Thoughts on a Greek Referendum

I have posted some thoughts on the potential Greek referendum over at the IIEA’s blog.

129 replies on “Thoughts on a Greek Referendum”

@Karl Whelan

Just read it.

Good summary. Relevant links. Key point is that last week’s deal was simply not good enough. IMHO, the consequences of Greece leaving the EZ [for which no legal mechanism exists at the mo] are more serious than a Greek default on debt. IMF sugested 75% last week … and when will the handcuffs be removed from the ECB?

… and we were discussing this back in Feb 2010 … and probably earlier

Real ECB Power must come into play … Democracy demands it.


German democracy demands it doesn’t.

Can you imagine how cheezed-off the political class will be at the mo in Greece. GPap will look like a traitor to them in their view. Wouldn’t be surprised if there was “effective” pressure for him to resign, but the cat might be too far out of the bag for that.


Then the present German Administration must lose this one ….

… the ‘minimum wage’ deal bounced late last week might allow the FDP to walk – and this would free up Angela’s hand (somewhat)… and the SPD are not fools. Meantime we ride the turbulent waves and try to stay afloat ….

Mario Draghi must be having the first day on the job of all first days on the job ever … I wish him luck.

Given his family’s connection with the Anglo world I cannot imagine him doing something like this without the BoE / FED riding shotgun.

With the G20 thingy coming soon this is high drama for the market crowds.

Dollar or Gold ,Dollar or Gold, Dollar or Gold.

There can only be one.


Can you imagine how cheezed-off the political class will be at the mo in Greece. GPap will look like a traitor to them in their view. Wouldn’t be surprised if there was “effective” pressure for him to resign, but the cat might be too far out of the bag for that.

A former Greek Finance minister, Stephanos Manos, was on the Pat Kenny Show this morning calling for the PASOK leadership to remove Papandreou and install a leader who would cancel any proposed referendum.

All strictly constitutional, of course.

@ Karl

Apparently he military shuffle is more akin to when our outgoing ministers give out a load of plum semi state positions to their mates right before they get the heave ho. Local Greek chatter suggests that the government will fall by the end of the week. Chances of a referendum actually diminishing as the day went on.

I was reading Satuday’s FT just now and there is a load of bank refinancing in the US that needs the moodmusic of a Eurozone deal in the background. Confidence is shaky stateside. The Squid’s share price rose 12% over last week on the back of the Thursday summit so there is a lot at stake if it all falls apart.

just saying………like………

The Dork of Cork Says:

June 28th, 2011 at 8:15 pm
@Kenny K
You mean those German made Greek tanks
They are a major purchaser of the Leopard II MBT.
But seriously no one is asking themselves what is going through the minds of the Generals and indeed perhaps more importantly the ranks.
The Greek state have the highest number of active troops per thousand in Europe standing at 15.72 using 2008 wik figures (although Cypriot forces are perhaps marginally higher for identical reasons)
Ireland’s ratio stands at 2.35 for comparison.
A very large section of the population knows how to fire a gun.
Just saying.

I have been on Mars for the past few days (well, Donegal with no web access). This is all getting very interesting. Will comment from home later, when my death star docks in Dublin.


I heard the VRT is astronomical on those and they always get clamped first, wouldn’t go near one.

Someone should remind the Greek govt it’s the colonels you have to watch!

The CIA Factbook has Greek mil spend at 22nd in the world as % of GDP (2005), not a single EU member above them (although Turkey is). US was 24th on the same chart. If you’re spending more than the US on defence, it’s probably a good place to look for cutbacks, starting with compulsory service.

If Ireland were to announce a similar ref, I for one would immediately move my humble little deposits to another jurisdiction. Surely this must precipitate an almighty run on Greek banks.

A part of me thinks this is a set up – Draghi will hit the Gold button maybe……………
All Euro debt is internal is it not ? So why not ?
My precious My Precious… calling…………………….

@ All

I would suggest that the fundamental political problem is the unwillingness of the two major foreign governments involved in the Greek saga, Germany and France, to pony up the money necessary to recover the situation that they themselves helped to create. The approach up to now has all the characteristics of the three shell trick known since Medieval times. Monies are simply moved from one to another and Sarkozy, in his TV “speech” to the French nation, had the temerity to state that his government was earning €200 million on the back of the loans repeat loans hitherto agreed for Greece.

Until the two political pygmies in charge of Germany and France confront this fundamental issue, the crisis will continue.

If anyone has any doubts as to the extraordinary hubris at top level, in France in particular, that gave rise to this situation, they might consider the draft of the Constitutional Treaty that emerged from the European Convention.

Note the opening statement in Greek. Modern Greece has as much to do with that of the fevered classical imagination of Giscard d’Estaing as Ireland has to do with that of Brian Ború.

@ Karl

Has anyone actually considered whether the average Greek on the street actually wants a referendum? The guys setting cars on fire may not be representative of the greater Greek society.

Ultimately, though, the end-game in Greece will revolve around the Greek government and its relationship with its official creditors, the EU, the IMF and the ECB.

I disagree. The endgame with Greece, as with Iceland, will revolve around the relationship between the Greek Government and its people. Specifically, with the thousands of its people who are currently baying for blood outside the Government’s doors.

G-Pap called a referendum for the same reason the Icelandic Government did not pay the bondholders three years ago: because an angry mob made them fear for their personal safety/livelihood if they were to do so.

We cannot rely on inept, ineffective, and industry dominated institutions, politicians or civil servants to resolve this banking/sovereign/financial crisis on their own. Left to the own devices, they will never resolve it. They will implement real and substantive action only if they fear dire consequences should they not. Without this, the ECB, EU, IMF and Greek Government would carry on as they have till the end of history.

No; The only way this crisis is getting resolved is by angry mobs, thousands strong, baying for an end to the incompetence, the greed, the inequality and the scandal. You may disagree, but there now appears to be two counterexamples to that point of view. If the Italians start marching, and defaulting, that will make three. In extremis, the public will resolve what the state refuses to.

The financial crisis is going to evolve into a moral one. There, all our current problems will finally be resolved, and not by the technocrats who have failed so miserably up to now. The only remaining issue is what new problems such an evolution will present. Let us hope they are not worse than those we face now.

@Overseas, don’t know about Karl, but the sheer brilliance of the decision to have every Irish taxpayer to pony up EUR 200 this week for the unguaranteed unsecured former insolvent bank bond, in order to ensure tranquility in the financial markets, is more obvious than ever.


