Framing a Greek Deal

Bill Emmott writes in the FT here.

174 replies on “Framing a Greek Deal”

Nietzsche’s eternal hellenic recurring ….

Is Syriza About to Score a Tactical Win Against the Troika?
Posted on February 9, 2015 by Yves Smith

Those who were hoping that Syriza would be cowed by the ECB’s aggressive moves to shut Greece out of bond markets and Eurozone finance ministers’ unified resistance to the new government’s proposals are no doubt frustrated by its refusal to capitulate. On Sunday, Greek prime minister Alexis Tsipras gave a rousing speech reaffirming Syriza’s plans. Ekathimerini’s summary:

Read on:

Good graphics & tables; Troika Fig(leafs) vs Greek Lumpen Citizenry Empirical Socio-Psycho-Economic Reality.

Will get to the FT – after a breakfast!

I agree with Emmott that Greece needs to ‘frame’ its proposals at a European Level – that is, an ‘agreement’ that also benefits other EZ citizens – not just the lumpen Greek citizenry who are in dire straits.

From what I can discern from realist commentary, the neu Gov is framing in an EZ direction. I cannot understand stance of Irish labour party on this …

“In addition to the debt swap, that could involve a beefed-up programme of publicly financed investment, across the EU, made possible by altering the fiscal pact to separate capital investment from current spending; and a new single-market drive, deepening market integration for goods and extending it to services and the digital economy.” [@FT Ta!]

The ‘Fiscal Pact’ is socio-economic nonsense; separating capital invest. from current spending in today’s EZ lifeworld makes sense.

Not sure on the latter re. the EU-US trade deal?

Cheneyite Nuland’s “Fu*k the EU” and her Kiev putsch, and neo-kon warmongering re Ukraine is very troubling … imho, It makes economic/political sense to build a decent relationship between EU and Russian Federation; which the cheneyite neo-kons wish to destroy.

p.s. Blind Biddy’s response to Ms. Nuland is unprintable on a family friendly blog such as this – if u get my drift!

Klaus Regling at the banking inquiry

“He said the design of the monetary union in 1988 was incomplete, the EU rescue funds were not in place as the founding fathers did not believe a euro zone member would lose market access.
He said they did not anticipate a crisis of such magnitude.”

They still haven’t “put a ring” or even a banking rescue system on it

“If we go on like this we will all end up in the mad house,” says Dimitris Kalatzis, a soft-spoken jeweller, who at 53 well recalls Greece’s entry to the EU in 1981. “Everyone is exhausted. Forget about new taxes, we can’t pay them! And forget about what Syriza says. No one really believes any of its promises of jobs and tax cuts and benefits being restored. But psychologically we have to calm down. If that means taking our chances, if that means the drachma coming back, then so be it.”
But Kalatzis, who spends his day in his Athenian workshop threading bracelets and necklaces, bangles and beads is right: a great many of those who will vote for Syriza will be motivated by protest. The formerly marginal Marxists have become the best way of expressing distaste for the mainstream politicians whose foolhardy policies over the past 40 years – exacted by New Democracy and the once mighty centre left Pasok – have brought Greece to its knees. That the international rescue programme was meant to put the country back on its feet by 2012, but has instead sent it into an austerity-driven death spiral, has reinforced the conviction that Athens is desperately in need of a change of direction. Unemployment was supposed to peak at 16% that year; instead it grew to 25% while gross domestic product nosedived to Depression-era levels. Lost time, policy U-turns and conflicting messages from Berlin – Europe’s paymaster and in Athens’s case provider of the bulk of rescue funds – has exacerbated the uncertainty.”

I think Greece 2015 has echoes of Gaza 2014 .

Martin Wolf Jan 20
“The resolute opposition of the German establishment to fiscal deficits even when the yield on its own 30-year bonds is 1.1 per cent — virtually free money — hampers the use of fiscal policy throughout the eurozone. The emphasis on the wickedness of debt, regardless of what it costs, is pathological. No other adjective will do.”

The Germans are going to have to yield. The hunt for yield finds another target now that Portugal 2 year is down to 0.2% !

Even the FT are banging on now about helicopter drops.

@ Seafoid

“I think Greece 2015 has echoes of Gaza 2014.”

I think you need to calm down there a bit, or you’ll do yourself an injury.

Greece has few cards to play and it could have played them better so far.

Bill Emmott makes an interesting point and with the right-wing governments of bailed-out (via loans) countries Ireland, Spain (banks) and Portugal supporting Germany to ensure that left-wing parties in their countries are not given bragging material to use against them in upcoming elections, the support of France and Italy is essential for Greece.

Germany is in a very strong position politically and economically with full employment and a record current account surplus while the UK has a record deficit.

Analysis: Germany world’s top surplus economy; UK tops deficit ranks

Quitting the euro can be a rational move but launching a new currency that is going to have a value that will be a fraction of the euro is not easy to engineer during a fragile economic time while there is also a Hotel California situation when times are good.

Besides, devaluation for Europe’s most closed economy is no panacea.

According to a Banque to France paper in 2012, prior to 2008 peripheral countries did not lose export competitiveness. It was the surge in imports that resulted in big trade deficits.

It’s also well to remember that while nations don’t like single currency diktats, a country with its own currency that gets a debt restructuring, has an incentive to fix its economy as a reputation as a serial defaulter is hardly going to attract investment.


I do actually. I’m not talking about white phosphorous or death (although we could mention Greek suicides). I’m thinking about what it all means.

It’s a dead ideology (Zionism/neoliberalism) trying to impose its rules on people who are sick of it. And the human reaction to nonsense.

You can’t say that whatever model you work on in your office is coherent when
Ian Harnett of Absolute Strategy says

“If you think yields are going to go to minus 2 per cent then minus a quarter is fine as a trade”

Ireland is just 200 bps above that level. Say it’s for risk. LOLZ.

How low do you think CHF 10 year will go by year end? Minus 3?
Reading the FT now is fascinating. Discipline is all over the place.

Martin Scholl of ZKB, the 4th largest bank in Switzerland was interviewed in the NZZ on Sunday. He says the SNB could reduce interest rates further or impose capital controls and says “das waere in einer globalisierten Wirtschaft zwar dramatisch aber sicher denkbar- “that would be dramatic in a globalised economy but not unthinkable”.

We are in the equivalent of the mid 70s in terms of economic model breakdown.

Regardless of what method is introduced to deal with the 300+ odd billion of Greek debt.

Will it work? Will the plan be successful in the long term?

Is Greece capable of changing to a sustainable economic / financial model of growth, jobs, balanced budget etc etc etc.

If not… then no matter what deal is done in 2015…. even if the debt is completely written off tomorrow…. Greece will be back in trouble in 10 or 20 years time.

Greece is like a ship that always has a hole below the waterline… no matter how many times it is bailed out by EU / IMF rescue teams it still continues to sink.

European countries are owed a lot of money… as is the IMF. Goldman Sachs are not around anymore to fudge the Greek national accounts.

Why should a Irish / other European civil servant work until 67… so that a Greek civil servant can retire at 50? Are other Europeans expected to fund the Greek who retires early? Is that just?

The Greek nation / Greek Govt has to demonstrate that it can be trusted, that it will step up to the plate, no more Goldman Sachs monkey business, threats of reneiging on previous agreements / deals.

Numerous other European countries have taken pain, Latvia being just one example, why should it be different for Greece?

For the Greeks, they have to man up… turn to a sustainable economic model whether they are in or out of the Euroland. The days of extend and pretend, devaluation, fudging accounts are getting harder to pull off. The world is a much smaller place in the 21st Century.

For all the bondwallahs out there with yields at subterranean levels and no sign of the momentum easing up

You were there in the spreadsheets
With the trend at your heels
You stretched for the yields
And you know how it feels
To reach too low
Too far
Too soon


It’s bigger than Greece at this stage.
France isn’t going to make it under the current approach either.

And whatever model they use for the bailout has to be honest. There were too many dud assumptions in the last one.
Deflation has to be one of the inputs.


“It’s a dead ideology (Zionism/neoliberalism)”

Amazing how the extreme right and the extreme left can always agree on one thing isn’t it?


Greece has been a serial defaulter since 1832. What reputation has it to lose at this stage.

@ Tull

What is your take on negative yields?
Is Mario Draghi going to do something about it in his inimitable style and unloose more verbiage ?

Lagarde said we need looser monetary policy and investment. Looser monetary policy is a huge part of the problem. Think of all the cr#p invested in credit in the US . No need to worry about liquidity. The Fed will sort everything out.

And something will turn up. Of course it will.

Last year Merrill Lynch calculated that that global central banks boosted liquidity by roughly $9tn since equities bottomed in 2009. Over the same period global market capitalisation rose $35tn while the global economy expanded only $14tn.”

They aren’t even investing in growth.

This video is as good as ever

“for all the money we paid to them banks we could have recapitalized a brand new banking system”

But we didn’t. And we might have to face the consequences.

The framing is one thing. Picking a particular level of debt/GDP at which the debt conversion would happen is another. Given the mood of the Troika, their optimal threshold would be Italy debt/GDP + 1 percentage point. Ingredients of anger and moral hazard right there.


I am putting your qyestion into google translate to see if I can understand. However my version does not translate from Doom to English.!!!

US 10 yr back at 1.98% and curve is beginning to steepen. Ex…cell.ent

It’s a great idea of the Greek government’s to have the OECD validate that an alternative slate of structural reforms is equivalent in expected impact to the slate originally imposed by the Troika. It’s just about the only organisation likely to be seen to be both competent to do this and reasonably impartial, while also being international and quite Europe-focused.

Would most people agree with this statement:

Absent a move to a political union in the EA involving substantial fiscal transfers it is not possible for Greece and Germany to share the same currency in the medium term , irrespective of short-term debt developments in the former.


I would definitely agree with that statement. What is more MOF Schauble would probably agree. The Sage thinks “its over” for Greece unless programme accepted.

To paraphrase Sir Edward Gray “the lights are going out all over Greece….”
Now bring on QE, OMT and a fiscal stimulus.

Trying to figure this out.
Scenario 1:
Greece defaults -> doesn’t it default on itself? It’s own banks run out of cash then what
1 a- it prints drachma (backed up by what?..A loan of Russian Gold maybe or
1 b it prints Drachma leading to a hyperinflation with Euro intervention needed to stabilise it

I would definitely disagree.

Greece has been 30 years in the EU and receiving annually something between 3% to 4% of its GDP in structural funds transfers (as has the Mezzogiorno for even longer). The euro is an opportunity that requires an associated discipline. The latter has been sadly lacking in Ireland with predictable results. The jury is still out as to the direction the country will now take. The “polloigarchy”, especially well ensconced in the education sector, is stirring.

One of the essential features of a healthy relationship – no pun intended – between organised labour and management is that there is acceptance that the latter has the right to manage.

@ tull

Are negative yields good for business ? What do they say to you ?

And where is your fiscal stimulus going to come from ?
Schauble’s fundament ?

Is it a sign of a market overheating when you go over to the airy fairy side ?

