Until 1949, Tibet was an independent Buddhist nation in the Himalayas which had little contact with the rest of the world. It existed as a rich cultural storehouse of the Mahayana and Vajrayana teachings of Buddhism. Religion was a unifying theme among the Tibetans -- as was their own language, literature, art, and world view developed by living at high altitudes, under harsh conditions, in a balance with their environment.
The Dalai Lama, an individual said to be an incarnation of the Buddha of Compassion, had been both the political and spiritual leader of the country. The current Dalai Lama (the 14th) was only 24 years old when this all came to an end in 1959. The Communist Chinese invasion in 1950 led to years of turmoil, that culminated in the complete overthrow of the Tibetan Government and the self-imposed exile of the Dalai Lama and 100,000 Tibetans in 1959.
Since that time over a million Tibetans have been killed. With the Chinese policy of resettlement of Chinese to Tibet, Tibetans have become a minority in their own country. Chinese is the official language. Compared to pre-1959 levels, only 1/20 monks are still allowed to practice, under the government's watch. Up to 6,000 monasteries and shrines have been destroyed. Famines have appeared for the first time in recorded history, natural resources are devastated, and wildlife depleted to extinction. Tibetan culture comes close to being eradicated there.
Peaceful demonstrations/protests/speech/writings by nuns, monks, and Tibetan laypeople have resulted in deaths and thousands of arrests. These political prisoners are tortured and held in sub-standard conditions, with little hope of justice. Unless we can all take part and recognize Tibet's loss as our own, the future looks grim.
Some Startling Facts
1. The peaceful buddhist country of Tibet was invaded by Communists China in 1949. Since that time, over 1.2 million out of 6 Tibetans have been killed, over 6000 monastaries have been destroyed, and thousands of TIbetans have been imprisoned.
2. In Tibet today, there is no freedom of speech, religion, or press and arbitrary dissidents continue.
3. The Dalai Lama, Tibet's political and spiritual leader, fled to India in 1959. He now lives among over 100,000 other Tibetan refugees and their government in exile.
4. Forced abortion, sterilization of Tibetan women and the transfer of low income Chinese citizens threaten the survival of Tibet's unique culture. In some Tibetan provinces, Chinese settlers outnumber Tibetans 7 to 1.
5. Within China itself, massive human rights abuses continue. It is estimated that there up to twenty million Chinese citizens working in prison camps.
6. Most of the Tibetan plataeu lies above 14,000 feet. Tibet is the source of five of Asia's greatest rivers, which over 2 billion people depend upon. Since 1959, the Chinese government estimates that they have removed over $54 billion worth of timber. Over 80% of their forests have been destroyed, and large amoutns nuclear and toxic waste have been disposed of in Tibet.
7. Despite these facts and figures, the US government and US corporations continue to support China economically. This shows their blatant lack of respect for these critical issues of political and religious freedom and human rights.
Yes, things are bad, but you may still ask, why Tibet? There are hundreds of other countries in which equal or worse environmental and human rights devistation has occured. Why Tibet? Tibet can be used as the catalyst for change in human rights, womens rights, political, religious and cultural freedom across the globe. Through a concerted effort, the citizens of Earth can stand up and say "NO!" to the corporations and governments that continue to abuse it's people and misuse it's resources. The struggles in Tibet are symbolic for every human rights struggle. Please, get involved. There is only a limited time left until there will longer be a Tibet to save.
Early History
Although the history of the Tibetan state started in 127 B.C., with the establishment of the Yarlung Dynasty, the country as we know it was first unified in the 7th Century A.D., under King Songtsen Gampo and his successors. Tibet was one of the mightiest powers of Asia for the three centuries that followed, as a pillar inscription at the foot of the Potala Palace in Lhasa and Chinese Tang histories of the period confirm. A formal peace treat concluded between China and Tibet in 821/823 demarcated the borders between the two countries and ensured that, "Tibetans shall be happy in Tibet and Chinese shall be happy in China."
Mongol Influence
As Genghis Khan's Mongol Empire expanded towards Europe in the West and China in the East in the 13th Century, Tibetan leaders of powerful Sakya school of Tibetan Buddhism concluded an agreement with the Mongol rulers in order to avoid the conquest of Tibet. The Tibetan Lama promised political loyalty and religious blessings and teachings in exchange for patronage and protection. The religious relationship became so important that when, decades later, Kublai Khan conquered China and established the Yuan Dynasty (1279-1368), he invited the Sakya Lama to become the Imperial Preceptor and supreme pontiff of his empire.
The relationship that developed and continued to exist into the 20th Century between the Mongols and Tibetans was a reflect of the close racial, cultural, and especially religious affinity between the two Central Asian peoples. The Mongol Empire was a world empire and, whatever the relationship between its rulers and the Tibetans, the Mongols never integrated the administration of Tibet and China or appended Tibet to China in any manner.
Tibet broke political ties with the Yuan emperor in 1350, before China regained its independence from the Mongols. Not until the 18th Century did Tibet again come under a degree of foreign influence.
Relations with Manchu, Gorkha and British Neighbors
Tibet developed no ties with Chinese Ming Dynasty (1386-1644). On the other hand, the Dalai Lama, who established his sovereign rule over Tibet with the help of a Mongol patron in 1642, did develop close religious ties with the Manchu emperors, who conquered China and established the Qing Dynasty (1644-1911). The Dalai Lama agreed to become the spiritual guide of the Manchu emperor, and accepted patronage and protection in exchange. This "priest-patron" relationship (known in Tibetan as
Choe-Yoen), which the Dalai Lama also maintained with some Mongol princes and Tibetan nobles, was the only formal tie that existed between the Tibetans and Manchus during the Qing Dynasty. It did not, in itself, affect Tibet's independence.
On the political level, some powerful Manchu emperors succeeded in exerting a degree of influence over Tibet. Thus, between 1720 and 1792, Emperors Kangxi, Yong Zhen, and Qianlong sent imperial troops to Tibet four times to protect the Dalai Lama and the Tibetan people from foreign invasions by Mongols, and Gorkhas or from internal unrest. These expeditions provided the emperor with the means for establishing influence in Tibet. He sent representatives to the Tibetan capital, Lhasa, some of whom successfully exercised their influence, in his name, over the Tibetan government, particularly
with respect to the conduct of foreign relations. At the height of Manchu power, which lasted a few decades, the situation was not unlike that which can exist between a superpower and a satellite or protectorate, and therefore one which, though politically significant, does not extinguish the independent existence of the weaker state. Tibet was never incorporated into the Manchu Empire, much less China, and it continued to conduct its relations with neighboring states largely on its own.
Manchu influence did not last very long. It was entirely ineffective by the time the British briefly invaded Lhasa and concluded a bilateral treaty with Tibet, the Lhasa Convention, in 1904. Despite this loss of influence, the imperial government in Peking continued to claim some authority over Tibet, particularly with respect to its international relations, an authority which the British imperial government termed "suzerainty" in its dealings with Peking and St. Petersburg, Russia. Chinese imperial armies tried to reassert actual influence in 1910 by invading the country and occupying Lhasa. Following the 1911 revolution in China and the overthrow of the Manchu Empire, the troops surrendered to the Tibetan army and were repatriated under a sino-Tibetan peace accord. The Dalai Lama reasserted Tibet's full independence internally, by issuing a proclamation, and externally, in communications to
foreign rulers and in a treaty with Mongolia.
