company, what is the justification for a Greek schoolteacher losing her savings that wouldn’t have applied just as strongly to a French schoolteacher five years ago? Because Greeks are responsible, as individuals, for what the governments they elect do? Well, then I deserve to be killed for what my government has done in Iraq and elsewhere. Is that where we want to go?

106 Cliff July 5, 2015 at 12:39 am

Yes the Greeks do want to borrow more. Without more borrowing there will be harsh austerity.

107 Mark July 6, 2015 at 9:53 pm

Indeed. The Greek budget deficit isn’t going to be bridged without more borrowing. Interfluidity’s “chutzpah’ analogy is funny because it works perfectly for Greece or those who side with the Greek government here: “EU, you need to loan us some more money.” EU: “Why, you can’t even come close to paying us back what you already owe us, and you refuse to reform your budget so you’ll be able to.” Greece: “Well that’s you’re fault for being dumb enough to loan us money in the first place when you knew we couldn’t pay back our loans. Now, about that loan we wanted?…”

Or has a colony of leprechauns been discovered somewhere in Greece that is going to supply enough pots of gold to stave off austerity without the need for more loans?

108 Alain July 5, 2015 at 11:56 am

> The Greek state itself is not trying to expand its borrowing.

Wrong liberal. Wrong.

109 bjssp July 5, 2015 at 12:38 pm

And what is wrong about what SRW said?

110 Peng Dehuai July 4, 2015 at 11:06 pm

Her/him saying the Greek government is fundamentally flawed, yet somehow arguing it’ll all work out if the northerners just forgive debt and “integrate greece’s banking system into a much more carefully regulated European banking system.” Seems far fetched.

I do agree with the point to drop the morality play. Unfortunately interfluidity’s tirade engages in this as well. With new knowledge, and citizens across Europe forced to think about what Europe and the Euro really mean, that future can be consolidated, without Greece in the Euro, likely. You need a common enemy for unity after all.

111 Richard Besserer July 4, 2015 at 10:43 pm

Well said, Tyler.

Now “progressives” are openly making common cause with neo-Nazis and unreconstructed communists, it’s time to start dismissing what they say as windowdressing and start figuring out what really motivates them—ignorance, greed for money or power they could never achieve on their own merits in a free society, envy of people who are objectively better than them in every way, or a combination of the three.

I actually supported Syriza at first, I’m sad to say. Now it’s clear they’re as serious about taking Greece out of the free world as Golden Dawn, not any more.

Someone once called anti-Semitism the socialism of fools. No. Socialism is the anti-Semitism of intellectuals.

112 MC July 4, 2015 at 11:13 pm

“Because Greeks are responsible, as individuals, for what the governments they elect do?”

When the people elect governments time and time again that do the same thing in order to please them, then the people get the government that they deserve. That’s popular sovereignty, and if the people are sovereign, then it’s ultimately their full faith and credit backing the public debt. So, yes, the people bear a large share of the responsibility.

113 Mark July 6, 2015 at 9:57 pm

Also, he makes an inane comparison. Killing or imprisoning an American for what his/her government did in the Middle East would violate his/her right to life or freedom. Firing a Greek teacher because of the actions of the Greek government violates what right? The right to cushy government job with a nice pension? Unfortunately many people do indeed seem to think everyone has an inalienable right to a government job and pension without condition.

114 TMC July 4, 2015 at 11:28 pm

“basically we want the European Union to clean up the problems for us. ”

Who is this ‘us’ you speak of?

115 carlolspln July 4, 2015 at 11:31 pm

The Eurozone is a financial dictatorship – run by bankers.

116 charlie July 4, 2015 at 11:58 pm

Under the original euro rules, it was to be forbidden to run a surplus over 3% gdp. It was a group project and they were very worried about shirking.

Now, multiple defaults, 10%+ deficits, accounting fraud, and calling other countries “terrorists” and “blackmailers” is something that should be accommodated? Hosting referendums and taunting your partners that you will goad the public to vote “no” in order to get more negotiating leverage is acceptable?

This was meant to be a partnership, not a baby sitting project.

117 msgkings July 5, 2015 at 12:07 am

I think you meant deficit not surplus

118 Randall Parker July 5, 2015 at 12:03 am

Tyler, Since your essay is lacking in quantitative info I have no idea if your assertions are correct. The vast bulk of the (quite enormous) amount of writing on Greece of late is very light on facts.

