Is Greece going to set off the long feared next wave of the Great Recession?

Joseph Stiglitz, Thomas Piketty and Other World-Renowned Economists Demand End to Greek Austerity
The economists called their letter a “plea for economic sanity and humanity.”

Less than 10% of the money was used by the government for reforming its economy and safeguarding weaker members of society

The rise of anti-austerity parties in Greece and Spain is “good news for Europe”, the economist Thomas Piketty has said, adding that citizens are paying the price of “incredible” attempts to force southern European countries to pay off their debts too fast.

News reports indicate that Greece has just defaulted in today's payment

not their ability to pay.

Quote:

News reports indicate that Greece has just defaulted in today's payment

I have not had time to look at the news, but that is highly unlikely.

Greece Defaults on IMF Loan Despite New Push for Bailout Aid
European finance chiefs shut down Athens’s last-minute request for emergency financial aid

NEW YORK -- The United States may benefit if Greece defaults when its latest loan payment is due on Tuesday, as this may set the stage for a permanent solution to the country’s debt crisis, some economists believe.

The White House on Monday signaled its support for European creditors, who demanded that Greece enact stricter austerity measures if it wants access to another tranche of its bailout fund. Without it, Greece cannot pay back the $1.73 billion owed on Tuesday to the International Monetary Fund. Greece now awaits a July 5 referendum on the new bailout measures.

But although a Greek default carries some near-term risks for the U.S., such a move may actually help Greece broker a deal that with time would lift its depressed economy.

“If they vote yes, it just postpones the day of reckoning,” Mark Weisbrot, co-director of the nonprofit Center for Economic and Policy Research, told HuffPost. “The debt is unsustainable and the austerity is making the debt burden worse by pushing the Greek economy back into recession.”

If Greece acquiesced to European demands, prompting creditors to release funds to pay back the debt due on Tuesday, it would serve as little more than a Band-Aid. European instability would continue, Weisbrot said.

“The instability of the eurozone as it fails to resolves this and the inability of Greece to grow its way out of the problem -- all of those things will affect us,” he said.

His comments echoed sentiments shared by other left-leaning economists, such as Nobel laureates Paul Krugman and Joseph Stiglitz.

There was no win in this for Greece, just a choice of ways to lose.

They've seriously got to smarten their collective asses up.

Did you read that before you commented on it?

In my more than 30 years writing about politics and economics, I have never before witnessed such an episode of sustained, self-righteous, ruinous and dissembling incompetence -- and I'm not talking about Alexis Tsipras and Syriza. As the damage mounts, the effort to rewrite the history of the European Union's abject failure over Greece is already underway. Pending a fuller postmortem, a little clarity on the immediate issues is in order.

On Monday, European Commission President Jean-Claude Juncker said at a news conference that he'd been betrayed by the Greek government.

The creditor institutions, he said, had shown flexibility and sought compromise. Their most recent offer involved no wage cuts, he emphasized, and no pension cuts; it was a package that created "more social fairness." Tsipras had misled Greeks about what the creditors were asking. The talks were getting somewhere. Agreement on this package could have been reached "easily" if Tsipras hadn't collapsed the process early Saturday by calling a referendum.

What an outrageous passel of distortion. Since these talks began five months ago, both sides have budged, but Tsipras has given vastly more ground than the creditors. In particular, he was ready to accede to more fiscal austerity -- a huge climbdown on his part. True, the last offer requires a slightly milder profile of primary budget surpluses than the creditors initially demanded; nonetheless, it still calls for severely (and irrationally) tight fiscal policy.

In contrast, the creditors have refused to climb down on the question of including debt relief in the current talks, absurdly insisting that this is an issue for later. On Tuesday, Tsipras made his most desperate attempt yet to bring the issue forward.

Far from expressing any desire to compromise, dominant voices among the creditors -- notably German Finance Minister Wolfgang Schaeuble, who often seemed to be calling the shots -- have maintained throughout that there is nothing to discuss. The program already in place had to be completed, and that was that.

Yes, the program had failed. No, it wouldn't achieve debt sustainability. Absolutely, it was pointlessly grinding down Greek living standards even further. What did that have to do with it?

Juncker says the last offer made no demand for wage cuts. Really? The offer says the "wage grid" should be modernized, including "decompressing the [public sector] wage distribution." On the face of it, decompressing involves cuts. If the creditors were calling for public-sector wages to be decompressed upward perhaps they should have made this clear. Regardless, the increases in value-added taxes demanded by the creditors mean lower real wages, public and private alike. As for no pension cuts, the creditors called for phasing out new early-retirement penalties and the so-called social solidarity payment for the poorest pensioners. Those are cuts.

The creditors called for a lot else, too. Remember that the Greek economy is on its knees. Living standards have collapsed and the unemployment rate is 25 percent. Now read the offer document, and see if you think the advance in "social fairness" that Juncker stressed at his news conference shines through.

But I haven’t mentioned the biggest distortion of all. Noticing for the first time that Greece has EU citizens within its borders, Juncker addressed them directly on the subject of the July 5 referendum. Greeks will be asked whether they accept the offer presented by the creditors -- an offer, by the way, that the creditors say no longer stands. "No [to the offer that no longer exists] would mean that Greece is saying no to Europe," Juncker explained. President Francois Hollande of France clarified: The vote would determine "whether the Greeks want to stay in the euro zone."

Nonsense. There's no doubt that Greeks want to stay in the euro system -- though I find it increasingly difficult to see why. If Greece leaves the system, it won't be because Greeks decide to leave; it will be because Europe decides to kick them out.

This isn't just semantics. There's no reason, in law or logic, why a Greek default necessitates an exit from the euro. The European Central Bank pulls this trigger by choosing -- choosing, please note -- to withhold its services as lender of last resort to the Greek banking system. That is what it did this week. That is what shut the banks and, in short order, will force the Greek authorities to start issuing a parallel currency in the form of IOUs.

A truly independent ECB, willing to do whatever it takes to defend the euro system, could have announced that it would keep supplying Greek banks with liquidity. If the Greek banks are deemed in due course to be insolvent (which hasn’t happened yet), that doesn't have to trigger an exit, either. Europe has the wherewithal and a bank-rescue mechanism that would allow the banks to be taken over and recapitalized. These options are foreclosed because the supposedly apolitical ECB has let Europe's finance ministers use it as a hammer to extract fiscal concessions from Greece.

Nobody ever imagined that a government default in Europe would dictate ejection from the euro zone. The very possibility would have been correctly recognized as a fatal defect in the design of the system.

If the Greeks vote no, a Greek exit is a possible and even likely consequence. But if it happens, the reason won't be that Greece chose to go. The reason will be that the European Union and its politicized central bank chose to inflict exit as punishment.