Archive Page 2 of 72
The truly criminal destruction by the Troika of the Greek economy and Greek society that we have witnessed these last five years may have one good outcome: it may bring down at least one of the organizations responsible, according to this scathing indictment by Ambrose Evans-Pritchard in the London Telegraph today. An excerpt:
The International Monetary Fund is in very serious trouble. Events have reached a point in Greece where the Fund’s own credibility and long-term survival are at stake.
The Greeks are not withholding a €300m payment to the IMF because they have run out of money, though they soon will do.
Five key players in the radical-Left Syriza movement – meeting in the Maximus Mansion in Athens yesterday – took an ice-cold, calculated, and carefully-considered decision not to pay.
They knew exactly what they were doing. The IMF’s Christine Lagarde was caught badly off guard. Staff officials in Washington were stunned.
On one level, the “bundling” of €1.6bn of payments due to the IMF in June is just a technical shuffle, albeit invoking a procedure last used by Zambia for different reasons in the 1980s. In reality it is a warning shot, and a dangerous escalation for all parties.
Syriza’s leaders are letting it be known that they are so angry, and so driven by a sense of injustice, that they may indeed default to the IMF on June 30 and in so doing place the institution in the invidious position of explaining to its 188 member countries why it has lost their money so carelessly, and why it has made such a colossal hash of its affairs.
The Greeks accuse the IMF of colluding in an EMU-imposed austerity regime that breaches the Fund’s own rules and is in open contradiction with five years of analysis by its own excellent research department and chief economist, Olivier Blanchard.
Greece’s public debt is 180pc of GDP. The loans are in a currency that the country does not control. It is therefore foreign currency debt. The IMF knows that Greece cannot possibly pay this down by draconian austerity – the policy already implemented for five years with such self-defeating effects – and the longer it pretends otherwise, the more its authority drains away.
It is has pushed for debt relief behind closed doors but only half-heartedly, unwilling to confront the EMU creditor powers head on. Objectively, it is acting as an imperialist lackey – as Greek Marxists might say.
Indeed, it has brought about the worst possible outcome. The Fund’s man on the ground in Athens – Poul Thomsen – has pushed the austerity agenda with a curious passion that shocks even officials in the European Commission, pussy cats by comparison.
This would be justifiable (sort of) if the other side of the usual IMF bargain were available: debt relief and devaluation. This how IMF programmes normally work: impose tough reforms but also wipe the slate clean on debt and restore crippled countries to external viability.
It is a very successful formula. On the rare occasion when the IMF goes wrong it is usually because it tries to prop up a fixed-exchange rate long past its sell-by date.
All of this went out of the window in Greece. The IMF enforced brute liquidation without compensating stimulus or relief. It claimed that its policies would lead to a 2.6pc contraction of GDP in 2010 followed by brisk recovery.
What in fact happened was six years of depression, a deflationary spiral, a 26pc fall in GDP, 60pc youth unemployment, mass exodus of the young and the brightest, chronic hysteresis that will blight Greece’s prospects for a decade to come, and to cap it all the debt ratio exploded because of the mathematical – and predictable – denominator effect of shrinking nominal GDP.
It is a public policy scandal of the first order. One part of the IMF has issued a mea culpa admitting that its own analysts misjudged the fiscal multiplier badly. Plaudits to them.
Another part of the Fund continues to push new variants of the same indefensible policies, demanding a combined fiscal squeeze from pension cuts and VAT rises equal to 1pc of GDP this year and 2pc next year even as the economy lurches back into recession.
Ashoka Mody, former chief of the IMF’s bail-out in Ireland, refuses to criticise his former colleagues on the European desk, but the meaning of the words I quoted last night are clear enough.
“Everything that we have learned over the last five years is that it is stunningly bad economics to enforce austerity on a country when it is in a deflationary cycle. Trauma patients have to heal their wounds before they can train for the 10K.”
“I am frankly shocked that we are even having a discussion about raising VAT at all in these circumstances. We have just seen a premature rise in VAT knock the wind out of a country as strong as Japan.”
“Syriza should recruit the IMF’s research department to be their spokesman because they are saying almost exactly the same thing as Syriza on the economics of this. The entire strategy of the creditors is wrong and the longer this goes on, the more is its going to cost them.”