“The guys setting cars on fire may not be representative of the greater Greek society.”

Then the referendum will be passed and there will be less contrived complaining and anti-austerity agitation from the opposition. The support of the majority will be apparent and the government will then be able to get on with policy.

@ Grumpy

And if there’s a run on Greek banks in between?

In theory the referendum is a great example of democracy in action. In reality it’s a very calculated political move which has, from everything we’ve heard today, enraged a very wide spectrum of Greek society and which risks the implosion of the entire Greek economy (and society). Not entirely sure people should be so euphoric, some caution is certainly warranted.

ECB did not get a respectable close on Italy – Germany 10year, over 4.4%. This is highly significant for the very influential squiggly line school of analysis – to whom a close above about 4.2% would be regarded as a proper breakout.

Nobody in the markets outside Ireland gives a monkey’s about the state now. The game has moved on.

Euphoric ??
If people (Yes even in Greece) had written off private debt we would not be in this lack of money mess now.
Every time a bank bond holder escapes he reduces the value of the currency – we just don’t see the devaluation because our wages are getting smaller.

The euro was designed from the outset to destroy goverment money – don’t you get it ?

@ Grumpy

What an absolute farce . And trading at 52c in the Euro. FFS.
And tranquility in the markets my arse. It wouldn’t make a blind bit of difference to leave them swinging.

But it is keeping interest rates low dontchaknow

@ Bond
Your lot are taking over the world
Imagine – a European Union afraid of democracy – what have we come to?!


“I would suggest that the fundamental political problem is the unwillingness of the two major foreign governments involved in the Greek saga, Germany and France, to pony up the money necessary to recover the situation that they themselves helped to create.”

It’s a bit like a car breaking down in the middle of nowhere and the driver saying he can’t do anything when in fact there’s a bus he owns across the road that he won’t use for religious reasons. The ECB can print money.

France hasn’t got any more AAA credit but that doesn’t mean anything.

It’s this simple….
Bond market: You know that money we lent you well…we want it back
Populace: Em …ol
Bond Market: Oh did we mention there is interest on it
Populace: No you didn’t
Bond Market: Well there is ..and your children will pay for that….
Populace: Ok
Fast forward 2 years:
Bond Market: Aggghhhhh
Populace: Aggghhhh
Fast forward 2 years:
Jesus: Right lads. I wasn’t planning on coming back this soon but am gonna have to kick those money lenders out of the temple again and preach some stuff….this gets bloody tedious after a while

I am pretty sure you realize private debt nets to zero while public debt just stays on the books normally.
It follows when private debt is being paid off it must be replaced by domestic goverment money – otherwise you have no money to play with and therefore subsequent economic collapse as nobody has any chips to trade with.

What in Gods name is so complicated about this ?
Its the core function of money for Christ sake – a medium of exchange.

@ Bryan G

I am afraid that you are missing the point that I am making. The question is: who is to pick up the bill for Greece?

The IMF is not daft, and neither is Chopra, but both are applying a well-tried IMF formula to a situation that they have never confronted before i.e. a single currency in respect of which the major players refuse to accept the financial consequences of their own creation.

This is the challenge that Germany has run away from by involving the IMF in the first place. Bear in mind that the single currency and the IMF are dominated by the same major Western powers. They are just different arenas, the main difference being that Germany has the final say in the first and the US the final say in the IMF.

It is clear that within a single currency without a lender of last resort, there can be no restoration of confidence by involving those that are actually losing said confidence. The leaders of Europe have been wasting their time for the past 18 months. The only solution is for the ECB to become the LOLR by default.

The markets understand this. I have a feeling that Papandreou also does. Maybe even the IMF! We will see!

500 million people in Europe alone, and the overwhelming majority had no hand in all this, are in between scylla and charybdis – Ulysses chapter 9 – politicos and markets, the former can shut the latter down, and so they should, but the intellectualized, with no belief or convictions at all, create the mother of all contagions, a financial ebola, and this is not Greece at all.

@ Eureka

I’m not afraid of democracy. But even democracy needs some controlling element and not be based on wild populism. The Greek Prime Minister has possibly abdicated his responsibility in this regard, particularly in the manner in which he has announced this referendum (he did not debate it with either his own party colleagues or his Eurozone partners – he is not a president, he is a prime minister, remember).

Its the new Bank capital rules – its draining money from the system to save the credit banks and their “investments” – they are taking our money to recapitalize by not producing credit – when debt is repaid the money supply contracts.
Although I don’t want them producing credit , I don’t want them existing in the first place – all credit deposits should be converted to goverment money and their fraudulent debt contracts should be written off.
The banks are a milestone around the neck of humanity I am afraid – they live only to game us out of our wealth.
They cannot create wealth themselves – that activity is alien to them.

A view by Larry Elliot

“The second card Papandreou has to play is that Greece is now a bigger problem for Europe than Europe is for Greece. The short-term outlook for Greece is going to be bad inside or outside the single currency, but the balance of risks is different for the other 16 members of monetary union. For them, the calculation is simple: would it be better to cut the Greeks some slack in order to prevent a disorderly default creating a domino effect across the eurozone? Or should they take a tough line, threatening to cut off all support in the event of a no vote? That is what is known as a no-brainer.

Why? Because the events of past 24 hours have made much clear: the sovereign debt crisis is getting more serious; the markets will remain turbulent; last week’s rescue package is a dead letter; the chances of a euro breakup have increased.

All this is pretty obvious. What is perhaps less obvious is that Greece now has immense power as a result of its predicament. It has the rest of the world by the short and curlies.”


allow me a private remark, do not be drawn into technicalities, it is not your territory and guess what, it is also not required to make your point, and fwiw, Karl is a good chap, and he is not talking through his butt like so many other ‘yes men’ here on this blog.

I listen closely when Karl makes a point, he did not even hesitate to confront the deliberate, albeit excellent, misleading H.W. Sinn, since more than two years three years I follow his comments, and I must say, he and btw. Kevin O’Rourke as well are the people I most cherish reading this blog here.

Wouldn’t you love to be a fly on the wall after Merkozy left the IIF meeting last week?

I do believe we need a bank holiday, for many reasons.

“The Greek Prime Minister has possibly abdicated his responsibility in this regard, particularly in the manner in which he has announced this referendum (he did not debate it with either his own party colleagues or his Eurozone partners – he is not a president, he is a prime minister, remember).”
Well, he might have debated it with them, but where would he have been if he said no?

