Greece is back as big news around the world, the little country with a big impact on economic markets, and the foreign media is paying keen attention.
Will Greece Ever Get Out of Debtor’s Prison?
The New York Times – Teresa Tritch
The efforts of the new Greek government to write off a portion of its debt are being cast by powerful European policy makers as a bid for “debt forgiveness.” But the whole concept of “forgiveness” implies that there is a magnanimous creditor and a profligate borrower, and that’s just not true. Greece now has more debt than it can ever repay, and lenders share some of the blame for this.
Moreover, calling debt reduction “forgiveness” reinforces the kind of moralizing that has blocked a sensible resolution to the eurozone crisis since it began in 2010. In the German telling, in particular, Greece lied about its fiscal condition in order to take on excessive debt and must be punished with backbreaking austerity.
But reckless lending and reckless borrowing went hand in hand in the years leading up to the euro crisis. Greek officials did indeed use financial tricks — developed by Wall Street — to mask the size of budget deficits. Still, even before Greece joined the Eurozone, it was clearly living far beyond its means. International lenders knew or should have known this; they were not defrauded so much as willfully blind, about deficits and also Greece’s inability or unwillingness to collect taxes.
Greece Promises To Do “Whatever We Can”
Toronto Globe and Mail – Alastair MacDonald and Jan Strupczewski
The Greek government promised to do “whatever we can” to secure a deal with its international creditors next week, cheering investors as experts from both sides began technical talks on Friday to lay the ground for an accord.
Fear of financial chaos have seen savers taking their cash out of Greek banks. Banking sources said this was the reason the European Central Bank offered more emergency funding for Greek banks on Thursday until after crunch talks among euro zone finance ministers on Monday
However, the Dutch finance minister, who will chair a meeting on Feb. 16 of Eurozone colleagues, continued to play down the chances of a rapid conclusion to negotiations. “I’m really still very pessimistic about that now,” Jeroen Dijsselbloem said.
“Greeks’ expectations of the Greek government are sky high,” he added. “But the possibilities, given the state of their economy, are very limited. So that still needs a huge adjustment and I don’t know if we can figure that out as soon as Monday.”
Greece is Playing to Lose
The Financial Express – Anatole Kaletsky
The future of Europe now depends on something apparently impossible: Greece and Germany must strike a deal. What makes such a deal seem impossible is not the principled opposition of the two governments—Greece has demanded a debt reduction, while Germany has insisted that not a euro of debt can be written off—but something more fundamental: while Greece is obviously the weaker party in this conflict, it has far more at stake.
Game theory suggests that some of the most unpredictable conflicts are between a weak, but determined, combatant and a strong opponent with much less commitment. In these scenarios, the most stable outcome tends to be a draw in which both sides are partly satisfied.
In the Greek-German confrontation, it is easy, at least in theory, to design such a positive-sum game. All we must do is ignore political rhetoric and focus on the economic outcomes that the protagonists really want.
Keeping Greece in the Eurozone Worth Financial Pain
CBC News – Don Pittis
To misquote Mao Zedong, creating a single currency is not a tea party. Despite former U.S. central banker Alan Greenspan’s disparaging comments about the future of the euro, Americans had far worse problems creating a single currency.
The question facing the Europeans as they hammer out a deal with Greece is whether the long-term advantages of the euro outweigh the pain of the current ructions. If the American experience is any guide, it is worth it.
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