Tibet in the 20th Century
Tibet's status following the expulsion of Manchu troops is not subject to serious dispute. What ever ties existed between the Dalai Lama and the Manchu emperors of the Qing Dynasty were extinguished with the fall of that empire and dynasty. From 1911 to 1950, Tibet successfully avoided undue foreign influence and behaved, in every respect, as a fully independent state.
Tibet maintained diplomatic relations with nepal, Bhutan, Britain, and later with independent India. Relations with China remain strained. The Chinese waged a border war with Tibet while formally urging Tibet to "join" the Chinese Republic, claiming all along to the world that Tibet already was one of China's "five races."
In an effort to reduce Sino-Tibetan tensions, the British convened a tripartite conference in Simla in 1913 where the representative of the three states met on equal terms. As the British delegation reminded his Chinese counterpart, Tibet entered the conference as "independent nation recognizing no allegiance to China." The conference was unsuccessful in that it did not resolve the difference between Tibet and China. It was, nevertheless, significant in that Anglo-Tibetans friendship was reaffirmed with the conclusion of bilateral trade and border agreements. In a Joint Declaration, Great
Britain and Tibet bound themselves not to recognize Chinese suzerainty or other special rights in Tibet unless China signed the draft Simla Convention which would have guaranteed Tibet's greater borders, its territorial integrity and fully autonomy. China never signed the Convention, however, leaving the terms of the Joint Declaration in full force.
Tibet conducted its international relations primarily by dealing with the British, Chinese, Nepalese, and Bhutanese diplomatic missions in Lhasa, but also through government delegations travelling abroad. When India became independent, the British mission in Lhasa was replaced by an Indian one. During World War II Tibet remained neutral, despite combined pressure from the United States, Great Britain, and China to allow passage of raw materials through Tibet.
Tibet never maintained extensive international relations, but those countries with whom it did maintain relations treated Tibet as they would with any sovereign state. Its international status was in fact no different from, say, that of Nepal. Thus, when Nepal applied for United Nations' membership in 1949, it cited its treaty and diplomatic relations with Tibet to demonstrate its full international personality.
The Invasion of Tibet
The turning point of Tibet's history came in 1949, when the People's Liberation Army of the PRC first crossed into Tibet. After defeating the small Tibetan army and occupying half the country, the Chinese government imposed the so-called "17-Point Agreement for the Peaceful Liberation of Tibet" on the Tibetan government in May 1951. Because it was singed under duress, the agreement lacked validity under international law. The presence of 40,000 troops in Tibet, the threat of an immediate occupation of Lhasa, and the prospect of the total obliteration of the Tibetan state left Tibetans little choice.
As the resistance to the Chinese occupation escalated, particularly in Eastern Tibet, the Chinese repression, which included the destruction of religious buildings and the imprisonment of monks and other community leaders, increased dramatically. By 1959, popular uprising culminated in massive demonstrations in Lhasa. By the time China crushed the uprising, 87,000 Tibetans were dead in the Lhasa region alone, and the Dalai Lama had fled to India, where he now heads the Tibetan Government-in-exile, headquartered in Dharmsala, India. In 1963, the Dalai Lama promulgated a constitution for a democratic Tibet. It has been successfully implemented, to the extent possible, by the Government-in-exile.
Meanwhile, in Tibet religious persecution, consistent violations of human rights, and the wholesale destruction of religious and historic buildings by the occupying authorities have not succeeded in destroying the spirit of the Tibetan people to resist the destruction of the national identity. 1.2 million Tibetans have lost their lives, (over one-sixth of the population) as a result of the Chinese occupation. But the new generation of Tibetans seems just as determined to regain the country's independence as the older generation was.
Present Situation
In the course of Tibet's 2,000-year history, the country came under a degree of foreign influence only for short periods of time in the 13th and 18th centuries. Few independent countries today can claim as impressive a record. As the ambassador of Ireland to the UN remarked during the General Assembly debates on the question of Tibet, "for thousands of years, for a couple of thousands years at any rate, (Tibet) was a free and as fully in control of its own affairs as any nation in this Assembly, and a thousand times more free to look after it own affairs than many of the nations here."
From a legal standpoint, Tibet has not lost its statehood. It is an independent start under illegal occupation. Neither China's military invasion nor the continuing occupation by the PLA has transferred the sovereignty of Tibet to China. As pointed out earlier the Chinese government has never claimed to have acquired sovereignty over Tibet by conquest. Indeed, China recognizes that the use or threat of force (outside the exceptional circumstances provided for in the UN Charter), the imposition of an unequal treaty, or the continued illegal occupation of a country can never grant an invader legal title to
territory. Its claims are based solely on the alleged subjection of Tibet to a few of China's strongest foreign rulers in the 13th and 18th centuries.
Source:(Michael C. van Walt van Praag practices international law. His publication include The Status of Tibet: History, Rights and Prospects in International Law (Westview Press, Boulder, Colo., Wisdom Press, London, 1987) and numerous articles in book collections and magazines.)
2/19/2010
Ο Δαλάι Λάμα στον Λευκό Οίκο
Κεκλεισμένων των θυρών υποδέχτηκε τον εξόριστο πνευματικό ηγέτη του Θιβέτ Δαλάι Λάμα ο Αμερικανός πρόεδρος Μπαράκ Ομπάμα στο Λευκό Οίκο την Πέμπτη.
Η επίσκεψη έγινε παρά τις «προειδοποιήσεις» της Κίνας ότι η επίσκεψη θα επιδεινώσει περισσότερο τις σινοαμερικανικές σχέσεις. Οι προγραμματισμένες συνομιλίες του Μπαράκ Ομπάμα με τον πνευματικό ηγέτη του Θιβέτ έχουν πυροδοτήσει την οργή της Κίνας, σε μία περίοδο τεταμένων διμερών σχέσεων με φόντο ζητήματα από την ισοτιμία του γουάν και το εμπόριο έως τις αμερικανικές πωλήσεις όπλων στην Ταϊβάν.
Η απόφαση του Μπαράκ Ομπάμα να προχωρήσει η συνάντηση στοχεύει στο να αντικρούσει τις φωνές εντός ΗΠΑ ότι ο Αμερικανός πρόεδρος συμπεριφέρεται «υποχωρητικά» απέναντι στην Κίνα. Τηρώντας όμως τις ισορροπίες και προσέχοντας να μην προκαλέσει τις ευαισθησίες του Πεκίνου, ο Αμερικανός πρόεδρος υποδέχθηκε τον Δαλάι Λάμα στην Αίθουσα των Χαρτών και όχι στο Οβάλ Γραφείο, για να υπογραμμιστεί η «ανεπίσημη φύση» της συνάντησης.
Κατά παράδοση, το Οβάλ Γραφείο θεωρείται χώρος υποδοχής πολιτικών ηγετών -με αυτόν τον τρόπο, η Ουάσιγκτον θέλει να τονίσει ότι δεν αντιλαμβάνεται κατ' αυτό τον τρόπο τον Δαλάι Λάμα. Την πραγματοποίηση της συνάντησης, πάντως, «τίμησαν» με πυροτεχνήματα κάτοικοι του Θιβέτ σύμφωνα με το Reuters, κίνηση ενδεικτική της σημασίας που αποδίδεται στον εξόριστο πνευματικό ηγέτη από τους συμπατριώτες του.
Προγραμματισμένη είναι επίσης συνάντηση του εξόριστου ηγέτη και με την Αμερικανίδα υπουργό Εξωτερικών Χίλαρι Κλίντον.
