The future lies in Greece


This will be the last post of this year and my choice is to dedicate it to the Greeks. Yes, to the people of a country that has been almost destroyed in the last years for economic reasons, for the people who has seen everything change for the worst and left behind to pay errors committed in many places out its boundaries. It’s a tiny nation, with less than eleven millions people who found themselves deep down a national debt like never before.

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The Cyprus bailout

At the very last moment a plan has been approved in order to save Cyprus from bankrupcy. Why am I not surprised? A few days ago I write another about this situation, the basic idea was to stigmatize that ten billion Euro are small money if we consider the hundreds of billions (or maybe the thousands) Euro already used to save other countries and/or their major banks.


Cyprus is not the real problem about Eurozone, nor it’s the worst place to consider when it comes to bad finance all aroud Europe. What is Cyprus today? A symbol. It’s a slap in the face of russian oligarchs, who used for years this small island to practice money laundering on a massive scale. It’s a slap in the face of a number of financial operators who used the fiscal laws of Cyprus to pay the lowest tax cut possible in Europe. It’s a warning, a strong one, to Malta (and thru Malta to the UK).

What Cyprus is today it’s a warning to all of us european citizens. The decision to drag a percentile of bank deposits, no matter how much, it’s not only a financial measure made by a scared government but the demonstration that under the combinate pressure of ECB, IMF and WB there are very few chances to escape their decisions. In Italy we already experienced such a fate, back in the ’90s. In order to get enough money to pay the interests on our national debt the government got a small cut, 6 part on one thousand, from every bank account.

So, what about tomorrow? What France will do later this year when the pressure of foreign investors will try to crush its economy? What Slovenia will do next month to lift the pressure of a compromised economy?

The Cyprus setback

Here we are, once again, facing the overheated financial markets. Ready to debate for days or weeks about a new economic crisis and all the perils for a new crash in the world economy. For what? Cyprus, no less.

A small island with a GDP of 24 billions USD. Less than a million of citizens. Safe heaven for money laundering and well-known for its policy of  “don’t ask, don’t tell” about capitals. It’s true, they’re bankrupting and another hard plan of recovery has been prepared to the rescue. Ten billion Euro ready to be deployed to save the national administration.


In the last five years BCE and IMF erogated hundreds (if not thousands) of billions Euro to save or sustain national economies and/or european-based banks “too big to fall“. Why all the fuss about ten billions Euro? What kind of danger poses a small economy like Cyprus? It looks like smoke and mirrors once again, noise good for the media.

European finance advisors put up their hard face, dictate another batch of memorandums about where to cut in the welfare and in all areas of public expenditure. A massive drag from the bank accounts will be made (in Italy we remember quite well this kind of tax, it has been done in the ’90s) and, once again, a massive output of capitals already leaved the island, well before the drag. The bill is set on the 99%, never on the 1%.

We will have another week of bad news from the rating agencies, more or less the same from BCE, IMF and WB. As I’ve written before, it’s all smoke and mirrors. The real problem is how to get out of the crisis, how to restart the engine of an economic model that’s working no more. Remember the riots in the Eastern Europe, all the demonstrations in Portugal, Greece and Spain. Under the pressure of unemployment and the fears for a major breakdown, even the most pacific people are on a warpath.

Where are the plans for a better tomorrow? When we will see the likes of Angela Merkel and David Cameron explain the road for an economic improvement?

It’s time to say no to recession

Last Sunday, March 2nd, AP reported of massive demonstrations held in Portugal. The basic matter is about economics, to go against the government decision to cut national budget in order to meet the objectives set up by the “Troika” (EU, IMF, WB) to resolve all the issues about debt and refinancing.

portugal demonstrations

This time the combined number of protesteers reach the one million level. It’s always a big number but became pretty impressive when you think that Portugal got a total population size about 10.6 millions. It means that one on ten has been on the streets, demanding a stop to austerity measures.

Like many other countries in Europe, Portugal is facing a growing number of unemployed, a shrinking welfare state and an economy in deep recession. In 2011 the national government stipulate a number of agreements to get an huge bailout (more than 100 USD billions). With a negative cycle in all the main economy sectors the only way to reach the planned steps (for the current government) is to cut national budget.

Four years of recession and the perspective to have at least one more is too much for the portoguese population. Political situation is hot to say the least and the pressure from the streets is becoming too high to stand for the national authorities. So it’s time to say “no”, to put an end to an agreement too heavy for this little country.

The recent examples set by Iceland, that recovers its own financial crisis by a plain refusal to pay its debt to foreing private banks (about 5 euro billions) and from Argentina, that force a massive reconsideration of its national debt in the face of IMF and WB, could drive countries like Portugal and Greece to find a strong way out the Eurozone with unexplored consequencies. Are we ready for such a scenario?

You may find an article by Iain Sullivan /AP here 

Blanchard ammette di aver sbagliato e nessuno cambia idea

C’è un personaggio importante, molto importante, che ha ammesso per iscritto di aver sbagliato. Di per sè sarebbe una notizia bomba qui in Italia, è decisamente più consueto all’estero. Tranquilli, non stiamo parlando di un nostro connazionale, neppure di un politicante da strapazzo. Ribadisco, è una persona importante. Olivier Blanchard. Lavora per il Fondo Monetario Internazionale. Mai sentito? Dovreste conoscerlo invece. E’ una delle persone che determinano gli orientamenti dell’FMI, il che ne fa davvero un uomo importante in tempi di crisi.


Il primo gennaio, insieme a Daniel Leigh, ha rilasciato un working paper (disponibile qui) di cui consiglio la lettura. Sono una trentina di pagine in inglese, piuttosto semplici da tradurre ma con qualche deriva matematica sui metodi di calcolo e previsione e sono una carica di C4 sugli ultimi tre anni di politiche economiche occidentali. In pratica si dice che i calcoli (e di conseguenza le previsioni) sono sbagliati. E non di poco. Il che significa che le azioni dell’FMI basate su quelle previsioni si sono rivelate troppo depressive per i cicli economici e quindi non adeguate a risolvere i problemi. Ops!

Citando direttamente dalle conclusioni del documento si apprende che:

If we put this together, and use the range of coefficients reported in our tables, this suggests that actual multipliers were substantially above 1 early in the crisis. The smaller coefficient we find for forecasts made in 2011 and 2012 could reflect smaller actual multipliers or partial learning by forecasters regarding the effects of fiscal policy. A decline in actual multipliers, despite the still-constraining zero lower bound, could reflect an easing of credit constraints faced by firms and households, and less economic slack in a number of economies relative to 2009–10.
However, our results need to be interpreted with care. As suggested by both theoretical considerations and the evidence in this and other empirical papers, there is no single multiplier for all times and all countries. Multipliers can be higher or lower across time and across economies. In some cases, confidence effects may partly offset direct effects. As economies recover, and economies exit the liquidity trap, multipliers are likely to return to their precrisis levels. Nevertheless, it seems safe for the time being, when thinking about fiscal consolidation, to assume higher multipliers than before the crisis.
Finally, it is worth emphasizing that deciding on the appropriate stance of fiscal policy requires much more than an assessment regarding the size of short-term fiscal multipliers.
Thus, our results should not be construed as arguing for any specific fiscal policy stance in any specific country. In particular, the results do not imply that fiscal consolidation is undesirable. Virtually all advanced economies face the challenge of fiscal adjustment in response to elevated government debt levels and future pressures on public finances from demographic change. The short-term effects of fiscal policy on economic activity are only one of the many factors that need to be considered in determining the appropriate pace of fiscal consolidation for any single country.

Bene. Sappiamo che è stato fatto un errore. Basarsi solo sulla rigidità fiscale (vedi fiscal compact europeo) e sulla gestione delle liquidità è sbagliato. Benissimo. E quindi? Adesso come ne usciamo? Nel documento non se ne fa parola, nè rimanda ad altri documenti esplicativi. La domanda è: chi glielo spiega alla Merkel?