Friday, July 17, 2015

Batman, Proust, and I

A little self-promotion. I can't say I ever expected to share a bill with Batman, but there it is (NY Times Best Seller List):

Hardcover Graphic Books

  1. BATMAN: THE KILLING JOKE, by Alan Moore and Brian Bolland
  3. SECONDS, by Bryan Lee O'Malley
  5. IN SEARCH OF LOST TIME: SWANN'S WAY, by Marcel Proust, Stéphane Heuet and Arthur Goldhammer

Anyone eager to buy a copy can find it here. It's a nice, gentle introduction to Proust for those who haven't had the pleasure.

Thursday, July 16, 2015

Whither Europe?

The lull did not last long. Whatever Merkel and Hollande thought they had accomplished with their Potemkin bailout has now been exposed for the sham it is by none other than Mario Draghi. Draghi announced that the ECB will increase its Emergency Liquidity Assistance (ELA) to Greek banks to €900 million a week, but he also said that Greece "indisputably" needs debt relief, thus reinforcing the position of the IMF (or at any rate its research staff as opposed, thus far, to its policy arm).

L’homme fort de l’institution de Francfort a également clairement pris position dans le vaste débat sur la dette grecque. Selon lui, il est « indiscutable » qu’un allégement de la dette de la Grèce est nécessaire — dette dont le poids représente quelque 180 % de son PIB. « La question sera quelle est la meilleure forme d’allégement », a-t-il ajouté lors d’une conférence de presse à Francfort.
The question is now squarely on the table. The Eurozone as presently constituted does not work. It either needs to cease and desist or face the challenge of establishing central--and hopefully democratic--political control in place of the unworkable combination of deregulated markets, semi-sovereign member states, and ad hoc emergency arrangements. One of the staunchest supporters of the European project, Jürgen Habermas, has conceded that left-wing critics such as Wolfgang Streeck have a point: "Europe is stuck in a political trap," he says. But he disagrees with Streeck that "a return to nation-states can solve the problem."

I agree. For Habermas,
Such tendencies [toward de-democratization and growing social inequality] can only be countered, if at all, by a change in political direction, brought about by democratic majorities in a more strongly integrated ‘core Europe’. The currency union must gain the capacity to act at the supra-national level. In view of the chaotic political process triggered by the crisis in Greece, we can no longer afford to ignore the limits of the present method of intergovernmental compromise.
Indeed. But Habermas simply skips over the formidable, perhaps insurmountable, political obstacles to achieving this "ever closer union." Doubts about the wisdom of continuing with the European project are on the rise everywhere. The problem of the Greek debt is urgent, but the EU moves glacially when it moves at all. Still, denial of the Merkel-Hollande variety is becoming daily more untenable.

Wednesday, July 15, 2015

The Eurozone Must Change

I don't have time today for a full post, but I just want to reiterate what I said yesterday. Eurozone leaders are patting themselves on the back for having prevented Greece from abandoning the euro. But their "solution" is merely another futile exercise in temporizing, kicking the can further down the road and Greece once again in the gut. The IMF minces no words on the futility of this maneuver, and Eurozone leaders knew this before they forced Greece to sign the agreement:

Dans un rapport publié mardi mais dont les autorités européennes ont eu connaissance le 11 juillet, soit avant que l’accord qui conditionne un nouveau plan d’aide à Athènes ne soit signé, le FMI estime en effet que la dette grecque ne peut être viable qu’« avec des mesures d’allégement ».
Continuing with this denial is madness. It will end badly.

Tuesday, July 14, 2015

Tragedy, Farce, Theater of the Absurd

Even as François Hollande was preening himself in today's 14 July interview on his brilliant role in "saving the euro" ("J'ai dit à Alexis, maintenant, après le réferendum tu es plus fort, mais tu es aussi plus faible"), the IMF was revealing the absurdity of the latest round of extend and pretend:
Greece’s public debt has become highly unsustainable. This is due to the easing of policies during the last year, with the recent deterioration in the domestic macroeconomic and financial environment because of the closure of the banking system adding significantly to the adverse dynamics.
The financing need through end-2018 is now estimated at €85bn and debt is expected to peak at close to 200 percent of GDP in the next two years, provided that there is an early agreement on a program. Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far.
This charade cannot go on. Hollande's participation in it discredits and dishonors him. To echo Matteo Renzi, enough is enough.