@ DoD

That chart says it all. Especially why the US recovery is so putrid.
SF Fed dude said the US was close to full employment- 92 million people are no longer in the workforce.


The links below showing Greek debt.

As you can see in the Greek pdma link, 242 billion out of 322 billion was owed to ‘official lenders’. [i.e. the official lenders bought the debts or forced Greece to buy them from private banks].

When a country or bank defaults, the smart way to do it, is not to pay creditors, but the assets (loans), if most are within the country which they are, are still the property of Greece.
The hair-cut (lovely word) on bank creditors should be more than adequate to recapitalise the banking system, as about 60 billion is owed to the eurosystem. [kalispera (goodnight) to that 60 billion].

On the government debt side, and the hair-cut to ‘official lenders’ could be over 200 billion (at least until things got sorted out), and the central bank would be able to print, in theory, up to the amount of the full haircut (less any internal losses incurred themselves on the haircut).

The creditors countries would, of course, bay for blood, and may take retaliatory action against Greece, but not every country would go for retaliatory action, with the UK in particular probably not joining the mob.

The Greek currency would devalue possibly by up to 40%, but as their chief export is tourism, they would very quickly start to increase ‘exports’ and employment.

Grexit and a hard default is a reasonable and realistic option for the Greeks.
But Varoufakis is correct. Once Greece goes and is seen to survive, other countries will leave when the pressure comes on.

The idea being put about that other countries might look for debt forgiveness is off the mark, imho. But the real issue is other countries leaving because their ‘currencies’ are overvalued, and taking the first opportunity to leave that presents itself.

“Absent a move to a political union in the EA involving substantial fiscal transfers it is not possible for Greece and Germany to share the same currency in the medium term , irrespective of short-term debt developments in the former.”

I would extend that to all the PIIGS and France.


another of the essential features of a healthy relationship between organised labour and management is that there is evidence that the management is competent

You are forgetting QE and OMT. I would not be surprised if the QPQ for shutting up on Greece is a substantial easing of already easy policy.
Recent data from Spain and Other peripheral show growth picking up but you don’t believe me. Low rates, cheap currency and the end of austerity.

I think Greece will end up outside of EU as a satrap of Putin’s Russia. JR points out that the world financial system has disengaged fromGreece so the losses will be at the official level. I doubt there will be much upturn in activity in Greece as a) there will probably be sanctions b) Greece is a largely closed economy apart from tourism and hyperinflation will see to that.


I do actually. I’m not talking about white phosphorous or death (although we could mention Greek suicides). I’m thinking about what it all means.

Actually, Greece has one of the lowest suicide rates in the world. Its about one-third Germany’s rate.

number of suicides in 2011 (Eurostat):

Greece 477 ( 4.3 per 100,000 population)

Germany 10,166 (12.5 per 100,000 population)

The Financial Times reports that Athens has signalled it was ready to end a two-week stand-off over its demand to end the current bailout before embarking on a new programme. A senior finance ministry official said a “bridge agreement” could be described by its partners as “a technical extension” of the existing arrangement, “a move that would be a significant reversal of Mr Tsipras’ stand.”

@ tullmcadoo

You’re correct in saying that Greece has been a serial defaulter but in recent decades it has kept its sovereign bib clean until the ongoing crisis. Investors tend to have short memories when there is some yield available.

According to Moody’s in 1997-2010 there have been 20 sovereign defaults:

Mongolia, Venezuela, Russia, Ukraine, Pakistan, Ecuador (twice), Turkey, Ivory Coast, Argentina, Moldova, Paraguay, Uruguay, Domenica, Cameroon, Grenada, Dominican Republic, Belize, Seychelles and Jamaica.

Turkey is an example of a country that has engineered a change in economic fortunes.

@ Dan McLaughlin

Given the the low expectations for long term European growth, Greece will struggle to maintain a standard of living higher than its neighbours.

It needs a consensus on what is required to be done and patience – for the next 25 years.

It has had a superior EU assisted infrastructure compared with its neighbours but a very poor FDI record compared with them.

Still, Germany will not wish to push it out of the currency or pay for it either.

That’s the problem with marriage and no divorce option.


But that’s why Noonan is distancing himself from them. What club do we want to be in? The ones going down the tube?

The idea that exiting the Euro offers salvation is baloney. For proof, we need look no further than this island. There is now a dramatic divergence in the growth outlook between the two parts of this island.

While growth is surging to Celtic Tiger levels south of the border, PMIs and other indicators show it grinding to a halt north of the border. And this is before the massive cuts in the public sector, recently introduced by SF, have even begun to take effect.

The main cause seems to be the overvalued exchange rate. The UK has a ‘one size fits all’ policy wrt its exchange rate. Effectively, the sterling exchange rate moves according to how finance-industry-dominated south-east England is doing. This has resulted in the past year in an exchange rate that is far too high for the low-productivity low-skill economy that N. Ireland has.

As 2015 progresses, it is going to be interesting to see how the loony UKIP/SF axis is going to explain away the contrast between the super growth euro-using R. Ireland economy and the stagnant non-euro-using N. Ireland economy.

‘The Prophets are Weeping’

President of Ireland, Michael D. Higgins, 2015

To those on the road it is reported that
The Prophets are weeping,
At the abuse
Of their words,
Scattered to sow an evil seed.

Rumour has it that,
The prophets are weeping.
At their texts distorted,
The death and destruction,
Imposed in their name.

The sun burns down,
On the children who are crying,
On the long journeys repeated,
Their questions not answered.
Mothers and Fathers hide their faces,

Unable to explain,
Why they must endlessly,
No end in sight,
Move for shelter,
for food, for safety, for hope.

The Prophets are weeping,
For the words that have been stolen,
From texts that once offered,
To reveal in ancient times,
A shared space,
Of love and care,
Above all for the stranger.

@Dan, I think Germany and Greece could also co-exist in the euro if there was:
1) a credible mechanism to *ensure* default on hard-to-sustain sovereign and bank debt was in place to keep a lid on moral hazard; and
2) coordination on fiscal policy to ensure a non-lowflationary stance for the eurozone as a whole, backed up by a non-discretionary ECB helicopter money rule designed to keep eurozone inflation from going below 1.75%.


Not sure your argument is consistent – isn’t Greece in the same predicament as NI, locked into a currency that is too strong? Therefore the solution is to leave the euro.

I believe a Grexit is inevitable and a year afterwards, once things settle down and Greece is growing strongly, everyone will say, why didn’t they do it sooner?

The potential geopolitical implications are huge; we could have an anti-EU/pro-Russia Greece, with a large military, right on the southern border of Europe. I’m sure Obama made that clear to Merkel during her recent visit!

@ DOCM: ??? “One of the essential features of a healthy relationship – no pun intended – between organised labour and management is that there is acceptance that the latter has the right to manage.” Eh?

One of the essential features of a healthy relationship – no pun intended – between organised labour and management is that there is acceptance that the former need to earn enough to continue with their “steady state” of consumption. Yes?

Downsizing employments and incomes and outsourcing and off-shoring productive investments will lead to a recovery in consumption (aka: ‘growth)? Is this some form of New Math, or what? Looks a tad dodgy.

Its a physical problem. Its a limit problem. Its an income problem. Its a debt (negative future income) problem. Productive supply capacity is, probably, an order of magnitude greater than consumption demand. The rate at which the potential output gap is ‘gapping’ is increasing!

Is it any wonder you cannot solve a particular problem when you are persisting with solutions to a quite different problem. Or worse, persisting with putative solutions which have repeatedly failed (very successfully) in the past.

Think of the economic situation in EU like our un-healthy Health Service. You can throw all the money you have at it …. again, and again and again. To no positive effect!

@ Sarah

Deflation is here so I don’t see Ireland escaping it. It’s about how to respond coherently and ,frankly, talking about Greek rock stars or differences in bond yields is pointless.

Monetary policy does not work with the level of debt there is in the system.
The Phillips curve does not work with the level of debt there is in the system.
Financial theory does not work with negative interest rates which are a function of the amount of debt in the system. It’s based on the notion of risk free bonds which requires positive interest rates. If Government bonds are overpriced so is everything else.

The Bank of England used a Phillips curve in advising Gideon on getting his deficit down to zero. Lower unemployment does not lead to wage inflation now.
The deficit is therefore 5% of GDP

The UK is thinking about raising interest rates but we don’t know if wages will increase under deflation. They probably won’t. If wages don’t increase interest rates won’t.

Carney has no idea what he is doing. Neither does anyone at the ECB.

“People tend to think of this as a European and Japanese issue but the move down in yields is a global trend. That increases your worry that economies are not responding to all this stimulus,” says Matt King, credit strategist at Citigroup.”

Low interest rates generate massive imbalances- if these are not managed they lead to massive financial instability.

Greece is just a bit ahead of the curve.


It was a reference to our lamentable health service. Insofar as it is managed, this can only be done with the either the express approval or the acquiescence of the assorted trade unions representing its staff. As it is the biggest employer in the country, this matters. (Anyone that has either a relative in hospital or experienced the trauma of being in hospital can confirm this from first hand experience).

The Greek crisis in six charts (H/t Alphaville)

The question is why the Greek economy contracted in the manner that it did. A speculative answer would be that the distortions that excessive borrowing gave rise to, notably to the manner in which the money was spent, were insuperable in the short term. Adding to those distortions, as advocated by Syriza, seems unlikely to help.

A racing certainty at this stage is that our two heroes will be left to stew until the meeting of ECOFIN next week They have made any other outcome politically impossible for their adversaries.

“Hubris and the reality of Europe: Coming to Terms with Imperfection”

Adair Turner

“The euro area now faces a chronic problem of deficient demand, to which the ECB’s quantitative easing programme will be only a partially effective response. Without progress to a more complete economic union, with some federalisation of public debt, and some write-off or monetisation of existing debt, the currency union risks another lost decade of weak growth and low inflation. This would mirror Japan’s experience in the 1990s and 2000s, but with far worse potential social and political consequences than in that ethnically and culturally homogeneous nation. If such progress is politically unachievable, a controlled breakup of the euro area might be the better – though still risky – path forward.”


I think dropping Greece would be ultra dangerous for an EZ that is not taking deflation seriously.

It would tell the markets that monetary union is over, that the EZ is just a badly run currency peg and that politics can be manipulated to kick undesirables out.
Zero credibility. And market logic is pathological in times of crisis

Noonan is ‘distancing himself’ for purely political reasons – afraid of being shown up BY Syriza for his’ rollover’ approach adopted to EZ/ECB/IMF ETC – Podemos and The Shinners are lurking with intent…
Now Coveney’s statements are interesting…and apparently upsetting the FG neoliberal wing…more political games….

A must read from Alan Beattie of the FT; including the blog posts.

@ GK

As Martin Wolf pointed out in a recent column (February 3) “It is also puzzling that the [Greek] finance minister thought it wise to announce ideas for debt restructuring in London, the capital of a nation of bystanders.”

The one thing those trying to keep the euro afloat have had more than their fill of is ex cathedra comments from that quarter.

A good bit of reading in here, including the links, but very solid stuff IMHO.