Στο επίκεντρο της συνομιλίας του Ομπάμα με τον Δαλάι Λάμα βρέθηκε η ανάγκη προώθησης της ειρήνης, των ανθρωπιστικών αξιών και της θρησκευτικής αρμονίας, όπως ανέφερε στον Τύπο ο 74χρονος πνευματικός ηγέτης του Θιβέτ λέγοντας επίσης ότι είναι «πολύ χαρούμενος» μετά από τη συνάντησή του με τον Αμερικανό πρόεδρο.
Μιλώντας στους δεκάδες δημοσιογράφους που είχαν συγκεντρωθεί από νωρίς στο Λευκό Οίκο ο Δαλάι Λάμαι ανέφερε ότι εξέφρασε, μεταξύ άλλων, στον Ομπάμα το θαυμασμό του για την Αμερική, την οποία χαρακτήρισε «χώρα πρωταθλήτρια της δημοκρατίας, της ελευθερίας και των ανθρωπίνων αξιών».
Σε λακωνική ανακοίνωση του Λευκού Οίκου αναφέρεται ότι οι δύο άνδρες συμφώνησαν για τη σημασία της συνεργασίας ΗΠΑ-Κίνας, ενώ ο Μπαράκ Ομπάμα προέτρεψε για απευθείας διάλογο μεταξύ της Κίνας και του Θιβέτ.
πηγή<ΤΑ ΝΕΑ>
Η επίσκεψη έγινε παρά τις «προειδοποιήσεις» της Κίνας ότι η επίσκεψη θα επιδεινώσει περισσότερο τις σινοαμερικανικές σχέσεις. Οι προγραμματισμένες συνομιλίες του Μπαράκ Ομπάμα με τον πνευματικό ηγέτη του Θιβέτ έχουν πυροδοτήσει την οργή της Κίνας, σε μία περίοδο τεταμένων διμερών σχέσεων με φόντο ζητήματα από την ισοτιμία του γουάν και το εμπόριο έως τις αμερικανικές πωλήσεις όπλων στην Ταϊβάν.
Η απόφαση του Μπαράκ Ομπάμα να προχωρήσει η συνάντηση στοχεύει στο να αντικρούσει τις φωνές εντός ΗΠΑ ότι ο Αμερικανός πρόεδρος συμπεριφέρεται «υποχωρητικά» απέναντι στην Κίνα. Τηρώντας όμως τις ισορροπίες και προσέχοντας να μην προκαλέσει τις ευαισθησίες του Πεκίνου, ο Αμερικανός πρόεδρος υποδέχθηκε τον Δαλάι Λάμα στην Αίθουσα των Χαρτών και όχι στο Οβάλ Γραφείο, για να υπογραμμιστεί η «ανεπίσημη φύση» της συνάντησης.
Κατά παράδοση, το Οβάλ Γραφείο θεωρείται χώρος υποδοχής πολιτικών ηγετών -με αυτόν τον τρόπο, η Ουάσιγκτον θέλει να τονίσει ότι δεν αντιλαμβάνεται κατ' αυτό τον τρόπο τον Δαλάι Λάμα. Την πραγματοποίηση της συνάντησης, πάντως, «τίμησαν» με πυροτεχνήματα κάτοικοι του Θιβέτ σύμφωνα με το Reuters, κίνηση ενδεικτική της σημασίας που αποδίδεται στον εξόριστο πνευματικό ηγέτη από τους συμπατριώτες του.
Προγραμματισμένη είναι επίσης συνάντηση του εξόριστου ηγέτη και με την Αμερικανίδα υπουργό Εξωτερικών Χίλαρι Κλίντον.
Στο επίκεντρο της συνομιλίας του Ομπάμα με τον Δαλάι Λάμα βρέθηκε η ανάγκη προώθησης της ειρήνης, των ανθρωπιστικών αξιών και της θρησκευτικής αρμονίας, όπως ανέφερε στον Τύπο ο 74χρονος πνευματικός ηγέτης του Θιβέτ λέγοντας επίσης ότι είναι «πολύ χαρούμενος» μετά από τη συνάντησή του με τον Αμερικανό πρόεδρο.
Μιλώντας στους δεκάδες δημοσιογράφους που είχαν συγκεντρωθεί από νωρίς στο Λευκό Οίκο ο Δαλάι Λάμαι ανέφερε ότι εξέφρασε, μεταξύ άλλων, στον Ομπάμα το θαυμασμό του για την Αμερική, την οποία χαρακτήρισε «χώρα πρωταθλήτρια της δημοκρατίας, της ελευθερίας και των ανθρωπίνων αξιών».
Σε λακωνική ανακοίνωση του Λευκού Οίκου αναφέρεται ότι οι δύο άνδρες συμφώνησαν για τη σημασία της συνεργασίας ΗΠΑ-Κίνας, ενώ ο Μπαράκ Ομπάμα προέτρεψε για απευθείας διάλογο μεταξύ της Κίνας και του Θιβέτ.
πηγή<ΤΑ ΝΕΑ>
2/18/2010
Greek Crisis: EU Leaders Reach Deal Over Debt
2:56pm UK, Thursday February 11, 2010
Hazel Tyldesley, Sky News Online
European leaders have reached a deal to help Greece with a crippling debt crisis that threatens to spread to other eurozone nations, the EU President has said.
Belgian politician Herman Van Rompuy announced that euro area member states would take "determined and co-ordinated action if needed to safeguard stability in the euro area".
He said they would back the Greek government's action plan to reduce its deficit and would suggest additional measures if needed, "drawing on the expertise of the International Monetary Fund".
Commenting on the development, Sky News' political correspondent Joey Jones said it would be seen more as a staging post than a solution.
"It is going to take more than this to convince the markets that this problem is going to be dealt with satisfactorily," he said.
Greece is on the brink of financial collapse and there has been speculation that a giant bail-out might be needed.
Earlier, the Chancellor said Britain had "no plans" to help bail out the struggling nation.
Greek PM George Papandreou arrives at the summit of European leaders in Brussels
Greek troubles have plunged the euro currency into its biggest crisis since it was launched 10 years ago and served as an example of how interconnected the global economy is.
In theory, the country could be forced to abandon the euro altogether and return to the drachma, but realistically its wealthier neighbours are likely to bail it out with a joint loan.
However, the Chancellor Alistair Darling has said Britain has "no proposal" to help provide such a cash injection and added that it was a eurozone problem.
"I think it's important that Greece sticks to what it promised, that it delivers on its programme," he said.
"The euro area countries have said they want to manage the situation and there are discussions taking place."
Greeks march in Athens over the handling of the crisis, with sign saying: 'I Do Not Pay'
Market analyst David Buik told Sky News it was "a serious situation" but said he did not expect euro area member states to hand out cash.
"It seems extremely unlikely that Europe will in the full sense of the word make loans. What I think it will do instead is give guarantees for loans," he said.
"I suspect the International Monetary Fund will have to come in."
Greece came under intense EU pressure to slash spending after it revealed a massive and previously undeclared budget shortfall last year. The shortfall continues to shake financial markets and the euro, which is shared by 16 EU members.
Greece's deficit spiralled to more than 12% of economic output in 2009, more than four times the eurozone limit.
Prime Minister George Papandreou's new government has announced sweeping spending cuts that will freeze salaries and cut bonuses, and increase the average retirement age by two years to 63.
The government also announced new taxes, which it insists will increase the burden on the rich but benefit the poor.
Widespread protests followed the revelation of the tough measures.
