Update on Greece

FT Big Read here.

Bulow and Rogoff here.

Peter Doyle here.

82 replies on “Update on Greece”

From Peter Doyle’s piece (his concluding paragraph).

“If nothing else, this message to the Greeks and the IMF would put the profession on the record against the louder voices of Euro politicians, including those at the IMF. If we remain quiet now, they and the IMF, by default, speak for us. That makes sensible resolution between these two European patriots virtually inconceivable, it leaves the Euro tinder-box primed to explode, and it may leave our profession deserving of the low esteem in which it is now widely held.”

The “patriots” in question are Schaeuble and Varoufakis.

To use a good old Irish phrase, the author has IMHO lost the run of himself. It is to be hoped that the “profession”, assuming that it exists, does not do likewise, although the temptation at this point seems rather high.

Hellenic lessons from Hibernia and the EeeeCccccBeeee

Exclusive: Chopra says ECB’s threats to Ireland were ‘outrageous’

THE European Central Bank acted in an “outrageous” manner and went beyond its remit when it pressured Ireland to commit to years of austerity, according to Ajai Chopra. The International Monetary Fund’s former Ireland mission chief made the damning assessment during an address at Oxford University.

A recording of his speech uncovered by the Irish Independent reveals Mr Chopra telling an audience that the so-called ‘Trichet letters’ were an “outrageous overreach” of the ECB’s mandate.
In a stinging criticism of the bank, Mr Chopra says he isn’t surprised people in Ireland were upset about the letters between the former ECB President Jean-Claude Trichet and the late Brian Lenihan in 2010 in which Mr Trichet threatened to cut off funds for the Irish banks if the Government did not apply for a bailout.

“The letters actually pressed Ireland to do fiscal consolidation, it pressed them to undertake vague structural reforms without specifying what these were, and that, in my view, is an outrageous overreach by a central bank,” Mr Chopra said.

And he also claimed that the possible effects of burning the bondholders that were put forward by Europe were “exaggerated.”

[…] Mr Chopra reiterated that it was unfair for Irish taxpayers to suffer the cost of bailing out the banks when senior bondholders got their money back.

“The IMF staff right from the beginning was very much in favour of imposing losses on senior bondholders. The EU partners were dead against it, especially the ECB,” he said.


Congrats to the Indo hacks for digging this up.

Chopra thinks the ECB’s behaviour was outrageous. We can all agree on that. But was it legal?

Only the ECJ can answer that question.

That the IMF and the European side, and notably the ECB, saw the issue of burning unsecured bondholders differently is not news.


The ECJ has not been asked. It would be a service to democratic accountability in Europe for the Irish government to put the question.

Is it open to someone to take a civil suit for damages?

The Chopper is yet another example of an IMF functionary who agreed with the Irish desires in two occasions to burn a few Bondholders. Yet when push came to shove they went MIA. With friends like these?

Burning bondholders was unspeakable and now bondholders are so fearful they buy bonds at negative yield, throwing away money. It’s a funny Eurozone. I wonder how much could have been burnt compared to what is being thrown away now.

Proper countries do not burn sovereigns or bond in systemically important banks. They extend maturities, cram down coupons a la war loan, inflate or monetise. They do not openly default. In short they do what the U.S. Brits and the ECB is doing now …at last.

Funny how selective folk here are on these quotations from Chopper. He also affirmed that the ECB were absolutely within their rights as lender of last resort to question the creditworthiness of the Irish banking system and to suggest that they should get a bail out. Chopper’s objection is to the ECB stepping above their pay grade and suggesting the terms of that bail out. That after all is for someone with experience in these matters like Chopper himself.

Just a reminder. The ECB were supporting the Irish banking system to the tune of 150Bn (today 25Bn). Just for context that is about the same level as today’s worst offender, Italy, but on GDP weightings about 15 times as bad. Greece is currently being supported to the tune of 90bn as a result of the deposit flight from that country but again on a GDP weighting Ireland of 2010 is a multiple of Greece today.


Spose u are telling us that Anglo-Irish and INBS were ‘systemic’? Systemic for whom?

Minor point: ‘proper countries’ … should that be ‘proper_tied countries’?

@The Second

Minor point: Mr Chopra was IMF head at the time ….

… your actuarial accuracy is seriously slipping … are u simply spinning? Or punting for a ‘gurrier award’?


Oh for the good ol days of what used to be known as ODC – ordinary decent capitalism – where those who failed were allowed to fail.

@The Second
“Just a reminder. The ECB were supporting …”

In both the case of Ireland and Greece, and whoever else, the ECB is providing liquidity to private banks, as a direct sine qua non, of its role as a central bank, in a currency zone. Not “supporting” as you and indeed Trichet and pals would like would to put it.

If the ECB does not wish to provide liquidity to banks, in certain out of favour countries, because it believes those banks to be bust, then stop providing the liquidity and insist that the banks be wound up.
But do not keep those banks open, on the basis that certain favoured creditors (bondholders and, yes, depositors) must be paid at the expense of specified patsies in the countries that those banks in question operate in.

The ECBs main role during the early part of the crisis, was to act as enforcer for large creditors. It succeeded very well in that task.

PS. We hear very little of HETA bank recently, and Austria’s refusal to stump up, on behalf of its state of Carinthia.

@ CMcC

That is, indeed, the problem! Whoever takes the action would have to prove locus standi. We have discussed this before. I am no lawyer but the concept is easily explained, courtesy Wikipedia.

“In law, standing or locus standi is the term for the ability of a party to demonstrate to the court sufficient connection to and harm from the law or action challenged to support that party’s participation in the case.”

Only the Irish government could hope to achieve this and it has evidently, and rightly in my opinion, not the slightest intention of suing the ECB. To do so would indicate that it was playing at the same game as Varoufakis. This is senior hurling not whatever the Greek alternative is.

Professor John Fitzgerald made two essential points on the Claire Byrne show yesterday; (i) the die was cast not on the famous night of the guarantee but in the previous spendthrift years of bad economic management (ii) the taxpayer cost that we now know we have incurred would have been unavoidable apart from the disputed decision on not bailing in unsecured bondholders, which he estimated, if my recollection is correct, at about €5 billion.