Pettis makes a key point that most economists know little about finance theory and do not know how to think about value. No wonder the governments, who depend on their advice, are stuck in their opposing trenches.

As he rightly points out, this is not about Germany v Greece, and still less is it about class divisions. It’s about the allocation of losses among stakeholders.

@ DOCM: Thanks. Angola!!! At least they have made some progress in de-mining that joint!

I reckon (subject to correction) that if the USC was X2 and given to HSE, in three years or so, they would be back for more! The entire enterprise is out of financial control and needs to have all costs drastically downsized. Not possible. And if not, bad trouble ahead. Increased taxes or diminished services?

Should we open a book: date on which 1000 are on trollies! Bad taste.

@ JR: Joe, if you superimpose (on that chart) the entry of China into global economy (1975-1980) – its close enough to the divergence point to raise a question or two.

The productivity gain is due to widespread technological enhancements and robotics. The competivity loss in production (in many developed economies) is an order of magnitude. You cannot ‘recover’ your economy from such a disparity. You have to fall back on domestic consumption – with downsized incomes and debt top-ups.

“So, how did work out for yeh?”
“It did not.”
“Yeah, I thought so.”

Took three decades, but the money vultures (aka: debt burdens) have eventually come home to roost. So whose carcase will they feed on?

@ PQ

Fáilte ar ais

“Pettis makes a key point that most economists know little about finance theory and do not know how to think about value”

Much finance theory is meaningless with negative yields
CAPM still drives a lot of asset allocation.
The insanity that equity is cheap compared to bonds -I have seen that so many times this week.

Bonds are screaming dysfunction and equity thinks it’s a come-on

The neolib memes are all ready for the hospice.
Monetarist logic doesn’t function any more. Capital won over labour in the US-. Given that US labour is excluded from the fruits of economic productivity and that the Fed is unable to generate 2% inflation, it seems as though the financial system has iterated to the end point of its logic.
Pyrrhic. It’s even worse in Europe.

Is the Levy Institute doing anything ?

It’s time to roll out Bourdieu.
And JD

@ PQ

Pettis could not be more wrong. It is a combined question of a dispute between sovereign nations and a class – if you will – difference of opinion about how to resolve it.

One blogger (‘a greek’) on the FT link above effectively ridiculed those chickens that were foolish enough to invite the fox into the chicken coop. That is also the major political question posed in Ireland.

@ Vinny

“Noonan is ‘distancing himself’ for purely political reasons – afraid of being shown up BY Syriza for his’ rollover’ approach adopted to EZ/ECB/IMF ETC”

He’s not afraid of being shown up by Syriza. He’s afraid that if he jumps into the rocket ship with Tspiras & Co, Ireland will be tipped into the abyss alongside Greece. He’s doing the responsible thing by looking out for this country rather than Greece, much (though without doubt not all) of whose troubles are of their own making. There’s no friends on the dancefloor.


2 trillion EZ sovs in negative yield says the market doesn’t believe the goons running the EZ.

Or if you want it another way

“Within Europe there is a sense of central banks not being totally in control of the situation,” says Simon Derrick, chief currency strategist at BNP Mellon.

The Germans and fellow travelers like Dieselboom have lost the plot.
They should have cut a deal with Greece 2 weeks ago and started thinking about how to deal with deflation. They are worse than Fianna Fail.


“The question is why the Greek economy contracted in the manner that it did.”

Is that a question that the Troika should be asked to answer. It was, after all, the policies they choose to enforce, that gave rise to the Greek depression.
How come reducing the minimum wage was top of Troika demands, rather than insisting on a proper tax collection system.
Good charts, all the same.

“As Martin Wolf pointed out in a recent column (February 3) “It is also puzzling that the [Greek] finance minister thought it wise to announce ideas for debt restructuring in London, the capital of a nation of bystanders.”

Symbolism matters at times: London Debt Agreement;

“It was only with the London Debt Agreement of 1953 that the German economy was given room to breathe again, says historian Ursula Rombeck-Jaschinski of Stuttgart University: ”


Ireland is not Greece, nor should Ireland be looking for any piece of the concessions that Greece might get. Glad to see that Coveney’s ‘me too’ shout, has been given short shrift.

But, Noonan could have expressed some empathy with Greece, without necessarily jumping into the Syriza camp. Instead of that he has gone (core) native, by insisting on full debt repayment for Greece.
Go réidh a bhean na dtri mbó…

@Seafoid/ BWS

I don’t fully understand the risks deflation poses, other than that of people with more than adequate means deferring purchases, and thereby reducing demand.
But many of these people / organizations have cut spending anyway.
I would be grateful for any (short or historical) reference materials covering deflation and its effects.

@ Bond etc

…and not even a ‘teenchy-weenchy’bit concerned about the rise of Syriza/Podemos/Shinners/Independents…?

Recent utterances from Kenny, Harris, Flanagan, Varadkar and Noonan re ‘stability’ and all that would indicate deep concerns.


Howya. I defer to you expertise on the inner workings of the EC and I share many of your concerns about rent seeking behaviour in this and other states. We need reform and plenty of it.

I did not notice, however that you are expert in debt resolution and restructuring. Neither am I. I can just about read a balance sheet, but I have read a fair bit of Pettis’s work, including his highly erudite views on the Chinese economy, and I do not think he talks through his a55.

Far from it. The man is reasonable and modest to a fault. So when he says, ‘Varoufakis has got something here folks, and its not just for the Greeks’, then the least we should do is try to see WTF he is talking about. It is a new idea, and bejasus, we need them.

We always did. As Gallileo said ‘Eppur si muove’. And it moved. The PTB didn’t like him, and he was lucky he didn’t come to a sticky end, but history shows he was on the money.

All those Grecophiles should remember that what Greece wants is to turn the debt owed to Other European taxpayers into an open ended fiscal transfer. Are any of you honest enough to argue this case in public on the doorsteps of Ireland. It is not only the German taxpayer who has to stump up but also the Finnish, Dutch and Irish.

I don’t recall the Irish public being consulted when the billions of privately held Greek debt were transferred onto European taxpayers to begin with.
PS: QE is much the same kind of wheeze. A trillion social welfare cheque for the 1%.

Yves Smith rightly highlights the security considerations, among other factors, at work here

Philip Bobbit’s ‘Shield of Achilles’ is a nice exposition of power dynamics in state formation. The Greek crisis is a crisis of the state, with political, financial and military aspects. Addressing the crisis is a test of character, as well as wit, for all the main players.
The EC is a big ship, but so was the Titanic………..

I don’t recall European taxpayers being consulted when privately held Greek bonds were transferred en masse into ‘official’ lending.
PS: QE is much the same wheeze. A one trillion welfare cheque for the 1%, no economic growth guaranteed as a result.

@Tull, if I was minded to do the public doorsteps thing, that is precisely what I would argue. The money was a de facto permanent transfer, and it is gone. What’s left to assign is the blame. The governments who told their electorates that they could have their loaf and eat it by lending the Greeks money to bail out the eurozone misled their publics and should justly suffer the consequences.

@ JR: “I don’t fully understand the risks deflation poses, other than that of people with more than adequate means deferring purchases, and thereby reducing demand.”

I am certain that I do not understand ‘deflation’ myself – its a very vexed and murkey concept. Its alter ego is ‘inflation’ – which should (and was) taken to mean an increase in the money supply. Whereas, increases in the cost of labour, commodities, services, energy and credit were named just that – “increases in …” Conflating changes in money supply and changes in the cost of a unit of whatever is most confusing – and very un-scientific-like!

So, unless I state otherwise ‘deflation’ means a significant (statistically) decrease in costs of labour, commodities, services, energy and credit – how-so-ever or whom-so-ever caused. I do not like this: to me, deflation is a decrease in money supply: stop – which due to the success of QEs x n, is not actually with us. So, what is? Hmmmmm. The answer(s) are both interesting and enigmatic. Too long for a blog comment. But we’ll be back at this.

Economic theory does not seem to include both energy and credit as essential factors of production. Big miss, but that’s the way it is.

For a dismal description of the affects of ‘deflation’ in Ireland try J J Lee’s ‘Ireland 1912-1985: politics and society. Dated, but still useful. J M Keynes (1919), ‘The Economic Consequences of the Peace’ lays out what will happen, economically and politically if war reparations (sovereign debts) are not pared back. No one listened! Probably did note even read it. Keyenes does have a short discussion of deflation in his ‘General Theory’. John Steinbeck’s, ‘The Grapes of Wrath’: no comment required. William Greider’s ‘Secrets of the Temple (1985: 592) mentions ‘deflation’ – as “[an] economic term that a generation of Americans had never heard – “deflation”” and he mentions it on 10 other occasions. Antoin Murphy, ‘The Genesis of Macroeconomics: ch. 9: “Henry Thornton, the Lender of last Resort”. Albert Hirschman (1958: 44-9) ‘The Strategy of Economic Development’ – “The Forces Corroding Development”. Mark Blyth, (2013); ‘Austerity: the history of a dangerous idea’. There are many more: Paul Baran; Paul Sweezy; Frederick Soddy; Josef Steindl; Robert Heilbroner; Joseph Stiglitz (especially about debts) all of who at some point bring up the matter of the ‘opposite of inflation’ rather than discussing ‘deflation’ directly.

The stuff is there. Its just tedious to access.

The contemporary problem is that we have ‘financialized’ economies so the issue is one of debt: its existence, its increase and the manner of its repayment – whilst never reducing it!

It appears Min Fin wanted to sign up to the following but got over-ruled from Tsipiras. Is their a split in the camp? Clearly Yanis is not his own man.

“The Greek authorities have agreed to work closely and constructively with the institutions to explore the possibilities for extending and successfully concluding the present programme taking into account the new government’s plans.”

My admiration for the Finns is increasing
“There are basically two options here. Number one is that Greece continues the programme and we give an extension to that programme. The other option, which I don’t like personally, would be a so-called ‘dirty exit’, where Greece would be on its own trying to claw its way back to the markets.”

“All those Grecophiles should remember that what Greece wants is to turn the debt owed to Other European taxpayers into an open ended fiscal transfer. Are any of you honest enough to argue this case in public on the doorsteps of Ireland.”

This is worth a read

I like McKinsey’s idea. Cancel all the debt held by the CBs.

Global debt has increased by $57tn since 2007 to almost $200tn — way beyond economic growth.

It is taking the p**s to assume that all of this is ever going to be repaid.
There is just too much of it. The only “stimulant” that has grown faster in the period is porn. And Dieselboom’s idea of bail ins is a recipe for chaos.

Let’s start a new economic paradigm that doesn’t have debt at the heart of it.
And cancel as much of the stuff as we can to get to tabula rasa.

But we’ll have to strengthen labour too, Tull. Because inequality leads to deflation. And that is lethal for balance sheets.

Because ni neart gan cur le chéile.

@ JR


“It is debatable whether shares will benefit, though. If continued deflation becomes a serious prospect, the lesson from Japan and from the Great Depression of the 1930s is that equities suffer horribly.”

Deflation is essentially a continuation of the transfer of money from labour to capital. But it strangles growth.

