There is probably not much voter support for returning to the drachma.

The voters would probably rather have the Germans run their finances than their own leaders.

They’ve seen past drachma financial dramas, with interest rates spiking for everyone, not just the govt, rampant inflation, and a collapsing currency as well as high unemployment.

With the euro none of that happened, so it’s not obvious the currency is the problem.

What does seem obvious to them is that their leaders are the problem.

So I expect the austerity measures to pass, as the alternative is 0 deficit spending.

And if discounts are ‘granted’ the politics quickly move towards same for the rest of the euro member nations.

18 Responses

  1. “interest rates spiking for everyone, not just the govt, rampant inflation, and a collapsing currency as well as high unemployment.”

    What was the cause of all that, when they were monetarily sovereign?

      1. @WARREN MOSLER, I thought if you hiked rates, the interest income channel helps spending and employment? huh? I know if Mike Norman was making more on his fixed income portfolio he could buy the premium dog food for his puppy.

      2. @WARREN MOSLER,

        I’m sorry, Warren, but that answer does not enlighten me.

        CB hikes rates, and then … ? what bad consequences of the rate hike cause (simultaneously) rampant inflation, high unemployment, and a collapsing currency?

      3. i did’t say the rates caused that. i said people remember that combination/outcome of govt running its own currency

        people don’t like double digit inflation, interest rates, currency depreciation, and rising unemployment which is what they saw with the drachma during a crisis

  2. There is no “Greek voters” there are “Greeks I”, “Greeks II” and “Greeks III” (and some Slavs still living in Greek Macedonia). Please remember that there was a civil war in Greece not so long time ago and that the commies and lefties (obviously divided as everything in that country) have about 40% support.

    The austerity circus will continue but the country is so deeply divided that any meaningful and orderly change (even in the form of internal deflation) is impossible.

    Nobody has said anything about slashing the military budget. The Orthodox Church is like the brahmin caste in ancient India – will they pay? The rich think and behave like the extreme American libertarians so they don’t see any reason why they should pay taxes but the difference is that they are far better skilled than the 1% (or 0.1%) from the US in the art of tax avoidance.

    This leaves the “middle-class” and the poor to be squeezed even harder when Government spending is slashed. Will it work in closing the budget gap?

    I believe that the apparatus of coercion will not work if directed by the Germans or rather by the faceless European bureaucracy. Coercion there was tried by the Turks for several hundred years. The Germans also tried this. Did it work?

    Also – there are serious voices advocating boycott of German goods. This is exactly what Mrs Merkel needs the most.

    The next step in this escalation of absurdity (if the Germans / Eurocrats start seizing the assets of the Greeks) might me to feed German tourists with rat poison. Unless a Green Zone is declared this is entirely possible. If one pushes the people over the edge everything is possible. The Merkozy team is trying very hard…

    I expect more mess to come and in the end a kind of military rule either like in Egypt (by proxies) or a kind of direct dictatorship as in the 1960s. Unless the Eurocrats do a 180 degree turn what is extremely unlikely.

    I have never visited Greece but I grew up in Europe. This is not the continent where people can be treated as sheep. Sooner or later blind violence will prevail.

    1. @Adam (ak), on the positive side, we’ll be able to watch it on tv. The Greeks should sell the rights on their riots footage for the next 3 years, with an option to 2 more years, to pay down their debt, maybe to the Deutsche Welle

    2. @Adam (ak),

      “escalation of absurdity” – that’s an astute way to phrase the situation; don’t know of many historical precedents where such situations end intelligently;
      most similar examples end up looking like schoolyard fights between opposing dimwit bullies (all downhill)

  3. A Greek described me the political situation in Greece like this:
    I think you will find interesting the latest poll in banania , it shows how things can change the political environment in previously free countries where colonial government is installed .