Monday, July 13, 2015

Endgame in Greece

It didn't end as I had hoped, but it's important to be lucid about what this episode has demonstrated. European politics will not be the same going forward. I offer some initial thoughts here. The implications for French politics are profound.

Euro wins, Europe loses: From Beethoven's Ode to Joy to Rihanna's S&M

So in the end my faint glimmer of hope was misplaced. It came down to a German diktat, with Hollande sitting in the room probably congratulating himself that he had prevented Wolfgang Schäuble from forcing Greece out of the euro, along the lines I suggested yesterday. But in retrospect it seems clear that Schäuble was prepared to yield on Grexit if nothing else. He got everything he wanted and more. Merkel, when she finally ended her temporizing, proved to be German at heart rather than European.

So the euro is saved, but the euro, it is now clear, is going to be a thorn in Europe's side if not a spike in its heart for years to come. Institutional change is impossible in today's climate of inflamed nationalism. One can even doubt that there is anything left in the European project worth saving. Europe should change its anthem from Beethoven's Ode to Joy to Rihanna's S&M.

Perhaps tomorrow will look brighter.

Saturday, July 11, 2015

An Ingenious Blunder?

As I have written elsewhere, the obvious strategy for Greece in its debt negotiations was to try to split the creditors. This the Greek government failed to do up to the moment of the referendum. The subsequent backtracking from the No position and apparent unconditional surrender made the decision to hold the referendum at all appear to be a monumental blunder. Or was it monumental duplicity? There are some who say that the only reason Tsipras called the referendum was because he expected the Yes to carry the day:
The Greek government and particularly the circle around Alexis, were worn down by this process. They saw that the other side does, in fact, have the power to destroy the Greek economy and the Greek society — which it is doing — in a very brutal, very sadistic way, because the burden falls particularly heavily on pensions. They were in some respects expecting that the yes would prevail, and even to some degree thinking that that was the best way to get out of this. The voters would speak and they would acquiesce.
But what has happened since the referendum is interesting. The creditors have at last been split. Two cleavages are of the utmost importance: between Germany and France and between Schäuble and Merkel.

France has emerged in recent days as Greece's strongest and perhaps only active ally in the crisis. A technical team dispatched from Paris helped draft the Syriza surrender document, which appears to have satisfied the immediate demands of the Eurogroup if nothing else. François Hollande has at last found a voice of sorts. If nothing else, he has made it clear that he would regard a Grexit as a genuine disaster. This puts him at odds with his German Social Democratic counterpart Sigmar Gabriel, leader of the SPD, who wasted no time in saying that the Greek No vote meant that there was no choice but Grexit.

With this declaration, Gabriel aligned himself with Schäuble against Merkel, who is caught in a dilemma of her own making. She does not want Grexit, but her uncompromising position on Greece until now has convinced many in the CDU-CSU that no matter what the Greeks say, they cannot be trusted. Hence even abject capitulation is not enough. If Merkel tries to save the euro by coming to an agreement, she makes herself vulnerable to a challenge from Schäuble within her party and from Gabriel without, but within her Grand Coalition.

Meanwhile, former Greek finance minister Varoufakis, who fled Athens to his island home in order to avoid voting on whether to accept the surrender to the Troika and thus became one of 17 Syriza deputies to abandon Tsipras, claims,  rather bizarrely, that Schäuble's ultimate goal is to intimidate France:
Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.
Of course France and Germany are not the only players. There are other countries, some more recalcitrant than Germany. And there is the IMF, which has suddenly become more vocal about the need for debt reduction as part of an overall settlement.