And modern balance sheets only make sense if there is growth . Deflation increases the real value of debt and reduces the real value of inventory and other inputs on the asset side of the balance sheet.

Roger Bootle-

Deflation the destroyer

On the face of it, falling prices could leave companies pretty much unscathed–and many economic commentators, particularly those of the market fundamentalist bent, still think on the ground in the US, take a relatively relaxed attitude to the prospect of deflation. They are wrong. In practice, deflation would be a machine for the destruction of much of corporate America, not to mention the corporate sector of just about every other developed country.

Although the downward flexibility of wage and salary costs has increased in recent years, it is still low in relation to selling prices, particularly as more products seem to have become commoditized. The result is that deflation will hit profits severely and unless it is extremely mild or short-lived, it is bound to bring on a wave of insolvencies. In this way the deflation of prices can easily lead to the depression of real output and employment.
In addition, the balance sheets of most companies are currently structured to lose out from deflation. All companies carry some real assets in the form of fixed capital, land. buildings, or inventory, and the market value of all of these can be expected to fall in nominal terms under deflation. Apart from shareholders’ funds, however, almost all of the liabilities will be fixed in nominal terms, either short-term bank borrowings or debt of various kinds. So typically the corporate balance sheet is unbalanced in relation to falling prices. The assets fall but the liabilities don’t, with the result that the value of shareholders’ equity falls.
Admittedly, if a company’s debt finance is on variable interest rate terms there may be some relief. At least the interest rate on the debt can fall, reflecting the weaker trend of prices. Up to a point this means that a company holding real assets financed by fixed monetary liabilities with variable interest is hedged. After all, if the rate of change of the prices of the assets on the balance sheet moves from +2 to -2 percent but short-term interest rates fall by 4 percent, the company is no worse off.
However, there is a little problem about the number zero. Interest rates cannot fall below it, yet there is no such restraint on the rate at which prices can fall–including asset prices.9 Thus real short rates are liable to rise in a period of deflation, thereby raising the cost of borrowing for individuals and the cost of finance for companies.10 This means that even variable-rate funding offers no protection against anything other than the mildest deflation. After tax the increase will be even greater because nominal interest payments are allowable against profits when computing a company’s tax bill, but no such allowance is made for the extra financial burden implied by falling prices under conditions of deflation.

Furthermore, the trend of recent years in America has been for companies to increase the gearing on their balance sheets by issuing more debt and even buying in equity. Accordingly, companies have restructured their balance sheets in a way that makes them more vulnerable to deflation.(Deflation hits the bottom line twice–once in revenues and again in inventory) DER)”

The formal letter of invitation to today’s meeting by the President of the European Council says it all. Greece is relegated to the last sentence.

Members of the Eurogroup are masters in their own house and their heads of state and government like it that way. Tsirpas may think he can change this situation but he is mistaken. Varoufakis, among other contradictory remarks designed to camouflage the fact that he does not have the authority required, said he found the meeting “fascinating”. As well he might! But the fact that he came close to agreeing the procedural statement suggests that he is learning.

An interesting weekend ahead for the new Greek government.


I would agree with you on cancelling all debt held by CBs then we can see what the real debt and debt service costs are. I reckon ours is now in the high 80% and going to low 80s when QE gets up and running and debt service is less that 4% of GDP.

Greece is well lower than the 170% headline rate -probably in the 130%s and debt service even lower than Ireland.

What you really want is for someone else to do the dirty work of campainging for higher taxes and lower public services for Irish people and Slovenes and Finns so that Greeks can retire at 55.

The reason why Noonan is not saying anything about Greece is because of all the plámás he’s getting from neoliberals like Carney

“The rapidly improving state of the Irish economy was highlighted by the governor of the Bank of England Mark Carney during a visit to Dublin during the week. “This is an economy that’s growing. This is an economy that’s become much more competitive, that has moved into a current account surplus for the right reasons. This is an economy that’s fixed the core of its banking system,” he said.
The view of an expert like Carney, that “Ireland has made tremendous progress”, was naturally welcome to the ears of the Government, which launched its 2015 Action Plan for Jobs. The annual plan, driven by Minister for Jobs Richard Bruton, has been one of the outstanding success stories of the Coalition’s term.”

The markets have turned against the Central Bankers in the last few weeks as 2 trillion euro in sovs has gone negative yield and I wonder how many serious players take what Carney says seriously.

Maybe Varoufakis is too far ahead of the curve to make the breakthrough.
He might be like a financial version of Sophie Scholl.

But he’s really on the ball…

Nobody seems have to have much sympathy for creditors and the narrative in the media is all about debtors, although the former outnumber the latter. In Ireland, for example, the recent CSO survey showed 89% of households have savings while 57% have debt.
Low rates are deemed to benefit the economy but in high net savings economies that may not be the case.

Since moderators are evidently reading the comments these days, have you considered just having them post instantly to the site and then deleting anything you don’t like a shortish time later later when you read it? Currently everything is slightly old by the time it appears which makes the site less worth bothering to visit when events are moving reasonably quickly.

Paul Mason has Greek sources that say the following statement was ‘agreed’ but then Schauble insisted the word “amending” in the third paragraph be removed.

“Today the Eurogroup took stock of the current situation in Greece and the state of the current adjustment programme. In this context, the Eurogroup has engaged in an intensive dialogue with the new Greek authorities.

The Greek authorities have expressed their commitment to a broader and stronger reform process aimed at durably improving growth prospects. At the same time, the Greek authorities reiterated their unequivocal commitment to the financial obligations to all their creditors.

On this basis, we will now start technical work on the further assessment of Greece’s reform plans. The Greek authorities have agreed to work closely and constructively with the institutions to explore the possibilities for amending and extending and successfully concluding the present programme taking into account the new government’s plans.

If this is successful this will bridge the time for the Greek authorities and the Eurogroup to work on possible new contractual arrangements. We will continue our discussions at our next meeting on Monday 16 February.”


The other big risk is inflation to get ride of the debt overhang.4% on 80 % only works at low rates.
It’s going to have to be something off the wall but how do we get by without debt as a growth driver ?


“Paul Mason has Greek sources that say the following statement was ‘agreed’ but then Schauble insisted the word “amending” in the third paragraph be removed.”

Well, it seems that Mason is telling porkies. Telegraph, FT and Greek media (amongst others) claim it was Greece that pulled the statement. The market seems of the view that it was Greece as well, fwiw.

I want to see the Greeks run a balanced budget, and let them pay for retirement at 55 themselves if that is what they really want. It’s not as if they are going to be so super-well endowed with employment opportunities that it will make a blind bit of difference to their economy in the near future anyway.

I want no more bailouts whatsoever. If some among the Greeks binge again, let whoever funded the idiocy get wiped out when the crash comes.

Much of the €350m the Greece owes Ireland is a sunk cost that we are never going to get back. In NPV terms, a large part of it is already gone even on paper, and it is inevitable that more is going to disappear. It is irrational to make decisions on the basis of sunk costs.

“There is NO alternative.” or “The ONLY option is …” etc., are propositions of social control.

Politicians are wont to deploy such-like propositions a lot as they seek to establish their argument/s as the absolutist definition of reality. But then, if folk believe, or are led to believe, that their predicament is not due to the natural order of things but is the result of the actions of others, then they will first seek redress either by legal means or government intervention. But if (when?) those fail – they turn to revolution.

Tull, DOCM – you paying attention? Clearly some EU politicians are not. The definition of an unpayable debt – is just that: its not payable! QED. How’s that for ‘social control’?


I doubt very much that Paul Mason is telling porkies – if he says he has sources then I would take his word for it.

The story he has, and that Sky seem to be running with is that there was a draft as per above which only the Germans disagreed with.

The version that was leaked to Peter S was (so the story goes) a re-draft by Dijsselbloem which was aimed at getting the Germans to agree. The Greeks would not agree to that version.

If you think PM is telling porkies you should Twit him about it.


With all due respect, you are missing the point. Generalities about the nature of debt are irrelevant. What is at issue is the clear attempt by the Greek government to gain, or rather to retain, domestic political advantage at the cost of politicians in other EZ countries losing it. That is not how the EU works. Nor could it.

The question of who pulled the plug at the Eurogroup is also not of much importance. That no less than six ministers had left on the assumption that the text had been agreed speaks for itself.

Tsirpas is being put in his place. The leaders have bigger fish to fry at this juncture and, in any case, as I pointed out on another thread, the Eurogroup is expected to act independently, again, because it has to if it is to retain any credibility. It seems from his most recent comments that Varoufakis still has not grasped this point.

Meanwhile, the pincer movement being implemented by the ECB continues.

And the ultimate arbiter – the markets – will also have its say over the coming days.


Debt logic such as right wing chicken licken style the sky is falling down if the debt isn’t repaid only works with limited amounts of debt.

Detroit becomes the reference when debt starts strangling growth.
The failure of CBs to generate 2% inflation means we are very close to that now.

Debt is risk and risk means you may lose your money. It would have been much better to shaft the bondholders back in 2008 but nobody had the balls.

The first week suggests that Syrizia have no intention of running a balanced budget. Spending up and taxes down. On day 1 Yanis was witttering on about going cold turkey on day 2 he was looking for an unconditional bridge.

I agree that we are never going to see 350m back but it is the next 350m and the one after that that concerns me. Greece in the euro is a money pit.

The Greek’s society is very much won’t pay rather than can’t pay. The below market interest rates, moratoria and CB holdings reduce that rate to 2-3% of GDP. Effectively the Greek political system has decided to rank Bondholders as junior to all other domestic liabilities whether good or bad. The voters in other EU countries have the democratic right to stop that gallop.

“Germany won’t insist that all elements of Greece’s current aid program continue, said two officials in Berlin. As long as the program is prolonged, they said, Germany would be open to talking about the size of Greece’s budget surplus requirement and conditions to sell off government assets.
For its part, Greece is prepared to commit to a primary budget surplus, as long as it’s lower than the current 4 percent of gross domestic product, according to Greek government officials. Prime Minister Alexis Tsipras’s coalition also might be willing to compromise on privatizations, one of the officials said. All the officials asked not to be named because the deliberations are private and ongoing.”

So more than 70% and less than 100% of the programme is intact. 70% being Yanis bid.
The primary surplus will be lower than 4% but above 1.5% again that being the bid-offer spread. So all the goodies announced on Monday will have to be phased in.
Privateisation back on agenda..
No haircut.
The Troika has been replaced by 3 institutions in the one person.
6-0 6-0 6-0 straight sets defeat for the Greeks


‘With all due respect, you are missing the point. Generalities about the nature of debt are irrelevant. What is at issue is the clear attempt by the Greek government to gain, or rather to retain, domestic political advantage at the cost of politicians in other EZ countries losing it. That is not how the EU works. Nor could it.’

That is to reduce the matter, surely, to one of politics (of the current orthodoxy), and to disregard economics and finance, and the privately monopolised MSM. Not to mention history.

Of course there is waste and abuse in the ‘primitive’ periphery but which firms, groups and sectors in the ‘ civilised core’ have benefited ? Who sells arms for example ? Who has an interest in subverting and manipulating peripheral actors ? Questions not to be asked.


