economist and the co-director of the Center for Economic and Policy Research, author of the forthcoming book, Failed: What the Experts Got Wrong About the Global Economy.
Greek Prime Minister Alexis Tsipras has submitted a bailout proposal which includes harsh austerity measures, just days after the Greek people overwhelmingly rejected such measures in a historic referendum. The proposal submitted to Greece’s creditors reportedly includes tax increases, pension cuts, a reduction in military spending, and the privatization of public assets. It comes after Tsipras himself had urged the Greek people to reject creditors’ demands for further austerity. In exchange for the reforms, Greece would receive a three-year, $59 billion bailout package. Germany, meanwhile, appears to be yielding to demands to provide at least some measure of debt relief to Greece. European officials have expressed approval for the Greek offer ahead of a key meeting of European finance ministers on Saturday. The Greek Parliament is expected to vote on the bailout proposal today, just five days after an overwhelming 61 percent of Greek voters rejected similar terms. We speak to Mark Weisbrot, co-director of the Center for Economic and Policy Research. He is the author of forthcoming book, "Failed: What the Experts Got Wrong About the Global Economy."
JUAN GONZÁLEZ: Greek Prime Minister Alexis Tsipras has submitted a bailout proposal which includes harsh austerity measures, just days after the Greek people overwhelmingly rejected such measures in an historic referendum. The proposal submitted to Greece’s creditors reportedly includes tax increases, pension cuts, a reduction in military spending, and the privatization of public assets. It comes after Tsipras himself had urged the Greek people to reject creditors’ demands for further austerity. In exchange for the reforms, Greece would receive a three-year, $59 billion bailout package.
Germany, meanwhile, appears to be yielding to demands to provide at least some measure of debt relief to Greece. European officials have expressed approval for the Greek offer ahead of a key meeting of European finance ministers on Saturday. The Greek Parliament is expected to vote on the bailout proposal today, just five days after an overwhelming 61 percent of Greek voters rejected similar terms.
AMY GOODMAN: In Greece, Dimos Koubouris of the Private Sector Pensioners Federation criticized the proposal for new austerity measures.
DIMOS KOUBOURIS: [translated] We demand that the government open the banks now and give us our pensions. This is money we have already paid in. It’s a lifetime’s work, and we want to be able to buy medicine and food for our families, and get our lives back.
AMY GOODMAN: Joining us to discuss the outlook for Greece and the new proposal under consideration is economist Mark Weisbrot, co-director of the Center for Economic and Policy Research. He’s the author of the forthcoming book, Failed: What the Experts Got Wrong About the Global Economy.
Mark Weisbrot, are you surprised by this deal that is being crafted right now? What exactly has the Greek prime minister put forward?
MARK WEISBROT: Well, the proposal is similar to what they had rejected previously. And, you know, you have to take into account that this is kind of a hostage situation. You know, they’ve had many—a number of deadlines before and threats and what the prime minister called blackmail, but a week before last Sunday’s referendum, they—you know, they really started bombing. That is, it wasn’t threats anymore. I think that’s why the former finance minister, Yanis Varoufakis, called it terrorism.
I mean, it is—they closed down the banking system, as you know, and with all the consequences that that entails. And that’s very important because a lot of people don’t know that. You know, they think the government closed down the banking system, but it really was the European Central Bank doing something that probably no central bank has ever done before, which is to create a financial crisis in a country that’s under their jurisdiction. So I think that was the pressure.
Now, we don’t really know what the deal looks like yet, because we don’t have the debt relief that the government is expecting. I would expect they will get debt relief. And if they don’t, I don’t see how it would pass the Parliament.
JUAN GONZÁLEZ: Now, Mark Weisbrot, a lot of the accounts today in the commercial press talk about Greece capitulating and basically giving in. But this issue of debt relief, could you clarify what that means? Because there is basically—as Greece has been saying, it’s not sustainable for the government to be able to put a country to pay back this debt, so they want the creditors to accept a certain loss in their principal on this debt to make it possible for Greece to repay at least some of it.
MARK WEISBROT: Yes. Well, it wouldn’t necessarily be a loss in principal, which is usually called a haircut. It could be a restructuring, so that, you know, interest payments are postponed into the future.
And I think the most important thing is whether the economy is allowed to recover soon, because they’ve had six years of depression, which has really been deepened and prolonged by the European Union—or the European authorities’ policies, and especially the Central Bank, which, as I said, has now really closed down the banking system. So, they need to be able to recover. And that’s not clear from this agreement yet whether they will be able to do that.
I mean, this agreement—or the proposal from the Greek government, which is matching the proposal from the European authorities on this issue, calls for a primary budget surplus of 1 percent this year, then 2 percent, 3 and three-and-a-half. And it’s hard—unless they get serious debt relief, it’s hard to see how they could recover with that kind of fiscal tightening, and certainly not a recovery that would bring down the massive unemployment in the near future. So this really isn’t over yet. I don’t think it’s over at all. This is—
AMY GOODMAN: The Greek prime minister, Alexis Tsipras, addressed the European Parliament Wednesday, saying Greeks are tired of being a laboratory for testing austerity.