Meanwhile, Belgium's former prime minister told Sky News he believed Europe should have acted sooner to find a solution to Greece's financial crisis.
Guy Verhofstadt, who is the leader of the Alliance of Liberals and Democrats for Europe, told Jeff Randall Live: "The problems were there last December, but it was a mistake for the European Union not to come with a package of measures earlier," he said.
"We have an ECB (European Central Bank), a monetary union, so it's our obligation to sort out the problem."
2:56pm UK, Thursday February 11, 2010
Hazel Tyldesley, Sky News Online
European leaders have reached a deal to help Greece with a crippling debt crisis that threatens to spread to other eurozone nations, the EU President has said.
Belgian politician Herman Van Rompuy announced that euro area member states would take "determined and co-ordinated action if needed to safeguard stability in the euro area".
He said they would back the Greek government's action plan to reduce its deficit and would suggest additional measures if needed, "drawing on the expertise of the International Monetary Fund".
Commenting on the development, Sky News' political correspondent Joey Jones said it would be seen more as a staging post than a solution.
"It is going to take more than this to convince the markets that this problem is going to be dealt with satisfactorily," he said.
Greece is on the brink of financial collapse and there has been speculation that a giant bail-out might be needed.
Earlier, the Chancellor said Britain had "no plans" to help bail out the struggling nation.
Greek PM George Papandreou arrives at the summit of European leaders in Brussels
Greek troubles have plunged the euro currency into its biggest crisis since it was launched 10 years ago and served as an example of how interconnected the global economy is.
In theory, the country could be forced to abandon the euro altogether and return to the drachma, but realistically its wealthier neighbours are likely to bail it out with a joint loan.
However, the Chancellor Alistair Darling has said Britain has "no proposal" to help provide such a cash injection and added that it was a eurozone problem.
"I think it's important that Greece sticks to what it promised, that it delivers on its programme," he said.
"The euro area countries have said they want to manage the situation and there are discussions taking place."
Greeks march in Athens over the handling of the crisis, with sign saying: 'I Do Not Pay'
Market analyst David Buik told Sky News it was "a serious situation" but said he did not expect euro area member states to hand out cash.
"It seems extremely unlikely that Europe will in the full sense of the word make loans. What I think it will do instead is give guarantees for loans," he said.
"I suspect the International Monetary Fund will have to come in."
Greece came under intense EU pressure to slash spending after it revealed a massive and previously undeclared budget shortfall last year. The shortfall continues to shake financial markets and the euro, which is shared by 16 EU members.
Greece's deficit spiralled to more than 12% of economic output in 2009, more than four times the eurozone limit.
Prime Minister George Papandreou's new government has announced sweeping spending cuts that will freeze salaries and cut bonuses, and increase the average retirement age by two years to 63.
The government also announced new taxes, which it insists will increase the burden on the rich but benefit the poor.
Widespread protests followed the revelation of the tough measures.
Meanwhile, Belgium's former prime minister told Sky News he believed Europe should have acted sooner to find a solution to Greece's financial crisis.
Guy Verhofstadt, who is the leader of the Alliance of Liberals and Democrats for Europe, told Jeff Randall Live: "The problems were there last December, but it was a mistake for the European Union not to come with a package of measures earlier," he said.
"We have an ECB (European Central Bank), a monetary union, so it's our obligation to sort out the problem."
To fix the Greek crisis, deal with the eurozone’s imbalances
By Tony Barber*
Financial Times, Brussels Blog 1-2-2010
The expression “it never rains but it pours” may seem inappropriate for a Mediterranean country such as Greece. But it was the phrase that sprang to mind when I heard last week that Greek tax collectors are planning to go on strike in protest at the government’s austerity measures. Like the political manipulation of budget data, the inefficiency of the tax system is one of the Greek state’s most glaring weaknesses. How will a tax collectors’ strike help matters?
That said, I do not share the view of German and French government officials who insisted vehemently last week that the solution to Greece’s problems lies almost entirely with the Greeks themselves. If this were the answer, nothing would be simpler than for the Greeks to roll up their sleeves and get on with a 10-year programe of wage restraint and productivity growth.
The truth is less pleasant: the Greek turmoil reflects a wider crisis of imbalances in the 16-nation eurozone, and everyone will have to make a contribution to bring this wider crisis under control. Specifically, Greece and a few other countries - notably, Portugal and Spain - have very big current account deficits, while Germany, Europe’s champion exporter and the the eurozone’s largest economy, tends to run big current account surpluses. The Greek deficit was a remarkable 12 per cent of gross domestic product in the third quarter of 2009, and Portugal’s stood at 10 per cent.
For sure, Greece and Portugal need to improve their competitiveness, but they would also benefit from stronger foreign demand for their products and services, especially in Germany. In order to overcome the eurozone’s crisis, it will be as necessary to raise demand in Germany and other surplus countries as to hold down wages and root out corruption in Greece.
This will be no easy task, for just as the mentality of German business is geared to the ruthless pursuit of international competitive advantage, so the mentality of German society is in many respects doggedly attached to the goal of amassing domestic savings. Yet in the long run it would be in Germany’s best interests to reduce the eurozone’s imbalances. The alternative - emergency financial support for Greece, arranged through gritted teeth and against the wishes of a disgruntled German public opinion - would surely be worse.
*Tony Barber is the FT's Brussels bureau chief since September 2007
By Tony Barber*
Financial Times, Brussels Blog 1-2-2010
The expression “it never rains but it pours” may seem inappropriate for a Mediterranean country such as Greece. But it was the phrase that sprang to mind when I heard last week that Greek tax collectors are planning to go on strike in protest at the government’s austerity measures. Like the political manipulation of budget data, the inefficiency of the tax system is one of the Greek state’s most glaring weaknesses. How will a tax collectors’ strike help matters?
That said, I do not share the view of German and French government officials who insisted vehemently last week that the solution to Greece’s problems lies almost entirely with the Greeks themselves. If this were the answer, nothing would be simpler than for the Greeks to roll up their sleeves and get on with a 10-year programe of wage restraint and productivity growth.
The truth is less pleasant: the Greek turmoil reflects a wider crisis of imbalances in the 16-nation eurozone, and everyone will have to make a contribution to bring this wider crisis under control. Specifically, Greece and a few other countries - notably, Portugal and Spain - have very big current account deficits, while Germany, Europe’s champion exporter and the the eurozone’s largest economy, tends to run big current account surpluses. The Greek deficit was a remarkable 12 per cent of gross domestic product in the third quarter of 2009, and Portugal’s stood at 10 per cent.
For sure, Greece and Portugal need to improve their competitiveness, but they would also benefit from stronger foreign demand for their products and services, especially in Germany. In order to overcome the eurozone’s crisis, it will be as necessary to raise demand in Germany and other surplus countries as to hold down wages and root out corruption in Greece.
This will be no easy task, for just as the mentality of German business is geared to the ruthless pursuit of international competitive advantage, so the mentality of German society is in many respects doggedly attached to the goal of amassing domestic savings. Yet in the long run it would be in Germany’s best interests to reduce the eurozone’s imbalances. The alternative - emergency financial support for Greece, arranged through gritted teeth and against the wishes of a disgruntled German public opinion - would surely be worse.
*Tony Barber is the FT's Brussels bureau chief since September 2007
A Greek crisis is coming to America
By Niall Ferguson
Published: February 10 2010 20:15 | Last updated: February 10 2010 20:15
It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate.