His government and the new deal (hah!) need a mandate. Calling an election would see them booted out of office and the deal subject to renegotiation.

It is astute on two fronts – in the first place, Greece does not enter vacuum status, in the second, the other governments of Europe have deniability in case it turns out badly.

Evangelos Venizelos in hospital with ‘stomach pains.’ Anyone recall John Major having to ‘visit the dentist’ at a crucial time for Marge Thatcher?

So what do we actually know? George has made a fairly vague threat about a referendum – on specifically what, when, etc. tba. He has been requested to attend a meeting in Cannes tomorrow. The markets have had a bit of turbulence but not end of the world stuff. George still appears to be PM after the emergency cabinet meeting that finished a short while ago.

What can we speculate? George will come under a lot of pressure, internally and externally over the next couple of days.

This can only be a political stunt (for internal purposes) or is part of a poker game (against external forces). Possibly both.

What will happen in Greece on Friday if the people are subsequently told they won’t now get a referendum? How will the people react?

What will happen if this all ends in a snap election being called? Who will the Greeks vote for?

Dr Merkel has already called me this evening to ask if I have a good line in ‘he was resigned because he has been under tremendous stress over the past couple of weeks and it has clouded his judgement, etc.’

Alternatively, George is absolutely sure he has them all by the short and curlies and is much smarter than Merkozy have given him credit for.

I have no idea how this will all end up – there are too many potential outcomes. Depends on how certain people react and I’m pleased to see there isn’t too much reacting going on at the moment. For once, they’re having a think before they open their mouths (I point to Sarko in particular).

The Influential BoI boys could survive this if ALL Irish deposits became Goverment money , all private debt was written off and then BOI mark II was given a new credit licence the very next day.
Why Oh God why do they want to inherit a shithole I just do not know.

p.s. haven’t had the chance to catch up on my reading since getting back from holiday this evening. This should have been a really great day for tipping out some bad news. Who took advantage?

It’s strange that GPap is said to have done a solo run on the referendum. If only he could have given me a heads up, I could have made a tidy sum. Then again I don’t have fangs and tentacles.

Gosh Eoin bond, you seem…rattled. Whatever? Democracy eh, however it plays out ..all good no?

The late Brian Lehihan did his own solo run when he decided his Blanket Guarantee. There was no vote for the ordinary person regarding socializing the debt of the entire Irish banking system, picking up a tab that was to bankrupt the entire country.

Neither did we get to vote on NAMA or the MOU even though we were made vote twice on Lisbon! Ireland should have rejected the “Bailout” and gone straight for a General Election last November and told our EU partners they would have to wait to see what the Irish people wanted. Instead our governor bounced us into a full scale bailout and squandered a great opportunity. Greece are playing a blinder.

@ Hogan
“It is astute on two fronts – in the first place, Greece does not enter vacuum status, in the second, the other governments of Europe have deniability in case it turns out badly.”

I would venture to suggest that Papandreou is not motivated by a desire to bring democracy to the people but rather by a base desire to preserve the status quo.
If you rationally examine this decision, it is rather obvious that Papandreou
was and is prepared to endanger the whole of the European project for his own selfish reasons. This is amply demonstrated by his failure to notify the very people who sought to assist the Greek people. His failure to even inform his finance minister further demonstrates his lack of integrity.
It is unfortunate for the Greek people that they are led at a crucial time in their history by a man who is more concerned with a continuation of the nepotism engendered by his father and grandfather than in resolving the very difficult problems faced by the country.


I agree that Germany/France should do more, and the ECB a lot more, but my main point was that the problem with PSI was not that it was pushed by Germany/IMF but that it was opposed for over two years by the ECB/France/EU Commission. However that battle is now over, at least for Greece, with Germany/IMF winning out.

It would have made sense in May 2010 for the Great Leaders to have sketched out on the nearest beermat the rough percentages to be paid by

– Bondholders
– National taxpayer (for a given “problem”)
– Pan-EU taxpayer (for the same “problem”)
– Euro currency Holder (via “money printing”)

The answers could have been different depending on whether type of debt was bank or sovereign, or whether debt level was serious or insane. This never happened, and is why 14 emergency summits later there is still no credible solution. In the USA the government support mix was about 9 parts Federal Reserve and 1 part Treasury (via TARP). Bondholders were hit in a handful of cases directly (WaMu, Lehman) but more generally through defaults on non-recourse loans. This is why Geithner/IMF can sketch out a solution with some real PSI, some taxpayer funds, and a big injection of central bank money. Of course when this sensible solution hits the institutional reality of Europe, the institutional reality always wins.

@ CP

Completely agree. Where’s one of those plus one thingies? Oh, there we go… +1


“there can be no restoration of confidence by involving those that are actually losing said confidence.”

Losing track a bit there – do you mean that the taxpayer can’t be LOLR resort for banks and sovs., as the more the taxpayers are being involved the more they are losing confidence?


“If you rationally examine this decision, it is rather obvious that Papandreou
was and is prepared to endanger the whole of the European project for his own selfish reasons.”

I think this is precisely the problem everyone is acting selfishly (Merkozy, I’m looking at you) so why shouldn’t Papandreou.

@ PR Guy

With the Finance minister in hospital it is reminiscent of what happened to the Greeks in 1453 . Another key player had to retire from the field and the game changed utterly shortly after.

Shortly after midnight on May 29 the all-out offensive began. First attacked the Christian troops of the Ottoman Empire,[31] followed by the successive waves of the irregular azaps, who were poorly trained and equipped, and Anatolians who focused on a section of the Blachernae walls in the northwest part of the city, which had been partially damaged by the cannon. This section of the walls had been built much more recently, in the eleventh century, and was much weaker. Anatolians managed to breach this section of walls and entered the city but were just as quickly pushed back by the defenders. Finally, as the battle was continuing, the last wave, consisting of elite Jannissaries, attacked the city walls. The Genoese general in charge of the land troops,[4][34][35] Giovanni Giustiniani, was grievously wounded during the attack, and his evacuation from the ramparts caused a panic in the ranks of the defenders.[56] Giustiniani was carried to Chios, where he succumbed to his wounds a few days later.

I guess the Squid would be the Janissaries.

There is a more chilling calculation he might have made:
You need a strong mandate to shoot your own people.