Can one say that Tsipras's endgame has been an ingenious blunder? It has achieved two things. First, it has moved the debate away from the terrain of economics and into the realm of politics. This of course complicates the picture enormously and introduces many imponderables. But there was always something absurd about having the fate of the European project hinge on a debate about whether hotels on Greek islands should pay a VAT of 17% or 23%. At least now there is scope for removing the green eyeshades and beginning to contemplate the real stakes, even if it also means contemplating the abyss.

Second, it has put Merkel in a position where she can no longer temporize. She always prefers delay to decision, and she has been encouraged in her passivity by Hollande's equal and opposite aversion to choice. But Hollande now seems to have been forced at last to stand firm against Grexit, and Tsipras's blunder may have made it more expedient for Merkel to seek an alliance with Hollande in order to wrongfoot both Gabriel and Schäuble simultaneously. We do not yet know which way she will go, but her place in history will depend on her choice.

Thursday, July 9, 2015

French Cavalry Arrives, Deal in Sight?

The NY Times:
The French assistance appeared to be an effort to make sure the Greek proposal,, submitted just before a midnight deadline, would be as thorough and salable as possible to Greece’s creditors and would smooth the way for a compromise on a new bailout package to keep Greece afloat financially and inside the euro.
“There is a group of people who have been sent to help the Greeks, to try to transform words into action,” said a French government official with knowledge of the effort.
France has been the most steadfast major nation in Europe supporting Greece ever since Prime Minister Alexis Tsipras was ushered in to power in January on a mandate to repudiate austerity. Paris has been particularly outspoken in recent days about the need for a compromise that would help Greece and hold the eurozone together.
Have I been selling Flanby short? He has pulled out all the stops, and, together with Wolfgang Schäuble's concession that debt reduction is possible, we have the makings of a way out of this crisis:
Wolfgang Schäuble, finally gave a little on that Thursday, admitting that “debt sustainability is not feasible without a haircut,” or writedown of debt, even if he then appeared to backtrack.

Slouching Toward Grexit: That Whirligig Sarkozy, Signs of Life Among the Socialists, European Democracy, etc.

A week ago Nicolas Sarkozy had a clear position on the Greek question: throw the bums out. In his detestation of Alexis Tsipras, he seemed to recover some of the joy of the good old days, when he could direct his heavy artillery against the "socialo-communists." No doubt he thought the Greek mess provided him with a nice issue on which he could both look tough and differentiate himself from Marine Le Pen, for whom Tsipras's "resistance" to the consummately evil forces of the Europe Union is an inspiring example, despite her advocacy of Grexit, which Tsipras says he does not want, as the quickest way to destroy the European Union, which is her ultimate solution for everything.

Alas, problem: Alain Juppé, whose presumably more statesmanlike approach to politics has put him ahead of Sarkozy in the race for the Republican nomination in 2017, also came out in favor of Grexit--rather surprisingly, because one would have expected a more conciliatory position from the former prime minister. So Sarkozy seized the opportunity: he would be statesmanlike, advocating compromise, thus setting himself apart from both Juppé and Le Pen--the two people he needs to demolish if he hopes to regain the presidency.

Meanwhile, Manuel Valls made a rather rousing pro-Greece speech in the National Assembly yesterday. The dormant Socialists have aroused themselves in other ways as well. Claude Bartolone spoke out in favor of compromise. Sapin and Macron are doing their best to slow the seemingly inexorable drive to expulsion. Even Christine Lagarde is now openly calling for debt reduction to be combined with extended austerity, and US Treasury Secretary Jack Lew has added to the pressure on the EU to stop short of forcing Greece out.

But yesterday's session in the EU Parliament was not encouraging to those who think that "more democracy" is the solution to Europe's problems. The sentiment among the democratically elected representatives of the peoples of Europe was decidedly anti-Greece.

And suddenly there is political life again in Europe. Instead of a very unequal tug of war between accountants in Brussels and firebrands in Athens, we are at last beginning to hear some discussion of the historic implications of the threat to the European project that Grexit poses. It may well be too little, too late, but at least we will have heard some debate that rises above the level of whether hotels on Greek islands should pay a value-added tax of 23% or 17%.