This ain’t hay, as an American might say, but it can be identified, it seems, as the prejudice suffered by the Irish state as a result of the supposed illegal actions of the ECB. One could speculate whether this prejudice has been remedied by other actions by (i) the ECB (see comment just posted by the Second above) and (ii) not just governments sharing the euro but others that are not (UK, Sweden and Denmark) in extending concessionary loans to get us out of the mess almost exclusively of our own making, or, putting it another way, within the purview of Irish governmental decision-makers, aka a bailout.

The idea of a legal action IMHO is not just a non-runner but based on a failure to appreciate the wider economic, financial and political context.

The ECB has, to date, been sued only by the UK and recently with some success.


As I said, this is senior hurling. Nobody forced us to adopt the euro, flawed and all as it is. We must live with the consequences.

Proper countries do allow bondholders in systemically important banks to be burned. We have done it ourselves to junior bondholders, without very much fanfare or fuss. We did it in banks systemically important to Ireland. We also did it in Irish banks not systemically important to Ireland, and only systemically important at all in the sense of protecting European banking from “another Lehman”.

We should have started much earlier – following a much narrower bank guarantee – so as to get more of them, and done the seniors at the same time.

Nope, Anglo and the other lad should have been nationalised and Bondholders of all stripe burned.

Exactly. Chopper was a very important dude. This is a demarcation issue for him. ECB are fully entitled to demand a bail out, in fact He welcomes it, keeps Him in a job, but the setting the terms is strictly his preserve.
It is not obvious to me that we could make a war crime case stick on Trichet.

I’m not sure what Irish commentators obsession with Greece is all about.

In my travels around Ireland (north and south) I’ve never met anyone who knows anything about Greece or cares much about what happens there.

Closer to home, both geographically and culturally, there was a ‘crisis’ election in Finland yesterday. It was billed as the last chance to pull Finland out of its long slump. This got little mention in the Irish media. But, then Finland is one of those countries that graduates cum laude of the Fintan O’Toole School of Self-Loathing, who dominate the Irish media, like to hold up as the model that Ireland should follow, so it wouldn’t be a good idea to dwell too much on the fact that, weighed down by loony-left-liberalism, its economy is currently going down the drain.

Anyway, a hopeful sign for Finland (I think).


It looks like the lefties have been given the boot and a millionaire businessman is to be the new PM. Maybe some one who knows more about Finland’s politics than me can confirm if my reading is correct.


“Nobody can write a scenario for the future; immediate, intermediate or distant.”

a variation on Cowen’s

“You can only go on the basis of information made available to you at the time and, of course, with the benefit of hindsight all of us can look at various other options that might have been available.’’

Hedgies would disagree

Just to be clear, does anybody actually disagree with this?

“Mr Chopra accepted that if you are the lender of last resort, such as the ECB was, it was reasonable for it to ask Ireland about the condition of its banks, and to say that if it isn’t possible to have them recapitalised via the markets, an international rescue package should be sought.

“My reading of the letters is that, if you’re the lender of last resort and you see this [a spike] happening with your liquidity support, I think it’s perfectly reasonable for you to ask the borrower, ‘what is the condition of your banks, are they solvent and do you have a plan to make these banks viable?’

“Every lender of last resort has to be asking these questions and also be saying, ‘look if you can’t recapitalise these banks by borrowing on the market, you’d better get an international rescue loan to recapitalise your banks’.”


I don’t think Irish commentators have an obsessions about Greece. There’s an amount of left-wing noise and clap-trap about the neoliberals (and the ordoliberals) beating up poor little Greece – without any recognition by them that Greece is a failed state. And there’s some academic interest in how a Eurozone that is struggling to fix its governance flaws will be able to deal with this failed state. I suspect most Irish people, insofar as Greece appears on their radars, just shudder and feel grateful that the failure of governance in Ireland that led to reliance on an official support programme has been addressed – even if the causes of this failure of governance haven’t.

And I’m not sure how much closer “geographically and culturally” the Finns are to the Irish. But they’re certainly at a different point of the cycle of the re-alignment of the coalitions of rent-capturing special interest groups. In Ireland, Labour, protecting its own constituency of rent-capturing special interest groups remains in government; in Finland, its counterpart, the Social Democratic Party, has been ejected losing 20% of its seats. Labour will be very lucky to keep its seat loss to that percentage.

However, the various rent-capturing special interest groups have little reason to worry, either in Ireland or Finland. As in most EU countries, those who suffer will be the poor, the unskilled and most of the young population – mainly because they either don’t vote or, if they do, vote for fantasists or the deluded.

According to Chopper we had the following exchange during the bail out negotiations:

“The person [from the ECB] who made the stupid comment made the comment and ended it by saying, ‘I’m not a bank supervisor or bank restructuring expert’. And the person from the Irish side, who happened to be British, said, ‘It shows’.”

I am not sure it is the smartest idea to have patronising British personnel represent Ireland at any level in matters EU or EZ.

The ECB isn’t the lender of last resort.
Once again, for those at the back, the EZ does not have

• a Banking union with a single supervisor
• a single resolution authority
• a common safety net involving
o Deposit insurance
o fiscal backstops
o burden sharing and
o a credible Lender of Last Resort

It is not a currency union. It is a shared currency area with some plasters


For avoidance of doubt it was Chopper who described the ECB as LOLR and according to DoD that dude is no special needs material.

@the Second

“I am not sure it is the smartest idea to have patronising British personnel represent Ireland at any level in matters EU or EZ.”

Back in 2007/2008/2009/2010, it is arguable that the Irish level of banking expertise, both within the banking industry, the CB/Regulator , the audit fraternity and the senior PS, was such that they would not have recognised a bank, even as it collapsed on top of them.

@Paul Hunt

“…without any recognition by them that Greece is a failed state.”

The euro has fallen about 33% against the dollar in the past 12 months. If Greece, the “failed state”, exits the euro, I suppose a Drachma currency fall of 33% would consign Greece to basket case status!

