
Syriza and the French indemnity of 1871-73 - MaysonL
http://blog.mpettis.com/2015/02/syriza-and-the-french-indemnity-of-1871-73/
======
dang
We changed the url to the original source instead of
[http://ftalphaville.ft.com/2015/02/06/2113951/michael-
pettis...](http://ftalphaville.ft.com/2015/02/06/2113951/michael-pettis-
explains-the-euro-crisis-and-a-lot-of-other-things-too/), which is a summary
of it. It's a good summary, though. Both pieces are worth reading.

In addition, since Varoufakis has been of interest to HN for a long time, some
of you might like this interview that Pettis links to:
[http://www.zeit.de/wirtschaft/2015-02/yanis-varoufakis-
greec...](http://www.zeit.de/wirtschaft/2015-02/yanis-varoufakis-greece-
finance-minister-eng). (The other articles that Pettis links to about
Varoufakis' proposals are behind the FT paywall.)

------
rrggrr
Michael Pettis is the Tony Stark of economics for those unaware. He has a
scary accurate track record of predictive accuracy, he has influence in many
central banks, perhaps most notably among Chinese decision-makers. Pettis has
a rare accounting-based approach to classical economics which makes his
analysis fresh, but also accessible to non-economists (me). That would be
enought except Pettis, also a musician, owned the most successful music club
in Beijing (D22), until he closed it at its peak. I have Elon Musk and Steve
Jobs playing cards like everyone else, but my Michael Pettis and Vernon
Walters cards are my most cherished.

------
grey-area
The original article referred to here is this one, with the unfortunately
esoteric title:

Syriza and the French indemnity of 1871-73

[http://blog.mpettis.com/2015/02/syriza-and-the-french-
indemn...](http://blog.mpettis.com/2015/02/syriza-and-the-french-indemnity-
of-1871-73/)

I really enjoyed reading this as it puts the Eurozone's current crisis in
historical perspective. It dismisses the unhelpful rhetoric about financial
probity which has come to dominate debates over Greek debt and which has
obscured the real structural problems faced by a federal state which has
monetary but not yet political union. One of his most important points was
this:

 _An awful lot of Europeans have understood the crisis primarily in terms of
differences in national character, economic virtue, and as a moral struggle
between prudence and irresponsibility. This interpretation is intuitively
appealing but it is almost wholly incorrect, and because the cost of saving
Europe is debt forgiveness, and Europe must decide if this is a cost worth
paying (I think it is), to the extent that the European crisis is seen as a
struggle between the prudent countries and the irresponsible countries, it is
extremely unlikely that Europeans will be willing to pay the cost._

------
lkrubner
This is very good:

"Third, it makes no sense to blame the recipients of the capital inflows for
causing the crisis. If enough money is sloshing around willing to invest in
any stupid idea, you shouldn’t be too surprised that a lot of stupid ideas get
funded. When, for example, Wolfgang Schaeuble, Germany’s finance minister,
says: "The reasons for Greece’s problems can be attributable only to Greece
and not to actors outside the country, and certainly not in Germany." As he
did during the press conference following his meeting with Yanis Varoufakis,
his Greek counterpart, we have to remember that Schaeuble is talking nonsense.
It’s logically impossible for excess borrowing to occur unless there is
someone sufficiently reckless (or stupid) to provide the financing."

And this is also good:

"I am hesitant to introduce what may seem like class warfare, but if you
separate those who benefitted the most from European policies before the
crisis from those who befitted the least, and are now expected to pay the bulk
of the adjustment costs, rather than posit a conflict between Germans and
Spaniards, it might be far more accurate to posit a conflict between the
business and financial elite on one side (along with EU officials) and workers
and middle class savers on the other. This is a conflict among economic
groups, in other words, and not a national conflict, although it is
increasingly hard to prevent it from becoming a national conflict."

The German government, in collusion with the German business establishment,
has wrecked Europe, first through its irresponsible lending, and then, later,
through the pressure it put on the ECB to raise rates despite the weak
European economy. The German government can try to blame others for the
problems in Europe, but the driving force behind all of these problems has
been Germany. Germany had a trade deficit at the end of the 1990s, and they
wanted to develop a trade surplus, and they did so through a series of
irresponsible measures that have done great harm to Europe.

~~~
NotableAlamode
Nonsense and victim blaming. Please look at who got what votes in the ECB
board, and look who voted how. Also please check who had lent Greece the most.
As far as I'm aware that was French banks. Next please take into account that
the Euro was forced onto Germany. Then please realise that nobody forced
Greece to take on these loans (and then use them to subsidise cushy government
jobs). Finally please realise the Germany has a trade surplus because they
produce goods that are internationally competitive.

