Must-Read: Speaking of people who were wrong in and before 2010 and get appear do made little effort to market their beliefs to market, Francesco Giavazzi. Karl Whelan reads him and gets shrill:
: The FT Lets Itself Down Again: Francesco Giavazzi on Greece: "With regular opinion pieces from the likes of Hans-Werner Sinn and Niall Ferguson...
...the Financial Times op-ed page is developing an unfortunate reputation for publishing rubbish on economics.... On Greece from... Francesco Giavazzi (“Greeks chose poverty, let them have their way”) perhaps tops the lot.... I want to offer a few comments on Giavazzi’s piece, starting with his claim about few reforms being achieved in the past five years. No Progress in Five Years? Public Employment... Fiscal Deficits... Structural Reforms... Pension Reforms.... Giavazzi suggests that the European Union may be better off without Greece partly because it causes serious political problems. But the political problems he cites seem fairly odd. The first is that Greece has been a distraction... the can’t-walk-and-chew-gum-at-the-same-time school of political thought.... The second is that Greece “stands in the way” of required further European political union. I’m not sure how it’s doing that. But even if it was, there are far larger obstacles to greater European political union....
The strangest part of Giavazzi’s article is his proposed offer to Greece. It’s a carrot and stick approach that turns out to be all carrot. Giavazzi... seems to call for a complete write-off.... Having written off most of Greece’s debt, his stick is the following. “But it is not for the rest of Europe to impose reforms on Greece. It should merely make crystal clear that without serious reforms, new official loans are over.” Giavazzi may imagine that a country that has just had most of its debts written off and that is close to having a primary balance won’t have any takers in the sovereign bond market because they are not doing enough reforms. But this isn’t how the world works. If bond markets will lend in large quantities to the likes of Brazil and Mexico, a post-write-off Greece should have no problem borrowing....
A useful datapoint to conclude with: Francesco Giavazzi was very enthusiastic about the decision to let Lehman Brothers go bankrupt. If he liked that so much, I suspect he’ll love Grexit.