There is of course a distinctive feature to the eurozone crisis. Because of the way the European Monetary Union was designed, there is in fact no mechanism for a bail-out of the Greek government by the European Union, other member states or the European Central Bank (articles 123 and 125 of the Lisbon treaty). True, Article 122 may be invoked by the European Council to assist a member state that is “seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control”, but at this point nobody wants to pretend that Greece’s yawning deficit was an act of God. Nor is there a way for Greece to devalue its currency, as it would have done in the pre-EMU days of the drachma. There is not even a mechanism for Greece to leave the eurozone.
That leaves just three possibilities: one of the most excruciating fiscal squeezes in modern European history – reducing the deficit from 13 per cent to 3 per cent of gross domestic product within just three years; outright default on all or part of the Greek government’s debt; or (most likely, as signalled by German officials on Wednesday) some kind of bail-out led by Berlin. Because none of these options is very appealing, and because any decision about Greece will have implications for Portugal, Spain and possibly others, it may take much horse-trading before one can be reached.
Yet the idiosyncrasies of the eurozone should not distract us from the general nature of the fiscal crisis that is now afflicting most western economies. Call it the fractal geometry of debt: the problem is essentially the same from Iceland to Ireland to Britain to the US. It just comes in widely differing sizes.
What we in the western world are about to learn is that there is no such thing as a Keynesian free lunch. Deficits did not “save” us half so much as monetary policy – zero interest rates plus quantitative easing – did. First, the impact of government spending (the hallowed “multiplier”) has been much less than the proponents of stimulus hoped. Second, there is a good deal of “leakage” from open economies in a globalised world. Last, crucially, explosions of public debt incur bills that fall due much sooner than we expect
For the world’s biggest economy, the US, the day of reckoning still seems reassuringly remote. The worse things get in the eurozone, the more the US dollar rallies as nervous investors park their cash in the “safe haven” of American government debt. This effect may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008.
Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase “safe haven”. US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.
Even according to the White House’s new budget projections, the gross federal debt will exceed 100 per cent of GDP in just two years’ time. This year, like last year, the federal deficit will be around 10 per cent of GDP. The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That’s right, never.
The International Monetary Fund recently published estimates of the fiscal adjustments developed economies would need to make to restore fiscal stability over the decade ahead. Worst were Japan and the UK (a fiscal tightening of 13 per cent of GDP). Then came Ireland, Spain and Greece (9 per cent). And in sixth place? Step forward America, which would need to tighten fiscal policy by 8.8 per cent of GDP to satisfy the IMF.
Explosions of public debt hurt economies in the following way, as numerous empirical studies have shown. By raising fears of default and/or currency depreciation ahead of actual inflation, they push up real interest rates. Higher real rates, in turn, act as drag on growth, especially when the private sector is also heavily indebted – as is the case in most western economies, not least the US.
Although the US household savings rate has risen since the Great Recession began, it has not risen enough to absorb a trillion dollars of net Treasury issuance a year. Only two things have thus far stood between the US and higher bond yields: purchases of Treasuries (and mortgage-backed securities, which many sellers essentially swapped for Treasuries) by the Federal Reserve and reserve accumulation by the Chinese monetary authorities.
But now the Fed is phasing out such purchases and is expected to wind up quantitative easing. Meanwhile, the Chinese have sharply reduced their purchases of Treasuries from around 47 per cent of new issuance in 2006 to 20 per cent in 2008 to an estimated 5 per cent last year. Small wonder Morgan Stanley assumes that 10-year yields will rise from around 3.5 per cent to 5.5 per cent this year. On a gross federal debt fast approaching $15,000bn, that implies up to $300bn of extra interest payments – and you get up there pretty quickly with the average maturity of the debt now below 50 months.
The Obama administration’s new budget blithely assumes real GDP growth of 3.6 per cent over the next five years, with inflation averaging 1.4 per cent. But with rising real rates, growth might well be lower. Under those circumstances, interest payments could soar as a share of federal revenue – from a tenth to a fifth to a quarter.
Last week Moody’s Investors Service warned that the triple A credit rating of the US should not be taken for granted. That warning recalls Larry Summers’ killer question (posed before he returned to government): “How long can the world’s biggest borrower remain the world’s biggest power?”
On reflection, it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic.
The writer is a contributing editor of the FT and author of ‘The Ascent of Money: A Financial History of the World‘
More columns at www.ft.com/niallferguson
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
By Niall Ferguson
Published: February 10 2010 20:15 | Last updated: February 10 2010 20:15
It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate.
There is of course a distinctive feature to the eurozone crisis. Because of the way the European Monetary Union was designed, there is in fact no mechanism for a bail-out of the Greek government by the European Union, other member states or the European Central Bank (articles 123 and 125 of the Lisbon treaty). True, Article 122 may be invoked by the European Council to assist a member state that is “seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control”, but at this point nobody wants to pretend that Greece’s yawning deficit was an act of God. Nor is there a way for Greece to devalue its currency, as it would have done in the pre-EMU days of the drachma. There is not even a mechanism for Greece to leave the eurozone.
That leaves just three possibilities: one of the most excruciating fiscal squeezes in modern European history – reducing the deficit from 13 per cent to 3 per cent of gross domestic product within just three years; outright default on all or part of the Greek government’s debt; or (most likely, as signalled by German officials on Wednesday) some kind of bail-out led by Berlin. Because none of these options is very appealing, and because any decision about Greece will have implications for Portugal, Spain and possibly others, it may take much horse-trading before one can be reached.
Yet the idiosyncrasies of the eurozone should not distract us from the general nature of the fiscal crisis that is now afflicting most western economies. Call it the fractal geometry of debt: the problem is essentially the same from Iceland to Ireland to Britain to the US. It just comes in widely differing sizes.
What we in the western world are about to learn is that there is no such thing as a Keynesian free lunch. Deficits did not “save” us half so much as monetary policy – zero interest rates plus quantitative easing – did. First, the impact of government spending (the hallowed “multiplier”) has been much less than the proponents of stimulus hoped. Second, there is a good deal of “leakage” from open economies in a globalised world. Last, crucially, explosions of public debt incur bills that fall due much sooner than we expect
For the world’s biggest economy, the US, the day of reckoning still seems reassuringly remote. The worse things get in the eurozone, the more the US dollar rallies as nervous investors park their cash in the “safe haven” of American government debt. This effect may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008.
Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase “safe haven”. US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.
Even according to the White House’s new budget projections, the gross federal debt will exceed 100 per cent of GDP in just two years’ time. This year, like last year, the federal deficit will be around 10 per cent of GDP. The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That’s right, never.
The International Monetary Fund recently published estimates of the fiscal adjustments developed economies would need to make to restore fiscal stability over the decade ahead. Worst were Japan and the UK (a fiscal tightening of 13 per cent of GDP). Then came Ireland, Spain and Greece (9 per cent). And in sixth place? Step forward America, which would need to tighten fiscal policy by 8.8 per cent of GDP to satisfy the IMF.
Explosions of public debt hurt economies in the following way, as numerous empirical studies have shown. By raising fears of default and/or currency depreciation ahead of actual inflation, they push up real interest rates. Higher real rates, in turn, act as drag on growth, especially when the private sector is also heavily indebted – as is the case in most western economies, not least the US.
Although the US household savings rate has risen since the Great Recession began, it has not risen enough to absorb a trillion dollars of net Treasury issuance a year. Only two things have thus far stood between the US and higher bond yields: purchases of Treasuries (and mortgage-backed securities, which many sellers essentially swapped for Treasuries) by the Federal Reserve and reserve accumulation by the Chinese monetary authorities.