Tuesday, July 7, 2015

Disappointment Thus Far

The other day I said it was time for Hollande to step up. Thus far he has not done so. No surprise there. Of course he is constrained by the proprieties of the "Franco-German couple." Public differences must be muted at all cost, lest there be "embarrassment." Of course there is a glimmer of difference: Sapin, Macron, and Valls have all repeatedly said that negotiations should be resumed immediately, but beyond that--nothing. Debt reduction is dangled implicitly, as before, but first there has to be agreement on continued austerity, or else the embarrassing thought of Grexit nastily intrudes upon the tranquil routine of yet another Eurozone summit.

To be sure, considerable embarrassment is evident among Euro-elites, but I have seen little discussion of what should embarrass them most, namely, the IMF's admission that its staff regards the debt as unsustainable. The report has been reinforced by DSK's suggestion that they frankly acknowledge this and by the leak of the NSA taps on Merkel and Schäuble, showing that they, too, knew that the debt was unsustainable and austerity could not yield the desired results as long as 4 years ago. Instead, they are embarrassed mainly by the imminence of what they have been saying until now was unthinkable and potentially catastrophic, namely, Grexit. They should be explaining why they cling to a fiction rather than trying to scramble back to reality. Instead, they're devoting their energies to blame-shifting, failing to recognize that they will all be blamed in the end if things go badly wrong, as they very well could if the ECB cuts off the Greek banks and the Grexit process becomes "disorderly." People who think Syriza has not managed things well thus far should not be relying on them to manage things going forward. "Humanitarian aid" offers are a poor substitute for authentic humanitarian feelings toward fellow Europeans.

And so we stumble on. Of course Greece did not help matters by showing up for today's Eurogroup meeting without a plan. Mañana there will be one, the say, reinforcing the stereotype of the lazy Mediterranean, although the true reason for their tardiness is undoubtedly not laziness but sheer lack of the staff necessary to pull together a proposal after the turbulent weekend and the sacking of former Fin Min Varoufakis (who in my view richly deserved to go: I am not a fan of negotiators who gratuitously insult their interlocutors by calling them "terrorists"). Still, on the substance, Varoufakis has always been correct: debt reduction is indispensable. If only Europe's leaders can come to that realization.

Sunday, July 5, 2015

Time for Hollande to Step Up

It has been announced that President Hollande and Chancellor Merkel will meet in Paris tomorrow night. It is now time for Hollande to show what he's made of. There are already signs of a gap opening up between France and Germany. Although Wolfgang Schaüble said before the vote that there would be no immediate resumption of talks no matter which way the outcome went, both Finance Minister Michel Sapin and Economy Minister Emmanuel Macron called for a resumption of talks and no punitive measures.

If I were to hazard a guess, I would say that there will be no immediate cutoff of the ECB's Emergency Liquidity Assistance and perhaps even an increase in the daily ceiling. This will allow Greek banks to reopen, alleviating pent-up pressures and preventing a massive outburst of Greek anger and recourse to the streets. There will then be time for both sides to work out a strategy.

In my view, if there is an ounce of humanity and a modicum of rationality on the Troika's side, they must agree to talks about debt reduction now that Greece has voted a resounding No and the IMF has admitted that the debt is unsustainable. Anything else would be heartless, vindictive, and likely to fail. If this happens, Syriza will have won a tremendous victory, which I freely admit I did not think possible.

If the Troika refuses debt reduction talks, I see nothing but trouble ahead. This is the opportunity, if ever there was one, for Hollande to press Germany hard, as he should have done in 2012. It is a moment for statesmanship, and, if I may put it bluntly, time to grow some couilles.

Thursday, July 2, 2015

Greece Again

I take another crack at the Greek crisis, which grows more worrisome by the hour.

Sarko vs. Les Guignols

It seems that former president Nicolas Sarkozy does not like les Guignols de l'Info, which, truth to be told, can be a bit tiresome as well as tasteless. In any case, his good friend Vincent Bolloré, who owns Canal+, the network home of les Guignols, wants them gone. A little comic relief is welcome in these troubled times.