@ ufc

The answer to your question is almost certainly a general no. The explanation for the apparent major differences of view between the IMF and the ECB lies almost equally certainly in the fact that they are looking at the problem from different perspectives, the IMF as dealing with a sovereign state in trouble with more or less common ingredients in the relationship between that state and its banking system, the cases it is used to dealing with, and the ECB, acting as the captain of a badly-designed monetary union vessel which it was trying to keep afloat as a number of unruly passengers were threatening to sink it.

As to the routine shock horror reaction to the latest “revelations”, these are rooted IMHO in a misreading of the attributes, powers and prerogatives of the international organisations involved. There is nothing supranational about the IMF. It is effectively controlled by the US – which has a de facto veto on decision-making – and the major countries that make up the bulk of the Euro Area, the UK being the odd man out. It has been a long-running bone of contention with the other countries of the mainly developing world that this power balance is completely out of kilter. Had they the decision-making power, the IMF would probably not have been involved at all in dealing with the crisis.

Both the ECB and the Commission, on the other hand, have treaty-based independence and legislative powers. The opinions as to the use to which they are being put may vary but their existence cannot be denied. Many – especially US – commentators are evidently totally unaware of these institutional differences or choose to ignore them.

@ PH

“As in most EU countries, those who suffer will be the poor, the unskilled and most of the young population”

Really politically dangerous longer term, I think. Taking hope away from huge chunks of society isn’t wise. Ar scáth a chéile a mhaireann na daoine. Rent seeking is possible because it is tolerated. Take away buy in to the system and take away “rights” to excessive compensation.



“The real struggle for Mr Renzi is not with the unions but the real struggle is poor people — especially among the young — and a crumbling social order,” Mr Galietti said.


Agree! Is this a Second?

@The Second

You are in breach of copywrite on the ‘Chopper’ Troika in using the derogatory as a form of propagandized spin: one is an x-official sinn fein playwriter and spinner from Cork who is losing the plot as in yesterday’s sindo piece; another is an x-chelsea full back who broke legs every second week; the third is an x-RAF squadron leader who wrecked havoc.

And the surname is?

BTW do you remember Jack Charlton? Or the Dub who captains the English ODI team? ‘These Islands’ dear boy; these islands.


‘Once again, for those at the back, the EZ does not have

• a Banking union with a single supervisor
• a single resolution authority
• a common safety net involving
o Deposit insurance
o fiscal backstops
o burden sharing and
o a credible Lender of Last Resort

It is not a currency union. It is a shared currency area with some plasters.’


@JtO & Olli


@Greek Citizenry

In solidarity.

@the second
If the ECB were LOLR Greece would not be on crisis 3.0 and Ireland would not have 210bn in sov debt.

The ECB is LOLZ. It looks like the real thing, it tastes like the real thing but it is fake plastic money trees.


‘Both the ECB and the Commission, on the other hand, have treaty-based independence and legislative powers.

The ECB(undesbanke) has, imho (refer to seafoid above), more of a weak ‘free state’ form of independence; once it declares UDI and dumps the ‘undesbanke’ then progress towards a functioning CB and LOLR will be possible.

btw Mad Oul Jozie is still waiting to lay your ‘odds’ on the Greek Finance Minister … as she put it ‘Mac is all talkk’ …

p.s. I won’t mention De Kommission as it is a lovely evening …. so let’s keep it epistle free …

There is something fundamentally dysfunctional about Europe. Tore itself apart twice last century. Schuman and Monnet tried to fix it in the 50s but the curse is back in the form of the EZ.

You can sing that. Ultimately the Yanks and the Brits will come in s the responsible adult. I think the Greeks get chuck under the bus. Obama told the rock star to cut. Warren Buffet and Larry Fink are both on record as saying EZ would be better without Greece. Even St Paul is telling the Greeks not to push it.

@ seafood

WADR you may be confusing the LOLR with the SOFOLR. An LOLR supplies funds to solvent but illiquid banks. The ECB has always done this. It is up to the likes of the Troika to supply funds as a last resort to insolvent banks/sovereigns.

@ ufc

This commentary some weeks ago by Ajai Chopra may also be of interest.


Ashoka Mody holds similar views. Neither has any real understanding of the EU, or the problems confronting it, on the evidence of their contributions, in a private capacity, to date. The crisis impacting the near bankrupt countries of the Euro Area is not a routine case for the IMF and never was. Being invited in to play the role of bad cop has evidently left not the most pleasant memories among some of the officials involved.


” The crisis impacting the near bankrupt countries of the Euro Area is not a routine case for the IMF and never was.”

Because the EZ as a whole was not bankrupt- balances for the entire currency area are positive. There’s enough money to fix problems. The driver of the crisis is political and revolves around attitudes to debt. Asians are right to ask what the IMF was doing bailing out Greece.

The ECB stood back as EZ banks issued trillions in debt pre 2008. Procyclicality and no control of interest rates and when the prices turned out to be dud it didn’t have the institutional structure to manage the panic . No bank resolution mechanism for example. Hierarchies of claims must be defined in order to reduce uncertainty around the capital structures of dead financial entities. Without clear rules chaos intensifies. Deleveraging as pure panic.

The IMF got involved because if the EZ blew up in 2010/11, capitalism would have blown up again a few years after Lehman.

A hallmark of modern capitalism is complexity.


The Yanks at least have a coherent attitude to dead debt.
The Germans and Dutch do not. Yet.

One more thing, DOCM

One must understand how finance markets work in order to understand the incoherence at the heart of the Euro project.

One could start with George Akerlof :

“In a market plagued by asymmetries of information, the quality of goods will decrease and the market will come to be dominated by crooked sellers and gullible or desperate buyers.”


““We have been forthcoming but I cannot promise . . . that we will fund Greece whatever the situation and the amount and the conditions.””

Mr Constancio is of course referring to Greek banks, which he says are solvent. Or is he referring to Greece, assuming he knows the difference?