How much of state owned businesses has the Greek government privatized since the 2008 crisis began?

How much has the average retirement age been raised already? I came across the claim that the average male retirement age in Greece is 63. Higher than I expected given all the rhetoric.

What percentage of the working Greeks work for the government?

How many obstacles are there to new business formation and to business in general?

119 Adrian Turcu July 5, 2015 at 11:05 am

Do you have google?
And I quote: “Enforcing contracts: 155” -position, of 169 countries counted.
They are getting better, but still are quite terrible for a EU country in a number of areas.

120 dirk July 5, 2015 at 12:09 am

The corrupt, clientelist nation that is Greece has been run corruptly by right and center governments for decades. The recent election of left (& right) radicals kinda shows that Greece was desperate enough to throw a Hail Mary. No, it’s not a surprise that this band of radicals is not popular with the rest of Europe. But what went wrong here, went very wrong before Syriza came to power. Syriza is not a root problem, but a symptom indicating that the patient has gotten much worse.

All this talk about progressives siding with the wrong party is just econ blogger poker and doesn’t address anything of relevance — yes, I believe that’s the right word.

Note that Interfluidity doesn’t bother with questions about the referendum or Syriza, but focuses on the bigger picture. His post doesn’t really belong in this post which begins with the theme of “progressive economists” siding with Syriza on the referendum vote.

121 Anon July 5, 2015 at 7:20 pm

Unless you are actually a communist! Pasok (Pan Hellenic Socialist Party) was a left wing party. The far left has always had a place in the Greek government it was only the recent events that widened the Overton window allowing otherwise marginal parties like the far left Syriza to become the party of the left. In fact all parties prior to the crisis were left wing by American standards. So unless you are an unreconstructed communist implying the current crisis was caused by centre/right governments is mood affiliation.

122 Jean July 5, 2015 at 12:25 am

Tyler, it’s late, and I’ve been celebrating Independence Day since lunch, so I may be incoherent, but I would have expected better from you. Yes, the Greek economy needs improvement, no argument from me there. But the Germans are using ISLM – the theory devised by Keynes, to function in a gold standard world. The rest of the world (those countries that used gold) learned that the gold standard was a problem with the Great Depression – and Irving Fischer’s equation of exchange replaced ISLM. The Germans didn’t get the message; every single German I have ever met blames the rise of the Nazis on hyperinflation – even though, in reality, the Germans had two years of horrible deflation before the Nazis took power (as did all countries on the gold standard).
I’ve lived there for ten years – I can guarantee you that not one German understands that the interest rate paid on his/her bank account since the Euro was used as everyday currency was earned in those countries the Germans now call PIGS. If you want to truly understand what happened, you have to go back to Gazprom Gard’s reforms. You then have to ask what the heck the bank regulators in Germany were doing – by Sept. 2008, a very well known German bank was leveraged 55 to 1.

123 Richard Besserer July 5, 2015 at 1:28 am

Yes. And?

Syriza promised debt relief, the way Lenin promised peace, land and bread. Their only real goal was gaining power and squandering other people’s money on themselves and their clientele, like the Greek cadres before them who shamelessly defrauded their creditors at home and abroad.

(It would be flattering them to even call Syriza socialists. A real socialist government would have expropriated Greece’s elites—including a certain Giorgos Varoufakis—on day one, or as soon as possible afterwards. And, of course, Lenin repudiated the Tsarist debt.)

The biggest difference was that the mainstream parties at least maintained the pretense of being willing to reform the Greek economy and strip rent-seekers in both the private and public sectors of long-standing privileges.

Now that Syriza has made its intentions clear, the institutions are understandably determined not to throw any more good money after bad while Syriza remain in power. Even Vladimir Putin has expressed only polite interest in assisting the Greeks.

What you’re seeing in Greece is what happens when rent-seekers are no longer able to extract rents from people with positive marginal products. If that hastens the end in Greece of government of, by, and for rent-seekers, so much the better.

Failing that, the best course for Europe seems to be to make it easier for Greece’s young, educated and productive to vote yes to Europe with their feet.

124 Debating Issues July 5, 2015 at 3:33 am

Syriza has only been in office for 6 months. Various Greek govts and Toika have presided over the long slide of fundamentals of Greek economy which were made much worse (collapse) by the austerity measures from 4 years ago onwards. why frontload all those ghastly sins on to a govt which has been in power but a short time. their mandate was amelioration from an electorate groaning in distress. And Democracy available to them offered the people a chance to subvert the economics….. Forget that left & right (Syriza & Samaras) both declined Austerity Plus. Maybe this period of even worse misery will help them to focus their minds and reconcile to the austerity measures!