‘… And the ultimate arbiter – the markets …’

Spose this freudian ideological slip is your stephen fry moment?

Ultimate! Really! “Free de markets!! Yeh Yeh Yey!!!


‘It would have been much better to shaft the bondholders back in 2008 but nobody had the balls.’

Difficult to refute that statement.

re: Greek pension reform facts.
1. 2010: Greek pension retirement age increased to 65 for both men and women.
2. 2012. Retirement age increased to 67.
3. 2010. Changed to career average earnings, previously average of last five years.
4. 2010. Full pension requires 40 years contributions.
5. Pensions in retirement cut from 2% to 15%.

Source: world pensions summit, Amsterdam 2013.
Georgios Symeonis.
Steering away fron the tip of the iceberg.
(Cannot copy link at present).

Greece has gone from a shambolic unsustainable pension system, to a pension system that could be sustainable, if the Troika had not destroyed the country.
The revised system, following the collapse in employment and therefore in contributors, will run into difficulties as early as 2016.
Greece, like most countries, needs growth and particularly employment in order to sustain its economy and society.

Why does Greece owe Finland money?
Have national governments gone into the hedge fund business?
Lets get real here. The Troika put the gun to Greece’s head in 2012, and insisted on Greece implementing a failed set of policies and a failed philosophy.
The Troika did that so that private bank debts would be backstopped and not have to suffer the full losses that were coming.
The sheer destruction imposed on Greece by the Troika has been impressive, even by Troika standards.
I have little empathy with Finland’s loss of patience, but empathise deeply with the Greek people because of the suffering imposed by Finland and others.

@Tull, I think a total cold turkey cut-off of new loans to Greece, after a short (maybe 6 month) bridging period to get the taxation system on track, would avoid that risk. The new government could still raise spending within the limits they have identified – going close to a neutral primary balance and increased efficiency in tax collection.

If they can’t do that, they have to leave the euro. The Greek people as a whole will probably be better off that way in any case after some initial turmoil, and we in the rest of the eurozone will be better off for the having the exit ramp from the euro well marked.

This is much bigger than Greece. It’s a key point in the cycle of capitalism and the relationship between labour and capital. They come around every 40 years when the rules fail. The cycle is shorter than a Kondratieff curve but very chaotic

There is always tension between wealth laudation, which favours concentration, and democracy, which promotes distribution. If wealth concentration can’t generate economic growth, political instability is certain to follow.

Kevin Phillips noted in Wealth and Democracy that the political dream of American conservatism has been “the illusion of markets as potential parliaments rather than descendants of carnivals, as rational decision makers rather than precarious litmuses of human nature”

Note Enda talks about rules. So does DOCM.

“There’s a very strong willingness within the European Council to work with Greece and with the new government in Greece to find a way forward here,” the Taoiseach said. He added, however, that there had been “a very strong view also that rules have to be adhered to

But what do the rules mean when the Schatz, the German 2 year, yields -.22%

The Finnish 10 year is at 0.35%

Rules based societies like Finland, Switzerland and Germany find it very hard to adjust to chaos.
And once again the EZ shows how hamstrung it is when crisis arrives.

@ JR: “Greece, like most countries, needs growth and particularly employment in order to sustain its economy and society.”

That’s the crux: resumption of that “steady advance” in aggregate economic activity. It has to be exponential (annual, percentage, compounding) and over the med- and long-term, averaging 3% if debt interest (state, commercial and private) is to be paid, and consistently above 3% if debts are to be amortized. Note however, that state debts are normally ‘rolled-over’ rather than being repaid. That becomes a real problem if the rate of “steady advance” goes below 3% – and remains there. We’re there! And by the looks of things, we’re stuck there.

@ DOCM: “With all due respect, you are missing the point.”

Fair enough – so what is ‘the point’ then?

@ Tull: “6-0 6-0 6-0 straight sets defeat for the Greeks”

Bad taste Tull. This is about the real harm that has been, and may continue to be, inflicted on real people. Nice to see our own HSE seeking additional finance. You think some ‘reform’ is in order there? Where is the finance going to come from? Savings? – whatever that means. Borrowings? – again!

We live in a glasshouse Tull. Leave the stones on the ground.

Anyhows, Frau M has not started to chirp yet!

Just as with Ireland’s €350m, the Finns have already lost most of the €1 billion that they put in. Refusing to recognise this provides no benefit to the Finns a whole. It only serves to protect the Finnish political parties that backed the bailout from well justified revenge by their electorate.

@ JR

Your comments about Finland imposing suffering on the Greeks are belied by your previous post about how pension arrangements in Greece have become more sustainable – during the Troika period. If you believe that these pension changes were necessary or desirable, then surely you agree with the Finns when it comes to making the Greeks suffer?

And personally I don’t buy the line that the EZ was motivated by a wish to save German/French banks. Merkel and Sarkozy proposed PSI at Deauville and were forced to back off on the fear that contagion would bring down the EZ. Nevertheless they brought it back again for the second Greek and Cypriot bail-outs.

The Greeks appear to want to stay in the EZ. Many in the EZ still want to help them to do. However they will need to borrow another 38B euro this year (the FTs “conservative” estimate – based on reducing the primary surplus to 1.5% of GDP as desired by Syriza). Who should provide these funds and on what terms? One thing is certain: no matter what the terms are, the radical left will denounce them.


very nice of you to propose that the Irish taxpayer forgive Greek debt and continue to subsidise the operations of the state. Do you think our taxpayers should be asked about this or is such a trifling matter as 350m plus beyond them.

I have no sympathy for the Finn point of view. They put 1bn into a stupid bailout that was designed to pay of bondholders for their misinvestments, not get Greece going again.

The notion that “all bondholders must be paid back in full” looks ridiculous now with 2 tn in EZ debt trading off negative yields. Market momentum can drive this and it’s uber rational but the minute someone like Varoukasis brings it up he’s a communist. Where is the coherence ?

Some reforms were obviously required, inlcuding that of pensions. However insistence on a 4% primary surplus was shotgun debt collection.
So why does Greece need 38 billion this year, while running a 4% primary surplus? Debt extraction (repayment of principal mostly).
A lot of this down to the debt maturity profile. I would like to see the profile of Italian debt maturity. Certainly enough to frighten most horses.
The bottom line is that if Greece goes, the exit is well signposted from there out. Draghi and the ECB had better be prepared to hold up to 500 billion Italian debt within 12 months of a Grexit.
Its make your mind up time.

Tull, I would be absolutely thrilled if Irish taxpayers were asked about it. It’s about time we brought popular democracy into decisions like the bank guarantee and financing bailouts.

@ JR

Oil , commodities and bonds all say deflation
Italy’s debt is not sustainable under deflation.
I doubt Ireland’s is either.

This comment by Noel Whelan in today’s IT cuts to the political chase.

The point that needs to be added in terms of the basic economics is twofold (i) the current turnaround in European economies must continue (which requires further action in the structural reform area by both Valls and Renzi if the French and Italian economies are not to bring the whole edifice down) and (ii) the “troika” must salvage enough of the Greek reform programme to reverse the direction of the economy and prevent Greece from falling even further behind.

cf. interview with head of Greek chambers of commerce and industry on News at One today which will have reached a wide Irish audience. It is not just that the new government has to stop digging a hole for the Greek economy but that its very arrival in power has made the hole even deeper.

I note the ‘schadenfreude’ crew are out in numbers again….perhaps somewhat prematurely.

Strange how some people react so virulently to a new government from a financially crippled nation , not of that govt’s making, trying to do its best to reduce the awful consequences of the neo-liberal austerity ‘programme’- and not a whisper about the utter stupidity and incompetence of those who implemented same…..

This profile in the Guardian is very funny

“But what film does not capture is his energy, focus and intensity”

If a male writer drooled over a female minister like this, it would spawn a week’s worth of columns on the trivialisation of women in politics.
Not that I don’t half fancy him myself, but still, it’s funny to see the double standard.

It also show how plain most politicians are. When an attractive one comes along, the press can’t cope.

The main problem is excess debt and deflation
The secondary problem is Euro politics and the absence of democracy in the EU.

It is much bigger than a late night summit fixer

You can bang on about rules all you want but the mix of capital power and EU deficiency has the capacity to tear the EU apart.

The US is only marginally better.QE is a trickle up mechanism and no more. No central bank can generate 2% inflation with debt at current levels. The US is in the same debt trap. Neoluberalism has iterated itself to the point where it can’t grow any longer. Capital has too much power.Piketty was right.

The Fed is as lost as Draghi. The next 5 years will be 5 years of massive political dysfunction across the OECD.

@ Vinny

“a new government from a financially crippled nation , not of that govt’s making”

It may not be that govt making, but it is largely that nations making, and new govts don’t just get to start with a clean slate. Greece is an economic mess, in conservatorship under the management of the Troika, and hanging onto its Eurozone membership by a thread. 70% of Greeks want to remain within the EZ “at all costs”. Syriza does not have a mandate to risk that EZ membership, something Tsipras is slowly realising in the last couple of days, but which Varoufakis still seems unclear of. I’d put a large wager that Tsipras throws Varoufakis under the bus eventually in order to take the plaudits for whatever deal eventually arises. He’s a smart ambitious politician who knows when he has to change tack to stay alive. He’s doing that as we speak. Varoufakis will probably be the last to realise unfortunately. He seems like an honest guy who’s been sent on a fools errand. Watch and wait until the media devour the man they themselves anointed the Rock Star.

The Finnish PM is being far from selfish in ruling out any transfer of wealth from Finland to Greece (which writing-off Greece’s debts to Finland would effectively be). He’s simply acting in the interests of his own country as it approaches troubled times (which is what his job description obliges him to do). He’s reflecting the democratically-expressed wishes of his own people just as much as the current Marxist government in Greece is expressing the wishes of the Greek people.

Although, like all Nordic countries, Finland is adulated in the loony-left-liberal Dublin 4 media, the reality is that its economy is suffering from severe problems which look set to worsen in the next few years.

(1) The Finnish economy is uncompetitive – its comparative price level is the highest in Europe. Back in 2008 Ireland was ranked second highest (just behind Finland), but since then Ireland has carried out a successful internal devaluation, recording by far the lowest inflation in the EU in the period 2008-2014. In contrast, inflation in Finland has been one of the highest and its relative uncompetitiveness has got worse.

(2) Partly as a result of (1), economic growth in Finland has ground to a halt. Between 2010 and 2015, cumulative economic growth in Finland looks like being under 2%, compared with almost 20% for Ireland. EU and OECD forecasts show this trend continuing up to 2018 at least. It looks certain that in 2015, Finland will have the lowest GNP per capita in the EU15 outside the Mediterraenean countries.

(3) Because of its reliance on trade with Russia, Finland is going to take a big hit over the next few years from Russia’s economic slump (partly due to western sanctions over Ukraine and partly due to the fall in the oil price). Some similarities with the early 1990s, when, partly for this reason, Finland had a deep recession just at the time the Celtic Tiger was taking off.

