Europe's Populist Left

[Admiral Yi]

My first impression is that you are not addressing any of the points I raised.

[Sheilbh]

On that Buttonwood piece, it brings to mind Juncker's discussion piece for Eurogroup leaders:

Juncker sparks debate about a core eurozone union

At the EU summit Thursday (12 February) Commission President Jean-Claude Juncker presented ideas for a core eurozone union, a concept viewed with apprehension from numerous quarters.

Juncker presented an Analytical Note on the Economic and Monetary Union (EMU), prepared in close cooperation with the President of the European Council Donald Tusk, the President of the Eurogroup Jeroen Dijsselbloem, and the President of the European Central Bank, Mario Draghi.

The Euro Summit of 24 October 2014 invited Juncker, in close cooperation with Dijsselbloem and Draghi, "to prepare next steps on better economic governance in the euro area".

One of the arguments used by Juncker is that the eurozone has not recovered from the 2008 economic crisis in the same way as the US, which might point to the fact that an incomplete monetary union adjusts much slower to downturns than unions with a more complete institutional framework in place.

Although the Analytical Note doesn't go as far as asking for separate institutions, and that a special budget be set up for the eurozone, and also does not mention EU treaty changes, it raises a number of questions which lead in those directions.

"To what extent can the framework of EMU mainly rely on strong rules, and to what extent are strong common institutions also required?", asked Juncker.

In particular, the question "How can accountability and legitimacy be best achieved in a multilevel setup such as EMU?" appears to suggest that Juncker is considering the setting-up of a eurozone parliament.

Other questions include:
"How could a better implementation and enforcement of the economic and fiscal governance framework be ensured?",
"What instruments are needed in situations in which national policies continue – despite surveillance under the governance framework – to go harmfully astray?"
"To what extent is the present sharing of sovereignty adequate to meet the economic, financial and fiscal framework requirements of the common currency?"

As Juncker explained it, this analysis prepares the ground for discussion, and is meant to be the first step towards a report of the Four Presidents (Commission, Council, Eurogroup, ECB) on the future of the Economic and Monetary Union, expected for June. Member states are expected to be involved in the preparation of the report.

Central and Eastern European member states, which are not yet members of the eurozone, are wary of ideas promoting a core eurozone. To a certain extent, they are reassured by the fact that Council President Donald Tusk, a Pole, is also Euro Summit President and is closely involved in the preparations of future proposals.

Although the Report of the Four Presidents is expected in June, the Juncker proposals are likely to make waves in the UK, where general elections will be held on 7 May. British Prime Minister David Cameron has promised a referendum on the UK remaining in the EU if he wins the elections.

Cameron's plan is based on a "new settlement of Britain in Europe", which means a treaty change which doesn't necessarily go in the same direction as for setting up a core eurozone union.

[Sheilbh]

My first impression is that you are not addressing any of the points I raised.

Then I misunderstood them as I was trying. Can you put the points in a very clear way for me?

[Sheilbh]

Interesting Greek response in the press seems to be that very few people expected a better deal than this was popular, so Syriza may lose support on the left but more than likely to keep their vote in the Greek middle (whose trust in PASOK and ND's been destroyed).

Onto Monday and then May

Edit: Incidentally the impression from the market people/financial journalists I follow is also that this is about as good a deal as Greece could expect (at this stage) and, on the substance, barely different from the Varoufakis letter.

I think the key difference is his letter was proposing a moratorium on fiscal targets and unilateral actions with new agreed reforms for the next six months, but extending the loan of the program. This extends the whole program for six months but (as Moscovici had floated) will use 'flexibility' within program to adjust fiscal targets and reforms, and no unilateral actions.

Edit: Also everyone's being very careful in using the formal language. It's all about the MMFA and the 'institutions' rather than the Troika. Lots in the statement about the 'current' program. On primary surplus targets Varoufakis has nicked my favourite Juncker line (and there are many....well three) by saying it's Europe at its best: 'constructive ambiguity'

[grumbler]

Lagarde is interesting () she's referred to statement as very dense and very deep and said 'read it very carefully'...

