quarta-feira, março 11, 2015

Eurogroup pressures fail to resolve Eurozone problem

Negociações na Grécia, prefácio do "Roteiros IX" e Belmiro sai da Sonae
A análise de Mariana Abrantes de Sousa, economista, e Hélder de Oliveira, Ordem dos Economistas, num programa conduzido por Sandra Xavier. "Conselho Consultivo" de 11 de Março de 2015.

The European financial media repeats ipsis verbis the creditors' negotiating pressures and accusations of wasting time on the the weakest debtor - Greece.  These same creditors were quite willing to do business with Greece back in 2006-7.  Some,  like France , who made the initial bad loans to Greece, and others, like Germany, who has taken over the lead creditor position, are certainly within their rights to bring political and public pressure to bear on the hapless debtors, but this agressive negotiating  tactic will not necessarily contribute to a sustainable solution to the Eurozone debt problem.

If this were only a Greek problem, we would be less worried.  If debtors like Greece could be pressured to tighten their belt still further, cutting the minimum wage to EUR 400/month, below the poverty level, instead of increasing it, would it increase their external debt repayment capacity to satisfy their external creditors?  Would it eliminate the intra-Eurozone economic imbalances?

Not necessarily,  economists would say.  What would boost debt repayment capacity would be to increase exports of goods and services, which depends on many other factors beyond wage costs. Lowering wages below the poverty level would probably require more spending on a minimum humanitarian safety net, which in Europe is done at the national level, and thus more local taxes.

 But the creditor posturing is in the hands of politicians and lawyers, who prefer to ignore basic international economics and finance.  All is fair in the, highly imperfect European Union, and an equitable solution to the Eurozone imbalances and debt problems is not on the agenda.

The mis-information  is surreal.  Some even argue that Greece has more generous social benefits than Germany? Greece and Spain both unemployment of under 25-year olds of over 50 % in November 2014  (seven times the levels of Germany. (7.1%). Unemployed Greek workers lose access to health care and  a huge number of Greek families cannot afford basic public services such as electricity.
If Greece is so much more generous, what do the net migration flows show?
Are Germans turning into "benefits tourists" and  and migrating to "generous and sunny" Greece?

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