The ECB is conditional LOLR for some banks, in some countries, depending on which direction the political wind is blowing at the time. However it has an annoying tendency to confuse banks with countries. However I concede the ECB may be ahead of game on that issue, as most countries have effectively ceded sovereingty to the banks.

@ seafóid

You got it right there as to the reasons for the IMF’s involvement or, rather, why the Western powers dominant within it so decided.

This wider context is, unfortunately, missing from the comments by former IMF staffers; and the commentariat in Ireland is seemingly unaware of it.


Chancellor Merkel’s insistence on involving the IMF in 2010 was an inspired move – and typical of this consummate politician. The IMF’s experience of compelling the emergence of some measure of sensible governance in developing country basket cases reduced the requirement for the political imposition of such governance by Germany and other well-governed nations as the EU’s failed states or states exhibiting major failures of governance – Greece, Portugal and Ireland (with Spain and Italy not far behind) – lined up for treatment. It also reduced the burden that would otherwise be imposed on the light-weight Barroso Commission.

Of course, the IMF should not have been involved in resolving some local difficulties in a club of some of the wealthiest nations on the planet – and if its governance reflected the global disposition of economic power and activity it wouldn’t have. But it got caught in an institutionally and politically complex situation and its usual playbook was of little use to its senior officials.

It’s both amusing and saddening to see citizens of failed states or of those whose governance continues to exhibit serious failings seizing on the regrets of some of the IMF officials involved to reinforce their sense of victimhood.

And as they wallow in their sense of victimhood they fail to see that Germany and other better-governed nations in northern and central Europe are more focused – and would much prefer to be more focused if they weren’t being distracted by dysfunctional governance in the peripheral nations – on the strategic positioning of the EU in a geopolitically and economically multi-polar world.

Germany (and other like-thinking member-states) appears to be reconciled to Greece falling out of the EZ. It needs the time and space to secure a measure of sensible self-governance – and the rest of the EU can afford to be generous to support its efforts.

Those, like Tull, who view the US and the UK as agents of salvation are fated to be disappointed. The UK has exhausted itself seeking to punch above its weight internationally and the current political class is barely capable of delivering effective domestic governance. The US seems to be going through on of its cyclical isolationist funks. By the time it re-emerges the global geo-political and economic landscape will have changed irrevocably.

The powerful and influential rent-capturing special interest groups continue to depress the economic performance of most of the advanced economies, but their malign impact is more curtailed in the better-governed states. One can only hope that public anger and disgust will eventually lead to the political curtailment of their malign impact in the less well-governed states such as Ireland. But, equally, it could increase support for the dangerous, or the deluded, or the well-intentioned chaos generators. It appears that quite a few voters will have to learn the hard way about the damaging effects of supporting these factions and individuals. But is is also a measure of the extent to which the established parties by spinning webs of lies, half-truths and fictions have angered and disgusted so many voters.


Overheard comment by German FinMin to Greek FinMin – “Let them eat lemons. The bitterer the betterer.”

Complex adaptive systems are not well understood ….

@Joseph Ryan

” [ECB] has an annoying tendency to confuse banks with countries …”

No confusion here; The Conflationist Fallacy is a Reality for the Financial System – allows them to control ‘states’ and dump cost of their louzy errors on supine citizenries in the form of ‘odious debt’ as the process of de-democratization continues apace …

No strong states and the FinSys does what it likes ….

According to Bloomberg the ECB is considering increasing the haircut on securities posted by Greek banks for ELA. 2-year Greek debt has risen to almost 30%. It is also interesting, as noted before, that peripheral bonds, notably Italy and Portugal, are still being sold off. Total government debt in Italy is now €2.135bn, according to Eurostat data published this morning, or 132% of GDP. The Portuguese figure is 130% . The Greek debt figure is €317bn or 177% of GDP.

It strikes me that many on here don’t really want our central bank to be a LOLR but rather a LOIR – Lender of Infinite Recourse.

The duties of the LOIR to include :-

Lending freely at negative interest rates
To insolvent and defunct institutions
Against all kinds of queer collateral – bogus promissory notes issued by bankrupt governments and bonds written by a finance minister who proudly claims he can’t possibly repay his debts.

All the comments about well run countries make me laugh. Debt is calling the shots. It got the advanced countries out of stagnation in the 80s but at the cost of massive instability now. And plutocracy. Much of it will never be repaid. The global economy is looking at a period of serious deflation and this is reflected in bond yields. Debt and growth are incompatible. MBTI S type Germans are great bureaucrats but they have no idea how to unmake the debt omelette. Neither does the IMF. The global system is in a managed depression and the EZ has no institutional capacity to respond coherently.

@ PH

I follow you all the way until your penultimate and final paragraphs. On the first, I would not lump the US with the UK. On the second, you know that I agree largely with your view on rent-seeking. There are egregious examples which fit the general definition. But democracy can be defined, in one sense, as the mechanism that allows for the peaceful resolution of competing societal demands. Leaving aside the more obvious cases such as the legal and medical professions, there is also a much wider definition which is best expressed in terms of the distinction between permanent and temporary i.e. precarious employment. This is really the central political problem in Western societies previously masked by economic growth. Conor Brady had a good article on the subject in the Sunday Times.

It is topical in Ireland at the moment in the context of the threatened strikes in Dublin Bus.

My own view is that there is a sea change in public opinion in this area. Whether it exists or not will emerge in the context of what might be described as the “Restoration” i.e. will the public service unions succeed in restoring what is, in effect, the totally unwarranted gap between salaries in the public sector having regard to the differences in terms of job security and pension (unfunded and paid by taxpayers out of current income).

The fact that the leader of their main friend at Court, Aka the Labour Party, kicked to touch on the subject (i.e. would “productivity” come into the equation) suggests that the winds of change may, indeed, be blowing.

Martin Wolf’s “Mythology That Blocks Progress in Greece” should be required reading. Especially this bit:

It is Greece’s fault. Nobody was forced to lend to Greece. Initially, private lenders were happy to lend to the Greek government on much the same terms as to the German government. Yet the nature of Greek politics, tellingly described in The 13th Labour of Hercules by Yannis Palaiologos , was no secret.