125 Mark July 6, 2015 at 10:08 pm

Again, after all that austerity, the GDP began to grow in 2014. Greece was doing better than it had been doing in 5 years, when Syriza got elected.

“…offered the people a chance to subvert the economics…”
Maybe someone should offer them a chance to subvert physics too while they’re at it. You can’t subvert reality.

126 Jean July 5, 2015 at 12:38 am

So, yes, the hard left has lost the PR battle – something I normally cheer, as a libertarian. However, I am also a student of history – the decision to peg the price of gold to twice its prewar level caused the 20/21 contraction in the US. Once Britain attempted to get back on the gold standard in 1925 they had similar problems; France took fright at the problems in the UK, and rather than recognize that gold was the problem, instead ordered that all French bank reserves must be held in gold! This, combined with stupidity from the Fed, caused the Great Depression, which the Germans now wish to emulate.
It’s late – I’m ‘merry’ and rambling – but please, if you don’t believe me go and check it out for yourselves. Germany sits in third place for the number of Nobel prizes, and yet, a German has only won once in economics. They don’t what they’re doing and they have Europe’s fate in their hands!

127 AcidDC July 5, 2015 at 1:26 am

Watch out, soon you’ll realize the hard left is right about everything else too.

128 Mark July 6, 2015 at 10:11 pm

So, Germany not giving Greece more money is going to cause the next Great Depression. Hmm. Had a few beers have we?

The solution here is not with Germans being innate;y incapable of understanding economics, which seems to be what you’re implying. It’s with Greece not being in the Euro anymore. The Greeks are the ones with the choice here, assuming the EU is willing to let them leave the Eurozone (which they’d be pretty foolish not too).

129 Jean July 5, 2015 at 12:46 am

And, lest anyone wonder where I stand – the fact that the Germans are using ISLM means that the euro CAN never function. Have a wonderful fourth of July everyone – that European Union that we’ve supported since the fifties – it’s toast.

130 Sam Gardner July 5, 2015 at 12:55 am

Dear Tyler,

I fear you are wrong.

They won the public relations debate. In Belgium, all the mainstream, also conservative, newspapers side with the Greek Viewpoint. The debt is NOT sustainable. It has no use to just keep doing the same for the next 100 years.

It is only the politicians who are disconnected. Just yelling, little arguments in their public statements.

131 Richard Besserer July 5, 2015 at 2:17 am

I can believe two things at the same time:

1. The money lent to Greek rent-seekers, directly and indirectly through Athens, will probably never be re-paid in full, and probably cannot be short of austerity on the scale of 1980’s Romania (complete with suppression of any opposition to debt re-payment and exit controls to stop Greeks from fleeing their share of the debt). The management of lenders, private and public, should face consequences from their stakeholders for lending foolishly.

2. Nobody else is obliged to throw good money after bad. On the contrary, Greece’s very viability as a nation-state is in doubt, never mind its status as a developed economy, while cavalier attitudes towards tax and debt payment remain so widespread there. Frankly encouraging emigration of Greece’s positive marginal product workers and entrepreneurs seems much less risky course of action than another bailout.

German capital and Greek labour can be combined in Germany as easily as in Greece, and enforcing tax payments and debt contracts is far easier in Germany.

132 Dude Man July 5, 2015 at 1:13 am

“which won’t cut its defense spending down to Nato norms”

It’s interesting to point out that NATO norms means cutting defense spending below their treaty obligations. NATO requires all member nations to spend 2% of GDP on defense, but only the US, France, and Greece meet this standard. If Greece cuts their defense spending from the 2.2% of GDP they currently spend, then they will join Germany in shirking NATO.

133 Dude Man July 5, 2015 at 1:30 am

Correction: Turkey and the UK also have defense spending above the 2% of GDP threshold. Still, perhaps Barack Obama should chide Germany for not meeting her obligations.

134 collateral July 5, 2015 at 1:44 am

NATO should have been disbanded when the USSR was. But the merchants of death wouldn’t go for that.

135 E. Harding July 5, 2015 at 3:29 pm


136 Jan July 5, 2015 at 6:17 am

Let’s not get NATO requirements get in the way a good narrative here.