Why do we see them as Greeks? If Europe is to survive we must see them as our fellow European citizens.
A kind of apartheid has crept into Europe.
This crisis has exposed the fracture lines of Europe.


“I guess the Squid would be the Janissaries.”

I can’t imagine the squid getting actively involved in the battle – more likely be the cause of it, take some positions beforehand, observe it, tweak things a bit (persuade others to get involved) if it’s not going in the right direction, pick up the profits afterwards and no casualties to self.

I see there is no ‘Big Fat Greek Meltdown’ this morning even though the Greek cabinet endorsed George’s call for a referendum last night.

More by accident than design, I left a sell on the Spanish index open on Friday. I am laughing this morning but don’t know how long that will last for as events unfold.

Will George last until Friday night? I fear that snap elections in Greece could cause far more problems than some vague promise of a referendum.

this really is a terrible time for Europe, it seems incredible that we are willing to tear ourselves apart to save a banking system.

Selfish? You’ve got to be kidding. How selfish would you have to be to want to continue as Greek PM? To be hated and despised by most of your own people (whether they will vote for you or not)?

That has to be the weakest pschological profile I’ve ever seen today…

@ Karl

re your EFSF thread….


@Mr. Bond and Cet. Par.,

I don’t think anybody would deny that this is a naked power play by the Greek PM. But, among other things that may or may not be in his interests or in those of the Greek people, he has shone a harsh light on the lack of democratic legitimacy underpinning the EU’s ‘institutional reality’ as Bryan G describes it.

The fudge concocted last week may be perfectly compliant with the TFEU, the laws governing the EU and the relevant democratic and administrative provedures, but it lacks genuine democratic legitimacy.

It’s easy for the politicians of northern Europe to lambast the feckless PIIGS for living high on the hog on cheap and easily available credit and to demand repentance and reform before assistance is advanced. But it takes two to tango – as Christine Lagarde pointed out recently (and was publicly chastised for her honesty). Northern export surpluses recycled into easy credit allowed the south to buy the output of the north – and these economies benefitted.

But now the bill is due and both sets of dancers must pay. Were northern European politicians to have the guts and honesty to tell their voters that they benefitted hugely, but unsustainably, from the previous madness, that huge balance of trade suplusses are as as damaging as huge deficits in a currency zone and that, in the interests of solidarity and the future prosperity of all, they must consent to footing a big part of the bill, it might be possible to secure the required democratic consent to empower the ECB to do its job, to re-balance their economies and to properly tackle the solvency of EZ banks.

This blame-game is futile and self-defeating. But Europe has a long history of previous in this foot-shooting speciality.

@ Bryan G/Gavin Kostick

By way of reply, I would quote from the article by Colm McCarthy in last week’s Sindo.

“Early graduation of the three ‘programme’ countries, those unable to borrow at any price, from reliance on official lenders, is not advanced by the measures as announced. The governor of the Bank of England observed last week, and quite accurately, that there are solvency problems for both banks and governments.

Indeed, since eurozone governments can no longer rely on a proper central bank to act as lender of last resort in their own currency, they are little different from banks as a credit proposition”.

What Germany is insisting upon is that a structure be set up, the EFSF/ESM, that will contain financial panics, as for some unexplained reason Germany does not seem to understand that this is a role proper to the ECB, both in the bond markets and the banking sector, by granting credit to governments to enable them to act in order to stop these panics. But is dragooning the investors that are in a panic into taking losses likely to add to or reduce their panic? The answer is obvious and blather about firewalls by EZ leaders will not disguise it.

This explains the rooted opposition of the ECB/France and the Commission to PSI and the view of France, and all the countries of the EZ other than the remaining AAA rated countries that the ECB must backstop the structure insisted upon by Germany if it is to work.

But the fundamental question is a political one. Merkel and Sarkozy have done everything to protect their own national political positions without any regard whatsoever to the need for politicians in other countries to do the same. Such an approach not only makes the functioning of the EZ nearly impossible but threatens the very existence of the EU.

I do not normally subscribe to the apocalyptic view of Paul Krugman because, like all American academics, he cannot get his head around how the EU actually works, but his most recent brief comment sums up the seriousness of the situation.

Ireland took the same approach as Greece –

When the GP withdrew from the coalition, the election was a de facto referendum on the bank bailout (load the debt of the guilty onto the innocent)

FG/ Lab came in with a new plan that hasn’t quite materialised

One take on the Greek referendum:

As for @fergoloh’s comment, the election was not really a referendum on the bailout as neither fg or labour ran on a platform to substantially change it. And yes, one could argue that the people chose that, but that’s not my impression from polling or talking to people.

The fact is that one growing Irish party is talking about the unfairness of the bank bailout, the issues with unemployment and generally holding people to account: sinn fein. And unless some other sane political party wakes up and starts addressing those issues, sf are going to go into gov’t in a future election.

Folks can sneer “populism” at the Greek referendum and at SF talking points, but the fact is that the current austerity fetish is negatively impacting the majority of people across Europe – and generally not the people that majorly fucked the economy in the first place. Those people are on the receiving end of a spigot shooting out billions of euro.

Current gov’t parties need to start addressing the issues of the majority – or the majority are going to start voting in people who say they’ll address it. And I don’t really think that latter outcome is going to work well for anyone.


And so we are back to mainly Germany’s (but also with the Netherlands, Finland and possibly some others in tow) refusal to sanction the ECB to make an open-ended commitment to buy sovs under threat from shorters. Sanctioning the use of this firepower would be enough; it would probably never have to be used in anger. The quid pro quo is meaningful fiscal adjustment and structural reforms, but these take time and will never be achieved when under attack.

Europe should have more than enough historical evidence of the damaging implications of big power obduracy and obstinacy. The EU was intended to restrain and modify this. It’s failure to do so leads inexorably to the failure of the EU.

I don’t know what your “fiscal adjustment” really means – this is not the 1980s where credit replaced money and blew all those BTUs on consumption.
You are effectivally arguing that we should have a economy with little money in circulation.
You are not saving anything under such circumstances – everything will depreciate into dust.

@ Hogan

I don’t understand why people like Zapatero or Papandreou continue
in their jobs. What is the point ? Why would anyone want to be the local enforcers of a failed ECB strategy ? And be despised with no sign of any hallelujah at the end .

