Tuesday, 14 July 2015

Athens, the view from Pluto

I'd always assumed that the New Horizons probe, currently whizzing through the outer darkness past the newly embiggened* former ninth planet, was travelling alone. But it's starting to look as if the little probe has picked up a hitchhiker, in the shape of Gideon Rachman, whose bizarre op-ed piece in the FT surely can't have been written by anybody currently living on this planet, or anywhere else within a few billion kilometers of it:
Europe woke up on Monday to a lot of headlines about the humiliation of Greece, the triumph of an all-powerful Germany and the subversion of democracy in Europe.

What nonsense. If anybody has capitulated, it is Germany. The German government has just agreed, in principle, to another multibillion-euro bailout of Greece — the third so far. In return, it has received promises of economic reform from a Greek government that makes it clear that it profoundly disagrees with everything that it has just agreed to. The Syriza government will clearly do all it can to thwart the deal it has just signed. If that is a German victory, I would hate to see a defeat.
From Gideon's unique perspective, which is apparently somewhere in the outer Solar System, it looks as if millions of carefree, happy Greeks are even now caught up in an explosion of dancing in the streets and on the taverna tables, to celebrate cutting a deal which - as far as I can see - gives no hint of relief from, or restructuring of, their crushing, unpayable mountain of debt, promises yet more punitive austerity, with no end in sight, formalises privatisation by the diktat of the occupying powers, along with the indefinite suspension of any hope of fiscal sovereignty, or effective democracy. That, I would suggest, looks considerably more like a defeat, than Rachman's alleged German capitulation.

I'm sure Gideon is right in thinking that The Syriza government will do all it can escape from the deal it signed with a loaded gun pressed to its head. But it was negotiating from a position of weakness from the start and has now been further hog-tied by a bunch of hard-faced control freaks, determined not to give a centimetre and, if possible, to break Syriza in the process, so 'all it can' looks as close to 'nothing' as makes no difference.

For the record, this is what a debtor with real power looks like:
Extension of credit was the most risky activity of all, and in the 1340s the Bardi and other leading banks discovered this to their sorrow. Both firms made the mistake of lending vast sums to King Edward III of England during the 1330s as he prepared for the conflict with France that became the Hundred Years’ War. The bankers soon realized that they had extended too much credit, but since they had already lent so much, they felt compelled to lend more, lest they lose what they had already lent. They also continued lending because they needed royal licenses for the export of medieval England’s great international product, wool, and lending to the king was the price they had to pay for permission to export. By 1343, when it became obvious that Edward was not going to score a speedy victory, the king repudiated his debts to the unpopular foreign bankers.

The amounts lost were enormous: 900,000 gold florins owed to the Bardi and 600,000 to the Peruzzi, none of it ever repaid. Both firms, and also several other Italian banks, were ruined; and since they also held money on deposit from wealthy individuals throughout Italy, their collapse spread financial loss far beyond their membership. The Peruzzi bank went into bankruptcy in 1343; the Bardi struggled on for three more years but were also liquidated.** 
As somebody put it earlier this year, the Syriza leaders are 'not King Edward III of England and cannot refuse to reimburse lenders. Greece cannot bankrupt lenders, imprison or assassinate (blackmail) them' (from an article written long before Varoufakis resigned).

*OK, not by very much, but every little helps, as they say.

**This is history so there is, of course, a more nuanced, revisionist version of the story. But the simple fact remains that Edward clearly won and his creditors lost.