137 Adrian Turcu July 5, 2015 at 11:24 am

2.2% is 0.2% over what NATO requires. In nominal terms this is about 484 mil euros. The creditors have asked for a 400mil reduction and got refused by the Greek government. Where is Tyler wrong here?

138 AcidDC July 5, 2015 at 1:25 am

It’s tough for me to blame Syriza for losing the public relations battle when the situation is basically “Syriza is 100% right about everything and the Greek creditors really do seem to be going crazy, but have managed to keep the people of Northern Europe on their side for now”.

If Syriza had indeed managed to get the European public more firmly on their side, or find some allies among the remaining center-left parties in power anywhere in Europe, that would have been nice, but what else can you do but tell the truth and hope people listen?

139 Alain July 5, 2015 at 12:09 pm

When the truth is ‘we want more of your resources so we can spend them as we see fit, on ourselves’, it is difficult to make allies of those from whom you are going to take resources. You can make allies with other like minded people of whom you are not going to take resources, but everyone understands that those are simple mood affiliated people, not those that will actually be useful.

If you want to be useful, and you want to prove that you stand strong with the Greeks, go over to Indigogo ( and give, give all of your resources comrade, to support their great state.

Now, go to sleep child.

140 Winton Bates July 5, 2015 at 4:27 am

My friends have gone crazy.
They think it will be easier for Greece to adjust by reducing money wages than by adopting a new currency and allowing it to float. Devaluation is no panacea, but it at least offers some hope of achieving the real wage cut that is needed to get people back to work.

141 Jazi Zilber July 5, 2015 at 6:08 am

Overlooked point of Syriza impolite behavior.

Syriza broke all EU tactical rules.
They beg for “European solidarity” while openly threatening to cause “a trillion Euro damage” to the EU.

And given that they will always need Shaueble, it is amazing that they allow to use his picture for Syriza I’m derogatory ways.

This is not “inside politics”, it is madness

It might even convince the EU to ignore rational math, and treat Greece as we treat blakmailers.

Sad case of human stupidity, and how low democracy can lead a nation

142 John July 5, 2015 at 6:40 am

Greece is indeed a “corrupt, clientist state,” which is why it shouldn’t have been in the Euro. Its being in the Euro hurt it, and has benefitted richer countries in the Euro, by depressing the currency. Which is why those same counties should forgive its debt and help it bring back the drachma.

143 JTL July 5, 2015 at 7:10 am

“I take the progressive “clustering out on a limb” here as a sign that, for better or worse, progressivism as an ideology has reached and indeed gone beyond its high water mark. The progressives are siding with a corrupt, clientist state, which won’t cut its defense spending down to Nato norms, against some admittedly imperfect social democracies, thereby sustaining the meme of powerful aggressor vs. victim, Arnold Kling telephone. – See more at:

This is pathetic, and I think it sums up the western right-liberal delusion perfectly. The Greek problem with patronage, military graft and clientelism is a centuries old problem. Greece isn’t really a European country: not that long ago it was an integral province of the same state that ruled over Iraq: the Ottoman Empire. It’s that political culture which Greece and Iraq has inherited: Greece to a lesser extent, but still substantially.

This is the liberal superman delusion that drives the policies of EU, US and their liberal international institutions like the IMF. This is the delusion that drove the US into Iraq, where it was expected that you only need to remove the despot and a flourishing liberal democracy will spontaneously emerge from beneath. Never mind the despotic institutions and the political culture which gave birth to someone like Saddam in the first place.

Austerity isn’t going to make this problem go away. The byzantine institutions will re-emerge. All you are going to accomplish with austerity is forcing Greek pensioners to eat cat-food and forcing Greek babies to die. The solution to Greek corruption is time, prosperity and peace: not some stupid EU hero project, where Merkel is going to solve all of that country’s problems overnight.

144 Hans Suter July 5, 2015 at 7:28 am

Like your habitual bartender, highly informed about nothing. PR battle in front of what audience ? There’s no European media, only national ones. Does this professor believe you can beat national media fully aligned with government ? How stupid can one be ?

145 Mike W July 5, 2015 at 8:56 am

Enough already with the inventing of words starting with “gre”…it’s not clever anymore, just so academic elitist.

146 meets July 5, 2015 at 5:14 pm

Yes, Grenough!