The IMF’s Original Sin in Greece was to allow the urbane Parisian Dominique Strauss-Kahn to hijack the institution to prop up Europe’s monetary union and the European banking system when the crisis erupted in 2010.
The Fund’s mission is to save countries, not currencies or banks, and it certainly should not be doing dirty work for a rich currency union that is fully capable of sorting out its own affairs, but refuses to do so for political reasons.
It was of course a difficult moment in May 2010. The eurozone was spinning out of control. There were no backstop defences – due to the criminal negligence of Europe’s leaders and banking regulators – and fears of a euro-Lehman were all too real.
Yet leaked minutes from the IMF board meetings showed that all the emerging market members (and Switzerland) opposed the terms of the first loan package for Greece. They protested that it was intended to save the euro, not Greece.
It loaded yet more debt onto the crushed shoulders of an already bankrupt country, and further complicated the picture by allowing one large French bank and one German bank – no names please – to offload much of their €25bn combined exposure onto EMU taxpayers.
“Debt restructuring should have been on the table,” said Brazil’s member. The loans “may be seen not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece’s private debt holders, mainly European financial institutions”.
Arvind Virmani, India’s member, was prophetic. “The scale of the fiscal reduction without any monetary policy offset is unprecedented. It is a mammoth burden that the economy could hardly bear,” he said.
“Even if, arguably, the programme is successfully implemented, it could trigger a deflationary spiral of falling prices, falling employment and falling fiscal revenues that could eventually undermine the programme itself.” This is exactly what has happened.
The Fund might have atoned later by acknowledging its special duty of care towards Greece and softening the terms. It did not do so. We should hardly be surprised if Syriza is now on the warpath.
The IMF needs to be careful. It has itself become an emblem of bad governance. Mr Strauss-Kahn was caught in flagrante delicto, only to be replaced instantly in a political stitch-up by another French finance minister (of quality and integrity – but that is not the point). Mr Strauss-Kahn’s predecessor was recently indicted in Spain for fraud.
The institution cries out for reform. There is no justifiable reason why the job of managing-director should go by divine right to a European, nor why the Europeans still control eight seats on the IMF board.
. . .
These anomalies should have been sorted out at the time of the Strauss-Kahn debacle – along with quota reform blocked by the US Congress – all the more so since China and a host of rising reserve powers were already bursting onto the scene by then.
Leadership failed. The West disgraced itself. No wonder Asia is now going its own way with a rival set of bodies.
Greece’s firebrand government is bringing matters to a head for an institution already in trouble, but one with a superb staff and still worth saving.
Mrs Lagarde must stop playing the role of a diplomat. She must take off her European hat and speak instead for the organisation she leads and for the world.
She must confront the EMU creditors head on and in public. She must tell them, in blunt language, that they share much of the blame for the current impasse.
She must make it clear to them that Greece needs sweeping debt relief – as a matter of economic science, whatever the morality – and that the refusal of the creditors to face up to this elemental fact is now the chief impediment to a solution. And she should tell them that the IMF will no longer play any part in their deceitful charade.
If she does not do so, and if the lack of leadership by Europe’s political class leads to a catastrophic denouement on every level, then let it be on her head too.
In January 2009, the Independent published a story speculating on an affair between the composer Felix Mendelssohn and the Swedish soprano Jenny Lind. I have only just discovered that the Journal of the Royal Musical Association published an article by one George Biddlecombe in 2013 which purports to get to the bottom of this story, and concludes that “Mendelssohn wrote passionate love letters to Jenny Lind entreating her to join him in an adulterous relationship and threatening suicide as a means of exerting pressure upon her”.
But the evidence presented in the paper supports no such claims. A half-competent lawyer for the defence could drive a coach and pair through the material presented here. A paper written in 2013 refers to two documents (not apparently in the public domain) written in 1980, describing a post-prandial conversation in 1947, a conversation about some letters allegedly discovered at Lind’s death in 1887, letters which were purportedly written by Mendelssohn to Lind before his own death in 1847. Where are these letters? Allegedly burnt at the time of their re-discovery in 1887. Who read them? As far as I can tell from Biddlecombe’s paper, possibly only Lind’s widower, Otto Goldschmidt, a man who died in 1907. What language were they written in? Presumably German, since that was Mendelssohn’s mother tongue, and Lind spoke it. Could the various English solicitors who pepper this story and who MAY have been present at the discovery and burning of the letters in 1887 read German? Even if they could, did anyone other than Goldschmidt actually read the letters?