@ Bond
The postponement is until after Greek referendum presumably. So possibly won’t be til January? If the referendum passes we’ll be ok and if it doesn’t it should still be ok shouldn’t it (they’ll just throw Greece out)

I see the FT is reporting that new car registrations in Greece have fallen off a cliff – that must really hurt Germany. Think of all those shiny new Mercs that won’t be replacing the older ones used as taxis out there.

I heard some talk that a massive amount of private and company deposits have been withdrawn from Greek banks over the past two weeks (and gone to Switzerland?). Can anyone confirm? The same must be happening in France and Italy surely? I also heard before the last EZ summit that JPM had been receiving a stash of dosh being transferred from French banks into their Asian operations. The rich are doing a final runner (as if they weren’t more than two weeks ago) from the EZ? Or, as they say, the ‘smart money’ really is getting out now?

Btw – were you aware that press accreditation today in Cannes is taking place in a casino? How very……..

I think the inexorable rise of SF would indicate that quite a few people thought that FG/Lab would do something other than carry on the FF/GP policies


Any thoughts as to why? I thought we were supposed to buy ‘safe’ things like this when there was trouble in t’market?

Does it have anything to do with China and whether they will (pony up and invest) or whether they won’t and how that will affect the standing of anyone else? Is China to be offered a ‘special’ deal? Or as they say in Greece: “To you my friend, is special price from my brother. I make nothing.”

Very interesting piece from the NZZ processed via the Google translate mangle .

O saolaiodh thu is mairg a ra go raibh an long anonn i ndan duit.
This is what awaits Ireland too.

31 October 2011

Neue Zürcher Zeitung

Athens ⋅ The decision to apply a 50% haircut to Greece’s sovereign debt has generated much fear and mistrust amongst many Greeks. The state of the economy increases the uncertainty. Apart from banks, other losers following the resolutions of the Brussels summit are importers, pension funds and insurance companies The first opinion poll on the debt haircut question shows that 55% of the Greeks judge the decision negatively.

Only 16.9% expect the debt haircut to overcome the crisis, the majority of respondents feel resignation (21%), anxiety (20%) and anger (19%). In addition, 48.8% of Greeks oppose the decision of the Summit, “for the duration of the program to build surveillance capacity on site,” as a restriction on the sovereignty. Nonetheless 72% of Greeks wish to keep the Euro.

In the Greek economy uncertainty is mounting because of the possible consequences of the debt restructure. For the recapitalization of the banks alone € 30 billion are needed. For assistance under the program, a support fund has been established, the use of its resources but would lead to nationalization of the affected institutions. Some banks now want to try to raise the necessary capital on their own.

The insurance companies, which hold almost € 4.5 billion in Greek bonds, will be hit hard by the restructure. Unlike the banks, there is no safety net for them, even though the industry had requested this months ago. The losses of the insurance companies could add up to € 2.2 billion. Experts in the market estimate that some companies will be unable to avoid bankruptcy. In contrast, the losses of the pension funds (12 billion €) are absorbed by the increase in government subsidies (€ 1 billion per year). This will lessen the impact although the manouvreability of the Government post haircut will be reduced budget considerably.

Dealers and traders fear that the high recapitalization loans are still expensive and that the lack of liquidity will have a negative impact on economic development. Importing companies have already begun to feel the impact of the debt restructure. According to the local Business Association, for some days Greek importers have been required to pay for deliveries in advance in cash. Guarantees that are issued by banks in Greece will not be accepted.

I agree, particularly in Papandreou’s case – it’s not as if he wouldn’t get a plum job somewhere else – perhaps he really does care? Who knows, the same might also be true for Zapatero.

” assured his ministers that the government would win the referendum and that he would receive the backing of his eurozone peers on the idea of holding the vote. The prime minister is due to hold talks at the sidelines of the G20 meeting in Cannes today with French President Nicolas Sarkozy and German Chancellor Angela Merkel.”

Is the man delusional?

Sorry I think I originally posted this in the wrong thread.


“Guarantees that are issued by banks in Greece will not be accepted.”

I have it on good authority that (ordinary) people are taking cash – Euro notes in smaller denominations – out of their bank accounts in droves this week and stuffing it under their beds. They are frightened to hell that they are going to wake up one morning soon and suddenly find their savings have been converted to worthless new Drachmas.


Looks as though the referendum is going to happen before Christmas (assuming no government collapse before then and that’s a big assumption) and is going to be some vague tosh about wanting to stay in the EZ.

Having just seen the reception committee lined up for the meeting with George this evening (everyone who is anyone in the EU is in the meeting with him, plus the fragrant Christine la IMF, but not Draghi who is ‘otherwise engaged in Frankfurt’ aka steering clear of Sarkozy) I would say there’s a good chance the whole thing will be watered down even further by the end of the night.

They sure are planning on ganging up on him and it’s not likely that his FM is going to be there as far as I’m currently aware. It must be a bit of that ‘Greek belly’ lingering on… unless of course he’s simply waiting in the wings. I’m sure they’re not in Cannes to praise Caesar but to bury him. What’s Greek for ‘Et tu Brutus?.

Meanwhile, back in Italy, Machiavellian is not the word for it…. expect some interesting developments.

I’m considering a kind of ‘dual forecast’ bet:

Two Finance Ministers will replace two Prime Ministers in the EZ before the end of the month (Greece and Italy) and the markets will rise massively for a short while.

Or failing that, two Italians will make dramatic announcements before the end of the month (Silvio and Draghi) and the markets will rise massively for a short while.

@ seafóid

Interesting article! It bears out the point that I have been making regarding the foolish German insistence on PSI. It is, in fact, the straw that broke Papandreou’s political back and, it seems, that of the EFSF.

So the Greeks are only going to be allowed ask one question: “do you want to stay in the EU ?”


Frankfurter Allgemeine ZeitungFrankfurt November 2, 2011

Horror in Germany, Finland, France, even in England, horror in the financial markets and the banks: horror, horror, everywhere – just because the Greek Prime Minister, Georgios Papandreou, plans a referendum on a fateful question for his country.

… Papandreou is not only doing the right thing. He’s also showing a way ahead for the Union. In this new situation, Europe would have to do everything possible to convince the Greeks why the path it is pointing to is the right one. It would then have to persuade itself that it truly is. That would amount tsome self-assurance for the equally highly indebted countries of Europe that could finally gain some clarity on what price they want to pay for the intangible values of a united Europe.

I, for one, concur.

I appear to be wrong. Evangelos Venizelos is at the meeting.

