Monday, October 31, 2011

A Prime Minister challenges a Chancellor: Could this be the end of the EU?

An epic struggle for the future of the EU was started this morning when a Greek politician threw down the gauntlet, challenging both those within his country who opposed his leadership as prime minister, and the latest 'solution' of the EU financial crisis engineered by Chancellor Merkel of Germany.
Heel, GeorgieBoy ...

It started with a proposal to go down a road that most senior European politicians seem to fear: a suggestion that the citizens of the country be consulted.

The Greek Prime Minister is putting the new Eurozone deal in the hands of the upset Greeks:
Papandreou appeared to take many lawmakers by surprise with the announcement. He gave no date or other details on the proposed referendum, which would be the first in Greece since 1974, when the monarchy was abolished by a landslide vote held months after the collapse of a military dictatorship.

"This will be the referendum: The citizen will be called upon to say a big 'yes' or a big 'no' to the new loan arrangement," Papandreou told Socialist members of parliament.

"This is a supreme act of democracy and of patriotism for the people to make their own decision ... We have a duty to promote the role and the responsibility of the citizen."
This comes on the heels of the latest opinion polls, which show that Panandreou, the 182nd prime minister of Greece since October 2009, now is viewed unfavourably by most Greeks. 

Having recently lost MPs, reducing his majority to a slim 153 in a parliament of 300, Papandreou faces opinion polls which show that about 60% of the Greeks don't favour the latest Merkel 'tough love' deal for them.

Who is this man who might destroy the Eurozone and perhaps Greece?

The third person from his family to be prime minister of Greece, he was born in the USA, educated in north America, including stints at schools in Toronto, Canada, and at universities in Sweden, USA and the UK. Fluent in Swedish, French and English, he is an adept politician, who has fought fiercely to uphold human rights.
The 182nd Prime Minister takes office in 2009

He reformed his political party by introducing a primary system of electing the leader in order to modernize it. 

When he became prime minister in 2009, he inherited a country with a broken economy, a broken financial system, a government that was the main employer in the nation, a civil service that was over staffed, overpaid, and under employed, a tax system that was a total failure in levying and collecting taxes, a people used to handouts from Big Daddy Government, and little hope for any positive changes in the next decade.

He started implementing austerity measures, bringing people into the streets to protest the end of the Greek dream.
What is at stake?

Two things are at stake.

The top-down decisions of European politicians is being challenged. 

The EU is bankrolled by the treasure of Germany, France and Italy, who have the muscle to sway the 17-member Eurozone to their wishes. 

The decision to force further austerity programs upon Greece, while forcing the banks holding Greek government debt to 'voluntarily' forgive 50%, is now to be put to the Greek people to decide.

Secondly,  and more importantly, the current economic ideology – supported by most politicians in Europe, Britain, Canada and the US – is being challenged.

It is likely that the Greeks will vote against the latest package, because they see no hope for themselves in it.

Is there an alternative?

There is, but it means the reigning economists (those nice folks who gave us the 2008 financial meltdown) and the ruling politicians (those nice folks who gave us the 2008 meltdown) will have to re-examine the fundamental foundations of their thinking.
Stiglitz - the Man with the Answers

Right now, there are voices raised in protest against the foolishly applied deep-cut austerity measures being adopted in a March of Folly worthy of the best in our short history.

These voices are being heard in the streets, as protestors occupy Wall Street and other cities, and in a conference room in Toronto.

The alternatives:

The best proponent for the alternatives is Nobel laureate Joseph Stiglitz:

Austerity programs adopted by the United States and Europe are “effectively a suicide pact for our economies,” said Nobel laureate Joseph Stiglitz.

Cuts to government spending only lead to more job losses, resulting in further slowing of demand, Mr. Stiglitz told business leaders in Toronto.

“It’s a vicious circle,” he said.

A fierce critic of many of the strategies adopted by the United States to dig its way out of the financial crisis that began in 2008, Mr. Stiglitz said some of the U.S. Federal Reserve programs amount to subsidies for the banks and part of the reason why 1% of the population is taking in 40% of the nation’s income...

Instead of pumping liquidity into the financial system as the U.S. and has been doing, it should be investing in building schools, airports and other infrastructure where it can create jobs in the short term and improve the country’s competitiveness in the long term, he said.

He said so-called quantitative easing results only in capital moving to developing economies and other places where returns are highest.
 Tough words from one of the sharpest minds in the world.

The Cat supports the Stiglitz Solution, and awaits the decision of the Greeks bearing referendum results with great interest.
Perhaps this is the beginning of the World Spring ....


  1. Did you read this?

    If Greece defaults, and I am certain it will, we will see some very interesting times in Europe. I don't buy the whole WW III scenario but there will be wars, Merkel is not wrong about that.

  2. Thanks, Rat. Merkel is right that the EU has helped soothe over national disputes. But another WW3 is beyond belief right now.

    However, if the Greeks vote No, we can expect some serious renegotiations taking place, lots of market instability, and hopefully some serious reconsideration about the depth and pace of these reckless austerity programs.

    Pity Harper has a majority - he proved once he hasn't really got a clue about much that goes on on the world stage, so I'm afraid he'll keep cutting and cutting here at home, having wasted billions of the stimulus program he branded the Action Plan on gazebos and trinkets. If he had spoken to Stiglitz instead of Lutz, perhaps we would have some solid infrastructure projects roaring along right now, pumping out jobs and building for our future.

    Instead, the Coalition Accord was ended, and Harper was given the chance to stay in power and work for his majority.

    Pass the popcorn, and hide your pensions from this modern breed of economists!

  3. What happens after the schools and airports and community centres are built? We've been borrowing money for 40 years now, we've stimulated the economy for 40 friggin years and, all we've managed to do is pay interest and rack up more debt, and your answer is to borrow more and build more? At the end of Dalton McGuinty's term more money will be paid every year simply servicing our yearly debt then will be spent on post secondary education, how is that progress?
    This federal gang is no better. Maybe I'm a simple minded moron, but, how does racking up a debt you can never repay help? How does borrowing more money and paying more interest save anyones pension? Havent we already tried that? Just wondering.


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