One can be involved while saying something or one can just let the money talk. When someone has such a clear right to veto everything, there is no point in talking outside the negotiations at all. Just like Merkel does it: here and there a nice word, but there is no reason to say "no" when the "no" is implicitly communicated by keeping the treasury closed.
Also don't forget that Schäuble is conservative and *has* an ideological angle. So his person was in the way of negotiations, as he simply disliked the greek choice of leaders (and vice versa - the greek minister of finances is far from dimplomatic for exactly the same reason). That is something Steinmeier or Merkel would have managed better.
Perhaps a more politically skilled finance minister could make a small improvement to the optics, but I really don't think it's the optics that are the source of the credible criticism from the like is Paul Krugman and the other economists who have been quoted or linked to in this thread.
A bad policy remains a bad policy even if you say it nicely, and a good academic won't be distracted from the substance of an issue by some window dressing.
Just like people in France would never vote Front National and nobody in UK would vote for UKIP. No matter how well things are communicated, in the end the whole issue is way to complex to convince people, who then will turn to euro-skeptic parties.
I have too much respect for the Germans to believe that selling sound financial policy to the Germans is going to drive them to racist parties in the vein of the FN and UKIP.
What takes real skill is selling a bad policy, not selling a good one!
But, yes, of course this happens nowhere in Europe and the idea that a German politician could have a mandate by his voters is just a load of rubbish as well...
I really don't follow at all here.
Are you saying Merkel does not have a mandate to protect German interests by attempting to resolve a European crisis threatening the whole continent in a positive way?
Or Greece will fail with a "financially sound plan" paid by Germany and no money will come back. Throwing good money after bad money. This is more money for trial and error.
You are assuming that not investing any more money will mean no additional risk for Germany, but you forget of course that Germany is full of Greek debtors, so not acting has a massive cost too.
In reality, the question is whether or not it is worth investing a little more to avoid losing a lot. If you do nothing Germany, and indeed the whole of Europe, stands to lose a lot, both directly and indirectly, so the potential cost of inaction is every big as high as the potential cost of bad action.
The only sound thing to do is to make an evidence-based decision with the lowest chance of a bad outcome.
Do nothing, and the likely hood of a bad outcome is high.
Implement more of the same and the likely outcome is bad too.
Implement a sound and fair plan, and the probability shifts towards a positive outcome.
No, it is not certain, but pretty much nothing is certain!
And for the sound plan, one it is negotiated.
Well, let's see what happened to the money "lent" to Greece so far: Half of it is gone and will never come back. Not sure the use of the word "lending" is as clear as you wish it to be. But wait - that debt cut wasn't giving money either, not a cent. I guess it is because in fairy land debt is nothing so if it is cut, nothing is lost, right?
Reading through the terms of the three bailouts, the only actual writing down of debt I can find is that as part of the second deal the private sector financial institutions, AKA the big banks, accepted a 'voluntary' haircut on Greek bonds.
You can argue that was a gift. But, it was not a gift at the expense of the Germany government, or the ECB, or the IMP. So that will not have hurt Germany's budget, and not have caused any sort of German suffering such as you described in your post previous to this one.
So far, the German government has only lent Greece money, and tinkered with the interest rates on that borrowed money.
So for you it might be fun to discuss semantics in order to undermine some opinion you don't expect, but to me using the correct term to describe something entirely different isn't much worse than using an incorrect term to describe exactly what it is used for in that context. Also possession is not the same as property, which might be interesting in the light of the definition you quoted.
Money is definitely relevant to the definitions I quoted. We give and lend money all the time.
When someone says "you can have this money on the condition you implement X reforms, and pay it back to me at Y time with Z% interest", that is a text-book example of a loan. For it to be a gift it would definitely have to come without a requirement for repayment, and arguably without conditions attached.
It is not actually factually correct to call the money the German government has loaned to Greece in exchange for reforms a gift.
