Before the Greeks say goodbye to the great European experiment, both Athens and the EU need to gird themselves for the mother of all economic fall-outs.
Is Greece ready to go it alone?
That's become the guessing game du jour after anti-austerity parties captured a shocking share of the vote in the latest Greek elections. But don't expect the drachma to return any time soon.
It won't be easy for either Greece or Europe to prepare for a divorce. If it was, they'd have already done so. Greece needs to get its budget ready, and Europe needs to get its firewall ready. The politics are terrible for both.
THE BUDGET AND THE FIREWALL
Right now, Greece is running a primary deficit. That means the Greek government would still need to borrow money even if it didn't have any interest payments to make. A euro exit and default wouldn't solve its austerity problem. A euro exit and default would create an even worse austerity problem -- or an inflation one. Remember: Greece is getting piles of cash from Europe as part of its bailout. Greece would lose that money if it defaults. And they wouldn't be able to replace it. Nobody wants to lend to them now and likely won't for a long, long time. Greece would have to either cut spending and raise taxes much more, or print the difference. It's a choice between hyperausterity and hyperinflation.
A premature Greek exit wouldn't be much better for Europe. It would set off a potentially euro-ending bank run. Depositors in Ireland, Portugal, Spain and Italy would pull their money out of local banks and move it to "safe" countries like Germany. The logic is simple: If countries can leave the euro zone, then not all euros are created equal. Euros in Italian banks might turn into cheaper lira overnight. Euros in German banks would stay euros -- or maybe even turn into stronger deutsche marks overnight. Investors would see this and bet on a breakup. Borrowing costs would soar.
There would only be one way to prevent a meltdown: Throw money at it. It would be the mother-of-all-bailouts to deal with the mother-of-all-bank runs. (A firewall is just a bailout fund that you haven't used yet). The ECB would have to buy bonds directly from troubled governments. And the Germans would have to give bonds to troubled governments -- a joint eurobond. It would take such a complete show of financial support to convince markets that Europe was determined to save itself at any cost.
But just as there is an unbalance of payments between Greece and Europe, there is also an unbalance of challenges. Greece's primary balance is more of an economic problem than a political hurdle. Europe's firewall is more of a political hurdle than an economic problem. That makes this a dangerous game.
NO DRACHMA (YET)
Neither side is ready for a split. Greece doesn't have a primary surplus and Europe doesn't have a genuine firewall. That gives both every incentive to kick the can a bit more. So that's exactly what we should expect -- for now.
The problem is that people eventually get tired of kicking the can -- and convince themselves that they might not need to.
As Greece gets closer and closer to a primary surplus, it will ask for more and more from Europe. That's basically what far-left leader Alexis Tsipras wants to do now. But Europe doesn't want to give in too much. Besides, Europe could just bailout everybody after a default, like the U.S. did with TARP. It would be messy -- and far worse than setting up a firewall in advance. But the world wouldn't end. So both sides might think that they have more leverage than they actually do. That's how you lose a game of chicken.
The safest strategy is simply to stop playing the game. Europe should create a firewall, kick Greece out of the euro, but then provide bridge loans to the troubled country.
“I hope that my story will help you understand the methods of Russian operatives in Washington and how they use U.S. enablers to achieve major foreign policy goals without disclosing those interests,” Browder writes.
The financier Bill Browder has emerged as an unlikely central player in the ongoing investigation of Russian interference in the 2016 elections. Sergei Magnitsky, an attorney Browder hired to investigate official corruption, died in Russian custody in 2009. Congress subsequently imposed sanctions on the officials it held responsible for his death, passing the Magnitsky Act in 2012. Russian President Vladimir Putin’s government retaliated, among other ways, by suspending American adoptions of Russian children.
Natalia Veselnitskaya, the Russian lawyer who secured a meeting with Donald Trump Jr., Jared Kushner, and Paul Manafort, was engaged in a campaign for the repeal of the Magnitsky Act, and raised the subject of adoptions in that meeting. That’s put the spotlight back on Browder’s long campaign for Kremlin accountability, and against corruption—a campaign whose success has irritated Putin and those around him.
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This week, as Donald Trump publicly attacked Attorney General Jeff Sessions, an assault one restrained observer described as “a multitiered tower of political idiocy, a sublime monument to the moronic, a gaudy, gleaming, Ozymandian folly,” even David Horowitz, the anti-Leftist intellectual and author of Big Agenda: President Trump’s Plan to Save America, felt compelled to admit something to his Twitter followers: “I have to confess, I'm really distressed by Trump's shabby treatment of Sessions.”
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Updated on July 27 at 6:02 p.m. ET
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Murkowski, a former member of the party leadership now beginning her third six-year term, angered the president by defying him on a key procedural vote to begin debate on Tuesday. Along with Senator Susan Collins of Maine, she was one of two Republicans voting against the motion, which succeeded only when Vice President Mike Pence broke a 50-50 tie. Trump ignored Collins but assailed Murkowski in a tweet on Wednesday morning, saying she “really let the Republicans, and our country, down yesterday.”
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Brighton Park is a predominantly Latino community on the southwest side of Chicago. It’s a neighborhood threatened by poverty, gang violence, ICE raids, and isolation—in a city where income, race, and zip code can determine access to jobs, schools, healthy food, and essential services. It is against this backdrop that the Chicago teacher Xian Franzinger Barrett arrived at the neighborhood’s elementary school in 2014.
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What Russian officials mean when they talk about “adoptions”
Let’s get something straight: The Magnitsky Act is not, nor has it ever been, about adoptions.
The Magnitsky Act, rather, is about money. It freezes certain Russian officials’ access to the stashes they were keeping in Western banks and real estate and bans their entry to the United States. The reason Russian (and now, American) officials keep talking about adoption in the same breath is because of how the Russian side retaliated to the Magnitsky Act in 2012, namely by banning American adoptions of Russian children. The Russians vowed they were punishing Americans who violated the human rights of Russians, after an adopted Russian toddler died of heat stroke in a Virginia family’s car. But the only Americans the bill directly targeted were the ones involved in putting the Magnitsky Act together.
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Quite obviously that was wrong. Penitent and determined to learn from my errors, I’ve avoided any predictions involving Trump and his circles ever since.
But a few days ago, I edged back into the danger zone, after my very first look of the just-named White House communications director, Anthony Scaramucci, on TV. Via the ever-perilous medium of Twitter, I observed that he seemed more at ease on camera than Sean Spicer ever had, and less committed to flat-Earth stonewalling denials than Kellyanne Conway or Sarah Huckabee Sanders. Maybe his smooth-schmoozy approach would be what the Trump team needed? Maybe the press should get ready to be handled by a pro?
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