Λαπαβίτσας Συνέντευξη
Εξαιρετική συνέντευξη του Κώστα Λαπαβίτσα για το Μεσοπρόθεσμο, το Ευρώ και την πραγματική ανάπτυξη (Αξία: http://bit.ly/rjXepz)
Costas Lapavitsas
Interview with Natasha Karatzavelou, Axia Newspaper
25/06/2011
What is your opinion regarding recent economic and political developments in Greece and the economic policies of the Papandreou government?
The defining issue of the past weeks has been political, it has been the demonstrations and the protests at Syntagma square. The Papandreou government has lost all of its credibility and a large part of its legitimacy. Many Greeks have overcome their fear as to what may happen if the country changes economic course. The government lost this weapon and will never regain it, reshuffle or no reshuffle. From now on, economic policy will take into account what the people in the squares ask for. As for the new minister of finance, Mr Venizelos, he ll quickly realize that the eloquence he based his carreer on has no resonance with the EU and possibly no longer in Greece either. Since his training and previous carreer is not one preparing him to deal with the debt problem, his tenure at the ministry of finance could well be an adventurous one.
The basic reason for the reshuffle is of course the abysmal failure of greek government policy under the auspices of the troika. The shipwreck was already obvious since the end of last year and now it has become impossible to deny. Greek GDP is shrinking by at least 3,5% this year, investment crumbles, taking production down with it, unemployment is over 15% and 40% for the young, consumption is down, retail suffers. The brief rise in exports seems to be drawing to its end, since it is not possible to be competitive enough inside the euro. At the same time, debt rises while central government deficit hovers around 10%. The EU-IMF plan has failed. Once again, the Stiglitz view that IMF is teeming with second-class degrees from first-class universities was proven right.
What does the vote of the medium term austerity plan mean? How destructive could it prove for Greece?
The medium term plan is absurd. It begins by admitting that current policy has failed and the Greek situation will be impossible to handle by 2015. It says that if we continue like this, debt will rise to 500bn euro, servicing the debt will cost 28 bn a year, the deficit will be 15% of GDP etc. So what s the plan? Austerity, shrinking demand, new taxes, large scale sale of public property. The plan failed, so let’s have more of the same. To achieve what? The medium term plan itself says that in the best case scenario, by 2015 debt will be around 350bn, servicing it will cost 22 bn per year and the deficit will be 8%. The Greek people will go through four years of hell just to get back to where we started out from. Needless to say that even the slightest deviation from the hypothesis of the plan, which is quite possible, will make the end result worse.
To put it differently, current policy means that by 2015, Greece will be bankrupt. The medium term plan means that by 2015 Greece will also be bankrupt. Why go through this if the result is the same, only after four years of austerity and with a weakened economy?
What are the interests in France and Germany, prompting these countries to opt for more loans to a country they know will not pay off its debts?
There was a big quarrel last week between Mrs Merkel and Mr Trichet, about whether to transfer part of the risk to the private lenders. Mr Trichet won. Once again, the interests of the banks and the large bondholders were placed higher that the interests of the population and the economy in general. So the EU chooses to give further loans to Greece, imposing the medium term austerity plan in return, with full knowledge of the country’s inability to pay. What does this mean? That when default finally comes, may be in 2015, the Greek debt will be held by public lenders. European taxpayers and working people will shoulder the costs of the write-down, while the banks will have been let off the hook. And of course, public lenders will have very harsh demands on Greece. This is an absolutely cynical way to handle the Greek problems, laying bare the interests at the core of the EMU.
Do you agree with Nouriel Roubini that the two options left to Greece are default and exit from the eurozone? What would this mean for Greece and the Greek people?
It is not, of course, just Mr Roubini proposing exit from the eurozone. Plenty of economists do. I myself claim, already since January 2010, that this is the preferred way forward. It is obvious by now that this is the way things go. In fact it is not a choice, it is simply the most probable outcome, whose implications will be manifold and complex. The minimum immediate requirement will be public ownership of the banks, capital controls, administrative measures regarding imports and exports, so as to meet demand for oil, food and medicine. The greek central bank will have to be promptly reconstructed so as to support the banks and implement monetary policy.
Secondly, we will need to redistribute wealth and income, radically rebuilt the tax collection system and progressively implement an industrial policy so as to restart growth and employment. A very difficult period awaits us, but at least there is a prospect of recovery and social change benefiting working people. Judging by similar past cases as well as by the recent performance of the Greek industry, there is a chance of the economy recovering relatively quickly and entering a path of growth. But we will need a steady hand at the helm and active participation by the people.
I would also like to point out that we need to properly analyse payment moratorium and exit from the eurozone even now, at the last moment. The country has wasted precious time since the end of 2009 refusing to even contemplate such a scenario. In the prevailing national blindness, some thought that exorcisms, or railing against speculators and conspiracies would be enough to avert the worse. Let s hope that at least now there will be the necessary preparations, because push has come to shove.
Do you consider the euro a successful project? What is the cost of the consecutive rescue packages of weaker eurozone countries for the instigators of the euro project, Germany in particular, who in the past benefited greatly from the common currency? Could Germany be the one leaving the euro rather than any of the weaker countries?
The EMU is not just a common currency, it is a mechanism for the creation of a global currency as a potential competitor to the dollar. There is no doubt that it has failed in its present form and it will either collapse or profoundly change. There are contradictions between the common monetary policy and the fragmented fiscal policies inside the EMU. There are contradictions between the common money market and the country-based banks. Those contradictions have brought the euro to a dead end, one that is all the more obvious in the periphery. The core countries have second thoughts about their past decision to accept the periphery into the euro, but there is no easy way to rid themselves of these countries now. As for a potential German exit, it is not in the cards because Germany is the euro heavyweight and benefits more than anyone. If a general collapse occurs, then Germany will most probably try to create a tighter euro. But in this case, political, economic and social developments will be so dramatic
Interview with Natasha Karatzavelou, Axia Newspaper
25/06/2011
What is your opinion regarding recent economic and political developments in Greece and the economic policies of the Papandreou government?
