How's that monetary offset thing working in Greece?
"To understand the political earthquake in Greece, it helps to look at Greece’s May 2010 “standby arrangement” with the International Monetary Fund, under which the so-called troika — the I.M.F., the European Central Bank and the European Commission — extended loans to the country in return for a combination of austerity and reform. It’s a remarkable document, in the worst way. The troika, while pretending to be hardheaded and realistic, was peddling an economic fantasy. And the Greek people have been paying the price for those elite delusions."
"You see, the economic projections that accompanied the standby arrangement assumed that Greece could impose harsh austerity with little effect on growth and employment. Greece was already in recession when the deal was reached, but the projections assumed that this downturn would end soon — that there would be only a small contraction in 2011, and that by 2012 Greece would be recovering. Unemployment, the projections conceded, would rise substantially, from 9.4 percent in 2009 to almost 15 percent in 2012, but would then begin coming down fairly quickly."
"What actually transpired was an economic and human nightmare. Far from ending in 2011, the Greek recession gathered momentum. Greece didn’t hit the bottom until 2014, and by that point it had experienced a full-fledged depression, with overall unemployment rising to 28 percent and youth unemployment rising to almost 60 percent. And the recovery now underway, such as it is, is barely visible, offering no prospect of returning to precrisis living standards for the foreseeable future."
http://www.nytimes.com/2015/01/26/opinion/paul-krugman-ending-greeces-nightmare.html?_r=0
According to Sumner's Market Monetarism fiscal austerity doesn't hurt as the central bank offsets it. By implication then-the more austerity the more monetary offset so really the more austerity the better. Now whether full monetary offset exists or not in the US with the Fed is one thing-I don't buy it but it's not as implausible as in the EU. Monetary offset is just a punchline when dealing with the EU.
It's interesting that La Pen in France from a far Right wing party supported the Left wing victory in Greece.
http://www.france24.com/en/20150120-france-far-right-syriza-greece-poll/
For those in Europe who feel lots of consternation over this ought to have thought about this in 2011 when they like Sumner claimed austerity has negligible effects.
"To understand the political earthquake in Greece, it helps to look at Greece’s May 2010 “standby arrangement” with the International Monetary Fund, under which the so-called troika — the I.M.F., the European Central Bank and the European Commission — extended loans to the country in return for a combination of austerity and reform. It’s a remarkable document, in the worst way. The troika, while pretending to be hardheaded and realistic, was peddling an economic fantasy. And the Greek people have been paying the price for those elite delusions."
"You see, the economic projections that accompanied the standby arrangement assumed that Greece could impose harsh austerity with little effect on growth and employment. Greece was already in recession when the deal was reached, but the projections assumed that this downturn would end soon — that there would be only a small contraction in 2011, and that by 2012 Greece would be recovering. Unemployment, the projections conceded, would rise substantially, from 9.4 percent in 2009 to almost 15 percent in 2012, but would then begin coming down fairly quickly."
"What actually transpired was an economic and human nightmare. Far from ending in 2011, the Greek recession gathered momentum. Greece didn’t hit the bottom until 2014, and by that point it had experienced a full-fledged depression, with overall unemployment rising to 28 percent and youth unemployment rising to almost 60 percent. And the recovery now underway, such as it is, is barely visible, offering no prospect of returning to precrisis living standards for the foreseeable future."
http://www.nytimes.com/2015/01/26/opinion/paul-krugman-ending-greeces-nightmare.html?_r=0
According to Sumner's Market Monetarism fiscal austerity doesn't hurt as the central bank offsets it. By implication then-the more austerity the more monetary offset so really the more austerity the better. Now whether full monetary offset exists or not in the US with the Fed is one thing-I don't buy it but it's not as implausible as in the EU. Monetary offset is just a punchline when dealing with the EU.
It's interesting that La Pen in France from a far Right wing party supported the Left wing victory in Greece.
http://www.france24.com/en/20150120-france-far-right-syriza-greece-poll/
For those in Europe who feel lots of consternation over this ought to have thought about this in 2011 when they like Sumner claimed austerity has negligible effects.
Greece doesn't have a central bank. Not a real one, anyway.
ReplyDeleteI know NIck but then why should Greece do austerity. The idea is that the ECB is their CB but that doesn't work as politically speaking countries like Germany won't let the ECB do what could help Greece.
ReplyDeleteMy point is that if you think monetary offset works in the US it certainly isn't working irn Greece.
I mean what argument can you make to the Greeks that they should stay the course on austerity in Greece?