Yanis Yaroufakis writes:  On September 6, 1946 US Secretary of State James F. Byrnes traveled to Stuttgart to deliver his historic “Speech of Hope.” Byrnes’ address marked America’s post-war change of heart vis-à-vis Germany and gave a fallen nation a chance to imagine recovery, growth, and a return to normalcy. Seven decades later, it is my country, Greece, that needs such a chance.

Until Byrnes’ “Speech of Hope,” the Allies were committed to converting “…Germany into a country primarily agricultural and pastoral in character.” That was the express intention of the Morgenthau Plan, devised by US Treasury Secretary Henry Morgenthau Jr. and co-signed by the United States and Britain two years earlier, in September 1944.

Prior to Byrnes’ speech, and for a while afterwards, America’s allies were not keen to restore hope to the defeated Germans. But once President Harry Truman’s administration decided to rehabilitate Germany, there was no turning back. Its rebirth was underway, facilitated by the Marshall Plan, the US-sponsored 1953 debt write-down, and by the infusion of migrant labor from Italy, Yugoslavia, and Greece.

Europe could not have united in peace and democracy without that sea change. Someone had to put aside moralistic objections and look dispassionately at a country locked in a set of circumstances that would only reproduce discord and fragmentation across the continent. The US, having emerged from the war as the only creditor country, did precisely that.

Today, it is my country that is locked in such circumstances and in need of hope. Moralistic objections to helping Greece abound, denying its people a shot at achieving their own renaissance. Greater austerity is being demanded from an economy that is on its knees, owing to the heftiest dose of austerity any country has ever had to endure in peacetime. No offer of debt relief. No plan for boosting investment. And certainly, as of yet, no “Speech of Hope” for this fallen people.

It is the mark of ancient societies, like those of Germany and of Greece, that contemporary tribulations revive old fears and foment new discord.

As I write these lines, the Greek government is presenting the European Union with a set of proposals for deep reforms, debt management, and an investment plan to kick-start the economy. Greece is indeed ready and willing to enter into a compact with Europe that will eliminate the deformities that caused it to be the first domino to fall in 2010.

But, if Greece is to implement these reforms successfully, its citizens need a missing ingredient: Hope. A “Speech of Hope” for Greece would make all the difference now – not only for us, but also for our creditors, as our renaissance would terminate the default risk.

A “Speech of Hope” for Greece does not have to be technical. It should simply mark a sea change, a break with the past five years of adding new loans on top of already unsustainable debt, conditional on further doses of punitive austerity.

Who should deliver it? In my mind, the speaker should be German Chancellor Angela Merkel, addressing an audience in Athens or Thessaloniki or any Greek city of her choice.

Hope was a force for good in post-war Europe, and it can be a force for positive transformation now. A speech by Germany’s leader in a Greek city could go a long way toward delivering it.

Ian Talley writes:-International Monetary Fund chief Christine Lagarde signaled that debt relief would still be a necessary component of any bailout package for Greece to ensure the program would rescue its beleaguered economy.

Led by fiscal hawk Germany, some European creditors have opposed debt relief as part of a bailout package for Greece, instead urging tougher economic overhauls from Athens. That position has been at odds with the new government in Athens that has an antiausterity stance and a requirement for European creditors to restructure their Greek debt holdings, which have stalled bailout talks for months.

A new proposal by Greece’s creditors–the IMF, the European Commission and the European Central Bank–offered Athens a slower pace of budget belt-tightening and, according to some reports, a softening of the IMF’s requirement for debt relief

But Ms. Lagarde said any slippages from the last bailout program would mean “financing has to be considered.” Greece has failed to meet many of its bailout targets.

“And financing is a factor of the level of the debt, which itself is a factor of the maturity and interest rates at which debt has been accumulated.  Everything has to add up at the end of the day,” she said.

Under the bailout program Athens is currently trying to renegotiate, the IMF said debt relief was required by Greece’s European creditors for the deal to be credible. In particular, the IMF assumed Europe would help Athens cut the ratio of its debt-to-gross domestic product to 124% by 2020, and in 2022 a debt-to-GDP ratio substantially lower than 110%. That, officials indicated, would likely mean some combination of debt maturity extensions, lowering of interest rates or even a cut in the underlying value of the bonds.

To be sure, that debt relief was contingent upon Athens living up to its bailout conditions, which it failed to do.

Such debt relief is a political anathema in Germany, and Berlin has fought against inclusion of any mention of debt relief in a new bailout package.

Given that Greece’s economic situation has deteriorated with the deadlock in bailout talks and officials are considering weakening the budget-tightening requirements, it would naturally entail more financing–including debt relief–to meet the debt levels the IMF said were necessary to be credible and sustainable.

 

Michael Kranish writes:  Senator Elizabeth Warren this week called on the Securities and Exchange Commission to launch an examination of rules that allow US companies to buy back billions of dollars of their own stock, a practice that she said is undermining the economy.

California-based Cisco laid off 182 workers in Boxborough at the same time it was spending billions of dollars to repurchase its own stock, said that while buybacks may temporarily boost stock price for companies, they often hurt workers.

Under a 1982 rule change, the SEC assured corporations they wouldn’t be charged with market manipulation if they repurchased large amounts of their stock. Warren wants that rule changed.

“These buybacks were treated as stock manipulation for decades because that is exactly what they are,” she said. “The SEC needs to recognize that.”

Warren also said that she is co-sponsoring legislation called the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act, which would revise 1993 legislation that enabled corporations to tie an executive’s pay to a company’s share price and make such pay tax-deductible.

While the 1993 bill was touted by then-President Bill Clinton as a way to curtail annual salaries exceeding $1 million, it had the opposite effect, prompting many companies to repurchase shares in an effort to boost stock prices, which in turn boosted the value of executive stock options and awards.

“We need to close the loophole that gives corporations a tax break when they give CEOs the giant stock payments,” Warren, a Massachusetts Democrat, said.

Buybacks have become one of the primary drivers of the stock market. US companies announced a record amount of buyback authorizations in April, and the trend is expected to continue this year. Many corporations say they buy back shares because they have excess cash and believe their stock is undervalued.

While the S&P 500 companies spent a record amount last year on capital expenditures before declaring their profits, they had far less of their profits available for investment in their business than in prior decades. In the 1980s, such companies had 70 percent of their profits available for reinvestment, with the rest spent on dividends. Last year, these companies spent all but 2 percent of their profits on dividends and stock buybacks.

The SEC last month was asked by Senator Tammy Baldwin, the Wisconsin Democrat, to examine the impact of its stock buyback rule, but so far the agency hasn’t delivered a response, according to a Baldwin aide.