(4) Finland suffers from severe social problems. It has the highest suicide and homicide rates in western Europe and last year’s EU report on sexual abuse of women showed Finland having the highest level in the EU28.

So, look at it from Finland’s point of view. Joseph Ryan and Seafoid would have a hard time trying to convince the Finnish people that handing over 1 billion of their hard-earned wealth to Greece is a sensible use of their resources, or that they are under any moral obligation whatever to do so.

Amazing to think that the Irish media is full of people who think that the Finnish economic and social model is the one that Ireland should follow.

@ seafóid

You will not find written down anywhere the basic rule I referred to i.e. that no politician in one country can expect to gain domestic political advantage to the countervailing cost of a politician, or politicians, in another. It is a political fact of life which only opportunistic populist politicians, both on the far left and the far right, attempt to ignore.

cf. remarks of Sloval MOF reported by Arthur Beesley.

Has it escaped your notice that all the member states of the EU are democracies. Or are you defining a democracy as doing stuff that YOU alone want. That seems to the new lefty definition. I think this week was a great week for democracy. The representatives of the voters of every EZ member state pointed out there unwillingness to give more of their taxpayers money to an unreformed Greek state that was going backwards into the 1970s.

@ DOCM: “This comment by Noel Whelan in today’s IT [Fri 13th] cuts to the political chase.” He hit a nail all right – maybe just not THE nail.

No so sure about his analysis. I believe its something else.

The “Troika” are an un-elected bunch. So, if you (Greek government) have a mandate from a mass of your electorate – why bother to confer with the ‘staff’ rather than directly with the other elected heads of EU and their government ministers?

This may be the political problem. If our voters believe, or are led to believe, that it is our elected representatives who should be the ones doing the talking – and taking the decisions, decisions for which we can hold them accountable at the polls, then if the Greek government are seen to do this, then why not our lot?

Its much easier for our government (or any government) to ‘outsource’ difficult decision making to un-elected third-parties: they then can, correctly, blame “them” for any subsequent problems. It works!

” I think this week was a great week for democracy.” You do?

Whose ‘democracy’ would that be then? Or more correctly, what is the nature of our contemporary EU “demo-cracies”? Or should that now be “bureau-cracies”?

@ BEB: “I’d put a large wager that Tsipras throws Varoufakis under the bus eventually in order to take the plaudits for whatever deal eventually arises.”

That might be an unfortunate career move. At the moment the plebs are quite. But they have showed their mettle. The only force that could successfully control the streets are the military. That would be nice! The EU leaders are not that stupid. Or are they? I doubt it.

The Ukranian civil war must be sorted out – quickly. Its only a few hours train-ride to Moscow. Whereas, Washington is an eight-hour plane journey. After that the EU administrations may be able to sort out the EU debts mess. But applying a fiscal and monetary choke-hold to the current Greece administration will not work – no matter how good it may appear in some EZ states.

Think of Heathrow on a busy day: lots of flights are placed in a ‘holding pattern’.

You will find that the Commentariat in this country will latch on to any model provided it involves high tax and spending and a “state knows best” approach. The cure for everything is more of OPM and a new state body.

I don’t think the institutional structure of the EZ is strong enough to weather deflation. Sure they are all democracies but system wise it is a mess. I can see the hedgies making a lot of money from the next crisis. And they have had a bad few years generating between 3 and 4 %.

Sean Whelan on the topic of the thread.!story/Home/News/Greece+and+the+eurozone+play+fox+and+hound+as+the+clock+ticks+down/id/0af85eec-5258-49a5-b5d8-369b74625704

Another image might suitably that of the captain of a ship mistaking a lighthouse for another ship in a fog and refusing to give way.

Peter Spiegel suggests a likely holding scenario based on the fact that the IMF element of the Greek bailout continues until end 2016.

An opportunity for Washington to put some money where its mouth is?

@ JohnTheOptimist

Finland has minus net sovereign debt.

It has problems every small economy encounters at some stage – reliance on a few sectors and a few companies.

1) The fall in the demand for newsprint with the rise of the Internet;

2) The demise of Nokia;

3) The global steel glut;

4) Russian trade.

5) The World Economic Forum’s Global Competitiveness Report 2014–15 published last Sept ranked Finland No. 4 of 144 countries and Ireland was at 26;

6) The WEF’s Global Information Technology Report 2014 put Finland at No. 1 and Ireland at 26;

7) The World Bank’s Doing Business 2015 report has Finland at 9 of 189 countries and Ireland at 13.

8) Whatever people in D4 say or not, Finland does have a good education system with teachers paid less that their Irish counterparts;

9) I’m not going to dispute these social claims as it’s easy to toss criticism like this about. We drink more than them apparently!

10) It does not always follow that exports fall when there is said to be a fall in competitiveness.

I retrieved some of this data to check Enda Kenny’s aspiration for Ireland to be the best small country to do business by 2016.

He will fail to exceed pre-recession indicators as Ireland was generally a good place to do business in, before 2011.

Greece has improved its “ease of doing business” ranking according to the World Bank from 100 in 2008 to 61 in 2015, close to Italy’s – Rome wasn’t built in a day!

Ireland 2016: "Best small country in the world" for business?

Wolfgang Munchau loses it in the FT!

As Pat Leahy points out in today’s SBP, the “centre” failed to implement the Greek programme of reform. To imply, as Munchau does, that the entire policy approach of the other EZ countries has failed in equal measure is to stand logic on its head.

The necessary structural reforms are blocked not just by objections from the right but, as in all democracies, but also from the left or, rather, from organised mass vested interests, the latter now being in the ascendant in Greece. Productivity in the sense of the the creation of more wealth is the victim. Maybe Varoufakis gets this. His political controllers, on the evidence, do not.

There can be little doubt that employment growth in Ireland has accelerated in early 2015.

The Morgan McKinley figures are backed up by all recent ISME and IBEC surveys, by all recent PMIs, and by the tax receipts for January.

I’ll be surprised if the unemployment rate is not below 8% by the time of the next election. If we define full employment as ‘5% unemployment rate’, I’ll stick my neck out and predict that this target will be hit in September 2017. I’m assuming here there there is not some catastrophic external event such as all-out-war in eastern Europe or Greece bringing down the Euro. Hitting this target would almost certainly also mean a return to net immigration, which has implications for housing demand.

Anybody who claims that business conditions are worse now than 2009-11 in Ireland cannot be on top of their game.

@Michael Hennigan.

I agree with you that Finland has a very good education system.

In the 2012 tests it ranked 1st in the EU28.

Ireland ranked 5th in the EU28 (beaten only by Finland, Estonia, Poland and narrowly by the Netherlands).

Although still ranked 1st in the EU28, Finland showed signs of slipping back in the 2012 tests. The big surprise was Poland which shot up the rankings to 3rd, leaving all countries of similar size (France, Germany, UK, Italy, Spain) trailing way behind it. Many think Poland will hit the number 1 spot next time. Given that, in the eyes of the Dublin 4 commentariat, Poland ranks with Ireland as the most ‘backward’ country in Europe, this will take some explaining.

The other Nordic countries fared disastrously.

Sweden was near the bottom, a total embarrassment. Sweden has become to PISA results what Italy is to Six Nations rugby results.

It would be interesting if some academic did research to find out why Finland performs so much better than its neighbour Sweden in PISA tests. My guess is that they would find that Finland has been plagued far less with all the PC claptrap in which Sweden has immersed itself in recent years. Sweden has gone completely loopy in this regard and now has 57 genders.

@David O’Donnell

How many Irish socialists follow cricket?

I doubt very much if anyone called Biddy would be allowed into Lords (blind or not).


And amendment…

“You will find that the Commentariat in this country will latch on to any model provided it involves high tax* and spending and a “state knows best” approach. The cure for everything is more of OPM and a new state body.”

*of other people

@ Michael Hennigan

You are right about the Finnish education system. With recession in the 90’s they had to cutback. It’s got a similar population and rural population spread to Ireland. They closed 1000 rural schools, put everyone into single schools in urban centres, [no choice obsession] and even merged primary and secondary schools. It was done for money but had enormous benefits.

A certain County Councillor of my acquaintance met a Finnish county councillor at a Very Important Conference and asked her “but how did you achieve all that? did the people not go mad? They’d never have it in Ireland”. And she said “We believe in democracy. But only up to a point.”

Just sayin’ 🙂

Finland pays its teachers less. But it pays them more than Ireland relative to average wages for third-level educated workers in the two countries. It’s typical of MH, though, to want to punish public sector workers for the fact that Irish wages in general are high.

Finland also gives teachers much more freedom, has no compulsory testing and state benefits surrounding leave, healthcare and childcare that make Ireland look like a cruel joke. I’m sure a lot of Irish teachers would take Finnish wages if Finnish government programmes were also in place. But, of course, the people making this argument don’t want anything like that: they just want teacher pay cut and taxes kept low. The more precarious life is in the public sector, the better, as far as they’re concerned.

You’re wrong on a lot there Ernie.

Yes Finnish teachers have huge autonomy. Guess what – they correct their pupils own exams. There’s no independent exam until school leaving. They abolished all the other independent testing to save money and it turned out to be a great thing.

Irish teachers are STRIKING when we try to do the same thing here.

The tradition is to oppose reform.

Of course the teachers are only one constituency to oppose reform. The parents go mad if they can’t choose the “ethos” of the school. From religion to Gaeilge, everyone wants to choose their choice. And that’s before you get to the private school brigade.

can you imagine the reaction if the gov tried to close the 2 teacher rural schools? War!

Here’s an interview I did with a Finnish expert a while back. Start 12mins


‘How many Irish socialists follow cricket?

I doubt very much if anyone called Biddy would be allowed into Lords (blind or not).’

On the former, I honestly don’t know! Ever since all the ‘socialists’ followed Bertie into Fianna Fail. And we know how that all turned out ….

On the latter, I have newz for you. During the Peace Process Blind Biddy used to meet her MI5/6_Foreign Office Old Etonian male friends at Lords and at Ascot – invaluable intelligence I might add. As she put to a few of the ‘reactionaries’ who were a touch dodgy at the time: “Would you like us to bowl you all out before lunch at Lords? How would that go down?” Naturally all saw sense, and Martin pulled out all the fast Hibernian bowlers!

12.30 a.m

West Indies 168-5, 38 overs.

Methinks we are in with a shout! Could be over by 4.

fyi @Lite Blue Slips et al. (cricket …)

Bill Black: The BBC Dismisses a Real Greek Economist as a Sexy “Ideologue”
Posted on February 15, 2015 by Yves Smith

‘In its web version, the BBC “News” has you click on a tease titled “Yanis Varoufakis, charismatic ideologue” to access a story dated February 13, 2015 entitled “Profile: Yanis Varoufakis, Greek bailout foe.” Neither the tease nor the title make any sense. Varoufakis is the Greek finance minister. Except, of course, we’re reading this in the BBC, so the description actually reads “Greece’s left-wing Finance Minister Yanis Varoufakis.” Funny, the BBC never describes the head of the ECB as “the ultra-right-wing” economist Mario Draghi or Jeroen Dijsselloem, the Dutch Finance Minister and troika hit man as the “ultra-ultra-right-wing” non-economist.

