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07-13-2015, 07:06 PM
After months of contentious talks and a weekend filled with hostile all-night negotiations, Greece's quest to secure a debt bailout deal looks to finally be coming to a close. Eurozone leaders and the Greek government agreed on Monday (http://start.westnet.ca/newstempch.php?article=entry/euro-zone-greece-bailout_55a366a6e4b0ecec71bc6171?) to talks for a conditional 86 billion euro bailout over three years.
If all goes according to plan, the deal prevents a Greek exit from the eurozone, which both creditors and the government in Athens feared could wreak political and economic havoc. But the bailout comes at an extremely high price, as the harsh terms of austerity and privatization of state assets in the agreement are exactly what Greece's left-wing Syriza party was elected to oppose.
Since the deal broke in the early hours of Monday, prominent economists have been weighing in on what the bailout means for Greece and the future of the eurozone. Here's a selection of their initial reactions to the news.
"In relative terms it's a good thing, in absolute terms it's a total mess," Mohamed El-Erian, chief economic adviser at Allianz, told CNBC (http://www.cnbc.com/2015/07/13/mohamed-el-erian-warns-markets-on-messy-greek-deal.html) in reaction to the deal. Examining what he called the "practical effects" of the agreement, El-Erian cautioned that markets should be prepared for a messy implementation of the agreement's proposed reforms.
While El-Erian said that global markets should be relieved Greece and its creditors came to a deal, he also warned that future uncertainty would be the long-term result of what he called "the return of gunboat diplomacy."
University College Dublin economics professor Karl Whelan (https://twitter.com/WhelanKarl) considered the domestic political ramifications of the deal, asking on Twitter what those who voted "no" to the bailout proposal in Greece's referendum will think of agreeing to a similarly austere package.
1. What fraction of the Oxi voters would ultimately have accepted this package knowing it is this or Grexit?
— Karl Whelan (@WhelanKarl) July 13, 2015 (https://twitter.com/WhelanKarl/status/620632544623620096)
Whelan additionally posed questions about the political fallout (https://twitter.com/WhelanKarl/status/620632544623620096) for the Syriza party, which could potentially splinter if hard left factions oppose taking the deal. If political instability results from the agreement, Whelan asks what the outcome of a future election would look like for Greece.
Other economists were critical of the precedent that these negotiations set for relations in the eurozone. Paul De Grauwe, Belgian economist and professor at the London School of Economics, tweeted as the deal was being hashed out on Sunday that the message from eurozone lenders was clear:
Template of future governance of Eurozone being written in Brussels: submit to German rule or leave.
— Paul De Grauwe (@pdegrauwe) July 12, 2015 (https://twitter.com/pdegrauwe/status/620348860481806336)
De Grauwe also spoke out against the tactics of creditors in an interview last week with The WorldPost (http://start.westnet.ca/newstempch.php?article=2015/07/10/paul-de-grauwe-greece_n_7770724.html), where he compared letting Greece run out of funds to torture, and said of the eurozone: "This is a union that will not last."
Jeffrey Sachs, director of the Earth Institute at Columbia University, similarly wrote of how the bailout talks exposed the broken nature of the eurozone. Early Monday, Sachs tweeted his thoughts on the process:
Eurozone was right to avoid suicide but the real tests are: (1) opening the banks; (2) implementing reform measures; and (3) debt relief.
— Jeffrey D. Sachs (@JeffDSachs) July 13, 2015 (https://twitter.com/JeffDSachs/status/620502451800686592)
Eurozone process was broken & nearly brought the entire system down (& killed Greek banks). Less politics, more professionalism needed.
— Jeffrey D. Sachs (@JeffDSachs) July 13, 2015 (https://twitter.com/JeffDSachs/status/620502997290864640)
"Europe’s bizarre decision-making structure has allowed domestic German politics to prevail over all other considerations. And that has meant less interest in an honest resolution of the crisis than in avoiding the appearance of being lenient toward Greece," Sachs wrote in a blog post (http://www.project-syndicate.org/commentary/greek-crisis-economic-governance-failures-by-jeffrey-d-sachs-2015-07#GkbDbm5wypZpy7j5.99) for Project Syndicate on Saturday.