But now the Fed is phasing out such purchases and is expected to wind up quantitative easing. Meanwhile, the Chinese have sharply reduced their purchases of Treasuries from around 47 per cent of new issuance in 2006 to 20 per cent in 2008 to an estimated 5 per cent last year. Small wonder Morgan Stanley assumes that 10-year yields will rise from around 3.5 per cent to 5.5 per cent this year. On a gross federal debt fast approaching $15,000bn, that implies up to $300bn of extra interest payments – and you get up there pretty quickly with the average maturity of the debt now below 50 months.
The Obama administration’s new budget blithely assumes real GDP growth of 3.6 per cent over the next five years, with inflation averaging 1.4 per cent. But with rising real rates, growth might well be lower. Under those circumstances, interest payments could soar as a share of federal revenue – from a tenth to a fifth to a quarter.
Last week Moody’s Investors Service warned that the triple A credit rating of the US should not be taken for granted. That warning recalls Larry Summers’ killer question (posed before he returned to government): “How long can the world’s biggest borrower remain the world’s biggest power?”
On reflection, it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic.
The writer is a contributing editor of the FT and author of ‘The Ascent of Money: A Financial History of the World‘
More columns at www.ft.com/niallferguson
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Greece: The start of a systemic crisis of the Eurozone?
Paul De Grauwe
Is the Greek crisis the beginning of a deeper sovereign debt crisis that could destabilise the Eurozone? This column argues the Eurozone is no closer to a debt crisis than the US, but some members are getting close. EU governments could bailout Greece and, to avoid having to do so, they should clarify their stance on the matter
the Greek crisis the beginning of a deeper sovereign debt crisis that could destabilise the Eurozone? This column argues the Eurozone is no closer to a debt crisis than the US, but some members are getting close. EU governments could bailout Greece and, to avoid having to do so, they should clarify their stance on the matter.
The Greek crisis has led to fears that this is only the beginning of a deeper sovereign debt crisis that could ultimately destabilise the Eurozone. Are these fears exaggerated? How to deal with these problems? These are some of the questions many observers have been asking themselves.
Origins of the present crisis
It is useful to start out with the origins of the present crisis. Figure 1 provides a useful way to organise our thoughts. It shows the average yearly changes (in percent of GDP) of private and public debt in the Eurozone.
The period 1999-2009 has been organised in periods of booms and busts: the boom years were 1999-2001 and 2005-07; the bust years were 2002-04 and 2008-09.
One observes a number of remarkable patterns.
•First, private debt increases much more than public debt throughout the whole period (compare the left hand axis with the right hand axis).
•Second, during boom years private debt increases spectacularly.
The latest boom period of 2005-07 stands out with yearly additions to private debt amounting on average to 35 percentage points of GDP.
•During these boom periods, public debt growth drops to 1 to 2 percentage points of GDP. The opposite occurs during bust years. Private debt growth slows down and public debt growth accelerates.
Again the last period of bust (2008-09) stands out. Public debt increases by 10 percentage points of GDP per year, mirroring the spectacular increase of private debt during the boom years (but note that the surge of public debt during the bust years of 2008-09 are dwarfed by the private debt surge during the preceding boom years).
The following picture emerges. During boom years the private sector adds a lot of debt. This was spectacularly so during the boom of 2005-07. Then the bust comes and the governments pick up the pieces. They do this in two ways.
•First, as the economy is driven into a recession, government revenues decline and social spending increases.
•Second as part of the private debt is implicitly guaranteed by the government (bank debt in particular) the government is forced to issue its own debt to rescue private institutions.
Thus the driving force of the cyclical behaviour of government debt is the boom and bust character of private debt. This feature is particularly pronounced during the last boom-bust cycle that led to unsustainable private debt growth forcing governments to add large amounts to its own debt.1
Is the public debt sustainable?
Financial markets now ask the question of whether the addition of government debt is sustainable. Clearly the rate of increase of the last two years is unsustainable. But with Eurozone government debt standing at 85% of GDP at the end of 2009, the Eurozone is miles away from a possible debt crisis.
Things are different in some individual countries, in Greece in particular, a country with a weak political system that has been adding government debt at a much higher rate than the rest of the Eurozone and that in addition has a debt level exceeding 100% of GDP. So, while the Eurozone as a whole is no closer to a debt crisis than is the US, some of its member states have been moving closer to such a crisis.
Is it conceivable that a debt crisis in one member country of the Eurozone triggers a more general crisis involving other Eurozone countries? My answer is that yes, it is conceivable, but that it can easily be avoided.2
A debt crisis is conceivable
Let’s start with the first part of the answer: It is conceivable. Financial markets are nervous and the most nervous actors in the financial markets are the rating agencies. One thing one can say about these institutions is that they systematically fail to see crises come. And after the crisis erupts, they systematically overreact thereby intensifying it.
This was the case two years ago when the rating agencies were completely caught off guard by the credit crisis. It was again the case during the last few weeks. Only after Dubai postponed the repayment of its bonds and we had all read about it in the FT, did the rating agencies realise there was a crisis and did they downgrade Dubai’s bonds.
Credit rating agencies playing catch-up
Having failed so miserably in forecasting a sovereign debt crisis, they went on a frantic search for possible other sovereign bond crises. They found Greece, and other Eurozone countries with high budget deficits, and started the process of downgrading. This in turn led to a significant increase in government bond rates in countries “visited” by the agencies.
Add to this that the ECB is still using the ratings produced by the same agencies to accept or refuse collateral presented by banks in the Eurozone, and one can see that all the elements are in place to transform a local crisis into a crisis for the system as a whole.
A systemic crisis can be avoided
It does not have to be that way, however. A systemic crisis can be avoided. Let’s start with Greece again. Although an outright default by the Greek government remains a remote possibility it is good to think through what the other Eurozone countries can and will do in that case. They can easily bail out Greece. It does not cost them that much. In the unlikely event that Greece defaults on the full amount of its outstanding debt, a bail-out by the other Eurozone governments would add about 3% to these governments’ debt – a small number compared to the amounts added to save the banks during the financial crisis.
A Eurozone bailout is likely
The other Eurozone governments are also very likely to bail out Greece out of pure self-interest. There are two reasons for this.
•First, a significant part of Greek bonds are held by financial institutions in Eurozone countries.
These institutions are likely to pressure their governments to come to their rescue.
•Second, and more importantly, a failure to bail out Greece would trigger contagious effects in sovereign bond markets of the Eurozone. Investors having lost a lot of money holding Greek bonds would likely dump government bonds of countries, like Spain, Ireland, Portugal, Belgium that they perceive to have similar budgetary problems.
The local sovereign debt crisis would trigger an avalanche of other sovereign debt crises. I conclude that the Eurozone governments are condemned to intervene and to rescue the government of a member country hit by a sovereign debt crisis.
Are bailouts illegal?
It is sometimes said that bail-outs in the Eurozone are illegal because the Treaty says so (see Wyplosz 2009 on this). But this is a misreading of the Treaty. The no-bail-out clause only says that the EU shall not be liable for the debt of governments, i.e. the governments of the Union cannot be forced to bail out a member state. But this does not exclude that the governments of the EU freely decide to provide financial assistance to one of the member states. In fact this is explicitly laid down in Article 100, section 2.3
Eurozone governments have the legal capacity to bail out other governments, and in my opinion they are very likely to do so in the Eurozone if the need arises.