~~~
atmosx
Hm, if Greece defaults, probably Italy and Spain will follow soon after. At
that point the EU will be dissolved and Germany (probably along with the Dutch
and few others) might create a new "Union" with a _very strong currency_.

At that point the countries of the South (and North? Ireland..?) will keep
devaluing daily, while the markets will push Germany's new currency through
the roof, turning exports virtually impossible. Unemployment will struck
Germany and all hell will broke loose. Repercussions for the South will be
devastating of course.

That's not my preview. That's the scenario Varoufakis foresees and probably
the author too. Makes a lot of sense to me, but Varoufakis might be wrong.
Time will tell I guess.

Just keep in mind that Greece, Italy and Spain are in dire straits anyway so
the prospect of defaulting doesn't seem all that scary.

~~~
NotableAlamode
Are you kidding? You make it sound like Greece is doing everybody a favour by
wasting EU money.

Germany used to have its own currency and did very well exporting its goods.
So does Japan, so does Singapore, so does Switzerland, so do Denmark and the
US.

~~~
coldtea
> _Are you kidding? You make it sound like Greece is doing everybody a favour
> by wasting EU money._

Maybe you should read up on the situation a little, instead of believing any
old populist crap you read, because those comments border on racism.

~~~
andybak
The racism accusation is a little strong and isn't helpful to the debate. I do
agree that the post you are referring to seems to be woefully devoid of any
insight into the way the benefits that have accrued to the 'northern'
economies and Germany in particular, from sharing a currency with Spain,
Greece etc.

------
atmosx
What I don’t understand about the current stance of Brussels and Germany, is
their distorted view of reality. Michael Pettis apparently and many others,
view what Brussels and mainstream economic magazines fail to see.

Take this excerpt from Buttonwood's article[1] in the “economist” on Feb 3rd.:

— _Yes, the Greek voters have given their opinion but what about voters in
other democracies? German voters, when polled, seem pretty clear that they don
't want Greece to be given debt forgiveness. Since they would bear the cost of
a Greek write-off, why should their views count for nothing? And what about
the Finns, Dutch, Austrians etc?_ —

For some reason ‘Buttonwood’ ignores Podemos in Spain, UKIP in the UK, M5S in
Italy and LePen in France. All these anti-EU parties are leading the polls in
their respective countries. It’s not something that _will happen in the
future_ it is something that it IS happening NOW.

The rhetoric has it that by punishing SYRIZA the current French, UK, Italian
and Spanish governments can make a bad example out of Greece and reclaim lost
votes. While to me seems a very unlikely outcome. No matter what will happen
to Greece, LePen is going to win Frances election if Frances economy doesn’t
change drastically in the next months. Same goes for Spain, Italy and the UK.
The economy can not change following austerity prescription by the Germans
unfortunately, that’s crystal-clear, so why are they sticking with
austerity?!?

I might be wrong, I don’t know time will tell, but I get the feeling that
people in key-positions throughout EU right now are severely under-educated.

The article was quite refreshing. Let’s hope for the best.

1 [http://www.economist.com/blogs/buttonwood/2015/02/greece-
and...](http://www.economist.com/blogs/buttonwood/2015/02/greece-and-euro-
crisis\]\(http://www.economist.com/blogs/buttonwood/2015/02/greece-and-euro-
crisis\))

~~~
WildUtah
Neither FN (Le Pen) nor UKIP has any chance of winning power in their
respective countries regardless of economic conditions.

The local centers of wealth and power in each nation is committed to
transnational politics and mass importation of cheap labor to control and
depress wages of working people. They own the media and the mainstream parties
and will not allow that control to fade. If necessary, the Labor and Tory
parties will unite and dissolve their differences in order to defeat UKIP.

~~~
tsotha
>Neither FN (Le Pen) nor UKIP has any chance of winning power in their
respective countries regardless of economic conditions.

I wouldn't be too sure about that. I don't know much about FN, but it isn't at
all inconceivable UKIP could win an outright majority in the UK.

~~~
alextgordon
UKIP are unlikely to win seats in London, Scotland, Wales or NI, which are 190
out of 650 seats. That means they'd have to win >71% of the remaining English
seats for an outright majority.

~~~
tsotha
I don't know why you think they can't win seats in those areas, particularly
as anti-EU sentiment increases.

