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This is a wonderful article by Joseph E. Stiglitz, a Nobel laureate in economics. How worse could the situation in Greece get if Greece opts out of using the Euro and withdraws totally from the EU? That is the real question to be answered.

Professor Mekonen Haddis

JUNE 29, 2015
Europe’s Attack on Greek Democracy

NEW YORK – The rising crescendo of bickering and acrimony within Europe might seem to outsiders to be the inevitable result of the bitter endgame playing out between Greece and its creditors. In fact, European leaders are finally beginning to reveal the true nature of the ongoing debt dispute, and the answer is not pleasant: it is about power and democracy much more than money and economics.
Of course, the economics behind the program that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.
It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned. The troika is still demanding that Greece achieve a primary budget surplus (excluding interest payments) of 3.5% of GDP by 2018.
Economists around the world have condemned that target as punitive, because aiming for it will inevitably result in a deeper downturn. Indeed, even if Greece’s debt is restructured beyond anything imaginable, the country will remain in depression if voters there commit to the troika’s target in the snap referendum to be held this weekend.
In terms of transforming a large primary deficit into a surplus, few countries have accomplished anything like what the Greeks have achieved in the last five years. And, though the cost in terms of human suffering has been extremely high, the Greek government’s recent proposals went a long way toward meeting its creditors’ demands.
We should be clear: almost none of the huge amount of money loaned to Greece has actually gone there. It has gone to pay out private-sector creditors – including German and French banks. Greece has gotten but a pittance, but it has paid a high price to preserve these countries’ banking systems. The IMF and the other “official” creditors do not need the money that is being demanded. Under a business-as-usual scenario, the money received would most likely just be lent out again to Greece.
But, again, it’s not about the money. It’s about using “deadlines” to force Greece to knuckle under, and to accept the unacceptable – not only austerity measures, but other regressive and punitive policies.
But why would Europe do this? Why are European Union leaders resisting the referendum and refusing even to extend by a few days the June 30 deadline for Greece’s next payment to the IMF? Isn’t Europe all about democracy?
In January, Greece’s citizens voted for a government committed to ending austerity. If the government were simply fulfilling its campaign promises, it would already have rejected the proposal. But it wanted to give Greeks a chance to weigh in on this issue, so critical for their country’s future wellbeing.
That concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project. Most of its members’ governments did not seek their people’s approval to turn over their monetary sovereignty to the ECB. When Sweden’s did, Swedes said no. They understood that unemployment would rise if the country’s monetary policy were set by a central bank that focused single-mindedly on inflation (and also that there would be insufficient attention to financial stability). The economy would suffer, because the economic model underlying the eurozone was predicated on power relationships that disadvantaged workers.
And, sure enough, what we are seeing now, 16 years after the eurozone institutionalized those relationships, is the antithesis of democracy: Many European leaders want to see the end of Prime Minister Alexis Tsipras’s leftist government. After all, it is extremely inconvenient to have in Greece a government that is so opposed to the types of policies that have done so much to increase inequality in so many advanced countries, and that is so committed to curbing the unbridled power of wealth. They seem to believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate.
It is hard to advise Greeks how to vote on July 5. Neither alternative – approval or rejection of the troika’s terms – will be easy, and both carry huge risks. A yes vote would mean depression almost without end. Perhaps a depleted country – one that has sold off all of its assets, and whose bright young people have emigrated – might finally get debt forgiveness; perhaps, having shriveled into a middle-income economy, Greece might finally be able to get assistance from the World Bank. All of this might happen in the next decade, or perhaps in the decade after that.
By contrast, a no vote would at least open the possibility that Greece, with its strong democratic tradition, might grasp its destiny in its own hands. Greeks might gain the opportunity to shape a future that, though perhaps not as prosperous as the past, is far more hopeful than the unconscionable torture of the present.
I know how I would vote.

FFD

Looking forward to Addis Abeba Accord (AAA)

Professor Mekonen Haddis

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In the office after a political breakfast meeting.

Professor Mekonen Haddis

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Professor Mekonen Haddis giving a lecture on Ethiopian Foreign and National Security Strategy to students from Dila University.

Extremely excited that this third FFD Conference will be held in Addis. We are expecting about six to seven thousand participants. We are certain of a globally useful outcome of the conference. Just delighted to be part of this huge undertaking by Ethiopia.