Then, in 2010, it became clear the money would not be repaid. Rather than agree to the write-off that was needed, governments (and the International Monetary Fund) decided to bail out the private creditors by refinancing Greece.

Thus, began the game of “extend and pretend”. Stupid lenders lose money. That has always been the case. It is still the case today.

The “bailout” under the burden of which Greece is now being crushed was a bailout of European banks in those “well-governed” countries. Why didn’t Germany just bail out its own banks? Beyond the obvious reasons (make the Greeks pay, not us), there were domestic political reasons having to do with keeping alive Germany’s perpetual sense of victimhood at the hands of (swarthy) foreigners with their begging bowls.

If that’s “good governance” (as opposed to state sponsored loan sharking): Nein danke.

@Paul Hunt

” The IMF’s experience of compelling the emergence of some measure of sensible governance in developing country basket cases reduced the requirement for the political imposition of such governance by Germany and other well-governed nations as the EU’s failed states or states exhibiting major failures of governance – Greece, Portugal and Ireland (with Spain and Italy not far behind) – lined up for treatment. ”

I do hope that we will never get to, or get back to, to the kind of world order you seem to envisage in that paragraph.
I would have hoped the the idea of ‘compelling’ nations or “the requirement for the political imposition of such governance by Germany and other well-governed nations ” were ideas of the distant past.


Apologies for the apparent disconnect, but the comment was probably too long already. On the US and the UK I agree. The current chairman of the Senate’s Foreign Relations Committee, Bob Corker, appears to be the kind of Republican whom I thought wasn’t being elected anymore – a politician capable of reaching pragmatically across the aisle.

On the sustained rent capture, it is a blight on all advanced economies. In this review:

of Paliaologos’s book (hat-tip to Ernie for the indirect link to it via Martin Wolf which jogged my memory), Paul Mason explictly, and correctly, links the rapacious rent capturing of the financial capitalist elites and Greece’s travails. It is a battle between globalised rent capturers and domestic rent capturers (who are also battling among themselves) that is being played out on the international stage with a large number of Greek citizens being the unwitting victims of these conflicts.

Greece needs time outside the EZ, but not the EU, to mend its failed state.

As for the rent capturers in Ireland, I wish I could share your sanguine view about a sea change in public opinion. There are too many backs in close proximity that are being mutually scratched.

The best example for me surfaced during the early stages of the water charge protests last year. When the sustained and blatant rent capturing by the existing semi-state (BGE – now Ervia), by the new entity, Irish Water, within it, by the water sector divisions within the local authorities and by the sheltered private sector players with their snouts in the same torugh was gradually being revealed, the various left-wing factions started shouting about a future privatisation to deflect public attention from the gouging of ordinary citizens being perpetrated by the sheltered private, semi-state and public sectors all acting in collusion. The line advanced was that these sectors could not and would not possibly be involved in any rip-off of this nature. The whole set-up, it was alleged, was intended to favour presumably foreign private sector capitalist vultures in the future.

It appears quite a few voters swallowed this nonsense.

Nothing much will happen until enough ordinary citizens wake up to the fact that the domestic rent-capturing special interest groups will rip them off more rapaciously than any foreign private sector capitalist vultures.

@ DoD

The Brits are fully entitled to their superiority complex in matters financial – London vs Frankfurt just ain’t a contest.

But Ireland having made the crazy decision, in a fit of anti British pique, to join the Euro hydra rather than go with sterling, it does not seem very clever to have Brits speak for us in that context – as the highlighted exchange illustrates.

Martin Wolf in todays FT on Greek ‘myths’


The most interesting question, I think, is whether Greece can stay in the euro zone after a default and it would appear to centre on whether the ECB would deem the Greek banks insolvent and hence not eligible for ELA. Any short term State default would involve the non-payment of IMF and Greek government bonds held by the ECB, so the latter would probably be directly affected anyway.

@ PH

Like most disputes, there are elements of truth on both sides. I do not buy the view of an international financial rent-seeking conspiracy. The varied national versions, yes.

This comment by Paul Mason on Greece is particularly apt.

“In fact the problem is that a modern state – in its prime function as arbiter between interest groups, acting for the general good – barely exists in the country.”

The extent to which states are “modern” in this sense is the key. Very few fit the bill. But Ireland is much further up the scale than most.


The far left factions in Syriza are intent on something as evidenced by the extent that it is pulling against any form of teamwork; what exactly nobody seems to know. Maybe not even the factions themselves!

Technically, it does not seem legally possible for a country to leave the euro without also leaving the EU. It is the currency of the Union, with both the right, AND the obligation, for all countries to eventually join, two countries (UK and Denmark) having permanent opt-outs.

Interview with Coeure.


According to a survey on Greek television station SKAI, support for the government’s negotiating “strategy” has fallen from 72.0% last month to 45.5% this month i.e. to the level of its electoral support. Its latest stunt of raiding the funds of local authorities seems to have been something of a catalyst in bringing home the fact that if central government has to borrow from the local level, something is going radically wrong.


Suggesting that my contention that the primary objective of the global capitalist class (and particularly of those in the financial sector) is the sustainable capture of economic rents requires belief in a conspiracy is a poor debating tactic. There is no conspiracy; this, quite simply, is what they do. And they compete ferociously among themselves to capture the most rents.

Nor are there conspiracies at the national level. Those who are in a position to exercise some political or economic power have the means, motive and opportunity to capture rent on a sustainable basis. It would be irrational and stupid not to. In their view, it they don’t capture these rents, someone else will. And, of course, there will be jockeying and competition among domestic special interest groups.

The challenge of governance, as Paul Mason highlights is to arbtrate between various combinations of interest groups in the common good. It also involves ensuring that the greed and stupidity of some favoured special interest groups do not expose the state to the risk of bankruptcy or that the conflicts between coalitions of special interest groups don’t lead to ungovernability. Ireland failed on the first count, but, with external support, has partly remedied that failure while leaving the underlying malaise untreated. Greece has failed persistently and continues to fail on the second.

