There was a big kerfuffle in October when the IMF made a point of saying that it (along with a bunch of other forecasters) had underestimated the effect of fiscal tightening on European economic growth over the past couple of years, with obvious implications for the troika’s austerity programmes for the likes of Ireland, Greece and Spain.
The admission got some predictable pushback from troika members who have drunk deep from the austerian well. It was also questioned by my colleague Chris Giles, who pointed out that the results were highly sensitive to the inclusion in the sample of outlier countries – especially Germany (which, despite its frugal prescription for others, has itself followed expansionary fiscal policy and enjoyed good growth) and Greece (the opposite) – and possibly the exclusion of the Baltic states, which followed aggressive fiscal tightening to better effect than Greece. Read more
With friends like these…. Jean-Claude Juncker and Christine Lagarde. (AFP)
It’s not as if the troika of eurozone rescue lenders never falls out, but usually it takes a not-in-front-of-the-children attitude to airing its rows. A refreshing change on Monday night, as my colleagues Peter Spiegel and Josh Chaffin report, when the eurogroup summit, while not actually deciding anything substantive, made sure it would stand out from the dozens of other such gatherings by hosting a very public argument between the eurogroup’s Jean-Claude “We all know what to do, we just don’t know how to get re-elected after we’ve done it” Juncker and the IMF’s Christine Lagarde.
The actual substance of the spat looks laughably trivial. It’s about whether Greece hits its 120 per cent of GDP debt target in 2020 or in 2022, which, given the huge uncertainties in forecasting debt dynamics, is about as precise as a Florida election count. The 120 per cent target is itself pretty arbitrary, apparently based on what seems to be sustainable in Italy, which is a very different country with a more flexible economy and captive domestic investor base for government bonds. Read more
Gideon Rachman blogs on how damaging the trial of Costas Vaxevanis will be for Greece. Read more
German chancellor Angela Merkel with Greek prime minister Antonis Samaras on October 9 in Athens (Thanassis Stavrakis/AFP/GettyImages)
The last time Angela Merkel visited Greece was in 2007 – which, incidentally, was also the last year the country recorded positive economic growth. Greece has seen its annual output shrink ever since; its economy rocked by a debt crisis, its political leaders repeatedly forced to go cap in hand to its richer eurozone cousins. Of these, Germany is the most important, but opinion polls suggest its public has long grown impatient with Athens’ failure to keep its promises. Locked in an embrace that neither would have chosen – Germany attempting to pull Greece out of its fiscal crisis; Greece, ever more dependent on Berlin’s support, but resenting its interference – the question is whether the two countries will hug tighter, or finally break apart. Could Merkel’s meeting with Antonis Samaras on Tuesday herald a friendlier era? Read more
If Greek citizens aren’t angry enough at the condescending and ignorant manner in which northern Europeans discuss their plight, I invite them to inspect the opinions of Jürgen Ligi, Estonia’s finance minister.
An interview with Mr Ligi appeared on Monday on the extremely handy European affairs blog that is published by the London School of Economics.
In answer to the question “Do you think that austerity measures in countries like Greece have gone far enough?”, here’s what the Estonian minister said:
“I honestly haven’t seen any austerity in Greece. It’s a rich country with a high level of consumption, and the present situation in Greece is far better than what we experienced in Estonia in the early 1990s. They are spending a lot – much more than they earn – so it can’t be called austerity.”
Let’s think about that.
Greece is projected next year to endure its sixth consecutive year of deep recession. By then, economic output will be 25 per cent below the peak of the boom years that marked Greece’s initial experience of eurozone membership. Read more
By Gideon Rachman
“This is what you have to do, if you want the people to build statues of you on horseback.” Valéry Giscard d’Estaing was doubtless being whimsical when he urged his colleagues to make bold decisions about the future of Europe. But the former French president’s remark offers a telling insight into the mentality that created the great euro-mess of today.
We’ve got plenty of brain food for you today:
Here’s what piqued our interest today:
Here are our picks from the weekend and this morning to start off your week’s reading:
Here are some of the articles, photo essays and blog posts that have attracted our attention from today’s FT and elsewhere: