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Letter from America

Despite Pressure from Washington, Greek Bailout Increases Grexit Odds

Mark Weisbrot (Center for Economic and Policy Research and Just Foreign Policy) argues that the new deal that the Greek government was forced to agree to is a guaranteed extension of the country's ongoing economic depression. The terms of the deal make little economic sense and should instead be interpreted as punishment for Greece for challenging the European neoliberal elites and as a warning to other vulnerable eurozone economies not to elect left parties. Meanwhile, the U.S. has a strong interest in a united Europe and has been lobbying EU authorities not to push Greece out of the eurozone – for example, by forcing the release of an IMF analysis showing Greek debt is unsustainable without a restructuring. However, even Washington's efforts may not be enough to save Greece from expulsion.

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Figure of the Month

Change in disposable household income

This figure from Basak Kus and Wen Fan's Article Income Inequality, Credit and Public Support for Redistribution shows that the household incomes of the richest ten per cent have grown faster than those of the poorest ten percent in the majority of OECD countries – even in traditionally low-inequality social democratic countries. Click on the image for more information, including the role credit plays in income inequality.

Editorial

How to Turn the Greek Deal into a Success

In exchange for more austerity and structural reforms, Greece is set to receive yet another loan programme. However, the new loans don't change a fundamental fact: Greece is insolvent. Sebastian Dullien (HTW Berlin and European Council on Foreign Relations) argues that without a debt restructuring, Greece will never be able to repay its new loans. However, such a restructuring is unpopular in creditor countries, and German leaders in particular would have to expend political capital to convince a sceptical public that reducing the net present value of Greek debt is also in their interest.

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Editor's Choice

Has the Eurozone Been Stabilised or Will EMU Fall Apart?

In early 2010, as the risk of sovereign default in Greece first emerged, the Intereconomics Forum invited several experts to examine the options available to EU policymakers. Eight months later, six of the same authors returned to reassess the situation. Today, in light of the recent referendum in Greece that could lead to the country's removal from the eurozone, these experts' views from five years ago are enlightening to read. From the Irish bailout to the precarious status of Portugal, not to mention the potentially disastrous situation looming in Spain, our contributors were uncertain whether EU policymakers were up to the challenge of defending the euro. Nonetheless, most of these economists still saw ways for the EU to escape the crisis without being forced to abandon the common currency.

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Quote of the Month

Greece

"The open question remains whether key players in Berlin actually want Greece to remain in the euro area."

- from Sebastian Dullien's Editorial How to Turn the Greek Deal into a Success

Forum

The Future of the European Power Market

The European power market is undergoing significant changes. The EU has set an ambitious goal of reducing its greenhouse gas emissions by 40 per cent by 2030. This will require significant investment in renewable energy sources such as wind and photovoltaics as well as measured policies to deal with the fluctuating capacity offered by these renewables. The integration of national power systems into a single European system would provide huge benefits in smoothing such fluctuations, enabling the EU power market to further increase its reliance on renewables. Current power generators and government regulators will inevitably face challenges adapting to the new market environment, but experience from other countries and regions could provide useful guidance.

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Inequality

Income Inequality, Credit and Public Support for Redistribution

Credit affects individuals' perceptions and experiences of inequality. Having access to credit enables those in lower- and middle-income groups to consume an array of products and services that they otherwise would not be able to afford, thereby taking the edge off discontent. Citizens with higher incomes who tend to be less supportive of redistribution in the first place may be further convinced that inequality is not a major issue and redistribution need not be a policy goal. All in all, credit may help smooth out class and status differences. This article looks at the impact of credit on citizens' support for redistributive policies. Controlling for a set of national and individual level variables, the findings show a negative association between credit use and public support for redistribution.

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Volume 50 · 2015 · issue 4

Current Issue

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Most popular articles

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    Mariana Mazzucato, Mario Cimoli, Giovanni Dosi, Joseph E. Stiglitz, Michael A. Landesmann, Mario Pianta, Rainer Walz, Tim Page

  3. Is the Global Economy on the Brink of Recession?

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  4. International Investment Rules and Capital Mobility - Considerations in Light of the Asian Financial Crisis

    Brigid Gavin, Jerôme Haegeli

  5. The Impact of the Financial and Economic Crisis on World Trade and Trade Policy

    Louise Curran, Hubert Escaith, Jean-Jacques Hallaert, Claude Barfield, Simon J. Evenett, Georg Koopmann



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