You may be right about it not being legally possible for a member-state to levae the EZ without also leaving the EU. I simply don’t know. But flexibility in the interpretation and application of the rules has always been feature of the functioning of the Community and now the Union – even if there are no rules about when, how or where this flexibility should be applied.

The other members of the EZ put their taxpayers on the line to pay off the rent-capturing financial capitalists who should have taken a bath on Greece. But it would also have hit their own national pension, investment and insurance funds. The Paddies, reluctantly and sullenly, appear prepared to pay for the official support received, despite many being resolved to deliver an electoral kicking to the Government. The Greeks aren’t and can’t until they are resolved collectively to mend their failed state.

@ PH

If not conspiracy, then some other word, perhaps collusion, has to be found. For my money, neither exists. For countries to trade with one another, some form of financial system has to exist. The present one stems from the Bretton-Woods agreement dictated, effectively, by the US. It is not a particularly robust one and for a simple reason; the international order, such as it exists, is made up of competing, often belligerent, nation states and is, in itself, not very robust, one of the fundamental rules governing its organisation being that one country does not interfere in the internal affairs of another.

The capture of economic rents implies that at the national level a government is failing in what Paul Mason rightly describes as the fundamental task of any laying claim to modernity “as arbiter between interest groups, acting for the general good”. The point about the EU is that it is a process in which countries are, effectively, agreeing to share competences and, de facto, breaching the general rule about non-interference. This where the apparent difference of view between us may lie.

I would accept that there is only a limited understanding of this in many EU countries – notably the UK – and would maintain that the fault lies with the politicians that have signed their peoples up to this process and then either deny its existence or attribute all what ails them to it.

How the “flash crash” dossier plays out may give some lessons on what is required to make the international system more responsible.


I agree we’re not that far apart, but that matters little. Things will run their course. In Ireland the various special interest groups will continue to capture their rents and waste scarce resources at the expense of the vast majority of citizens and of the economy. But, unlike the bankers in cahoots with the developers and the supporters of fiscal incontinent, their greed and stupidity is extremely unlikely to threaten national bankruptcy.

Many voters may not be aware of the complex legal, regulatory and administrative arrangements that facilitate their being ripped off by these special interest groups, but their disgust and anger is increasing – even if it is badly focused and directed. Unfortunately, as a means of expressing their anger it appears that many will have to go through the process of providing electoral support to political offers that range from being dangerous and economically illiterate, through deluded to well-intentioned but chaotic until they recognise the damaging nature and futility of these offers.

Where this might lead or whether or not any of the existing mainstream parties decides to rise to the challenge of implementing policy and regulatory arrangements that will reduce the economic damage being wrought by these special interest groups is anyone’s guess.

As for Greece, it is ultimately up to Greek citizens collectively to decide whether or not they wish to have a functioning state.

And as for the UK, it is a little better than watching a grim football match replete with cheating and diving and hoping it were possible that both sides could lose because it looks like both the Tories and Labour will lose since neither will secure a majority and there is little prospect of either being able to cobble together a sustainable majority. But some arrangement will emerge eventually. And the Fixed Term Parliament Act locks whoever concocts one in to whatever arrangement they concoct. It seems like a well deserved reward for the webs of lies, half-truths and fictions they’ve both spun over the last three decades.

Update on Ireland:


Ireland’s NET debt as percentage of GDP down to 89.9% in Q4 2014.

Given GDP/GNP current volume growth rates,


the 50% fall in the price of oil which will directly add 2-3% to Ireland’s GDP/GNP and even more indirectly


the virtual disappearance of the budget deficit in 2015 and a likely move into surplus in the next few years


the sharp fall in the value of the Euro against £sterling and the $dollar which will increase Ireland’s nominal GDP/GNP on top of that achieved from GDP/GNP volume growth


Ireland’s huge balance-of-payments surplus

Given all these,

I think a very sharp fall in Ireland’s debt to GDP/GNP ratio is inevitable in the next few years, certainly to well below the EU average and to well below the UK figure.

I can’t see any way (barring some wholly unexpected malevolent event like a global war or mid-east revolutions or England winning the Rugby World Cup) can prevent Ireland regaining Triple A status in the next 18 months.

God be with the old days on this site, when you had 78 predictions of imminent bankruptcy before breakfast.


Although I don’t think a mid-east revolution counts as an unexpected event.

re Balance of Payments

The UK had a BOP deficit of 5.5% of GDP in 2014, about the same as Ireland experienced in 2006. One doesn’t see much commentary on that in the general media.

@ PH

There is one additional issue worth developing. The problem of Greece being obliged to leave the EU were it to quit the euro is not totally a technical or legal one. As you point out, there are always ways and means! There are reports that the Greek finance ministry is still refusing access to basic national financial data to the “institutions” (previously known as the troika). In an EU institutional context, this would be unacceptable. But it is Germany, under Merkel, that has insisted that the issue of euro bailouts be dealt with as a routine international i.e. inter-governmental issue, also involving the IMF. The Greeks are, in other words, within their rights.


The idea of Tsipras urging Merkel to “speed up” negotiations is almost too ridiculous for words. Travelling budget class to Brussels – without a tie – and being feted by the lucky accompanying passengers is another example of the sheer silliness of the current Greek approach. The point is not that the other countries of the EU have woken up to it but that the Greek electorate also appears to be doing so.

Eventual agreement is now delayed until end June!

The Greek electorate should be wide awake by that point.

@ PH

On your point; “There is no conspiracy; this, quite simply, is what they do.”


Especially this bit!

“The CME, like other major exchanges, is known as a self-regulatory organisation, which means it enforces rules, reporting requirements and other regulations for its members to protect against fraud and market manipulation. But because the CME makes money from its members, there are concerns it may have a conflict of interest around policing market participants. Yet cash-strapped regulators such as the CFTC rely on self-regulatory organisations because they do not have the resources to fulfill all of their enforcement duties.


You make a number of valid points in your successive comments, but, re the topic of this thread, the Eurogroup is demanding that Syriza, a party that secured around 36% of the votes in a turnout of a little over 60%, should transform Greece in to a modern functioning state in the space of months – since Syriza believes it has a mandate to reject the reforms previously imposed by the Troika with the political backing of the Eurogroup. Only some form of a government of national unity would be capable of just beginning this task.

