By William K. Black.

Bloomington, MN: January 25, 2015

The Wall Street Journal and the New York Time’s eurozone reporters, who share the same unshakable devotion to TINA and austerity as the Murdochized WSJ news staff have been thrown into a panic by Syriza’s electoral successes in Greece.

Both papers are freaked out, as are the Germans, about the potential for Greece to spark a wave of rejections of the troika’s infliction of austerity in a manner similar to how the infliction of self-destructive austerity programs pursuant to the Washington Consensus’ demands led to the “lost decade” and the democratic election of what is now over a dozen Latin American candidates running on anti-austerity platforms.  The Washington Consensus was drafted and named by an economist at Pete Peterson’s International Institute.  Peterson is a Wall Street billionaire whose mission is causing debt and deficit hysteria and plugging the joys of austerity and unraveling the safety nets.  His greatest goal is privatizing Social Security – producing hundreds of billions in additional fees for Wall Street.

The NYT predicted that:

“A Syriza victory would lift the hopes of euroskeptic parties elsewhere in Europe, especially in Spain, where the left-leaning, anti-austerity Podemos party, not yet a year old, is already drawing 20 percent support in national opinion polls. The leader of Podemos, Pablo Iglesias, joined Mr. Tsipras this week during Syriza’s final campaign rally.”

The WSJ makes a similar point to explain the significance of Syriza’s electoral success.

“A Syriza victory would also be closely watched by other antiausterity parties in Europe—on the left and the right—that have been gaining ground in the past year. In Europe-wide parliamentary elections last spring, voters fed up with years of cutbacks, rising unemployment and a shrinking social state, strongly backed new and fringe antiestablishment parties such as France’s National Front and Spain’s newly created Podemos party in a reaction to Europe’s old guard.”

Pete Peterson Brings Latin America’s Lost Decade to Europe

The NYT responded by citing quoting as its one non-partisan economic commentator on Syriza’s win – a Peterson institute economist!  Yes, the people that crafted the Washington Consensus and claimed U.S. fiscal stimulus would produce hyper-inflation and who praised Germany’s austerity policies were presented by the NYT as the impartial experts on austerity – with no explanation of any of this history.

“‘[Alexis Tsipras, Syriza’s leader] is campaigning on change and the end of austerity,’ said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington, who argues that Mr. Tsipras must move toward a more centrist stance if he hopes to revive the economy and keep Greece solvent.

‘If he can pull that off, that will be the best possible outcome for Greece and for Europe, because it would show that these protest movements ultimately recognize reality, which is that they are in the euro, and they have to play by the rules,’ he added.”

The NYT did not bother to explain what the Peterson economist meant by the phrase “they have to play by the rules.”  He means that Greece must continue to follow draconian austerity under the eurozone’s oxymoronic “Stability and Growth Pact” that has caused massive instability and crippled growth because it requires the economic malpractice of responding to a Great Recession by forcing Greece, Spain, and Italy into Great Depressions.  As I have explained many times, Greece’s current Great Depression is more severe and long-lasting than its Great Depression 80 years ago.  Under the plan the troika successfully extorted prior Greek leaders to adopt he will be forced to further tighten the austerity screws for at least another five years.  When the Peterson economist says that he hopes Tsipras “move[s] toward a more centrist stance” he means he hopes Tsirpras betrays all of his campaign promises and adopts austerity.

The NYT Thinks its Redemptive for Poor Greeks to Suffer

But it gets better, for Peterson’s economist says that if Syriza betrays the promises it made to the people of Greece and instead embraces austerity it will “revive the economy and keep Greece solvent.”  Austerity has forced Greece into a Great Depression – the opposite of “reviv[ing] the economy.”  A sovereign government is not a corporation and doesn’t (and can’t) use GAAP accounting.  It is not “insolvent” because it has debts.  It that is the definition, then austerity has not and will not make Greece “solvent.”

The Peterson economist then ends on an even worse note.  He implicitly defines “reality” as requiring brutal austerity.  He excludes fiscal stimulus, even though – as Paul Krugman (and many folks like us have tried to explain for many years – the great majority of economists think responding to a Great Recession with austerity constitutes economic malpractice.

The NYT also throws in its near constant meme that the Greeks aren’t mature and ready to “sacrifice” enough to get better.  They still believe in the medical myth that you need to bleed a patient to help him recover.  Embracing austerity constitutes pointless masochism that delays rather than speeds recovery from a Great Recession – suffering inflicted primarily on the poor and the sick, but the NYT loves to blame poor Greeks.

“Continuing economic weakness has stirred a populist backlash as more voters grow fed up with policies that demand sacrifice.”

Opposing austerity is not immoral, weak, or “populist.”  It is good economics and humane – a win-win.

The WSJ Claims Austerity Helped the Greeks Economy (by ignoring the Great Depression)

The WSJ doesn’t need one of Peterson’s economists to match the NYT’s mendacity.  In the midst of a purported news story (not an opinion piece) the WSJ states the following as if it were undisputed fact.

Since first seeking a bailout in 2010, Greece has undertaken a broad sweep of economic overhauls and cutbacks that have helped mend its public finances and nudged the economy back to growth following six years of deep recession. Those cutbacks have come at a cost: Some 25% of Greeks remain jobless, while a quarter of households live close to the poverty line.

It is a clumsy attempt at mendacity given that the facts in the second sentence render risible the fiction foisted in the first sentence.  Austerity has not “nudged the economy back to growth following six years of deep recession.”  Austerity threw an economy in a deep recession into a gratuitous Great Depression.  But for austerity, Greece could have begun a robust recovery four years ago.

There are at the time I write this two WSJ articles about the Greek election and the second one also has a clunker that is unintentionally hilarious.

And if Syriza refuses to meet those terms: Will Merkel blink?

No. German leaders fear that funding a Greece that refuses to reform would be the death knell of the eurozone. Other debtor countries could conclude that they could blackmail Berlin, refuse to cut their deficits or overhaul their economies, and still get German taxpayers’ money.

Where to start?

  • The horribly designed euro, a design Germany insisted on, austerity, which Germany insisted on, and a horribly designed ECB, which Germany insisted on, will be the “death knell of the eurozone” if Prime Minister Merkel continues those policies.
  • Germany has repeatedly used the troika, the bond vigilantes, and the desperation of peoples in crisis to “blackmail” nations throughout the eurozone – and German politicians have then proceeded to mock and excoriate the Greeks when they succumbed to that blackmail.
  • The economic policies Syriza supports are economically sensible – they will speed the eurozone’s recovery and eventually be highly beneficial to the German people
  • The economic policies Merkel has blackmailed the eurozone leaders into inflicting on their own peoples constitute economic malpractice.  They slow the recovery and cause immense human misery that serves no purpose.
  • Troubled debt renegotiations occur thousands of times every day because we learned hundreds of years ago that once a debtor has been pushed to the point of default with no prospect for relief it makes sense to let the debtor make a fresh start
  • The ECB can shoehorn the euro into becoming a quasi-sovereign currency for the eurozone if the concern is “German taxpayers.”  The German courts might try to block it, but if the alternative is a new, even deeper crisis they may allow the ECB to do what needs to be done.  The ECB has repeatedly had to evolve beyond its original German design in order to prevent the eurozone’s collapse.

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