That's the lowest bar for I've ever seen! 

[Sheilbh]

I think she's difficult for a gay man to resist:



Edit: Also having actually read the statement now I think this could be a good step forward. Which is something I don't think I've ever said after a Eurogroup summit.

As I say it all depends on Monday and possibly the EuCo the next day but it's a start and both sides are moving.

[Admiral Yi]

Then I misunderstood them as I was trying. Can you put the points in a very clear way for me?

Let's start with the one about tight money and the MoU.  The fact that a condition of the bailout is that Greece's ability to borrow on the market is limited has nothing to do with the tightness or looseness of the euro.  A currency is tight or loose.  An individual borrower is not tight or loose.

[Sheilbh]

Let's start with the one about tight money and the MoU.  The fact that a condition of the bailout is that Greece's ability to borrow on the market is limited has nothing to do with the tightness or looseness of the euro.  A currency is tight or loose.  An individual borrower is not tight or loose.

Okay. I was ignoring the tightness/looseness point because I've nothing to add to Minsky's point - not least because I don't understand it. Except this chart, if it means anything to you:


I was just agreeing with Cel, I think part of the reason Spanish yields are low (though again, look in the other thread to see how many negative interest bonds there now are in Europe) is possibly because the government's limited in how many they can issue but as growth is low, there's deflation and they're still capital for banks they are, tragically, worth buying.

Edit: Incidentally as I think this does seem like the first step to giving Syriza a chance which I think they deserve as Greece's first non-corrupt leaders since Kapodistras it's probably fair to say that if they fail to govern reasonably competently and transparently and fail to take corruption and entrenched interests then it should probably be the end of the road for Greece.

Edit: And I really think Schaeuble is like the finance minister equivalent of Rumsfeld. I cannot understand any possible purpose for a line like this 'the Greeks certainly will have a difficult time to explain deal to their voters'

[citizen k]

Edit: And I really think Schaeuble is like the finance minister equivalent of Rumsfeld. I cannot understand any possible purpose for a line like this 'the Greeks certainly will have a difficult time to explain deal to their voters'

As usual, the fine print of any European "deal" is revealed not only after the agreement, but after the US market close. So for all those waiting for the real punchline, here it is - it also is the reason why Greece got until Monday to reveal the list of "reforms" it would undertake:
"We're in trouble next week if creditors don't accept Greece's reforms", Greek Finance Minister Yanis Varoufakis says. "If our list of reforms is not backed by the institutions, this agreement is dead and buried."
That's bad. But... "But it's not going to be knocked down by the institutions."
For his sake, let's hopes he is correct in predicting what the Troika, pardon, Institutions will do. Because this is precisely what Schauble meant when he said that the "Greeks Certainly Will Have A Difficult Time To Explain The Deal To Their Voters": under the conditionality of the Troika's approval, the Tsipras government now has to walk back essentially all the promises it made to the Greek people - promises which by some accounts amount to over €20 billion in additional spending - or the Troika, pardon Institutions, will yank the entire deal and the Grexit can then commence.
And that's the bottom line.
It's also the reason Schauble was gloating: because he gave the Greek government just enough rope with which to hang itself.
Then again, if and when the Tsirpas government is booted out next once the Greek euphoria turns to disgust and disillusionment, does Germany really want to negotiate with Golden Dawn instead?

[Sheilbh]

I'm more optimistic. Though there are multiple interpretations and a spinning war and obviously it's true that a lot of the hard work is ahead and as I say this is a four month extension until Monday. But, as Lagarde put it this is a timeline and the potential of fiscal targets based on economic reality not inaccurate, panglossian IMF projections made in 2012 is a big start. I do also think there's constructive ambiguity here: 'the Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.'