Financial markets today do not seem to believe this conclusion. If they did, they would not price the risk of Greek government bonds 250 basis points higher than the risk of German government bonds. The scepticism of the financial markets has much to do with the poor communication by the EU-authorities that have given conflicting signals about their readiness to give financial support to Greece if a sovereign debt crisis were to erupt.
Conclusion
All this leads to the conclusion that the Eurozone governments should make clear where they stand on this issue. Not doing so implies that each time one member country gets into financial problems the future of the system is put into doubt.
References
Reinhart, C., and Rogoff, K., (2009), This Time is Different: Eight Centuries of Financial Folly, Princeton University Press, 496pp.
Eichengreen, B., (2007), The euro: love it or leave it?, VoxEU.org, 19 November.
Wyplosz, C., (2009), Bailouts: the next step up?, VoxEU.org, 21 February.
--------------------------------------------------------------------------------
1 For a fascinating historic analysis of public and private debt see Reinhart and Rogoff(2009).
2 See also Eichengreen(2007) on this issue.
3 Here is the text: “Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, acting by a qualified majority on a proposal from the Commission, may grant, under certain conditions, Community financial assistance to the Member State concerned”.
Is the Greek crisis the beginning of a deeper sovereign debt crisis that could destabilise the Eurozone? This column argues the Eurozone is no closer to a debt crisis than the US, but some members are getting close. EU governments could bailout Greece and, to avoid having to do so, they should clarify their stance on the matter
the Greek crisis the beginning of a deeper sovereign debt crisis that could destabilise the Eurozone? This column argues the Eurozone is no closer to a debt crisis than the US, but some members are getting close. EU governments could bailout Greece and, to avoid having to do so, they should clarify their stance on the matter.
The Greek crisis has led to fears that this is only the beginning of a deeper sovereign debt crisis that could ultimately destabilise the Eurozone. Are these fears exaggerated? How to deal with these problems? These are some of the questions many observers have been asking themselves.
Origins of the present crisis
It is useful to start out with the origins of the present crisis. Figure 1 provides a useful way to organise our thoughts. It shows the average yearly changes (in percent of GDP) of private and public debt in the Eurozone.
The period 1999-2009 has been organised in periods of booms and busts: the boom years were 1999-2001 and 2005-07; the bust years were 2002-04 and 2008-09.
One observes a number of remarkable patterns.
•First, private debt increases much more than public debt throughout the whole period (compare the left hand axis with the right hand axis).
•Second, during boom years private debt increases spectacularly.
The latest boom period of 2005-07 stands out with yearly additions to private debt amounting on average to 35 percentage points of GDP.
•During these boom periods, public debt growth drops to 1 to 2 percentage points of GDP. The opposite occurs during bust years. Private debt growth slows down and public debt growth accelerates.
Again the last period of bust (2008-09) stands out. Public debt increases by 10 percentage points of GDP per year, mirroring the spectacular increase of private debt during the boom years (but note that the surge of public debt during the bust years of 2008-09 are dwarfed by the private debt surge during the preceding boom years).
The following picture emerges. During boom years the private sector adds a lot of debt. This was spectacularly so during the boom of 2005-07. Then the bust comes and the governments pick up the pieces. They do this in two ways.
•First, as the economy is driven into a recession, government revenues decline and social spending increases.
•Second as part of the private debt is implicitly guaranteed by the government (bank debt in particular) the government is forced to issue its own debt to rescue private institutions.
Thus the driving force of the cyclical behaviour of government debt is the boom and bust character of private debt. This feature is particularly pronounced during the last boom-bust cycle that led to unsustainable private debt growth forcing governments to add large amounts to its own debt.1
Is the public debt sustainable?
Financial markets now ask the question of whether the addition of government debt is sustainable. Clearly the rate of increase of the last two years is unsustainable. But with Eurozone government debt standing at 85% of GDP at the end of 2009, the Eurozone is miles away from a possible debt crisis.
Things are different in some individual countries, in Greece in particular, a country with a weak political system that has been adding government debt at a much higher rate than the rest of the Eurozone and that in addition has a debt level exceeding 100% of GDP. So, while the Eurozone as a whole is no closer to a debt crisis than is the US, some of its member states have been moving closer to such a crisis.
Is it conceivable that a debt crisis in one member country of the Eurozone triggers a more general crisis involving other Eurozone countries? My answer is that yes, it is conceivable, but that it can easily be avoided.2
A debt crisis is conceivable
Let’s start with the first part of the answer: It is conceivable. Financial markets are nervous and the most nervous actors in the financial markets are the rating agencies. One thing one can say about these institutions is that they systematically fail to see crises come. And after the crisis erupts, they systematically overreact thereby intensifying it.
This was the case two years ago when the rating agencies were completely caught off guard by the credit crisis. It was again the case during the last few weeks. Only after Dubai postponed the repayment of its bonds and we had all read about it in the FT, did the rating agencies realise there was a crisis and did they downgrade Dubai’s bonds.
Credit rating agencies playing catch-up
Having failed so miserably in forecasting a sovereign debt crisis, they went on a frantic search for possible other sovereign bond crises. They found Greece, and other Eurozone countries with high budget deficits, and started the process of downgrading. This in turn led to a significant increase in government bond rates in countries “visited” by the agencies.
Add to this that the ECB is still using the ratings produced by the same agencies to accept or refuse collateral presented by banks in the Eurozone, and one can see that all the elements are in place to transform a local crisis into a crisis for the system as a whole.
A systemic crisis can be avoided
It does not have to be that way, however. A systemic crisis can be avoided. Let’s start with Greece again. Although an outright default by the Greek government remains a remote possibility it is good to think through what the other Eurozone countries can and will do in that case. They can easily bail out Greece. It does not cost them that much. In the unlikely event that Greece defaults on the full amount of its outstanding debt, a bail-out by the other Eurozone governments would add about 3% to these governments’ debt – a small number compared to the amounts added to save the banks during the financial crisis.
A Eurozone bailout is likely
The other Eurozone governments are also very likely to bail out Greece out of pure self-interest. There are two reasons for this.
•First, a significant part of Greek bonds are held by financial institutions in Eurozone countries.
These institutions are likely to pressure their governments to come to their rescue.
•Second, and more importantly, a failure to bail out Greece would trigger contagious effects in sovereign bond markets of the Eurozone. Investors having lost a lot of money holding Greek bonds would likely dump government bonds of countries, like Spain, Ireland, Portugal, Belgium that they perceive to have similar budgetary problems.
The local sovereign debt crisis would trigger an avalanche of other sovereign debt crises. I conclude that the Eurozone governments are condemned to intervene and to rescue the government of a member country hit by a sovereign debt crisis.
Are bailouts illegal?
It is sometimes said that bail-outs in the Eurozone are illegal because the Treaty says so (see Wyplosz 2009 on this). But this is a misreading of the Treaty. The no-bail-out clause only says that the EU shall not be liable for the debt of governments, i.e. the governments of the Union cannot be forced to bail out a member state. But this does not exclude that the governments of the EU freely decide to provide financial assistance to one of the member states. In fact this is explicitly laid down in Article 100, section 2.3
Eurozone governments have the legal capacity to bail out other governments, and in my opinion they are very likely to do so in the Eurozone if the need arises.
Financial markets today do not seem to believe this conclusion. If they did, they would not price the risk of Greek government bonds 250 basis points higher than the risk of German government bonds. The scepticism of the financial markets has much to do with the poor communication by the EU-authorities that have given conflicting signals about their readiness to give financial support to Greece if a sovereign debt crisis were to erupt.
