Posts Tagged ‘Greece’

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Next week, after the Memorial Day recess, the entire House is expected to take up the bill, which last week was approved (by a vote of 29-10) within the House Natural Resources Committee, with support from the White House, to handle the Puerto Rico debt crisis.

The folks at the Wall Street Journal couldn’t be happier.

The bill offers debt relief to Puerto Rico in return for a mechanism to overrule the territory’s feckless current government and impose reform. The legislation explicitly pre-empts conflicting laws and regulations passed by the commonwealth. It also stipulates that legal challenges will be heard in federal rather than commonwealth court.

The key to the reform is a seven-person control board modeled after the board that pulled the District of Columbia out of a debt spiral in the 1990s. The President would select the board from nominations by the House Speaker (two), Senate Majority Leader (two), House Minority Leader (one) and Senate Minority Leader (one). The President has sole discretion to choose the seventh. The appointments must be made by Dec. 1, and the terms last three years, so the GOP majority’s choices will steer the board’s crucial early decisions. . .

After ensuring that financial audits and a fiscal plan have been completed, the board would propose a plan of adjustment that is fair and equitable. The legislation explicitly requires that the plan respect creditor priorities and liens and be “in the best interest of creditors.” So if Democrats later control the board, they couldn’t subordinate general obligation bondholders to pensioners.

As we know, similar programs elsewhere—in Europe (e.g., Greece) and in the United States (e.g., Detroit and Flint)—have proven disastrous, at least for the majority of the population. They have only helped the “vulture creditors,” who have already profited enormously from extending high-interest loans and purchasing tax-privileged bonds. In each case, the possibility of real debt relief was scuttled in favor of repaying the creditors and imposing the kinds of economic and political “reforms” elites both inside and outside have long wanted to implement.

Last August, Joseph Stiglitz and Mark Medish warned that Puerto Rico “can’t pay its debts today, and with short-term debt financing at the high interest rates demanded by creditors, it will be even less able to pay its debts tomorrow.” As for the United States, it needs to

take responsibility for its imperialist past and neocolonial present. Washington owes Puerto Ricans a future based on democratic legitimacy and a financially and socially viable development strategy—a development strategy that is more than a set of tax breaks for profitable U.S. corporations.

The new deal is exactly the opposite of taking that responsibility, since (as Erik Levitz [ht: sm] explains) it means establishing “a pseudo-colonial shadow government tasked with trading debt haircuts for austerity measures.”

It should come as no surprise, then, that Bernie Sanders, in the midst of his own presidential campaign, is strenuously campaigning against the bipartisan Puerto Rico deal.

In my view, we must never give an unelected control board the power to make life and death decisions for the people of Puerto Rico without any meaningful input from them at all. We must not balance Puerto Rico’s budget on the backs of children, senior citizens, the sick and the most vulnerable people in Puerto Rico.

Moreover, this legislation requires that any restructuring of Puerto Rico’s debt must be “in the best interests of creditors,” not in the best interests of the 3.5 million U.S. citizens living in Puerto Rico.

“Not in the best interests of 3.5 million U.S. citizens living in Puerto Rico”—who may soon find themselves in the same position as the citizens of Greece, Detroit, and Flint.

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Greek workers have begun a 3-day general strike in protest against further austerity measures that are being proposed in return for more bailout money from their European creditors.

Even the Wall Street Journal admits that the proposed package of fiscal retrenchment measures is unsustainable, as it could come to 5 percent of Greece’s gross domestic product.

Eurozone finance ministers are holding a special meeting on Monday to debate the problem. Few expect a solution. One is needed at the latest by July, when Greece will default on bond debts unless a deal unlocks fresh bailout aid. The number causing the most grief is 3.5% of GDP: the primary-surplus target written in last year’s Greek bailout agreement. “The IMF thinks the primary objective should be lower. That would help Greece,” says David Mackie, chief European economist at J.P. Morgan.

Aiming for a smaller surplus would allow for less austerity, and for the Greek economy to breathe, IMF officials have argued for months. But it would also entail restructuring European loans to Greece, so that its debt doesn’t spiral ever higher. At a minimum, the IMF wants Europe to postpone Greece’s payment obligations by decades.

Eurozone governments led by Germany don’t want to take a hit on their Greek bailout loans, which total €205 billion ($234 billion) so far. Berlin is insisting the primary-surplus goal can’t be changed.

The fact is, since 2010, a succession of Greek governments have enacted spending cuts and tax increases worth a total of 32.3 percent of GDP, “a scale of austerity far beyond that seen in any other European country during the financial-crisis era.”

Greek workers are saying no more—and even the Wall Street Journal, which still considers the previous austerity measures to have been “inevitable,” can’t find a policymaker or economist who “argues that further belt-tightening on that scale is what Greece’s economy needs at this point.”

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Simon Wren-Lewis starts with “the real damage that austerity has had on people’s lives” and then explains how “Austerity is a trap for the left as long as they refuse to challenge it.”

You cannot say that you will spend more doing worthwhile things, and when (inevitably) asked how you will pay for it try and change the subject. Voters may not be experts on economics, but they can sense weakness and vulnerability. If instead you restrict yourself to changes at the margin, you appear to be ‘just the same’.

The problem, of course, is that austerity is still inflicting its damage, especially in Greece, which is why workers, farmers, and others have taken to the streets in that country in recent days.

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It’s mostly flown under the radar, at least in the United States. But, in Portugal, the ruling austerity coalition, Portugal Ahead, lost its parliamentary majority in yesterday’s election.

Meanwhile, the Left Bloc, the sister party of Greece’s anti-austerity Syriza, looks to be on course for its best-ever result of 10.2 percent of the vote and 19 seats, up from its previous score of eight.