In a joint interview with German daily Der Tagesspiegel and ThePressProject International, Syriza MP and economist Costas Lapavitsas says that the time has come for Greece and its partners to understand that “they are flogging a dead horse”.....
So what should the Greek government do in your opinion?
Greece needs to consider the true alternative path which is to leave this failed monetary union....
Do you think Syriza has the mandate for it?
A straight answer is no.Must-read. Frank and spot on.
Verso
Costas Lapavitsas: The Syriza strategy has come to an end
ht Dan Lynch in the comments
3 comments:
This really seems naive:
(Lapavitsas): "I think Greece should set a target for itself to negotiate an exit basically without rupture, without falling out, without fighting, without unilateral actions. This would mean: Exit takes place and Greece seeks deep debt restructuring."
The eurozone has no reason to offer Greece what Lapavitsas is asking for. He wants his country to behave like the proverbial nice guy talking to the boss: "hey, let me get out of this prison, this mess I'm in - and please be also kind enough to waive all of my debts to you and everything will be fine, you'll see".
Sorry, it won't work. There are no "good" bosses around in the eurozone.
An alternative strategy would be for Greece to simply disobey the injunctions of the eurozone authorities, including the ECB.
No more speeches about what is "good" for Europe and for Greece. Just take advantage of the fact that Greek commercial banks can create euros out of nothing - let them lend directly to the government (if asset to equity ratios are too low, just inject pension fund capital in those banks) all the necessary euros.
Then wait to see if the ECB dares to react - not threaten to react, as it's done up to now, but really, react) - by engaging in illegal moves (in the sense of measures not authorized by the present Treaties - that, remember, can only be changed by unanimous vote, that is with the Greek vote included) such as suspending the Greek ELA and expelling Greece from the TARGET2 system.
If the ECB does not react, the matter is solved - Greece will have found the necessary euros to both spend and pay its foreign debts.
If the ECB does cut off Greece from TARGET2, then the "Citibank scenario" will apply: since the expulsion was illegal and the debts were contracted when Greece had the euro as a currency, the country will be entitled to repudiate all of its $300 billion foreign debt. Again, problem solved.
Instead of talking, it's time for Greece to act - by using to the full its very valuable prerogative to create euros, as a member of the eurozone.
On the "Citibank scenario" of Greece being entitled to repudiate its debts if she is expelled from the euro, watch 16 seconds of this video (minutes 2:19 to 2:35):
http://www.bloomberg.com/news/videos/2015-02-20/euro-is-one-of-the-worst-designed-currencies-kerr
Yes, that is pretty unrealistic. Part of Syriza's sometime strategy is/was? to be such a bad boy - in the eyes of the austerity-mad - that they might be thrown out of the suicide pact. So Lapavitsas has his own "Good Eurozone" dream here, just a different, and perhaps even more unrealistic one than Varoufakis's. In any case people exaggerate the difference between the consequences of and even the meaning of forced vs. unforced Grexit - determining who "made the final decision" to separate could be a difficult and vain project.
Jose,
Fully agree. The time for appeasement is over.
Let's see if Draghi has the balls to press the big red button when his job is on the line.
The article is a good one, however it once again falls into a misunderstanding about the way FX works in an endogenous system - and it means that any exit will be a disaster.
What you have to do as a matter of law is ban the banks from funding FX settlement. You make any debt incurred for the purchase of foreign exchange unenforceable in the courts.
That stops the banks creating Greek Euros to settle short sales, which in turns means that that FX system will self level much more easily. The FX system then acts as its own capital control by introducing settlement drag.
Bank's create liquidity to get transactions done. That creation has to be limited to allowing real activity to complete.
Post a Comment