Altered logo at Bank of Greece HQ in Athens, April 2011.

A crazy way to run civilisation

Despite a series of swingeing austerity budgets to calm the international markets, Greece yet again totters on the brink of bankruptcy. But should democracies determine economic policy according to what a few thousand traders might, or might not, want?

Published on 10 May 2011 at 13:31
Altered logo at Bank of Greece HQ in Athens, April 2011.

It used to be that only less developed countries had to live under the power of capricious "international markets". One classic example of this came in 2003, when the new government of Brazil, under Luiz Inácio Lula da Silva, had to temporarily set aside its social democratic mission and simply do what it took to get traders to bring the country's bond prices under control.

But now, the unpredictable might of the markets is felt in the world's richest areas, too. The government of Greece and eurozone officials have just come to the realisation that the bailout they designed a year ago is not working – that is, that it has not allowed Greece to re-enter the markets. This outcome for the first of the three bailouts does not bode well for Portugal and Ireland's packages.

It is the fluctuations of these markets that triggered the crises in the first place and that threaten to bring on new ones. In the UK, the chancellor, George Osborne, need not hide the fact that Britain's package of cuts is fundamentally about avoiding their wrath. The idea is to avoid in the UK what is happening in Portugal. He admits to the strange way these markets work, too, when noting that the UK's budget deficit is actually larger than that of Portugal.

We are now all learning what poorer countries learned first: international bond investors determine to a large extent what range of decisions are available to democratic governments. And those determinations are far from as rational as we would hope. It becomes very near impossible to know what will work, and how much pain and austerity are required to avert disaster. Read full article in Guardian...

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From Greece

No solutions in sight

On May 9 rating agency Standard & Poor's once again downgraded Greece’s credit rating, in a sign of market concern. Meanwhile the country, strangled by debt, has begun to negotiate a new plan to garner EU aid. Prime Minister George Papandreou has run out of options for resolving the debt issue and dragging his government out of inertia, writes leading Athens daily Ta Nea. In office since October 2009, the socialist PM now has to face the slings and arrows of a number of his ministers, such as Andreas Loverdos (Health), who has stepped up to the barricades to demand that the pace of reforms and privatisations be accelerated. German Chancellor Angela Merkel, European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy have a meeting scheduled in Berlin for 11 May. The struggle against the crisis in the eurozone will be the main topic on the table at this “crucial interview”, the newspaper reports.

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