147 Art Deco July 5, 2015 at 9:12 am

Prog-trash politics is all about status games and manufacturing excuses to transfer discretion to lawyers and resources to the educational apparat (with lawyers, the social work and mental health trade, intellectual property holders, and unionized public employees getting their cut). Only oddballs like Harold Pollack and the very old like Nat Hentoff have a non-spurious concern for social sectors of which they are not a part or make attempts to be intellectually consistent. Why listen to the rest of them?

148 Ben July 5, 2015 at 9:38 am

Love how these clowns complain about moral hazard when someone else is asking for a bailout.

But when they need one? There’s no moral hazard – its something about the monetary transmission mechanism and stabilizing interest rates.

149 Whatever July 5, 2015 at 7:32 pm

If after getting their bailout, these “clowns” spit in your face and refused to pay back, it would indeed be something complaining about.

But, see, they paid back.

Would you bet now that the Greeks will pay back? Do they even signal an intention to pay back?

150 dearieme July 5, 2015 at 9:46 am

“the Greek government has lost the public relations battle.” I’m sad to see such journalistic drivel defacing this blog. Poor show, Mr Cowen.

151 prior_approval July 5, 2015 at 1:52 pm

As if the chairman and general director of the Mercatus Center cares about any other battles, unless it be the ones that ensure a steady supply of donations.

Or maybe you are unaware of Prof. Cowen’s actual priorities and likely primary source of salary (based on Mercatus Center IRS filings found here – ), especially in light of how often others point them out in terms of his research activities or teaching load?

After all, why believe someone who actually worked at the GMU PR dept. in terms of the priorities of any director of any university based donation funded public advocacy center, at least until the early 1990s.

Maybe Prof. Cowen, in violation of the founding principles of the Virginia School, actually is an advocate for his beliefs unmotivated by any personal interest in his personal economic interests.

Yeah, it doesn’t convince me either, but then, nobody is paying me to convince you otherwise.

152 E. Harding July 5, 2015 at 3:32 pm

Where are your donations coming from, prior? ThinkProgress? The CPUSA?

153 Art Deco July 5, 2015 at 7:21 pm

why believe someone who actually worked at the GMU PR dept. in terms of the priorities of any director of any university based donation funded public advocacy center, at least until the early 1990s.

I dunno. Maybe because they fired you for cause?

154 Steve July 5, 2015 at 10:46 am

“They retain some sympathy in the American government, but we are not willing to put any money on the table and basically we want the European Union to clean up the problems for us.”

For us? So now even classical liberal intellectuals think that everything in the world is an American problem.

155 Deguello July 5, 2015 at 11:16 am

Did anyone really think that a guy who named his son after Che Gueverra was going to win a public relations battle or come up with a viable economic solution to a debt problem?

156 Jim Stuart July 5, 2015 at 11:48 am

Very articulate, fact-aware, generally not too polemical comments here. Different positions expressed well. I like it, and will return. Don’t often do Comments: too predictable (given what the originating blog’s slant is), often polemical, rarely seeming interested in learning something, or furthering an important and shared conversation. A few predictions here:

1. The No vote will win today. If so, IMO a PR win for Syriza.

2. ECB will not quickly relent on ELA.

3. If Banks reopen, won’t stay open for long.

4. Result: a good, old fashioned mess (disaster, catastrophe, etc.).

5. Government will issue parallel currency – de facto, a Grexit.

6. No formal “exiting” or “exiling”.

7. Greece will offer to pay debts in new currency. Troika will say no. Serial defaults. Unknown consequences for Greece and for EZ/EU.

8. Greece will secure “bridge” funding, possibly from the Fed, within three-six months.

9. Eurozone no longer “unquittable”. Profound effects on political conversations in other PIIGS countries.

10. Merkel, Hollande, Draghi, Lagarde, Juncker – all will get clobbered. Austerity economics will have taken and will keep taking a big hit.

11. This will mark a deep shift in Ground Economic Assumptions (i.e., the neoliberal, pro-austerity, monetarist, anti-Keynesian perspective).

I welcome comments, arguments, alternate scenario planning.

Happy 5th of July!

157 Lord July 5, 2015 at 2:00 pm

I don’t think 7 holds, or 8. They will quickly move to restore the surplus and use this to purge any remaining parallel currency (generally in the form of forced borrowing, warrants or other floating checks), moving to cash in advance, likely keeping the euro and only pay debt selectively to domestic institutions. Capital controls will limit imports but not exports, locals but not tourism, borrowing but not domestic payments.