Observing the pictures, I thought it was interesting that George turned up totally alone, not an aide or a colleague in sight, with a very slim folder in his hand. I wonder what was in it? It smacks of a very short, sharp message to the people he is meeting. A ‘one-pager’ perhaps?

‘Go George’… as our American colleagues would say. It takes some guts to turn up at a meeting like that on your own. Seriously. I may not agree with most of what he does but he’s got some balls.

There is a 65% chance the referendum will get through. Then the army will feel okish about cracking down on protesters …for a while.
This is not Pap’s fault. What kind of dumbasses think that it’s ok to condemn a nation to hopeless poverty – oh I know – European politicians.
Michael Noonan – you have got to see the bigger picture

looks like a bad mistake from G PaP going to the set up i mean meeting in cannes as it seems that he has agreed with Merkozy to word the Referendum
about Eurozone Membership than about the Bailout i feel he`s days are numbered as Prime Minister can`t see him getting through the week now
and the Referendum may not happen now .

as for Merkozy be careful what you wish for as Elections may bring a watershed of anti EU elite sentiment .

the Key is what the Referendum wording is about if for example his fellow ministers insist that the Referendum is about the Bailout and not about Euro Membership he will survive and i feel that the Greeks will then vote No

then back to you Europe

@all early hours Nov 3, 2011

““This referendum has changed the psychological situation massively,” Dr Merkel said.

“We want to help Greece. We want Greece to remain a member of the euro area but there is this unilateral decision taken by Greece that has changed the situation significantly,” she added.

“This is why we’re saying very clearly the sixth tranche can only be dispersed once Greece has adopted all of the parts of the decisions of the 27th of October and, additionally, any doubt as to the outcome of the announced referendum are removed. That is to say there is a positive vote on this referendum.” ….. “This referendum needs to be in its very core about the question: does Greece wish to remain in the euro area, yes or no?” the chancellor said.

I don’t think Angela has studied much social psychology – this will absolutely infuriate the Greek citizenry through its collective 20th century memory …..

….and there is a rumour going around Athens that the Neu Greek Generals have hired a poltroon of eight Irish mercenary 5*_attorney_Generals to engineer a NO Vote with the Island of Crete as the down payment.

How people think this is a masterstroke from G Pap is beyond me. Greece has about 5 weeks to sort itself out or be kicked out of the Eurozone, and probably even the EU. If you were a Greek depositor, would you have any money left in the country by Dec 1st? The country is facing complete implosion unless they oust Pap pronto.


The Flying Geese Brigade ie the eight Irish mercenary five star A Generals know which side their bread is buttered i think Merkozy have already signed them up !

@Bond E Bond

maybe G Pap or who ever takes after him know that they have to carry the majority of the people with him in order to take the hard medicine that is coming their way, which ever is the out come at the moment Greece is tearing its self apart and it can only get worse with more austerity coming down the tracks with the people voting it makes it a joint national voice as to say well the people have voted for this is the coarse of action the people have decided on and should ensure more compliance from the general populace,

also it ensures that the bail out has to have a significant upside so that the people can buy in to it this where perhaps he was hoping to tee s out some
more concessions as the Greek People will go through the pros and cons with a fine tooth comb


Interesting article! It bears out the point that I have been making regarding the foolish German insistence on PSI. It is, in fact, the straw that broke Papandreou’s political back and, it seems, that of the EFSF.

I see my persuasive arguments didn’t actually persuade! Why don’t you write “foolish IMF and German insistence…”?

Without PSI there would be a need for an extra €100bn for Greece (though of course this may all be overtaken by this week’s events). With your scheme who pays – ECB, Greece via EFSF, or EU AAA countries directly?


“How people think this is a masterstroke from G Pap is beyond me. ”

Agree – the whole thing was ill-considered and counter-productive. Look at what has happened:

– On Monday Papandreou calls a referendum without consulting his cabinet or finance minister, and doesn’t say what the wording is.

– On Tuesday he calls a cabinet meeting that lasts 7 hours. At the meeting he says the plan is for a referendum on the “loan-agreement” and is scheduled for January. (Some reports say there is a three part question – Yes/No to loan-agreement, Yes/NO to EZ, Yes/No to EU). He also sends a letter to Merkel etc. saying he wants to renegotiate some details of the second bailout before the referendum.

– On Wednesday he meets with Merkel, Sarkozy and Lagarde who say “WTF – no more money till this is sorted and you implement what was agreed last week”. So now the referendum changes from one on the “loan-agreement” to one exclusively on EZ membership and is also brought forward to happen before the next tranche of bailout money is due, as if it isn’t pensions and wages won’t be paid for the Christmas period.

So Papandreou didn’t even figure out how to get past the first step with Merkel etc. and assumed the next tranche would be paid regardless in mid-Dec, and assumed he could renegotiate details of the bailout before the referendum. He seems totally unfit to lead anything if he can’t even figure out one simple step ahead, let alone figure out the multiple steps needed to get to the end game. Even the newspapers that support his party are calling him the “Lord of Chaos”. I think there’s a strong chance he’ll be gone by Friday.

Would you want the job of Greek Prime-minister now?
Sometimes you resign. Sometimes you make a mess and get kicked out.
Europe is now a dictatorship. Government of the people by governments for banks.

Greek Finance Minister now opposes the referendum. I don’t see how Papandreou can win the confidence vote now.

The EU has lost a lot of credibility for me.

How is it acceptable, in a political union, for the leaders of two States to humiliatingly summon the leader of another state to instruct him that the referendum he is proposing in his state is on the point of whether to leave the Euro, in direct violation of the EU treaties?

France and Germany are telling Greece that the law of the EU will not apply if Greece votes no. EU law is our law and not just France and Germany’s law.

It is Greece’s choice to obey laws or not.

It is not France and Germany’s right to direct Greece’s to break the law, or to speak on our behalf to Greece to threaten that The EU members will breach the law vis-a-vis Greece.

In my view, France and Germany have come close to repudiating the EU Treaties by their action.

France and Germany have lost the plot and we should say so.

Sarkozy & Merkel have acted to destabilise the Greek political system.

Democratic plebiscite may yet pull Greece together. It may also cause civil war.

Obeying France & Germany without plebiscite will almost certainly cause civil unrest.

Disobeying France & Germany without plebiscite may screw the economy but save the nation.