Irrespective of how it might be managed Greece needs time outside the EZ, but not outside the EU, to mend itself.


Results of 2015 election in Greece:
Syriza: 36.3%
Voter turnout: 63.9%

Results of 2011 election in Republic of Ireland:
Fine Gael: 36.1%
Voter turnout: 70.0%

(from Wikipedia)


That’s very helpful. And what would be even more helpful would be Syriza’s and ANEL’s combined vote share of 43.8% and seat share of 54% (including a 50 seat bonus to Syriza as the leading party) compared to FG’s and Labour’s 1st preference vote share of 55.5% and seat share of 68%.

By virtue of the electoral kicking they administered to FF and the Greens, a majority of voters provided FG and Labour with an overwhelming majority of seats. Drawing soem reassurance from this enormous majority, FG and Labour largely did what they were told by the Troika in relation to fiscal adjustments and financial sector reforms, but went out of their way to protect the powerful rent-capturing special interest groups – and this was the case particularly when it came to any progress on non-financial sector structural reforms. The effect, of course, was to retard the emergence of a strong and inevitable underlying economic recovery. The pandering to the management, staff and union interests in the semi-states and in the local authorities, in the higher echelons of the public sector and in the sheltered private sectors reached its peak in the establishment of Irish Water. For some reason the previous sullen acceptance by a majority of voters of fiscal adjustment and of the limited structural changes that were being implemented simply evaporated.

It’s difficult to know whether or not its major concessions on water charges combined with palpable evidence of economic recovery will save the Government’s bacon at the next election.

The deep fault-lines and dysfunction in Greek society and its economy meant that the combination of New Democracy and PASOK could not achieve what FG and Labour achieved. The rise of something like Syriza was almost inevitable and the outcome – exit from the Euro (and possibly rom the EU) is amost equally inevitable.

1. Varoufakis argues (rightly I think) that the IMF approach to debt sustainability is flawed- the Fund sets an (arbitrary) debt target of 120 % of GDP by 2020 and then work backwards to arrive at a required annual primary surplus of 4.5%of GDP, even though that may be neither politically or socially attainable and even if achieved for a few years may render the GDP growth assumptions optimistic , but

2. Greece cannot print money as a member of the euro area and needs cash from euro governments as the markets are unwilling to provide it , so

3. Greece has to accept the conditions euro governments attach to any assistance, or

4. Persuade the euro governments to lend it more money at even more generous terms with fewer conditions attached, although,

5. Some (most?) euro governments have decided that enough is enough and that unless (3) holds the euro can survive a Greek default and possible exit. which

6. May or may not be true.

Compared with the election in Greece, the election in Finland last Sunday continues to get negligible coverage in the Dublin 4 media. Now I know why.

Nice analysis here on Slugger O’Toole website.


It appears that the left is collapsing in Nordic countries. Yippee! They are getting fed up with the high taxes, nanny-statism and social engineering so beloved of the Dublin 4 commentariat. When news of this reaches the Irish Times, I’m sure we’ll see a reduction in the number of articles arguing for Ireland to adopt the Nordic model.

Specifically with regard to Finland, Slugger says the new government has its base in rural and small-town Finland and that the new Prime Minister is a strict Lutheran. It sounds like the new Finnish government is a sort of coalition of pre-Michael Martin FF and the DUP. Could well be a similar All-Ireland government in a decade’s time.

@ PH

The Eurogroup is doing no such thing. It is demanding a list of conditions be fulfilled in order to agree to lend Greece more money.


The idea that the mandate that Syriza has received binds anyone other than Syriza itself is at odds with reality. Varoufakis seems also to have little contact with it. The problem is that he is part of the apparatus currently governing a member state of the EU.

If anyone wishes to borrow money, the lender, invariably, sets conditions. The problem is that Greece is represented by a minister who either does not grasp this, and, it must be said, with him, a somewhat gullible cohort of academic supporters, or he is playing some other game which no one other than himself understands, other than, possibly, his prime minister.


@ Kerchav

What works is what allows governments to recover and retain the confidence of those (i.e. the much maligned “markets”) willing to lend to them.

Varoufakis sees it this way (cf his Project Syndicate article).

“The “troika” institutions (the European Commission, the European Central Bank, and the International Monetary Fund) have, over the years, relied on a process of backward induction: They set a date (say, the year 2020) and a target for the ratio of nominal debt to national income (say, 120%) that must be achieved before money markets are deemed ready to lend to Greece at reasonable rates.”

Money markets “deemed ready to lend”? Even to a non-economist such as myself, the man is talking through his hat.

What works for me is the comment by Michael Heise, Chief Economist to Allianz, the German insurance conglomerate.

“But Ireland still holds important lessons for Greece – beginning with the need to regain the confidence of financial markets. An unwavering focus on putting its public finances in order and cleaning up the banking sector enabled Ireland to exit its €67.5 billion ($73.7 billion) bailout program as planned at the end of 2013.

Moreover, the yield on ten-year Irish government bonds, which peaked at almost 15% in mid-2011, now stands at an all-time low of less than 1%. Though the ECB’s large-scale bond-buying program helped to lower bond yields, the Irish government’s success in returning to the capital market without the safety net of a precautionary credit line from its international creditors – an example that Portugal later followed – should not be overlooked.

Once investor confidence returned, a virtuous cycle took hold. For example, Ireland was able to repay the €12.5 billion it owed to the IMF early, once it was able to refinance itself more cheaply in the markets, helping it to reduce its interest-rate bill further.”

Syriza is just an example of the failure of bourgeois politics. Ireland is flying on one wing with FG but they could go the way of ND if things turn bad. Fast forward 8-10 years and more than a few EZ countries could have a Syriza moment. France, for one. When bourgeois parties fail , moderates tend to be replaced by those less moderate. This is what happened in the 30s across Europe and it didn’t end well. Don’t take popular support for neoliberalism for granted. People need to see some benefit from a system to support it.