The BBC “profile” is not unremittingly hostile to Varoufakis – it simply refuses to take him seriously. Varoufakis is a highly competent academic economist. His policy views have proven correct, as even the BBC (back-handedly) concedes by calling him Greece’s “Cassandra.” So why does the BBC treat Varoufakis as a sexy leftist and Dijsselboem as the respected spokesperson for the troika even though Dijsselboem is a fanatic ideologue who has caused massive human misery because of the intersection of his inflexible ideology and economic incompetence?

Varoufakis’ views on the self-destructive nature of austerity as a response to the Great Recession are mainstream economic views. He certainly is a leftist, but his policy views arise from different ideological traditions most people would find antagonistic. That makes him a non-ideologue as the term is defined. The troika, by contrast, is led entirely by ideologues. The primary difference is that they are exceptionally bad economists and exceptionally indifferent to the human misery they inflict on the workers of the periphery that they despise and ridicule. The BBC, the New York Times, and the Wall Street Journal will never write a “profile” of the troika’s leadership that makes any of these points. The BBC profile is another example of what I call “revealed biases.” “Journalists” and media organs routinely reveal and betray their biases – biases that they hotly deny but rarely escape.’

Methinks there just might be a few ‘vulgar ideologues’ on the blog.

12.56 228-5, 44 overs

Greece has moved well on from being a practical or ideological issue. It can’t pay, so it won’t pay. Whether or not a large portion of its debts to other EU countries were run up to repay the banks of those countries is,a few years on, irrelevant.

So let’s accept that Greece won’t pay. At this stage, even with an NPV writedown, it’s difficult to see the nominal value of the debt remaining repayable. Ever.

No Euro area government will get re-elected if it writes down Greek debt, and throws that bill onto its taxpayers. Greek exit will have to be achieved, to save face on both sides. Ideally, the Northern European axis would like Greece to choose to leave – they don’t get repaid, but they have written off nothing. Ideally, the Greeks (claiming all the while their sincere desire to stay in the euro) have nowhere to go but the New Drachma, with all its attendant problems. Crucially, they can if ejected claim it was German intransigence, if ejected. Domestic political face is thus saved.

There was a time, back in 2010/11, when the current Greek strategy might have been employed – when then bank debtors might have been let go wallop. It’s a strategy Ireland certainly could have employed, very possibly fruitfully for both its own and the Eurozone’s longer term economic stability.

With such a large proportion of Greece’s debt now socialised to Eurozone taxpayers, I can’t see this ending in other than a Greek exit and default. The current discussions look to me like an effort by each side to provoke the other into taking the exit decision.

@ Ernie Ball

No – I wasn’t arguing that teachers pay should be cut. It was a response to JTO’s dystopian vision of uncompetitive Finland.

Overall Finnish hourly pay is lower than Ireland’s and Finnish teachers’ pay is comparable with that of doctors and lawyers in the country.

I’m not arguing for low pay and Denmark with Europe’s highest pay levels is ranked one of the world’s most competitive economies.

The current issue of The Economist says: “Finland pays teachers modestly but manages them well; ten graduates apply for each training place. South Korea recruits teachers from the top 5% of school-leavers and promises them fat pay cheques. In both countries teachers are revered—and results are among the world’s best.”

I’m not in favour of rising temporary workforces or what’s called the freelance economy while states guaranteeing their total workforces lifetime work, didn’t seem to work very well in the past.

@ Tullmcadoo

“Anybody who claims that business conditions are worse now than 2009-11 in Ireland cannot be on top of their game.”

That is certainly true and employment falling by 305,000 in Q1 2008- Q1 2011 and rising from 2013 of course suggests a huge reversal in business conditions.
It is legitimate to check if Kenny’s oft-repeated 2016 target on being “the best small economy” for business will be met, using international indicators of sustainable competitive advantage.

Bruton said on the World Bank’s ranking: “Ireland’s 2015 position ranks it ahead of investment competitors such as Switzerland, Netherlands and Israel.” He didn’t say who was ahead of Ireland.

@ Joseph Ryan

“Greece calls a halt to ransacking of country.”

That would be a good thing but if it means that it will continue to do very poorly in attracting investment from China, Germany or wherever, the cash-strapped government will not be able to invest itself in infrastructure in its two main export areas: tourism and shipping.

Without private cash to renew tourist facilities such as hotels overtime, it will lose business.

The Chinese must see the Port of Piraeus as having potential to take business from Rotterdam. Would Greeks get more work?


Full employment in 2017? Maybe?

At the current participation rate or the pre-recession one?

A government report suggested that the full employment rate could be up to 6%.

Germany’s International Labour Organisation (ILO) jobless rate based on paid employment of at least 1 hour per weak was at 4.8% in December.

The US introduced what is called the broad jobless rate in 1994 and it was at 11.3% in January compared with the Irish equivalent at 21%.

A job is usually better than being unemployed but the quality of jobs should not be ignored.

Of the rise in UK employment of 1.3m between early 2008 and November 2014, 220,00 full time employee jobs were added; 400,000 part-time employee positions and almost 700,000 in self-employment. The proportion of self-employed people who earn sufficient income to pay tax has fallen from 80% to 65% since 2008.

Compared with Q1 2008 and Q3 2014 in Ireland:

There is a loss of 233,000 full-time employee jobs;

Self-employed owners with employees are down 35,000;

Self-employed 1 person operations and Assisting Relative are down 10.0;

Part-time work is up 49,000.

A view of the Irish economy from Wales:

“Irish economy is a great success story and able to reinvent itself whatever the challenges”

Do any of the resident leftists have any views on why the other Nordic countries fared so badly in PISA tests?

Of 31 EU countries (31 and not 28 because England, Scotland, N. Ireland, Wales are given separately):

Finland ranked 1st
Ireland ranked 5th
Denmark ranked 14th
Sweden ranked 24th

Comparing the aggregate PISA scores for Ireland with those for all Nordic countries (including non-EU ones) we get:

Ireland 3094

Finland 3178
Denmark 2990
Norway 2976
Iceland 2908
Sweden 2894

Nordic average: 2989

So, on average Ireland’s PISA scores are much higher than the Nordic’s PISA scores.

The OECD average score is 3,000, Only one of the Nordic countries were above this threshold.

This is pathetic given the astronomical tax rates the Nordic countries pay. Shouldn’t the Irish electorate be given an explanation of this abysmal performance before trying to persuade them to go down the same route.

So, the loopy-liberal-left Irish Times continues to invent news.

Apparently, Ireland has the highest levels of income inequality in the EU and is approaching US levels (approaching the US level of anything is the most damning criticism an Irish leftist can make)

All for the cause. ‘The end justifies the means’. etc etc

The reality is somewhat different.

The 2011 EU Silc survey showed income inequality in Ireland to be bang in the middle of the EU league table. The measure used (the percentage below the 60% median threshold) was 16.1%. This compares with:

EU28 average: 16.4%

U. Kingdom 17.1%

The U. States is not part of the SILC survey (obviously) but similar surveys there invariably put the figure (again based on 60% median) at well over 20%.

The figures confirm that Ireland is bang in the middle of the EU league table for income inequality (15th of 28 in 2011), more unequal than the Nordic countries, but slightly less unequal than the U. Kingdom and much less unequal than the U. States.

A more recent figure for Ireland was published a few weeks ago. The showed Ireland’s figure falling to 15.2% in 2013.


I think you are missing the point on the this morning’s IT headline. Absent the generous SW Safety Net that we have here in Ireland, we would be an unequal society. With the generous safeety net we are quite egalitarian as you point out. The net point of this article can be summed up in the old phrase “if my aunt had b***s, she would be my uncle”.

I think you are spot on. The rest of the EZ is fed up with the Greek “won’t pay” attitude & Schauble was rumoured to have referred to the country as a “diseased limb”. A messy divorce seems to be the most likely outcome.

What does Greece look like post exit. I would guess it heads in an Argentinian or Venezuelan direction.
A more interesting question might be what happens to the EZ minus the “gangrenous limb.” After a few days of noise and panic not much?

“With such a large proportion of Greece’s debt now socialised to Eurozone taxpayers, I can’t see this ending in other than a Greek exit and default. The current discussions look to me like an effort by each side to provoke the other into taking the exit decision.”

Good analysis, and pretty close to the mark, imho.

The fact that US treasury officials went to Greece, in the past few weeks, is an indication that the Greeks were making preparations for exit, and the US intelligence agencies would have known that.
Whether the US treasury officials were there to threaten the Greeks or to prepare damage limitation, is another matter.

“Without private cash to renew tourist facilities such as hotels overtime, it will lose business.

The Chinese must see the Port of Piraeus as having potential to take business from Rotterdam. Would Greeks get more work”

Those are good points, and I would not support the stranglehold that the unions had on the Greek port of Pireaus, as post in the NY Times link by DOCM.

However a 40 years lease seems to be really taking advantage of the Greece’s cash strapped situation, ergo ransacking.

So the Greek ports, Pireaus at least, end up in Chinese ownership (management); 15 Greek airports being ‘managed’ by a German company.
No wonder the Greeks believe they are being gelded.
And some of the gelding is being done by their own oligarchs and citizens with billions in Swiss accounts.
Some people would say that the new government should be given a chance to make real reforms in Greek society, as distinct from the ‘structural reforms’ so favoured by the Eurocrats.

It looks like Germany has made up its mind to push Greece out, and Greece will go out rather than accept debt slave status.
When Greece goes, that’s it for the euro. Unless of course the ECB is prepared to buy up sovereign bonds in their trillions, particularly those of Italy. Even at that, the imbalances remain. Some monetary union.


“When Greece goes, that’s it for the euro.”

I think they are on the way out, but if the “gangrenous limb” meme/spin takes hold, well, perhaps amputation has already been “priced-in” already. Why do you think it’ll bring the whole thing down?

@ JR

How the IMF saw the situation in May.


Extended Arrangement. On March 15, 2012, the Executive Board approved a four-year arrangement in the amount of SDR 23.79 billion (2,159 percent of quota; €28 billion). Purchases totaling SDR 7.2 billion (€8.1 billion) have been made so far, and a purchase in the equivalent of SDR 3 billion (€3.5 billion) is proposed to be released on the completion of the review. Euro area countries have so far disbursed €139.9 billion since this program’s approval (of €144.6 billion committed), of which €48.2 billion was for bank recapitalization.


Significant progress has been made toward rebalancing the economy. The fiscal primary and external current account balances are in surplus. Investor sentiment has improved, and the government successfully placed a medium-term bond. The economy is poised to grow in 2014, after six years of deep recession. All this bodes well for a potentially virtuous cycle of recovery to take hold. But a number of challenges remain to be overcome before stabilization is deemed complete and Greece is on a sustained and balanced growth path. The real exchange rate remains overvalued, and non-tourism exports are relatively weak. Banks face a mountain of bad loans that will require adequate capital and oversight to clean up, absent which the prospects are of a prolonged deleveraging antithetical to the assumed recovery. Fiscal gaps are projected for 2015–16, and public debt remains very high.