~~~
alextgordon
UKIP won't win in London because London is full of migrants. These migrants
are unlikely to vote for their own christmas, so to speak.

UKIP won't win in Scotland, Wales, or NI because these areas already have
alternative parties (SNP, Plaid Cymru, DUP).

Anti-EU sentiment has actually been decreasing as UKIP support increases[1].
In 2013 and before, most people wanted to leave the EU, but now it's more of a
wash.

[1]
[https://en.wikipedia.org/wiki/Proposed_referendum_on_United_...](https://en.wikipedia.org/wiki/Proposed_referendum_on_United_Kingdom_membership_of_the_European_Union#Standard_polling_on_EU_membership)

------
markvdb
The Greek _minimum_ wage is over 50% higher than my girlfriend's in EU and
euro zone Latvia .

How do I convince her of the need to participate in Greek debt relief?

~~~
coldtea
By telling her that minumum (or median) wage is not the be all end all.

Rate of economic development, cost of living and personal debt matters as do
relative changes in wage levels.

The minumum wage doesn't matter at all also, when you have ~40% youth
unemployment and 27% general unemployment (so those people's wage is zero).

If Americans, for example, started getting mass 40%-50% pay cut across the
board, a huge amount of them would end in bankruptcy, small business closed,
houses lost to unpaid loans, etc.

~~~
markvdb
The Latvians got that 5 years ago. GDP -26%, mass government layoffs, 30%
paycuts for those that were left, housing prices -55%.

Once the housing cost factored out (extreme heating bills, unlike at least
most of southern Greece!), cost of basic necessities here is not so incredibly
different from Western Europe.

Youth unemployment was remedied by emigration.

------
danmaz74
There is something I completely missed in this piece: the distinction between
public and private debt. For public debt, there is a single agent that
decides: the Government, that is elected democratically. How does the "there
is no Spain" argument apply to that?

~~~
swatow
you are right. And the same applies in the other way. If most of the lenders
are in Germany or some other country, of course they are going to be annoyed
if Greece defaults.

Unfortunately, the length and tone of the article are going to convince many
people that the author was on to something.

------
ta97531
"People sometimes mistake their own shortcomings for those of society and want
to fix it because they don't know how to fix themselves."

"It is possible for individuals, and even for whole cultures, to care about
the wrong things, which is to say that it's possible for them to have beliefs
and desires that reliably lead to needless human suffering."

I'm outraged. I was born in Greece to Greek parents and feel extremely unlucky
about this, sort of being born in a completely third world country.

The level that the Greeks (not all of them, but to an extraordinary extend)
fail to comprehend reality is astonishing. The modus operandi here is "do
whatever other people do around you". And what is that? Slowing drag your feet
through education, which is laughable and teaches almost nothing of practical
value, go out as much as you can, drink coffee for hours on end talking about
crap every day, study "whatever you like" failing to understand that some
(most!) university departments are terribly anachronistic and will lead to
unemployment with certainty, etc, etc. It's a failure from top to bottom:
parents and especially teachers are freeloader lazy people and this is exactly
what they teach to the young, by every aspect of social interaction.

I lost too many years of my life, trying to find out what's wrong with me, and
eventually found out about Paul Graham, and startups, and ambition, dammit!

I read a comment somewhere about the US/western Europe just nuking the place
and felt so in tune with it.

In fact, the people here are just unlucky, like me. They don't even comprehend
what it means to work. They say stuff like "Greeks work more than Germans!"
and they go to work 1 or 2 hours late and talk for hours about last night's
football match.

Empirical data towards a proof of what I'm saying: I was saying those stuff to
a sibling of mine, and they were hating me, as most people do here. But then,
they moved to a Western European country, and after several years of trying to
adjust, they now tell me that they themselves regard the Greeks to be lazy
whining freeloaders.

I apologize for the rant. My question is this:

Why the German government, and Western European countries more advanced and
with better "culture" in general, doesn't try to help Greeks become more like
them, starting from education? Is it because of politics, or is it that this
might be happening already, but to see actual results you have to wait a very
long time?

------
mrwarn
maybe the real problem is lack of grocery stores in places like Spain and
Italy, [http://flowingdata.com/2014/05/29/bars-versus-grocery-
stores...](http://flowingdata.com/2014/05/29/bars-versus-grocery-stores-
around-the-world/) now admittedly this might have nothing to do with the
current economic problems faced by the EU, but at least in some of those
places they have plenty of places to grab a drink!

~~~
psykovsky
You're not wrong, you know...