No, actually your argument was, that as long as the Germans don't suffer as much as the Greek, they are not allowed to think about what to do with their money and have to give... pardon... lend it away til nothing is left. But if we start that suffering competition, there are former third world nations who have significantly less life quality. So if we base who we give money just on suffering, I doubt Greece, just like any other European country, would get a single cent.
Your description of my argument, and my actual argument are not in agreement at all.
My argument is that the Euro has had very asymmetrical effects because of it's inability to deal with asymmetric shocks, and because of the capital flows it set up.
Germany has benefited massively from the capital flows, allowing it to cut deficits without needing to cut spending nearly as much as you'd imagine because the money was pouring from the periphery into the heart of Europe.
When the asymmetric shock hit, Germany did not do it's part to help resolve the problems by keeping inflation at at least 2%. This forced Spain, Ireland, and Greece to deflate, rather than just stagnate.
As a member of a union that has had very asymmetric effects, and as the largest economy in the union, Germany has a moral obligation to the union, and it is not doing a good job of living up to that obligation.
My point was that the crisis is real, and that there is real suffering in the periphery, not only in Greece, but especially in Greece.
Your counter was that poor Germany has been suffering terribly and therefore owes no one nothing.
A point I countered by point out that the staggering asymmetry of suffering makes that section of your look ridiculous and totally out of touch.
What I was talking about is the decrease in life quality which clearly happened in Germany over the course of almost two decades and the impact on the people's opions, which make it necessary that politicians walk on egg shells.
The quality of life in Germany has gone down? Really? Compared to where exactly? Ireland? Spain? Great Britain? Greece?
You have it so much better than you realise!
I hope your illusion that you have suffered terribly in the last two decades is never shattered, but man, you ain't seen nothing! Has your pay been cut by 33% over the last 8 years, while the price of everything you need to live has gone up? Mine has, and I'm only in Ireland, and we're apparently a 'success'!
Something you don't seem to acknowledge, because you are just looking and numbers and even just at the big ones.
There will be no dramatic up-turn. But the small growth is based on very solid foundation.
What 'small growth', where is the upward kink in what graph? And is it bigger than the noise in the data?
I am still waiting on facts to back up your claim that austerity is working. I've shown you factual and quantitative evidence that it is not working, can you do the same?
True, but nonetheless the kg works in the same system. There is not a second system which says that under different conditions which we don't know exactly something entirely different will happen. Everything can get boiled down to equasions which are all 100% compatible with each other.
Err - NO! The EQUATIONS of Quantum Mechanics CONFLICT with the EQUATIONS of Relativity - that embarrassing fact is actually the single biggest problem in modern physics - we have two fabulous theories, each very useful in some situations, but they are in total conflict with each other at both ends of the scale.
And again, there are many more sciences than physics, and many of them deal with probabilities and approximations rather than specifics, but they remain superbly useful. Even within your beloved physics, we are utterly unable to give you certainty on specific sub-atomic particle, we can ONLY give you probabilities. That is how QM works, it accepts that it is impossible to know specifics (thanks to the Heisenberg uncertainty principle), and yet, QM's probabilistic theories have allowed us to build modern computers entirely on their back!
Astronomy is a lot like economics, you can observe, but not control. You don't get to re-play the great depression over and over again, just like you don't get to create supernovae on demand.
You really do underestimate the usefulness of the empirical approach of the scientific method, and of probabilistic theories.
Two of the best books I ever read helped me appreciate how much we can know about chaotic systems like economies:
1. "Chaos: Making a New Science" by James Gleick (
http://refhide.com/?http://en.wikipedia.org/wiki/Chaos:_Making_a_New_Science)
2. "Complexity: The Emerging Science at the Edge of Order and Chaos" by M. Mitchell Waldrop.
Both are fantastic reads, and very engaging if you love science.
I just say they are by far not as precise as you want them to be.
And I say an imprecise theory is better than an emotional guess - you may not get it exactly right, but at least you're likely to be close!
