I recently tweeted: \u00a0“Receivership is better than Grexit for Greece, hence Tsipras; but worse for Europe, hence Schauble.” \u00a0That’s the headline. \u00a0Here is the explication.<\/p>\n
On Greece, I have been trying to understand how rational people (on both sides) wound up with such an unworkable solution. \u00a0It seems to me that in the end Tsipras made a calculation that Grexit was the worst outcome, or at least an outcome over which he was unprepared\/unwilling to preside, given the debt overhang. \u00a0Schauble made the opposite calculation that receivership was the worst outcome, or at least an outcome over which he was unprepared\/unwilling to preside, given the debt overhang. \u00a0So Schauble made the alternative to Grexit as unattractive as possible, hoping that Tsipras would turn it down, but Tsipras took it anyway because he felt he had no other choice.<\/p>\n
The result is that no one is happy with the outcome. \u00a0Certainly not Greece, but also not Brussels. \u00a0Greece does not want Brussels to be running their country, and neither does Brussels, but that is what the solution entails.<\/p>\n
I leave aside the question of where the debt overhang came from, since it is now a fact on the ground. \u00a0But I agree with those who say that the original lenders (private banks in France and Germany mostly) got bailed out by Europe, which now seems to want Greece to pay the bill. \u00a0It makes no economic sense. \u00a0Debts that cannot be repaid will not be repaid, and markets will only begin to work again when this economic reality is embraced.<\/p>\n
In all this I am inspired somewhat by the experience of my hometown New York, which had its own financial crisis in 1975. \u00a0Initially the federal government refused to help. \u00a0The local paper had a famous headline “Ford to City: \u00a0Drop Dead”. \u00a0Here<\/a> is a good account of what happened after that. \u00a0I urge everyone to click on the link and read it.<\/p>\n The New York experience suggests to me the importance of finding, or creating, some institutional structure in between Greece and Brussels that can serve as a credible receiver, credible to both Greece and Brussels<\/strong>. \u00a0In the case of New York, that receiver was the Emergency Financial Control Board, created by New York State (not the Federal government). \u00a0 This is the key. \u00a0What analogue could be created for Greece and Europe?<\/p>\n","protected":false},"excerpt":{"rendered":" I recently tweeted: \u00a0“Receivership is better than Grexit for Greece, hence Tsipras; but worse for Europe, hence Schauble.” \u00a0That’s the headline. \u00a0Here is the explication. On Greece, I have been trying to understand how rational people (on both sides) wound up with such an unworkable solution. \u00a0It seems to me that in the end Tsipras […]<\/p>\n","protected":false},"author":15789,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[23],"_links":{"self":[{"href":"https:\/\/sites.bu.edu\/perry\/wp-json\/wp\/v2\/posts\/94"}],"collection":[{"href":"https:\/\/sites.bu.edu\/perry\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sites.bu.edu\/perry\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sites.bu.edu\/perry\/wp-json\/wp\/v2\/users\/15789"}],"replies":[{"embeddable":true,"href":"https:\/\/sites.bu.edu\/perry\/wp-json\/wp\/v2\/comments?post=94"}],"version-history":[{"count":1,"href":"https:\/\/sites.bu.edu\/perry\/wp-json\/wp\/v2\/posts\/94\/revisions"}],"predecessor-version":[{"id":95,"href":"https:\/\/sites.bu.edu\/perry\/wp-json\/wp\/v2\/posts\/94\/revisions\/95"}],"wp:attachment":[{"href":"https:\/\/sites.bu.edu\/perry\/wp-json\/wp\/v2\/media?parent=94"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sites.bu.edu\/perry\/wp-json\/wp\/v2\/categories?post=94"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sites.bu.edu\/perry\/wp-json\/wp\/v2\/tags?post=94"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}