Professor Mekonen Haddis

Financing for Development second draft expands, somewhat, on local finance

Following on a month and a half of negotiation and additional consultation, talks to create a global framework on how to pay for new anti-poverty and climate-related development efforts have resulted in a newly revised negotiating text.
Talks for what’s known as the Financing for Development (FFD) process aim for the first time to come up with a collective approach to paying for the new sustainable development agenda being agreed to later this year. The previous global development approach — the Millennium Development Goals — did not include agreement on how to finance the various massive interventions required, in education, sanitation, energy and the like.
Ahead of the MDGs’ replacement, the Sustainable Development Goals (SDGs), the international community is now trying to rectify this problem. While the SDGs are to be finalized in September, the Financing for Development process is trying to come to agreement at a major summit in mid-July, in Addis Ababa. The new approaches will also facilitate implementation of a climate-related accord expected in December as well as the New Urban Agenda to be finalized at next year’s Habitat III conference on cities.
From all reports, however, the Financing for Development negotiations remain highly contentious, and thus this newly revised negotiating draft will be keenly scrutinized. (The first FFD draft came out in mid-March; the revision was released during the first week of May. A summary of civil society input can also be found here.)
A key issue of debate is the extent to which local government authorities — in cities, municipalities and others — will have powers and freedom to determine how and where new development funding associated with the SDGs will be spent. This is a controversial prospect, however, particularly given that it is the central governments of member states that are doing the negotiating. As noted in previous Citiscope reporting, advocates have expressed frustration at the very minor mention that cities and sub-national governments received in the draft text.
In the revised text, for the most part, this hasn’t changed all that much. Cities and local authorities do receive a smattering of references, some new. But a key overview strengthened this contextualization only slightly.
“The fundamental responsibility for organizing this global partnership lies with governments,” the revised text notes. “But our success will also depend on the resources, knowledge and ingenuity of business, civil society, the scientific community, academia, philanthropists and foundations, parliaments, local authorities, volunteers and other stakeholders.”
Much of the concern around local authorities is focused on infrastructure. Some USD 1 trillion a year is forecast to be needed over the next decade and a half to pay for the roads, electricity lines, floodwater embankments and other needs seen as central to current development aims. And in many cases, no one knows better than local authorities where and how this money could be best spent.
In the second draft of the Financing for Development text, a key section (Paragraph 31) on these issues does indeed include some substantive revisions. The text of that section is reproduced here in full, with deletions in square brackets and additions in bold:
We further acknowledge that in [more and more] many countries, responsibilities for revenues, expenditures and investments in sustainable development are being devolved to the sub-national level and municipalities, which often lack adequate technical capacity, financing and support. We therefore commit to develop mechanisms to assist them, including to strengthen capacity, particularly in areas of infrastructure [project] development, local taxation, sectorial finance and debt issuance and management, including access to domestic bond markets. We will strive to support [our] local governments in their efforts to mobilize revenues and strengthen links between urban, peri-urban and rural areas within the context of national sustainable development strategies. We commit to scale up international cooperation to strengthen capacity, particularly in climate friendly policies and infrastructure investments. We will support cities and local authorities, particularly in LDCs, in implementing resilient infrastructure, including energy, transport, water and sanitation and buildings. We will also support them to implement climate-friendly policies [. and investments. Reliable support for national and local capacity for prevention and mitigation of external shocks and risk management is needed. We must also] In these efforts, we will ensure appropriate local community participation in decisions affecting their communities, based on country circumstances. We will develop and implement holistic disaster risk management at all levels in line with the Sendai Framework. In this regard, reliable support for national and local capacity for prevention, adaptation and mitigation of external shocks and risk management is needed.
The Sendai Framework, reference to which is included in the new revisions, is new global guidelines on disaster-risk mitigation, agreed upon at a major summit in March.
The changes in the local-financing section are extensive but still largely tweaks. Nonetheless, such revisions indicate clearly the contours of the debates that have been taking place behind the scenes and which will likely continue through the July conference in Addis.
Elsewhere, however, one of the most notable insertions to the new Financing for Development draft likewise deals with this looming infrastructure-financing need. The member states are now making a new call for an “infrastructure platform”, to facilitate multiple aspects of the process of getting necessary infrastructure built in developing countries.
“We note with concern the large gap in financing for resilient and quality infrastructure, in particular in developing countries,” Paragraph 46 reads. “Given the importance of this challenge, particularly for developing countries, more needs to be done, and we call for a new infrastructure platform to bring together all stakeholders to make to ensure that no countries or sectors are left behind, and that investment is aligned with sustainable development.”
The section continues:
To address constraints, we will imbed resilient infrastructure investment plans in our national sustainable development strategies, and strengthen the domestic enabling environment. We commit to ensuring the technical support for countries to translate these plans into concrete project pipelines, as well as for individual implementable projects, particularly with regard to the preparation of feasibility studies, negotiation of complex contracts, and the management of projects. Efforts should aim to develop local skills and capacity.
– See more at: http://citiscope.org/habitatIII/news/2015/05/financing-development-second-draft-expands-somewhat-local-finance#sthash.URn1Qd3V.dpuf

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Professor Mekonen Haddis giving a speech at the German Alumni Conference dinner at the Hilton Addis.

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