On the whole pre-election promises thing it doesn't matter. None of the previous governments that have dealt with the Eurogroup could credibly say no. They all went, ultimately, semi-supplicating and weren't really negotiating terms. I think the expectation that Syriza would soft-pedal their policy plans once they got into office fell into that. For example everyone expected them to quietly stop talking about increasing the minimum wage. Because they didn't that's now a concession they can make, had they stopped talking about and then in negotiations said 'well we won't raise the minimum wage' they'd be met with shrugged shoulders because they'd have already conceded it. As it is not passing it without the support of the Eurogroup, the EC and the IMF is now, suddenly, a concession.

Within days of the election Varoufakis publicly said they wouldn't keep all their pre-election promises if it isn't possible with running a negotiated surplus. They've said they accept 70% of the program reforms. Everything Tsipras has said in his 'not a step back' speeches has provided him with bargaining chips - one of the Greek concessions is already no unilateral actions - and he never actually set a time except for the minimum wage but even then it was tied to economic recovery and Varoufakis has said they'll be looking at that 'creatively'.

So I think the Greek people expect a considerable amount of back-pedalling. They have a very strong left - the Eurosceptic Left Platform is a huge chunk of their party base and opposes any deal - but I think they're becoming a party that's bigger than that. But if you look at approval ratings of their handling of the negotiations it's at over 70% (as is staying in the Euro), they've got majority approval from voters of every other party including New Democracy and they didn't win the election because 36% of Greeks suddenly became 'radical' left, but because the other parties had so failed that they were the only alternative. They won the middle ground and I think they'll probably try and keep it (they could have issues with the Left Platform but it is interesting that they've constantly kept To Potami updated who could possibly join a coalition if needed). Despite all of that support under 50% actually think Syriza can make a deal. Even this is better than a - what New Democracy or PASOK ever got near and b - Greek expectation. The Greeks have had the expectations beat out of them. A government negotiating and delivering even some of their promises will be a novelty.

It is interesting but the Greek journalists I follow just after the election were saying that they wondered how Europe would take it when they discover there's not much radical about Syriza and are now saying that what they've got today - which is only a start - is about the best deal Greeks had hoped for. And watch Varoufakis' press conference, this was the most confident and assured he's been - he's either a very good actor or he really believes they've got a decent deal.

And I think there's an element of what I suggested in this. They've potentially got four months to prove themselves: 'the authorities commit to implementing long overdue reforms to tackle corruption and tax evasion, and improving the efficiency of the public sector. In this context, the Greek authorities undertake to make best use of the continued provision of technical assistance.' If they're not good for that and they can't govern competently and non-corruptly then I think it will and should be the end of the road for Greece in the Euro. But they need a chance.

[Tamas]

The quick analysis I read said that Greece pretty much surrendered its radical stance in everything: radical of TEH PEOPLE is over.

[Sheilbh]

As I say there's a lot of spin.

I suppose part of it is weighing up what you think matters and is most important.

So if your emphasis is supervision, or 'structural reforms', or Syriza's election promises then I can see that they conceded a lot from January 25.

My point is they'd already conceded all of that by yesterday. What's new is that the Eurogroup have conceded on austerity and in my opinion the difference between a 4.5% to a 1.5% surplus is key.

Lots to do, obviously, but I think there's a very solid starting point here for a good deal for Greece which is a good deal for Europe.

Edit: And it is fair to say there are profoundly different opinions on this.

Edit: One niggle that's emerged. Because this is an extension as normal Greece won't get the next tranche until it ends. in April. Trouble is there's a €7 billion repayment to the IMF before which apparently no-one's considered as it's not at all clear at the minute, even if everything goes well on Monday, how that'll be paid....It may be that, at the minute, the Eurogroup and the Greeks don't actually know...

[Admiral Yi]

I haven't seen any sign that the bad guys have agreed to 1.5% primary surplus.

[Sheilbh]

I haven't seen any sign that the bad guys have agreed to 1.5% primary surplus.

They've been saying it for weeks.
https://www.google.co.uk/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=varoufakis+primary+surplus+1.5%25&tbm=nws

[Admiral Yi]

Sorry.  By bad guys I meant the troika.