Papandreou should have told Merkozy to take a hike when they asked him to come and meet them.

@ Bryan G

Is not the answer obvious? All countries that can afford to – and this must surely include France – pay to recapitalise their own banks (the real problem) and those that cannot (the trio in a programme for the moment) get favourable loans to enable them to do so. It would have been preferable in an ideal world to give them these loans through the budget of the EU, possibly via the EIB, to which all 27 EU countries – including the UK which handles three quarters of the financial business of the EU – contribute in terms of their means and where decisions can be taken quickly and by QMV.

As to PSI, it is too late to remedy the error in the case of Greece but it can be mitigated by giving the necessary assistance to ensure that Greek private investors – especially pension funds – are not too greatly impacted.

The IMF can also get it wrong, as its historical track record only too often confirms.

For me, the great benefit of Papandreou’s move – worthy of another former great populist party – is its pedagogical impact. To listen to the former Greek PM on RTE each morning is a tonic.

But the impact goes further than that. It demonstrates the gross mishandling of the crisis by Germany and France from start to finish. For example, there is little comment on the fact that the German constitutional court last Friday made it effectively impossible for Germany to keep to the 27 October agreement. The “wall of money” approach seems all that is left (although how Germany officials might react to the use of such a term, especially by a finance minister, can only be guessed at). cf.

The capital hole in European banks is, of course, much bigger than the 100 billion being touted. This points up the incongruity of two leaders, who have been totally pusillanimous in confronting their own national problems for domestic political reasons, reading the riot act to another politician for doing the same. Of course, they own the ball, or they think they do.

As to banks generally, the phrase used in anothe context “cannot live with them, cannot live without them”, comes to mind. cf. the “policy letter” from the IIF to the G20.

The paradoxical in all of this is that the simplicities sought by commentators left right and centre – and I am listening to some now on the PK show – are being shown to be just that. At this stage, the overall impression is one of a coach out of control with two leaders still pretending to be driving it.

Reflections of ‘The Raft of the Medusa’
G20 Summit, November 3rd, 2011

Even with eyes closed,
Spars groan, like an animal in our ears,
under a strain
They cannot now endure
Yet cannot be allowed to splinter.

I look down, at beautiful wooden desktops and oak-panelled doors
Now welling over with water,
Where they have been lashed into an makeshift decking.
And I cannot place my feet on a firm place.

And some insist, wretched, ragged, we must bail and bail and bail,
Whilst others say the holes must be plugged,
With what, with what?

The ship has foundered,
The craft must be rebuilt even as
Heavy seas tear it apart.

And where there was an order about the rescue,
Hope even, optimism, care,
A sense of bringing all safely to port,
Salt-wrecked, sleepless reddened eyes,
Peer at the weakest and start to meanly wonder.

And I keep my head down,
Hoping without faith that the last of the sailors,
Really know their craft.
(But they sunk the ship, can they really know their craft?)
And if I stay still as I have been told,
Their eyes will not look at me.

Talk of rescue has stopped,
And we know that whatever is done on this raft is ours alone.
The compass went,
In sailing on, we do not know if deeper, higher, swelling leaden seas will overwhelm us,
Or perhaps we will suddenly be torn apart on a foreign shore.

I remember the happy conversations,
When we talked of Michaelangelo,
When we should have been recalling Gericault.

And the eyes looking,
And the atrocities to come.

“France and Germany have lost the plot and we should say so.”

The compromise of the EU was that the hippos would avoid fouling the waters completely for the minnows. Alas, the first hint of senna and the compromise is abandoned.

The ‘no-bailout clause’ in the EU treaties makes it clear that there is no obligation for a country or group of countries to bail-out another country. Therefore it can be said that France, Germany, the rest of the countries in the EU can chose whether or not to bail out Greece.

Since France, Germany & the rest of the EU can chose whether or not to pay on behalf of Greece they can be said to be the ones paying the piper & hence they believe they should be allowed to call the tune. Is it a reasonable belief?

Greece is now possibly about to decide if the tune that is being called for is a tune they’d like to hear. Should Greece decide if they want to take part?

@ All


The debate on here about the Greek referendum has been revealing – almost no one actually had a clue what they were talking about.


– G Pap is the Prime Minister and therefore beholden to his parliament. He is not the President and does not have presidential-like powers
– This announcement of a referendum was almost surely a brazen act of political selfishness
– He did not consult even his Finance Minister
– He did not consult the EU or IMF
– He required a majority vote in parliament to actually get a referendum to the people in the first place, but almost the entire parliament has revolted against his suggestion
– The average Greek on the street, while angry at the austerity measures being suggested, fully wants Greece to remain within the EU/EZ and not unilaterally default. Pap’s referendum put all of these goals at risk.
– Being keep suggesting there may be a Greek coup or have random comments about “Greek generals”. Greeks find these comments a mix of bizarre, hilarious and offensive.
– The average Greek has been humiliated by Pap’s actions this week
– The Eurozone has been thrown into fresh dissaray by Pap’s actions this week, which were ultimately self serving and pointless. We are closer to EZ implosion because of Pap’s decision.
– Pap’s decision has, if anything, reduced down the ability of the Greeks to renegotiate last week’s deal. Merkozy has told them to put up or shut up by Dec 5th.

Oh, and now seems like G-Pap will resign in the next few hours. Democracy in action fellas, accountability in action fellas. Whats to complain about?


How is it acceptable, in a political union, for the leaders of two States to humiliatingly summon the leader of another state to instruct him that the referendum he is proposing in his state is on the point of whether to leave the Euro, in direct violation of the EU treaties?

So give them the money with no strings attached in some hope the tooth fairy will also turn up for Ireland?

How would a multilateral system work, if everyone operated like Papandreou?

It’s akin to a company agreement on funding a restructuring and after an agreement, the head reverts to his lenders and says he will have to get the assent of his workers in 3 months. In the meantime, can I have some advance?

Some here live in la la land.

@Michael Hennigan

You totally miss the point I have made. Nobody is disputing that there should be strings attached to the money.

Germany and France have the right to withdraw their contributions to any fund if they are not satisfied a to the basis on which that fund will work. That is France and Germany’s sovereign prerogative.

The problem is France and Germany doing the following:
(i) summoning the leader of another country
(ii) publicly telling another country that France and Germany run the EU according to their rules and if Greece don’t like it they can get out of the Euro, and
(iii) telling Greece how to conduct its internal democratic processes under threat of Euro expulsion.