@Grecophiles and Grecophobes

The reality is that even if the Greek govt capitulates on every condition demanded, the money ‘advanced’ will probably never see Greece. Instead it will be used to pay off IMF loans, ECB loans etc.
The Eurogroup even demanded that the funds (from previous loan tranches) being held by the Greek Central Bank, as a contingency to recap Greek banks, be returned and held by Regling’s organization (EFSF? ESM/EZZZgroup etc etc).

The Eurogroup, for which Minister Noonan is Ireland’s chappie, insist as one their of their conditions, that house repossessions be speeded up, throwing thousands of impoverished Greeks onto the streets.
The very same Minister Noonan, just a few short weeks ago, insisted that that Irish government did not see repossession as a solution to the Irish housing crisis. [The Greeks are southern Europeans you see, and they can survive better on the streets in those climates]

The other major condition is that pensions in payment be cut, by about 15% as I understand. As somebody who probably has as many 15 separate state pensions, it is a pity Mr Noonan would not cut a few of his own, in the national interest of course.
Another landed minister, Richard Bruton shuddered at the thought of reducing ministerial pensions in payment, and considered the right to a state pension to be on a par with property rights.

But the Irish, and Limerick in particular, has real form when it comes to separate treatment of its citizens and guests. There are several categories and locations for people in Limerick. Apart from the usual myhome.ie middle class locations, we have more interesting locations for residing such as Moyross, Rathkeale, and Knocklisheen.
[Knocklisheen is for non-citizens on €19.00 per week. Back in 1956 it was where the Hungarian camps were located.]

So Minister Noonan will not be all conflicted, by the very apparent conflict between what is being demanded of Greece and what is tolerated in Ireland.

And of course I should add, that the amount of money (capital repayment) involved in the case of Greece (which is now running a primary surplus) is about €8 billion.
Super Mario meantime, is spending about €1000 billion, buying up the financial assets of the none too distressed wealthy elite of the remainder of Europe, not including Greece of course.

Pardon me if I am a little confused by it all.
[But perhaps the Greeks should have listened a little more attentively to John Cleese, about suitable topics for conversation!!]

Stephen Kinsella had an interesting comment in reply to the contribution by Michael Heise.

“Michael misses the single key factor differentiating Ireland from Greece: Ireland’s openness. Any index of Ireland’s openness, say simply X+M/Y, shows Ireland’s export sector dwarf that of Greece, Portugal, or Spain. The Irish economy can ‘accommodate’ austerity in a way other economies can’t, simply because our export sector grew throughout the crisis, and the large and steady stream of FDI expenditure kept the economy on life support in a way very few other economies could have. Michael points to reforms in the Irish economy but as someone who has studied it extensively, I can’t point to any significant reforms of any kind. In truth, three things saved Ireland. First, Mario Draghi’s 2012 ‘whatever it takes’ speech. Second, the significant depreciation of the euro, which has helped us enormously given our large export profile, and third, a willingness on the part of the government to balance the books in terms of current spending. Ireland extracted over 18% of GDP over a four year period, but this is not comparable to the Greek or Icelandic crises, precisely because of the sectoral differences I highlighted above.”

To Ireland’s “openness” could be added the safety-valve of traditional emigration patterns; but this is a feature shared with the other economies in trouble; with the exception of Spain.

As to the author’s inability to identify any actual reforms, the items of mail coming through his front door relating to (i) property tax (ii) septic tank charges (iii) water charges – to list the most contentious – must have escaped his attention, the aim being to bring about the necessary “reform” i.e. re-balancing in the states finances.

But the comment misses the still more essential point which that in terms of flexibility and public administration, there is no comparison between the Irish economy and that of Greece. The failure to introduce the remaining, and by definition, more radical reforms in Ireland is attributable to the fact that these two elements are at a level, with the other factors mentioned, to allow for a “systems recovery” even from a catastrophic systems failure. To complete the metaphor, we seem intent, however, on continuing with the present operating system and it is simply a matter of time before the next “systems crash”.

Michael Heise is right in his central conclusion. The crucial factor lay in the steps taken to restore market confidence. Greece may have implemented even more draconian cuts but has failed totally in terms of opening up its economy, reforming its tax administration and recognising that the size of the state’s commitments must be related to the economic capacity of the country; in short, the programme of reform that its creditors are insisting on.


Michael Heise’s piece is true in parts, but his explanation for the current Irish situation displays little knowledge of our actual (as opposed to notional) economy. The tax arbitrage tail wags the domestic dog, and the UK has pulled up traditional exports.

As a typical representative of the ‘responsible’ financial sector, Heise fails to acknowledge the central role of financial interests in destabilising the political and economic order, and damaging public confidence in the rule of law. The recent Citadel deal with the the ex-Chair of the Fed is redolent of ancient Rome.

Perhaps there was a time when insurers were a force for prudent financial practice. Unfortunately the buy-side has succumbed fully to the bonus culture and chasing yield is the only game in town. The dissolution of the old finance house joint liability partnerships was a crossing of the Rubicon.

The understanding at the top is that paying debts is for mugs.


@ PQ

All of what you say may well be true. However, there is no gainsaying the fact that the steps taken, as identified by Heise, whatever views one may have as to their real utility, had the desired impact in the matter of restoring market confidence i.e. the capacity to continue borrowing in them. From the point of view of a government wishing to do so – or, rather whose political survival depends on it – this is all that matters.

Varoufakis does not seem to get this, to put mildly, cf. his tweet from yesterday which I posted on the thread opened by Colm McCarthy on the views of Ashoka Mody.

FDR, 1936: “They are unanimous in their hate for me; and I welcome their hatred.” A quotation close to my heart (& reality) these days”.

On the saga of “Mr. Bernanke goes to Washington”, it is the American , and increasingly near universal, way! But that is a wider problem and not directly related to Greece’s immediate predicament.

@ PQ

“Washington” should read “Wall Street”; a recent US headline which I came across.


Market confidence is a very thin reed against which to lean.
Psychology isn`t as solid as growth.

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