Making amends: Restoring the voice of an Irish activist (which I had, unwittingly, played a part in suppressing)

In my previous post, I mentioned a debate between Daniel Gross, a German based colleague and myself. (You can hear it here – beginning on the  38th minute). Well, in saying that, I was as guilty as the BBC anchor of silencing a fourth voice on that program. That of Kate Bopp, an Irish activist, independent parliamentary candidate, mother of five, blogger and, generally, the type of person whose voice deserves a mass audience.

The first injustice was perpetrated during the program (as you can hear) by virtue of the way in which the three male economists (myself included) oligopolised the proceedings, with Kate getting no more than a few seconds to contribute. I was, personally, fully responsible for the second injustice, courtesy of neglecting to mention Kate’s participation in my last post.

To make partial amends, I copy and paste below Kate’s recent thoughtful views on the Greek crisis. (You can read them straight out of her blog by pressing here.) Kate Bopp, apologies. Boys will be boys. The only saving grace is that some of us can feel guilty afterwards.

This is not economics, this is war…

by Kate Bopp, 19th June 2011

Neither Greek nor Irish debt crises will be resolved by tossing funds into a bottomless well, a practice which ensures that the long term effect will be more drastic and devastating. Until better governance mechanisms are put in place regarding struggling economies, there will be no way for us to claw our way out of a pit created by decades of fiscal mismanagement. Economic folly combined with fast and loose credit conditions have rendered us prostrate with the only apparent option an even more menacing cure – a bailout, the repayment terms of which ensure complete evisceration of our economies. The events that follow are difficult to contemplate. Difficult but not impossible, and only difficult because they present a sinister picture of our immediate future and continuing on to taint that of our children. Chancellor Angela Merkel said that Germany’s ability to bounce back from recession was largely dependent on what events were unfolding in the remainder of the eurozone. The future of all states must be factored into any plans and not just a tendency to react to emergency situations. However, it is debatable what that future represents to some. Perhaps the future is a vista portraying a couple of powerful, healthy economies who have dominance over the other states, and in particular countries such as Greece and Ireland, positioned on the geographic periphery of the eurozone. While very real economic interdependencies exist, financial burdens need to be spread. It is inequitable to socialise investment losses and at the same time keep profits private. Taxpayers should never be penalized. There has to be political awareness and acceptance for the various rescue measures being proposed. Merkel and Sarkozy have discussed a debt rollover modeled on the “Vienna Initiative” of 2009 which would boost credit for central European economies in exchange for agreement to roll over existing debt holdings as they mature. This proposal is championed by the ECB, France and Germany (of course) who all claim that it will go a long way towards resolving issues of debt deficit funding, thus minimising risk of investor boycott. Standards & Poors say that “Greek debt will trigger rating cuts into default territory” subsequently causing problems for banks holding Greek debt who are no longer capable of using bonds as collateral to obtain fixed rate funding from the ECB and in particular domestic banks with no other cash source. Greece, however cannot force those who do not want to exchange their bonds to accept new terms and the majority of Greek debt is governed by domestic law which means it is therefore not subject to the “collective action clause” needed for a set majority of bondholders to impose changes on the minority. While Ireland’s elected representatives continue to contradict each other regarding the most effective direction to take to resolve our financial woes, the citizens (at least those who are not apathy laden) are not so much demonstrating, but more so slightly raising voices angrily, with regard to the bailout terms that have been imposed on us. European Council President Von Rompoy called for governments blocking Ireland’s attempt to achieve interest rate reduction from the 5.8%, to “reach a deal”. France is holding us over a barrel regarding our corporate tax rate of 12.5%, demanding that we raise it to a figure that harmonises with that of other member states. Our finance minister Michael Noonan says that we will hold fast on our *golden egg* corporate tax rate (as it may be the only egg left in our basket). Noonan also recently alluded to the possibility of unsecured bondholders possibly having to take on some of the burden. Many Irish citizens wonder why the suggestion that bondholders shoulder that responsibility (which is a predictable and possible consequence of risk) is one that ignites so many fires of indignance. Economists in some quarters together with some debt market analysists see this as one of the ways in which countries like Greece and Ireland could actually relieve debt levels. Bondholders should accept a reduction in the face value of their holdings and perhaps extend the period of return on investment. Combine this with a reduced interest rate and we may be on to something. The practice of extending more credit to an economy already drowning in debt accompanied by unsustainable interest rates is akin to taking all the means of recovery from a struggling business and then coming back to the company to invite the employees to sell their organs to generate revenue.