The authorities over-performed significantly on their 2013 fiscal primary balance target, achieving a surplus of 0.8 percent of GDP. Although the carryover of the overperformance to 2014 is small, the authorities are on track to achieve this year’s target. They are implementing a number of structural reform commitments, with a notable acceleration of product and service market liberalization, where progress has lagged. However, in the area of labor market reforms, where Greece has made important progress in the past, the program is now falling short of targets. Following the Bank of Greece’s stress tests, the HFSF buffer has been set aside to safeguard financial stability, and ambitious steps are planned to strengthen the private debt resolution framework. Reforms to tax codes have been legislated, aimed at simplifying the system and making tax administration easier and, thus, addressing longstanding weaknesses. But at the same time, the authorities need to guard against pressure to rollback progress. On public administration reform, progress is mixed as Greece is struggling to introduce performance-based management and address the taboo against mandatory dismissals.”

The Greeks, having elected a government on a false prospectus, are discovering that expecting taxpayers in other countries to pay for it is not on. Such an awakening, far from weakening the fabric of European integration, may add to its resilience.

The taboo mentioned in the last sentence has equal relevance in Ireland and until the division of the workforce into two categories – the permanent and the precarious – is ended, it is unlikely that the implicit drag on economic performance will end either; except, possibly, by accurately costing the concession (variously valued at a need to find an equivalence of pay rates in the public sector – politicians included – at least 15% to 20% below those in the private).

@Sarah Carey

If Greece goes it will be accompanied by a hard default. After that, institutions holding peripheral bonds will begin to get out of them. What is the advantage of a 2% yield on a Italian or Portuguese bond, if there is an established exit ramp and a good possibility of a serious haircut.

The ECB will enter the fray, but of necessity, it holdings of peripheral bonds would have to be so large that in effect EZ sovereign bonds would become mutualised. I cannot see Germany buying that scenario. But that’s just an opinion.

“The Greeks, having elected a government on a false prospectus, are discovering that expecting taxpayers in other countries to pay for it is not on.”

How did EZ governments via their institutions end up passing Greek debt onto European taxpayers. Whose losses were being passed on European taxpayers?

I am fully aware of the income and job security disparity between the exposed private sector in Ireland, and the sheltered upper echelon PS, the over paid, parasitic, pampered, financial sector, and various legal, auditing and other sheltered sectors. But if very little was done in Ireland to sort these out in an equitable way, why are we pointing the finger at Greece for not getting on with it.

On Greece, the IMF say that Greece is turning the corner, a corner that was five times further down the road in terms of GDP growth that the IMF, first predicted.

The Europeans have got the economics wrong and the politics wrong, choosing to support broken banking systems and bank creditors at the direct expense of causing huge unemployment and devastation. The principles of solidarity and equity went out the window, and it became a direct confrontation between creditors and debtors, both within the EZ and within countries.
So far the creditors have won, hands down, but European integration has been lost for generations in the process. The question European elites should be asking themselves is whether the recovery of money for creditors was worth the price being paid, not only by Greece, but by all of Europe and indeed beyond.

I see some estimates out there that the run rate primary defict in Greece is of the order of 3% after the collapse in tax and increased spending. That would put budget defict at 5-6%. Not a great position to default from.

Mody – ‘the new govt blew it – they could and should have negotiated a better deal – they had a mandate…they caved in to the Germans and Brussels….’

Stephen Kinsella – ‘these guys have exchanged mobile numbers(senior Irish and German bureaucrats), they dine out with each other…’

Someone else mentions ‘Stockholm syndrome’……

Wonder is there any connection between those statements and Noonan’s refrain that our debt levels are manageable – between 8/10 bn. yearly in interest payments while the state gravy train chugs along merrily and vital frontline services are stripped bare and close to collapse?

Yeah – ‘manageable’ – great word that!

@ Joseph R

“If Greece goes it will be accompanied by a hard default”

On official loans. International banks wont make too much read across beyond Portugal. OMT and QE are waiting in the background. Nominal yield levels are low enough that even a decent sized rise in yields would still leave them reasonably low. Greeks have tried to play the “contagion!” card, but it doesn’t add up in reality.

@ JR

Nobody is arguing that the EZ as established was adequate to the stresses placed upon it. But it was, and remains, a collective undertaking. Each country carried the oversight responsibility for its own banks and the bill when this oversight failed. The debate with regard to the bailing out of unsecured bondholders is entirely legitimate but this can form only a very small part of the overall creditor/debtor relationship.

On reform, Ireland has done just about enough to recover market confidence. Greece has not.

As I said some time ago, Ireland is seeing played out in real time what happens when a prospectus as false as that advanced by Syriza is successful in electoral terms. I disagree with your view on the impact with regard to European integration. The face-off between Greece and the rest of the EZ is clarifying in a manner that all the technocratic debate in the world could not achieve the fact that the EU is made up of nation states and that these states remain individually primarily responsible for the societal choices that they make and the for the impact these have on their capacity to compete internationally and pay their way.

Ashoka Mody, for example, seems not to have grasped this essential point.

So Ireland, ‘as a nation state primarily responsible for its (own) societal choices’ ….has never had to yield to any pressures from EZ/ECB/IMF?


After that, institutions holding peripheral bonds will begin to get out of them.

Which is why the government (irish) has been so keen to position us as NOT a peripheral country. We’re in with the Nordics, right?

I still think there will be a deal. Letting Greece go is too dangerous. Lehman was easy to kill but the panic that followed nearly brought the house down.

Once more btw the EZ doesn’t have LOLR, bank recap, deposit insurance or clear rules on how to wind down dead banks. Bringing everything back to core vs lazy shouting matches is a sign of severe dysfunction.

OMT & QE are there for the Periphs. I suspect that is why Greece has no allies.
Sarah, you are spot on. We are not Greece so you will get your money back if u lend to us.
Vinny, we cd have gone our own way. However we were running massive budget deficit at the time so PS salaries wd now be much lower and paid in another currency. Also we looked to burn bondholders twice but IMF supported us but ran away. So how helpful was Mody.

@BEB: That sounds just like BennyB saying in 2007 that the subprime crisis is contained. The fact is that no one knows what will happen. Neither you nor I nor anyone else. And anyone pretending to know with any degree of confidence is invited to put their money where their mouth is.

@DOCM: What you have signally failed to realize through all your posts is that the current model is broken. No country can pay off 175% of GDP in a deflationary or even disinflationary environment. Germany was given massive debt relief after WWII even though it was Germany that caused all the destruction including in the creditor countries such as the UK and Greece. By continuing these policies Germany and its bag holders like Ireland and Finland are continuing to venerate capital over labour and making sure that this depression will continue for another decade. They are sowing the seeds for Europe’s decay and indeed for the next crisis. You simply refuse to see the obvious and remind me of Upton Sinclair’s quote:
“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

From the Guardian.
19.54 pm.

“Varoufakis blames Dijsselbloem for talks collapsing

Varoufakis states that Pierre Moscovici presented him today with a draft communique that he was “perfectly happy to sign there & then” .

But then, he claims, it was withdrawn by eurozone chief Jeroen Dijsselbloem in favour of a different draft that unwound all the progress made by officials in recent ways.

All we got was some “nebulous words”, promising “some flexibility”.

So, despite our “infinite goodwill”, we weren’t able to sign the communique, Varoufakis continues.

The text of the draft agreement is also on the Guardian blog. Greece could not have been expected to sign. 19.19 pm on Guardian blog.

I wonder what Moscovici’ response will be.

@ vinny

In fact, no! Or almost! You missed the word “primarily” in my comment. The bodies you mention are only interested in (i) getting back the money the taxpayers they represent have advanced and (ii) creating the conditions for economic growth to enable the debtors to pay it back. The rest is up to the countries concerned. It need not need firing the cleaners! In Ireland, we have come pretty close. Those in the public sector lifeboat have taken a hit but the major savings have been made by preventing any others from climbing on board.

@ JR

It should be his resignation (if the report is correct). He has no business as the representative of the Commission within the Eurogroup presenting texts to anyone.

Ah here –
…the innocence of some – ‘getting back the money the ‘taxpayers’ (BANKERS/BONDHOLDERS – German and French + USA) represent’…!

so screwing the living daylights out of the people who earn the median and spend to protect and develop their lives = ‘creating the conditions for economic growth’! Wow!

‘The rest is up to’…we, in the West, live in a consumer/debt driven capitalist model – nothing or little left for spendies uner austerity ….capital has well and truly shafted labour, mid-management etc ….enthustiacally helped by the neo-lib pro austerity crew…who believe in the ‘trickle down stuff’….its the ‘flowing upwards stuff’ we have to thank for the current, imbalanced version of capitalism and we need to tame it …or the ‘pitchforks’ will soon be appearing..and not just in Greece….


actually really interesting. So thats twice now that the Guardian has been amongst the only news outlet to publish a Varoufakis claim that someone within the EZ has withdrawn a previously agreed text/agreement. I think Mason has gone native.

@ JR

It seems that the report is correct!

Moscivici has put his foot in it! He is not the former minister of finance of France sent to Brussels to represent the interests of a Socialist French administration in deep economic difficulty but the representative of a body which under Protocol No. 14 to the TFEU on the establishment of the Eurogroup simply “participates” in its work. Dijsselbloem is the Eurogroup’s elected chairman. He calls the tune; if it represents the view of the governments participating. It seems that it does; with French participation; maybe willy nilly.



u put it to Garo: “Come back to me when you have the evidence that “the current model is broken”.

Evidence? Shur OrdoLiberal spinners do not believe in empirical evidence; adherence to the cult_ish financial system_fellow traveller ideology is all. BTW, rumour has it that you are terrified of Blind Biddy …. Mad Oul Jozie’s pal in the NSA passed on the details … and the alleged top up to ur pension.

That said, superb stuff by the “real” Irish spinners down under a few hours ago.

@Greek Citizenry

In Solidarity.

If a 26% contraction in the Greek economy will not convince you that the model is broken, nothing will. Read that Upton Sinclair quote again and reflect. Or maybe that is beyond you?


If the Guardian is even half correct, you might as well fire the whole EC typing pool, because that is what the EC has has been reduced to by the intergovernmental / Eurogroup/ Large Power mismanagement over the past 7 years.

@Joseph Ryan

Joseph – pls try to desist from any slightly negative references to ‘De Kommission’ – otherwise I need to scroll through eleventeen or twelveteen morsels of spin from our anonymous (!) blogger DOCM before I find a useful comment.



And not only in Greece – millions of Germans on dodgy precarious work are on the breadline not to mention many millions more across the EU.


Blind Biddy is out on the town with some guy named Porterfield!

The One-eyed Shia Sheikh is joining her for the bash in Brisbane vs UAE on 25th … plane loads of Irish mammies are also on the way …. to be with the childer of course.

Paddy Zhukov is otherwise engaged at the mo ….

Nite all!


Do any of the resident leftists have any views on why the other Nordic countries fared so badly in PISA tests?

The clear answer is: NO, they do not.

Comments are closed.