158 Jim Stuart July 5, 2015 at 2:36 pm

You might be right. My concern: might Greece’s supply of Euros dry up, without any clear replacement source (tourism goes very soft for the summer; exports tank in the uncertainty/supply disruptions)? Your scenario might be decidedly less painful.

159 Yancey Ward July 5, 2015 at 12:01 pm

Reading through the first half of the comments, I think there is great confusion about who holds Greece’s liabilities as assets if that country defaults. Most Greek bonds were bought by the EFSF/ESM stability funds. Those organizations did so selling their own bonds on the capital markets, and some of those funds were additionally lent to the various countries like Greece, Ireland, etc for general government spending (though a fraction of what was spent buying up the old debt and restructuring it). The countries of the EU guaranteed the bonds of EFSF/ESM, and those countries also guarantee to fix any liabilities incurred by the ECB should Greece default on ELA and Target-2 liabilities.

French and German (or others) banks don’t own Greek debt- if they own any part of it, it will be the bonds of ESM/EFSF.

160 Yancey Ward July 5, 2015 at 12:37 pm

And the real problem with Waldeman’s essay is that he thinks the political/fiscal integration ever had a chance in the first place. Real moral hazard worries is what was always going to prevent that sort of union from arising. And now he bitches and complains that that same worry is what is stopping the further integration after it is learned that the original worries were correct along!

161 sirr Duende July 5, 2015 at 1:25 pm

“Why we recommend a NO in the referendum – in 6 short bullet points
Posted on July 1, 2015 by yanisv
Negotiations have stalled because Greece’s creditors (a) refused to reduce our un-payable public debt and (b) insisted that it should be repaid ‘parametrically’ by the weakest members of our society, their children and their grandchildren
The IMF, the United States’ government, many other governments around the globe, and most independent economists believe — along with us — that the debt must be restructured.
The Eurogroup had previously (November 2012) conceded that the debt ought to be restructured but is refusing to commit to a debt restructure
Since the announcement of the referendum, official Europe has sent signals that they are ready to discuss debt restructuring. These signals show that official Europe too would vote NO on its own ‘final’ offer.
Greece will stay in the euro. Deposits in Greece’s banks are safe. Creditors have chosen the strategy of blackmail based on bank closures. The current impasse is due to this choice by the creditors and not by the Greek government discontinuing the negotiations or any Greek thoughts of Grexit and devaluation. Greece’s place in the Eurozone and in the European Union is non-negotiable.
The future demands a proud Greece within the Eurozone and at the heart of Europe. This future demands that Greeks say a big NO on Sunday, that we stay in the Euro Area, and that, with the power vested upon us by that NO, we renegotiate Greece’s public debt as well as the distribution of burdens between the haves and the have nots.”

162 Anon July 5, 2015 at 7:32 pm

This actually sums up the feelings of many Greeks I have discussed this with. These people believe that a no vote is a way of saying we don’t accept the current deal the ECB is offering and once we have won this vote then the ECB will come around to our way of thinking and change it’s policies and we will sail on happily as part of Europe, part of the Euro etc.

163 guest July 5, 2015 at 2:06 pm

So cutting through all the weird passive aggressive anger we get to the crux of the issue “I agree with significant debt relief with all the progressives” but “I dont trust the current government”? So like…all the other progressives who made the point? Poor Tyler, maybe once you are dead people will put you in the same breath as famous economists. But probably not.

164 dearieme July 5, 2015 at 2:18 pm

I’m sorry to say that I could see the EU imposing a government on Greece that it can trust to make the necessary reforms. Enter General Unscrupoulous?

165 The Polycapitalist July 5, 2015 at 2:19 pm

Based on the referendum returns Syriza appears to have won the PR battle domestically. While this is certainly not the only audience that matters, the domestic audience is certainly Syriza’s most important audience by a significant margin and therefore means Syriza have won their most important PR battle.

I also think many people see Greece vs. the Troika as a David vs. Goliath story, with sympathy naturally falling towards the little guy. Syriza’s efforts are also resonating with a number of activists political parties around Europe that are seeking to become the next Syriza.

So, while I would agree that Syriza may not have won every audience over, I think it’s a stretch to claim they’ve lost the PR battle.

166 BenK July 5, 2015 at 2:43 pm

Whatever you think, the Greek voters just affirmed the earlier election and repudiated the attempt by external parties to suggest they didn’t get the representatives they wanted.