Prominent German economist Hans-Werner Sinn, president of the Ifo Institute for Economic Research, also condemned the deal, albeit on quite different grounds. "While it will cost the rest of Europe a lot of money, all this money won’t be enough to make the Greeks happy,” he wrote in a statement, according to The New York Times (http://www.nytimes.com/live/greek-debt-crisis-live-updates/prominent-german-economist-rejects-greek-deal/?smid=tw-nytimesworld).
Sinn has long been an avowed opponent (http://www.reuters.com/article/2015/01/14/ecb-policy-legal-germany-idUSL6N0UT3HF20150114) of bailing out Greece.
“It makes no sense to want to pour in money to try to solve the country’s problems,” said Sinn.
Outspoken Greek economist and former finance minister Yanis Varoufakis, himself a central figure in the talks, tweeted out a link to a lengthy interview in the New Statesman in which he gave his account of the negotiations.
An account of the past five months of negotiations. http://t.co/Rrh83elEwA
— Yanis Varoufakis (@yanisvaroufakis) July 13, 2015 (https://twitter.com/yanisvaroufakis/status/620568597191073792)
Varoufakis claims in his account that eurozone leaders never honestly intended to negotiate in good faith, but instead held a firm line -- set by the Germans -- that the Greeks must accept the strict program demanded by creditors or leave the euro. Creditors would be evasive on any specifics of negotiating a deal and reject proposals without debating how they could be compromised, Varoufakis told the Statesman.
The former finance minister also appeared as a guest on Australian Broadcasting Corporation's "Late Night Live" radio show, where he called Monday's deal (http://www.abc.net.au/radionational/programs/latenightlive/greek-bailout-deal-a-new-versailles-treaty-yanis-varoufakis/6616532) "the new Treaty of Versailles."
Echoing a popular sentiment on social media (http://www.theguardian.com/business/2015/jul/13/thisisacoup-germany-faces-backlash-over-tough-greece-bailout-demands), Varoufakis said the deal was an attempt at removing Prime Minister Alexis Tsipras from power and likened it to the country's 1967 military coup.
"In the coup d’état the choice of weapon used in order to bring down democracy then was the tanks," said Varoufakis. "Well, this time it was the banks. The banks were used by foreign powers to take over the government. The difference is that this time they’re taking over all public property." -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. (http://start.westnet.ca/newstempch.php?article=terms.html/) It may be used for personal consumption, but may not be distributed on a website.
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If all goes according to plan, the deal prevents a Greek exit from the eurozone, which both creditors and the government in Athens feared could wreak political and economic havoc. But the bailout comes at an extremely high price, as the harsh terms of austerity and privatization of state assets in the agreement are exactly what Greece's left-wing Syriza party was elected to oppose.
Since the deal broke in the early hours of Monday, prominent economists have been weighing in on what the bailout means for Greece and the future of the eurozone. Here's a selection of their initial reactions to the news.
"In relative terms it's a good thing, in absolute terms it's a total mess," Mohamed El-Erian, chief economic adviser at Allianz, told CNBC (http://www.cnbc.com/2015/07/13/mohamed-el-erian-warns-markets-on-messy-greek-deal.html) in reaction to the deal. Examining what he called the "practical effects" of the agreement, El-Erian cautioned that markets should be prepared for a messy implementation of the agreement's proposed reforms.
While El-Erian said that global markets should be relieved Greece and its creditors came to a deal, he also warned that future uncertainty would be the long-term result of what he called "the return of gunboat diplomacy."
University College Dublin economics professor Karl Whelan (https://twitter.com/WhelanKarl) considered the domestic political ramifications of the deal, asking on Twitter what those who voted "no" to the bailout proposal in Greece's referendum will think of agreeing to a similarly austere package.
1. What fraction of the Oxi voters would ultimately have accepted this package knowing it is this or Grexit?
— Karl Whelan (@WhelanKarl) July 13, 2015 (https://twitter.com/WhelanKarl/status/620632544623620096)
Whelan additionally posed questions about the political fallout (https://twitter.com/WhelanKarl/status/620632544623620096) for the Syriza party, which could potentially splinter if hard left factions oppose taking the deal. If political instability results from the agreement, Whelan asks what the outcome of a future election would look like for Greece.