When the "science" does not provide a solution other than hoping that it will fit to the situation, there is not much to throw out. Economics is a great tool to read the numbers available, because that is what this science worked with. But everything beyond the already existing numbers is just a model, most likely one of many, depending on which factors one wants to predict.
'just a model' - indeed, like Evolution, that too is 'just a model'.
That is where the scientific method comes in!
You take your models, you present them with today's economic situation, and you run them forward 6 months, a year, 2 years, 5 years. Then you wait, and see which models worked, and which did not.
You can then refine the promising models, and discard the failed models. Lather, rinse, repeat, and you have economics.
We have models that have been well tested, and they point us towards a solution. We ignore that kind of information at our peril!
And the context changes, wheras in Physics we know the influence of the context very well.
A given model will describe a given context - trade balances, or macro economics, or micro economics, or the behaviour of stock markets, or the behaviour of people to incentives and so forth.
The Keynesian models which are pointing the way here have been polished and tested for nearly 100 years. They have proven correct so far in this very crisis we are now trying to resolve. Why on earth would you discard a model that has been correct about this very crisis right up to this very day?
The scientific process has refined and distilled some very useful theories to guide our way - I say we should harness that knowledge, you apparently, do not think all that effort is worth a bean?
That you compare the situation to particle physics which are relatively new and to a great part very theoretical concepts to economics fits very well. Just like nobody would build a giant reactor based on an unproven theory - even if the theory is build in a scientifically correct way without any contradiction so far - nobody would spend large amounts of money on the fiscal equivalent.
This is not actually at all relevant to this discussion, but you are 100% wrong here!
You do not build an accelerator because you know your are right, you build it to test whether or not you are right. That has always been what big experiments are about, and that is what we did most recently in CERN. The Higgs Boson was NOT proven theory, the LHC was built precisely BECAUSE the Higgs was not proven. We have only been able to prove it because we built the experiment, not the other way around.
Why is this not relevant, because economics is an observational science, not an experimental science. You can smash atoms together in the LHC over and over again, you don't get to summon up great depressions on demand!
Economics is not like particle physics, it is like the other observational sciences including climate science, Astronomy, and psychology.
That is why your "facts", figures and graphs might be absolutely correct when researching what happened, while they still do not provide a fail safe indicator about future experiments, just like they did not prevent the crisis from happening.
NOTHING is "fail safe". Doing nothing, or continuing to do the same is definitely not!
Maybe it is time for a test reactor of a smaller size, maybe one could think of alternatives. But the simple idea of "money is free in Germany, let's make a lot of it flow into that direction because 80 years ago something remotely resembling this which incidentally fell together with world wide war" as tempting as it sounds is far from being a safe option.
What a pathetic over-simplification of economics. You do yourself a disservice with that kind of wilful ignorance.
And here we are back at Astrology. It is a big complex system, so even if it works (and while I agree that economics actually have a measurable impact while astrology is nonsense from the beginning) there are too many unknown factors to be sure that some boom will appear according to the concept which then will make it rain money.
Here we go again - only in a fantasy world is economics even remotely like astrology.
Millions of hours of studying sounds nice, but when one would need hundreds of millions of hours to get anywhere near that quality which is needed, it does not really help. "There will be sun after the rain" is hardly a prediction to base one plans on. Unfortunatly that is all ecomony comes up with.
Fine, revel in your ignorance of what we know, but don't expect me to be even remotely swayed by your call to ignorance.
You might think imperfect knowledge is useless, but like I have said a million times, better to base your actions on the best information we have, than on a whim, a guess, or pure emotion.
I guess the German stereotype of rationality and logic is utterly undeserved
The current policy is not set in stone and - especially after what I have said before - I see that the context has changed. Greece is in a different position. I don't share the sentiment that it is necessarily a worse position, as the political options have changed which btw. they would not have, had Europe offered Greece an easy way out. The outcome is different in parts from what was planned or rather promised (I doubt a certain shrinkage was not expected) and in other parts things developed as expected.
