08-17-2015, 02:05 AM
Worrying in his re-election campaign about the one-fifth of U.S. exports going to Europe, President Obama called in vain a number of times on the German chancellor to withdraw her devastating austerity diktat to the sinking euro area economies. Repeated appeals of the American president were not only turned down; they were also publicly ridiculed. The German leader bristled that "adding more debt to an already large debt" made no sense.
IMF, US failure on German austerity stance damned Greece
As a result, the euro area was left to bleed as the German chancellor ordered that "those who violated the budget rules (French, Italians, Portuguese and Greeks), and those who failed to supervise their banks (the Spanish), had to be taught a lesson." Predictably, deepening recessions and rising unemployment swept away from power the incumbents in France, Italy, Spain, Portugal and Greece.
IMF, US failure on German austerity stance damned Greece
Much after the damage was done, the I.M.F. eventually denounced the obvious: Austerity measures imposed by Germany under conditions of euro area's declining demand, output and employment were wrong. Growth was better, they said. And then, after months of bruising scuffles with the Greeks, the I.M.F. recognized another fairly obvious issue: Greece needed debt restructuring to give some oxygen to its asphyxiated economy. That was another grotesque reversal, because the request for debt restructuring was consistently denied to the Greek government since last January.
IMF, US failure on German austerity stance damned Greece
July saw factory production in Greece contract sharply amid an unprecedented drop in new orders and difficulties in purchasing raw materials. The headline seasonally adjusted Markit Greece Manufacturing Purchasing Managers’ Index® (PMI® ) – a single-figure measure of overall business conditions – registered 30.2, well below the neutral 50.0 mark and its lowest ever reading.
Shocking Greek thirtysomethings | FT Alphaville
In fact, from an economic perspective, Grexit no longer represents the potential catastrophe that it once did. After all, the main short-term cost – financial-system disruption – has already materialized in Greece: banks and the stock market have been shut down, and capital controls have been imposed. While those actions were needed to stem large-scale capital flight and prevent the banking system’s collapse, they also caused the Greek economy to contract sharply.
Why Greece Declined a Euro Holiday by Daniel Gros - Project Syndicate
When push came to shove, Varoufakis faced the difficult choice of going along with more of the same, despite knowing that it would fail, or trying to pivot to a new approach. He bravely opted for the latter. While his brash style undermined outcomes, it would be a real tragedy to lose sight of his arguments (which have been made by many others as well). If Greece is to have any realistic chance of long-term economic recovery and meeting its citizens’ legitimate aspirations, policymakers must recast the country’s austerity program, couple pro-growth reforms with greater social justice, and secure additional debt relief.
In Defense of Varoufakis by Mohamed A. El-Erian - Project Syndicate