Yet another final deadline for Greece

Supposedly, if no agreement by Sunday, the ECB will stop funding Greece .

There have been a lot of final deadlines.

That which cannot go on forever will stop, but I would not bet on it stopping on Sunday.

Greece does not need austerity nor does it need stimulus. Greece does not need to remain in the Euro nor to exit the Euro. What Greece needs is a a massive reallocation of labor from luxuries and import consumption, to necessities and export production. Such labor flexibility could be accomplished by cutting taxes, dropping official wage floors and cutting the salaries of government employees, few of whom do anything remotely useful (“austerity”), or could be accomplished by retaining nominal wage floors and inflating them away. (Exit from the Euro plus “stimulus”)

In practice however Greece is likely to get the “austerity” of raising taxes that are far above the Laffer limit even further above the Laffer limit, and the “stimulus” of ever more governmental and quasi governmental patronage jobs. When neither measure, stimulus nor austerity, has the intended result, it will get further loans from countries less dysfunctional than Greece. These loans will gradually become stingier and stingier, and less and less able to maintain the illusion of first world normality.

Ending not with a bang, but with a whimper.

9 Responses to “Yet another final deadline for Greece”

  1. Rhett again says:

    As you’ve covered before in the comments, Greece did better under the Junta, in part because the Junta did promote “necessities and export production.” Factories abound, as well as tourism and the military was strong. Goodyear tires, Pirelli tires, and a whole slew of other companies, both foreign and domestic, were employing Greek workers. It was “freedom” that led to the bloated public sector, and of course feminism (which the progressive countries demanded of Greece), which means women must enter the work force, which means……..more public sector employees, yaaaaaaay!

    If I’, not mistaken, I think that the Financial Times had given Greece the award for most economic development for two years in a row during the Junta time.

  2. vxxc2014 says:

    “A Europe without Greece is like a party without drugs,”

    That’s the Plan.

  3. Mark Citadel says:

    Jim, any odds on eventually, a Golden Dawn government?

  4. Alan J. Perrick says:

    What goes up must come down. (Unless, before it lands, it gets sucked into something more substantial than itself)

    A.J.P.

  5. Thales says:

    Oh well, despite the overwhelming rejection of a “deal” less worse than the one they’ve been saddled with, it appears Greece is going to be liquidated in piecemeal fashion. For Democracy!

  6. Anthony says:

    How does one judge whether taxes are on the wrong side of the Laffer curve when nobody who can dodge them pays? For well over 700 years, paying taxes only benefited non-Greeks. That’s plenty long enough to have genetically altered the national character in favour of tax evaders.

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