It really is like you don't read my posts.
I KNOW SHRINKAGE WAS EXPECTED - THE GRAPH I SHOWED WAS ACTUAL SHRINKAGE -V- EXPECTED SHRINKAGE!
My argument was not that the plan was flawed because there was some shrinkage, it's that the plan was flawed because it was based on the un-proven and fringe theory that austerity creates confidence, and that confidence would magically fix everything. What the well tested theories all said was that austerity would cause a recessionary spiral, and make everything much worse. The facts show that the austerity theory FAILED, while Keynesian models were proved right. Clearly, in the fact of that fact, we should look to the theory that successfully predicted what would happen, and away from the one that so obviously failed to reflect reality.
So even when the approach of austerity is followed further, it has to be reviewed. It is a good time for that as after the end of this package, nobody has to lose his face when starting over. A new deal is a lot about selling it politcally on both sides.
And a new deal should be based on a factual analysis of how we got here, and of how the different models have matched up to reality. In other words, on sound and tested economic theory.
The whole factor of pushing Greece towards having a solid budget for example falls out of the equasion as there is no need for further political pressure to get there. Someone who is not Schäuble could take that opportunity to declare this as a goal met (without pretending it would be the massive up-turn which it clearly isn't and most likely could not be on its own).
If there is one thing that I am 99% sure we agree on, it is that declaring something that is not true as true is a terrible idea. That is literally one of the factors that got us here. The EU, and Germany all agreed to declare that Greece met the criteria for the Euro, even though everyone knew that was utter bollox. What ever we do, lets not do that kind of thing again!
This for example opens up a path for euro bonds like projects on an international level and also shifting the discussion into the EU parliament, where the discussion would be a different one, also the risk would be. Even if the money comes in essence from some 0% interest debt of Germany, the risk would be divided on more shoulders when it comes to paying it back in the case Greece fails. This detour would make things much easier to sell.
I don't believe I have argued against that. I certainly have no objection at all to the load being spread across the union, that is what unions are for!
My biggest objection has been Germany's obstruction of progress, and Germany's failure to deliver on inflation targets, hence holding down all of Europe.
Also the embargo against Russia and Russia's attempt to maximize the damage for eropean unification should be taken into account. This is a matter which is not just about saving Greece but also to stand united against an enemy. Unfortunatly Greece decided to play that card differently, so I guess that opportunity is lost.
What has been done to lose that opportunity? I was not aware Greece had entered into a deal with Russia? Do you have any links so I can read up on this deal? Or is this still that bollox about which ambassador exchanged routine pleasantries first?
That investments (no matter whether corporate or public) will have a different impact is pretty much common sense - one does not even need to follow the keynesian theory as a whole to get that. The question is whether Greek has something to offer which is worth more than their word for further help programs. The perfect case would be some kind of proposal by the greek government. This would allow to have rather tight conditions attached to any kind of help without worsening the situation by appearing to influence inner political decisions.
I wouldn't be opposed to an offer from Greece to make reforms to fight corruption and tax evasion. In fact, I think that would be a nice thing to see.
It is pretty obvious that sooner or later another debt cut will happen and a few billion euros become another silent donation. So when this has to be sold to the other members of the EU anyway, maybe one should consider doing it early, honest and with maximal impact. When it is done after the next crisis hits Europe (unscientifically just jumping half of a market cycle wave...) it will be once more just a measure to save everyone's ass without using the room for decisions it could offer when done one time. It is not like it will be less painful as a decision. This is nothing one can decide over night, but it is for sure something which in the extreme case will be decided that way. So maybe it is something one should prepare throroughly.
Expecting failure before you being is one of the surest ways to ensure failure. The worst kind of self-fulfilling prophesy!
The aim should be to create a realistic and fair deal soon so we can end this crisis ASAP. If you create this deal in such a way that you know there will be another one needed, then you are literally doing it wrong!
B.