167 Barkley Rosser July 5, 2015 at 4:46 pm

Well, a third of the vote is still uncounted, but with about a 60-61% turnout, the No vote side has 61% to 39% yes. I think the Syriza politicians are winning this within Greece, whatever the final margin, because they managed to turn it effectively into a confidence vote in their government by threatening to resign if the vote was Yes. All the polls have shown that, despite some slippage in recent months, they have remained popular in Greece, even if those supporting them are holding ultimately incoherent views. Many Greeks have applauded while they engaged in their “Not Very Serious” lecturing about the factual economic situation to eurozpne foreign ministers and leaders of government, with those people for whatever reason just terribly offended from Day One when Varoufakis did this while not wearing a tie, shame on him. They never actually responded with intelligent or reasonable arguments, mostly a lot of rhetoric and name calling, with it clear that at least Schauble was after regime change from Day One, as Tyler reported and supported. These awful people needed to be removed and replaced by appropriately kowtowing puppets.

I note, again, that I was wrong in my pollyannaism. I thought a deal would be cut, but it was not, even though the final offers were not that far apart, the Greeks having given way considerable on many fronts, including a 200 million euro cut in defense spending that somehow Tyler thinks is not enough, and substantial increases in contributions to both the health care and pension systems. But, no, the troika demanded that the Greeks had to give on every single thing they promised in their election campaign. They had to cut pension spending, even though that has been cut 40% over the last half decade. Just improving the financing of the system would not cut it. They had to politically kowtow totally. This was all about politics and not economics, in the end. But, it looks like was wrong in my comment far above. The game is not over, given this likely strong No vote.

So, to those of you, which seems to include Tyler who go on about the only people agreeing with the economic arguments of Varoufakis being some weird little group of mostly US “progressive” economists, you are just plain wrong. Those seeing much correct in the Greek position has included many more, including very establishment ones. Thus, the Director for Europe at the IMF has agreed with the basic Greek position, stated perhaps too forcefully by Varoufakis on his first tour, that Greece had far more intense austerity imposed on it than Spain or Latvia or any other euro zone member and that its debt is unsustainable now, and that there needs to be debt restructuring. This is about as establishment as it gets, and it has been widely reported that this is supported by the IMF Chief Economist, Blanchard, who was overruled at the IMF by others, mostly for political reasons. Note that on this issue, as well as the matter of demanding that pension spending be cut, there has never been a shred of give by any of those leading the troika officially.

I am not really sure why the Greeks lost the PR battle among the eurozone leaders. I have not seen polls from those countries, so it is not so clear that popular opinioin really backs the official positions, although I think the news stories have been all about how those citizens face some kind of enormous tax hikes if there is any real give to the Greeks, which is basically a bunch of baloney. One can appreciate that some places, such as Spain, are run by conservative governments that would like to see Syriza fall. Places like Latvia can be understood in that they did have serious austeritiy and are now recovering and remain poorer than Greece. It is less clear why governments in France and Italy and a few others have gone along with Schauble on this, which may have been partly a matter of just not wanting to go up against strong German opinion on this. But, reports that Hollande is meeting with Merkel tomorrow suggest that perhaps the old “muddling through” group may be about to reassert itself, although I am not about to revert to pollyannism, and I am also making no forecasts at all about what is actually going to happen next, either politically or economically, other than that it looks like Syriza will remain in office for some time more in Greece..

168 Art Deco July 5, 2015 at 4:55 pm

“…when a sentence is made stronger, it usually becomes shorter. Thus, brevity is a by-product of vigor.”
― William Strunk Jr.

169 PatrickH July 5, 2015 at 4:50 pm

You make some fair points, but this definitely isn’t one of them:

“The progressives are siding with a corrupt, clientist state, which won’t cut its defense spending down to Nato norms”

the progressives are siding with a government that has come to power with the collapse of the parties that built the corrupt clientilist state; made repeated (probably undeliverable; different issue) promises to restructure it; and whose main member has no objections, coalition calculations aside, to defense cuts, if anything the opposite…

170 meets July 5, 2015 at 5:18 pm

The progressives came to power because they vowed to protect, rather than reform as demanded by the creditors, the corrupt clientist state.