Other economists were critical of the precedent that these negotiations set for relations in the eurozone. Paul De Grauwe, Belgian economist and professor at the London School of Economics, tweeted as the deal was being hashed out on Sunday that the message from eurozone lenders was clear:
Template of future governance of Eurozone being written in Brussels: submit to German rule or leave.
— Paul De Grauwe (@pdegrauwe) July 12, 2015 (https://twitter.com/pdegrauwe/status/620348860481806336)
De Grauwe also spoke out against the tactics of creditors in an interview last week with The WorldPost (http://start.westnet.ca/newstempch.php?article=2015/07/10/paul-de-grauwe-greece_n_7770724.html), where he compared letting Greece run out of funds to torture, and said of the eurozone: "This is a union that will not last."
Jeffrey Sachs, director of the Earth Institute at Columbia University, similarly wrote of how the bailout talks exposed the broken nature of the eurozone. Early Monday, Sachs tweeted his thoughts on the process:
Eurozone was right to avoid suicide but the real tests are: (1) opening the banks; (2) implementing reform measures; and (3) debt relief.
— Jeffrey D. Sachs (@JeffDSachs) July 13, 2015 (https://twitter.com/JeffDSachs/status/620502451800686592)
Eurozone process was broken & nearly brought the entire system down (& killed Greek banks). Less politics, more professionalism needed.
— Jeffrey D. Sachs (@JeffDSachs) July 13, 2015 (https://twitter.com/JeffDSachs/status/620502997290864640)
"Europe’s bizarre decision-making structure has allowed domestic German politics to prevail over all other considerations. And that has meant less interest in an honest resolution of the crisis than in avoiding the appearance of being lenient toward Greece," Sachs wrote in a blog post (http://www.project-syndicate.org/commentary/greek-crisis-economic-governance-failures-by-jeffrey-d-sachs-2015-07#GkbDbm5wypZpy7j5.99) for Project Syndicate on Saturday.
Prominent German economist Hans-Werner Sinn, president of the Ifo Institute for Economic Research, also condemned the deal, albeit on quite different grounds. "While it will cost the rest of Europe a lot of money, all this money won’t be enough to make the Greeks happy,” he wrote in a statement, according to The New York Times (http://www.nytimes.com/live/greek-debt-crisis-live-updates/prominent-german-economist-rejects-greek-deal/?smid=tw-nytimesworld).
Sinn has long been an avowed opponent (http://www.reuters.com/article/2015/01/14/ecb-policy-legal-germany-idUSL6N0UT3HF20150114) of bailing out Greece.
“It makes no sense to want to pour in money to try to solve the country’s problems,” said Sinn.
Outspoken Greek economist and former finance minister Yanis Varoufakis, himself a central figure in the talks, tweeted out a link to a lengthy interview in the New Statesman in which he gave his account of the negotiations.
An account of the past five months of negotiations. http://t.co/Rrh83elEwA
— Yanis Varoufakis (@yanisvaroufakis) July 13, 2015 (https://twitter.com/yanisvaroufakis/status/620568597191073792)
Varoufakis claims in his account that eurozone leaders never honestly intended to negotiate in good faith, but instead held a firm line -- set by the Germans -- that the Greeks must accept the strict program demanded by creditors or leave the euro. Creditors would be evasive on any specifics of negotiating a deal and reject proposals without debating how they could be compromised, Varoufakis told the Statesman.
The former finance minister also appeared as a guest on Australian Broadcasting Corporation's "Late Night Live" radio show, where he called Monday's deal (http://www.abc.net.au/radionational/programs/latenightlive/greek-bailout-deal-a-new-versailles-treaty-yanis-varoufakis/6616532) "the new Treaty of Versailles."
Echoing a popular sentiment on social media (http://www.theguardian.com/business/2015/jul/13/thisisacoup-germany-faces-backlash-over-tough-greece-bailout-demands), Varoufakis said the deal was an attempt at removing Prime Minister Alexis Tsipras from power and likened it to the country's 1967 military coup.
"In the coup d’état the choice of weapon used in order to bring down democracy then was the tanks," said Varoufakis. "Well, this time it was the banks. The banks were used by foreign powers to take over the government. The difference is that this time they’re taking over all public property." -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. (http://start.westnet.ca/newstempch.php?article=terms.html/) It may be used for personal consumption, but may not be distributed on a website.
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