Did these letters actually exist? This is not obvious to me, and the evidence is only third- and fourth-hand. But even if they did exist, we have only Otto Goldschmidt’s alleged word, at several removes over 126 years, to say that the letters contained statements of passion by Mendelssohn to Lind. They may have been shopping lists, for all we know with certainty. Even though the various intermediaries in this fantastical story may have been lawyers of integrity, and fine, upstanding men (as Biddlecombe seeks to show), who knows what Goldschmidt’s motivations may have been, whether in 1887 or later. All here is hearsay, and hearsay repeated after long intervals of time, and buried in obscure documents not open to our inspection. No court would accept such ramshackle, hearsay evidence for the claims made in this paper. And perhaps George Biddlecombe also realizes this, since he includes a discussion of other sources (eg, third-party letters, memoirs) to buttress the claim of an affair. But these other sources, too, are less than compelling. A hill of beans is what they don’t add up to.
What a shame that this paper traduces the reputations of two people, both long dead, on such flimsy grounds. What a shame that others rush to endorse its argument. The problem is both too much imagination and too little. An affair is imagined when the evidence – the firm, uncontestable, irrefutable evidence – does not support any such claim. At the same time, there is a failure to imagine that two people can have a deep, intense friendship without also being lovers.
George Biddlecombe : Secret letters and a missing memorandum: New light on the personal relationship between Felix Mendelssohn and Jenny Lind. Journal of the Royal Musical Association, 138 (1): 47-83.
The Skygarden Bar at 20 Fenchurch Street (aka the Walkie-Talkie Building), London.
Yanis Varoufakis, Greek Minister for Finance, speaking at a press conference in Berlin on 5 February 2015:
“As finance minister in a government facing from day one emergency circumstances caused by a savage debt deflationary crisis, I feel that the German nation is the one nation in Europe that can understand us better than anyone else.
No-one understands better than the people of this land how a severely depressed economy, combined with a ritual national humiliation and unending hopelessness can hatch the serpent’s egg within its society.
When I return home tonight, I will find myself in a parliament in which the third-largest party is not a neo-Nazi party, it is a Nazi party.”
West Germany received debt relief in 1953, yet now deny it to the rest of Europe. The hypocrisy and economic negligence of the German government of Mrs Merkel reminds me of the British Government’s hypocrisy in the Great Depression: insisting that Australian Federal and State Governments continue to pay all interest and loans owed to British lenders, while at the same time seeking debt relief for British loans from American creditors. Every Australian economist, including no doubt the very impressive former Sydney University academic Dr Varoufakis, knows the name of Sir Otto Niemeyer, bullying representative of colonial rapacity. The unspeakable Mrs Merkel and her condescending ilk will, like Niemeyer, live long in the memory of Greeks.
Niemeyer came first in the 1906 British Civil Service entrance examination in which John Maynard Keynes came second, according to Richard Davenport-Hines’ fine new biography of Keynes.
An article from the Sydney Morning Herald of 1924, about the introduction of buffaloes to Australia in 1857, an adventure involving both a great-great-grandfather and a great-great-great-grandfather of mine. I wonder if the ship mentioned below, the Florence Street, was named after a member of the illustrious Street Family of New South Wales.
To the late Captain Peverley, of Balmain, belongs the credit of having introduced the buffalo to Northern Australia, though he did so indirectly in a measure, when the good barque the Florence Street became a total wreck on the northern coast, not very far from where Wyndham now stands.
Captain Peverley, ship master and ship owner had, when he settled in Balmain, 28 ships of various sizes and capacities; he always boasted that not one was a “coffin ship”, and that he himself would sail on them in any sea, in any weather, and he would add as climax that he would give a first-rate rope’s ending to any of his crew, who dared to complain or say otherwise. He was a true type of the ship’s master of the old windjammer days, days when Sydney Harbour was crowded with sailing craft of all kinds, the days of the middle and late ‘fifties, when the gold fever had reached its crisis after the astonishing yields from Bendigo and Ballarat.
Continue reading ‘Australian Buffaloes’