Their actions have caused lasting damage to the EU.

@ Grumpy

Its all over people. Thanks for playing.

“Papandreou ‘to Offer to Resign’ Within Next Half-Hour, BBC Says”


@ zhou_enlai

There was a G-20 summit about to start and the EU president, European Commission president and IMF executive head were also involved in the issue.

The issue had to be brought to a head; the rest is vaporising from an armchair


As far as I am aware, the EU Commission President did not summon Papandreou and did not attend the meeting. The Commission President made a statement but it followed on form and was a reaction to the statements of French, German and Greeek leaders and officials. Do I have that wrong?

I would also like to point out that there are some obvious problems with your analogy of a company and its employees, not least that it misses the out on the whole concept of democracy and sovereignty deriving from the people. Papandreou’s call for a referendum was surely ill-judged, but now we have seen the whites of France and Germany’s eyes and I don’t like what I see.

@ PR Guy – you ask whats greek for et tu Brute.

According to some his words were: “Kai su, teknon?” – and you my child and that subsequently this was recorded in latin.

@ zhou_enlai

I have some sympathy for your point of view. However, you may be overstating it a bit. Papandreou attempted to play Merkozy at their own game and he lost. Even his own people seem to recognise this, if news reports are any guide. There is also the point that what Merkozy were trying to react to was the danger created by a consultation of the Greek people based on a false premise.

As to the game as it is played by Merkozy, I think it is rapidly coming to the end of the road and, indeed, this particular episode may copper fasten its demise.

I linked above to the “policy letter” from the IIF. The section on how PSI will be applied in Greece is of particular interest as is the obvious linkage being made between the various elements of the grand plan, such as it is. Indeed, the plan can be viewed as a series of communicating flexible vessels where pressure on one increases the pressure on another and vice versa. The main pressure points for both Merkel and Sarkozy are electoral. They want to keep the pressure on the vessel marked “public expenditure” in their respective countries as low as possible. However, in increasing the pressure on the vessel marked banks, they leave themselves open to “le credit crunch”. The IIF is quite open in its letter about this possibility. The devil will be in the detail of the deal for Greece which is still to be agreed, again as the letter makes clear.

Meanwhile, the pedagogical impact of the crisis, especially for an Irish audience, increases by the hour. Reaching for the weapon of a referendum is not always the magic solution, or democratic answer, that is required.


Maybe I am overstating things a bit insofar as Merkozy is entitled to point out what they will or will not support at a Council of Europe level.

I agree that it isn’t only Greece that is having to face up to reality. Sarkozy has had a bowel loosening moment too.

@Michael Hennigan/zhou_enlai

I’m pretty sure that Lagarde, Schaeuble, Merkel, Sarkozy, Papandreou and Barroso were in the meeting.

The photo I saw didn’t show everyone who was sitting around the table but I think also present were Juncker, Venizelos (not sure if in person or by phone) and Draghi (by phone – he was in Frankfurt last night).

That was what I meant when I posted yesterday about a ‘reception committee’ being big enough to gang up on him and having some balls going into that room on his own (I have conflicting reports about whether Venizelos was there in person or not – he certainly didn’t arrive with his PM, who entered the building on his own).

I don’t know who actually extended the invite (to put it politely) to Papandreou – might have been Sarkozy – but Barroso spoke to Papandreou by phone several hours earlier in the day and gave him the heads-up (to put it politely again) about no payment being made in November if that referendum wasn’t taken off the table. They conversed in English and I’m told that the word ‘bullshit’ was used seven times during the call.

@PR Guy

Thanks for the clarification. “Bullshit” used seven times? Was Alan Shatter on the line?

@ All

G-Pap making a speech to parliament at the moment. Bizarre if what he says is true. He’s claiming this was all a rouse/ambush to get Samaras to play ball and accept the package. He’ll enter negotiations with Samaras over a transition govt, but is not willing to sign just anything. He’s either the greatest political genius of our times, or just a great spoofer. Either way, he clearly had absolutely no interest in the “democracy” element of this referendum, it was a cold, calculated political move, as a minority of us here identified immediately.


“Was Alan Shatter on the line?”

I’m told it’s one of Barroso’s favourite English words.

Another interesting little anecdote (and this is from a really reliable source who has worked with him in the past), apparently Obama swears like a trooper all the time and Biden isn’t much better. Words a little stronger than ‘bullshit’


“the question of what exactly Cameron meant is open for debate.”

Yes, I saw that earlier. Do you think the IMF is gearing up for one of the ‘too big to fails’ (e.g. Italy)? A precautionary move perhaps? Get the commitments in place now….. just in case it’s needed.

The fragrant Christine has been working hard at the G20 and bowling from one meeting to the next. She even got herself into the group photo but didn’t have elbows sharp enough to be one of the blessed ones who get to stand next to Obama for the pic. Did DSK feature in G20 photoshoots? It seems such a long time ago that he was around that I can’t recall.

@Bond. Eoin Bond

“He’s either the greatest political genius of our times, or just a great spoofer.”

Now let me think for about half a nanosecond to get the right answer to that question….

@Bond Eoin Bond

Shock! Awe! Incredulity! Dismissal! Scapegoat! The Wake! Disbelief! Consternation! Puzzlement! Emergence! Admiration!

What next? Hero Worship? St. Georges.

Ain’t over yet …………

@ PR Guy

I have no idea but this Alphaville piece may be of interest.

In short, the bluster underpinning the national positions of both Germany and France is becoming more obvious with every passing hour in Cannes. The Russian leader has also pointed out the obvious. Europe has the means to solve its own crisis. It just does not want to use them. By the way, it is raining in Cannes.


Rainin in Cannes! Poor Nikki – he musta upset all those gods in the Acropolis …. The Russians, and the local high infants, are right on this one … I hear Silvio lookin very down and out around Cannes as well …

The WSJ article posits further Euro integration. If this can be achieved by Treaty, then I suggest it be run in about 70 years time when the citizens of Europe have forgotten how the place really works.


Treaty change will be required on a few fronts [monitoring dodgy capital flows to dodgies of various hues; a truly independent ECB; centralised bank monitoring at EZ level; a President of Commission with real, as distinct from false, teeth (fought against since 1956 by the Gaullists in Franco-Germania); … democracy can be a real nuisance at times 😆 but recent days have shown us just how fragile it can be – and we can thank St. Georges for that one …

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