    Conservative party responsible for the sell out of the country gets 31%
    Democratic Left – something like masked free market butt kissers using wrong title get 18%
    Stalinist party gets 12,5 %
    Whiny wannabe communists get 12%
    Softcore nazis get 5%
    Treehaggers 3,5%
    Hardcore nazis 3%
    Little idiot George party gets 8%
    I am not voting for those a-holes is at 30%

    91% is against coalition governments
    48% dont like the new “technocrat” PM while 46% still likes him
    71% doesn’t trust new “technocrat”” PM to run the economics 27% still trusts him
    91% believe that matters in our country are going the wrong way (no shit Sherlock !)
    79% states disappoint with the way democracy is working in banania
    79% is against the bail out while 12% are for
    70% believes that things will be worst if we go back to drachma while 15% believes that things will be better
    54% has negative view for the EU while 41% positive ( reverse from 44%-51% a month earlier)
    61% still thinks joining Eurozone was a good idea while 35% believes it was stupid

  4. Let me ask again, since I’ve run out of “reply” links:

    “interest rates spiking for everyone, not just the govt, rampant inflation, and a collapsing currency as well as high unemployment.”

    What was the cause of all that, when they were monetarily sovereign?

    So far, people have answered:

    “Bad currency management” — [ How, specifically? Too much growth? Too little? ]


    “CB hiking rates, etc.” — [ but now you say that was not the cause, just one of the things people remember that they didn’t like.]

    What was the cause?

    1. finally understand your question!
      I don’t know specifically, but usually a policy response like hiking rates is a response to something like what they saw as an inflation spike maybe from higher oil prices, or currency depreciation from any number of things, including what’s fundamentally the other guy’s currency going up if you don’t have domestic inflation, etc.

      1. @WARREN MOSLER,

        I’m not so sure you do understand my question.

        We’re referring to an historical event, right? A Greek currency crisis involving simultaneous high inflation, high unemployment, high interest rates, and a collapsing currency.

        I don’t know when that happened, was it after the 1973 oil embargo?

        Whenever it was, you and PG say these 4 bad things were caused by bad currency management. What did they do? What should they have done instead?

        It’s interesting because many people say we have bad currency management in the US today, and I’m wondering if we might see the same effects, or maybe we’re mismanaging in the opposite direction, and the effects will be different.

        Thanks for your patience.

      2. looks like Greece had double digit interest rates throughout the 1980’s and 1990’s, peaking at maybe 20% during that period.

        Must have been trying to use high rates to ‘fight inflation’ but not something I followed closely

  5. Doing some google searches myself.


    “Between 1961 and 1972 Greek annual inflation averaged less than 2 1/2%. Sharp oil price increases in 1973 drove Greek as well as global inflation rates up. The election of the Papandreou Government in 1980 resulted in an unsustainable rise in wages and large budget deficits which were funded in an inflationary manner resulted in extraordinarily high inflation.”


    “Some of the factors contributing to the vast improvement in inflation include austerity measures which have reduced wage growth, a determination to keep the exchange rate stable against major European currencies, the sale of inefficient state run enterprises and a willingness amongst policy makers to avoid inflationary policy measures. An annual inflation rate around 5 1/2% by the end of 1997 is a possibility.”

    “deficits of over 15% at the late 1980s and early 1990”

    I also found one unemployment chart that showed it rising from 1973 to 1990, when the chart ended.

    In Wikipedia they say government revenues (1999-2010) are 45% or so of GDP, on a very slight downward trend, and tax evasion is high, and hit 49% in 2005. I’m not sure if this is the right way to interpret that, but it would seem to mean that if everyone had paid their taxes, revenues would have been about 90% of GDP?

    And if the deficit were 15%, then spending was 60% of GDP? The 15% deficit is from a different time frame than the 45%, but things can only have been more so in 1990 than in 1999, after much improvement.

    These numbers seem astonishing, even for Europe. When government is that much of the economy, how much of economic theory is still valid? The Law of Supply, for instance, says that an increase in the market price causes producers to increase output. But, if the only producer is government, their output is controlled by some committee which probably is not or is not able to be sensitive to price. What then? Prices can only continue upward as the shortages intensify.

    Excusing the MMT-illiteracy in those first quotes, it would appear that Greece’s poor experience with monetary sovereignty occurred only during the time that a Socialist-oriented government tried to run a Soviet-style planned economy. Before that experiment, they had great success, and by the time they joined the Euro they had almost fully recovered. Even with the Euro, they did OK until the GFC, which hit them harder than most. If people are blaming their poor results in the 1980’s on monetary soveriegnty rather than on political philosophy, they are missing the point.

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