Entering the Danger Zone Again

EXTRACT: In Greece, to the surprise of many, the government and its private creditors have not yet done a deal on debt repayment. European finance ministers are putting Greece’s private creditors under intense pressure to accept a lower interest rate than the 4% previously offered - take an even bigger write-down (‘haircut’) on their loans to Athens. Therefore they have rejected, or effectively vetoed, all the offers/arrangements that so far have been put on the table by the respective parties. Various ministers have strongly reiterated that it is absolutely essential for the Greek government and its private creditors to come to a final agreement in order for the European Union, European Central Bank and International Monetary Fund troika to release the next tranche of €130 billion bailout money for Greece - without which Athens will not be able to make €14.5 billion of loan repayments due in March.

Troika officials have called on both parties to reach a deal by the end of the week, which in reality is a demand that Greece’s creditors swallow the bitter pill and accept the fact that they are going to make a substantial loss. The ongoing impasse in Athens raises the dreaded fear of a messy or disorderly default by the Greek government, which in turn could see it crashing out of the euro and unleashing economic chaos across the entire continent - if not the entire world. At the very least, the disagreements on display at Athens could overshadow - even disrupt - the January 30 summit of EU leaders.

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Fishy Business

Europe's Mutual Suicide Pact

EXTRACT: The standard complaint from rightwing economists and politicians is that some countries and parties are not sufficiently committed to pushing though ‘reforms’ - by which they mean attacking workers’ rights/conditions and in general rolling back (or ideally dismantling altogether) the gains of the 1950-60s.

Hence the constant attacks on “labour rigidities” and so on. The ruling class wants to make a bonfire of workers’ rights in Europe, with Greece and Italy paving the way. Naturally, there is no alternative course of action if we want to cut deficits and produce healthy, growing, economies - shorn of all waste and inefficiencies. Tough decisions have to be made.

But this has revealed itself to be an unpleasant fantasy. The economics of masochists. Recession is looming over Europe and not even Germany is immune.

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