The defining issue of the past weeks has been political, it has been the demonstrations and the protests at Syntagma square. The Papandreou government has lost all of its credibility and a large part of its legitimacy. Many Greeks have overcome their fear as to what may happen if the country changes economic course. The government lost this weapon and will never regain it, reshuffle or no reshuffle. From now on, economic policy will take into account what the people in the squares ask for. As for the new minister of finance, Mr Venizelos, he ll quickly realize that the eloquence he based his carreer on has no resonance with the EU and possibly no longer in Greece either. Since his training and previous carreer is not one preparing him to deal with the debt problem, his tenure at the ministry of finance could well be an adventurous one.
The basic reason for the reshuffle is of course the abysmal failure of greek government policy under the auspices of the troika. The shipwreck was already obvious since the end of last year and now it has become impossible to deny. Greek GDP is shrinking by at least 3,5% this year, investment crumbles, taking production down with it, unemployment is over 15% and 40% for the young, consumption is down, retail suffers. The brief rise in exports seems to be drawing to its end, since it is not possible to be competitive enough inside the euro. At the same time, debt rises while central government deficit hovers around 10%. The EU-IMF plan has failed. Once again, the Stiglitz view that IMF is teeming with second-class degrees from first-class universities was proven right.
What does the vote of the medium term austerity plan mean? How destructive could it prove for Greece?
The medium term plan is absurd. It begins by admitting that current policy has failed and the Greek situation will be impossible to handle by 2015. It says that if we continue like this, debt will rise to 500bn euro, servicing the debt will cost 28 bn a year, the deficit will be 15% of GDP etc. So what s the plan? Austerity, shrinking demand, new taxes, large scale sale of public property. The plan failed, so let’s have more of the same. To achieve what? The medium term plan itself says that in the best case scenario, by 2015 debt will be around 350bn, servicing it will cost 22 bn per year and the deficit will be 8%. The Greek people will go through four years of hell just to get back to where we started out from. Needless to say that even the slightest deviation from the hypothesis of the plan, which is quite possible, will make the end result worse.
To put it differently, current policy means that by 2015, Greece will be bankrupt. The medium term plan means that by 2015 Greece will also be bankrupt. Why go through this if the result is the same, only after four years of austerity and with a weakened economy?
What are the interests in France and Germany, prompting these countries to opt for more loans to a country they know will not pay off its debts?
There was a big quarrel last week between Mrs Merkel and Mr Trichet, about whether to transfer part of the risk to the private lenders. Mr Trichet won. Once again, the interests of the banks and the large bondholders were placed higher that the interests of the population and the economy in general. So the EU chooses to give further loans to Greece, imposing the medium term austerity plan in return, with full knowledge of the country’s inability to pay. What does this mean? That when default finally comes, may be in 2015, the Greek debt will be held by public lenders. European taxpayers and working people will shoulder the costs of the write-down, while the banks will have been let off the hook. And of course, public lenders will have very harsh demands on Greece. This is an absolutely cynical way to handle the Greek problems, laying bare the interests at the core of the EMU.
Do you agree with Nouriel Roubini that the two options left to Greece are default and exit from the eurozone? What would this mean for Greece and the Greek people?
It is not, of course, just Mr Roubini proposing exit from the eurozone. Plenty of economists do. I myself claim, already since January 2010, that this is the preferred way forward. It is obvious by now that this is the way things go. In fact it is not a choice, it is simply the most probable outcome, whose implications will be manifold and complex. The minimum immediate requirement will be public ownership of the banks, capital controls, administrative measures regarding imports and exports, so as to meet demand for oil, food and medicine. The greek central bank will have to be promptly reconstructed so as to support the banks and implement monetary policy.
Secondly, we will need to redistribute wealth and income, radically rebuilt the tax collection system and progressively implement an industrial policy so as to restart growth and employment. A very difficult period awaits us, but at least there is a prospect of recovery and social change benefiting working people. Judging by similar past cases as well as by the recent performance of the Greek industry, there is a chance of the economy recovering relatively quickly and entering a path of growth. But we will need a steady hand at the helm and active participation by the people.
I would also like to point out that we need to properly analyse payment moratorium and exit from the eurozone even now, at the last moment. The country has wasted precious time since the end of 2009 refusing to even contemplate such a scenario. In the prevailing national blindness, some thought that exorcisms, or railing against speculators and conspiracies would be enough to avert the worse. Let s hope that at least now there will be the necessary preparations, because push has come to shove.
Do you consider the euro a successful project? What is the cost of the consecutive rescue packages of weaker eurozone countries for the instigators of the euro project, Germany in particular, who in the past benefited greatly from the common currency? Could Germany be the one leaving the euro rather than any of the weaker countries?
The EMU is not just a common currency, it is a mechanism for the creation of a global currency as a potential competitor to the dollar. There is no doubt that it has failed in its present form and it will either collapse or profoundly change. There are contradictions between the common monetary policy and the fragmented fiscal policies inside the EMU. There are contradictions between the common money market and the country-based banks. Those contradictions have brought the euro to a dead end, one that is all the more obvious in the periphery. The core countries have second thoughts about their past decision to accept the periphery into the euro, but there is no easy way to rid themselves of these countries now. As for a potential German exit, it is not in the cards because Germany is the euro heavyweight and benefits more than anyone. If a general collapse occurs, then Germany will most probably try to create a tighter euro. But in this case, political, economic and social developments will be so dramatic