Conclusion
All this leads to the conclusion that the Eurozone governments should make clear where they stand on this issue. Not doing so implies that each time one member country gets into financial problems the future of the system is put into doubt.
References
Reinhart, C., and Rogoff, K., (2009), This Time is Different: Eight Centuries of Financial Folly, Princeton University Press, 496pp.
Eichengreen, B., (2007), The euro: love it or leave it?, VoxEU.org, 19 November.
Wyplosz, C., (2009), Bailouts: the next step up?, VoxEU.org, 21 February.
--------------------------------------------------------------------------------
1 For a fascinating historic analysis of public and private debt see Reinhart and Rogoff(2009).
2 See also Eichengreen(2007) on this issue.
3 Here is the text: “Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, acting by a qualified majority on a proposal from the Commission, may grant, under certain conditions, Community financial assistance to the Member State concerned”.
Βρήκαν στου Ψυρρή τις Ηρίες Πύλες
«Ηρία: αι πύλαι Αθήνησι διά το τους νεκρούς εκφέρεσθαι εκεί επί τα ηρία, ο εστί τους τάφους» σημείωνε ο Θεόφραστος. Το εσωτερικό των Ηρίων Πυλών εντόπισε τώρα η αρχαιολογική σκαπάνη, στην περιοχή του Κεραμεικού, που δεν παύει να μας δίνει σημαντικά ευρήματα. Σε οικόπεδο της οδού Λεωκορίου, στην περιοχή του Ψυρρή, αποκαλύφθηκαν κατάλοιπα των περίφημων πυλών, και το θέμα εισάγεται αύριο στο Κεντρικό Αρχαιολογικό Συμβoύλιο.
Ιχνη των εξωτερικών τμημάτων είχαν ανακαλυφθεί κατά τη διάρκεια παλαιών ανασκαφών, στο οδόστρωμα. Επίσης, σε παρακείμενες οικοδομές, όπως στο παράρτημα Ισλαμικής Τέχνης του Μουσείου Μπενάκη, έχουν εντοπισθεί τμήματα του τείχους της αρχαίας Αθήνας. Οι αρχαιολόγοι γνώριζαν πως οι Ηρίες πύλες τοποθετούνται στην περιοχή καθώς ο Ιωάννης Τραυλός ήδη από τη δεκαετία του ‘60 είχε σχετικές αναφορές, βασισμένες, πάντοτε, σε ανασκαφικά ευρήματα.
Τα κατάλοιπα βρέθηκαν σε στρώματα ελαφρώς διαταραγμένα, αυτό όμως δεν εμποδίζει τους αρχαιολόγους να βγάλουν κάποια πρώτα συμπεράσματα. Η ενδελεχής μελέτη θα δώσει λεπτομέρειες που θα είναι πολύτιμες για την Αθήνα και την επιστήμη. Βορειοδυτικά του περιβόλου του Κεραμεικού, του μεγαλύτερου νεκροταφείου της Αθήνας, βρίσκονταν οι Ηρίες Πύλες (ή Ηρία) το Δίπυλον και η Ιερά Πύλη. Ο αρχαίος δρόμος που περνούσε από την Ηρία κατευθυνόταν στον Ιππιο Κολωνό. Η ονομασία τους σημαίνει πύλες των τάφων (ο τάφος, ιδίως ο τύμβος, τόσο στον Ομηρο όσο και σε μεταγενέστερους, απαντάται συχνά ως ηρίον). Εξω από αυτές και προς τον Κολωνό έχουν ανασκαφεί πάρα πολλοί τάφοι, που επιβεβαίωναν την τοποθεσία των πυλών πριν από τον εντοπισμό τους.
«Οι Αθηναίοι και έξω από την πόλη, στους δήμους και στους δρόμους, έχουν ιερά θεών και ηρώων και τάφους ανθρώπων», γράφει ο αρχαίος περιηγητής Παυσανίας. Ο Παυσανίας είχε δει πολλούς τέτοιους τάφους στην περιοχή, μεταξύ των οποίων «οι τάφοι του Περικλή, του Χαβρία και του Φορμίωνα».
ΑΓΓΕΛΙΚΗ ΚΩΤΤΗ
akotti@pegasus.gr
Εθνος
«Ηρία: αι πύλαι Αθήνησι διά το τους νεκρούς εκφέρεσθαι εκεί επί τα ηρία, ο εστί τους τάφους» σημείωνε ο Θεόφραστος. Το εσωτερικό των Ηρίων Πυλών εντόπισε τώρα η αρχαιολογική σκαπάνη, στην περιοχή του Κεραμεικού, που δεν παύει να μας δίνει σημαντικά ευρήματα. Σε οικόπεδο της οδού Λεωκορίου, στην περιοχή του Ψυρρή, αποκαλύφθηκαν κατάλοιπα των περίφημων πυλών, και το θέμα εισάγεται αύριο στο Κεντρικό Αρχαιολογικό Συμβoύλιο.
Ιχνη των εξωτερικών τμημάτων είχαν ανακαλυφθεί κατά τη διάρκεια παλαιών ανασκαφών, στο οδόστρωμα. Επίσης, σε παρακείμενες οικοδομές, όπως στο παράρτημα Ισλαμικής Τέχνης του Μουσείου Μπενάκη, έχουν εντοπισθεί τμήματα του τείχους της αρχαίας Αθήνας. Οι αρχαιολόγοι γνώριζαν πως οι Ηρίες πύλες τοποθετούνται στην περιοχή καθώς ο Ιωάννης Τραυλός ήδη από τη δεκαετία του ‘60 είχε σχετικές αναφορές, βασισμένες, πάντοτε, σε ανασκαφικά ευρήματα.
Τα κατάλοιπα βρέθηκαν σε στρώματα ελαφρώς διαταραγμένα, αυτό όμως δεν εμποδίζει τους αρχαιολόγους να βγάλουν κάποια πρώτα συμπεράσματα. Η ενδελεχής μελέτη θα δώσει λεπτομέρειες που θα είναι πολύτιμες για την Αθήνα και την επιστήμη. Βορειοδυτικά του περιβόλου του Κεραμεικού, του μεγαλύτερου νεκροταφείου της Αθήνας, βρίσκονταν οι Ηρίες Πύλες (ή Ηρία) το Δίπυλον και η Ιερά Πύλη. Ο αρχαίος δρόμος που περνούσε από την Ηρία κατευθυνόταν στον Ιππιο Κολωνό. Η ονομασία τους σημαίνει πύλες των τάφων (ο τάφος, ιδίως ο τύμβος, τόσο στον Ομηρο όσο και σε μεταγενέστερους, απαντάται συχνά ως ηρίον). Εξω από αυτές και προς τον Κολωνό έχουν ανασκαφεί πάρα πολλοί τάφοι, που επιβεβαίωναν την τοποθεσία των πυλών πριν από τον εντοπισμό τους.
«Οι Αθηναίοι και έξω από την πόλη, στους δήμους και στους δρόμους, έχουν ιερά θεών και ηρώων και τάφους ανθρώπων», γράφει ο αρχαίος περιηγητής Παυσανίας. Ο Παυσανίας είχε δει πολλούς τέτοιους τάφους στην περιοχή, μεταξύ των οποίων «οι τάφοι του Περικλή, του Χαβρία και του Φορμίωνα».
ΑΓΓΕΛΙΚΗ ΚΩΤΤΗ
akotti@pegasus.gr
Εθνος
Εγγραφή σε:
Αναρτήσεις (Atom)