Monday, May 7, 2012

Greek voter rejection of bailouts and austerity is itself rejected by politicians who adopted these policies for Greece

To no one's surprise, the politicians who signed on for subjecting Greek citizens to austerity while banks are bailed out, are rejecting the idea that there is a mandate to find an alternative solution that does not involve austerity and bank bailouts.

This rejection comes in spite of the fact that Greek voters overwhelmingly voted no on austerity and bank bailouts by voting into office a majority that is against austerity and bank bailouts.

As reported by Bloomberg,

Alexis Tsipras became the surprise package of the Greek election by telling Angela Merkel to get lost. 
“The people of Europe can no longer be reconciled with the bailouts of barbarism,” Tsipras, 37, said on state-run NET TV late yesterday after his Syriza party unexpectedly came second in the country’s election. “European leaders, and especially Ms. Merkel, should realize that her policies have undergone a crushing defeat.” 
Tsipras’s calls to tax the rich, delay debt repayments and cut defense spending struck a chord with voters angry at austerity measures imposed by the European Union and the International Monetary Fund in return for bailouts. 
As far as euro membership is concerned, Tsipras told voters that a Greek exit would put the currency itself in jeopardy and they shouldn’t feel “blackmailed” into more austerity. 
The result put Syriza ahead of the Socialist Pasok party, potentially derailing efforts to implement the terms of the country’s financial lifeline. Syriza, which means Coalition of the Radical Left, won 16 percent of the vote, projections showed. That exceeded the 13 percent won by Pasok, one of the two pillars of the political establishment since 1974....  
Greek voters flocked to anti-bailout parties, official results showed yesterday, as the country balks at an unemployment rate of almost 22 percent. That’s throwing doubt on whether, New Democracy and Pasok, can form a coalition to implement spending cuts to ensure the flow of bailout funds. 
Pasok party leader Evangelos Venizelos, the former finance minister who negotiated the second rescue packages, said the electorate had provided no clear mandate and called on a pro- European national unity government to be formed....
It is a question of interpretation whether there is a clear no austerity and no bailout mandate when the parties that reject this idea represent the majority.
Bowing to German austerity, Greece agreed to impose pension and wage cuts in return for two international rescues worth 240 billion euros ($312 billion). Greece must continue spending cuts to keep disbursements flowing. Failure to do that may determine whether the country has a future in the euro area. 
For Tsipras, a civil engineer by training, the question of Greece’s continuing membership of the euro is overstated because its exit could mean an end to the currency itself. 
“The crisis isn’t just Greek, it’s European,” he said on April 22. “There will either be a collective, sustainable and fair European solution to the public debt issue or it will collectively fall apart. The Greek people should understand that this blackmail is false and they must stop blackmailing them with a supposed exit of just Greece without the destruction of the euro.”
Regular readers know that what is driving austerity was the adoption in 2009 of the Japanese model for handling the bank solvency led financial crisis.  Under the Japanese model, bank book capital levels are protected at all costs.

As a result, rather than the banking system absorbing the losses on the excesses in the financial system, the real economy has to absorb these losses.  One of the ways for the real economy to absorb the losses is austerity.

Regular readers also know that modern banking system are designed to absorb the losses on the excesses in the financial system and protect the real economy.  Hence, austerity is optional.   Which raises the question of why any politician would vote for it.

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