171 Barkley Rosser July 5, 2015 at 7:24 pm

This will be my last post on this thread, but I just cannot let this piece of ridiculous garbage pass without comment. You may not like who they have been promising to protect, old pensioners in Greece.bit tje claim that they were elected to protect a bunch of corrupt clients is simply garbage of the worst sort. They were elected precisely to go after the bums., and they have made some efforts to do so, even not all of these have worked out. While Tyler and most of you have ignored it, they have in fact increased tax collections from people used not to paying them, including some of the sheltered rich.

Go back to calling them commies or Trots or Maoists, or even covert supporters of Golden Dawn, or whatever, but do not make the totally false and ridiculous claim that they ran on protecting a bunch of corrupt clients or that is what they have been doing, unless you think old pensioners are corrupt clients. If you keep this up, you may start to resemble somebody whose head disappeared up his behind some time ago, yet to be found.

172 meets July 6, 2015 at 11:44 am

They refused to even privatize the power industry, as one of many examples. What is this, 1950?

And of course no one is advocating cutting pensions for the old, but they need to raise the retirement age above 50 and implement other reforms.

And they collected more taxes. But you know what, that’s what they’re supposed to do! The nerve of listing that as some sort of achievement!

173 jdd6y July 5, 2015 at 8:47 pm

I’m not convinced, remotely, that Tyler’s first sentence is accurate. And even if it is, it is because it refers to people who don’t really matter than consist of (a) people interested in keeping Greece in the monetary union and seeking regime change via economic pressure and (b) other, less interested get their information from a media that really doesn’t know very much about the situation at all. Why does Greece really care either way? Why does Syriza? Syriza won’t stay in office if it acts like is Pasok/ND. It’s entire purpose is to either get the debt forgiven or to transition to a new currency without everyone starving to death.

Given that the “no” vote won by a large margin, it is safe to say that Syriza won the PR battle quite handily within Greece. That kind of seems to me to be the relevant question.

Having spent a lot of time in Greece myself, there are very real problems with the level of bureaucracy and regulatory apparatus and societal corruption on par with many South American countries. I don’t know whether having the Germans, compel a reform of civil society is a good idea or not — but it would never work — any more than the USA trying to reform Iraq from without. It might be more akin the the USA meddling in the affairs of Native Americans, after having largely destroyed them, after all, that is what the Germans did.

To the extent that Tyler is trying to take a position, I don’t find him very compelling. Greece is going to suffer and if it society doesn’t try and make the government more for the people, by the people, then it will continue being poor. Syriza’s most important role is to act as a departure from the taste great/less filling combination of Pasok and ND that extracted the resources from the people of Greece and ran the country horribly. Syriza will not succeed in reforming Greece, IMO, but their job is really just to get rid of the old guard who were a bunch of crooks, far worse than typical politicians.

Whether any less corrupt free-market party will show up in place of Syriza, or, Golden Dawn and Syriza will take turns destroying the Greeks, I have no idea. But having German bankers try and coerce reforms that are useful to the EU’s banking system doesn’t seem like a very smart idea and one that any sane populace would reject.

I really don’t understand how anything good could happen from taking another bailout. I suppose one could have pie in the sky dreams about how as a condition to the bailout, the Greeks will agree to be run as a libertarian paradise free market. And if it were, hey, I’d move to Milos, Naxos, or Ikaria, tomorrow.

174 Tarrou July 5, 2015 at 10:55 pm

My favorite bit of hard-to-justify Syriza PR blunders was their threat to issue EU papers to ISIS so they could run terrorists right to Berlin. “Give us more money or we will send terrorists to your country” is the sort of diplomacy Iran would be embarrassed to engage in. Perhaps only North Korea has a worse diplomatic team in all the world.

175 ilkh July 6, 2015 at 4:56 pm

You could call this “properly mood affiliated austerity,”

You really, really couldn’t. It’s direct advocacy for the opposite of austerity, stimulus – the only path to stimulus is for Greece to get more control of the printing press, whether that’s through a new currency or a better bargain with the creditors. There’s no universe in which “properly mood affiliated austerity” describes “stimulus at all costs.”

176 Doly July 6, 2015 at 6:02 pm

The Greek government lost the PR battle with the right, and won it with the left. Not all that surprising, really, considering where they came from.

All you are saying here is that left and right are drifting further apart. That’s hardly news.

As for the debate of whether morality is on the side of creditors or debtors, the answer has always been crystal clear: it depends mainly on whether you are the creditor or the debtor. Morality is always on your side. Always, always, always. Don’t ever kid yourself thinking that you’d own up to being wrong before you notice something nasty happening as a consequence to your behavior.

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