12 Comments

  • Thank you Yanis. A very correct decision; she has a good mind and her thoughts echo everyone of us that have come to the same conclusion.

  • I guess some people need to learn how to share correctly .
    Europe is being destroyed by the banks & their immoral strategy .
    So far , I have noticed that the current economic system is based on grabbing , taking & possessing .
    There is no use fighting tyrants & terrorists all over the globe , while at the same time we breed them in our countries .
    Now it is the time for the honest scientists & brave people to create a new mechanism for an economic system that will not permit the creation of very poor or even poor neighborhoods that will serve the rich & very rich ones .
    There is no justification for the greek politicians that brought Greece to its knees . The corruption was well known but nothing was done to prevent its escalation or its existence . Many european partners took advantage of that .
    All those calculations & percentages are undermining the values of life , which should be put on top of every matter & discussion .
    As Yanis wrote “boys will be boys” & right now some boys should stop playing stupid games that damage many families who earned their living with hard work & lots of sacrifices .
    Kate Bopp’s article is facing the reality & points out where we should focus .
    Thank you.

  • Bondholders refuse to accept a haircut so the default alternative for the IMF is the people of Greece (and Ireland) to accept economic suicide.

    In 1984, the government of the people of Mexico chose suicide; the parlous state of the economy since then speaks for itself. The people of Europe yawned and created narratives about excess brought on by the native’s lack of prudence

    In 2001, the government of the people of Argentina refused suicide; the improved state of the economy since then speaks for itself. The people of Europe yawned once more

    In 2010, the governments of the peoples of Greece, Portugal, Spain and the UK propose suicide and some of the people have a vague memory of something like this happening elsewhere , in far away places with strange sounding names, places that lacked, prima facie, the habits of prudence which underpins the guiding narrative of the North.

    The economists of the IMF (or World Bank for that matter) who design and justify economic suicide come from all these places; none so far has raised any objections, even as a matter of professional integrity or given any evidence of historical memory on the relevance of predictive models that have never done so.

    The question is this: What is alternative to which suicide is a better choice?

    • You are welcome Kate.. Just read how you ‘ve been involved as an independent candidate in the Irish elections and all I can say to you (and to all of us) is a ”good luck” not in terms of the votes you will gather but in terms of the applications your move will have to all res cogitans who struggle to find their way back to democracy in all European countries, to say at least. Gongratulations for your move, hoping that others will follow as well possible awaking our moribund democratic reflects, overcoming our catatonia and become ACTIVE again !

  • Κυριε Βαρουφακη

    Συγχαρητήρια για το ύφος και το περιεχόμενο της δημοσίας παρέμβασης σας καθώς και για την ποιότητα των αναρτήσεων σας.
    Κάντε παρακαλω σε όλους τους Ευρωπαίους (δηλ.και τους Ελληνες) μια χάρη…επιδιώξετε το συντομότερο μια συνάντηση με τον νέο υπουργό οικονομικών -αλλά και γενικότερα με την πολιτική ηγεσία- έτσι ώστε να μπορέσει(ουν) να αντιληφτούν το βεληνεκές και το αξιοποιήσιμο των αποψεων σας και έτσι να σας παρασχεθεί η δυνατότητα να τις συμπεριλάβετε σαν κύριο συστατικό μέρος στο υπό (επανα)διαμόρφωση πλαίσιο της εθνικής στρατηγικής για την αντιμετώπιση της ευρωπαϊκής κρίσης χρέους…

  • Greeks have to demonstrate against a new bailout. They need to ask the government to let Greece default. That way Greeks may save Greece.
    The bondholders in the Greek debt hold a defaulted bond. They need to take losses like any other investor, whose investments have lost in market value. Greeks need to fight for this.
    Ro

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