PRIME MINISTER ALEXIS TSIPRAS: [translated] We want a sustainable program, because we want to be in a position to repay the loans that we’ve accepted. And when we ask to reduce the debt, we are asking for that because we want to be able to pay this back. We don’t want to be forced time and time again to accept new loans to pay off the old ones.
AMY GOODMAN: That’s the Greek prime minister. Mark Weisbrot, does the deal that he is putting forward now perhaps explain why Yanis Varoufakis—he wanted him out, and Varoufakis complied, the finance minister who just quit?
MARK WEISBROT: Well, I don’t know why—I mean, I don’t know why the finance minister quit. Obviously, you know, the European—the other finance ministers and European authorities wanted him out, and they said it was his negotiating style and things like that. I don’t know that that makes much difference.
You know, the main thing, again, is whether they can get a deal that allows for an economic recovery. You know, this is the ironic thing about it, is that the European authorities have made this mess. The reason they need all this debt relief is because the economy has shrunk by more than 25 percent and greatly reduced their ability to pay. And now, the IMF is already saying—or the IMF has already acknowledged that the debt is unsustainable.
And some of that is U.S. influence. You know, you have a difference between the U.S. and the European Union, or the European authorities, I should say, because the U.S. is only concerned with keeping Greece in the euro, whereas the others have this project. They want to transform Europe into a place that has a smaller social safety net, a reduced state, cuts in pensions and healthcare. This isn’t just Greece. Greece is the obstacle in their way of transforming Europe. So they have these whole set of other interests that they’re fighting for, and that’s why they’re being so brutal and stubborn about this.
So, again, you know, we don’t really know what’s going to happen yet. We don’t know whether they’re going to grant sufficient debt relief to allow for an economic recovery. So I think this fight is going to go on for a while.
JUAN GONZÁLEZ: Mark, I wanted to ask you about the parallels between what’s happening in Greece and in potentially America’s own Greece—the debt crisis in Puerto Rico and the role of hedge funds. I have a column in today’s Daily News talking about a big fundraiser that’s being held by hedge fund billionaires this weekend at an East Hampton mansion for Governor Cuomo. And many of the—there’s a new report that’s being released today by the group Hedge Clippers, that really lays out what are the role of hedge funds in the Puerto Rico debt crisis.
And that report names a bunch of hedge funds: Andrew Feldstein’s BlueMountain Capital, Paul Tudor Jones’s Stone Line Capital, the billionaire John Paulson and others, all of whom are huge donors to Governor Cuomo, who are also heavily invested in Puerto Rico debt. Fortune magazine estimates up to 50 percent of the $73 billion in Puerto Rico debt is being held by these hedge funds that bought up the debt at discount prices, are hoping to press austerity in Puerto Rico, force the raising of taxes, so then they can make a killing. Puerto Rico’s government, for instance, just on July 1st, raised the sales tax from 7 percent to 11-and-a-half percent last week on the Puerto Rican people. But many of these hedge funds also had been invested in Argentina, had been invested in Greece. The role of hedge funds in some of these financial debt crises?
MARK WEISBROT: Well, there’s no question they played a huge role in Argentina. I mean, it was them who got the court decision that actually prevented Argentina from paying the interest payments on its debt to all the creditors, the over 90 percent of creditors, who accepted a restructuring. So I think the main role, the main negative role, that the hedge funds—the vulture funds, as they’re accurately called—the main role they play is to make it more difficult to have a restructuring when there is one. So that’s a very serious problem, and it’s caused enormous problems for Argentina.
In Greece right now, of course, the main problem is still the European authorities. They’re the ones that are—you know, they’re not really fighting over the money in Greece. It’s really about forcing Greece to make these changes. And also they’re worried about what’s going to happen in the rest of Europe, because, for instance, if Greece were to win this battle, you would be much more likely to see Podemos, a left party that didn’t even exist about a year and a half ago and is now leading in the polls—
AMY GOODMAN: In Spain.
MARK WEISBROT: —they could win the election in November. So, that’s another thing they’re looking at. This really is a political project. And it’s really driven more by this politics than the actual payments on the debt, which they could have settled in Greece a long time ago for a lot more—a lot less than what they’re going to lose going forward.
AMY GOODMAN: Well, we’ll leave it there on Greece. And, Juan, on Puerto Rico, the piece that you did, "Hedge Fund Moguls Who Played Role in Puerto Rico’s Money Woes Will Be Greeted by Protesters at Swanky Fundraiser for Governor Cuomo," this is an East Hampton $5,000-a-plate fundraiser?
JUAN GONZÁLEZ: Yeah, on Saturday night, yes.
AMY GOODMAN: And there will be protests outside?
JUAN GONZÁLEZ: There’s supposed to be protests outside, yes.
AMY GOODMAN: Well, we’ll link to that piece, as well. And, Mark Weisbrot, thanks for joining us, economist and co-director of the Center for Economic and Policy Research, author of the forthcoming book, Failed: What the Experts Got Wrong About the Global Economy.